<TABLE>
<CAPTION>
Heartland Properties, Inc.-Consolidated Balance Sheet
Including Iowa Investments
As of June 30, 2000
** UNAUDITED **
HPI
---
<S> <C>
Cash and cash equivalents 5,717,731
Trade account receivable 1,078,722
Allowance for doubtful accounts (182,610)
Restricted cash - short-term 1,644,929
Loan to Money Pools 0
Other current assets: 0
Short-term notes receivable 2,018,768
Current portion of l-t notes rec 0
Deferred income tax 0
Federal income tax receivable (2,136,480)
State income tax receivable 4,987
Receivable form parent and affiliates 3,000
Receivable from other related parties 2,290,524
Other 231,476
-----------------------------
Total other current assets 2,412,275
0
-----------------------------
Total Current Assets 10,671,047
-----------------------------
0
Operating property and equipment 800,894
Rental property 116,539,112
-----------------------------
Total property 117,340,006
-----------------------------
Accumulated depreciation - operating 490,141
Accumulated depreciation - rental 24,757,573
-----------------------------
Total accumulated depreciation 25,247,714
0
Net Fixed Assets 92,092,292
-----------------------------
0
Net intangible assets 1,707,391
-----------------------------
0
Investment - interco 0
-----------------------------
0
0
-----------------------------
Restricted cash - long-term 0
4,777,416
-----------------------------
Long-term assets 0
Long-term notes receivable 0
Due from related party 0
Deferred income taxes 3,961,569
Equity and other investments 0
Other 5,299,652
Total long-term assets 1,469,200
-----------------------------
2,358,066
-----------------------------
TOTAL ASSETS 0
119,978,567
=============================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Heartland Properties, Inc.-Consolidated Balance Sheet
Including Iowa Investments
As of June 30, 2000
** UNAUDITED **
HPI
Combined
--------
<S> <C>
Line of credit borrowing (10,495,153)
Payable to parent and affiliates 581,858
-----------------------------
Total short-term debt (9,913,295)
-----------------------------
Current maturities of long-term debt 2,813,294
Trade accounts payable 581,566
Payable to other related parties 0
Accrued payroll and vacation 107,136
Accrued interest payable 1,779,853
Federal income tax payable 0
State income tax payable 0
Deferred revenue 3,443
Other current liabilities 2,499,355
-----------------------------
0
Total Current Liabilities (2,128,648)
-----------------------------
0
Long-term debt 0
Mortgage notes payable on rental 68,859,453
Long-term debt with related party 0
-----------------------------
0
Total long-term debt 68,859,453
-----------------------------
0
Deferred income tax 4,487,391
0
Other long-term liabilities 3,902,200
-----------------------------
0
TOTAL LIABILITIES 75,120,396
-----------------------------
0
Minority interest 824,603
0
Common stock 2,695,213
Additional paid in capital 35,091,424
Syndication/stock iss. costs (522,579)
-----------------------------
Total common stock 37,264,058
-----------------------------
Dividends paid (14,880,808)
Retained earnings - prior year 20,302,409
Unrealized Security Gain/Loss 0
Current year earnings(loss) 1,347,909
-----------------------------
Total reinvested earnings 6,769,510
-----------------------------
0
TOTAL STOCKHOLDERS' EQUITY 44,033,568
-----------------------------
0
TOTAL LIABILITIES AND EQUITY 119,978,567
=============================
-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Heartland Properties, Inc.-Consolidated Income Statement
Including Iowa Investments
For the Twelve Months Ended June 30, 2000
** UNAUDITED **
HPI
Combined
--------
<S> <C>
Professional services 323,979
Rental revenue 5,911,369
-----------------------------
Gross revenue 6,235,348
-----------------------------
Less: reimbursements 0
-----------------------------
0
Net revenue 6,235,348
-----------------------------
0
Operating expenses 0
Operating expenses 1,370,058
Administrative and general expenses 3,167,173
Depreciation 1,601,039
Amortization 45,281
Taxes other than income 605,807
-----------------------------
0
Total operating expenses 6,789,358
-----------------------------
0
Pre-Bonus Operating Inc (Loss) (554,010)
0
Bonus 52,500
-----------------------------
0
Post-Bonus Operating Inc (Loss) (606,510)
-----------------------------
0
Interest income - trade 620,515
Interest income - interco 88,243
-----------------------------
0
Total interest income 708,758
-----------------------------
0
Interest expense - trade 2,249,778
Interest expense - interco (2,729)
-----------------------------
0
Total interest expense 2,247,049
-----------------------------
0
Dividend income - trade 0
Dividend income - interco 0
Equity losses in unconsolidated entities (281,658)
Equity gain (loss) in Cargill 0
Other income (expense) (445,431)
-----------------------------
0
Total other income (expense) 9,479,314
-----------------------------
0
Pre-Tax Income (Loss) (2,871,890)
-----------------------------
0
Federal income tax expense (benefit) (1,153,364)
LIH tax credits (2,840,864)
Federal deferred income tax 0
State deferred income tax 0
State income tax expense (benefit) (225,493)
-----------------------------
0
Total tax benefit (4,219,721)
-----------------------------
0
Net Income (Loss) B/F Minority Int. 1,347,831
0
Minority Interest Net (Income) Loss (78)
-----------------------------
0
Net Income (Loss) 1,347,909
=============================
</TABLE>
<PAGE>
Response to SEC request
File No. 70-9323
Reporting period 1/1/00 through 6/30/00
Exhibit B
3. A copy of the partnership agreement for each partnership is
attached.
Pickerel Park Associates Limited Partnership
Meadow Wood Associates of Carroll Phase II, L.P.
Fort Madison IHA II Senior Housing Limited Partnership
<PAGE>
_______________________________________
PICKEREL PARK ASSOCIATES LIMITED PARTNERSHIP
_______________________________________
AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP
Dated as of February 1, 2000
<PAGE>
PICKEREL PARK ASSOCIATES LIMITED PARTNERSHIP
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> ` <C>
ARTICLE I -- Preliminary Statement. 1
ARTICLE II -- Continuation; Name; and Purpose. 1
Section 2.1 Continuation. 1
Section 2.2 Name and Office. 1
Section 2.3 Purpose. 2
Section 2.4 Authorized Acts. 2
Section 2.5 Term and Dissolution. 3
ARTICLE III -- Partners; Capital 3
Section 3.1 General Partner 3
Section 3.2 Limited Partners 4
Section 3.3 Partnership Capital 4
Section 3.4 Withdrawal of Capital 5
Section 3.5 Liability of Limited Partners 5
Section 3.6 Additional Limited Partners 5
ARTICLE IV -- Limited Partner Capital Contributions 6
Section 4.1 Payments 6
Section 4.2 Special Adjustments. 7
Section 4.3 Repurchase Obligation of the General Partner 9
Section 4.4 Repurchase Option of the General Partner. 11
Section 4.5 Right of First Refusal of the General Partner 11
ARTICLE V -- Profits, Losses and Distributions 12
Section 5.1 Profits, Losses and Tax Credits 12
Section 5.2 Distributions Prior to Dissolution 13
Section 5.3 Distributions Upon Dissolution 14
Section 5.4 Special Provisions 15
ARTICLE VI -- General Partner Rights, Powers and Duties 18
Section 6.1 Restrictions on Authority 18
Section 6.2 Personal Services 19
Section 6.3 Business Management and Control; Tax Matters Partner. 19
Section 6.4 Authority of General Partner 20
Section 6.5 Duties and Obligations 21
Section 6.6 Representations and Warranties 23
Section 6.7 Liability 26
Section 6.8 Indemnification 26
Section 6.9 Development Completion Obligation 27
Section 6.10 Operating Expense Obligation 27
Section 6.11 Development Services 28
Section 6.12 Property Management 28
Section 6.13 Borrowings 30
Section 6.14 Replacement Reserve 31
ARTICLE VII -- Books and Records, Accounting and Reports 31
Section 7.1 Books and Records 31
Section 7.2 Bank Accounts 31
Section 7.3 Accountants 32
Section 7.4 Reports, Financial Statements, Tax Returns 32
Section 7.5 Tax Elections 34
Section 7.6 Fiscal Year and Accounting Method. 34
ARTICLE VIII -- Retirement of a General Partner 34
Section 8.1 Retirement 34
Section 8.2 Obligation to Continue 35
Section 8.3 Retirement of a Sole General Partner 35
Section 8.4 Interest of Retired General Partners 35
Section 8.5 Designation of New General Partners 36
Section 8.6 Additional and Substitute General Partners 36
Section 8.7 Amendment of Certificate 38
<PAGE>
ARTICLE IX -- Limited Partner Transfers 38
Section 9.1 Assignments 38
Section 9.2 Substitute Limited Partners 39
Section 9.3 Restrictions 39
Section 9.4 Other Limited Partners 39
ARTICLE X -- General Provisions 39
Section 10.1 Amendments to Certificate 39
Section 10.2 Notices 40
Section 10.3 Word Meanings 40
Section 10.4 Binding Provisions 40
Section 10.5 Applicable Law 40
Section 10.6 Counterparts 41
Section 10.7 Separability of Provisions 41
Section 10.8 Paragraph Titles 41
Section 10.9 Amendments 41
Section 10.10 Time of Admission 41
ARTICLE XI -- Defined Terms 41
Schedule A -- Schedule of Partners
Exhibit 1 -- Legal Description of Property
Exhibit 2 -- Projected Initial Rent Levels and Operating Expenses
Exhibit 3 -- Reporting Guidelines
</TABLE>
<PAGE>
PICKEREL PARK ASSOCIATES LIMITED PARTNERSHIP
AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP
1. -- Preliminary Statement.
Pickerel Park Associates Limited Partnership (the
"Partnership") was formed as a limited partnership under the laws
of the State of Minnesota pursuant to a Limited Partnership
Agreement dated July 16, 1999. A certificate of limited
partnership was filed with the Filing Office on July 19, 1999.
The purposes of this amendment to and restatement of said
Agreement are to: (i) admit Alliant Energy Investments, Inc.,
an Iowa corporation, as the Investor Limited Partner and to
admit Heartland Special Limited, Inc., a Wisconsin corporation ,
as the Special Limited Partner; (ii) provide for the withdrawal
of Newbury Development Company as the pre-existing limited
partner; and (iii) set out more fully the rights, obligations and
duties of the General Partner and the Limited Partners and to
restate the partnership agreement in its entirety.
It is hereby agreed that the agreement of limited
partnership is hereby amended and fully restated as provided
herein. Capitalized terms not defined in the text hereof shall
have the meanings set forth in Article XI.
2. -- Continuation; Name; and Purpose.
2.1. Continuation.
The parties hereto hereby agree to continue the limited
partnership known as Pickerel Park Associates Limited
Partnership, formed pursuant to the provisions of the Uniform Act.
2.2. Name and Office.
The Partnership shall continue to be conducted under the
name of Pickerel Park Associates Limited Partnership. The
principal office of the Partnership shall be at 100 Court Avenue,
Suite 212, Des Moines, Iowa, and the principal office in
Minnesota shall be 1825 Ninth Street West, Albert Lea,
Minnesota. The Partnership may also maintain offices at the
Property. The resident agent for service of process on the
Partnership shall be Newbury Development Company, CT System,
Inc., 405 Second Avenue South, Minneapolis, Minnesota. The
General Partner may at any time change the location of a
Partnership office or the identity or address of its resident
agent in the State and shall give due notice of any such change
to the Limited Partners.
2.3. Purpose.
The purpose of the Partnership is to acquire, construct,
develop, improve, own, maintain, operate, manage, lease, sell,
and otherwise deal with the Property. The Partnership and the
General Partner shall operate the Property in accordance with the
Property Documents and any applicable governmental regulations.
The Partnership shall not engage in any other business or
activity.
2.4. Authorized Acts.
In furtherance of its purposes, but subject to all other
provisions of this Agreement including, but not limited to,
Article III and Article VI, the Partnership is hereby authorized,
and the General Partner shall have full power, authority and
discretion to cause the Partnership:
(i) To acquire by purchase, lease or otherwise any real or
personal property which may be necessary, convenient or
incidental to the accomplishment of the purposes of the
Partnership.
(ii) To construct, operate, maintain, finance and improve,
and to own, sell, convey, assign, mortgage or lease any real
estate and any personal property necessary, convenient or
incidental to the accomplishment of the purposes of the
Partnership.
(iii)To borrow money and issue evidences of indebtedness in
furtherance of any or all of the purposes of the Partnership, and
to secure the same by mortgage, pledge or other lien on the
Property or any other assets of the Partnership.
(iv) To prepay in whole or in part, refinance, recast,
increase, modify or extend a Mortgage and in connection therewith
to execute any extensions, renewals, or modifications of the
Mortgages.
(v) To employ a Management Agent, including an Affiliate,
to manage the Property, and to pay reasonable compensation for
such services.
(vi) To enter into, perform and carry out contracts of any
kind, including contracts with Affiliates, necessary to, in
connection with or incidental to, the accomplishment of the
purposes of the Partnership, specifically including, but not
limited to, the execution and delivery of the Property Documents,
and all other agreements, certificates, instruments or documents
required by the Lenders in connection with the Property Documents
and the acquisition, construction, development, improvement,
maintenance and operation of the Property or otherwise required
by the Lenders in connection with the Property.
(vii)To enter into any kind of activity and to perform and
carry out contracts of any kind necessary to, or in connection
with, or incidental to, the accomplishment of the purposes of the
Partnership, so long as said activities and contracts may be
lawfully carried on or performed by a partnership under the laws
of the State.
2.5. Term and Dissolution.
The Partnership shall continue in full force and effect
until December 31, 2050, except that the Partnership shall be
dissolved prior to such date upon the happening of any of the
following events:
2.5.1. The sale or other disposition of all or
substantially all the assets of the Partnership; or
2.5.2. The Retirement of a General Partner if no
General Partner remains and the Partnership is not reconstituted
with a successor General Partner pursuant to Section 8.3; or
2.5.3. The occurrence of any event which would cause
the dissolution of the Partnership under the Uniform Act
notwithstanding the agreement of the Partners or the election of
the General Partner to continue the business of the Partnership.
The Partners agree, and the General Partner agrees to elect, to
continue the business of the Partnership under all circumstances
permitted by the Uniform Act.
Upon dissolution of the Partnership, unless the Partnership
is reconstituted pursuant to Section 8.3, the General Partner (or
its trustees, receivers, successors, or legal representatives)
shall cause the cancellation of the Partnership's Certificate of
Limited Partnership as then in force, and shall liquidate the
Partnership assets and apply and distribute the proceeds thereof
in accordance with Section 5.3. Notwithstanding the foregoing,
in the event such liquidating General Partner shall determine
that an immediate sale of part or all of the Partnership's assets
would cause undue loss to the Partners, the liquidating General
Partner may, with the prior consent of the Special Limited
Partner, in order to avoid such loss, either (i) delay
liquidation of, and withhold from distribution for a reasonable
time, any assets of the Partnership except those necessary to
satisfy Partnership debts and obligations other than debts
provided for in Section 5.2.B, Clauses Two and following, or (ii)
distribute the assets to the Partners in kind.
3. -- Partners; Capital
3.1. General Partner.
The general partners of the Partnership are James F. Levy,
an individual resident of Iowa, and Newbury Development Company,
an Iowa corporation, at the addresses set forth on the Schedule.
(The general partners are referred to collectively herein as the
"General Partner".) The General Partner has made a Capital
Contribution to the Partnership in the total amount of $100.00
The General Partner shall not be obligated or permitted to make
additional Capital Contributions to the Partnership, except that
the General Partner shall be obligated to make such additional
Capital Contributions to meet Development Cost shortfalls as
provided in Section 6.9.B.
3.2. Limited Partners.
3.2.1. On the Admission Date, Heartland Special
Limited, Inc., a Wisconsin corporation, shall be admitted to the
Partnership as the Special Limited Partner, Alliant Energy
Investments, Inc., an Iowa corporation, shall be admitted to the
Partnership as the Investor Limited Partner, and thenceforth the
Limited Partners shall be those Limited Partners shown on the
Schedule. The addresses of each of the Limited Partners shall be
as set forth on the Schedule.
3.2.2. Newbury Development Company hereby withdraws
as a Limited Partner, effective on the Admission Date, and
acknowledges that as of the Admission Date he (i) has received a
return of his capital contribution in his capacity as a withdrawn
Partner, and (ii) no longer has any interest in or rights or
claims against the Partnership in his capacity as a withdrawn
Partner or for unpaid fees or compensation earned prior to the
Admission Date.
3.3. Partnership Capital.
3.3.1. The capital of the Partnership shall be the
aggregate amount of the cash and the agreed value of property
contributed by the General Partner, and the aggregate amount of
the cash contributed by the Limited Partners, which amounts are
hereby agreed to be those set forth in the Schedule. The
Schedule shall be amended from time to time to reflect the
withdrawal or admission of Partners, any changes in the
Partnership interests held by a Partner arising from the transfer
of a Partnership interest to or by such Partner and any change in
the amounts to be contributed or agreed to be contributed by any
Partner; provided that no funds provided by a Partner shall be
deemed to be additional Capital Contributions unless payment
thereof is pursuant to a specific provision of this Agreement
requiring or permitting the making of additional Capital
Contributions.
3.3.2. An individual Capital Account shall be
established and maintained for each Partner, including any
additional or substituted Partner who shall hereafter receive an
interest in Partnership. The Capital Account of each Partner
shall consist of (a) the amount of cash such Partner contributes
to the Partnership, plus (b) the fair market value of any
property such Partner contributes to the Partnership net of any
liabilities assumed by the Partnership or to which such property
is subject, plus (c) the amount of profits and gain and tax
exempt income allocated to such Partner, minus (d) the amount of
losses and deductions allocated to such Partner, minus (e) the
amount of all cash distributed to such Partner, minus (f) the
fair market value of any property distributed to such Partner net
of any liabilities assumed by such Partner or to which such
property is subject, minus (g) the amount of any other
expenditures which are not deductible by the Partnership for
Federal income tax purposes or which are not allowable as
additions to the basis of Partnership property and which are
allocated to such Partner. Each Capital Account shall also be
subject to such other adjustments as may be required under the
Code and Treasury Regulations. The Capital Account of a Partner
shall not be affected by any adjustments to basis made pursuant
to Section 743 of the Code.
3.3.3. The original Capital Account established for
any substituted Partner shall be in the same amount as, and shall
replace, the Capital Account of the Partner which such
substituted Partner succeeds, and, for the purposes of this
Agreement, such substituted Partner shall be deemed to have made
the Capital Contribution, to the extent actually paid in, of the
Partner which such substituted Partner succeeds. The term
"substituted Partner", as used in this paragraph, shall mean a
Person who shall become entitled to receive a share of the
profits, losses and distributions of the Partnership by reason of
such Person succeeding to the interest in the Partnership of a
Partner by assignment of all or any part of a Partner's interest
in the Partnership. To the extent a substituted Partner receives
less than 100% of the interest in the Partnership of a Partner it
succeeds, the original Capital Account of such substituted
Partner and its Capital Contribution shall be in proportion to
the interest he receives and the Capital Account of the Partner
who retains a partial interest in the Partnership and its Capital
Contribution shall continue, and not be replaced, in proportion
to the interest he retains. Nothing in this Section 3.3 shall
affect the limitations on transferability of Partnership
interests set forth in this Agreement.
3.4. Withdrawal of Capital.
Except as may be specifically provided in Article V hereof,
no Partner shall have the right to withdraw from the Partnership
all or any part of its Capital Contribution. No Partner shall
have any right to demand and receive property or cash of the
Partnership in return of its Capital Contribution except as may
be specifically provided in this Agreement.
3.5. Liability of Limited Partners.
No Limited Partner shall be liable for any debts,
liabilities, contracts or obligations of the Partnership except
to the extent such Limited Partner shall undertake such liability
pursuant to a separate written instrument. A Limited Partner
shall be liable to the Partnership only to make payments of its
Capital Contribution as and when due hereunder, and, after its
Capital Contribution shall be fully paid, no Limited Partner
shall, except as otherwise required by the Uniform Act, be
required to make any further Capital Contributions or lend any
funds to the Partnership.
3.6. Additional Limited Partners.
3.6.1. Except as may be expressly provided elsewhere
in this Agreement, the General Partner shall have no right or
authority to admit Limited Partners other than those being
admitted pursuant to Section 3.2 unless such admission shall have
received the Consent of the Special Limited Partner.
3.6.2. Any incoming Limited Partner shall, as a
condition of receiving any interest in Partnership property,
agree to be bound by the Property Documents to the same extent
and on the same terms as all other Partners of the same class.
Any incoming Limited Partner shall also agree to be bound by the
provisions of this Agreement.
3.6.3. Upon the admission of any additional Limited
Partners, the Schedule shall be amended to reflect the names,
addresses and Capital Contributions of such additional Limited
Partners, and the date each Limited Partner is admitted to the
Partnership.
4. -- Limited Partner Capital Contributions
4.1. Payments.
4.1.1. The Special Limited Partner shall pay its
entire Capital Contribution of $100.00 to the Partnership in cash
on the Admission Date. The Investor Limited Partner shall make
its Capital Contributions in the total amount of $1,322,800,
which shall be paid in Installments (subject to the provision of
Section 4.2.C) as set forth in the following payment schedule
(the "Payment Schedule") and upon satisfaction of the conditions
set forth in Section 4.1.B:
(1) The first installment in the amount of
$661,400 (the "First Installment") shall be paid on the Admission
Date; provided, however, that if as of the Admission Date the
development costs to be drawn against are less than the amount of
the First Installment, the disbursement of the extra portion of
such Installment shall be delayed pending future construction
draw requests.
(2) The second installment in the amount of
$264,560 (the "Second Installment") shall be paid on the later of
(a) Full Completion, (b) Basis Certification, and (c) Carryover
Allocation Issuance.
(3) The third installment in the amount of
$264,560 (the "Third Installment") shall be paid on the later of
(a) Permanent Mortgage Closing, and (b) 8609 Issuance.
(4) The fourth installment in the amount of
$132,280 (the "Fourth Installment") shall be paid on the later of
(a) the occurrence of Stabilized Occupancy, and (b) the initial
occupancy of all dwelling units in the Property by Qualified
Tenants.
All Capital Contributions received by the Partnership
shall be used only for Partnership purposes permitted by this
Agreement.
4.1.2. The obligation of the Investor Limited
Partner to pay to the Partnership each Installment is subject to
the conditions that (i) each of the preceding Installments shall
have become due and payable and (ii) the delivery by the General
Partner to the Special Limited Partner of a written certificate
(the "Certificate"), which shall be addressed to the Special
Limited Partner and the Investor Limited Partner and which shall
state that, as of the date of execution of such Certificate, (i)
the Installment in question is due and payable to the Partnership
(except with regard to the mere passage of time to any certain
date set forth in the Payment Schedule), and (ii) all
preconditions (except with regard to the mere passage of time to
any certain date set forth in the Payment Schedule),
representations, warranties and agreements applicable to such
Installment set forth in Sections 4.1 and 6.6 and elsewhere in
this Agreement have been satisfied, or are true and correct, as
the case may be. The Certificate shall include as an exhibit
thereto a copy of the title insurance commitment or policy for
the Property including all endorsements (the most recent of which
must be dated within 15 days of the date of the Certificate)
evidencing the accuracy of the representation set forth in
Section 6.6(viii). The Certificate delivered with respect to the
First Installment shall be dated as of the Admission Date, and
the Certificate delivered with respect to each subsequent
Installment shall be dated no earlier than 15 days prior to the
date of payment of such Installment. By acceptance of such
Installment on behalf of the Partnership, the General Partner
shall be deemed to have reaffirmed and ratified the Certificate
as of the date such Installment is paid to the Partnership.
4.1.3. If as of the date when any Installment or
portion thereof would otherwise be payable to the Partnership
pursuant to the Payment Schedule, the Certificate required under
Section 4.1.B cannot truthfully be given, then the Installment
shall not be payable to the Partnership unless and until (a) the
General Partner shall resolve the circumstances which prevent
delivery of such Certificate, (b) such resolution shall have been
effected in a manner and under circumstances such that the
Investor Limited Partner shall not have irrevocably lost any
substantial part of the benefits of this Agreement, (c) the
General Partner shall not otherwise be in default hereunder and
(d) the Certificate shall be delivered in compliance with the
provisions of Section 4.1.B.
4.2. Special Adjustments.
Upon occurrence of the events set forth in the following
paragraphs, the following adjustments shall be made:
4.2.1. Low Income Housing Credit Adjustment.
(1) If the Annual Reported Credit which will
apply to each year of the Credit Period is less than $177,734,
then the General Partner shall pay to the Investor Limited
Partner, in the manner provided in Section 4.2.C below, an
Adjustment Amount equal to 74.4% of the excess of (a) the sum of
the Projected Credit for all years included in the table in the
definition of "Projected Credit" minus (b) the sum of the Low
Income Housing Credit which will be allocated to the Investor
Limited Partner for all such years based on the Annual Reported
Credit. If instead such Annual Reported Credit is greater than
$177,734, then an offsetting Adjustment Amount shall be
determined as aforesaid, and the Investor Limited Partner shall
make an additional Capital Contribution to the partnership in an
amount equal to that offsetting Adjustment Amount, which
additional Capital Contribution shall be payable at the time of
the Third Installment.
(2) In the event that the Actual Credit for 2001
is less than the Projected Credit for such year (after the
Projected Credit has been revised by any adjustment made pursuant
to Section 4.2.A(1) above), then the General Partner shall pay to
the Investor Limited Partner, in the manner provided in Section
4.2.C below, an Adjustment Amount equal to the total shortfall in
Projected Credit, and, to the extent the shortfall will be
deferred pursuant to Section 42(f)(2)(B) of the Code, the
Projected Credit for 2011 shall be increased by the amount of
such Adjustment Amount.
(3) If for any reason (except changes in federal
income tax law), the amount of Actual Credit for any year is less
than the Projected Credit for such year after the Projected
Credit has been revised by any adjustments made pursuant to
Sections 4.2.A(1) or 4.2.A(2) above), then the General Partner
shall pay to the Investor Limited Partner, in the manner provided
in Section 4.2.C below, an Adjustment Amount equal to the sum of
(a) the shortfall in Projected Credit for such year and the
corresponding shortfall for all future years which will also
occur due to the circumstances in question, (b) the amount of any
Low Income Housing Credit recapture amount (as defined in Code
Section 42(j), including any interest and/or penalties due to the
Internal Revenue Service), if the Internal Revenue Service
determines that the payment by the General Partner to the
Investor Limited Partner is not a return of capital, or otherwise
determines that such recapture amount is owing, and (c) if the
receipt of the foregoing amounts results in a tax liability for
the Investor Limited Partner, an amount sufficient to pay such
tax liability (calculated at an assumed tax rate of 40%). It is
understood and acknowledged that the provisions of this Section
4.2.A(3) may be applied with respect to each year of the Credit
Period.
(4) "Projected Credit" shall mean the amount for
each year expected to be allocated to the Investor Limited
Partner as set forth in the table below:
Year Projected Credit
------------------------------------------
2001 $81,456
2002 and each year
thereafter through 2010 $177,734
2011 $96,278
When any adjustment is made pursuant to this Section 4.2.A, the
"Projected Credit" for purposes of any future adjustment shall be
revised to equal the Actual Credit on which such adjustment was
computed.
(5) "Actual Credit" means, with respect to any
tax year, the total amount of Low Income Housing Credit actually
reported by the Partnership on its tax return for that tax year
and allocated to the Investor Limited Partner and not disallowed
by any taxing authority, as subsequently adjusted (if applicable)
by any Tax Credit recapture amounts (as defined in Section
42(j)(2) of the Code).
(6) "Annual Reported Credit" means the annual
amount of Low Income Housing Credit which is expected to be
allocated by the Partnership to the Investor Limited Partner on
the Partnership tax return for each year of the Credit Period
(subject only to timing adjustments such as placed in service and
occupancy dates), as determined and reflected in a statement to
be prepared by the Accountants after Full Completion and 8609
Issuance and which (a) shall be based on an audit by the
Accountants of Development Costs, (b) shall include supporting
documentation and/or certifications from the General Partner and
the Accountants indicating the date when each building comprising
the Property was placed in service and indicating the number and
percentage of tenants occupying units in the Property who are
Qualified Tenants and (c) on which the Accountants shall express
a favorable opinion as to fair presentation. In no event shall
the amount of the Development Completion Fee which is taken into
account in computing the Annual Reported Credit exceed the lesser
of (a) the amount of such fee actually paid or to be paid
pursuant to Section 6.11.A and (b) the amount allowable by the
Credit Agency.
4.2.2. Intentionally Omitted.
4.2.3. Adjustment Procedure.
When an "Adjustment Amount" shall become due from the
General Partner pursuant to this Section 4.2, it shall be paid to
the Investor Limited Partner by paying such amount to the
Partnership in satisfaction of the Investor Limited Partner's
obligation to pay the corresponding amount of the Installment
which is next due (and, if necessary, succeeding Installments in
order until the Adjustment Amount is fully paid), and the
Investor Limited Partner shall pay only the remaining amount (if
any) of such Installment(s).
If the Adjustment Amount exceeds the amount of the
succeeding Installments or is determined after all Installments
have been paid, then the General Partner shall pay, not later
than 30 days following the determination of the Adjustment
Amount, to the Investor Limited Partner an amount equal to any
portion of the Adjustment Amount which cannot be applied to
succeeding Installments. If such amount is not paid to the
Investor Limited Partner by the date required above, then the
interest rate accruing thereon shall be increased to the rate of
12% per annum retroactively to the date the Adjustment Amount was
determined.
The payment made to the Partnership on behalf of the
Investor Limited Partner shall be deemed to be indemnification
paid to the Investor Limited Partner by the General Partner for
breach of warranty of the availability of the full Projected
Credit and/or the full depreciation tax deductions, shall not
constitute a Capital Contribution, loan or advance by the General
Partner and shall not be reimbursable or repayable to the General
Partner by the Partnership or the Investor Limited Partner. If
the General Partner shall default in making such payment to the
Partnership, the Partnership's remedies shall be only against the
General Partner and the Investor Limited Partner shall
nevertheless be deemed to have paid its entire Installment in
full.
4.3. Repurchase Obligation of the General Partner.
Upon the occurrence of any of the Repurchase Events set
forth below, each Limited Partner shall have the right to elect
to sell its interest in the Partnership by sending written notice
(the "Election Notice") thereof to the General Partner at any
time (provided that such notice must be sent within 90 days after
receipt by such Limited Partner of notice of the occurrence of a
Repurchase Event from the General Partner (which notice the
General Partner shall be obligated to give promptly to each
Limited Partner). The purchase shall be made by the General
Partner within 120 days after the receipt of the Election
Notice. The "Repurchase Events" which shall create the aforesaid
right to be repurchased shall be any of the following:
1. The failure of the Partnership to achieve Minimum Set
Aside and to continue to maintain occupancy in compliance with
Minimum Set Aside throughout the Compliance Period; or
2. A determination by the Special Limited Partner or the
Internal Revenue Service that the Property is ineligible for 20%
or more of the Projected Credit.
3. The failure of the Partnership to achieve Full
Completion by the earlier of (i) December 31, 2001 (or, if the
Internal Revenue Service grants a formal, written extension of
the placed-in-service date deadline for the Property, then such
later date as the Internal Revenue Service shall specify as the
new placed-in-service date deadline), or (ii) any earlier date as
of which a default shall occur under, or demand for payment shall
have been made pursuant to, the Construction Mortgage.
4. The failure of the Partnership to execute and record by
December 31, 2001 (or, if the Internal Revenue Service grants a
formal, written extension of the placed-in-service date deadline
for the Property, then such later date as the Internal Revenue
Service shall specify as the new placed-in-service date deadline)
a valid extended use agreement as required pursuant to Section 42
of the Code.
5. The failure of the Partnership to achieve Carryover
Allocation Issuance by December 31, 1999.
The purchase price for any of the purchases described above
shall be an amount in cash equal to the Outstanding Capital of
each selling Limited Partner plus interest at the annual rate of
12%, from the occurrence of the Repurchase Event through the
date the purchase price is paid. If at the time of such
repurchase, the payment of the purchase price plus interest to
the selling Limited Partners constitutes a violation of the
Uniform Act, the General Partner shall (i) contribute sufficient
additional Capital to the Partnership to permit such repurchase
without constituting such a violation, and (ii) shall indemnify
and hold harmless each selling Limited Partner against all loss
and damage by reason of such repurchase being in violation of the
Uniform Act.
Upon the purchase of such interest the General Partner shall
become a Substitute Investor Limited Partner to the extent of the
Limited Partner interest acquired by them, and the interest as a
Limited Partner of each selling Limited Partner shall terminate.
Upon the occurrence of any event which requires the General
Partner to give notice of the obligation of the General Partner
to purchase the interest of the Limited Partners, as herein
described, the Investor Limited Partner shall have no further
obligation to pay any subsequent Installment of its Capital
Contribution unless the Investor Limited Partner fails to elect,
within the time described above, to have its interest repurchased.
4.4. Repurchase Option of the General Partner.
At any time after the expiration of the Compliance Period,
the General Partner shall have the option to purchase all of the
interests of the Investor Limited Partner and Special Limited
Partner in the LLC by sending written notice (the "Option
Notice") thereof to the Special Limited Partner. The purchase
shall be made by the General Partner no later than 90 days after
the receipt of the Option Notice by the Special Limited Partner.
The purchase price for such purchase shall be the fair
market value of the Investor Limited Partner and Special Limited
Partner's interests in the Property (the "Interests"). To
determine the fair market value of the Interests, the General
Partner and Special Limited Partner shall have thirty (30) days
to mutually agree on a fair market value of the Interests. If
the General Partner and Special Limited Partner do not so agree
within such thirty (30) days, then they shall mutually select a
qualified real estate appraiser to appraise the fair market value
of the Interests. Upon receipt of the appraisal, if either the
General Partner or Special Limited Partner, in its sole
discretion, does not agree that the appraised value to accurately
reflect the fair market value of the Interests, then the General
Partner and Special Limited Partner shall each separately select
other qualified appraisers, both different from each other and
from the first appraiser, to appraise the fair market value of
the Interests. In that event, the fair market value be the
average of the three appraised values of the Interests. Fair
market value shall consider restrictions on transfer and
applicable use restrictions on the Property.
Upon the purchase of the interests of the Investor Limited
Partner and the Special Limited Partner, the General Partner
shall become a Substitute Investor Limited Partner to the extent
of the Partner(s) interest acquired by them, and the interest as
a Partner of each selling Partner shall terminate. The
indemnification of the Investor Limited Partner and Special
Limited Partner by the General Partner pursuant to Section 6.7
for all events occurring prior to purchase under this Section
4.4, shall survive such purchase of the interests of the Investor
Limited Partner and the Special Limited Partner.
4.5. Right of First Refusal of the General Partner.
At any time after the expiration of the Compliance Period,
if the Investor Limited Partner receives from any Person that is
not an Affiliate a bona fide written offer to purchase its
Interest in the Partnership, and the Investor Limited Partner
desires to accept such offer, then the Investor Limited Partner
shall provide written notice (the "Sales Notice") to the General
Partner setting forth the terms of the proposed sale (the "Sales
Price and Terms"). The General Partner shall then have the
option, for a period of 45 days from receipt of the Sales Notice,
to purchase the Property at the Sales Price and Terms set forth
in the Sales Notice. After the expiration of such option to
purchase the Property or upon delivery of notice from all Members
to the Managing Member of their election not to exercise such
option, the Managing Member shall have a period of 180 days (the
"Sales Period") to sell the Property at the Sales Price and
Terms. If a sale of the Property has not occurred prior to the
expiration of the Sales Period, the Investor Limited Partner
shall be required to re-offer the Property for sale in accordance
with the provisions of this Section 4.5.
Upon the purchase of the interests of the Investor Limited
Partner and the Special Limited Partner, the General Partner
shall become a Substitute Investor Limited Partner to the extent
of the Partner(s) interest acquired by them, and the interest as
a Partner of each selling Partner shall terminate. The
indemnification of the Investor Limited Partner and Special
Limited Partner by the General Partner pursuant to Section 6.7
for all events occurring prior to purchase under this Section
4.5, shall survive such purchase of the interests of the Investor
Limited Partner and the Special Limited Partner.
5. -- Profits, Losses and Distributions
5.1. Profits, Losses and Tax Credits.
5.1.1. Except as otherwise provided in this Article
V, for each fiscal year or portion thereof, all profits,
tax-exempt income, gains, losses, nondeductible expenditures and
tax credits incurred and/or accrued by the Partnership, other
than those arising from a Capital Transaction, shall be allocated
0.01% to the General Partner, and 99.99% to the Limited Partners.
5.1.2. Except as otherwise provided in this Article
V, all profits and losses arising from a Capital Transaction
shall be shared by the Partners, as of the end of the fiscal year
in which such Capital Transaction occurs, as follows:
As to profits:
--------------
First, an amount of profit equal to the aggregate negative
balances (if any) in the Capital Accounts of all Partners having
negative Capital Accounts shall be allocated to such Partners in
proportion to the negative Capital Account balances until all
such Capital Accounts shall have a zero balance; and
Second, an amount of profits shall be allocated to each of
the Partners until the positive balance in the Capital Account of
each Partner equals the amount of cash which would be distributed
to such Partner in accordance with the provisions of Clauses
Fourth, Fifth and Sixth of Section 5.2.B if the aggregate amount
of such Capital Accounts balances were cash available for
distribution.
As to losses:
-------------
First, an amount of losses equal to the aggregate positive
balances (if any) in the Capital Accounts of all Partners having
positive balance Capital Accounts shall be allocated to such
Partners in proportion to their positive Capital Account balances
until all such Capital Accounts shall have zero balances;
provided, however, that if the amount of losses so to be
allocated is less than the sum of the positive balances in the
Capital Accounts of those Partners having positive balances in
their Capital Accounts, then such losses shall be allocated to
the Partners in such proportions and in such amounts so that the
Capital Account balances of each Partner shall equal, as nearly
as possible, the amount such Partner would receive if an amount
equal to the excess of (a) the sum of all Partners' balances in
their Capital Accounts computed prior to the allocation of losses
under this clause First over (b) the aggregate amount of losses
to be allocated to the Partners pursuant to this clause First
were distributed to the Partners in accordance with the
provisions of Clauses Fourth, Fifth and Sixth of Section 5.2.B;
and
Second, the balance, if any of such losses, to those
Partners and in those percentage shares set forth in Section
5.1.A.
C. Notwithstanding the foregoing provisions of
Sections 5.1.A and 5.1.B, in no event shall any losses be
allocated to a Limited Partner if and to the extent that such
allocation would cause, as of the end of the Partnership taxable
year, the negative balance in such Limited Partner's Capital
Account to exceed such Limited Partner's obligation, if any, to
restore deficits in its Capital Account pursuant to Section 5.3.A
or deemed under Treasury Regulation Section 1.704-1(b)(2)(ii)(c)
plus such Limited Partner's share of Partnership Minimum Gain
plus such Limited Partner's share of Partner Non-Recourse Debt
Minimum Gain. Any losses which are not allocated to the Limited
Partners by virtue of the application of this Section 5.1.C shall
be allocated to the General Partner. For purposes of this
Section, a Partner's Capital Account shall be treated as reduced
by Qualified Income Offset Items.
D. The terms "profits" and "losses" used in this
Agreement shall mean income and losses, and each item of income,
gain, loss, deduction or credit entering into the computation
thereof, as determined in accordance with the accounting methods
followed by the Partnership computed in a manner consistent with
Treasury Regulation Section 1.704-1(b)(2)(iv). Profits and
losses for federal income tax purposes shall be allocated in the
same manner as profits and losses in this Section 5.1 subject to
Section 5.4.A.
5.2. Distributions Prior to Dissolution.
5.2.1. Distributions of Cash Flow. Cash Flow for
each fiscal year (or fractional portion thereof) following the
Admission Date shall be applied as follows:
(1) To payment of the Asset Management Fee for
such fiscal year and for any prior years to the extent
unpaid.
(2) Seventy percent (70%) of remaining Cash Flow
shall be applied in the following priority:
(a) To the payment of outstanding Operating
Deficits Loans;
(b) To the payment of the Incentive
Management Fee; and
(c) To a distribution to the General Partner.
(3) Thirty percent (30%) of remaining Cash Flow
shall be distributed 0.01% to the General Partner (less any
distributions made to them pursuant to clause (2)(c)) and
the balance shall be distributed to the Limited Partners.
Distributions of Cash Flow to the Partners shall be made at
such reasonable intervals during the fiscal year as shall be
determined by the General Partner, and in any event shall be made
within 60 days after the close of each fiscal year.
5.2.2. Distributions of Capital Transaction
Proceeds. Prior to dissolution, and subject to any applicable
Lender regulations, if the General Partner shall determine from
time to time that there are cash proceeds available for
distribution from a Capital Transaction, such cash proceeds shall
be applied or distributed, as the case may be, as follows:
First, to the discharge, to the extent required by any
lender or creditor, of debts and obligations of the Partnership
(including any accrued but unpaid Asset Management Fees), but
excluding debts and obligations provided for below in this
Section 5.2.B;
Second, to fund reserves for contingent liabilities to the
extent deemed reasonable by the General Partner, the Special
Limited Partner, and the Accountants;
Third, to the payment of outstanding Operating Deficit Loans;
Fourth, to the Investor Limited Partner an amount equal to
its Outstanding Capital;
Fifth, to the General Partner an amount equal to its
Outstanding Capital; and
Sixth, any balance thereof, 50% to the General Partner and
50% to the Limited Partners.
5.3. Distributions Upon Dissolution.
5.3.1. Upon dissolution and termination, after
payment of, or adequate provision for, the debts and obligations
of the Partnership, the remaining assets of the Partnership (or
the proceeds of sales or other dispositions in liquidation of the
Partnership assets, as may be determined by the remaining or
surviving General Partner) shall be distributed to the Partners
in accordance with the positive balances in their Capital
Accounts after taking into account all Capital Account
adjustments for the Partnership taxable year, including
adjustments to Capital Accounts pursuant to Sections 5.1.B and
5.3.B. In the event that a General Partner has a negative
balance in its Capital Account following the liquidation of the
Partnership or its interest in the Partnership after taking into
account all Capital Account adjustments for the Partnership
taxable year in which the liquidation occurs, such General
Partner shall pay to the Partnership in cash an amount equal to
the negative balance in its Capital Account. Such payment shall
be made by the end of such taxable year (or, if later, within 90
days after the date of such liquidation) and shall, upon
liquidation of the Partnership, be paid to recourse creditors of
the Partnership or distributed to other Partners in accordance
with the positive balances in their Capital Accounts.
