Exhibit
Number Exhibit Description
EX-10.1 The Amended and Restated Agreement of Limited Partnership of Cotton
Mill Elderly Living Center, L.P.
EX-10.2 The Amended and Restated Agreement of Limited Partnership of
Country Club Investors, L.P.
EX-10.3 The Amended and Restated Agreement of Limited Partnership of Kechel
Towers L.P.
EX-10.4 The Amended and Restated Agreement of Limited Partnership of St.
Susanne Associates I, L.P.
<PAGE>
Table of Contents
Exhibit Page
Limited Partnership Agreement of Cotton Mill Elderly
Living Center, L.P. 41
Limited Partnership Agreement of Country Club Investors, L.P. 95
Limited Partnership Agreement of Kechel Tower L.P. 148
Limited Partnership Agreement of St. Susanne Associates I, L.P. 187
<PAGE>
Amended and Restated Agreement
of Limited Partnership of
Cotton Mill Elderly Living Center, L.P.
<PAGE>
Amended and Restated Agreement
of Limited Partnership of
Cotton Mill Elderly Living Center, L.P.
<TABLE>
<CAPTION>
<S> <C>
This Amended and Restated Agreement of Limited Partnership is being
entered into effective as of the date written below by and between Elderly
Living Development, Inc., and Quad Cities Redevelopment Resources, Inc., a
non-profit corporation as general partners (collectively referred to herein as
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 Elderly Living Development, Inc., and John McChurch as withdrawing
limited partners (collectively referred to herein as the "Original Limited
Partner").
RECITALS
WHEREAS, Cotton Mill Elderly Living Center, L.P., an Illinois limited
partnership (the "Partnership") recorded a certificate of limited partnership
with the Illinois Secretary of State on April 21, 1998. A Certificate and
Agreement of Limited Partnership dated November 1, 1997 was entered into by and
between Elderly Living Development, Inc. and the Original Limited Partner (the
"Original Partnership Agreement").
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 Quad Cities Redevelopment Resources, Inc., a non-profit corporation
as a general partner, (iii) the admission of the Limited Partner and the Special
Limited Partner as partners of the Partnership, (iv) the liquidation of the
Original Limited Partner's Interest in the Partnership, (v) the payment of
Capital Contributions by the Limited Partner and the Special Limited Partner to
the Partnership, (vi) the allocation of Income, Losses, Tax Credits and
distributions of Net Operating Income and other cash funds of the Partnership
among the Partners (vii) the respective rights, obligations and interests of the
Partners to each other and to the Partnership, and (viii) 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 1."Accountant" shall mean Friduss, Lukee, Schiff & Company, 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 1."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 1."Actual Tax Credit" shall mean as of any point in time, the
total amount of the LIHTC actually allocated by the Partnership to the Limited
Partner, representing 99.98% of the LIHTC actually received by the Partnership,
as shown on the applicable tax returns of the Partnership.
Section 1.4 1."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 1."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 1."Affordability Requirements" shall mean the AHP requirement
to lease 19 units of the Project to tenants with 50% or less of the area median
income, and 5 units of the Project to tenants with 60% or less of the area
median income.
Section 1.7 1."Agreement" or "Partnership Agreement" shall mean this
Amended and Restated Agreement of Limited Partnership, as it may be amended from
time to time. Words such as "herein," "hereinafter," "hereof," "hereto,"
"hereby" and "hereunder," when used with reference to this Agreement, refers to
this Agreement as a whole, unless the context otherwise requires.
Section 1.8 1."AHP" shall mean an affordable housing program used to assist
members of Federal Home Loan Bank to finance affordable housing for very low,
low and moderate income households.
Section 1.9 1."AHP Grant" shall mean the affordable housing program grant
in the amount of $231,560 granted to Quad Cities Redevelopment Resources, Inc.,
a non-profit corporation. Quad Cities Redevelopment Resources, Inc. contributed
the funds to the Partnership as a General Partner Capital Contribution pursuant
to Section 6.1 of this Agreement. The Partnership's acceptance of the Quad
Cities Redevelopment Resources, Inc.'s Capital Contribution will require the
Partnership to be subject to the Affordability Requirements for a term of 15
years from Completion of Construction.
Section 1.10 1."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 1.11 1."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 1.12 1."Break-even Operations" shall mean at such time as the
Partnership has Net Operating Income as determined by the Accountant and
approved by the Special Limited Partner.
Section 1.13 1."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 1.14 1."Capital Contribution" shall mean the total amount of money,
or the Gross Asset Value of property contributed to the Partnership, if any, by
all the Partners or any class of Partners or any one Partner as the case may be
(or by a predecessor-in-interest of such Partner or Partners), reduced by any
such capital which shall have been returned pursuant to Section 7.3, 7.4 or 7.6
of this Agreement. A loan to the Partnership by a Partner shall not be
considered a Capital Contribution.
Section 1.15 1."Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, or any successor statute.
Section 1.16 1."Completion of Construction" shall mean the completion of
rehabilitation of the Project substantially in accordance with the Project
Documents in order to obtain the required certificates of occupancy (or the
local equivalent) for all 31 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 rehabilitation 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.
Section 1.17 1."Compliance Period" shall mean the period set forth in
Section 42 (i)(1) of the Code, as amended, or any successor statute.
Section 1.18 1."Consent of the Special Limited Partner" shall mean the
prior written consent or approval of the Special Limited Partner.
Section 1.19 1."Construction Contract" shall mean the construction contract
in the amount of $1,170,000, entered into between the Partnership and the
Contractor pursuant to which the Project is being constructed.
Section 1.20 1."Construction Loan" shall mean the loan obtained from First
Illinois National Bank in the principal amount of $760,000 at an interest rate
not to exceed 8.81% per annum for a term of 24 months to provide funds for the
acquisition, renovation 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 1.21 1."Contractor" shall mean Twin Rivers Construction Company,
which is the general construction contractor for the Project.
Section 1.22 1."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 1.10 Debt Service Coverage means that
for every $1.00 of debt service required to be paid there must be $1.10 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 1.23 1."Developer" shall mean Elderly Living Development, Inc.
Section 1.24 1."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 rehabilitation of the Project in accordance with the
Development Fee Agreement between the Partnership and the Developer dated the
even date herewith and incorporated herein by this reference.
Section 1.25 1."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 1.26 1."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 1.27 1."First Year Certificate" shall mean the certificate to be
filed by the Managing General Partner with the Secretary of the Treasury as
required by Code Section 42(1)(1), as amended, or any successor thereto.
Section 1.28 1."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 1.29 1."General Partner" shall collectively mean Elderly Living
Development, Inc. and Quad Cities Redevelopment Resources, Inc., a non-profit
corporation and such other Persons as are admitted to the Partnership as
additional or substitute General Partners pursuant to this Agreement.
Section 1.30 1."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 Managing 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 Managing
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 Managing 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 1.30(d) to the extent the Managing General Partner
determines that an adjustment pursuant to Section 1.30(b) hereof is necessary or
appropriate in connection with a transaction that would otherwise result in an
adjustment pursuant to this Section 1.30(d).
If the Gross Asset Value of an asset has been determined or adjusted pursuant to
Section 1.30(a), Section 1.30(b), or Section 1.30(d) hereof, such Gross Asset
Value shall thereafter be adjusted by the depreciation taken into account with
respect to such asset for purposes of computing Income and Losses.
Section 1.31 1."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 1.32 1."Improvements" shall mean the 31 unit apartment complex for
elderly tenants built in accordance with the Project Documents.
Section 1.33 1."Incentive Management Fee" shall have the meaning set forth
in Section 9.2(e) hereof.
Section 1.34 1."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 1.34 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 1.34 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 1.30(a) or (b) hereof, the amount of such
adjustment shall be taken into account as gain or loss from the disposition of
such asset for purposes of computing Income and Losses;
(d) gain or loss resulting from any disposition of Partnership assets
with respect to which gain or loss is recognized for federal income purposes
shall be computed by reference to the Gross Asset Value of the property disposed
of, notwithstanding that the adjusted tax basis of such property differs from
its Gross Asset Value;
(e) in lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing such taxable income or loss, there
shall be taken into account depreciation for such fiscal year or other period,
computed as provided below; and
(f) notwithstanding any other provision of this definition, any items which
are specially allocated pursuant to Sections 10.3 or 10.4 hereof shall not
otherwise be taken into account in computing Income or Losses.
Depreciation for each fiscal year or other period shall be calculated as
follows: an amount equal to the depreciation, amortization, or other cost
recovery deduction allowable with respect to an asset for such year or other
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 1.35 1."Insurance" shall mean:
(a) during rehabilitation, 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 on
all properties;
(d) all Insurance polices shall name the Partnership as the named
insured and the Limited Partner as an additional insured, and WNC & Associates,
Inc. as the certificate holder;
(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 WNC & Associates, Inc., as
certificate holder.
Section 1.36 1."Insurance Company" shall mean any insurance company engaged
by the General Partner for the Partnership with the Consent of the Special
Limited Partner which Insurance Company shall have an A rating or better for
financial safety by A.M. Best or Standard & Poor's.
Section 1.37 1."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 1.38 1."Involuntary Withdrawal" means any Withdrawal caused by the
dissolution or liquidation or incompetence, or Bankruptcy of a General Partner,
or the removal of a General Partner pursuant to Section 13.2 hereof.
Section 1.39 1."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 1.40 1."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 1.41 1."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 Heartland
Mgt., Inc.
Section 1.42 1."Management Agreement" shall mean the agreement between the
Partnership and the Management Agent for property management services. The
management fee shall equal 5% of gross revenues. Neither the Management
Agreement nor ancillary agreement shall provide for an initial rent-up fee nor a
set-up fee, nor any other similar pre-management fee payable to the Management
Agent.
Section 1.43 1."Managing General Partner" shall mean Elderly Living
Development, Inc., and such other Persons as are admitted to the Partnership.
Section 1.44 1."Minimum Set-Aside Test" shall mean the 40-60 set-aside test
pursuant to Section 42(g), as amended and any successor thereto, of the Code
with respect to the percentage of apartment units in the Project to be occupied
by tenants whose incomes are equal to or less than the required percentage of
the area median gross income. Notwithstanding, the General Partner has made the
election to rent 20% of the apartment units to tenants with income less than or
equal to 30% of area median income, adjusted for family size.
Section 1.45 1."Mortgage" or "Mortgage Loan" shall mean the permanent
nonrecourse financing wherein the Partnership promises to pay First Illinois
National Bank, or its successor or assignee, the principal sum of $656,529, plus
interest on the principal at an interest rate not to exceed 8.81% per annum over
a term of 18 years and amortized over 30 years. Where the context admits, the
term "Mortgage" or "Mortgage Loan" shall include any mortgage, deed, deed of
trust, note, regulatory agreement, security agreement, assumption agreement or
other instrument executed in connection with the Mortgage which is binding on
the Partnership; and in case any Mortgage is replaced or supplemented by any
subsequent mortgage or mortgages, the Mortgage shall refer to any such
subsequent mortgage or mortgages. In the event the terms of the Mortgage are not
as specified herein at the time of the Mortgage closing 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 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 1.46 1."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 all revenues of the Partnership from whatever
source derived, including, without limitation, rental income (but not any
subsidy thereof from the General Partner or an Affiliate thereof) and laundry
income, but excluding prepayments, security deposits and interest thereon; (b)
over all cash operating obligations of the Partnership (other than those covered
by Insurance) in accordance with the applicable budget adopted by the
Partnership in accordance with Section 14.3(k) of this Agreement (the "Budget"),
including, without limitation, the payment of the Mortgage, the Management Agent
fees (which shall be deemed to include that portion of such fees which is
deferred and not currently paid) and the funding of reserves in accordance with
Article VIII of this Agreement, and a reserve for all taxes or payments in lieu
of taxes and any other expenses which may reasonably be expected to be paid in a
subsequent period but which on an accrual basis are allocable to the period in
question, such as insurance premiums, audit, tax or accounting expenses
(excluding deductions for cost recovery of buildings, improvements and personal
property and amortization of any financing fees). Without limiting the
generality of the foregoing, the Partnership's gross revenues for purposes of
this Section shall not include Capital Contributions, borrowings, any lump-sum
payment or any other extraordinary receipt of funds.
Section 1.47 1."Non-Profit Corporation" shall mean a corporation organized
exclusively for charitable and/or educational purposes, including for such
purposes, the making of distributions to organizations which qualify as exempt
organization under Section 501(c)(3) of the Internal Revenue of 1986, as amended
from time to time. The corporation shall have the power to acquire, improve and
to sell or operate any real or personal property or interest therein or
appurtenant thereto.
Section 1.48 1."Nonrecourse Deductions" shall have the meaning given it in
Treasury Regulations Section 1.704-2(b)(1).
Section 1.49 1."Nonrecourse Liability" shall have the meaning given it in
Treasury Regulations Section 1.704-2(b)(3).
Section 1.50 1."Operating Deficit" shall mean at any time when the
Partnership does not have Net Operating Income as determined by the Accountant
and approved by the Special Limited Partner.
Section 1.51 1."Operating Deficit Guarantee Period" shall mean the period
commencing with the date of this Agreement and ending thirty months following
two consecutive months of Break-Even Operations.
Section 1.52 1."Operating Loans" shall mean loans made by the General
Partner to the Partnership pursuant to Article VI of this Agreement, which loans
do not bear interest and are repayable only as provided in Article XI of this
Agreement.
Section 1.53 1."Original Limited Partner" shall collectively mean Elderly
Living Development, Inc. and John McChurch.
Section 1.54 1."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 1.55 1."Partner Nonrecourse Debt" shall have the meaning set forth
in Section 1.704-2(b)(4) of the Treasury Regulations.
Section 1.56 1."Partner Nonrecourse Debt Minimum Gain" shall mean an
amount, with respect to each Partner Nonrecourse Debt, equal to the Partnership
Minimum Gain that would result if such Partner Nonrecourse Debt were treated as
a Nonrecourse Liability, determined in accordance with Section 1.704-2(i)(3) of
the Treasury Regulations.
Section 1.57 1."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 1.58 1."Partnership" shall mean the limited partnership continued
under this Agreement.
Section 1.59 1."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 1.60 1."Permanent Mortgage Commencement" shall mean the first date
on which all of the following have occurred: (a) the Construction Loan shall
have been repaid in full; (b) the Mortgage shall have closed and funded; and (c)
amortization of the Mortgage shall have commenced.
Section 1.61 1."Person" shall collectively mean an individual,
proprietorship, trust, estate, partnership, joint venture, association, company,
corporation or other entity.
Section 1.62 1."Project" shall mean the property site at 1220 51st Avenue,
in Rock Island, Rock Island County, Illinois, as more fully described in Exhibit
"A" attached hereto and incorporated herein by this reference, and the
Improvements.
Section 1.63 1."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, rehabilitation and financing of the Project,
including but not limited to, the approved plans and specifications for the
development and rehabilitation of the Project.
Section 1.64 1."Projected Annual Tax Credits" shall mean LIHTC in the
amount of $132,413 for 2000, $144,451 per year for each of the years 2001
through 2009, and $12,038 for 2010, which the General Partner has projected to
be the total amount of LIHTC which will be allocated to the Limited Partner by
the Partnership, constituting 99.98% of the aggregate amount of LIHTC of
$1,444,800 to be available to the Partnership; provided, however, that if the
Actual Tax Credit for 2000 is greater (or lesser than) $132,413 the Projected
Annual Tax Credit for the year 2010 shall be reduced (increased) by an amount
equal to the amount by which the Actual Credit for 2000 exceeds (is less than)
$132,413.
Section 1.65 1."Projected Tax Credits" shall mean LIHTC in the aggregate
amount of $1,444,800.
Section 1.66 1."Qualified Tenants" shall mean any tenants who have incomes
of 60% or less of the area median gross income, as adjusted for family size, so
as to make the Project eligible for LIHTC.
Section 1.67 1."Rent Restriction Test" shall mean the test pursuant to
Section 42 of the Code whereby the gross rent charged to tenants of the
low-income apartment units in the Project must not exceed 30% of the applicable
income standards.
Section 1.68 1."Reporting Fee" shall have the meaning set forth in Section
9.2(d) hereof.
Section 1.69 1."Revised Projected Tax Credits" shall have the meaning set
forth in Section 7.4(a) hereof.
Section 1.70 1."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 1.71 1."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 1.72 1."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 1.73 1."State" shall mean the State of Illinois.
Section 1.74 1."State Tax Credit Agency" shall mean the state agency of
Illinois which has the responsibility and authorization to administer the LIHTC
program in Illinois, specifically the Illinois Housing Development Authority.
Section 1.75 1."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 1.76 1."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 1.77 1."Tax Credit Conditions" shall mean, for the duration of the
Compliance Period, any and all restrictions including, but not limited to,
applicable federal, state and local laws, rules and regulations, which must be
complied with in order to qualify for the LIHTC or to avoid an event of
recapture in respect of the LIHTC.
Section 1.78 1."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 1.79 1."TRA 1986" shall mean the Tax Reform Act of 1986.
Section 1.80 1."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 1.81
1."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 dissolution, liquidation, 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 "Cotton Mill Elderly Living Center,
L.P."
ARTICLE III
PRINCIPAL EXECUTIVE OFFICE/AGENT FOR SERVICE
Section 3.1 Principal Executive Office. The principal executive office of
the Partnership is located at 3919-17th Street, East Moline, Illinois 61244, 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 John McChurch, whose address is
3919-17th Street, East Moline, Illinois 61244.
ARTICLE IV
PURPOSE
The purpose of the Partnership is to acquire, rehabilitate, own and
operate the Project in order to provide, in part, Tax Credits to the Partners in
accordance with the provisions of the Code and the Treasury Regulations
applicable to LIHTC and to sell the Project. The Partnership shall not engage in
any business or activity which is not incident to the attainment of such
purpose.
ARTICLE V
TERM
The Partnership term commenced upon the filing of the Certificate of
Limited Partnership in the office of, and on the form prescribed by, the
Secretary of State of the State, and shall continue until December 31, 2055
unless terminated earlier in accordance with the provisions of this Agreement or
as otherwise provided by law.
ARTICLE VI
GENERAL PARTNER'S CONTRIBUTIONS AND LOANS
Section 6.1 Capital Contribution of General Partner. The General Partner
shall make a Capital Contribution in an amount required by the Mortgage lender.
Said General Partner Capital Contribution includes the amount of $231,560
contributed by Quad Cities Redevelopment Resources, Inc., a non-profit
corporation as fully described in Section 1.9 of this Agreement.
Section 6.2 Construction and Operating Obligations; General Partner Loans.
(a) The General Partner shall cause Completion of Construction in
accordance with the Project Documents, and shall equip the Project or cause the
same to be equipped with all necessary and appropriate fixtures, equipment and
articles of personal property, including 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 and shall be
considered a cost overrun and not be repayable. In addition, if (1) the
Improvements are not completed on or before February 15, 2000 ("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); or (2) a foreclosure
action is commenced against the Partnership and is not dismissed within six
months, then at the Special Limited Partner's election, either the General
Partner will be removed from the Partnership and the Special Limited Partner
will be admitted as successor General Partner, all in accordance with Article
XIII hereof, or the General Partner will repurchase the Interests of the Limited
Partner and the Special Limited Partner for an amount equal to the amounts
theretofore paid by the Limited Partner and the Special Limited Partner, and the
Limited Partner and the Special Limited Partner shall have no further Interest
in the Partnership. If the Limited Partner elects to have the General Partner
repurchase the Interest of the Limited Partner then the repurchase shall occur
within 60 days after the General Partner receives written demand from the
Limited Partner.
(b) From Completion of Construction until two consecutive months of
Break-even Operations, the General Partner will personally provide Operating
Loans to pay any Operating Deficits; and for the balance of the Operating
Deficit Guarantee Period the General Partner will provide Operating Loans to pay
any Operating Deficits up to the aggregate maximum amount of $100,000. Each
Operating Loan shall be nonrecourse to the Partners, and shall be repayable out
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 advance by the General Partner
and such advance will bear no interest and will be repaid in accordance with
Article XI of this Agreement.
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 $500. Effective as of the date of this Agreement, the
Original Limited Partner's Interest has been liquidated and the Partnership has
reacquired the Original Limited Partner's Interest in the Partnership. The
Original Limited Partner acknowledges that it has no further interest in the
Partnership as a limited partner as of the date of this Agreement, and has
released all claims, if any, against the Partnership arising out of its
participation as a limited partner.
Section 7.2 Capital Contribution of Limited Partner. The Limited
Partner shall make a Capital Contribution in the amount of $1,040,048, as may be
adjusted in accordance with Section 7.4 of this Agreement. The Capital
Contribution will be paid into an escrow account at First Illinois National Bank
in accordance with the Escrow Agreement dated the even date herewith ("Escrow
Agreement"). The Limited Partner shall approve the release of the funds from the
escrow account as follows:
(a) $936,033, to be disbursed on a monthly basis in accordance with
Section 7.2(d), of this Agreement provided the Limited Partner has received the
following:
(1) a legal opinion in a form substantially similar to the
form of opinion attached hereto as Exhibit "B" and incorporated herein by this
reference;
(2) a fully executed Certification and Agreement in the form
attached hereto as Exhibit "C" and incorporated herein by this reference;
(3) 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;
(4) verification that the Partnership has obtained Insurance
required during rehabilitation;
(5) delivery to the Limited Partner of a copy of the recorded
grant deed (warranty deed); and
(6) execution of the Construction and Operating Budget
Agreement.
(b) $26,004 upon delivery to the Limited Partner of the following:
(1) 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;
(2) if not previously provided, 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).
(3) 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 accordance with the Project Documents;
(4) 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 and that the Partnership is not in violation of the Construction
Contract;
(5) verification that the Partnership has obtained Insurance
required during operations; and
(6)a fully executed General Partner Certification in the form
attached hereto as Exhibit "D" and incorporated herein by this reference.
(c) $78,011 (as adjusted pursuant to Section 7.4(a) of this Agreement)
upon delivery to the Limited Partner of the following:
(1) a copy of the current rent roll;
(2) 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;
(3) copies of the executed lease agreement with the tenants;
(4) a fully executed General Partner Certification;
(5) copies of all Mortgage documents and Title Insurance in an
amount equal to the Mortgage and the Limited Partner's Capital Contribution;
(6) a copy of the declaration of restrictive
covenants/extended use agreement entered into between the Partnership and the
State Tax Credit Agency;
(7) an audited construction cost certification (which includes
an itemized cost breakdown);
(8) 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;
(9) Internal Revenue Code Form 8609, or any successor form;
and
(10) any documents previous not provided to the Limited Part-
ner but required pursuant to Sections 14.3(a), (b) and (c) in this Agreement.
(d) On the 25th day of each month the Managing General Partner shall
submit to the Limited Partner a written itemized statement, signed by the
Managing General Partner and the general contractor ("Application for Payment")
setting forth:
(1) a description of the work performed, material supplied
and/or costs incurred or due for which disbursement is requested with respect to
any line item ("Item") shown in the Construction and Operating Budget Agreement;
(2) the total amount incurred, expended and/or due for each
requested Item less prior disbursements; and
(3) Each Application for Payment by the Managing General
Partner shall constitute a representation and warranty by the Managing General
Partner that the General Partner is in compliance.
(e) On the 25th day of each month, except if such date falls on a
weekend, the Limited Partner's architect/engineer will visit the job site,
review the rehabilitation progress and approve the Application for Payment and
make a recommendation on the disbursement request. ("Limited Partner Review").
The Limited Partner Review shall be completed by the 30th day of each month,
barring unforeseen events and/or weekends.
(f) Provided the Limited Partner Review recommends payment of the
Application for Payment, then the Limited Partner will notify the Escrow Agent
that funds can be disbursed to the general contractor on behalf of the
Partnership. Escrow Agent shall disburse up to 90% of the maximum amount
allocated for such Item in the Application for Payment less prior disbursements.
The remaining 10% ("Retention") shall be held for the benefit or account of the
General Partner upon completion of the Improvements in accordance with the Plans
and Specifications, governmental requirements and or evidence satisfactory to
lender of lien free completion.
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) cause the Project to be placed in service by December 31, 2000;
(b) achieve 90% occupancy of the Project by Qualified Tenants by
December 31, 2001;
(c) obtain Permanent Mortgage Commencement by December 31, 2001;
(d) meet both the Minimum Set-Aside Test and the Rent Restriction Test
not later than December 31 of the first year the Partnership elects the LIHTC to
commence in accordance with the Code; and
(e) 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 and Special Limited Partner are less than
$1,444,656 (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 0.72% 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.
(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 three
calendar years following the year in which the first building in 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 Annual Credit Shortfall amount, and any
portion of such Annual Credit Shortfall in excess of such Capital Contribution
shall be applied to reduce succeeding Capital Contributions of the Limited
Partner or the Special Limited Partner. If the Annual Credit Shortfall is
greater than the Limited Partner's and Special Limited Partner's remaining
Capital Contributions then the General Partner shall pay to the Limited Partner
and Special Limited Partner the excess of the Annual Credit Shortfall over the
remaining Capital Contributions. The General Partner shall have ninety days to
pay the Annual Credit Shortfall from the date the General Partner receives
notice from either the Limited Partner or the Special Limited Partner.
(c) In the event that, for any reason, at any time after the first
three calendar years following the year in which the Project is placed in
service, there is an Annual Credit Shortfall, then, unless the Annual Credit
Shortfall shall have previously been addressed under Section 7.4(a) or Section
7.4(b), there shall be a reduction in the General Partner's share of Net
Operating Income in an amount equal to the Annual Credit Shortfall and said
amount instead shall be paid to the Limited Partner. In the event there are not
sufficient funds to pay the full Annual Credit Shortfall to the Limited Partner
at the time of the next Distribution of Net Operating Income, then the unpaid
Annual Credit Shortfall shall be repaid in the next year in which sufficient
monies are available from the General Partner's Net Operating Income. In the
event a Sale or Refinancing of the Project occurs prior to repayment in full of
the Annual Credit Shortfall then the excess will be paid in accordance with
Section 11.2(b). Notwithstanding, the foregoing provisions of this Section
7.4(c), the General Partner shall not be obligated to pay the Limited Partner or
Special Limited Partner any funds if the recapture of Tax Credits was the result
of an Act of Congress, a change in the law, or other acts beyond the control of
the General Partner.
(d) In the event there is a reduction in the qualified basis of the
Project for income tax purposes following an audit by the Internal Revenue
Service (IRS) resulting in a recapture of Tax Credits previously claimed, then,
in addition to any other payments to which the Limited Partner and Special
Limited Partner 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). Notwithstanding, the foregoing provisions of
this Section 7.4(d), the General Partner shall not be obligated to pay the
Limited Partner or Special Limited Partner any funds if the recapture of Tax
Credits was the result of an Act of Congress, a change in the law, or other acts
beyond the control of the General Partner.
Section 7.5 Capital Contribution of Special Limited Partner. The
Special Limited Partner shall make a Capital Contribution of $104 at the time of
the Limited Partner's Capital Contribution payment into escrow in accordance
with the Escrow Agreement. 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 Liability of Limited Partner and Special Limited Partner.
The Limited Partner and Special Limited Partner shall not be liable for any of
the debts, liabilities, contracts or other obligations of the Partnership. The
Limited Partner and Special Limited Partner shall be liable only to make Capital
Contributions in the amounts and on the dates specified in this Agreement and,
except as otherwise expressly required hereunder, shall not be required to lend
any funds to the Partnership or, after their respective Capital Contributions
have been paid, to make any further Capital Contribution to the Partnership.
ARTICLE VIII
WORKING CAPITAL AND RESERVES
Section 8.1 Operating and Maintenance Account. The General Partner, on
behalf of the Partnership, shall establish an operating and maintenance account
and shall deposit thereinto an annual amount equal to $200 per residential unit
per year for the purpose of repairs, maintenance and capital repairs. Said
deposit shall be made monthly in equal installments. Withdrawals from such
account shall be made only with the Consent of the Special Limited Partner. Any
balance remaining in the account at the time of a sale of the Project shall be
allocated and distributed equally between the General Partner and the Limited
Partner.
Section 8.2 Tax and Insurance Account.The General Partner, on behalf of
the Partnership, shall establish a tax and insurance account ("T & I Account")
for the purpose of making the requisite Insurance premium payments and the real
estate tax payments. The annual deposit to the T & I Account shall equal the
total annual Insurance payment and the total annual real estate tax payment.
Said amount shall be deposited monthly in equal installments. Withdrawals from
such account shall be made only for its intended purpose. Any balance remaining
in the account at the time of a sale of the Project shall be allocated and
distributed equally between the General partner and the Limited Partner.
Section 8.3 Other Reserves. The General Partner, on behalf of the
Partnership, shall establish out of funds available to the Partnership a reserve
account sufficient in its sole discretion to pay any unforeseen contingencies
which might arise in connection with the furtherance of the Partnership business
including, but not limited to, (a) any rent subsidy required to maintain rent
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 Managing General Partner. Subject to
the Consent of the Special Limited Partner or the consent of the Limited Partner
where required by this Agreement, and subject to the other limitations and
restrictions included in this Agreement, the Managing 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 the Managing General Partner. No
Limited Partner or Special Limited Partner (except one who may also be a General
Partner, and then only in its capacity as General Partner within the scope of
its authority hereunder) shall have any right to be active in the management of
the Partnership's business or investments or to exercise any control thereover,
nor have the right to bind the Partnership in any contract, agreement, promise
or undertaking, or to act in any way whatsoever with respect to the control or
conduct of the business of the Partnership, except as otherwise specifically
provided in this Agreement.
Section 9.2 Payments to the General Partners and Others.
(a) The Partnership shall pay to the Developer a Development Fee in the
amount of $264,143. 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 at the time of the Limited Partner's first Capital
Contribution payment referenced in Exhibit "A" of the Escrow Agreement; and at
50% Completion of Construction as evidenced by the architect's certification,
provided, if rehabilitation overruns are greater than 50% of the contingency
amount referenced in the construction budget then the second Development Fee
payment will be reduced (and deferred) in an amount equal to $1.00 for each
dollar the rehabilitation overrun is greater than 50% of the contingency amount.
The construction budget and contingency amount are specified in the Construction
and Operating Budget Agreement to be entered into between the Parties. If any
Capital Contribution proceeds are remaining after Completion of Construction and
all rehabilitation costs, including the above referenced 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.
(c) The Partnership shall pay to the Management Agent a property
management fee for the leasing and management of the Project in an amount in
accordance with the Management Agreement. The term of the Management Agreement
shall not exceed two years, and the execution or renewal of any Management
Agreement shall be subject to the prior Consent of the Special Limited Partner.
(1) The General Partner shall, upon receiving any request of
the Mortgage lender requesting such action, dismiss the Management Agent as the
entity responsible for management of the Project under the terms of the
Management Agreement; or, the General Partner shall dismiss the Management Agent
at the request of the Special Limited Partner.
(2) The appointment of any successor Management Agent is
subject to the Consent of the Special Limited Partner which may only be sought
after the General Partner has provided the Special Limited Partner with accurate
and complete disclosure respecting the proposed Management Agent.
(3) The Partners consent and agree that all initial tenants
must be approved and accepted by the Management Agent, Managing General Partner
and a third party retained by the Limited Partner. The Management Agent shall
submit all tenant files to the Limited Partner's agent including, but not
limited to copies of tenant applications, certifications and third party
verifications. The Limited Partner's agent shall have 48 hours to review the
completed file and approve or disapprove of the applicant as a tenant. Approval
or disapproval shall be made strictly on the basis of Tax Credit compliance.
(d) The Partnership shall pay to the Limited Partner a fee (the
"Reporting Fee") commencing in 1999 equal to $1,500 per year for the Limited
Partner's services in monitoring the operations of the Partnership and for
services in connection with the Partnership's accounting matters and assisting
with the preparation of tax returns and the reports required in Sections 14.2
and 14.3 of this Agreement. The Reporting Fee shall be payable within
seventy-five (75) days following each calendar year and shall be payable from
Net Operating Income in the manner and priority set forth in Section 11.1 of
this Agreement; provided, however, that if in any year Net Operating Income is
insufficient to pay the full $1,500, the unpaid portion thereof shall accrue and
be payable on a cumulative basis in the first year in which there is sufficient
Net Operating Income, as provided in Section 11.1, or sufficient Sale or
Refinancing Proceeds, as provided in Section 11.2.
(e) The Partnership shall pay to the Managing General Partner an
Incentive Management Fee in accordance with Section 11.1 of this Agreement for
each fiscal year of the Partnership commencing in 1999 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 Managing General Partner. Subject to
the other provisions of this Agreement, the Managing General Partner, in the
Partnership's name and on its behalf, may:
(a) hold, sell, transfer, lease or otherwise deal with any real,
personal or mixed property, interest therein or appurtenance thereto in
accordance with the purpose of this Agreement as indicated in Article IV hereto;
(b) employ, contract and otherwise deal with, from time to time,
Persons whose services are necessary or appropriate in connection with
management and operation of the Partnership business, including, without
limitation, contractors, agents, brokers, Accountants and Management Agents
(provided that the selection of any Accountant or Management Agent has received
the Consent of the Special Limited Partner) and attorneys, on such terms as the
General Partner shall determine;
(c) bring or defend, pay, collect, compromise, arbitrate, resort to
legal action or otherwise adjust claims or demands of or against the
Partnership;
(d) pay as a Partnership expense any and all costs and expenses
associated with the formation, development, organization and operation of the
Partnership, including the expense of annual audits, tax returns and LIHTC
compliance;
(e) deposit, withdraw, invest, pay, retain and distribute the
Partnership's funds in a manner consistent with the provisions of this
Agreement;
(f) execute the Construction Loan and the Mortgage; and
(g) execute, acknowledge and deliver any and all instruments to
effectuate any of the foregoing.
Section 9.4 Authority Requirements. During the Compliance Period,
the following provisions shall apply.
(a) Each of the provisions of this Agreement shall be subject to, and
the General Partner covenants to act in accordance with, the Tax Credit
Conditions and all applicable federal, state and local laws and regulations.
(b) The Tax Credit Conditions and all such laws and regulations, as
amended or supplemented, shall govern the rights and obligations of the
Partners, their heirs, executors, administrators, successor and assigns, and
they shall control as to any terms in this Agreement which are inconsistent
therewith, and any such inconsistent terms of this Agreement shall be
unenforceable by or against any of the Partners.
(c) Upon any dissolution of the Partnership or any transfer of the
Project, no title or right to the possession and control of the Project and no
right to collect rent therefrom shall pass to any Person who is not, or does not
become, bound by the Tax Credit Conditions in a manner that, in the opinion of
counsel to the Partnership, would not avoid a recapture thereof on the part of
the former owners.
(d) Any conveyance or transfer of title to all or any portion of the
Project required or permitted under this Agreement shall in all respects be
subject to the Tax Credit Conditions and all conditions, approvals or other
requirements of the rules and regulations of any authority applicable thereto.
Section 9.5 Limitations on General Partner's Power and Authority.
Notwithstanding the provisions of this Article IX, neither the Managing General
Partner nor the General Partner shall:
(a) except as required by Section 9.4, act in contravention of this
Agreement;
(b) act in any manner which would make it impossible to carry on the
ordinary business of the Partnership;
(c) confess a judgment against the Partnership;
(d) possess Partnership property, or assign the Partner's right in
specific Partnership property, for other than the exclusive benefit of the
Partnership;
(e) admit a Person as a General Partner except as provided in this
Agreement;
(f) admit a Person as a Limited Partner except as provided in this
Agreement;
(g) violate any provision of the Mortgage;
(h) cause the Project apartment units to be rented to anyone other than
Qualified Tenants;
(i) violate the Minimum Set-Aside Test or the Rent Restriction Test for
the Project;
(j) cause any recapture of the Tax Credits;
(k) permit any creditor who makes a nonrecourse loan to the Partnership
to have, or to acquire at any time as a result of making such loan, any direct
or indirect interest in the profits, income, capital or other property of the
Partnership, other than as a secured creditor;
(l) commingle funds of the Partnership with the funds of another Per-
son; 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 the General Partner. Without
consent of the Special Limited Partner neither the Managing General Partner nor
the General Partner shall:
(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 expenditure of funds in excess of $10,000, 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 Managing General Partner and
the General Partner agree that they shall at all times:
(a) diligently and faithfully devote such of their time to the business
of the Partnership as may be necessary to properly conduct the affairs of the
Partnership;
(b) file and publish all certificates, statements or other instruments
required by law for the formation and operation of the Partnership as a limited
partnership in all appropriate jurisdictions;
(c) cause the Partnership to carry Insurance from an Insurance Company
as defined in Section 1.35;
(d) have a fiduciary responsibility for the safekeeping and use of all
funds and assets of the Partnership, whether or not in their 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 their 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 their 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;
(j) make any Capital Contributions, advances or loans required to be
made by the General Partner under the terms of this Agreement;
(k) establish and maintain all reserves required to be established and
maintained under the terms of this Agreement;
(l) cause the Management Agent to manage the Project in such a manner
that the Project will be eligible to receive LIHTC with respect to 100% of the
apartment units in the Project. To that end, the Managing General Partner and
the General Partner agree, 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
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. The foregoing provisions of this
Section 9.8(b) shall not apply if the General Partner also serves as the
Management Agent. 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 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, rehabilitation, operation and
management of real estate projects and developments of every type on their own
behalf or on behalf of other partnerships, joint ventures, corporations or other
business ventures formed by them or in which they may have an interest,
including, without limitation, business ventures similar to, related to or in
direct or indirect competition with the Project. 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 9.10 Covenants, Representations and Warranties. The General
Partner covenants, represents and warrants that the following are presently true
and will be true during the term of this Agreement, to the extent then
applicable.
(a) The Partnership is a duly organized limited partnership validly
existing under the laws of the State and has complied with all filing
requirements necessary for the protection of the limited liability of the
Limited Partner and the Special Limited Partner.
(b) The Partnership Agreement and the Project Documents are in full
force and effect and neither the Partnership nor the General Partner is in
breach or violation of any provisions thereof.
(c) Improvements will be completed in a timely and workerlike manner in
accordance 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 First
Illinois National Bank, 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 approved by the
Special Limited Partner.
(f) No Partner has or will have any personal liability with respect to
or has or will have personally guaranteed the payment of the Mortgage.
(g) The Partnership is in compliance with all rehabilitation and use
codes applicable to the Project and is not in violation of any zoning,
environmental or similar regulations applicable to the Project.
(h) All appropriate public utilities, including sanitary and storm
sewers, water, gas and electricity, are currently available and will be
operating properly for all units in the Project at the time of first occupancy
and throughout the term of the Partnership.
(i) The 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 27.5 year term. Site work, landscaping and personal property
(cabinets, appliances, carpet and window coverings) shall be broken out
separately from Improvements and depreciated over 7 years using the cost
recovery system, mid-year 200% declining balance depreciation method.
(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 and (2) no aboveground or underground
storage tanks are now or have ever been located on or under the Project. The
General Partner will not install or allow to be installed any aboveground or
underground storage tanks on the Project. The General Partner covenants that the
Project shall be kept free of Hazardous Materials and shall not be used to
generate, manufacture, refine, transport, treat, store, handle, dispose of,
transfer, produce or process Hazardous Materials, except in connection with the
normal maintenance and operation of any portion of the Project. The General
Partner shall comply, or cause there to be compliance, with all applicable
Federal, state and local laws, ordinances, rules and regulations with respect to
Hazardous Materials and shall keep, or cause to be kept, the Project free and
clear of any liens imposed pursuant to such laws, ordinances, rules and
regulations. The General Partner must promptly notify the Limited Partner and
the Special Limited Partner in writing (3) if it knows, or suspects or believes
there may be any Hazardous Substance in or around any part of the Project, any
Improvements constructed on the Project, or the soil, groundwater or soil vapor,
(4) if the General Partner or the Partnership may be subject to any threatened
or pending investigation by any governmental agency under any law, regulation or
ordinance pertaining to any Hazardous Substance, and (5) of any claim made or
threatened by any Person, other than a governmental agency, against the
Partnership or General Partner arising out of or resulting from any Hazardous
Substance being present or released in, on or around any part of the Project.
(n) The General Partner has not executed and will not execute any
agreements with provisions contradictory to, or in opposition to, the provisions
of this Agreement.
(o) The Partnership will allocate to the Limited Partner the Projected
Annual Tax Credits, or the Revised Projected Tax Credits, if applicable.
(p) No charges, liens or encumbrances exist with respect to the Project
other than those which are created or permitted by the Project Documents or
Mortgage or are noted or excepted in the title policy for the Project.
(q) The buildings on the Project site constitute or shall constitute a
"qualified low-income housing project" as defined in Section 42(g) of the Code,
and as amplified by the Treasury Regulations thereunder. In this connection, not
later than December 31 of the first year in which the Partners elect the LIHTC
to commence in accordance 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, are currently funded to required levels,
including levels required by any authority.
(s) The General Partner has not lent or otherwise advanced any funds to
the Partnership other than its Capital Contribution and the Partnership has no
unsatisfied obligation to make any payments of any kind to the General Partner
or any Affiliate thereof, except as provided on Schedule One attached hereto and
incorporated herein by this reference.
(t) No event has occurred which constitutes a default under any of the
Project Documents.
(u) No event has occurred which has caused, and the General Partner has
not acted in any manner which will cause (1) the Partnership to be treated for
federal income tax purposes as an association taxable as a corporation, (2) the
Partnership to fail to qualify as a limited partnership under the Act, or (3)
the Limited Partner to be liable for Partnership obligations; provided however,
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) No event or proceeding, including, but not limited to, any legal
actions or proceedings before any court, commission, administrative body or
other governmental authority, and acts of any governmental authority having
jurisdiction over the zoning or land use laws applicable to the Project, has
occurred the continuing effect of which has: (1) materially or adversely
affected the operation of the Partnership or the Project; (2) materially or
adversely affected the ability of the General Partner to perform its obligations
hereunder or under any other agreement with respect to the Project; or (3)
prevented the Completion of Construction of the Improvements in substantial
conformity with the Project Documents, other than legal proceedings which have
been bonded against (or as to which other adequate financial security has been
issued) in a manner as to indemnify the Partnership against loss; provided,
however, the foregoing does not apply to matters of general applicability which
would adversely affect the Partnership, the General Partner, Affiliates of the
General Partner or the Project only insofar as they or any of them are part of
the general public.
(w) Neither the Partnership nor the General Partner has any
liabilities, contingent or otherwise, which have not been disclosed in writing
to the Limited Partner and the Special Limited Partner and which in the
aggregate affect the ability of the Limited Partner to obtain the anticipated
benefits of its investment in the Partnership.
(x) The General Partner 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
9.10.
Section 9.11 Option to Acquire. After expiration of the Compliance
Period, either General Partner may give notice (the "GP Notice") to the Limited
Partner that it desires to purchase the entire Interest of each of the Limited
Partner and the Special Limited Partner in the Partnership.
Upon receipt by the Limited Partner and the Special Limited Partner, the
following events shall occur:
(a) The purchase price of the Interests shall be determined. The
purchase price shall be the greater of (i) the aggregate of the Fair Market
Value of the Interest of the Limited Partner and the Fair Market Value of the
Interest of the Special Limited Partner or (ii) the "Tax Amount" as hereinafter
defined. Notwithstanding the preceding, the purchase price shall be no less than
the principal amount of all outstanding indebtedness secured by the Project.
(b) The Limited Partner and the Special Limited Partner shall negotiate
with the General Partner for a period of 30 days after the GP Notice is received
to agree upon the Fair Market Value of their respective Interests. In the event
an agreement is not reached within such 30-day period, then the General Partner
or the Special Limited Partner may request that Fair Market Value be determined
in accordance with the process set forth below by sending notice (the "Appraisal
Notice") of same to the other party within 15 days of the expiration of the
30-day period. If an Appraisal Notice is not sent by either party within such
15-day period, then the General Partner's option shall expire.
(c) If the respective Fair Market Value of the Interests of the Limited
Partner and the Special Limited Partner are not agreed upon as provided above
and either the General Partner or the Special Limited Partner issues to the
other Person an Appraisal Notice, then the Fair Market Value of such Interests
shall be determined by an appraisal. The appraisal shall be conducted by an
independent appraiser satisfactory to the General Partner and the Special
Limited Partner or, in the event that a single independent appraiser cannot be
agreed upon within 30 days following the date of the Appraisal Notice, the
General Partner and the Special Limited Partner shall each select an independent
appraiser and the appraisers so selected shall select a third independent
appraiser. All appraisers so designated shall be experienced in accounting,
business or real estate appraisal. The appraiser or appraisers shall determine
the Fair Market Value of the Interest of each of the Limited Partner and the
Special Limited Partner. The decision of the appraisers (if more than one) shall
be made by the majority of such appraisers. The appraiser or appraisers shall
render a written report setting forth the Fair Market Value of such Interests,
which decision shall be rendered as expeditiously as possible by the appraiser
or appraisers and which decision shall be final and binding upon the parties.
The reasonable fees and expenses of the appraiser or appraisers shall be paid
one-half by the General Partner and one-half by the Limited Partner.
(d) The "Tax Amount" shall mean the dollar amount computed in the
following fashion:
(i) The Limited Partner and the Special Limited Partner shall
be deemed to have gain in an amount equal to the difference between their
respective basis in the Project and an amount equal to the total forgiveness of
debt which would be realized by the Limited Partner and the Special Limited
Partner computed as if the Limited Partner and the Special Limited Partner
abandoned their Interests in the Partnership on the date of the GP Notice. The
Tax Amount shall equal the deemed gain as computed above by a tax rate(s)
applied to such gain. The tax rate shall be the highest individual rate stated
in the Code applicable to the type of income (and if there is more than one rate
applicable because of more than one type of income, the different rates shall be
applied to the appropriate portions of such income). The Limited Partner shall
cooperate to expeditiously determine the Tax Amount.
(e) Following determination of the purchase price, the General Partner
shall have 30 days thereafter to determine whether the General Partner will
purchase the Interests of the Limited Partner and the Special Limited Partner at
the purchase price so determined. The General Partner shall exercise such right
by written notice to the Limited Partner and the Special Limited Partner within
such 30-day period, and if such right is not so exercised, the option shall
lapse in its entirety.
(f) If the General Partner determines to proceed with the purchase, the
purchase price shall be paid in cash, within 90 days following the giving of the
notice required by Section 9.11(e) and, in addition, interest shall be paid on
the purchase price from the date of the GP Notice, payable with the purchase
price, and calculated at the rate of interest set forth in Section 6.3 hereof.
ARTICLE X
ALLOCATIONS OF INCOME, LOSSES AND CREDITS
Section 10.1 General. All items includable in the calculation of Income
or Loss not arising from a Sale or Refinancing, and all Tax Credits, shall be
allocated 99.98% to the Limited Partner, 0.01% to the Special Limited Partner,
and 0.01% to the General Partner.
Section 10.2 Allocations From Sale or Refinancing. All Income and
Losses arising from a Sale or Refinancing shall be allocated between the
Partners as follows:
(a) As to Income:
(1) first, an amount of Income equal to the aggregate negative
balances (if any) in the Capital Accounts of all Partners having negative
Capital Accounts (prior to taking into account the Sale or Refinancing and the
Distribution of the related Sale or Refinancing Proceeds, but after giving
effect to Distributions of 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 99.98%
to the Limited Partner, 0.01% to the Special Limited Partner and 0.01% to the
General Partner.
