SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 1, 1999
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6
(Exact name of registrant as specified in its charter)
California 333-24111 33-0761578
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
3158 Redhill Avenue, Suite 120, Costa Mesa, California 92626
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (714) 662-5565
N/A
Former name or former address, if changed since last report)
<PAGE>
Item 2. Acquisition or Disposition of Assets
WNC Housing Tax Credit Fund VI, L.P., Series 6 ("Series 6") has
acquired a Local Limited Partnership Interest in Summer Wood, Ltd., an Alabama
limited partnership (the "Local Limited Partnership" or "SUMMER WOOD"). SUMMER
WOOD owns the Summer Wood Apartments in Camden, Alabama (the "Apartment
Complex").
The following table contains information concerning the Apartment
Complex and the Local Limited Partnership identified herein:
<TABLE>
LOCAL
ACTUAL OR LIMITED
ESTIMATED ESTIMATED PERMANENT PARTNER-
PROJECT CONSTRUC- DEVELOPMENT MORTGAGE SHIP'S
LOCAL NAME AND TION COST NUMBER OF BASIC LOAN ANTICIPATED YEAR CREDITS
LIMITED NUMBER LOCATION COMPLETION (INCLUDING APARTMENT MONTHLY PRINCIPAL TAX CREDITS TO BE FIRST
PARTNERSHIP OF BUILDINGS OF PROPERTY DATE LAND COST) UNITS RENTS AMOUNT (1) AVAILABLE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------- ------------- ------------ ------------ ------------ ------------- --------- ------------ ------------ -------------
SUMMER Summer Wood Camden November $2,260,515 18 2BR units $235 $65,000 $1,775,611 1999
WOOD Apartments (Wilcox 1999 14 3BR units $309 RB (2)
County),
5 buildings Alabama $785,000
HOME (3)
- --------------- ------------- ------------ ------------ ------------ ------------- --------- ------------ ------------ -------------
<FN>
(1) Low Income Housing Credits are available over a 10-year period. For the
year in which the credit first becomes available, Series 6 will receive
only that percentage of the annual credit which corresponds to the
number of months during which Series 6 was a limited partner of the
Local Limited Partnership, and during which the Apartment Complex was
completed and in service.
(2) Regions Bank ("RB") will provide the first mortgage loan for a term of
20 years at an annual interest rate of 8%. Principal and interest will
be payable monthly, based on a 20-year amortization schedule.
(3) Alabama Housing Finance Authority will provide HOME funds for the
second mortgage loan for a term of 20 years at an annual interest rate
of 0.5%. Principal and interest will be payable monthly, based on a
20-year amortization schedule.
</FN>
</TABLE>
Camden (SUMMER WOOD): Camden (population 2,500) is the county seat of Wilcox
County, Alabama, and is on State Highways 28, 41, 164, 221 and 265,
approximately 35 miles south of Selma. The major employers for Camden residents
are MacMillan Bloedel Packaging, Simplex Industries and International Knife and
Saw Inc.
<TABLE>
LOCAL ESTIMATED
GENERAL SHARING RATIOS: ACQUISITION
LOCAL LOCAL PARTNER SHARING ALLOCATIONS (4) AND FEES PAYABLE
LIMITED GENERAL PROPERTY DEVELOPMENT RATIOS: SALE OR REFINANCING SERIES 6's CAPITAL TO FUND
PARTNERSHIP PARTNER MANAGER (1) FEE (2) CASH FLOW (3) PROCEEDS (5) CONTRIBUTION (6) MANAGER
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------- ------------ ------------ -------------- --------------- -------------------- ------------------- ---------------
SUMMER WOOD ACHR Charter $279,756 WNC: Greater 99.98/.01/.01 $1,287,189 $119,000
Property of 10% or 50/50
Management $500
Co., Inc. LGP: 70% of
the balance
The balance:
30/70
- --------------- ------------ ------------ -------------- --------------- -------------------- ------------------- ---------------
<FN>
(1) The Local General Partner is authorized to employ either itself or one of
its affiliates, or a third party, as property manager for leasing and management
of the Apartment Complex. Although in some instances the maximum annual
management fee payable to the property manager is determined pursuant to lender
regulations, in most cases the fee is equal to market rate.
2
<PAGE>
(2) The Local Limited Partnership will pay its Local General Partner or an
affiliate of its Local General Partner a development fee in the amount set
forth, for services incident to the development and construction of the
Apartment Complex, which services include: negotiating the financing commitments
for the Apartment Complex; securing necessary approvals and permits for the
development and construction of the Apartment Complex; and obtaining allocations
of Low Income Housing Credits. This payment will be made in installments after
receipt of each installment of the capital contributions made by Series 6.
(3) Reflects the amount of the net cash flow from operations, if any, to be
distributed to Series 6 ("WNC") and the Local General Partner ("LGP") of the
Local Limited Partnership for each year of operations. Generally, to the extent
that the specific dollar amounts which are to be paid to WNC are not paid
annually, they will accrue and be paid from sale or refinancing proceeds as an
obligation of the Local Limited Partnership.
(4) Subject to certain special allocations, reflects the respective percentage
interests in profits, losses and Low Income Housing Credits of (i) Series 6,
(ii) WNC Housing, L.P., an affiliate of the sponsor which is the special limited
partner, and (iii) the Local General Partner.
(5) Reflects the percentage interests in any net cash proceeds from sale or
refinancing of the Apartment Complex, after payment of the mortgage loan and
other Local Limited Partnership obligations, of (i) Series 6 and (ii) the Local
General Partner.
(6) Series 6 will make its capital contributions to the Local Limited
Partnership in stages, with each contribution due when certain conditions
regarding construction or operations of the Apartment Complex have been
fulfilled.
</FN>
</TABLE>
3
<PAGE>
Item 7. Financial Statements and Exhibits
a. Financial Statements of Businesses Acquired
Inapplicable.
b. Proforma Financial Information
Proforma Balance Sheet, December 31, 1998 (Unaudited)
Notes to Proforma Balance Sheet
c. Exhibits
10.1 Amended and Restated Agreement of Limited Partnership of Summer
Wood, Ltd.
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., Series 6
(A California Limited Partnership)
(A Development-Stage Partnership)
PROFORMA BALANCE SHEET
December 31, 1998
ASSETS
<TABLE>
Historical Proforma Proforma
Balance Adjustments Balance
<S> <C> <C> <C>
Cash and cash equivalents $ 372,505 $ 5,208,360
(427,315)
(305,201) $ 4,848,349
Subscriptions receivable 1,030,915 305,201 1,336,116
Investment in limited partnerships, net 6,440,762 4,168,282
427,315 11,036,359
Loan receivable 50,000 (50,000)
Other assets - - -
------------ ------------- -------------
$ 7,894,182 $ 9,326,642 $ 17,220,824
========= ========== ==========
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES:
Notes Payable to limited partnerships $ 1,734,427 $ 4,168,282
(50,000) $ 5,852,709
Loan payable 113,269 113,269
Accrued fees and expenses due to
general partner and affiliates 173,323 - 173,323
----------- ------------ -----------
2,021,019 4,118,282 6,139,301
--------- --------- ---------
PARTNERS' EQUITY (DEFICIT)
General partner (7,977) (8,961) (16,938)
Limited partners 5,881,140 5,217,321 11,098,461
--------- --------- ----------
Total partners' equity 5,873,163 5,208,360 11,081,523
--------- --------- ----------
$ 7,894,182 $ 9,326,642 $ 17,220,824
=========== ========== ============
</TABLE>
- Unaudited -
See Accompanying Notes to Proforma Balance Sheet
FS-1
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6
(A California Limited Partnership)
(A Development-Stage Partnership)
NOTES TO UNAUDITED PROFORMA FINANCIAL STATEMENTS
NOTE 1 - GENERAL
The information contained in the following notes to the proforma balance sheet
is condensed from that which appears in the financial statements. Accordingly,
this proforma balance sheet should be reviewed in conjunction with the financial
statements and related notes thereto contained in the WNC Housing Tax Credit
Fund VI, L.P., Series 6 financial statements dated December 31, 1998. WNC
Housing Tax Credit Fund VI, L.P., Series 6 is referred to in these notes as the
"Partnership."
NOTE 2 - INTRODUCTION TO PROFORMA ADJUSTMENTS
As of December 31, 1998, the Partnership had acquired a limited partnership
interest in four limited partnerships: Trenton Village Apartments., L.P.
(TRENTON); United Development Co., L.P. - 97.0 (UNITED 97.0); Desloge Associates
I, L.P. (DESLOGE);.and Brighton Ridge Apartments, L.P. (BRIGHTON RIDGE). Each
owns one apartment complex. Subsequent to December 31, 1998, the Partnership has
acquired an interest in three limited partnerships: Ottawa I, L.P. (OTTAWA),
Preservation Partners I, L.P. (PRESERVATION), and Summer Wood, Ltd. (SUMMER
WOOD). OTTAWA and SUMMER WOOD each owns one apartment complex. PRESERVATION owns
the Autumn Ridge I Apartments (PRESERVATION AUTUMN), the Pontiac "A" Apartments
(PRESERVATION PONTIAC) and the Shumway Apartments (PRESERVATION SHUMWAY). The
Partnership is negotiating to acquire limited partnership interest in one other
partnership that owns one apartment complex: West Mobile County Housing, Ltd.
(WEST MOBILE). These investments commit the Partnership to capital contributions
as follows:
OTTAWA $ 402,847
PRESERVATION AUTUMN 166,315
PRESERVATION PONTIAC 166,084
PRESERVATION SHUMWAY 182,299
SUMMER WOOD 1,287,189
WEST MOBILE 1,963,548
---------
$4,168,282
==========
F-2
<PAGE>
NOTE 2 - INTRODUCTION TO PROFORMA ADJUSTMENTS (Continued)
In accordance with Article 11, Proforma Financial Information of Regulation S-X
of the Securities and Exchange Commission, the accompanying proforma balance
sheet was computed assuming that the limited partnerships discussed above were
acquired at the end of the period presented. The first adjustment to cash and
the adjustment to partners' equity of $5,208,360 reflects the net proceeds from
December 31, 1998 to May 1, 1999 from issuance of 6,401 units of limited
partners' capital ($6,401,000 less notes receivable and commissions and offering
costs of $296,500 and $896,140, respectively.) The second adjustment to cash and
the adjustment to subscriptions receivable of $305,201 reflects the collection
of subscriptions receivable from the above subscriptions. The adjustment to
investment in limited partnerships and the first adjustment to notes payable to
limited partnerships of $4,168,282 reflects the Partnership's acquisition of the
three limited partnership interests as if the Partnership's date of acquisition
was December 31, 1998. The second adjustment to investment in limited
partnerships and the third adjustment to cash of $427,315 reflects the
acquisition fee from the proceeds raised from December 31, 1998 to May 1, 1999.
The second adjustment to notes payable and the adjustment to loan receivable of
$50,000 reflects the application of the loan receivable to the note payable upon
acquisition of the limited interest in PRESERVATION.
The four limited partnerships (six apartment complexes) were under construction
or rehabilitation during the period presented and had no operations which should
be reported. The Partnership will use the equity method of accounting to account
for its investments in these local limited partnerships.
F-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6
Date: May 6, 1999 By: WNC & Associates, Inc.,
General Partner
By: /s/ JOHN B. LESTER, JR.
John B. Lester, Jr.,
President
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
10.1 Amended and Restated Agreement of Limited Partnership of Summer
Wood, Ltd.
Amended And Restated Agreement
Of Limited Partnership Of
Summer Wood, Ltd.
<PAGE>
TABLE OF CONTENTS
Page
I. DEFINITIONS ......................................... 1
1.1 "Accountant" ................................... 1
1.2 "Act" .......................................... 2
1.3 "Actual Tax Credit"............................. 2
1.4 "Adjusted Capital Account Deficit" ............. 2
1.5 "Affiliate" .................................... 2
1.6 "Agreement" or "Partnership Agreement".......... 2
1.7 "Assignee" ..................................... 2
1.8 "Bankruptcy" or "Bankrupt"...................... 2
1.9 "Break-even Operations"......................... 3
1.10 "Capital Account" .............................. 3
1.11 "Capital Contribution" ......................... 3
1.12 "Code" ......................................... 3
1.13 "Completion of Construction".................... 3
1.14 "Compliance Period"............................. 4
1.15 "Consent of the Special Limited Partner"........ 4
1.16 "Construction Contract"......................... 4
1.17 "Construction Loan" ............................ 4
1.18 "Contractor" ................................... 4
1.19 "Debt Service Coverage"......................... 4
1.20 "Deferred Management Fee"....................... 4
1.21 "Developer"..................................... 4
1.22 "Development Fee" .............................. 4
1.23 "Distributions" ................................ 5
1.24 "Fair Market Value" ............................ 5
1.25 "First Year Certificate" ....................... 5
1.26 "Force Majeure"................................. 5
1.27 "General Partner" .............................. 5
1.28 "Gross Asset Value" ............................ 5
1.29 "Hazardous Substance"........................... 6
1.30 "Improvements".................................. 6
1.31 "Incentive Management Fee"...................... 6
1.32 "Income and Losses"............................. 7
1.33 "Insurance" .................................... 8
1.34 "Insurance Company" ............................ 8
1.35 "Interest" ..................................... 8
1.36 "Involuntary Withdrawal"........................ 8
1.37 "LIHTC"......................................... 8
1.38 "Limited Partner"............................... 8
1.39 "Management Agent".............................. 8
1.40 "Management Agreement".......................... 9
1.41 "Minimum Set-Aside Test"........................ 9
1.42 "Mortgage" or "Mortgage Loan"................... 9
1.43 "Net Operating Income".......................... 9
1.44 "Nonrecourse Deductions"........................ 10
1.45 "Nonrecourse Liability"......................... 10
1.46 "Operating Deficit" ............................ 10
1.47 "Operating Deficit Guarantee Period"............ 10
1.48 "Operating Loans"............................... 10
i
<PAGE>
1.49 "Original Limited Partner" ..................... 10
1.50 "Partner(s)" ................................... 10
1.51 "Partner Nonrecourse Debt" ..................... 10
1.52 "Partner Nonrecourse Debt Minimum Gain" ........ 10
1.53 "Partner Nonrecourse Deductions" ............... 10
1.54 "Partnership" .................................. 11
1.55 "Partnership Minimum Gain" ..................... 11
1.56 "Permanent Mortgage Commencement" .............. 11
1.57 "Person" ....................................... 11
1.58 "Project" ...................................... 11
1.59 "Project Documents" ............................ 11
1.60 "Projected Annual Tax Credits" ................. 11
1.61 "Projected Tax Credits" ........................ 11
1.62 "Qualified Tenants" ............................ 11
1.63 "Rent Restriction Test" ........................ 11
1.64 "Reporting Fee"................................. 11
1.65 "Revised Projected Tax Credits"................. 12
1.66 "Sale or Refinancing"........................... 12
1.67 "Sale or Refinancing Proceeds" ................. 12
1.68 "Special Limited Partner"....................... 12
1.69 "State" ........................................ 12
1.70 "State Tax Credit Agency" ...................... 12
1.71 "Substitute Limited Partner" ................... 12
1.72 "Tax Credit" ................................... 12
1.73 "Tax Credit Conditions"......................... 12
1.74 "Tax Credit Period"............................. 12
1.75 "TRA 1986" ..................................... 13
1.76 "Treasury Regulations" ......................... 13
1.77 "Withdrawing" or "Withdrawal"................... 13
II. NAME ................................................ 13
III. PRINCIPAL EXECUTIVE OFFICE/AGENT FOR SERVICE ........ 13
3.1 Principal Executive Office ..................... 13
3.2 Agent for Service of Process ................... 13
IV. PURPOSE ............................................. 13
V. TERM ................................................ 14
VI. GENERAL PARTNER'S CONTRIBUTIONS AND LOANS............ 14
6.1 Capital Contribution of General Partner......... 14
6.2 Construction and Operating Obligations;
General Partner Loans......................... 14
6.3 Other General Partner Loans..................... 15
VII. CAPITAL CONTRIBUTIONS OF LIMITED PARTNER............. 15
7.1 Original Limited Partner........................ 15
7.2 Capital Contribution of Limited Partner......... 15
7.3 Repurchase of Limited Partner's Interest........ 17
7.4 Reduction of Limited Partner's
Capital Contribution.......................... 18
7.5 Capital Contribution of Special Limited Partner. 20
ii
<PAGE>
7.6 Return of Capital Contribution.................. 20
7.7 Liability of Limited Partner and Special
Limited Partner................................. 21
VIII. WORKING CAPITAL AND RESERVES ....................... 21
8.1 Operation and Maintenance Reserve and
Replacement Reserve Account..................... 21
8.2 Tax and Insurance Account....................... 21
8.3 Other Reserves.................................. 21
IX. MANAGEMENT AND CONTROL .............................. 21
9.1 Power and Authority of General Partner ......... 21
9.2 Payments to the General Partners and Others .... 22
9.3 Specific Powers of the General Partner ......... 24
9.4 Authority Requirements.......................... 24
9.5 Limitations on General Partner's
Power and Authority ............................ 25
9.6 Restrictions on Authority of General Partner.... 26
9.7 Duties of General Partner ...................... 26
9.8 Partnership Expenses ........................... 28
9.9 General Partner Expenses ....................... 30
9.10 Other Business of Partners ..................... 30
9.11 Covenants, Representations and Warranties....... 30
X. ALLOCATIONS OF INCOME, LOSSES AND CREDITS ........... 33
10.1 General ........................................ 33
10.2 Allocations From Sale or Refinancing............ 34
10.3 Special Allocations............................. 38
10.4 Curative Allocations............................ 38
10.5 Other Allocation Rules.......................... 38
10.6 Tax Allocations: Code Section 704(c)........... 39
10.7 Allocation Among Limited Partners............... 40
10.8 Allocation Among General Partners .............. 40
10.9 Modification of Allocations .................... 40
XI. DISTRIBUTION ........................................ 40
11.1 Distribution of Net Operating Income ........... 40
11.2 Distribution of Sale or Refinancing Proceeds.... 41
XII. TRANSFERS OF LIMITED PARTNER'S INTEREST
IN THE PARTNERSHIP................................... 42
12.1 Assignment of Limited Partner's Interest ....... 42
12.2 Effective Date of Transfer ..................... 42
12.3 Invalid Assignment ............................. 42
12.4 Assignee's Rights to Allocations
and Distributions .............................. 43
12.5 Substitution of Assignee as Limited Partner
or Special Limited Partner........................ 43
12.6 Death, Bankruptcy, Incompetency, etc.
of a Limited Partner ............................. 43
iii
<PAGE>
XIII. WITHDRAWAL, REMOVAL AND REPLACEMENT OF GENERAL
PARTNER ............................................ 44
13.1 Withdrawal of General Partner .................. 44
13.2 Removal of General Partner ..................... 44
13.3 Effects of a Withdrawal......................... 46
13.4 Successor General Partner....................... 48
13.5 Admission of Additional or Successor
General Partner ................................ 48
13.6 Transfer of Interest ........................... 48
13.7 No Goodwill Value............................... 48
XIV. BOOKS AND ACCOUNTS, REPORTS, TAX RETURNS,
FISCAL YEAR AND BANKING ............................. 49
14.1 Books and Accounts ............................. 49
14.2 Accounting Reports ............................. 49
14.3 Other Reports .................................. 50
14.4 Late Reports ................................... 52
14.5 Annual Site Visits.............................. 52
14.6 Tax Returns..................................... 53
14.7 Fiscal Year .................................... 53
14.8 Banking ........................................ 53
14.9 Certificates and Elections ..................... 53
XV. DISSOLUTION, WINDING UP, TERMINATION AND
LIQUIDATION OF THE PARTNERSHIP ...................... 53
15.1 Dissolution of Partnership ..................... 53
15.2 Return of Capital Contribution upon
Dissolution .................................... 54
15.3 Distributions of Assets ........................ 54
15.4 Deferral of Liquidation......................... 55
15.5 Liquidation Statement .......................... 56
15.6 Certificates of Dissolution; Certificate of
Cancellation of Certificate of Limited
Partnership .................................... 56
XVI. AMENDMENTS .......................................... 56
XVII. MISCELLANEOUS ...................................... 57
17.1 Voting Rights .................................. 57
17.2 Meeting of Partnership ......................... 57
17.3 Notices ........................................ 58
17.4 Successors and Assigns ......................... 58
17.5 Recording of Certificate of Limited
Partnership. ................................... 59
17.6 Amendment of Certificate of Limited
Partnership .................................... 58
17.7 Counterparts ................................... 59
17.8 Captions ....................................... 59
17.9 Saving Clause................................... 59
17.10 Tax Matters Partners........................... 59
iv
<PAGE>
17.11 Expiration of Compliance Period................ 60
17.12 Number and Gender ............................. 61
17.13 Entire Agreement .............................. 61
17.14 Governing Law ................................. 61
17.15 Attorney's Fees ............................... 61
17.16 Receipt of Correspondence ..................... 61
17.17 Security Interest and Right of Set-Off ........ 61
EXHIBIT A - Legal Description...................... A-1
EXHIBIT B - Form of Legal Opinion.................. B-1 - B-4
EXHIBIT C - Certification and Agreement............ C-1 - C-4
EXHIBIT D - General Partner Certification.......... D-1 - D-5
EXHIBIT E - Form of Completion Certificate......... E-1
EXHIBIT F - Accountant's Certificate............... F-1
EXHIBIT G - Contractor's Letter.....................G-1
EXHIBIT H - Report of Operations................... H-1 - H-10
v
<PAGE>
Amended And Restated Agreement
Of Limited Partnership Of
Summer Wood, Ltd.
This Amended And Restated Agreement Of Limited Partnership is being
entered into effective as of the date written below by and between ACHR Housing
Corporation, as the general partner (the "General Partner"), WNC Housing Tax
Credit Fund VI, L.P. Series 6, 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 Nancy S. Spears as the withdrawing
limited partner (the "Original Limited Partner").
RECITALS
WHEREAS, Summer Wood, Ltd., an Alabama limited partnership (the
"Partnership") recorded a certificate and agreement of limited partnership (the
"Original Partnership Agreement") with the Probate Judge of the County of Lee,
Alabama on July 2, 1998.
WHEREAS, the Partners desire to enter into this Agreement to provide
for, among other things, (i) the continuation of the Partnership, (ii) the
admission of the Limited Partner and the Special Limited Partner as partners of
the Partnership, (iii) the liquidation of the Original Limited Partner's
Interest in the Partnership, (iv) the payment of Capital Contributions by the
Limited Partner and the Special Limited Partner to the Partnership, (v) the
allocation of Income, Losses, Tax Credits and distributions of Net Operating
Income and other cash funds of the Partnership among the Partners, (vi) the
respective rights, obligations and interests of the Partners to each other and
to the Partnership, and (vii) certain other matters.
WHEREAS, the Partners desire hereby to amend and restate the Original
Partnership Agreement.
NOW, THEREFORE, in consideration of their mutual agreements herein set
forth, the Partners hereby agree to amend and restate the Original Partnership
Agreement in its entirety to provide as follows:
<PAGE>
ARTICLE I
DEFINITIONS
Section 1.1 "Accountant" shall mean Wilson, Price, Bardeneo, Blankenship,
or such other firm of independent certified public accountants as may be engaged
for the Partnership by the General Partner with the Consent of the Special
Limited Partner. Notwithstanding any provision of this Agreement to the
contrary, the Special Limited Partner shall have the discretion to dismiss the
Accountants for cause if such Accountant fails to provide, or inaccurately
provides, the information required in Section 14.2 and 14.3 of this Agreement.
Section 1.2 "Act" shall mean the laws of the State governing limited
partnerships, as now in effect and as the same may be amended from time to time.
Section 1.3 "Actual Tax Credit" shall mean as of any point in time, the
total amount of the LIHTC actually allocated by the Partnership to the Limited
Partner, representing % of the LIHTC actually received by the Partnership, as
shown on the applicable tax returns of the Partnership.
Section 1.4 "Adjusted Capital Account Deficit" shall mean with respect to
any Partner, the deficit balance, if any, in such Partner's Capital Account as
of the end of the relevant fiscal period, after giving effect to the following
adjustments:
(a) Credit to such Capital Account any amounts which such Partner is
obligated to restore or is deemed to be obligated to restore pursuant to the
penultimate sentences of Treasury Regulations Sections 1.704-2(g)(1) and
1.704-2(i)(5); and
(b) Debit to such Capital Account the items described in Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6) of
the Treasury Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Treasury
Regulations and shall be interpreted consistently therewith.
Section 1.5 "Affiliate" shall mean (a) any Person directly or indirectly
controlling, controlled by, or under common control with another Person; (b) any
Person owning or controlling 10% or more of the outstanding voting securities of
such other Person; (c) any officer, director, trustee, or partner of such other
Person; and (d) if such Person is an officer, director, trustee or general
partner, any other Person for which such Person acts in any such capacity.
Section 1.6 "Agreement" or "Partnership Agreement" shall mean this Amended
and Restated Agreement of Limited Partnership, as it may be amended from time to
2
<PAGE>
time. Words such as "herein," "hereinafter," "hereof," "hereto," "hereby" and
"hereunder," when used with reference to this Agreement, refers to this
Agreement as a whole, unless the context otherwise requires.
Section 1.7 "Assignee" shall mean a Person who has acquired all or a
portion of the Limited Partner's beneficial interest in the Partnership and has
not become a Substitute Limited Partner.
Section 1.8 "Bankruptcy" or "Bankrupt" shall mean the making of an
assignment for the benefit of creditors, becoming a party to any liquidation or
dissolution action or proceeding, the commencement of any bankruptcy,
reorganization, insolvency or other proceeding for the relief of financially
distressed debtors, or the appointment of a receiver, liquidator, custodian or
trustee and, if any of the same occur involuntarily, the same not being
dismissed, stayed or discharged within 90 days; or the entry of an order for
relief under Title 11 of the United States Code. A Partner shall be deemed
Bankrupt if the Bankruptcy of such Partner shall have occurred and be
continuing.
Section 1.9 "Break-even Operations" shall mean at such time as the
Partnership has Net Operating Income as determined by the Accountant and
reasonably approved by the Special Limited Partner.
Section 1.10 "Capital Account" shall mean, with respect to each Partner,
the account maintained for such Partner comprised of such Partner's Capital
Contribution as increased by allocations to such Partner of Partnership Income
(or items thereof) and any items in the nature of income or gain which are
specially allocated pursuant to Section 10.3 or 10.4 hereof, and decreased by
the amount of any Distributions made to such Partner, and allocations to such
Partner of Partnership Losses (or items thereof) and any items in the nature of
expenses or losses which are specially allocated pursuant to Section 10.3 or
10.4 hereof.