5.3.2. With respect to assets distributed in kind to
the Partners in liquidation or otherwise, (i) any unrealized
appreciation or unrealized depreciation in the values of such
assets shall be deemed to be profits and losses realized by the
Partnership immediately prior to the liquidation or other
distribution event; and (ii) such profits and losses shall be
allocated to the Partners in accordance with Section 5.1.B
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. For the purposes of this Section 5.3.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 computed in
accordance with Treasury Regulation Section 1.704-1(b). This
Section 5.3.B is merely intended to provide a rule for allocating
unrealized gains and losses upon liquidation or other
distribution event, and nothing contained in this Section 5.3.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 appraiser to be
selected by the General Partner with the Consent of the Special
Limited Partner.
5.4. Special Provisions.
Notwithstanding the foregoing provisions in this Article V:
A. For federal income tax purposes, income, gain,
loss and deduction with respect to property which has a variation
between its basis computed in accordance with Treasury Regulation
Section 1.704-1(b) and its basis computed for federal income tax
purposes shall be shared among Partners so as to take account of
such variation in a manner consistent with the principles of
Section 704(c) of the Code and Treasury Regulation 1.704-3.
B. Except as otherwise provided in this Article V
where profits, losses or distributions are allocated according to
Capital Account balances, all profits, losses, credits and
distributions shared by the Partners in each class of Partners
(e.g., the General Partner class or the Limited Partner class)
shall be shared by each Partner in such class in the percentages
set forth on the Schedule.
C.1. If (i) the Partnership incurs recourse obligations
or Partner Non-Recourse Debt to the General Partner or its
Related Persons (including without limitation Operating Deficit
Loans) or (ii) the Partnership incurs losses from extraordinary
events which are not recovered from insurance or otherwise
(collectively "Recourse Obligations") in respect of any
Partnership taxable year, then the calculation and allocation of
profits and losses shall be adjusted as follows: first, an
amount of deductions (consisting of operating expenses but not
cost recovery deductions) attributable to the Recourse
Obligations shall be allocated to the General Partner; and
second, the balance of such deductions shall be allocated as
provided in Section 5.1.A.
C.2. If the Partnership makes any payment with respect
to an obligation with respect to which an allocation of
deductions was made under Section 5.4.C.1, then the calculation
and allocation of profit and losses in respect of the Partnership
taxable year of such payment shall be adjusted as follows: first,
an allocation of gross income shall be allocated to the Partner
or Partners to whom the deductions were allocated under Section
5.4.C.1 in an amount equal to the lesser of (i) the amount of
such deductions minus all previous allocations with respect to
such deductions under this Section 5.4.C.2 or (ii) the amount of
such payment; and second, the balance of such gross income shall
be allocated as provided in Section 5.1.A.
D. If there is a net decrease in Partner Non-Recourse
Debt Minimum Gain during a Partnership taxable year, then each
Partner with a share of the minimum gain attributable to such
debt at the beginning of such year will be allocated items of
income and gain (including gross income if necessary) for such
year (and, if necessary, subsequent years) in proportion to, and
to the extent of, an amount equal to such Partner's share of the
net decrease in Partner Non-Recourse Debt Minimum Gain during the
year. A Partner is not subject to this Partner Non-Recourse Debt
Minimum Gain chargeback to the extent that any of the exceptions
provided in Treasury Regulation Section 1.704-2(i)(4) applied
consistently with Treasury Regulation Section 1.704-2(f)(2)-(5)
apply. Such allocations shall be made in a manner consistent
with the requirements of Treasury Regulation Section
1.704-2(i)(4) under Section 704 of the Code.
E. If the Partnership shall receive any purchase
money indebtedness in partial payment of the purchase price of
the Property and such indebtedness is distributed to the Partners
pursuant to the provisions of Section 5.2.B or Section 5.3, the
distributions of the cash portion of such purchase price and the
principal amount of such purchase money indebtedness hereunder
shall be allocated among the Partners in the following manner.
On the basis of the sum of the principal amount of the purchase
money indebtedness and cash payments received on the sale (net of
amounts required to pay Partnership obligations and fund
reasonable reserves), there shall be calculated the percentage of
the total net proceeds distributable to each class of Partners
based on Section 5.2.B or under Section 5.3, as applicable,
treating cash payments and purchase money indebtedness principal
fungibly for this purpose, and the respective classes shall
receive such respective percentages of the net cash purchase
price and purchase money principal. Payments on such purchase
money indebtedness retained by the Partnership shall be
distributed in accordance with the respective portions of
principal allocated to the respective classes of Partner in
accordance with the preceding sentence, and if any such purchase
money indebtedness shall be sold, the sale proceeds shall be
allocated in the same proportion.
F. If there is a net decrease in Partnership Minimum
Gain during a Partnership taxable year, each Partner will be
allocated items of income and gain (including gross income if
necessary) for such year (and, if necessary, subsequent years) in
the proportion to, and to the extent of, an amount equal to such
Partner's share of the net decrease in Partnership Minimum Gain
during the year. A Partner is not subject to this Partnership
Minimum Gain chargeback to the extent that any of the exceptions
provided in Treasury Regulation Section 1.704-2(f)(2)-(5) apply.
Such allocations shall be made in a manner consistent with the
requirements of Treasury Regulation Section 1.704-2(f) under
Section 704 of the Code.
G. If a Limited Partner unexpectedly receives (1) an
allocation of loss or deduction or expenditures described in
Section 705(a)(2)(B) of the Code made (a) pursuant to Section
704(e)(2) of the Code to a donee of an interest in the
Partnership, (b) pursuant to Section 706(d) of the Code as the
result of a change in any Partner's interest in the Partnership,
or (c) pursuant to Regulation Section 1.751-1(b)(2)(ii) as a
result of a distribution by the Partnership of unrealized
receivables or inventory items or (2) a distribution, and such
allocation and/or distribution would cause the negative balance
in such Partner's Capital Account to exceed such Partner's
obligation, if any, to restore deficits in its Capital Account
pursuant to Section 5.3.A or deemed under Treasury Regulation
Section 1.704-1(b)(2)(ii)(c) plus its share of Partner
Non-Recourse Debt Minimum Gain plus its share of Partnership
Minimum Gain, then such Partner shall be allocated items of
income and gain (including gross income if necessary) in an
amount and manner sufficient to eliminate such negative balance
as quickly as possible. For purposes of this Section, a
Partner's Capital Account shall be treated as reduced by
Qualified Income Offset Items.
H. Notwithstanding anything to the contrary herein,
it is the intention of the Partnership to conform to the
requirements of any Treasury regulations issued with respect to
the allocation of Partnership items, in a manner maximizing the
benefits to the Limited Partners, particularly with regard to any
special provisions with respect to nonrecourse indebtedness. The
General Partner may, with the Consent of the Special Limited
Partner, amend Article V to comply with any such regulations.
I. In applying the provisions of Article V with
respect to distributions and allocations, the following ordering
of priorities shall apply:
(1) Capital Accounts shall be deemed to be
reduced by Qualified Income Offset Items.
(2) Capital Accounts shall be reduced by
distributions of Cash Flow under Section 5.2.A.
(3) Capital Accounts shall be reduced by
distributions from Capital Transactions under Section
5.2.B.
(4) Capital Accounts shall be increased by
any Minimum Gain chargeback under Section 5.4.D or
5.4.F.
(5) Capital Accounts shall be increased by
any Qualified Income Offset under Section 5.4.G.
(6) Capital Accounts shall be increased by
allocations of profits under Section 5.1.A.
(7) Capital Accounts shall be reduced by
allocations of losses under Section 5.1.A.
(8) Capital Accounts shall be reduced by
allocations of losses under Section 5.1.B.
(9) Capital Accounts shall be increased by
allocations of profits under Section 5.1.B.
K. To the maximum extent permitted under the Code,
allocations of profits and losses shall be modified so that the
Partners' Capital Accounts reflect the amount they would have
reflected if adjustments required by Sections 5.4.D, 5.4.F and
5.4.G had not occurred.
6. -- General Partner Rights, Powers and Duties
6.1. Restrictions on Authority.
Notwithstanding any other provisions of this Agreement, the
General Partner shall have no authority (a) to perform any act in
violation of (i) any applicable law or regulations, (ii) any
agreement between the Partnership and the Lenders or (iii) the
Property Documents, or (b) to do any act required to be approved
or ratified by the Limited Partners under the Uniform Act. The
General Partner shall not have any authority to do any of the
following specific acts without the Consent of the Special
Limited Partner:
A. following completion of construction of the
Property, to construct any new capital improvements, or to
replace any existing capital improvements, which construction or
replacement would substantially alter the character or use of the
Property, or
B. to acquire any real property in addition to the
Property, other than fee title or easements to de minimis parcels
of land for the purpose of correcting record title to the
Property, or
C. except to the extent permitted under Section 6.13,
if any, to be personally liable on, or to guarantee, or to permit
any Related Person of a Partner of the Partnership to be
personally liable on, to guarantee or otherwise bear the Economic
Risk of Loss with respect to, the Mortgages, or
D. except as otherwise provided in Section 6.13, to
refinance, sell, convey or mortgage the Property or to materially
amend or modify any Mortgage or Property Document, or
E. to permit the occupancy of dwelling units in the
Property in violation of Minimum Set Aside or any other
requirement which must be complied with to enable the Property to
generate the Projected Credit, or
F. to lease (i) pursuant to one lease (or pursuant to
a series of leases which are negotiated as part of one
transaction) more than 50% of the Property as an entity or (ii)
the Property in such a manner as to cause the Property or any
part thereof to be treated as tax-exempt use property within the
meaning of Section 168(h) of the Code, or
G. to borrow on the general credit of the
Partnership, except as specifically permitted hereunder as to
Operating Deficit Loans and pursuant to Section 6.13, or
H. to cause the Partnership to operate any business
on the Property other than the business of renting dwelling
units, or to rent any portion of the Property other than for
occupancy as a dwelling unit, or
I. to cause the Partnership to take any action
referred to in clause (ii) of the definition of "Event of
Bankruptcy" in Article XI.
6.2. Personal Services.
No Affiliate shall receive any compensation from the
Partnership for services rendered to the Partnership in
connection with the construction or operation of the Property or
any other aspect of the business of the Partnership unless such
compensation is provided for in Article VI or, if for services
not compensated for pursuant to Article VI, such compensation is
reasonable, does not exceed fees which would be payable on an
arms-length basis to a non-Affiliate in the business of supplying
such services, and complies with Lender regulations. Nothing
herein shall prevent the General Partner from engaging other
Persons to perform services for the General Partner in connection
with the Partnership or the Property, providing such Persons are
paid from funds of the General Partner. Any Partner may engage
independently or with others in other business ventures of every
nature and description including, without limitation, the
ownership, operation, management, syndication and development of
real estate, including real estate which may be in competition
with the Property and neither the Partnership nor any Partner
shall have any rights by virtue of this Agreement in and to such
independent ventures or the income or profits derived therefrom.
6.3. Business Management and Control; Tax Matters Partner.
6.3.1. The General Partner shall have the exclusive
right to manage the business of the Partnership and, subject to
all provisions of this Agreement including without limitation
Articles III and VI, shall have full power, authority and
discretion to cause the Partnership to do any of the acts
described in Section 2.4 hereof. No Limited Partner (except one
who may also be a General Partner, and then only in its capacity
as General Partner) shall participate in or have control over the
Partnership business, except as provided in Article VIII hereof
or as required by law. The Partners hereby consent to the
exercise by the General Partner of the powers conferred on the
General Partner by this Agreement. No Limited Partner (except
one who may also be a General Partner, and then only in its
capacity as a General Partner) shall have any authority or right
to act for or to bind the Partnership.
6.3.2. All Partners hereby agree that, as long as he
shall be a General Partner, James F. Levy shall be the "Tax
Matters Partner." The Tax Matters Partner shall employ
experienced tax counsel to represent the Partnership in
connection with any audit or investigation of the Partnership by
the Internal Revenue Service, and in connection with all
subsequent administrative and judicial proceedings arising out of
such audit, and the fees of counsel shall be a Partnership
expense. The Tax Matters Partner shall keep the Partners
informed of all administrative and judicial proceedings, as
required by Section 6223(g) of the Code, and shall furnish to
each Partner a copy of each notice or other communication
received by the Tax Matters Partner from the Internal Revenue
Service. The Tax Matters Partner shall have no authority,
without the Consent of the Special Limited Partner, to (i) enter
into a settlement agreement with the Internal Revenue Service
which purports to bind Partners other than the Tax Matters
Partner, (ii) file a petition as contemplated in Section 6226(a)
or 6228 of the Code, (iii) intervene in any action as
contemplated in Section 6226(b) of the Code, (iv) file any
request contemplated in Section 6227(b) of the Code, (v) enter
into an agreement extending the period of limitations as
contemplated in Section 6229(b)(1)(B) of the Code or (vi) to file
any tax related litigation in a court other than the United
States Tax Court. In the event that the General Partner
designated as the Tax Matters Partner shall Retire form the
Partnership, the partnership shall designate a successor Tax
Matters Partners in accordance with Treasury Regulation Section
301.6231(a)(7)-1(T) or any successor Regulation. The partnership
shall notify the Internal Revenue Service of the designation of a
successor Tax Matters Partners for such year as well as all prior
years that the Retired General Partner was serving as Tax Matters
Partner.
6.4. Authority of General Partner.
6.4.1. Every contract, deed, mortgage, lease and
other instrument executed by a General Partner shall be
conclusive evidence in favor of every Person relying thereon or
claiming thereunder that, at the time of the delivery thereof
(except as shown in certificates or other instruments duly filed
with the Filing Office), (a) the Partnership was in existence,
(b) this Agreement had not been terminated or cancelled or
amended in any manner so as to restrict such authority, and (c)
such General Partner was duly authorized to execute such
instrument. Except as otherwise provided in a certificate or
other instrument filed in the Filing Office with respect to the
Partnership, any Person dealing with the Partnership or the
General Partner may always rely on a certificate signed by the
General Partner hereunder:
(1) as to who are the General Partner or
Limited Partners hereunder,
(2) as to the existence or nonexistence of
any fact or facts which constitute conditions precedent
to acts by the General Partner or are in any other
manner germane to the affairs of the Partnership,
(3) as to who is authorized to execute and
deliver any instrument or document of the Partnership,
(4) as to the authenticity of any copy of
this Agreement and amendments thereto, or
(5) as to any act or failure to act by the
Partnership or as to any other matter whatsoever
involving the Partnership or any Partner.
6.4.2. If there shall be more than one General
Partner serving hereunder, each General Partner (with the Consent
of the Special Limited Partner and subject to the provisions of
Section 8.6) may from time to time, by an instrument in writing
or by a provision in this Agreement, delegate its powers and
authority hereunder to another General Partner or General
Partners to the extent stated therein. Such writing shall fully
authorize such other General Partner(s) to act alone without the
requirement of any act or signature of the delegating General
Partner and to take any action of any type and to do anything and
everything which a General Partner may be authorized to take or
do hereunder, and the delegating General Partner thereafter shall
have no right, power or authority to act for the Partnership with
respect to the powers or authority so delegated. No such
delegation shall relieve the delegating General Partner of any of
its duties or obligations under this Agreement or otherwise with
respect to the Partnership. Pursuant to the foregoing, each of
the other General Partners hereby delegates to James F. Levy all
of the rights, powers and authority which each such General
Partner may possess with respect to the Partnership.
6.5. Duties and Obligations.
6.5.1. The General Partner shall promptly take all
material actions which may be necessary or appropriate for the
completion of construction of the Property and the proper
maintenance and operation of the Property in accordance with the
provisions of this Agreement, the Property Documents, applicable
laws and regulations, and in compliance with the representations
and warranties in Section 6.6, and shall conduct the affairs of
the Partnership in compliance with Mortgage requirements and in a
manner consistent with the fiduciary obligations of the General
Partner under law. The General Partner shall devote to the
Partnership such time as may be necessary for the proper
performance of its duties.
6.5.2. The General Partner shall (a) cause the
Property to be insured against fire and other risks covered by
such insurance in the maximum amount required by any Lender,
and/or the Credit Agency, the Special Limited Partner or by good
management practices, and in any event in an amount equal to the
full replacement value of the Property (other than the land), (b)
obtain and keep in force adequate business or rental interruption
and worker's compensation insurance satisfactory to each Lender,
and to the Credit Agency and the Special Limited Partner, (c)
obtain and keep in force public liability insurance for the
benefit of the Partnership and its Partners in amounts from time
to time acceptable to the Credit Agency, and the Lenders and the
Special Limited Partner and in any event providing coverage at
least equivalent to a combined single limit bodily injury and
property damage liability insurance policy in the amount of not
less than $6,000,000 (of which up to $5,000,000 may be provided
under an "umbrella" policy). All of the foregoing insurance
policies shall be written by insurance companies rated A or
better by Best's, include the Investor and Special Limited
Partners as named insureds, and include a provision requiring the
insurance company to notify the Special Limited Partner in
writing 30 days prior to the cancellation of any such policy.
The General Partner shall promptly provide the Special Limited
Partner with copies of such insurance policies upon request from
time to time. In the event of any casualty and provided that the
insurance proceeds shall be made available therefor and such
restoration is permitted by the Lenders and receives the Consent
of the Special Limited Partner, the General Partner shall repair
any damage to the Property which was caused by such event, so as
to restore the Property (as nearly as possible) to the condition
and market value thereof immediately prior to such occurrence.
6.5.3. The General Partner shall obtain an owner's
policy insuring title to the Property in favor of the Partnership
in an amount sufficient to cover the outstanding amount of all
Mortgages plus the Capital Contributions of all Partners (which
amount is hereby agreed to be $2,209,485), which policy shall
include so-called "non-imputation" and "Fairways" endorsements
and be subject to no exceptions other than those referred to in
Section 6.6(ix).
6.5.4. The General Partner shall take such actions
as are necessary to make the Partnership eligible for the full
amount of the available Low Income Housing Credit (including
without limitation the renting of dwelling units at rents and to
tenants as required under Section 42 of the Code). The General
Partner shall operate the Property such that the right of each
tenant to occupancy of a dwelling unit shall be pursuant to an
agreement and for a charge which shall be separate from the
agreements and charges for the right of such tenant to receive
any services or any other benefits, and no tenant shall be
required to receive or pay for any of such other benefits as a
condition of occupancy.
6.5.5. The General Partner shall elect to commence
the Credit Period for each building comprising the Property at
the time such building is placed in service, except that, upon
the written request of the Special Limited Partner, the General
Partner shall elect, for any building not 100% occupied by
Qualified Tenants by the end of the calendar year in which such
building is placed in service, to defer commencement of the
Credit Period for such building to January 1 of the next year.
6.5.6. The General Partner shall (i) not store
(except in compliance with applicable Hazardous Waste Laws) or
dispose of any Hazardous Material at the Property, or at or on
any other Facility or Vessel owned, occupied, or operated either
by any General Partner or any Person for whose conduct any
General Partner is or was responsible; (ii) not transport or
arrange for the transport of any Hazardous Material (except in
compliance with applicable Hazardous Waste Laws); (iii) provide
the Special Limited Partner with written notice (x) upon any
General Partner's obtaining knowledge of any potential or known
release, or threat of release, of any Hazardous Material at or
from the Property or any other Facility or Vessel owned,
occupied, or operated by any General Partner or any Person for
whose conduct any General Partner is or was responsible or whose
liability may result in a lien on the Property; (y) upon any
General Partner's receipt of any notice to such effect from any
Federal, state, or other governmental authority; and (z) upon any
General Partner's obtaining knowledge of any incurrence of any
expense or loss by any such governmental authority in connection
with the assessment, containment, or removal of any Hazardous
Material for which expense or loss any General Partner may be
liable or for which expense or loss a lien may be imposed on the
Property; and (iv) indemnify and hold harmless the Partnership
and the other Partners against any losses, judgments,
liabilities, expenses and amounts paid in settlement of any
claims sustained by any of said indemnitees (including reasonable
attorneys' fees, fines, damages and similar payments) in
connection with the violation by the General Partner of any of
the foregoing covenants or with the presence of any Hazardous
Material at the Property.
6.5.7. If requested to do so by the Special Limited
Partner at any time after the expiration of the fourteenth year
of the compliance period (as defined in Section 42(i)(1) of the
Code) or any later date to which the Partnership may have agreed
with the Credit Agency to defer its opportunity to make such
submission, the General Partner shall submit a written request to
the Credit Agency to find a Person to acquire the Partnership's
interest in the Property and/or take such other action permitted
or required by the Code as the Special Limited Partner may
reasonably request to effect a sale of the Property or to
terminate the extended use commitment of Section 42(h)(6)(B) of
the Code; provided that the proceeds to be received by the
Partnership with respect to any proposed sale or refinancing must
be sufficient to pay all outstanding amounts pursuant to Clauses
First through Third of Section 5.2.B.
6.5.8. Each obligation of the General Partner
hereunder shall be the joint and several obligation of each
General Partner, if there is more than one. In the event of a
default by the General Partner in the performance of any of its
obligations under this Agreement, then the amount in default
shall be offset against all payments from the Partnership to the
General Partner, including repayments of loans, returns of
Capital Contributions and payments of fees. Nothing in Sections
6.7 or 6.8 shall have the effect of relieving the General Partner
of any liability for any of its obligations set forth in this
Agreement.
6.6. Representations and Warranties.
The General Partner hereby represents and warrants to each
Limited Partner that as a condition to the payment of each
Installment as provided in Section 4.1.B, the following are true
and will be true on the due date for payment to the Partnership
of each of such Installments, and that they will use their best
efforts to maintain the truth of such representations and
warranties which are then applicable to the Partnership at all
other times (except as otherwise provided):
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 Partners and to maintain the limited
liability of the Limited Partners in the manner provided in
Section 3.5.
B. Construction of the Property will be or has been
completed in substantial conformity with the Property Documents.
C. All Development Costs will be paid or provided for
by, or for the account of, the Partnership utilizing only those
sources of funds referred to in Section 6.9.
D. To the best of the knowledge and belief of the
General Partner, no event, occurrence or proceeding is pending or
threatened which would (a) materially adversely affect the
Partnership or its properties, (b) materially adversely affect
the ability of the General Partner or any Affiliate to perform
their respective obligations hereunder or under any other
agreement with respect to the Partnership or the Property, or (c)
prevent the completion of construction of the Property in
substantial conformity with the Property Documents. This
subparagraph shall be deemed to include, but not be limited to,
the following: (x) legal actions or proceedings before any
court, commission, administrative body or other governmental
authority having jurisdiction over the zoning applicable to the
Property, (y) labor disputes and (z) acts of any governmental
authority.
E. No material default (or event which, with the
giving of notice or the passage of time or both, would constitute
a material default) has occurred and is continuing on the part of
the General Partner under this Agreement or on the part of the
General Partner or the Partnership under any of the Property
Documents or any other agreement affecting the Property, the same
are in full force and effect, and no default by the Partnership,
the General Partner or an Affiliate under any of the Property
Documents has been asserted by any party thereto.
F. The Property is being operated in compliance with
the requirements of this Agreement and the Property Documents,
including without limitation the requirements of Section 6.5.C
hereof.
G. Except to the extent permitted under Section
6.13.B, if any, no Partner or Related Person of a Partner of the
Partnership has any personal liability or otherwise bears the
Economic Risk of Loss with respect to the payment of principal or
interest with respect to the debt evidenced by any of the
Mortgages.
H. There is no material violation by the Partnership
or the General Partner of any zoning, environmental or similar
regulation applicable to the Property; all necessary building and
other applicable permits have been obtained to permit the
construction of the Property; all permits necessary to operate
the Property for its intended use have been obtained; and the
Partnership has substantially complied with all applicable
municipal and other laws, ordinances and regulations relating to
such construction and use of the Property.
I. The Partnership owns the fee simple interest in
the Property, subject to no material liens, charges or
encumbrances other than the Permitted Loans and those which (a)
are both permitted by the Property Documents and noted or
excepted on Schedule B of the owner's title insurance commitment
File Number 102340, Reissue No. 2, issued by Commonwealth Title
Insurance Corporation, and (b) do not materially interfere with
the use of the Property or any part thereof for its intended
purpose or have a material adverse effect on the value of the
Property.
J. The execution and delivery of all instruments and
the performance of all acts heretofore or hereafter made or taken
or to be made or taken pertaining to the Partnership or the
Property by each General Partner and each Affiliate of a General
Partner which is a partnership, a limited liability company or a
corporation have been or will be duly authorized by all necessary
action by such Entity and the consummation of any such
transactions with or on behalf of the Partnership will not
constitute a breach or violation of, or a default under, the
partnership agreement, operating agreement, charter, by-laws or
comparable organizational documents of said Entity or any
agreement by which such Entity or any of its properties is bound,
nor constitute a violation of any law, administrative regulation
or court decree.
K. No Event of Bankruptcy has occurred with respect
to any General Partner or any Affiliate of a General Partner.
L. None of those Persons named in Section 3.1 hereof
as General Partner has Retired other than as permitted in Section
8.1.
M. No Lender approval is required (or, if required,
such approval has been obtained) with respect to the execution or
delivery of this Agreement or the admission to the Partnership of
the Limited Partners.
N. No Person or Entity holds any equity interest in
the Property other than the Partnership.
O. The Partnership has the sole responsibility to pay
all maintenance and operating costs, including all taxes levied
and all insurance costs, attributable to the Property.
P. 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 Property is destroyed or
condemned or there is a diminution in the value of the Property.
Q. 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 Property.
R. The Property does not receive assistance under the
HUD Section 8 Moderate Rehabilitation Program other than under
the Stewart B. McKinney Homeless Assistance Act of 1988.
6.7. Liability.
The General Partner shall indemnify and hold harmless the
Partnership and the other Partners against any losses, judgments,
liabilities, expenses and amounts paid in settlement of any
claims sustained by any of said indemnitees (including reasonable
attorneys' fees, fines, damages and similar payments) in
connection with the Partnership, provided, however, that no
General Partner or Affiliate shall be liable, responsible or
accountable for damages or otherwise to the Partnership or any
Partner for any act performed under this Agreement or for any
failure to act, on its own part or that of any of its Affiliates,
if such course of conduct did not constitute misconduct,
negligence, material misrepresentation or material breach of
covenant, warranty or fiduciary duty to the Limited Partners and
such General Partner or Affiliate reasonably believed in good
faith that such course of conduct was in the best interest of the
Partnership and the Partners.
6.8. Indemnification.
The General Partner and its Affiliates shall be indemnified
and held harmless by the Partnership against any losses,
judgments, liabilities, expenses and amounts paid in settlement
of any claims sustained by them (including reasonable attorneys
fees, fines, damages and similar payments) in connection with the
Partnership, provided that the same were not the result of a
course of conduct constituting misconduct, negligence, material
misrepresentation or material breach of covenant, warranty or
fiduciary duty.
Notwithstanding the above, a General Partner, its Affiliates
and any person acting as a broker-dealer in connection with the
offering and sale of interests in the Partnership shall not be
indemnified by the Partnership for any losses, liabilities or
expenses arising from or out of an alleged violation of Federal
or state securities laws unless (1) there has been a successful
adjudication on the merits of each count involving alleged
securities law violations as to the particular indemnitee; or (2)
such claims have been dismissed with prejudice on the merits by a
court of competent jurisdiction as to the particular indemnitee;
or (3) a court of competent jurisdiction approves a settlement of
the claims against a particular indemnitee.
In any claim for indemnification for Federal or state
securities law violations, the party seeking indemnification
shall place before the court the position of the Securities and
Exchange Commission with respect to the issue of indemnification
for securities law violations.
The Partnership shall not incur the cost of the portion of
any insurance, other than public liability insurance, which
insures any party against any liability the indemnification of
which is herein prohibited.
Any indemnity under this Section 6.8 shall be provided out
of and to the extent of Partnership assets only, and no Limited
Partner shall have any personal liability on account thereof.
6.9. Development Completion Obligation.
6.9.1. The General Partner guarantees to the
Partnership and the other Partners to cause the Property to be
acquired and to complete development of the Property for a fixed
turnkey price of $2,209,485 (the "Guaranteed Development Cost"),
which obligation (the "Development Completion Obligation") shall
include without limitation (i) acquisition of fee simple title to
the Property subject only to those liens, restrictions and
encumbrances referred to in Section 6.6(I), (ii) completion of
construction of the Property substantially in accordance with the
Property Documents and remedy of any defects in the construction
of the Property or variances in construction from the Plans and
Specifications which in each case are or should have been
discovered within two years after Full Completion (provided that
the guarantee for the second year after Full Completion shall
cover only material items), (iii) achievement of Stabilized
Occupancy and payment of all Operating Expenses and Debt Service
in excess of Operating Revenues attributable to the period
through the achievement of Stabilized Occupancy, (iv) payment of
all costs and funding of all reserves and escrows necessary to
close the Permanent Mortgage, (v) repayment in full of the
Construction Mortgage and (vi) payment in full of the Development
Services Fee (collectively "Development Costs").
6.9.2. All funds (collectively "Development Funds")
constituting the proceeds of Permitted Loans and the Capital
Contributions paid by or on behalf of the Investor Limited
Partner shall be applied to pay when due all payments and
expenses required to carry out the Development Completion
Obligation. If Development Costs due at any time exceed
available Development Funds, then such excess Development Costs
shall be paid from funds which the General Partner shall be
required to furnish promptly to meet such Development Costs, and
such funds shall be returned to the General Partner from any
Development Funds which thereafter become available. If
Development Funds are not sufficient to return all funds to the
General Partner, then the shortfall shall be treated as follows:
(a) To the extent that total Development Costs exceed the
Guaranteed Development Cost, such excess shall be borne and
absorbed solely by the General Partner as part of its Development
Completion Obligation; and (b) to the extent that Development
Funds are less than the Guaranteed Development Cost, then the
shortfall shall constitute a Capital Contribution to the
Partnership by the General Partner.
6.10.Operating Expense Obligation.
If the Partnership requires any funds for Operating Expenses
(reduced by any deferral of payment of the Management Fee
required pursuant to Section 6.12.C) or Debt Service in excess of
Operating Revenues, then such excess expenses ("Operating
Deficits") shall be paid from advances ("Operating Deficit
Loans") which the General Partner shall be required to make to
the Partnership, provided that (i) Operating Deficit Loans need
be made only to pay Operating Deficits attributable to the period
commencing on the occurrence of Stabilized Occupancy and ending
on the third anniversary of such occurrence, and (ii) the General
Partner shall not be obligated to make an Operating Deficit Loan
to the extent that such Loan would cause the aggregate principal
amount of Operating Deficit Loans then outstanding to exceed
$100,000. (The General Partner may, however, make such loans at
any time and in any amount.) Operating Deficit Loans shall not
bear interest and shall be repayable only to the extent provided
in Article V.
6.11.Development Services.
The Partnership shall engage the General Partner to perform,
or to engage and supervise others to perform, all activities
necessary to complete construction of the Property in accordance
with the Plans and Specifications, and shall pay the Development
Services Fee of $150,000 to the General Partner in return for
such services. The Development Services Fee shall be earned as
development of the Property progresses and shall be fully earned
no later than Full Completion, and shall be paid in the amount of
$30,000 upon Carryover Allocation Issuance, $45,000 at the time
the Second Installment shall become payable pursuant to Section
4.1, and $75,000 at the time the Fourth Installment shall become
payable pursuant to Section 4.1. In addition, the General
Partner shall be entitled to receive an incentive development
fee, in the amount of development cost savings, if any, up to a
maximum amount of the difference between $150,000 and the maximum
development fee allowable by the IRS and/or Credit Agency for
inclusion in eligible basis. (Any development cost savings in
excess of that difference shall be reinvested in the development
at the direction of the General Partner, with the consent of the
Special Limited Partner.) Any incentive development fee shall be
paid at the time of the Fourth Installment.
6.12.Property Management.
6.12.1. The General Partner shall have overall
responsibility for managing the Property and obtaining a
Management Agent. The General Partner shall cause the
Partnership, prior to commencement of operation of the Property,
to enter into a Management Agreement with Heartland Management
Company, of Des Moines, Iowa to serve as the Management Agent.
If at any time after Full Completion:
(1) the Property shall be subject to a
substantial building code violation which shall not have been
cured within 90 days after notice from the applicable
governmental agency or department or the Special Limited Partner
or unless such violation(s) is (are) being validly contested by
the General Partner by proceedings which operate to prevent any
fines or criminal penalties from being levied against the
Partnership;
(2) Operating Revenues in respect of any period
of six consecutive calendar months commencing after May 1, 2001
shall be insufficient to permit the Partnership to pay when due
on a current basis all Operating Expenses and Debt Service due
and owing in respect of such six month period, and the General
Partner has not made an Operating Deficit Loan to the Property
during such six-month period to cover such Operating Deficit; or
(3) the Management Agent or its agents or
employees have demonstrated incompetence or malfeasance (a
"breach") in the management of the Property, and such breach has
not been cured within 30 days after notice thereof has been given
to the Management Agent;
the General Partner shall forthwith give notice of such event to
the Limited Partners and thereafter the General Partner shall
forthwith cause the Partnership to terminate the Management
Agreement with the Management Agent, unless the Consent of the
Special Limited Partner is obtained to the retention of the
Management Agent as the manager of the Property. If the
Management Agreement is terminated as aforesaid or for any other
reason, the General Partner shall immediately proceed to select a
new Management Agent for the Property which selection shall be
subject to the Consent of the Special Limited Partner.
6.12.2. The Partnership shall not enter into any
Management Agreement which does not provide for deferral of the
Management Fee under the circumstances set forth in Section
6.12.C and termination by the Partnership (a) under the
circumstances set forth in Section 6.12.A, (b) in the event of
other malfeasance or nonperformance on the part of the Management
Agent, or (c) upon the Retirement from the Partnership in
violation of Section 8.1 of any General Partner as to whom the
Management Agent is an Affiliate. The General Partner shall have
the duty to manage the Property during any period when there is
no Management Agent, and shall be entitled to the Management Fee
with respect to any period during which they so manage, and must
comply with the provisions of this Agreement which would be
applicable to the Management Agent.
6.12.3. The Management Agent shall receive from the
Partnership the Management Fee provided for in the Management
Agreement from time to time in accordance with a reasonable and
competitive fee arrangement, provided that the Management Fee
payable to any Management Agent shall not exceed 6% of Operating
Revenues. Furthermore, unless the General Partner funds any
Operating Deficit pursuant to Section 6.10 hereof, any Management
Agent which is an Affiliate of a General Partner shall be
obligated to defer payment of its Management Fee to the extent
necessary for any year so that the Partnership will not incur an
Operating Deficit for such year, and the deferred amount shall
then be payable in any future year in which such payment,
together with payment of all other Operating Expenses and Debt
Service for such future year, will not result in an Operating
Deficit for such future year.
6.12.4. The Partnership shall pay to the General
Partner for its services in supervising and monitoring the
performance of the Management Agent pursuant to the Management
Agreement an annual Incentive Management Fee (which Fee shall be
treated as a Partnership expense). The Incentive Management Fee
for each fiscal year shall be the amount available for payment
thereof from Cash Flow pursuant to Section 5.2.A(2) up to a
maximum which will not cause the total of the Management Fee plus
the Incentive Management Fee for such year to exceed 10% of
Operating Revenue for such year.
6.12.5. Intentionally Omitted.
6.12.6. The Partnership shall pay to Heartland
Properties, Inc. the Asset Management Fee for monitoring the
affairs of the Partnership and the Property and consulting with
the Special Limited Partner with respect to Consents which may be
requested from it. The Asset Management Fee shall be in the
annual amount of $2,400, commencing on the earlier of (i) the
first day of the month of the occurrence of Stabilized Occupancy,
or (ii) the first day of the month containing the first
anniversary of the date on which all dwelling units in the
Property have been placed in service. (If the Asset Management
Fee commences in a month other than January, then the Asset
Management Fee for that first year shall be pro rated.) The
Asset Management Fee shall be paid for each fiscal year to the
extent funds are available as provided in Section 5.2.A; to the
extent the Asset Management Fee for any fiscal year is not paid
in full, the shortfall shall accrue and be payable to the extent
provided in Sections 5.2.A and 5.2.B.
6.13.Borrowings.
6.13.1. All Partnership borrowings shall be subject
to the terms of this Agreement, including the restrictions set
forth in Section 6.1. To the extent borrowings are permitted,
such borrowings may be made from any source, including Partners
and Affiliates, except as otherwise provided in this Agreement.
If any Partner or Affiliate shall lend any monies to the
Partnership, the amount of any such loan shall not be an increase
of its Capital Contribution nor affect in any way its share of
the profits, losses or distributions of the Partnership, and, if
such loan is an Operating Deficit Loan, shall be unsecured. Any
loans which are made, other than Operating Deficit Loans, shall
bear interest and be on such other terms no less favorable to the
Partnership than comparable loans from non-Affiliates.
6.13.2. Subject to the provisions of this Agreement,
the Partnership may borrow pursuant to the Permitted Loans such
amounts as may be required for the acquisition, development, and
construction of the Property and to meet the expenses of
operating the Property. Any other borrowings (excluding (a)
normal trade payables outstanding in the ordinary course of
business and (b) borrowings to meet Partnership expenditures to
remedy emergency circumstances) which are not contemplated by
this Agreement and which are in excess of $1,000 must receive
the Consent of the Special Limited Partner. All Mortgages shall
provide that no Partner or Related Person of a Partner of the
Partnership shall bear the Economic Risk of Loss with respect to
all or any part of principal or interest due with respect to the
debt evidenced by such Mortgage. The General Partner is
specifically authorized, except as otherwise limited in this
Agreement, to execute such documents as they deem necessary in
connection with the acquisition, development and financing of the
Property, including without limiting the generality hereof, the
Mortgages and other documents required by the Lenders in
connection with the Mortgages or the Project documents.
6.13.3. Each General Partner shall be bound by the
terms of the Property Documents and any other documents required
in connection therewith, but in no event shall any Partner or
Related Person be personally liable for the debt evidenced by any
Mortgage except to the extent permitted under Section 6.13.A, if
any. Any incoming General Partner shall as a condition of
receiving any interest in the Partnership property agree to be
bound by the Property Documents and any other documents required
by the Lenders in connection therewith to the same extent and on
the same terms as the other General Partner(s).
6.13.4. The General Partner may amend, modify or
refinance a Mortgage (including any required transfer or
conveyance of Partnership assets for security or mortgage
purposes), and sell, lease, exchange or otherwise transfer or
convey all or any substantial portion of the assets of the
Partnership; provided, however, that the terms of any refinancing
or material amendment or modification of a Mortgage or any such
sale, exchange or other transfer or conveyance must receive the
Consent of the Special Limited Partner before such transaction
shall be binding on the Partnership.
6.14.Replacement Reserve.
The General Partner shall cause the Partnership to establish
the Replacement Reserve which shall be funded each year
commencing on Permanent Mortgage Closing from Operating Revenue
at the rate of $6,300 per year. Replacement Reserve Funds shall
be maintained in an account under the control of the General
Partner, with the Consent of the Special Limited Partner, and
shall be prudently invested at the direction of the General
Partner. All earnings shall remain in the Replacement Reserve
and be available for the purpose thereof. Withdrawals from the
Replacement Reserve shall be made to fund capital repairs and
replacements for the Property.
7. -- Books and Records, Accounting and Reports
7.1. Books and Records.
The General Partner shall keep or cause to be kept complete
and accurate books and records of the Partnership which shall be
maintained in accordance with sound accounting practices and the
Uniform Act and shall be maintained and be available at the
principal office of the Partnership for examination by any
Partner, or its duly authorized representatives, at any and all
reasonable times. The Partnership may maintain such books and
records and may provide such financial or other statements as the
General Partner deems advisable.
A list of the names and addresses of all Partners shall be
maintained at the principal office of the Partnership and shall
be available at any and all reasonable times to any Partner or
its designated representative. Representatives of any Limited
Partner shall be permitted to visit and inspect the Property and
all books and records maintained at the Property from time to
time upon reasonable advance notice to the General Partner.
7.2. Bank Accounts.
The bank accounts of the Partnership shall be maintained in
such banking institutions as the General Partner shall determine
with Consent of the Special Limited Partner, and withdrawals
shall be made only in the regular course of business on such
signature or signatures, subject to the requirements of Section
8.6, as the General Partner shall determine. All deposits and
other funds not needed in the operation of the business shall be
deposited in interest-bearing accounts (which need not be
segregated, provided that accurate records are kept and interest
allocated appropriately) or invested in short-term United States
Government or municipal obligations maturing within one year.
7.3. Accountants.
The Accountants for the Partnership shall be McGowen, Hurst,
Clark & Smith, P.C., of Des Moines, Iowa, or such other certified
public accountants as shall be engaged by the General Partner
with the Consent of the Special Limited Partner; provided,
however, that if the Special Limited Partner deems the
Accountants' work product not to be satisfactory, and such work
product is not corrected so that it is satisfactory to the
Special Limited Partner, in its sole discretion, within thirty
(30) days of notice by the Special Limited Partner to the General
Partner, the General Partner and Special Limited Partner shall
mutually select new Accountants for the Property.
7.4. Reports, Financial Statements, Tax Returns.
7.4.1. The General Partner shall cause the
Partnership to prepare financial statements for each fiscal year
of the Partnership, which shall include a balance sheet as of the
end of each such year and statements of income, partners' equity
and cash flows for such year. Such financial statements shall
include a note setting forth a schedule of all loans to the
Partnership, the Section of this Agreement under which such debt
was incurred and the purpose for which such loan was applied by
the Partnership. Such schedule shall demonstrate that loans have
been made, used, carried on the books of the Partnership (and
repaid, if applicable) in accordance with the provisions of this
Agreement. In addition, the financial statements of the
Partnership for the fiscal year in which Full Completion occurs
shall include a depreciation schedule for that year and all
future years, along with the depreciation worksheet. The books
of the Partnership shall be examined in accordance with generally
accepted auditing standards as of the end of each fiscal year of
the Partnership by the Accountants, who shall then express their
opinion that the aforesaid balance sheet and statements have been
prepared in accordance with generally accepted accounting
principles applied consistently with prior periods except as to
any matters to which the Accountants take exception and stating,
to the extent practicable, the effect of each such exception on
such financial statements. The General Partner shall, promptly
upon receipt of such balance sheet, statements and opinion and in
any event on or before February 28 of the following year,
transmit to the Limited Partners a copy thereof.