(c) Notwithstanding the foregoing provisions of Section 10.2(a) and
(b), in no event shall any Losses be allocated to the Limited Partner or the
Special Limited Partner if and to the extent that such allocation would create
or increase an Adjusted Capital Account Deficit for the Limited Partner or the
Special Limited Partner. In the event an allocation of 99.98% or 0.01% of each
item includable in the calculation of Income or Loss not arising from a Sale or
Refinancing, would create or increase an Adjusted Capital Account Deficit for
the Limited Partner or the Special Limited Partner, respectively, then so much
of the items of deduction other than projected depreciation shall be allocated
to the General Partner instead of the Limited Partner or the Special Limited
Partner as is necessary to allow the Limited Partner or the Special Limited
Partner to be allocated 99.98% and 0.01%, respectively, of the items of Income
and Project depreciation without creating or increasing an Adjusted Capital
Account Deficit for the Limited Partner or the Special Limited Partner, it being
the intent of the parties that the Limited Partner and the Special Limited
Partner always shall be allocated 99.98% and 0.01%, respectively, of the items
of Income not arising from a Sale or Refinancing and 99.98% and 0.01%,
respectively, of the Project depreciation.
Section 10.3 Special Allocations. The following special allocations
shall be made in the following order.
(a) Except as otherwise provided in Section 1.704-2(f) of the Treasury
Regulations, notwithstanding any other provisions of this Article X, if there is
a net decrease in Partnership Minimum Gain during any Partnership fiscal year,
each Partner shall be specially allocated items of Partnership income and gain
for such fiscal year (and, if necessary, subsequent fiscal years) in an amount
equal to such Person's share of the net decrease in Partnership Minimum Gain,
determined in accordance with Treasury Regulations Section 1.704-2(g).
Allocations pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Partner pursuant thereto.
The items to be so allocated shall be determined in accordance with Section
1.704-2(f)(6) and 1.704-2(j)(2) of the Treasury Regulations. This Section
10.3(a) is intended to comply with the minimum gain chargeback requirement in
Section 1.704-2(f) of the Treasury Regulations and shall be interpreted
consistently therewith.
(b) Except as otherwise provided in Section 1.704-2(i)(4) of the
Treasury Regulations, notwithstanding any other provision of this Article X, if
there is a net decrease in Partner Nonrecourse Debt Minimum Gain attributable to
a Partner Nonrecourse Debt during any Partnership fiscal year, each Person who
has a share of the Partner Nonrecourse Debt Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with Section 1.704-2(i)(5) of
the Treasury Regulations, shall be specially allocated items of Partnership
income and gain for such fiscal year (and, if necessary, subsequent fiscal
years) in an amount equal to such Person's share of the net decrease in Partner
Nonrecourse Debt Minimum Gain attributable to such Partner Nonrecourse Debt,
determined in accordance with Treasury Regulations Section 1.704-2(i)(4).
Allocations pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Partner pursuant thereto.
The items to be so allocated shall be determined in accordance with Sections
1.704-2(i)(4) and 1.704-2(j)(2) of the Treasury Regulations. This Section
10.3(b) is intended to comply with the minimum gain chargeback requirement in
Section 1.704-2(i)(4) of the Treasury Regulations and shall be interpreted
consistently therewith.
(c) In the event any Partner unexpectedly receives any adjustments,
allocations, or distributions described in Treasury Regulations Section
1.704-1(b)(2)(ii)(d)(4), Section 1.704-1(b)(2)(ii)(d)(5), or Section
1.704-1(b)(2)(ii)(d)(6), items of Partnership income and gain shall be specially
allocated to each such Partner in an amount and manner sufficient to eliminate,
to the extent required by the Treasury Regulations, the Adjusted Capital Account
Deficit of such Partner as quickly as possible, provided that an allocation
pursuant to this Section 10.3(c) shall be made if and only to the extent that
such Partner would have an Adjusted Capital Account Deficit after all other
allocations provided for in this Section 10.3 have been tentatively made as if
this Section 10.3(c) were not in the Agreement.
(d) In the event any Partner has a deficit Capital Account at the end
of any Partnership fiscal year which is in excess of the sum of (i) the amount
such Partner is obligated to restore, and (ii) the amount such Partner is deemed
to be obligated to restore pursuant to the penultimate sentences of Treasury
Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), each such Partner shall be
specially allocated items of Partnership income and gain in the amount of such
excess as quickly as possible, provided that an allocation pursuant to this
Section 10.3(d) shall be made if and only to the extent that such Partner would
have a deficit Capital Account in excess of such sum after all other allocations
provided for in this Section 10.3 have been tentatively made as if this Section
10.3(d) and Section 10.3(c) hereof were not in the Agreement.
(e) Nonrecourse Deductions for any fiscal year shall be specially
allocated 99.98% to the Limited Partner, 0.01% to the Special Limited Partner
and 0.01% to the General Partner.
(f) Any Partner Nonrecourse Deductions for any fiscal year shall be
specially allocated to the Partner who bears the economic risk of loss with
respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse
Deductions are attributable in accordance with Treasury Regulations Section
1.704-2(i)(1).
(g) To the extent an adjustment to the adjusted tax basis of any
Partnership asset pursuant to Code Section 734(b) or Code Section 743(b) is
required, pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(2) or
Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital
Accounts as the result of a distribution to a Partner in complete liquidation of
his interest in the Partnership, the amount of such adjustment to the Capital
Accounts shall be treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases such basis) and such
gain or loss shall be specially allocated to the Partners in accordance with
their interests in the Partnership in the event that Treasury Regulations
Section 1.704-1 (b)(2)(iv)(m)(2) applies, or to the Partner to whom such
distribution was made in the event that Treasury Regulations Section
1.704-1(b)(2)(iv)(m)(4) applies.
(h) To the extent the Partnership has taxable interest income with
respect to any promissory note pursuant to Section 483 or Section 1271 through
1288 of the Code:
(1) such interest income shall be specially allocated to the
Limited Partner to whom such promissory note relates; and
(2) the amount of such interest income shall be excluded from
the Capital Contributions credited to such Partner's Capital Account in
connection with payments of principal with respect to such promissory note.
(i) In the event the adjusted tax basis of any investment tax credit
property that has been placed in service by the Partnership is increased
pursuant to Code Section 50(c), such increase shall be specially allocated among
the Partners (as an item in the nature of income or gain) in the same
proportions as the investment tax credit that is recaptured with respect to such
property is shared among the Partners.
(j) Any reduction in the adjusted tax basis (or cost) of Partnership
investment tax credit property pursuant to Code Section 50(c) shall be specially
allocated among the Partners (as an item in the nature of expenses or losses) in
the same proportions as the basis (or cost) of such property is allocated
pursuant to Treasury Regulations Section 1.46-3(f)(2)(i).
(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 0.01% of
each such item at all times during the existence of the Partnership.
(n) Interest deduction on the Partnership indebtedness referred to
in Section 6.3 shall be allocated 100% to the General Partner.
Section 10.4 Curative Allocations. The allocations set forth in
Sections 10.2(c), 10.3(a), 10.3(b), 10.3(c), 10.3(d), 10.3(e), 10.3(f), and
10.3(g) hereof (the "Regulatory Allocations") are intended to comply with
certain requirements of the Treasury Regulations. It is the intent of the
Partners that, to the extent possible, all Regulatory Allocations shall be
offset either with other Regulatory Allocations or with special allocations of
other items of Partnership income, gain, loss, or deduction pursuant to this
Section 10.4. Therefore, notwithstanding any other provision of this Article X
(other than the Regulatory Allocations), with the Consent of the Special Limited
Partner, the General Partner shall make such offsetting special allocations of
Partnership income, gain, loss, or deduction in whatever manner the General
Partner, with the Consent of the Special Limited Partner, determines appropriate
so that, after such offsetting allocations are made, each Partner's Capital
Account balance is, to the extent possible, equal to the Capital Account balance
such Partner would have had if the Regulatory Allocations were not part of the
Agreement and all Partnership items were allocated pursuant to Sections 10.1,
10.2(a), 10.2(b), 10.3(h), 10.3(i), 10.3(j), 10.3(k), 10.3(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 99.98% to the Limited Partner, 0.01% to the Special Limited Partner
and 0.01% to the General Partner.
(b) In the event Partnership investment tax credit property is disposed
of during any taxable year, profits for such taxable year (and, to the extent
such profits are insufficient, profits for subsequent taxable years) in an
amount equal to the excess, if any, of (1) the reduction in the adjusted tax
basis (or cost) of such property pursuant to Code Section 50(c), over (2) any
increase in the adjusted tax basis of such property pursuant to Code Section
50(c) caused by the disposition of such property, shall be excluded from the
profits allocated pursuant to Section 10.1 and Section 10.2(a) hereof and shall
instead be allocated among the Partners in proportion to their respective shares
of such excess, determined pursuant to Section 10.3(i) and 10.3(j) hereof. In
the event more than one item of such property is disposed of by the Partnership,
the foregoing sentence shall apply to such items in the order in which they are
disposed of by the Partnership, so the profits equal to the entire amount of
such excess with respect to the first such property disposed of shall be
allocated prior to any allocations with respect to the second such property
disposed of, and so forth.
(c) For purposes of determining the Income, Losses, or any other items
allocable to any period, Income, Losses, and any such other items shall be
determined on a daily, monthly, or other basis, as determined by the General
Partner with the Consent of the Special Limited Partner, using any permissible
method under Code Section 706 and the Treasury Regulations thereunder.
(d) Solely for purposes of determining a Partner's proportionate share
of the "excess nonrecourse liabilities" of the Partnership within the meaning of
Treasury Regulations Section 1.752-3(a)(3), the Partners' interests in
Partnership profits are as follows: Limited Partner:
99.98%; Special Limited Partner: 0.01%; and General Partner: 0.01%.
(e) To the extent permitted by Section 1.704-2(h)(3) of the Treasury
Regulations, the General Partner shall endeavor to treat Distributions as having
been made from the proceeds of a Nonrecourse Liability or a Partner Nonrecourse
Debt only to the extent that such Distributions would cause or increase an
Adjusted Capital Account Deficit for any Partner who is not a General Partner.
Section 10.6 Tax Allocations: Code Section 704(c). In accordance with
Code Section 704(c) and the Treasury Regulations thereunder, income, gain, loss,
and deduction with respect to any property contributed to the capital of the
Partnership shall, solely for tax purposes, be allocated among the Partners so
as to take account of any variation between the adjusted basis of such property
to the Partnership for federal income tax purposes and its initial Gross Asset
Value (computed in accordance with Section 1.30(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.
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 current Reporting Fee and then to pay any accrued Report
ing Fees which have not been paid in full from previous years;
(b) to pay the Development Fee;
(c) to pay the Operating Loans, if any, as referenced in Section 6.2(b)
of this Agreement, from the Net Operating Income remaining after reduction for
the payments made pursuant to subsections (a) and (b) of this Section 11.1;
(d) to pay the Incentive Management Fee from 70% of the Net Operating
Income remaining after reduction for the payments made pursuant to subsections
(a) through (c) of this Section 11.1; and
(e) to the Limited Partner in an amount equal to 50% of the remaining
Net Operating Income and to the General Partner in an amount equal to 50% of the
remaining Net Operating Income.
Section 11.2 Distribution of Sale or Refinancing Proceeds. Sale or Re-
financing 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
shall deem reasonably necessary for contingent, unmatured or unforeseen
liabilities or obligations of the Partnership; and
(d) thereafter, 50% to the Limited Partner and 50% to the General Part-
ner.
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.
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.
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 First Illinois National Bank, and the State Tax
Credit Agency. Withdrawal shall be conditioned upon the agreement of the Special
Limited Partner to be admitted as a successor General Partner, or if the Special
Limited Partner declines to be admitted as a successor General Partner then on
the agreement of one or more Persons who satisfy the requirements of Section
13.5 of this Agreement to be admitted as successor General Partner(s).
(b) Each General Partner shall indemnify and hold harmless the
Partnership and all Partners from its Withdrawal in violation of Section 13.1(a)
hereof. Each General Partner shall be liable for damages to the Partnership
resulting from its Withdrawal in violation of Section 13.1(a).
Section 13.2 Removal of General Partner.
(a) The Special Limited Partner or the Limited Partner, or both of
them, may remove the Managing General Partner or the General Partner or both for
cause if such Managing General Partner or General Partner has:
(1) been subject to Bankruptcy in accordance with this Agree-
ment;
(2) committed any fraud, willful misconduct, material breach
of fiduciary duty or other negligent conduct in the performance of its duties
under this Agreement;
(3) been convicted of, or entered into a plea of guilty to, a
felony related to the purpose of this Agreement;
(4) made personal use of Partnership funds or properties;
(5) violated the terms of the Mortgage and such violation
prompts First Illinois National Bank, 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 or the cure period under the
appropriate Mortgage document if longer;
(6) failed to provide any loan, advance, Capital Contribution
or any other payment to the Partnership required under this Agreement;
(7) failed to obtain the Consent of the Special Limited
Partner prior to any decision, act or omission under circumstances where this
Agreement requires that such consent be obtained;
(8) breached any material representation, warranty or covenant
contained in this Agreement, or failing to perform any other material action
which may be required by this Agreement;
(9) violated any federal or state tax law which causes a
recapture of LIHTC; or
(10) failed during any six-month period during the Compliance
Period to cause at least 85% of the total apartment units in the Project to
qualify for LIHTC, unless such failure is the result of Force Majeure or unless
such failure is cured within 120 days after the end of the six-month period.
(b) Written notice of the removal for cause of the General Partner
shall be served by the Special Limited Partner or the Limited Partner, or both
of them, upon the General Partner either by certified or by registered mail,
return receipt requested, or by personal service. Such notice shall set forth
the reasons for the removal, if any, and the date upon which the removal is to
become effective.
(c) Upon receipt of such notice of removal for cause, the General
Partner shall cause an accounting to be prepared covering the transactions of
the Partnership from the end of the previous fiscal year through the date of
receipt of such notice, and thereafter it shall not sell or dispose of
Partnership assets under any circumstances. The accounting shall be completed by
the effective date of the removal and shall be in sufficient detail to
accurately and fully reflect the earnings or losses for the period and the
financial condition of the Partnership. If the General Partner fails to cause
the accounting to be prepared within 30 days of receipt of the notice of removal
for cause then the Limited Partner may cause the accounting to be prepared. The
expenses of the accounting shall be borne by the General Partner.
Section 13.3 Effects of a Withdrawal. In the event of a Withdrawal, the
entire Interest of the Withdrawing General Partner shall immediately and
automatically terminate on the effective date of such Withdrawal, and such
General Partner shall immediately cease to be a General Partner, shall have no
further right to participate in the management or operation of the Partnership
or the Project or to receive any allocations or Distributions from the
Partnership or any other funds or assets of the Partnership, except as
specifically set forth below. In the event of a Withdrawal, any or all executory
contracts, including but not limited to the Management Agreement, between the
Partnership and the Withdrawing General Partner or its Affiliates may be
terminated by the Partnership, with the Consent of the Special Limited Partner,
upon written notice to the party so terminated.
Furthermore, notwithstanding such Withdrawal, the Withdrawing General
Partner shall be and shall remain, liable as a General Partner for all
liabilities and obligations incurred by the Partnership or by the General
Partner prior to the effective date of the Withdrawal, or which may arise upon
such Withdrawal. Any remaining Partner shall have all other rights and remedies
against the Withdrawing General Partner as provided by law or under this
Agreement. Notwithstanding, the Withdrawing General Partner shall not be
responsible for any obligations which may arise following the effective date of
the Withdrawal, including without limitation any continuing guarantees for which
the General Partner and any affiliates may be responsible.
The following additional provisions shall apply in the event of a
Withdrawal.
(a) In the event of a Withdrawal which is not an Involuntary
Withdrawal, the Withdrawing General Partner shall have no further right to
receive any future allocations or Distributions from the Partnership or any
other funds or assets of the Partnership, nor shall it be entitled to receive or
to be paid by the Partnership any further payments of fees (including fees which
have been earned but are unpaid) or to be repaid any outstanding advances or
loans made by it to the Partnership or to be paid any amount for its former
Interest unless such forfeiture creates an unreasonable financial benefit to the
Partnership or Limited Partner. 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. 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
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 60-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 which consent
shall not be unreasonably withheld.
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 amend
ments thereto;
(5) financial statements of the Partnership for the six most
recent fiscal years; and
(6) the Partnership's books and records for at least the
current and past three fiscal years.
(b) Upon the request of the Limited Partner, the General Partner shall
promptly deliver to the Limited Partner, at the expense of the Partnership, a
copy of the information set forth in Section 14.1(a) above. The Limited Partner
shall have the right upon reasonable request and during normal business hours to
inspect and copy any of the foregoing, or any of the other books and records of
the Partnership or the Project at its own expense.
Section 14.2 Accounting Reports.
(a) By February 20 of each calendar year the General Partner shall
provide to the Limited Partner and the Special Limited Partner all tax
information necessary for the preparation of their federal and state income tax
returns and other tax returns with regard to the jurisdiction(s) in which the
Partnership is formed and in which the Project is located.
(b) By March 1 of each calendar year the General Partner shall send to
the Limited Partner and the Special Limited Partner: (1) a balance sheet as of
the end of such fiscal year and statements of income, Partners' equity and
changes in cash flow for such fiscal year prepared in accordance with generally
accepted accounting principles and accompanied by an auditor's report containing
an opinion of the Partnership's Accountants; (2) a report (which need not be
audited) of any Distributions made at any time during the fiscal year,
separately identifying Distributions from Net Operating Income for the fiscal
year, Net Operating Income for prior years, Sale or Refinancing Proceeds, and
reserves; and (3) a report setting forth the amount of all fees and other
compensation and Distributions and reimbursed expenses paid by the Partnership
for the fiscal year to the General Partner or Affiliates of the General Partner
and the services performed in consideration therefor, which report shall be
verified by the Partnership's Accountants, with the method of verification to
include, at a minimum, a review of the time records of individual employees, the
costs of whose services were reimbursed, and a review of the specific nature of
the work performed by each such employee, all in accordance with generally
accepted auditing standards and, accordingly, including such tests of the
accounting records and such other auditing procedures as the Accountants
consider appropriate in the circumstances.
(c) Within 60 days after the end of each fiscal quarter in which a Sale
or Refinancing of the Project occurs, the General Partner shall send to the
Limited Partner and the Special Limited Partner a report as to the nature of the
Sale or Refinancing and as to the Income and Losses for tax purposes and
proceeds arising from the Sale or Refinancing.
Section 14.3 Other Reports. The Managing General Partner shall provide
to the Limited Partner and the Special Limited Partner the following reports.
(a) During rehabilitation, 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
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 rehabilitation and rent-up until a later year, the Managing
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 Managing General
Partner shall provide to the Limited Partner 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 the day any such
certification is filed, copies of any certifications which the Partnership must
furnish to federal or state governmental authorities administering the Tax
Credit program including, but not limited to, copies of all annual tenant
recertifications required under Section 42 of the Code.
(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
of income and expenses, balance sheet, rent roll as of the end of each calendar
quarter of each year, and third party verification of current utility allowance.
(h) By the annual renewal date 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 Part
ner's updated financial statement as of December 31 of the previous year.
(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) 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 9.10 of this Agreement, and
any inability of the Partnership to meet its cash obligations as they become
payable, within ten days after the occurrence of such event.
Section 14.4 Late Reports. If the General Partner does not fulfill its
obligations under Section 14.2 after notice by the Limited Partner or Special
Limited Partner, the General Partner, using its own funds, shall pay as damages
the sum of $25 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 Managing General Partner does not fulfill its obligations
under Section 14.3 within the time periods set forth therein, the Managing
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 Managing General Partner shall so fail to pay, the General
Partner and its Affiliates shall forthwith cease to be entitled to any fees
hereunder (other than the Development Fee) and/or to the payment of any Net
Operating Income or Sale or Refinancing Proceeds to which the Managing 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 notice to 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 Managing 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 Managing General Partner, with the Consent of the Special
Limited Partner, may, but is not required to, cause the Partnership to make or
revoke the election referred to in Section 754 of the Code, as amended, or any
similar provisions enacted in lieu thereof.
ARTICLE XV
DISSOLUTION, WINDING UP, TERMINATION
AND LIQUIDATION OF THE PARTNERSHIP
Section 15.1 Dissolution of Partnership. The Partnership shall be dis-
solved upon the expiration of its term or the earlier occurrence of any of the
following events.
(a) The effective date of the Withdrawal or removal of the General
Partner, unless (1) at the time there is at least one other General Partner
(which may be the Special Limited Partner if it elects to serve as successor
General Partner under Section 13.4 hereof) who will continue as General Partner,
or (2) within 120 days after the occurrence of any such event the Limited
Partner elects to continue the business of the Partnership.
(b) The sale of the Project and the receipt in cash of the full amount
of the proceeds of such sale.
Notwithstanding the foregoing, however, in no event shall the
Partnership terminate prior to the expiration of its term if such termination
would result in a violation of the Mortgage or any other agreement with or rule
or regulation of First Illinois National Bank, 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.
(a) Upon dissolution and termination, after payment of, or adequate
provision for, the debts and obligations of the Partnership pursuant to Section
11.2(a) through and including 11.2(c), the remaining assets of the Partnership
shall be distributed to the Partners in accordance with Section 11.2, after
taking into account all allocations under Article X hereof.
(b) 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.
(c) For the purposes of Section 15.3(b), "unrealized appreciation" or
"unrealized depreciation" shall mean the difference between the Fair Market
Value of such assets, taking into account the Fair Market Value of the
associated financing but subject to Section 7701(g) of the Code, and the
Partnership's adjusted basis in such assets for book purposes. Section 15.3(b)
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(b) or elsewhere in this Agreement is intended to treat or cause such
Distributions to be treated as sales for value. The Fair Market Value of such
assets shall be determined by an independent appraiser to be selected by the
General Partner with the Consent of the Special Limited Partner.
Section 15.4 Deferral of Liquidation. If at the time of liquidation the
General Partner or other liquidator shall determine that an immediate sale of
part or all of the Partnership assets could cause undue loss to the Partners,
the liquidator may, in order to avoid loss, but only with the Consent of the
Special Limited Partner, either defer liquidation and retain all or a portion of
the assets or distribute all or a portion of the assets to the Partners in kind.
In the event that the liquidator elects to distribute such assets in kind, the
assets shall first be assigned a value (by appraisal by an independent
appraiser) and the unrealized appreciation or depreciation in value of the
assets shall be allocated to the Partners' Capital Accounts, as if such assets
had been sold, in the manner described in Section 10.2, and such assets shall
then be distributed to the Partners as provided herein. In applying the
preceding sentence, the Project shall not be assigned a value less than the
unamortized principal balance of any loan secured thereby.
Section 15.5 Liquidation Statement. Each of the Partners shall be
furnished with a statement prepared or caused to be prepared by the General
Partner or other liquidator, which shall set forth the assets and liabilities of
the Partnership as of the date of complete liquidation. Upon compliance with the
distribution plan as outlined in Sections 15.3 and 15.4, the Limited Partner and
Special Limited Partner shall cease to be such and the General Partner shall
execute, acknowledge and cause to be filed those certificates referenced in
Section 15.6.
Section 15.6 Certificates of Dissolution; Certificate of Cancellation
of Certificate of Limited Partnership.
(a) Upon the dissolution of the Partnership, the General Partner shall
cause to be filed in the office of, and on a form prescribed by the Secretary of
State of the State, a certificate of dissolution. The certificate of dissolution
shall set forth the Partnership's name, the Secretary of State's file number for
the Partnership, the event causing the Partnership's dissolution and the date of
the dissolution.
(b) Upon the completion of the winding up of the Partnership's affairs,
the General Partner shall cause to be filed in the office of, and on a form
prescribed by, the Secretary of State of the State, a certificate of
cancellation of the Certificate of Limited Partnership. The certificate of
cancellation of the Certificate of Limited Partnership shall set forth the
Partnership's name, the Secretary of State's file number for the Partnership,
and any other information which the General Partner determines to include
therein.
ARTICLE XVI
AMENDMENTS
This Agreement may be amended at any time by the Limited Partner. This
Agreement may not be amended by the General Partner absent the Consent of the
Special Limited Partner. Notwithstanding the foregoing, the Limited Partner will
not initiate an amendment to the Partnership, no amendment shall change the
Partnership to a general partnership; extend the term of the Partnership beyond
the date provided for in this Agreement; modify the limited liability of the
Limited Partner and the Special Limited Partner; allow the Limited Partner to
take control of the Partnership's business within the meaning of the Act; reduce
or defer the realization of any Partner's interest in allocations,
Distributions, capital or compensation hereunder, or increase any Partner's
obligations hereunder, without the consent of the Partner so affected; or change
the provisions of this Article XVI.
ARTICLE XVII
MISCELLANEOUS
Section 17.1 Voting Rights.
(a) The Limited Partner shall have no right to vote upon any matters
affecting the Partnership, except as provided in this Agreement. Notwithstanding
the foregoing, the Limited Partner may, without the concurrence of the General
Partner or the Managing General Partner:
(1) approve or disapprove, but not initiate, the Sale or Re-
financing of the Project;
(2) remove the General Partner and/or the Managing General
Partner and elect a substitute General Partner as provided in this Agreement;
(3) elect a successor General Partner and/or the Managing Gen-
eral 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.
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: Elderly Living Development, Inc.
3919 17th Street
East Moline, Illinois 61244
Quad Cities RedevelopmentResources, Inc.,
a non-profit corporation
3919 17th Street
East Moline, Illinois 61244
To the Limited Partner: WNC Housing Tax Credit Fund VI, L.P., Series 6
c/o WNC & Associates, Inc.
3158 Redhill Ave., Suite 120
Costa Mesa, CA 92626-3416
To the Special
Limited Partner: WNC Housing, L.P.
3158 Redhill Ave., Suite 120
Costa Mesa, CA 92626-3416
Section 17.4 Successors and Assigns. All the terms and conditions of
this Agreement shall be binding upon and inure to the benefit of the successors
and assigns of the Partners.
Section 17.5 Recording of Certificate of Limited Partnership. If the
General Partner should deem it advisable to do so, the Partnership shall record
in the office of the County Recorder of the county in which the principal place
of business of the Partnership is located a certified copy of the Certificate of
Limited Partnership, or any amendment thereto, after such Certificate or
amendment has been filed with the Secretary of State of the State.
Section 17.6 Amendment of Certificate of Limited Partnership.
(a) The General Partner shall cause to be filed, within 30 days after
the happening of any of the following events, an amendment to the Certificate of
Limited Partnership reflecting the occurrence of any of the following.
(1) A change in the name of the Partnership.
(2) A change in the street address of the Partnership's
principal executive office.
(3) A change in the address, or the Withdrawal, of a General
Partner, or a change in the address of the agent for service of process, or
appointment of a new agent for service of process.
(4) The admission of a General Partner and that Partner's
address.
(5) The discovery by the General Partner of any false or
erroneous material statement contained in the Certificate of Limited Partnership
or any amendment thereto.
(b) The Certificate of Limited Partnership may also be amended in
conformity with this Agreement at any time in any other respect that the General
Partner determines.
(c) The General Partner shall cause the Certificate of Limited
Partnership to be amended, when required or permitted as aforesaid, by filing a
certificate of amendment thereto in the office of, and on a form prescribed by,
the Secretary of State of the State. The certificate of amendment shall set
forth the Partnership's name, the Secretary of State's file number for the
Partnership and the text of the amendment.
Section 17.7 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, and said
counterparts shall constitute but one and the same instrument which may
sufficiently be evidenced by one counterpart.
Section 17.8 Captions. Captions to and headings of the Articles,
Sections and subsections of this Agreement are solely for the conveniences of
the Partners, are not a part of this Agreement, and shall not be used for the
interpretation or determination of the validity of this Agreement or any
provision hereof.
Section 17.9 Saving Clause. If any provision of this Agreement, or the
application of such provision to any Person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to Persons or circumstances other than those as to which it is held invalid,
shall not be affected thereby.
Section 17.10 Tax Matters Partners. All the Partners hereby agree that
the Managing General Partner shall be the "Tax Matters Partner" pursuant to the
Code and in connection with any audit of the federal income tax returns of the
Partnership; provided, however, that if the Managing General Partner shall
withdraw from the Partnership or become Bankrupt, the Special Limited Partner
shall thereafter be the "Tax Matters Partner". If the Tax Matters Partner shall
determine to litigate any administrative determination relating to federal
income tax matters, it shall litigate such matter in such court as the Tax
Matters Partner shall decide in its sole discretion. In discharging its duties
and responsibilities, the Tax Matters Partner shall act as a fiduciary (i) to
the Limited Partner (to the exclusion of the other Partners) insofar as tax
matters related to the Tax Credits are concerned, and (ii) to all of the
Partners in other respects. The Limited Partner will make no claim against the
Partnership in respect of any action or omission by the Tax Matters Partner
during such time as the Special Limited Partner acts as the Tax Matters Partner.
Section 17.11 Expiration of Compliance Period.
(a) Notwithstanding any provision hereof to the contrary (other than
this Section 17.11), the Special Limited Partner shall have the right at any
time after the beginning of the last year of the Compliance Period to require,
by written notice to the General Partner, that the General Partner promptly
submit a written request to the applicable State Tax Credit Agency pursuant to
Section 42(h) of the Code (or any successor provision) that such agency endeavor
to locate within one year from the date of such written request a purchaser for
the Project who will continue to operate the Project as a qualified low income
property, at a purchase price that is not less than the minimum amount set forth
in Section 42(h)(6) of the Code (or any successor provision). In the event that
the State Tax Credit Agency obtains an offer satisfying the conditions of the
preceding sentence, the General Partner shall promptly notify the Special
Limited Partner in writing with respect to the terms and conditions of such
offer, and, if the Special Limited Partner notifies the General Partner that
such offer should be accepted, the General Partner shall cause the Partnership
promptly to accept such offer and to proceed to sell the Project pursuant to
such offer.
(b) 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.
IN WITNESS WHEREOF, this Amended and Restated Agreement of Limited
Partnership of Cotton Mill Elderly Living Center, L.P., an Illinois limited
partnership, is made and entered into as of the ________ day of
_________________, 1999.
GENERAL PARTNER
Elderly Living Development, Inc.
By: ____________________________
John McChurch
Vice President and Chief Operating Officer
Quad Cities Redevelopment Resources, Inc., a non-
profit corporation
By: ____________________________
Paul Elgatian,
Chairman of the Board
WITHDRAWING ORIGINAL LIMITED PARTNER
Elderly Living Development, Inc.
By: ____________________________
John McChurch
Vice President and Chief Operating Officer
Signatures continued on next page . . .
---------------------------------
John McChurch
LIMITED PARTNER
WNC Housing Tax Credit Fund VI, L.P., Series 6
By: WNC & Associates, Inc.,
General Partner
By: _________________________
David N. Shafer,
Senior Vice President
SPECIAL LIMITED PARTNER
WNC Housing, L.P.
By: WNC & Associates, Inc.,
General Partner
By: _______________________________
David N. Shafer,
Senior Vice President
<PAGE>
EXHIBIT A TO PARTNERSHIP AGREEMENT
LEGAL DESCRIPTION
Lot One (1) of Cotton Mill Addition to the city of Rock Island, Situated in the
County of Rock Island and State of Illinois.
<PAGE>
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: Cotton Mill Elderly Living Center, L.P.
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 Cotton Mill
Elderly Living Center, L.P. (the "Partnership"), an Illinois limited partnership
formed to own, develop, rehabilitate, finance and operate an apartment complex
for low-income persons (the "Apartment Complex") in Rock Island, Rock Island
County, Illinois. The general partners of the Partnership are Elderly Living
Development, Inc. and Quad Cities Redevelopment Resources, Inc., a non-profit
corporation (the "General Partners").
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.
<PAGE>
Based on the foregoing we are of the opinion that:
(a) ________________________, one of the General Partners, is a
corporation 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 Illinois.
(c) The Partnership is validly existing under and subject to the laws
of Illinois 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
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, 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) (l) The non-profit General Partner: (i) is described within the
meaning of Section 509(a) and is exempt from tax under Section 501(c)(3) of the
Internal Revenue Code; (ii) is determined by the State Agency not to be
affiliated with or controlled by a for-profit organization; and (iii) one of the
exempt purposes of such non-profit General Partner includes the fostering of low
income housing.
(m) The non-profit General Partner owns an interest in the Apartment
Complex (directly or through a partnership) and materially participates [within
the meaning of Section 469(h)] in the development and operation of the Apartment
Complex throughout the tax credit compliance period.
(n) The non-profit General Partner satisfies the requirements and
conditions of California Revenue and Taxation Code Sections 214(g) and 214.8
and, provided such requirements and conditions are maintained, the Partnership
shall be entitled to a property tax exemption within the meaning of those
Sections.
(o) 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
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,
--------------------
<PAGE>
EXHIBIT C TO PARTNERSHIP AGREEMENT
CERTIFICATION AND AGREEMENT
CERTIFICATION AND AGREEMENT made as of the date written below by Cotton
Mill Elderly Living Center, L.P., an Illinois limited partnership (the
"Partnership"); Elderly Living Development, Inc. and Quad Cities Redevelopment
Resources, Inc., a non-profit corporation (collectively referred to as the
"General Partner"); and Elderly Living Development, Inc. and John McChurch
(collectively referred to as 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 power and authority to own its apartment complex (the "Apartment Complex")
and conduct its business; the Partnership, the General Partner and the Original
Limited Partner have the power and authority to enter into and perform this
Certification and Agreement; the execution and delivery of this Certification
and Agreement by the Partnership, the General Partner and the Original Limited
Partner have been duly and validly authorized by all necessary action; the
execution and delivery of this Certification and Agreement, the fulfillment of
its terms and consummation of the transactions contemplated hereunder do not and
will not conflict with or result in a violation, breach or termination of or
constitute a default under (or would not result in such a conflict, violation,
breach, termination or default with the giving of notice or passage of time or
both) any other agreement, indenture or instrument by which the Partnership or
any General Partner or Original Limited Partner is bound or any law, regulation,
judgment, decree or order applicable to the Partnership or any General Partner
or Original Limited Partner or any of their respective properties; this
Certification and Agreement constitutes the valid and binding agreement of the
Partnership, the General Partner and the Original Limited Partner, enforceable
against each of them in accordance with its terms.
1.2 The General Partner has delivered to the Investment
Partnership, WNC or their affiliates all documents and information which would
be material to a prudent investor in deciding whether to invest in the
Partnership. All factual information provided to the Investment Partnership, WNC
or their affiliates either in writing or orally, did not, at the time given, and
does not, on the date hereof, contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading in light of the circumstances under which
they are made.
1.3 Each of the representations and warranties contained in
the Partnership Agreement is true and correct as of the date hereof.
1.4 Each of the covenants and agreements of the Partnership
and the General Partner contained in the Partnership Agreement has been duly
performed to the extent that performance of any covenant or agreement is
required on or prior to the date hereof.
1.5 All conditions to admission of the Investment Partnership
as the investment limited partner of the Partnership contained in the
Partnership Agreement have been satisfied.
1.6 No default has occurred and is continuing under the
Partnership Agreement or any of the Project Documents (as such term is defined
in the Partnership Agreement) for the Partnership.
1.7 The Partnership will allocate to the Limited Partner
the Projected Annual Tax Credits, or the Revised Projected Tax Credits, if
applicable.
1.8 The General Partner agrees to take all actions necessary
to claim the Projected Tax Credit, including, without limitation, the filing of
Form(s) 8609 with the Internal Revenue Service.
1.9 No person or entity other than the Partnership holds any
equity interest in the Apartment Complex.
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 Certifica-
tion Agreement shall have the meanings given to them in the Partnership Agree-
ment.
<PAGE>
IN WITNESS WHEREOF, this Certificate and Agreement is made and entered
into as of the day of ____________, 1999.
PARTNERSHIP
Cotton Mill Elderly Living Center, L.P.
By: Elderly Living Development, Inc.,
General Partner
By:
John McChurch
Vice President and Chief Operating Officer
By: Quad Cities Redevelopment Resources, Inc.,
a non-profit corporation,
General Partner
By: _____________________________
Paul Elgatian,
Chairman of the Board
GENERAL PARTNER
Elderly Living Development, Inc.
By:
John McChurch
Vice President and Chief Operating Officer
Quad Cities Redevelopment Resources, Inc.,
a non-profit corporation
By: __________________________
Paul Elgatian,
Chairman of the Board
ORIGINAL LIMITED PARTNER
Elderly Living Development, Inc.
By:
John McChurch
Vice President and Chief Operating Officer
-----------------------------
John McChurch
<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 Elderly Living
Development, Inc. and Quad Cities Redevelopment Resources, Inc., a non-profit
corporation General Partner of Cotton Mill Elderly Living Center, L.P., an
Illinois 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 Contribu-
tion to the Partnership;
WHEREAS, the Partnership Agreement requires the General Partner to
issue this Certification prior to the Limited Partner's payment; and
WHEREAS, the Limited Partner shall rely on this Certification in
evaluating the continued merits of its investment in the Partnership;
NOW, THEREFORE, to induce the Limited Partner to make its scheduled
Capital Contribution to the Partnership, the General Partner represents and
warrants to the Limited Partner that the following are true and correct as of
the date written below.
(a) The Partnership is a duly organized limited partnership validly
existing under the laws of the State and has complied with all filing
requirements necessary for the protection of the limited liability of the
Limited Partner and the Special Limited Partner.
(b) The Partnership Agreement and the Project Documents are in full
force and effect and neither the Partnership nor the General Partner is in
breach or violation of any provisions thereof.
(c) Improvements will be completed in a timely and workerlike manner in
accordance 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 First
Illinois National Bank, 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 approved by the
Special Limited Partner.
(f)No Partner has or will have any personal liability with respect to,
or has or will have personally guaranteed the payment of, the Mortgage.
(g) The Partnership is in compliance with all rehabilitation and use
codes applicable to the Project and is not in violation of any zoning,
environmental or similar regulations applicable to the Project.
(h) All appropriate public utilities, including sanitary and storm
sewers, water, gas and electricity, are currently available and will be
operating properly for all units in the Project at the time of first occupancy
and throughout the term of the Partnership.
(i) The 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 27.5 year term. Site work, landscaping and personal property
(cabinets, appliances, carpet and window coverings) shall be broken out
separately from Improvements and depreciated over 7 years using the cost
recovery system, mid-year 200% declining balance depreciation method.
(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 and (2) no aboveground or underground
storage tanks are now or have ever been located on or under the Project. The
General Partner will not install or allow to be installed any aboveground or
underground storage tanks on the Project. The General Partner covenants that the
Project shall be kept free of Hazardous Materials and shall not be used to
generate, manufacture, refine, transport, treat, store, handle, dispose of,
transfer, produce or process Hazardous Materials, except in connection with the
normal maintenance and operation of any portion of the project. The General
Partner shall comply, or cause there to be compliance, with all applicable
Federal, state and local laws, ordinances, rules and regulations with respect to
Hazardous Materials and shall keep, or cause to be kept, the Project free and
clear of any liens imposed pursuant to such laws, ordinances, rules and
regulations. The General Partner must promptly notify the Special Limited
Partner in writing (3) if it knows, or suspects or believes there may be any
Hazardous Substance in or around any part of the Project, any Improvements
constructed on the Project, or the soil, groundwater or soil vapor, (4) if the
General Partner or the Partnership may be subject to any threatened or pending
investigation by any governmental agency under any law, regulation or ordinance
pertaining to any Hazardous Substance, and (5) of any claim made or threatened
by any Person, other than a governmental agency, against the Partnership or
General Partner arising out of or resulting from any Hazardous Substance being
present or released in, on or around any part of the Project.
(n) The General Partner has not executed and will not execute any
agreements with provisions contradictory to, or in opposition to, the provisions
of the Partnership Agreement.
(o) The Partnership will allocate to the Limited Partner the Projected
Annual Tax Credits, or the Revised Projected Tax Credits, if applicable.
(p) No charges or encumbrances exist with respect to the Project other
than those which are created or permitted by the Project Documents or are noted
or excepted in the title policy for the Project.
(q) The buildings on the Project site constitute or shall constitute a
"qualified low-income housing project" as defined in Section 42(g) of the Code,
and as amplified by the Treasury Regulations thereunder. In this connection, not
later than December 31 of the first year in which the Partners elect the LIHTC
to commence in accordance the Code, the Project will satisfy the Minimum
Set-Aside Test.
(r) All accounts of the Partnership required to be maintained under the
terms of the Project Documents, including, without limitation, any reserves in
accordance with Article VIII hereof, are currently funded to required levels,
including levels required by any authority.
(s) The General Partner has not lent or otherwise advanced any funds to
the Partnership other than its Capital Contribution and the Partnership has no
unsatisfied obligation to make any payments of any kind to the General Partner
or any Affiliate thereof, except as provided on Schedule One attached hereto and
incorporated herein by this reference.
(t) No event has occurred which constitutes a material default under
any of the Project Documents.
(u) No event has occurred which has caused, and the General Partner has
not acted in any manner which will cause (1) the Partnership to be treated for
federal income tax purposes as an association taxable as a corporation, (2) the
Partnership to fail to qualify as a limited partnership under the Act, or (3)
the Limited Partner to be liable for Partnership obligations; provided however,
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) No event or proceeding, including, but not limited to, any legal
actions or proceedings before any court, commission, administrative body or
other governmental authority, and acts of any governmental authority having
jurisdiction over the zoning or land use laws applicable to the Project, has
occurred the continuing effect of which has: (1) materially or adversely
affected the operation of the Partnership or the Project; (2) materially or
adversely affected the ability of the General Partner to perform its obligations
hereunder or under any other agreement with respect to the Project; or (3)
prevented the Completion of Construction of the Improvements in substantial
conformity with the Project Documents, other than legal proceedings which have
been bonded against (or as to which other adequate financial security has been
issued) in a manner as to indemnify the Partnership against loss; provided,
however, the foregoing does not apply to matters of general applicability which
would adversely affect the Partnership, the General Partner, Affiliates of the
General Partner or the Project only insofar as they or any of them are part of
the general public.
(w) Neither the Partnership nor the General Partner has any
liabilities, contingent or otherwise, which have not been disclosed in writing
to the Limited Partner and the Special Limited Partner and which in the
aggregate affect the ability of the Limited Partner to obtain the anticipated
benefits of its investment in the Partnership.
(x) The General Partner has and shall maintain a net worth equal to
at least $1,000,000 computed in accordance with generally accepted accounting
principles.
<PAGE>
IN WITNESS WHEREOF, the undersigned have set their hands to this
General Partner Certification this day of _________, 1999.
Elderly Living Development, Inc.
By: ____________________________
John McChurch
Vice President and Chief Operating Officer
Quad Cities Redevelopment Resources, Inc.,
a non-profit corporation
By: _____________________________
Paul Elgatian,
Chairman of the Board
<PAGE>
Amended and Restated Agreement
Of Limited Partnership Of
Country Club Investors, L.P.
<PAGE>
Amended and Restated Agreement
Of Limited Partnership Of
Country Club Investors, L.P.
This Amended and Restated Agreement Of Limited Partnership is being
entered into effective as of the date written below by and between Mark-Dana
Corporation, a Virginia corporation, as the general partner (the "General
Partner"), Paul E. Norris as a remaining limited partner (the "Remaining Limited
Partner"), Virginia United Methodist Housing Development Corporation, a Virginia
not-for-profit corporation, as the non-profit special limited partner (the
"Non-Profit Special Limited 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., a California limited partnership, as the special
limited partner (the "Special Limited Partner"), Jaelkay, Incorporated, a
Virginia corporation, as the withdrawing general partner (the "Withdrawing
General Partner"), and Dana R. Koogler and David Mark Koogler as the withdrawing
limited partners ( together, the "Original Limited Partners").
RECITALS
WHEREAS, Country Club Investors, L.P., a Virginia limited partnership
(the "Partnership"), recorded a certificate of limited partnership with the
Virginia Secretary of State on August 6, 1996. A partnership agreement dated
July 26, 1996 was entered into by and between the General Partner, the
Withdrawing General Partner, the Remaining Limited Partner and the Original
Limited Partners (the "Original Partnership Agreement").
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 Non-Profit Special Limited Partner, the Limited Partner and the
Special Limited Partner as partners of the Partnership, (iii) the liquidation of
the Withdrawing General Partner's and Original Limited Partners' Interests in
the Partnership, (iv) the reduction of the General Partner's Interest in the
Partnership, (v) the payment of Capital Contributions by the Non-Profit Special
Limited Partner, Limited Partner and the Special Limited Partner to the
Partnership, (vi) the allocation of Income, Losses, Tax Credits and
distributions of Net Operating Income and other cash funds of the Partnership
among the Partners (vii) the determination of the respective rights, obligations
and interests of the Partners to each other and to the Partnership, and (viii)
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
1." shall mean Barber & Gardner, PLC, 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 Accountant for cause if such Accountant
fails to provide, or inaccurately provides, the information required in Section
14.2 or 14.3 of this Agreement.
1." 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.
1." shall mean as of any point in time, the total amount of the LIHTC
actually allocated by the Partnership to the Limited Partner, representing
66.99% of the LIHTC actually received by the Partnership, as shown on the
applicable tax returns of the Partnership.
1." 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.
1." 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.
Notwithstanding, this definition specifically excludes the law firm of Haynes
and Boone.
1." shall mean this Amended and Restated Agreement of Limited
Partnership, as it may be amended from time to time. Words such as "herein,"
"hereinafter," "hereof," "hereto," "hereby" and "hereunder," when used with
reference to this Agreement, refer to this Agreement as a whole, unless the
context otherwise requires.
1." shall collectively mean the approximately 7.644 acres of land in
Richmond, Henrico County, Virginia, as more fully described in Exhibit "A",
attached hereto and incorporated herein by this reference, and the Improvements.
1." 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.
1." 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.
1." shall mean at such time as the Partnership has Cash Receipts equal
to Cash Expenses, as determined by the Accountant and approved by the Special
Limited Partner. For purposes of this definition, any one-time up front fee paid
to the Partnership from any source shall not be included in Cash Receipts to
calculate Break-even Operations. Moreover, in the event any rent concession is
granted for the rental of an apartment unit the value of the rental concession
shall be amortized over the term of the lease.
1." shall mean the annual operating Budget of the Partnership as more
fully described in Section 14.3 of this Agreement.
1." 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.
1." shall mean the total amount of money, or the Gross Asset Value of
property contributed to the Partnership, if any, by all the Partners or any
class of Partners or any one Partner as the case may be (or by a
predecessor-in-interest of such Partner or Partners), reduced by any such
capital which shall have been returned pursuant to Section 7.3, 7.4 or 7.6 of
this Agreement. A loan to the Partnership by a Partner shall not be considered a
Capital Contribution.
1." shall mean all cash operating obligations of the Partnership (other
than those covered by Insurance) in accordance with the applicable Budget,
including without limitation, the payment of Mortgage payments, the Management
Agent fees (which shall be deemed to include that portion of such fees which is
currently deferred and not paid), the funding of reserves in accordance with
Article VIII of this Agreement, advertising and promotion, utilities,
maintenance, repairs, Partner communications, legal, telephone, any other
expenses which may reasonably be expected to be paid in a subsequent period but
which on an accrual basis is allocable to the period in question, such as
Insurance, real estate taxes and audit, tax or accounting expenses (excluding
deductions for cost recovery of buildings; improvements and personal property
and amortization of any financing fees) and any seasonal expenses (such as snow
removal, the use of air conditioners in the middle of the summer, or heaters in
the middle of the winter) which may reasonably be expected to be paid in a
subsequent period shall be allocated equally per month over the calendar year.
Cash Expenses payable to Partners or Affiliates of Partners shall be paid after
Cash Expenses payable to third parties.
1." shall mean actual cash received on a cash basis by the Partnership
from operating revenues of the Partnership, including without limitation rental
income (but not any subsidy thereof from the General Partner or an Affiliate
thereof) and laundry income, but excluding prepayments, security deposits,
Capital Contributions, borrowings, lump-sum payment, any extraordinary receipt
of funds, and any income earned on investment of its funds.