In the event of any transfer of an interest in the Partnership in
accordance with the terms of this Agreement, the transferee shall succeed to the
Capital Account of the transferor to the extent it relates to the transferred
interest.
The foregoing definition and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Treasury Regulation Section 1.704-1(b), as amended or any successor thereto, and
shall be interpreted and applied in a manner consistent with such Treasury
Regulation.
Section 1.11 "Capital Contribution" shall mean the total amount of money,
or the Gross Asset Value of property contributed to the Partnership, if any, by
all the Partners or any class of Partners or any one Partner as the case may be
(or by a predecessor-in-interest of such Partner or Partners), reduced by any
such
3
<PAGE>
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 a
Capital Contribution.
Section 1.12 "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, or any successor statute.
Section 1.13 "Completion of Construction" shall mean the completion of
construction of the Project substantially in accordance with the Project
Documents in order to obtain the required certificates of occupancy (or the
local equivalent) for all thirty two (32) apartment units as evidenced by the
issuance of the certificate of occupancy by the governmental agency having
jurisdiction over the Project or by the issuance of the inspecting architect's
certification, in a form substantially similar to the form attached hereto as
Exhibit "E" and incorporated herein by this reference. Completion of
Construction further means that the construction shall be completed in good
quality, free and clear of all mechanic, material or similar liens; all other
expenses and costs must be paid with respect to the Project through completion,
including but not limited to costs of financing, except for normal retainages
and amounts in dispute.
Section 1.14 "Compliance Period" shall mean the period set forth in Section
42 (i)(1) of the Code, as amended, or any successor statute.
Section 1.15 "Consent of the Special Limited Partner" shall mean the prior
written consent or approval of the Special Limited Partner which shall not be
unreasonably withheld.
Section 1.16 "Construction Contract" shall mean the construction contract
in the amount of $1,563,810, entered into between the Partnership and the
Contractor pursuant to which the Project is being constructed.
Section 1.17 "Construction Loan" shall mean the loan obtained from Regions
Bank in the principal amount of $1,400,000 at an interest rate equal to Regions
Financial Corporation Commercial Base Rate + 1% per annum for a term of 18
months to provide funds for the acquisition, renovation and/or construction and
development of the Project. Where the context admits, the term "Construction
Loan" shall include any deed, deed of trust, note, security agreement,
assumption agreement or other instrument executed by, or on behalf of, the
Partnership or General Partner in connection with the Construction Loan.
Section 1.18 "Contractor" shall mean Charter Construction Management Co.,
Inc., which is the general construction contractor for the Project.
Section 1.19 "Debt Service Coverage" shall mean the ratio between the Net
Operating Income (excluding Mortgage payments) and the debt service required to
be paid on the Mortgage(s); as example, a 1.15 Debt Service Coverage means that
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for every $1.00 of debt service required to be paid there must be $1.15 of Net
Operating Income available. A worksheet for the calculation of Debt Service
Coverage is found in the Report of Operations attached hereto as Exhibit "H" and
incorporated herein by this reference.
Section 1.20 "Deferred Management Fee" shall have the meaning set forth in
Section 9.2(c) hereof.
Section 1.21 "Developer" shall mean ACHR Housing Corporation.
Section 1.22 "Development Fee" shall mean the fee payable to the Developer
pursuant to Section 9.2(a) of this Agreement for services incident to the
development and construction of the Project in accordance with the Development
Agreement between the Partnership and the Developer dated of even date herewith
and incorporated herein by this reference.
Section 1.23 "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 1.24 "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 1.25 "First Year Certificate" shall mean the certificate to be
filed by the General Partner with the Secretary of the Treasury as required by
Code Section 42(1)(1), as amended, or any successor thereto.
Section 1.26 "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 1.27 "General Partner(s)" shall mean ACHR Housing Corporation and
such other Persons as are admitted to the Partnership as additional or
substitute General Partners pursuant to this Agreement.
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Section 1.28 "Gross Asset Value" shall mean with respect to any asset, the
asset's adjusted basis for federal income tax purposes, except as follows:
a) The initial Gross Asset Value of any asset contributed by a Partner
to the Partnership shall be the Fair Market Value of such asset, as determined
by the contributing Partner and the General Partner, provided that, if the
contributing Partner is a General Partner, the determination of the Fair Market
Value of a contributed asset shall be determined by appraisal;
(b) The Gross Asset Values of all Partnership assets shall be adjusted
to equal their respective Fair Market Values, as determined by the General
Partner, as of the following times: (1) the acquisition of an additional
Interest in the Partnership by any new or existing Partner in exchange for more
than a de minimis Capital Contribution; (2) the distribution by the Partnership
to a Partner of more than a de minimis amount of Partnership property as
consideration for an Interest in the Partnership; and (3) the liquidation of the
Partnership within the meaning of Treasury Regulations Section
1.704-1(b)(2)(ii)(g); provided, however, that the adjustments pursuant to
clauses (1) and (2) above shall be made only with the Consent of the Special
Limited Partner and only if the General Partner reasonably determines that such
adjustments are necessary or appropriate to reflect the relative economic
interests of the Partners in the Partnership;
(c) The Gross Asset Value of any Partnership asset distributed to any
Partner shall be adjusted to equal the Fair Market Value of such asset on the
date of distribution as determined by the 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 1.28(d) to the extent the General Partner determines
that an adjustment pursuant to Section 1.28(b) hereof is necessary or
appropriate in connection with a transaction that would otherwise result in an
adjustment pursuant to this Section 1.28(d).
If the Gross Asset Value of an asset has been determined or adjusted
pursuant to Section 1.28(a), Section 1.28(b), or Section 1.28(d) hereof, such
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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 1.29 "Hazardous Substance" shall mean and include any substance,
material or waste, including asbestos, petroleum and petroleum products
(including crude oil), that is or becomes designated, classified or regulated as
"toxic" or "hazardous" or a "pollutant" or that is or becomes similarly
designated, classified or regulated, under any federal, state or local law,
regulation or ordinance including, without limitation, Compensation and
Liability Act of 1980, as amended, the Hazardous Materials Transportation Act,
as amended, the Resource Conservation and Recovery Act, as amended, and the
regulations adopted and publications promulgated pursuant thereto.
Section 1.30 "Improvements" shall mean the thirty two (32) unit apartment
complex for family built in accordance with the Project Documents.
Section 1.31 "Incentive Management Fee" shall have the meaning set forth in
Section 9.2(e) hereof.
Section 1.32 "Income and Losses" shall mean, for each fiscal year or other
period, an amount equal to the Partnership's taxable income or loss for such
year or period, determined in accordance with Code Section 703(a) (for this
purpose, all items of income, gain, loss or deduction required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in taxable
income or loss), with the following adjustments:
(a) any income of the Partnership that is exempt from federal income tax
and not otherwise taken into account in computing Income or Losses pursuant to
this Section 1.32 shall be added to such taxable income or loss;
(b) any expenditures of the Partnership described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to
Regulation Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in
computing Income and Losses pursuant to this Section 1.32 shall be subtracted
from such taxable income or loss;
(c) in the event the Gross Asset Value of any Partnership asset is
adjusted pursuant to Section 1.28(a) or (b) hereof, the amount of such
adjustment shall be taken into account as gain or loss from the disposition of
such asset for purposes of computing Income and Losses;
(d) gain or loss resulting from any disposition of Partnership assets
with respect to which gain or loss is recognized for federal income purposes
shall be computed by reference to the Gross Asset Value of the property disposed
of, notwithstanding that the adjusted tax basis of such property differs from
its Gross Asset Value;
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(e) in lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing such taxable income or loss, there
shall be taken into account depreciation for such fiscal year or other period,
computed as provided below; and
(f) notwithstanding any other provision of this definition, any items
which are specially allocated pursuant to Sections 10.3 or 10.4 hereof shall not
otherwise be taken into account in computing Income or Losses.
Depreciation for each fiscal year or other period shall be calculated
as follows: an amount equal to the depreciation, amortization, or other cost
recovery deduction allowable with respect to an asset for such year or other
period for federal income tax purposes, except that if the Gross Asset Value of
an asset differs from its adjusted basis for federal income tax purposes at the
beginning of such year or other period, depreciation shall be an amount which
bears the same ratio to such beginning Gross Asset Value as the federal income
tax depreciation, amortization, or other cost recovery deduction for such year
or other period bears to such beginning adjusted tax basis; provided, however,
if the federal income tax depreciation, amortization, or other cost recovery
deduction for such year is zero, depreciation shall be determined with reference
to such beginning Gross Asset Value using any reasonable method selected by the
General Partner.
Section 1.33 "Insurance" shall mean:
(a) during construction, the Insurance shall include builder's risk
insurance, liability insurance in the minimum amount of $1,000,000 per
occurrence with an aggregate of $2,000,000, and worker's compensation;
(b) during operations the Insurance shall include business interruption
coverage covering actual sustained loss for 12 months, worker's compensation,
hazard coverage (including but not limited to fire, or other casualty loss to
any structure or building on the Project in an amount equal to the full
replacement value of the damaged property without deducting for depreciation)
and general liability coverage against liability claims for bodily injury or
property damage in the minimum amount of $1,000,000 per occurrence and an
aggregate of $2,000,000;
(c) 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;
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(d) all Insurance polices shall name the Partnership as the named
insured and the Limited Partner as an additional insured, and the Partnership as
the certificate holder;
(e) all Insurance policies shall include a provision to notify the
insured prior to cancellation;
(f) hazard coverage must include inflation and building or ordinance
endorsements;
(g) the minimum builder's risk coverage shall be in an amount equal to
the construction contract amount; and
(h) the Contractor must also provide evidence of liability coverage
equal to $1,000,000 per occurrence with an aggregate of $2,000,000 and shall
name the Partnership as an additional insured and the Partnership as certificate
holder.
Section 1.34 "Insurance Company" shall mean any insurance company engaged
by the General Partner for the Partnership which Insurance Company shall have an
A rating or better for financial safety by A.M. Best or Standard & Poor's.
Section 1.35 "Interest" shall mean the entire ownership interest of a
Partner in the Partnership at any particular time, including the right of such
Partner to any and all benefits to which a Partner may be entitled hereunder and
the obligation of such Partner to comply with the terms of this Agreement.
Section 1.36 "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 1.37 "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 1.38 "Limited Partner" shall mean WNC Housing Tax Credit Fund VI,
L.P. Series 6, 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 1.39 "Management Agent" shall mean the property management company
which oversees the property management functions for the Project and which is
on-site at the Project. The initial Management Agent shall be Charter Property
Management Co., Inc.
Section 1.40 "Management Agreement" shall mean the agreement between the
Partnership and the Management Agent for property management services. The
management fee shall equal % of gross revenues. Neither the Management Agreement
nor ancillary agreement shall provide for an initial rent-up fee nor a set-up
fee, nor any other similar pre-management fee payable to the Management Agent.
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Section 1.41 "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 1.42 "Mortgage" or "Mortgage Loan" shall mean the permanent
nonrecourse financing wherein the Partnership promises to pay: (a) Regions Bank,
or its successor or assignee, the principal sum of $65,000, plus interest on the
principal at 8% per annum over a term of 20 years and amortized over 20 years;
(b) Alabama Housing Finance Authority (HOME), or its successor or assignee, the
principal sum of $785,000, plus interest on the principal at % per annum over a
term of 20 years. This loan is payable out of excess cash flow defined as cash
flow in excess of a 1.40 debt coverage ratio. Where the context admits, the term
"Mortgage" or "Mortgage Loan" shall include any mortgage, deed, deed of trust,
note, regulatory agreement, security agreement, assumption agreement or other
instrument executed in connection with the Mortgage which is binding on the
Partnership; and in case any Mortgage is replaced or supplemented by any
subsequent mortgage or mortgages, the Mortgage shall refer to any such
subsequent mortgage or mortgages. In the event the terms of the Mortgage are not
as specified herein and the Special Limited Partner determines in its discretion
that the Debt Service Coverage falls below 1.15, then at the request of the
Special Limited Partner the General Partner shall reduce and/or refinance the
principal of the Mortgage, that is not payable out of excess cash flow, to an
amount the Special Limited Partner determines is adequate to produce a 1.15 Debt
Service Coverage. The Mortgage funds shall be used to retire the Construction
Loan and if there are any funds remaining the Mortgage funds shall be used to
retire any outstanding hard construction costs including labor and materials.
Section 1.43 "Net Operating Income" shall mean the excess of revenues over
expenses determined as follows: (a) the excess of actual cash received on a cash
basis by the Partnership from operating revenues of the Partnership, including,
without limitation, rental income (but not any subsidy thereof from the General
Partner or an Affiliate thereof) and laundry income, but excluding prepayments,
security deposits and interest thereon; (b) over all cash operating obligations
of the Partnership (other than those covered by Insurance) in accordance with
the applicable budget adopted by the Partnership in accordance with Section
14.3(k) of this Agreement (the "Budget"), including, without limitation, the
payment of the Mortgage, the Management Agent fees (which shall be deemed to
include that portion of such fees which is deferred and not currently paid) and
the funding of reserves in accordance with Article VIII of this Agreement, and a
reserve for all taxes or payments in lieu of taxes and any other expenses which
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may reasonably be expected to be paid in a subsequent period but which on an
accrual basis are allocable to the period in question, such as insurance
premiums, audit, tax or accounting expenses (excluding deductions for cost
recovery of buildings, improvements and personal property and amortization of
any financing fees). Without limiting the generality of the foregoing, the
Partnership's gross revenues for purposes of this Section shall not include
Capital Contributions, borrowings, any lump-sum payment or any other
extraordinary receipt of funds thereby, or interest or any other income earned
on investment of its funds, and unless otherwise provided in a Budget, the cash
operating obligations of the Partnership shall be deemed to include real estate
taxes for the period at the fully assessed rate.
Section 1.44 Nonrecourse Deductions" shall have the meaning given it in
Treasury Regulations Section 1.704-2(b)(1).
Section 1.45 "Nonrecourse Liability" shall have the meaning given it in
Treasury Regulations Section 1.704-2(b)(3).
Section 1.46 "Operating Deficit" shall mean at any time when the
Partnership does not have Net Operating Income as determined by the Accountant
and reasonably approved by the Special Limited Partner.
Section 1.47 "Operating Deficit Guarantee Period" shall mean the period
commencing with the date of this Agreement and ending two years following the
three consecutive months of break-even operations.
Section 1.48 "Operating Loans" shall mean loans made by the General Partner
to the Partnership pursuant to Article VI and Article VII of this Agreement,
which loans do not bear interest and are repayable only as provided in Article
XI of this Agreement.
Section 1.49 "Original Limited Partner" shall mean Nancy S. Spears.
Section 1.50 "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 1.51 "Partner Nonrecourse Debt" shall have the meaning set forth in
Section 1.704-2(b)(4) of the Treasury Regulations.
Section 1.52 "Partner Nonrecourse Debt Minimum Gain" shall mean an amount,
with respect to each Partner Nonrecourse Debt, equal to the Partnership Minimum
Gain that would result if such Partner Nonrecourse Debt were treated as a
Nonrecourse Liability, determined in accordance with Section 1.704-2(i)(3) of
the Treasury Regulations.
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Section 1.53 "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 1.54 "Partnership" shall mean the limited partnership continued
under this Agreement.
Section 1.55 "Partnership Minimum Gain" shall mean the amount determined in
accordance with the principles of Treasury Regulation Sections 1.704-2(b)(2) and
1.704-2(d).
Section 1.56 "Permanent Mortgage Commencement" shall mean the first date on
which all of the following have occurred: (a) the Construction Loan shall have
been paid down to $65,000; (b) the Mortgage shall have closed and funded; and
(c) amortization of the Mortgage shall have commenced.
Section 1.57 "Person" shall collectively mean an individual,
proprietorship, trust, estate, partnership, joint venture, association, company,
corporation or other entity.
Section 1.58 "Project" shall collectively mean that parcel of land in
Camden, Wilcox County, Alabama, as more fully described in Exhibit "A" attached
hereto and incorporated herein by this reference, and the Improvements.
Section 1.59 "Project Documents" shall mean all documents relating to the
Construction Loan and Mortgage Loan. It shall also include all documents
required by any governmental agency having jurisdiction over the Project in
connection with the development, construction and financing of the Project,
including but not limited to, the approved plans and specifications for the
development and construction of the Project.
Section 1.60 "Projected Annual Tax Credits" shall mean LIHTC in the amount
of $177,543 for 2000, $177,543 per year for each of the years 2001 through 2009,
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 % of
the aggregate amount of LIHTC of $1,775,611 to be available to the Partnership.
Section 1.61 "Projected Tax Credits" shall mean LIHTC in the aggregate
amount of $1,775,611.
Section 1.62 "Qualified Tenants" shall mean any tenants who have incomes as
a percentage of the area median gross income, as adjusted for family size, so as
to make the Project unit occupied by such tenant eligible for LIHTC.
Section 1.63 "Rent Restriction Test" shall mean the test pursuant to
Section 42 of the Code whereby the gross rent charged to tenants of the
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low-income apartment units in the Project must not exceed 30% of the applicable
income standards.
Section 1.64 "Reporting Fee" shall have the meaning set forth in Section
9.2(d) hereof.
Section 1.65 "Revised Projected Tax Credits" shall have the meaning set
forth in Section 7.4(a) hereof.
Section 1.66 "Sale or Refinancing" shall mean any of the following items or
transactions: a sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Partnership, a condemnation of or
casualty at the Project or any part thereof, a claim against a title insurance
company, the refinancing or any Mortgage or other indebtedness of the
Partnership and any similar item or transaction; provided, however, that the
payment of Capital Contributions by the Partners shall not be included within
the meaning of the term "Sale or Refinancing."
Section 1.67 "Sale or Refinancing Proceeds" shall mean all cash receipts of
the Partnership arising from a Sale or Refinancing (including principal and
interest received on a debt obligation received as consideration in whole or in
part, on a Sale or Refinancing) less the amount paid or to be paid in connection
with or as an expense of such Sale or Refinancing, and with regard to damage
recoveries or insurance or condemnation proceeds, the amount paid or to be paid
for repairs, replacements or renewals resulting from damage to or partial
condemnation of the Project.
Section 1.68 "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 1.69 "State" shall mean the State of Alabama.
Section 1.70 "State Tax Credit Agency" shall mean the state agency of
Alabama which has the responsibility and authorization to administer the LIHTC
program in Alabama.
Section 1.71 "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 1.72 "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 1.73 "Tax Credit Conditions" shall mean, for the duration of the
Compliance Period, any and all restrictions including, but not limited to,
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applicable federal, state and local laws, rules and regulations, which must be
complied with in order to qualify for the LIHTC or to avoid an event of
recapture in respect of the LIHTC.
Section 1.74 "Tax Credit Period" shall mean the ten year time period
referenced in Code Section 42(f)(1) over which the Projected Tax Credits are
allocated to the Partners. It is the intent of the Partners that the Projected
Tax Credits will be allocated during the Tax Credit Period and not a longer
term.
Section 1.75 "TRA 1986" shall mean the Tax Reform Act of 1986.
Section 1.76 "Treasury Regulations" shall mean the Income Tax Regulations
promulgated under the Code, as such regulations may be amended from time to time
(including corresponding provisions of succeeding regulations).
Section 1.77 "Withdrawing" or "Withdrawal" (including the verb form
"Withdraw" and the adjectival forms "Withdrawing" and "Withdrawn") shall mean,
as to a General Partner, the occurrence of the death, adjudication of insanity
or incompetence, or Bankruptcy of such Partner, or the withdrawal, removal or
retirement from the Partnership of such Partner for any reason, including any
sale, pledge, encumbering, assignment or other transfer of all or any part of
its General Partner Interest and those situations when a General Partner may no
longer continue as a General Partner by reason of any law or pursuant to any
terms of this Agreement.
ARTICLE II
NAME
The name of the Partnership shall be "Summer Wood, Ltd."
ARTICLE III
PRINCIPAL EXECUTIVE OFFICE/AGENT FOR SERVICE
Section 3.1 Principal Executive Office. The principal executive office of
the Partnership is located at 319 West Glenn Ave., Auburn, AL 36831, 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 Nancy S. Spears, whose address is 319 West
Glenn Ave., Auburn, AL 36831.
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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 Probate
Judge of Lee County, Alabama, and shall continue until December 31, 2050 unless
terminated earlier in accordance with the provisions of this Agreement or as
otherwise provided by law.
ARTICLE VI
GENERAL PARTNER'S CONTRIBUTIONS AND LOANS
Section 6.1 Capital Contribution of General Partner. The General Partner
shall make a Capital Contribution in the amount of $1.
Section 6.2 Construction and Operating Obligations; General Partner Loans.
(a) The General Partner shall cause Completion of Construction, and
shall equip the Project or cause the same to be equipped with all necessary and
appropriate fixtures, equipment and articles of personal property, including but
not limited to, refrigerators and ranges. If costs and expenses necessary to
effect Completion of Construction exceed the sum of the Capital Contributions,
the proceeds of the Mortgage and the Development Fee then the General Partner
shall be responsible for and shall be obligated to pay such deficiencies. Any
such advances by the General Partner shall not change the Interest of any
Partner in the Partnership, but shall be treated as a loan by the General
Partner to the Partnership. In addition, if (1) the Improvements are not
completed on or before August 31, 1999 ("Completion Date") (which date may be
extended in the events of Force Majeure, but in no event longer than three
months from the Completion Date); (2) prior to completing the Improvements,
there is a default under or termination of the Construction Loan, Mortgage Loan
commitment, or other material documents which remains uncured after the
expiration of any applicable cure period; or (3) a foreclosure action is
commenced against the Partnership, then at the Special Limited Partner's
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election, either the General Partner will be removed from the Partnership and
the Special Limited Partner will be admitted as successor General Partner, all
in accordance with Article XIII hereof, or the General Partner will repurchase
the Interests of the Limited Partner and the Special Limited Partner for an
amount equal to the amounts theretofore paid by the Limited Partner and the
Special Limited Partner, and the Limited Partner and the Special Limited Partner
shall have no further Interest in the Partnership. If the Limited Partner elects
to have the General Partner repurchase the Interest of the Limited Partner and
the Special Limited Partner then the repurchase shall occur within 60 days after
the General Partner receives written demand from the Special Limited Partner.
Notwithstanding the foregoing, the General Partner shall have thirty (30) days
after written notice from the Special Limited Partner during which it may cure,
to the reasonable satisfaction of the Special Limited Partner, any default under
clauses (2) or (3) above.
(b) From Completion of Construction until three consecutive months of
Break-even Operations, the General Partner will personally provide Operating
Loans to pay any Operating Deficits; and for the balance of the Operating
Deficit Guarantee Period the General Partner will provide Operating Loans to pay
any Operating Deficits up to $65,000. Each Operating Loan shall be nonrecourse
to the Partners, and shall be repayable out of 50% of the available Net
Operating Income or Sale or Refinancing Proceeds in accordance with Article XI
of this Agreement.
Section 6.3 Other General Partner Loans. After expiration of the Operating
Deficit Guarantee Period, with the Consent of the Special Limited Partner, the
General Partner may loan to the Partnership any sums required by the Partnership
and not otherwise reasonably available to it. Any such loan shall bear simple
interest (not compounded) at the rate of 2% per annum above the then prevailing
prime or reference rate charged by Bank of America N.T. & S.A., Main Office, San
Francisco, California, or, if lesser, the maximum legal rate. The maturity date
and repayment schedule of any such loan shall be as agreed to by the General
Partner and the Special Limited Partner. The terms of any such loan shall be
evidenced by a written instrument. The General Partner shall not charge a
prepayment penalty on any such loan. Any loan in contravention of this Section
shall be deemed an invalid action taken by the General Partner and such advance
will be classified as a General Partner Capital Contribution.
ARTICLE VII
CAPITAL CONTRIBUTIONS OF LIMITED PARTNER
AND SPECIAL LIMITED PARTNER
Section 7.1 Original Limited Partner. The Original Limited Partner made a
Capital Contribution of $99. Effective as of the date of this Agreement, the
Original Limited Partner's Interest has been liquidated and the Partnership has
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reacquired the Original Limited Partner's Interest in the Partnership. The
Original Limited Partner acknowledges that it has no further interest in the
Partnership as a limited partner as of the date of this Agreement, and has
released all claims, if any, against the Partnership arising out of its
participation as a limited partner.
Section 7.2 Capital Contribution of Limited Partner. The Limited Partner
shall make a Capital Contribution in the amount of $1,287,189, as may be
adjusted in accordance with Section 7.4 of this Agreement, in cash on the dates
and subject to the conditions hereinafter set forth.
(a) The obligation of the Limited Partner to pay the aforesaid Capital
Contribution shall be subject to the satisfaction of the following conditions.
(1) Prior to the initial Capital Contribution payment the
General Partner shall deliver to the Limited Partner:
(A) a legal opinion in a form substantially similar
to the form of opinion attached hereto as Exhibit "B" and incorporated herein by
this reference;
(B) a fully executed Certification and Agreement in
the form attached hereto as Exhibit "C" and incorporated herein by this
reference;
(C) a copy of an ALTA owners title insurance policy
naming the Limited Partner as a co-insured and including a non-imputation and
fairway endorsement ("Title Insurance"). The Title Insurance shall be in an
amount equal to the Mortgage Loan and the Limited Partner's Capital
Contribution;
(D) verification that the Partnership has obtained
Insurance required during construction; and
(E) delivery to the Limited Partner a copy of the
recorded grant deed (warranty deed).
(2) Prior to the due date of each Capital Contribution
installment, except the first payment, the General Partner shall deliver to the
Limited Partner a fully executed General Partner Certification in the form
attached hereto as Exhibit "D" and incorporated herein by this reference.
(3) Prior to the Capital Contribution payment referenced in
Section 7.2(b)(2) the General Partner shall deliver to the Limited Partner:
(A) a certificate of occupancy (or equivalent
evidence of local occupancy approval if a permanent certificate is not
available) on all the apartment units in the Project;
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(B) if not previously provided, the draw request
information referenced in Section 14.3(a) of this Agreement;
(C) a certification signed by the architect in a form
substantially similar to the form attached hereto as Exhibit "E" and
incorporated herein by this reference, indicating that the Improvements have
been completed in all material respects in accordance with the Project
Documents;
(D) a letter from the Contractor in a form
substantially similar to the form attached hereto as Exhibit "G" and
incorporated herein by this reference stating that all amounts payable to the
Contractor have been paid in full except for normal retainages and amounts in
dispute and that the Partnership is not in material violation of the
Construction Contract; and
(E) verification that the Partnership has obtained
Insurance required during operations.
(4) Prior to the Capital Contribution payment referenced in
Section 7.2(b)(3) the General Partner shall deliver to the Limited Partner:
(A) the current rent roll;
(B) copies of all initial tenant files including
completed applications, completed questionnaires or
checklist of income and assets, documentation of third party verification of
income and assets, and income certification forms (LIHTC specific) collected by
the Management Agent, or General Partner, verifying each tenant's eligibility as
a Qualified Tenant; and
(C) copies of the executed lease agreement with the
tenants.