7.4.2. Each General Partner shall send to the
Special Limited Partner updated financial statements (including a
balance sheet and statement of income) for such General Partner
on or before August 1 of each year; provided, however, that in no
event shall James F. Levy be required to submit a statement of
income.
7.4.3. The Accountants shall prepare the Federal and
state income tax returns of the Partnership. The General Partner
shall complete the books of the Partnership in such time as will
allow the Accountants to complete such tax returns on or before
February 28 of the following year. The General Partner shall
cause such tax returns to be filed within such time periods and
shall immediately upon the filing thereof transmit to the Limited
Partners a copy of the Federal and State income tax returns and
Form K-1. If the General Partner fails to complete such tax
returns and to transmit such returns and Form K-1 to the Limited
Partners within such time periods, or shall fail to transmit the
annual balance sheet, financial statements and opinion to the
Limited Partners within the time period set forth above, the
General Partner shall, upon the request of the Special Limited
Partner and assuming that no Limited Partner has caused such
delay, pay as damages the sum of $200 per day to the Investor
Limited Partner until such Form K-1, balance sheet and financial
statements are received by the Limited Partners. Such damages
shall be paid forthwith by the General Partner and failure to so
pay shall constitute a default of the General Partner under
Section 8.6 hereof. In addition, if the General Partner fails to
so pay, the General Partner and its Affiliates shall forthwith
cease to be entitled to the amounts otherwise payable to them
pursuant to Section 5.2.A. Such Section 5.2.A payments shall
accrue but only be paid upon the payment of such damages in full
and any amount of such damages not so paid shall be deducted
against such Section 5.2.A payments otherwise due to the General
Partner or its Affiliates. In addition, if the General Partner
fails to complete such tax returns and submit such Forms K-1
within the applicable time period set forth above, the Special
Limited Partner may select a firm of accountants (or an Affiliate
of the Special Limited Partner) who shall prepare such returns
and Forms K-1 and the fees and expenses of such accountants (or
Affiliate) shall be paid by the General Partner. The General
Partner shall immediately furnish all necessary documentation and
other information to prepare such tax returns and such Forms K-1
to such accountants (or Affiliate).
7.4.4. Within 30 days following the end of each
month after the Completion Date, the General Partner shall send
to the Special Limited Partner at the expense of the Partnership
one or more reports which, taken together, provide the following
information (which need not be audited): (i) a balance sheet as
of the end of such quarter; (ii) a statement of income for such
quarter; (iii) a statement of cash available for distribution and
reserves for such quarter; (iv) a statement describing (a) any
new agreement, contract or arrangement between the Partnership
and a General Partner or an Affiliate of a General Partner, and
(b) the amount of all fees and other compensation and
distributions and reimbursed expenses paid by the Partnership for
the quarter to any General Partner or Affiliate of a General
Partner and (v) a report of the significant activities of the
Partnership during the fiscal quarter. In addition, the General
Partner shall prepare and furnish to the Special Limited Partner
the other financial and operating reports set forth in the
Reporting Guidelines attached hereto as Exhibit 3, as modified by
the mutual agreement of the General partner and Special Limited
Partner.
7.4.5. The General Partner shall at the expense of
the Partnership provide the Special Limited Partner with (i) a
copy of each draw request for construction or development costs
as such requests are made to the Lender; (ii) a copy of each
inspection report, evaluation or similar report issued to the
Partnership by the Credit Agency or the Lender promptly upon
receipt thereof; (iii) a copy of each Low Income Housing Credit
compliance report delivered to or prepared by the Credit Agency
with respect to the Property; (iv) prompt notice of any casualty
or other significant adverse event relating to the Partnership
and (v) such other information as the Special Limited Partner may
specifically and reasonably request from time to time with regard
to the progress of construction, initial lease up or any other
matters concerning the business or operations of the Partnership.
7.4.6. An annual pro forma operating budget shall be
prepared by the General Partner at the expense of the Partnership
and furnished to the Special Limited Partner within 120 days
prior to the beginning of each calendar year, or at such other
time as the Special Limited Partner shall reasonably request. In
addition, upon the reasonable request of the Special Limited
Partner, the General Partner shall prepare at the expense of the
Partnership and furnish to the Investor Limited Partner an
estimate of the profits and losses of the Partnership for Federal
income tax purposes for the current fiscal year.
7.5. Tax Elections.
7.5.1. If requested to do so by the transferee of a
Partnership interest, the General Partner shall make the election
under Section 754 of the Code, on behalf of the Partnership, at
such time and in such manner as to obtain all the benefits
provided for by such Section; provided that the transferee will
pay all costs associated therewith and neither the Partnership
nor the General Partner shall be held responsible or liable for
the failure to make such elections if the General Partner are not
given notice of the event giving rise to an adjustment for which
such election is needed at or prior to the close of the fiscal
year during which the event occurs.
7.5.2. All other elections required or permitted to
be made by the Partnership under the Code shall be made by the
General Partner in such manner as will, in the opinion of the
Accountants, be most advantageous to the Investor Limited Partner
but shall not create additional obligations on the part of the
General Partner.
7.6. Fiscal Year and Accounting Method.
The fiscal year of the Partnership shall be the calendar
year. The books of the Partnership shall be kept on the accrual
basis.
8. -- Retirement of a General Partner
8.1. Retirement.
8.1.1. No General Partner shall Retire (other than
by reason of death or adjudication of incompetence or insanity)
from the Partnership or sell, assign, transfer or encumber its
interest as a General Partner without the Consent of the Special
Limited Partner. In the event of a Retirement of a General
Partner its status and the disposition of its interest in the
Partnership shall be determined in accordance with Section 8.4.
In no event shall any General Partner assign, transfer or sell
all or any part of its interest as a General Partner to any
Entity which is a tax-exempt entity as defined in Section
168(h)(2) of the Code.
8.1.2. If at any time one or more corporations or
other limited liability entities are the only General Partners of
the Partnership, at least one of such entities shall be obligated
on a continuing basis to maintain its net worth and to meet all
other requirements for a corporate general partner set forth in
Revenue Procedure 89-12 as promulgated by the Internal Revenue
Service (or any successor requirement) in order to obtain an
advance ruling as to the partnership status of the Partnership.
If at any time the requirements of this Section 8.1.B are not
met, then at the election of the Special Limited Partner
exercised at any time thereafter, any or all of the General
Partners shall be deemed to have Retired from the Partnership in
violation of the provisions of this Section 8.1 and shall be
subject to the consequences thereof as provided in Section 8.4.
8.2. Obligation to Continue.
Upon the Retirement of a General Partner, any remaining
General Partner or General Partners, if any, or, if none, the
Retired General Partner or its heirs, successors or assigns,
shall immediately send notice of such Retirement (the "Retirement
Notice") to each Limited Partner, and the Partnership shall be
(i) dissolved if there is no remaining General Partner and the
Partnership is not reconstituted pursuant to Section 8.3 hereof,
or (ii) continued by the remaining General Partner(s) as provided
in the sentence next following. The General Partner shall have
the right, and hereby covenant and agree to, unless there is no
remaining General Partner, to elect to continue the business of
the Partnership.
8.3. Retirement of a Sole General Partner.
If, following the Retirement of a General Partner, there is
no remaining General Partner of the Partnership, or if there are
remaining General Partners but they shall fail to elect to
continue the business of the Partnership, then the Special
Limited Partner may designate a Person (which Person may be the
Special Limited Partner) to become a successor General Partner of
the Partnership as reconstituted as hereinafter provided.
8.4. Interest of Retired General Partners.
8.4.1. Each General Partner hereby agrees that at
the time of its Retirement if such Retirement is in violation of
the provisions of Section 8.1, (a) the Retired General Partner
and all Partners who are Affiliates of the Retired General
Partner shall be immediately and automatically withdrawn from the
Partnership and the interest in the Partnership of the Retired
General Partner and such Affiliates shall be automatically
transferred and be deemed transferred to the Partnership for the
benefit of the remaining Partners, (b) the right of the Retired
General Partner and such Affiliates to receive all fees, loan
repayments and any other amounts from the Partnership shall
terminate and (c) the Retired General Partner and such Affiliates
shall remain liable for the performance of all of their
obligations under this Agreement. For the purposes of Article V
hereof, the effective date of the aforesaid transfers shall be
deemed to be the date on which such Retirement occurs.
8.4.2. In the event that a General Partner shall
Retire as a General Partner under circumstances not in violation
of Section 8.1, such Retired General Partner shall be deemed to
have automatically transferred to the remaining or successor
General Partner, in proportion to its respective General Partner
interest, all or such portion of the interest of such Retired
General Partner in each of the profits, losses and distributions
of the Partnership (as set forth in Article V hereof) which, when
aggregated with the existing General Partner interests of all
such remaining and successor General Partners, will be sufficient
to assure such remaining and successor General Partner an
aggregate 0.01% interest in all such profits, losses and
distributions of Cash Flow and Capital Transactions proceeds of
the Partnership under Article V hereof. No documentation shall
be necessary to effectuate such transfer and the same shall be
deemed effective upon the Retirement of such Retired General
Partner. The Retiring General Partner shall retain the right to
be paid all fees, loan repayments (including repayment of any
Operating Deficit Loan) and other amounts from the Partnership
which have become due at the time of such Retirement, and shall
not be liable for any obligations of the Partnership arising
after the date of its Retirement. Those Persons succeeding to
the portion of the interest of the Retired General Partner not so
transferred to the remaining and successor General Partner shall
become Limited Partners hereunder provided that such Persons
shall not participate in any of the votes or Consents of the
Limited Partners set forth herein nor share in any of the
profits, losses or distributions of the Partnership expressly
accorded to the Limited Partners under Article V, but shall have
instead the same share of such Partnership profits, losses and
distributions represented by such interest when held by the
Retiring General Partner. Notwithstanding the foregoing,
however, all Partnership interests and all fees, loan payments
and other amounts payable which are reserved to the Retired
General Partner and its successors pursuant to this Section 8.4.B
shall be subject to offset by any amounts and Partnership
interests which the Partnership must pay or assign to any Person
in order to induce such Person to become a General Partner in
replacement of the Retired General Partner.
8.5. Designation of New General Partners.
Subject to the provisions of Section 10.1, the General
Partner may, with the approval of the Lenders (if required), and
of any other Person required under the Property Documents and
with the Consent of each Limited Partner, at any time designate
additional General Partners each with such interest as a General
Partner in the Partnership as the General Partner may agree
upon.
Any incoming General Partner (other than a General Partner
admitted pursuant to Section 8.6) shall as a condition of
receiving any interest in the Partnership agree to be bound by
the Mortgages, all other Property Documents, and any other
documents required in connection therewith and by the provisions
of this Agreement, to the same extent and on the same terms as
any other then General Partner(s).
8.6. Additional and Substitute General Partners.
8.6.1. Upon the occurrence of any one or more of the
Events of Default set forth in Section 8.6.B below, the Special
Limited Partner shall have the right to cause itself or its
Affiliate to be admitted to the Partnership as an additional
General Partner as provided in Section 8.6.C, and/or to remove
the General Partner as provided in Section 8.6.D. Each of the
Partners hereby makes, constitutes, and appoints the Special
Limited Partner, with full power of substitution, the true and
lawful attorney of, and in the name, place and stead of, such
Partner, with power from time to time to take all action and do
all things necessary or appropriate to implement and carry out
the provisions of this Section 8.6. Such appointment shall
constitute a power coupled with an interest, shall be
irrevocable, shall survive the death, incompetency or dissolution
of any Partner and shall be binding on any assignee of all or any
portion of the interest of any Partner.
8.6.2. The following shall each be an "Event of
Default":
1. Failure of a General Partner to observe or
perform any material obligation or covenant to be observed or
performed under this Agreement by such General Partner, which
failure shall not have been cured within thirty (30) days after
the Special Limited Partner has given notice of such failure to
the General Partner.
2. The Partnership shall be in material default
of any of its obligations under the Property Documents, which
default, in the reasonable judgment of the Special Limited
Partner, threatens an assignment or foreclosure of any Mortgage.
3. At any one time twenty percent or more of the
dwelling units in the Property shall not be in compliance with
Section 42 of the Code.
Any dispute or controversy as to whether any of the Events of
Default has occurred, or whether such event has been cured or is
susceptible of being cured within any grace period specified,
shall be initially determined solely by the Special Limited
Partner, whereupon the Special Limited Partner may exercise its
rights set forth in this Section 8.6. However, such
determination shall be subject to review in a judicial proceeding
brought by either the General Partner or the Special Limited
Partner in a court of general jurisdiction sitting in Madison,
Wisconsin. Any judicial findings which are contrary to the
determination of the Special Limited Partner shall not
retroactively impair or otherwise affect the rights and authority
of the Special Limited Partner hereunder prior to the issuance of
such findings. The Special Limited Partner shall indemnify and
hold harmless the General Partner for all claims, damages, loss
and expense arising from its actions as a General Partner
pursuant to this Section 8.6 prior to such judicial review if
such review shall conclude that an Event of Default did not in
fact occur. Each of the parties shall bear its own expense of
litigation.
8.6.3. If the Special Limited Partner elects to
admit itself or its Affiliate as an additional General Partner,
such admission shall occur automatically and without further
action by any Partner upon the giving of notice thereof by the
Special Limited Partner to the Partners, and each of the Partners
hereby agrees and consents in advance to the foregoing
admission. Upon the occurrence of such admission, any delegation
of authority agreed to between the General Partner in accordance
with Section 6.4.B hereof (whether expressly set forth in this
Agreement or otherwise) shall be cancelled and of no further
force and effect, and instead all of the other General Partners
shall be deemed to have delegated, automatically and without the
requirement of a writing or any other action other than as set
forth above, all their powers and authority (including, without
limitation, all right to deposit to, withdraw from and otherwise
control all Partnership bank accounts) to the Special Limited
Partner in its capacity as an additional General Partner as set
forth in Section 6.4.B. Notwithstanding its admission to the
Partnership, said additional General Partner shall not undertake
or assume, or be deemed to have undertaken or assumed, any
obligations or liabilities imposed on the General Partner
pursuant to this Agreement or which arise in any other manner
with respect to the Partnership or the Partners. Each Partner
agrees that the Special Limited Partner or any Person it causes
to be admitted as a General Partner pursuant to this Section 8.6
may withdraw as a General Partner without the consent of any
other Partner.
8.6.4. If the Special Limited Partner shall elect to
remove one or more of the General Partners, then such removal
shall occur automatically and without further action by any
Partner upon the giving of notice thereof by the Special Limited
Partner to the Partners. Any General Partner so removed shall
have the obligation to sell its Partnership interest to the
Special Limited Partner upon payment of the amount of the removed
General Partner's Capital Account; its right, if any, to be paid
all fees, repayments of loans and other payments by the
Partnership shall terminate and any delegation of authority
agreed to between the removed General Partner in accordance with
Section 6.4.B hereof (whether expressly set forth in this
Agreement or otherwise) shall be cancelled and of no further
force and effect. A General Partner so removed shall remain
liable for all obligations to the Partnership arising before and
after the effective date of its removal.
8.7. Amendment of Certificate.
Upon the admission of an additional or replacement General
Partner, the Schedule shall be amended to reflect such admission
and an amendment to the Certificate of Limited Partnership, also
reflecting such admission, shall be filed in accordance with the
Uniform Act.
9. -- Limited Partner Transfers
9.1. Assignments.
9.1.1. An assignee of a Limited Partner who does not
become a Substitute Limited Partner in accordance with Section
9.2 shall have the right to receive the same share of profits,
losses, credits and distributions of the Partnership to which the
assigning Limited Partner would have been entitled if no such
assignment had been made by such Limited Partner.
9.1.2. In the event any assignment of a Limited
Partner's interest as a Limited Partner shall be made, there
shall be filed with the Partnership (and the Partnership need not
recognize such assignment until such filing) a duly executed and
acknowledged counterpart of the instrument making such
assignment. Such instrument must evidence the written acceptance
of the assignee to all the terms and provisions hereof.
9.1.3. Notwithstanding the foregoing, the
obligations of any assigning Limited Partner to pay Installments
to the Partnership shall be extinguished only by and to the
extent of the aggregate amount of Installments paid to the
Partnership by such assigning Limited Partner or on its behalf by
its assignee.
9.2. Substitute Limited Partners.
9.2.1. Each Limited Partner shall, without the
consent of any other Limited Partner, have the right to
substitute an assignee as a Limited Partner in its place. Any
Substitute Limited Partner shall, as a condition of receiving any
interest in the Partnership assets, agree to be bound to the
extent required under Section 3.6.B.
9.2.2. Upon the admission of a Substitute Limited
Partner, the Schedule shall be amended to reflect the name and
address of such Substitute Limited Partner and to eliminate the
name and address of the assigning Limited Partner, and, if
required under the Uniform Act, an amendment to the certificate
of limited partnership of the Partnership reflecting such
admission shall be filed in accordance with the Uniform Act.
Each Substitute Limited Partner shall execute such instrument or
instruments as shall be required by the General Partner to
signify its agreement to be bound by all the provisions hereof,
and shall pay reasonable legal and filing expenses in connection
with its substitution as a Limited Partner.
9.3. Restrictions.
9.3.1. In no event shall all or any part of a
Limited Partner interest in the Partnership be assigned or
transferred to a minor (other than to a member of a Limited
Partner's Immediate Family by reason of death) or to an
incompetent.
9.3.2. Any sale, exchange, transfer or other
disposition in contravention of any of the provisions of this
Section 9.3 shall be void and ineffectual and shall not bind or
be recognized by the Partnership.
9.4. Other Limited Partners.
The Special Limited Partner shall have the right at any time
and from time to time to substitute in its place as Special
Limited Partner any Person which (a) controls the Special Limited
Partner, (b) is owned in substantial part by the Special Limited
Partner or (c) is controlled by the Person controlling the
Special Limited Partner. Each Partner hereby consents to such
substitution(s) if and when it occurs, and agrees that the
substitute Special Limited Partner shall have all the rights,
benefits and duties set out in this Agreement for the Special
Limited Partner.
10. -- General Provisions
10.1.Amendments to Certificate.
Within 120 days after the end of any fiscal year in which
the Limited Partners shall have received any distributions under
Article V hereof, the General Partner shall file if required
under the law of the State and elsewhere as the General Partner
deem appropriate or required an amendment to the Certificate of
Limited Partnership reducing by the amount of its allocable share
of such distribution the amount of Capital Contribution of each
Limited Partner as stated in the last previous amendment to the
Certificate of Limited Partnership. Nothing in this Section 10.1
shall authorize, however, any change in the Schedule.
10.2.Notices.
Except as otherwise specifically provided herein, all
notices, demands or other communications hereunder shall be in
writing and shall be deemed to have been given (i) four business
days after being deposited in the United States mail and sent by
certified or registered mail, postage prepaid, (ii) two business
days after being deposited with Federal Express or similar
overnight delivery service, (iii) on the business day after the
day of transmission by telecopier or other facsimile
transmission, answerback requested, or (iv) on the business day
following delivery personally, in each case to the parties at the
addresses set forth below or at such other addresses as such
parties may designate by notice to the Partnership: If to the
Partnership, at the principal office of the Partnership set forth
in Section 2.2, and if to a Partner, at its address set forth in
the Schedule, in each case with copies to:
(i) The Special Limited Partner, c/o Heartland
Properties, Inc., Hovde Building, 6th Floor, 122 West Washington
Avenue, Madison, Wisconsin 53703-2718 (Attention: Vice
President-Real Estate and Finance);
(ii) Leonard, Street & Deinard, 150 South Fifth
Street, Suite 2300, Minneapolis, Minnesota, 55402 (Attention:
Angela M. Christy).
10.3.Word Meanings.
The words such as "herein," "hereinbefore," "hereinafter,"
"hereof" and "hereunder" refer to this Agreement as a whole and
not merely to a subdivision in which such words appear unless the
context otherwise requires. The singular shall include the
plural and the masculine gender shall include the feminine and
neuter, and vice versa, unless the context otherwise requires.
10.4.Binding Provisions.
The covenants and agreements contained herein shall be
binding upon, and inure to the benefit of, the heirs, legal
representatives, successors and assigns of the respective parties
hereto.
10.5.Applicable Law.
This Agreement shall be construed and enforced in accordance
with the laws of the State.
10.6.Counterparts.
This Agreement may be executed in several counterparts and
all so executed shall constitute one agreement binding on all
parties hereto, notwithstanding that all the parties have not
signed the original or the same counterpart.
10.7.Separability of Provisions.
Each provision of this Agreement shall be considered
separable and (a) if for any reason any provision or provisions
herein are determined to be invalid and contrary to any existing
or future law, such invalidity shall not impair the operation of
or affect those portions of this Agreement which are valid, or
(b) if for any reason any provision or provisions herein would
cause the Limited Partners to be bound by the obligations of the
Partnership under the laws of the State as the same may now or
hereafter exist, such provision or provisions shall be deemed
void and of no effect.
10.8.Paragraph Titles.
Paragraph titles are for descriptive purposes only and shall
not control or alter the meaning of the Agreement as set forth in
the text.
10.9.Amendments.
Except as otherwise provided in Section 5.4.H, this
Agreement may not be amended or modified except by a written
instrument signed by all of the Partners.
10.10. Time of Admission.
Each Limited Partner shall be deemed to have been admitted
to the Partnership as of the first day of the month during which
its actual admission occurs for all purposes of this Agreement
including Article V.
11. -- Defined Terms
Certain capitalized terms used in this Agreement shall have
the meanings specified below:
"Accountants" means the certified public accountant as may
-------------
be engaged by the Partnership in accordance with Section 7.3
hereof.
"Adjustment Amount" has the meaning set forth in Section 4.2.
------------------
"Admission Date" means the date on which this Agreement
-----------------
shall have been fully executed by, delivered among and become
binding on all of the Partners.
"Affiliate" means, as to any named Person or Persons (or as
----------
to every General Partner if no Person is specifically named): (1)
such Person; (2) member of the Immediate Family of such Person;
(3) legal representative, successor or assignee of any Person
referred to in the preceding clauses (1) or (2); (4) trustee of a
trust for the benefit of any Person referred to in the preceding
clauses (1) or (2); or (5) any other Person (a) who directly or
indirectly controls, is controlled by, or is under common control
with such Person, (b) who owns or controls 10% or more of the
outstanding voting interests of such Person, (c) of which 10% or
more of the outstanding voting interests is owned by such Person
or any of the Persons referred to in the foregoing clauses (1)
through (3); (d) who is an officer, director, partner or trustee
of such Person, or (e) for which such Person acts in the capacity
of officer, director, partner or trustee.
"Agreement" means this Amended and Restated Agreement of
-----------
Limited Partnership as it may be amended from time to time.
"Annual Reported Credit" has the meaning set forth in
-------------------------
Section 4.2.A.
"Asset Management Fee" means the fee payable to Heartland
-----------------------
Properties, Inc. by the Partnership pursuant to Section 6.12.F.
"Basis Certification" means (a) the receipt by each Limited
----------------------
Partner of the written certification of the Accountants, in a
form and in substance satisfactory to the Special Limited Partner
and its accountants, as to the itemized amounts of the
construction and development costs of the Property and the
"eligible basis" and "applicable percentage" (as defined in the
Code) pertaining to each building in the Property following Full
Completion, and (b) the written acceptance of such certification
by the Special Limited Partner after review thereof by a
certified public accounting firm engaged by the Special Limited
Partner for such purpose.
"Capital Account" has the meaning set forth in Section 3.3.
-----------------
"Capital Contribution" means the total amount of cash
------------------------
contributed or agreed to be contributed to the Partnership by
each Partner as shown in the Schedule, including any amounts
which are paid on behalf of the Investor Limited Partner pursuant
to the provisions of Section 4.2.C. herein. Any reference in
this Agreement to the Capital Contribution of a then Partner
shall include a Capital Contribution previously made by any prior
Partner with respect to the Partnership interest of such then
Partner.
"Capital Transaction" means any transaction or other source
----------------------
of funds the proceeds of which are not includable in determining
Cash Flow including, without implied limitation, the sale or
other disposition of all or substantially all of the assets of
the Partnership and any refinancing of any Mortgage, but
excluding the payment of Capital Contributions by the Partners.
"Carryover Allocation Issuance" means (a) the issuance, on
---------------------------------
or before December 31, 1999, by the Agency to the Partnership of
a carryover allocation of low income housing tax credits pursuant
to Section 42(h)(1)(E) of the Code for the Property, (b) the
incurrence, on or before December 31, 1999, by the Partnership of
capitalizable costs of at least 10% of the Partnership's
reasonably expected basis in the Project as of December 31, 2001,
and (c) the receipt by the Limited Partners of a written
certification from the Accountants setting forth in reasonable
detail the nature and amount of such costs and the written
acceptance of such certification by the Special Limited Partner
after review thereof by a certified public accounting firm
engaged by the Special Limited Partner for such purpose.
"Cash Flow" means for any period the excess of (a) Operating
-----------
Revenues for such period over (b) the sum of Operating Expenses
and Debt Service for such period.
"City Loan" means the loan being made by the City of Albert
------------
Lea with underlying funds provided by the Minnesota Department of
Trade and Economic Development in the principal amount of
$500,000, and bearing interest at the fixed annual rate of 1%.
"Code" means the Internal Revenue Code of 1986, as amended
-------
from time to time.
"Compliance Period" means the "compliance period" as defined
-------------------
in Section 42 of the Code for the Property or any building
comprising a part of the Property.
"Consent" of any Partner means the advance written consent
---------
or approval of such Partner, which consent shall not be
unreasonably withheld, conditioned or delayed.
"Construction Mortgage" means the Mortgage being made by
------------------------
Capital Square Financial Corporation in the principal amount of
$805,000.
"Credit Agency" means the Minnesota Housing Finance Agency.
---------------
"Credit Period" means the "credit period" for the Property
---------------
or any building comprising a part of the Property, as defined in
Section 42 of the Code.
"Debt Service" shall mean all payments of interest,
----------------
principal and recurring charges due and payable on the Mortgages
during a specified period.
"Development Completion Obligation" means the obligation of
-------------------------------------
the General Partner to acquire and develop the Property for a
fixed turnkey price, as set forth in Section 6.9.
"Development Costs" means those costs related to the
----------------------
development and initial leaseup of the Property as more
specifically described in Section 6.9.
"Development Funds" means those sources of funds available
--------------------
to meet Development Costs as more specifically described in
Section 6.9.
"Development Services Fee" means the fee payable to the
----------------------------
General Partner pursuant to Section 6.11.A.
"Economic Risk of Loss" has the meaning set forth in
---------------------------
Treasury Regulation Section 1.752-2.
"8609 Issuance" means the receipt by the Partnership from
-----------------
the Credit Agency of Internal Revenue Service Form(s) 8609 with
respect to all buildings in the Property and allocating to the
Partnership Low Income Housing Credit in an amount of $177,752.
"Entity" means any general partnership, limited partnership,
--------
limited liability company, corporation, joint venture, trust,
business trust, cooperative or association.
"Event of Bankruptcy" means with respect to any Person:
---------------------
(i) the entry of a decree or order for relief by a court
having jurisdiction in respect of such Person in a case under the
Federal bankruptcy laws, as now or hereafter constituted, or any
other applicable Federal or state bankruptcy, insolvency or other
similar law, or the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or similar official)
of such Person or for any substantial part of its property, or
the issuance of an order for the winding-up or liquidation of its
affairs and the continuance of any such decree or order unstayed
and in effect for a period of 60 consecutive days; or
(ii) the commencement by such Person of a proceeding seeking
any decree, order or appointment referred to in clause (i), the
consent by such Person to any such decree, order or the
appointment, or taking of any action by such Person in
furtherance of any of the foregoing.
"Facility" shall have the meaning given to it in the Federal
----------
Comprehensive Environmental Response, Compensation and Liability
Act of 1980, 42 U.S.C. Sec. 9601 et seq., as amended, and shall
also include any meaning given to analogous property under other
Hazardous Waste Laws.
"Filing Office" means the office of the Secretary of State
-----------------
of the State.
"Full Completion" means the occurrence of (a) completion of
------------------
construction of the entire Property no later than December 31,
2001 and in substantial compliance with the Property Documents,
as such completion is evidenced by the receipt by the Partnership
of (i) written confirmation of completion from the inspecting
architect for the Property and (ii) written approval of occupancy
by all state and municipal agencies empowered or required to
issue such approval and (b) satisfaction of all requirements in
the Property Documents relating to completion of the entire
Property.
"General Partner" means all Persons designated as General
-----------------
Partners in the Schedule and all Persons who become General
Partners as provided herein, in each such Person's capacity as a
General Partner of the Partnership, and if there be only one
General Partner at any time, such term shall refer to such sole
General Partner.
"GMHF Loan" means the loan being made by the Greater
------------
Minnesota Housing Fund in the principal amount of $178,485, and
bearing interest at the fixed annual rate of 1%.
"Guaranteed Development Cost" means the amount payable to
-------------------------------
the General Partner pursuant to Section 6.9.A.
"Hazardous Material" shall have the collective meanings
---------------------
given to the terms "hazardous material," "hazardous substances,"
"hazardous wastes," "toxic substances" and analogous terms in the
Hazardous Waste Laws. In addition, the term "Hazardous Material"
shall also include oil and any other substance known to be
hazardous.
"Hazardous Waste Laws" means and includes the Federal
-------------------------
Comprehensive Environmental Response, Compensation and Liability
Act of 1980; the Resource Conservation and Recovery Act; the
Toxic Substances Control Act and any other federal, state or
local statutes, ordinances, regulations or by-laws dealing with
Hazardous Material, as the same may be amended from time to time
and including any regulations promulgated thereunder.
"Immediate Family" means, with respect to any Person, its
--------------------
spouse, parents, parents-in-law, descendants, nephews, nieces,
brothers, sisters, brothers-in-law, sisters-in-law,
children-in-law and grandchildren-in-law.
"Incentive Management Fee" means the fee payable by the
---------------------------
Partnership pursuant to Section 6.12.D hereof.
"Installment" means a portion of the Capital Contribution
-------------
due from the Investor Limited Partner as more fully set forth in
Article IV.
"Investor Limited Partner" means Alliant Energy Investments,
--------------------------
Inc., an Iowa corporation, or any Person who becomes a Substitute
Investor Limited Partner as provided herein, in each such
Person's capacity as the Investor Limited Partner of the
Partnership.
"Lenders" means the lenders with respect to the Permitted
---------
Loans.
"Limited Partner" or "Limited Partners" means the Investor
------------------------------------------
Limited Partner and the Special Limited Partner.
"Low Income Housing Credit" means the amount of low-income
-----------------------------
housing tax credit, as certified by the Accountants, which the
Partnership and/or its Partners has or will claim pursuant to
Section 42 of the Code (or successor provisions) with respect to
the Property.
"Management Agent" means the managing and rental agent for
-------------------
the Property engaged by the Partnership pursuant to Section 6.12.
"Management Agreement" means the agreement between the
-------------------------
Partnership and the Management Agent in effect from time to time
providing for management services to the Property.
"Management Fee" means the amount payable from time to time
-----------------
by the Partnership to the Management Agent (or to the General
Partner if there shall be no Management Agent serving hereunder)
on an annual basis for management services in accordance with the
Management Agreement.
"Minimum Set Aside" means occupancy of dwelling units in all
--------------------
of the Property sufficient to satisfy the "40-60 test" set forth
in Section 42(g) of the Code within the time period required
thereunder.
"Mortgage" or "Mortgages" means any or all of the
------------------------------
indebtedness of the Partnership evidenced by the Permitted Loans,
and any other indebtedness secured by a mortgage of the
Property. Where the context admits, the term Mortgage shall
include any mortgage, deed, note, security agreement or other
instrument executed in connection with a Mortgage which is
binding on the Partnership; and in case a Mortgage is replaced or
supplemented by any subsequent mortgage or mortgages, such term
shall refer to any such subsequent mortgage or mortgages.
"Operating Deficit" means the excess (if any) of the sum of
---------------------
Operating Expenses and Debt Service over Operating Revenues for a
particular period, as more specifically described in Section 6.10.
"Operating Deficit Loan" means a loan made to the
------------------------------
Partnership pursuant to Section 6.10 and which is repayable
without interest and only as provided under this Agreement.
"Operating Expenses" means all the costs and expenses of any
---------------------
type which are incident to the ownership and operation of the
Property, including, without limitation, real estate and other
taxes, the cost of capital improvements properly attributable to
the period in question, the cost of operations (including the
cost of any services provided to residents), maintenance and
repairs, Management Fees, fees payable pursuant to Section
6.12.E, the funding of any reserves required to be maintained by
the Lenders or pursuant to Section 6.14, and all amounts due with
respect to Partnership indebtedness, but excluding Debt Service,
the cost of those items which are included in Development Costs
pursuant to Section 6.9, payments made pursuant to Section 5.2.A
or 5.2.B, depreciation and other non-cash charges and cash
distributions to Partners.
"Operating Revenue" means all rental revenue, laundry
---------------------
income, parking revenue and other incidental revenues which are
received by the Partnership and arise from the operation of the
Property as a rental apartment property.
"Outstanding Capital" means, as to any Partner at any point
----------------------
in time, the excess of: (a) the amount of the Capital
Contributions paid in by such Partner through such time (in the
case of the Investor Limited Partner, including both amounts
paid pursuant to Section 4.1, and all amounts paid or payable on
behalf of the Investor Limited Partner by the General Partner
pursuant to Section 4.2), over (b) amounts which have previously
been distributed to such Partner pursuant to Section 5.2.B as
returns of Outstanding Capital.
"Partner" or "Partners" means any or all of the General
--------------------------
Partners and the Limited Partners.
"Partner Non-Recourse Debt" means any Partnership liability
---------------------------
(1) that is considered non-recourse under Regulation Section
1.1001-2 or for which the creditor's right to repayment is
limited to one or more assets of the Partnership and (2) for
which any Partner or Related Person bears the Economic Risk of
Loss.
"Partner Non-Recourse Debt Minimum Gain" means the amount of
-----------------------------------------
partner non-recourse debt minimum gain and the net increase or
decrease in partner non-recourse debt minimum gain determined in
a manner consistent with Treasury Regulation Sections 1.704-2(d)
and 1.704-2(g)(3).
"Partnership" means the limited partnership governed by this
-------------
Agreement as said limited partnership may from time to time be
constituted and amended.
"Partnership Minimum Gain" means the amount determined by
---------------------------
computing, with respect to each Partnership Non-Recourse
Liability, the amount of gain, if any, that would be realized by
the Partnership if it disposed of (in a taxable transaction) the
property subject to such liability in full satisfaction of such
liability, and by then aggregating the amounts so computed. Such
computations shall be made in a manner consistent with Treasury
Regulation Section 1.704-2(d).
"Partnership Non-Recourse Liability" means any Partnership
--------------------------------------
liability (or portion thereof) for which no Partner or Related
Person bears the Economic Risk of Loss.
"Permanent Mortgage" means the Mortgage made by Norwest Bank
---------------------
Iowa, N.A. in the principal amount of $164,000 and on such terms
to be determined pursuant to the Permanent Mortgage commitment
letter dated October 25, 1999.
"Permanent Mortgage Closing" means the occurrence of Full
------------------------------
Completion, closing of the Permanent Mortgage and full
disbursement thereof to the Partnership and repayment in full and
discharge of the Construction Mortgage.
"Permitted Loans" means the Construction Mortgage, Permanent
-----------------
Mortgage, City Loan, GMHF Loan, and Port Authority Loan.
"Person" means any individual or Entity, and the heirs,
--------
executors, administrators, legal representatives, successors and
assigns of such Person where the context so admits; and, unless
the context otherwise requires, the singular shall include the
plural, and the masculine gender shall include the feminine and
the neuter and vice versa.
"Plans and Specifications" means the plans and
--------------------------------
specifications for the Property as last revised prior to the date
hereof, together with future revisions thereof which, if such
future revision constitutes a change in the design, scope or
value of the Property, shall have received the Consent of the
Special Limited Partner.
"Port Authority Loan" means the loan being made by the Port
-----------------------
Authority of the City of Albert Lea in the principal amount of
$10,000, and bearing interest at the fixed annual rate of 1%.
"Projected Credit" means the projected amounts of Low Income
-------------------
Housing Credit set forth in the table in Section 4.2.A.
"Property" means the real property located at 1801 Ninth
----------
Street West in Albert Lea, Minnesota, which real property is more
fully described in Exhibit 1 attached hereto.
"Property Documents" means all promissory notes, mortgages,
--------------------
agreements and other instruments executed in connection with any
of the Mortgages; the Plans and Specifications; the Management
Agreement; the Incentive Management Agreement; the Turnkey
Development Agreement; all applications, reservations, carryover
allocations, restrictive covenants and extended use agreements
and all other agreements and documents related to the Low Income
Housing Credit; agreements relating to real estate taxation and
assessments relating to the Property; agreements relating to the
availability of parking for users of the Property; and any other
agreement or instrument relating to the Property or under which
the Partnership is bound.
"Qualified Tenant" means a tenant who meets the income
-------------------
requirements for a "low income unit" (as defined in Section 42 of
the Code) and who occupies a dwelling unit in the Property
pursuant to an executed lease which is for a term of at least
twelve months, conforms to all requirements of the Property
Documents and will not prevent the Partnership from obtaining the
Low Income Housing Credit with respect to such dwelling unit.
"Qualified Income Offset Item" means (1) an allocation of
--------------------------------
loss or deduction that, as of the end of each year, reasonably is
expected to be made (a) pursuant to Section 704(e)(2) of the Code
to a donee of an interest in the Partnership, (b) pursuant to
Section 706(d) of the Code as the result of a change in any
Partner's Interest, and (c) pursuant to Regulation Section
1.751-1(b)(2)(ii) as the result of a distribution by the
Partnership of unrealized receivables or inventory items and (2)
a distribution that, as of the end of such year, reasonably is
expected to be made to a Partner to the extent it exceeds
offsetting increases to such Partner's Capital Account which
reasonably are expected to occur during or prior to the
Partnership taxable year in which such distribution reasonably is
expected to occur.
"Related Person" has the meaning set forth in Treasury
----------------
Regulation Section 1.752-4(b) or any successor regulation
thereto.
"Replacement Reserve" shall mean the reserve maintained
---------------------
pursuant to Section 6.14 to make capital repairs and improvements.
"Retirement" (including the verb form "Retire" and the
------------
adjective form "Retiring") means as to a General Partner, the
occurrence of death, adjudication of insanity or incompetence,
Event of Bankruptcy, dissolution, or voluntary or involuntary
withdrawal from the Partnership for any reason, and shall
constitute "retirement" for purposes of the Uniform Act.
"Retirement" shall also mean the sale, assignment, transfer or
encumbrance by a General Partner of its interest as a General
Partner. A General Partner which is a corporation, limited
liability company or partnership shall be deemed to have sold,
assigned, transferred or encumbered its interest as a General
Partner in the event of any sale, assignment, transfer or
encumbrance of a controlling interest in a corporate or limited
liability company General Partner or of a general partner
interest in a General Partner which is a partnership.
"Schedule" means Schedule A of Partners annexed hereto as
---------
amended from time to time and as so amended at the time of
reference thereto.
"Special Limited Partner" means Heartland Special Limited,
--------------------------
Inc., a Wisconsin corporation, or such other Person as it may
substitute pursuant to Section 9.4 hereof.
"Stabilized Occupancy" means the achievement of occupancy of
-----------------------
at least 90% of the dwelling units in the Property by Qualified
Tenants at rent levels not less than the rents set forth on
Exhibit 2 hereto for each of three consecutive months following
Full Completion.
"State" means the State of Minnesota.
-------
"Substitute Limited Partner" means any Person who is
-------------------------------
admitted to the Partnership as a Limited Partner under the
provisions of Sections 9.2 or 9.4.
"Uniform Act" means the Uniform Limited Partnership Act as
------------
adopted by the State.
"Vessel" shall have the meaning given to it in the Federal
--------
Comprehensive Environmental Response, Compensation and Liability
Act of 1980, 42 U.S.C. Sec. 9601 et seq., as amended, and shall
also include any meaning given to analogous property under other
Hazardous Waste Laws.
<PAGE>
WITNESS the execution hereof under seal as of the 1st day of
February, 2000.
GENERAL PARTNER Newbury Development Company
___________________________ By: ___________________________
James F. Levy James F. Levy, President
<PAGE>
WITHDRAWING LIMITED PARTNER SPECIAL LIMITED PARTNER
Newbury Development Company Heartland Special Limited, Inc.
By: ___________________________ By: ___________________________
James F. Levy, President Ruth A. Domack, President
INVESTOR LIMITED PARTNER
Alliant Energy Investments, Inc.
By: ___________________________
Thomas L. Aller, President
<PAGE>
STATE OF IOWA )
) ss.
COUNTY OF POLK )
On this _____ day of February, 2000, before me, the
undersigned, a Notary Public in and for said State, personally
came James F. Levy, who executed the above instrument and
acknowledged to me that he executed the same as his free act and
deed.
______________________________
Notary Public
My commission expires:_________
STATE OF IOWA )
) ss.
COUNTY OF POLK )
On this _____ day of February, 2000, before me, the
undersigned, a Notary Public in and for said State, personally
came James F. Levy, known to me to be President of Newbury
Development Company, who executed the above instrument on behalf
of said corporation and acknowledged to me that he executed the
same as his free act and deed and the free act and deed of said
corporation..
______________________________
Notary Public
My commission expires:_________
<PAGE>
STATE OF IOWA )
) ss.
COUNTY OF LINN )
On this _______ day of February, 2000, before me, the
undersigned, a Notary Public in and for said State, personally
came Thomas L. Aller, known to me to be President of Alliant
Energy Investments, Inc., who executed the above instrument on
behalf of said corporation and acknowledged to me that he
executed the same as his free act and deed and the free act and
deed of said corporation.
______________________________
Notary Public
My commission expires:_________
STATE OF WISCONSIN )
) ss.