Section 1.16 1."Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, or any successor statute.
1." shall mean the date the Partnership has received the required
certificates of occupancy (or the local equivalent) for all ninety-seven (97)
apartment units, or by the issuance of the inspecting architect's certification,
in a form substantially similar to the form attached hereto as Exhibit "D" and
incorporated herein by this reference, with respect to completion of all the
apartment units in the Apartment Housing; provided, however, that Completion of
Construction shall not be deemed to have occurred if on such date any liens or
other encumbrances as to title to the Apartment Housing exist, other than those
securing the Construction Loan or Mortgage and/or those consented to by the
Limited Partner and Special Limited Partner.
1." shall mean the period set forth in Section 42 (i)(1) of the Code,
as amended, or any successor statute.
1." shall mean the prior written consent or approval of the Special
Limited Partner.
1." shall mean the agreed upon cost of construction of the
Improvements, including soft costs (which includes, but is not limited to,
financing charges, market study fees, the Development Fee, architect fees,
etc.), based upon the Plans and Specifications. The final Construction Budget is
referenced in the Construction and Operating Budget Agreement entered into by
and between the Partners the even date hereof.
1." shall mean the construction contract dated May 15, 1997 in the am-
ount of $844,940, entered into between the Partnership and the Contractor
pursuant to which the Improvements were constructed.
1." shall mean the Virginia Housing Development Authority or any
successor thereto.
1." shall mean the loan obtained from Construction Lender on May 15,
1997 in the principal amount of $2,850,000 at an interest rate equal to 7.8275%
per annum that provided funds for the acquisition, renovation and/or
construction and development of the Apartment Housing. Interest only was to be
payable every month up to and including May 1, 1998 at which time the loan was
converted to a permanent status and monthly payments of principle and interest
commenced. 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.
1." shall mean Koogler Construction Company, Inc., which is the general
construction contractor for the Apartment Housing.
1." shall mean for the applicable period the ratio between the Net
Operating Income (excluding Mortgage payments) and the debt service required to
be paid on the Mortgage(s); as example, a 1.15 Debt Service Coverage means that
for every $1.00 of debt service required to be paid there must be $1.15 of Net
Operating Income available. A worksheet for the calculation of Debt Service
Coverage is found in the Report of Operations attached hereto as Exhibit "G" and
incorporated herein by this reference.
1." shall have the meaning set forth in Section 9.2(c) hereof.
1." shall mean Mark-Dana Corporation.
1." shall mean the fee payable to the Developer for services incident
to the development and construction of the Apartment Housing in accordance with
the Development Fee Agreement between the Partnership and the Developer dated
the even date herewith and incorporated herein by this reference.
Development activities do not include services for the acquisition of the land
or syndication activities.
1." 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.
1." 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.
1." 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.
1." 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.
1." shall mean Mark-Dana Corporation and such other Persons as are
admitted to the Partnership as additional or substitute General Partners
pursuant to this Agreement. If there is more than one General Partner of the
Partnership, the term "General Partner" shall be deemed to refer to such General
Partners and vice versa.
1." 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 1.34(d) to the extent the General Partner determines
that an adjustment pursuant to Section 1.34(b) hereof is necessary or
appropriate in connection with a transaction that would otherwise result in an
adjustment pursuant to this Section 1.34(d).
If the Gross Asset Value of an asset has been determined or adjusted
pursuant to Section 1.34(a), Section 1.34(b), or Section 1.34(d) hereof, such
Gross Asset Value shall thereafter be adjusted by the depreciation taken into
account with respect to such asset for purposes of computing Income and Losses.
1." 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.
1." shall mean the three (3) buildings containing ninety-seven (97)
apartment units and ancillary and appurtenant facilities (including those
intended for commercial use, if any) being constructed for family use in
accordance with the Project Documents. It shall also include all furnishings,
equipment and personal property used in connection with the operation thereof.
1." shall have the meaning set forth in Section 9.2(e) hereof.
1." 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 1.38 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 1.38 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 1.34(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 tax purposes
shall be computed by reference to the Gross Asset Value of the property disposed
of, notwithstanding that the adjusted tax basis of such property differs from
its Gross Asset Value;
(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.
For purposes of this Agreement, the term Income when used alone shall include
all items of income or revenue contemplated in this Section and the term Losses
when used alone shall include all items of loss or deductions contemplated in
this Section.
1." shall mean Edward H. Winks & James D. Snowa Architects, P.C. The
Inspecting Architect shall make regular inspections of the construction site,
but in no event less than once a month, to confirm that construction of the
Improvements is in conformance with the Plans and Specifications. The Inspecting
Architect will sign-off on all the draw requests made by the Contractor and
provide the documents specified in Section 14.3 of this Agreement.
1." shall mean:."Insurance
(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 Apartment Housing 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;
(d) all Insurance polices shall name the Partnership as the named
insured, the Limited Partner as an additional insured, and WNC & Associates,
Inc. as the certificate holder;
(e) all Insurance policies shall include a provision to notify the in-
sured, the Limited Partner and the certificate holder in writing, at least 30
days prior to cancellation;
(f) hazard coverage must include inflation and building or ordinance
endorsements; and
(g) the minimum builder's risk coverage shall be in an amount equal to
the construction contract amount.
1." shall mean any insurance company engaged by the General Partner for
the Partnership with the Consent of the Special Limited Partner which Insurance
Company shall have an A rating or better for financial safety by A.M. Best or
Standard & Poor's.
1." 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.
1." means any Withdrawal caused by the death, adjudication of insanity
or incompetence, Bankruptcy of a General Partner, or the removal of a General
Partner pursuant to Section 13.2 hereof.
1." shall mean the fee payable to the General Partner in an amount
equal to $ 9,690 for the General Partner's services in locating, negotiating and
closing on the purchase of the real property upon which the Improvements are, or
will be, erected.
1." 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.
1." 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.
1." shall mean the property management company which oversees the
property management functions for the Apartment Housing and which is on-site at
the Apartment Housing. The initial Management Agent shall be Mark-Dana
Corporation.
1." shall mean the agreement between the Partnership and the Management
Agent for property management services. The management fee shall equal 5.4% of
gross rent collections with a minimum of $30,000 per year. Neither the
Management Agreement nor any ancillary agreement shall provide for an initial
rent-up fee, a set-up fee, nor any other similar pre-management fee payable to
the Management Agent.
1." 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 Apartment Housing to be occupied by tenants whose incomes
are equal to or less than the required percentage of the area median gross
income.
1." shall mean the permanent nonrecourse financing wherein the
Partnership promises to pay: (a) Virginia Housing Development Authority, or its
successor or assignee, the principal sum of $2,850,000, plus interest on the
principal at 7.8275% per annum over a term of 30 years and amortized over 30
years. Where the context admits, the term "Mortgage" or "Mortgage Loan" shall
include any mortgage, deed, deed of trust, note, regulatory agreement, security
agreement, assumption agreement or other instrument executed in connection with
the Mortgage which is binding on the Partnership; and in case any Mortgage is
replaced or supplemented by any subsequent mortgage or mortgages, the Mortgage
shall refer to any such subsequent mortgage or mortgages.
1." shall mean the cash available for Distribution on an annual basis,
when Cash Receipts exceed Cash Expenses.
1." shall mean Virginia United Methodist Housing Development
Corporation, a Virginia not-for-profit corporation, and such other Persons as
are admitted to the Partnership as additional or Substitute Non-Profit Special
Limited Partners pursuant to this Agreement.
1." shall have the meaning given it in Treasury Regulations Section
1.704-2(b)(1).
1." shall have the meaning given it in Treasury Regulations Section
1.704-2(b)(3).
1." shall mean, for the applicable period, insufficient funds to pay
operating costs when Cash Expenses exceed Cash Receipts, as determined by the
Accountant and approved by the Special Limited Partner.
1." shall mean the period commencing with the date of this Agreement
and ending three years after three consecutive months of Break-Even Operations.
1." shall mean loans made by the General Partner to the Partnership
pursuant to Article VI of this Agreement, which loans do not bear interest and
are repayable only as provided in Article XI of this Agreement.
1." shall mean Dana R. Koogler and David Mark Koogler.
1." shall collectively mean the General Partner, the Non-Profit Special
Limited Partner, the Remaining Limited Partner, the Limited Partner and the
Special Limited Partner or individually may mean any Partner as the context
dictates.
1." shall have the meaning set forth in Section 1.704-2(b)(4) of the
Treasury Regulations.
Section 1.61 1."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.
1." shall have the meaning set forth in Sections 1.704-2 (i)(1) and
1.704-2(i)(2) of the Treasury Regulations.
1." shall mean the limited partnership continued under this Agreement.
1." shall mean the amount determined in accordance with the principles
of Treasury Regulation Sections 1.704-2(b)(2) and 1.704-2(d).
1." shall mean the first date on which all of the following have
occurred: (a) the Construction Loan shall have been repaid in full; (b) the
Mortgage shall have closed and funded; and (c) amortization of the Mortgage
shall have commenced.
1." shall collectively mean an individual, proprietorship, trust,
estate, partnership, joint venture, association, company, corporation or other
entity.
1." shall mean the plans and specifications for the construction of the
Improvements which are approved by the local city/county building department
with jurisdiction over the construction of the Improvements and which plans and
specifications are referred to in the Construction Contract. Any changes to the
Plans and Specifications after approval by the appropriate government building
department, shall require the Consent of the Special Limited Partner.
1." shall mean all documents relating to the Construction Loan,
Mortgage Loan and Construction Contract. It shall also include all documents
required by any governmental agency having jurisdiction over the Apartment
Housing in connection with the development, construction and financing of the
Apartment Housing, including but not limited to, the approved Plans and
Specifications for the development and construction of the Apartment Housing.
1." shall mean LIHTC in the amount of $30,000 for 1999, $36,406 per
year for each of the years 2000 through 2008, and $6,406 for 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 66.99% of the
aggregate amount of LIHTC of $543,460 to be available to the Partnership.
1." shall mean LIHTC in the aggregate amount of $543,460.
1." shall mean Paul E. Norris, an individual, and such other Persons as
are admitted to the Partnership as additional or Substitute Limited Partners
pursuant to this Agreement.
1." shall mean the test pursuant to Section 42 of the Code whereby the
gross rent charged to tenants of the low-income apartment units in the Apartment
Housing cannot exceed 30% of the qualifying income levels of those units under
Section 42.
1." shall have the meaning set forth in Section 9.2(d) hereof.
1." shall have the meaning set forth in Section 7.4(a) hereof.
1." 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 Apartment
Housing 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."
1." 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 Apartment
Housing.
1." 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.
1." shall mean the Commonwealth of Virginia.
1." shall mean the state agency of Virginia which has the
responsibility and authorization to administer the LIHTC program in Virginia.
1." shall mean any Person who is admitted to the Partnership as a Limi-
ted Partner pursuant to Section 12.5 or acquires the Interest of the Limited
Partner pursuant to Section 7.3 of this Agreement.
1." shall mean the fee payable to the General Partner in an amount
equal to $30,000 for the General Partner's services in forming the Partnership,
locating and approving the Limited Partner and Special Limited Partner as the
investors in the Partnership, negotiating and finalizing this Partnership
Agreement and for such other services referenced in Treasury Regulation Section
1.709-2(B).
1." 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.
1." shall mean, for the duration of the Compliance Period, any and all
restrictions including, but not limited to, applicable federal, state and local
laws, rules and regulations, which must be complied with in order to qualify for
the LIHTC or to avoid an event of recapture in respect of the LIHTC.
1." 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.
1." shall mean the policy of insurance covering the fee simple title to
the Apartment Housing from a company approved by the Special Limited Partner.
The Title Policy shall be an ALTA owners title policy naming the Partnership as
insured and including non-imputation and Fairways endorsements. The Title Policy
shall also insure against rights-of-way, easements, or claims of easements, not
shown by public records. The Title Policy shall be in an amount equal to the
aggregate of the Construction Loan amount and the Limited Partner's Capital
Contribution.
1." shall mean the Tax Reform Act of 1986.
1." 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).
1." (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, Bankruptcy of
such Partner, 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.
1." shall mean Jaelkay, Incorporated.Partner
ARTICLE II
NAME
The name of the Partnership shall be "Country Club Investors, L.P."
ARTICLE III
PRINCIPAL EXECUTIVE OFFICE/AGENT FOR SERVICE
. The principal executive office of the Partnership is located at 2249
Jefferson Highway, Fishersville, Virginia 22939, or at such other place or
places within the State as the General Partner may hereafter designate.
. The name of the agent for service of process on the Partnership is
Dana R. Koogler, whose address is 2249 Jefferson Highway, Fishersville,
Virginia 22939.
ARTICLE IV
PURPOSE
. The purpose of the Partnership is to acquire, construct, renovate,
own and operate the Apartment Housing 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 Apartment Housing. The
Partnership shall not engage in any business or activity which is not incident
to the attainment of such purpose.
. In order to carry out its purpose, the Partnership is empowered and
authorized to do any and all acts and things necessary, appropriate, proper,
advisable or incidental to the furtherance and accomplishment of its purpose,
and for protection and benefit of the Partnership, including but not limited to
the following:
(a) acquire ownership of the real property referred to in Exhibit "A"
attached hereto;
(b) construct, renovate, rehabilitate, own, maintain and operate the
Apartment Housing in accordance with the Plans and Specifications;
(c) provide housing, subject to the Minimum Set-Aside Test and the Rent
Restriction Test and consistent with the requirements of the Project Documents,
so long as any Project Documents remain in force;
(d) maintain and operate the Apartment Housing, including hiring the
Management Agent (which Management Agent may be any of the Partners or an
Affiliate thereof) and entering into any agreement for the management of the
Apartment Housing during its rent-up and after its rent-up period in accordance
with this Agreement;
(e) enter into the Construction Loan and Mortgage Loan;
(f) rent dwelling units in the Apartment Housing from time to time, in
accordance with the provisions of the Code applicable to LIHTC; and
(g) do any and all other acts and things necessary or proper in
furtherance of the Partnership business and in accordance with this Agreement.
ARTICLE V
TERM
The Partnership term commenced upon the filing of the Certificate of
Limited Partnership in the office of, and on the form prescribed by, the
Secretary of State of the State, and shall continue until July 1, 2040 unless
terminated earlier in accordance with the provisions of this Agreement or as
otherwise provided by law.
ARTICLE VI
GENERAL PARTNER'S AND WITHDRAWING
GENERAL PARTNER'S CONTRIBUTIONS AND LOANS
. The General Partner has made a Capital Contribution equal to $80,000.
The Withdrawing General Partner made a Capital Contribution of $150,000.
Effective as of the date of this Agreement, the Withdrawing General Partner's
Interest has been liquidated and the Partnership has reacquired the Withdrawing
General Partner's Interest in the Partnership. The Withdrawing General Partner
acknowledges that it has no further interest in the Partnership as a 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 partner.
. tion 6.2 6.Construction Obligations
[INTENTIONALLY OMITTED]
. From Completion of Construction until three consecutive months of
Break-even Operations, the General Partner will provide the necessary funds to
pay any Operating Deficits, which funds shall not change the Interest of any
Partner and shall be considered a cost overrun and not be repayable. For the
balance of the Operating Deficit Guarantee Period, the General Partner will
provide Operating Loans to pay any Operating Deficits. The aggregate maximum
amount of the Operating Loan(s) the General Partner will be obligated to lend
will be equal to one year's operating expenses (including debt and reserves)
approved by the General Partner and the Special Limited Partner. Each Operating
Loan shall be nonrecourse to the Partners, and shall be repayable out of 50% of
the available Net Operating Income or Sale or Refinancing Proceeds in accordance
with Article XI of this Agreement.
. 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 10-year Treasury money market rate in effect as of the day of the General
Partner loan, 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, SPECIAL
, REMAINING LIMITED PARTNER AND
NON-PROFIT SPECIAL LIMITED PARTNER
. The Remaining Limited Partner has made a Capital Contribution of
$27,500. The Original Limited Partners made a Capital Contribution of $65,000.
Effective as of the date of this Agreement, the Original Limited Partners'
Interest has been liquidated and the Partnership has reacquired the Original
Limited Partners' Interest in the Partnership. The Original Limited Partners
acknowledge that they have no further interest in the Partnership as partners as
of the date of this Agreement, and have released all claims, if any, against the
Partnership arising out of their participation as partners.
. The Limited Partner shall make a Capital Contribution in the amount
of $309,455, as may be adjusted in accordance with Section 7.4 of this Agree
ment, in cash on the dates and subject to the conditions hereinafter set forth.
(a) $271,918 shall be payable upon the Limited Partner's receipt and
approval of the following documents:
(1) a legal opinion in a form substantially similar to the form of
opinion attached hereto as Exhibit "B" and incorporated herein by this
reference;
(2) Construction costs, sources and uses and operating budget;
(3) a fully executed Certification and Agreement in the form
attached hereto as Exhibit "C" and incorporated herein by this reference;
(4) endorsement to the Title Policy, naming the Limited
Partner as a co-insured, dated no more than ten days prior to the scheduled
Capital Contribution providing an as-built survey after Completion of
Construction, and confirming that there are no liens, claims or rights to a lien
or judgments filed against the property or the Apartment Housing during the time
period since the issuance of the original owner's Title Policy referenced above
in this Section 7.2;
(5) a copy of the recorded grant deed (warranty deed);
(6) 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 Apartment Housing;
(7) a certification signed by the Inspecting Architect in a
form substantially similar to the form attached hereto as Exhibit "D" and
incorporated herein by this reference, indicating that the Improvements
have been completed in accordance with the Project Documents;
(8) a letter from the Contractor in a form substantially
similar to the form attached hereto as Exhibit "F" and incorporated herein by
this reference stating that all amounts payable to the Contractor have been paid
in full and that the Partnership is not in violation of the Construction
Contract; Mortgage Loan documents and evidence that the Mortgage has been
funded;
(10) a copy of the declaration of restrictive covenants/extend
ed use agreement entered into between the Partnership and the State Tax Credit
Agency;
(11) an audited construction cost certification (which inclu-
des an itemized cost breakdown);
(12) the Accountant's final Tax Credit certification in a form
substantially similar to the form attached hereto as Exhibit "E" and
incorporated herein by this reference;
(13) Internal Revenue Code Form 8609, or any successor form;
(14)evidence that the Partnership has received a grant for
the Apartment Housing in the amount of $14,550 from the Richmond Gas Incentive;
(15) Insurance required during operations;
(16) 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 pursuant to the Minimum
Set-Aside Test. The cost of the copies will be incurred by the Special Limited
Partner; and
(17) any outstanding due diligence documents.
(b) $37,537 shall be payable upon the Limited Partner's receipt and
approval of the following documents:
(1) achievement by the Project Partnership of a debt service
coverage of 1.15 for 90 consecutive days;
(2) the current rent roll;
(3) copies of the executed lease agreement with the tenants;
and
(4) any documents previously not provided to the Limited Part-
ner but required pursuant to this Section 7.2 and Sections 14.3(a) and (b).
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 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.
.ection 7.4 7.Adjustment of Limited Partner's Capital Contribution
(a) The amount of the Limited Partner's and Special Limited Partner's
Capital Contribution was determined in part upon the amount of Tax Credits that
were expected to be available to the Partnership, and was based on the
assumption that the Partnership would be eligible to claim, in the aggregate,
the Projected Tax Credits. If the anticipated amount of Projected Tax Credits to
be allocated to the Limited Partner and Special Limited Partner as evidenced by
IRS Form 8609, Schedule A thereto, and the audited construction cost
certification provided to the Limited Partner and Special Limited Partner is
less than $364,119 (the new Tax Credit amount, if applicable, shall be referred
to as 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 adjusted 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 85% of the Revised Projected Tax Credits so
anticipated to be allocated to the Limited Partner and Special Limited Partner.
If the Capital Contribution adjustment referenced in this Section 7.4(a) is a
reduction which 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.
If the Capital Contribution adjustment referenced in this Section 7.4(a) is an
increase then the Limited Partner and Special Limited Partner shall have ninety
days from the date the Limited Partner and Special Limited Partner have received
notice from the General Partner to pay the increase.
(b) The General Partner is required to use its best reasonable
commercial efforts to rent 100% of the Apartment Housing's apartment units to
tenants who meet the Minimum Set-Aside Test throughout the Compliance Period. If
at the end of each calendar year during the first five calendar years following
the year in which the Apartment Housing 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 Projected Annual Tax Credit as modified by
Section 7.4(a) of this Agreement if applicable (collectively the "Annual Tax
Credit") (the "Annual Credit Shortfall"), then the next Capital Contribution
owed by the Limited Partner shall be reduced by the Annual Credit Shortfall
amount, and any portion of such Annual Credit Shortfall in excess of such
Capital Contribution shall be applied to reduce succeeding Capital Contributions
of the Limited Partner. If the Annual Credit Shortfall is greater than the
Limited Partner's remaining Capital Contributions then the General Partner shall
pay to the Limited Partner the excess of the Annual Credit Shortfall over the
remaining Capital Contributions. The General Partner shall have ninety days to
pay the Annual Credit Shortfall from the date the General Partner receives
notice from the Limited Partner. The provisions of this Section 7.4(b) shall
apply equally to the Special Limited Partner in proportion to its Capital
Contribution and anticipated annual Tax Credit.
(c) In the event that, for any reason, at any time after the first
three calendar years following the year in which the Apartment Housing is placed
in service, there is an Annual Credit Shortfall, then there shall be a reduction
in the General Partner's share of Net Operating Income in an amount equal to the
Annual Credit Shortfall and said amount shall be paid to the Limited Partner. In
the event there are not sufficient funds to pay the full Annual Credit Shortfall
to the Limited Partner at the time of the next Distribution of Net Operating
Income, then the unpaid Annual Credit Shortfall shall be repaid in the next year
in which sufficient monies are available from the General Partner's Net
Operating Income. In the event a Sale or Refinancing of the Apartment Housing
occurs prior to repayment in full of the Annual Credit Shortfall then the excess
will be paid in accordance with Section 11.2(b). The provisions of this Section
7.4(b) shall apply equally to the Special Limited Partner in proportion to its
Capital Contribution and anticipated annual Tax Credit.
(d) The General Partner has represented, in part, that the Limited
Partner will receive Projected Annual Tax Credits of $30,000 in 1999 and $36,406
in 2000. In the event the 1999 and 2000 Actual Tax Credits are less than
projected then the Limited Partner's Capital Contribution shall be reduced by an
amount equal to 85% times the difference between the Projected Annual Tax
Credits for 1999 and 2000 and the Actual Tax Credits for 1999 and 2000. If the
1999 and 2000 Actual 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 the
excess 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) In the event there is: (1) a filing of a tax return by the
Partnership evidencing a reduction in the qualified basis of the Apartment
Housing causing a recapture of Tax Credits previously allocated to the Limited
Partner; (2) a reduction in the qualified basis of the Apartment Housing for
income tax purposes following an audit by the Internal Revenue Service (IRS)
resulting in a recapture of Tax Credits previously claimed; (3) a decision by
the United States Tax Court upholding the assessment of such deficiency against
the Partnership with respect to any Tax Credit previously claimed in connection
with the Apartment Housing, unless the Partnership shall timely appeal such
decision and the collection of such assessment shall be stayed pending the
disposition of such appeal; or (4) a decision of a court affirming such decision
upon such appeal then, in addition to any other payments to which the Limited
Partner and Special Limited Partner are entitled under the terms of this Section
7.4, the General Partner shall pay to the Limited Partner and the Special
Limited Partner the sum of (A) the income tax deficiency assessed against the
Limited Partner or Special Limited Partner as a result of the Tax Credit
recapture, (B) any interest and penalties imposed on the Limited Partner or
Special Limited Partner with respect to such deficiency, and (C) an amount
sufficient to pay any tax liability owed by the Limited Partner or Special
Limited Partner resulting from the receipt of the amounts specified in (A) and
(B). Notwithstanding the foregoing, the General Partner shall not be liable for
a Tax Credit recapture if said recapture was caused by a change in the law or
interpretation thereof by any governmental act or an act of the Limited Partner
or the Special Limited Partner.
. The Special Limited Partner shall make a Capital Contribution of $46
at the time of the Limited Partner's Capital Contribution payment referenced in
Section 7.2(a) upon the same conditions. The Non-Profit Special Limited Partner
shall make a Capital Contribution of $46 at the time of its entry into the
Partnership. The Special Limited Partner and the Non-Profit 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.
. 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.
. The Limited Partner, Special Limited Partner, Remaining Limited
Partner and Non-Profit Special Limited Partner shall not be liable for any of
the debts, liabilities, contracts or other obligations of the Partnership. The
Limited Partner, Special Limited Partner, Remaining Limited Partner and
Non-Profit Special Limited Partner shall be liable only to have made and/or to
make Capital Contributions in the amounts and on the dates specified in this
Agreement and, except as otherwise expressly required hereunder, shall not be
required to lend any funds to the Partnership or, after their respective Capital
Contributions have been paid, to make any further Capital Contribution to the
Partnership.
ARTICLE VIII
WORKING CAPITAL AND RESERVES
. The General Partner, on behalf of the Partnership, shall establish an
operating and maintenance reserve account to be held by the Virginia Housing and
Development Authority and shall deposit thereinto an annual amount equal to
$16,980 per year for the purpose of repairs, maintenance and capital repairs
(the "Operating and Maintenance Account"). Said deposit shall be made monthly in
equal installments. Withdrawals from such account shall be made only with the
Consent of the Special Limited Partner. Any balance remaining in the account at
the time of a sale of the Apartment Housing shall be allocated and distributed
equally between the General Partner and the Limited Partner.
. The General Partner, on behalf of the Partnership, shall establish a
tax and insurance account ("T & I Account") for the purpose of making the
requisite Insurance premium payments and the real estate tax payments. The
annual deposit to the T & I Account shall equal the total annual Insurance
payment and the total annual real estate tax payment. Said amount shall be
deposited monthly in equal installments. Withdrawals from such account shall be
made only for its intended purpose. Any balance remaining in the account at the
time of a sale of the Apartment Housing shall be allocated and distributed
equally between the General Partner and the Limited Partner.
. The General Partner, on behalf of the Partnership, shall establish a
special reserve for operating expenses in an amount equal to $60,000 (the
"Special Reserve"). At the end of the third year after payment of the second
Capital Contribution pursuant to Section 7.2(b), the Partnership shall release a
portion of the Special Reserve to the General Partner, provided that the
aggregate sum of the Special Reserve and the Operating and Maintenance Reserve
shall be in an amount not less than $60,000 (the "Aggregate Minimum Reserve
Amount") as determined in the year-audit of the Partnership for such year. At
the end of each year thereafter that there continue to be funds held in the
Special Reserve , the funds in the Special Reserve will be released to the
General Partner to the extent, if any, that such funds exceed the Aggregate
Minimum Reserve Amount as determined in the year-end audit for such year.
. The General Partner, on behalf of the Partnership, shall establish
out of funds available to the Partnership a reserve account sufficient in its
sole discretion to pay any unforeseen contingencies which might arise in
connection with the furtherance of the Partnership business including, but not
limited to, (a) any rent subsidy required to maintain rent 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
. Subject to the Consent of the Special Limited Partner or the consent
of the Limited Partner where required by this Agreement, and subject to the
other limitations and restrictions included in this Agreement, the General
Partner shall have complete and exclusive control over the management of the
Partnership business and affairs, and shall have the right, power and authority,
on behalf of the Partnership, and in its name, to exercise all of the rights,
powers and authority of a partner of a partnership without limited partners. If
there is more than one General Partner, all acts, decisions or consents of the
General Partners shall require the concurrence of all of the General Partners.
No actions taken without the authorization of all the General Partners shall be
deemed valid actions taken by the General Partners pursuant to this Agreement.
No Limited Partner or Special Limited Partner (except one who may also be a
General Partner, and then only in its capacity as General Partner within the
scope of its authority hereunder) shall have any right to be active in the
management of the Partnership's business or investments or to exercise any
control thereover, nor have the right to bind the Partnership in any contract,
agreement, promise or undertaking, or to act in any way whatsoever with respect
to the control or conduct of the business of the Partnership, except as
otherwise specifically provided in this Agreement.
. tion 9.2 9.Payments to the General Partners and Others
(a) The Partnership shall pay to the Developer a Development Fee in the
amount of $478,524 in accordance with the Development Fee Agreement entered into
by and between the Developer and the Partnership on the even date hereof. The
Development Fee Agreement provides, in part, that the Development Fee shall
first be paid from available proceeds in accordance with Section 9.2(b) of this
Agreement and if not paid in full then the balance of the Development Fee will
be paid in accordance with Section 11.1 of this Agreement.
(b) The Partnership shall utilize the proceeds from the Capital
Contributions paid pursuant to Section 7.2 and Section 7.5 of this Agreement for
development costs including, but not limited to, land costs, Land Acquisition
Fee, architectural fees, survey and engineering costs, financing costs, loan
fees, Syndication Fee, 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 Withdrawing General
Partner and the Original Limited Partners in liquidation of their Interest;
second, an amount equal to $1,000 to be paid to Mark-Dana Corporation in
consideration for the reduction of its General Partner Interest; third be paid
to the Developer in payment of the Development Fee; fourth 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.
(c) The Partnership shall pay to the Management Agent a property
management fee for the leasing and management of the Apartment Housing in an
amount in accordance with the Management Agreement. The term of the Management
Agreement shall not exceed two years, and the execution or renewal of any
Management Agreement shall be subject to the prior Consent of the Special
Limited Partner, which consent shall not be unreasonably withheld. 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 Apartment Housing has an Operating Deficit, 25% of the management fee will
be deferred ("Deferred Management Fee"). Deferred Management Fees, if any, shall
be paid to the Management Agent in accordance with Section 11.1 of this
Agreement.
(1) The General Partner shall, upon receiving any request of
the Mortgage lender requesting such action, dismiss the Management Agent as the
entity responsible for management of the Apartment Housing under the terms of
the Management Agreement; or, the General Partner shall dismiss the Management
Agent at the request of the Special Limited Partner. In the event the Special
Limited Partner requests the dismissal of the Management Agent and the General
Partner disagrees with said decision then the General Partner can arbitrate the
dismissal of the Management Agent in accordance with Section 13.2(c) of this
Agreement.
(2) The appointment of any successor Management Agent is
subject to the Consent of the Special Limited Partner, and the State Tax Credit
Agency, if required, which may only be sought after the General Partner has
provided the Special Limited Partner with accurate and complete disclosure
respecting the proposed Management Agent.
(d) The Partnership shall pay a Reporting Fee to the Limited Partner
commencing in 1999 of $3,000 per year, to be increased each year in the same
percentage as the aggregate increase in the Apartment Housing's rental income,
for the Limited Partner's services in monitoring the operations of the
Partnership and for services in connection with the Partnership's accounting
matters and assisting with the preparation of tax returns and the reports
required in Sections 14.2 and 14.3 of this Agreement. The Reporting Fee shall be
payable within seventy-five (75) days following each calendar year and shall be
payable from Net Operating Income in the manner and priority set forth in
Section 11.1 of this Agreement; provided, however, that if in any year Net
Operating Income is insufficient to pay the full amount of Reporting Fee, the
unpaid portion thereof shall accrue and be payable on a cumulative basis in the
first year in which there is sufficient Net Operating Income, as provided in
Section 11.1, or sufficient Sale or Refinancing Proceeds, as provided in Section
11.2.
(e) The Partnership shall pay to the General Partner an Incentive
Management Fee equal to 61.5% of Net Operating Income for each fiscal year of
the Partnership commencing in 1999 for overseeing the marketing, lease-up and
continued occupancy of the Partnership's apartment units, obtaining and
monitoring the Mortgage Loan, 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 Apartment Housing and the Partnership, all as required by
Article XIV of this Agreement, provided that the Incentive Management Fee shall
not exceed $50,000 per annum. The Partners acknowledge that the Incentive
Management Fee is being paid as an inducement to the General Partner to operate
the Partnership efficiently, to maximize occupancy and to increase the Net
Operating Income. 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.
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 this Agreement;
(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) execute, acknowledge and deliver any and all instruments to
effectuate any of the foregoing.
. 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
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
Apartment Housing, no title or right to the possession and control of the
Apartment Housing 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 avoid a
recapture of Tax Credits thereof on the part of the former owners.
(d) Any conveyance or transfer of title to all or any portion of the
Apartment Housing 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.
. Notwithstanding the provisions of this Article IX, the General Par-
ner shall not:
(a) except as required by Section 9.4, act in contravention of this
Agreement;
(b) act in any manner which would make it impossible to carry on the
ordinary business of the Partnership;
(c) confess a judgment against the Partnership;
(d) possess Partnership property, or assign the Partner's right in
specific Partnership property, for other than the exclusive benefit of the
Partnership;
(e) admit a Person as a General Partner except as provided in this
Agreement;
(f) admit a Person as a Limited Partner except as provided in this
Agreement;
(g) violate any provision of the Mortgage;
(h) cause the Apartment Housing 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 Apartment Housing;
(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;
(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.
. Without Consent of the Special Limited Partner, the General Partner
shall not:
(a)sell, exchange, lease or otherwise dispose of the Apartment Housing;
(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 Apartment Housing to fail to
qualify, or which would cause a termination or discontinuance of the
qualification of the Apartment Housing, as a "qualified low income housing
project" under Section 42(g)(1) of the Code, as amended, or any successor
thereto, or which would cause the Limited Partner to fail to obtain the
Projected Tax Credits or which would cause the recapture of any LIHTC;
(f) make any expenditure of funds, or commit to make any such
expenditure, other than in response to an emergency, except as provided for in
the annual budget approved by the Special Limited Partner, as provided in
Section 14.3(i) hereof;
(g)cause the merger or other reorganization of the Partnership;
(h)dissolve the Partnership, except as provided in this Agreement;
(i) cause the Partnership to acquire any real or personal property
(tangible or intangible) in addition to the Apartment Housing the aggregate
value of which shall exceed $10,000 (other than easement or similar rights
necessary or appropriate for the operation of the Apartment Housing);
(j) become personally liable on or in respect of, or guarantee, the
Mortgage or any other indebtedness of the Partnership;
(k) cause the Partnership to pay any salary, fees or other compensation
to a General Partner or any Affiliate thereof, except as authorized by Section
9.2 and Section 9.8 hereof or specifically provided for in this Agreement;
(l) terminate the services of the Accountant, Inspecting Architect,
Contractor or Management Agent, or terminate, amend or modify the Construction
Contract or any other Project Document, or grant any material waiver or consent
thereunder;
(m) cause the Partnership to redeem or repurchase all or any portion of
the Interest of a Partner;
(n) cause the Partnership to convert the Apartment Housing to coopera-
tive or condominium ownership; or
(o) cause or permit the Partnership to make loans to the General
Partner or any Affiliate.
. 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 reasonably necessary to properly conduct the
affairs of the Partnership;
(b) file and publish all certificates, statements or other instruments
required by law for the formation and operation of the Partnership as a limited
partnership in all appropriate jurisdictions;
(c) cause the Partnership to carry Insurance from an Insurance Company;
(d) have a fiduciary responsibility for the safekeeping and use of all
funds and assets of the Partnership, whether or not in its immediate possession
or control and not employ or permit another to employ such funds or assets in
any manner except for the benefit of the Partnership;
(e) use its best reasonable commercial 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 Apartment Housing 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 Apartment Housing; (3) compliance with all
provisions of the Project Documents and (4) a reservation and allocation of
LIHTC from the State Tax Credit Agency;
(f) make inspections of the Apartment Housing and assure that the
Apartment Housing is 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 at the Special Limited Partner's expense
for travel and lodging: (1) to have access to the Apartment Housing 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 Apartment Housing, and shall take no action with respect to
the business and property of the Partnership which is not reasonably related to
the achievement of the purpose of the Partnership;
(j) make any Capital Contributions, advances or loans required to be
made by the General Partner under the terms of this Agreement;
(k) establish and maintain all reserves required to be established and
maintained under the terms of this Agreement;
(l) cause the Management Agent to manage the Apartment Housing in such
a manner that the Apartment Housing will be eligible to receive LIHTC with
respect to 100% of the apartment units in the Apartment Housing. 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 Apartment Housing as required, for at least the duration of
the Compliance Period; (3) to operate the Apartment Housing and cause the
Management Agent to manage the Apartment Housing 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 Apartment Housing and cause the Management Agent to manage the
Apartment Housing 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.
. With the approval of any lender, if such approval is required, any
Insurance proceeds received by the Partnership due to fire or other casualty
affecting the Apartment Housing will be utilized to repair and rebuild the
Apartment Housing in satisfaction of the conditions contained in Section
42(j)(4) of the Code and to the extent required by any lender. Any such proceeds
received in respect of such event occurring after the Compliance Period shall be
so utilized or, if permitted by the Project Documents and with the Consent of
the Special Limited Partner, shall be treated as Sale or Refinancing Proceeds.
.ection 9.9 9.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 Cash Expenses unless the General Partner is obligated to pay
the same as an Operating Deficit during the Operating Deficit Guarantee Period,
and subject to the limitations on the reimbursement of such expenses set forth
herein. For purposes of this Section, Cash Expenses shall include fees paid by
the Partnership to the General Partner or any Affiliate of the General Partner
permitted by this Agreement and the actual cost of goods, materials and
administrative services used for or by the Partnership, whether incurred by the
General Partner, an Affiliate of the General Partner or a nonaffiliated Person
in performing the foregoing functions. As used in the preceding sentence,
"actual cost of goods and materials" means the actual cost of goods and
materials used for or by the Partnership and obtained from entities which are
not Affiliates of the General Partner, and actual cost of administrative
services means the pro rata cost of personnel (as if such persons were employees
of the Partnership) associated therewith, but in no event to exceed the amount
which would be charged by nonaffiliated Persons for comparable goods and
services.
(b) Reimbursement to the General Partner or any of its Affiliates of
operating cash expenses pursuant to Subsection (a) hereof shall be subject
to the following:
(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
used in the home office, 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 9.9(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.
. The General Partner or Affiliates of the General Partner shall pay
all expenses of the General Partner or Affiliates which are not permitted to be
reimbursed pursuant to Section 9.9 and all of their own expenses which are
unrelated to the business of the Partnership.
. 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 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 Apartment
Housing. 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.
. The General Partner covenants, represents and warrants that the
following are presently true, will be true at the time of each Capital
Contribution payment made by the Limited Partner and will be true during the
term of this Agreement, to the extent then applicable.
(a) The Partnership is a duly organized limited partnership validly
existing under the laws of the State and has complied with all filing
requirements necessary for the protection of the limited liability of the
Limited Partner and the Special Limited Partner.
(b) The Partnership Agreement and the Project Documents are in full
force and effect and neither the Partnership nor the General Partner is in
breach or violation of any provisions thereof.
(c) Improvements will be completed in a timely and workerlike manner in
accordance with all applicable requirements of all appropriate governmental
entities and the Plans and Specifications of the Apartment Housing.
(d) The Apartment Housing is being operated in accordance with
standards and procedures which are prudent and customary for the operation of
properties similar to the Apartment Housing.
(e) All conditions to the funding of the Construction Loan have been
met.
(f) No Partner has or will have any personal liability with respect to
or has or will have personally guaranteed the payment of the Mortgage.
(g) To the best of its knowledge the Partnership is in compliance with
all construction and use codes applicable to the Apartment Housing and is not in
violation of any zoning, environmental or similar regulations applicable to the
Apartment Housing.
(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 Apartment Housing at the time of first
occupancy and throughout the term of the Partnership.
(i) All roads necessary for the full utilization of the Improvements
have either been completed or the necessary rights of way therefore have been
acquired by the appropriate governmental authority or have been dedicated to
public use and accepted by said governmental authority.
(j) The Partnership has obtained Insurance written by an Insurance
Company.
(k) The Partnership owns the fee simple interest in the Apartment
Housing.
(l) 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.
(m) The Partnership will require the Accountant to depreciate 75% of
the Improvements on a straight line depreciation schedule based on the non-
profit ownership, as approved by the Accountant.
(n) To the best of the General Partner's knowledge: (1) no Hazardous
Substance in violation of applicable laws has been disposed of, or released to
or from, or otherwise now exists in, on, under or around, the Apartment Housing
and (2) no aboveground or underground storage tanks are now or have ever been
located on or under the Apartment Housing. The General Partner will not install
or allow to be installed any aboveground or underground storage tanks on the
Apartment Housing. The General Partner covenants that the Apartment Housing
shall be kept free of Hazardous Substance and shall not be used to generate,
manufacture, refine, transport, treat, store, handle, dispose of, transfer,
produce or process Hazardous Substance, except in connection with the normal
maintenance and operation of any portion of the Apartment Housing. 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 Substance and shall keep, or cause to be kept, the Apartment Housing
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 Apartment
Housing, any Improvements constructed on the Apartment Housing, or the soil,
groundwater or soil vapor, (4) if the General Partner or the Partnership may be
subject to any threatened or pending investigation by any governmental agency
under any law, regulation or ordinance pertaining to any Hazardous Substance,
and (5) of any claim made or threatened by any Person, other than a governmental
agency, against the Partnership or General Partner arising out of or resulting
from any Hazardous Substance being present or released in, on or around any part
of the Apartment Housing.
(o) 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.
(p) The Partnership will allocate to the Limited Partner the Projected
Annual Tax Credits, or the Revised Projected Tax Credits, if applicable, and the
General Partner will take no action which would cause a termination,
discontinuance or recapture of the Tax Credits.
(q) No charges, liens or encumbrances exist with respect to the
Apartment Housing other than those which are created or permitted by the Project
Documents or Mortgage or are noted or excepted in the Title Policy.
(r) The buildings on the Apartment Housing 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 Apartment Housing
will satisfy the Minimum Set-Aside Test.
(s) All accounts of the Partnership required to be maintained under the
terms of the Project Documents, including, without limitation, any reserves in
accordance with Article VIII hereof, are currently funded to required levels,
including levels required by any authority.
(t) The General Partner has not lent or otherwise advanced any funds to
the Partnership other than its Capital Contribution, or Operating Deficit Loan,
if applicable, and the Partnership has no unsatisfied obligation to make any
payments of any kind to the General Partner or any Affiliate thereof.
(u) No event has occurred which constitutes a default under any of the
Project Documents.
(v) No event has occurred which has caused, and the General Partner has
not acted in any manner which will cause (1) the Partnership to be treated for
federal income tax purposes as an association taxable as a corporation, (2) the
Partnership to fail to qualify as a limited partnership under the Act, or (3)
the Limited Partner to be liable for Partnership obligations; provided however,
the General Partner shall not be in breach of this representation if all or a
portion of a Limited Partner's agreed upon Capital Contributions are used to
satisfy the Partnership's obligations to creditors of the Partnership and such
action by the General Partner is otherwise authorized under this Agreement and;
provided further, however, the General Partner shall not be in breach of this
representation if the action causing the Limited Partner to be liable for the
Partnership obligations is undertaken by the Limited Partner.
(w) 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 Apartment
Housing, has occurred the continuing effect of which has: (1) materially or
adversely affected the operation of the Partnership or the Apartment Housing;
(2) materially or adversely affected the ability of the General Partner to
perform its obligations hereunder or under any other agreement with respect to
the Apartment Housing; 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 Apartment Housing only insofar
as they or any of them are part of the general public.
(x) 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.
(y) The General Partner has and shall maintain a net worth equal to at
least $600,000 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
9.12.
ARTICLE X
ALLOCATIONS OF INCOME, LOSSES AND CREDITS
. All items includable in the calculation of Income or Loss not arising
from a Sale or Refinancing, and all Tax Credits, shall be allocated 66.99% to
the Limited Partner, 0.01% to the Special Limited Partner, 24.49% to the General
Partner, .01% to the Non-Profit Special Limited Partner, and 8.5% to the
Remaining Limited Partner.
. 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
Remaining Limited Partner's positive Capital Account balance to an amount equal
to its Capital Contribution;
(4) fourth, an amount of Income sufficient to increase the
General Partner's positive Capital Account balance to an amount equal to its
Capital Contribution;
(5) fifth, an amount of Income sufficient to pay a sales pre-
paration fee to the General Partner representing 20% of the property sales
price; and
(6) sixth, the balance, if any, of such Income shall be allo-
cated 75% to the Non-Profit Special Limited Partner, 12.5% to the Limited
Partner and 12.5% to be split between the General Partner and the Remaining Lim-
ited Partner.
(b) Losses shall be allocated 66.99% to the Limited Partner, 0.01% to
the Special Limited Partner, 24.49% to the General Partner, .01% to the Non-
Profit Special Limited Partner, and 8.5% to the Remaining Limited 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, the
Special Limited Partner, the Non-Profit Special Limited Partner, or the
Remaining Limited Partner if and to the extent that such allocation would create
or increase an Adjusted Capital Account Deficit for the Limited Partner, the
Special Limited Partner, the Non-Profit Special Limited Partner, or the
Remaining Limited Partner. In the event an allocation of 66.99%, 0.01%, .01% or
8.5% of each item includable in the calculation of Income or Loss not arising
from a Sale or Refinancing, would create or increase an Adjusted Capital Account
Deficit for the Limited Partner, the Special Limited Partner, the Non-Profit
Special Limited Partner, or the Remaining 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, the Special
Limited Partner, the Non-Profit Special Limited Partner, or the Remaining
Limited Partner as is necessary to allow the Limited Partner, the Special
Limited Partner, the Non-Profit Special Limited Partner, or the Remaining
Limited Partner to be allocated 66.99%, 0.01%, .01% or 8.5%, respectively, of
the items of Income and Apartment Housing depreciation without creating or
increasing an Adjusted Capital Account Deficit for the Limited Partner, the
Special Limited Partner, the Non-Profit Special Limited Partner, or the
Remaining Limited Partner, it being the intent of the parties that the Limited
Partner, the Special Limited Partner, the Non-Profit Special Limited Partner,
and the Remaining Limited Partner always shall be allocated 66.99%, 0.01%, .01%
or 8.5%, respectively, of the items of Income not arising from a Sale or
Refinancing and 66.99%, 0.01%, .01% or 8.5%, respectively, of the Apartment
Housing depreciation.
. The following special allocations shall be made in the following
order.
(a) Except as otherwise provided in Section 1.704-2(f) of the Treasury
Regulations, notwithstanding any other provisions of this Article X, if there is
a net decrease in Partnership Minimum Gain during any Partnership fiscal year,
each Partner shall be specially allocated items of Partnership income and gain
for such fiscal year (and, if necessary, subsequent fiscal years) in an amount
equal to such Person's share of the net decrease in Partnership Minimum Gain,
determined in accordance with Treasury Regulations Section 1.704-2(g).
Allocations pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Partner pursuant thereto.
The items to be so allocated shall be determined in accordance with Section
1.704-2(f)(6) and 1.704-2(j)(2) of the Treasury Regulations. This Section
10.3(a) is intended to comply with the minimum gain chargeback requirement in
Section 1.704-2(f) of the Treasury Regulations and shall be interpreted
consistently therewith.
(b) Except as otherwise provided in Section 1.704-2(i)(4) of the
Treasury Regulations, notwithstanding any other provision of this Article X, if
there is a net decrease in Partner Nonrecourse Debt Minimum Gain attributable to
a Partner Nonrecourse Debt during any Partnership fiscal year, each Person who
has a share of the Partner Nonrecourse Debt Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with Section 1.704-2(i)(5) of
the Treasury Regulations, shall be specially allocated items of Partnership
income and gain for such fiscal year (and, if necessary, subsequent fiscal
years) in an amount equal to such Person's share of the net decrease in Partner
Nonrecourse Debt Minimum Gain attributable to such Partner Nonrecourse Debt,
determined in accordance with Treasury Regulations Section 1.704-2(i)(4).
Allocations pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Partner pursuant thereto.