(D) copies of all Mortgage documents and Title
Insurance in an amount equal to the Mortgage and the Limited
Partner's Capital Contribution.
(E) a copy of the declaration of restrictive
covenants/extended use agreement entered into between the
Partnership and the State Tax Credit Agency;
(F) an audited construction cost certification (which
includes an itemized cost breakdown);
(G) 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;
(H) Internal Revenue Code Form 8609, or any successor
form; and
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(E) any documents previous not provided to the
Limited Partner but required pursuant to this Section 7.2(a)
and Sections 14.3(a), (b) and (c).
(b) Provided the conditions of Section 7.2(a) of this Partnership
Agreement have been met, the Limited Partner shall make the following Capital
Contributions:
(1) $643,530 shall be payable upon:
(A) Upon admittance of the Limited Partner into the
partnership; (B) receipt and approval of construction costs, sources and
uses, the operating budget and construction insurance; (C) closing of the
construction loan.
(2) $514,824 shall be payable upon:
(A) Upon completion of construction as evidenced by
the inspecting architect's certification, provided that the conditions in 7.2
(a)of this agreement have been met.
(3) $128,706 shall be payable upon:
(A) receipt by the Limited Partner of an updated
title insurance policy naming the Limited Partner as a co-insured; (B) Debt
service coverage of 1.10 for 3 consecutive months or 5 months cumulative; (C)
The Limited Partner's receipt of the first year tax return in which the tax
credits are taken; provided (D) the conditions set forth in Section 7.2 (a)of
this Agreement have been met.
Section 7.3 Repurchase of Limited Partner's Interest. Within 60 days after
the General Partner receives written demand from the Limited Partner and/or the
Special Limited Partner, the Partnership shall repurchase the Limited Partner's
Interest and/or the Special Limited Partner's Interest in the Partnership by
refunding to it in cash the full amount of the Capital Contribution which the
Limited Partner and/or the Special Limited Partner has theretofore made in the
event that, for any reason, the Partnership shall fail to:
(a) receive an allocation of LIHTC no later than the close of the
calendar year during which the Project is placed in service unless the
Partnership elects to defer the commencement of the credit period to the
following year;
(b) cause the Project to be placed in service by November 1, 1999;
(c) achieve 90% occupancy of the Project by Qualified Tenants by April
1, 2000;
(d) obtain Permanent Mortgage Commencement by January 1, 2000;
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(e) meet both the Minimum Set-Aside Test and the Rent Restriction Test
not later than December 31 of the first year the Partnership elects the LIHTC to
commence in accordance with the Code; and
(f) obtain a carryover allocation, within the meaning of Section 42 of
the Code, from the State Tax Credit Agency on or before December 31, 1998.
Section 7.4 Reduction of Limited Partner's Capital Contribution.
(a) If the anticipated amount of Projected Tax Credits to be allocated
to the Limited Partner and Special Limited Partner as evidenced by IRS Form
8609, Schedule A thereto, and the audited construction cost certification
provided to the Limited Partner are less than $1,775,433 (the "Revised Projected
Tax Credits") then the Limited Partner's and Special Limited Partner's Capital
Contribution provided for in Section 7.2 and Section 7.5 respectively shall be
reduced by the amount which will make the total Capital Contribution to be paid
by the Limited Partner and Special Limited Partner to the Partnership equal to %
of the Revised Projected Tax Credits so anticipated to be allocated to the
Limited Partner and Special Limited Partner. If the Capital Contribution
reduction referenced in this Section 7.4(a) is greater than the remaining
Capital Contribution to be paid by the Limited Partner and the Special Limited
Partner then the General Partner shall have ninety days from the date the
General Partner receives notice from either the Limited Partner or the Special
Limited Partner to pay the shortfall to the Partnership, which shall be treated
as an Operating Loan.
(b) The General Partner is required to use its best efforts to rent
100% of the Project's apartment units to Qualified Tenants throughout the
Compliance Period. If at the end of each calendar year during the first five
calendar years following the year in which the Project is placed in service, the
Actual Tax Credit for any fiscal year or portion thereof is or will be less than
the Projected Annual Tax Credit, or the Revised Projected Tax Credit calculated
on an annual basis ("Revised Projected Annual Tax Credit"), if applicable (the
"Annual Credit Shortfall"), then, unless the Annual Credit Shortfall shall have
previously been addressed under Section 7.4(a), the next Capital Contribution
owed by the Limited Partner or the Special Limited Partner shall be reduced by
the product of the Annual Credit Shortfall amount multiplied by 72.5% (such
amount, the "Capital Contribution Reduction Amount"), and if the Capital
Contribution Reduction Amount exceeds the amount of the next scheduled Capital
Contribution, then such excess Capital Contribution Reduction Amount shall be
applied to reduce succeeding Capital Contributions of the Limited Partner or the
Special Limited Partner. If the Capital Contribution Reduction Amount is greater
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than the Limited Partner's and Special Limited Partner's remaining Capital
Contributions then the General Partner shall pay to the Partnership such excess
Capital Contribution Reduction Amount, which shall be treated as an Operating
Loan. The General Partner shall have ninety (90) days to pay such excess Capital
Contribution Reduction Amount from the date the General Partner receives notice
from either the Limited Partner or the Special Limited Partner.
(c) In the event that, for any reason, at any time after the first five
calendar years following the year in which the Project is placed in service,
there is an Annual Credit Shortfall, that was not previously addressed under
Section 7.4 (a) or Section 7.4 (b) such that the total capital contributions
paid by the Limited Partner and the Special Limited Partner exceed 72.5% of the
projected Tax Credits to be paid to the Limited Partner and the Special Limited
Partner over the Tax Credit Period (such amount, the "Excess Capital
Contribution"), then there shall be a reduction in the General Partner's share
of Net Operating Income in an amount equal to the Excess Capital Contribution
and said amount instead shall be paid to the Limited Partner. In the event there
are not sufficient funds to pay the full Excess Capital Contribution to the
Limited Partner at the time of the next Distribution of Net Operating Income,
then the unpaid Excess Capital Contribution 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 Excess Capital Contribution then the excess will be
paid in accordance with Section 11.2(b).
(d) The General Partner has represented, in part, that the Limited
Partner will receive Projected Annual Tax Credits of $177,543 in 2000 and 2001.
In the event the 2000 and 2001 Actual Annual Tax Credits are less than projected
then the Limited Partner's Capital Contribution shall be reduced by an amount
equal to % times the difference between the Projected Annual Tax Credits for
2000 and 2001 and the Actual Tax Credits for 2000 and 2001. If the 2000 and 2001
Tax Credits are less than projected then the Special Limited Partner's Capital
Contribution shall be reduced following the same equation referenced in the
preceding sentence. If, at the time of determination thereof, the Capital
Contribution adjustment referenced in this Section 7.4(d) is greater than the
balance of the Limited Partner's or Special Limited Partner's Capital
Contribution payment which is then due, if any, then such excess Capital
Contribution Reduction Amount shall be paid by the General Partner to the
Limited Partner and/or the Special Limited Partner within ninety days of the
General Partner receiving notice of the reduction from the Limited Partners
and/or the Special Limited Partner.
(e) The Partners recognize and acknowledge that the Limited Partner and
the Special Limited Partner are making their Capital Contribution, in part, on
the expectation that the Projected Tax Credits are allocated to the Partners
over the Tax Credit Period. If the Projected Tax Credits are not allocated to
the Partners during the Tax Credit Period then the Limited Partner's and Special
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Limited Partner's Capital Contribution shall be reduced by an amount agreed upon
by the Partners, reasonably and in good faith, to provide the Limited Partner
and the Special Limited Partner with their anticipated internal rate of return
of 8%.
(f) In the event there is a reduction in the qualified basis of the
Project for income tax purposes following an audit by the Internal Revenue
Service (IRS) resulting in a recapture of Tax Credits previously claimed, then,
in addition to any other payments to which the Limited Partner and Special
Limited Partner are entitled under the terms of this Section 7.4, the General
Partner shall pay to the Limited Partner and the Special Limited Partner the sum
of (1) the deficiency assessed against the Limited Partner or Special Limited
Partner as a result of the Tax Credit recapture, (2) any interest and penalties
imposed on the Limited Partner or Special Limited Partner with respect to such
deficiency, and (3) an amount sufficient to pay any tax liability owed by the
Limited Partner or Special Limited Partner resulting from the receipt of the
amounts specified in (1) and (2).
Section 7.5 Capital Contribution of Special Limited Partner. The Special
Limited Partner shall make a Capital Contribution of $129 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, with the Consent of
the Special Limited Partner, determine that such cash should, in whole or in
part, be returned to the Partners, pro rata, in reduction of their Capital
Contribution. No such return shall be made unless all liabilities of the
Partnership (except those to Partners on account of amounts credited to them
pursuant to this Agreement) have been paid or there remain assets of the
Partnership sufficient, in the sole discretion of the General Partner, to pay
such liabilities.
Section 7.7 Liability of Limited Partner and Special Limited Partner. The
Limited Partner and Special Limited Partner shall not be liable for any of the
debts, liabilities, contracts or other obligations of the Partnership. The
Limited Partner and Special Limited Partner shall be liable only to make Capital
Contributions in the amounts and on the dates specified in this Agreement and,
except as otherwise expressly required hereunder, shall not be required to lend
any funds to the Partnership or, after their respective Capital Contributions
have been paid, to make any further Capital Contribution to the Partnership.
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ARTICLE VIII
WORKING CAPITAL AND RESERVES
Section 8.1 Operating and Maintenance Account. The General Partner, from
Partnership funds, shall establish an operating and maintenance account and
shall deposit thereinto an annual amount equal to $ 200 per residential unit per
year for the purpose of repairs, maintenance and capital repairs. Said deposit
shall be made monthly in equal installments. Withdrawals from such account in
excess of $5,000 shall be made only with the Consent of the Special Limited
Partner. Any balance remaining in the account at the time of a sale of the
Project shall be allocated and distributed equally between the General Partner
and the Limited Partner.
Section 8.2 Tax and Insurance Account.The General Partner, from Partnership
funds, shall establish a tax and insurance account ("T & I Account") for the
purpose of making the requisite Insurance premium payments and the real estate
tax payments. The annual deposit to the T & I Account shall equal the total
annual Insurance payment and the total annual real estate tax payment. Said
amount shall be deposited monthly in equal installments. Withdrawals from such
account shall be made only for its intended purpose. Any balance remaining in
the account at the time of a sale of the Project shall be allocated and
distributed equally between the General Partner and the Limited Partner.
Section 8.3 Other Reserves. The General Partner, on behalf of the
Partnership, shall establish out of funds available to the Partnership any
reserve account(s) that may be required by the State Tax Credit Agency and/or
such other reserve accounts sufficient in the General Partner's sole discretion
to pay any unforeseen contingencies which might arise in connection with the
furtherance of the Partnership business including, but not limited to, (a) any
rent subsidy required to maintain rent levels in compliance with the Tax Credit
Conditions; and (b) any debt service or other payments for which other funds are
not provided for hereunder or otherwise expected to be available to the
Partnership. The General Partner shall not be liable for any good-faith estimate
which it shall make in connection with establishing or maintaining any such
reserves nor shall the General Partner be required to establish or maintain any
such reserves if, in its sole discretion, such reserves do not appear to be
necessary.
ARTICLE IX
MANAGEMENT AND CONTROL
Section 9.1 Power and Authority of General Partner. Subject to the
Consent of the Special Limited Partner or the consent of the Limited Partner
where required by this Agreement, and subject to the other limitations and
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restrictions included in this Agreement, the General Partner shall have complete
and exclusive control over the management of the Partnership business and
affairs, and shall have the right, power and authority, on behalf of the
Partnership, and in its name, to exercise all of the rights, powers and
authority of a partner of a partnership without limited partners. If there is
more than one General Partner, all acts, decisions or consents of the General
Partners shall require the concurrence of all of the General Partners. No
actions taken without the authorization of all the General Partners shall be
deemed valid actions taken by the General Partners pursuant to this Agreement.
No Limited Partner or Special Limited Partner (except one who may also be a
General Partner, and then only in its capacity as General Partner within the
scope of its authority hereunder) shall have any right to be active in the
management of the Partnership's business or investments or to exercise any
control thereover, nor have the right to bind the Partnership in any contract,
agreement, promise or undertaking, or to act in any way whatsoever with respect
to the control or conduct of the business of the Partnership, except as
otherwise specifically provided in this Agreement.
Section 9.2 Payments to the General Partners and Others.
(a) The Partnership shall pay to the Developer a Development Fee of
$279,756. The Development Fee shall first be paid from available proceeds in
accordance with Section 9.2(b) of this Agreement and if not paid in full then
the Development Fee will be paid to the extent permitted in Section 11.1 of this
Agreement.
(b) The Partnership shall utilize the proceeds from the Capital
Contributions paid pursuant to Section 7.2(b) and Section 7.5 of this Agreement
for development costs including, but not limited to, land costs, architectural
fees, survey and engineering costs, financing costs, loan fees, building
materials and labor. If any Capital Contribution proceeds are remaining after
Completion of Construction and all construction costs, excluding the Development
Fee, are paid in full and the Construction Loan retired, then the remainder
shall: first be paid to the Developer in payment of the Development Fee; second
be paid to the General Partner as a reduction of the General Partner's Capital
Contribution; and any remaining Capital Contribution proceeds shall be paid to
the General Partner as a Partnership oversight fee. Notwithstanding the
foregoing, the Developer shall be paid 15% of the Development Fee, not to exceed
$40,261, from the initial Capital Contribution under Section 7.2(b)(1).
(c) The Partnership shall pay to the Management Agent a property
management fee for the leasing and management of the Project in an amount in
accordance with the Management Agreement. The initial term of the Management
Agreement shall not exceed three years, and the execution or renewal of any
Management Agreement shall be subject to the prior Consent of the Special
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Limited Partner. If the Management Agent is an Affiliate of the General Partner
then commencing with the termination of the Operating Deficit Guarantee Period,
in any year in which the Project has an Operating Deficit, 40% of the management
fee will be deferred ("Deferred Management Fee"). Deferred Management Fees, if
any, shall be paid to the Management Agent in accordance with Section 11.1 of
this Agreement.
(1) The General Partner shall dismiss the Management Agent,
subject to the terms of any agreement with the Management Agent at the
reasonable request of the Special Limited Partner.
(2) The appointment of any successor Management Agent is
subject to the Consent of the Special Limited Partner which may only be sought
after the General Partner has, to the best of its knowledge, provided the
Special Limited Partner with accurate and complete disclosure respecting the
proposed Management Agent.
(d) The Partnership shall pay to the Limited Partner a fee (the
"Reporting Fee") commencing in 2000 equal to 10% of the Net Operating Income but
in no event less than $500 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.
(e) The Partnership shall pay to the General Partner an Incentive
Management Fee equal to % of the available Net Operating Income in accordance
with Section 11.1 of this Agreement for each fiscal year of the Partnership
commencing in 2000 for services incident to the administration of the business
and affairs of the Partnership, which services shall include, but not limited
to, maintaining the books and records of the Partnership, selecting and
supervising the Partnership's Accountants, bookkeepers and other Persons
required to prepare and audit the Partnership's financial statements and tax
returns, and preparing and disseminating reports on the status of the Project
and the Partnership, all as required by Article XIV of this Agreement. The
Incentive Management Fee shall be payable within seventy-five (75) days
following each calendar year and shall be payable from Net Operating Income in
the manner and priority set forth in Section 11.1. If the Incentive Management
Fee is not paid in any year it shall not accrue for payment in subsequent years.
Section 9.3 Specific Powers of the General Partner. Subject to the other
provisions of this Agreement, the General Partner, in the Partnership's name and
on its behalf, may:
(a) hold, sell, transfer, lease or otherwise deal with any real,
personal or mixed property, interest therein or appurtenance thereto in
accordance with the purpose of this Agreement as indicated in Article IV hereto;
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(b) employ, contract and otherwise deal with, from time to time,
Persons whose services are necessary or appropriate in connection with
management and operation of the Partnership business, including, without
limitation, contractors, agents, brokers, Accountants and Management Agents
(provided that the selection of any Accountant or Management Agent has received
the Consent of the Special Limited Partner) and attorneys, on such terms as the
General Partner shall determine;
(c) bring or defend, pay, collect, compromise, arbitrate, resort to
legal action or otherwise adjust claims or demands of or against the
Partnership;
(d) pay as a Partnership expense any and all costs and expenses
associated with the formation, development, organization and operation of the
Partnership, including the expense of annual audits, tax returns and LIHTC
compliance;
(e) deposit, withdraw, invest, pay, retain and distribute the
Partnership's funds in a manner consistent with the provisions of this
Agreement;
(f) execute the Construction Loan and the Mortgage; and
(g) require in any or all Partnership contracts that the General
Partner shall not have any personal liability thereunder but that the Person
contracting with the Partnership shall look solely to the Partnership and its
assets for satisfaction;
(h) raise or lower rents in the General Partner's discretion; provided,
however that any such changes in rents shall not cause the Project to violate
the Minimum Set-Aside Test, any applicable regulations of the State Tax Credit
Agency, or otherwise cause the Partnership to lose any of the Projected Tax
Credits.
(i) execute, acknowledge and deliver any and all instruments to
effectuate any of the foregoing.
Section 9.4 Authority Requirements. During the Compliance Period, the
following provisions shall apply.
(a) Each of the provisions of this Agreement shall be subject to, and
the General Partner covenants to act in accordance with, the Tax Credit
Conditions and all applicable federal, state and local laws and regulations.
(b) The Tax Credit Conditions and all such laws and regulations, as
amended or supplemented, shall govern the rights and obligations of the
Partners, their heirs, executors, administrators, successor and assigns, and
they shall control as to any terms in this Agreement which are inconsistent
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therewith, and any such inconsistent terms of this Agreement shall be
unenforceable by or against any of the Partners.
(c) Upon any dissolution of the Partnership or any transfer of the
Project, no title or right to the possession and control of the Project and no
right to collect rent therefrom shall pass to any Person who is not, or does not
become, bound by the Tax Credit Conditions in a manner that, in the opinion of
counsel to the Partnership, would not avoid a recapture thereof on the part of
the former owners.
(d) Any conveyance or transfer of title to all or any portion of the
Project required or permitted under this Agreement shall in all respects be
subject to the Tax Credit Conditions and all conditions, approvals or other
requirements of the rules and regulations of any authority applicable thereto.
Section 9.5 Limitations on General Partner's Power and Authority.
Notwithstanding the provisions of this Article IX, the General Partner shall
not:
(a) except as required by Section 9.4, act in contravention of this
Agreement;
(b) act in any manner which would make it impossible to carry on the
ordinary business of the Partnership;
(c) confess a judgment against the Partnership;
(d) possess Partnership property, or assign the Partner's right in
specific Partnership property, for other than the exclusive benefit of the
Partnership;
(e) admit a Person as a General Partne except as provided in this
Agreement;
(f) admit a Person as a Limited Partner except as provided in this
Agreement;
(g) violate any provision of the Mortgage;
(h) cause the Project apartment units to be rented to anyone other than
Qualified Tenants;
(i) violate the Minimum Set-Aside Test or the Rent Restriction Test for
the Project;
(j) cause any recapture of the Tax Credits;
(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;
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(l) commingle funds of the Partnership with the funds of another
Person; or
(m) take any action which requires the Consent of the Special Limited
Partner or the consent of the Limited Partner unless the General Partner has
received said Consent.
Section 9.6 Restrictions on Authority of General Partner. Without Consent
of the Special Limited Partner the General Partner shall not:
(a) sell, exchange, lease or otherwise dispose of the Project;
(b) incur indebtedness other than the Construction Loan and Mortgage
Loan in the name of the Partnership, other than in the ordinary course of the
Partnership's business;
(c) engage in any transaction not expressly contemplated by this
Agreement in which the General Partner has an actual or potential conflict of
interest with the Limited Partner or the Special Limited Partner;
(d) contract away the fiduciary duty owed to the Limited Partner and
the Special Limited Partner at common law;
(e) take any action which would cause the Project to fail to qualify,
or which would cause a termination or discontinuance of the qualification of the
Project, as a "qualified low income housing project" under Section 42(g)(1) of
the Code, as amended, or any successor thereto, or which would cause the Limited
Partner to fail to obtain the Projected Tax Credits or which would cause the
recapture of any LIHTC;
(f) make any material expenditure of funds, or commit to make any such
expenditure, other than in response to an emergency, except as provided for in
the annual budget approved by the Special Limited Partner, as provided in
Section 14.3(i) hereof;
(g) cause the merger or other reorganization of the Partnership; or
(h) dissolve the Partnership, except as provided in this Agreement.
Section 9.7 Duties of General Partner. The General Partner agrees that it
shall at all times:
(a) diligently and faithfully devote such of its time to the business
of the Partnership as may be necessary to properly conduct the affairs of the
Partnership;
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(b) file and publish all certificates, statements or other instruments
required by law for the formation and operation of the Partnership as a limited
partnership in all appropriate jurisdictions;
(c) cause the Partnership to carry Insurance from an Insurance Company;
(d) have a fiduciary responsibility for the safekeeping and use of all
funds and assets of the Partnership, whether or not in its immediate possession
or control and not employ or permit another to employ such funds or assets in
any manner except for the benefit of the Partnership;
(e) use its best efforts so that all requirements shall be met which
are reasonably necessary to obtain or achieve (1) compliance with the Minimum
Set-Aside Test, the Rent Restriction Test, and any other requirements necessary
for the Project to initially qualify, and to continue to qualify, for LIHTC; (2)
issuance of all necessary certificates of occupancy, including all governmental
approvals required to permit occupancy of all of the apartment units in the
Project; (3) compliance with all provisions of the Project Documents and (4) a
reservation and allocation of LIHTC from the State Tax Credit Agency;
(f) use its best efforts to keep the Project in decent, safe, sanitary
and good condition, repair and working order, ordinary use and obsolescence
excepted, and make or cause to be made from time to time all necessary repairs
thereto (including external and structural repairs) and renewals and
replacements thereof;
(g) pay, before the same shall become delinquent and before penalties
accrue thereon all Partnership taxes, assessments and other governmental charges
against the Partnership or its properties, and all of its other liabilities,
except to the extent and so long as the same are being contested in good faith
by appropriate proceedings in such manners as not to cause any material adverse
effect on the Partnership's property, financial condition or business
operations, with adequate reserves provided for such payments;
(h) permit, and cause the Management Agent to permit, the Special
Limited Partner and its representatives: (1) to have access to the Project and
personnel employed by the Partnership and by the Management Agent at all times
during normal business hours after reasonable notice; (2) to examine all
agreements, LIHTC compliance data and plans and specifications; and (3) to make
copies thereof;
(i) exercise good faith in all activities relating to the conduct of
the business of the Partnership, including the development, operation and
maintenance of the Project, and shall take no action with respect to the
business and property of the Partnership which is not reasonably related to the
achievement of the purpose of the Partnership;
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(j) make any Capital Contributions, advances or loans required to be
made by the General Partner under the terms of this Agreement;
(k) establish and maintain all reserves required to be established and
maintained under the terms of this Agreement;
(l) use its best efforts to cause the Management Agent to manage the
Project in such a manner that the Project will be eligible to receive LIHTC with
respect to 100% of the apartment units in the Project. To that end, the General
Partner agrees, without limitation: (1) to make all elections requested by the
Special Limited Partner under Section 42 of the Code to allow the Partnership or
its Partners to claim the Tax Credit; (2) to file Form 8609 with respect to the
Project as required, for at least the duration of the Compliance Period; (3) to
operate the Project and cause the Management Agent to manage the Project so as
to comply with the requirements of Section 42 of the Code, as amended, or any
successor thereto, including, but not limited to, Section 42(g) and Section
42(i)(3) of the Code, as amended, or any successors thereto; (4) to make all
certifications required by Section 42(l) of the Code, as amended, or any
successor thereto; and (5) to operate the Project and cause the Management Agent
to manage the Project so as to comply with all other Tax Credit Conditions; and
(m) perform such other acts as may be expressly required of it under
the terms of this Agreement.
Section 9.8 Partnership Expenses.
(a) All of the Partnership's expenses shall be billed directly to and
paid by the Partnership to the extent practicable. Reimbursements to the General
Partner or any of its Affiliates by the Partnership shall be allowed only for
the Partnership's operating cash expenses and subject to the limitations on the
reimbursement of such expenses set forth herein. As used in this Section 9.8 the
term "operating cash expenses" shall mean, with respect to any fiscal period,
the amount of cash disbursed by the Partnership for Partnership business in that
period in the ordinary course of business for the payment of its operating
expenses, including, but not limited to expenses for advertising and promotion,
management, utilities, repair and maintenance, Insurance, Partner
communications, legal, accounting, statistical and bookkeeping services, use of
computing or accounting equipment, travel and telephone expenses, salaries and
direct expenses of Partnership employees while engaged in Partnership business,
and any other operational and administrative expenses necessary for the prudent
operation of the Partnership. Without limiting the generality of the foregoing,
"operating cash expenses" shall include fees paid by the Partnership to the
General Partner or any Affiliate of the General Partner permitted by this
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Agreement and the actual cost of goods, materials and administrative services
used for or by the Partnership, whether incurred by the General Partner, an
Affiliate of the General Partner or a nonaffiliated Person in performing the
foregoing functions. As used in the preceding sentence, "actual cost of goods
and materials" means the actual cost of goods and materials used for or by the
Partnership and obtained from entities which are not Affiliates of the General
Partner, and actual cost of administrative services means the pro rata cost of
personnel (as if such persons were employees of the Partnership) associated
therewith, but in no event to exceed the amount which would be charged by
nonaffiliated Persons for comparable goods and services.
(b) Reimbursement to the General Partner or any of its Affiliates of
operating cash expenses pursuant to Subsection (a) hereof shall be subject to
the following:
(1) no such reimbursement shall be permitted for services for
which the General Partner or any of its Affiliates is entitled to compensation
by way of a separate fee; and
(2) no such reimbursement shall be made for (A) rent or
depreciation, utilities, capital equipment or other such administrative items,
and (B) salaries, fringe benefits, travel expenses and other administrative
items incurred or allocated to any "controlling person" of the General Partner
or any Affiliate of the General Partner. For the purposes of this Section
9.8(b)(2), "controlling person" includes, but is not limited to, any Person,
however titled, who performs functions for the General Partner or any Affiliate
of the General Partner similar to those of: (i) chairman or member of the board
of directors; (ii) executive management, such as president, vice president or
senior vice president, corporate secretary or treasurer; (iii) senior
management, such as the vice president of an operating division who reports
directly to executive management; or (iv) those holding 5% or more equity
interest in such General Partner or any such Affiliate of the General Partner or
a person having the power to direct or cause the direction of such General
Partner or any such Affiliate of the General Partner, whether through the
ownership of voting securities, by contract or otherwise.