COUNTY OF DANE )
On this _______ day of February, 2000, before me, the
undersigned, a Notary Public in and for said State, personally
came Ruth A. Domack, known to me to be President of Heartland
Special Limited, Inc., who executed the above instrument on
behalf of said corporation and acknowledged to me that she
executed the same as her free act and deed and the free act and
deed of said corporation.
______________________________
Notary Public
My commission expires:_________
<PAGE>
<TABLE>
<CAPTION>
PICKEREL PARK ASSOCIATES LIMITED PARTNERSHIP
Schedule A -- Schedule of Partners
Total
Agreed-to Paid-in Capital Share of Total
GENERAL PARTNERS Capital Contribution * Partner Class
------------------ Contribution ---------------- Interest
------------- ---------------
<S> <C> <C> <C>
James F. Levy $50 $50 50%
Newbury Development Company
100 Court Avenue, Suite 212
Des Moines, Iowa 50309-2200
Newbury Development Company $50 $50 50%
100 Court Avenue, Suite 212
Des Moines, Iowa 50309-2200
LIMITED PARTNERS
----------------
Special Limited Partner
Heartland Special Limited, Inc. $100 $100 0.01%
Heartland Properties, Inc.
Hovde Building, 6th Floor
122 West Washington Avenue
Madison, WI 53703-2718
Investor Limited Partner
Alliant Energy Investments, Inc. $1,322,800 $661,400 99.99%
Heartland Properties, Inc.
Hovde Building, 6th Floor
122 West Washington Avenue
Madison, WI 53703-2718
</TABLE>
______________________
* Paid-in Capital Contribution as of the date of this Schedule
A. Future Installments of Capital Contribution are due from the
Investor Limited Partner at the times set forth in this
Partnership Agreement.
<PAGE>
Exhibit 1
LEGAL DESCRIPTION OF PROPERTY
Lot 1, Block 1, Pickerel Park Subdivision in Government
Lot 3, in SE 1/4, Section 18, Township 102 North, Range
21 West, City of Albert Lea, County of Freeborn, State
of Minnesota.
<PAGE>
Exhibit 2
PROJECTED INITIAL RENT LEVELS
AND OPERATING EXPENSES
<PAGE>
Exhibit 3
REPORTING GUIDELINES
<PAGE>
_______________________________________
MEADOW WOOD ASSOCIATES OF CARROLL PHASE II, L.P.
_______________________________________
AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP
Dated as of March 1, 2000
<PAGE>
<TABLE>
<CAPTION>
MEADOW WOOD ASSOCIATES OF CARROLL PHASE II, L.P.
TABLE OF CONTENTS
Page
----
<S> <C>
ARTICLE I -- Preliminary Statement. 1
ARTICLE II -- Continuation; Name; and Purpose. 1
Section 2.1 Continuation. 1
Section 2.2 Name and Office. 1
Section 2.3 Purpose. 2
Section 2.4 Authorized Acts. 2
Section 2.5 Term and Dissolution. 3
ARTICLE III -- Partners; Capital 3
Section 3.1 General Partner 3
Section 3.2 Limited Partners 4
Section 3.3 Partnership Capital 4
Section 3.4 Withdrawal of Capital 5
Section 3.5 Liability of Limited Partners 5
Section 3.6 Additional Limited Partners 5
ARTICLE IV -- Limited Partner Capital Contributions 6
Section 4.1 Payments 6
Section 4.2 Special Adjustments. 7
Section 4.3 Repurchase Obligation of the General Partner 9
Section 4.4 Repurchase Option of the General Partner. 11
Section 4.5 Right of First Refusal of the General Partner 11
ARTICLE V -- Profits, Losses and Distributions 12
Section 5.1 Profits, Losses and Tax Credits 12
Section 5.2 Distributions Prior to Dissolution 13
Section 5.3 Distributions Upon Dissolution 14
Section 5.4 Special Provisions 15
ARTICLE VI -- General Partner Rights, Powers and Duties 18
Section 6.1 Restrictions on Authority 18
Section 6.2 Personal Services 19
Section 6.3 Business Management and Control; Tax Matters Partner. 19
Section 6.4 Authority of General Partner 20
Section 6.5 Duties and Obligations 21
Section 6.6 Representations and Warranties 23
Section 6.7 Liability 26
Section 6.8 Indemnification 26
Section 6.9 Development Completion Obligation 27
Section 6.10 Operating Expense Obligation 27
Section 6.11 Development Services 28
Section 6.12 Property Management 28
Section 6.13 Borrowings 30
Section 6.14 Replacement Reserve 31
<PAGE>
ARTICLE VII -- Books and Records, Accounting and Reports 31
Section 7.1 Books and Records 31
Section 7.2 Bank Accounts 31
Section 7.3 Accountants 32
Section 7.4 Reports, Financial Statements, Tax Returns 32
Section 7.5 Tax Elections 34
Section 7.6 Fiscal Year and Accounting Method. 34
ARTICLE VIII -- Retirement of a General Partner 34
Section 8.1 Retirement 34
Section 8.2 Obligation to Continue 35
Section 8.3 Retirement of a Sole General Partner 35
Section 8.4 Interest of Retired General Partners 35
Section 8.5 Designation of New General Partners 36
Section 8.6 Additional and Substitute General Partners 36
Section 8.7 Amendment of Certificate 38
ARTICLE IX -- Limited Partner Transfers 38
Section 9.1 Assignments 38
Section 9.2 Substitute Limited Partners 39
Section 9.3 Restrictions 39
Section 9.4 Other Limited Partners 39
ARTICLE X -- General Provisions 39
Section 10.1 Amendments to Certificate 39
Section 10.2 Notices 40
Section 10.3 Word Meanings 40
Section 10.4 Binding Provisions 40
Section 10.5 Applicable Law 40
Section 10.6 Counterparts 41
Section 10.7 Separability of Provisions 41
Section 10.8 Paragraph Titles 41
Section 10.9 Amendments 41
Section 10.10 Time of Admission 41
ARTICLE XI -- Defined Terms 41
Schedule A -- Schedule of Partners
Exhibit 1 -- Legal Description of Property
Exhibit 2 -- Projected Initial Rent Levels and Operating Expenses
Exhibit 3 -- Reporting Guidelines
</TABLE>
<PAGE>
MEADOW WOOD ASSOCIATES OF CARROLL PHASE II, L.P.
AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP
1. -- Preliminary Statement.
Meadow Wood Associates of Carroll Phase II, L.P. (the "Partnership")
was formed as a limited partnership under the laws of the State of Iowa
pursuant to an Agreement of Limited Partnership dated September 25, 1998. A
certificate of limited partnership was filed with the Filing Office on
September 29,1998.
The purposes of this amendment to and restatement of said Agreement are
to: (i) admit Newbury Development Company, an Iowa corporation, as a general
partner, admit Alliant Energy Investments, Inc., an Iowa corporation, as the
Investor Limited Partner, and admit Heartland Special Limited, Inc., a
Wisconsin corporation, as the Special Limited Partner; (ii) provide for the
withdrawal of James F. Levy and Debbie L. Fisher as the pre-existing limited
partners; and (iii) set out more fully the rights, obligations and duties of
the General Partner and the Limited Partners and to restate the partnership
agreement in its entirety.
It is hereby agreed that the agreement of limited partnership is hereby
amended and fully restated as provided herein. Capitalized terms not defined
in the text hereof shall have the meanings set forth in Article XI.
2. -- Continuation; Name; and Purpose.
2.1. Continuation.
The parties hereto hereby agree to continue the limited partnership
known as Meadow Wood Associates of Carroll Phase II, L.P., formed pursuant to
the provisions of the Uniform Act.
2.2. Name and Office.
The Partnership shall continue to be conducted under the name of Meadow
Wood Associates of Carroll Phase II, L.P. The principal office of the
Partnership shall be at 100 Court Avenue, Suite 212, Des Moines, Iowa 50309.
The Partnership may also maintain offices at the Property. The resident
agent for service of process on the Partnership shall be Newbury Development
Company at 100 Court Avenue, Suite 212, Des Moines, Iowa 50309. The General
Partner may at any time change the location of a Partnership office or the
identity or address of its resident agent in the State and shall give due
notice of any such change to the Limited Partners.
2.3. Purpose.
The purpose of the Partnership is to acquire, construct, develop,
improve, own, maintain, operate, manage, lease, sell, and otherwise deal with
the Property. The Partnership and the General Partner shall operate the
Property in accordance with the Property Documents and any applicable
governmental regulations. The Partnership shall not engage in any other
business or activity.
2.4. Authorized Acts.
In furtherance of its purposes, but subject to all other provisions of
this Agreement including, but not limited to, Article III and Article VI, the
Partnership is hereby authorized, and the General Partner shall have full
power, authority and discretion to cause the Partnership:
(i) To acquire by purchase, lease or otherwise any real or personal
property which may be necessary, convenient or incidental to the
accomplishment of the purposes of the Partnership.
(ii) To construct, operate, maintain, finance and improve, and to own,
sell, convey, assign, mortgage or lease any real estate and any personal
property necessary, convenient or incidental to the accomplishment of the
purposes of the Partnership.
(iii)To borrow money and issue evidences of indebtedness in furtherance
of any or all of the purposes of the Partnership, and to secure the same by
mortgage, pledge or other lien on the Property or any other assets of the
Partnership.
(iv) To prepay in whole or in part, refinance, recast, increase, modify
or extend a Mortgage and in connection therewith to execute any extensions,
renewals, or modifications of the Mortgages.
(v) To employ a Management Agent, including an Affiliate, to manage the
Property, and to pay reasonable compensation for such services.
(vi) To enter into, perform and carry out contracts of any kind,
including contracts with Affiliates, necessary to, in connection with or
incidental to, the accomplishment of the purposes of the Partnership,
specifically including, but not limited to, the execution and delivery of the
Property Documents, and all other agreements, certificates, instruments or
documents required by the Lenders in connection with the Property Documents
and the acquisition, construction, development, improvement, maintenance and
operation of the Property or otherwise required by the Lenders in connection
with the Property.
(vii)To enter into any kind of activity and to perform and carry out
contracts of any kind necessary to, or in connection with, or incidental to,
the accomplishment of the purposes of the Partnership, so long as said
activities and contracts may be lawfully carried on or performed by a
partnership under the laws of the State.
2.5. Term and Dissolution.
The Partnership shall continue in full force and effect until December
31, 2045, except that the Partnership shall be dissolved prior to such date
upon the happening of any of the following events:
2.5.1. The sale or other disposition of all or substantially all
the assets of the Partnership; or
2.5.2. The Retirement of a General Partner if no General Partner
remains and the Partnership is not reconstituted with a successor General
Partner pursuant to Section 8.3; or
2.5.3. The occurrence of any event which would cause the
dissolution of the Partnership under the Uniform Act notwithstanding the
agreement of the Partners or the election of the General Partner to continue
the business of the Partnership. The Partners agree, and the General Partner
agrees to elect, to continue the business of the Partnership under all
circumstances permitted by the Uniform Act.
Upon dissolution of the Partnership, unless the Partnership is
reconstituted pursuant to Section 8.3, the General Partner (or its trustees,
receivers, successors, or legal representatives) shall cause the cancellation
of the Partnership's Certificate of Limited Partnership as then in force, and
shall liquidate the Partnership assets and apply and distribute the proceeds
thereof in accordance with Section 5.3. Notwithstanding the foregoing, in
the event such liquidating General Partner shall determine that an immediate
sale of part or all of the Partnership's assets would cause undue loss to the
Partners, the liquidating General Partner may, with the prior consent of the
Special Limited Partner, in order to avoid such loss, either (i) delay
liquidation of, and withhold from distribution for a reasonable time, any
assets of the Partnership except those necessary to satisfy Partnership debts
and obligations other than debts provided for in Section 5.2.B, Clauses Two
and following, or (ii) distribute the assets to the Partners in kind.
3. -- Partners; Capital
3.1. General Partner.
On the Admission Date, Newbury Development Company, an Iowa corporation,
shall be admitted to the Partnership as a general partner, following which
admission the general partners of the Partnership shall be James F. Levy and
Newbury Development Company at the addresses set forth on the Schedule. (The
general partners are referred to collectively herein as the "General
Partner".) The General Partner has made a Capital Contribution to the
Partnership in the total amount of $100.00 The General Partner shall not be
obligated or permitted to make additional Capital Contributions to the
Partnership, except that the General Partner shall be obligated to make such
additional Capital Contributions to meet Development Cost shortfalls as
provided in Section 6.9.B., and as may be required upon the dissolution and
termination of the Partnership pursuant to Section 5.3.A.
3.2. Limited Partners.
3.2.1. On the Admission Date, Heartland Special Limited, Inc., a
Wisconsin corporation, shall be admitted to the Partnership as the Special
Limited Partner, Alliant Energy Investments, Inc., an Iowa corporation, shall
be admitted to the Partnership as the Investor Limited Partner, and
thenceforth the Limited Partners shall be those Limited Partners shown on the
Schedule. The addresses of each of the Limited Partners shall be as set
forth on the Schedule.
3.2.2. James F. Levy and Debbie L. Fisher each hereby withdraws
as a Limited Partner, effective on the Admission Date, and acknowledges that
as of the Admission Date he/she (i) has received a return of his/her capital
contribution in his/her capacity as a withdrawn Partner, and (ii) no longer
has any interest in or rights or claims against the Partnership in his/her
capacity as a withdrawn Partner or for unpaid fees or compensation earned
prior to the Admission Date.
3.3. Partnership Capital.
3.3.1. The capital of the Partnership shall be the aggregate
amount of the cash and the agreed value of property contributed by the
General Partner, and the aggregate amount of the cash contributed by the
Limited Partners, which amounts are hereby agreed to be those set forth in
the Schedule. The Schedule shall be amended from time to time to reflect the
withdrawal or admission of Partners, any changes in the Partnership interests
held by a Partner arising from the transfer of a Partnership interest to or
by such Partner and any change in the amounts to be contributed or agreed to
be contributed by any Partner; provided that no funds provided by a Partner
shall be deemed to be additional Capital Contributions unless payment thereof
is pursuant to a specific provision of this Agreement requiring or permitting
the making of additional Capital Contributions.
3.3.2. An individual Capital Account shall be established and
maintained for each Partner, including any additional or substituted Partner
who shall hereafter receive an interest in Partnership. The Capital Account
of each Partner shall consist of (a) the amount of cash such Partner
contributes to the Partnership, plus (b) the fair market value of any
property such Partner contributes to the Partnership net of any liabilities
assumed by the Partnership or to which such property is subject, plus (c) the
amount of profits and gain and tax exempt income allocated to such Partner,
minus (d) the amount of losses and deductions allocated to such Partner,
minus (e) the amount of all cash distributed to such Partner, minus (f) the
fair market value of any property distributed to such Partner net of any
liabilities assumed by such Partner or to which such property is subject,
minus (g) the amount of any other expenditures which are not deductible by
the Partnership for Federal income tax purposes or which are not allowable as
additions to the basis of Partnership property and which are allocated to
such Partner. Each Capital Account shall also be subject to such other
adjustments as may be required under the Code and Treasury Regulations. The
Capital Account of a Partner shall not be affected by any adjustments to
basis made pursuant to Section 743 of the Code.
3.3.3. The original Capital Account established for any
substituted Partner shall be in the same amount as, and shall replace, the
Capital Account of the Partner which such substituted Partner succeeds, and,
for the purposes of this Agreement, such substituted Partner shall be deemed
to have made the Capital Contribution, to the extent actually paid in, of the
Partner which such substituted Partner succeeds. The term "substituted
Partner", as used in this paragraph, shall mean a Person who shall become
entitled to receive a share of the profits, losses and distributions of the
Partnership by reason of such Person succeeding to the interest in the
Partnership of a Partner by assignment of all or any part of a Partner's
interest in the Partnership. To the extent a substituted Partner receives
less than 100% of the interest in the Partnership of a Partner it succeeds,
the original Capital Account of such substituted Partner and its Capital
Contribution shall be in proportion to the interest he receives and the
Capital Account of the Partner who retains a partial interest in the
Partnership and its Capital Contribution shall continue, and not be replaced,
in proportion to the interest he retains. Nothing in this Section 3.3 shall
affect the limitations on transferability of Partnership interests set forth
in this Agreement.
3.4. Withdrawal of Capital.
Except as may be specifically provided in Article V hereof, no Partner
shall have the right to withdraw from the Partnership all or any part of its
Capital Contribution. No Partner shall have any right to demand and receive
property or cash of the Partnership in return of its Capital Contribution
except as may be specifically provided in this Agreement.
3.5. Liability of Limited Partners.
No Limited Partner shall be liable for any debts, liabilities, contracts
or obligations of the Partnership except to the extent such Limited Partner
shall undertake such liability pursuant to a separate written instrument. A
Limited Partner shall be liable to the Partnership only to make payments of
its Capital Contribution as and when due hereunder, and, after its Capital
Contribution shall be fully paid, no Limited Partner shall, except as
otherwise required by the Uniform Act, be required to make any further
Capital Contributions or lend any funds to the Partnership.
3.6. Additional Limited Partners.
3.6.1. Except as may be expressly provided elsewhere in this
Agreement, the General Partner shall have no right or authority to admit
Limited Partners other than those being admitted pursuant to Section 3.2
unless such admission shall have received the Consent of the Special Limited
Partner.
3.6.2. Any incoming Limited Partner shall, as a condition of
receiving any interest in Partnership property, agree to be bound by the
Property Documents to the same extent and on the same terms as all other
Partners of the same class. Any incoming Limited Partner shall also agree to
be bound by the provisions of this Agreement.
3.6.3. Upon the admission of any additional Limited Partners,
the Schedule shall be amended to reflect the names, addresses and Capital
Contributions of such additional Limited Partners, and the date each Limited
Partner is admitted to the Partnership.
4. -- Limited Partner Capital Contributions
4.1. Payments.
4.1.1. The Special Limited Partner shall pay its entire Capital
Contribution of $100.00 to the Partnership in cash on the Admission Date.
The Investor Limited Partner shall make its Capital Contributions in the
total amount of $1,156,810, which shall be paid in Installments (subject to
the provision of Section 4.2.C) as set forth in the following payment
schedule (the "Payment Schedule") and upon satisfaction of the conditions set
forth in Section 4.1.B:
(1) The first installment in the amount of $578,405 (the
"First Installment") shall be paid on the Admission Date; provided, however,
that if as of the Admission Date the development costs to be drawn against
are less than the amount of the First Installment, the disbursement of the
extra portion of such Installment shall be delayed pending future
construction draw requests.
(2) The second installment in the amount of $231,362 (the
"Second Installment") shall be paid on the later of (a) Full Completion, (b)
Basis Certification, and (c) Carryover Allocation Issuance.
(3) The third installment in the amount of $231,362 (the
"Third Installment") shall be paid on the later of (a) Permanent Mortgage
Closing, and (b) 8609 Issuance.
(4) The fourth installment in the amount of $115,681 (the
"Fourth Installment") shall be paid on the later of (a) the occurrence of
Stabilized Occupancy, and (b) the initial occupancy of all dwelling units in
the Property by Qualified Tenants.
All Capital Contributions received by the Partnership shall be used
only for Partnership purposes permitted by this Agreement.
4.1.2. The obligation of the Investor Limited Partner to pay to
the Partnership each Installment is subject to the conditions that (i) each
of the preceding Installments shall have become due and payable and (ii) the
delivery by the General Partner to the Special Limited Partner of a written
certificate (the "Certificate"), which shall be addressed to the Special
Limited Partner and the Investor Limited Partner and which shall state that,
as of the date of execution of such Certificate, (i) the Installment in
question is due and payable to the Partnership (except with regard to the
mere passage of time to any certain date set forth in the Payment Schedule),
and (ii) all preconditions (except with regard to the mere passage of time to
any certain date set forth in the Payment Schedule), representations,
warranties and agreements applicable to such Installment set forth in
Sections 4.1 and 6.6 and elsewhere in this Agreement have been satisfied, or
are true and correct, as the case may be. The Certificate shall include as
an exhibit thereto a copy of an updated title opinion for the Property (the
most recent of which must be dated within 15 days of the date of the
Certificate) evidencing the accuracy of the representation set forth in
Section 6.6(viii). The Certificate delivered with respect to the First
Installment shall be dated as of the Admission Date, and the Certificate
delivered with respect to each subsequent Installment shall be dated no
earlier than 15 days prior to the date of payment of such Installment. By
acceptance of such Installment on behalf of the Partnership, the General
Partner shall be deemed to have reaffirmed and ratified the Certificate as of
the date such Installment is paid to the Partnership.
4.1.3. If as of the date when any Installment or portion thereof
would otherwise be payable to the Partnership pursuant to the Payment
Schedule, the Certificate required under Section 4.1.B cannot truthfully be
given, then the Installment shall not be payable to the Partnership unless
and until (a) the General Partner shall resolve the circumstances which
prevent delivery of such Certificate, (b) such resolution shall have been
effected in a manner and under circumstances such that the Investor Limited
Partner shall not have irrevocably lost any substantial part of the benefits
of this Agreement, (c) the General Partner shall not otherwise be in default
hereunder and (d) the Certificate shall be delivered in compliance with the
provisions of Section 4.1.B.
4.2. Special Adjustments.
Upon occurrence of the events set forth in the following paragraphs, the
following adjustments shall be made:
4.2.1. Low Income Housing Credit Adjustment.
(1) If the Annual Reported Credit which will apply to each
year of the Credit Period is less than $157,046, then the General Partner
shall pay to the Investor Limited Partner, in the manner provided in Section
4.2.C below, an Adjustment Amount equal to 74.4% of the excess of (a) the sum
of the Projected Credit for all years included in the table in the definition
of "Projected Credit" minus (b) the sum of the Low Income Housing Credit
which will be allocated to the Investor Limited Partner for all such years
based on the Annual Reported Credit. If instead such Annual Reported Credit
is greater than $157,046, then an offsetting Adjustment Amount shall be
determined as aforesaid, and the Investor Limited Partner shall make an
additional Capital Contribution to the partnership in an amount equal to that
offsetting Adjustment Amount, which additional Capital Contribution shall be
payable at the time of the Third Installment.
(2) In the event that the Actual Credit for 2001 is less than
the Projected Credit for such year (after the Projected Credit has been
revised by any adjustment made pursuant to Section 4.2.A(1) above), then the
General Partner shall pay to the Investor Limited Partner, in the manner
provided in Section 4.2.C below, an Adjustment Amount equal to the total
shortfall in Projected Credit, and, to the extent the shortfall will be
deferred pursuant to Section 42(f)(2)(B) of the Code, the Projected Credit
for 2011 shall be increased by the amount of such Adjustment Amount.
(3) If for any reason (except changes in federal income tax
law), the amount of Actual Credit for any year is less than the Projected
Credit for such year after the Projected Credit has been revised by any
adjustments made pursuant to Sections 4.2.A(1) or 4.2.A(2) above), then the
General Partner shall pay to the Investor Limited Partner, in the manner
provided in Section 4.2.C below, an Adjustment Amount equal to the sum of (a)
the shortfall in Projected Credit for such year and the corresponding
shortfall for all future years which will also occur due to the circumstances
in question, (b) the amount of any Low Income Housing Credit recapture amount
(as defined in Code Section 42(j), including any interest and/or penalties
due to the Internal Revenue Service), if the Internal Revenue Service
determines that the payment by the General Partner to the Investor Limited
Partner is not a return of capital, or otherwise determines that such
recapture amount is owing, and (c) if the receipt of the foregoing amounts
results in a tax liability for the Investor Limited Partner, an amount
sufficient to pay such tax liability (calculated at an assumed tax rate of
40%). It is understood and acknowledged that the provisions of this Section
4.2.A(3) may be applied with respect to each year of the Credit Period.
(4) "Projected Credit" shall mean the amount for each year
expected to be allocated to the Investor Limited Partner as set forth in the
table below:
Year Projected Credit
------------------------------------------
2001 $157,030
2002 and each year
thereafter through 2010 $157,030
2011 $0
When any adjustment is made pursuant to this Section 4.2.A, the "Projected
Credit" for purposes of any future adjustment shall be revised to equal the
Actual Credit on which such adjustment was computed.
(5) "Actual Credit" means, with respect to any tax year, the
total amount of Low Income Housing Credit actually reported by the
Partnership on its tax return for that tax year and allocated to the Investor
Limited Partner and not disallowed by any taxing authority, as subsequently
adjusted (if applicable) by any Tax Credit recapture amounts (as defined in
Section 42(j)(2) of the Code).
(6) "Annual Reported Credit" means the annual amount of Low
Income Housing Credit which is expected to be allocated by the Partnership to
the Investor Limited Partner on the Partnership tax return for each year of
the Credit Period (subject only to timing adjustments such as placed in
service and occupancy dates), as determined and reflected in a statement to
be prepared by the Accountants after Full Completion and 8609 Issuance and
which (a) shall be based on an audit by the Accountants of Development Costs,
(b) shall include supporting documentation and/or certifications from the
General Partner and the Accountants indicating the date when each building
comprising the Property was placed in service and indicating the number and
percentage of tenants occupying units in the Property who are Qualified
Tenants and (c) on which the Accountants shall express a favorable opinion as
to fair presentation. In no event shall the amount of the Development
Completion Fee which is taken into account in computing the Annual Reported
Credit exceed the lesser of (a) the amount of such fee actually paid or to be
paid pursuant to Section 6.11.A and (b) the amount allowable by the Credit
Agency.
4.2.2. Intentionally Omitted.
4.2.3. Adjustment Procedure.
When an "Adjustment Amount" shall become due from the General Partner
pursuant to this Section 4.2, it shall be paid to the Investor Limited
Partner by paying such amount to the Partnership in satisfaction of the
Investor Limited Partner's obligation to pay the corresponding amount of the
Installment which is next due (and, if necessary, succeeding Installments in
order until the Adjustment Amount is fully paid), and the Investor Limited
Partner shall pay only the remaining amount (if any) of such Installment(s).
If the Adjustment Amount exceeds the amount of the succeeding
Installments or is determined after all Installments have been paid, then the
General Partner shall pay, not later than 30 days following the determination
of the Adjustment Amount, to the Investor Limited Partner an amount equal to
any portion of the Adjustment Amount which cannot be applied to succeeding
Installments. If such amount is not paid to the Investor Limited Partner by
the date required above, then the interest rate accruing thereon shall be
increased to the rate of 12% per annum retroactively to the date the
Adjustment Amount was determined.
The payment made to the Partnership on behalf of the Investor Limited
Partner shall be deemed to be indemnification paid to the Investor Limited
Partner by the General Partner for breach of warranty of the availability of
the full Projected Credit and/or the full depreciation tax deductions, shall
not constitute a Capital Contribution, loan or advance by the General Partner
and shall not be reimbursable or repayable to the General Partner by the
Partnership or the Investor Limited Partner. If the General Partner shall
default in making such payment to the Partnership, the Partnership's remedies
shall be only against the General Partner and the Investor Limited Partner
shall nevertheless be deemed to have paid its entire Installment in full.
4.3. Repurchase Obligation of the General Partner.
Upon the occurrence of any of the Repurchase Events set forth below,
each Limited Partner shall have the right to elect to sell its interest in
the Partnership by sending written notice (the "Election Notice") thereof to
the General Partner at any time (provided that such notice must be sent
within 90 days after receipt by such Limited Partner of notice of the
occurrence of a Repurchase Event from the General Partner (which notice the
General Partner shall be obligated to give promptly to each Limited
Partner). The purchase shall be made by the General Partner within 120 days
after the receipt of the Election Notice. The "Repurchase Events" which
shall create the aforesaid right to be repurchased shall be any of the
following:
1. The failure of the Partnership to achieve Minimum Set Aside and to
continue to maintain occupancy in compliance with Minimum Set Aside
throughout the Compliance Period; or
2. A determination by the Special Limited Partner or the Internal
Revenue Service that the Property is ineligible for 20% or more of the
Projected Credit.
3. The failure of the Partnership to achieve Full Completion by the
earlier of (i) December 31, 2001 (or, if the Internal Revenue Service grants
a formal, written extension of the placed-in-service date deadline for the
Property, then such later date as the Internal Revenue Service shall specify
as the new placed-in-service date deadline), or (ii) any earlier date as of
which a default shall occur under, or demand for payment shall have been made
pursuant to, the Construction Mortgage.
4. The failure of the Partnership to execute and record by December
31, 2001 (or, if the Internal Revenue Service grants a formal, written
extension of the placed-in-service date deadline for the Property, then such
later date as the Internal Revenue Service shall specify as the new
placed-in-service date deadline) a valid extended use agreement as required
pursuant to Section 42 of the Code.
5. The failure of the Partnership to achieve Carryover Allocation
Issuance by December 31, 1999.
The purchase price for any of the purchases described above shall be an
amount in cash equal to the Outstanding Capital of each selling Limited
Partner plus interest at the annual rate of 12%, from the occurrence of the
Repurchase Event through the date the purchase price is paid. If at the time
of such repurchase, the payment of the purchase price plus interest to the
selling Limited Partners constitutes a violation of the Uniform Act, the
General Partner shall (i) contribute sufficient additional Capital to the
Partnership to permit such repurchase without constituting such a violation,
and (ii) shall indemnify and hold harmless each selling Limited Partner
against all loss and damage by reason of such repurchase being in violation
of the Uniform Act.
Upon the purchase of such interest the General Partner shall become a
Substitute Investor Limited Partner to the extent of the Limited Partner
interest acquired by them, and the interest as a Limited Partner of each
selling Limited Partner shall terminate. Upon the occurrence of any event
which requires the General Partner to give notice of the obligation of the
General Partner to purchase the interest of the Limited Partners, as herein
described, the Investor Limited Partner shall have no further obligation to
pay any subsequent Installment of its Capital Contribution unless the
Investor Limited Partner fails to elect, within the time described above, to
have its interest repurchased.
4.4. Repurchase Option of the General Partner.
At any time after the expiration of the Compliance Period, the General
Partner shall have the option to purchase all of the interests of the
Investor Limited Partner and Special Limited Partner in the LLC by sending
written notice (the "Option Notice") thereof to the Special Limited Partner.
The purchase shall be made by the General Partner no later than 90 days after
the receipt of the Option Notice by the Special Limited Partner.
The purchase price for such purchase shall be the fair market value of
the Investor Limited Partner and Special Limited Partner's interests in the
Property (the "Interests"). To determine the fair market value of the
Interests, the General Partner and Special Limited Partner shall have thirty
(30) days to mutually agree on a fair market value of the Interests. If the
General Partner and Special Limited Partner do not so agree within such
thirty (30) days, then they shall mutually select a qualified real estate
appraiser to appraise the fair market value of the Interests. Upon receipt
of the appraisal, if either the General Partner or Special Limited Partner,
in its sole discretion, does not agree that the appraised value to accurately
reflect the fair market value of the Interests, then the General Partner and
Special Limited Partner shall each separately select other qualified
appraisers, both different from each other and from the first appraiser, to
appraise the fair market value of the Interests. In that event, the fair
market value be the average of the three appraised values of the Interests.
Fair market value shall consider restrictions on transfer and applicable use
restrictions on the Property.
Upon the purchase of the interests of the Investor Limited Partner and
the Special Limited Partner, the General Partner shall become a Substitute
Investor Limited Partner to the extent of the Partner(s) interest acquired by
them, and the interest as a Partner of each selling Partner shall terminate.
The indemnification of the Investor Limited Partner and Special Limited
Partner by the General Partner pursuant to Section 6.7 for all events
occurring prior to purchase under this Section 4.4, shall survive such
purchase of the interests of the Investor Limited Partner and the Special
Limited Partner.
4.5. Right of First Refusal of the General Partner.
At any time after the expiration of the Compliance Period, if the
Investor Limited Partner receives from any Person that is not an Affiliate a
bona fide written offer to purchase its Interest in the Partnership, and the
Investor Limited Partner desires to accept such offer, then the Investor
Limited Partner shall provide written notice (the "Sales Notice") to the
General Partner setting forth the terms of the proposed sale (the "Sales
Price and Terms"). The General Partner shall then have the option, for a
period of 45 days from receipt of the Sales Notice, to purchase the Property
at the Sales Price and Terms set forth in the Sales Notice. After the
expiration of such option to purchase the Property or upon delivery of notice
from all Members to the Managing Member of their election not to exercise
such option, the Managing Member shall have a period of 180 days (the "Sales
Period") to sell the Property at the Sales Price and Terms. If a sale of the
Property has not occurred prior to the expiration of the Sales Period, the
Investor Limited Partner shall be required to re-offer the Property for sale
in accordance with the provisions of this Section 4.5.
Upon the purchase of the interests of the Investor Limited Partner and
the Special Limited Partner, the General Partner shall become a Substitute
Investor Limited Partner to the extent of the Partner(s) interest acquired by
them, and the interest as a Partner of each selling Partner shall terminate.
The indemnification of the Investor Limited Partner and Special Limited
Partner by the General Partner pursuant to Section 6.7 for all events
occurring prior to purchase under this Section 4.5, shall survive such
purchase of the interests of the Investor Limited Partner and the Special
Limited Partner.
5. -- Profits, Losses and Distributions
5.1. Profits, Losses and Tax Credits.
5.1.1. Except as otherwise provided in this Article V, for each
fiscal year or portion thereof, all profits, tax-exempt income, gains,
losses, nondeductible expenditures and tax credits incurred and/or accrued by
the Partnership, other than those arising from a Capital Transaction, shall
be allocated 0.01% to the General Partner, and 99.99% to the Limited
Partners.
5.1.2. Except as otherwise provided in this Article V, all
profits and losses arising from a Capital Transaction shall be shared by the
Partners, as of the end of the fiscal year in which such Capital Transaction
occurs, as follows:
As to profits:
--------------
First, an amount of profit equal to the aggregate negative balances (if
any) in the Capital Accounts of all Partners having negative Capital Accounts
shall be allocated to such Partners in proportion to the negative Capital
Account balances until all such Capital Accounts shall have a zero balance;
and
Second, an amount of profits shall be allocated to each of the Partners
until the positive balance in the Capital Account of each Partner equals the
amount of cash which would be distributed to such Partner in accordance with
the provisions of Clauses Fourth, Fifth and Sixth of Section 5.2.B if the
aggregate amount of such Capital Accounts balances were cash available for
distribution.
As to losses:
-------------
First, an amount of losses equal to the aggregate positive balances (if
any) in the Capital Accounts of all Partners having positive balance Capital
Accounts shall be allocated to such Partners in proportion to their positive
Capital Account balances until all such Capital Accounts shall have zero
balances; provided, however, that if the amount of losses so to be allocated
is less than the sum of the positive balances in the Capital Accounts of
those Partners having positive balances in their Capital Accounts, then such
losses shall be allocated to the Partners in such proportions and in such
amounts so that the Capital Account balances of each Partner shall equal, as
nearly as possible, the amount such Partner would receive if an amount equal
to the excess of (a) the sum of all Partners' balances in their Capital
Accounts computed prior to the allocation of losses under this clause First
over (b) the aggregate amount of losses to be allocated to the Partners
pursuant to this clause First were distributed to the Partners in accordance
with the provisions of Clauses Fourth, Fifth and Sixth of Section 5.2.B; and
Second, the balance, if any of such losses, to those Partners and in
those percentage shares set forth in Section 5.1.A.
C. Notwithstanding the foregoing provisions of Sections 5.1.A and
5.1.B, in no event shall any losses be allocated to a Limited Partner if and
to the extent that such allocation would cause, as of the end of the
Partnership taxable year, the negative balance in such Limited Partner's
Capital Account to exceed such Limited Partner's obligation, if any, to
restore deficits in its Capital Account pursuant to Section 5.3.A or deemed
under Treasury Regulation Section 1.704-1(b)(2)(ii)(c) plus such Limited
Partner's share of Partnership Minimum Gain plus such Limited Partner's share
of Partner Non-Recourse Debt Minimum Gain. Any losses which are not
allocated to the Limited Partners by virtue of the application of this
Section 5.1.C shall be allocated to the General Partner. For purposes of
this Section, a Partner's Capital Account shall be treated as reduced by
Qualified Income Offset Items.
D. The terms "profits" and "losses" used in this Agreement shall
mean income and losses, and each item of income, gain, loss, deduction or
credit entering into the computation thereof, as determined in accordance
with the accounting methods followed by the Partnership computed in a manner
consistent with Treasury Regulation Section 1.704-1(b)(2)(iv). Profits and
losses for federal income tax purposes shall be allocated in the same manner
as profits and losses in this Section 5.1 subject to Section 5.4.A.
5.2. Distributions Prior to Dissolution.
5.2.1. Distributions of Cash Flow. Cash Flow for each fiscal
year (or fractional portion thereof) following the Admission Date shall be
applied as follows:
(1) To payment of the Asset Management Fee for such fiscal
year and for any prior years to the extent unpaid.
(2) Seventy percent (70%) of remaining Cash Flow shall be
applied in the following priority:
(a) First, to the payment of outstanding Operating
Deficits Loans;
(b) Second, to the payment of the Incentive Management
Fee; and
(c) Third, to a distribution to the General Partner.
(3) Thirty percent (30%) of remaining Cash Flow shall be
distributed 0.01% to the General Partner (less any distributions made to
them pursuant to clause (2)(c)) and the balance shall be distributed to
the Limited Partners.
Distributions of Cash Flow to the Partners shall be made at such
reasonable intervals during the fiscal year as shall be determined by the
General Partner, and in any event shall be made within 60 days after the
close of each fiscal year.
5.2.2. Distributions of Capital Transaction Proceeds. Prior to
dissolution, and subject to any applicable Lender regulations, if the General
Partner shall determine from time to time that there are cash proceeds
available for distribution from a Capital Transaction, such cash proceeds
shall be applied or distributed, as the case may be, as follows:
First, to the discharge, to the extent required by any lender or
creditor, of debts and obligations of the Partnership (including any accrued
but unpaid Asset Management Fees), but excluding debts and obligations
provided for below in this Section 5.2.B;
Second, to fund reserves for contingent liabilities to the extent deemed
reasonable by the General Partner, the Special Limited Partner, and the
Accountants;
Third, to the payment of outstanding Operating Deficit Loans;
Fourth, to the Investor Limited Partner an amount equal to its
Outstanding Capital;
Fifth, to the General Partner an amount equal to its Outstanding
Capital; and
Sixth, any balance thereof, 50% to the General Partner and 50% to the
Limited Partners.
5.3. Distributions Upon Dissolution.
5.3.1. Upon dissolution and termination, after payment of, or
adequate provision for, the debts and obligations of the Partnership, the
remaining assets of the Partnership (or the proceeds of sales or other
dispositions in liquidation of the Partnership assets, as may be determined
by the remaining or surviving General Partner) shall be distributed to the
Partners in accordance with the positive balances in their Capital Accounts
after taking into account all Capital Account adjustments for the Partnership
taxable year, including adjustments to Capital Accounts pursuant to Sections
5.1.B and 5.3.B. In the event that a General Partner has a negative balance
in its Capital Account following the liquidation of the Partnership or its
interest in the Partnership after taking into account all Capital Account
adjustments for the Partnership taxable year in which the liquidation occurs,
such General Partner shall pay to the Partnership in cash an amount equal to
the negative balance in its Capital Account. Such payment shall be made by
the end of such taxable year (or, if later, within 90 days after the date of
such liquidation) and shall, upon liquidation of the Partnership, be paid to
recourse creditors of the Partnership or distributed to other Partners in
accordance with the positive balances in their Capital Accounts.
5.3.2. With respect to assets distributed in kind to the
Partners in liquidation or otherwise, (i) any unrealized appreciation or
unrealized depreciation in the values of such assets shall be deemed to be
profits and losses realized by the Partnership immediately prior to the
liquidation or other distribution event; and (ii) such profits and losses
shall be allocated to the Partners in accordance with Section 5.1.B 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. For the purposes of this Section 5.3.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
computed in accordance with Treasury Regulation Section 1.704-1(b). This
Section 5.3.B is merely intended to provide a rule for allocating unrealized
gains and losses upon liquidation or other distribution event, and nothing
contained in this Section 5.3.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 appraiser to be
selected by the General Partner with the Consent of the Special Limited
Partner.
5.4. Special Provisions.
Notwithstanding the foregoing provisions in this Article V:
A. For federal income tax purposes, income, gain, loss and
deduction with respect to property which has a variation between its basis
computed in accordance with Treasury Regulation Section 1.704-1(b) and its
basis computed for federal income tax purposes shall be shared among Partners
so as to take account of such variation in a manner consistent with the
principles of Section 704(c) of the Code and Treasury Regulation 1.704-3.
B. Except as otherwise provided in this Article V where profits,
losses or distributions are allocated according to Capital Account balances,
all profits, losses, credits and distributions shared by the Partners in each
class of Partners (e.g., the General Partner class or the Limited Partner
class) shall be shared by each Partner in such class in the percentages set
forth on the Schedule.
C.1. If (i) the Partnership incurs recourse obligations or Partner
Non-Recourse Debt to the General Partner or its Related Persons (including
without limitation Operating Deficit Loans) or (ii) the Partnership incurs
losses from extraordinary events which are not recovered from insurance or
otherwise (collectively "Recourse Obligations") in respect of any Partnership
taxable year, then the calculation and allocation of profits and losses shall
be adjusted as follows: first, an amount of deductions (consisting of
operating expenses but not cost recovery deductions) attributable to the
Recourse Obligations shall be allocated to the General Partner; and second,
the balance of such deductions shall be allocated as provided in Section
5.1.A.
C.2. If the Partnership makes any payment with respect to an
obligation with respect to which an allocation of deductions was made under
Section 5.4.C.1, then the calculation and allocation of profit and losses in
respect of the Partnership taxable year of such payment shall be adjusted as
follows: first, an allocation of gross income shall be allocated to the
Partner or Partners to whom the deductions were allocated under Section
5.4.C.1 in an amount equal to the lesser of (i) the amount of such deductions
minus all previous allocations with respect to such deductions under this
Section 5.4.C.2 or (ii) the amount of such payment; and second, the balance
of such gross income shall be allocated as provided in Section 5.1.A.
D. If there is a net decrease in Partner Non-Recourse Debt
Minimum Gain during a Partnership taxable year, then each Partner with a
share of the minimum gain attributable to such debt at the beginning of such
year will be allocated items of income and gain (including gross income if
necessary) for such year (and, if necessary, subsequent years) in proportion
to, and to the extent of, an amount equal to such Partner's share of the net
decrease in Partner Non-Recourse Debt Minimum Gain during the year. A
Partner is not subject to this Partner Non-Recourse Debt Minimum Gain
chargeback to the extent that any of the exceptions provided in Treasury
Regulation Section 1.704-2(i)(4) applied consistently with Treasury
Regulation Section 1.704-2(f)(2)-(5) apply. Such allocations shall be made
in a manner consistent with the requirements of Treasury Regulation Section
1.704-2(i)(4) under Section 704 of the Code.