The items to be so allocated shall be determined in accordance with Sections
1.704-2(i)(4) and 1.704-2(j)(2) of the Treasury Regulations. This Section
10.3(b) is intended to comply with the minimum gain chargeback requirement in
Section 1.704-2(i)(4) of the Treasury Regulations and shall be interpreted
consistently therewith.
(c) In the event any Partner unexpectedly receives any adjustments,
allocations, or distributions described in Treasury Regulations Section
1.704-1(b)(2)(ii)(d)(4), Section 1.704-1(b)(2)(ii)(d)(5), or Section
1.704-1(b)(2)(ii)(d)(6), items of Partnership income and gain shall be specially
allocated to each such Partner in an amount and manner sufficient to eliminate,
to the extent required by the Treasury Regulations, the Adjusted Capital Account
Deficit of such Partner as quickly as possible, provided that an allocation
pursuant to this Section 10.3(c) shall be made if and only to the extent that
such Partner would have an Adjusted Capital Account Deficit after all other
allocations provided for in this Section 10.3 have been tentatively made as if
this Section 10.3(c) were not in the Agreement.
(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 66.99% to the Limited Partner, 0.01% to the Special Limited Partner,
24.49% to the General Partner, .01% to the Non-Profit Special Limited Partner,
and 8.5% to the Remaining Limited Partner.
(f) Any Partner Nonrecourse Deductions for any fiscal year shall be
specially allocated to the Partner who bears the economic risk of loss with
respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse
Deductions are attributable in accordance with Treasury Regulations Section
1.704-2(i)(1).
(g) To the extent an adjustment to the adjusted tax basis of any
Partnership asset pursuant to Code Section 734(b) or Code Section 743(b) is
required, pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(2) or
Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital
Accounts as the result of a distribution to a Partner in complete liquidation of
his interest in the Partnership, the amount of such adjustment to the Capital
Accounts shall be treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases such basis) and such
gain or loss shall be specially allocated to the Partners in accordance with
their interests in the Partnership in the event that Treasury Regulations
Section 1.704-1 (b)(2)(iv)(m)(2) applies, or to the Partner to whom such
distribution was made in the event that Treasury Regulations Section
1.704-1(b)(2)(iv)(m)(4) applies.
(h) To the extent the Partnership has taxable interest income
with respect to any promissory note pursuant to Section 483 or Section 1271
through 1288 of the Code:
(1) such interest income shall be specially allocated to the
Limited Partner to whom such promissory note relates; and
(2) the amount of such interest income shall be excluded from
the Capital Contributions credited to such Partner's Capital Account in
connection with payments of principal with respect to such promissory note.
(i) In the event the adjusted tax basis of any investment tax credit
property that has been placed in service by the Partnership is increased
pursuant to Code Section 50(c), such increase shall be specially allocated among
the Partners (as an item in the nature of income or gain) in the same
proportions as the investment tax credit that is recaptured with respect to such
property is shared among the Partners.
(j) Any reduction in the adjusted tax basis (or cost) of Partnership
investment tax credit property pursuant to Code Section 50(c) shall be specially
allocated among the Partners (as an item in the nature of expenses or losses) in
the same proportions as the basis (or cost) of such property is allocated
pursuant to Treasury Regulations Section 1.46-3(f)(2)(i).
(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 Part
nership income, loss, deduction or credit will not be less than 33% of each
such item at all times during the existence of the Partnership.
(n) Interest deduction on the Partnership indebtedness referred to in
Section 6.3 shall be allocated 100% to the General Partner.
(o) In the event all or part of the Incentive Management Fee is
disallowed by the Internal Revenue Service, then any interest or income
chargeable to the Partnership for such disallowance shall be allocated to the
General Partner.
. 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).
.ection 10.5 10. 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 66.99% to the Limited Partner, 0.01% to the Special Limited Partner,
24.49% to the General Partner, .01% to the Non-Profit Special Limited Partner,
and 8.5% to the Remaining Limited Partner.
(b) In the event Partnership investment tax credit property is disposed
of during any taxable year, profits for such taxable year (and, to the extent
such profits are insufficient, profits for subsequent taxable years) in an
amount equal to the excess, if any, of (1) the reduction in the adjusted tax
basis (or cost) of such property pursuant to Code Section 50(c), over (2) any
increase in the adjusted tax basis of such property pursuant to Code Section
50(c) caused by the disposition of such property, shall be excluded from the
profits allocated pursuant to Section 10.1 and Section 10.2(a) hereof and shall
instead be allocated among the Partners in proportion to their respective shares
of such excess, determined pursuant to Section 10.3(i) and 10.3(j) hereof. In
the event more than one item of such property is disposed of by the Partnership,
the foregoing sentence shall apply to such items in the order in which they are
disposed of by the Partnership, so the profits equal to the entire amount of
such excess with respect to the first such property disposed of shall be
allocated prior to any allocations with respect to the second such property
disposed of, and so forth.
(c) For purposes of determining the Income, Losses, or any other items
allocable to any period, Income, Losses, and any such other items shall be
determined on a daily, monthly, or other basis, as determined by the General
Partner with the Consent of the Special Limited Partner, using any permissible
method under Code Section 706 and the Treasury Regulations thereunder.
(d) Solely for purposes of determining a Partner's proportionate share
of the "excess nonrecourse liabilities" of the Partnership within the meaning of
Treasury Regulations Section 1.752-3(a)(3), the Partners' interests in Partner-
ship profits are as follows: Limited Partner: 66.99%; Special Limited Partner:
0.01%; General Partner: 24.49%; Non-Profit Special Limited Partner: .01%; and
the Remaining Limited Partner: 8.5%.
(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.
(f) In the event that the deduction of all or a portion of any fee
paid or incurred out of Net Operating Income by the
Partnership to a Partner or an Affiliate of a Partner is
disallowed for federal income tax purposes by the Internal
Revenue Service with respect to a taxable year of the
Partnership, the Partnership shall then allocate to such
Partner an amount of gross income of the Partnership for such
year equal to the amount of such fee as to which the deduction
is disallowed.
. 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
1.34(a) hereof).
In the event the Gross Asset Value of any Partnership asset is adjusted
pursuant to Section 1.34(b) hereof, subsequent allocations of income, gain,
loss, and deduction with respect to such asset shall take account of any
variation between the adjusted basis of such asset for federal income tax
purposes and its Gross Asset Value in the same manner as under Code Section
704(c) and the Treasury Regulations thereunder.
Any elections or other decisions relating to such allocations shall be
made by the General Partner with the Consent of the Special Limited Partner in
any manner that reasonably reflects the purpose and intention of this Agreement.
Allocations pursuant to this Section 10.6 are solely for purposes of federal,
state, and local taxes and shall not affect, or in any way be taken into account
in computing, any Person's Capital Account or share of Income, Losses, other
items, or distributions pursuant to any provision of this Agreement.
. 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.
. 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.
. 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
. Net Operating Income for each fiscal year shall be distributed within
seventy-five (75) days following each calendar year and shall be applied in the
following order of priority:
(a) to pay the Deferred Management Fee, if any;
(b) to pay the current Reporting Fee and then to pay any accrued Report
ing Fees which have not been paid in full from previous years;
(c) to pay the Development Fee;
(d) to pay the Operating Loans, if any, as referenced in Section 6.3 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 equal to 61.5% of remaining
cash flow;
(f) to pay to the Remaining Limited Partner 8.5% of remaining, after
reduction for the payments made pursuant to the Subsection (a) through (e) of
this Section 11.1;
(g) the balance to the General Partner until the General Partner has
received $100,000 pursuant to this Section 11.1(f); and
(h) the balance, if any, as follows: Limited Partner: 66.99%; Special
Limited Partner: 0.01%; General Partner: 24.49%; Non-Profit Special Limited
Partner: .01%; and Remaining Limiting Partner: 8.5%.
. 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) to the Limited Partner in an amount equal to its Capital Contribu-
tion;
(e) to the Special Limited Partner in an amount equal to its Capital-
Contribution;
(f) to the General Partner in an amount equal to its Capital Contribu-
tion;
(g) payment of a sales preparation fee to the General Partner represent
ing 2.0% of the property sales price; and
(h) thereafter, 75% of the remaining proceeds shall be paid to the Non
-Profit Special Limited Partner, 12.5% to the Limited Partner, and 12.5% to be
split between the General Partner and the Remaining Limited Partner.
ARTICLE XII
TRANSFERS OF LIMITED
PARTNER'S INTEREST IN THE PARTNERSHIP
. The Limited Partner and Special Limited Partner shall have the right
to assign all or any part of their respective Interests to any other Person,
whether or not a Partner, upon satisfaction of the following:
(a) 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
consent 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.
(d) Notwithstanding any provision to the contrary, the Limited Partner
may assign its Interest to an Affiliate or assign its Interest to Southern
California Bank or its successors as collateral to secure a capital contribution
loan without satisfying the conditions of Sections 12.1(a) through (c) above.
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.
. 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.
. 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.
. 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 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.
.ection 12.5 Substitution of Assignee as Limited Partner or Special
Limited Partner
(a) An Assignee shall not have the right to become a Substitute Limited
Partner or Substitute Special Limited Partner in place of his assignor unless
the written consent of the General Partner to such substitution shall have been
obtained, which consent, in the General Partner's absolute discretion, may be
withheld; except that an Assignee which is an Affiliate of the Limited Partner
or Special Limited Partner, or Southern California bank or its successors, may
become a Substitute Limited Partner or Substitute Special Limited Partner
without the consent of the General Partner.
(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 as such Partner possessed to constitute a successor as a transferee
of its Interest in the Partnership and to join with such transferee in making
the application to substitute such transferee as a Partner. However, such
executors, administrators or legal representatives will not have the right to
become Substitute Limited Partners or substitute Special Limited Partners in the
place of their respective predecessors-in-interest unless the General Partner
shall so consent.
ARTICLE XIII
WITHDRAWAL, REMOVAL AND REPLACEMENT OF
GENERAL PARTNER
. tion 13.1 13.Withdrawal of General Partner
(a) The General Partner may not Withdraw (other than as a result of an
Involuntary Withdrawal) without the Consent of the Special Limited Partner, and,
to the extent required, of the Virginia Housing Development Authority.
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).
.ection 13.2 13.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, its
president or any officer who has made an adverse decision directly affecting
this Apartment Housing, has:
(1) been subject to Bankruptcy;
(2) committed any fraud, willful misconduct, breach of
fiduciary duty or gross negligent conduct in the performance of its duties under
this Agreement;
(3) been convicted of, or entered into a plea of guilty to, a
felony;
(4) been disbarred from participating in any federal or state
housing program;
(5) made personal use of Partnership funds;
(6) violated the terms of the Mortgage and such violation
prompts Virginia Housing Development Authority to issue a default letter or
acceleration notice to the Partnership or General Partner, and any such default
is not cured the sooner of thirty days or ten days prior to the expiration of
the cure period referenced in the loan documents, if any, or Virginia Housing
Development Authority acknowledges satisfactory progress, agrees not to take
further action without prior notice and refrains from action until cure occurs;
(7) failed to provide any loan, advance, Capital Contribution
or any other payment to the Partnership, the Limited Partner or the Special
Limited Partner required under this Agreement;
(8) materially breached any representation, warranty or
covenant contained in 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 Apartment
Housing to qualify for LIHTC, unless such failure is the result of Force Majeure
or unless such failure is cured within 120 days after the end of the six-month
period.
(b) Written notice of the removal for cause of the General Partner
("Removal Notice") shall set forth the reasons for removal and 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. If Section 13.2(a)(2), (6), (7) or (8) is the
basis for the removal for cause, then the General Partner shall have thirty days
from receipt of the Removal Notice in which to cure the removal condition. If
the condition for the removal for cause is not cured within the thirty day cure
period then the General Partner's removal shall become effective on the first
day following the expiration of the cure period, or, thirty-one days from the
General Partner's receipt of the Removal Notice. If the removal for cause is for
a condition referenced in Sections 13.2(a)(1), (3), (4), (5), (9), (10) or (11)
then the removal shall become effective upon the General Partner's receipt of
the Removal Notice. Upon the General Partner's removal, the General Partner
shall deliver to the Special Limited Partner within five business days of the
termination of the cure period, or five business days of the Removal Notice all
Partnership books and records including all bank signature cards and an
authorization to change the signature on the signature cards from the General
Partner to the Special Limited Partner, or a successor general partner so
nominated by the Limited Partner and Special Limited Partner. The Partner's
recognize and acknowledge that if the General Partner fails to provide the
Partnership books and records upon the General Partner's removal then the
remaining Partners may suffer irreparable injury. Therefore, in the event the
General Partner does not adhere to the provisions of this Section 13.2(b), and
in addition to other rights or remedies which may be provided by law and equity
or this Agreement, the Limited Partner and/or Special Limited Partner shall have
the right to specific performance to compel the General Partner to perform its
obligation under this Section and the Limited Partner and/or Special Limited
Partner may bring such action, and other actions to enforce the removal, by way
of temporary and/or permanent injunctive relief. Notwithstanding the foregoing,
in the event the Limited Partner removes the General Partner for cause in
accordance with this Partnership Agreement and the General Partner disagrees
with the decision of the Limited Partner or Special Limited Partner then the
General Partner can arbitrate the removal for cause in accordance with Section
13.2(c) of this Agreement.
(c) The arbitration shall be promptly conducted in accordance with the
rule of the American Arbitration Association in the City of Richmond, Virginia.
The arbitration shall be conducted by a single arbitrator agreed upon by the
Partners. However, if the Partners are unable to agree upon an arbitrator within
ten days following removal of the General Partner and/or Management Agent, the
arbitrator shall be selected by the American Arbitration Association. If the
arbitrator determines that there were, in fact, grounds for removal of the
General Partner and/or Management Agent in accordance with this Partnership
Agreement, the removal of the General Partner and/or Management Agent shall be
deemed final and permanent. Otherwise, the removal shall be void and the General
Partner and/or Management Agent shall be immediately restored to its position as
such, with all of its rights, powers and obligations under this Partnership
Agreement. In addition if the General Partner and/or Management Agent prevails,
the Limited Partner or Partners who have made the charges agree to reimburse the
General Partner and/or Management Agent for any costs, expenses and lost profits
under this Partnership Agreement, and any costs and expenses in connection with
this arbitration procedure, which the General Partner and/or Management Agent
incurs or forgoes, as the case may be, as a consequence of such wrongful
removal. In addition, all legal rights of the General Partner and/or Management
Agent are reserved.
For all purposes of this Partnership Agreement upon "removal" of the
General Partner and/ or Management Agent whether temporary or permanent, such
General Partner and/or Management Agent shall immediately cease to be the
General Partner and/or Management Agent and shall immediately cease to have the
rights previously conferred as General Partner and /or Management Agent as to
the operation of the Partnership business, and the powers and authority
conferred on it as General Partner and/or Management Agent under this
Partnership Agreement shall terminate.
. 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 Apartment Housing or to receive any
allocations or Distributions from the Partnership or any other funds or assets
of the Partnership, except as specifically set forth below. In the event of a
Withdrawal, any or all executory contracts, including but not limited to the
Management Agreement, between the Partnership and the Withdrawing General
Partner or its Affiliates may be terminated by the Partnership, with the Consent
of the Special Limited Partner, upon written notice to the party so terminated.
Furthermore, notwithstanding such Withdrawal, the Withdrawing General Partner
shall be and shall remain, liable as a General Partner for all liabilities and
obligations incurred by the Partnership or by the General Partner prior to the
effective date of the Withdrawal, or which may arise upon such Withdrawal. Any
remaining Partner shall have all other rights and remedies against the
Withdrawing General Partner as provided by law or under this Agreement. Except
as provided in Section 13.2 hereof, the General Partner agrees that in the event
of its Withdrawal it will indemnify and hold the Limited Partner and the Special
Limited Partner harmless from and against all losses, costs and expenses
incurred in connection with the Withdrawal, including, without limitation, all
legal fees and other expenses of the Limited Partner and the Special Limited
Partner in connection with the transaction. The following additional provisions
shall apply in the event of a Withdrawal.
(a) In the event of a Withdrawal which is not an Involuntary
Withdrawal, or an Involuntary Withdrawal in accordance with Section 13.2(a), the
Withdrawing General Partner shall have no further right to receive any future
allocations or Distributions from the Partnership or any other funds or assets
of the Partnership, nor shall it be entitled to receive or to be paid by the
Partnership any further payments of fees (including fees which have been earned
but are unpaid) or to be repaid any outstanding advances or loans made by it to
the Partnership or to be paid any amount for its former Interest. From and after
the effective date of such Withdrawal, the former rights of the Withdrawing
General Partner to receive or to be paid such allocations, Distributions, funds,
assets, fees or repayments shall be assigned to the other General Partner or
General Partners (which may include the Special Limited Partner), or if there is
no other general partner of the Partnership at that time, to the Special Limited
Partner.
(b) In the event of an Involuntary Withdrawal, except as provided in
the preceding paragraph or in Section 13.3(b)(2) 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 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 Section 13.2 (c) hereof. 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.
(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), and if the
Partnership does not purchase the Interest of the Withdrawing General Partner in
Partnership allocations, Distributions and capital, then the Withdrawing General
Partner shall retain its Interest in such items, but such Interest shall be held
as a special limited partner.
(c) Notwithstanding the provisions of Section 13.3(b), if the
Involuntary Withdrawal arises from removal for cause as set forth in Section
13.2(a) hereof, the Withdrawn 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 or any Partners or successor partners, any further
payments of fees (including fees which have been earned but remain unpaid) or to
be repaid any outstanding advances or loans made by it to the Partnership.
Notwithstanding any of the above, if the removal of the General Partner is
arbitrated in accordance with this Agreement, then the arbitrator will make a
determination as to the amount and method of compensation the General Partner
shall receive for the General Partner's 24.49% Interest in the Partnership if
the arbitrator rules the General Partner's removal for cause is valid and shall
remain enforceable. In making said determination, the arbitrator shall offset
the value of the General Partner's Interest with any funds expended by the
Limited Partner, Special Limited Partner or their Affiliate in connection with
curing the cause, which formed the basis of the General Partner's removal. In
determining the value of the General Partner's Interest, the arbitrator will
rely upon an appraisal or other competent source of valuation.
. 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.
. 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, and (d) unless the
General Partner has involuntarily withdrawn, the written consent of the General
Partner, in its sole discretion, shall have been given. 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.
. 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 acquire an Interest in the Partnership, without the
Consent of the Special Limited Partner.
. 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
.ection 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 in-
come 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;
(6) the Partnership's books and records for at least the cur-
rent and past three fiscal years; and
(7) in regard to the first tenants to occupy the apartment
units in the Apartment Housing, copies of all 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).
(b) Upon the request of the Limited Partner, the General Partner shall
promptly deliver to the Limited Partner, at the expense of the Partnership, a
copy of the information set forth in Section 14.1(a) above. The Limited Partner
shall have the right, upon reasonable request and during normal business hours,
to inspect and copy any of the foregoing, or any of the other books and records
of the Partnership or the Apartment Housing, at its own expense.
.ection 14.2 14.Accounting Reports
(a) By March 1 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 Apartment Housing is located.
(b) By March 1 of each calendar year, the General Partner shall send to
the Limited Partner and the Special Limited Partner: (1) a balance sheet as of
the end of such fiscal year and statements of income, Partners' equity and
changes in cash flow for such fiscal year prepared in accordance with generally
accepted accounting principles and accompanied by an auditor's report containing
an opinion of the Partnership's Accountants; (2) a report (which need not be
audited) of any Distributions made at any time during the fiscal year,
separately identifying Distributions from Net Operating Income for the fiscal
year, Net Operating Income for prior years, Sale or Refinancing Proceeds, and
reserves; and (3) a report setting forth the amount of all fees and other
compensation and Distributions and reimbursed expenses paid by the Partnership
for the fiscal year to the General Partner or Affiliates of the General Partner
and the services performed in consideration therefor, which report shall be
verified by the Partnership's Accountants, with the method of verification to
include, at a minimum, a review of the time records of individual employees, the
costs of whose services were reimbursed, and a review of the specific nature of
the work performed by each such employee, all in accordance with generally
accepted auditing standards and, accordingly, including such tests of the
accounting records and such other auditing procedures as the Accountants
consider appropriate in the circumstances.
(c) Within 60 days after the end of each fiscal quarter in which a Sale
or Refinancing of the Apartment Housing 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.
. The General Partner shall provide to the Limited Partner and the
Special Limited Partner the following reports:
(a) during the rent-up phase, and continuing until the end of the first
six-month period during which the Apartment Housing has a sustained occupancy of
95% or 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 "G" attached hereto and incorporated herein by
this reference;
(b) a quarterly tax credit compliance report similar to the worksheet
included in Exhibit "G" due on or before April 30 of each year for the first
quarter, July 31 of each year for the second quarter, October 31 of each year
for the third quarter and January 31 of each year for the fourth quarter. In
order to verify the reliability of the information being provided on the
compliance report the Limited Partner may request a small sampling of tenant
files to be provided. The sampling will include, but not be limited to, copies
of tenant applications, certifications and third party verifications used to
qualify tenants. If any inaccuracies are found to exist on the tax credit
compliance report or any items of noncompliance are discovered then the sampling
will be expanded as determined by the Limited Partner;
(c) a quarterly report on operations, in the form attached hereto as
Exhibit "G", due on or before April 30 of each year for the first quarter of
operations, July 31 of each year for the second quarter of operations, October
31 of each year for the third quarter of operations and January 31 of each year
for the fourth quarter of operations which shall include, but is not limited to,
an unaudited income statement showing all activity in the reserve accounts
required to be maintained pursuant to Section VIII of this Agreement, and a
statement of income and expenses, balance sheet and rent roll as of the end of
each calendar quarter of each year;
(d) upon request of the Special Limited Partner, by September 15 of
each year, an estimate of LIHTC for that year;
(e) during the Compliance Period, no later than the day any such
certification is filed, copies of any certifications which the Partnership must
furnish to federal or state governmental authorities administering the Tax
Credit program including, but not limited to, copies of all annual tenant
recertifications required under Section 42 of the Code;
(f) by the annual renewal date each and every year, an executed
original or certified copy of each and every Insurance policy or certificate
required by the terms of this Agreement;
(g) by the payment date of the real estate property taxes each and
every year verification that the same has been paid in full;
(h) on or before March 15th of each calendar year, a copy of the
General Partner's updated financial statement as of December 31 of the
previous year;
(i) on or before November 1 of each calendar year, a third party
verification of current utility allowance and a copy of the following year's
proposed operating budget. Each such Budget shall contain all the anticipated
Cash Expenses of the Partnership. Such Budget shall only be adopted with the
Consent of the Special Limited Partner; and
(j) notice of the occurrence, or of the likelihood of occurrence, of
any event which has had a material adverse effect upon the Apartment Housing or
the Partnership, including, but not limited to, any breach of any of the
representations and warranties set forth in Section 9.12 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.
. 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.
. The General Partner shall cause income tax returns for the
Partnership to be prepared and timely filed with the appropriate federal, state
and local taxing authorities.
. The 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.
. 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.
.ection 14.8 14.Certificates and Elections
(a) The General Partner shall file the First Year Certificate within 90
days following the close of the taxable year during which Completion of
Construction occurs and thereafter shall timely file any certificates which the
Partnership must furnish to federal or state governmental authorities
administering the Tax Credit programs under Section 42 of the Code.
(b) The General Partner, with the Consent of the Special Limited
Partner, may, but is not required to, cause the Partnership to make or revoke
the election referred to in Section 754 of the Code, as amended, or any similar
provisions enacted in lieu thereof.
ARTICLE XV
DISSOLUTION, WINDING UP, TERMINATION
AND LIQUIDATION OF THE PARTNERSHIP
. The Partnership shall be dissolved upon the expiration of its term or
the earlier occurrence of any of the following events.
(a) The effective date of the Withdrawal or removal of the General
Partner, unless (1) at the time there is at least one other General Partner
(which may be the Special Limited Partner if it elects to serve as successor
General Partner under Section 13.4 hereof) who will continue as General Partner,
or (2) within 120 days after the occurrence of any such event the Limited
Partner elects to continue the business of the Partnership.
(b) The sale of the Apartment Housing 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 the Virginia Housing Development Authority to which the
Partnership is subject.
. 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.
. 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 Limited Partner or by the court in a
judicial dissolution) shall take full account of the Partnership assets and
liabilities and shall liquidate the assets as promptly as is consistent with
obtaining the fair value thereof.
(a) Upon dissolution and termination, after payment of, or adequate
provision for, the debts and obligations of the Partnership pursuant to Section
11.2(a) through and including 11.2(c), the remaining assets of the Partnership
shall be distributed to the Partners in accordance with the positive balances in
their Capital Accounts, after taking into account all allocations under Article
X hereof.
(b) In the event that a General Partner has a deficit balance in its
Capital Account following the Liquidation of the Partnership or its interest, as
determined after taking into account all Capital Account adjustments for the
Partnership 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).
(1) The deficit reduction amount shall be paid by the General
Partner by the end of such taxable year (or, if later, within 90 days after the
date of Liquidation) and shall, upon Liquidation of the Partnership, be paid to
creditors of the Partnership or distributed to other Partners in accordance with
their positive Capital Account balances.
(c) With respect to assets distributed in kind to the Partners in
Liquidation or otherwise:
(1) unrealized appreciation or unrealized depreciation in the
values of such assets shall be deemed to be Income and Losses realized by the
Partnership immediately prior to the Liquidation or other Distribution event;
and
(2) such Income and Losses shall be allocated to the Partners
in accordance with Section 10.2 hereof, and any property so distributed shall be
treated as a Distribution of an amount in cash equal to the excess of such Fair
Market Value over the outstanding principal balance of and accrued interest on
any debt by which the property is encumbered.
(d) For the purposes of Section 15.3(c), "unrealized appreciation" or
"unrealized depreciation" shall mean the difference between the Fair Market
Value of such assets, taking into account the Fair Market Value of the
associated financing but subject to Section 7701(g) of the Code, and the asset's
Gross Asset Value. Section 15.3(c) is merely intended to provide a rule for
allocating unrealized Income and Losses upon Liquidation or other Distribution
event, and nothing contained in Section 15.3(c) or elsewhere in this Agreement
is intended to treat or cause such Distributions to be treated as sales for
value. The Fair Market Value of such assets shall be determined by an
independent appraiser to be selected by the General Partner.
. 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 Apartment Housing shall
not be assigned a value less than the unamortized principal balance of any loan
secured thereby.
. 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.
.ction 15.6 Certificates of Dissolution; Certificate of Cancellation of
Certificate of Limited Partnership
(a) Upon the dissolution of the Partnership, the General Partner shall
cause to be filed in the office of, and on a form prescribed by the Secretary of
State of the State, a certificate of dissolution. The certificate of dissolution
shall set forth the Partnership's name, the Secretary of State's file number for
the Partnership, the event causing the Partnership's dissolution and the date of
the dissolution.
(b) Upon the completion of the winding up of the Partnership's affairs,
the General Partner shall cause to be filed in the office of, and on a form
prescribed by, the Secretary of State of the State, a certificate of
cancellation of the Certificate of Limited Partnership. The certificate of
cancellation of the Certificate of Limited Partnership shall set forth the
Partnership's name, the Secretary of State's file number for the Partnership,
and any other information which the General Partner determines to include
therein.
ARTICLE XVI
AMENDMENTS
This Agreement may be amended by a unanimous consent of the Partners
after a meeting of the Partners, which meeting shall be held after proper notice
as provided in Section 17.2 of this Agreement. For purposes of this Article XVI,
a Partner shall grant its consent to a proposed amendment unless such Partner
reasonably determines that the proposed amendment is adverse to the Partner's
Interest.
ARTICLE XVII
MISCELLANEOUS
.ection 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. At a meeting of
the Partnership, the Limited Partner may vote:
(1) to approve or disapprove the Sale or Refinancing of the
Apartment Housing;
(2) to remove the General Partner and elect a substitute Gen-
eral Partner as provided in this Agreement;
(3) to elect a successor General Partner upon the Withdrawal
of the General Partner;
(4) to approve or disapprove the dissolution of the Partner-
ship; or
(5) subject to the provisions of Article XVI hereof, to amend
this Agreement; or
(6) to approve or disapprove the refinancing of the Mortgage.
(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.
. 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.
. 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: Mark-Dana Corporation
19 Silverstrand Place, Suite 201
The Woodlands, Texas 77381
With a copy to:
Mark-Dana Corporation
2249 Jefferson Highway
Fishersville, VA 22939
To the Non-Profit
Special Limited Partner: Virginia United Methodist Housing
Development Corporation
P.O. Box 698
Locust Grove, Virginia 22508
To the Remaining
Limited Partner: Paul E. Norris
2823 Plantation Road
Charlotte, North Carolina 28270
To the Limited Partner: WNC Housing Tax Credit Fund VI, L.P., Series 6
c/o WNC & Associates, Inc.
3158 Redhill Ave., Suite 120
Costa Mesa, CA 92626-3416
To the Special
Limited Partner: WNC Housing, L.P.
3158 Redhill Ave., Suite 120
Costa Mesa, CA 92626-3416
. 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.
. If the General Partner should deem it advisable to do so, the
Partnership shall record in the office of the County Recorder of the county in
which the principal place of business of the Partnership is located a certified
copy of the Certificate of Limited Partnership, or any amendment thereto, after
such Certificate or amendment has been filed with the Secretary of State of the
State.
.ection 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, and on a form prescribed by,
the Secretary of State of the State. The certificate of amendment shall set
forth the Partnership's name, the Secretary of State's file number for the
Partnership and the text of the amendment.
. 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.
. 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.
. 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.
. If the operation of any provision of this Agreement would contravene
the provisions of applicable law, or would result in the imposition of general
liability on any Limited Partner or Special Limited Partner, such provisions
shall be void and ineffectual.
. All the Partners hereby agree that the General Partner shall be the
"Tax Matters Partner" pursuant to the Code and in connection with any audit of
the federal income tax returns of the Partnership.
(a) The Tax Matters Partner shall furnish to each Partner notice and
information with respect to the following: closing conference with an examining
agent; proposed adjustments, rights of appeal, and requirements for filing a
protest; time and place of any appeals conference; acceptance by the Internal
Revenue Service of any settlement offer; consent to the extension of the period
of limitation with respect to all Partners; filing of a request for
administrative adjustment on behalf of the Partnership; filing by the Tax
Matters Partner or any other Partner of any petition for judicial review; filing
of any appeal with respect to any judicial determination; and a final judicial
redetermination.
(b) If the Tax Matters Partner shall determine to litigate any
administrative determination relating to federal income tax matters, then the
Tax Matters Partner shall litigate such matter in such court as the Tax Matters
Partner shall decide in its sole discretion.
(c) In discharging its duties and responsibilities, the Tax Matters
Partner shall act as a fiduciary (1) to the Limited Partner (to the exclusion of
the other Partners) insofar as tax matters related to the Tax Credits are
concerned, and (2) to all of the Partners in other respects.
(d) The Partners consent and agree that in connection with any audit of
the Partnership, or if the Tax Matters Partner withdraws from the Partnership or
the Tax Matters Partner becomes Bankrupt, then the Special Limited Partner may
become, in its sole discretion, a special general partner, and become the Tax
Matters Partner. The Limited Partner will make no claim against the Partnership
in respect of any action or omission by the Tax Matters Partner during such time
as the Special Limited Partner acts as the Tax Matters Partner.
.ection 17.12 Expiration of Compliance Period
(a) Notwithstanding any provision hereof to the contrary (other than
this Section 17.12), the Special Limited Partner shall have the right at any
time after the beginning of the last year of the Compliance Period to require,
by written notice to the General Partner, that the General Partner promptly
submit a written request to the applicable State Tax Credit Agency pursuant to
Section 42(h) of the Code (or any successor provision) that such agency endeavor
to locate within one year from the date of such written request a purchaser for
the Apartment Housing who will continue to operate the Apartment Housing as a
qualified low income property, at a purchase price that is not less than the
minimum amount set forth in Section 42(h)(6) of the Code (or any successor
provision). In the event that the State Tax Credit Agency obtains an offer
satisfying the conditions of the preceding sentence, the General Partner shall
promptly notify the Special Limited Partner in writing with respect to the terms
and conditions of such offer, and, if the Special Limited Partner notifies the
General Partner that such offer should be accepted, the General Partner shall
cause the Partnership promptly to accept such offer and to proceed to sell the
Apartment Housing pursuant to such offer.
(b) Notwithstanding any other provision of this Agreement to the
contrary, the Special Limited Partner shall have the right at any time after the
end of the Compliance Period to require, by written notice to the General
Partner (the "Required Sale Notice"), that the General Partner promptly use its
best efforts to obtain a buyer for the Apartment Housing on the most favorable
terms then available. The General Partner shall submit the terms of any proposed
sale to the Special Limited Partner for its approval in the manner set forth in
Section 17.12(a) hereof. If the General Partner shall fail to so obtain a buyer
for the Apartment Housing within six months of receipt of the Required Sale
Notice or if the Consent of the Special Limited Partner in its sole discretion
shall be withheld to any proposed sale, then the Special Limited Partner shall
have the right at any time thereafter to obtain a buyer for the Apartment
Housing on terms acceptable to the Special Limited Partner (but not less
favorable to the Partnership than any proposed sale previously rejected by the
Special Limited Partner). In the event that the Special Limited Partner so
obtains a buyer, it shall notify the General Partner in writing with respect to
the terms and conditions of the proposed sale and the General Partner shall
cause the Partnership promptly to sell the Apartment Housing to such buyer.
(c) A sale of the Apartment Housing 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 Apartment Housing post the required bond on behalf of the
Partnership.
. 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.
. 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.
. This Agreement and its application shall be governed by the laws of
the State.
. 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.
. The Partners agree that the General Partner shall send to the Limited
Partner and the Special Limited Partner within five days of receipt a copy of
any correspondence relative to the Apartment Housing's noncompliance with the
Mortgage, relative to the Apartment Housing's noncompliance with the Tax Credit
rules or regulations, relative to the acceleration of the Mortgage and/or
relative to the disposition of the Apartment Housing.
. 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
their respective Interests of such Partner in all funds distributable to said
Partner to the extent of the amount of such obligation.
IN WITNESS WHEREOF, this Amended and Restated Agreement of Limited
Partnership of Country Club Investors, L.P., a Virginia limited partnership, is
effectively made and entered into as of the _______ day of _____________, 1999.
GENERAL PARTNER
Mark-Dana Corporation
By:
David M. Koogler
President
NON-PROFIT SPECIAL LIMITED PARTNER
Virginia United Methodist Housing Development
Corporation
By:
J. Robert Regan, Jr.
President
Signatures continued on next page
<PAGE>
REMAINING LIMITED PARTNER
Paul E. Norris
WITHDRAWING GENERAL PARTNER
Jaelkay Incorporated
By:
Name:
Title:
WITHDRAWING ORIGINAL LIMITED PARTNERS
Dana R. Koogler
David Mark Koogler
LIMITED PARTNER
WNC Housing Tax Credit Fund VI, L.P., Series 6
By: WNC & Associates, Inc.,
General Partner
By: _________________________
David N. Shafer,
Senior Vice President
SPECIAL LIMITED PARTNER
WNC Housing, L.P.
By: WNC & Associates, Inc.,
General Partner
By: _______________________________
David N. Shafer,
Senior Vice President
<PAGE>
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF
KECHEL TOWER L.P.
<PAGE>
AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP OF
KECHEL TOWER L.P.
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP is being
entered into effective as of the date written below by and between Compass
Square Development Corporation as the general partner (the "General Partner"),
WNC Institutional Tax Credit Fund VII, L.P., 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 Lawrence R. Ulrich as the
withdrawing limited partner (referred to herein as the "Original Limited
Partner").
RECITALS
WHEREAS, Kechel Tower L.P., an Indiana limited partnership (the
"Partnership") recorded a certificate of limited partnership with the Indiana
Secretary of State on October 16, 1998. A partnership agreement dated on October
15, 1998 was entered into by and between the General Partner and the Original
Limited Partner (the "Original Partnership Agreement").
WHEREAS, the Partners desire to enter into this Agreement to provide
for, among other things, (i) the admission of the Limited Partner and the
Special Limited Partner as partners of the Partnership, (ii) the liquidation of
the Original Limited Partner's Interest in the Partnership (iii) the payment of
Capital Contributions by the Limited Partner and the Special Limited Partner to
the Partnership, (iv) the allocation of Income, Losses, Tax Credits and
distributions of Net Operating Income and other cash funds of the Partnership
among the Partners (v) the respective rights, obligations and interests of the
Partners to each other and to the Partnership, and (vi) certain other matters.
NOW, THEREFORE, in consideration of their mutual agreements herein set
forth, the Partners hereby agree to enter into this Agreement to provide as
follows:
ARTICLE I
DEFINITIONS
Section 1.1 "Accountant" shall mean Katz, Sapper & Miller LLP, 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 99.98% of the LIHTC actually received by the Partnership,
as shown on the applicable tax returns of the Partnership.
Section 1.4 "Adjusted Capital Account Deficit" shall mean with respect
to any Partner, the deficit balance, if any, in such Partner's Capital Account
as of the end of the relevant fiscal period, after giving effect to the
following adjustments:
(a) Credit to such Capital Account any amounts which such Partner is
obligated to restore or is deemed to be obligated to restore pursuant to the
penultimate sentences of Treasury Regulations Sections 1.704-2(g)(1) and
1.704-2(i)(5); and
(b) Debit to such Capital Account the items described in Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6) of
the Treasury Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Treasury
Regulations and shall be interpreted consistently therewith.
Section 1.5 "Affiliate" shall mean (a) any Person directly or
indirectly controlling, controlled by, or under common control with another
Person; (b) any Person owning or controlling 10% or more of the outstanding
voting securities of such other Person; (c) any officer, director, trustee, or
partner of such other Person; and (d) if such Person is an officer, director,
trustee or general partner, any other Person for which such Person acts in any
such capacity.
Section 1.6 "Agreement" or "Partnership Agreement" shall mean this
Agreement of Limited Partnership, as it may be amended from time to time. Words
such as "herein," "hereinafter," "hereof," "hereto," "hereby" and "hereunder,"
when used with reference to this Agreement, refers to this Agreement as a whole,
unless the context otherwise requires.
Section 1.7 "Area Five Agency Weatherization Grant" shall mean the
grant to the partnership in the amount of $43,700 from the Area Five Agency for
the Partnership's efforts to provide energy efficient housing.
Section 1.8 "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 1.9 "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 1.10 "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 capital which shall have been returned pursuant to Section 7.3, 7.4 or
7.5 of this Agreement. A loan to the Partnership by a Partner shall not be
considered a Capital Contribution.
Section 1.12 "Code" shall mean the Internal Revenue Code of 1986,
as amended from time to time, or any successor statute.
Section 1.13 "Completion of Construction" shall mean the completion of
rehabilitation of the Project substantially in accordance with the Project
Documents in order to obtain the required certificates of occupancy (or the
local equivalent) for all twenty-three (23) apartment units as evidenced by the
issuance of the certificate of occupancy by the governmental agency having
jurisdiction over the Project or by the issuance of the inspecting architect's
certification, in a form substantially similar to that attached hereto as
Exhibit "E". The rehabilitation shall be completed in good workmanlike manner,
free and clear of all mechanic's, materialmen's 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.
Section 1.14 "Compliance Period" shall mean the period set forth in
Section 42 (i)(1) of the Code, as amended, or any successor statute.
Section 1.15 "Consent of the Special Limited Partner" shall mean the
prior written consent or approval of the Special Limited Partner.
Section 1.16 "Construction Contract" shall mean the construction con-
tract in the amount of $1,278,902, 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
Security Federal Savings Bank in the principal amount of $1,600,000 at an
interest rate equal to 8% per annum for a term of 12 months to provide funds for
the acquisition and renovation and development of the Project. Where the context
admits, the term "Construction Loan" shall include any deed, deed of trust,
note, security agreement, assumption agreement or other instrument executed in
connection with the Construction Loan which is binding on the Partnership. The
Partners hereby agree that the Construction Loan will convert to a Mortgage Loan
upon Completion of Construction. The difference between the construction loan
balance and the permanent mortgage being paid upon completion of the project.
Section 1.18 "Contractor" shall mean Triad Associates, 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 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 Four County Comprehensive Mental
Health Center, Inc.
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 Services Agreement between the Partnership and the Developer dated
the 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 "FHLB AHP Subsidy" shall mean Federal Home Loan Bank Affor
dable Housing Program Subsidy in the amount of $250,000.
Section 1.26 "First Year Certificate" shall mean the certificate to be
filed by the General Partner with the Secretary of the Treasury as required by
Code Section 42(1)(1), as amended, or any successor thereto.
Section 1.27 "Force Majeure" shall mean any act of God, strike,
lockout, or other industrial disturbance, act of the public enemy, war,
blockage, public riot, fire, flood, explosion, governmental action, governmental
delay, restraint or inaction and any other cause or event, whether of the kind
enumerated specifically herein, or otherwise, which is not reasonably within the
control of a Partner to this Agreement claiming such suspension.
Section 1.28 "General Partner(s)" shall mean Compass Square Development
Corporation and such other Persons as are admitted to the Partnership as
additional or substitute General Partners pursuant to this Agreement.
Section 1.29 "Gross Asset Value" shall mean with respect to any asset,
the asset's adjusted basis for federal income tax purposes, except as follows:
(a) The initial Gross Asset Value of any asset contributed by a Partner
to the Partnership shall be the Fair Market Value of such asset, as determined
by the contributing Partner and the General Partner, provided that, if the
contributing Partner is a General Partner, the determination of the Fair Market
Value of a contributed asset shall be determined by appraisal;
(b) The Gross Asset Values of all Partnership assets shall be adjusted
to equal their respective Fair Market Values, as determined by the General
Partner, as of the following times: (1) the acquisition of an additional
Interest in the Partnership by any new or existing Partner in exchange for more
than a de minimis Capital Contribution; (2) the distribution by the Partnership
to a Partner of more than a de minimis amount of Partnership property as
consideration for an Interest in the Partnership; and (3) the liquidation of the
Partnership within the meaning of Treasury Regulations Section
1.704-1(b)(2)(ii)(g); provided, however, that the adjustments pursuant to
clauses (1) and (2) above shall be made only with the Consent of the Special
Limited Partner and only if the General Partner reasonably determines that such
adjustments are necessary or appropriate to reflect the relative economic
interests of the Partners in the Partnership;
(c) The Gross Asset Value of any Partnership asset distributed to any
Partner shall be adjusted to equal the Fair Market Value of such asset on the
date of distribution as determined by the 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 1.29(d) to the extent the General Partner determines
that an adjustment pursuant to Section 1.29(b) hereof is necessary or
appropriate in connection with a transaction that would otherwise result in an
adjustment pursuant to this Section 1.29(d).
If the Gross Asset Value of an asset has been determined or adjusted
pursuant to Section 1.29(a), Section 1.29(b), or Section 1.29(d) hereof, such
Gross Asset Value shall thereafter be adjusted by the depreciation taken into
account with respect to such asset for purposes of computing Income and Losses.
Section 1.30 "Hazardous Substance" shall mean and include any
substance, material or waste, including asbestos, petroleum and petroleum
products (including crude oil), that is or becomes designated, classified or
regulated as "toxic" or "hazardous" or a "pollutant" or that is or becomes
similarly designated, classified or regulated, under any federal, state or local
law, regulation or ordinance including, without limitation, Compensation and
Liability Act of 1980, as amended, the Hazardous Materials Transportation Act,
as amended, the Resource Conservation and Recovery Act, as amended, and the
regulations adopted and publications promulgated pursuant thereto.
Section 1.31 "Historic Tax Credits" shall mean the tax credit permitted
for rehabilitation expenditures with respect to certified historic structures in
accordance with Code Section 47, as amended from time to time.
Section 1.32 "Improvements" shall mean the twenty-three (23) unit apart
ment complex for special needs residents rehabilitated in accordance with the
plans and specifications and Project Documents.
Section 1.33 "Incentive Management Fee" shall have the meaning set
forth in Section 9.2(e) hereof.
Section 1.34 "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 1.34 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 1.34 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 1.29(a) or (b) hereof, the amount of such
adjustment shall be taken into account as gain or loss from the disposition of
such asset for purposes of computing Income and Losses;
(d) Gain or loss resulting from any disposition of Partnership assets
with respect to which gain or loss is recognized for federal income purposes
shall be computed by reference to the Gross Asset Value of the property disposed
of, notwithstanding that the adjusted tax basis of such property differs from
its Gross Asset Value;
(e) In lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing such taxable income or loss, there
shall be taken into account depreciation for such fiscal year or other period,
computed as provided below; and
(f) Notwithstanding any other provision of this definition, any items
which are specially allocated pursuant to Sections 10.3 or 10.4 hereof shall not
otherwise be taken into account in computing Income or Losses.
Depreciation for each fiscal year or other period shall be calculated
as follows: an amount equal to the depreciation, amortization, or other cost
recovery deduction allowable with respect to an asset for such year or other
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 1.35 "Indiana Department of Natural Resources Grant" shall mean
Indiana Department of Natural Resources Grant in the amount of $4,000.00
Section 1.36 "Insurance" shall mean:
(a) during construction, the Insurance shall include
builder's risk insurance, liability insurance in the minimum amount of
$2,000,000 per occurrence with an aggregate of $2,000,000, and worker's compensa
tion;
(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 $2,000,000 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;
(d) all Insurance polices shall name the Partnership as the
named insured and the Limited Partner as an additional insured, and WNC &
Associates, Inc. as the certificate holder;
(e) all Insurance policies shall include a provision to notify
the insured prior to cancellation;
(f) hazard coverage must include inflation and building or ord
inance 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 WNC & Associates, Inc.,
as certificate holder.
Section 1.37 "Insurance Company" shall mean any insurance company
engaged by the General Partner for the Partnership with the Consent of the
Special Limited Partner which Insurance Company shall have an A rating or better
for financial safety by A.M. Best or Standard & Poor's.
Section 1.38 "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 1.39 "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 1.40 "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 1.41 "Limited Partner" shall mean WNC Institutional Tax Credit
Fund VII, L.P., 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 1.42 "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 Four
County Comprehensive Mental Health Center, Inc.
Section 1.43 "Management Agreement" shall mean the agreement between
the Partnership and the Management Agent for property management services.
Section 1.44 "Minimum Set-Aside Test" shall mean the 40-60 set-aside
test pursuant to Section 42(g), as amended and any successor thereto, of the
Code with respect to the percentage of apartment units in the Project to be
occupied by tenants whose incomes are equal to or less than the required
percentage of the area median gross income. Notwithstanding the foregoing, the
General Partner has agreed to rent 23 apartment units to tenants whose income is
50% or less of the area median income as adjusted for family size.
Section 1.45 "Mortgage" or "Mortgage Loan" shall mean the permanent
nonrecourse financing wherein the Partnership promises to pay: Security Federal
Savings Bank, or its successor or assignee, the principal sum of $266,500, plus
interest on the principal at 8.00% per annum over a term of 18 years and
amortized over 30 years. Where the context admits, the term "Mortgage" or
"Mortgage Loan" shall include any mortgage, deed, deed of trust, note,
regulatory agreement, security agreement, assumption agreement or other
instrument executed in connection with the Mortgage which is binding on the
Partnership; and in case any Mortgage is replaced or supplemented by any
subsequent mortgage or mortgages, the Mortgage shall refer to any such
subsequent mortgage or mortgages. In the event the terms of the Mortgage are not
as specified herein and the Limited Partner determines in its discretion that
the Debt Service Coverage falls below 1.10 then at the request of the Limited
Partner the General Partner shall reduce the principal of the Mortgage to an
amount the Limited Partner determines is adequate to produce a 1.10 Debt Service
Coverage. The Mortgage funds shall be used to retire the Construction Loan and
if there are any funds remaining the Mortgage funds shall be used to retire any
outstanding hard construction costs including labor and materials.