Section 9.9 General Partner Expenses. The General Partner or Affiliates of
the General Partner shall pay all Partnership expenses which are not permitted
to be reimbursed pursuant to Section 9.8 and all expenses which are unrelated to
the business of the Partnership.
Section 9.10 Other Business of Partners. Any Partner may engage
independently or with others in other business ventures wholly unrelated to the
Partnership business of every nature and description, including, without
limitation, the acquisition, development, construction, operation and management
of real estate projects and developments of every type on their own behalf or on
behalf of other partnerships, joint ventures, corporations or other business
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ventures formed by them or in which they may have an interest, including,
without limitation, business ventures similar to, related to or in direct or
indirect competition with the Project. Neither the Partnership nor any Partner
shall have any right by virtue of this Agreement or the partnership relationship
created hereby in or to such other ventures or activities or to the income or
proceeds derived therefrom. Conversely, no Person shall have any rights to
Partnership assets, incomes or proceeds by virtue of such other ventures or
activities of any Partner.
Section 9.11 Covenants, Representations and Warranties. The General Partner
covenants, represents and warrants that the following are presently true and,
except as otherwise provided, 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 (as of the date
hereof) are in full force and effect and neither the Partnership nor the General
Partner is in breach or violation, in any material respect, of any provisions
thereof.
(c) Improvements will be completed in a timely and workerlike manner in
accordance in all material respects with all applicable requirements of all
appropriate governmental entities and the plans and specifications of the
Project, as such plans and specifications may be changed from time to time with
the approval of Regions Bank, Alabama Housing Finance Authority (HOME) and any
applicable governmental entities, if such approval shall be required.
(d) The Project is being operated in accordance with standards and
procedures which are prudent and customary for the operation of properties
similar to the Project.
(e) Additional Improvements on the Project, if any, shall be completed
substantially in conformity with plans and specifications reasonably approved by
the Special Limited Partner.
(f) Except for any action taken by a Partner other than the General
Partner, no Partner has or will have any personal liability with respect to or
has or will have personally guaranteed the payment of the Mortgage, except that
the General Partner has limited recourse for environmental clean up, fraud or
misrepresentation, or misapplication of insurance proceeds, condemnation awards
or rents.
(g) The Partnership is in substantial compliance with all construction
and use codes applicable to the Project and is not in material violation of any
zoning, environmental or similar regulations applicable to the Project.
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(h) All appropriate public utilities, including sanitary and storm
sewers, water, gas and electricity, are currently available and will be
operating properly for all units in the Project at the time of first occupancy
and throughout the term of the Partnership subject to temporary interruptions
not as a result of the General Partner's actions, that may occur from time to
time.
(i) The Partnership has obtained Insurance written by an Insurance
Company.
(j) The Partnership owns the fee simple interest in the Project.
(k) The Construction Contract has been entered into between the
Partnership and the Contractor; no other consideration or fee shall be paid to
the Contractor other than amounts set forth in the Construction Contract.
(l) The Partnership will require the Accountant to depreciate the
Improvements over a 27 1/2 year term.
(m) 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, except those that may have been used in
the normal maintenance and operation of any portion of 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 Substances and shall
not be used to generate, manufacture, refine, transport, treat, store, handle,
dispose of, transfer, produce or process Hazardous Materials, except in
connection with the normal maintenance and operation of any portion of the
Project. The General Partner shall comply, or cause there to be compliance, with
all applicable Federal, state and local laws, ordinances, rules and regulations
with respect to Hazardous Materials and shall keep, or cause to be kept, the
Project free and clear of any liens imposed pursuant to such laws, ordinances,
rules and regulations. The General Partner must promptly notify the Limited
Partner and the Special Limited Partner in writing (3) if it knows, or suspects
or believes there may be any Hazardous Substance in or around any part of the
Project, any Improvements constructed on the Project, or the soil, groundwater
or soil vapor that is not used in connection with the normal maintenance and
operation of any portion of the Project, (4) if the General Partner becomes
aware that the General Partner or the Partnership is likely to be subject to any
threatened or pending investigation by any governmental agency under any law,
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regulation or ordinance pertaining to any Hazardous Substance, and (5) of any
claim made or threatened by (to the extent the General Partner is aware of such
threat)any Person, other than a governmental agency, against the Partnership or
General Partner arising out of or resulting from any Hazardous Substance being
present or released in, on or around any part of the Project.
(n) The General Partner has not executed and will not execute any
agreements with provisions contradictory to, or in opposition to, the provisions
of this Agreement.
(o) The Partnership will, to the extent permitted by law, allocate to
the Limited Partner the Projected Annual Tax Credits, or the Revised Projected
Tax Credits, if applicable.
(p) To the knowledge of the General Partner, no charges, liens or
encumbrances exist with respect to the Project other than those which are
created or permitted by the Project Documents or Mortgage or are noted or
excepted in the title policy for the Project.
(q) The buildings on the Project site constitute or shall constitute a
"qualified low-income housing project" as defined in Section 42(g) of the Code,
and as amplified by the Treasury Regulations thereunder. In this connection, not
later than December 31 of the first year in which the Partners elect the LIHTC
to commence in accordance with the Code, the Project will satisfy the Minimum
Set-Aside Test.
(r) All accounts of the Partnership required to be maintained under the
terms of the Project Documents, including, without limitation, any reserves in
accordance with Article VIII hereof, as of the required time shall be funded to
required levels.
(s) Except as permitted by this Agreement, the General Partner has not
lent or otherwise advanced any funds to the Partnership other than its Capital
Contribution and the Partnership has no unsatisfied obligation to make any
payments of any kind to the General Partner or any Affiliate thereof.
(t) As of the date hereof, no event has occurred which constitutes a
material default under any of the Project Documents.
(u) No event has occurred which has caused, and the General Partner has
not acted in any manner which will cause (1) the Partnership to be treated for
federal income tax purposes as an association taxable as a corporation, (2) the
Partnership to fail to qualify as a limited partnership under the Act, or (3) as
of the date hereof, 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
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Partner shall not be in breach of this representation if the action causing the
Limited Partner to be liable for the Partnership obligations is undertaken by
the Limited Partner.
(v) As of the date hereof, 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 and adversely affected the operation of the Partnership or the
Project; (2) materially and 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.
(w) As of the date hereof, neither the Partnership nor the General
Partner has any liabilities, contingent or otherwise, which have not been
disclosed in writing to the Limited Partner and the Special Limited Partner and
which in the aggregate affect the ability of the Limited Partner to obtain the
anticipated benefits of its investment in the Partnership.
(x) The General Partner or guarantor has and shall maintain a net worth
equal to at least $1,000,000 computed in accordance with generally accepted
accounting principles.
The General Partner shall be liable to the Limited Partner for any
costs, damages, loss of profits, diminution in the value of its investment in
the Partnership, or other losses, of every nature and kind whatsoever, direct or
indirect, realized or incurred by the Limited Partner as a result of any
material breach of the representations and warranties set forth in this Section
9.11.b Notwithstanding the foregoing, the General Partner shall not be liable
for any exemplary, punitive or consequential damages. The General Partner shall
not have any liability whatsoever under this provision if the Limited Partner
has exercised any right to require the General Partner to repurchase the
interest of the Limited Partner. It is the intention of the Partners that no
Partner hereto shall be entitled to more than one remedy under any provision of
this Agreement. By way of example, any effective operation of Section 7.4 of
this Agreement which ccurs as a proximate result of a breach of representation,
warranty or covenant contained in this Agreement shall moot any other remedy
against the General partner contained herein.
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Section 9.12 Right of First Refusal. The Right of First Refusal provided
for in this Agreement shall conform to the requirements of Code Section
42(i)(7), as amended from time to time. If the Limited Partner is desirous of
selling its Interest in the Partnership then it must first offer its Interest to
Alabama Council on Human Relations, Inc., an Alabama non-profit corporation. For
these purposes, the term "sell" shall include any transfer, conveyance,
assignment or pledge of all or any portion of such Interests. Before the Limited
Partner sells or unconditionally agrees to sell its Interest, it shall offer
to sell its Interest to Alabama Council on Human Relations, Inc. (the "Offer")
for an amount equal to the principal amount of outstanding indebtedness secured
by the Project (other than indebtedness incurred within the 5-year period ending
on the date of the sale) and all Federal, State and local taxes attributable to
such sale. Alabama Council on Human Relations, Inc. shall have 30 days from
receipt of the Offer (the "Offer Period") in which to accept or reject the
Offer. If Alabama Council on Human Relations, Inc. gives timely notice of
acceptance of the Offer, the Limited Partner shall be obligated to sell its
Interest and Alabama Council on Human Relations, Inc. shall be obligated to
purchase the Interest. If Alabama Council on Human Relations, Inc. does not give
timely notice of acceptance of the Offer, then the Limited Partner may sell its
Interest to a third party on the same terms and conditions as the Limited
Partner offered its capital interest to Alabama Council on Human Relations, Inc.
Section 9.13 Representation and Warranties of the Limited Partner and the
Special Limited Partner. The Limited Partner and the Special Limited Partner
covenant, represent and warrant that the following are presently true and,
except as otherwise provided, will be true during the term of this Agreement, to
the extent applicable.
(a) Each of the Limited Partner and the Special Limited Partner is a
limited partnership duly organized and in good standing under the jurisdiction
in which it was organized;
(b) The execution of the Partnership Agreement has been authorized by
all necessary corporate and partnership action on the part of each of the
Limited Partner, the Special Limited Partner and the general partners of each
and the Partnership Agreement has been duly executed and delivered by each of
the Limited Partner and Special Limited Partner and is enforceable in accordance
with its terms against each of them and neither is in breach or violation of any
of the provisions hereof.
(c) Neither the Limited Partner nor the Special Limited Partner has
pending, nor to the best knowledge of each of them, has threatened, any
litigation or other proceeding before any court, regulatory authority or other
tribunal which challenges the validity of the transaction contemplated by this
Agreement or which, if adversely determined, would impair the ability of either
of them to perform their respective obligations under this Agreement.
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(d) The execution, delivery and performance of this Agreement by each
of the Limited Partner and the Special Limited Partner shall not constitute a
breach or violation of any agreement, order or instrument by which either of
them or their respective properties are bound and each of the Limited Partner
and the Special Limited Partner has received all necessary regulatory approvals
for the execution, delivery and performance of this Agreement and the execution,
delivery and performance of this Agreement shall not constitute a violation of
any applicable law, statute, regulation or order.
(e) The investment in the limited partnership interests of the
Partnership is suitable for the Limited Partner and Special Limited Partner and
the investment by each of them in the limited partnership interests does not
exceed twenty percent (20%) of their respective net worth.
(f) Each of the Limited Partner and Special Limited Partner has such
knowledge and experience in financial, business and tax matters that each of
Limited Partner and Special Limited Partner is capable of evaluating the merits
and risks of an investment in the Partnership.
(g) Each of Limited Partner and Special Limited partner (i) has
adequate means of providing for its current needs and contingencies, (ii) has no
need for liquidity in this investment, (iii) has the ability to bear the
economic risk of this investment, and (iv) can afford a complete loss of the
purchase price of this investment.
(h) Each of the Limited Partner and Special Limited Partner is
purchasing the limited partnership unit for investment, for its own account and
not with a view to resale or in connection with the distribution thereof. Each
of Limited Partner and Special Limited Partner is aware that the limited
partnership interest may not be transferred for a period of 15 years without
incurring substantial adverse federal income tax effects, subject to certain
very limited exceptions.
(i) Each of Limited Partner and Special Limited Partner is familiar
with the nature of, and risks attending, investments in securities of the type
represented by the limited partnership interest and has determined that the
purchase of the limited partnership interest is consistent with its investment
and community development objectives.
(j) Each of Limited Partner and Special Limited Partner has been
advised and understands that an investment in the limited partnership interest
involves a high degree of risk.
(k) Each of the Limited Partner and the Special Limited Partner
confirms that they have received those documents, records and books pertaining
to the Partnership, which the General Partner has made available to them and
each also confirms that they have been given an opportunity to make further
inquiries of the General Partner and its representatives with respect to the
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Partnership, the Project and the General Partner and/or the investment to the
extent they desired to do so. Limited Partner and Special Limited Partner
acknowledge that counsel for General Partner and Partnership does not represent
them.
(l) Each of Limited Partner and Special Limited Partner is aware that
the limited partnership interests have not been, and there are no present plans
for them to be, registered under the Securities Act of 1933, as amended (the
"Securities Act") or any state securities law, and accordingly, that the limited
partnership interests must be held indefinitely by them unless they are
registered under the Securities Act and any applicable state securities law, or
unless, in the opinion of counsel satisfactory to counsel for general Partner, a
sale or transfer may be made without such registration.
Section 9.14 Limitation of General Partner Liability. The General Partner
will satisfy any judgment, decree, decision or settlement arising out of a
liability of the Partnership as follows: (I) first, out of insurance proceeds
available therefor; (ii) next out of Partnership income or profit; and (iii)
finally, and only if the General Partner is personally liable therefor, out of
the separate income or property of the General Partner. The General Partner
shall have no liability whatsoever to the Limited Partner, the Special Limited
Partner or the Partnership for any act or omission taken or not taken at the
written direction of the Special Limited Partner or the Limited Partner, as the
case may be. Nothing in this Agreement is intended to require the General
Partner to expend its own funds with respect to any action or liability except
as otherwise expressly provided herein. The General Partner is not required to
take any action, or refrain from taking any action, if the General Partner
reasonably believes that the action or inaction, as the case may be, will result
in any liability to the General Partner, constitute a breach of any other
agreement of the Partnership with any unaffiliated third party or violate any
law. The General Partner shall have no liability whatsoever under this Agreement
with respect to the recapture of any Tax Credits if such recapture was
principally caused by an act of the Limited Partner or the Special Limited
Partner.
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 % to the Limited Partner, % to the Special Limited Partner and % to
the General Partner.
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Section 10.2 Allocations From Sale or Refinancing. All Income and Losses
arising from a Sale or Refinancing shall be allocated between the Partners as
follows:
(a) As to Income:
(1) first, an amount of Income equal to the aggregate negative
balances (if any) in the Capital Accounts of all Partners having negative
Capital Accounts (prior to taking into account the Sale or Refinancing and the
Distribution of the related Sale or Refinancing Proceeds, but after giving
effect to Distributions of Net Operating Income and allocations of other Income
and Losses pursuant to this Article X up to the date of the Sale or Refinancing)
shall be allocated to such Partners in proportion to their negative Capital
Account balances until all such Capital Accounts shall have zero balances;
(2) second, an amount of Income sufficient to increase the
Limited Partner's positive Capital Account balance to its Capital Contribution
and to increase the Special Limited Partner's positive Capital Account balance
to an amount equal to its Capital Contribution, shall be allocated to the
Limited Partner and the Special Limited Partner, respectively;
(3) third, an amount of Income sufficient to increase the
General Partner's positive Capital Account balance to an amount equal to its
Capital Contribution; and
(4) the balance, if any, of such Income shall be allocated 50%
to the Limited Partner and 50% to the General Partner.
(b) As to Losses:
(1) an amount of Losses equal to the aggregate positive
balances (if any) in the Capital Accounts of all Partners having positive
Capital Accounts (prior to taking into account the Sale or Refinancing and the
Distribution of the related Sale or Refinancing Proceeds, but after giving
effect to Distributions of Net Operating Income and allocations of Income and
Losses pursuant to Section 10.1 up to the date of the Sale or Refinancing) shall
be allocated to such Partners in proportion to their positive Capital Account
balances until all such Capital Accounts shall have zero balances; and
(2) the balance of any such Losses shall be allocated % to the
Limited Partner, % to the Special Limited Partner and % 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 % or % of each item
includable in the calculation of Income or Loss not arising from a Sale or
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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 % and %, 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 % and %, respectively, of the items of Income not
arising from a Sale or Refinancing and % and %, 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 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).
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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 % to the Limited Partner, % to the Special Limited Partner and % to
the General Partner.
(f) Any Partner Nonrecourse Deductions for any fiscal year shall be
specially allocated to the Partner who bears the economic risk of loss with
respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse
Deductions are attributable in accordance with Treasury Regulations Section
1.704-2(i)(1).
(g) To the extent an adjustment to the adjusted tax basis of any
Partnership asset pursuant to Code Section 734(b) or Code Section 743(b) is
required, pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(2) or
Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital
Accounts as the result of a distribution to a Partner in complete liquidation of
his interest in the Partnership, the amount of such adjustment to the Capital
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Accounts shall be treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases such basis) and such
gain or loss shall be specially allocated to the Partners in accordance with
their interests in the Partnership in the event that Treasury Regulations
Section 1.704-1 (b)(2)(iv)(m)(2) applies, or to the Partner to whom such
distribution was made in the event that Treasury Regulations Section
1.704-1(b)(2)(iv)(m)(4) applies.
(h) To the extent the Partnership has taxable interest income with
respect to any promissory note pursuant to Section 483 or Section 1271 through
1288 of the Code:
(1) such interest income shall be specially allocated to the
Limited Partner to whom such promissory note relates; and
(2) the amount of such interest income shall be excluded from
the Capital Contributions credited to such Partner's Capital Account in
connection with payments of principal with respect to such promissory note.
(i) In the event the adjusted tax basis of any investment tax credit
property that has been placed in service by the Partnership is increased
pursuant to Code Section 50(c), such increase shall be specially allocated among
the Partners (as an item in the nature of income or gain) in the same
proportions as the investment tax credit that is recaptured with respect to such
property is shared among the Partners.
(j) Any reduction in the adjusted tax basis (or cost) of Partnership
investment tax credit property pursuant to Code Section 50(c) shall be specially
allocated among the Partners (as an item in the nature of expenses or losses) in
the same proportions as the basis (or cost) of such property is allocated
pursuant to Treasury Regulations Section 1.46-3(f)(2)(i).
(k) Any income, gain, loss or deduction realized as a direct or
indirect result of the issuance of an interest in the Partnership by the
Partnership to a Partner (the "Issuance Items") shall be allocated among the
Partners so that, to the extent possible, the net amount of such Issuance Items,
together with all other allocations under this Agreement to each Partner, shall
be equal to the net amount that would have been allocated to each such Partner
if the Issuance Items had not been realized.
(l) If any Partnership expenditure treated as a deduction on its
federal income tax return is disallowed as a deduction and treated as a
distribution pursuant to Section 731(a) of the Code, there shall be a special
allocation of gross income to the Partner deemed to have received such
distribution equal to the amount of such distribution.
(m) The allocation to the General Partner of each material item of
Partnership income, loss, deduction or credit will not be less than % of each
such item at all times during the existence of the Partnership.
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(n) Interest deduction on the Partnership indebtedness referred to in
Section 6.3 shall be allocated 100% to the General Partner.
Section 10.4 Curative Allocations. The allocations set forth in Sections
10.2(c), 10.3(a), 10.3(b), 10.3(c), 10.3(d), 10.3(e), 10.3(f), and 10.3(g)
hereof (the "Regulatory Allocations") are intended to comply with certain
requirements of the Treasury Regulations. It is the intent of the Partners that,
to the extent possible, all Regulatory Allocations shall be offset either with
other Regulatory Allocations or with special allocations of other items of
Partnership income, gain, loss, or deduction pursuant to this Section 10.4.
Therefore, notwithstanding any other provision of this Article X (other than the
Regulatory Allocations), with the Consent of the Special Limited Partner, the
General Partner shall make such offsetting special allocations of Partnership
income, gain, loss, or deduction in whatever manner the General Partner, with
the Consent of the Special Limited Partner, determines appropriate so that,
after such offsetting allocations are made, each Partner's Capital Account
balance is, to the extent possible, equal to the Capital Account balance such
Partner would have had if the Regulatory Allocations were not part of the
Agreement and all Partnership items were allocated pursuant to Sections 10.1,
10.2(a), 10.2(b), 10.3(h), 10.3(i), 10.3(j), 10.3(k), 10.3(l), 10.3(m), 10.3(n)
and 10.5. In exercising its authority under this Section 10.4, the General
Partner shall take into account future Regulatory Allocations under Section
10.3(a) and 10.3(b) that, although not yet made, are likely to offset other
Regulatory Allocations previously made under Sections 10.3(e) and 10.3(f).
Section 10.5 Other Allocation Rules.
(a) The basis (or cost) of any Partnership investment tax credit
property shall be allocated among the Partners in accordance with Treasury
Regulations Section 1.46-3(f)(2)(i). All Tax Credits (other than the investment
tax credit) shall be allocated among the Partners in accordance with applicable
law. Consistent with the foregoing, the Partners intend that LIHTC will be
allocated % to the Limited Partner, % to the Special Limited Partner and % to
the General Partner.
(b) In the event Partnership investment tax credit property is disposed
of during any taxable year, profits for such taxable year (and, to the extent
such profits are insufficient, profits for subsequent taxable years) in an
amount equal to the excess, if any, of (1) the reduction in the adjusted tax
basis (or cost) of such property pursuant to Code Section 50(c), over (2) any
increase in the adjusted tax basis of such property pursuant to Code Section
50(c) caused by the disposition of such property, shall be excluded from the
profits allocated pursuant to Section 10.1 and Section 10.2(a) hereof and shall
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instead be allocated among the Partners in proportion to their respective shares
of such excess, determined pursuant to Section 10.3(i) and 10.3(j) hereof. In
the event more than one item of such property is disposed of by the Partnership,
the foregoing sentence shall apply to such items in the order in which they are
disposed of by the Partnership, so the profits equal to the entire amount of
such excess with respect to the first such property disposed of shall be
allocated prior to any allocations with respect to the second such property
disposed of, and so forth.
(c) For purposes of determining the Income, Losses, or any other items
allocable to any period, Income, Losses, and any such other items shall be
determined on a daily, monthly, or other basis, as determined by the General
Partner with the Consent of the Special Limited Partner, using any permissible
method under Code Section 706 and the Treasury Regulations thereunder.
(d) Solely for purposes of determining a Partner's proportionate share
of the "excess nonrecourse liabilities" of the Partnership within the
meaning of Treasury Regulations Section 1.752-3(a)(3), the Partners' interests
in Partnership profits are as follows: Limited Partner: 99.98%; Special Limited
Partner: %; General Partner: %.
(e) To the extent permitted by Section 1.704-2(h)(3) of the Treasury
Regulations, the General Partner shall endeavor to treat Distributions as having
been made from the proceeds of a Nonrecourse Liability or a Partner Nonrecourse
Debt only to the extent that such Distributions would cause or increase an
Adjusted Capital Account Deficit for any Partner who is not a General Partner.
Section 10.6 Tax Allocations: Code Section 704(c). In accordance with Code
Section 704(c) and the Treasury Regulations thereunder, income, gain, loss, and
deduction with respect to any property contributed to the capital of the
Partnership shall, solely for tax purposes, be allocated among the Partners so
as to take account of any variation between the adjusted basis of such property
to the Partnership for federal income tax purposes and its initial Gross Asset
Value (computed in accordance with Section 1.28(a) hereof).
In the event the Gross Asset Value of any Partnership asset is adjusted
pursuant to Section 1.30(b) hereof, subsequent allocations of income, gain,
loss, and deduction with respect to such asset shall take account of any
variation between the adjusted basis of such asset for federal income tax
purposes and its Gross Asset Value in the same manner as under Code Section
704(c) and the Treasury Regulations thereunder.
Any elections or other decisions relating to such allocations shall be
made by the General Partner with the Consent of the Special Limited Partner in
any manner that reasonably reflects the purpose and intention of this Agreement.
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Allocations pursuant to this Section 10.6 are solely for purposes of federal,
state, and local taxes and shall not affect, or in any way be taken into account
in computing, any Person's Capital Account or share of Income, Losses, other
items, or distributions pursuant to any provision of this Agreement.
Section 10.7 Allocation Among Limited Partners. In the event that the
Interest of the Limited Partner hereunder is at any time held by more than one
Limited Partner all items which are specifically allocated to the Limited
Partner for any month pursuant to this Article X shall be apportioned among such
Persons according to the ratio of their respective profit-sharing interests in
the Partnership at the last day of such month.
Section 10.8 Allocation Among General Partners. In the event that the
Interest of the General Partner hereunder is at any time held by more than one
General Partner all items which are specifically allocated to the General
Partner for any month pursuant to this Article X shall be apportioned among such
Persons in such percentages as may from time to time be determined by agreement
among them without amendment to this Agreement or consent of the Limited Partner
or Consent of the Special Limited Partner.
Section 10.9 Modification of Allocations. The provisions of Articles X and
XI and other provisions of this Agreement are intended to comply with Treasury
Regulations Section 1.704 and shall be interpreted and applied in a manner
consistent with such section of the Treasury Regulations. In the event that the
General Partner determines, in its sole discretion, that it is prudent to modify
the manner in which the Capital Accounts of the Partners, or any debit or credit
thereto, are computed in order to comply with such section of the Treasury
Regulations, the General Partner may make such modification, but only with the
Consent of the Special Limited Partner, to the minimum extent necessary, to
effect the plan of allocations and Distributions provided for elsewhere in this
Agreement. Further, the General Partner shall make any appropriate
modifications, but only with the Consent of the Special Limited Partner, in the
event it appears that unanticipated events (e.g., the existence of a Partnership
election pursuant to Code Section 754) might otherwise cause this Agreement not
to comply with Treasury Regulation Section 1.704.
ARTICLE XI
DISTRIBUTION
Section 11.1 Distribution of Net Operating Income. Net Operating Income for
each fiscal year shall be distributed within seventy-five (75) days following
each calendar year and shall be applied in the following order of priority:
(a) to pay the Deferred Management Fee, if any;
(b) to pay the current Reporting Fee;
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(c) to pay the Development Fee in accordance with this Agreement and
the Development Agreement;
(d) to pay the Operating Loans, if any, as referenced in Section 6.2(b)
of this Agreement, limited to 50% of the Net Operating Income remaining after
reduction for the payments made pursuant to subsections (a) through (c) of this
Section 11.1;
(e) to pay the Incentive Management Fee from Net Operating Income
remaining after reduction for the payments made pursuant to subsections (a)
through (d) of this Section 11.1; and
(f) to the Limited Partner in an amount equal to % of the remaining Net
Operating Income and to the General Partner in an amount equal to % of the
remaining Net Operating Income.
(g) notwithstanding the above provisions of this Section 11.1, Net
Operating Income greater than the excess cash flow (as defined in the Mortgage)
shall be paid to the State Tax Credit Agency in accordance with the Mortgage.