E. If the Partnership shall receive any purchase money
indebtedness in partial payment of the purchase price of the Property and
such indebtedness is distributed to the Partners pursuant to the provisions
of Section 5.2.B or Section 5.3, the distributions of the cash portion of
such purchase price and the principal amount of such purchase money
indebtedness hereunder shall be allocated among the Partners in the following
manner. On the basis of the sum of the principal amount of the purchase
money indebtedness and cash payments received on the sale (net of amounts
required to pay Partnership obligations and fund reasonable reserves), there
shall be calculated the percentage of the total net proceeds distributable to
each class of Partners based on Section 5.2.B or under Section 5.3, as
applicable, treating cash payments and purchase money indebtedness principal
fungibly for this purpose, and the respective classes shall receive such
respective percentages of the net cash purchase price and purchase money
principal. Payments on such purchase money indebtedness retained by the
Partnership shall be distributed in accordance with the respective portions
of principal allocated to the respective classes of Partner in accordance
with the preceding sentence, and if any such purchase money indebtedness
shall be sold, the sale proceeds shall be allocated in the same proportion.
F. If there is a net decrease in Partnership Minimum Gain during
a Partnership taxable year, each Partner will be allocated items of income
and gain (including gross income if necessary) for such year (and, if
necessary, subsequent years) in the proportion to, and to the extent of, an
amount equal to such Partner's share of the net decrease in Partnership
Minimum Gain during the year. A Partner is not subject to this Partnership
Minimum Gain chargeback to the extent that any of the exceptions provided in
Treasury Regulation Section 1.704-2(f)(2)-(5) apply. Such allocations shall
be made in a manner consistent with the requirements of Treasury Regulation
Section 1.704-2(f) under Section 704 of the Code.
G. If a Limited Partner unexpectedly receives (1) an allocation
of loss or deduction or expenditures described in Section 705(a)(2)(B) of the
Code made (a) pursuant to Section 704(e)(2) of the Code to a donee of an
interest in the Partnership, (b) pursuant to Section 706(d) of the Code as
the result of a change in any Partner's interest in the Partnership, or (c)
pursuant to Regulation Section 1.751-1(b)(2)(ii) as a result of a
distribution by the Partnership of unrealized receivables or inventory items
or (2) a distribution, and such allocation and/or distribution would cause
the negative balance in such Partner's Capital Account to exceed such
Partner's obligation, if any, to restore deficits in its Capital Account
pursuant to Section 5.3.A or deemed under Treasury Regulation Section
1.704-1(b)(2)(ii)(c) plus its share of Partner Non-Recourse Debt Minimum Gain
plus its share of Partnership Minimum Gain, then such Partner shall be
allocated items of income and gain (including gross income if necessary) in
an amount and manner sufficient to eliminate such negative balance as quickly
as possible. For purposes of this Section, a Partner's Capital Account shall
be treated as reduced by Qualified Income Offset Items.
H. Notwithstanding anything to the contrary herein, it is the
intention of the Partnership to conform to the requirements of any Treasury
regulations issued with respect to the allocation of Partnership items, in a
manner maximizing the benefits to the Limited Partners, particularly with
regard to any special provisions with respect to nonrecourse indebtedness.
The General Partner may, with the Consent of the Special Limited Partner,
amend Article V to comply with any such regulations.
I. In applying the provisions of Article V with respect to
distributions and allocations, the following ordering of priorities shall
apply:
(1) Capital Accounts shall be deemed to be reduced by
Qualified Income Offset Items.
(2) Capital Accounts shall be reduced by distributions of
Cash Flow under Section 5.2.A.
(3) Capital Accounts shall be reduced by distributions
from Capital Transactions under Section 5.2.B.
(4) Capital Accounts shall be increased by any Minimum
Gain chargeback under Section 5.4.D or 5.4.F.
(5) Capital Accounts shall be increased by any Qualified
Income Offset under Section 5.4.G.
(6) Capital Accounts shall be increased by allocations
of profits under Section 5.1.A.
(7) Capital Accounts shall be reduced by allocations of
losses under Section 5.1.A.
(8) Capital Accounts shall be reduced by allocations of
losses under Section 5.1.B.
(9) Capital Accounts shall be increased by allocations
of profits under Section 5.1.B.
K. To the maximum extent permitted under the Code, allocations of
profits and losses shall be modified so that the Partners' Capital Accounts
reflect the amount they would have reflected if adjustments required by
Sections 5.4.D, 5.4.F and 5.4.G had not occurred.
6. -- General Partner Rights, Powers and Duties
6.1. Restrictions on Authority.
Notwithstanding any other provisions of this Agreement, the General
Partner shall have no authority (a) to perform any act in violation of (i)
any applicable law or regulations, (ii) any agreement between the Partnership
and the Lenders or (iii) the Property Documents, or (b) to do any act
required to be approved or ratified by the Limited Partners under the Uniform
Act. The General Partner shall not have any authority to do any of the
following specific acts without the Consent of the Special Limited Partner:
A. following completion of construction of the Property, to
construct any new capital improvements, or to replace any existing capital
improvements, which construction or replacement would substantially alter the
character or use of the Property, or
B. to acquire any real property in addition to the Property,
other than fee title or easements to de minimis parcels of land for the
purpose of correcting record title to the Property, or
C. except to the extent permitted under Section 6.13, if any, to
be personally liable on, or to guarantee, or to permit any Related Person of
a Partner of the Partnership to be personally liable on, to guarantee or
otherwise bear the Economic Risk of Loss with respect to, the Mortgages, or
D. except as otherwise provided in Section 6.13, to refinance,
sell, convey or mortgage the Property or to materially amend or modify any
Mortgage or Property Document, or
E. to permit the occupancy of dwelling units in the Property in
violation of Minimum Set Aside or any other requirement which must be
complied with to enable the Property to generate the Projected Credit, or
F. to lease (i) pursuant to one lease (or pursuant to a series of
leases which are negotiated as part of one transaction) more than 50% of the
Property as an entity or (ii) the Property in such a manner as to cause the
Property or any part thereof to be treated as tax-exempt use property within
the meaning of Section 168(h) of the Code, or
G. to borrow on the general credit of the Partnership, except as
specifically permitted hereunder as to Operating Deficit Loans and pursuant
to Section 6.13, or
H. to cause the Partnership to operate any business on the
Property other than the business of renting dwelling units, or to rent any
portion of the Property other than for occupancy as a dwelling unit, or
I. to cause the Partnership to take any action referred to in
clause (ii) of the definition of "Event of Bankruptcy" in Article XI.
6.2. Personal Services.
No Affiliate shall receive any compensation from the Partnership for
services rendered to the Partnership in connection with the construction or
operation of the Property or any other aspect of the business of the
Partnership unless such compensation is provided for in Article VI or, if for
services not compensated for pursuant to Article VI, such compensation is
reasonable, does not exceed fees which would be payable on an arms-length
basis to a non-Affiliate in the business of supplying such services, and
complies with Lender regulations. Nothing herein shall prevent the General
Partner from engaging other Persons to perform services for the General
Partner in connection with the Partnership or the Property, providing such
Persons are paid from funds of the General Partner. Any Partner may engage
independently or with others in other business ventures of every nature and
description including, without limitation, the ownership, operation,
management, syndication and development of real estate, including real estate
which may be in competition with the Property and neither the Partnership nor
any Partner shall have any rights by virtue of this Agreement in and to such
independent ventures or the income or profits derived therefrom.
6.3. Business Management and Control; Tax Matters Partner.
6.3.1. The General Partner shall have the exclusive right to
manage the business of the Partnership and, subject to all provisions of this
Agreement including without limitation Articles III and VI, shall have full
power, authority and discretion to cause the Partnership to do any of the
acts described in Section 2.4 hereof. No Limited Partner (except one who may
also be a General Partner, and then only in its capacity as General Partner)
shall participate in or have control over the Partnership business, except as
provided in Article VIII hereof or as required by law. The Partners hereby
consent to the exercise by the General Partner of the powers conferred on the
General Partner by this Agreement. No Limited Partner (except one who may
also be a General Partner, and then only in its capacity as a General
Partner) shall have any authority or right to act for or to bind the
Partnership.
6.3.2. All Partners hereby agree that, as long as he shall be a
General Partner, James F. Levy shall be the "Tax Matters Partner." The Tax
Matters Partner shall employ experienced tax counsel to represent the
Partnership in connection with any audit or investigation of the Partnership
by the Internal Revenue Service, and in connection with all subsequent
administrative and judicial proceedings arising out of such audit, and the
fees of counsel shall be a Partnership expense. The Tax Matters Partner
shall keep the Partners informed of all administrative and judicial
proceedings, as required by Section 6223(g) of the Code, and shall furnish to
each Partner a copy of each notice or other communication received by the Tax
Matters Partner from the Internal Revenue Service. The Tax Matters Partner
shall have no authority, without the Consent of the Special Limited Partner,
to (i) enter into a settlement agreement with the Internal Revenue Service
which purports to bind Partners other than the Tax Matters Partner, (ii) file
a petition as contemplated in Section 6226(a) or 6228 of the Code, (iii)
intervene in any action as contemplated in Section 6226(b) of the Code, (iv)
file any request contemplated in Section 6227(b) of the Code, (v) enter into
an agreement extending the period of limitations as contemplated in Section
6229(b)(1)(B) of the Code or (vi) to file any tax related litigation in a
court other than the United States Tax Court. In the event that the General
Partner designated as the Tax Matters Partner shall Retire form the
Partnership, the partnership shall designate a successor Tax Matters Partners
in accordance with Treasury Regulation Section 301.6231(a)(7)-1 or any
successor Regulation. The partnership shall notify the Internal Revenue
Service of the designation of a successor Tax Matters Partners for such year
as well as all prior years that the Retired General Partner was serving as
Tax Matters Partner.
6.4. Authority of General Partner.
6.4.1. Every contract, deed, mortgage, lease and other
instrument executed by a General Partner shall be conclusive evidence in
favor of every Person relying thereon or claiming thereunder that, at the
time of the delivery thereof (except as shown in certificates or other
instruments duly filed with the Filing Office), (a) the Partnership was in
existence, (b) this Agreement had not been terminated or cancelled or amended
in any manner so as to restrict such authority, and (c) such General Partner
was duly authorized to execute such instrument. Except as otherwise provided
in a certificate or other instrument filed in the Filing Office with respect
to the Partnership, any Person dealing with the Partnership or the General
Partner may always rely on a certificate signed by the General Partner
hereunder:
(1) as to who are the General Partner or Limited
Partners hereunder,
(2) as to the existence or nonexistence of any fact or
facts which constitute conditions precedent to acts by the General
Partner or are in any other manner germane to the affairs of the
Partnership,
(3) as to who is authorized to execute and deliver any
instrument or document of the Partnership,
(4) as to the authenticity of any copy of this Agreement
and amendments thereto, or
(5) as to any act or failure to act by the Partnership
or as to any other matter whatsoever involving the Partnership or
any Partner.
6.4.2. If there shall be more than one General Partner serving
hereunder, each General Partner (with the Consent of the Special Limited
Partner and subject to the provisions of Section 8.6) may from time to time,
by an instrument in writing or by a provision in this Agreement, delegate its
powers and authority hereunder to another General Partner or General Partners
to the extent stated therein. Such writing shall fully authorize such other
General Partner(s) to act alone without the requirement of any act or
signature of the delegating General Partner and to take any action of any
type and to do anything and everything which a General Partner may be
authorized to take or do hereunder, and the delegating General Partner
thereafter shall have no right, power or authority to act for the Partnership
with respect to the powers or authority so delegated. No such delegation
shall relieve the delegating General Partner of any of its duties or
obligations under this Agreement or otherwise with respect to the
Partnership. Pursuant to the foregoing, each of the other General Partners
hereby delegates to James F. Levy all of the rights, powers and authority
which each such General Partner may possess with respect to the Partnership.
6.5. Duties and Obligations.
6.5.1. The General Partner shall promptly take all material
actions which may be necessary or appropriate for the completion of
construction of the Property and the proper maintenance and operation of the
Property in accordance with the provisions of this Agreement, the Property
Documents, applicable laws and regulations, and in compliance with the
representations and warranties in Section 6.6, and shall conduct the affairs
of the Partnership in compliance with Mortgage requirements and in a manner
consistent with the fiduciary obligations of the General Partner under law.
The General Partner shall devote to the Partnership such time as may be
necessary for the proper performance of its duties.
6.5.2. The General Partner shall (a) cause the Property to be
insured against fire and other risks covered by such insurance in the maximum
amount required by any Lender, and/or the Credit Agency, the Special Limited
Partner or by good management practices, and in any event in an amount equal
to the full replacement value of the Property (other than the land), (b)
obtain and keep in force adequate business or rental interruption and
worker's compensation insurance satisfactory to each Lender, and to the
Credit Agency and the Special Limited Partner, (c) obtain and keep in force
public liability insurance for the benefit of the Partnership and its
Partners in amounts from time to time acceptable to the Credit Agency, and
the Lenders and the Special Limited Partner and in any event providing
coverage at least equivalent to a combined single limit bodily injury and
property damage liability insurance policy in the amount of not less than
$6,000,000 (of which up to $5,000,000 may be provided under an "umbrella"
policy). All of the foregoing insurance policies shall be written by
insurance companies rated A or better by Best's, include the Investor and
Special Limited Partners as named insureds, and include a provision requiring
the insurance company to notify the Special Limited Partner in writing 30
days prior to the cancellation of any such policy. The General Partner shall
promptly provide the Special Limited Partner with copies of such insurance
policies upon request from time to time. In the event of any casualty and
provided that the insurance proceeds shall be made available therefor and
such restoration is permitted by the Lenders and receives the Consent of the
Special Limited Partner, the General Partner shall repair any damage to the
Property which was caused by such event, so as to restore the Property (as
nearly as possible) to the condition and market value thereof immediately
prior to such occurrence.
6.5.3. The General Partner shall obtain a title guaranty to the
Property in favor of the Partnership in an amount sufficient to cover the
outstanding amount of all Mortgages plus the Capital Contributions of all
Partners (which amount is hereby agreed to be $1,910,162), which title
guaranty shall be subject to no exceptions other than those referred to in
Section 6.6(ix).
6.5.4. The General Partner shall take such actions as are
necessary to make the Partnership eligible for the full amount of the
available Low Income Housing Credit (including without limitation the renting
of dwelling units at rents and to tenants as required under Section 42 of the
Code). The General Partner shall operate the Property such that the right of
each tenant to occupancy of a dwelling unit shall be pursuant to an agreement
and for a charge which shall be separate from the agreements and charges for
the right of such tenant to receive any services or any other benefits, and
no tenant shall be required to receive or pay for any of such other benefits
as a condition of occupancy.
6.5.5. The General Partner shall elect to commence the Credit
Period for each building comprising the Property at the time such building is
placed in service, except that, upon the written request of the Special
Limited Partner, the General Partner shall elect, for any building not 100%
occupied by Qualified Tenants by the end of the calendar year in which such
building is placed in service, to defer commencement of the Credit Period for
such building to January 1 of the next year.
6.5.6. The General Partner shall (i) not store (except in
compliance with applicable Hazardous Waste Laws) or dispose of any Hazardous
Material at the Property, or at or on any other Facility or Vessel owned,
occupied, or operated either by any General Partner or any Person for whose
conduct any General Partner is or was responsible; (ii) not transport or
arrange for the transport of any Hazardous Material (except in compliance
with applicable Hazardous Waste Laws); (iii) provide the Special Limited
Partner with written notice (x) upon any General Partner's obtaining
knowledge of any potential or known release, or threat of release, of any
Hazardous Material at or from the Property or any other Facility or Vessel
owned, occupied, or operated by any General Partner or any Person for whose
conduct any General Partner is or was responsible or whose liability may
result in a lien on the Property; (y) upon any General Partner's receipt of
any notice to such effect from any Federal, state, or other governmental
authority; and (z) upon any General Partner's obtaining knowledge of any
incurrence of any expense or loss by any such governmental authority in
connection with the assessment, containment, or removal of any Hazardous
Material for which expense or loss any General Partner may be liable or for
which expense or loss a lien may be imposed on the Property; and (iv)
indemnify and hold harmless the Partnership and the other Partners against
any losses, judgments, liabilities, expenses and amounts paid in settlement
of any claims sustained by any of said indemnitees (including reasonable
attorneys' fees, fines, damages and similar payments) in connection with the
violation by the General Partner of any of the foregoing covenants or with
the presence of any Hazardous Material at the Property.
6.5.7. If requested to do so by the Special Limited Partner at
any time after the expiration of the fourteenth year of the compliance period
(as defined in Section 42(i)(1) of the Code) or any later date to which the
Partnership may have agreed with the Credit Agency to defer its opportunity
to make such submission, the General Partner shall submit a written request
to the Credit Agency to find a Person to acquire the Partnership's interest
in the Property and/or take such other action permitted or required by the
Code as the Special Limited Partner may reasonably request to effect a sale
of the Property or to terminate the extended use commitment of Section
42(h)(6)(B) of the Code; provided that the proceeds to be received by the
Partnership with respect to any proposed sale or refinancing must be
sufficient to pay all outstanding amounts pursuant to Clauses First through
Third of Section 5.2.B.
6.5.8. Each obligation of the General Partner hereunder shall be
the joint and several obligation of each General Partner, if there is more
than one. In the event of a default by the General Partner in the
performance of any of its obligations under this Agreement, then the amount
in default shall be offset against all payments from the Partnership to the
General Partner, including repayments of loans, returns of Capital
Contributions and payments of fees. Nothing in Sections 6.7 or 6.8 shall
have the effect of relieving the General Partner of any liability for any of
its obligations set forth in this Agreement.
6.6. Representations and Warranties.
The General Partner hereby represents and warrants to each Limited
Partner that as a condition to the payment of each Installment as provided in
Section 4.1.B, the following are true and will be true on the due date for
payment to the Partnership of each of such Installments, and that they will
use their best efforts to maintain the truth of such representations and
warranties which are then applicable to the Partnership at all other times
(except as otherwise provided):
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 Partners and to
maintain the limited liability of the Limited Partners in the manner provided
in Section 3.5.
B. Construction of the Property will be or has been completed in
substantial conformity with the Property Documents.
C. All Development Costs will be paid or provided for by, or for
the account of, the Partnership utilizing only those sources of funds
referred to in Section 6.9.
D. To the best of the knowledge and belief of the General
Partner, no event, occurrence or proceeding is pending or threatened which
would (a) materially adversely affect the Partnership or its properties, (b)
materially adversely affect the ability of the General Partner or any
Affiliate to perform their respective obligations hereunder or under any
other agreement with respect to the Partnership or the Property, or (c)
prevent the completion of construction of the Property in substantial
conformity with the Property Documents. This subparagraph shall be deemed to
include, but not be limited to, the following: (x) legal actions or
proceedings before any court, commission, administrative body or other
governmental authority having jurisdiction over the zoning applicable to the
Property, (y) labor disputes and (z) acts of any governmental authority.
E. No material default (or event which, with the giving of notice
or the passage of time or both, would constitute a material default) has
occurred and is continuing on the part of the General Partner under this
Agreement or on the part of the General Partner or the Partnership under any
of the Property Documents or any other agreement affecting the Property, the
same are in full force and effect, and no default by the Partnership, the
General Partner or an Affiliate under any of the Property Documents has been
asserted by any party thereto.
F. The Property is being operated in compliance with the
requirements of this Agreement and the Property Documents, including without
limitation the requirements of Section 6.5.C hereof.
G. Except to the extent permitted under Section 6.13.B, if any,
no Partner or Related Person of a Partner of the Partnership has any personal
liability or otherwise bears the Economic Risk of Loss with respect to the
payment of principal or interest with respect to the debt evidenced by any of
the Mortgages.
H. There is no material violation by the Partnership or the
General Partner of any zoning, environmental or similar regulation applicable
to the Property; all necessary building and other applicable permits have
been obtained to permit the construction of the Property; all permits
necessary to operate the Property for its intended use have been obtained;
and the Partnership has substantially complied with all applicable municipal
and other laws, ordinances and regulations relating to such construction and
use of the Property.
I. The Partnership owns the fee simple interest in the Property,
subject to no material liens, charges or encumbrances other than the
Permitted Loans and those which (a) are both permitted by the Property
Documents and agreed to in writing by the Special Limited Partner and further
documented in the title guaranty, and (b) do not materially interfere with
the use of the Property or any part thereof for its intended purpose or have
a material adverse effect on the value of the Property.
J. The execution and delivery of all instruments and the
performance of all acts heretofore or hereafter made or taken or to be made
or taken pertaining to the Partnership or the Property by each General
Partner and each Affiliate of a General Partner which is a partnership, a
limited liability company or a corporation have been or will be duly
authorized by all necessary action by such Entity and the consummation of any
such transactions with or on behalf of the Partnership will not constitute a
breach or violation of, or a default under, the partnership agreement,
operating agreement, charter, by-laws or comparable organizational documents
of said Entity or any agreement by which such Entity or any of its properties
is bound, nor constitute a violation of any law, administrative regulation or
court decree.
K. No Event of Bankruptcy has occurred with respect to any
General Partner or any Affiliate of a General Partner.
L. None of those Persons named in Section 3.1 hereof as General
Partner has Retired other than as permitted in Section 8.1.
M. No Lender approval is required (or, if required, such approval
has been obtained) with respect to the execution or delivery of this
Agreement or the admission to the Partnership of the Limited Partners.
N. No Person or Entity holds any equity interest in the Property
other than the Partnership.
O. The Partnership has the sole responsibility to pay all
maintenance and operating costs, including all taxes levied and all insurance
costs, attributable to the Property.
P. 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 Property is destroyed or condemned or there is a diminution in
the value of the Property.
Q. 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 Property.
R. The Property does not receive assistance under the HUD Section
8 Moderate Rehabilitation Program other than under the Stewart B. McKinney
Homeless Assistance Act of 1988.
6.7. Liability.
The General Partner shall indemnify and hold harmless the Partnership
and the other Partners against any losses, judgments, liabilities, expenses
and amounts paid in settlement of any claims sustained by any of said
indemnitees (including reasonable attorneys' fees, fines, damages and similar
payments) in connection with the Partnership, provided, however, that no
General Partner or Affiliate shall be liable, responsible or accountable for
damages or otherwise to the Partnership or any Partner for any act performed
under this Agreement or for any failure to act, on its own part or that of
any of its Affiliates, if such course of conduct did not constitute
misconduct, negligence, material misrepresentation or material breach of
covenant, warranty or fiduciary duty to the Limited Partners and such General
Partner or Affiliate reasonably believed in good faith that such course of
conduct was in the best interest of the Partnership and the Partners.
6.8. Indemnification.
The General Partner and its Affiliates shall be indemnified and held
harmless by the Partnership against any losses, judgments, liabilities,
expenses and amounts paid in settlement of any claims sustained by them
(including reasonable attorneys fees, fines, damages and similar payments) in
connection with the Partnership, provided that the same were not the result
of a course of conduct constituting misconduct, negligence, material
misrepresentation or material breach of covenant, warranty or fiduciary duty.
Notwithstanding the above, a General Partner, its Affiliates and any
person acting as a broker-dealer in connection with the offering and sale of
interests in the Partnership shall not be indemnified by the Partnership for
any losses, liabilities or expenses arising from or out of an alleged
violation of Federal or state securities laws unless (1) there has been a
successful adjudication on the merits of each count involving alleged
securities law violations as to the particular indemnitee; or (2) such claims
have been dismissed with prejudice on the merits by a court of competent
jurisdiction as to the particular indemnitee; or (3) a court of competent
jurisdiction approves a settlement of the claims against a particular
indemnitee.
In any claim for indemnification for Federal or state securities law
violations, the party seeking indemnification shall place before the court
the position of the Securities and Exchange Commission with respect to the
issue of indemnification for securities law violations.
The Partnership shall not incur the cost of the portion of any
insurance, other than public liability insurance, which insures any party
against any liability the indemnification of which is herein prohibited.
Any indemnity under this Section 6.8 shall be provided out of and to the
extent of Partnership assets only, and no Limited Partner shall have any
personal liability on account thereof.
6.9. Development Completion Obligation.
6.9.1. The General Partner guarantees to the Partnership and the
other Partners to cause the Property to be acquired and to complete
development of the Property for a fixed turnkey price of $1,910,162 (the
"Guaranteed Development Cost"), which obligation (the "Development Completion
Obligation") shall include without limitation (i) acquisition of fee simple
title to the Property subject only to those liens, restrictions and
encumbrances referred to in Section 6.6(I), (ii) completion of construction
of the Property substantially in accordance with the Property Documents and
remedy of any defects in the construction of the Property or variances in
construction from the Plans and Specifications which in each case are or
should have been discovered within two years after Full Completion (provided
that the guarantee for the second year after Full Completion shall cover only
material items), (iii) achievement of Stabilized Occupancy and payment of all
Operating Expenses and Debt Service in excess of Operating Revenues
attributable to the period through the achievement of Stabilized Occupancy,
(iv) payment of all costs and funding of all reserves and escrows necessary
to close the Permanent Mortgage, (v) repayment in full of the Construction
Mortgage and (vi) payment in full of the Development Services Fee
(collectively "Development Costs").
6.9.2. All funds (collectively "Development Funds") constituting
the proceeds of Permitted Loans and the Capital Contributions paid by or on
behalf of the Investor Limited Partner shall be applied to pay when due all
payments and expenses required to carry out the Development Completion
Obligation. If Development Costs due at any time exceed available
Development Funds, then such excess Development Costs shall be paid from
funds which the General Partner shall be required to furnish promptly to meet
such Development Costs, and such funds shall be returned to the General
Partner from any Development Funds which thereafter become available. If
Development Funds are not sufficient to return all funds to the General
Partner, then the shortfall shall be treated as follows: (a) To the extent
that total Development Costs exceed the Guaranteed Development Cost, such
excess shall be borne and absorbed solely by the General Partner as part of
its Development Completion Obligation; and (b) to the extent that Development
Funds are less than the Guaranteed Development Cost, then the shortfall shall
constitute a Capital Contribution to the Partnership by the General Partner.
6.10. Operating Expense Obligation.
If the Partnership requires any funds for Operating Expenses (reduced by
any deferral of payment of the Management Fee required pursuant to Section
6.12.C) or Debt Service in excess of Operating Revenues, then such excess
expenses ("Operating Deficits") shall be paid from advances ("Operating
Deficit Loans") which the General Partner shall be required to make to the
Partnership, provided that (i) Operating Deficit Loans need be made only to
pay Operating Deficits attributable to the period commencing on the
occurrence of Stabilized Occupancy and ending on the third anniversary of
such occurrence, and (ii) the General Partner shall not be obligated to make
an Operating Deficit Loan to the extent that such Loan would cause the
aggregate principal amount of Operating Deficit Loans then outstanding to
exceed $100,000. (The General Partner may, however, make such loans at any
time and in any amount.) Operating Deficit Loans shall not bear interest and
shall be repayable only to the extent provided in Article V.
6.11. Development Services.
The Partnership shall engage the General Partner to perform, or to
engage and supervise others to perform, all activities necessary to complete
construction of the Property in accordance with the Plans and Specifications,
and shall pay the Development Services Fee of $180,000 to the General Partner
in return for such services. The Development Services Fee shall be earned as
development of the Property progresses and shall be fully earned no later
than Full Completion, and shall be paid in the amount of $40,000 upon
Carryover Allocation Issuance, $54,000 at the time the Second Installment
shall become payable pursuant to Section 4.1, and $86,000 at the time the
Fourth Installment shall become payable pursuant to Section 4.1. In
addition, the General Partner shall be entitled to receive an incentive
development fee, in the amount of development cost savings, if any, up to a
maximum amount of the difference between $180,000 and the maximum development
fee allowable by the IRS and/or Credit Agency for inclusion in eligible
basis. (Any development cost savings in excess of that difference shall be
reinvested in the development at the direction of the General Partner, with
the consent of the Special Limited Partner.) Any incentive development fee
shall be paid at the time of the Fourth Installment.
6.12. Property Management.
6.12.1. The General Partner shall have overall responsibility for
managing the Property and obtaining a Management Agent. The General Partner
shall cause the Partnership, prior to commencement of operation of the
Property, to enter into a Management Agreement with Heartland Management
Company, of Des Moines, Iowa to serve as the Management Agent. If at any
time after Full Completion:
(1) the Property shall be subject to a substantial building
code violation which shall not have been cured within 90 days after notice
from the applicable governmental agency or department or the Special Limited
Partner or unless such violation(s) is (are) being validly contested by the
General Partner by proceedings which operate to prevent any fines or criminal
penalties from being levied against the Partnership;
(2) Operating Revenues in respect of any period of six
consecutive calendar months commencing after July 1, 2001 shall be
insufficient to permit the Partnership to pay when due on a current basis all
Operating Expenses and Debt Service due and owing in respect of such six
month period, and the General Partner has not made an Operating Deficit Loan
to the Property during such six-month period to cover such Operating Deficit;
or
(3) the Management Agent or its agents or employees have
demonstrated incompetence or malfeasance (a "breach") in the management of
the Property, and such breach has not been cured within 30 days after notice
thereof has been given to the Management Agent;
the General Partner shall forthwith give notice of such event to the Limited
Partners and thereafter the General Partner shall forthwith cause the
Partnership to terminate the Management Agreement with the Management Agent,
unless the Consent of the Special Limited Partner is obtained to the
retention of the Management Agent as the manager of the Property. If the
Management Agreement is terminated as aforesaid or for any other reason, the
General Partner shall immediately proceed to select a new Management Agent
for the Property which selection shall be subject to the Consent of the
Special Limited Partner.
6.12.2. The Partnership shall not enter into any Management
Agreement which does not provide for deferral of the Management Fee under the
circumstances set forth in Section 6.12.C and termination by the Partnership
(a) under the circumstances set forth in Section 6.12.A, (b) in the event of
other malfeasance or nonperformance on the part of the Management Agent, or
(c) upon the Retirement from the Partnership in violation of Section 8.1 of
any General Partner as to whom the Management Agent is an Affiliate. The
General Partner shall have the duty to manage the Property during any period
when there is no Management Agent, and shall be entitled to the Management
Fee with respect to any period during which they so manage, and must comply
with the provisions of this Agreement which would be applicable to the
Management Agent.
6.12.3. The Management Agent shall receive from the Partnership
the Management Fee provided for in the Management Agreement from time to time
in accordance with a reasonable and competitive fee arrangement, provided
that the Management Fee payable to any Management Agent shall not exceed 6%
of Operating Revenues. Furthermore, unless the General Partner funds any
Operating Deficit pursuant to Section 6.10 hereof, any Management Agent which
is an Affiliate of a General Partner shall be obligated to defer payment of
its Management Fee to the extent necessary for any year so that the
Partnership will not incur an Operating Deficit for such year, and the
deferred amount shall then be payable in any future year in which such
payment, together with payment of all other Operating Expenses and Debt
Service for such future year, will not result in an Operating Deficit for
such future year.
6.12.4. The Partnership shall pay to the General Partner for its
services in supervising and monitoring the performance of the Management
Agent pursuant to the Management Agreement an annual Incentive Management Fee
(which Fee shall be treated as a Partnership expense). The Incentive
Management Fee for each fiscal year shall be the amount available for payment
thereof from Cash Flow pursuant to Section 5.2.A(2) up to a maximum which
will not cause the total of the Management Fee plus the Incentive Management
Fee for such year to exceed 10% of Operating Revenue for such year.
6.12.5. Intentionally Omitted.
6.12.6. The Partnership shall pay to Heartland Special Limited,
Inc. the Asset Management Fee for monitoring the affairs of the Partnership
and the Property and consulting with the Special Limited Partner with respect
to Consents which may be requested from it. The Asset Management Fee shall
be in the annual amount of $2,400, commencing on the earlier of (i) the first
day of the month of the occurrence of Stabilized Occupancy, or (ii) the first
day of the month containing the first anniversary of the date on which all
dwelling units in the Property have been placed in service. (If the Asset
Management Fee commences in a month other than January, then the Asset
Management Fee for that first year shall be pro rated.) The Asset Management
Fee shall be paid for each fiscal year to the extent funds are available as
provided in Section 5.2.A; to the extent the Asset Management Fee for any
fiscal year is not paid in full, the shortfall shall accrue and be payable to
the extent provided in Sections 5.2.A and 5.2.B.
6.13. Borrowings.
6.13.1. All Partnership borrowings shall be subject to the terms
of this Agreement, including the restrictions set forth in Section 6.1. To
the extent borrowings are permitted, such borrowings may be made from any
source, including Partners and Affiliates, except as otherwise provided in
this Agreement. If any Partner or Affiliate shall lend any monies to the
Partnership, the amount of any such loan shall not be an increase of its
Capital Contribution nor affect in any way its share of the profits, losses
or distributions of the Partnership, and, if such loan is an Operating
Deficit Loan, shall be unsecured. Any loans which are made, other than
Operating Deficit Loans, shall bear interest and be on such other terms no
less favorable to the Partnership than comparable loans from non-Affiliates.
6.13.2. Subject to the provisions of this Agreement, the
Partnership may borrow pursuant to the Permitted Loans such amounts as may be
required for the acquisition, development, and construction of the Property
and to meet the expenses of operating the Property. Any other borrowings
(excluding (a) normal trade payables outstanding in the ordinary course of
business and (b) borrowings to meet Partnership expenditures to remedy
emergency circumstances) which are not contemplated by this Agreement and
which are in excess of $1,000 must receive the Consent of the Special Limited
Partner. All Mortgages shall provide that no Partner or Related Person of a
Partner of the Partnership shall bear the Economic Risk of Loss with respect
to all or any part of principal or interest due with respect to the debt
evidenced by such Mortgage. The General Partner is specifically authorized,
except as otherwise limited in this Agreement, to execute such documents as
they deem necessary in connection with the acquisition, development and
financing of the Property, including without limiting the generality hereof,
the Mortgages and other documents required by the Lenders in connection with
the Mortgages or the Project documents.
6.13.3. Each General Partner shall be bound by the terms of the
Property Documents and any other documents required in connection therewith,
but in no event shall any Partner or Related Person be personally liable for
the debt evidenced by any Mortgage except to the extent permitted under
Section 6.13.A, if any. Any incoming General Partner shall as a condition of
receiving any interest in the Partnership property agree to be bound by the
Property Documents and any other documents required by the Lenders in
connection therewith to the same extent and on the same terms as the other
General Partner(s).
6.13.4. The General Partner may amend, modify or refinance a
Mortgage (including any required transfer or conveyance of Partnership assets
for security or mortgage purposes), and sell, lease, exchange or otherwise
transfer or convey all or any substantial portion of the assets of the
Partnership; provided, however, that the terms of any refinancing or material
amendment or modification of a Mortgage or any such sale, exchange or other
transfer or conveyance must receive the Consent of the Special Limited
Partner before such transaction shall be binding on the Partnership.
6.14. Replacement Reserve.
The General Partner shall cause the Partnership to establish the
Replacement Reserve which shall be funded each year commencing on Permanent
Mortgage Closing from Operating Revenue at the rate of $4,800 per year.
Replacement Reserve Funds shall be maintained in an account under the control
of the General Partner, with the Consent of the Special Limited Partner, and
shall be prudently invested at the direction of the General Partner. All
earnings shall remain in the Replacement Reserve and be available for the
purpose thereof. Withdrawals from the Replacement Reserve shall be made to
fund capital repairs and replacements for the Property.
7. -- Books and Records, Accounting and Reports
7.1. Books and Records.
The General Partner shall keep or cause to be kept complete and accurate
books and records of the Partnership which shall be maintained in accordance
with sound accounting practices and the Uniform Act and shall be maintained
and be available at the principal office of the Partnership for examination
by any Partner, or its duly authorized representatives, at any and all
reasonable times. The Partnership may maintain such books and records and
may provide such financial or other statements as the General Partner deems
advisable.
A list of the names and addresses of all Partners shall be maintained at
the principal office of the Partnership and shall be available at any and all
reasonable times to any Partner or its designated representative.
Representatives of any Limited Partner shall be permitted to visit and
inspect the Property and all books and records maintained at the Property
from time to time upon reasonable advance notice to the General Partner.
7.2. Bank Accounts.
The bank accounts of the Partnership shall be maintained in such banking
institutions as the General Partner shall determine with Consent of the
Special Limited Partner, and withdrawals shall be made only in the regular
course of business on such signature or signatures, subject to the
requirements of Section 8.6, as the General Partner shall determine. All
deposits and other funds not needed in the operation of the business shall be
deposited in interest-bearing accounts (which need not be segregated,
provided that accurate records are kept and interest allocated appropriately)
or invested in short-term United States Government or municipal obligations
maturing within one year.
7.3. Accountants.
The Accountants for the Partnership shall be McGowen, Hurst, Clark &
Smith, P.C., of Des Moines, Iowa, or such other certified public accountants
as shall be engaged by the General Partner with the Consent of the Special
Limited Partner; provided, however, that if the Special Limited Partner deems
the Accountants' work product not to be satisfactory, and such work product
is not corrected so that it is satisfactory to the Special Limited Partner,
in its sole discretion, within thirty (30) days of notice by the Special
Limited Partner to the General Partner, the General Partner and Special
Limited Partner shall mutually select new Accountants for the Property.
7.4. Reports, Financial Statements, Tax Returns.
7.4.1. The General Partner shall cause the Partnership to
prepare financial statements for each fiscal year of the Partnership, which
shall include a balance sheet as of the end of each such year and statements
of income, partners' equity and cash flows for such year. Such financial
statements shall include a note setting forth a schedule of all loans to the
Partnership, the Section of this Agreement under which such debt was incurred
and the purpose for which such loan was applied by the Partnership. Such
schedule shall demonstrate that loans have been made, used, carried on the
books of the Partnership (and repaid, if applicable) in accordance with the
provisions of this Agreement. In addition, the financial statements of the
Partnership for the fiscal year in which Full Completion occurs shall include
a depreciation schedule for that year and all future years, along with the
depreciation worksheet. The books of the Partnership shall be examined in
accordance with generally accepted auditing standards as of the end of each
fiscal year of the Partnership by the Accountants, who shall then express
their opinion that the aforesaid balance sheet and statements have been
prepared in accordance with generally accepted accounting principles applied
consistently with prior periods except as to any matters to which the
Accountants take exception and stating, to the extent practicable, the effect
of each such exception on such financial statements. The General Partner
shall, promptly upon receipt of such balance sheet, statements and opinion
and in any event on or before February 28 of the following year, transmit to
the Limited Partners a copy thereof.
7.4.2. Each General Partner shall send to the Special Limited
Partner updated financial statements (including a balance sheet and statement
of income) for such General Partner on or before August 1 of each year;
provided, however, that in no event shall James F. Levy be required to submit
a statement of income.
7.4.3. The Accountants shall prepare the Federal and state
income tax returns of the Partnership. The General Partner shall complete
the books of the Partnership in such time as will allow the Accountants to
complete such tax returns on or before February 28 of the following year.
The General Partner shall cause such tax returns to be filed within such time
periods and shall immediately upon the filing thereof transmit to the Limited
Partners a copy of the Federal and State income tax returns and Form K-1. If
the General Partner fails to complete such tax returns and to transmit such
returns and Form K-1 to the Limited Partners within such time periods, or
shall fail to transmit the annual balance sheet, financial statements and
opinion to the Limited Partners within the time period set forth above, the
General Partner shall, upon the request of the Special Limited Partner and
assuming that no Limited Partner has caused such delay, pay as damages the
sum of $200 per day to the Investor Limited Partner until such Form K-1,
balance sheet and financial statements are received by the Limited Partners.
Such damages shall be paid forthwith by the General Partner and failure to so
pay shall constitute a default of the General Partner under Section 8.6
hereof. In addition, if the General Partner fails to so pay, the General
Partner and its Affiliates shall forthwith cease to be entitled to the
amounts otherwise payable to them pursuant to Section 5.2.A. Such Section
5.2.A payments shall accrue but only be paid upon the payment of such damages
in full and any amount of such damages not so paid shall be deducted against
such Section 5.2.A payments otherwise due to the General Partner or its
Affiliates. In addition, if the General Partner fails to complete such tax
returns and submit such Forms K-1 within the applicable time period set forth
above, the Special Limited Partner may select a firm of accountants (or an
Affiliate of the Special Limited Partner) who shall prepare such returns and
Forms K-1 and the fees and expenses of such accountants (or Affiliate) shall
be paid by the General Partner. The General Partner shall immediately
furnish all necessary documentation and other information to prepare such tax
returns and such Forms K-1 to such accountants (or Affiliate).
7.4.4. Within 30 days following the end of each month after the
Completion Date, the General Partner shall send to the Special Limited
Partner at the expense of the Partnership one or more reports which, taken
together, provide the following information (which need not be audited): (i)
a balance sheet as of the end of such month; (ii) a statement of income for
such month; (iii) a statement of cash available for distribution and reserves
for such month; (iv) a statement describing (a) any new agreement, contract
or arrangement between the Partnership and a General Partner or an Affiliate
of a General Partner, and (b) the amount of all fees and other compensation
and distributions and reimbursed expenses paid by the Partnership for the
month to any General Partner or Affiliate of a General Partner and (v) a
report of the significant activities of the Partnership during the month. In
addition, the General Partner shall prepare and furnish to the Special
Limited Partner the other financial and operating reports set forth in the
Reporting Guidelines attached hereto as Exhibit 3, as modified by the mutual
agreement of the General partner and Special Limited Partner.
7.4.5. The General Partner shall at the expense of the
Partnership provide the Special Limited Partner with (i) a copy of each draw
request for construction or development costs as such requests are made to
the Lender; (ii) a copy of each inspection report, evaluation or similar
report issued to the Partnership by the Credit Agency or the Lender promptly
upon receipt thereof; (iii) a copy of each Low Income Housing Credit
compliance report delivered to or prepared by the Credit Agency with respect
to the Property; (iv) prompt notice of any casualty or other significant
adverse event relating to the Partnership and (v) such other information as
the Special Limited Partner may specifically and reasonably request from time
to time with regard to the progress of construction, initial lease up or any
other matters concerning the business or operations of the Partnership.