Section 1.46 "Net Operating Income" shall mean: (a) the excess of
actual receipt on a cash basis by the Partnership of revenues from operations of
the Partnership, including, without limitation, rental income (but not any
subsidy thereof from the General Partner or an Affiliate thereof), but excluding
prepayments, security deposits and interest thereon, (b) over all cash operating
obligations of the Partnership (other than those covered by insurance) in
accordance with the applicable budget adopted by the Partnership in accordance
with Section 14.3(j) of this Agreement (the "Budget"), including, without
limitation, the payment of the Mortgage, the Management Agent fees (which shall
be deemed to include that portion of such fees which is deferred and not
currently paid) and the funding of reserves in accordance with Article VIII of
this Agreement, and a reserve for all taxes or payments in lieu of taxes and any
other expenses which may reasonably be expected to be paid in a subsequent
period but which on an accrual basis are allocable to the period in question,
such as insurance premiums, audit, tax or accounting expenses (excluding
deductions for cost recovery of buildings, improvements and personal property
and amortization of any financing fees). Without limiting the generality of the
foregoing, the Partnership's gross revenues for purposes of this Section shall
not include Capital Contributions, borrowings, any lump-sum payment or any other
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 1.47 "Nonrecourse Deductions" shall have the meaning given it
in Treasury Regulations Section 1.704-2(b)(1).
Section 1.48 "Nonrecourse Liability" shall have the meaning given it in
Treasury Regulations Section 1.704-2(b)(3).
Section 1.49 "Operating Deficit" shall mean for any fiscal year when
the Partnership does not have Net Operating Income as determined by the
Accountant and approved by the Special Limited Partner.
Section 1.50 "Operating Deficit Guarantee Period" shall mean the period
commencing with the date of this Agreement and ending three years following the
three consecutive months of Break-even Operations.
Section 1.51 "Operating Loans" shall mean loans made by the General
Partner to the Partnership pursuant to Article VI of this Agreement, which loans
do not bear interest and are repayable only as provided in Article XI of this
Agreement.
Section 1.52 "Partner(s)" shall collectively mean the General Partner,
the Limited Partner and the Special Limited Partner or individually may mean any
Partner as the context dictates.
Section 1.53 "Partner Nonrecourse Debt" shall have the meaning set
forth in Section 1.704-2(b)(4) of the Treasury Regulations.
Section 1.54 "Partner Nonrecourse Debt Minimum Gain" shall mean an
amount, with respect to each Partner Nonrecourse Debt, equal to the Partnership
Minimum Gain that would result if such Partner Nonrecourse Debt were treated as
a Nonrecourse Liability, determined in accordance with Section 1.704-2(i)(3) of
the Treasury Regulations.
Section 1.55 "Partner Nonrecourse Deductions" shall have the meaning
set forth in Sections 1.704-2 (i)(1) and 1.704-2(i)(2) of the Treasury Regula-
tions.
Section 1.56 "Partnership" shall mean the limited partnership continued
under this Agreement.
Section 1.57 "Partnership Minimum Gain" shall mean the amount deter-
mined in accordance with the principles of Treasury Regulation Sections 1.704
-2(b)(2) and 1.704-2(d).
Section 1.58 "Permanent Mortgage Commencement" shall mean the first
date on which all of the following have occurred: (a) the Construction Loan
shall have been repaid in full; and (b) the closing of the Mortgage shall have
occurred and amortization of the Mortgage shall have commenced.
Section 1.59 "Person" shall mean an individual, proprietorship, trust,
estate, partnership, joint venture, association, company, corporation or other
entity.
Section 1.60 "Project" shall collectively mean the approximately .50
acres of land in Logansport, Cass County, Indiana, as more fully described in
Exhibit "A" attached hereto and incorporated herein by this reference, and the
Improvements.
Section 1.61 "Project Documents" shall mean and include all documents
delivered to or required by the Construction Loan and Mortgage Loan and/or any
governmental agency having jurisdiction over the Project in connection with the
development, construction and financing of the Project, including but not
limited to, the approved plans and specifications for the development and
construction of the Project.
Section 1.62 "Projected Annual Tax Credits" shall mean LIHTC in the
amount of $37,371 for 1999, $125,803 per year for each of the years 2000 through
2008, and $88,440 for 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 99.98% of the aggregate amount of LIHTC of $1,258,290,
to be available to the Partnership. The definition of Projected Annual Tax
Credits is subject to change pursuant to Section 9.11(aa).
Section 1.63 "Projected Federal Tax Credits" shall mean LIHTC in the
aggregate amount of $1,258,290.
Section 1.64 "Projected Historic Tax Credits" shall mean the Histor-
ic Tax Credits in the aggregate amount of $363,762 to be earned in the year the
Project is placed in service.
Section 1.65 "Projected State Historic Tax Credits" shall mean the Sta-
te Historic Tax Credits in the aggregate amount of $100,000 to be earned in the
year the Project is placed in service.
Section 1.66 "Qualified Tenants" shall mean any tenants who have in-
comes of 60% or less of the area median gross income, as adjusted for family
size, so as to make the Project eligible for LIHTC.
Section 1.67 "Rent Restriction Test" shall mean the test pursuant to
Section 42 of the Code whereby the gross rent charged to tenants of the low-
income apartment units in the Project must not exceed 30% of the applicable in-
come standards.
Section 1.68 "Reporting Fee" shall have the meaning set forth in Sec-
tion 9.2(d) hereof.
Section 1.69 "Revised Projected Tax Credits" shall have the meaning set
forth in Section 7.4(a) hereof.
Section 1.70 "Sale or Refinancing" shall mean any of the following
items or transactions: a sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Partnership, a condemnation of or
casualty at the Project or any part thereof, a claim against a title insurance
company, the refinancing or any Mortgage Note or other indebtedness of the
Partnership and any similar item or transaction; provided, however, that the
payment of Capital Contributions by the Partners shall not be included within
the meaning of the term "Sale or Refinancing."
Section 1.71 "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 1.72 "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 1.73 "State" shall mean the State of Indiana.
Section 1.74 "State Historic Tax Credits" shall mean the tax credit
permitted for rehabilitation expenditures with respect to certified historic
structures in accordance with Indiana Code Section 6-3.1-16-1, as amended from
time to time.
Section 1.75 "State Tax Credit Agency" shall mean the state agency of
Indiana which has the responsibility and authorization to administer the LIHTC
program in Indiana.
Section 1.76 "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 1.77 "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 1.78 "Tax Credit Conditions" shall mean, for the duration of
the Compliance Period, any and all restrictions including, but not limited to,
applicable federal, state and local laws, rules and regulations, which must be
complied with in order to qualify for the LIHTC or to avoid an event of
recapture in respect of the LIHTC.
Section 1.79 "Tax Credit Period" shall mean the ten year time period
referenced in Code Section 42(f)(1) over which the Projected Federal Tax Credits
are allocated to the Partners. It is the intent of the Partners that the
Projected Federal Tax Credits will be allocated during the Tax Credit Period and
not a longer term.
Section 1.80 "TRA 1986" shall mean the Tax Reform Act of 1986.
Section 1.81 "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 1.82 "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 "Kechel Tower L.P."
ARTICLE III
PRINCIPAL EXECUTIVE OFFICE/AGENT FOR SERVICE
Section 3.1 Principal Executive Office. The principal executive office
of the Partnership is located at 1015 Michigan Ave., Logansport, Indiana
46947-1577, 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 Ronald M. Katz Esq., Katz & Korin P.
C., 1120 Market Tower, 10 West Market Street, Indianapolis, Indiana 46204-2964.
ARTICLE IV
PURPOSE
The purpose of the Partnership is to acquire, construct, own and
operate the Project in order to provide, in part, Tax Credits to the Partners in
accordance with the provisions of the Code and the Treasury Regulations
applicable to LIHTC and to sell the Project. The Partnership shall not engage in
any business or activity which is not incident to the attainment of such
purpose.
ARTICLE V
TERM
The Partnership term commenced upon the filing of the Certificate of
Limited Partnership in the office of, and on the form prescribed by, the
Secretary of State of the State, and shall continue until December 31, 2040
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 Part-
ner shall make a Capital Contribution in the amount of $126.
Section 6.2 Construction and Operating Obligations; General Partner
Loans.
(a) The General Partner shall cause Completion of Construction in
accordance with the Project Documents, and shall equip the Project or cause the
same to be equipped with all necessary and appropriate fixtures, equipment and
articles of personal property, including refrigerators and ranges. If costs and
expenses necessary to effect Completion of Construction exceed the sum of the
Capital Contributions, the proceeds of the Mortgage Note, and the net rental
income prior to Completion of Construction, 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 and shall be considered a cost overrun and not be repayable. In
addition, if (1) the Improvements are not completed on or before January 1, 2000
("Completion Date") (which date may be extended in the events of Force Majeure,
but in no event longer than three months from the Completion Date); (2) prior to
completing the Improvements, there is an uncured default under or termination of
the Construction Loan, Mortgage Loan commitment, or other material documents; or
(3) a foreclosure action is commenced against the Partnership, then at the
Special Limited Partner's election, either the General Partner will be removed
from the Partnership and the Special Limited Partner will be admitted as
successor General Partner, all in accordance with Article XIII hereof, or the
General Partner will repurchase the Interests of the Limited Partner and the
Special Limited Partner for an amount equal to the amounts theretofore paid by
the Limited Partner and the Special Limited Partner, and the Limited Partner and
the Special Limited Partner shall have no further Interest in the Partnership.
If the Limited Partner elects to have the General Partner repurchase the
Interest of the Limited Partner then the repurchase shall occur within 60 days
after the General Partner receives written demand from the Limited Partner.
(b) From Completion of Construction until three consecutive months of
Break-even Operations, the General Partner shall provide funds to pay Operating
Deficits; and during the balance of the Operating Deficit Guarantee Period the
General Partner will provide Operating Loans to pay any Operating Deficits up to
a maximum amount equal to one-year operating expenses (including debt and
reserves). 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 $99.99. Effective as of the date of this Agreement,
the Original Limited Partner's Interest has been liquidated and the Partnership
has reacquired the Original Limited Partner's Interest in the Partnership. The
Original Limited Partner acknowledges that it has no further interest in the
Partnership as a limited partner as of the date of this Agreement, and has
released all claims, if any, against the Partnership arising out of its
participation as a limited partner.
Section 7.2 Capital Contribution of Limited Partner. The Limited
Partner shall make a Capital Contribution in the amount of $1,348,268, 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) $269,653 shall be payable upon:
(1) admittance of the Limited Partner into the Partnership;
(2) issuance to the Limited Partner of an opinion of the
Partnership's legal counsel, in a form substantially similar to the form of
opinion attached hereto as Exhibit "B" and incorporated herein by this
reference;
(3) delivery to the Limited Partner of a fully executed Certi-
fication and Agreement in the form attached hereto as Exhibit "C" and incorpora-
ted herein by this reference;
(4) delivery to the Limited Partner of a fully approved and
executed Historic Preservation Certification Application Part 1 - Evaluation of
Significance and Part 2 - Description of Rehabilitation;
(5) delivery to the Limited Partner of the building permit;
(6) verification that the Partnership has obtained Insurance;
(7) an ALTA Owner's Title Insurance Policy in the amount of
debt plus equity with a non-imputation and fairway endorsements and copies of
all Mortgage documents;
(8) Limited Partner approval of the construction costs,
sources and uses and operating budget;
(9) closing of the Construction Loan;
(10) delivery to the Limited Partner of fully executed firm
commitments for the Area Five Agency Weatherization Grant and the FHLB AHP
Subsidy; and
(11) approval by the Limited Partner's acquisition committee
within 30 days of receipt of all items referenced in Section 7.2(a).
(b) $539,306 shall be payable upon:
(1) Completion of Construction as approved by the Limited Part
ner and as evidenced by the inspecting architect's certification and the con-
truction draw request;.
(2) delivery to the Limited Partner of 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;
(3) delivery to the Limited Partner of receipt of copies of
all inspecting architect's application and certificate of payment (AIA Document
G702, or similar form acceptable to the Limited Partner), all Construction Loan
draw requests and a copy of the construction schedule and any updates to the
construction schedule;
(4) delivery to the Limited Partner of 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 accordance with the plans and
specifications;
(5) delivery to the Limited Partner of a fully executed
General Partner Certification in the form attached hereto as Exhibit "D" and
incorporated herein by this reference, to the effect that all of the
representations and warranties set forth in Article IX are accurate;
(6) delivery to the Limited Partner of 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 and that the Partnership is not
in violation of the Construction Contract; and
(7) delivery to the Limited Partner of a copy of the recorded
grant deed (warranty deed);
(c) $269,653 shall be payable upon:
(1)achievement by the Partnership of a Debt Service Coverage
of 1.10 for 90 consecutive days;
(2) delivery to the Limited Partner of current rent roll,
copies of all initial tenant files including completed applications, completed
questionnaires or checklist of income and assets, documentation of third party
verification of income and assets, income certification forms (LIHTC specific)
and executed lease agreements collected by the Management Agent, or General
Partner, verifying each tenant's eligibility as a Qualified Tenant;
(3) tenant income verification data to determine that 100% of
the units in the Project qualify under Section 42 of the code; and
(4) delivery to the Limited Partner of a fully executed
General Partner Certification in the form attached hereto as Exhibit "D" and
incorporated herein by this reference, to the effect that all of the
representations and warranties set forth in Article IX are accurate;
(d) $134,827 shall be payable upon delivery to the Limited Partner of:
(1) copies of all Mortgage documents; and
(2) a fully executed General Partner Certification in the form
attached hereto as Exhibit "D" and incorporated herein by this reference, to the
effect that all of the representations and warranties set forth in Article IX
are accurate.
(e) $134,829 shall be payable upon delivery to the Limited Partner of:
(1) the first year tax return in which the Tax Credits are
taken; provided
(2) a copy of the Declaration of Restrictive Covenants/Extend-
ed Use Agreement entered into between the Partnership and the State Tax Credit
Agency;
(3) an audited construction cost certification (which includes
an itemized cost breakdown);
(4) the Accountant's final tax credit certification in a form
substantially similar to the form attached hereto as Exhibit "F" and
incorporated herein by this reference setting forth the Project's eligible basis
with the amount of Tax Credits to which the Project is entitled;
(5) Internal Revenue Code Form 8609, or any successor form;
(6) a fully executed General Partner Certification in the form
attached hereto as Exhibit "D" and incorporated herein by this reference, to the
effect that all of the representations and warranties set forth in Article IX
are accurate; and
(7) any documents previous not provided to the Limited Partner
but required pursuant to this Section 7(a)(1) through Section 7(e)(6).
Section 7.3 Repurchase of Limited Partner's Interest. Within
60 days after the General Partner receives written demand from the Limited
Partner and/or the Special Limited Partner, the Partnership shall repurchase the
Limited Partner's Interest and/or the Special Limited Partner's Interest in the
Partnership by refunding to it in cash the full amount of the Capital
Contribution which the Limited Partner and/or the Special Limited Partner has
theretofore made in the event that, for any reason, the Partnership shall fail
to:
(a) receive an allocation of LIHTC no later than the close of the
calendar year during which the Project is placed in service;
(b) cause the Project to be placed in service by December 31, 1999;
(c) achieve 90% occupancy of the Project by Qualified Tenants by
January 1, 2000;
(d) obtain Permanent Mortgage Commencement by November 1, 1999;
(e) meet both the Minimum Set-Aside Test and the Rent Restriction Test
not later than December 31 of the first year the Partnership elects the LIHTC
to commence in accordance with the Code;
(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;
(g) receive approval from the Limited Partner's acquisition committee
by May 15, 1999; and
(h) receive approved and executed Historic Preservation Certification
Application Part 2 - Description of Rehabilitation.
Section 7.4 Adjustment of Limited Partner's Capital Contribution.
(a) If the anticipated amount of Projected Federal Tax Credits to be
allocated to the Limited Partner and Special Limited Partner as evidenced by IRS
Form 8609, Schedule A thereto, and the audited construction cost certification
provided to the Limited Partner and Special Limited Partner are less than and/or
greater than $1,258,164 (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 adjusted by the amount which
will make the total Capital Contribution to be paid by the Limited Partner and
Special Limited Partner to the Partnership for the LIHTC equal to 74% of the
Revised Projected Federal Tax Credits so anticipated to be allocated to the
Limited Partner and Special Limited Partner; and if the anticipated amount of
Historic Projected Tax Credits to be allocated to the Limited Partner and
Special Limited Partner as evidenced by the audited construction cost
certification provided to the Limited Partner and Special Limited Partner are
less than or greater than $363,726 (the "Revised Historic 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
adjusted by the amount which will make the total Capital Contribution to be paid
by the Limited Partner and Special Limited Partner for the Historic Tax Credits
equal to 90% of the Revised Historic Projected Tax Credits so anticipated to be
allocated to the Limited Partner and Special Limited Partner. If the Capital
Contribution is to be reduced in accordance with this Section 7.4(a) 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. If the Capital Contribution is to be increased in
accordance with this Section 7.4 (a) then the Limited Partner and Special
Limited Partner shall have ninety days from the date the Limited Partner and
Special Limited Partner receives notice from the General Partner to pay the
addition.
(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 Annual Credit Shortfall amount, and any portion of such Annual Credit
Shortfall in excess of such Capital Contribution shall be applied to reduce
succeeding Capital Contributions of the Limited Partner or the Special Limited
Partner. If the Annual Credit Shortfall is greater than the Limited Partner's
and Special Limited Partner's remaining Capital Contributions then the General
Partner shall pay to the Limited Partner and Special Limited Partner the excess
of the Annual Credit Shortfall over the remaining Capital Contributions. The
General Partner shall have ninety days to pay the Annual Credit Shortfall from
the date the General Partner receives notice from either the Limited Partner or
the Special Limited Partner.
(c) In the event that, for any reason, at any time after the first five
calendar years following the year in which the Project is placed in service,
there is an Annual Credit Shortfall, then, unless the Annual Credit Shortfall
shall have previously been addressed under Section 7.4(a) or Section 7.4(b),
there shall be a reduction in the General Partner's share of Net Operating
Income in an amount equal to the Annual Credit Shortfall and said amount instead
shall be paid to the Limited Partner. In the event there are not sufficient
funds to pay the full Annual Credit Shortfall to the Limited Partner at the time
of the next Distribution of Net Operating Income, then the Limited Partner shall
be treated as having made a constructive advance to the Partnership in an amount
equal to the Annual Credit Shortfall (a "Credit Shortfall Loan"), which shall be
deemed to have been made on January 1 of the year in which the Annual Credit
Shortfall arises. Each Credit Shortfall Loan shall bear simple interest (not
compounded) from the date on which such loan is deemed to have been made under
this Section 7.4(d) at the rate equal to the 5-year Treasury money rate at the
time of the Credit Shortfall Loan, or, if lesser, the maximum legal rate. Credit
Shortfall Loans or any portion thereof shall be repaid in the next year in which
sufficient monies are available from the General Partner's Net Operating Income,
with interest payable prior to principal. In the event a Sale or Refinancing of
the Project occurs prior to repayment in full of the Credit Shortfall Loan then
the excess will be paid in accordance with Section 11.2(b).
(d) The Partners recognize and acknowledge that the State Historic Tax
Credits can only be used by an Indiana taxpayer to offset an Indiana tax
liability. Therefore, notwithstanding the provision of 7.2(a), if the Limited
Partner does not secure an Indiana investor for its limited partnership, then
the amount of the Limited Partner's Capital Contribution shall be reduced by an
amount equal to $90,000.
(e) In the event there is a reduction in the qualified basis of the
Project for income tax purposes following an audit by the Internal Revenue
Service (IRS) resulting in a recapture of Tax Credits previously claimed, then,
in addition to any other payments to which the Limited Partner and Special
Limited Partner is entitled under the terms of this Section 7.3 the General
Partner shall pay to the Limited Partner and the Special Limited Partner the sum
of (1) the deficiency assessed against the Limited Partner or Special Limited
Partner as a result of the Tax Credit recapture, (2) any interest and penalties
imposed on the Limited Partner or Special Limited Partner with respect to such
deficiency, and (3) an amount sufficient to pay any tax liability owed by the
Limited Partner or Special Limited Partner resulting from the receipt of the
amounts specified in (1) and (2).
Section 7.5 Capital Contribution of Special Limited Partner. The
Special Limited Partner shall make a Capital Contribution of $126 at the time of
the Limited Partner's Capital Contribution payment referenced in Section 7.2(a)
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 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.
Section 7.7 Additional Limited Partners. In the event the Limited
Partner fails to make the payments described in Section 7.2 when due, the
General Partner may, upon thirty days written notice to the Limited Partner
specifying the default, admit an additional limited partner to the Partnership
for the purpose of funding the omitted payments. The additional limited
partner's capital account shall be based on the payments made by the additional
limited partner and the additional limited partner shall share in any
allocations or distributions of income, cash flow or credits on the basis of its
capital account.
ARTICLE VIII
WORKING CAPITAL AND RESERVES
Section 8.1 Operating and Maintenance Account. The Partnership shall
establish an operating and maintenance account and shall deposit thereinto an
annual amount equal to $200 per residential unit per year for the purpose of
repairs, maintenance and capital repairs. Said deposit shall be made monthly in
equal installments. Withdrawals from such account shall be made only with the
Consent of the Special Limited Partner. Any balance remaining in these accounts
at the time of a sale of the Project shall be allocated and distributed equally
between the General Partner and the Limited Partner.
Section 8.2 Other Reserves. The General Partner shall establish out of
funds available to the Partnership a reserve account sufficient in its sole
discretion to pay any unforeseen contingencies which might arise in connection
with the furtherance of the Partnership business including, but not limited to,
(a) any rent subsidy required to maintain rent levels in compliance with the Tax
Credit Conditions; and (b) any real estate taxes, insurance, debt service or
other payments for which other funds are not provided for hereunder or otherwise
expected to be available to the Partnership. The General Partner shall not be
liable for any good-faith estimate which it shall make in connection with
establishing or maintaining any such reserves nor shall the General Partner be
required to establish or maintain any such reserves if, in its sole discretion,
such reserves do not appear to be necessary.
Section 8.3 Rent-up Reserves.The General Partner, on behalf of the
Partnership, shall establish a rent reserve account and shall deposit thereinto
an amount equal to $21,500 to be used to cover any unforeseen events which
relates to renting. Withdrawals from such account shall be made only with the
Consent of the Special Limited Partner. Any balance remaining in the account at
the time of a sale of the Project shall be allocated and distributed equally
between the General Partner and the Limited Partner.
Section 8.4 Working Capital Reserves. The General Partner, on behalf of
the Partnership, shall establish a working capital reserve in the initial amount
of $21,500. This working capital reserve shall be held in a working capital
reserve account and shall be used to pay for Operating Deficits throughout the
Operating Deficit Guaranty Period and for the purpose of operation and debt
liabilities of the Partnership. Any balance remaining in the account at the time
of a sale of the Project shall be allocated to the General Partner as an
Incentive Management Fee.
ARTICLE IX
MANAGEMENT AND CONTROL
Section 9.1 Power and Authority of General Partner. Subject to the
receipt of Consent of the Special Limited Partner or the consent of the Limited
Partner where required by this Agreement, and subject to the other limitations
and restrictions included in this Agreement, the General Partner shall have
complete and exclusive control over the management of the Partnership business
and affairs, and shall have the right, power and authority, on behalf of the
Partnership, and in its name, to exercise all of the rights, powers and
authority of a partner of a partnership without limited partners. If there is
more than one General Partner, all acts, decisions or consents of the General
Partners shall require the concurrence of all of the General Partners. No
actions taken without the authorization of all the General Partners shall be
deemed valid actions taken by the General Partners pursuant to this Agreement.
No Limited Partner or Special Limited Partner (except one who may also be a
General Partner, and then only in its capacity as General Partner within the
scope of its authority hereunder) shall have any right to be active in the
management of the Partnership's business or investments or to exercise any
control thereover, nor have the right to bind the Partnership in any contract,
agreement, promise or undertaking, or to act in any way whatsoever with respect
to the control or conduct of the business of the Partnership, except as
otherwise specifically provided in this Agreement.
Section 9.2 Payments to the General Partners and Others.
(a) The Partnership shall pay to the Developer a Development Fee in the
amount of $137,500. 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) Notwithstanding the preceding, the Partnership shall utilize the
proceeds from the Capital Contributions paid pursuant to Section 7.2 and Section
7.4 of this Agreement for supplemental development costs including, but not
limited to, land costs, architectural fees, survey and engineering costs,
financing costs, loan fees, building materials and labor, but the amount
retained shall in no event be greater than the difference between the
Construction Loan and the Mortgage Loan. If any such funds are remaining after
Completion of Construction and all construction costs, excluding the Development
Fee, are paid in full and the Construction Loan retired, then the remainder
shall first be paid to the General Partner in an amount equal to any unpaid
Development Fee and the balance, if any, shall be paid to the General Partner as
a reduction of the General Partner's Capital Contribution and/or an incentive
rent-up fee.
(c) The Partnership shall pay to the Management Agent a property
management fee for the leasing and management of the Project in an amount in
accordance with the Management Agreement. The term of the Management Agreement
shall not exceed three years following the date of Completion of Construction,
and the execution or renewal of any Management Agreement shall be subject to the
prior Consent of the Special Limited Partner. If the Management Agent is an
Affiliate of the General Partner then commencing with the termination of the
Operating Deficit Guarantee Period referenced in Section 6.2(b), in any year in
which the Project has an Operating Deficit, 40% of the management fee will be
deferred ("Deferred Management Fee"). Deferred Management Fees, if any, shall be
paid to the Management Agent solely in accordance with and to the extent
permitted by Section 11.1 of this Agreement.
(1) The General Partner shall, upon receiving any request of
the Mortgage lender requesting such action, dismiss the Management Agent as the
entity responsible for management of the Project under the terms of the
Management Agreement; or, the General Partner shall dismiss the Management Agent
at the request of the Special Limited Partner without cause.
(2) The appointment of any successor Management Agent is
subject to the Consent of the Special Limited Partner which may only be sought
after the General Partner has provided the Special Limited Partner accurate and
complete disclosure respecting the proposed Management Agent.
(d) The Partnership shall pay to the Limited Partner a fee (the
"Reporting Fee") commencing in 1999 equal to 20% 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; provided, however, that if
in any year Net Operating Income is insufficient to pay the full $500, the
unpaid portion thereof shall accrue and be payable on a cumulative basis in the
first year in which there is sufficient Net Operating Income, as provided in
Section 11.1, or sufficient Sale or Refinancing Proceeds, as provided in Section
11.2.
(e) The Partnership shall pay to the General Partner an Incentive
Management Fee equal to the greater of $500 or 70% of the available Net
Operating Income in accordance with Section 11.1 of this Agreement for each
fiscal year of the Partnership commencing in 1999 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;
(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) 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
therewith, and any such inconsistent terms of this Agreement shall be
unenforceable by or against any of the Partners;
(c) Upon any dissolution of the Partnership or any transfer of the
Project, no title or right to the possession and control of the Project and no
right to collect rent therefrom shall pass to any Person who is not, or does not
become, bound by the Tax Credit Conditions in a manner that, in the opinion of
counsel to the Partnership, would not avoid a recapture thereof on the part of
the former owners; and
(d) Any conveyance or transfer of title to all or any portion of the
Project required or permitted under this Agreement shall in all respects be
subject to the Tax Credit Conditions and all conditions, approvals or other
requirements of the rules and regulations of any authority applicable thereto.
Section 9.5 Limitations on General Partner's Power and Authority.
Notwithstanding the provisions of this Article IX, the General Partner shall not
(a) Except as required by Section 9.4, act in contravention of this
Agreement;
(b) Act in any manner which would make it impossible to carry on the
ordinary business of the Partnership;
(c) Confess a judgment against the Partnership;
(d) Possess Partnership property, or assign the Partner's right in
specific Partnership property, for other than the exclusive benefit of the
Partnership;
(e) Admit a Person as a General Partner except as provided in this
Agreement;
(f) Admit a Person as a Limited Partner except as provided in this
Agreement;
(g) Violate any provision of the Mortgage Loan or Mortgage Note;
(h) Cause the Project apartment units to be rented to anyone other than
Qualified Tenants;
(i) Violate the Minimum Set-Aside Test or the Rent Restriction Test for
the Project;
(j) Cause any recapture of the Tax Credits;
(k) Permit any creditor who makes a nonrecourse loan to the Partnership
to have, or to acquire at any time as a result of making such loan, any direct
or indirect interest in the profits, income, capital or other property of the
Partnership, other than as a secured creditor;
(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 the Consent of the Special Limited Partner.
Section 9.6 Restrictions on Authority f 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 Federal Tax Credits or which would cause
the recapture of any LIHTC;
(f) Make any expenditure of funds, or commit to make any such
expenditure, other than expenditures within the amount of $5,000, or
expenditures 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;
(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 Agency;
(f) Use its best efforts to keep the Project and Project dwelling
units, in decent, safe, sanitary and good condition, repair and working order,
ordinary use and obsolescence excepted, and make or cause to be made from time
to time all necessary repairs thereto (including external and structural
repairs) and renewals and replacements thereof;
(g) Pay, before the same shall become delinquent and before penalties
accrue thereon all Partnership taxes, assessments and other governmental charges
against the Partnership or its properties, and all of its other liabilities,
except to the extent and so long as the same are being contested in good faith
by appropriate proceedings in such manners as not to cause any material adverse
effect on the Partnership's property, financial condition or business
operations, with adequate reserves provided for such payments;
(h) Permit, and cause the Management Agent to permit, the Special
Limited Partner and its representatives to have access to the Project and
personnel employed by the Partnership and by the Management Agent who are
concerned with management of the Project at all reasonable times during normal
business hours and to examine all agreements, LIHTC compliance data and plans
and specifications and deliver copies thereof and such reports as may reasonably
be required by the Special Limited Partner. The General Partner shall provide
the Special Limited Partner with copies of all correspondence, notices and
reports sent pursuant to or received under the Project Documents or any
authority with respect to the Project at the time such correspondence, notices
or reports are sent or received, copies of all other correspondence of
substantial importance which a prudent investor would wish to examine in
connection with the transaction at the time such correspondence is sent or
received, and all reports required by Article XIV within the required time
periods set forth therein;
(i) Exercise good faith in all activities relating to the conduct of
the business of the Partnership, including the development, operation and
maintenance of the Project, and it shall take no action with respect to the
business and property of the Partnership which is not reasonably related to the
achievement of the purpose of the Partnership;
(j) Make any Capital 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) Comply with each and every covenant, representation and warranty
set forth in Section 9.11;
(m) 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, to make all elections requested by the Special Limited Partner under
Section 42 of the Code to allow the Partnership or its Partners to claim the Tax
Credit, to file Form 8609 with respect to the Project as required, for at least
the duration of the Compliance Period to operate the Project and cause the
Management Agent to manage the Project so as to comply with the requirements of
Section 42 of the Code, as amended, or any successor thereto, including, but not
limited to, Section 42(g) and Section 42(i)(3) of the Code, as amended, or any
successors thereto, to make all certifications required by Section 42(l) of the
Code, as amended, or any successor thereto, and to operate the Project and cause
the Management Agent to manage the Project so as to comply with all other Tax
Credit Conditions; and
(n) 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
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
ventures formed by them or in which they may have an interest, including,
without limitation, business ventures similar to, related to or in direct or
indirect competition with the Project. Neither the Partnership nor any Partner
shall have any right by virtue of this Agreement or the partnership relationship
created hereby in or to such other ventures or activities or to the income or
proceeds derived therefrom. Conversely, no Person shall have any rights to
Partnership assets, incomes or proceeds by virtue of such other ventures or
activities of any Partner.
Section 9.11 Covenants, Representations and Warranties. The General
Partner covenants, represents and warrants that the following are presently true
and will be true during the term of this Agreement, to the extent then
applicable:
(a) The Partnership is a duly organized limited partnership validly
existing under the laws of the State and has complied with all filing
requirements necessary for the protection of the limited liability of the
Limited Partner and the Special Limited Partner.
(b) The Partnership Agreement and the Project Documents are in full
force and effect and neither the Partnership nor the General Partner is in
breach or violation of any provisions thereof.
(c) Improvements will be completed in a timely and workmanlike manner
in accordance with all applicable requirements of the Mortgage Loan, all
applicable requirements of all appropriate governmental entities and the plans
and specifications of the Project, and all applicable governmental entities, as
such plans and specifications may be changed from time to time with the approval
of Security Federal Savings Bank 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 approved by the Spe-
cial Limited Partner.
(f) No Partner has or will have any personal liability with respect to
or has or will have personally guaranteed the payment of the Mortgage.
(g) The Partnership is in compliance with all construction and use
codes applicable to the Project and is not in violation of any zoning,
environmental or similar regulations applicable to the Project.
(h) All appropriate public utilities, including sanitary and storm
sewers, water, gas and electricity, are currently available and will be
operating properly for all units in the Project at the time of first occupancy
and throughout the term of the Partnership.
(i) The Project has obtained, or will obtain before Permanent Mortgage
Commencement, and will maintain throughout the term of this Partnership
Insurance written by an Insurance Company.
(j) The Partnership owns the fee simple interest in the Project.
(k) The Construction Contract has been entered into between the
Partnership and the Contractor; no other consideration or fee shall be paid to
the Contractor other than amounts set forth in the Construction Contract.
(l) A builder's risk insurance policy in favor of the Partner-
ship is in full force and effect and will remain in full force and effect until
Completion of Construction.
(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 and (2) no aboveground or underground
storage tanks are now or have ever been located on or under the Project, except
to the extent provided in the environmental report provided by Environmental
Solutions Midwest, Inc. The General Partner will not install or allow to be
installed any aboveground or underground storage tanks on the Project. The
General Partner covenants that the Project shall be kept free of Hazardous
Materials and shall not be used to generate, manufacture, refine, transport,
treat, store, handle, dispose of, transfer, produce or process Hazardous
Materials, except in connection with the normal maintenance and operation of any
portion of the Project. The General Partner shall comply, or cause there to be
compliance, with all applicable Federal, state and local laws, ordinances, rules
and regulations with respect to Hazardous Materials and shall keep, or cause to
be kept, the Project free and clear of any liens imposed pursuant to such laws,
ordinances, rules and regulations. The General Partner must promptly notify the
Limited Partner and the Special Limited Partner in writing (3) if it knows, or
suspects or believes there may be any Hazardous Substance in or around any part
of the Project, any Improvements constructed on the Project, or the soil,
groundwater or soil vapor, (4) if the General Partner or the Partnership may be
subject to any threatened or pending investigation by any governmental agency
under any law, regulation or ordinance pertaining to any Hazardous Substance,
and (5) of any claim made or threatened by any Person, other than a governmental
agency, against the Partnership or General Partner arising out of or resulting
from any Hazardous Substance being present or released in, on or around any part
of the Project.
(n) The General Partner has not executed and will not execute any agree
ments with provisions contradictory to, or in opposition to, the provisions
of this Agreement.
(o) The Partnership will allocate to the Limited Partner the Projected
Annual Tax Credits, or the Revised Projected Federal Tax Credits and Projected
Historic Tax Credits, if applicable.
(p) No charges, liens or encumbrances exist with respect to the Project
other than those which are created or permitted by the Project Documents or
Mortgage or are noted or excepted in the title policy for the Project.
(q) The buildings on the Project site constitute or shall constitute a
"qualified low-income housing project" as defined in Section 42(g) of the Code,
and as amplified by the Treasury Regulations thereunder. In this connection, not
later than December 31 of the first year in which the Partners elect the LIHTC
to commence in accordance 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, are currently funded to required levels,
including levels required by any authority.
(s) The General Partner has not lent or otherwise advanced any funds to
the Partnership other than its Capital Contribution and the Partnership has no
unsatisfied obligation to make any payments of any kind to the General Partner
or any Affiliate thereof.
(t) No event has occurred which constitutes a default under any of the
Project Documents.
(u) No event has occurred which has caused, and the General Partner has
not acted in any manner which will cause (1) the Partnership to be treated for
federal income tax purposes as an association taxable as a corporation, (2) the
Partnership to fail to qualify as a limited partnership under the Act, or (3)
the Limited Partner to be liable for Partnership obligations; provided however,
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) 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 adversely affected
the operation of the Partnership or the Project; (2) materially 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) 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 and/or an acceptable guarantor has and shall
maintain a net worth equal to at least $1,000,000 computed in accordance with
generally accepted accounting principles.
(y) The General Partner will ensure that any and all lease agreements
between the Partnership and Qualified Tenants shall be for a minimum term of six
months.
(z) The General Partner will ensure that not more than 25% of Improve-
ments shall be leased to non-residential tenants.
(aa) As a condition to this Agreement, the Partners warranted and
represented that they would in good faith negotiate and enter into a side letter
for an adjustment to the Limited Partner's Capital Contribution. The side letter
will provide for different pay-in amounts based on different dates for the
payment of the Capital Contribution with the intent the Partners will choose one
of the pay-in schedules that maximizes the amount of the Limited Partner's
Capital Contribution and maximizes the internal rate of return of the Limited
Partner's investment. The side letter will be subject to additional conditions
as may be required.
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.
Section 9.12 Option to Acquire. After expiration of the Compliance
Period, the General Partner may give notice (the "GP Notice") to the Limited
Partner that the Developer desires to purchase the entire Interest of each of
the Limited Partner and the Special Limited Partner in the Partnership. Upon
receipt by the Limited Partner and the Special Limited Partner, the following
events shall occur:
(a) The purchase price of the Interests shall be determined. The
purchase price shall be the greater of (i) the aggregate of the Fair Market
Value of the Interest of the Limited Partner and the Fair Market Value of the
Interest of the Special Limited Partner or (ii) the "Tax Amount" as hereinafter
defined. Notwithstanding the preceding, the purchase price shall be no less than
the principal amount of all outstanding indebtedness secured by the Project.
(b) The Limited Partner and the Special Limited Partner shall negotiate
with the Developer for a period of 30 days after the GP Notice is received to
agree upon the Fair Market Value of their respective Interests. In the event an
agreement is not reached within such 30-day period, then the Developer or the
Special Limited Partner may request that Fair Market Value be determined in
accordance with the process set forth below by sending notice (the "Appraisal
Notice") of same to the other party within 15 days of the expiration of the
30-day period. If an Appraisal Notice is not sent by either party within such
15-day period, then the Developer's option shall expire.
(c) If the respective Fair Market Value of the Interests of the Limited
Partner and the Special Limited Partner are not agreed upon as provided above
and either the Developer or the Special Limited Partner issues to the other
Person an Appraisal Notice, then the Fair Market Value of such Interests shall
be determined by an appraisal. The appraisal shall be conducted by an
independent appraiser satisfactory to the Developer and the Special Limited
Partner or, in the event that a single independent appraiser cannot be agreed
upon within 30 days following the date of the Appraisal Notice, the Developer
and the Special Limited Partner shall each select an independent appraiser and
the appraisers so selected shall select a third independent appraiser. All
appraisers so designated shall be experienced in accounting, business or real
estate appraisal. The appraiser or appraisers shall determine the Fair Market
Value of the Interest of each of the Limited Partner and the Special Limited
Partner. The decision of the appraisers (if more than one) shall be made by the
majority of such appraisers. The appraiser or appraisers shall render a written
report setting forth the Fair Market Value of such Interests, which decision
shall be rendered as expeditiously as possible by the appraiser or appraisers
and which decision shall be final and binding upon the parties. The reasonable
fees and expenses of the appraiser or appraisers shall be paid one-half by the
Developer and one-half by the Limited Partner.
(d) The "Tax Amount" shall mean the dollar amount computed in the
following fashion:
(i) The Limited Partner and the Special Limited Partner shall
be deemed to have gain in an amount equal to the difference between their
respective basis in the Project and an amount equal to the total forgiveness of
debt which would be realized by the Limited Partner and the Special Limited
Partner computed as if the Limited Partner and the Special Limited Partner
abandoned their Interests in the Partnership on the date of the GP Notice. The
Tax Amount shall equal the deemed gain as computed above by a tax rate(s)
applied to such gain. The tax rate shall be the highest individual rate stated
in the Code applicable to the type of income (and if there is more than one rate
applicable because of more than one type of income, the different rates shall be
applied to the appropriate portions of such income). The Limited Partner shall
cooperate to expeditiously determine the Tax Amount.
(e) Following determination of the purchase price, the Developer shall
have 30 days thereafter to determine whether the Developer will purchase the
Interests of the Limited Partner and the Special Limited Partner at the purchase
price so determined. The Developer shall exercise such right by written notice
to the Limited Partner and the Special Limited Partner within such 30-day
period, and if such right is not so exercised, the option shall lapse in its
entirety.
(f) If the Developer determines to proceed with the purchase, the
purchase price shall be paid in cash, within 90 days following the giving of
the notice required by Section 9.12(e).
Section 9.13 Right of First Refusal. If the Limited Partner and the
Special Limited Partner are desirous of selling their Interests in the
Partnership then they must first offer their Interests to the Developer. For
these purposes, the term "sell" shall include any transfer, conveyance,
assignment, hypothecation or pledge of all or any portion of such Interests.
Before the Limited Partner and the Special Limited Partner sell or
unconditionally agree to sell their Interests to any third party, they shall
offer to sell their Interests to the Developer on the same terms and conditions
as such third party is willing to purchase the Interest (the "Offer"). The Offer
shall contain the name of the proposed purchaser, the proposed sale price, the
terms of the payment and any other material terms and conditions on which the
sale is to be consummated. The Developer shall have 10 days from receipt of the
Offer (the "Offer Period") in which to accept or reject the Offer. If the
Developer gives timely notice of acceptance of the Offer, the Limited Partner
and the Special Limited Partner shall be obligated to sell their Interests and
the Developer shall be obligated to purchase the Interests on the terms and
conditions set forth in the Offer. If the Developer does not give timely notice
of acceptance of the Offer, then the Limited Partner and the Special Limited
Partner may sell their Interests to the party identified in the Offer on the
terms and conditions set forth in the Offer.
ARTICLE X
ALLOCATIONS OF INCOME, LOSSES AND CREDITS
Section 10.1 General. All items includable in the calculation of Income
or Loss not arising from a Sale or Refinancing, and all Tax Credits, shall be
allocated 99.98% to the Limited Partner, .01% to the Special Limited Partner and
.01% to the General Partner.
Section 10.2 Allocations From Sale or Refinancing. All Income and
Losses arising from a Sale or Refinancing shall be allocated between the Part-
ners 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; and
(2) Second, an amount of Income sufficient to increase the
Limited Partner's positive Capital Account balance to its Capital Contribution
and to increase the Special Limited Partner's positive Capital Account balance
to an amount equal to its Capital Contribution, shall be allocated to the
Limited Partner and the Special Limited Partner, respectively;
(3) Third, an amount of Income sufficient to increase the
General Partner's positive Capital Account balance to an amount equal to
its Capital Contribution; and
(4) The balance, if any, of such Income shall be allocated 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 99.98%
to the Limited Partner, .01% to the Special Limited Partner and .01% to the Gen-
eral Partner.
(c) Notwithstanding the foregoing provisions of Section 10.2(a) and
(b), in no event shall any Losses be allocated to the Limited Partner or the
Special Limited Partner if and to the extent that such allocation would create
or increase an Adjusted Capital Account Deficit for the Limited Partner or the
Special Limited Partner. In the event an allocation of 99.98% or .01% of each
item includable in the calculation of Income or Loss not arising from a Sale or
Refinancing, would create or increase an Adjusted Capital Account Deficit for
the Limited Partner or the Special Limited Partner, respectively, then so much
of the items of deduction other than projected depreciation shall be allocated
to the General Partner instead of the Limited Partner or the Special Limited
Partner as is necessary to allow the Limited Partner or the Special Limited
Partner to be allocated 99.98% and .01%, respectively, of the items of Income
and Project depreciation without creating or increasing an Adjusted Capital
Account Deficit for the Limited Partner or the Special Limited Partner, it being
the intent of the parties that the Limited Partner and the Special Limited
Partner always shall be allocated 99.98% and .01%, respectively, of the items of
Income not arising from a Sale or Refinancing and 99.98% and .01%, respectively,
of the Project depreciation.
Section 10.3 Special Allocations. The following special allocations
shall be made in the following order:
(a) Except as otherwise provided in Section 1.704-2(f) of the Treasury
Regulations, notwithstanding any other provisions of this Article X, if there is
a net decrease in Partnership Minimum Gain during any Partnership fiscal year,
each Partner shall be specially allocated items of Partnership income and gain
for such fiscal year (and, if necessary, subsequent fiscal years) in an amount
equal to such Person's share of the net decrease in Partnership Minimum Gain,
determined in accordance with Treasury Regulations Section 1.704-2(g).
Allocations pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Partner pursuant thereto.
The items to be so allocated shall be determined in accordance with Section
1.704-2(f)(6) and 1.704-2(j)(2) of the Treasury Regulations. This Section
10.3(a) is intended to comply with the minimum gain chargeback requirement in
Section 1.704-2(f) of the Treasury Regulations and shall be interpreted
consistently therewith.
(b) Except as otherwise provided in Section 1.704-2(i)(4) of the
Treasury Regulations, notwithstanding any other provision of this Article X, if
there is a net decrease in Partner Nonrecourse Debt Minimum Gain attributable to
a Partner Nonrecourse Debt during any Partnership fiscal year, each Person who
has a share of the Partner Nonrecourse Debt Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with Section 1.704-2(i)(5) of
the Treasury Regulations, shall be specially allocated items of Partnership
income and gain for such fiscal year (and, if necessary, subsequent fiscal
years) in an amount equal to such Person's share of the net decrease in Partner
Nonrecourse Debt Minimum Gain attributable to such Partner Nonrecourse Debt,
determined in accordance with Treasury Regulations Section 1.704-2(i)(4).
Allocations pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Partner pursuant thereto.
The items to be so allocated shall be determined in accordance with Sections
1.704-2(i)(4) and 1.704-2(j)(2) of the Treasury Regulations. This Section
10.3(b) is intended to comply with the minimum gain chargeback requirement in
Section 1.704-2(i)(4) of the Treasury Regulations and shall be interpreted
consistently therewith.
(c) In the event any Partner unexpectedly receives any adjustments,
allocations, or distributions described in Treasury Regulations Section
1.704-1(b)(2)(ii)(d)(4), Section 1.704-1(b)(2)(ii)(d)(5), or Section
1.704-1(b)(2)(ii)(d)(6), items of Partnership income and gain shall be specially
allocated to each such Partner in an amount and manner sufficient to eliminate,
to the extent required by the Treasury Regulations, the Adjusted Capital Account
Deficit of such Partner as quickly as possible, provided that an allocation
pursuant to this Section 10.3(c) shall be made if and only to the extent that
such Partner would have an Adjusted Capital Account Deficit after all other
allocations provided for in this Section 10.3 have been tentatively made as if
this Section 10.3(c) were not in the Agreement.
(d) In the event any Partner has a deficit Capital Account at the end
of any Partnership fiscal year which is in excess of the sum of (i) the amount
such Partner is obligated to restore, and (ii) the amount such Partner is deemed
to be obligated to restore pursuant to the penultimate sentences of Treasury
Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), each such Partner shall be
specially allocated items of Partnership income and gain in the amount of such
excess as quickly as possible, provided that an allocation pursuant to this
Section 10.3(d) shall be made if and only to the extent that such Partner would
have a deficit Capital Account in excess of such sum after all other allocations
provided for in this Section 10.3 have been tentatively made as if this Section
10.3(d) and Section 10.3(c) hereof were not in the Agreement.