Section 11.2 Distribution of Sale or Refinancing Proceeds. Sale or
Refinancing Proceeds shall be distributed in the following order:
(a) to the payment of the Mortgage and other matured debts and
liabilities of the Partnership, other than accrued payments, debts or other
liabilities owing to Partners or former Partners;
(b) to any accrued payments, debts or other liabilities owing to the
Partners or former Partners, including, but not limited to, accrued Reporting
Fees and Operating Loans, to be paid prorata if necessary;
(c) to the establishment of any reserves which the General Partner,
with the Consent of the Special Limited Partner, shall deem reasonably necessary
for contingent, unmatured or unforeseen liabilities or obligations of the
Partnership;
(d) thereafter, % to the Limited Partner and % to the General Partner.
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ARTICLE XII
TRANSFERS OF LIMITED
PARTNER'S INTEREST IN THE PARTNERSHIP
Section 12.1 Assignment of Limited Partner's Interest. Except assignments
to the Southern California Bank to secure capital contribution loans, the
Limited Partner and Special Limited Partner shall not have the right to assign
all or any part of their respective Interests to any other Person, whether or
not a Partner, except upon satisfaction of each of the following:
(a) by a written instrument in form and substance satisfactory to the
General Partner and its counsel, setting forth the name and address of the
proposed transferee, the nature and extent of the Interest which is proposed to
be transferred and the terms and conditions upon which the transfer is proposed
to be made, stating that the Assignee accepts and agrees to be bound by all of
the terms and provisions of this Agreement, and providing for the payment of all
reasonable expenses incurred by the Partnership in connection with such
assignment, including but not limited to the cost of preparing any necessary
amendment to this Agreement;
(b) upon consent of the General Partner to such assignment, which shall
not be unreasonably withheld; and
(c) upon receipt by the General Partner of the Assignee's written
representation that the Partnership Interest is to be acquired by the Assignee
for the Assignee's own account for long-term investment and not with a view
toward resale, fractionalization, division or distribution thereof.
THE LIMITED PARTNERSHIP INTEREST AND THE SPECIAL LIMITED PARTNERSHIP
INTEREST DESCRIBED HEREIN HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 AS AMENDED OR UNDER ANY STATE SECURITIES LAW. THESE INTERESTS MAY NOT BE
SOLD OR OTHERWISE TRANSFERRED UNLESS REGISTERED UNDER APPLICABLE FEDERAL AND
STATE SECURITIES LAWS OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
Section 12.2 Effective Date of Transfer. Any assignment of a Limited
Partner's Interest or Special Limited Partner's Interest pursuant to Section
12.1 shall become effective as of the last day of the calendar month in which
the last of the conditions to such assignment are satisfied.
Section 12.3 Invalid Assignment. Any purported assignment of an Interest of
a Limited Partner or Special Limited Partner otherwise than in accordance with
Section 12.1 or Section 12.6 shall be of no effect as between the Partnership
and the purported assignee and shall be disregarded by the General Partner in
making allocations and Distributions hereunder.
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Section 12.4 Assignee's Rights to Allocations and Distributions. An
Assignee shall be entitled to receive allocations and Distributions from the
Partnership attributable to the Interest acquired by reason of any permitted
assignment from and after the first day of the calendar month following the
month which ends with the effective date of the transfer of such Interest as
provided in Section 12.2. The Partnership and the General Partner shall be
entitled to treat the assignor of such Partnership Interest as the absolute
owner thereof in all respects, and shall incur no liability for allocations and
Distributions made in good faith to such assignor, until such time as the
written instrument of assignment has been received by the Partnership.
Section 12.5 Substitution of Assignee as Limited Partner or Special Limited
Partner.
(a) An Assignee shall not have the right to become a Substitute Limited
Partner or substitute Special Limited Partner in place of his assignor unless
the written consent of the General Partner to such substitution shall have been
obtained, which consent, in the General Partner's absolute discretion, may be
withheld.
(b) A nonadmitted transferee of a Limited Partner's Interest or Special
Limited Partner's Interest in the Partnership shall only be entitled to receive
that share of allocations, Distributions and the return of Capital Contribution
to which its transferor would otherwise have been entitled with respect to the
Interest transferred, and shall have no right to obtain any information on
account of the Partnership's transactions, to inspect the Partnership's books
and records or have any other of the rights and privileges of a Limited Partner
or Special Limited Partner, provided, however, that the Partnership shall, if a
transferee and transferor jointly advise the General Partner in writing of a
transfer of an Interest in the Partnership, furnish the transferee with
pertinent tax information at the end of each fiscal year of the Partnership.
(c) The General Partner may elect to treat a transferee of a
Partnership Interest who has not become a Substitute Limited Partner or
substitute Special Limited Partner as a Substitute Limited Partner or substitute
Special Limited Partner, as the case may be, in the place of its transferor
should the General Partner determine in its absolute discretion that such
treatment is in the best interest of the Partnership.
Section 12.6 Death, Bankruptcy, Incompetency, etc. of a Limited Partner.
Upon the death, dissolution, adjudication of bankruptcy, or adjudication of
incompetency or insanity of a Limited Partner or Special Limited Partner, such
Partner's executors, administrators or legal representatives shall have all the
rights of a Limited Partner or Special Limited Partner, as the case may be, for
the purpose of settling or managing such Partner's estate, including such power
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as such Partner possessed to constitute a successor as a transferee of its
Interest in the Partnership and to join with such transferee in making the
application to substitute such transferee as a Partner. However, such executors,
administrators or legal representatives will not have the right to become
Substitute Limited Partners or substitute Special Limited Partners in the place
of their respective predecessors-in-interest unless the General Partner shall so
consent, which consent, in the General Partner's absolute discretion, may be
withheld.
ARTICLE XIII
WITHDRAWAL, REMOVAL AND REPLACEMENT OF
GENERAL PARTNER
Section 13.1 Withdrawal of General Partner.
(a) The General Partner may not Withdraw (other than as a result of an
Involuntary Withdrawal) without the Consent of the Special Limited Partner, and,
to the extent required, of Regions Bank and the Alabama Housing Finance
Authority (HOME). Withdrawal shall be conditioned upon the agreement of the
Special Limited Partner to be admitted as a successor General Partner, or if the
Special Limited Partner declines to be admitted as a successor General Partner
then on the agreement of one or more Persons who satisfy the requirements of
Section 13.5 of this Agreement to be admitted as successor General Partner(s).
(b) Each General Partner shall indemnify and hold harmless the
Partnership and all Partners from its Withdrawal in violation of Section 13.1(a)
hereof. Each General Partner shall be liable for damages to the Partnership
resulting from its Withdrawal in violation of Section 13.1(a).
Section 13.2 Removal of General Partner.
(a) The Special Limited Partner or the Limited Partner, or both of
them, may remove the General Partner for cause if such General Partner has:
(1) been subject to Bankruptcy in accordance with this
Agreement;
(2) committed any fraud, willful misconduct or breach of
fiduciary duty which was materially injurious to the Partnership in the
performance of its duties under this Agreement;
(3) been convicted of, or entered into a plea of guilty to, a
felony;
(4) knowingly made personal use of Partnership funds or, or
except as to incidental matters, properties;
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(5) violated the terms of the Mortgage and such violation
prompts Regions Bank and Alabama Housing Finance Authority (HOME) to issue a
default letter or acceleration notice to the Partnership or General Partner and
such violation has not been cured within 30 days of such letter or notice;
(6) failed to provide any loan, advance, Capital Contribution
or any other payment to the Partnership required under this Agreement;
(7) failed to obtain the Consent of the Special Limited
Partner prior to any decision, act or omission under circumstances where this
Agreement requires that such consent be obtained and where such failure was
materially injurious to the Partnership;
(8) materially breached any representation, warranty or
covenant contained in this Agreement, or materially failed to perform any other
action which may be required by this Agreement;
(9) caused the Projected Tax Credits to be allocated to the
Partners for a term longer than the Tax Credit Period unless the provisions of
Section 7.4(e) of this Agreement apply;
(10)violated any federal or state tax law which causes a
recapture of LIHTC; or
(11) failed during any six-month period during the Compliance
Period to cause at least 85% of the total apartment units in the Project to
qualify for LIHTC, unless such failure is the result of Force Majeure or unless
such failure is cured within 120 days after the end of the six-month period.
Notwithstanding the foregoing, the General Partner shall have, with
respect to each of the items of cause listed above, except for Section
13.2(a)(3), the right to cure, to the reasonable satisfaction of the Special
Limited Partner, such condition within thirty (30) days after notice thereof
from the Special Limited Partner (or, as to any non-monetary obligation that is
not reasonably capable of cure within 30 days, and provided that cure is
commenced within 10 days of notice and diligently pursued thereafter to
completion, within such time as may reasonably be necessary to complete such
cure).
(b) Written notice of the removal for cause of the General Partner
shall be served by the Special Limited Partner or the Limited Partner, or both
of them, upon the General Partner either by certified or by registered mail,
return receipt requested, or by personal service. Such notice shall set forth
the reasons for the removal, if any, and the date upon which the removal is to
become effective.
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(c) Upon receipt of such notice of removal for cause, the General
Partner shall cause an accounting to be prepared covering the transactions of
the Partnership from the end of the previous fiscal year through the date of
receipt of such notice, and thereafter it shall not sell or dispose of
Partnership assets under any circumstances. The accounting shall be completed by
the effective date of the removal and shall be in sufficient detail to
accurately and fully reflect the earnings or losses for the period and the
financial condition of the Partnership. If the General Partner fails to cause
the accounting to be prepared within 30 days of receipt of the notice of removal
for cause then the Limited Partner may cause the accounting to be prepared. The
reasonable expenses of the accounting shall be borne by the General Partner.
Section 13.3 Effects of a Withdrawal. In the event of a Withdrawal, the
entire Interest of the Withdrawing General Partner shall immediately and
automatically terminate on the effective date of such Withdrawal, and such
General Partner shall immediately cease to be a General Partner, shall have no
further right to participate in the management or operation of the Partnership
or the Project or to receive any allocations or Distributions from the
Partnership or any other funds or assets of the Partnership, except as
specifically set forth below. In the event of a Withdrawal, any or all executory
contracts, including but not limited to the Management Agreement, between the
Partnership and the Withdrawing General Partner or its Affiliates may be
terminated by the Partnership, with the Consent of the Special Limited Partner,
upon written notice to the party so terminated.
Furthermore, notwithstanding such Withdrawal, the Withdrawing General
Partner shall be and shall remain, liable as a General Partner for all
liabilities and obligations incurred by the Partnership or by the General
Partner prior to the effective date of the Withdrawal. Any remaining Partner
shall have all other rights and remedies against the Withdrawing General Partner
as provided by law or under this Agreement.
The General Partner agrees that in the event of its Withdrawal (other than
an Involuntary Withdrawal) it will indemnify and hold the Limited Partner and
the Special Limited Partner harmless from and against all losses, costs and
expenses incurred in connection with the Withdrawal, including, without
limitation, all reasonable legal fees and other expenses of the Limited Partner
and the Special Limited Partner in connection with the transaction; provided
that the General Partner shall not be liable for any exemplary, punitive or
consequential damages.
The following additional provisions shall apply in the event of a
Withdrawal.
(a) In the event of a Withdrawal which is not an Involuntary
Withdrawal, the Withdrawing General Partner shall have no further right to
receive any future allocations or Distributions from the Partnership or any
other funds or assets of the Partnership, nor shall it be entitled to receive or
to be paid by the Partnership any further payments of fees (including fees which
have been earned but are unpaid) or to be repaid any outstanding advances or
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loans made by it to the Partnership or to be paid any amount for its former
Interest. From and after the effective date of such Withdrawal, the former
rights of the Withdrawing General Partner to receive or to be paid such
allocations, Distributions, funds, assets, fees or repayments shall be assigned
to the other General Partner or General Partners (which may include the Special
Limited Partner), or if there is no other general partner of the Partnership at
that time, to the Special Limited Partner.
(b) In the event of an Involuntary Withdrawal, except as provided in
Section 13.3(b)(3) below, the Withdrawing General Partner shall have no further
right to receive any future allocations or Distributions from the Partnership or
any other funds or assets of the Partnership, provided that accrued and payable
fees (i.e., fees earned but unpaid as of the date of Withdrawal) owed to the
Withdrawing General Partner, and any outstanding loans of the Withdrawing
General Partner to the Partnership, shall be paid to the Withdrawing General
Partner in the manner and at the times such fees and loans would have been paid
had the Withdrawing General Partner not Withdrawn. The Interest of the General
Partner shall be purchased as follows.
(1) If the Involuntary Withdrawal arises from removal for
cause as set forth in Section 13.2(a) hereof, the Withdrawn General Partner
shall be entitled to receive as its sole compensation for its Interest in the
Partnership an amount equal to its positive Capital Account balance determined
as of the effective date of the removal, if any, payable upon the dissolution
and termination of the Partnership after all of the Partners have been
distributed the positive balances in their Capital Accounts.
(2) If the Involuntary Withdrawal does not arise from removal
for cause under Section 13.2(a) hereof, and if the Partnership is to be
continued with one or more remaining or successor General Partner(s), the
Partnership, with the Consent of the Special Limited Partner, may, but is not
obligated to, purchase the Interest of the Withdrawing General Partner in
Partnership allocations, Distributions and capital. The purchase price of such
Interest shall be its Fair Market Value as determined by agreement between the
Withdrawing General Partner and the Special Limited Partner, or, if they cannot
agree, by arbitration in accordance with the then current rules of the American
Arbitration Association. The cost of such arbitration shall be borne equally by
the Withdrawing General Partner and the Partnership. The purchase price shall be
paid by the Partnership by delivering to the General Partner or its
representative the Partnership's non-interest bearing unsecured promissory note
payable, if at all, upon liquidation of the Partnership in accordance with
Section 11.2(b). The note shall also provide that the Partnership may prepay all
or any part thereof without penalty.
(3) If the Involuntary Withdrawal does not arise from removal
for cause under Section 13.2(a) hereof, and if the Partnership is to be
continued with one or more remaining or successor General Partner(s), and if the
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Partnership does not purchase the Interest of the Withdrawing General Partner in
Partnership allocations, Distributions and capital, then the Withdrawing General
Partner shall retain its Interest in such items, but such Interest shall be held
as a special limited partner.
Section 13.4 Successor General Partner. Upon the occurrence of an event
giving rise to a Withdrawal of a General Partner, any remaining General Partner,
or, if there be no remaining General Partner, the Withdrawing General Partner or
its legal representative, shall promptly notify the Special Limited Partner of
such Withdrawal (the "Withdrawal Notice"). Whether or not the Withdrawal Notice
shall have been sent as provided herein, the Special Limited Partner shall have
the right to become a successor General Partner (and to become the successor
managing General Partner if the Withdrawing General Partner was previously the
managing General Partner). In order to effectuate the provisions of this Section
13.4 and the continuance of the Partnership, the Withdrawal of a General Partner
shall not be effective until the expiration of 120 days from the date on which
occurred the event giving rise to the Withdrawal, unless the Special Limited
Partner shall have elected to become a successor General Partner as provided
herein prior to expiration of such 120-day period, whereupon the Withdrawal of
the General Partner shall be deemed effective upon the notification of all the
other Partners by the Special Limited Partner of such election.
Section 13.5 Admission of Additional or Successor General Partner. No
Person shall be admitted as an additional or successor General Partner unless
(a) such Person shall have agreed to become a General Partner by a written
instrument which shall include the acceptance and adoption of this Agreement;
(b) the Consent of the Special Limited Partner to the admission of such Person
as a substitute General Partner, which consent may be withheld in the discretion
of the Special Limited Partner, shall have been given; and (c) such Person shall
have executed and acknowledged any other instruments which the Special Limited
Partner shall reasonably deem necessary or appropriate to affect the admission
of such Person as a substitute General Partner. If the foregoing conditions are
satisfied, this Agreement shall be amended in accordance with the provisions of
the Act, and all other steps shall be taken which are reasonably necessary to
effect the Withdrawal of the Withdrawing General Partner and the substitution of
the successor General Partner. Nothing contained herein shall reduce the Limited
Partner's Interest or the Special Limited Partner's Interest in the Partnership.
Section 13.6 Transfer of Interest. Except as otherwise provided herein, the
General Partner may not Withdraw from the Partnership, or enter into any
agreement as the result of which any Person shall become interested in the
Partnership, without the Consent of the Special Limited Partner.
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Section 13.7 No Goodwill Value. At no time during continuation of the
Partnership shall any value ever be placed on the Partnership name, or the right
to its use, or to the goodwill appertaining to the Partnership or its business,
either as among the Partners or for the purpose of determining the value of any
Interest, nor shall the legal representatives of any Partner have any right to
claim any such value. In the event of a termination and dissolution of the
Partnership as provided in this Agreement, neither the Partnership name, nor the
right to its use, nor the same goodwill, if any, shall be considered as an asset
of the Partnership, and no valuation shall be put thereon for the purpose of
liquidation or distribution, or for any other purpose whatsoever.
ARTICLE XIV
BOOKS AND ACCOUNTS, REPORTS,
TAX RETURNS, FISCAL YEAR AND BANKING
Section 14.1 Books and Accounts.
(a) The General Partner shall cause the Partnership to keep and
maintain at its principal executive office full and complete books and records
which shall include each of the following:
(1) a current list of the full name and last known business or
residence address of each Partner set forth in alphabetical order together with
the Capital Contribution and the share in Income and Losses of each Partner;
(2) a copy of the Certificate of Limited Partnership and all
certificates of amendment thereto, together with executed copies of any powers
of attorney pursuant to which any certificate has been executed;
(3) copies of the Partnership's federal, state and local
income tax information returns and reports, if any, for the six most recent
taxable years;
(4) copies of the original of this Agreement and all
amendments thereto;
(5) financial statements of the Partnership for the six most
recent fiscal years; and
(6) the Partnership's books and records for at least the
current and past three fiscal years.
(b) Upon the request of the Limited Partner, the General Partner shall
promptly deliver to the Limited Partner, at the expense of the Partnership, a
copy of the information set forth in Section 14.1(a) above. The Limited Partner
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shall have the right upon reasonable request and during normal business hours to
inspect and copy any of the foregoing, or any of the other books and records of
the Partnership or the Project at its own expense.
Section 14.2 Accounting Reports.
(a) By February 20 of each calendar year the General Partner shall
provide to the Limited Partner and the Special Limited Partner all tax
information necessary for the preparation of their federal and state income tax
returns and other tax returns with regard to the jurisdiction(s) in which the
Partnership is formed and in which the Project is located.
(b) By March 1 of each calendar year the General Partner shall send to
the Limited Partner and the Special Limited Partner: (1) a balance sheet as of
the end of such fiscal year and statements of income, Partners' equity and
changes in cash flow for such fiscal year prepared in accordance with generally
accepted accounting principles and accompanied by an auditor's report containing
an opinion of the Partnership's Accountants; (2) a report (which need not be
audited) of any Distributions made at any time during the fiscal year,
separately identifying Distributions from Net Operating Income for the fiscal
year, Net Operating Income for prior years, Sale or Refinancing Proceeds, and
reserves; and (3) a report setting forth the amount of all fees and other
compensation and Distributions and reimbursed expenses paid by the Partnership
for the fiscal year to the General Partner or Affiliates of the General Partner
and the services performed in consideration therefor, which report shall be
verified by the Partnership's Accountants, with the method of verification to be
in accordance with generally accepted auditing standards and, accordingly,
including such tests of the accounting records and such other auditing
procedures as the Accountants consider appropriate in the circumstances.
(c) Within 60 days after the end of each fiscal quarter in which a Sale
or Refinancing of the Project occurs, the General Partner shall send to the
Limited Partner and the Special Limited Partner a report as to the nature of the
Sale or Refinancing and as to the Income and Losses for tax purposes and
proceeds arising from the Sale or Refinancing.
Section 14.3 Other Reports. The General Partner shall provide to the
Limited Partner and the Special Limited Partner the following reports.
(a) During construction, a copy of the construction schedule and any
updates to the construction schedule; and by the twentieth day of each month a
copy of the previous month's Construction Loan draw request and the inspecting
architect's application and certification of payment (AIA Document G702, or
similar form acceptable to the Limited Partner).
(b) During the rent-up phase, and continuing until the end of the first
six-month period during which the Project has a sustained occupancy of 95% or
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better, by the twentieth day of each month within such period a copy of the
previous month's rent roll (through the last day of the month) and a tenant
LIHTC compliance worksheet similar to the monthly initial tenant certification
worksheet included in Exhibit "H" attached hereto and incorporated herein by
this reference.
(c) A quarterly tax credit compliance report similar to the worksheet
included in Exhibit "H" due on or before April 30 of each year for the first
quarter, July 31 of each year for the second quarter, October 31 of each year
for the third quarter and January 31 of each year for the fourth quarter. In
order to verify the reliability of the information being provided on the
compliance report the Limited Partner may request a small sampling of tenant
files to be provided. The sampling will include, but not be limited to, copies
of tenant applications, certifications and third party verifications used to
qualify tenants. If any inaccuracies are found to exist on the tax credit
compliance report or any items of noncompliance are discovered then the sampling
will be expanded as determined by the Limited Partner.
(d) By September 15 of each year, an estimate of LIHTC for that year.
(e) If the Project receives a reservation of LIHTC in one year but will
not complete the construction and rent-up until a later year, the General
Partner will provide to the Limited Partner by December 31 of the year during
which the reservation is received an audited cost certification together with
the Accountant's work papers verifying that the Partnership has expended the
requisite 10% of the reasonably expected cost basis to meet the carryover test
provisions of Section 42 of the Code. Furthermore, if materials and supplies are
purchased to meet the 10% requirement then the General Partner shall provide to
the Limited Partner, if requested, an opinion of counsel that title to the
materials and supplies pass to the Partnership and that the Partnership bears
the risk of loss of the materials and supplies.
(f) During the Compliance Period, no later than five (5) days after any
such certification is filed, copies of any certifications which the Partnership
must furnish to federal or state governmental authorities administering the Tax
Credit program including, but not limited to, copies of all annual tenant
recertifications required under Section 42 of the Code.
(g) A quarterly report on operations, in the form attached hereto as
Exhibit "H", due on or before April 30 of each year for the first quarter of
operations, July 31 of each year for the second quarter of operations, October
31 of each year for the third quarter of operations and January 31 of each year
for the fourth quarter of operations which shall include, but is not limited to,
an unaudited income statement showing all activity in the reserve accounts
required to be maintained pursuant to Section VIII of this Agreement, statement
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of income and expenses, balance sheet, rent roll as of the end of each calendar
quarter of each year, and annual third party verification of current utility
allowance.
(h) By the annual renewal date each and every year, an executed
original or certified copy of each and every Insurance policy or certificate
required by the terms of this Agreement.
(i) By the payment date of the real estate property taxes each and
every year verification that the same has been paid in full.
(j) On or before March 15th of each calendar year, the General
Partner's updated financial statement as of December 31 of the previous year if
requested by the Limited Partner.
(k) On or before November 1 of each calendar year, a copy of the
following year's proposed operating budget. Each such budget shall contain an
amount required for reserves in accordance with Article VIII and for the payment
of real estate taxes, insurance, debt service and other payments. Such budget
shall only be adopted with the Consent of the Special Limited Partner.
(l) If the Limited Partner is required by the Securities and Exchange
Commission to file a post-effective amendment to its offering document, an
audited operating statement for the Project within 60 days of the request
therefor by the Limited Partner, covering the Project's operating history from
the Completion of Construction to the date requested by the Limited Partner and
in a form required by the Securities and Exchange Commission.
(m) Notice of the occurrence, or of the likelihood of occurrence, of
any event which has had a material adverse effect upon the Project or the
Partnership, including, but not limited to, any breach of any of the
representations and warranties set forth in Section 9.11 of this Agreement, and
any inability of the Partnership to meet its cash obligations as they become
payable, within ten days after the occurrence of such event.
Section 14.4 Late Reports. If the General Partner does not fulfill its
obligations under Section 14.2 within the time periods set forth therein, and
after ten (10) days written notice from the Special Limited Partner, the General
Partner, using its own funds, shall pay as damages the sum of $100 per day (plus
interest at the rate established by Section 6.3 of this Agreement) to the
Limited Partner until such obligations shall have been fulfilled. If the General
Partner does not fulfill its obligations under Section 14.3 within the time
periods set forth therein, and after ten (10) days written notice from the
Special Limited Partner, the General Partner, using its own funds, shall pay as
damages the sum of $100.00 per week (plus interest at the rate established by
Section 6.3 of this Agreement) to the Limited Partner until such obligations
shall have been fulfilled. If the General Partner shall so fail to pay, the
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General Partner and its Affiliates shall forthwith cease to be entitled to any
fees hereunder (other than the Development Fee) and/or to the payment of any Net
Operating Income or Sale or Refinancing Proceeds to which the General Partner
may otherwise be entitled hereunder. Payments of fees and Distributions shall be
restored only upon payment of such damages in full.
Section 14.5 Annual Site Visits. On an annual basis a representative of
the Limited Partner, at the Limited Partner's expense, will conduct a site visit
which will include, in part, an inspection of the property, a review of the
office and tenant files and an interview with the property manager. The Limited
Partner may, in its sole discretion, cancel all or any part of the annual site
visit.
Section 14.6 Tax Returns. The General Partner shall cause income tax
returns for the Partnership to be prepared and timely filed with the appropriate
federal, state and local taxing authorities.
Section 14.7 Fiscal Year. The fiscal year of the Partnership shall be
the calendar year or such other period as may be approved by the Internal
Revenue Service for federal income tax purposes.
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.
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ARTICLE XV
DISSOLUTION, WINDING UP, TERMINATION
AND LIQUIDATION OF THE PARTNERSHIP
Section 15.1 Dissolution of Partnership. The Partnership shall be dissolved
upon the expiration of its term or the earlier occurrence of any of the
following events.
(a) The effective date of the Withdrawal or removal of the General
Partner, unless (1) at the time there is at least one other General Partner
(which may be the Special Limited Partner if it elects to serve as successor
General Partner under Section 13.4 hereof) who will continue as General Partner,
or (2) within ninety (90) days after the withdrawal, all partners agree in
writing to continue the business of the Partnership and to the appointment of
one or more additional general partners if necessary or desired, which agreement
shall be effective as of the date of such event or withdrawal.
(b) The sale of the Project and the receipt in cash of the full amount
of the proceeds of such sale.
Notwithstanding the foregoing, however, in no event shall the
Partnership terminate prior to the expiration of its term if such termination
would result in a violation of the Mortgage or any other agreement with or rule
or regulation of Regions Bank and Alabama Housing Finance Authority (HOME) to
which the Partnership is subject.