7.4.6. An annual pro forma operating budget shall be prepared by
the General Partner at the expense of the Partnership and furnished to the
Special Limited Partner within 120 days prior to the beginning of each
calendar year, or at such other time as the Special Limited Partner shall
reasonably request. In addition, upon the reasonable request of the Special
Limited Partner, the General Partner shall prepare at the expense of the
Partnership and furnish to the Investor Limited Partner an estimate of the
profits and losses of the Partnership for Federal income tax purposes for the
current fiscal year.
7.5. Tax Elections.
7.5.1. If requested to do so by the transferee of a Partnership
interest, the General Partner shall make the election under Section 754 of
the Code, on behalf of the Partnership, at such time and in such manner as to
obtain all the benefits provided for by such Section; provided that the
transferee will pay all costs associated therewith and neither the
Partnership nor the General Partner shall be held responsible or liable for
the failure to make such elections if the General Partner are not given
notice of the event giving rise to an adjustment for which such election is
needed at or prior to the close of the fiscal year during which the event
occurs.
7.5.2. All other elections required or permitted to be made by
the Partnership under the Code shall be made by the General Partner in such
manner as will, in the opinion of the Accountants, be most advantageous to
the Investor Limited Partner but shall not create additional obligations on
the part of the General Partner.
7.6. Fiscal Year and Accounting Method.
The fiscal year of the Partnership shall be the calendar year. The
books of the Partnership shall be kept on the accrual basis.
8. -- Retirement of a General Partner
8.1. Retirement.
8.1.1. No General Partner shall Retire (other than by reason of
death or adjudication of incompetence or insanity) from the Partnership or
sell, assign, transfer or encumber its interest as a General Partner without
the Consent of the Special Limited Partner. In the event of a Retirement of
a General Partner its status and the disposition of its interest in the
Partnership shall be determined in accordance with Section 8.4. In no event
shall any General Partner assign, transfer or sell all or any part of its
interest as a General Partner to any Entity which is a tax-exempt entity as
defined in Section 168(h)(2) of the Code.
8.1.2. If at any time one or more corporations or other limited
liability entities are the only General Partners of the Partnership, at least
one of such entities shall be obligated on a continuing basis to maintain its
net worth and to meet all other requirements for a corporate general partner
set forth in Revenue Procedure 89-12 as promulgated by the Internal Revenue
Service (or any successor requirement) in order to obtain an advance ruling
as to the partnership status of the Partnership. If at any time the
requirements of this Section 8.1.B are not met, then at the election of the
Special Limited Partner exercised at any time thereafter, any or all of the
General Partners shall be deemed to have Retired from the Partnership in
violation of the provisions of this Section 8.1 and shall be subject to the
consequences thereof as provided in Section 8.4.
8.2. Obligation to Continue.
Upon the Retirement of a General Partner, any remaining General Partner
or General Partners, if any, or, if none, the Retired General Partner or its
heirs, successors or assigns, shall immediately send notice of such
Retirement (the "Retirement Notice") to each Limited Partner, and the
Partnership shall be (i) dissolved if there is no remaining General Partner
and the Partnership is not reconstituted pursuant to Section 8.3 hereof, or
(ii) continued by the remaining General Partner(s) as provided in the
sentence next following. The General Partner shall have the right, and
hereby covenant and agree to, unless there is no remaining General Partner,
to elect to continue the business of the Partnership.
8.3. Retirement of a Sole General Partner.
If, following the Retirement of a General Partner, there is no remaining
General Partner of the Partnership, or if there are remaining General
Partners but they shall fail to elect to continue the business of the
Partnership, then the Special Limited Partner may designate a Person (which
Person may be the Special Limited Partner) to become a successor General
Partner of the Partnership as reconstituted as hereinafter provided.
8.4. Interest of Retired General Partners.
8.4.1. Each General Partner hereby agrees that at the time of
its Retirement if such Retirement is in violation of the provisions of
Section 8.1, (a) the Retired General Partner and all Partners who are
Affiliates of the Retired General Partner shall be immediately and
automatically withdrawn from the Partnership and the interest in the
Partnership of the Retired General Partner and such Affiliates shall be
automatically transferred and be deemed transferred to the Partnership for
the benefit of the remaining Partners, (b) the right of the Retired General
Partner and such Affiliates to receive all fees, loan repayments and any
other amounts from the Partnership shall terminate and (c) the Retired
General Partner and such Affiliates shall remain liable for the performance
of all of their obligations under this Agreement. For the purposes of
Article V hereof, the effective date of the aforesaid transfers shall be
deemed to be the date on which such Retirement occurs.
8.4.2. In the event that a General Partner shall Retire as a
General Partner under circumstances not in violation of Section 8.1, such
Retired General Partner shall be deemed to have automatically transferred to
the remaining or successor General Partner, in proportion to its respective
General Partner interest, all or such portion of the interest of such Retired
General Partner in each of the profits, losses and distributions of the
Partnership (as set forth in Article V hereof) which, when aggregated with
the existing General Partner interests of all such remaining and successor
General Partners, will be sufficient to assure such remaining and successor
General Partner an aggregate 0.01% interest in all such profits, losses and
distributions of Cash Flow and Capital Transactions proceeds of the
Partnership under Article V hereof. No documentation shall be necessary to
effectuate such transfer and the same shall be deemed effective upon the
Retirement of such Retired General Partner. The Retiring General Partner
shall retain the right to be paid all fees, loan repayments (including
repayment of any Operating Deficit Loan) and other amounts from the
Partnership which have become due at the time of such Retirement, and shall
not be liable for any obligations of the Partnership arising after the date
of its Retirement. Those Persons succeeding to the portion of the interest
of the Retired General Partner not so transferred to the remaining and
successor General Partner shall become Limited Partners hereunder provided
that such Persons shall not participate in any of the votes or Consents of
the Limited Partners set forth herein nor share in any of the profits, losses
or distributions of the Partnership expressly accorded to the Limited
Partners under Article V, but shall have instead the same share of such
Partnership profits, losses and distributions represented by such interest
when held by the Retiring General Partner. Notwithstanding the foregoing,
however, all Partnership interests and all fees, loan payments and other
amounts payable which are reserved to the Retired General Partner and its
successors pursuant to this Section 8.4.B shall be subject to offset by any
amounts and Partnership interests which the Partnership must pay or assign to
any Person in order to induce such Person to become a General Partner in
replacement of the Retired General Partner.
8.5. Designation of New General Partners.
Subject to the provisions of Section 10.1, the General Partner may, with
the approval of the Lenders (if required), and of any other Person required
under the Property Documents and with the Consent of each Limited Partner, at
any time designate additional General Partners each with such interest as a
General Partner in the Partnership as the General Partner may agree upon.
Any incoming General Partner (other than a General Partner admitted
pursuant to Section 8.6) shall as a condition of receiving any interest in
the Partnership agree to be bound by the Mortgages, all other Property
Documents, and any other documents required in connection therewith and by
the provisions of this Agreement, to the same extent and on the same terms as
any other then General Partner(s).
8.6. Additional and Substitute General Partners.
8.6.1. Upon the occurrence of any one or more of the Events of
Default set forth in Section 8.6.B below, the Special Limited Partner shall
have the right to cause itself or its Affiliate to be admitted to the
Partnership as an additional General Partner as provided in Section 8.6.C,
and/or to remove the General Partner as provided in Section 8.6.D. Each of
the Partners hereby makes, constitutes, and appoints the Special Limited
Partner, with full power of substitution, the true and lawful attorney of,
and in the name, place and stead of, such Partner, with power from time to
time to take all action and do all things necessary or appropriate to
implement and carry out the provisions of this Section 8.6. Such appointment
shall constitute a power coupled with an interest, shall be irrevocable,
shall survive the death, incompetency or dissolution of any Partner and shall
be binding on any assignee of all or any portion of the interest of any
Partner.
8.6.2. The following shall each be an "Event of Default":
1. Failure of a General Partner to observe or perform any
material obligation or covenant to be observed or performed under this
Agreement by such General Partner, which failure shall not have been cured
within thirty (30) days after the Special Limited Partner has given notice
of such failure to the General Partner.
2. The Partnership shall be in material default of any of
its obligations under the Property Documents, which default, in the
reasonable judgment of the Special Limited Partner, threatens an assignment
or foreclosure of any Mortgage.
3. At any one time twenty percent or more of the dwelling
units in the Property shall not be in compliance with Section 42 of the Code.
Any dispute or controversy as to whether any of the Events of Default has
occurred, or whether such event has been cured or is susceptible of being
cured within any grace period specified, shall be initially determined solely
by the Special Limited Partner, whereupon the Special Limited Partner may
exercise its rights set forth in this Section 8.6. However, such
determination shall be subject to review in a judicial proceeding brought by
either the General Partner or the Special Limited Partner in a court of
general jurisdiction sitting in Des Moines, Iowa. Any judicial findings
which are contrary to the determination of the Special Limited Partner shall
not retroactively impair or otherwise affect the rights and authority of the
Special Limited Partner hereunder prior to the issuance of such findings.
The Special Limited Partner shall indemnify and hold harmless the General
Partner for all claims, damages, loss and expense arising from its actions as
a General Partner pursuant to this Section 8.6 prior to such judicial review
if such review shall conclude that an Event of Default did not in fact
occur. Each of the parties shall bear its own expense of litigation.
8.6.3. If the Special Limited Partner elects to admit itself or
its Affiliate as an additional General Partner, such admission shall occur
automatically and without further action by any Partner upon the giving of
notice thereof by the Special Limited Partner to the Partners, and each of
the Partners hereby agrees and consents in advance to the foregoing
admission. Upon the occurrence of such admission, any delegation of
authority agreed to between the General Partner in accordance with Section
6.4.B hereof (whether expressly set forth in this Agreement or otherwise)
shall be cancelled and of no further force and effect, and instead all of the
other General Partners shall be deemed to have delegated, automatically and
without the requirement of a writing or any other action other than as set
forth above, all their powers and authority (including, without limitation,
all right to deposit to, withdraw from and otherwise control all Partnership
bank accounts) to the Special Limited Partner in its capacity as an
additional General Partner as set forth in Section 6.4.B. Notwithstanding
its admission to the Partnership, said additional General Partner shall not
undertake or assume, or be deemed to have undertaken or assumed, any
obligations or liabilities imposed on the General Partner pursuant to this
Agreement or which arise in any other manner with respect to the Partnership
or the Partners. Each Partner agrees that the Special Limited Partner or
any Person it causes to be admitted as a General Partner pursuant to this
Section 8.6 may withdraw as a General Partner without the consent of any
other Partner.
8.6.4. If the Special Limited Partner shall elect to remove one
or more of the General Partners, then such removal shall occur automatically
and without further action by any Partner upon the giving of notice thereof
by the Special Limited Partner to the Partners. Any General Partner so
removed shall have the obligation to sell its Partnership interest to the
Special Limited Partner upon payment of the amount of the removed General
Partner's Capital Account; its right, if any, to be paid all fees, repayments
of loans and other payments by the Partnership shall terminate and any
delegation of authority agreed to between the removed General Partner in
accordance with Section 6.4.B hereof (whether expressly set forth in this
Agreement or otherwise) shall be cancelled and of no further force and
effect. A General Partner so removed shall remain liable for all obligations
to the Partnership arising before and after the effective date of its removal.
8.7. Amendment of Certificate.
Upon the admission of an additional or replacement General Partner, the
Schedule shall be amended to reflect such admission and an amendment to the
Certificate of Limited Partnership, also reflecting such admission, shall be
filed in accordance with the Uniform Act.
9. -- Limited Partner Transfers
9.1. Assignments.
9.1.1. An assignee of a Limited Partner who does not become a
Substitute Limited Partner in accordance with Section 9.2 shall have the
right to receive the same share of profits, losses, credits and distributions
of the Partnership to which the assigning Limited Partner would have been
entitled if no such assignment had been made by such Limited Partner.
9.1.2. In the event any assignment of a Limited Partner's
interest as a Limited Partner shall be made, there shall be filed with the
Partnership (and the Partnership need not recognize such assignment until
such filing) a duly executed and acknowledged counterpart of the instrument
making such assignment. Such instrument must evidence the written acceptance
of the assignee to all the terms and provisions hereof.
9.1.3. Notwithstanding the foregoing, the obligations of any
assigning Limited Partner to pay Installments to the Partnership shall be
extinguished only by and to the extent of the aggregate amount of
Installments paid to the Partnership by such assigning Limited Partner or on
its behalf by its assignee.
9.2. Substitute Limited Partners.
9.2.1. Each Limited Partner shall, without the consent of any
other Limited Partner, have the right to substitute an assignee as a Limited
Partner in its place. Any Substitute Limited Partner shall, as a condition
of receiving any interest in the Partnership assets, agree to be bound to the
extent required under Section 3.6.B.
9.2.2. Upon the admission of a Substitute Limited Partner, the
Schedule shall be amended to reflect the name and address of such Substitute
Limited Partner and to eliminate the name and address of the assigning
Limited Partner, and, if required under the Uniform Act, an amendment to the
certificate of limited partnership of the Partnership reflecting such
admission shall be filed in accordance with the Uniform Act. Each Substitute
Limited Partner shall execute such instrument or instruments as shall be
required by the General Partner to signify its agreement to be bound by all
the provisions hereof, and shall pay reasonable legal and filing expenses in
connection with its substitution as a Limited Partner.
9.3. Restrictions.
9.3.1. In no event shall all or any part of a Limited Partner
interest in the Partnership be assigned or transferred to a minor (other than
to a member of a Limited Partner's Immediate Family by reason of death) or to
an incompetent.
9.3.2. Any sale, exchange, transfer or other disposition in
contravention of any of the provisions of this Section 9.3 shall be void and
ineffectual and shall not bind or be recognized by the Partnership.
9.4. Other Limited Partners.
The Special Limited Partner shall have the right at any time and from
time to time to substitute in its place as Special Limited Partner any Person
which (a) controls the Special Limited Partner, (b) is owned in substantial
part by the Special Limited Partner or (c) is controlled by the Person
controlling the Special Limited Partner. Each Partner hereby consents to
such substitution(s) if and when it occurs, and agrees that the substitute
Special Limited Partner shall have all the rights, benefits and duties set
out in this Agreement for the Special Limited Partner.
10. -- General Provisions
10.1. Amendments to Certificate.
Within 120 days after the end of any fiscal year in which the Limited
Partners shall have received any distributions under Article V hereof, the
General Partner shall file if required under the law of the State and
elsewhere as the General Partner deem appropriate or required an amendment to
the Certificate of Limited Partnership reducing by the amount of its
allocable share of such distribution the amount of Capital Contribution of
each Limited Partner as stated in the last previous amendment to the
Certificate of Limited Partnership. Nothing in this Section 10.1 shall
authorize, however, any change in the Schedule.
10.2. Notices.
Except as otherwise specifically provided herein, all notices, demands
or other communications hereunder shall be in writing and shall be deemed to
have been given (i) four business days after being deposited in the United
States mail and sent by certified or registered mail, postage prepaid, (ii)
two business days after being deposited with Federal Express or similar
overnight delivery service, (iii) on the business day after the day of
transmission by telecopier or other facsimile transmission, answerback
requested, or (iv) on the business day following delivery personally, in each
case to the parties at the addresses set forth below or at such other
addresses as such parties may designate by notice to the Partnership: If to
the Partnership, at the principal office of the Partnership set forth in
Section 2.2, and if to a Partner, at its address set forth in the Schedule,
in each case with copies to:
(i) The Special Limited Partner, c/o Heartland Properties,
Inc., Hovde Building, 6th Floor, 122 West Washington Avenue, Madison,
Wisconsin 53703-2718 (Attention: Vice President-Real Estate and Finance);
(ii) Nyemaster, Goode, McLauglin, Voigts, West, Hansell &
O'Brien, P.C., 700 Walnut Street, Suite 1600, Des Moines, Iowa 50309
(Attention: Lawrence E. Myers).
10.3. Word Meanings.
The words such as "herein," "hereinbefore," "hereinafter," "hereof" and
"hereunder" refer to this Agreement as a whole and not merely to a
subdivision in which such words appear unless the context otherwise
requires. The singular shall include the plural and the masculine gender
shall include the feminine and neuter, and vice versa, unless the context
otherwise requires.
10.4. Binding Provisions.
The covenants and agreements contained herein shall be binding upon, and
inure to the benefit of, the heirs, legal representatives, successors and
assigns of the respective parties hereto.
10.5. Applicable Law.
This Agreement shall be construed and enforced in accordance with the
laws of the State.
10.6. Counterparts.
This Agreement may be executed in several counterparts and all so
executed shall constitute one agreement binding on all parties hereto,
notwithstanding that all the parties have not signed the original or the same
counterpart.
10.7. Separability of Provisions.
Each provision of this Agreement shall be considered separable and (a)
if for any reason any provision or provisions herein are determined to be
invalid and contrary to any existing or future law, such invalidity shall not
impair the operation of or affect those portions of this Agreement which are
valid, or (b) if for any reason any provision or provisions herein would
cause the Limited Partners to be bound by the obligations of the Partnership
under the laws of the State as the same may now or hereafter exist, such
provision or provisions shall be deemed void and of no effect.
10.8. Paragraph Titles.
Paragraph titles are for descriptive purposes only and shall not control
or alter the meaning of the Agreement as set forth in the text.
10.9. Amendments.
Except as otherwise provided in Section 5.4.H, this Agreement may not be
amended or modified except by a written instrument signed by all of the
Partners.
10.10. Time of Admission.
Each Limited Partner shall be deemed to have been admitted to the
Partnership as of the first day of the month during which its actual
admission occurs for all purposes of this Agreement including Article V.
11. -- Defined Terms
Certain capitalized terms used in this Agreement shall have the meanings
specified below:
"Accountants" means the certified public accountant as may be engaged by
-------------
the Partnership in accordance with Section 7.3 hereof.
"Adjustment Amount" has the meaning set forth in Section 4.2.
-------------------
"Admission Date" means the date on which this Agreement shall have been
-----------------
fully executed by, delivered among and become binding on all of the Partners.
"Affiliate" means, as to any named Person or Persons (or as to every
----------
General Partner if no Person is specifically named): (1) such Person; (2)
member of the Immediate Family of such Person; (3) legal representative,
successor or assignee of any Person referred to in the preceding clauses (1)
or (2); (4) trustee of a trust for the benefit of any Person referred to in
the preceding clauses (1) or (2); or (5) any other Person (a) who directly or
indirectly controls, is controlled by, or is under common control with such
Person, (b) who owns or controls 10% or more of the outstanding voting
interests of such Person, (c) of which 10% or more of the outstanding voting
interests is owned by such Person or any of the Persons referred to in the
foregoing clauses (1) through (3); (d) who is an officer, director, partner
or trustee of such Person, or (e) for which such Person acts in the capacity
of officer, director, partner or trustee.
"Agreement" means this Amended and Restated Agreement of Limited
-----------
Partnership as it may be amended from time to time.
"Annual Reported Credit" has the meaning set forth in Section 4.2.A.
------------------------
"Asset Management Fee" means the fee payable to Heartland Special
------------------------
Limited, Inc. by the Partnership pursuant to Section 6.12.F.
"Basis Certification" means (a) the receipt by each Limited Partner of
----------------------
the written certification of the Accountants, in a form and in substance
satisfactory to the Special Limited Partner and its accountants, as to the
itemized amounts of the construction and development costs of the Property
and the "eligible basis" and "applicable percentage" (as defined in the Code)
pertaining to each building in the Property following Full Completion, and
(b) the written acceptance of such certification by the Special Limited
Partner after review thereof by a certified public accounting firm engaged by
the Special Limited Partner for such purpose.
"Capital Account" has the meaning set forth in Section 3.3.
----------------
"Capital Contribution" means the total amount of cash contributed or
-----------------------
agreed to be contributed to the Partnership by each Partner as shown in the
Schedule, including any amounts which are paid on behalf of the Investor
Limited Partner pursuant to the provisions of Section 4.2.C. herein. Any
reference in this Agreement to the Capital Contribution of a then Partner
shall include a Capital Contribution previously made by any prior Partner
with respect to the Partnership interest of such then Partner.
"Capital Transaction" means any transaction or other source of funds the
----------------------
proceeds of which are not includable in determining Cash Flow including,
without implied limitation, the sale or other disposition of all or
substantially all of the assets of the Partnership and any refinancing of any
Mortgage, but excluding the payment of Capital Contributions by the Partners.
"Carryover Allocation Issuance" means (a) the issuance, on or before
--------------------------------
December 31, 1999, by the Agency to the Partnership of a carryover allocation
of low income housing tax credits pursuant to Section 42(h)(1)(E) of the Code
for the Property, (b) the incurrence, on or before December 31, 1999, by the
Partnership of capitalizable costs of at least 10% of the Partnership's
reasonably expected basis in the Project as of December 31, 2001, and (c) the
receipt by the Limited Partners of a written certification from the
Accountants setting forth in reasonable detail the nature and amount of such
costs and the written acceptance of such certification by the Special Limited
Partner after review thereof by a certified public accounting firm engaged by
the Special Limited Partner for such purpose.
"Cash Flow" means for any period the excess of (a) Operating Revenues
------------
for such period over (b) the sum of Operating Expenses and Debt Service for
such period.
"Code" means the Internal Revenue Code of 1986, as amended from time to
-------
time.
"Compliance Period" means the "compliance period" as defined in Section
--------------------
42 of the Code for the Property or any building comprising a part of the
Property.
"Consent" of any Partner means the advance written consent or approval
---------
of such Partner, which consent shall not be unreasonably withheld,
conditioned or delayed.
"Construction Mortgage" means the Mortgage being made by Norwest Bank of
-----------------------
Iowa, N.A. in the principal amount of $632,000.
"Credit Agency" means the Iowa Finance Authority.
---------------
"Credit Period" means the "credit period" for the Property or any
-----------------
building comprising a part of the Property, as defined in Section 42 of the
Code.
"Debt Service" shall mean all payments of interest, principal and
---------------
recurring charges due and payable on the Mortgages during a specified period.
"Development Completion Obligation" means the obligation of the General
------------------------------------
Partner to acquire and develop the Property for a fixed turnkey price, as set
forth in Section 6.9.
"Development Costs" means those costs related to the development and
--------------------
initial leaseup of the Property as more specifically described in Section 6.9.
"Development Funds" means those sources of funds available to meet
---------------------
Development Costs as more specifically described in Section 6.9.
"Development Services Fee" means the fee payable to the General Partner
---------------------------
pursuant to Section 6.11.A.
"Economic Risk of Loss" has the meaning set forth in Treasury Regulation
-----------------------
Section 1.752-2.
"8609 Issuance" means the receipt by the Partnership from the Credit
-----------------
Agency of Internal Revenue Service Form(s) 8609 with respect to all buildings
in the Property and allocating to the Partnership Low Income Housing Credit
in an amount of $157,046.
"Entity" means any general partnership, limited partnership, limited
---------
liability company, corporation, joint venture, trust, business trust,
cooperative or association.
"Event of Bankruptcy" means with respect to any Person:
---------------------
(i) the entry of a decree or order for relief by a court having
jurisdiction in respect of such Person in a case under the Federal bankruptcy
laws, as now or hereafter constituted, or any other applicable Federal or
state bankruptcy, insolvency or other similar law, or the appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of such Person or for any substantial part of its property, or the
issuance of an order for the winding-up or liquidation of its affairs and the
continuance of any such decree or order unstayed and in effect for a period
of 60 consecutive days; or
(ii) the commencement by such Person of a proceeding seeking any decree,
order or appointment referred to in clause (i), the consent by such Person to
any such decree, order or the appointment, or taking of any action by such
Person in furtherance of any of the foregoing.
"Facility" shall have the meaning given to it in the Federal
-----------
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
42 U.S.C. Sec. 9601 et seq., as amended, and shall also include any meaning
given to analogous property under other Hazardous Waste Laws.
"Filing Office" means the office of the Secretary of State of the State.
---------------
"Full Completion" means the occurrence of (a) completion of construction
-----------------
of the entire Property no later than December 31, 2001 and in substantial
compliance with the Property Documents, as such completion is evidenced by
the receipt by the Partnership of (i) written confirmation of completion from
the inspecting architect for the Property and (ii) written approval of
occupancy by all state and municipal agencies empowered or required to issue
such approval and (b) satisfaction of all requirements in the Property
Documents relating to completion of the entire Property.
"General Partner" means all Persons designated as General Partners in
------------------
the Schedule and all Persons who become General Partners as provided herein,
in each such Person's capacity as a General Partner of the Partnership, and
if there be only one General Partner at any time, such term shall refer to
such sole General Partner.
"Guaranteed Development Cost" means the amount payable to the General
--------------------------------
Partner pursuant to Section 6.9.A.
"Hazardous Material" shall have the collective meanings given to the
----------------------
terms "hazardous material," "hazardous substances," "hazardous wastes,"
"toxic substances" and analogous terms in the Hazardous Waste Laws. In
addition, the term "Hazardous Material" shall also include oil and any other
substance known to be hazardous.
"Hazardous Waste Laws" means and includes the Federal Comprehensive
------------------------
Environmental Response, Compensation and Liability Act of 1980; the Resource
Conservation and Recovery Act; the Toxic Substances Control Act and any other
federal, state or local statutes, ordinances, regulations or by-laws dealing
with Hazardous Material, as the same may be amended from time to time and
including any regulations promulgated thereunder.
"HOME Loan" means the loan being made by the Iowa Department of Economic
-----------
Development pursuant to the Home Investment Partnership ("HOME") Program in
the principal amount of $475,152, and bearing interest at the fixed annual
rate of 1%.
"Immediate Family" means, with respect to any Person, its spouse,
-------------------
parents, parents-in-law, descendants, nephews, nieces, brothers, sisters,
brothers-in-law, sisters-in-law, children-in-law and grandchildren-in-law.
"Incentive Management Fee" means the fee payable by the Partnership
----------------------------
pursuant to Section 6.12.D hereof.
"Installment" means a portion of the Capital Contribution due from the
--------------
Investor Limited Partner as more fully set forth in Article IV.
"Investor Limited Partner" means Alliant Energy Investments, Inc., an
--------------------------
Iowa corporation, or any Person who becomes a Substitute Investor Limited
Partner as provided herein, in each such Person's capacity as the Investor
Limited Partner of the Partnership.
"Lenders" means the lenders with respect to the Permitted Loans.
---------
"Limited Partner" or "Limited Partners" means the Investor Limited
-------------------------------------------
Partner and the Special Limited Partner.
"Low Income Housing Credit" means the amount of low-income housing tax
-----------------------------
credit, as certified by the Accountants, which the Partnership and/or its
Partners has or will claim pursuant to Section 42 of the Code (or successor
provisions) with respect to the Property.
"Management Agent" means the managing and rental agent for the Property
-------------------
engaged by the Partnership pursuant to Section 6.12.
"Management Agreement" means the agreement between the Partnership and
----------------------
the Management Agent in effect from time to time providing for management
services to the Property.
"Management Fee" means the amount payable from time to time by the
------------------
Partnership to the Management Agent (or to the General Partner if there shall
be no Management Agent serving hereunder) on an annual basis for management
services in accordance with the Management Agreement.
"Minimum Set Aside" means occupancy of dwelling units in all of the
--------------------
Property sufficient to satisfy the "40-60 test" set forth in Section 42(g) of
the Code within the time period required thereunder.
"Mortgage" or "Mortgages" means any or all of the indebtedness of the
--------------------------
Partnership evidenced by the Permitted Loans, and any other indebtedness
secured by a mortgage of the Property. Where the context admits, the term
Mortgage shall include any mortgage, deed, note, security agreement or other
instrument executed in connection with a Mortgage which is binding on the
Partnership; and in case a Mortgage is replaced or supplemented by any
subsequent mortgage or mortgages, such term shall refer to any such
subsequent mortgage or mortgages.
"Operating Deficit" means the excess (if any) of the sum of Operating
---------------------
Expenses and Debt Service over Operating Revenues for a particular period, as
more specifically described in Section 6.10.
"Operating Deficit Loan" means a loan made to the Partnership pursuant
------------------------
to Section 6.10 and which is repayable without interest and only as provided
under this Agreement.
"Operating Expenses" means all the costs and expenses of any type which
---------------------
are incident to the ownership and operation of the Property, including,
without limitation, real estate and other taxes, the cost of capital
improvements properly attributable to the period in question, the cost of
operations (including the cost of any services provided to residents),
maintenance and repairs, Management Fees, fees payable pursuant to Section
6.12.E, the funding of any reserves required to be maintained by the Lenders
or pursuant to Section 6.14, and all amounts due with respect to Partnership
indebtedness, but excluding Debt Service, the cost of those items which are
included in Development Costs pursuant to Section 6.9, payments made pursuant
to Section 5.2.A or 5.2.B, depreciation and other non-cash charges and cash
distributions to Partners.
"Operating Revenue" means all rental revenue, laundry income, parking
--------------------
revenue and other incidental revenues which are received by the Partnership
and arise from the operation of the Property as a rental apartment property.
"Outstanding Capital" means, as to any Partner at any point in time, the
----------------------
excess of: (a) the amount of the Capital Contributions paid in by such
Partner through such time (in the case of the Investor Limited Partner,
including both amounts paid pursuant to Section 4.1, and all amounts paid or
payable on behalf of the Investor Limited Partner by the General Partner
pursuant to Section 4.2), over (b) amounts which have previously been
distributed to such Partner pursuant to Section 5.2.B as returns of
Outstanding Capital.
"Partner" or "Partners" means any or all of the General Partners and the
-----------------------
Limited Partners.
"Partner Non-Recourse Debt" means any Partnership liability (1) that is
---------------------------
considered non-recourse under Treasury Regulation Section 1.1001-2 or for
which the creditor's right to repayment is limited to one or more assets of
the Partnership and (2) for which any Partner or Related Person bears the
Economic Risk of Loss.
"Partner Non-Recourse Debt Minimum Gain" means the amount of partner
-------------------------------------------
non-recourse debt minimum gain and the net increase or decrease in partner
non-recourse debt minimum gain determined in a manner consistent with Treasury
Regulation Sections 1.704-2(d) and 1.704-2(g)(3).
"Partnership" means the limited partnership governed by this Agreement
------------
as said limited partnership may from time to time be constituted and amended.
"Partnership Minimum Gain" means the amount determined by computing,
-----------------------------
with respect to each Partnership Non-Recourse Liability, the amount of gain,
if any, that would be realized by the Partnership if it disposed of (in a
taxable transaction) the property subject to such liability in full
satisfaction of such liability, and by then aggregating the amounts so
computed. Such computations shall be made in a manner consistent with
Treasury Regulation Section 1.704-2(d).
"Partnership Non-Recourse Liability" means any Partnership liability (or
------------------------------------
portion thereof) for which no Partner or Related Person bears the Economic
Risk of Loss.
"Permanent Mortgage" means the Mortgage made by Norwest Bank Iowa, N.A.
----------------------
in the principal amount of $278,000 and on such terms to be determined
pursuant to the Permanent Mortgage commitment letter dated December 6, 1999.
"Permanent Mortgage Closing" means the occurrence of Full Completion,
------------------------------
closing of the Permanent Mortgage and full disbursement thereof to the
Partnership and repayment in full and discharge of the Construction Mortgage.
"Permitted Loans" means the Construction Mortgage, Permanent Mortgage,
-----------------
HOME Loan, and TIF Agreement.
"Person" means any individual or Entity, and the heirs, executors,
---------
administrators, legal representatives, successors and assigns of such Person
where the context so admits; and, unless the context otherwise requires, the
singular shall include the plural, and the masculine gender shall include the
feminine and the neuter and vice versa.
"Plans and Specifications" means the plans and specifications for the
---------------------------
Property as last revised prior to the date hereof, together with future
revisions thereof which, if such future revision constitutes a change in the
design, scope or value of the Property, shall have received the Consent of
the Special Limited Partner.
"Projected Credit" means the projected amounts of Low Income Housing
-------------------
Credit set forth in the table in Section 4.2.A.
"Property" means the real property located at 1102 and 1106 Woodland
----------
Drive, Carroll, Iowa, which real property is more fully described in Exhibit
1 attached hereto.
"Property Documents" means all promissory notes, mortgages, agreements
--------------------
and other instruments executed in connection with any of the Mortgages; the
Plans and Specifications; the Management Agreement; the Incentive Management
Agreement; the Turnkey Development Agreement; all applications, reservations,
carryover allocations, restrictive covenants and extended use agreements and
all other agreements and documents related to the Low Income Housing Credit;
agreements relating to real estate taxation and assessments relating to the
Property; agreements relating to the availability of parking for users of the
Property; and any other agreement or instrument relating to the Property or
under which the Partnership is bound.
"Qualified Income Offset Item" means (1) an allocation of loss or
---------------------------------
deduction that, as of the end of each year, reasonably is expected to be made
(a) pursuant to Section 704(e)(2) of the Code to a donee of an interest in
the Partnership, (b) pursuant to Section 706(d) of the Code as the result of
a change in any Partner's Interest, and (c) pursuant to Treasury Regulation
Section 1.751-1(b)(2)(ii) as the result of a distribution by the Partnership
of unrealized receivables or inventory items and (2) a distribution that, as
of the end of such year, reasonably is expected to be made to a Partner to
the extent it exceeds offsetting increases to such Partner's Capital Account
which reasonably are expected to occur during or prior to the Partnership
taxable year in which such distribution reasonably is expected to occur.
"Qualified Tenant" means a tenant who meets the income requirements for
-------------------
a "low income unit" (as defined in Section 42 of the Code) and who occupies a
dwelling unit in the Property pursuant to an executed lease which is for a
term of at least twelve months, conforms to all requirements of the Property
Documents and will not prevent the Partnership from obtaining the Low Income
Housing Credit with respect to such dwelling unit.
"Related Person" has the meaning set forth in Treasury Regulation
----------------
Section 1.752-4(b) or any successor regulation thereto.
"Replacement Reserve" shall mean the reserve maintained pursuant to
---------------------
Section 6.14 to make capital repairs and improvements.
"Retirement" (including the verb form "Retire" and the adjective form
-----------
"Retiring") means as to a General Partner, the occurrence of death,
adjudication of insanity or incompetence, Event of Bankruptcy, dissolution,
or voluntary or involuntary withdrawal from the Partnership for any reason,
and shall constitute "retirement" for purposes of the Uniform Act.
"Retirement" shall also mean the sale, assignment, transfer or encumbrance by
a General Partner of its interest as a General Partner. A General Partner
which is a corporation, limited liability company or partnership shall be
deemed to have sold, assigned, transferred or encumbered its interest as a
General Partner in the event of any sale, assignment, transfer or encumbrance
of a controlling interest in a corporate or limited liability company General
Partner or of a general partner interest in a General Partner which is a
partnership.
"Schedule" means Schedule A of Partners annexed hereto as amended from
---------
time to time and as so amended at the time of reference thereto.
"Special Limited Partner" means Heartland Special Limited, Inc., a
---------------------------
Wisconsin corporation, or such other Person as it may substitute pursuant to
Section 9.4 hereof.
"Stabilized Occupancy" means the achievement of occupancy of at least
----------------------
90% of the dwelling units in the Property by Qualified Tenants at rent levels
not less than the rents set forth on Exhibit 2 hereto for each of three
consecutive months following Full Completion.
"State" means the State of Iowa.
------
"Substitute Limited Partner" means any Person who is admitted to the
-----------------------------
Partnership as a Limited Partner under the provisions of Sections 9.2 or 9.4.
"TIF Agreement" means the Agreement for Private Redevelopment by and
---------------
between The City of Carroll, Iowa and the Partnership providing in part tax
abatement grants for the Property.
"Uniform Act" means the Uniform Limited Partnership Act as adopted by
-------------
the State.
"Vessel" shall have the meaning given to it in the Federal Comprehensive
--------
Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C.
Sec. 9601 et seq., as amended, and shall also include any meaning given to
analogous property under other Hazardous Waste Laws.
<PAGE>
WITNESS the execution hereof under seal as of the 1st day of March, 2000.
GENERAL PARTNER
___________________________
James F. Levy
Newbury Development Company
By: ___________________________
James F. Levy, President
WITHDRAWING LIMITED PARTNERS
___________________________
James F. Levy
___________________________
Debbie L. Fisher
<PAGE>
SPECIAL LIMITED PARTNER
Heartland Special Limited, Inc.
By: ___________________________
Ruth A. Domack, President
INVESTOR LIMITED PARTNER
Alliant Energy Investments, Inc.
By: ___________________________
Thomas L. Aller, Vice President
<PAGE>
STATE OF IOWA )
) ss.
COUNTY OF POLK )
On this _____ day of March, 2000, before me, the undersigned, a Notary
Public in and for said State, personally came James F. Levy, who executed the
above instrument and acknowledged to me that he executed the same as his free
act and deed.
______________________________
Notary Public
My commission expires:_________
STATE OF IOWA )
) ss.
COUNTY OF POLK )
On this _____ day of March, 2000, before me, the undersigned, a Notary
Public in and for said State, personally came James F. Levy, known to me to
be President of Newbury Development Company, who executed the above
instrument on behalf of said corporation and acknowledged to me that he
executed the same as his free act and deed and the free act and deed of said
corporation.
______________________________
Notary Public
My commission expires:_________
STATE OF IOWA )
) ss.
COUNTY OF POLK )
On this _____ day of March, 2000, before me, the undersigned, a Notary
Public in and for said State, personally came Debbie L. Fisher, who executed
the above instrument and acknowledged to me that she executed the same as her
free act and deed.
______________________________
Notary Public
My commission expires:_________
<PAGE>
STATE OF IOWA )
) ss.
COUNTY OF LINN )
On this _______ day of March, 2000, before me, the undersigned, a Notary
Public in and for said State, personally came Thomas L. Aller, known to me to
be Vice President of Alliant Energy Investments, Inc., who executed the above
instrument on behalf of said corporation and acknowledged to me that he
executed the same as his free act and deed and the free act and deed of said
corporation.
______________________________
Notary Public
My commission expires:_________
STATE OF WISCONSIN )
) ss.
COUNTY OF DANE )
On this _______ day of March, 2000, before me, the undersigned, a Notary
Public in and for said State, personally came Ruth A. Domack, known to me to
be President of Heartland Special Limited, Inc., who executed the above
instrument on behalf of said corporation and acknowledged to me that she
executed the same as her free act and deed and the free act and deed of said
corporation.
______________________________
Notary Public
My commission expires:_________
<PAGE>
MEADOW WOOD ASSOCIATES OF CARROLL PHASE II, L.P.
Schedule A -- Schedule of Partners
<TABLE>
<CAPTION>
Total Agreed-to Share of Total
GENERAL PARTNERS Capital Paid-in Capital Partner Class
---------------- Contribution Contribution * Interest
------------ -------------- --------------
<S> <C> <C> <C>
James F. Levy $50 $50 50%
c/o Newbury Development Company
100 Court Avenue, Suite 212
Des Moines, Iowa 50309-2200
Newbury Development Company $50 $50 50%
100 Court Avenue, Suite 212
Des Moines, Iowa 50309-2200
LIMITED PARTNERS
----------------
Special Limited Partner
Heartland Special Limited, Inc. $100 $100 0.01%
c/o Heartland Properties, Inc.
Hovde Building, 6th Floor
122 West Washington Avenue
Madison, WI 53703-2718
Investor Limited Partner
Alliant Energy Investments, Inc. $1,156,810 $578,405 99.99%
c/o Heartland Properties, Inc.
Hovde Building, 6th Floor
122 West Washington Avenue
Madison, WI 53703-2718
</TABLE>
______________________
* Paid-in Capital Contribution as of the date of this Schedule A. Future
Installments of Capital Contribution are due from the Investor Limited
Partner at the times set forth in this Partnership Agreement.
<PAGE>
Exhibit 1
LEGAL DESCRIPTION OF PROPERTY
Lot B (except Lot 1 thereof) of BELLA VISTA FIRST ADDITION FIRST
RESUBDIVISION of the City of Carroll, Carroll County, Iowa.
<PAGE>
Exhibit 2
PROJECTED INITIAL RENT LEVELS
AND OPERATING EXPENSES
<PAGE>
Exhibit 3
REPORTING GUIDELINES
<PAGE>
_______________________________________
FORT MADISON IHA II SENIOR HOUSING LIMITED PARTNERSHIP
_______________________________________
AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP
Dated as of March 1, 2000
<PAGE>
<TABLE>
<CAPTION>
FORT MADISON IHA II SENIOR HOUSING LIMITED PARTNERSHIP
TABLE OF CONTENTS
Page
----
<S> <C>
ARTICLE I.-- Preliminary Statement. 1
ARTICLE II. -- Continuation; Name; and Purpose. 1
Section 2.1 Continuation. 1
Section 2.2 Name and Office. 1
Section 2.3 Purpose. 2
Section 2.4 Authorized Acts. 2
Section 2.5 Term and Dissolution. 3
ARTICLE III. -- Partners; Capital 3
Section 3.1 General Partner 3
Section 3.2 Limited Partners 4
Section 3.3 Partnership Capital 4
Section 3.4 Withdrawal of Capital 5
Section 3.5 Liability of Limited Partners 5
Section 3.6 Additional Limited Partners 5
ARTICLE IV. -- Limited Partner Capital Contributions 6
Section 4.1 Capital Contributions 6
Section 4.2 Special Adjustments. 7
Section 4.3 Repurchase Obligation of the General Partner 10
ARTICLE V. -- Profits, Losses and Distributions 11
Section 5.1 Profits, Losses and Tax Credits 11
Section 5.2 Distributions Prior to Dissolution 12
Section 5.3 Distributions Upon Dissolution 13
Section 5.4 Special Provisions 14
ARTICLE VI. -- General Partner Rights, Powers and Duties 17
Section 6.1 Restrictions on Authority 17
Section 6.2 Personal Services 18
Section 6.3 Business Management and Control; Tax Matters Partner. 19
Section 6.4 Authority of General Partner 19
Section 6.5 Duties and Obligations 20
Section 6.6 Representations and Warranties 23
Section 6.7 Liability 25
Section 6.8 Indemnification 25
Section 6.9 Development Completion Obligation 26
Section 6.10 Operating Expense Obligation 27
Section 6.11 Development Services 27
Section 6.12 Property Management 27
Section 6.13 Borrowings 29
Section 6.14 Reserves 30
ARTICLE VII. -- Books and Records, Accounting and Reports 30
Section 7.1 Books and Records 30
Section 7.2 Bank Accounts 31
Section 7.3 Accountants 31
Section 7.4 Reports, Financial Statements, Tax Returns 31
Section 7.5 Tax Elections 33
Section 7.6 Fiscal Year and Accounting Method. 33
ARTICLE VIII. -- Retirement of a General Partner 33
Section 8.1 Retirement 33
Section 8.2 Obligation to Continue 34
Section 8.3 Retirement of a Sole General Partner 34
Section 8.4 Interest of Retired General Partners 34
Section 8.5 Designation of New General Partners 35
Section 8.6 Additional and Substitute General Partners 35
Section 8.7 Amendment of Certificate 37
<PAGE>
ARTICLE IX. -- Limited Partner Transfers 37
Section 9.1 Assignments 37
Section 9.2 Substitute Limited Partners 38
Section 9.3 Restrictions 38
Section 9.4 Other Limited Partners 38
ARTICLE X. -- General Provisions 38
Section 10.1 Amendments to Certificate 38
Section 10.2 Notices 39
Section 10.3 Word Meanings 39
Section 10.4 Binding Provisions 39
Section 10.5 Applicable Law 39
Section 10.6 Counterparts 40
Section 10.7 Separability of Provisions 40
Section 10.8 Paragraph Titles 40
Section 10.9 Amendments 40
Section 10.10 Time of Admission 40
ARTICLE XI. -- Defined Terms 40
ARTICLE XII. -- USDA-Rural Development Regulations 49
Section 12.1 Change in General Partner 49
Section 12.2 USDA-Rural Development Loan 49
Schedule A -- Schedule of Partners
Exhibit 1 -- Legal Description of Property
Exhibit 2 -- Projected Initial Rent Levels and Operating Expenses
Exhibit 3 -- Reporting Guidelines
</TABLE>
<PAGE>
FORT MADISON IHA II SENIOR HOUSING LIMITED PARTNERSHIP
AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP
1.-- Preliminary Statement.