(e) Nonrecourse Deductions for any fiscal year shall be specially
allocated 99.98% to the Limited Partner, .01% to the Special Limited Partner
and .01% to the General Partner.
(f) Any Partner Nonrecourse Deductions for any fiscal year shall be
specially allocated to the Partner who bears the economic risk of loss with
respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse
Deductions are attributable in accordance with Treasury Regulations Section
1.704-2(i)(1).
(g) To the extent an adjustment to the adjusted tax basis of any
Partnership asset pursuant to Code Section 734(b) or Code Section 743(b) is
required, pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(2) or
Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital
Accounts as the result of a distribution to a Partner in complete liquidation of
his interest in the Partnership, the amount of such adjustment to the Capital
Accounts shall be treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases such basis) and such
gain or loss shall be specially allocated to the Partners in accordance with
their interests in the Partnership in the event that Treasury Regulations
Section 1.704-1 (b)(2)(iv)(m)(2) applies, or to the Partner to whom such
distribution was made in the event that Treasury Regulations Section
1.704-1(b)(2)(iv)(m)(4) applies.
(h) To the extent the Partnership has taxable interest income with
respect to any promissory note pursuant to Section 483 or Section 1271 through
1288 of the Code:
(1) Such interest income shall be specially allocated to the
Limited Partner to whom such promissory note relates; and
(2) The amount of such interest income shall be excluded from
the Capital Contributions credited to such Partner's Capital Account in
connection with payments of principal with respect to such promissory note.
(i) In the event the adjusted tax basis of any investment tax credit
property that has been placed in service by the Partnership is increased
pursuant to Code Section 50(c), such increase shall be specially allocated among
the Partners (as an item in the nature of income or gain) in the same
proportions as the investment tax credit that is recaptured with respect to such
property is shared among the Partners.
(j) Any reduction in the adjusted tax basis (or cost) of Partnership
investment tax credit property pursuant to Code Section 50(c) shall be specially
allocated among the Partners (as an item in the nature of expenses or losses) in
the same proportions as the basis (or cost) of such property is allocated
pursuant to Treasury Regulations Section 1.46-3(f)(2)(i).
(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 .01% of
each such item at all times during the existence of the Partnership.
(n) Interest deduction on the Partnership indebtedness referred to in
Section 6.3 shall be allocated 100% to the General Partner.
Section 10.4 Curative Allocations. The allocations set forth in
Sections 10.2(c), 10.3(a), 10.3(b), 10.3(c), 10.3(d), 10.3(e), 10.3(f), and
10.3(g) hereof (the "Regulatory Allocations") are intended to comply with
certain requirements of the Treasury Regulations. It is the intent of the
Partners that, to the extent possible, all Regulatory Allocations shall be
offset either with other Regulatory Allocations or with special allocations of
other items of Partnership income, gain, loss, or deduction pursuant to this
Section 10.4. Therefore, notwithstanding any other provision of this Article X
(other than the Regulatory Allocations), with the Consent of the Special Limited
Partner, the General Partner shall make such offsetting special allocations of
Partnership income, gain, loss, or deduction in whatever manner the General
Partner, with the Consent of the Special Limited Partner, determines appropriate
so that, after such offsetting allocations are made, each Partner's Capital
Account balance is, to the extent possible, equal to the Capital Account balance
such Partner would have had if the Regulatory Allocations were not part of the
Agreement and all Partnership items were allocated pursuant to Sections 10.1,
10.2(a), 10.2(b), 10.3(h), 10.3(i), 10.3(j), 10.3(k), 10.3(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 99.98% to the Limited Partner, .01% to the Special Limited Partner and
.01% to the General Partner.
(b) In the event Partnership investment tax credit property is disposed
of during any taxable year, profits for such taxable year (and, to the extent
such profits are insufficient, profits for subsequent taxable years) in an
amount equal to the excess, if any, of (1) the reduction in the adjusted tax
basis (or cost) of such property pursuant to Code Section 50(c), over (2) any
increase in the adjusted tax basis of such property pursuant to Code Section
50(c) caused by the disposition of such property, shall be excluded from the
profits allocated pursuant to Section 10.1 and Section 10.2(a) hereof and shall
instead be allocated among the Partners in proportion to their respective shares
of such excess, determined pursuant to Section 10.3(i) and 10.3(j) hereof. In
the event more than one item of such property is disposed of by the Partnership,
the foregoing sentence shall apply to such items in the order in which they are
disposed of by the Partnership, so the profits equal to the entire amount of
such excess with respect to the first such property disposed of shall be
allocated prior to any allocations with respect to the second such property
disposed of, and so forth.
(c) For purposes of determining the Income, Losses, or any other items
allocable to any period, Income, Losses, and any such other items shall be
determined on a daily, monthly, or other basis, as determined by the General
Partner with the Consent of the Special Limited Partner, using any permissible
method under Code Section 706 and the Treasury Regulations thereunder.
(d) Solely for purposes of determining a Partner's proportionate share
of the "excess nonrecourse liabilities" of the Partnership within the meaning of
Treasury Regulations Section 1.752-3(a)(3), the Partners' interests in
Partnership profits are as follows: Limited Partner: 99.98%; Special Limited
Partner: .01%; General Partner: .01%.
(e) To the extent permitted by Section 1.704-2(h)(3) of the Treasury
Regulations, the General Partner shall endeavor to treat Distributions as having
been made from the proceeds of a Nonrecourse Liability or a Partner Nonrecourse
Debt only to the extent that such Distributions would cause or increase an
Adjusted Capital Account Deficit for any Partner who is not a General Partner.
Section 10.6 Tax Allocations: Code Section 704(c). In accordance with
Code Section 704(c) and the Treasury Regulations thereunder, income, gain, loss,
and deduction with respect to any property contributed to the capital of the
Partnership shall, solely for tax purposes, be allocated among the Partners so
as to take account of any variation between the adjusted basis of such property
to the Partnership for federal income tax purposes and its initial Gross Asset
Value (computed in accordance with Section 1.29(a) hereof).
In the event the Gross Asset Value of any Partnership asset is adjusted
pursuant to Section 1.27(b) hereof, subsequent allocations of income, gain,
loss, and deduction with respect to such asset shall take account of any
variation between the adjusted basis of such asset for federal income tax
purposes and its Gross Asset Value in the same manner as under Code Section
704(c) and the Treasury Regulations thereunder.
Any elections or other decisions relating to such allocations shall be
made by the General Partner with the Consent of the Special Limited Partner in
any manner that reasonably reflects the purpose and intention of this Agreement.
Allocations pursuant to this Section 10.6 are solely for purposes of federal,
state, and local taxes and shall not affect, or in any way be taken into account
in computing, any Person's Capital Account or share of Income, Losses, other
items, or distributions pursuant to any provision of this Agreement.
Section 10.7 Allocation Among Limited Partners. In the event that the
Interest of the Limited Partner hereunder is at any time held by more than one
Limited Partner all items which are specifically allocated to the Limited
Partner for any month pursuant to this Article X shall be apportioned among such
Persons according to the ratio of their respective profit-sharing interests in
the Partnership at the last day of such month.
Section 10.8 Allocation Among General Partners. In the event that the
Interest of the General Partner hereunder is at any time held by more than one
General Partner all items which are specifically allocated to the General
Partner for any month pursuant to this Article X shall be apportioned among such
Persons in such percentages as may from time to time be determined by agreement
among them without amendment to this Agreement or consent of the Limited Partner
or Consent of the Special Limited Partner.
Section 10.9 Modification of Allocations. The provisions of Articles X
and XI and other provisions of this Agreement are intended to comply with
Treasury Regulations Section 1.704 and shall be interpreted and applied in a
manner consistent with such section of the Treasury Regulations. In the event
that the General Partner determines, in its sole discretion, that it is prudent
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 In
come 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 pri-
ority:
(a) To pay the Deferred Management Fee, if any;
(b) To pay the current Reporting Fee and then to pay any accrued Report
ing Fees which have not been paid in full from previous years;
(c) To pay the Development Fee in accordance with the Development Ser-
vices 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 re-
maining after reduction for the payments made pursuant to subsections (a)
through (d) of this Section 11.1; and
(f) To the Limited Partner in an amount equal to 50% of the remaining
Net Operating Income and to the General Partner in an amount equal to 50% of
the remaining Net Operating Income.
Section 11.2 Distribution of Sale or Refinancing Proceeds. Sale or
Refinancing Proceeds shall be distributed in the following order:
(a) To the payment of the Mortgage Note and other matured debts and
liabilities of the Partnership, other than accrued payments, debts or other
liabilities owing to Partners or former Partners;
(b) To any accrued payments, debts or other liabilities owing to the
Partners or former Partners, including, but not limited to, accrued Reporting
Fees and Operating Loans, to be paid prorata if necessary;
(c) To the Limited Partner in an amount equal to its Capital Contribu-
tion;
(d) To the Special Limited Partner in an amount equal to its Capital
Contribution;
(e) To the General Partner in an amount equal to its Capital Contribu-
tion; and
(f) Thereafter, 40% to the Limited Partner and 60% to the General Part-
ner.
ARTICLE XII
TRANSFERS OF LIMITED
PARTNER'S INTEREST IN THE PARTNERSHIP
Section 12.1 Assignment of Limited Partner's Interest. The Limited
Partner and Special Limited Partner shall not have the right to assign all or
any part of their respective Interests 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.
(d) Notwithstanding this Section 12.1, the Partners recognize and
acknowledge, and consent and agree that the Limited Partner may assign all or a
portion of their Interest to a qualified commercial lender as a collateral and
security for an interim loan which the Limited Partner may obtain from the
lender.
THE LIMITED PARTNERSHIP INTEREST AND THE SPECIAL LIMITED PARTNERSHIP
INTEREST DESCRIBED HEREIN HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 AS AMENDED OR UNDER ANY STATE SECURITIES LAW. THESE INTERESTS MAY NOT BE
SOLD OR OTHERWISE TRANSFERRED UNLESS REGISTERED UNDER APPLICABLE FEDERAL AND
STATE SECURITIES LAWS OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
Section 12.2 Effective Date of Transfer. Any assignment of a Limited
Partner's Interest or Special Limited Partner's Interest pursuant to Section
12.1 shall become effective as of the last day of the calendar month in which
the last of the conditions to such assignment are satisfied.
Section 12.3 Invalid Assignment. Any purported assignment of an
Interest of a Limited Partner or Special Limited Partner otherwise than in
accordance with Section 12.1 or Section 12.6 shall be of no effect as between
the Partnership and the purported assignee and shall be disregarded by the
General Partner in making allocations and Distributions hereunder.
Section 12.4 Assignee's Rights to Allocations and Distributions. An
Assignee shall be entitled to receive allocations and Distributions from the
Partnership attributable to the Interest acquired by reason of any permitted
assignment from and after the first day of the calendar month following the
month which ends with the effective date of the transfer of such Interest as
provided in Section 12.2. The Partnership and the General Partner shall be
entitled to treat the assignor of such Partnership Interest as the absolute
owner thereof in all respects, and shall incur no liability for allocations and
Distributions made in good faith to such assignor, until such time as the
written instrument of assignment has been received by the Partnership.
Section 12.5 Substitution of Assignee as Limited Partner or Special Li-
mited 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 as such Partner possessed to constitute a successor as a transferee
of its Interest in the Partnership and to join with such transferee in making
the application to substitute such transferee as a Partner. However, such
executors, administrators or legal representatives will not have the right to
become Substitute Limited Partners or substitute Special Limited Partners in the
place of their respective predecessors-in-interest unless the General Partner
shall so consent.
ARTICLE XIII
WITHDRAWAL, REMOVAL AND REPLACEMENT OF
GENERAL PARTNER
Section 13.1 Withdrawal of General Partner.
(a) The General Partner may not Withdraw (other than as a result of an
Involuntary Withdrawal) without the Consent of the Special Limited Partner, and,
to the extent required, of Security Federal Savings Bank and the State Tax
Credit Agency. Withdrawal shall be conditioned upon the agreement of the Special
Limited Partner to be admitted as a successor General Partner, or if the Special
Limited Partner declines to be admitted as a successor General Partner then on
the agreement of one or more Persons who satisfy the requirements of Section
13.5 of this Agreement to be admitted as successor General Partner(s).
(b) Each General Partner shall indemnify and hold harmless the
Partnership and all Partners from its Withdrawal in violation of Section 13.1(a)
hereof. Each General Partner shall be liable for damages to the Partnership
resulting from its Withdrawal in violation of Section 13.1(a).
Section 13.2 Removal of General Partner.
(a) The Special Limited Partner or the Limited Partner, or both of
them, may remove the General Partner:
(1) For cause if such General Partner has:
(A) Been subject to Bankruptcy in accordance with
this Agreement;
(B) Committed any fraud, willful misconduct, breach
of fiduciary duty or other negligent conduct in the performance of its duties
under this Agreement;
(C) Been convicted of, or entered into a plea of
guilty to, a felony;
(D) Made personal use of Partnership funds or
properties;
(E) Violated the terms of the Mortgage Note, and such
violation prompts Security Federal Savings Bank to issue a default letter or
acceleration notice to the Partnership or General Partner;
(F) Failed to provide any loan, advance, Capital
Contribution or any other payment to the Partnership required under this
Agreement;
(G) Failed to obtain the Consent of the Special
Limited Partner prior to any decision, act or omission under circumstances where
this Agreement
requires that such consent be obtained;
(H) Breached any representation, warranty or covenant
contained in this Agreement, or failed to perform any other action which may be
required by this Agreement;
(I) Violated any federal or state tax law which
causes a recapture of LIHTC; or
(J) 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.
(2) As provided in Section 6.2(a) hereof.
(b) Written notice of the removal for cause of the General Partner
shall be served by the Special Limited Partner or the Limited Partner, or both
of them, upon the General Partner either by certified or by registered mail,
return receipt requested, or by personal service. Such notice shall set forth
the reasons for the removal, if any, and the date upon which the removal is to
become effective.
(c) Upon receipt of such notice of removal for cause, the General
Partner shall cause an accounting to be prepared covering the transactions of
the Partnership from the end of the previous fiscal year through the date of
receipt of such notice, and thereafter it shall not sell or dispose of
Partnership assets under any circumstances. The accounting shall be completed by
the effective date of the removal and shall be in sufficient detail to
accurately and fully reflect the earnings or losses for the period and the
financial condition of the Partnership. If the General Partner fails to cause
the accounting to be prepared within 30 days of receipt of the notice of removal
for cause then the Limited Partner may cause the accounting to be prepared. The
expenses of the accounting shall be borne by the General Partner.
Section 13.3 Effects of a Withdrawal. In the event of a Withdrawal, the
entire Interest of the Withdrawing General Partner shall immediately and
automatically terminate on the effective date of such Withdrawal, and such
General Partner shall immediately cease to be a General Partner, shall have no
further right to participate in the management or operation of the Partnership
or the Project or to receive any allocations or Distributions from the
Partnership or any other funds or assets of the Partnership, except as
specifically set forth below. In the event of a Withdrawal, any or all executory
contracts, including but not limited to the Management Agreement, between the
Partnership and the Withdrawing General Partner or its Affiliates may be
terminated by the Partnership, with the Consent of the Special Limited Partner,
upon written notice to the party so terminated.
Furthermore, notwithstanding such Withdrawal, the Withdrawing General
Partner shall be and shall remain, liable as a General Partner for all
liabilities and obligations incurred by the Partnership or by the General
Partner prior to the effective date of the Withdrawal, or which may arise upon
such Withdrawal. Any remaining Partner shall have all other rights and remedies
against the Withdrawing General Partner as provided by law or under this
Agreement.
The General Partner agrees that in the event of its Withdrawal it will
indemnify and hold the Limited Partner and the Special Limited Partner harmless
from and against all losses, costs and expenses incurred in connection with the
Withdrawal, including, without limitation, all legal fees and other expenses of
the Limited Partner and the Special Limited Partner in connection with the
transaction.
The following additional provisions shall apply in the event of a
Withdrawal:
(a) In the event of a Withdrawal which is not an Involuntary
Withdrawal, the Withdrawing General Partner shall have no further right to
receive any future allocations or Distributions from the Partnership or any
other funds or assets of the Partnership, nor shall it be entitled to receive or
to be paid by the Partnership any further payments of fees 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 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.
(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), and if the
Partnership does not purchase the Interest of the Withdrawing General Partner in
Partnership allocations, Distributions and capital, then the Withdrawing General
Partner shall retain its Interest in such items, but such Interest shall be held
as a special limited partner.
Section 13.4 Successor General Partner. Upon the occurrence of an event
giving rise to a Withdrawal of a General Partner, any remaining General Partner,
or, if there be no remaining General Partner, the Withdrawing General Partner or
its legal representative, shall promptly notify the Special Limited Partner of
such Withdrawal (the "Withdrawal Notice"). Whether or not the Withdrawal Notice
shall have been sent as provided herein, the Special Limited Partner shall have
the right to become a successor General Partner (and to become the successor
managing General Partner if the Withdrawing General Partner was previously the
managing General Partner). In order to effectuate the provisions of this Section
13.4 and the continuance of the Partnership, the Withdrawal of a General Partner
shall not be effective until the expiration of 120 days from the date on which
occurred the event giving rise to the Withdrawal, unless the Special Limited
Partner shall have elected to become a successor General Partner as provided
herein prior to expiration of such 120-day period, whereupon the Withdrawal of
the General Partner shall be deemed effective upon the notification of all the
other Partners by the Special Limited Partner of such election.
Section 13.5 Admission of Additional or Successor General Partner. No
Person shall be admitted as an additional or successor General Partner unless
(a) such Person shall have agreed to become a General Partner by a written
instrument which shall include the acceptance and adoption of this Agreement;
(b) the Consent of the Special Limited Partner to the admission of such Person
as a substitute General Partner, which consent may be withheld in the discretion
of the Special Limited Partner, shall have been given; and (c) such Person shall
have executed and acknowledged any other instruments which the Special Limited
Partner shall reasonably deem necessary or appropriate to affect the admission
of such Person as a substitute General Partner. If the foregoing conditions are
satisfied, this Agreement shall be amended in accordance with the provisions of
the Act, and all other steps shall be taken which are reasonably necessary to
effect the Withdrawal of the Withdrawing General Partner and the substitution of
the successor General Partner. Nothing contained herein shall reduce the Limited
Partner's Interest or the Special Limited Partner's Interest in the Partnership.
Section 13.6 Transfer of Interest. Except as otherwise provided herein,
the General Partner may not Withdraw from the Partnership, or enter into any
agreement as the result of which any Person shall become interested in the
Partnership, without the Consent of the Special Limited Partner.
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 main-
tain 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 in-
come tax information returns and reports, if any, for the six most recent tax-
able years;
(4) copies of the original of this Agreement and all amend
ments thereto;
(5) financial statements of the Partnership for the six most
recent fiscal years; and
(6) the Partnership's books and records for at least the
current and past three fiscal years.
(b) Upon the request of the Limited Partner, the General Partner shall
promptly deliver to the Limited Partner, at the expense of the Partnership, a
copy of the information set forth in Section 14.1(a) above. The Limited Partner
shall have the right upon reasonable request and during normal business hours to
inspect and copy any of the foregoing, or any of the other books and records of
the Partnership or the Project at its own expense.
Section 14.2 Accounting Reports.
(a) By February 20 of each calendar year the General Partner shall
provide to the Limited Partner and the Special Limited Partner all tax
information necessary for the preparation of their federal and state income tax
returns and other tax returns with regard to the jurisdiction(s) in which the
Partnership is formed and in which the Project is located.
(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; (3) a report setting forth the amount of all fees and other
compensation and Distributions and reimbursed expenses paid by the Partnership
for the fiscal year to the General Partner or Affiliates of the General Partner
and the services performed in consideration therefor, which report shall be
verified by the Partnership's Accountants, with the method of verification to
include, at a minimum, a review of the time records of individual employees, the
costs of whose services were reimbursed, and a review of the specific nature of
the work performed by each such employee, all in accordance with generally
accepted auditing standards and, accordingly, including such tests of the
accounting records and such other auditing procedures as the Accountants
consider appropriate in the circumstances; (4) a copy of the Project's rent roll
for the most recent calendar quarter; (5) a statement signed by the General
Partner indicating the number of apartment units which are occupied by Qualified
Tenants; and (6) a report of the significant activities of the Partnership
during the year.
(c) Within 60 days after the end of each fiscal quarter in which a Sale
or Refinancing of the Project occurs, the General Partner shall send to the
Limited Partner and the Special Limited Partner a report as to the nature of the
Sale or Refinancing and as to the Income and Losses for tax purposes and
proceeds arising from the Sale or Refinancing.
Section 14.3 Other Reports. The General Partner shall provide to the
Limited Partner and the Special Limited Partner:
(a) During the period of construction, a copy of the initial
construction schedule and any updates to the construction schedule, and by the
tenth day of each month a copy of the previous month's Construction Loan draw
request and the inspecting architect's application and certification of payment
(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
better, by the tenth day of each month within such period a copy of the previous
month's rent roll (through the last day of the month) and a tenant LIHTC
compliance worksheet similar to the monthly initial tenant certification
worksheet 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;
(f) During the Compliance Period, no later than the day any such
certification is filed, copies of any certifications which the Partnership must
furnish to federal or state governmental authorities administering any Tax
Credit program including, but not limited to, copies of all annual tenant
recertifications required under Section 42 of the Code;
(g) A quarterly report on operations, in the form attached hereto as
Exhibit "H", due on or before April 30 of each year for the first quarter of
operations, July 31 of each year for the second quarter of operations, October
31 of each year for the third quarter of operations and January 31 of each year
for the fourth quarter of operations which shall include, but is not limited to,
an unaudited income statement showing all activity in the reserve accounts
required to be maintained pursuant to Section VIII of this Agreement, statement
of income and expenses, balance sheet, rent roll as of the end of each calendar
quarter of each year, and third party verification of current utility allowance;
(h) By the annual renewal date of each and every year, an executed or-
iginal or certified copy of each and every Insurance policy or certificate re-
quired by the terms of this Agreement;
(i) On or before March 15th of each calendar year, the General Part-
ner's updated financial statement as of December 31 of the previous year;
(j) On or before November 1 of each calendar year, a copy of the
following year's proposed operating budget. Each such budget shall contain an
amount required for reserves in accordance with Article VIII and for the payment
of real estate taxes, insurance, debt service and other payments. Such budget
shall only be adopted with the Consent of the Special Limited Partner; and
(k) Notice of the occurrence, or of the likelihood of occurrence, of
any event which has had 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 and Section 14.3 within the time periods set
forth therein, the General Partner, using its own funds, shall pay as damages
the sum of $100 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. Such damages shall be paid forthwith by the General Partner, and
failure to so pay shall constitute a material default of the General Partner
hereunder and cause for removal under Section 13.2 hereof. In addition, if the
General Partner shall so fail to pay, the General Partner and its Affiliates
shall forthwith cease to be entitled to any fees hereunder (other than the
Development Fee) and/or to the payment of any 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 Rev-
enue 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 with the
tax return to be filed for the Partnership for the period encompassing the
Completion of Construction date and thereafter shall timely file any
certificates which the Partnership must furnish to federal or state governmental
authorities administering the Tax Credit programs under Section 42 of the Code.
(b) The General Partner, with the Consent of the Special Limited
Partner, may, but is not required to, cause the Partnership to make or revoke
the election referred to in Section 754 of the Code, as amended, or any similar
provisions enacted in lieu thereof.
ARTICLE XV
DISSOLUTION, WINDING UP, TERMINATION
AND LIQUIDATION OF THE PARTNERSHIP
Section 15.1 Dissolution of Partnership. The Partnership shall be dis-
solved upon the expiration of its term or the earlier occurrence of any of the
following events:
(a) The effective date of the Withdrawal or removal of the General
Partner, unless (1) at the time there is at least one other General Partner
(which may be the Special Limited Partner if it elects to serve as successor
General Partner under Section 13.4 hereof) who will continue as General Partner,
or (2) within 120 days after the occurrence of any such event the Limited
Partner elects to continue the business of the Partnership;
(b) The sale of the Project and the receipt in cash of the full amount
of the proceeds of such sale; or
(c) The written election to do so of the Limited Partner.
Notwithstanding the foregoing, however, in no event shall the
Partnership terminate prior to the expiration of its term if such termination
would result in a violation of the Mortgage Note or any other agreement with or
rule or regulation of Cass County to which the Partnership is subject.
Section 15.2 Return of Capital Contribution upon Dissolution. Except as
provided in Sections 7.3, 7.4 and 7.6 of this Agreement, which provide for a
reduction or refund of the Limited Partner's Capital Contribution under certain
circumstances, and which shall represent the personal obligation of the General
Partner, as well as the obligation of the Partnership, each Partner shall look
solely to the assets of the Partnership for all Distributions with respect to
the Partnership (including the return of its Capital Contribution) and shall
have no recourse therefor (upon dissolution or otherwise) against any General
Partner. No Partner shall have any right to demand property other than money
upon dissolution and termination of the Partnership, and the Partnership is
prohibited from such a distribution of property absent the Consent of the
Special Limited Partner.
Section 15.3 Distributions of Assets. Upon a dissolution of the
Partnership, the General Partner (or, if there is no General Partner then
remaining, such other Person(s) designated as the liquidator of the Partnership
by the Special Limited Partner or by the court in a judicial dissolution) shall
take full account of the Partnership assets and liabilities and shall liquidate
the assets as promptly as is consistent with obtaining the fair value thereof.
(a) Upon dissolution and termination, after payment of, or adequate
provision for, the debts and obligations of the Partnership pursuant to Section
11.2(a) through and including 11.2(c), the remaining assets of the Partnership
shall be distributed to the Partners in accordance with the positive balances in
their Capital Accounts, after taking into account all allocations under Article
X hereof.
(b) In the event that a General Partner has a deficit balance in its
Capital Account following the liquidation of the Partnership or its Interest, as
determined after taking into account all Capital Account adjustments for the
Partnership's taxable year in which such liquidation occurs, such General
Partner shall pay to the Partnership the amount necessary to restore such
deficit balance to zero in compliance with Treasury Regulation Section
1.704-1(b)(2)(ii)(b)(3).
The deficit make-up shall be paid by the General Partner by the end of
such taxable year and shall, upon liquidation of the Partnership, be paid to
creditors of the Partnership or distributed to other Partners in accordance with
their positive Capital Account balances. Notwithstanding, if the Special Limited
Partner has become successor General Partner, it shall not be responsible for
any deficit balance in its Capital Account which arose during the time the
former General Partner served as General Partner.
(c) With respect to assets distributed in kind to the Partners in
liquidation or otherwise:
(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.
Section 15.4 Deferral of Liquidation. If at the time of liquidation the
General Partner or other liquidator shall determine that an immediate sale of
part or all of the Partnership assets could cause undue loss to the Partners,
the liquidator may, in order to avoid loss, but only with the Consent of the
Special Limited Partner, either defer liquidation and retain all or a portion of
the assets or distribute all or a portion of the assets to the Partners in kind.
In the event that the liquidator elects to distribute such assets in kind, the
assets shall first be assigned a value (by appraisal by an independent
appraiser) and the unrealized appreciation or depreciation in value of the
assets shall be allocated to the Partners' Capital Accounts, as if such assets
had been sold, in the manner described in Section 10.2, and such assets shall
then be distributed to the Partners as provided herein. In applying the
preceding sentence, the Project shall not be assigned a value less than the
unamortized principal balance of any loan secured thereby.
Section 15.5 Liquidation Statement. Each of the Partners shall be
furnished with a statement prepared or caused to be prepared by the General
Partner or other liquidator, which shall set forth the assets and liabilities of
the Partnership as of the date of complete liquidation. Upon compliance with the
distribution plan as outlined in Sections 15.3 and 15.4, the Limited Partner and
Special Limited Partner shall cease to be such and the General Partner shall
execute, acknowledge and cause to be filed those certificates referenced in
Section 15.6.
Section 15.6 Certificates of Dissolution; Certificate of Cancellation
of Certificate of Limited Partnership.
(a) Upon the dissolution of the Partnership, the General Partner shall
cause to be filed in the office of, and on a form prescribed by the Secretary of
State of the State, a certificate of dissolution. The certificate of dissolution
shall set forth the Partnership's name, the Secretary of State's file number for
the Partnership, the event causing the Partnership's dissolution and the date of
the dissolution.
(b) Upon the completion of the winding up of the Partnership's affairs,
the General Partner shall cause to be filed in the office of, and on a form
prescribed by, the Secretary of State of the State, a certificate of
cancellation of the Certificate of Limited Partnership. The certificate of
cancellation of the Certificate of Limited Partnership shall set forth the
Partnership's name, the Secretary of State's file number for the Partnership,
and any other information which the General Partner determines to include
therein.
ARTICLE XVI
AMENDMENTS
This Agreement may not be amended by the General Partner absent the
Consent of the Special Limited Partner. Notwithstanding the foregoing, no
amendment shall change the Partnership to a general partnership; extend the term
of the Partnership beyond the date provided for in this Agreement; modify the
limited liability of the Limited Partner and the Special Limited Partner; allow
the Limited Partner to take control of the Partnership's business within the
meaning of the Act; reduce or defer the realization of any Partner's interest in
allocations, Distributions, capital or compensation hereunder, or increase any
Partner's obligations hereunder, without the consent of the Partner so affected;
or change the provisions of this Article XVI.
ARTICLE XVII
MISCELLANEOUS
Section 17.1 Voting Rights.
(a) The Limited Partner shall have no right to vote upon any matters
affecting the Partnership, except as provided in this Agreement. Notwithstanding
the foregoing, the Limited Partner may, without the concurrence of the General
Partner:
(1) Approve or disapprove, but, except as otherwise expressly
provided herein, not initiate, the Sale or Refinancing of the Project;
(2) Remove the General Partner and elect a substitute General
Partner as provided in this Agreement;
(3) Elect a successor General Partner upon the Withdrawal of
the General Partner;
(4) Approve or disapprove, but not initiate, the dissolution
of the Partnership; or
(5) Subject to the provisions of Article XVI hereof, amend
this Agreement.
(b) On any matter where the Limited Partner has the right to vote,
votes may only be cast at a duly called meeting of the Partnership or through
written action without a meeting.
(c) The Special Limited Partner shall have the right to consent to
those actions or inactions of the Partnership and/or General Partner as
otherwise set forth in this Agreement, and the General Partner is prohibited
from any action or inaction requiring such consent unless such consent has been
obtained.
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: Compass Square Development Corporation
1015 Michigan Ave.
Logansport, IN 46947-1577
With a Copy to: Katz & Korin
1120 Market Tower
10 West Market Street
Indianapolis, IN 46204-42964
Area Five Agency on Aging and
Community Services, Inc.
1801 Smith St.
Logansport, IN 46947
To the Limited Partner: WNC Institutional Tax Credit Fund VII, L.P.
c/o WNC & Associates, Inc.
3158 Redhill Ave., Suite 120
Costa Mesa, CA 92626-3416
To the Special
Limited Partner: WNC HOUSING, L.P.
3158 Redhill Ave., Suite 120
Costa Mesa, CA 92626-3416
Section 17.4 Successors and Assigns. All the terms and conditions of
this Agreement shall be binding upon and inure to the benefit of the successors
and assigns of the Partners.
Section 17.5 Recording of Certificate of Limited Partnership. If the
General Partner should deem it advisable to do so, the Partnership shall record
in the office of the County Recorder of the county in which the principal place
of business of the Partnership is located a certified copy of the Certificate of
Limited Partnership, or any amendment thereto, after such Certificate or
amendment has been filed with the Secretary of State of the State.
Section 17.6 Amendment of Certificate of Limited Partnership.
(a) The General Partner shall cause to be filed, within 30 days after
the happening of any of the following events, an amendment to the Certificate
of Limited Partnership reflecting the occurrence thereof:
(1) A change in the name of the Partnership.
(2) A change in the street address of the Partnership's
principal executive office.
(3) A change in the address, or the Withdrawal, of a General
Partner, or a change in the address of the agent for service of process, or
appointment of a new agent for service of process.
(4) The admission of a General Partner and that Partner's
address.
(5) The discovery by the General Partner of any false or
erroneous material statement contained in the Certificate of Limited Partnership
or any amendment thereto.
(b) The Certificate of Limited Partnership may also be amended in
conformity with this Agreement at any time in any other respect that the Gen-
eral Partner determines.
(c) The General Partner shall cause the Certificate of Limited
Partnership to be amended, when required or permitted as aforesaid, by filing a
certificate of amendment thereto in the office of, and on a form prescribed by,
the Secretary of State of the State. The certificate of amendment shall set
forth the Partnership's name, the Secretary of State's file number for the
Partnership and the text of the amendment.
Section 17.7 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, and said
counterparts shall constitute but one and the same instrument which may
sufficiently be evidenced by one counterpart.
Section 17.8 Captions. Captions to and headings of the Articles,
Sections and subsections of this Agreement are solely for the conveniences of
the parties, are not a part of this Agreement, and shall not be used for the
interpretation or determination of the validity of this Agreement or any
provision hereof.
Section 17.9 Saving Clause. If any provision of this Agreement, or the
application of such provision to any Person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to Persons or circumstances other than those as to which it is held invalid,
shall not be affected thereby.
Section 17.10 Tax Matters Partners. All the Partners hereby agree that
the Special Limited Partner shall be the "Tax Matters Partner" pursuant to the
Code and in connection with any audit of the federal income tax returns of the
Partnership; provided, however, that if the Special Limited Partner shall
withdraw from the Partnership or become Bankrupt, the General Partner shall
thereafter be the "Tax Matters Partner". If the Tax Matters Partner shall
determine to litigate any administrative determination relating to federal
income tax matters, it shall litigate such matter in such court as the Tax
Matters Partner shall decide in its sole discretion. In discharging its duties
and responsibilities, the Tax Matters Partner shall act as a fiduciary (i) to
the Limited Partner (to the exclusion of the other Partners) insofar as tax
matters related to the Tax Credits are concerned, and (ii) to all of the
Partners in other respects. The Limited Partner will make no claim against the
Partnership in respect of any action or omission by the Tax Matters Partner
during such time as the Special Limited Partner acts as the Tax Matters Partner.
Section 17.11 Expiration of Compliance Period.
(a) Notwithstanding any provision hereof to the contrary (other than
this Section 17.11), the Special Limited Partner shall have the right at any
time after the beginning of the last year of the Compliance Period to require,
by written notice to the General Partner, that the General Partner promptly
submit a written request to the applicable State Tax Credit Agency pursuant to
Section 42(h) of the Code (or any successor provision) that such agency endeavor
to locate within one year from the date of such written request a purchaser for
the Project who will continue to operate the Project as a qualified low income
property, at a purchase price that is not less than the minimum amount set forth
in Section 42(h)(6) of the Code (or any successor provision). In the event that
the State Tax Credit Agency obtains an offer satisfying the conditions of the
preceding sentence, the General Partner shall promptly notify the Special
Limited Partner in writing with respect to the terms and conditions of such
offer, and, if the Special Limited Partner notifies the General Partner that
such offer should be accepted, the General Partner shall cause the Partnership
promptly to accept such offer and to proceed to sell the Project pursuant to
such offer.
(b) Notwithstanding any other provision of this Agreement to the
contrary, the Special Limited Partner shall have the right at any time after the
end of the Compliance Period to require, by written notice to the General
Partner (the "Required Sale Notice"), that the General Partner promptly use its
best efforts to obtain a buyer for the Project on the most favorable terms then
available. The General Partner shall submit the terms of any proposed sale to
the Special Limited Partner for its approval in the manner set forth in Section
17.11(a) hereof. If the General Partner shall fail to so obtain a buyer for the
Project within six months of receipt of the Required Sale Notice or if the
Consent of the Special Limited Partner in its sole discretion shall be withheld
to any proposed sale, then the Special Limited Partner shall have the right at
any time thereafter to obtain a buyer for the Project on terms acceptable to the
Special Limited Partner (but not less favorable to the Partnership than any
proposed sale previously rejected by the Special Limited Partner). In the event
that the Special Limited Partner so obtains a buyer, it shall notify the General
Partner in writing with respect to the terms and conditions of the proposed sale
and the General Partner shall cause the Partnership promptly to sell the Project
to such buyer.
(c) A sale of the Project prior to the end of the Compliance Period may
only take place if the conditions of Section 42(j)(6) of the Code (or any
successor provision) will be satisfied upon such sale by having the purchaser of
the Project post the required bond on behalf of the Partnership.
Section 17.12 Number and Gender. All pronouns and any variations there-
of 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 Note, relative to the acceleration of the Mortgage Note 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.
IN WITNESS WHEREOF, this Agreement of Limited Partnership of
Kechel Tower L.P., a Indiana limited partnership, is made and entered into as
of the _____ day of _________________, 1998.
<PAGE>
GENERAL PARTNER
Compass Square Development Corporation
By: ___________________________________
Lawrence R. Ulrich,
President
LIMITED PARTNER
WNC Institutional Tax Credit Fund VII, L.P.
By: WNC Institutional Partners VII, L.P.
General Partner
By: WNC & ASSOCIATES, INC.
General Partner
By: _________________________
David N. Shafer,
Senior Vice President
SPECIAL LIMITED PARTNER
WNC HOUSING, L.P.
By: WNC & ASSOCIATES, INC.
General Partner
By: _______________________________
David N. Shafer,
Senior Vice President
This Agreement is acknowledged and agreed to by the undersigned for purposes of
complying with Section 9.12 and 9.13 of this Agreement:
DEVELOPER
By: Four County Comprehensive Mental
Health Center, Inc.
---------------------------------
Lawrence R. Ulrich
Executive Director
<PAGE>
Amended and Restated Agreement
of Limited Partnership of
St. Susanne Associates I, L.P.
<PAGE>
Amended and Restated
Agreement of Limited Partnership
of
St. Susanne Associates I, L.P.
This Amended and Restated Agreement of Limited Partnership is
being entered into effective as of the date written below by and between
Southwind Community Development Corporation, a Missouri Non-Profit Corporation
as the general partner (the "General Partner"), WNC Housing Tax Credit Fund VI,
L.P., Series 6, California limited partnership as the limited partner (the
"Limited Partner"), WNC Housing, L.P., as the special limited partner (the
"Class A Special Limited Partner"), Missouri Affordable Housing Fund X, L.P., a
Missouri limited partnership, as the special limited partner (the "Class B
Special Limited Partner"), and The Lockwood Group, L.L.P., a Missouri limited
liability partnership as the withdrawing limited partner (the "Original Limited
Partner").
RECITALS
WHEREAS, St. Susanne Associates I, L.P., a Missouri limited partnership
(the "Partnership") filed for record a certificate of limited partnership with
the Missouri Secretary of State on July 6, 1998. A partnership agreement dated
June 30, 1998 was entered into by and between Joseph A. Shepard and Kenneth M.
Vitor as general partners, and The Lockwood Group, L.L.P., a Missouri limited
liability partnership as the limited partner (the "Original Partnership
Agreement").
WHEREAS, a First Amendment to Agreement of Limited Partnership dated
May 12, 1999 was entered into to provide for the withdrawal of Joseph A. Shepard
and Kenneth M. Vitor as general partners, and the admittance of Southwind
Community Development Corporation, a Missouri Non-Profit Corporation as the
successor General Partner (the "First Amendment").
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, the Class A Special Limited Partner and Class
B 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, Class A Special Limited Partner
and the Class B 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 determination of
the respective rights, obligations and interests of the Partners to each other
and to the Partnership, and (vii) certain other matters.
NOW, THEREFORE, in consideration of their mutual agreements herein set
forth, the Partners hereby agree to amend and restate the Original Partnership
Agreement in its entirety to provide as follows:
ARTICLE I
DEFINITIONS
Section 1.1 1."Accountant" shall mean Mueller, Walla, Albertson, 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 Class A Special
Limited Partner. Notwithstanding any provision of this Agreement to the
contrary, the Class A Special Limited Partner shall have the discretion to
dismiss the Accountant for cause if such Accountant fails to provide, or
inaccurately provides in any material respect, the information required in
Section 14.2 or 14.3 of this Agreement.
Section 1.2 1."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 1."Actual Tax Credit" shall mean as of any point in time, the
total amount of the LIHTC actually allocated by the Partnership to the Limited
Partner, representing 99.98% of the LIHTC actually received by the Partnership,
as shown on the applicable tax returns of the Partnership.
Section 1.4 1."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 1."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 1."Agreement" or "Partnership Agreement" shall mean this
Amended and Restated Agreement of Limited Partnership, as it may be amended from
time to time. Words such as "herein," "hereinafter," "hereof," "hereto,"
"hereby" and "hereunder," when used with reference to this Agreement, refers to
this Agreement as a whole, unless the context otherwise requires.
Section 1.7 1."Apartment Housing" shall collectively mean the approximately
1.10 acres of land in Mt. Vernon, Lawrence County, Missouri, as more fully
described in Exhibit "A" attached hereto and incorporated herein by this
reference, and the Improvements.
Section 1.8 1."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 1.9 1."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 1.10 1."Break-even Operations" shall mean at such time as the
Partnership has Cash Receipts equal to Cash Expenses, as determined by the
Accountant and approved by the Class A Special Limited Partner which approval
shall not be unreasonably withheld. For purposes of this definition, any
one-time up front fee paid to the Partnership from any source shall not be
included in Cash Receipts to calculate Break-even Operations.
Section 1.11 1."Budget" shall mean the annual operating Budget of the
Partnership as more fully described in Section 14.3 of this Agreement.
Section 1.12 1."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 1.13 1."Capital Contribution" shall mean the total amount of money,
or the Gross Asset Value of property contributed to the Partnership, if any, by
all the Partners or any class of Partners or any one Partner as the case may be
(or by a predecessor-in-interest of such Partner or Partners), reduced by any
such capital which shall have been returned pursuant to Section 7.3, 7.4 or 7.6
of this Agreement. A loan to the Partnership by a Partner shall not be
considered a Capital Contribution.
Section 1.14 1."Cash Expenses" shall mean all cash operating obligations of
the Partnership (other than those covered by Insurance) in accordance with the
applicable Budget, including without limitation, the payment of Mortgage
payments, the Management Agent fees (which shall be deemed to include that
portion of such fees which is currently deferred and not paid), the funding of
reserves in accordance with Article VIII of this Agreement, advertising and
promotion, utilities, maintenance, repairs, Partner communications, legal,
telephone, any other expenses which may reasonably be expected to be paid in a
subsequent period but which on an accrual basis is allocable to the period in
question, such as Insurance, real estate taxes and audit, tax or accounting
expenses (excluding deductions for cost recovery of buildings; improvements and
personal property and amortization of any financing fees) and any seasonal
expenses (such as snow removal, the use of air conditioners in the middle of the
summer, or heaters in the middle of the winter) which may reasonably be expected
to be paid in a subsequent period shall be allocated equally per month over the
calendar year. Cash Expenses payable to Partners or Affiliates of Partners shall
be paid after Cash Expenses payable to third parties.
Section 1.15 1."Cash Receipts" shall mean actual cash received on a cash
basis by the Partnership from operating revenues of the Partnership, including
without limitation rental income (but not any subsidy thereof from the General
Partner or an Affiliate thereof) and laundry income, but excluding prepayments,
security deposits, Capital Contributions, borrowings, lump-sum payment, any
extraordinary receipt of funds, and any income earned on investment of its
funds.
Section 1.16 1."Class A 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 Class A Special Limited Partners
pursuant to this Agreement.
Section 1.17 1."Class B Special Limited Partner" shall mean Missouri
Affordable Housing Fund X, L.P., a Missouri limited partnership, and such other
Persons as are admitted to the Partnership as additional or substitute Class B
Special Limited Partners pursuant to this Agreement.
Section 1.18 1."Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, or any successor statute.
Section 1.19 1."Completion of Construction" shall mean the date the
Partnership has received the required certificates of occupancy (or the local
equivalent) for all sixteen (16) apartment units, or by the issuance of the
inspecting architect's certification, in a form substantially similar to the
form attached hereto as Exhibit "D" and incorporated herein by this reference,
with respect to completion of all the apartment units in the Apartment Housing;
provided, however, that Completion of Construction shall not be deemed to have
occurred if on such date any liens or other encumbrances as to title to the
Apartment Housing exist, other than those securing the Construction Loan or
Mortgage and/or those set forth in the Title Policy as of the date of closing as
consented to by the Limited Partner, and/or those consented to by the Limited
Partner and Class A Special Limited Partner and/or those liens in dispute which
do not show up on title because provisions for payment have been made.
Section 1.20 1."Compliance Period" shall mean the period set forth in
Section 42 (i)(1) of the Code, as amended, or any successor statute.
Section 1.21 1. "Consent" shall mean the agreement or approval of a Partner
which shall not be unreasonably withheld, delayed or conditioned in light of the
facts and circumstances. If a Partner fails to respond to any notice soliciting
consent within 30 days (or such other period as may be set forth in the
Agreement) after the date of such notice, such Partner shall be deemed for all
purposes of this Agreement to have granted Consent to the action proposed in
such notice.
Section 1.22 1."Consent of the Class A Special Limited Partner" shall mean
the prior written consent or approval of the Class A Special Limited Partner
which consent shall not be unreasonably withheld, delayed or conditioned in
light of the facts and circumstances. If any Partner fails to respond to any
notice soliciting Consent within 30 days (or such other period as may be set
forth in the Agreement) after the date of such notice, such Partner shall be
deemed for all purposes of this Agreement to have granted Consent to the action
proposed in such notice.
Section 1.23 1. "Construction Budget" shall mean the agreed upon cost of
construction of the Improvements, including soft costs (which includes, but is
not limited to, financing charges, market study, Development Fee, architect
fees, etc.), based upon the Plans and Specifications. The final Construction
Budget is referenced in the Construction and Operating Budget Agreement entered
into by and between the Partners the even date hereof and incorporated herein by
this reference.
Section 1.24 1."Construction Contract" shall mean the construction contract
dated November 17, 1999 in the amount of $722,000, entered into between the
Partnership and the Contractor pursuant to which the Improvements are being
constructed.
Section 1.25 1."Construction Lender" shall mean FmHA or any successor
thereto.
Section 1.26 1."Construction Loan" shall mean the loan obtained from
Construction Lender in the principal amount of $651,250 at an interest rate
equal to 6.25% per annum for a term of 8 (eight) months to provide funds for the
acquisition, renovation and/or construction and development of the Apartment
Housing. 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. This Construction Loan will convert into
permanent loan upon Construction Completion.
Section 1.27 1."Contractor" shall mean Licking Construction and Development
Company, which is the general construction contractor for the Apartment Housing.
Section 1.28 1."Debt Service Coverage" shall mean for the applicable period the
ratio between the Net Operating Income (excluding Mortgage payments)
and the debt service required to be paid on the Mortgage(s); as
example, a 1.10 Debt Service Coverage means that for every $1.00 of
debt service required to be paid there must be $1.10 of Net Operating
Income available. A worksheet for the calculation of Debt Service
Coverage is found in the Report of Operations attached hereto as
Exhibit "G" and incorporated herein by this reference.
Section 1.29 1."Deferred Management Fee" shall have the meaning set forth
in Section 9.2(c) hereof.
Section 1.30 1."Developer" shall mean Lockwood Development Company, L.L.C.
Section 1.31 1."Development Fee" shall mean the fee payable to the
Developer for services incident to the development and construction of the
Apartment Housing in accordance with the Development Services Agreement between
the Partnership and the Developer dated the even date herewith and incorporated
herein by this reference. Development activities do not include services for the
acquisition of the land or syndication activities.