Section 15.2 Return of Capital Contribution upon Dissolution. Except as
provided in Sections 7.3 and 7.4 of this Agreement, which provide for a
reduction or refund of the Limited Partner's Capital Contribution under certain
circumstances, and which shall represent the personal obligation of the General
Partner, as well as the obligation of the Partnership, each Partner shall look
solely to the assets of the Partnership for all Distributions with respect to
the Partnership (including the return of its Capital Contribution) and shall
have no recourse therefor (upon dissolution or otherwise) against any General
Partner. No Partner shall have any right to demand property other than money
upon dissolution and termination of the Partnership, and the Partnership is
prohibited from such a distribution of property absent the Consent of the
Special Limited Partner.
Section 15.3 Distributions of Assets. Upon a dissolution of the
Partnership, the General Partner (or, if there is no General Partner then
remaining, such other Person(s) designated as the liquidator of the Partnership
by the Special Limited Partner or by the court in a judicial dissolution) shall
take full account of the Partnership assets and liabilities and shall liquidate
the assets as promptly as is consistent with obtaining the fair value thereof.
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(a) Upon dissolution and termination, after payment of, or adequate
provision for, the debts and obligations of the Partnership pursuant to Section
11.2(a) through and including 11.2(c), the remaining assets of the Partnership
shall be distributed to the Partners in accordance with the positive balances
in their Capital Accounts, after taking into account all allocations under
Article X hereof.
(b) In the event that a General Partner has a deficit balance in its
Capital Account following the liquidation of the Partnership or its Interest, as
determined after taking into account all Capital Account adjustments for the
Partnership's taxable year in which such liquidation occurs, such General
Partner shall pay to the Partnership the amount necessary to restore such
deficit balance to zero in compliance with Treasury Regulation Section
1.704-1(b)(2)(ii)(b)(3).
The deficit make-up shall be paid by the General Partner by the end of
such taxable year and shall, upon liquidation of the Partnership, be paid to
creditors of the Partnership or distributed to other Partners in accordance with
their positive Capital Account balances. Notwithstanding, if the Special Limited
Partner has become successor General Partner, it shall not be responsible for
any deficit balance in its Capital Account which arose during the time the
former General Partner served as General Partner.
(c) With respect to assets distributed in kind to the Partners in
liquidation or otherwise:
(1) unrealized appreciation or unrealized depreciation in the
values of such assets shall be deemed to be Income and Losses realized by the
Partnership immediately prior to the liquidation or other Distribution event;
and
(2) such Income and Losses shall be allocated to the Partners
in accordance with Section 10.2 hereof, and any property so distributed shall be
treated as a Distribution of an amount in cash equal to the excess of such Fair
Market Value over the outstanding principal balance of and accrued interest on
any debt by which the property is encumbered.
(d) For the purposes of Section 15.3(c), "unrealized appreciation" or
"unrealized depreciation" shall mean the difference between the Fair Market
Value of such assets, taking into account the Fair Market Value of the
associated financing but subject to Section 7701(g) of the Code, and the
Partnership's adjusted basis in such assets for book purposes. Section 15.3(c)
is merely intended to provide a rule for allocating unrealized Income and Losses
upon liquidation or other Distribution event, and nothing contained in Section
15.3(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.
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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.
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ARTICLE XVI
AMENDMENTS
This Agreement may be amended at any time by the Limited Partner with
the consent of the General Partner. This Agreement may not be amended by the
General Partner absent the Consent of the Special Limited Partner.
Notwithstanding the foregoing, no amendment shall change the Partnership to a
general partnership; extend the term of the Partnership beyond the date provided
for in this Agreement; modify the limited liability of the Limited Partner and
the Special Limited Partner; allow the Limited Partner to take control of the
Partnership's business within the meaning of the Act; reduce or defer the
realization of any Partner's interest in allocations, Distributions, capital or
compensation hereunder, or affect any Partner's rights, obligations, or
conditions to performance or status hereunder, without the consent of the
Partner so affected; change the provisions of this Article XVI.
ARTICLE XVII
MISCELLANEOUS
Section 17.1 Voting Rights.
(a) The Limited Partner shall have no right to vote upon any matters
affecting the Partnership, except as provided in this Agreement. Notwithstanding
the foregoing, the Limited Partner may, without the concurrence of the General
Partner:
(1) approve or disapprove, but not initiate, the Sale or
Refinancing of the Project;
(2) remove the General Partner and elect a substitute General
Partner as provided in this Agreement;
(3) elect a successor General Partner upon the Withdrawal of
the General Partner;
(4) approve or disapprove, but not initiate, the dissolution
of the Partnership; or
(5) subject to the provisions of Article XVI hereof, amend
this Agreement.
(b) On any matter where the Limited Partner has the right to vote,
votes may only be cast at a duly called meeting of the Partnership or through
written action without a meeting.
(c) The Special Limited Partner shall have the right to consent to
those actions or inactions of the Partnership and/or General Partner as
otherwise set forth in this Agreement, and the General Partner is prohibited
from any action or inaction requiring such consent unless such consent has been
obtained.
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Section 17.2 Meeting of Partnership. Meetings of the Partnership may be
called either (a) at any time by the General Partner; or (b) upon the General
Partner's receipt of a written or facsimile request from the Limited Partner
setting forth the purpose of such meeting. Within ten days after receipt of the
Limited Partner's written or facsimile request for a meeting, the General
Partner shall provide all Partners with written notice of the meeting (which
shall be by telephone conference, or at the principal place of business of the
Partnership or such other location referenced in the notice) to be held not less
than 15 days nor more than 30 days after receipt of such written or facsimile
request from the Limited Partner, which notice shall specify the time and place
of such meeting and the purpose or purposes thereof. If the General Partner
fails to provide the written notice of the meeting within ten days after receipt
of the Limited Partner's request to hold a meeting, then the Limited Partner may
provide the written notice of the meeting to all the Partners, which notice
shall specify the time and place of such meeting and the purpose or purposes
thereof. All meetings and actions of the Limited Partner shall be governed in
all respects, including matters relating to notice, quorum, adjournment,
proxies, record dates and actions without a meeting, by the applicable
provisions of the Act, as it shall be amended from time to time.
Section 17.3 Notices. Any notice given pursuant to this Agreement may
be served personally on the Partner to be notified, or may be mailed, first
class postage prepaid, to the following address, or to such other address as a
party may from time to time designate in writing:
To the General Partner: ACHR Housing Corporation
319 West Glenn, Ave. P/O Box 409
Auburn, AL 36831-0409
To the Limited Partner: WNC Housing Tax Credit Fund VI, L.P.
Series 6
3158 Redhill Ave., Suite 120
Costa Mesa, CA 92626-3416
To the Special
Limited Partner: WNC Housing, L.P.
3158 Redhill Ave., Suite 120
Costa Mesa, CA 92626-3416
Section 17.4 Successors and Assigns. All the terms and conditions of
this Agreement shall be binding upon and inure to the benefit of the successors
and assigns of the Partners.
Section 17.5 Recording of Certificate of Limited Partnership. The
Partnership shall record in the office of the Probate Judge of the county in
which the principal place of business of the Partnership is located the
Certificate of Limited Partnership, or any amendment thereto.
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Section 17.6 Amendment of Certificate of Limited Partnership.
(a) The General Partner shall cause to be filed, within 30 days after
the happening of any of the following events, an amendment to the Certificate of
Limited Partnership reflecting the occurrence of any of the following.
(1) A change in the name of the Partnership.
(2) A change in the street address of the Partnership's
principal executive office.
(3) A change in the address, or the Withdrawal, of a General
Partner, or a change in the address of the agent for service of process, or
appointment of a new agent for service of process.
(4) The admission of a General Partner and that Partner's
address.
(5) The discovery by the General Partner of any false or
erroneous material statement contained in the Certificate of Limited Partnership
or any amendment thereto.
(b) The Certificate of Limited Partnership may also be amended in
conformity with this Agreement at any time in any other respect that the General
Partner determines.
(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 the Judge of Probate in whose
office the Certificate of Limited Partnership is filed. The certificate of
amendment shall comply with applicable law.
Section 17.7 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, and said
counterparts shall constitute but one and the same instrument which may
sufficiently be evidenced by one counterpart.
Section 17.8 Captions. Captions to and headings of the Articles,
Sections and subsections of this Agreement are solely for the conveniences of
the Partners, are not a part of this Agreement, and shall not be used for the
interpretation or determination of the validity of this Agreement or any
provision hereof.
Section 17.9 Saving Clause. If any provision of this Agreement, or the
application of such provision to any Person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
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to Persons or circumstances other than those as to which it is held invalid,
shall not be affected thereby.
Section 17.10 Tax Matters Partners. All the Partners hereby agree that
the Special Limited Partner shall be the "Tax Matters Partner" pursuant to the
Code and in connection with any audit of the federal income tax returns of the
Partnership; provided, however, that if the Special Limited Partner shall
withdraw from the Partnership or become Bankrupt, the General Partner shall
thereafter be the "Tax Matters Partner". If the Tax Matters Partner shall
determine to litigate any administrative determination relating to federal
income tax matters, it shall litigate such matter in such court as the Tax
Matters Partner shall decide in its sole discretion. In discharging its duties
and responsibilities, the Tax Matters Partner shall act as a fiduciary (i) to
the Limited Partner (to the exclusion of the other Partners) insofar as tax
matters related to the Tax Credits are concerned, and (ii) to all of the
Partners in other respects. The Limited Partner will make no claim against the
Partnership or the General Partner in respect of any action or omission by the
Tax Matters Partner during such time as the Special Limited Partner acts as the
Tax Matters Partner.
Section 17.11 Expiration of Compliance Period.
(a) Notwithstanding any other provision of this Agreement to the
contrary, the Special Limited Partner shall have the right at any time after the
later of (i) the end of the Compliance Period or (ii) the expiration of the land
use covenants relating to the Mortgage under HOME, to require, by written notice
to the General Partner (the "Required Sale Notice"), that the General Partner
promptly use its best efforts to obtain a buyer for the Project on the most
favorable terms then available. Upon such notice, the General Partner shall also
have the right to purchase the entire interest of each of the Limited Partner
and the Special Limited Partner in the manner provided for in Section 9.12
hereof or upon such other terms as shall be mutually agreeable. The General
Partner shall submit the terms of any proposed sale to the Special Limited
Partner for its approval in the manner set forth in Section 17.11(a) hereof. If
the General Partner shall fail to so obtain a buyer for the Project within six
months of receipt of the Required Sale Notice or if the Consent of the Special
Limited Partner in its sole discretion shall be withheld to any proposed sale,
and if the General Partner shall not have served notice that it desired to
purchase the entire interest of each of the Limited Partner and the Special
Limited Partner aforesaid, then the Special Limited Partner shall have the right
at any time thereafter to obtain a buyer for the Project on terms acceptable to
the Special Limited Partner (but not less favorable to the Partnership than any
proposed sale previously rejected by the Special Limited Partner). In the event
that the Special Limited Partner so obtains a buyer, it shall notify the General
Partner in writing with respect to the terms and conditions of the proposed sale
and the General Partner shall cause the Partnership promptly to sell the Project
to such buyer.
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(b) A sale of the Project prior to the end of the Compliance Period may
only take place if the conditions of Section 42(j)(6) of the Code (or any
successor provision) will be satisfied upon such sale by having the purchaser of
the Project post the required bond on behalf of the Partnership.
Section 17.12 Number and Gender. All pronouns and any variations
thereof shall be deemed to refer to the masculine, feminine, neuter, singular or
plural as the identity of the Person or Persons may require.
Section 17.13 Entire Agreement. This Agreement constitutes the entire
understanding between the parties with respect to the subject matter hereof and
all prior understandings and agreements between the parties, written or oral,
respecting this transaction are merged in this Agreement.
Section 17.14 Governing Law. This Agreement and its application shall
be governed by the laws of the State.
Section 17.15 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 17.16 Receipt of Correspondence. The Partners agree that the
General Partner shall send to the Limited Partner and the Special Limited
Partner a copy of any correspondence relative to the Project's noncompliance
with the Mortgage, relative to the acceleration of the Mortgage and/or relative
to the disposition of the Project.
Section 17.17 Security Interest and Right of Set-Off. As security for
the performance of the respective obligations to which any Partner may be
subject under this Agreement, the Partnership shall have (and each Partner
hereby grants to the Partnership) a security interest in all funds distributable
to said Partner to the extent of the amount of such obligation.
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IN WITNESS WHEREOF, this Amended and Restated Agreement of Limited
Partnership of Summer Wood, Ltd., a Alabama limited partnership, is made and
entered into as of May 1, 1999.
GENERAL PARTNER
ACHR Housing Corporation
By: /s/Nancy S. Spears
Nancy S. Spears,
President
WITHDRAWING ORIGINAL LIMITED PARTNER
/s/Nancy S. Spears
Nancy S. Spears
Signatures continued on next page...
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LIMITED PARTNER
WNC Housing Tax Credit Fund VI, L.P. Series 6
By: WNC & ASSOCIATES, INC.
General Partner
By: /s/David N. Shafer
David N. Shafer,
Senior Vice President
SPECIAL LIMITED PARTNER
WNC HOUSING, L.P.
By: WNC & Associates, Inc.,
General Partner
By: /s/David N. Shafer
David N. Shafer,
Senior Vice President
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EXHIBIT A TO PARTNERSHIP AGREEMENT
LEGAL DESCRIPTION
A parcel of land lying in Section 24, Township 12 North, Range 7 East, Wilcox
County, Alabama, and being more particularly described as follows: Commence at a
found concrete monument (AHD 66-7, 1991); thence North 14 degrees 16' 53" East,
13748.37 feet to a found T-post; thence North 00 degrees 34' 39" West, 18.74
feet t a rebar set at the point of beginning; thence North 77 degrees 11' 58"
West, 308.37 feet to a set rebar; thence North 00 degrees 34'39" West 668.62
feet to a rebar set on the south right of way (R.O.W.) Line of County Road 22
(60'R.O.W.); thence along said R.O.W. the following courses: South 76 degrees
45' 57" East, 159.17 feet; South 73 degrees 23'46" East, 152.22 feet to a found
t-post; thence leaving said R.O.W. South 00 degrees 34' 39" East, 657.00 feet to
the point of beginning, containing 4.58 acres, more or less.
A-1
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EXHIBIT B TO PARTNERSHIP AGREEMENT
FORM OF LEGAL OPINION
WNC Housing Tax Credit Fund VI, L.P. Series 6
c/o WNC & Associates, Inc.
3158 Redhill Avenue, Suite 120
Costa Mesa, California 92626
RE: Summer Wood, Ltd.
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in
connection with the investment by WNC Housing Tax Credit Fund VI, L.P. Series 6,
a California limited partnership (the "Limited Partner") in Summer Wood, Ltd.
(the "Partnership"), a Alabama limited partnership formed to own, develop,
(construct/-rehabilitate) finance and operate an apartment complex for
low-income persons (the "Apartment Complex") in Camden, Wilcox County, Alabama .
The general partner of the Partnership is ACHR Housing Corporation (the "General
Partner").
In rendering the opinions stated below, we have examined and relied
upon the following:
(i) [Certificate of Limited Partnership];
(ii) [Agreement of Limited Partnership] (the "Partnership
Agreement");
(iii) A preliminary reservation letter from [State
Allocating Agency] (the "State Agency") dated
_________, 199___ conditionally awarding
$_______________ in Federal tax credits annually for
each of ten years and $_______________ in California
tax credits annually for each of four years for the
Apartment Complex; and
(iv) Such other documents, records and instruments as we
have deemed necessary in order to enable us to render
the opinions referred to in this letter.
For purposes of rendering the opinions stated below we have assumed
that, in those cases in which we have not been involved directly in the
preparation, execution or the filing of a document, that (a) the document
reviewed by us is an original document, or a true and accurate copy of the
original document, and has not been subsequently amended, (b) the signatures on
each original document are genuine, and (c) each party who executed the document
had proper authority and capacity.
Based on the foregoing we are of the opinion that:
B-1
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WNC Housing Tax Credit Fund VI, L.P. Series 6
c/o WNC & Associates, Inc.
______________, 199__
Page 2
(a) ________________________, one of the General Partners, is a
[corporation/partnership] duly formed and validly existing under the laws of the
State of _____________________ and has full power and authority to enter into
and perform its obligations under the Partnership Agreement.
_____________________, one of the other General Partners, is a
[corporation/partnership] duly formed and validly existing under the laws of the
State of __________________ and has full power and authority to enter into and
perform its obligations under the Partnership Agreement.
(b) The Partnership is a limited partnership duly formed and validly
existing under the laws of the State of Alabama.
(c) The Partnership is validly existing under and subject to the laws
of Alabama with full power and authority to own, develop,
[construct/rehabilitate], finance and operate the Apartment Complex and to
otherwise conduct business under the Partnership Agreement.
(d) Execution of the Partnership Agreement by the General Partner(s)
has been duly and validly authorized by or on behalf of the General Partner(s)
and, having been executed and delivered in accordance with its terms, the
Partnership Agreement constitutes the valid and binding agreement of the General
Partner(s), enforceable in accordance with its terms.
(e) The execution and delivery of the Partnership Agreement by the
General Partner(s) does not conflict with and will not result in a breach of any
of the terms, provisions or conditions of any agreement or instrument known to
counsel to which any of the General Partner(s) or the Partnership is a party or
by which any of them may be bound, or any order, rule, or regulation to be
applicable to any of such parties of any court or governmental body or
administrative agency having jurisdiction over any of such parties or over the
property.
(f) To the best of counsel's knowledge, after due inquiry, there is no
litigation or governmental proceeding pending or threatened against, or
involving the Apartment Complex, the Partnership or any General Partner which
would materially adversely affect the condition (financial or otherwise) or
business of the Apartment Complex, the Partnership or any of the Partners of the
Partnership.
(g) The Limited Partner and the Special Limited Partner have been
admitted to the Partnership as limited partners of the Partnership under
__________ law and are entitled to all of the rights of limited partners under
the Partnership Agreement. Except as described in the Partnership Agreement, no
B-2
<PAGE>
WNC Housing Tax Credit Fund VI, L.P. Series 6
c/o WNC & Associates, Inc.
______________, 199__
Page 3
person is a partner of or has any legal or equitable interest in the
Partnership, and all former partners of record or known to counsel have validly
withdrawn from the Partnership and have released any claims against the
Partnership arising out of their participation as partners therein.
(h) Liability of the Limited Partner for obligations of the Partnership
is limited to the amount of the Limited Partner's capital contributions required
by the Partnership Agreement.
(i) Neither the General Partner(s) of the Partnership nor the Limited
Partner nor the Special Limited Partner will have any liability for the Mortgage
represented thereby (as those terms are defined in the Partnership Agreement,
and the lender of the Mortgage Loan will look only to its security in the
Apartment Complex for repayment of the Mortgage Loan.
(j) The Partnership owns a fee simple interest in the Apartment
Complex.
(k) To the best of our actual knowledge and belief, after due inquiry,
the Partnership has obtained all consents, permissions, licenses, approvals, or
orders required by all applicable governmental or regulatory agencies for the
development, [construction/rehabilitation] and operation of the Apartment
Complex, and the Apartment Complex conforms to all applicable Federal, state and
local land use, zoning, health, building and safety laws, ordinances, rules and
regulations.
(l) The Apartment Complex has obtained a preliminary reservation of low
income housing tax credits ("LIHTC") from the State Agency. The final allocation
of the LIHTC and ultimately eligibility of the Apartment Complex for such final
allocation are subject to a series of requirements which must be met, performed
or achieved at various times prior to and after such final allocation. Assuming
all such requirements are met, performed or achieved at the time or times
provided by applicable laws and regulations, the Apartment Complex will qualify
for LIHTC.
All of the opinions set forth above are qualified to the extent that
the validity of any provision of any agreement may be subject to or affected by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the rights of creditors generally. We do not express any opinion as to
the availability of any equitable or specific remedy upon any breach of any of
the covenants, warranties or other provisions contained in any agreement. We
have not examined, and we express no opinion with respect to, the applicability
of, or liability under, any Federal, state or local law, ordinance or regulation
B-3
<PAGE>
WNC Housing Tax Credit Fund VI, L.P. Series 6
c/o WNC & Associates, Inc.
______________, 199__
Page 4
governing or pertaining to environmental matters, hazardous wastes, toxic
substances or the like.
We express no opinion as to any matter except those set forth above.
These opinions are rendered for use by the Limited Partner and its legal counsel
which will rely on this opinion in connection with federal income tax opinions
to be rendered by that firm. This opinion may not be delivered to or relied upon
by any other person or entity without our express written consent.
Sincerely,
- --------------------
B-4
<PAGE>
EXHIBIT C TO PARTNERSHIP AGREEMENT
CERTIFICATION AND AGREEMENT
CERTIFICATION AND AGREEMENT made as of the date written below by Summer
Wood, Ltd., a Alabama limited partnership (the "Partnership"); ACHR Housing
Corporation (the "General Partner"); and Nancy S. Spears (the "Original Limited
Partner") for the benefit of WNC Housing Tax Credit Fund VI, L.P. Series 6, a
California limited partnership (the "Investment Partnership"), and WNC &
Associates, Inc. ("WNC").
WHEREAS, the Partnership proposes to admit the Investment Partnership
as a limited partner thereof pursuant to an Amended and Restated Agreement of
Limited Partnership of the Partnership (the "Partnership Agreement"), in
accordance with which the Investment Partnership will make substantial capital
contributions to the Partnership; and
WHEREAS, the Investment Partnership and WNC have relied upon certain
information and representations described herein in evaluating the merits of
investment by the Investment Partnership in the Partnership;
NOW, THEREFORE, to induce the Investment Partnership to enter into the
Partnership Agreement and become a limited partner of the Partnership, and for
$1.00 and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the Partnership, the General Partner and the
Original Limited Partner hereby agree as follows for the benefit of the
Investment Partnership and WNC.
1. Representations, Warranties and Covenants of the Partnership,
the General Partner and the Original Limited Partner
The Partnership, the General Partner and the Original Limited Partner
jointly and severally represent, warrant and certify to the Investment
Partnership and WNC that, with respect to the Partnership, as of the date
hereof:
1.1 The Partnership is duly organized and in good standing as
a limited partnership pursuant to the laws of the state of its formation with
full limited partnership power and authority to own its apartment complex (the
"Apartment Complex") and conduct its business; the Partnership, the General
Partner and the Original Limited Partner have the power and authority to enter
into and perform this Certification and Agreement; the execution and delivery of
this Certification and Agreement by the Partnership, the General Partner and the
Original Limited Partner have been duly and validly authorized by all necessary
action; the execution and delivery of this Certification and Agreement, the
fulfillment of its terms and consummation of the transactions contemplated
C-1
<PAGE>
hereunder do not and will not conflict with or result in a violation, breach or
termination of or constitute a default under (or would not result in such a
conflict, violation, breach, termination or default with the giving of notice or
passage of time or both) any other agreement, indenture or instrument by which
the Partnership or any General Partner or Original Limited Partner is bound or
any law, regulation, judgment, decree or order applicable to the Partnership or
any General Partner or Original Limited Partner or any of their respective
properties; this Certification and Agreement constitutes the valid and binding
agreement of the Partnership, the General Partner and the Original Limited
Partner, enforceable against each of them in accordance with its terms; except
as such enforceability may be subject to or limited by bankruptcy, receivership,
insolvency, reorganization, moratorium, fraudulent transfer or similar laws
relating to or affecting the rights of creditors generally.
1.2 The General Partner has delivered to the Investment
Partnership, WNC or their affiliates all documents and information which the
General Partner considers to be material to a prudent investor in deciding
whether to invest in the Partnership. All factual information provided to the
Investment Partnership, WNC or their affiliates either in writing or orally, did
not, at the time given, and does not, on the date hereof, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances under which they are made.
1.3 Each of the representations and warranties contained in
the Partnership Agreement is true and correct as of the date hereof.
1.4 Each of the covenants and agreements of the Partnership
and the General Partner contained in the Partnership Agreement has been duly
performed to the extent that performance of any covenant or agreement is
required on or prior to the date hereof.
1.5 All conditions to admission of the Investment Partnership
as the investment limited partner of the Partnership contained in the
Partnership Agreement have been satisfied in all material respects.
1.6 No material default has occurred and is continuing under
the Partnership Agreement or any of the Project Documents (as such term is
defined in the Partnership Agreement) for the Partnership.
C-2
<PAGE>
1.7 The Partnership will allocate to the Limited Partner the
Projected Annual Tax Credits, or the Revised Projected Tax Credits, if
applicable.
1.8 The General Partner agrees to take all lawful actions
necessary to claim the Projected Tax Credit, including, without limitation, the
filing of Form(s) 8609 with the Internal Revenue Service.
1.9 No person or entity other than the Partnership holds any
equity interest in the Apartment Complex.
1.10 The Partnership has the sole responsibility to pay all
maintenance and operating costs, including all taxes levied and all insurance
costs, attributable to the Apartment Complex.
1.11 The Partnership, except to the extent it is protected by
insurance and excluding any risk borne by lenders, bears the sole risk of loss
if the Apartment Complex is destroyed or condemned or there is a diminution in
the value of the Apartment Complex.
1.12 No person or entity except the Partnership has the right
to any proceeds, after payment of all indebtedness, from the sale, refinancing,
or leasing of the Apartment Complex.
1.13 No General Partner is related in any manner to the
Investment Partnership, nor is any General Partner acting as an agent of the
Investment Partnership.
2. Miscellaneous
2.1 This Certification and Agreement is made solely for the
benefit of the Investment Partnership and WNC, and their respective successors
and assignees, and no other person shall acquire or have any right under or by
virtue of this Agreement.
2.2 This Certification and Agreement may be executed in
several counterparts, each of which shall be deemed to be an original, all of
which together shall constitute one and the same instrument.
2.3 Capitalized terms used but not defined in this
Certification Agreement shall have the meanings given to them in the Partnership
Agreement.
C-3
<PAGE>
IN WITNESS WHEREOF, this Certificate and Agreement is made and entered
into as of the day of ____________, 1999.
Summer Wood, Ltd.
GENERAL PARTNER
ACHR Housing Corporation
By: /s/ Nancy S. Spears
Nancy S. Spears,
President
ORIGINAL LIMITED PARTNER
By: /s/ Nancy S. Spears
Nancy S. Spears
C-4
<PAGE>
EXHIBIT D TO THE PARTNERSHIP AGREEMENT
GENERAL PARTNER CERTIFICATION
This General Partner Certification is being issued to WNC Housing Tax
Credit Fund VI, L.P. Series 6 ("Limited Partner") by ACHR Housing Corporation,
General Partner of Summer Wood, Ltd., a Alabama limited partnership
("Partnership") in accordance with Section 7.2 of the Amended and Restated
Agreement of Limited Partnership of the Partnership ("Partnership Agreement").
Capitalized terms used but not defined in this General Partner
Certification shall have the meanings given to them in the Partnership
Agreement.