Fort Madison IHA II Senior Housing Limited Partnership (the
"Partnership") was formed as a limited partnership under the laws
of the State of Iowa pursuant to a Limited Partnership Agreement
dated March 5, 1998. A certificate of limited partnership of the
Partnership was filed with the Filing Office on March 10, 1998.
The purposes of this amendment to and restatement of said
Limited Partnership Agreement are to: (i) admit Alliant Energy
Investments, Inc., an Iowa corporation, as the Investor Limited
Partner and to admit Heartland Special Limited, Inc., a Wisconsin
corporation, as the Special Limited Partner; (ii) provide for the
withdrawal of Jesse D. Burns as the pre-existing limited partner;
and (iii) set out more fully the rights, obligations and duties
of the General Partner and the Limited Partners and to restate
the Limited Partnership Agreement in its entirety.
It is hereby agreed that the Limited Partnership Agreement
is hereby amended and fully restated as provided herein.
Capitalized terms not defined in the text hereof shall have the
meanings set forth in Article XI.
2. -- Continuation; Name; and Purpose.
2.1. Continuation.
The parties hereto hereby agree to continue the limited
partnership known as Fort Madison IHA II Senior Housing Limited
Partnership, formed pursuant to the provisions of the Uniform Act.
2.2. Name and Office.
The Partnership shall continue to be conducted under the
name of Fort Madison IHA II Senior Housing Limited Partnership.
The principal office of the Partnership shall be at 319 East
Washington Street, P.O. Box 1226, Iowa City, Johnson County, Iowa
52244-1226, and the Partnership may also maintain offices at the
Property. The resident agent for service of process on the
Partnership shall be Robert P. Burns. The General Partner may at
any time change the location of a Partnership office or the
identity or address of its resident agent in the State and shall
give due notice of any such change to the Limited Partners.
<PAGE>
2.3. Purpose.
The purpose of the Partnership is to acquire, construct,
develop, improve, own, maintain, operate, manage, lease, sell,
and otherwise deal with the Property. The Partnership and the
General Partner shall operate the Property in accordance with the
Property Documents and any applicable governmental regulations.
The Partnership shall not engage in any other business or
activity.
2.4. Authorized Acts.
In furtherance of its purposes, but subject to all other
provisions of this Agreement including, but not limited to,
Article III and Article VI, the Partnership is hereby authorized,
and the General Partner shall have full power, authority and
discretion to cause the Partnership:
(i) To acquire by purchase, lease or otherwise any real or
personal property which may be necessary, convenient or
incidental to the accomplishment of the purposes of the
Partnership.
(ii) To construct, operate, maintain, finance and improve,
and to own, sell, convey, assign, mortgage or lease any real
estate and any personal property necessary, convenient or
incidental to the accomplishment of the purposes of the
Partnership.
(iii)To borrow money and issue evidences of indebtedness in
furtherance of any or all of the purposes of the Partnership, and
to secure the same by mortgage, pledge or other lien on the
Property or any other assets of the Partnership.
(iv) To prepay in whole or in part, refinance, recast,
increase, modify or extend a Mortgage and in connection therewith
to execute any extensions, renewals, or modifications of the
Mortgages.
(v) To employ a Management Agent, including an Affiliate,
to manage the Property, and to pay reasonable compensation for
such services.
(vi) To enter into, perform and carry out contracts of any
kind, including contracts with Affiliates, necessary to, in
connection with or incidental to, the accomplishment of the
purposes of the Partnership, specifically including, but not
limited to, the execution and delivery of the Property Documents,
and all other agreements, certificates, instruments or documents
required by the Lenders in connection with the Property Documents
and the acquisition, construction, development, improvement,
maintenance and operation of the Property or otherwise required
by the Lenders in connection with the Property.
(vii)To enter into any kind of activity and to perform and
carry out contracts of any kind necessary to, or in connection
with, or incidental to, the accomplishment of the purposes of the
Partnership, so long as said activities and contracts may be
lawfully carried on or performed by a partnership under the laws
of the State.
<PAGE>
2.5. Term and Dissolution.
The Partnership shall continue in full force and effect
until December 31, 2049, except that the Partnership shall be
dissolved prior to such date upon the happening of any of the
following events:
2.5.1. The sale or other disposition of all or
substantially all the assets of the Partnership; or
2.5.2. The Retirement of a General Partner if no
General Partner remains and the Partnership is not reconstituted
with a successor General Partner pursuant to Section 8.3; or
2.5.3. The occurrence of any event which would cause
the dissolution of the Partnership under the Uniform Act
notwithstanding the agreement of the Partners or the election of
a General Partner to continue the business of the Partnership.
The Partners agree, and the General Partner agrees to elect, to
continue the business of the Partnership under all circumstances
permitted by the Uniform Act.
Upon dissolution of the Partnership, unless the Partnership
is reconstituted pursuant to Section 8.3, the General Partner (or
its trustees, receivers, successors, or legal representatives)
shall cause the cancellation of the Partnership's Certificate of
Limited Partnership as then in force, and shall liquidate the
Partnership assets and apply and distribute the proceeds thereof
in accordance with Section 5.3. Notwithstanding the foregoing,
in the event such liquidating General Partner shall determine
that an immediate sale of part or all of the Partnership's assets
would cause undue loss to the Partners, the liquidating General
Partner may, with the prior consent of the Special Limited
Partner, in order to avoid such loss, either (i) delay
liquidation of, and withhold from distribution for a reasonable
time, any assets of the Partnership except those necessary to
satisfy Partnership debts and obligations other than debts
provided for in Section 5.2.B, Clauses Two and following, or (ii)
distribute the assets to the Partners in kind.
3. -- Partners; Capital
3.1. General Partner.
The General Partner of the Partnership is Burns & Burns,
L.C., an Iowa limited liability company, at the address set forth
on the Schedule. The General Partner has made a Capital
Contribution to the Partnership in the total amount of $100.00
The General Partner shall not be obligated or permitted to make
additional Capital Contributions to the Partnership, except that
the General Partner shall be obligated to make such additional
Capital Contributions to meet Development Cost shortfalls as
provided in Section 6.9.B.
3.2. Limited Partners.
3.2.1. On the Admission Date, Heartland Special
Limited, Inc., a Wisconsin corporation, shall be admitted to the
Partnership as the Special Limited Partner, Alliant Energy
Investments, Inc., an Iowa corporation, shall be admitted to the
Partnership as the Investor Limited Partner, and thenceforth the
Limited Partners shall be those Limited Partners shown on the
Schedule. The addresses of each of the Limited Partners shall be
as set forth on the Schedule.
3.2.2. Jesse D. Burns hereby withdraws as a Limited
Partner, effective on the Admission Date, and acknowledges that
as of the Admission Date he (i) has received a return of his
capital contribution in his capacity as a withdrawn Partner, and
(ii) no longer has any interest in or rights or claims against
the Partnership in his capacity as a withdrawn Limited Partner or
for unpaid fees or compensation earned prior to the Admission
Date.
3.3. Partnership Capital.
3.3.1. The capital of the Partnership shall be the
aggregate amount of the cash and the agreed value of property
contributed by the General Partner, and the aggregate amount of
<PAGE>
the cash contributed by the Limited Partners, which amounts are
hereby agreed to be those set forth in the Schedule. The
Schedule shall be amended from time to time to reflect the
withdrawal or admission of Partners, any changes in the
Partnership interests held by a Partner arising from the transfer
of a Partnership interest to or by such Partner and any change in
the amounts to be contributed or agreed to be contributed by any
Partner; provided that no funds provided by a Partner shall be
deemed to be additional Capital Contributions unless payment
thereof is pursuant to a specific provision of this Agreement
requiring or permitting the making of additional Capital
Contributions.
3.3.2. An individual Capital Account shall be
established and maintained for each Partner, including any
additional or substituted Partner who shall hereafter receive an
interest in Partnership. The Capital Account of each Partner
shall consist of (a) the amount of cash such Partner contributes
to the Partnership, plus (b) the fair market value of any
property such Partner contributes to the Partnership net of any
liabilities assumed by the Partnership or to which such property
is subject, plus (c) the amount of profits and gain and tax
exempt income allocated to such Partner, minus (d) the amount of
losses and deductions allocated to such Partner, minus (e) the
amount of all cash distributed to such Partner, minus (f) the
fair market value of any property distributed to such Partner net
of any liabilities assumed by such Partner or to which such
property is subject, minus (g) the amount of any other
expenditures which are not deductible by the Partnership for
Federal income tax purposes or which are not allowable as
additions to the basis of Partnership property and which are
allocated to such Partner. Each Capital Account shall also be
subject to such other adjustments as may be required under the
Code and Treasury Regulations. The Capital Account of a Partner
shall not be affected by any adjustments to basis made pursuant
to Section 743 of the Code.
3.3.3. The original Capital Account established for
any substituted Partner shall be in the same amount as, and shall
replace, the Capital Account of the Partner which such
substituted Partner succeeds, and, for the purposes of this
Agreement, such substituted Partner shall be deemed to have made
the Capital Contribution, to the extent actually paid in, of the
Partner which such substituted Partner succeeds. The term
"substituted Partner", as used in this paragraph, shall mean a
Person who shall become entitled to receive a share of the
profits, losses and distributions of the Partnership by reason of
such Person succeeding to the interest in the Partnership of a
Partner by assignment of all or any part of a Partner's interest
in the Partnership. To the extent a substituted Partner receives
less than 100% of the interest in the Partnership of a Partner he
succeeds, the original Capital Account of such substituted
Partner and his Capital Contribution shall be in proportion to
the interest he receives and the Capital Account of the Partner
who retains a partial interest in the Partnership and his Capital
Contribution shall continue, and not be replaced, in proportion
to the interest he retains. Nothing in this Section 3.3 shall
affect the limitations on transferability of Partnership
interests set forth in this Agreement.
3.4. Withdrawal of Capital.
Except as may be specifically provided in Article V hereof,
no Partner shall have the right to withdraw from the Partnership
all or any part of his Capital Contribution. No Partner shall
have any right to demand and receive property or cash of the
Partnership in return of his Capital Contribution except as may
be specifically provided in this Agreement.
3.5. Liability of Limited Partners.
No Limited Partner shall be liable for any debts,
liabilities, contracts or obligations of the Partnership except
to the extent such Limited Partner shall undertake such liability
pursuant to a separate written instrument. A Limited Partner
shall be liable to the Partnership only to make payments of his
Capital Contribution as and when due hereunder, and, after his
Capital Contribution shall be fully paid, no Limited Partner
shall, except as otherwise required by the Uniform Act, be
required to make any further Capital Contributions or lend any
funds to the Partnership.
3.6. Additional Limited Partners.
3.6.1. Except as may be expressly provided elsewhere
in this Agreement, the General Partner shall have no right or
authority to admit Limited Partners other than those being
admitted pursuant to Section 3.2 unless such admission shall have
received the Consent of the Special Limited Partner.
<PAGE>
3.6.2. Any incoming Limited Partner shall, as a
condition of receiving any interest in Partnership property,
agree to be bound by the Property Documents to the same extent
and on the same terms as all other Partners of the same class.
Any incoming Limited Partner shall also agree to be bound by the
provisions of this Agreement.
3.6.3. Upon the admission of any additional Limited
Partners, the Schedule shall be amended to reflect the names,
addresses and Capital Contributions of such additional Limited
Partners, and the date each Limited Partner is admitted to the
Partnership.
4. -- Limited Partner Capital Contributions
4.1. Capital Contributions.
4.1.1. The Special Limited Partner shall pay its
entire Capital Contribution of $100.00 to the Partnership in cash
on the Admission Date. The Investor Limited Partner shall make
its Capital Contributions in the total amount of $592,000, which
shall be paid in Installments (subject to the provision of
Section 4.2.C) as set forth in the following payment schedule
(the "Payment Schedule") and upon satisfaction of the conditions
set forth in Section 4.1.B:
(1) The first installment in the amount of
$473,600 (the "First Installment") shall be contributed on the
Admission Date.
(2) The second installment in the amount of
$59,200 (the "Second Installment") shall be contributed on the
later of (a) Full Completion, (b) Basis Certification, and (c)
8609 Issuance.
(3) The third installment in the amount of
$59,200 (the "Third Installment") shall be contributed on the
initial occupancy of all dwelling units in the Property by
Qualified Tenants.
All Capital Contributions received by the Partnership
shall be used only for Partnership purposes permitted by this
Agreement.
4.1.2. The obligation of the Investor Limited
Partner to pay to the Partnership each Installment is subject to
the conditions that (i) each of the preceding Installments shall
have become due and payable and (ii) the delivery by the General
Partner to the Special Limited Partner of a written certificate
(the "Certificate"), which shall be addressed to the Special
Limited Partner and the Investor Limited Partner and signed by
the General Partner, and which shall state that, as of the date
of execution of such Certificate, (i) the Installment in question
is due and payable to the Partnership (except with regard to the
mere passage of time to any certain date set forth in the Payment
Schedule), and (ii) all preconditions (except with regard to the
mere passage of time to any certain date set forth in the Payment
Schedule), representations, warranties and agreements applicable
to such Installment set forth in Sections 4.1 and 6.6 and
elsewhere in this Agreement have been satisfied, or are true and
correct, as the case may be; provided, however, that the Investor
Limited Partner shall not withhold funding of an Installment
because a lien exists against the Property in violation of the
representation contained under Section 6.6.I, if (i) that lien is
being disputed by the Partnership, (ii) a bond is filed to cover
such lien pursuant to section 572.15 of the Iowa state statutes,
and (iii) the representation under Section 6.6.I would be true if
such bond were used to pay such lien. The Certificate shall
include as an exhibit thereto a letter from the attorney who
issued the title opinion (such letter to be dated within 15 days
of the date of the Certificate) verifying that no liens, deeds or
other document effecting title to the Property have been filed
against the Property since the date of the last title opinion,
and otherwise evidencing the accuracy of the representation set
forth in Section 6.6.I. The Certificate delivered with respect
to the First Installment shall be dated as of the Admission Date,
and the Certificate delivered with respect to each subsequent
Installment shall be dated no earlier than 15 days prior to the
date of payment of such Installment. By acceptance of such
Installment on behalf of the Partnership, the General Partner
shall be deemed to have reaffirmed and ratified the Certificate
as of the date such Installment is paid to the Partnership.
<PAGE>
4.1.3. If as of the date when any Installment or
portion thereof would otherwise be payable to the Partnership
pursuant to the Payment Schedule, the Certificate required under
Section 4.1.B cannot truthfully be given, then the Installment
shall not be payable to the Partnership unless and until (a) the
General Partner shall resolve the circumstances which prevent
delivery of such Certificate, (b) such resolution shall have been
effected in a manner and under circumstances such that the
Investor Limited Partner shall not have irrevocably lost any
substantial part of the benefits of this Agreement, (c) the
General Partner shall not otherwise be in default hereunder and
(d) the Certificate shall be delivered in compliance with the
provisions of Section 4.1.B; provided, however, that, if the
foregoing prerequisites to payment of such Installment shall not
be met on or before December 31, 2001, then the Partnership shall
forever waive all right to receive any portion of such
Installment; provided, however, that if (i) the General Partner
is unable to deliver the Certificate by that date because one or
more of the representations required under Section 6.6 are not
true, (ii) the General Partner has requested from the Special
Limited Partner additional time to correct the situation(s)
making such representations untrue, and (iii) the Special Limited
Partner has granted its Consent to the request for additional
time (which Consent shall not be unreasonably withheld), then the
date after which the Partnership shall forever waive all right to
receive any portion of such Installment shall be extended from
December 31, 2001 to such later date as the General Partner has
requested and the Special Limited Partner given its Consent.
4.2. Special Adjustments.
Upon occurrence of the events set forth in the following
paragraphs, the following adjustments shall be made:
4.2.1. Low Income Housing Credit Adjustment.
(1) If the Annual Reported Credit which will
apply to each year of the Credit Period is less than $84,318,
then the General Partner shall pay to the Investor Limited
Partner, in the manner provided in Section 4.2.C below, an
Adjustment Amount equal to 75% of the excess of (a) the sum of
the Projected Credit for all years included in the table in the
definition of "Projected Credit" minus (b) the sum of the Low
Income Housing Credit which will be allocated to the Investor
Limited Partner for all such years based on the Annual Reported
Credit. If instead such Annual Reported Credit is greater than
$84,318, then an offsetting Adjustment Amount shall be determined
as aforesaid which shall be applied to reduce any Adjustment
Amount which would otherwise be due pursuant to Sections 4.2.A(2)
or (3) or Section 4.2.B.
(2) In the event that the Actual Credit for 2000
is less than the Projected Credit for such year (after the
Projected Credit has been revised by any adjustment made pursuant
to Section 4.2.A(1) above), then the General Partner shall pay to
the Investor Limited Partner, in the manner provided in Section
4.2.C below, an Adjustment Amount equal to 75% of the total
shortfall in Projected Credit, and, to the extent the shortfall
will be deferred pursuant to Section 42(f)(2)(B) of the Code, the
Projected Credit for 2010 shall be respectively increased.
(3) If for any reason (except changes in federal
income tax law), the amount of Actual Credit for any year is less
than the Projected Credit for such year after the Projected
Credit has been revised by any adjustments made pursuant to
Sections 4.2.A(1) or 4.2.A(2) above), then the General Partner
shall pay to the Investor Limited Partner, in the manner provided
in Section 4.2.C below, an Adjustment Amount equal to the sum of
(a) the shortfall in Projected Credit for such year and the
corresponding shortfall for all future years which will also
occur due to the circumstances in question, plus (b) the amount
of any Low Income Housing Credit recapture amount (as defined in
Code Section 42(j), including any interest and/or penalties due
to the Internal Revenue Service) and an amount sufficient to pay
any tax liability owed by the Limited Partners resulting from
receipt of the foregoing amounts (calculated at an assumed tax
rate of 40%). It is understood and acknowledged that the
provisions of this Section 4.2.A(3) may be applied with respect
to each year of the Credit Period.
<PAGE>
(4) "Projected Credit" shall mean the amount for
each year expected to be allocated to the Investor Limited
Partner as set forth in the table below:
Year Projected Credit
------------------------------------------
2001 $77,292
2002 and each year
thereafter through 2010 $84,318
2011 $7,027
When any adjustment is made pursuant to this Section 4.2.A, the
"Projected Credit" for purposes of any future adjustment shall be
revised to equal the Actual Credit on which such adjustment was
computed.
(5) "Actual Credit" means, with respect to any
tax year, the total amount of Low Income Housing Credit actually
reported by the Partnership on its tax return for that tax year
and allocated to the Investor Limited Partner and not disallowed
by any taxing authority, as subsequently adjusted (if applicable)
by any Tax Credit recapture amounts (as defined in Section
42(j)(2) of the Code).
(6) "Annual Reported Credit" means the annual
amount of Low Income Housing Credit which is expected to be
allocated by the Partnership to the Investor Limited Partner on
the Partnership tax return for each year of the Credit Period
(subject only to timing adjustments such as placed in service and
occupancy dates), as determined and reflected in a statement to
be prepared by the Accountants after Full Completion and 8609
Issuance and which (a) shall be based on an audit by the
Accountants of Development Costs, (b) shall include supporting
documentation and/or certifications from the General Partner and
the Accountants indicating the date when each building comprising
the Property was placed in service and indicating the number and
percentage of tenants occupying units in the Property who are
Qualified Tenants and (c) on which the Accountants shall express
a favorable opinion as to fair presentation. In no event shall
the amount of the Development Completion Fee which is taken into
account in computing the Annual Reported Credit exceed the lesser
of (a) the amount of such fee actually paid or to be paid
pursuant to Section 6.11.A and (b) the amount allowable by the
Credit Agency.
<PAGE>
4.2.2. Intentionally Omitted.
4.2.3. Adjustment Procedure.
When an "Adjustment Amount" shall become due from the
General Partner pursuant to this Section 4.2, it shall be paid to
the Investor Limited Partner (together with interest from the
date the Adjustment Amount is determined to the date paid at the
annual rate of the Prime Rate plus 4%, if the Adjustment Amount
exceeds the amount of the succeeding Installments or is
determined after all Installments have been paid) by paying such
amount to the Partnership in satisfaction of the Investor Limited
Partner's obligation to pay the corresponding amount of the
Installment which is next due (and, if necessary, succeeding
Installments in order until the Adjustment Amount is fully paid),
and the Investor Limited Partner shall pay only the remaining
amount (if any) of such Installment(s).
If the Adjustment Amount (including interest as aforesaid)
exceeds the amount of the succeeding Installments or is
determined after all Installments have been paid, then the
General Partner shall pay, not later than 15 days following the
determination of the Adjustment Amount, to the Investor Limited
Partner an amount equal to any portion of the Adjustment Amount
which cannot be applied to succeeding Installments. If such
amount is not paid to the Investor Limited Partner by the date
required above, then the interest rate accruing thereon shall be
increased to the rate of 15% per annum retroactively to the
beginning of the interest accrual period.
The payment made to the Partnership on behalf of the
Investor Limited Partner shall be deemed to be indemnification
paid to the Investor Limited Partner by the General Partner for
breach of warranty of the availability of the full Projected
Credit and/or the full depreciation tax deductions, shall not
constitute a Capital Contribution, loan or advance by the General
Partner and shall not be reimbursable or repayable to the General
Partner by the Partnership or the Investor Limited Partner. If
the General Partner shall default in making such payment to the
Partnership, the Partnership's remedies shall be only against the
General Partner and the Investor Limited Partner shall
nevertheless be deemed to have paid its entire Installment in
full.
4.3. Repurchase Obligation of the General Partner.
Upon the occurrence of any of the Repurchase Events set
forth below, each Limited Partner shall have the right to elect
to sell its interest in the Partnership by sending written notice
(the "Election Notice") thereof to the General Partner at any
time (provided that such notice must be sent within 90 days after
receipt by such Limited Partner of notice of the occurrence of a
Repurchase Event from the General Partner (which notice the
General Partner shall be obligated to give promptly to each
Limited Partner). The purchase shall be made by the General
Partner within 75 days after the receipt of the Election Notice.
The "Repurchase Events" which shall create the aforesaid right to
be repurchased shall be any of the following:
1. The failure of the Partnership to achieve Minimum Set
Aside and to continue to maintain occupancy in compliance with
Minimum Set Aside throughout the Compliance Period; or
2. A determination by the Special Limited Partner or the
Internal Revenue Service that the Property is ineligible for 10%
or more of the Projected Credit.
<PAGE>
3. The failure of the Partnership to execute and record by
December 31, 1999 a valid extended use agreement as required
pursuant to Section 42 of the Code.
The purchase price for any of the purchases described above
shall be an amount in cash equal to the Outstanding Capital of
each selling Limited Partner plus interest at the annual rate of
the Prime Rate plus 4%, from the occurrence of the Repurchase
Event through the date the purchase price is paid, less the value
of the financial benefits previously received by the selling
Limited Partner through the first day of the month in which the
Repurchase Event occurs. (The financial benefits received by the
selling Limited Partner shall be computed as: (i) tax credits
allocated to the selling Limited Partner multiplied by 72%, plus
(ii) tax losses allocated to the selling Limited Partner
multiplied by 40%, plus (iii) cash distributions received by the
selling Limited Partner.) If at the time of such repurchase, the
payment of the purchase price plus interest to the selling
Limited Partners constitutes a violation of the Uniform Act, the
General Partner shall (i) contribute sufficient additional
Capital to the Partnership to permit such repurchase without
constituting such a violation, and (ii) shall indemnify and hold
harmless each selling Limited Partner against all loss and damage
by reason of such repurchase being in violation of the Uniform
Act.
Upon the purchase of such interest the General Partner shall
become a Substitute Investor Limited Partner to the extent of the
Limited Partner interest acquired by such General Partner, and
the interest as a Limited Partner of each selling Limited Partner
shall terminate. Upon the occurrence of any event which requires
the General Partner to give notice of the obligation of the
General Partner to purchase the interest of the Limited Partners,
as herein described, the Investor Limited Partner shall have no
further obligation to pay any subsequent Installment of its
Capital Contribution unless the Investor Limited Partner fails to
elect, within the time described above, to have its interest
repurchased.
5. -- Profits, Losses and Distributions
5.1. Profits, Losses and Tax Credits.
5.1.1. Except as otherwise provided in this Article
V, for each fiscal year or portion thereof, all profits,
tax-exempt income, gains, losses, nondeductible expenditures and
tax credits incurred and/or accrued by the Partnership, other
than those arising from a Capital Transaction, shall be allocated
1% to the General Partner, and 99% to the Limited Partners.
5.1.2. Except as otherwise provided in this Article
V, all profits and losses arising from a Capital Transaction
shall be shared by the Partners, as of the end of the fiscal year
in which such Capital Transaction occurs, as follows:
As to profits:
--------------
First, an amount of profit equal to the aggregate negative
balances (if any) in the Capital Accounts of all Partners having
negative Capital Accounts shall be allocated to such Partners in
proportion to the negative Capital Account balances until all
such Capital Accounts shall have a zero balance; and
<PAGE>
Second, an amount of profits shall be allocated to each of
the Partners until the positive balance in the Capital Account of
each Partner equals the amount of cash which would be distributed
to such Partner in accordance with the provisions of Clauses
Fifth through Eighth of Section 5.2.B if the aggregate amount of
such Capital Accounts balances were cash available for
distribution.
As to losses:
-------------
First, an amount of losses equal to the aggregate positive
balances (if any) in the Capital Accounts of all Partners having
positive balance Capital Accounts shall be allocated to such
Partners in proportion to their positive Capital Account balances
until all such Capital Accounts shall have zero balances;
provided, however, that if the amount of losses so to be
allocated is less than the sum of the positive balances in the
Capital Accounts of those Partners having positive balances in
their Capital Accounts, then such losses shall be allocated to
the Partners in such proportions and in such amounts so that the
Capital Account balances of each Partner shall equal, as nearly
as possible, the amount such Partner would receive if an amount
equal to the excess of (a) the sum of all Partners' balances in
their Capital Accounts computed prior to the allocation of losses
under this clause First over (b) the aggregate amount of losses
to be allocated to the Partners pursuant to this clause First
were distributed to the Partners in accordance with the
provisions of Clauses Fifth through Eighth of Section 5.2.B; and
Second, the balance, if any of such losses, to those
Partners and in those percentage shares set forth in Section
5.1.A.
C. Notwithstanding the foregoing provisions of
Sections 5.1.A and 5.1.B, in no event shall any losses be
allocated to a Limited Partner if and to the extent that such
allocation would cause, as of the end of the Partnership taxable
year, the negative balance in such Limited Partner's Capital
Account to exceed such Limited Partner's obligation, if any, to
restore deficits in his Capital Account pursuant to Section 5.3.A
or deemed under Treasury Regulation Section 1.704-1(b)(2)(ii)(c)
plus such Limited Partner's share of Partnership Minimum Gain
plus such Limited Partner's share of Partner Non-Recourse Debt
Minimum Gain. Any losses which are not allocated to the Limited
Partners by virtue of the application of this Section 5.1.C shall
be allocated to the General Partner. For purposes of this
Section, a Partner's Capital Account shall be treated as reduced
by Qualified Income Offset Items.
D. The terms "profits" and "losses" used in this
Agreement shall mean income and losses, and each item of income,
gain, loss, deduction or credit entering into the computation
thereof, as determined in accordance with the accounting methods
followed by the Partnership computed in a manner consistent with
Treasury Regulation Section 1.704-1(b)(2)(iv). Profits and
losses for federal income tax purposes shall be allocated in the
same manner as profits and losses in this Section 5.1 subject to
Section 5.4.A.
5.2. Distributions Prior to Dissolution.
5.2.1. Distributions of Cash Flow. Cash Flow for
each fiscal year (or fractional portion thereof) following the
Admission Date shall be applied as follows:
<PAGE>
(1) Fifty percent (50%) of Cash Flow
shall be applied in the following priority:
(a) First, to the payment of
outstanding Operating Deficit Loans;
(b) Second, to the payment
of the Incentive Management Fee; and
(c) Third, to a distribution
to the General Partner.
(2) Fifty percent (50%) of remaining
Cash Flow shall be distributed 1.0% to the General Partner (less
any distributions made to the General Partner pursuant to clause
(1)(c)) and the balance shall be distributed to the Limited
Partners.
Distributions of Cash Flow to the Partners shall be made at
such reasonable intervals during the fiscal year as shall be
determined by the General Partner, and in any event shall be made
within 45 days after approval from USDA-Rural Development.
5.2.2. Distributions of Capital Transaction
Proceeds. Prior to dissolution, and subject to any applicable
Lender regulations, if the General Partner shall determine from
time to time that there are cash proceeds available for
distribution from a Capital Transaction, such cash proceeds shall
be applied or distributed, as the case may be, as follows:
First, to the discharge, to the extent required by any
lender or creditor, of debts and obligations of the Partnership,
but excluding debts and obligations provided for below in this
Section 5.2.B;
Second, to fund reserves for contingent liabilities to the
extent deemed reasonable by the General Partner, the Special
Limited Partner and the Accountants;
Third, to the payment of outstanding Operating Deficit Loans;
Fourth, in connection with any sale of the Property (meaning
the transfer of ownership of the Property to another Person), the
Partnership shall pay to the General Partner or its designee a
sales commission equal to the lesser of (i) six percent (6%) of
the sales price of the Property, or (ii) the fee which would
customarily be payable to third parties for such services, less
any amount actually paid by the Partnership to third parties for
such services.
Fifth, to the General Partner an amount equal to five
percent (5%) of remaining proceeds, less any amount paid to the
General Partner pursuant to clause Fourth above;
Sixth, to the Investor Limited Partner an amount equal to
its Outstanding Capital;
<PAGE>
Seventh, to the General Partner an amount equal to its
Outstanding Capital, plus any amounts paid by the General Partner
to the Partnership pursuant to Section 5.3.A to bring such
General Partner's negative Capital Account balance up to zero; and
Eighth, any balance thereof, 60% to the General Partner and
40% to the Limited Partners.
5.3. Distributions Upon Dissolution.
5.3.1. Upon dissolution and termination, after
payment of, or adequate provision for, the debts and obligations
of the Partnership, the remaining assets of the Partnership (or
the proceeds of sales or other dispositions in liquidation of the
Partnership assets, as may be determined by the remaining or
surviving General Partner) shall be distributed to the Partners
in accordance with the positive balances in their Capital
Accounts after taking into account all Capital Account
adjustments for the Partnership taxable year, including
adjustments to Capital Accounts pursuant to Sections 5.1.B and
5.3.B. In the event that a General Partner has a negative
balance in its Capital Account following the liquidation of the
Partnership or its interest in the Partnership after taking into
account all Capital Account adjustments for the Partnership
taxable year in which the liquidation occurs, such General
Partner shall pay to the Partnership in cash an amount equal to
the negative balance in its Capital Account. Such payment shall
be made by the end of such taxable year (or, if later, within 90
days after the date of such liquidation) and shall, upon
liquidation of the Partnership, be paid to recourse creditors of
the Partnership or distributed to other Partners in accordance
with the positive balances in their Capital Accounts.
5.3.2. With respect to assets distributed in kind to
the Partners in liquidation or otherwise, (i) any unrealized
appreciation or unrealized depreciation in the values of such
assets shall be deemed to be profits and losses realized by the
Partnership immediately prior to the liquidation or other
distribution event; and (ii) such profits and losses shall be
allocated to the Partners in accordance with Section 5.1.B
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. For the purposes of this Section 5.3.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 computed in
accordance with Treasury Regulation Section 1.704-1(b). This
Section 5.3.B is merely intended to provide a rule for allocating
unrealized gains and losses upon liquidation or other
distribution event, and nothing contained in this Section 5.3.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 appraiser to be
selected by the General Partner with the Consent of the Special
Limited Partner.
5.4. Special Provisions.
Notwithstanding the foregoing provisions in this Article V:
A. For federal income tax purposes, income, gain,
loss and deduction with respect to property which has a variation
between its basis computed in accordance with Treasury Regulation
Section 1.704-1(b) and its basis computed for federal income tax
purposes shall be shared among Partners so as to take account of
such variation in a manner consistent with the principles of
Section 704(c) of the Code and Treasury Regulation 1.704-3.
B. Except as otherwise provided in this Article V
where profits, losses or distributions are allocated according to
Capital Account balances, all profits, losses, credits and
distributions shared by the Partners in each class of Partners
(e.g., the General Partner class or the Limited Partner class)
shall be shared by each Partner in such class in the percentages
set forth on the Schedule.
<PAGE>
C.1. If (i) the Partnership incurs recourse obligations
or Partner Non-Recourse Debt to the General Partner or any
Related Persons (including without limitation Operating Deficit
Loans) or (ii) the Partnership incurs losses from extraordinary
events which are not recovered from insurance or otherwise
(collectively "Recourse Obligations") in respect of any
Partnership taxable year, then the calculation and allocation of
profits and losses shall be adjusted as follows: first, an
amount of deductions (consisting of operating expenses but not
cost recovery deductions) attributable to the Recourse
Obligations shall be allocated to the General Partner; and
second, the balance of such deductions shall be allocated as
provided in Section 5.1.A.
C.2. If the Partnership makes any payment with respect
to an obligation with respect to which an allocation of
deductions was made under Section 5.4.C.1, then the calculation
and allocation of profit and losses in respect of the Partnership
taxable year of such payment shall be adjusted as follows: first,
an allocation of gross income shall be allocated to the Partner
or Partners to whom the deductions were allocated under Section
5.4.C.1 in an amount equal to the lesser of (i) the amount of
such deductions minus all previous allocations with respect to
such deductions under this Section 5.4.C.2 or (ii) the amount of
such payment; and second, the balance of such gross income shall
be allocated as provided in Section 5.1.A.
D. If there is a net decrease in Partner Non-Recourse
Debt Minimum Gain during a Partnership taxable year, then each
Partner with a share of the minimum gain attributable to such
debt at the beginning of such year will be allocated items of
income and gain (including gross income if necessary) for such
year (and, if necessary, subsequent years) in proportion to, and
to the extent of, an amount equal to such Partner's share of the
net decrease in Partner Non-Recourse Debt Minimum Gain during the
year. A Partner is not subject to this Partner Non-Recourse Debt
Minimum Gain chargeback to the extent that any of the exceptions
provided in Treasury Regulation Section 1.704-2(i)(4) applied
consistently with Treasury Regulation Section 1.704-2(f)(2)-(5)
apply. Such allocations shall be made in a manner consistent
with the requirements of Treasury Regulation Section
1.704-2(i)(4) under Section 704 of the Code.
E. If the Partnership shall receive any purchase
money indebtedness in partial payment of the purchase price of
the Property and such indebtedness is distributed to the Partners
pursuant to the provisions of Section 5.2.B or Section 5.3, the
distributions of the cash portion of such purchase price and the
principal amount of such purchase money indebtedness hereunder
shall be allocated among the Partners in the following manner.
On the basis of the sum of the principal amount of the purchase
money indebtedness and cash payments received on the sale (net of
amounts required to pay Partnership obligations and fund
reasonable reserves), there shall be calculated the percentage of
the total net proceeds distributable to each class of Partners
based on Section 5.2.B or under Section 5.3, as applicable,
treating cash payments and purchase money indebtedness principal
fungibly for this purpose, and the respective classes shall
receive such respective percentages of the net cash purchase
price and purchase money principal. Payments on such purchase
money indebtedness retained by the Partnership shall be
distributed in accordance with the respective portions of
principal allocated to the respective classes of Partner in
accordance with the preceding sentence, and if any such purchase
money indebtedness shall be sold, the sale proceeds shall be
allocated in the same proportion.
<PAGE>
F. If there is a net decrease in Partnership Minimum
Gain during a Partnership taxable year, each Partner will be
allocated items of income and gain (including gross income if
necessary) for such year (and, if necessary, subsequent years) in
the proportion to, and to the extent of, an amount equal to such
Partner's share of the net decrease in Partnership Minimum Gain
during the year. A Partner is not subject to this Partnership
Minimum Gain chargeback to the extent that any of the exceptions
provided in Treasury Regulation Section 1.704-2(f)(2)-(5) apply.
Such allocations shall be made in a manner consistent with the
requirements of Treasury Regulation Section 1.704-2(f) under
Section 704 of the Code.
G. If a Limited Partner unexpectedly receives (1) an
allocation of loss or deduction or expenditures described in
Section 705(a)(2)(B) of the Code made (a) pursuant to Section
704(e)(2) of the Code to a donee of an interest in the
Partnership, (b) pursuant to Section 706(d) of the Code as the
result of a change in any Partner's interest in the Partnership,
or (c) pursuant to Regulation Section 1.751-1(b)(2)(ii) as a
result of a distribution by the Partnership of unrealized
receivables or inventory items or (2) a distribution, and such
allocation and/or distribution would cause the negative balance
in such Partner's Capital Account to exceed such Partner's
obligation, if any, to restore deficits in its Capital Account
pursuant to Section 5.3.A or deemed under Treasury Regulation
Section 1.704-1(b)(2)(ii)(c) plus its share of Partner
Non-Recourse Debt Minimum Gain plus its share of Partnership
Minimum Gain, then such Partner shall be allocated items of
income and gain (including gross income if necessary) in an
amount and manner sufficient to eliminate such negative balance
as quickly as possible. For purposes of this Section, a
Partner's Capital Account shall be treated as reduced by
Qualified Income Offset Items.
H. Notwithstanding anything to the contrary herein,
it is the intention of the Partnership to conform to the
requirements of any Treasury regulations issued with respect to
the allocation of Partnership items, in a manner maximizing the
benefits to the Limited Partners, particularly with regard to any
special provisions with respect to nonrecourse indebtedness. The
General Partner may, with the Consent of the Special Limited
Partner, amend Article V to comply with any such regulations.
I. In applying the provisions of Article V with
respect to distributions and allocations, the following ordering
of priorities shall apply:
(1) Capital Accounts shall be deemed to be
reduced by Qualified Income Offset Items.
(2) Capital Accounts shall be reduced by
distributions of Cash Flow under Section 5.2.A.
(3) Capital Accounts shall be reduced by
distributions from Capital Transactions under Section
5.2.B.
<PAGE>
(4) Capital Accounts shall be increased by
any Minimum Gain chargeback under Section 5.4.D or
5.4.F.
(5) Capital Accounts shall be increased by
any Qualified Income Offset under Section 5.4.G.
(6) Capital Accounts shall be increased by
allocations of profits under Section 5.1.A.
(7) Capital Accounts shall be reduced by
allocations of losses under Section 5.1.A.
(8) Capital Accounts shall be reduced by
allocations of losses under Section 5.1.B.
(9) Capital Accounts shall be increased by
allocations of profits under Section 5.1.B.
K. To the maximum extent permitted under the Code,
allocations of profits and losses shall be modified so that the
Partners' Capital Accounts reflect the amount they would have
reflected if adjustments required by Sections 5.4.D, 5.4.F and
5.4.G had not occurred.
6. -- General Partner Rights, Powers and Duties
6.1. Restrictions on Authority.
Notwithstanding any other provisions of this Agreement, the
General Partner shall have no authority (a) to perform any act in
violation of (i) any applicable law or regulations, (ii) any
agreement between the Partnership and the Lenders or (iii) the
Property Documents, or (b) to do any act required to be approved
or ratified by the Limited Partners under the Uniform Act. The
General Partner shall not have any authority to do any of the
following specific acts without the Consent of the Special
Limited Partner:
A. following completion of construction of the
Property, to construct any new capital improvements, or to
replace any existing capital improvements, which construction or
replacement would substantially alter the character or use of the
Property, or
B. to acquire for the Partnership any real property
in addition to the Property, other than fee title or easements to
de minimis parcels of land for the purpose of correcting record
title to the Property, or
C. except to the extent permitted under Section
6.13.B, if any, to be personally liable on, or to guarantee, or
to permit any Related Person of a Partner of the Partnership to
be personally liable on, to guarantee or otherwise bear the
Economic Risk of Loss with respect to, the Mortgages, or
<PAGE>
D. except as otherwise provided in Section 6.13.C, to
refinance, sell, convey or mortgage the Property or to materially
amend or modify any Mortgage or Property Document, or
E. to permit the occupancy of dwelling units in the
Property in violation of Minimum Set Aside or any other
requirement which must be complied with to enable the Property to
generate the Projected Credit, or
F. to lease (i) pursuant to one lease (or pursuant to
a series of leases which are negotiated as part of one
transaction) more than 50% of the Property as an entity or (ii)
the Property in such a manner as to cause the Property or any
part thereof to be treated as tax-exempt use property within the
meaning of Section 168(h) of the Code, or
G. to borrow on the general credit of the
Partnership, except as specifically permitted hereunder as to
Operating Deficit Loans and pursuant to Section 6.13, or
H. to cause the Partnership to operate any business
on the Property other than the business of renting dwelling
units, or to rent any portion of the Property other than for
occupancy as a dwelling unit, or
I. to cause the Partnership to take any action
referred to in clause (ii) of the definition of "Event of
Bankruptcy" in Article XI.