Section 1.32 1."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 1.33 1."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 1.34 1."Financial Interest" shall mean the General Partner's
capital interest in the Partnership to be contributed and maintained pursuant to
the requirements of FmHA Instruction 1944-E, Section 1944.211(a)(13)(ii) or any
amendments thereto. Such Financial Interest shall not affect the Partners'
allocable share of the Profits, Losses, Tax Credits or Cash Flow From Operations
as set forth in this Agreement.
Section 1.35 1."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 1.36 1."FmHA" shall mean the United States Department of
Agriculture, Rural Development (formerly Farmers Home Administration) or any
successor thereto.
Section 1.37 1."FmHA Interest Credit Agreement" shall mean the Multiple
Family Housing Interest Credit and Rental Assistance Agreement (Form FmHA 1944-7
or any successor thereof) between the FmHA and the Partnership whereby FmHA will
provide a monthly credit subsidy to the Partnership's Mortgage account when the
Partnership makes each monthly payment on the Mortgage.
Section 1.38 1."FmHA Loan Agreement" shall mean the Loan Agreement for an
RRH Loan to a Limited Partnership Operating on a Limited Profit Basis (Form FmHA
1944-34 or any successor thereof) between the FmHA and the Partnership made in
consideration of the Mortgage Loan to the Partnership by the FmHA pursuant to
Section 515(b) of the Housing Act of 1949 to build a low to moderate income
apartment complex.
Section 1.39 1."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 1.40 1."General Partner" shall mean Southwind Community Development
Corporation, a Missouri Non-Profit Corporation and such other Persons as are
admitted to the Partnership as additional or substitute General Partners
pursuant to this Agreement.
Section 1.41 1."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 Class A
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 1.41(d) to the extent the General Partner determines
that an adjustment pursuant to Section 1.41(b) hereof is necessary or
appropriate in connection with a transaction that would otherwise result in an
adjustment pursuant to this Section 1.41(d).
If the Gross Asset Value of an asset has been determined or adjusted
pursuant to Section 1.41(a), Section 1.41(b), or Section 1.41(d) hereof, such
Gross Asset Value shall thereafter be adjusted by the depreciation taken into
account with respect to such asset for purposes of computing Income and Losses.
Section 1.42 1."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 1.43 1."Improvements" shall mean the 2 buildings containing sixteen
(16) apartment units and ancillary and appurtenant facilities (including those
intended for commercial use, if any,) being constructed for family built in
accordance with the Project Documents. It shall also include all furnishings,
equipment and personal property used in connection with the operation thereof.
Section 1.44 1."Incentive Management Fee" shall have the meaning set forth
in Section 9.2(e) hereof.
Section 1.45 1."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 1.45 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 1.45 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 1.41(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 tax purposes
shall be computed by reference to the Gross Asset Value of the property disposed
of, notwithstanding that the adjusted tax basis of such property differs from
its Gross Asset Value;
(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.
For purposes of this Agreement, the term Income when used alone shall
include all items of income or revenue contemplated in this Section and the term
Losses when used alone shall include all items of loss or deductions
contemplated in this Section.
Section 1.46 1."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 Apartment Housing 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;
(d) all Insurance polices shall name the Partnership as the named
insured, the Limited Partner as an additional insured, and WNC & Associates,
Inc. as the certificate holder;
(e) all Insurance policies shall include a provision to notify the
insured, the Limited Partner and the certificate holder 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 WNC & Associates, Inc., as
certificate holder.
Section 1.47 1."Insurance Company" shall mean any insurance company engaged
by the General Partner for the Partnership with the Consent of the Class A
Special Limited Partner which Insurance Company shall have an A rating or better
for financial safety by A.M. Best or Standard & Poor's.
Section 1.48 1."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 1.49 1."Involuntary Withdrawal" means any Withdrawal caused by the
death, adjudication of insanity or incompetence, Bankruptcy of a General
Partner, or the removal of a General Partner pursuant to Section 13.2 hereof.
Section 1.50 1."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 1.51 1."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 1.52 1."Management Agent" shall mean the property management
company which oversees the property management functions for the Apartment
Housing and which is on-site at the Apartment Housing. The initial Management
Agent shall be Lockwood Realty Inc.
Section 1.53 1."Management Agreement" shall mean the agreement between the
Partnership and the Management Agent for property management services. The
initial management fee shall equal $28 per unit. Neither the Management
Agreement nor ancillary agreement shall provide for an initial rent-up fee, a
set-up fee, nor any other similar pre-management fee payable to the Management
Agent. The Management Agreement shall provide that it will be terminable at will
by the Partnership at anytime following the Withdrawal or removal of the General
Partner and, in any event, on any anniversary of the date of execution of the
Management Agreement, without payment or penalty for failure to renew the same.
Section 1.54 1."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 Apartment Housing to be
occupied by tenants whose incomes are equal to or less than the required
percentage of the area median gross income.
Section 1.55 1."Missouri Tax Credits" shall mean the tax credit under the
Missouri Income tax providing for low-income housing by the State of Missouri.
Section 1.56 1."Mortgage" or "Mortgage Loan" shall mean the permanent
nonrecourse financing wherein the Partnership promises to pay Rural Development,
or its successor or assignee, the principal sum of $673,500, plus interest on
the principal at 1% per annum over a term of 30 years and amortized over 50
years. Where the context admits, the term "Mortgage" or "Mortgage Loan" shall
include any mortgage, deed, deed of trust, note, regulatory agreement, security
agreement, assumption agreement or other instrument executed in connection with
the Mortgage which is binding on the Partnership; and in case any Mortgage is
replaced or supplemented by any subsequent mortgage or mortgages, the Mortgage
shall refer to any such subsequent mortgage or mortgages. Prior to closing the
Mortgage, the General Partner shall provide to the Limited Partner a draft of
the Mortgage documents for review.
Section 1.57 1."Net Operating Income" shall mean the cash available for
Distribution on an annual basis, when Cash Receipts exceed Cash Expenses.
Section 1.58 1."Non-Profit Corporation" shall mean a corporation organized
exclusively for charitable and/or education purposes, including for such
purposes, the making of distributions to organizations which qualify as exempt
organization under Section 501 (c)(4) of the Internal Revenue of 1986, as
amended from time to time. The corporation shall have the power to acquire,
improve and to sell or operate any real or personal or interest therein or
appurtenant thereto.
Section 1.59 1."Nonrecourse Deductions" shall have the meaning given it in
Treasury Regulations Section 1.704-2(b)(1).
Section 1.60 1."Nonrecourse Liability" shall have the meaning given it in
Treasury Regulations Section 1.704-2(b)(3).
Section 1.61 1."Operating Deficit" shall mean, for the applicable period,
insufficient funds to pay operating costs when Cash Expenses exceed Cash
Receipts, as determined by the Accountant and approved by the Class A Special
Limited Partner which approval shall not be unreasonably withheld; provided,
however, that for purposes of determining Operating Deficit funding of reserves
shall be excluded from Cash Expenses.
Section 1.62 1."Operating Deficit Guarantee Period" shall mean the period
commencing with the date of this Agreement and ending three years following
three months of Break-even Operations.
Section 1.63 1."Operating Loans" shall mean loans made by the General
Partner to the Partnership pursuant to Article VI of this Agreement, which loans
do not bear interest and are repayable only as provided in Article XI of this
Agreement.
Section 1.64 1."Original Limited Partner" shall mean The Lockwood Group,
L.L.P.
Section 1.65 1."Partner(s)" shall collectively mean the General Partner,
the Limited Partner, Class A Special Limited Partner and the Class B Special
Limited Partner or individually may mean any Partner as the context dictates.
Section 1.66 1."Partner Nonrecourse Debt" shall have the meaning set forth
in Section 1.704-2(b)(4) of the Treasury Regulations.
Section 1.67 1."Partner Nonrecourse Debt Minimum Gain" shall mean an
amount, with respect to each Partner Nonrecourse Debt, equal to the Partnership
Minimum Gain that would result if such Partner Nonrecourse Debt were treated as
a Nonrecourse Liability, determined in accordance with Section 1.704-2(i)(3) of
the Treasury Regulations.
Section 1.68 1."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 1.69 1."Partnership" shall mean the limited partnership continued
under this Agreement.
Section 1.70 1."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 1.71 1."Permanent Mortgage Commencement" shall mean the first date
on which all of the following have occurred: (a) the Construction Loan shall
have been repaid in full; (b) the Mortgage shall have closed and funded; and (c)
amortization of the Mortgage shall have commenced. Section 1.72 1."Person" shall
collectively mean an individual, proprietorship, trust, estate, partnership,
joint venture, association, company, corporation or other entity.
Section 1.73 1."Plans and Specifications" shall mean the plans and
specifications for the construction of the Improvements which are approved by
the local city/county building department with jurisdiction over the
construction of the Improvements and which plans and specifications are referred
to in the Construction Contract.
Section 1.74 1."Project Documents" shall mean all documents relating to the
Construction Loan, Mortgage Loan and Construction Contract. It shall also
include all documents required by any governmental agency having jurisdiction
over the Apartment Housing in connection with the development, construction and
financing of the Apartment Housing, including but not limited to, the approved
Plans and Specifications for the development and construction of the Apartment
Housing.
Section 1.75 1."Projected Annual Tax Credits" shall mean LIHTC in the
amount of $11,239 for 2000, $33,710 for 2001 through 2009, and $22,471 for 2010,
which the General Partner has projected to be the total amount of LIHTC which
will be allocated to the Limited Partner by the Partnership, constituting 99.98%
of the aggregate amount of LIHTC of $337,170 to be available to the Partnership.
Section 1.76 1."Projected Missouri Tax Credits" shall mean Missouri Tax
Credits in the amount of $337,170.
Section 1.77 1."Projected Tax Credits" shall mean LIHTC in the aggregate
amount of $337,170.
Section 1.78 1."Rent Restriction Test" shall mean the test pursuant to
Section 42 of the Code whereby the gross rent charged to tenants of the
low-income apartment units in the Apartment Housing cannot exceed 30% of the
qualifying income levels of those units under Section 42.
Section 1.79 1."Reporting Fee" shall have the meaning set forth in Section
9.2(d) hereof.
Section 1.80 1."Revised Projected Missouri Tax Credits" shall have the
meaning set forth in Section 7.4 (h) (1) hereof.
Section 1.81 1."Revised Projected Tax Credits" shall have the meaning set
forth in Section 7.4(a) hereof.
Section 1.82 1."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 Apartment Housing 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 1.83 1."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 Apartment Housing.
Section 1.84 1."State" shall mean the State of Missouri.
Section 1.85 1."State Tax Credit Agency" shall mean the state agency of
Missouri, which has the responsibility and authorization to administer the LIHTC
program in Missouri.
Section 1.86 1."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 1.87 1."Tax Credit" shall mean any credit other than Missouri Tax
Credits 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 1.88 1."Tax Credit Conditions" shall mean for the duration of the
Compliance Period, any and all restrictions including, but not limited to,
applicable federal, state, and local laws, rules and regulations, which must be
complied with in order to qualify for the LIHTC or to avoid an event of
recapture in respect of the LIHTC.
Section 1.89 1."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 1.90 1."Title Policy" shall mean the policy of insurance covering
the fee simple title to the Apartment Housing from a company approved by the
Class A Special Limited Partner. The Title Policy shall be an ALTA owners title
policy naming the Partnership as insured and including a non-imputation and
fairway endorsement. The Title Policy shall delete the standard exception for
rights-of-way, easements, or claims of easements, which are not shown on a valid
survey. The Title Policy shall be in an amount not less than the Construction
Loan amount and the Limited Partner's Capital Contribution.
Section 1.91 1."TRA 1986" shall mean the Tax Reform Act of 1986.
Section 1.92 1."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 1.93 1."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 "St. Susanne Associates I, L.P."
ARTICLE III
PRINCIPAL EXECUTIVE OFFICE/AGENT FOR SERVICE
Section 3.1 Principal Executive Office. The principal executive office
of the Partnership is located at 1423 David, Mt. Vernon, Missouri 65712, 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 Donald E. Meirick, whose address 1423
David, Mt. Vernon, Missouri 65712 is or as otherwise set forth in the
Partnership's certificate of limited partnership.
ARTICLE IV
PURPOSE
Section 4.1 Purpose of the Partnership. The purpose of the Partnership
is to acquire, construct, own and operate the Apartment Housing 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
Apartment Housing. The Partnership shall not engage in any business or activity
which is not incident to the attainment of such purpose.
Section 4.2 Authority of the Partnership. In order to carry out its
purpose, the Partnership is empowered and authorized to do any and all acts and
things necessary, appropriate, proper, advisable or incidental to the
furtherance and accomplishment of its purpose, and for protection and benefit of
the Partnership, including but not limited to the following:
(a) acquire ownership of the real property referred to in Exhibit "A"
attached hereto;
(b) construct, renovate, rehabilitate, own, maintain and operate the
Apartment Housing in accordance with the Plans and Specifications;
(c) provide housing, subject to the Minimum Set-Aside Test and the Rent
Restriction Test and consistent with the requirements of the Project Documents
so long as any Project Documents remain in force;
(d) maintain and operate the Apartment Housing, including hiring the
Management Agent (which Management Agent may be any of the Partners or an
Affiliate thereof) and entering into any agreement for the management of the
Apartment Housing during its rent-up and after its rent-up period in accordance
with this Agreement;
(e)enter into the Construction Loan and Mortgage;
(f) rent dwelling units in the Apartment Housing from time to time, in
accordance with the provisions of the Code applicable to LIHTC; and
(g) do any and all other acts and things necessary or proper in
furtherance of the Partnership business and in accordance with this Agreement.
ARTICLE V
TERM
The Partnership term commenced upon the filing of the Certificate of
Limited Partnership in the office of, and on the form prescribed by, the
Secretary of State of the State, and shall continue until December 31, 2051
unless terminated earlier in accordance with the provisions of this Agreement or
as otherwise provided by law.
ARTICLE VI
GENERAL PARTNER'S CONTRIBUTIONS AND LOANS
Section 6.1 Capital Contribution of General Partner. The General
Partner shall make a Capital Contribution in the amount required by FmHA. In
addition, the General Partner's Interest was earned for its services relating to
the acquisition of land including locating, negotiating and closing on the
purchase of the real property upon which the Improvements are, or will be,
erected and syndication including services in forming the Partnership, locating
and approving the Limited Partner, the Class A Special Limited Partner, and
Class B Special Limited Partner as the limited partners in the Partnership,
negotiating and finalizing this Agreement and for such other services described
in Treasury Regulation Section 1.709-2(B).
Section 6.2 Construction Obligations.
(a) The General Partner shall cause Completion of Construction in
accordance with the Project Documents, pay all expenses and costs with respect
to financing the Apartment Housing through Completion of Construction, equip the
Apartment Housing 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 and pay all other costs incident to the
Apartment Housing through Completion of Construction. 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
construction financing shortfalls. Any such advances by the General Partner
pursuant to the previous sentence shall not change the Interest of any Partner
in the Partnership and shall be considered a cost overrun and not be repayable.
(b) In addition, if (1) the Improvements are not completed on or before
December 1, 2000 ("Completion Date") (which date may be extended in the events
of Force Majeure, but in no event longer than three months from the Completion
Date); (2) prior to completing the Improvements, there is an uncured default
under or termination of the Construction Loan, Mortgage Loan commitment, or
other material documents; or (3) a foreclosure action is commenced against the
Partnership, then at the Class A Special Limited Partner's election, either the
General Partner will be removed from the Partnership and the Class A Special
Limited Partner will be admitted as successor General Partner, all in accordance
with Article XIII hereof, or the General Partner will repurchase the Interest of
the Limited Partner and the Class A Special Limited Partner for an amount equal
to the amounts theretofore paid by the Limited Partner and the Class A Special
Limited Partner shall have no further Interest in the Partnership. If the
Limited Partner elects to have the General Partner repurchase the Interest of
the Limited Partner then the repurchase shall occur within 60 days after the
General Partner receives written demand from the Limited Partner.
Section 6.3 Operating Obligations. From Completion of Construction
until three consecutive months of Break-even Operations, the General Partner
will provide the necessary funds to pay any Operating Deficits which funds shall
not change the Interest of any Partner and shall be considered a cost overrun
and not be repayable. For the balance of the Operating Deficit Guarantee Period
the General Partner will provide Operating Loans to pay any Operating Deficits.
The aggregate maximum amount of the Operating Loan(s) the General Partner will
be obligated to lend will be equal to one year's operating expenses (including
debt and reserves) approved by the General Partner and the Class A Special
Limited Partner. 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 6.4 Other General Partner Loans. After expiration of the
Operating Deficit Guarantee Period, with the Consent of the Class A Special
Limited Partner and 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 10-year Treasury
money market rate in effect as of the day of the General Partner loan, 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 Class A 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 $100. Effective as of the date of this Agreement, the
Original Limited Partner's Interest has been liquidated and the Partnership has
reacquired the Original Limited Partner's Interest in the Partnership. 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 $254,850, 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) $191,138 shall be payable upon the Limited Partner's receipt and
approval of the following documents:
(1) a legal opinion in a form substantially similar to the
form of opinion attached hereto as Exhibit "B" and incorporated herein by
this reference;
(2) a fully executed Certification and Agreement in the form
attached hereto as Exhibit "C" and incorporated herein by this reference;
(3) a copy of the Title Policy naming the Limited Partner
as co-insured;
(4) closing and funding of the Construction Loan;
(5) Insurance required during construction;
(6) a copy of the recorded grant deed (warranty deed);
(7) copy of executed Construction Loan documents; and
(8) construction costs, sources and uses and operating
budget.
(b) $12,743 shall be payable upon the Limited Partner's receipt and
approval of the following documents:
(1) upon 50% Completion of Construction as evidenced by the
certification signed by the Inspecting Architect in a form substantially similar
to the form attached hereto as Exhibit "D" and incorporated herein by this
reference, indicating that the Improvements have been completed substantially in
accordance with the Project Documents; and
(2) the construction draw requests.
(c) $17,840 shall be payable upon the Limited Partner's receipt and
approval of the following documents:
(1) upon Completion of Construction as evidenced by the
certification signed by the Inspecting Architect in a form substantially similar
to the form attached hereto as Exhibit "D" and incorporated herein by this
reference, indicating that the Improvements have been completed substantially in
accordance with the Project Documents;
(2) 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 Apartment Housing;
(3) a letter from the Contractor in a form substantially
similar to the form attached hereto as Exhibit "F" and incorporated herein by
this reference stating that all amounts payable to the Contractor have been paid
in full and that the Partnership is not in violation of the Construction
Contract;
(4) a copy of the updated Title Policy naming the Limited
Partner as co-insured; and
(5)the construction documents required pursuant to Section
14.3(a) of this Agreement, if not previously provided to the Limited Partner.
(6) an original AIA Document G702 which includes a line item
break-down of the Construction Budget (which shall include, description of work
to be performed or materials to be supplied, total dollar amount of the work or
materials, dollar amount of work previously completed and paid or materials
supplied and paid, dollar amount of work or materials to be paid per the current
disbursement request, dollar amount of materials stored, total dollar amount of
work completed and sorted as of the current disbursement date, percentage of
completion, dollar amount of work or materials needed to complete the line item,
and retainage) or similar form acceptable to the Class A Special Limited
Partner; and
(d) $16,565 shall be payable upon the Limited Partner's receipt and
approval of the following documents:
(1) debt service coverage of 1.10 for 90 consecutive days; and
(2) tenant income verification data to determine that 100%
of the units in the Apartment Housing qualify under Section 42 of the Code.
(e) $16,564 shall be payable upon the Limited Partner's receipt and
approval of the following documents:
(1) a fully executed Internal Revenue Code Form 8609, or any
successor form;
(2) an audited construction cost certification (which includes
an itemized cost breakdown);
(3) the Accountant's final Tax Credit certification in a form
substantially similar to the form attached hereto as Exhibit "E" and
incorporated herein by this reference; and
(4)any documents previously not provided to the Limited Part-
ner but required pursuant to this Section 7.2 and Sections 14.3(a) and
(b).
(f) The Class B Special Limited Partner shall make a total Capital
Contribution in the amount of $84,293 in cash, on the dates and subject to the
conditions herein as follows:
(1) $67,434 shall be paid when the payment of the Limited Part
ner's Capital Contribution in Section 7.2(a) becomes due and payable;
(2) $5,901 shall be paid upon 50% Completion of Construction;
(3) $5,901 shall be paid upon State designation as evidenced
by issuance of the Missouri eligibility statements; and
(4) $5,057 shall be paid upon the initial 100% tax credit
qualified occupancy and attainment of 1.10 Debt Service Coverage.
(g) In the event the Limited Partner fails to make a Capital
Contribution payment when due as provided in this Section, the General Partner
shall give written notice to the Limited Partner of its failure to make the
required Capital Contribution payment. The Limited Partner shall have fifteen
calendar days to either: (i) pay the Capital Contribution payment; or (ii)
provide the General Partner with a written explanation identifying the
conditions precedent to payment which the Partnership has not satisfied which
are the Limited Partner's basis for non-payment; or (iii) the Limited Partner
can do nothing. If the Limited Partner does not make its Capital Contribution
payment within the fifteen day notice period, the General Partner may request a
copy of Limited Partner's financial statements to verify that the Limited
Partner has the required Capital Contribution funds on deposit and has the
ability to make the disputed Capital Contribution payment. The Limited Partner,
within ten (10) business days of such request shall provide the General Partner
with its or an acceptable guarantor's financial statement, or in the alternative
in its sole and absolute discretion may deposit the disputed funds into an
escrow account to be held until the resolution of the dispute. In the event the
Limited Partner cannot demonstrate its ability to pay the Capital Contribution
payment as evidenced by the above documents or deposit then the Limited Partner
may sell its Interest within sixty (60) days to a third party purchaser
acceptable to the General Partner, which acceptance shall not be unreasonably
withheld. If the Limited Partner does not elect to sell its Interest, or elects
to sell its Interest and does not sell it within the sixty (60) day period, then
the Limited Partner's Interest may be reduced as provided below at the General
Partner's election. The Interest of the Limited Partner shall be reduced by
multiplying the Interest by a fraction, the numerator of which is the difference
between the Limited Partner's total Capital Contribution and the Limited
Partner's paid in Capital Contribution and the denominator is the Limited
Partner's total Capital Contribution. Upon reduction of the Interest of the
Limited Partner, the Partnership may sell the remaining Interest to any person
and admit the purchaser of the Interest as a Limited Partner. Notwithstanding,
if the Limited Partner does not make its Capital Contribution payment within the
fifteen-day notice period, and the Limited Partner has demonstrated it has the
financial ability to make the Capital Contribution payment, then any Partner may
arbitrate the non-payment dispute. Such arbitration shall be mandatory and shall
be conducted under the auspice of the American Arbitration Association in the
State. The decision of the arbitrator may be entered in any court having
jurisdiction and may be appealable as if it were the decision of that court. The
Partners shall share equally the expenses of arbitration, including the
arbitrator's fee, provided, however, that the arbitrator, in the arbitrator's
sole discretion, may award costs to the prevailing party. The Partner filing the
arbitration request may seek any remedy it deems appropriate for non-payment of
the Limited Partner's Capital Contribution payment.
(h) The aforementioned Capital Contributions will be evidenced by the
Limited Partner's secured note in favor of the Partnership. The Partnership may,
in its discretion, transfer or assign to a third party the Limited Partner's
secured note.
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 Class A Special Limited Partner and or the Class B Special Limited
Partner, the Partnership shall repurchase the Limited Partner's Interest and/or
the Class A Special Limited Partner and or the Class B 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 Class A Special
Limited Partner and Class B Special Limited Partner has theretofore made in the
event that, for any reason, the Partnership shall fail to:
(a) cause the Apartment Housing to be placed in service by December 1,
2000;
(b) achieve 90% occupancy of the Apartment Housing by satisfying the
minimum Set-Aside Test by February 1, 2001;
(c) obtain Permanent Mortgage Commencement by September 1, 2000;
(d) meet both the Minimum Set-Aside Test and the Rent Restriction Test
not later than December 31 of the first year the Partnership elects the LIHTC to
commence in accordance with the Code; and
(e) obtain a carryover allocation, within the meaning of Section 42 of
the Code, from the State Tax Credit Agency on or before December 31, 1999.
Section 7.4 Adjustment of Limited Partner's Capital Contribution.
(a) The amount of the Limited Partner's and Class A Special Limited
Partner's Capital Contribution was determined in part upon the amount of Tax
Credits that were expected to be available to the Partnership, and was based on
the assumption that the Partnership would be eligible to claim, in the
aggregate, the Projected Tax Credits. If the anticipated amount of Projected Tax
Credits to be allocated to the Limited Partner and the Class A Special Limited
Partner as evidenced by IRS Form 8609, Schedule A thereto, and the audited
construction cost certification provided to the Limited Partner and the Class A
Special Limited Partner are less than or greater than $337,136 (the new Tax
Credit amount, if applicable, shall be referred to as the "Revised Projected Tax
Credits") then the Limited Partner's and Class A Special Limited Partner's
Capital Contribution provided for in Section 7.2 and Section 7.5 respectively
shall be adjusted by the amount which will make the total Capital Contribution
to be paid by the Limited Partner and Class A Special Limited Partner to the
Partnership equal to 75.60% of the Revised Projected Tax Credits so anticipated
to be allocated to the Limited Partner and Class A Special Limited Partner. If
the Capital Contribution adjustment referenced in this Section 7.4(a) is a
reduction which is greater than the remaining Capital Contribution to be paid by
the Limited Partner and the Class A 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 Class A Special Limited Partner and to
pay the shortfall. If the Capital Contribution adjustment referenced in this
Section 7.4(a) is an increase then the Limited Partner and Class A Special
Limited Partner shall have ninety days from the date the Limited Partner and
Class A Special Limited Partner have received notice from the General Partner to
pay the increase.
(b) The General Partner is required to use its best efforts to rent
100% of the Apartment Housing's apartment units to tenants who meet the Minimum
Set-Aside Test throughout the Compliance Period. If at the end of each calendar
year during the first five calendar years following the year in which the
Apartment Housing is placed in service, the Actual Tax Credit for any fiscal
year or portion thereof is or will be less than 95% of the Projected Annual Tax
Credit, or the Projected Annual Tax Credit as modified by Section 7.4(a) of this
Agreement if applicable (collectively the "Annual Tax Credit") (the "Annual
Credit Shortfall"), then unless the Annual Credit Shortfall shall have
previously been addressed under Section 7.4(a) or 7.4(d), the next Capital
Contribution owed by the Limited Partner shall be reduced by the Annual Credit
Shortfall amount, and any portion of such Annual Credit Shortfall in excess of
such Capital Contribution shall be applied to reduce succeeding Capital
Contributions of the Limited Partner. If the Annual Credit Shortfall is greater
than the Limited Partner's remaining Capital Contributions then the General
Partner shall pay to the Limited Partner the excess of the Annual Credit
Shortfall over the remaining Capital Contributions. The General Partner shall
have ninety days to pay the Annual Credit Shortfall from the date the General
Partner receives notice from the Limited Partner. The provisions of this Section
7.4(b) shall apply equally to the Class A Special Limited Partner in proportion
to its Capital Contribution and anticipated annual Tax Credit.
(c) In the event that, for any reason, at any time after the first five
calendar years following the year in which the Apartment Housing is placed in
service, there is an Annual Credit Shortfall, then there shall be a reduction in
the General Partner's share of Net Operating Income in an amount equal to the
Annual Credit Shortfall and said amount shall be paid to the Limited Partner. In
the event there are not sufficient funds to pay the full Annual Credit Shortfall
to the Limited Partner at the time of the next Distribution of Net Operating
Income, then the unpaid Annual Credit Shortfall shall be repaid in the next year
in which sufficient monies are available from the General Partner's Net
Operating Income. In the event a Sale or Refinancing of the Apartment Housing
occurs prior to repayment in full of the Annual Credit Shortfall then the excess
will be paid in accordance with Section 11.2(b). The provisions of this Section
7.4(b) shall apply equally to the Class A Special Limited Partner in proportion
to its Capital Contribution and anticipated annual Tax Credit.
(d) The General Partner has represented, in part, that the Limited
Partner will receive Projected Annual Tax Credits of $11,239 in 2000 and $33,710
in 2001. In the event the 2000 and 2001 Actual Tax Credits are less than 95% of
projected then the Limited Partner's Capital Contribution shall be reduced by an
amount equal to 75.60% times the difference between 95% of the Projected Annual
Tax Credits for 2000 and 2001 and the Actual Tax Credits for 2000 and 2001. If
the 2000 and 2001 Actual Tax Credits are less than projected then the Class A
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 and Class A
Special Limited Partner's Capital Contribution payment which is then due, if
any, then the excess amount shall be paid by the General Partner to the Limited
Partner and/or the Class A Special Limited Partner within ninety days of the
General Partner receiving notice of the reduction from the Limited Partners
and/or the Class A Special Limited Partner.
(e) The Partners recognize and acknowledge that the Limited Partner and
the Class A 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 Class A Special Limited Partner's Capital Contribution shall be
reduced by an amount agreed upon by the Partners, in good faith, to provide the
Limited Partner and Class A Special Limited Partner with their anticipated
internal rate of return.
(f) In the event there is: (1) a filing of a tax return by the
Partnership evidencing a reduction in the qualified basis of the Apartment
Housing causing a recapture of Tax Credits previously allocated to the Limited
Partner; (2) a reduction in the qualified basis of the Apartment Housing for
income tax purposes following an audit by the Internal Revenue Service (IRS)
resulting in a recapture of Tax Credits previously claimed; (3) a decision by
the United States Tax Court upholding the assessment of such deficiency against
the Partnership with respect to any Tax Credit previously claimed in connection
with the Apartment Housing, unless the Partnership shall timely appeal such
decision and the collection of such assessment shall be stayed pending the
disposition of such appeal; or (4) a decision of a court affirming such decision
upon such appeal then, in addition to any other payments to which the Limited
Partner and Class A Special Limited Partner are entitled under the terms of this
Section 7.4, the General Partner shall pay to the Limited Partner and Class A
Special Limited Partner the sum of (A) the income tax deficiency assessed
against the Limited Partner or Class A Special Limited Partner as a result of
the Tax Credit recapture, (B) any interest and penalties imposed on the Limited
Partner or Class A Special Limited Partner with respect to such deficiency, and
(C) an amount sufficient to pay any tax liability owed by the Limited Partner or
Class A Special Limited Partner resulting from the receipt of the amounts
specified in (A) and (B).
(g) The increase in the Capital Contribution of the Limited Partner and
Class A Special Limited Partner pursuant to Section 7.4(a) shall be subject to
the Limited Partner and Class A Special Limited Partner having funds available
to pay any such increase at the time of its notification of such increase. For
these purposes, any funds theretofore previously earmarked by the Limited
Partner or Class A Special Limited Partner to make other investments, or to be
held as required reserves, shall not be considered available for payment
hereunder.
(h) In the event that the Class B Special Limited Partner's Interest in
the Missouri Tax Credits is different than $337,170, then the Capital
Contribution provided in Section 7.2(e) shall be adjusted by the amount which
will make the total Capital Contribution to be paid by the Class B Special
Limited Partner equal to 25% of the total Missouri Tax Credits allocable to the
Class B Special Limited Partner. In the event that there is a payment to the
Class B Special Limited Partner pursuant to this Section 7.4 (h), Projected
Missouri Tax Credits shall be referenced to as Revised Projected Missouri Tax
Credits. In the event that there is a reduction in the Capital Contribution of
the Class B Special Limited Partner pursuant to this Section 7.4 (h), the amount
of the reduction shall be paid by the General Partner to the Class B Special
Limited Partner within ninety days of the determination of the amount of the
reduction. In the event that there is an increase in the Capital Contribution of
the Class B Special Limited Partner pursuant to the Section 7.4 (h), the
additional Capital Contribution shall be paid by the Class B Special Limited
Partner within ninety days of notification from the Partnership to the Class B
Special Limited Partner. If at any time the Accountants determine that the
Missouri Tax Credits for any fiscal year are less than the Projected Missouri
Tax Credits or the Revised Projected Missouri Tax Credits, as applicable, then
the Partnership shall make a payment to the Class B Special Limited Partner in
the aggregate amount of the reduction within ninety days of notice of such
reduction. During the first five calendar years of Partnership operations, the
General Partner shall be obligated to provide such funds to the Partnership as
shall be necessary to cause the aforesaid payment to be made by the Partnership
to the Class B Special Limited Partner.
(i) Anything in this Section 7.4 to the contrary notwithstanding, there
shall be no adjustment in the Limited Partner's Capital Contribution resulting
from Actual Tax Credits allocated to the Limited Partner being less than
Projected Tax Credits, or in the Class B Special Limited Partner's Capital
Contribution resulting from Missouri Tax Credits allocated to the Class B
Special Limited Partner being less than Projected Missouri Tax Credits, if such
shortfall is a result of any of the following:
(1) Repeal, amendment or modification to Section 42 of the
Code or the regulations thereunder or repeal amendment or modification of
Sections 135.350 et. seq. Missouri Revised Statutes; and
(2) Reduction in eligible basis resulting from FmHA's denial
to rebuild the Project after the occurrence of a cause beyond the control of the
Partnership, including, but not limited to, fire, windstorm, or other property
or casualty loss, or condemnation; and
(3) Determination that the Limited Partner is not eligible to
be allocated the Projected Tax Credits or the Class B Special Limited Partner is
not eligible to be allocated the Missouri Tax Credits for any reason, including,
but not limited to, application of the Code to the provisions of Article X of
the Partnership Agreement; and
(4)Any action or omission of the Limited Partner, Class A Spe-
cial Limited Partner or Class B Special Limited Partner.
Section 7.5 Capital Contribution of Class A Special Limited Partner.
The Class A Special Limited Partner shall make a Capital Contribution of $25 at
the time of the Limited Partner's Capital Contribution payment referenced in
Section 7.2(a) upon the same conditions. The Class A 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 Class A 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, Class A Special Limited
Partner and Class B Special Limited Partner. The Limited Partner, Class A
Special Limited Partner and Class B Special Limited Partner shall not be liable
for any of the debts, liabilities, contracts or other obligations of the
Partnership. The Limited Partner, Class A Special Limited Partner and Class B
Special Limited Partner shall be liable only to make Capital Contributions in
the amounts and on the dates specified in this Agreement and, except as
otherwise expressly required hereunder, shall not be required to lend any funds
to the Partnership or, after their respective Capital Contributions have been
paid, to make any further Capital Contribution to the Partnership.
ARTICLE VIII
WORKING CAPITAL AND RESERVES
Section 8.1 Operating and Maintenance Account. The Partnership shall
establish an operating and maintenance account and shall deposit thereinto, or
provide a letter of credit, in an amount required by the FmHA, to be used for
initial operating capital as permitted or required by applicable FmHA
regulations. Any amount remaining in such account shall be paid to the General
Partner as authorized in accordance with applicable FmHA regulations as an
operating deficit guaranty fee.
Section 8.2 Reserve for Replacements. The Partnership shall fund,
establish and maintain a reserve account in an amount required by the FmHA Loan
Agreement which funds shall be used in accordance with FmHA Regulation 7 CFR
Part 1930-C, or any successor thereof, as evidenced by the FmHA Loan Agreement.
Section 8.3 Tax and Insurance Account. The Partnership, shall establish
a tax and insurance account ("T & I Account") for the purpose of making the
requisite Insurance premium payments and the real estate tax payments. The
annual deposit to the T & I Account shall equal the total annual Insurance
payment and the total annual real estate tax payment. Said amount shall be
deposited monthly in equal installments. Withdrawals from such account shall be
made only for its intended purpose. Any balance remaining in the account at the
time of a sale of the Apartment Housing shall be allocated and distributed
equally between the General Partner and the Limited Partner.
Section 8.4 Other Reserves. The General Partner, may establish out of
funds available to the Partnership a reserve account sufficient in its sole
discretion to pay any unforeseen contingencies which might arise in connection
with the furtherance of the Partnership business including, but not limited to,
(a) any rent subsidy required to maintain rent levels in compliance with the
Code and applicable FmHA regulations; and (b) any real estate taxes, Insurance,
debt service or other payments for which other funds are not provided for
hereunder or otherwise expected to be available to the Partnership. The General
Partner shall not be liable for any good-faith estimate which it shall make in
connection with establishing or maintaining any such reserves nor shall the
General Partner be required to establish or maintain any such reserves if, in
its sole discretion, such reserves do not appear to be necessary.
ARTICLE IX
MANAGEMENT AND CONTROL
Section 9.1 Power and Authority of General Partner. Subject to the
Consent of the Class A Special Limited Partner and the Consent of the Limited
Partner where required by this Agreement, and subject to the other limitations
and restrictions included in this Agreement, the General Partner shall have
complete and exclusive control over the management of the Partnership business
and affairs, and shall have the right, power and authority, on behalf of the
Partnership, and in its name, to exercise all of the rights, powers and
authority of a partner of a partnership without limited partners. If there is
more than one General Partner, the decision of a majority in Interest of the
General Partner shall be binding on all the General Partner. If there is more
than one General Partner, a majority in Interest of the General Partner may
appoint a Managing General Partner who shall administer the day to day affairs
of the Partnership and shall make decisions and take actions on behalf of the
Partnership in connection therewith. The Managing General partner shall
regularly consult with, and report to, the other General Partners with respect
to its activities. If the Managing General Partner shall cease to be a General
Partner or shall resign as Managing General Partner, a majority in Interest of
the General Partners may choose a new Managing General Partner. No Limited
Partner or Class A Special Limited Partner (except one who may also be a General
Partner, and then only in its capacity as General Partner within the scope of
its authority hereunder) shall have any right to be active in the management of
the Partnership's business or investments or to exercise any control thereover,
nor have the right to bind the Partnership in any contract, agreement, promise
or undertaking, or to act in any way whatsoever with respect to the control or
conduct of the business of the Partnership, except as otherwise specifically
provided in this Agreement.
Section 9.2 Payments to the General Partners and Others.
(a) The Partnership shall pay to the Developer a Development Fee in the
amount of $120,000 in accordance with the Development Services Agreement entered
into by and between the Developer and the Partnership on the even date hereof.
The Development Services Agreement provides, in part, that the Development Fee
shall first be paid from available proceeds in accordance with Section 9.2(b) of
this Agreement and if not paid in full then the balance of the Development Fee
will be paid in accordance with Section 11.1 of this Agreement.
(b) The Partnership shall utilize the proceeds from the Capital
Contributions paid pursuant to Section 7.2 and Section 7.5 of this Agreement 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.
(c) The Partnership shall pay to the Management Agent a property
management fee for the leasing and management of the Apartment Housing in an
amount in accordance with the Management Agreement. The term of the Management
Agreement shall not exceed three years. 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 Apartment Housing has an
Operating Deficit, 40% of the management fee will be deferred ("Deferred
Management Fee"). Deferred Management Fees, if any, shall be paid to the
Management Agent in accordance with Section 11.1 of this Agreement.
(1) The General Partner shall, upon receiving any request of
the Mortgage Lender requesting such action, dismiss the Management Agent for
cause as the entity responsible for management of the Apartment Housing under
the terms of the Management Agreement; or, the General Partner shall dismiss the
Management Agent at the request of the Class A Special Limited Partner if such
Management Agent fails to provide or inaccurately provides in any material
respect, the information required in Section 14.1, 14.2 and 14.3 of this
Agreement.
(2) The appointment of any successor Management Agent is
subject to the Consent of the Class A Special Limited Partner, which may only be
sought after the General Partner has provided the Class A Special Limited
Partner with accurate and complete disclosure respecting the proposed Management
Agent. The Consent of the Class A Special Limited Partner in reference to this
Section shall not be unreasonably withheld.
(d) The Partnership shall pay to the Limited Partner a fee (the
"Reporting Fee") commencing in 2000 equal to 15% of the FmHA return to owner,
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; provided, however, that if
in any year Net Operating Income is insufficient to pay the full $500, the
unpaid portion thereof shall accrue and be payable on a cumulative basis in the
first year in which there is sufficient Net Operating Income, as provided in
Section 11.1, or sufficient Sale or Refinancing Proceeds, as provided in Section
11.2.
(e) The Partnership shall pay to the General Partner an Incentive
Management Fee equal to 70% of the FmHA return to owner for each fiscal year of
the Partnership commencing in 2000 for overseeing the marketing, lease-up and
continued occupancy of the Partnership's apartment units, obtaining and
monitoring the Mortgage Loan, 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 Apartment Housing and the Partnership, all as required by
Article XIV of this Agreement. The Partners acknowledge that the Incentive
Management Fee is being paid as an inducement to the General Partner to operate
the Partnership efficiently, to maximize occupancy and to increase the Net
Operating Income. 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 this Agreement;
(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 successor Management Agent has
received the Consent of the Class A 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) 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
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
Apartment Housing, no title or right to the possession and control of the
Apartment Housing 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 avoid a
recapture of Tax Credits thereof on the part of the former owners.
(d) Any conveyance or transfer of title to all or any portion of the
Apartment Housing required or permitted under this Agreement shall in all
respects be subject to the Tax Credit Conditions and all conditions, approvals
or other requirements of the rules and regulations of any authority applicable
thereto.
Section 9.5 Limitations on General Partner's Power and Authority.
Notwithstanding the provisions of this Article IX, the General Partner shall not
(a) except as required by Section 9.4, act in contravention of this
Agreement;
(b) act in any manner which would make it impossible to carry on the
ordinary business of the Partnership;
(c)confess a judgment against the Partnership;
(d) possess Partnership property, or assign the Partner's right in
specific Partnership property, for other than the exclusive benefit of the
Partnership;
(e) admit a Person as a General Partner except as provided in this
Agreement;
(f) admit a Person as a Limited Partner except as provided in this
Agreement;
(g) violate any provision of the Mortgage;
(h) cause the Apartment Housing 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 Apartment Housing;
(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;
(l)commingle funds of the Partnership with the funds of another Person;
or
(m) take any action which requires the Consent of the Class A 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 Con-
sent of the Class A Special Limited Partner, the General Partner shall not:
(a)sell, exchange, lease or otherwise dispose of the Apartment Housing;
(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 Class A Special Limited Partner;
(d) contract away the fiduciary duty owed to the Limited Partner and
the Class A Special Limited Partner at common law;
(e) take any action which would cause the Apartment Housing to fail to
qualify, or which would cause a termination or discontinuance of the
qualification of the Apartment Housing, 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) cause the merger or other reorganization of the Partnership;
(g) dissolve the Partnership, except as provided in this Agreement;
(h) acquire any real or personal property (tangible or intangible) in
addition to the Apartment Housing the aggregate value of which shall exceed
$10,000 (other than easement or similar rights necessary or appropriate for the
operation of the Apartment Housing);
(i) become personally liable on or in respect of, or guarantee, the
Mortgage or any other mortgage indebtedness of the Partnership;
(j) pay any salary, fees or other compensation to a General Partner or
any Affiliate thereof, except as authorized by Section 9.2 and Section 9.8 here-
of or specifically provided for in this Agreement;
(k) cause the Partnership to redeem or repurchase all or any portion
of the Interest of a Partner except as otherwise provided in this Agreement;
(l) cause the Partnership to convert the Apartment Housing to coopera-
tive or condominium ownership; or
(m) cause or permit the Partnership to make loans to the General
Partner or any Affiliate.
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;
(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 Apartment Housing 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 Apartment Housing; (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 reasonable efforts to assure that the Apartment Housing is 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 from Partnership funds, 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 Class A
Special Limited Partner and its representatives: (1) to have access to the
Apartment Housing 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 Apartment Housing, and shall take no action with respect to
the business and property of the Partnership which is not reasonably related to
the achievement of the purpose of the Partnership;
(j) make any Capital Contributions, advances or loans required to be
made by the General Partner under the terms of this Agreement;
(k) establish and maintain all reserves required to be established and
maintained under the terms of this Agreement;
(l) cause the Management Agent to manage the Apartment Housing in such
a manner that the Apartment Housing will be eligible to receive LIHTC with
respect to 100% of the apartment units in the Apartment Housing. To that end,
the General Partner agrees, without limitation: (1) to make all elections
requested by the Class A 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 Apartment Housing as required, for at least the
duration of the Compliance Period; (3) to operate the Apartment Housing and
cause the Management Agent to manage the Apartment Housing 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 Apartment Housing and cause the Management Agent to manage
the Apartment Housing 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 Obligations to Repair and Rebuild Apartment Housing. With
the approval of any lender, if such approval is required, any Insurance proceeds
received by the Partnership due to fire or other casualty affecting the
Apartment Housing will be utilized to repair and rebuild the Apartment Housing
in satisfaction of the conditions contained in Section 42(j)(4) of the Code and
to the extent required by any lender. Any such proceeds received in respect of
such event occurring after the Compliance Period shall be so utilized or, if
permitted by the Project Documents and with the Consent of the Class A Special
Limited Partner, shall be treated as Sale or Refinancing Proceeds.
Section 9.9 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 Cash Expenses unless the General Partner is obligated to pay
the same as an Operating Deficit during the Operating Deficit Guarantee Period,
and subject to the limitations on the reimbursement of such expenses set forth
herein. For purposes of this Section, Cash Expenses shall include fees paid by
the Partnership to the General Partner or any Affiliate of the General Partner
permitted by this Agreement and the actual cost of goods, materials and
administrative services used for or by the Partnership, whether incurred by the
General Partner, an Affiliate of the General Partner or a nonaffiliated Person
in performing the foregoing functions. As used in the preceding sentence,
"actual cost of goods and materials" means the actual cost of goods and
materials used for or by the Partnership and obtained from entities which are
not Affiliates of the General Partner, and actual cost of administrative
services means the pro rata cost of personnel (as if such persons were employees
of the Partnership) associated therewith, but in no event to exceed the amount
which would be charged by nonaffiliated Persons for comparable goods and
services. Notwithstanding, the "actual cost of goods and services" and
"administrative services" includes a profit payable to the General Partner or
affiliate in an amount not to exceed an 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
9.9(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.
(c) Anything in the Partnership Agreement to the contrary
notwithstanding, the General Partner is authorized to obtain the Partnership's
property and casualty insurance through Chubb Group of Insurance Companies,
which is reinsured by Rural Housing Reinsurance Company International, Ltd., an
entity in which the General Partner is a shareholder.
Section 9.10 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 9.9 and all expenses which
are unrelated to the business of the Partnership.
Section 9.11 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
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 Apartment Housing. 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 9.12 Covenants, Representations and Warranties. The General
Partner covenants, represents and warrants that the following are presently
true, will be true at the time of each Capital Contribution payment made by the
Limited Partner and will be true during the term of this Agreement, to the
extent then applicable.
(a) The Partnership is a duly organized limited partnership validly
existing under the laws of the State and has complied with all filing
requirements necessary for the protection of the limited liability of the
Limited Partner and the Class A Special Limited Partner.
(b) The Partnership Agreement and the Project Documents are in full
force and effect and neither the Partnership nor the General Partner is in
breach or violation of any material provisions thereof.
(c) Improvements will be completed in a timely and workerlike manner
substantially in accordance with all applicable requirements of all appropriate
governmental entities and the Plans and Specifications of the Apartment Housing.
(d)Additional Improvements on the Project, if any shall be completed
substantially in conformity with Plans and Specifications approved by the Class
A Special Limited Partner.
(e) All conditions to the funding of the Construction Loan have been
met.
(f) The Apartment Housing is being operated in accordance with
standards and procedures which are prudent and customary for the operation of
properties similar to the Apartment Housing.
(g) No Partner has or will have any personal liability with respect to
or has or will have personally guaranteed the payment of the Mortgage.
(h) The Partnership is in compliance in all material respects with all
construction and use codes applicable to the Apartment Housing and is not in
violation in any material respect of any zoning, environmental or similar
regulations applicable to the Apartment Housing.
(i) 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 Apartment Housing at the time of first
occupancy and throughout the term of the Partnership.