WHEREAS, the Limited Partner is scheduled to make a Capital
Contribution to the Partnership;
WHEREAS, the Partnership Agreement requires the General Partner to
issue this Certification prior to the Limited Partner's payment; and
WHEREAS, the Limited Partner shall rely on this Certification in
evaluating the continued merits of its investment in the Partnership;
NOW, THEREFORE, to induce the Limited Partner to make its scheduled
Capital Contribution to the Partnership, the General Partner represents and
warrants to the Limited Partner that the following are true and correct as of
the date written below.
(a) The Partnership is a duly organized limited partnership validly
existing under the laws of the State and has complied with all filing
requirements necessary for the protection of the limited liability of the
Limited Partner and the Special Limited Partner.
(b) The Partnership Agreement and the Project Documents as of the date
hereof are in full force and effect and neither the Partnership nor the General
Partner is in breach or violation in any material respect of any provisions
thereof.
(c) Improvements will be completed in a timely and workerlike manner in
accordance, in all material respects, with all applicable requirements of all
appropriate governmental entities and the plans and specifications of the
Project, as such plans and specifications may be changed from time to time with
the approval of Regions Bank and Alabama Housing Finance Authority (HOME) and
any applicable governmental entities, if such approval shall be required.
D-1
<PAGE>
(d) The Project is being operated in accordance with standards and
procedures which are prudent and customary for the operation of properties
similar to the Project.
(e) Additional Improvements on the Project, if any, shall be completed
substantially in conformity with plans and specifications reasonably approved by
the Special Limited Partner.
(f) Except for any actions taken by a Partner other than the General
Partner, no Partner has or will have any personal liability with respect to, or
has or will have personally guaranteed the payment of, the Mortgage, except that
the General Partner has limited recourse for environmental clean-up, fraud or
misrepresentation of insurance proceeds, condemnation awards or rents.
(g) The Partnership is in substantial compliance with all construction
and use codes applicable to the Project and is not in material violation of any
zoning, environmental or similar regulations applicable to the Project.
(h) All appropriate public utilities, including sanitary and storm
sewers, water, gas and electricity, are currently available and will be
operating properly for all units in the Project at the time of first occupancy
and throughout the term of the Partnership, subject to temporary interruptions
not caused by any action of any Partner.
(i) The Partnership has obtained Insurance written by an Insurance
Company.
(j) The Partnership owns the fee simple interest in the Project.
(k) The Construction Contract has been entered into between the
Partnership and the Contractor; no other consideration or fee shall be paid to
the Contractor other than amounts set forth in the Construction Contract.
(l) The Partnership will require the Accountant to depreciate the
Improvements over a 27 1/2 year term.
(m) 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, except those that may have been used in
the normal maintenance and operations of any portion of 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 Substances and shall
D-2
<PAGE>
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, that is not
used in connection with the normal maintenance and operation of any portion of
the Project, (4) if the General Partner becomes aware that 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 (to the extent
the General Partner is aware of such threat) any Person, other than a
governmental agency, against the Partnership or General Partner arising out of
or resulting from any Hazardous Substance being present or released in, on or
around any part of the Project.
(n) The General Partner has not executed and will not execute any
agreements with provisions contradictory to, or in opposition to, the provisions
of the Partnership Agreement.
(o) The Partnership will allocate to the Limited Partner the Projected
Annual Tax Credits, or the Revised Projected Tax Credits, if applicable.
(p) To the knowledge of the General Partner, no charges or encumbrances
exist with respect to the Project other than those which are created or
permitted by the Project Documents or are noted or excepted in the title policy
for the Project.
(q) The buildings on the Project site constitute or shall constitute a
"qualified low-income housing project" as defined in Section 42(g) of the Code,
and as amplified by the Treasury Regulations thereunder. In this connection, not
later than December 31 of the first year in which the Partners elect the LIHTC
to commence in accordance the Code, the Project will satisfy the Minimum
Set-Aside Test.
(r) All accounts of the Partnership required to be maintained under the
terms of the Project Documents, including, without limitation, any reserves in
accordance with Article VIII hereof, as of the required time shall be funded to
required levels.
D-3
<PAGE>
(s) Except as required or permitted by this Agreement, the General
Partner has not lent or otherwise advanced any funds to the Partnership other
than its Capital Contribution and the Partnership has no unsatisfied obligation
to make any payments of any kind to the General Partner or any Affiliate
thereof.
(t) No event has occurred which constitutes a material default under
any of the Project Documents.
(u) No event has occurred which has caused, and the General Partner has
not acted in any manner which will cause (1) the Partnership to be treated for
federal income tax purposes as an association taxable as a corporation, (2) the
Partnership to fail to qualify as a limited partnership under the Act, or (3) as
of the date hereof, 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.
(v) As of the date hereof, 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 and adversely affected the operation of the Partnership or the
Project; (2) materially and 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.
(w) As of the date hereof, neither the Partnership nor the General
Partner has any liabilities, contingent or otherwise, which have not been
disclosed in writing to the Limited Partner and the Special Limited Partner and
which in the aggregate affect the ability of the Limited Partner to obtain the
anticipated benefits of its investment in the Partnership.
D-4
<PAGE>
(x) The General Partner or guarantor has and shall maintain a net worth
equal to at least $1,000,000 computed in accordance with generally accepted
accounting principles.
IN WITNESS WHEREOF, the undersigned have set their hands to this
General Partner Certification this day of _________, 1999.
ACHR Housing Corporation
General Partner
By: ___________________
Nancy S. Spears,
President
D-5
<PAGE>
EXHIBIT E TO PARTNERSHIP AGREEMENT
FORM OF COMPLETION CERTIFICATE
(to be used when construction [rehabilitation] completed)
COMPLETION CERTIFICATE
The undersigned, an architect duly licensed and registered in the State of
Alabama, has prepared final working plans and detailed specifications for Summer
Wood, Ltd., a Alabama limited partnership (the "Partnership"), between WNC
Housing Tax Credit Fund VI, L.P. Series 6, a California limited partnership
("Limited Partner") and the Partnership in connection with the construction
[rehabilitation] of improvements on certain real property located in Camden,
Wilcox, Alabama (the "Improvements").
The undersigned hereby certifies (i) that the Improvements have been completed
in accordance with the aforesaid plans and specifications, (ii) that a permanent
certificate of occupancy and all other permits required for the continued use
and occupancy of the Improvements have been issued with respect thereto by the
governmental agencies having jurisdiction thereof, (iii) that the Improvements
are in compliance in all material respects with all requirements and
restrictions of all governmental authorities having jurisdiction over the
Improvements, including, without limitation, all applicable zoning, building,
environmental, fire, and health ordinances, rules and regulations and (iv) that
all contractors, subcontractors and workmen who worked on the Improvements have
been paid in full except for normal retainages and amounts in dispute.
- -----------------------------------
Project Architect
Date: ____________________________
Confirmed by:
- -----------------------------------
General Partner
Date: ____________________________
E-1
<PAGE>
EXHIBIT F TO THE PARTNERSHIP
[ACCOUNTANT'S CERTIFICATE]
[Accountant's Letterhead]
_______________, 199____
WNC Housing Tax Credit Fund VI, L.P. Series 6
c/o WNC & Associates, Inc.
3158 Redhill Ave., Suite 120
Costa Mesa, California 92626
RE: Partnership
Certification as to Amount
of Eligible Tax Credit Base
Gentlemen:
In connection with the acquisition by WNC Housing Tax Credit Fund VI, L.P.
Series 6 (the "Limited Partner") of a limited partnership interest in Summer
Wood, Ltd., a Alabama limited partnership (the "Partnership") which owns a
certain parcel of land located in Camden, Wilcox County, Alabama
and improvements thereon (the "Project"), the Limited Partner has requested our
certification as to the amount of low-income housing tax credits ("Tax Credits")
available with respect to the Project under Section 42 of the Internal Revenue
Code of 1986, as amended (the "Code"). Based upon our review of [the financial
information provided by the Partnership] of the Partnership, we are prepared to
file the Federal information tax return of the Partnership claiming annual Tax
Credits in the amount of $_______________, which amount is based on an eligible
basis (as defined in Section 42(d) of the Code) of the Project of
$________________, a qualified basis (as defined in Section 42(c) of the Code)
of the Project of $_________________ and an applicable percentage (as defined in
Section 42(b) of the Code) of _____%.
Sincerely,
- -------------------------
F-1
<PAGE>
EXHIBIT G TO THE PARTNERSHIP AGREEMENT
[CONTRACTOR'S CERTIFICATE]
[Contractor's Letterhead]
_______________, 199____
WNC Housing Tax Credit Fund VI, L.P. Series 6
c/o WNC & Associates, Inc.
3158 Redhill Avenue
Suite 120
Costa Mesa, California 92626
Re: Summer Wood, Ltd.
Dear Ladies and Gentlemen:
The undersigned Charter Construction Management Co., Inc., (hereinafter referred
to as "Contractor"), has furnished or has contracted to furnish labor, services
and/or materials (hereinafter collectively referred to as the "Work") in
connection with the improvement of certain real property known as
__________________ located in Camden, Wilcox County, Alabama
(hereinafter known as the "Project").
Contractor makes the following representations and warranties regarding Work at
the Project.
o Work on said Project has been performed and completed in accordance with the
plans and specifications for the Project.
o Contractor acknowledges that all amounts owed pursuant to the contract for
Work performed for Summer Wood, Ltd. have been paid in full except for
normal retainages and amounts in dispute.
o Contractor acknowledges that Summer Wood, Ltd. is not in material violation
with terms and conditions of the contractual documents related to the
Project.
o Contractor warrants that all parties who have supplied Work for improvement
of the Project have been paid in full except for normal retainages and
amounts in dispute.
o Contractor acknowledges the contract to be paid in full except for normal
retainages and amounts in dispute and releases any lien or right to lien
against the above property.
The undersigned has personal knowledge of the matters stated herein and is
authorized and fully qualified to execute this document on behalf of the
Contractor.
(NAME OF COMPANY)
By:_________________________________________
Title:______________________________________
G-1
<PAGE>
EXHIBIT H TO THE PARTNERSHIP
REPORT OF OPERATIONS
QUARTER ENDED:____________________________,199X
- ------------------------------------- -----------------------------------
LOCAL PARTNERSHIP:
- ------------------------------------- -----------------------------------
- ------------------------------------- -----------------------------------
GENERAL PARTNER:
- ------------------------------------- -----------------------------------
- ------------------------------------- -----------------------------------
FIRM NAME:
- ------------------------------------- -----------------------------------
- ------------------------------------- -----------------------------------
ADDRESS:
- ------------------------------------- -----------------------------------
- ------------------------------------- -----------------------------------
CITY, STATE, ZIP:
- ------------------------------------- -----------------------------------
- ------------------------------------- -----------------------------------
PHONE:
- ------------------------------------- -----------------------------------
- ------------------------------------- -----------------------------------
PROPERTY NAME:
- ------------------------------------- -----------------------------------
- ------------------------------------- -----------------------------------
ADDRESS:
- ------------------------------------- -----------------------------------
- ------------------------------------- -----------------------------------
CITY, STATE, ZIP:
-----------------------------------
- ------------------------------------- -----------------------------------
RESIDENT MANAGER:
- ------------------------------------- -----------------------------------
- ------------------------------------- -----------------------------------
PHONE:
- ------------------------------------- -----------------------------------
- ------------------------------------- -----------------------------------
ACCOUNTANT:
- ------------------------------------- -----------------------------------
- ------------------------------------- -----------------------------------
FIRM:
- ------------------------------------- -----------------------------------
- ------------------------------------- -----------------------------------
ADDRESS:
- ------------------------------------- -----------------------------------
- ------------------------------------- -----------------------------------
CITY, STATE, ZIP:
- ------------------------------------- -----------------------------------
- ------------------------------------- -----------------------------------
PHONE:
- ------------------------------------- -----------------------------------
- ------------------------------------ -----------------------------------
MANAGEMENT COMPANY
- ------------------------------------- -----------------------------------
- ------------------------------------- -----------------------------------
ADDRESS:
- ------------------------------------- -----------------------------------
- ------------------------------------- -----------------------------------
CITY, STATE, ZIP:
- ------------------------------------- -----------------------------------
- ------------------------------------- -----------------------------------
PHONE:
- ------------------------------------- -----------------------------------
- ------------------------------------- -----------------------------------
CONTACT:
- ------------------------------------- -----------------------------------
- -------------------------------------------------------------------------------
OCCUPANCY INFORMATION
A. Number of Units_____ Number of RA Units_____ Number of Section 8 Tenants ____
B. Occupancy for the Quarter has: Increased ____ Decreased_____
Remained the Same _____
<PAGE>
C. Number of: Move-Ins ______ Move-Outs __________ % of Occupancy ______
D. Average length of tenant residency: 1-6 months ______ 6-12 months ______
1-3 years ______ Over 4 years_____
E. Number of Basic rent qualified applicants on waiting list: ________
F. If the apartments are less than 90% occupied, please explain why and
describe what efforts are being made to lease-up remaining units.
___________________________________________________________________________
G. On site manager: Full Time__________ Part Time____________.
If part-time, the number of hours per week_____________.
H-1
<PAGE>
OPERATIONAL INFORMATION
Rent Schedule and Increases from Previous Quarter
Number Monthly Rent Rent Increases Effective
of Units Basic / Market Amount Percent Date
1 Bedroom ________ ______________ _________________ ________
2 Bedroom ________ ______________ _________________ ________
3 Bedroom ________ ______________ _________________ ________
PROPOSED MAINTENANCE
Completed Funded by
Type Description or Operations or Amount
Planned Reserves
- ------------------------------------------------------------------------------
Interior Painting
- ------------------------------------------------------------------------------
Exterior Painting
- ------------------------------------------------------------------------------
Siding
- ------------------------------------------------------------------------------
Roofing
- ------------------------------------------------------------------------------
Drainage
- ------------------------------------------------------------------------------
Paving
- ------------------------------------------------------------------------------
Landscaping
- ------------------------------------------------------------------------------
Playground
- ------------------------------------------------------------------------------
Community Room
- ------------------------------------------------------------------------------
Laundry Room
- ------------------------------------------------------------------------------
Common Areas
- ------------------------------------------------------------------------------
Carpet
- ------------------------------------------------------------------------------
Appliances
- ------------------------------------------------------------------------------
Lighting
- ------------------------------------------------------------------------------
Other
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Please describe in detail any major repairs:
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
H-2
<PAGE>
CONDITION OF PROPERTY
THE OVERALL APPEARANCE OF THE BUILDING(S) IS:
Excellent Good Fair Bad
THE OVERALL APPEARANCE OF THE GROUNDS IS:
Excellent Good Fair Bad
EXTERIOR CONDITION (Please Check Appropriate Box)
- ------------------------------------------------------------------------------
Type of Condition Excellent Good Fair Problems/Comments
- ------------------------------------------------------------------------------
Signage
- -------------------------------------------------------------------------------
Parking Lots
- -------------------------------------------------------------------------------
Office/Storage
- -------------------------------------------------------------------------------
Equipment
- -------------------------------------------------------------------------------
Community Building
- -------------------------------------------------------------------------------
Laundry Room
- -------------------------------------------------------------------------------
Benches/Playground
- -------------------------------------------------------------------------------
Lawns, Plantings
- -------------------------------------------------------------------------------
Drainage, Erosion
- -------------------------------------------------------------------------------
Carports
- -------------------------------------------------------------------------------
Fences
- -------------------------------------------------------------------------------
Walks/Steps/Guardrails
- -------------------------------------------------------------------------------
Lighting
- -------------------------------------------------------------------------------
Painting
- -------------------------------------------------------------------------------
Walls/Foundation
- -------------------------------------------------------------------------------
Roof/Flashing/Vents
- -------------------------------------------------------------------------------
Gutters/Splashblocks
- -------------------------------------------------------------------------------
Balconies/Patios
- -------------------------------------------------------------------------------
Doors Windows/Screens
- -------------------------------------------------------------------------------
Elevators
- -------------------------------------------------------------------------------
INTERIOR CONDITION
- -------------------------------------------------------------------------------
Stairs
- -------------------------------------------------------------------------------
Flooring
- -------------------------------------------------------------------------------
Doors/Cabinets/Hardware
- -------------------------------------------------------------------------------
Drapes/Blinds
- -------------------------------------------------------------------------------
Interior Painting
- -------------------------------------------------------------------------------
Refrig/Stoves/Sinks
- -------------------------------------------------------------------------------
Bathroom/Tubs/Showers
Toilets
- -------------------------------------------------------------------------------
H-3
<PAGE>
FINANCIAL STATUS
A. Replacement Reserve is: Fully-funded Under-funded Amount
(complete attached schedule)
Tax/Insurance Escrow is: Fully-funded Under-funded Amount
(complete attached schedule)
Property is operating at a: Surplus Deficit Amount
If deficit, General Partner funding? Yes No Amount
Mortgage Payments are: On Schedule Delinquent Amount
Are the taxes current? Yes No
(please provide copy of paid tax bill)
Is the insurance current? Yes No Renewal Date
(please provide copy of yearly renewal)
B. Please note and explain any significant changes in the following:
Administrative Expense Increase Decrease Amount
------------------------------------------------------------------------
------------------------------------------------------------------------
Repairs/Maintenance Expense Increase Decrease Amount
------------------------------------------------------------------------
------------------------------------------------------------------------
Utility Expense Increase Decrease Amount
------------------------------------------------------------------------
------------------------------------------------------------------------
Taxes/Insurance Expense Increase Decrease Amount
------------------------------------------------------------------------
------------------------------------------------------------------------
C. Do you anticipate making a return to owner distribution? Yes No
Explanation:
------------------------------------------------------------------------
------------------------------------------------------------------------
D. Please explain in detail any change in the financial condition:
------------------------------------------------------------------------
------------------------------------------------------------------------
E. Any insurance claims files? Yes______ No______
If yes, please explain:
------------------------------------------------------------------------
------------------------------------------------------------------------
H-4
<PAGE>
SCHEDULE OF RESERVES
Replacement Tax & Insurance Other Total
Beginning Balance:
Deposits:
---------- ----------- ---------- ------- -------
---------- ----------- ---------- ------- -------
---------- ----------- ---------- ------- -------
Total Deposits
----------- ---------- ------- -------
Authorized Disbursements:
Description:
--------- ----------- ---------- ------- -------
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Total Disbursements: ----------- ---------- -------- ------
Ending Balance: (1) ----------- ---------- -------- ------
Required Balance: ----------- ---------- -------- ------
Over/under funding: ----------- ---------- -------- ------
(1) Must agree with amount shown on the balance sheet.
Prepared By: Date:
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Firm: Telephone:
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Reminder: Please include the following documents:
1. Completed Report of Operations
2. Balance Sheet
3. Statement of Income & Expenses
4. Rent roll for quarter ending
5. Tax Credit Compliance Report
H-5
<PAGE>
INITIAL TENANT CERTIFICATIONS
PARTNERSHIP NAME
Fund: Tax Credit Set-Asides Information: Loan/Regulatory Set-Asides:
Property Name: [ ] 20/50 or [ ] 40/60 Election
Address: Does the 51% average apply? [ ] Y [ ] N
Deeper Set-Aside __% @ 50% AMI
County:
Management Company
[ ] Multi-Family Contact Person:
[ ] Elderly
24 Number of Units Phone #
Number of Exempt
Units
LIHTC Project#
- -----------------------------------------------------------------------------
Gross Move-In
Unit First Time Move-In No. of No. in Income Income
No. Tenant Name Date Bdrms Sq. Ft. Set-Aside Unit Move-In Limits
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BIN # Certificate of Occupancy Date:
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BIN # Certificate of Occupancy Date:
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BIN # Certificate of Occupancy Date:
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<PAGE>
INITIAL TENANT CERTIFICATIONS
PARTNERSHIP NAME
(CONTINUED)
Tenant Tenant
Income Income Asset Unit Rent Tenant Utility
Qualified Verification Verification Rent Subsidy Payment Allowance
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<PAGE>
INITIAL TENANT CERTIFICATIONS
PARTNERSHIP NAME
(CONTINUED)
Tenant Tenant Overall
Gross Maximum Rent Tenant
Rent Rent Qualified Eligible
- -------------------------------------------------------------------------------
YES YES
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YES YES
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YES YES
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YES YES
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YES YES
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YES YES
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YES YES
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YES YES
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YES YES
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YES YES
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YES YES
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YES YES
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YES YES
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YES YES
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H-6
<PAGE>
QUARTERLY TAX CREDIT COMPLIANCE REPORT
PROPERTY NAME
Quarter Ending: Tax Credit Set-Asides Information: Loan/Regulatory Set-Asides:
[ ] 20/50 or [ ] 40/60 Election
Does the 51% average apply? [ ] Y [ ] N
Deeper Set-Aside : ( List Details)
County: Allocation: Management Company:
Pre-1990 (Rent based on number of persons) Contact Person:
Elected to change No. Bedrm
Post-1989 (Based on number of Bedroom)
[ ] Multi-Family [ ] Elderly Phone No.
Number of Units
Number of Exempt Units Fax No.
Prepared by:
LIHTC Project#
- -----------------------------------------------------------------------------
Gross Annual
Unit Tenant Move-In No. Of Inc. Set- No. In Annual Income
No. Name Date Bdrms Pct. Aside Unit Income Limits
- -------------------------------------------------------------------------------
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<PAGE>
QUARTERLY TAX CREDIT COMPLIANCE REPORT
PROPERTY NAME
(CONTINUED)
Annual Tenant Less
Recert. Income Income Assets Unit Rent Tenant
Date Qualified Verified Verified Rent Subsidy Payment
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<PAGE>
Tenant Tenant Overall
Utility Gross Maximum Rent Tenat
Allow. Rent Rent Qualified Eligible
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H-7
<PAGE>
Tenant Tax Credit Compliance Audit
Document Transmittal Checklist
Unit Number Property Name Date
Tenant Name Completed By:
Initial _________ Annual________
Check Box for Type of Certification Management Company
This Section For WNC Use Only
Check Documents Being Sent
Received. Reviewed
___Internal Checklist or worksheet
___Initial - Rental Application/Rental Agreement
___Initial - Questionnaire of Income/Assets
___Recertification - Questionnaire of Income/Assets
___Recertification - Addendum to Lease
___Employment Verification
___Employment Termination Verification
___Military Verification
___Verification of Welfare Benefits
___Verification of Social Security Benefits
___Verification of Disability Benefits
___Unemployment Verification
___Verification of Unemployment Compensation
___Verification Worksmen Compensation
___Retirement/Annuities Verification
___Verification of Veterans Pension
___Verification of Child Support
___Verification of Alimony Support
___Disposed of Assets Last 2 yrs.
___Real Estate
___Investment
___Assets Verifications (savings, stocks etc.)
___Trusts/with Current Tax Return
___Lump Sum Settlements
___Notarized Affidavit of Support
___Certification of Handicap
___Notarized Self-Employed-Tax Return
___Notarized statement of no income
___Tenant Certification
- ------------------------------------------------------------------------------
This Section For WNC Use Only
YES NO
Are all required forms completed?
Are all required forms dated?
Did the Manager and Tenant sign all documents?
Third party verification of income completed?
Third party verification of assets completed?
Are verifications completed for all members 18 yrs. and
over?
Did all the members of the household 18 yrs. and
over sign all documents?
Is lease completed with a minimum of six months/ SRO
monthly?
Addendum completed?
Tenant Certification completed?
Are all members of the household full-time students?
Is utility allowance correct?
Is correct income limit being used?
Is correct rent limit being used?
For tenants with no income
Was notarized statement of no income obtained with tax
return?
or Were all sources verified (AFDC, Unemployment,
Soc. Sec., Disability)?
H-8
<PAGE>
TAX CREDIT COMPLIANCE MONITORING:
ANNUAL CERTIFICATION
As General Partner of Summer Wood, Ltd., I hereby certify as to the
following:
1. Summer Wood, Ltd. owns a thirty two (32) unit project ("Project") in
Camden, Wilcox County, Alabama
.
2. An annual income certification (including supporting documentation)
has been received from each tenant. The income certification reflects that the
tenant's income meets the income limitation applicable to the Project pursuant
to Section 42(g)(1) of the Internal Revenue Code ("Code").
3. The Project satisfies the requirements of the applicable minimum
set aside test as defined in Section 42(g)(1) of the Code.
4. Each unit within the Project is rent restricted as defined in
Section 42(g)(2)of the Code.
5. Each unit in the Project is available for use by the general public
and not for use on a transient basis.
6. Each building in the Project is suitable for occupancy in accordance
with local health, safety, and building codes.
7. During the preceding calendar year, there had been no change in the
eligible basis, as defined in Section 42(d)of the Code, of any building within
the Project.
8. All common area facilities included in the eligible basis of the
Apartment Complex are provided to the tenants on a comparable basis without a
separate fee to any tenant in the Project.
9. During the preceding calendar year when a unit in the Project became
vacant reasonable attempts were made to rent that unit to tenants whose incomes
met the income limitation applicable to the Project pursuant to Section 42(g)(1)
of the Code and while that unit was vacant no units of comparable or smaller
size were rented to tenants whose income did not meet the income limitation
applicable to the Project pursuant to Section 42(g)(1) of the Code.
10. If the income of a tenant in a unit increased above the limit
allowed in Section 42 (g)(2)(D)(ii), then the next available unit of comparable
or smaller size was rented to tenants whose incomes met the income limitation
applicable to the Project pursuant to Section 42(g)(1) of the Code.
H-9
<PAGE>
IN VERIFICATION OF THE FOREGOING ENCLOSED HEREWITH IS A COPY OF THE ANNUAL
INCOME CERTIFICATION RECEIVED FROM EACH TENANT IN THE PROJECT. UPON REQUEST I
WILL PROVIDE COPIES OF ALL DOCUMENTATION RECEIVED FROM THE TENANT TO SUPPORT
THAT CERTIFICATION.
I declare under penalty of perjury under the law of the State of
Alabama that the foregoing is true and correct.
Executed this ________ day of _______ at __________, _________________.
- ------------------------------------
H-10
<PAGE>
Calculation of Debt Service Coverage
Month 1 Month 2 Month 3
------------ ------------ ------------
INCOME
Gross Potential Rent
Other Income
Vacancy Loss
------------ ------------ ------------
Adjusted Gross Income
------------ ------------ ------------
OPERATING EXPENSES
Utilities
Maintenance
Management Fee
Administration
Insurance
Real Estate Taxes
Other Expenses
------------ ------------ ------------
Total Operating Expenses
------------ ------------ ------------
Net Operating Income (1)
Accrual adjustments for:
R/E Taxes
Insurance
Tax/ Accounting
Other
Replacement Reserves
============ ============ ============
Income for DSC Calculation
============ ============ ============
------------ ------------ ------------
Stabilized Debt Service
------------ ------------ ------------
------------ ------------ ------------
Debt Service Coverage (2)
------------ ------------ ------------
Please submit this form along with the following supporting
documentation:
Monthly Financial Reports (income statement, balance sheet,
general ledger and rent rolls) Operating Budget
Copies of bank statements.