(j) All roads necessary for the full utilization of the Improvements
have either been completed or the necessary rights of way therefore have been
acquired by the appropriate governmental authority or have been dedicated to
public use and accepted by said governmental authority.
(k) The Partnership has obtained Insurance written by an Insurance
Company.
(l) The Partnership owns the fee simple interest in the Apartment
Housing.
(m) 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.
(n) The Partnership will require the Accountant to depreciate the
Improvements over a 27 1/2-year term. Site work, landscaping and personal
property (cabinets, appliances, carpet and window coverings) shall be broken out
separately from Improvements and depreciated over 7 years using the cost
recovery system, mid-year 200% declining balance depreciation method.
(o) 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 Apartment Housing and (2) no aboveground or
underground storage tanks are now or have ever been located on or under the
Apartment Housing. The General Partner will not install or allow to be installed
any aboveground or underground storage tanks on the Apartment Housing. The
General Partner covenants that the Apartment Housing shall be kept free of
Hazardous Substance and shall not be used to generate, manufacture, refine,
transport, treat, store, handle, dispose of, transfer, produce or process
Hazardous Substance, except in connection with the normal maintenance and
operation of any portion of the Apartment Housing. 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
Substance and shall keep, or cause to be kept, the Apartment Housing free and
clear of any liens imposed pursuant to such laws, ordinances, rules and
regulations. The General Partner must promptly notify the Limited Partner, the
Class A 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
Apartment Housing, any Improvements constructed on the Apartment Housing, or the
soil, groundwater or soil vapor, (4) if the General Partner or the Partnership
may be subject to any threatened or pending investigation by any governmental
agency under any law, regulation or ordinance pertaining to any Hazardous
Substance, and (5) of any claim made or threatened by any Person, other than a
governmental agency, against the Partnership or General Partner arising out of
or resulting from any Hazardous Substance being present or released in, on or
around any part of the Apartment Housing.
(p) 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.
(q) The Partnership will allocate to the Limited Partner the Projected
Annual Tax Credits, or the Revised Projected Tax Credits, if applicable.
(r) No charges, liens or encumbrances exist with respect to the
Apartment Housing other than those which are created or permitted by the Project
Documents or Mortgage or are noted or excepted in the Title Policy.
(s) The buildings on the Apartment Housing 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 Apartment Housing
will satisfy the Minimum Set-Aside Test.
(t) All accounts of the Partnership required to be maintained under the
terms of the Project Documents, including, without limitation, any reserves in
accordance with Article VIII hereof, are currently funded to required levels,
including levels required by any authority.
(u) The General Partner has not lent or otherwise advanced any funds to
the Partnership other than its Capital Contribution, or Operating Deficit Loan,
if applicable, and the Partnership has no unsatisfied obligation to make any
payments of any kind to the General Partner or any Affiliate thereof.
(v) No event has occurred which constitutes a default under any of the
Project Documents.
(w) No event has occurred which has caused, and the General Partner has
not acted in any manner which will cause (1) the Partnership to be treated for
federal income tax purposes as an association taxable as a corporation, (2) the
Partnership to fail to qualify as a limited partnership under the Act, or (3)
the Limited Partner to be liable for Partnership obligations; provided however,
the General Partner shall not be in breach of this representation if all or a
portion of a Limited Partner's agreed upon Capital Contributions are used to
satisfy the Partnership's obligations to creditors of the Partnership and such
action by the General Partner is otherwise authorized under this Agreement and;
provided further, however, the General Partner shall not be in breach of this
representation if the action causing the Limited Partner to be liable for the
Partnership obligations is undertaken by the Limited Partner.
(x) 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 Apartment
Housing, has occurred the continuing effect of which has: (1) materially or
adversely affected the operation of the Partnership or the Apartment Housing;
(2) materially or adversely affected the ability of the General Partner to
perform its obligations hereunder or under any other agreement with respect to
the Apartment Housing; 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 Apartment Housing only insofar
as they or any of them are part of the general public.
(y) 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 Class A 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.
(z) The General Partner and/or an acceptable guarantor 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
9.12.
ARTICLE X
ALLOCATIONS OF INCOME, LOSSES AND CREDITS
Section 10.1 General. All items includable in the calculation of Income
or Loss not arising from a Sale or Refinancing, and all Tax Credits, shall be
allocated 99.98% to the Limited Partner, 0.01% to the Class A Special Limited
Partner and 0.01% to the General Partner. Any and all Missouri Tax Credits shall
be allocated to the Class B Special Limited Partner. Missouri Tax Credits are
those Tax Credits under the State of Missouri Tax Code deductible from income
tax, otherwise payable to the State of Missouri.
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, the balance, if any, of such Income shall be all-
ocated 49.99% to the Limited Partner, .01% to the Class A Special Limited
Partner, 49.90% to the General Partner and 0.10% to the Class B Special Limited
Partner.
(b) Losses shall be allocated 99.98% to the Limited Partner, 0.01% to
the Class A Special Limited Partner and 0.01% to the General Partner.
(c) Notwithstanding the foregoing provisions of Section 10.2(a) and
(b), in no event shall any Losses be allocated to the Limited Partner or the
Class A 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 Class A Special Limited Partner. In the event an allocation of 99.98% or
0.01% of each item includable in the calculation of Income or Loss not arising
from a Sale or Refinancing, would create or increase an Adjusted Capital Account
Deficit for the Limited Partner or the Class A 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 Class A Special Limited Partner and as is necessary to allow the
Limited Partner or the Class A Special Limited Partner to be allocated 99.98%
and 0.01%, respectively, of the items of Income and Apartment Housing
depreciation without creating or increasing an Adjusted Capital Account Deficit
for the Limited Partner or the Class A Special Limited Partner, it being the
intent of the parties that the Limited Partner and the Class A Special Limited
Partner always shall be allocated 99.98% and 0.01%, respectively, of the items
of Income not arising from a Sale or Refinancing and 99.98% and 0.01%,
respectively, of the Apartment Housing 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).
Allocations pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Partner pursuant thereto.
The items to be so allocated shall be determined in accordance with Sections
1.704-2(i)(4) and 1.704-2(j)(2) of the Treasury Regulations. This Section
10.3(b) is intended to comply with the minimum gain chargeback requirement in
Section 1.704-2(i)(4) of the Treasury Regulations and shall be interpreted
consistently therewith.
(c) In the event any Partner unexpectedly receives any adjustments,
allocations, or distributions described in Treasury Regulations Section
1.704-1(b)(2)(ii)(d)(4), Section 1.704-1(b)(2)(ii)(d)(5), or Section
1.704-1(b)(2)(ii)(d)(6), items of Partnership income and gain shall be specially
allocated to each such Partner in an amount and manner sufficient to eliminate,
to the extent required by the Treasury Regulations, the Adjusted Capital Account
Deficit of such Partner as quickly as possible, provided that an allocation
pursuant to this Section 10.3(c) shall be made if and only to the extent that
such Partner would have an Adjusted Capital Account Deficit after all other
allocations provided for in this Section 10.3 have been tentatively made as if
this Section 10.3(c) were not in the Agreement.
(d) In the event any Partner has a deficit Capital Account at the end
of any Partnership fiscal year which is in excess of the sum of (i) the amount
such Partner is obligated to restore, and (ii) the amount such Partner is deemed
to be obligated to restore pursuant to the penultimate sentences of Treasury
Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), each such Partner shall be
specially allocated items of Partnership income and gain in the amount of such
excess as quickly as possible, provided that an allocation pursuant to this
Section 10.3(d) shall be made if and only to the extent that such Partner would
have a deficit Capital Account in excess of such sum after all other allocations
provided for in this Section 10.3 have been tentatively made as if this Section
10.3(d) and Section 10.3(c) hereof were not in the Agreement.
(e) Nonrecourse Deductions for any fiscal year shall be specially
allocated 99.98% to the Limited Partner, 0.01% to the Class A Special Limited
Partner and 0.01% to the General Partner.
(f) Any Partner Nonrecourse Deductions for any fiscal year shall be
specially allocated to the Partner who bears the economic risk of loss with
respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse
Deductions are attributable in accordance with Treasury Regulations Section
1.704-2(i)(1).
(g) To the extent an adjustment to the adjusted tax basis of any
Partnership asset pursuant to Code Section 734(b) or Code Section 743(b) is
required, pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(2) or
Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital
Accounts as the result of a distribution to a Partner in complete liquidation of
his interest in the Partnership, the amount of such adjustment to the Capital
Accounts shall be treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases such basis) and such
gain or loss shall be specially allocated to the Partners in accordance with
their interests in the Partnership in the event that Treasury Regulations
Section 1.704-1 (b)(2)(iv)(m)(2) applies, or to the Partner to whom such
distribution was made in the event that Treasury Regulations Section
1.704-1(b)(2)(iv)(m)(4) applies.
(h) To the extent the Partnership has taxable interest income with
respect to any promissory note pursuant to Section 483 or Section 1271 through
1288 of the Code:
(1) such interest income shall be specially allocated to the
Limited Partner to whom such promissory note relates; and
(2) the amount of such interest income shall be excluded from
the Capital Contributions credited to such Partner's Capital Account in
connection with payments of principal with respect to such promissory note.
(i) In the event the adjusted tax basis of any investment tax credit
property that has been placed in service by the Partnership is increased
pursuant to Code Section 50(c), such increase shall be specially allocated among
the Partners (as an item in the nature of income or gain) in the same
proportions as the investment tax credit that is recaptured with respect to such
property is shared among the Partners.
(j) Any reduction in the adjusted tax basis (or cost) of Partnership
investment tax credit property pursuant to Code Section 50(c) shall be specially
allocated among the Partners (as an item in the nature of expenses or losses) in
the same proportions as the basis (or cost) of such property is allocated
pursuant to Treasury Regulations Section 1.46-3(f)(2)(i).
(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 Part
nership income, loss, deduction or credit will not be less than 0.01% of each
such item at all times during the existence of the Partnership.
(n) Interest deduction on the Partnership indebtedness referred to in
Section 6.3 shall be allocated 100% to the General Partner.
(o) In the event all or part of the Incentive Management Fee is
disallowed by the Internal Revenue Service, then any interest or income
chargeable to the Partnership for such disallowance shall be allocated 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 Class A Special
Limited Partner and 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 Class A 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 99.98% to the Limited Partner, 0.01% to the Class A Special Limited
Partner and 0.01% to the General Partner.
(b) In the event Partnership investment tax credit property is disposed
of during any taxable year, profits for such taxable year (and, to the extent
such profits are insufficient, profits for subsequent taxable years) in an
amount equal to the excess, if any, of (1) the reduction in the adjusted tax
basis (or cost) of such property pursuant to Code Section 50(c), over (2) any
increase in the adjusted tax basis of such property pursuant to Code Section
50(c) caused by the disposition of such property, shall be excluded from the
profits allocated pursuant to Section 10.1 and Section 10.2(a) hereof and shall
instead be allocated among the Partners in proportion to their respective shares
of such excess, determined pursuant to Section 10.3(i) and 10.3(j) hereof. In
the event more than one item of such property is disposed of by the Partnership,
the foregoing sentence shall apply to such items in the order in which they are
disposed of by the Partnership, so the profits equal to the entire amount of
such excess with respect to the first such property disposed of shall be
allocated prior to any allocations with respect to the second such property
disposed of, and so forth.
(c) For purposes of determining the Income, Losses, or any other items
allocable to any period, Income, Losses, and any such other items shall be
determined on a daily, monthly, or other basis, as determined by the General
Partner with the Consent of the Class A 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 Part-
nership profits are as follows: Limited Partner: 99.98%; Class A Special Limited
Partner: 0.01%; and General Partner: 0.01%.
(e) To the extent permitted by Section 1.704-2(h)(3) of the Treasury
Regulations, the General Partner shall endeavor to treat Distributions as having
been made from the proceeds of a Nonrecourse Liability or a Partner Nonrecourse
Debt only to the extent that such Distributions would cause or increase an
Adjusted Capital Account Deficit for any Partner who is not a General Partner.
(f) Tax Credits shall be allocated 99.98% to the Limited Partner, 0.01% to
the Class A Special Limited Partner, and 0.01% to the General Partner. In the
event there occurs a recapture of Tax Credits previously allocated to the
Partners, the responsibility for the recapture of such Tax Credits shall be
allocated in accordance with the requirements of the Code and the Treasury
Regulations; namely, to the Partners (if permitted by applicable law) who are or
are deemed to be Partners in the year in which such recapture occurs, in
accordance with their interests in the losses of the Partnership for that year.
Missouri Tax Credits shall be allocated 100% to the Class B Special Limited
Partner, which Class B Special Limited Partner also shall be allocated 100% of
any recapture of Missouri Tax Credits.
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 1.41(a) hereof).
In the event the Gross Asset Value of any Partnership asset is adjusted
pursuant to Section 1.41(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 Class A Special Limited
Partner in any manner that reasonably reflects the purpose and intention of this
Agreement. Allocations pursuant to this Section 10.6 are solely for purposes of
federal, state, and local taxes and shall not affect, or in any way be taken
into account in computing, any Person's Capital Account or share of Income,
Losses, other items, or distributions pursuant to any provision of this
Agreement.
Section 10.7 Allocation Among Limited Partners. In the event that the
Interest of the Limited Partner hereunder is at any time held by more than one
Limited Partner all items which are specifically allocated to the Limited
Partner for any month pursuant to this Article X shall be apportioned among such
Persons according to the ratio of their respective profit-sharing interests in
the Partnership at the last day of such month.
Section 10.8 Allocation Among General Partners. In the event that the
Interest of the General Partner hereunder is at any time held by more than one
General Partner all items which are specifically allocated to the General
Partner for any month pursuant to this Article X shall be apportioned among such
Persons in such percentages as may from time to time be determined by agreement
among them without amendment to this Agreement or consent of the Limited Partner
or Consent of the Class A 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 Class A 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 Class A Special
Limited Partner, in the event it appears that unanticipated events (e.g., the
existence of a Partnership election pursuant to Code Section 754) might
otherwise cause this Agreement not to comply with Treasury Regulation Section
1.704.
ARTICLE XI
DISTRIBUTION
Section 11.1 Distribution of Net Operating Income. Net Operating Income
for each fiscal year shall be distributed within seventy-five (75) days
following each calendar year and shall be applied in the following order of
priority:
(a) to pay the Deferred Management Fee, if any;
(b) to pay the current Reporting Fee and then to pay any accrued Report
ing Fees which have not been paid in full from previous years;
(c) to pay the interest and then the principal on the Development Fee;
(d) to pay the Operating Loans, if any, as referenced in Section 6.3 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; and
(f) the balance, 30% to the Limited Partner and 70% to the General Part
ner.
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 Class A Special Limited Partner and Class B Special
Limited Partner, shall deem reasonably necessary for contingent, unmatured or
unforeseen liabilities or obligations of the Partnership; and
(d) thereafter, 49.99% to the Limited Partner, .01% to the Class A
Special Limited Partner, 49.90% to the General Partner and 0.10% to the
Class B Special Limited Partner.
ARTICLE XII
TRANSFERS OF LIMITED
PARTNER'S INTEREST IN THE PARTNERSHIP
Section 12.1 Assignment of Limited Partner's Interest. The Limited
Partner, Class A Special Limited Partner and Class B Special Limited Partner
shall have the right to assign all or any part of their respective Interests to
any other Person, whether or not a Partner, upon satisfaction of the following:
(a) 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
consent 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.
(d) Notwithstanding any provision to the contrary, the Limited Partner
may assign its Interest to an Affiliate or assign its Interest to Southern
California Bank or its successors as collateral to secure a capital contribution
loan without satisfying the conditions of Sections 12.1(a) through (c) above.
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 Class A Special Limited Partner and Class B 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, Class A Special Limited Partner or Class B
Special Limited Partner otherwise than in accordance with Section 12.1 or
Section 12.6 shall be of no effect as between the Partnership and the purported
assignee and shall be disregarded by the General Partner in making allocations
and Distributions hereunder.
Section 12.4 Assignee's Rights to Allocations and Distributions. An
Assignee shall be entitled to receive allocations and Distributions from the
Partnership attributable to the Interest acquired by reason of any permitted
assignment from and after the first day of the calendar month 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, Class A
Special Limited Partner or Class B Special Limited Partner.
(a) An Assignee shall not have the right to become a Substitute Limited
Partner or Substitute Class A Special Limited Partner or Class B Special Limited
Partner in place of his assignor unless the written consent of the General
Partner to such substitution shall have been obtained, which consent, in the
General Partner's absolute discretion, may be withheld; except that an Assignee
which is an Affiliate of the Limited Partner, Class A Special Limited Partner or
Class B Special Limited Partner, or Southern California Bank or its successors,
may become a Substitute Limited Partner, Substitute Class A Special Limited
Partner or Substitute Class B Special Limited Partner without the consent of the
General Partner.
(b) A nonadmitted transferee of a Limited Partner's Interest, Class A
Special Limited Partner Interest or Class B 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, Class A Special Limited
Partner or Class B 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, Substitute
Class A Special Limited Partner or Substitute Class B Special Limited Partner as
a Substitute Limited Partner, Substitute Limited Partner, Substitute Class A
Special Limited Partner or Substitute Class B 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, Class A Special
Limited Partner or Class B Special Limited Partner, such Partner's executors,
administrators or legal representatives shall have all the rights of a Limited
Partner, Class A Special Limited Partner or Class B Special Limited Partner, as
the case may be, for the purpose of settling or managing such Partner's estate,
including such power as such Partner possessed to constitute a successor as a
transferee of its Interest in the Partnership and to join with such transferee
in making the application to substitute such transferee as a Partner. However,
such executors, administrators or legal representatives will not have the right
to become Substitute Limited Partners, Substitute Class A Special Limited
Partners or Substitute Class B Special Limited Partners in the place of their
respective predecessors-in-interest unless the General Partner shall so consent.
ARTICLE XIII
WITHDRAWAL, REMOVAL AND REPLACEMENT OF
GENERAL PARTNER
Section 13.1 Withdrawal of General Partner.
(a) The General Partner may not Withdraw (other than as a result of an
Involuntary Withdrawal) without the Consent of the Class A Special Limited
Partner, and, to the extent required, of Rural Development. Withdrawal shall be
conditioned upon the agreement of the Class A Special Limited Partner to be
admitted as a successor General Partner, or if the Class A 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 Class A Special Limited Partner or the Limited Partner, or both
of them, may remove the General Partner for cause if such General Partner, its
officers or directors, if applicable, has:
(1) been subject to Bankruptcy in accordance with this Agree-
ment;
(2) committed any fraud, willful misconduct, breach of
fiduciary duty or other grossly negligent conduct in the performance of its
duties under this Agreement;
(3) been convicted of, or entered into a plea of guilty to, a
felony;
(4) made personal use of Partnership funds or properties;
(5) violated the terms of the Mortgage and such violation
prompts Rural Development 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 notice;
(6) failed to provide any loan, advance, Capital Contribution
or any other payment to the Partnership, the Limited Partner or the Class A
Special Limited Partner required under this Agreement;
(7) failed to obtain the Consent of the Class A Special
Limited Partner prior to any decision, act or omission under circumstances where
this Agreement requires that such consent be obtained, required under this
Agreement;
(8) breached in any material respect representation, warranty
or covenant contained in this Agreement, or failed in any material respect to
perform any 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 re-
capture of LIHTC for which payments have not been made as prescribed in
Section 7.4 of this Agreement; or
(11) failed during any six-month period during the Compliance
Period to cause at least 85% of the total apartment units in the Apartment
Housing to qualify for LIHTC, unless such failure is the result of Force Majeure
or unless such failure is cured within 120 days after the end of the six-month
period.
(b) The Limited Partner or Class A Special Limited Partner shall
provide the General Partner with written notice of the removal for cause of the
General Partner ("Removal Notice"). Such notice shall set forth the reasons for
the removal and shall be served by the Class A 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. If
Section 13.2(a)(2), (5), (6) or (7) is the basis for the removal for cause, then
the General Partner shall have thirty days from receipt of the Removal Notice in
which to cure the removal condition; except that in regard to the Mortgage the
cure period shall be the sooner of thirty days or ten days prior to the
expiration of the cure period referenced in the loan documents, if any. If the
condition for the removal for cause is not cured within the thirty day cure
period then the General Partner's removal shall become effective on the first
day following the expiration of the cure period, or, thirty-one days from the
General Partner's receipt of the Removal Notice. If the removal for cause is for
a condition referenced in Sections 13.2(a)(1), (3), (4), (9), (10), or (11) then
the removal shall become effective upon the General Partner's receipt of the
Removal Notice. Upon the General Partner's removal, the General Partner shall
deliver to the Class A Special Limited Partner within five business days of the
termination of the cure period, or five business days of the Removal Notice all
Partnership books and records including all bank signature cards and an
authorization to change the signature on the signature cards from the General
Partner to the Class A Special Limited Partner, or a successor general partner
so nominated by the Limited Partner and Class A Special Limited Partner. The
Partner's recognize and acknowledge that if the General Partner fails to provide
the Partnership books and records upon the General Partner's removal then the
remaining Partners may suffer irreparable injury. Therefore, in the event the
General Partner does not adhere to the provisions of this Section 13.2(b), and
in addition to other rights or remedies which may be provided by law and equity
or this Agreement, the Limited Partner and/or Class A Special Limited Partner
shall have the right to specific performance to compel the General Partner to
perform its obligation under this Section and the Limited Partner and/or Class A
Special Limited Partner may bring such action, and other actions to enforce the
removal, by way of temporary and/or permanent injunctive relief.
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 Apartment Housing 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 Class A Special Limited
Partner, upon written notice to the party so terminated. Furthermore,
notwithstanding such Withdrawal, the Withdrawing General Partner shall be and
shall remain, liable as a General Partner for all liabilities and obligations
incurred by the Partnership or by the General Partner prior to the effective
date of the Withdrawal, or which may arise upon such Withdrawal. Any remaining
Partner shall have all other rights and remedies against the Withdrawing General
Partner as provided by law or under this Agreement. The General Partner agrees
that in the event of its Withdrawal it will indemnify and hold the Limited
Partner and the Class A Special Limited Partner harmless from and against all
losses, costs and expenses incurred in connection with the Withdrawal,
including, without limitation, all legal fees and other expenses of the Limited
Partner and the Class A Special Limited Partner in connection with the
transaction. The following additional provisions shall apply in the event of a
Withdrawal.
(a) In the event of a Withdrawal which is not an Involuntary
Withdrawal, the Withdrawing General Partner shall have no further right to
receive any future allocations or Distributions from the Partnership or any
other funds or assets of the Partnership, nor shall it be entitled to receive or
to be paid by the Partnership any further payments of fees (including fees which
have been earned but are unpaid) or to be 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 Class A
Special Limited Partner), or if there is no other general partner of the
Partnership at that time, to the Class A Special Limited Partner.
(b) In the event of an Involuntary Withdrawal, except as provided in
the preceding paragraph or in Section 13.3(b)(2) 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 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 Class A 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 Class A 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.
(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), and if the
Partnership does not purchase the Interest of the Withdrawing General Partner in
Partnership allocations, Distributions and capital, then the Withdrawing General
Partner shall retain its Interest in such items, but such Interest shall be held
as a special limited partner.
(c) Notwithstanding the provisions of Section 13.3(b), if the
Involuntary Withdrawal arises from removal for cause as set forth in Section
13.2(a) hereof, the Withdrawn 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 or any Partners or successor partners, any further
payments of fees (including fees which have been earned but remain unpaid)
further, the Withdrawn General Partner shall be repaid outstanding obligations,
advances, or loans only to the extent and in the amount such obligations,
advances, or loans exceed amounts owed to the Partnership by the Withdrawn
General Partner by mutual agreement of the Withdrawing General Partner and Class
A Special Limited Partner. If the Withdrawing General Partner and the Class A
Special Limited Partner cannot reach an agreement within fifteen (15) business
days then the determination shall be made 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.
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 Class A Special Limited
Partner of such Withdrawal (the "Withdrawal Notice"). Whether or not the
Withdrawal Notice shall have been sent as provided herein, the Class A 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 Class A 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 Class A
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 Class A Special Limited Partner to the admission of such
Person as a substitute General Partner, which consent may be withheld in the
discretion of the Class A Special Limited Partner, shall have been given; and
(c) such Person shall have executed and acknowledged any other instruments which
the Class A 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 Class A 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 acquire an Interest in the
Partnership, without the Consent of the Class A Special Limited Partner.
Section 13.7 No Goodwill Value. At no time during continuation of the
Partnership shall any value ever be placed on the Partnership name, or the right
to its use, or to the goodwill appertaining to the Partnership or its business,
either as among the Partners or for the purpose of determining the value of any
Interest, nor shall the legal representatives of any Partner have any right to
claim any such value. In the event of a termination and dissolution of the
Partnership as provided in this Agreement, neither the Partnership name, nor the
right to its use, nor the same goodwill, if any, shall be considered as an asset
of the Partnership, and no valuation shall be put thereon for the purpose of
liquidation or distribution, or for any other purpose whatsoever.
ARTICLE XIV
BOOKS AND ACCOUNTS, REPORTS,
TAX RETURNS, FISCAL YEAR AND BANKING
Section 14.1 Books and Accounts.
(a) The General Partner shall cause the Partnership to keep and
maintain at its principal executive office full and complete books and records
which shall include each of the following:
(1) a current list of the full name and last known business or
residence address of each Partner set forth in alphabetical order together with
the Capital Contribution and the share in Income and Losses of each Partner;
(2) a copy of the Certificate of Limited Partnership and all
certificates of amendment thereto, together with executed copies of any powers
of attorney pursuant to which any certificate has been executed;
(3) copies of the Partnership's federal, state and local in
come tax information returns and reports, if any, for the six most recent tax-
able 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;
(6) the Partnership's books and records for at least the cur-
rent and past three fiscal years; and
(7) in regard to the first tenants to occupy the apartment
units in the Apartment Housing, copies of all 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).
(b) Upon the request of the Limited Partner, the General Partner shall
promptly deliver to the Limited Partner, at the expense of the Partnership, a
copy of the information set forth in Section 14.1(a) above. The Limited Partner
shall have the right upon reasonable request and during normal business hours to
inspect and copy any of the foregoing, or any of the other books and records of
the Partnership or the Apartment Housing, at its own expense.
Section 14.2 Accounting Reports.
(a) By March 1 of each calendar year the General Partner shall provide
to the Limited Partner, Class A Special Limited Partner and Class B 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 Apartment
Housing is located.
(b) By March 10 of each calendar year after the year in which the
Apartment Housing is placed in service, the General Partner shall send to the
Limited Partner, Class A Special Limited Partner and the Class B 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;
provided, however, an audit is not required for FmHA projects less than 25
units; (2) a report (which need not be audited) of any Distributions made at any
time during the fiscal year, separately identifying Distributions from Net
Operating Income for the fiscal year, Net Operating Income for prior years, Sale
or Refinancing Proceeds, and reserves; and (3) a report setting forth the amount
of all fees and other compensation and Distributions and reimbursed expenses
paid by the Partnership for the fiscal year to the General Partner or Affiliates
of the General Partner and the services performed in consideration therefor,
which report shall be verified by the Partnership's Accountants, with the method
of verification to include, at a minimum, a review of the time records of
individual employees, the costs of whose services were reimbursed, and a review
of the specific nature of the work performed by each such employee, all in
accordance with generally accepted auditing standards and, accordingly,
including such tests of the accounting records and such other auditing
procedures as the Accountants consider appropriate in the circumstances.
(c) Within 60 days after the end of each fiscal quarter in which a Sale
or Refinancing of the Apartment Housing occurs, the General Partner shall send
to the Limited Partner, Class A Special Limited Partner and the Class B 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, Class A Special Limited Partner and the Class B Special Limited
Partner the following reports:
(a) during construction, on a regular basis, but in no event less than
once a month, a copy of the Inspecting Architect's report and other construction
reports including, but not limited to, (1) the name of each person performing
work on the Improvements or providing materials for the Improvements, the work
performed or materials supplied by said person and the code number corresponding
to the line item in the Construction Budget which the person will be paid, (2)
an original AIA Document G702, or similar form acceptable to the Special Limited
Partner, (3) if not included in the Inspecting Architect's report or the AIA
Document G702, a line item break-down of the Construction Budget (which shall
include, description of work to be performed or materials to be supplied; total
dollar amount of the work or materials; dollar amount of work previously
completed and paid or materials supplied and paid; dollar amount of work or
materials to be paid per the current disbursement request; dollar amount of
materials stored; total dollar amount of work completed and stored as of the
current disbursement date; percentage of completion; dollar amount of work or
materials needed to complete the line item; and retainage), (4) a reconciliation
of the sources and uses to determine that the Construction Budget is in balance
and there are sufficient funds to complete the construction of the Improvements,
and (5) copies of lien releases, or waivers, from the Contractor and all
sub-contractors or material suppliers who were paid the previous month;
(b) during the rent-up phase, and continuing until the end of the first
six-month period during which the Apartment Housing has a sustained occupancy of
95% or 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 "G" attached hereto and incorporated herein by
this reference;
(c) during the rent-up phase, and continuing until the end of the first
six-month period during which the Apartment Housing has a sustained occupancy of
90% or better, by the twenty-fifth 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 on the Management Agent's form which will be
similar to the monthly initial tenant certification worksheet included in
Exhibit "G" attached hereto and incorporated herein by this reference;
(d) a quarterly tax credit compliance report on the Management Agent's
form, which will be similar to the worksheet included in Exhibit "G" due on or
before April 30 of each year for the first quarter, July 31 of each year for the
second quarter, October 31 of each year for the third quarter and January 31 of
each year for the fourth quarter. In order to verify the reliability of the
information being provided on the compliance report the Limited Partner may
request a small sampling of tenant 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;
(e) a quarterly report on operations, on the Management Agent's form,
which will be similar to the form attached hereto as Exhibit "G", due on or
before April 30 of each year for the first quarter of operations, July 31 of
each year for the second quarter of operations, October 31 of each year for the
third quarter of operations and January 31 of each year for the fourth quarter
of operations which shall include, but is not limited to, an unaudited income
statement showing all activity in the reserve accounts required to be maintained
pursuant to Section VIII of this Agreement, statement of income and expenses,
balance sheet, rent roll as of the end of each calendar quarter of each year,
and third party verification of current utility allowance;
(f) by September 15 of each year, an estimate of LIHTC for that year;
(g) if the Apartment Housing receives a reservation of LIHTC in one
year but will not complete the construction and rent-up until a later year, 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. Such
certification shall be provided to the Limited Partner and Class A Special
Limited Partner and Class B Special Limited Partner by December 31 of the year
during which the reservation was received. Furthermore, if materials and
supplies are purchased to meet the 10% requirement then the General Partner
shall provide to the Limited Partner satisfactory evidence as determined by the
Class A Special Limited Partner, 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;
(h) during the Compliance Period, no later than 10 days 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;
(i) 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;
(j) within sixty (60) days after the payment date of the real estate
property taxes each and every year verification that the same has been paid in
full;
(k) within seventy-five (75) days of the end of the General Partner's
fiscal year, a copy of the General Partner's updated financial statement of the
previous year;
(l) on or before November 15th of each calendar year, a copy of the
following year's proposed operating budget. Each such Budget shall contain all
the anticipated Cash Expenses of the Partnership. Such Budget shall only be
adopted with the Consent of the Class A Special Limited Partner; and
(m) notice of the occurrence, or of the likelihood of occurrence, of
any event which has had a material adverse effect upon the Apartment Housing or
the Partnership, including, but not limited to, any breach of any of the
representations and warranties set forth in Section 9.12 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(a) and Section 14.3 within the time periods set
forth therein, the General Partner, using its own funds, shall pay as damages
the sum of $100 per week (plus interest at the rate established by Section 6.3
of this Agreement) to the Limited Partner until such obligations shall have been
fulfilled. If the General Partner shall so fail to pay, the General Partner and
its Affiliates shall forthwith cease to be entitled to any fees hereunder (other
than the Development Fee) and/or to the payment of any Net Operating Income or
Sale or Refinancing Proceeds to which the General Partner may otherwise be
entitled hereunder. Payments of fees and Distributions shall be restored only
upon payment of such damages in full. If the General Partner does not fulfill
its obligations under Section 14.2(b) and Section 14.3 within 30 days of
receiving written notice by the Limited Partner, then the General Partner and
their Affiliates shall forthwith cease to be entitled to any fees and Cash Flow
from Operations referenced in Section 11.1 of this Agreement and to any Sale or
Refinancing Proceeds to which they may otherwise be entitled hereunder. Such
payments of fees and Cash Flow from Operations referenced in Section 11.1 of
this Agreement and Sale and Refinancing Proceeds shall be restored only upon
delivery of such documents.
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
during normal business hours 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. 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 Class A Special
Limited Partner, may, but is not required to, cause the Partnership to make or
revoke the election referred to in Section 754 of the Code, as amended, or any
similar provisions enacted in lieu thereof.
ARTICLE XV
DISSOLUTION, WINDING UP, TERMINATION
AND LIQUIDATION OF THE PARTNERSHIP
Section 15.1 Dissolution of Partnership. The Partnership shall be dis-
solved 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 Class A Special Limited Partner if it elects to serve as
successor General Partner under Section 13.4 hereof) who will continue as
General Partner, or (2) within 120 days after the occurrence of any such event
the Limited Partner elects to continue the business of the Partnership.
(b) The sale of the Apartment Housing 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 Rural Development, 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 Class
A Special Limited Partner.
Section 15.3 Distribution 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 Limited Partner or by the court in a judicial dissolution) shall take
full account of the Partnership assets and liabilities and shall liquidate the
assets as promptly as is consistent with obtaining the fair value thereof.
(a) Upon dissolution and termination, after payment of, or adequate
provision for, the debts and obligations of the Partnership pursuant to Section
11.2(a) through and including 11.2(c), the remaining assets of the Partnership
shall be distributed to the Partners in accordance with the positive balances in
their Capital Accounts, after taking into account all allocations under Article
X hereof.
(b) In the event that a General Partner has a deficit balance in its
Capital Account following the Liquidation of the Partnership or its interest, as
determined after taking into account all Capital Account adjustments for the
Partnership taxable year in which such Liquidation occurs, such General Partner
shall pay to the Partnership the lesser of (1) the amount necessary to restore
such deficit balance to zero in compliance with Treasury Regulation Section
1.704-1(b)(2)(ii)(b)(3),and (2) 1.01% of the Capital Contribution less any prior
Capital Contributions made by the General Partner.
(1) The deficit reduction amount shall be paid by the General
Partner by the end of such taxable year (or, if later, within 90 days after the
date of Liquidation) and shall, upon Liquidation of the Partnership, be paid to
creditors of the Partnership or distributed to other Partners in accordance with
their positive Capital Account balances.
(c) With respect to assets distributed in kind to the Partners in
Liquidation or otherwise:
(1) unrealized appreciation or unrealized depreciation in the
values of such assets shall be deemed to be Income and Losses realized by the
Partnership immediately prior to the Liquidation or other Distribution event;
and
(2) such Income and Losses shall be allocated to the Partners
in accordance with Section 10.2 hereof, and any property so distributed shall be
treated as a Distribution of an amount in cash equal to the excess of such Fair
Market Value over the outstanding principal balance of and accrued interest on
any debt by which the property is encumbered.
(d) For the purposes of Section 15.3(c), "unrealized appreciation" or
"unrealized depreciation" shall mean the difference between the Fair Market
Value of such assets, taking into account the Fair Market Value of the
associated financing but subject to Section 7701(g) of the Code, and the asset's
Gross Asset Value. Section 15.3(c) is merely intended to provide a rule for
allocating unrealized Income and Losses upon Liquidation or other Distribution
event, and nothing contained in Section 15.3(c) or elsewhere in this Agreement
is intended to treat or cause such Distributions to be treated as sales for
value. The Fair Market Value of such assets shall be determined by an
independent appraiser to be selected by the General Partner.
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
Class A 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 Apartment Housing 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
Class A Special Limited Partner shall cease to be such and the General Partner
shall execute, acknowledge and cause to be filed those certificates referenced
in Section 15.6.
Section 15.6 Certificates of Dissolution; Certificate of Cancellation
of Certificate of Limited Partnership.
(a) Upon the dissolution of the Partnership, the General Partner shall
cause to be filed in the office of, and on a form prescribed by the Secretary of
State of the State, a certificate of dissolution. The certificate of dissolution
shall set forth the Partnership's name, the Secretary of State's file number for
the Partnership, the event causing the Partnership's dissolution and the date of
the dissolution.
(b) Upon the completion of the winding up of the Partnership's affairs,
the General Partner shall cause to be filed in the office of, and on a form
prescribed by, the Secretary of State of the State, a certificate of
cancellation of the Certificate of Limited Partnership. The certificate of
cancellation of the Certificate of Limited Partnership shall set forth the
Partnership's name, the Secretary of State's file number for the Partnership,
and any other information which the General Partner determines to include
therein.
ARTICLE XVI
AMENDMENTS
This Agreement may be amended by a unanimous Consent of the Partners
after a meeting of the Partners, which meeting shall be held after proper notice
as provided in Section 17.2 of this Agreement. For purposes of this Article XVI,
a Partner shall grant its Consent to a proposed amendment unless such Partner
reasonably determines that the proposed amendment is adverse to the Partner's
Interest.
ARTICLE XVII
MISCELLANEOUS
Section 17.1 Voting Rights.
(a) The Limited Partner shall have no right to vote upon any matters
affecting the Partnership, except as provided in this Agreement. At a meeting of
the Partnership, the Limited Partner may vote:
(1) to approve or disapprove the Sale or Refinancing of the
Apartment Housing;
(2) to remove the General Partner and elect a substitute Gen-
eral Partner as provided in this Agreement;
(3) to elect a successor General Partner upon the Withdrawal
of the General Partner;
(4) to approve or disapprove the dissolution of the Partner-
ship;
(5) subject to the provisions of Article XVI hereof, to amend
this Agreement; or
(6) to approve or disapprove the refinancing of the Mortgage.
(b) On any matter where any 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 Class A Special Limited Partner shall have the right to Consent
to those actions or inaction's of the Partnership and/or General Partner as
otherwise set forth in this Agreement, and the General Partner is prohibited
from any action or inaction requiring such Consent unless such Consent has been
obtained.
Section 17.2 Meeting of Partnership. Meetings of the Partnership may be
called either (a) at any time by the General Partner; or (b) upon the General
Partner's receipt of a written or facsimile request from the Limited Partner
setting forth the purpose of such meeting. Within ten days after receipt of the
Limited Partner's written or facsimile request for a meeting, the General
Partner shall provide all Partners with written notice of the meeting (which
shall be by telephone conference, or at the principal place of business of the
Partnership or such other location referenced in the notice) to be held not less
than 15 days nor more than 30 days after receipt of such written or facsimile
request from the Limited Partner, which notice shall specify the time and place
of such meeting and the purpose or purposes thereof. If the General Partner
fails to provide the written notice of the meeting within ten days after receipt
of the Limited Partner's request to hold a meeting, then the Limited Partner may
provide the written notice of the meeting to all the Partners, which notice
shall specify the time and place of such meeting and the purpose or purposes
thereof. All meetings and actions of the Limited Partner shall be governed in
all respects, including matters relating to notice, quorum, adjournment,
proxies, record dates and actions without a meeting, by the applicable
provisions of the Act, as it shall be amended from time to time.
Section 17.3 Notices. Any notice given pursuant to this Agreement may
be served personally on the Partner to be notified, sent by a reputable
overnight delivery service 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: Southwind Community Development Corporation,
a Missouri Non-Profit Corporation
1423 David
Mt. Vernon, Missouri 65712
To the Limited Partner: WNC Housing Tax Credit Fund VI, L.P., Series 6
3158 Redhill Avenue
Suite 120
Costa Mesa, California 92626
To the Class A Special
Limited Partner: WNC Housing, L.P.
3158 Redhill Ave., Suite 120
Costa Mesa, CA 92626-3416
To the Class B Special
Limited Partner: Missouri Affordable Housing Fund X, L.P.
Affordable Equity Partners, Inc.
11000 Airport Drive, Building One, South Wing
Columbia, Missouri 65201
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 FmHA Regulations. Notwithstanding any other provisions of
this Agreement, the following will take precedence:
(a) The Partnership is authorized to execute any documents required by
FmHA in connection with the FmHA Loan Agreement. The General Partner hereby
covenants to act in accordance with the Project Documents. Any incoming General
Partner shall, as a condition of receiving a Partnership interest, agree to be
bound by the Project Documents, and all other documents executed in connection
with the FmHA Loan Agreement to the same extent and on the same terms as any
other General Partner. Upon any dissolution, no title or right to possession and
control of the Project, and no right to collect the rents therefrom, shall pass
to any Person who is not bound in a manner consistent with Section 515 of the
Housing Act and the rules and regulations thereunder.
(b) In the event that any provision of this Agreement in any way tends
to contradict, modify or in any way change the terms of the Project Documents or
any other agreement related to the Project entered into, or to be entered into,
by or on behalf of the Partnership with FmHA, the terms of the Project Documents
or such other agreements with FmHA shall prevail and govern.
(c) Any amendment or revision of this Agreement, transfer of a
Partnership interest or other action requiring approval shall be subject to the
written approval of FmHA, if such approval is required, and any amendment
without the prior written approval of FmHA shall be subject to later amendment
to comply with the requirements of FmHA; provided, however, that no such
approval of FmHA shall be required for any amendment of this Agreement the sole
purpose of which is to provide for the admission of additional or substituted
limited partners so long as any such additional or substituted limited partner
so admitted shall own in the aggregate less than a 10% limited partner interest
in the Partnership.
(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 all conditions, approvals and other requirements of FmHA rules and
regulations applicable thereto.
(e) The General Partner will at all times maintain the FmHA required
Financial Interest in the Partnership.
The foregoing paragraphs (a), (b), (c), (d), and (e) will automatically
become void and of no further force and effect with respect to FmHA at such time
as the Mortgage is no longer being provided by FmHA.
Section 17.6 Recording of Certificate of Limited Partnership. If the
General Partner should deem it advisable to do so, the Partnership shall record
in the office of the County Recorder of the county in which the principal place
of business of the Partnership is located a certified copy of the Certificate of
Limited Partnership, or any amendment thereto, after such Certificate or
amendment has been filed with the Secretary of State of the State.
Section 17.7 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 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.
(3) The admission of a General Partner and that Partner's
address.
(4) The discovery by the General Partner of any false or
erroneous material statement contained in the Certificate of Limited Partnership
or any amendment thereto.
(b) The Certificate of Limited Partnership may also be amended in
conformity with this Agreement at any time in any other respect that the General
Partner determines.
(c) The General Partner shall cause the Certificate of Limited
Partnership to be amended, when required or permitted as aforesaid, by filing a
certificate of amendment thereto in the office of, and on a form prescribed by,
the Secretary of State of the State. The certificate of amendment shall set
forth the Partnership's name, the Secretary of State's file number for the
Partnership and the text of the amendment.
Section 17.8 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 17.9 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 17.10 Saving Clause. If any provision of this Agreement, or the
application of such provision to any Person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to Persons or circumstances other than those as to which it is held invalid,
shall not be affected thereby.
Section 17.11 Certain Provisions. If the operation of any provision of
this Agreement would contravene the provisions of applicable law, or would
result in the imposition of general liability on any Limited Partner, Class A
Special Limited Partner or Class B Special Limited Partner, such provisions
shall be void and ineffectual.
Section 17.12 Tax Matters Partner. All the Partners hereby agree that
the General Partner shall be the "Tax Matters Partner" pursuant to the Code and
in connection with any audit of the federal income tax returns of the
Partnership.
(a) The Tax Matters Partner shall furnish to each Partner notice and
information with respect to the following: closing conference with an examining
agent; proposed adjustments, rights of appeal, and requirements for filing a
protest; time and place of any appeals conference; acceptance by the Internal
Revenue Service of any settlement offer; consent to the extension of the period
of limitation with respect to all Partners; filing of a request for
administrative adjustment on behalf of the Partnership; filing by the Tax
Matters Partner or any other Partner of any petition for judicial review; filing
of any appeal with respect to any judicial determination; and a final judicial
redetermination.
(b) If the Tax Matters Partner shall determine to litigate any
administrative determination relating to federal income tax matters, then the
Tax Matters Partner shall litigate such matter in such court as the Tax Matters
Partner shall decide in its sole discretion.
(c) In discharging its duties and responsibilities, the Tax Matters
Partner shall act as a fiduciary (1) to the Limited Partner (to the exclusion of
the other Partners) insofar as tax matters related to the Tax Credits are
concerned, and (2) to all of the Partners in other respects.
(d) The Partners consent and agree that in connection with any audit of
the Partnership, or if the Tax Matters Partner withdraws from the Partnership or
the Tax Matters Partner becomes Bankrupt, then the Class A Special Limited
Partner may become, in its sole discretion, a special general partner, and
become the Tax Matters Partner. The Limited Partner will make no claim against
the Partnership in respect of any action or omission by the Tax Matters Partner
during such time as the Class A Special Limited Partner acts as the Tax Matters
Partner.
Section 17.13 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 17.14 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 17.15 Governing Law. This Agreement and its application shall
be governed by the laws of the State.
Section 17.16 Attorney's Fees. If a suit or action is instituted in
connection with an alleged breach of any provision of this Agreement, the
prevailing party shall be entitled to recover, in addition to costs, such sums
as the court may adjudge reasonable as attorney's fees, including fees on any
appeal.
Section 17.17 Receipt of Correspondence. The Partners agree that the
General Partner shall send to the Limited Partner and the Class A Special
Limited Partner within five days of receipt a copy of any correspondence
relative to the Apartment Housing's noncompliance with the Mortgage, relative to
the Apartment Housing's noncompliance with the Tax Credit rules or regulations,
relative to the acceleration of the Mortgage and/or relative to the disposition
of the Apartment Housing.
Section 17.18 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 their respective
Interests of such Partner in all funds distributable to said Partner to the
extent of the amount of such obligation.
Section 17.19 Liability for Acts and Omissions.
(a) Neither the General Partner nor any Affiliate shall be
liable, responsible or accountable in damages or otherwise to any of the
Partners or the Partnership for any act or omissions performed or omitted by
them if they determined, in good faith, that such action or omission was in the
best interests of the Partnership, and such course of action did not constitute
negligence or misconduct by such Persons.
(b) The Partnership shall not incur the cost of that portion
of any insurance, other than public liability insurance, which insures any party
against any liability as to which such party is herein prohibited from being
indemnified.
(c) The General Partner shall not be required by this Agree-
ment to take any action requiring the expenditure of funds if Partnership
funds are not available.
IN WITNESS WHEREOF, this Amended and Restated Agreement of Limited
Partnership of St. Susanne Associates I, L.P., a Missouri limited partnership,
is made and entered into as of the ________ day of _________________, 1999.
GENERAL PARTNER
Southwind Community Development Corporation,
a Missouri Non-Profit Corporation
By: __________________________
Donald E. Meirick,
Executive Director
WITHDRAWING ORIGINAL LIMITED PARTNER
The Lockwood Group, L.L.P.
By:
Kenneth M. Vitor,
Partner
LIMITED PARTNER
WNC Housing Tax Credit Fund VI, L.P., Series 6
By: WNC & Associates, Inc.,
General Partner
By: ___________________________
David N. Shafer,
Senior Vice President
CLASS A SPECIAL LIMITED PARTNER
WNC Housing, L.P.
By: WNC & Associates, Inc.,
General Partner
By: _______________________________
David N. Shafer,
Senior Vice President
CLASS B SPECIAL LIMITED PARTNER
Missouri Affordable Housing Fund X, L.P.
By: Jeffrey E. Smith Partnerships, L.C.,
General Partner
By:
Pat Bess,
Vice President
</TABLE>