(1) This number should reconcile easily with the monthly financial
statements
(2) The ratio between the Income for DSC calculation and
Stabilized Debt Service. As example, a 1.15 DSC means that for
every $1.00 of Stabilized Debt Service required to be paid there
must be $1.15 of Net Operating Income available.
H-11
<PAGE>
DEVELOPMENT AGREEMENT
This DEVELOPMENT AGREEMENT ("Agreement"), is entered into as of the
date written below by and between ACHR Housing Corporation ("Developer") and
Summer Wood, Ltd., a Alabama limited partnership ("Owner"). Developer and Owner
collectively may be referred to as the "Parties" or individually may be referred
to as a "Party".
RECITALS
A. Owner has acquired the real property located in Camden, Wilcox
County, Alabama, as more particularly described in Exhibit A attached hereto and
incorporated herein (the "Real Property").
B. Owner intends to develop on the Real Property a 32 unit low-income
rental housing complex and other related improvements, which is intended to
qualify for federal low-income housing tax credits (the "Project").
C. Prior to the date of this Agreement Developer has performed
substantial development services with respect to the Project as specified in
Section 2.3 of this Agreement. Developer has also agreed to oversee the
development of the Project until all construction work is completed and to
provide certain services relating thereto. The Parties recognize and acknowledge
that the Developer is, and has been, an independent contractor in all services
rendered to, and to be rendered to, the Owner pursuant to this Development
Agreement.
D. Owner desires to commit its existing development agreement with
Developer into writing through this Development Agreement for Developer's
services to manage, oversee, and complete development of the Project. Developer
desires to commit its existing development agreement with Owner into writing
through this Development Agreement and Developer is willing to assign all
development rights to the Project to Owner, to undertake performance of such
development services, and to fulfill all obligations of the Developer set forth
in this Agreement, in consideration of Owner's restated promise to pay to
Developer the fee specified in this Agreement.
NOW THEREFORE, in consideration of the foregoing recitals and the
mutual promises and undertakings in this Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Owner and Developer agree as follows.
1
<PAGE>
SECTION I
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall, when capitalized,
have the following meanings:
"Code" means the Internal Revenue Code of 1986, as amended.
"Construction Documents" means the contract documents between the Owner
and the Construction Lender pertaining to construction of the Project.
"Construction Lender" means Regions Bank, which has committed to make a
loan to finance construction of the Project.
"Construction Loan" means the loan to finance construction of the
Project, made to Owner by the Construction Lender.
"Contractor" means Charter Construction Management Co., Inc..
"Department" means the Alabama agency responsible for the reservation
and allocation of Tax Credits.
"Development Fee" means the fee for development services described in
Section 2 of this Agreement.
"Partnership Agreement" shall mean the Amended and Restated Agreement
of Limited Partnership of Summer Wood, Ltd., a Alabama limited partnership,
which Partnership Agreement is incorporated herein by this reference. Any terms
capitalized but not defined herein shall have the meaning ascribed in the
Partnership Agreement.
"Tax Credits" means the low-income housing tax credits found in Section
42 of the Code, and all rules, regulations, rulings, notices and other
promulgations thereunder.
SECTION 2
ENGAGEMENT OF DEVELOPER; FEE; SERVICES
2.1 Engagement; Term. Owner hereby confirms the engagement of Developer
to act as developer of the Project, and to perform the various covenants and
obligations of the Developer under this Agreement. Developer hereby confirms and
accepts such engagement and agrees to perform fully and timely each and every
one of its obligations under this Agreement. The term of such engagement shall
commence on the date hereof and subject to the pre-payment provisions of Section
3 shall expire on December 31, 2009.
2
<PAGE>
2.2 Development Fee. In consideration of Developer's prior activities
and Developer's agreement to provide development services during the term of
this Agreement, Owner agrees to pay the Developer a Development Fee equal to the
greater of $279,756 or 15% of total development costs. The Development Fee shall
be payable in accordance with Section 3 of this Agreement.
2.3 Development Services.
(a) Prior Services. Owner acknowledges that Developer has, prior to the
date hereof, performed substantial development services relating to the Project.
Such services (the "Prior Services") have included the following.
(1) Services Rendered Prior to December 31, 1998.
(A) Developer has located, negotiated and closed on
the purchase of the Real Property.
(B) Developer has made an application for Tax Credits
to the Department.
(C) Developer has negotiated, conferred and worked
with the Department to obtain a reservation of Tax
Credits for the Owner on the Project.
(D) Developer has negotiated, conferred and worked
with the Department to obtain an allocation of Tax
Credits for the Owner on the Project.
(E) Developer has negotiated and conferred with the
environmental engineer to provide a full
environmental evaluation of the Real Property.
(F) Developer has negotiated and conferred with a
market analyst to provide a full market feasibility
study of the Project.
(G) Developer has negotiated, conferred and caused
the Owner to execute an architectural contract for
the planning and design of the Project.
(2) Other Prior Services.
(A) Developer has created, refined and analyzed the
financial projections for the Project.
(B) Developer has negotiated, conferred, and worked
with the Project architects, engineers and
Contractor with regard to preparation, refinement, and finalization of the plans
and specifications for the Project, and projected construction schedules and
costs.
3
<PAGE>
(C) Developer has applied for zoning approvals, land
use approvals and development permits necessary for the Project, and has
conferred and worked with the City of Camden planning and building agencies with
regard to such approvals and permits.
(D) Developer has negotiated and conferred with the
Construction Lender to obtain the Construction Loan.
(E) Developer has negotiated and conferred with an
insurance carrier to provide a builder's risk policy during construction.
(b) Future Services. Developer hereby agrees to perform the following
development services for and as an agent of Owner.
(1) Construction and Development Matters. Developer shall
oversee construction of the Project on Owner's behalf, as provided in this
Section 2.3(b)(1). Owner shall allow Developer full access to the Project during
the construction period. Developer and Developer's agents shall perform their
work in a manner that minimizes interference with the management and operation
of the Project.
(A) Developer shall exert its best efforts to ensure
that the Contractor performs its obligations under the Construction Documents in
a diligent and timely manner.
(B) Developer shall participate in and provide
assistance with regard to pre-construction conferences and pre-construction
documents, including drawings, specifications, contracts, and schedules.
(C) Developer shall review all Construction
Documents, identify construction issues and participate in the resolution of
such issues.
(D) Developer shall attend construction progress
meetings at the Project site to monitor construction progress and advise Owner
and the Contractor with respect to the resolution of construction issues.
(E) Developer shall review the Contractor's monthly
pay applications.
(F) Developer shall monitor the Contractor's progress
with respect to the approved Project schedule and keep the Owner informed of all
pertinent Project issues and construction progress.
(G) Developer shall advise Owner with respect to
relations with engineers, architects, and other construction professionals.
4
<PAGE>
(H) Developer shall be available for immediate
response in critical situations arising during the
construction of the Project.
(I) Developer shall coordinate relations with the
City of Camden and other governmental authorities
having jurisdiction over development of the Project.
(2) Tax Credit Matters. From the date hereof through the
completion of construction of the Project, the Developer shall provide the
following services to Owner with regard to the Tax Credits which services do not
constitute the rendering of legal or tax advice:
(A) Developer shall consult with and advise Owner
concerning construction issues that could affect the
amount of Tax Credits for which the Project is eligible.
(B) Developer shall consult with and advise Owner
with respect to the requirements of the Department
as they relate to the construction and development of the Project.
(C) Developer shall monitor construction progress
with respect to the Project schedule agreed to with
the Department, if any.
(D) Developer shall coordinate and participate in any
conferences with the Department relating to the
Project and construction matters.
(c) Assignment of Development Rights. Developer hereby assigns to Owner
all rights to the development of the Project, including but not limited to, all
tangible and intangible rights arising with respect to the name Summer Wood,
Ltd., the design of the Project, the plans and specifications for the Project
and all rights arising under the agreements with Project architects, engineers
and other Project design and construction professionals.
SECTION 3
DEVELOPMENT FEE PAYMENTS
3.1 Services Rendered Prior to October , 1998. The Parties acknowledge
and agree that Developer has earned the sum of $ for services rendered prior to
October , 1998, that said amount is reasonable in relation to the work
performed, is fully earned as of that date and said amount shall be paid in any
event notwithstanding the termination of this Agreement. The Parties further
acknowledge and agree that the Owner has accrued the Development Fee of $ ,
under its method of accounting, and has reported the Development Fee expense on
its 1998 income tax return.
5
<PAGE>
3.2 Payment of Development Fee. The Development Fee shall be paid to
the Developer from Capital Contribution payments received by the Owner in
accordance with Section 9.2(b) of the Partnership Agreement. If the Development
Fee is not paid in full in accordance with Section 9.2(b) of the Partnership
Agreement then the balance of the Development Fee shall be paid from available
Net Operating Income in accordance with the terms of Section 11.1 of the
Partnership Agreement, but in the event later than December 21, 2009. Also, if
the Development Fee is not paid in full in accordance with Section 9.2(b) of the
Partnership Agreement then the unpaid portion shall accrue interest at a rate
equal to the 5-year Treasury money rate in effect as of the date of Completion
of Construction as defined in the Partnership Agreement.
SECTION 4
TERMINATION
Neither Party to this Agreement shall have the right to terminate this
Agreement prior to the expiration of the term without cause. Owner may terminate
this Agreement without further liability, for cause, which shall mean any one of
the following:
(a) a material breach by Developer of its obligations under this
Agreement that is not cured within thirty (30) days after notice thereof (or, as
to any non-monetary obligations that is not reasonably capable of cure within 30
days, and provided that cure is commenced within 10 days of notice and
diligently pursued thereafter to completion, within such time as may reasonably
be necessary to complete such cure);
(b) a fraudulent or intentionally incorrect report by Developer to
Owner with respect to the Project; or
(c) any intentional misconduct or gross negligence by Developer with
respect to its duties under this Contract.
Upon proper termination of this Agreement by Owner pursuant to this
Section 4, all rights of Developer to receive unearned Development Fees pursuant
to this Agreement with respect to services not yet performed shall terminate.
Developer shall receive the full Development Fee for Prior Services and shall
receive a portion of the Development Fee for Future Services based on the
percentage of completion of construction of the Project at the time of
termination. Nothing in this Section 4 shall be deemed to prevent Owner from
bringing an action against Developer to recover fully all damages resulting from
any of the causes set forth in paragraphs (a), (b) or (c) above, or to prevent
Owner from contending in any action or proceeding that the Future Services were
not earned by Developer.
6
<PAGE>
SECTION 5
GENERAL PROVISIONS
5.1 Notices. Notices required or permitted to be given under this
Agreement shall be in writing sent by registered or certified mail, postage
prepaid, return receipt requested, to the Parties at the following addresses, or
such other address as is designated in writing by the Party, the date of
registry thereof, or the date of certification receipt therefor being deemed the
date of such notice; provided, however, that any written communication
containing such information sent to a Party actually received by a Party shall
constitute notice for all purposes of this Agreement.
If to Developer: ACHR Housing Corporation
319 West Glenn Ave. P/O Box 409
Auburn, AL. 36830
If to Owner: Summer Wood, Ltd.
319 West Glenn Ave. P/O Box 409
Auburn, Al. 36830
5.2 Interpretation.
(a) Headings. The section headings in this Agreement are included for
convenience only; they do not give full notice of the terms of any portion of
this Agreement and are not relevant to the interpretation of any provision of
this Agreement.
(b) Relationship of the Parties. Neither Party hereto shall be deemed
an agent, partner, joint venturer, or related entity of the other by reason of
this Agreement and as such neither Party may enter into contracts or agreements
which bind the other Party.
(c) Governing Law. The Parties intend that this Agreement shall be
governed by and construed in accordance with the laws of the state of Alabama
applicable to contracts made and wholly performed within Alabama by persons
domiciled in Alabama.
(d) Severability. Any provision of this Agreement that is deemed
invalid or unenforceable shall be ineffective to the extent of such invalidity
or unenforceability, without rendering invalid or unenforceable the remaining
provisions of this Agreement.
5.3 Integration; Amendment. This Agreement constitutes the entire
agreement of the Parties relating to the subject matter hereof. There are no
promises, terms, conditions, obligations, or warranties other than those
contained herein. This Agreement supersedes all prior communications,
7
<PAGE>
representations, or agreements, verbal or written, among the Parties relating to
the subject matter hereof. This Agreement may not be amended except in writing.
5.4 Attorney' Fees. If any suit or action arising out of or related to
this Agreement is brought by any Party to any such document, the prevailing
Party shall be entitled to recover the costs and fees (including without
limitation reasonable attorneys' fees and costs of experts and consultants,
copying, courier and telecommunication costs, and deposition costs and all other
costs of discovery) incurred by such Party in such suit or action, including
without limitation to any post-trial or appellate proceeding.
5.5 Binding Effect. This Agreement shall bind and inure to the benefit
of, and be enforceable by, the Parties hereto and their respective successors,
heirs, and permitted assigns.
5.6 Assignment. Neither Party may assign this Agreement without the
consent of the other Party. No assignment shall relieve any Party of liability
under this Agreement unless agreed in writing to the contrary.
5.7 Third-Party Beneficiary Rights. No person not a Party to this
Agreement is an intended beneficiary of this Agreement, and no person not a
Party to this Agreement shall have any right to enforce any term of this
Agreement.
5.8 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one agreement binding
on all the Parties, notwithstanding that all Parties are not signatories to the
same counterpart.
5.9 Further Assurances. Each Party agrees, at the request of the other
Party, at any time and from time to time after the date hereof, to execute and
deliver all such further documents, and to take and forbear from all such
action, as may be reasonably necessary or appropriate in order more effectively
to perfect the transfers or rights contemplated herein or otherwise to confirm
or carry out the provisions of this Agreement.
5.10 Mandatory Arbitration. Any person enforcing this Agreement may
require that all disputes, claims, counterclaims, and defenses ("Claims")
relating in any way to this Agreement or any transaction of which this Agreement
is a part (the "Transaction"), be settled by binding arbitration in accordance
with the Commercial Arbitration Rules of the American Arbitration Association
and Title 9 of the U.S. Code. All claims will be subject to the statutes of
limitation applicable if they were litigated.
8
<PAGE>
If arbitration occurs, one neutral arbitrator will decide all issues
unless either Party's Claim is $100,000.00 or more, in which case three neutral
arbitrators will decide all issues. All arbitrators will be active Alabama State
Bar members in good standing. In addition to all other powers, the arbitrator(s)
shall have the exclusive right to determine all issues of arbitrability.
Judgment on any arbitration award may be entered in any court with jurisdiction.
If either Party institutes any judicial proceeding relating to the
Transaction, such action shall not be a waiver of the right to submit any Claim
to arbitration. In addition, both Parties have the right before, during, and
after any arbitration to exercise any of the following remedies, in any order or
concurrently: (i) setoff, (ii) self-help repossession, (iii) judicial or
non-judicial foreclosure against real or personal property collateral, (iv)
provisional remedies, including injunction, appointment of receiver, attachment,
claim and delivery, and replevin.
This arbitration clause cannot be modified or waived by either Party
except in a writing that refers to this arbitration clause and is signed by both
Parties.
IN WITNESS WHEREOF, the Parties have caused this Development Agreement
to be executed as of ___________________, 1999.
DEVELOPER: ACHR Housing Corporation
By: ________________________
Nancy S. Spears,
President
OWNER: Summer Wood, Ltd.
By: ACHR Housing Corporation
General Partner
By: ________________________
Nancy S. Spears,
President
9
<PAGE>
EXHIBIT A
A 2.75 acre portion of the following real estate property: West one - half (W
1/2) of East one - half (E 1/2) South of Whiskey Run Road and North of Camden By
- - Pass, also the Southeast Quarter (SE 1/4) of Northwest Quarter (NW 1/4), ten
(10) acres on the South and the East one-half (E 1/2) of Southwest Quarter (SW
1/4), North of the Camden By - Pass, all in Section 24, less and except Veeder -
Root Plant site, all in Township 12 North, Range 7 East. Situated in Wilcox
County, Alabama.
<PAGE>
GUARANTY AGREEMENT
FOR VALUE RECEIVED, the receipt and sufficiency of which is hereby
acknowledged, and in consideration of the agreement of ACHR Housing Corporation,
(the "Developer") to permit deferral of the $279,756 due from Summer Wood, Ltd.
a Alabama limited partnership ("Debtor") to the Developer, the undersigned
Guarantor(s), hereby unconditionally guaranty the full and prompt payment when
due, whether by acceleration or otherwise of that certain Developer Fee from
Debtor to the Developer, evidenced by the Development Fee Agreement dated the
even date herewith, and incorporated herein by this reference. The foregoing
described debt is referred to hereinafter as the "Liabilities" or "Liability."
The undersigned further agree to pay all expenses paid or incurred by
the Developer in endeavoring to collect the Liabilities, or any part thereof,
and in enforcing the Liabilities or this Guaranty Agreement (including
reasonable attorneys' fees if collected or enforced by law or through an
attorney-at-law). The undersigned hereby represent and warrant that the
extension of credit or other financial accommodations by the Developer to Debtor
will be to the interest and advantage of the undersigned, and acknowledge that
this Guaranty Agreement is a substantial inducement to the Developer to extend
credit to Debtor and that the Developer would not otherwise extend credit to
Debtor.
The Developer may, from time to time, without notice to or consent of
the undersigned, (a) retain or obtain a security interest in any property to
secure any of the Liabilities or any obligation hereunder, (b) retain or obtain
the primary or secondary liability of any party or parties, in addition to the
undersigned, with respect to any of the Liabilities, (c) extend or renew for any
period (whether or not longer than the original period) or alter any of the
Liabilities, (d) release or compromise any Liability of the undersigned
hereunder or any Liability of any other party or parties primarily or
secondarily liable on any of the Liabilities, (e) release, compromise or
subordinate its title or security interest, or any part thereof, if any, in all
or any property now or hereafter securing any of the Liabilities or any
obligation hereunder, and permit any substitution or exchange for any such
property, and (f) resort to the undersigned for payment of any of the
Liabilities, whether or not the Developer shall have resorted to any property
securing any of the Liabilities or any obligation hereunder or shall have
preceded against any other party primarily or secondarily liable on any of the
Liabilities.
The undersigned hereby expressly waive: (a) notice of the existence or
creation of all or any of the Liabilities, (b) notice of any amendment or
modification of any of the instruments or documents evidencing or securing the
Liabilities, (c) presentment, demand, notice of dishonor and protest, (d) all
diligence in collection or protection of or realization upon the Liabilities or
any thereof, any obligation hereunder, or any security for any of the foregoing,
and (e) the right to require the Developer to proceed against Debtor on any of
the Liabilities.
In the event any payment of Debtor to the Developer is held to
constitute a preference under the bankruptcy laws, or if for any other reason
the Developer is required to refund such payment or pay the amount thereof to
any other party, such payment by Debtor to the Developer shall not constitute a
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release of Guarantor from any Liability hereunder, but Guarantor agrees to pay
such amount to the Developer upon demand and this Guaranty shall continue to be
effective or shall be reinstated, as the case may be, to the extent of any such
payment or payments.
No delay or failure on the part of the Developer in the exercise of any
right or remedy shall operate as a waiver thereof, and no single or partial
exercise by the Developer of any right or remedy shall preclude other or future
exercise thereof or the exercise of any other right or remedy. No action of the
Developer permitted hereunder shall in any way impair or affect this Guaranty
Agreement. For the purpose of this Guaranty Agreement, the Liabilities of Debtor
to the Developer are guaranteed notwithstanding any right or power of Debtor or
anyone else to assert any claim or defense as to the invalidity or
unenforceability of any such obligation, and no such claim or defense shall
impair or affect the obligations of the undersigned hereunder.
Payment by the Guarantor under this Guaranty Agreement shall be
recorded as a capital contribution payment from the Guarantor to Debtor and,
subsequently, as a payment of the Development Fee from Debtor to Developer.
This Guaranty Agreement shall be binding upon the undersigned, and upon
the legal representatives, heirs, successors and assigns of the undersigned.
This Guaranty Agreement has been made and delivered in the state of
Alabama and shall be construed and governed under Alabama law.
Whenever possible, each provision of the Guaranty Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Guaranty Agreement shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition of invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Guaranty Agreement.
Whenever the singular or plural number, masculine or feminine or neuter
is used herein, it shall equally include the other where applicable. In the
event this Guaranty Agreement is executed by more than one guarantor, this
Guaranty Agreement and the obligations hereunder are the joint and several
obligation of the undersigned.
Guarantor consents to the jurisdiction of the courts in the State of
Alabama and/or to the jurisdiction and venue of any United States District Court
in the State of Alabama having jurisdiction over any action or judicial
proceeding brought to enforce, construe or interpret this Guaranty. Guarantor
agrees to stipulate in any such proceeding that this Guaranty is to be
considered for all purposes to have been executed and delivered within the
geographical boundaries of the State of Alabama, even if it was, in fact,
executed and delivered elsewhere.
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IN WITNESS WHEREOF, the undersigned have hereunto caused this
Guaranty Agreement to be executed as of _______________________, 1999.
Signed, sealed and delivered GUARANTOR:
in the presence of:
____________________________ ACHR Housing Corporation
Witness
--------------------------
- ----------------------------
Notary Public
My Commission Expires:
Address for Guarantor:
____________________________ 319 West Glenn Ave.,
(NOTARY SEAL) Auburn, Al 36831-0409,
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CONSTRUCTION AND OPERATING BUDGET
AGREEMENT
This Construction and Operating Budget Agreement ("Agreement") is
entered into as of the date written below by and between Summer Wood, Ltd., a
Alabama limited Partnership ("Owner"), ACHR Housing Corporation, ("General
Partner"), WNC Housing Tax Credit Fund VI, L.P. Series 6, a California limited
Partnership ("Limited Partner") and WNC Housing, L.P., a California limited
Partnership ("Special Limited Partner"). Owner, General Partner, Limited Partner
and Special Limited Partner collectively may be referred to as the "Parties" or
individually may be referred to as a "Party".
RECITALS
A. Owner has acquired 4.57 acres of land in Camden, Wilcox County,
Alabama (the "Real Property").
B. Owner intends to develop on the Real Property a 32 unit low-income
rental housing complex and other related improvements for family housing, which
is intended to qualify for federal low-income housing tax credits (the
"Project").
C. On the even date herewith a Partnership agreement for Summer Wood,
Ltd. ("Partnership Agreement") was entered into by and between ACHR Housing
Corporation, as the general partner ("General Partner"), WNC Housing Tax Credit
Fund VI, L.P. Series 6 as the limited partner and WNC Housing, L.P. as the
special limited partner (the Partnership Agreement is incorporated herein by
this reference as if the same were reproduced in full and any capitalized terms
not defined in this Agreement shall have the meaning as defined in the
Partnership Agreement).
D. In determining whether to be admitted into Summer Wood, Ltd. and
contribute funds to the development of the Project, the Limited Partner and
Special Limited Partner performed a due diligence review. Part of the due
diligence review included an analysis of the available sources of funds to
develop the Project, the cost of construction, the anticipated revenues
associated with the rental of the Project apartment units and the expenses
required to operate the Project.
E. The Parties recognize and acknowledge that the final construction
cost determination involves substantial negotiations with lenders, contractors
and governmental authorities.
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F. The Parties recognize and acknowledge that a final operating budget
involves substantial negotiations with lenders and governmental authorities.
G. Limited Partner's and Special Limited Partner's decision to execute
the Partnership Agreement is based, in part, on their acceptance of the sources
of funds available to develop the Project, the cost of construction to build the
Project and the operating budget necessary to provide a positive Debt Service
Coverage.
Now Therefore, in consideration of the foregoing recitals and the
mutual promises and undertakings in this Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Owner and Developer agree as follows.
1. Source of Funds. Attached hereto as Exhibit "A" and incorporated
herein by this reference is the Project Source of Funds. The Source of Funds
have been specified in the Partnership Agreement as the Construction Loan, the
Mortgage, the Capital Contribution of the General Partner, the Capital
Contribution of the Limited Partner and the Capital Contribution of the Special
Limited Partner. Unless expressly permitted in the Partnership Agreement,
Consent of the Special Limited Partner is required for any change to the Source
of Funds.
2. Construction Proforma. Attached hereto as Exhibit "B" and
incorporated herein by this reference is the Construction Proforma. If the
construction costs exceed the sum of the Capital Contributions, the proceeds of
the Mortgage and the Development Fee then the General Partner shall be
responsible for and shall be obligated to pay such deficiencies as and to the
extent provided in the Partnership Agreement.
3. Operating Proforma. Attached hereto as Exhibit "C" and incorporated
herein by this reference is the Operating Proforma. The Limited Partner and the
Special Limited Partner underwrote the subject transaction at a 1.15 Debt
Service Coverage. Notwithstanding, in the event the Net Operating Income does
not produce a 1.15 Debt Service Coverage as determined by the Special Limited
Partner then at the request of the Special Limited Partner the General Partner
shall reduce and/or refinance the principal of the Mortgage to an amount the
Special Limited Partner determines is adequate to produce a 1.15 Debt Service
Coverage, as to the extent provided in the Partnership Agreement.
4. Notices. Any notice given pursuant to this Agreement may be served
personally on the Party to be notified, or may be mailed, first class postage
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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: ACHR Housing Corporation
319 West Glenn Ave. P/O Box 409
Auburn, AL 36831
To the Limited Partner: WNC Housing Tax Credit Fund VI, L.P. Series 6
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
5. Successors and Assigns. All the terms and conditions of this
Agreement shall be binding upon and inure to the benefit of the successors and
assigns of the Parties.
6. 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.
7. Captions. Captions to and headings of the Sections 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.
8. 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.
9. Governing Law. This Agreement and its application shall be governed
by the laws of Alabama.
10. 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.
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In Witness Whereof, this Construction and Operating Budget Agreement is
made and entered into as of ________, 1999.
GENERAL PARTNER
ACHR Housing Corporation
By:
Nancy S. Spears,
President
LIMITED PARTNER
WNC Housing Tax Credit Fund VI, L.P. Series 6
By: WNC and 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
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EXHIBIT A
TO CONSTRUCTION AND OPERATING BUDGET AGREEMENT
SOURCE OF FUNDS
A
<PAGE>
EXHIBIT B
TO CONSTRUCTION AND OPERATING BUDGET AGREEMENT
CONSTRUCTION PROFORMA
B
<PAGE>
EXHIBIT C
TO CONSTRUCTION AND OPERATING BUDGET AGREEMENT
OPERATING PROFORMA
C