6.2. Personal Services.
No Affiliate shall receive any compensation from the
Partnership for services rendered to the Partnership in
connection with the construction or operation of the Property or
any other aspect of the business of the Partnership unless such
compensation is provided for in Article VI or, if for services
not compensated for pursuant to Article VI, such compensation is
reasonable, does not exceed fees which would be payable on an
arms-length basis to a non-Affiliate in the business of supplying
such services, and complies with Lender regulations. Nothing
herein shall prevent the General Partner from engaging other
Persons to perform services for the General Partner in connection
with the Partnership or the Property, providing such Persons are
paid from funds of the General Partner. Any Partner may engage
independently or with others in other business ventures of every
nature and description including, without limitation, the
ownership, operation, management, syndication and development of
real estate, including real estate which may be in competition
with the Property and neither the Partnership nor any Partner
shall have any rights by virtue of this Agreement in and to such
independent ventures or the income or profits derived therefrom.
6.3. Business Management and Control; Tax Matters Partner.
6.3.1. The General Partner shall have the exclusive
right to manage the business of the Partnership and, subject to
all provisions of this Agreement including without limitation
Articles III and VI, shall have full power, authority and
discretion to cause the Partnership to do any of the acts
described in Section 2.4 hereof. No Limited Partner (except one
<PAGE>
who may also be a General Partner, and then only in its capacity
as General Partner) shall participate in or have control over the
Partnership business, except as provided in Article VIII hereof
or as required by law. The Partners hereby consent to the
exercise by the General Partner of the powers conferred on it by
this Agreement. No Limited Partner (except one who may also be a
General Partner, and then only in its capacity as a General
Partner) shall have any authority or right to act for or to bind
the Partnership.
6.3.2. All Partners hereby agree that, as long as it
shall be a General Partner, Burns & Burns, L.C. shall be the "Tax
Matters Partner." The Tax Matters Partner shall employ
experienced tax counsel to represent the Partnership in
connection with any audit or investigation of the Partnership by
the Internal Revenue Service, and in connection with all
subsequent administrative and judicial proceedings arising out of
such audit, and the fees of counsel shall be a Partnership
expense. The Tax Matters Partner shall keep the Partners
informed of all administrative and judicial proceedings, as
required by Section 6223(g) of the Code, and shall furnish to
each Partner a copy of each notice or other communication
received by the Tax Matters Partner from the Internal Revenue
Service. The Tax Matters Partner shall have no authority,
without the Consent of the Special Limited Partner, to (i) enter
into a settlement agreement with the Internal Revenue Service
which purports to bind Partners other than the Tax Matters
Partner, (ii) file a petition as contemplated in Section 6226(a)
or 6228 of the Code, (iii) intervene in any action as
contemplated in Section 6226(b) of the Code, (iv) file any
request contemplated in Section 6227(b) of the Code, (v) enter
into an agreement extending the period of limitations as
contemplated in Section 6229(b)(1)(B) of the Code or (vi) to file
any tax related litigation in a court other than the United
States Tax Court. In the event that the General Partner
designated as the Tax Matters Partner shall Retire from the
Partnership, the Partnership shall designate a successor Tax
Matters Partner in accordance with Treasury Regulation Section
301.6231(a)(7)-1(T) or any successor Regulation. The Partnership
shall notify the Internal Revenue Service of the designation of a
successor Tax Matters Partner for such year as well as all prior
years that the Retired General Partner was serving as Tax Matters
Partner.
6.4. Authority of General Partner.
6.4.1. Every contract, deed, mortgage, lease and
other instrument executed by a General Partner shall be
conclusive evidence in favor of every Person relying thereon or
claiming thereunder that, at the time of the delivery thereof
(except as shown in certificates or other instruments duly filed
with the Filing Office), (a) the Partnership was in existence,
(b) this Agreement had not been terminated or cancelled or
amended in any manner so as to restrict such authority, and (c)
such General Partner was duly authorized to execute such
instrument. Except as otherwise provided in a certificate or
other instrument filed in the Filing Office with respect to the
Partnership, any Person dealing with the Partnership or the
General Partner may always rely on a certificate signed by the
General Partner hereunder:
(1) as to who are the General Partner or
Limited Partners hereunder,
(2) as to the existence or nonexistence of
any fact or facts which constitute conditions precedent
to acts by the General Partner or are in any other
manner germane to the affairs of the Partnership,
(3) as to who is authorized to execute and
deliver any instrument or document of the Partnership,
(4) as to the authenticity of any copy of
this Agreement and amendments thereto, or
(5) as to any act or failure to act by the
Partnership or as to any other matter whatsoever
involving the Partnership or any Partner.
<PAGE>
6.4.2. If there shall be more than one General
Partner serving hereunder, each General Partner (with the Consent
of the Special Limited Partner and subject to the provisions of
Section 8.6) may from time to time, by an instrument in writing
or by a provision in this Agreement, delegate his powers and
authority hereunder to another General Partner or General
Partners to the extent stated therein. Such writing shall fully
authorize such other General Partner to act alone without the
requirement of any act or signature of the delegating General
Partner and to take any action of any type and to do anything and
everything which a General Partner may be authorized to take or
do hereunder, and the delegating General Partner thereafter shall
have no right, power or authority to act for the Partnership with
respect to the powers or authority so delegated. No such
delegation shall relieve the delegating General Partner of any of
its duties or obligations under this Agreement or otherwise with
respect to the Partnership.
6.5. Duties and Obligations.
6.5.1. The General Partner shall promptly take all
material actions which may be necessary or appropriate for the
completion of construction of the Property and the proper
maintenance and operation of the Property in accordance with the
provisions of this Agreement, the Property Documents, applicable
laws and regulations, and in compliance with the representations
and warranties in Section 6.6, and shall conduct the affairs of
the Partnership in compliance with Mortgage requirements and in a
manner consistent with the fiduciary obligations of the General
Partner under law. The General Partner shall devote to the
Partnership such time as may be necessary for the proper
performance of its duties.
6.5.2. The General Partner shall (a) cause the
Property to be insured against fire and other risks covered by
such insurance in the maximum amount required by any Lender,
and/or the Credit Agency, the Special Limited Partner or by good
management practices, and in any event in an amount equal to the
full replacement value of the Property (other than the land), (b)
obtain and keep in force adequate business or rental interruption
and worker's compensation insurance satisfactory to each Lender,
and to the Credit Agency and the Special Limited Partner, (c)
obtain and keep in force public liability insurance for the
benefit of the Partnership and its Partners in amounts from time
to time acceptable to the Credit Agency, and the Lenders and the
Special Limited Partner and in any event providing coverage at
least equivalent to a combined single limit bodily injury and
property damage liability insurance policy in the amount of not
less than $6,000,000 (of which up to $5,000,000 may be provided
under an "umbrella" policy). All of the foregoing insurance
policies shall be written by insurance companies rated A or
better by Best's, include the Investor and Special Limited
Partners as named insureds, and include a provision requiring the
insurance company to notify the Special Limited Partner in
writing 30 days prior to the cancellation of any such policy.
The General Partner shall promptly provide the Special Limited
Partner with copies of such insurance policies upon request from
time to time. In the event of any casualty and provided that the
insurance proceeds shall be made available therefor and such
restoration is permitted by the Lenders and receives the Consent
of the Special Limited Partner, the General Partner shall repair
any damage to the Property which was caused by such event, so as
to restore the Property (as nearly as possible) to the condition
and market value thereof immediately prior to such occurrence.
The General Partner shall be compensated for its efforts to
restore the Property in an amount equal to five percent (5%) of
the total restoration cost; provided however, that such payment
shall be not be made from Partnership funds, but shall be made
only from insurance proceeds after all other costs of restoration
have been paid.
6.5.3. The General Partner shall obtain a title
opinion regarding title to the Property in favor of the
Partnership, which opinion shall be subject to no exceptions
other than those referred to in Section 6.6.I.
6.5.4. The General Partner shall take such actions
as are necessary to make the Partnership eligible for the full
amount of the available Low Income Housing Credit (including
without limitation the renting of dwelling units at rents and to
tenants as required under Section 42 of the Code). The General
Partner shall operate the Property such that the right of each
tenant to occupancy of a dwelling unit shall be pursuant to an
agreement and for a charge which shall be separate from the
agreements and charges for the right of such tenant to receive
any services or any other benefits, and no tenant shall be
required to receive or pay for any of such other benefits as a
condition of occupancy.
<PAGE>
6.5.5. The General Partner shall elect to commence
the Credit Period for the Property as of January 1, 2001 except
that, if all of the dwelling units in the Property have been
initially occupied by Qualified Tenants by December 31, 2000, the
General Partner shall elect to commence the Credit Period in
2000. In that event, the Investor Limited Partner shall make an
additional Capital Contribution to the Partnership in the amount
of $7,500, and the Partnership shall pay to the General Partner
an incentive lease-up fee in the amount of $7,500.
6.5.6. The General Partner shall (i) not store
(except in compliance with applicable Hazardous Waste Laws) or
dispose of any Hazardous Material at the Property, or at or on
any other Facility or Vessel owned, occupied, or operated by any
General Partner; (ii) not transport or arrange for the transport
of any Hazardous Material (except in compliance with applicable
Hazardous Waste Laws); (iii) provide the Special Limited Partner
with written notice (x) upon any General Partner's obtaining
knowledge of any potential or known release, or threat of
release, of any Hazardous Material at or from the Property or any
other Facility or Vessel owned, occupied, or operated by any
General Partner or any Person for whose conduct any General
Partner is or was responsible or whose liability may result in a
lien on the Property; (y) upon any General Partner's receipt of
any notice to such effect from any Federal, state, or other
governmental authority; and (z) upon any General Partner's
obtaining knowledge of any incurrence of any expense or loss by
any such governmental authority in connection with the
assessment, containment, or removal of any Hazardous Material for
which expense or loss any General Partner may be liable or for
which expense or loss a lien may be imposed on the Property; and
(iv) indemnify and hold harmless the Partnership and the other
Partners against any losses, judgments, liabilities, expenses and
amounts paid in settlement of any claims sustained by any of said
indemnitees (including reasonable attorneys' fees, fines, damages
and similar payments) in connection with the violation by the
General Partner of any of the foregoing covenants or with the
presence of any Hazardous Material at the Property.
6.5.7. If requested to do so by the Special Limited
Partner at any time after the expiration of the fourteenth year
of the compliance period (as defined in Section 42(i)(1) of the
Code) or any later date to which the Partnership may have agreed
with the Credit Agency to defer its opportunity to make such
submission, the General Partner shall submit a written request to
the Credit Agency to find a Person to acquire the Partnership's
interest in the Property and/or take such other action permitted
or required by the Code as the Special Limited Partner may
reasonably request to effect a sale of the Property or to
terminate the extended use commitment of Section 42(h)(6)(B) of
the Code; provided that the proceeds to be received by the
Partnership with respect to any proposed sale or refinancing must
be sufficient to pay all outstanding amounts pursuant to Clauses
First through Fifth of Section 5.2.B.
6.5.8. Each obligation of the General Partner
hereunder shall be the joint and several obligation of each
General Partner, if there is more than one. In the event of a
default by the General Partner in the performance of any of its
obligations under this Agreement, then the amount in default
shall be offset against all payments from the Partnership to the
General Partner, including repayments of loans, returns of
Capital Contributions and payments of fees. Nothing in Sections
6.7 or 6.8 shall have the effect of relieving the General Partner
of any liability for any of its obligations set forth in this
Agreement.
6.5.9. The General Partner shall maintain a net
worth in an amount equal to at least the larger of (i) $600,000,
and (ii) the applicable estate and gift tax exclusion amount for
any given year set forth under Section 2010(c) of the Internal
Revenue Code; provided, however, that in no event shall the
General Partner be required to maintain a net worth in excess of
$1,000,000. The General Partner shall submit annual financial
statements to the Special Limited Partner within ninety (90) days
of the end of each calendar year.
<PAGE>
6.6. Representations and Warranties.
The General Partner hereby represents and warrants to each
Limited Partner that as a condition to the payment of each
Installment as provided in Section 4.1.B, the following are true
and will be true on the due date for payment to the Partnership
of each of such Installments, and that it will use its best
efforts to maintain the truth of such representations and
warranties which are then applicable to the Partnership at all
other times (except as otherwise provided):
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 Partners and to maintain the limited
liability of the Limited Partners in the manner provided in
Section 3.5.
B. Construction of the Property will be or has been
completed in substantial conformity with the Property Documents.
C. All Development Costs will be paid or provided for
by, or for the account of, the Partnership utilizing only those
sources of funds referred to in Section 6.9.
D. To the best of the knowledge and belief of the
General Partner, no event, occurrence or proceeding is pending or
threatened which would (a) materially adversely affect the
Partnership or its properties, (b) materially adversely affect
the ability of the General Partner or any Affiliate to perform
their respective obligations hereunder or under any other
agreement with respect to the Partnership or the Property, or (c)
prevent the completion of construction of the Property in
substantial conformity with the Property Documents. This
subparagraph shall be deemed to include, but not be limited to,
the following: (x) legal actions or proceedings before any
court, commission, administrative body or other governmental
authority having jurisdiction over the zoning applicable to the
Property, (y) labor disputes and (z) acts of any governmental
authority.
E. No material default (or event which, with the
giving of notice or the passage of time or both, would constitute
a material default) has occurred and is continuing on the part of
the General Partner under this Agreement or on the part of the
General Partner or the Partnership under any of the Property
Documents or any other agreement affecting the Property, the same
are in full force and effect, and no default by the Partnership,
the General Partner or any Affiliate under any of the Property
Documents has been asserted by any party thereto.
F. The Property is being operated in compliance with
the requirements of this Agreement and the Property Documents,
including without limitation the requirements of Section 6.5.C
hereof.
G. Except to the extent permitted under Section
6.13.B, if any, no Partner or Related Person of a Partner of the
Partnership has any personal liability or otherwise bears the
Economic Risk of Loss with respect to the payment of principal or
interest with respect to the debt evidenced by any of the
Mortgages.
H. There is no material violation by the Partnership
or the General Partner of any zoning, environmental or similar
regulation applicable to the Property; all necessary building and
other applicable permits have been obtained to permit the
construction of the Property; all permits necessary to operate
the Property for its intended use have been obtained; and the
Partnership has substantially complied with all applicable
municipal and other laws, ordinances and regulations relating to
such construction and use of the Property.
I. The Partnership owns the fee simple interest in
the Property, subject to no material liens, charges or
encumbrances other than the Permitted Loans and those which (a)
are permitted by the Property Documents and (b) do not materially
interfere with the use of the Property or any part thereof for
its intended purpose or have a material adverse effect on the
value of the Property.
J. The execution and delivery of all instruments and
the performance of all acts heretofore or hereafter made or taken
or to be made or taken pertaining to the Partnership or the
<PAGE>
Property by each General Partner and each Affiliate of a General
Partner which is a partnership, a limited liability company or a
corporation have been or will be duly authorized by all necessary
action by such Entity and the consummation of any such
transactions with or on behalf of the Partnership will not
constitute a breach or violation of, or a default under, the
partnership agreement, operating agreement, charter, by-laws or
comparable organizational documents of said Entity or any
agreement by which such Entity or any of its properties is bound,
nor constitute a violation of any law, administrative regulation
or court decree.
K. No Event of Bankruptcy has occurred with respect
to any General Partner or any Affiliate of a General Partner.
L. None of those Persons named in Section 3.1 hereof
as General Partner have Retired other than as permitted in
Section 8.1.
M. No Lender approval is required (or, if required,
such approval has been obtained) with respect to the execution or
delivery of this Agreement or the admission to the Partnership of
the Limited Partners.
N. No Person or Entity holds any equity interest in
the Property other than the Partnership.
O. The Partnership has the sole responsibility to pay
all maintenance and operating costs, including all taxes levied
and all insurance costs, attributable to the Property.
P. 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 Property is destroyed or
condemned or there is a diminution in the value of the Property.
Q. Except as otherwise provided in this Agreement, 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 Property.
R. The Property does not receive assistance under the
HUD Section 8 Moderate Rehabilitation Program other than under
the Stewart B. McKinney Homeless Assistance Act of 1988.
6.7. Liability.
The General Partner shall indemnify and hold harmless the
Partnership and the other Partners against any losses, judgments,
liabilities, expenses and amounts paid in settlement of any
claims sustained by any of said indemnitees (including reasonable
attorneys' fees, fines, damages and similar payments) in
connection with the Partnership, provided, however, that no
General Partner or Affiliate shall be liable, responsible or
accountable for damages or otherwise to the Partnership or any
Partner for any act performed under this Agreement or for any
failure to act, on its own part or that of any of its Affiliates,
if such course of conduct did not constitute misconduct,
negligence, material misrepresentation or material breach of
covenant, warranty or fiduciary duty to the Limited Partners and
such General Partner or Affiliate reasonably believed in good
faith that such course of conduct was in the best interest of the
Partnership and the Partners.
<PAGE>
6.8. Indemnification.
The General Partner and its Affiliates shall be indemnified
and held harmless by the Partnership against any losses,
judgments, liabilities, expenses and amounts paid in settlement
of any claims sustained by them (including reasonable attorneys
fees, fines, damages and similar payments) in connection with the
Partnership, provided that the same were not the result of a
course of conduct constituting misconduct, negligence, material
misrepresentation or material breach of covenant, warranty or
fiduciary duty, and that such General Partner or Affiliate
reasonably believed in good faith that such course of conduct was
in the best interest of the Partnership and the Partners
Notwithstanding the above, a General Partner, its Affiliates
and any person acting as a broker-dealer in connection with the
offering and sale of interests in the Partnership shall not be
indemnified by the Partnership for any losses, liabilities or
expenses arising from or out of an alleged violation of Federal
or state securities laws unless (1) there has been a successful
adjudication on the merits of each count involving alleged
securities law violations as to the particular indemnitee; or (2)
such claims have been dismissed with prejudice on the merits by a
court of competent jurisdiction as to the particular indemnitee;
or (3) a court of competent jurisdiction approves a settlement of
the claims against a particular indemnitee.
In any claim for indemnification for Federal or state
securities law violations, the party seeking indemnification
shall place before the court the position of the Securities and
Exchange Commission with respect to the issue of indemnification
for securities law violations.
The Partnership shall not incur the cost of the portion of
any insurance, other than public liability insurance, which
insures any party against any liability the indemnification of
which is herein prohibited.
Any indemnity under this Section 6.8 shall be provided out
of and to the extent of Partnership assets only, and no Limited
Partner shall have any personal liability on account thereof.
6.9. Development Completion Obligation.
6.9.1. The General Partner guarantees to the
Partnership and the other Partners to cause the Property to be
acquired and to complete development of the Property for a fixed
turnkey price of $1,399,332 (the "Guaranteed Development Cost"),
which obligation (the "Development Completion Obligation") shall
include without limitation (i) acquisition of fee simple title to
the Property subject only to those liens, restrictions and
encumbrances referred to in Section 6.6.I, (ii) completion of
construction of the Property substantially in accordance with the
Property Documents and remedy of any defects in the construction
of the Property or variances in construction from the Plans and
Specifications which in each case are or should have been
discovered within two years after Full Completion, (iii)
achievement of Stabilized Occupancy and payment of all Operating
Expenses and Debt Service in excess of Operating Revenues
attributable to the period through the achievement of Stabilized
Occupancy, (iv) payment of all costs and funding of all reserves
and escrows necessary to close the Permanent Mortgage and to fund
the Rent Up Reserves, and (v) payment in full of the Development
Services Fee (collectively "Development Costs").
<PAGE>
6.9.2. All funds (collectively "Development Funds")
constituting the proceeds of Permitted Loans and the Capital
Contributions paid by or on behalf of the Investor Limited
Partner shall be applied to pay when due all payments and
expenses required to carry out the Development Completion
Obligation. If Development Costs due at any time exceed
available Development Funds, then such excess Development Costs
shall be paid from funds which the General Partner shall be
required to furnish promptly to meet such Development Costs, and
such funds shall be returned to the General Partner from any
Development Funds which thereafter become available. If
Development Funds are not sufficient to return all funds to the
General Partner, then the shortfall shall be treated as follows:
(a) To the extent that total Development Costs exceed the
Guaranteed Development Cost, such excess shall be borne and
absorbed solely by the General Partner as part of its Development
Completion Obligation; and (b) to the extent that Development
Funds are less than the Guaranteed Development Cost, then the
shortfall shall constitute a Capital Contribution to the
Partnership by the General Partner.
6.10.Operating Expense Obligation.
If the Partnership requires any funds for Operating Expenses
(reduced by any deferral of payment of the Management Fee
required pursuant to Section 6.12.C) or Debt Service in excess of
the sum of (a) Operating Revenues plus (b) funds available in the
Rent Up Reserve to meet Operating Expenses and Debt Service then
payable, then such excess expenses ("Operating Deficits") shall
be paid from advances ("Operating Deficit Loans") which the
General Partner shall be required to make to the Partnership,
provided that Operating Deficit Loans need be made only to pay
Operating Deficits attributable to the period commencing on the
occurrence of Stabilized Occupancy and ending on the fourth
anniversary of such occurrence. Operating Deficit Loans shall
not bear interest and shall be repayable only to the extent
provided in Article V.
6.11.Development Services.
The Partnership shall engage the General Partner to perform,
or to engage and supervise others to perform, all activities
necessary to complete construction of the Property in accordance
with the Plans and Specifications, and shall pay the Development
Services Fee of 15% of Total Project Costs (as such term is
defined in the Development Agreement), up to a maximum of
$181,793, to the General Partner in return for such services.
The Development Services Fee shall be earned as development of
the Property progresses and shall be fully earned no later than
Full Completion.
6.12.Property Management.
6.12.1. The General Partner shall have overall
responsibility for managing the Property and obtaining a
Management Agent. The General Partner shall cause the
Partnership, prior to commencement of operation of the Property,
to enter into a Management Agreement with NMC/RPB Management
Company, L.C., of West Des Moines, Iowa to serve as the
Management Agent. If at any time after Full Completion:
(1) the Property shall be subject to a
substantial building code violation which shall not have been
cured within 90 days after notice from the applicable
governmental agency or department or the Special Limited Partner
or unless such violation(s) is (are) being validly contested by
the General Partner by proceedings which operate to prevent any
fines or criminal penalties from being levied against the
Partnership,
<PAGE>
(2) Operating Revenues in respect of any period
of six consecutive calendar months commencing after January 1,
2001 shall be insufficient to permit the Partnership to pay when
due on a current basis all Operating Expenses and Debt Service
due and owing in respect of such six month period, or
(3) the Management Agent or its agents or
employees have demonstrated incompetence or malfeasance (a
"breach") in the management of the Property, and such breach has
not been cured within 30 days after notice thereof has been given
to the Management Agent, the General Partner shall forthwith give
notice of such event to the Limited Partners and thereafter the
General Partner shall forthwith cause the Partnership to
terminate the Management Agreement with the Management Agent,
unless the Consent of the Special Limited Partner is obtained to
the retention of the Management Agent as the manager of the
Property. If the Management Agreement is terminated as aforesaid
or for any other reason, the General Partner shall immediately
proceed to select a new Management Agent for the Property which
selection shall be subject to the Consent of the Special Limited
Partner.
6.12.2. The Partnership shall not enter into any
Management Agreement which does not provide for deferral of the
Management Fee under the circumstances set forth in Section
6.12.C and termination by the Partnership (a) under the
circumstances set forth in Section 6.12.A, (b) in the event of
other malfeasance or nonperformance on the part of the Management
Agent, or (c) upon the Retirement from the Partnership in
violation of Section 8.1 of any General Partner as to whom the
Management Agent is an Affiliate. The General Partner shall have
the duty to manage the Property during any period when there is
no Management Agent, and shall be entitled to the Management Fee
with respect to any period during which it so manages, and must
comply with the provisions of this Agreement which would be
applicable to the Management Agent.
6.12.3. The Management Agent shall receive from the
Partnership the Management Fee provided for in the Management
Agreement from time to time in accordance with a reasonable and
competitive fee arrangement, provided that the Management Fee
payable to any Management Agent shall initially not exceed 5.0%
of gross Operating Revenues from the Management Fee Note Rate
Rent. Furthermore, any Management Agent which is an Affiliate of
a General Partner shall be obligated to defer payment of its
Management Fee to the extent necessary for any year so that the
Partnership will not incur an Operating Deficit for such year,
and the deferred amount shall then be payable in any future year
in which such payment, together with payment of all other
Operating Expenses and Debt Service for such future year, will
not result in an Operating Deficit for such future year. Any
change in the structure of the Management Fee shall require the
approval of USDA-Rural Development and the Consent of the Special
Limited Partner, which Consent shall not be unreasonably withheld.
6.12.4. The Partnership shall pay to the General
Partner for its services in supervising and monitoring the
performance of the Management Agent pursuant to the Management
Agreement an annual Incentive Management Fee (which Fee shall be
treated as a Partnership expense). The Incentive Management Fee
for each fiscal year shall be the amount available for payment
thereof from Cash Flow pursuant to Section 5.2.A(1) up to a
maximum which will not cause the total of the Management Fee plus
the Incentive Management Fee for such year to exceed 10% of
Operating Revenue for such year.
6.12.5. Intentionally Omitted.
6.12.6. Intentionally Omitted.
6.13.Borrowings.
6.13.1. All Partnership borrowings shall be subject
to the terms of this Agreement, including the restrictions set
forth in Section 6.1. To the extent borrowings are permitted,
such borrowings may be made from any source, including Partners
and Affiliates, except as otherwise provided in this Agreement.
If any Partner or Affiliate shall lend any monies to the
Partnership, the amount of any such loan shall not be an increase
of his Capital Contribution nor affect in any way his share of
the profits, losses or distributions of the Partnership, and, if
such loan is an Operating Deficit Loan, shall be unsecured. Any
loans which are made, other than Operating Deficit Loans, shall
bear interest and be on such other terms no less favorable to the
Partnership than comparable loans from non-Affiliates.
<PAGE>
6.13.2. Subject to the provisions of this Agreement,
the Partnership may borrow pursuant to the Permitted Loans such
amounts as may be required for the acquisition, development, and
construction of the Property and to meet the expenses of
operating the Property. Any other borrowings (excluding (a)
normal trade payables outstanding in the ordinary course of
business and (b) borrowings to meet Partnership expenditures to
remedy emergency circumstances) which are not contemplated by
this Agreement and which are in excess of $1,000 must receive the
Consent of the Special Limited Partner. All Mortgages shall
provide that no Partner or Related Person of a Partner of the
Partnership shall bear the Economic Risk of Loss with respect to
all or any part of principal or interest due with respect to the
debt evidenced by such Mortgage. The General Partner is
specifically authorized, except as otherwise limited in this
Agreement, to execute such documents as it deems necessary in
connection with the acquisition, development and financing of the
Property, including without limiting the generality hereof, the
Mortgages and other documents required by the Lenders in
connection with the Mortgages or the Project documents.
6.13.3. Each General Partner shall be bound by the
terms of the Property Documents and any other documents required
in connection therewith, but in no event shall any Partner or
Related Person be personally liable for the debt evidenced by any
Mortgage except to the extent permitted under Section 6.13.A, if
any. Any incoming General Partner shall as a condition of
receiving any interest in the Partnership property agree to be
bound by the Property Documents and any other documents required
by the Lenders in connection therewith to the same extent and on
the same terms as the other General Partner(s).
6.13.4. The General Partner may amend, modify or
refinance a Mortgage (including any required transfer or
conveyance of Partnership assets for security or mortgage
purposes), and sell, lease, exchange or otherwise transfer or
convey all or any substantial portion of the assets of the
Partnership; provided, however, that the terms of any refinancing
or material amendment or modification of a Mortgage or any such
sale, exchange or other transfer or conveyance must receive the
Consent of the Special Limited Partner before such transaction
shall be binding on the Partnership.
6.14.Reserves.
6.14.1. The General Partner shall cause the
Partnership to establish the Rent-Up Reserve in the amount of
$20,510, which shall be funded from Capital Contributions and/or
Mortgage proceeds prior to Full Completion. Rent-Up Reserve
funds shall be maintained in an account under the joint control
of the General Partner and the Special Limited Partner and shall
be prudently invested at the direction of the General Partner.
All earnings shall remain in the Rent-Up Reserve and be available
for the purpose thereof. Withdrawals from the Rent-Up Reserve
shall be made to fund Operating Deficits occurring prior to
achievement of Stabilized Occupancy. Any remaining balance of
the Rent-Up Reserve after the occurrence of Stabilized Occupancy
and the authorized return of initial operating reserve account
funds by USDA-Rural Development shall be distributed 50% to the
General Partner as an incentive management fee, and 50% to the
Investor Limited Partner as a return of its Outstanding Capital.
6.14.2. The General Partner shall cause the
Partnership to establish the Replacement Reserve which shall be
funded each year from Operating Revenue at the rate of $12,167
per year, up to a maximum total replacement reserve of $121,670.
Replacement Reserve Funds shall be maintained in an account under
the control of the General Partner, with the consent of the
Special Limited Partner, and shall be prudently invested at the
direction of the General Partner. All earnings shall remain in
the Replacement Reserve and be available for the purpose
thereof. Withdrawals from the Replacement Reserve shall be made
to fund capital repairs and replacements for the Property,
subject to the approval of USDA-Rural Development.
<PAGE>
7. -- Books and Records, Accounting and Reports
7.1. Books and Records.
The General Partner shall keep or cause to be kept complete
and accurate books and records of the Partnership which shall be
maintained in accordance with sound accounting practices and the
Uniform Act and shall be maintained and be available at the
principal office of the Partnership for examination by any
Partner, or his duly authorized representatives, at any and all
reasonable times. The Partnership may maintain such books and
records and may provide such financial or other statements as the
General Partner deems advisable.
A list of the names and addresses of all Partners shall be
maintained at the principal office of the Partnership and shall
be available at any and all reasonable times to any Partner or
his designated representative. Representatives of any Limited
Partner shall be permitted to visit and inspect the Property and
all books and records maintained at the Property from time to
time upon reasonable advance notice to the General Partner.
7.2. Bank Accounts.
The bank accounts of the Partnership shall be maintained in
such banking institutions as the General Partner shall determine
with Consent of the Special Limited Partner, and withdrawals
shall be made only in the regular course of business on such
signature or signatures, subject to the requirements of Section
8.6, as the General Partner shall determine. All deposits and
other funds not needed in the operation of the business shall be
deposited in interest-bearing accounts or invested in short-term
United States Government or municipal obligations maturing within
one year.
7.3. Accountants.
The Accountants for the Partnership shall be McGladrey &
Pullen, of Des Moines, Iowa, or such other certified public
accountants as shall be engaged by the General Partner with the
Consent of the Special Limited Partner.
7.4. Reports, Financial Statements, Tax Returns.
7.4.1. The General Partner shall cause the
Partnership to prepare financial statements for each fiscal year
of the Partnership, which shall include a balance sheet as of the
end of each such year and statements of income, partners' equity
and cash flows for such year. Such financial statements shall
include a note setting forth a schedule of all loans to the
Partnership, the Section of this Agreement under which such debt
was incurred and the purpose for which such loan was applied by
the Partnership. Such schedule shall demonstrate that loans have
been made, used, carried on the books of the Partnership (and
repaid, if applicable) in accordance with the provisions of this
Agreement. In addition, the financial statements of the
Partnership for the fiscal year in which Full Completion occurs
shall include a depreciation schedule for that year and all
future years, along with the depreciation worksheet. The books
of the Partnership shall be compiled by the Accountants as of the
end of each fiscal year in accordance with generally accepted
auditing standards and the guidelines set forth by the: (a)
United States Department of Agriculture-Rural Development
(USDA-RD) for a UDSA-RD compilation; (b) paragraph 2.0 in
Attachment A of the Iowa Department of Economic Development Home
Investment Partnership (HOME) Program Master Contract Number
99-HM-405 dated March 10, 1999; and (c) Section 3.03 of the Iowa
Finance Authority Housing Assistance Fund Loan Agreement for
Project. The General Partner shall, promptly upon receipt of
such balance sheet, statements and opinion and in any event
within 45 days after the end of each fiscal year, transmit to the
Limited Partners a copy thereof.
7.4.2. Together with the statements to be delivered
pursuant to Section 7.4.A, each General Partner shall send to the
Special Limited Partner comparable financial statements
(including a balance sheet and statement of income) for such
General Partner relating to the same period. In addition, the
General Partner shall prepare and furnish to the Special Limited
Partner the other financial and operating reports set forth in
the Reporting Guidelines attached hereto as Exhibit 3. Such
reports shall be in the forms attached to Exhibit 3, as such
forms may be amended from time to time by the Special Limited
Partner.
<PAGE>
7.4.3. The Accountants shall prepare the Federal and
state income tax returns of the Partnership. The General Partner
shall complete the books of the Partnership in such time as will
allow the Accountants to complete such tax returns within 45 days
after the end of such fiscal year. The General Partner shall
cause such tax returns to be filed within such time periods and
shall immediately upon the filing thereof transmit to the Limited
Partners a copy of the Federal and State income tax returns and
Form K-1. If the General Partner fails to complete such tax
returns and to transmit such returns and Form K-1 to the Limited
Partners within such time periods, or shall fail to transmit the
annual balance sheet, financial statements and opinion to the
Limited Partners within the time period set forth above, the
General Partner shall, upon the request of the Special Limited
Partner and assuming that no Limited Partner has caused such
delay, pay as damages the sum of $250 per day to the Investor
Limited Partner until such Form K-1, balance sheet and financial
statements and information required pursuant to Section 7.4.D are
received by the Limited Partners. Such damages shall be paid
forthwith by the General Partner and failure to so pay shall
constitute a default of the General Partner under Section 8.6
hereof. In addition, if the General Partner fails to so pay, the
General Partner and its Affiliates shall forthwith cease to be
entitled to the amounts otherwise payable to them pursuant to
Section 5.2.A. Such Section 5.2.A payments shall accrue but only
be paid upon the payment of such damages in full and any amount
of such damages not so paid shall be deducted against such
Section 5.2.A payments otherwise due to the General Partner or
its Affiliates. In addition, if the General Partner fails to
complete such tax returns and submit such Forms K-1 within the
applicable time period set forth above, the Special Limited
Partner may select a firm of accountants (or an Affiliate of the
Special Limited Partner) who shall prepare such returns and Forms
K-1 and the fees and expenses of such accountants (or Affiliate)
shall be paid by the General Partner. The General Partner shall
immediately furnish all necessary documentation and other
information to prepare such tax returns and such Forms K-1 to
such accountants (or Affiliate).
7.4.4. Within 15 days following the end of each of
the first three quarters of each fiscal year after the Completion
Date, the General Partner shall send to the Special Limited
Partner at the expense of the Partnership one or more reports
which, taken together, provide the following information (which
need not be audited): (i) a balance sheet as of the end of such
quarter; (ii) a statement of income for such quarter; (iii) a
statement of cash available for distribution and reserves for
such quarter; (iv) a statement describing (a) any new agreement,
contract or arrangement between the Partnership and a General
Partner or an Affiliate of a General Partner, and (b) the amount
of all fees and other compensation and distributions and
reimbursed expenses paid by the Partnership for the quarter to
any General Partner or Affiliate of a General Partner and (v) a
report of the significant activities of the Partnership during
the fiscal quarter.
7.4.5. The General Partner shall at the expense of
the Partnership provide the Special Limited Partner with (i) a
copy of each draw request for construction or development costs
as such requests are made to the Lender; (ii) a copy of each
inspection report, evaluation or similar report issued to the
Partnership by the Credit Agency or the Lender promptly upon
receipt thereof; (iii) a copy of each Low Income Housing Credit
compliance report delivered to or prepared by the Credit Agency
with respect to the Property; (iv) prompt notice of any casualty
or other significant adverse event relating to the Partnership
and (v) such other information as the Special Limited Partner may
specifically and reasonably request from time to time with regard
to the progress of construction, initial leaseup or any other
matters concerning the business or operations of the Partnership.
7.4.6. An annual pro forma operating budget shall be
prepared by the General Partner at the expense of the Partnership
and furnished to the Special Limited Partner within 120 days
prior to the beginning of each calendar year, or at such other
time as the Special Limited Partner shall reasonably request. In
addition, upon the request of the Special Limited Partner, the
General Partner shall prepare at the expense of the Partnership
and furnish to the Investor Limited Partner an estimate of the
profits and losses of the Partnership for Federal income tax
purposes for the current fiscal year. Such estimate need not be
prepared by the Accountants, but instead may be prepared by the
General Partner from information obtained by the General Partner
from the Management Agent.
<PAGE>
7.5. Tax Elections.
7.5.1. If requested to do so by the transferee of a
Partnership interest, the General Partner shall make the election
under Section 754 of the Code, on behalf of the Partnership, at
such time and in such manner as to obtain all the benefits
provided for by such Section; provided that the transferee will
pay all costs associated therewith and neither the Partnership
nor the General Partner shall be held responsible or liable for
the failure to make such elections if the General Partner is not
given notice of the event giving rise to an adjustment for which
such election is needed at or prior to the close of the fiscal
year during which the event occurs.
7.5.2. All other elections required or permitted to
be made by the Partnership under the Code shall be made by the
General Partner in such manner as will, in the opinion of the
Accountants, be most advantageous to the Investor Limited Partner
but shall not create additional obligations on the part of the
General Partner.
7.6. Fiscal Year and Accounting Method.
The fiscal year of the Partnership shall be the calendar
year. The books of the Partnership shall be kept on the accrual
basis.
8. -- Retirement of a General Partner
8.1. Retirement.
No General Partner shall do any of the following without the
Consent of the Special Limited Partner, which Consent shall not
be unreasonably withheld: (i) Retire (other than by reason of
death or adjudication of incompetence or insanity) from the
Partnership, (ii) sell, assign, transfer or encumber its interest
as a General Partner, or (iii) transfer a controlling or
substantial economic interest in a General Partner Entity. In
the event of a Retirement of a General Partner, its status and
the disposition of its interest in the Partnership shall be
determined in accordance with Section 8.4. In no event shall any
General Partner assign, transfer or sell all or any part of his
interest as a General Partner to any Entity which is a tax-exempt
entity as defined in Section 168(h)(2) of the Code.
8.2. Obligation to Continue.
Upon the Retirement of a General Partner, any remaining
General Partner or General Partners, if any, or, if none, the
Retired General Partner or its heirs, successors or assigns,
shall immediately send notice of such Retirement (the "Retirement
Notice") to each Limited Partner, and the Partnership shall be
(i) dissolved if there is no remaining General Partner and the
Partnership is not reconstituted pursuant to Section 8.3 hereof,
or (ii) continued by the remaining General Partner(s) as provided
in the sentence next following. The General Partner shall have
the right, and hereby covenant and agree to, unless there is no
remaining General Partner, to elect to continue the business of
the Partnership.
8.3. Retirement of a Sole General Partner.
If, following the Retirement of a General Partner, there is
no remaining General Partner of the Partnership, or if there are
remaining General Partners but they shall fail to elect to
continue the business of the Partnership, then the Special
Limited Partner may designate a Person (which Person may be the
Special Limited Partner) to become a successor General Partner of
the Partnership as reconstituted as hereinafter provided.
8.4. Interest of Retired General Partners.
8.4.1. Each General Partner hereby agrees that at
the time of its Retirement if such Retirement is in violation of
the provisions of Section 8.1, (a) the Retired General Partner
and all Partners who are Affiliates of the Retired General
Partner shall be immediately and automatically withdrawn from the
Partnership and the interest in the Partnership of the Retired
General Partner and such Affiliates shall be automatically
transferred and be deemed transferred to the Partnership for the
benefit of the remaining Partners, (b) the right of the Retired
General Partner and such Affiliates to receive all fees, loan
repayments and any other amounts from the Partnership shall
terminate and (c) the Retired General Partner and such Affiliates
shall remain liable for the performance of all of their
obligations under this Agreement. For the purposes of Article V
hereof, the effective date of the aforesaid transfers shall be
deemed to be the date on which such Retirement occurs.
<PAGE>
8.4.2. In the event that a General Partner shall
Retire as a General Partner under circumstances not in violation
of Section 8.1, such Retired General Partner shall be deemed to
have automatically transferred to the remaining or successor
General Partner(s), in proportion to their respective General
Partner interests, all or such portion of the interest of such
Retired General Partner in each of the profits, losses and
distributions of the Partnership (as set forth in Article V
hereof) which, when aggregated with the existing General Partner
interests of all such remaining and successor General Partners,
will be sufficient to assure such remaining and successor General
Partners an aggregate 1% interest in all such profits, losses and
distributions of Cash Flow and Capital Transactions proceeds of
the Partnership under Article V hereof. No documentation shall
be necessary to effectuate such transfer and the same shall be
deemed effective upon the Retirement of such Retired General
Partner. The Retiring General Partner shall retain the right to
be paid all fees, loan repayments and other amounts from the
Partnership which have become due at the time of such Retirement,
and shall not be liable for any obligations of the Partnership
arising after the date of his Retirement. Those Persons
succeeding to the portion of the interest of the Retired General
Partner not so transferred to the remaining and successor General
Partner(s) shall become Limited Partners hereunder provided that
such Persons shall not participate in any of the votes or
Consents of the Limited Partners set forth herein nor share in
any of the profits, losses or distributions of the Partnership
expressly accorded to the Limited Partners under Article V, but
shall have instead the same share of such Partnership profits,
losses and distributions represented by such interest when held
by the Retiring General Partner. Notwithstanding the foregoing,
however, all Partnership interests and all fees, loan payments
and other amounts payable which are reserved to the Retired
General Partner and his successors pursuant to this Section 8.4.B
shall be subject to offset by any amounts and Partnership
interests which the Partnership must pay or assign to any Person
in order to induce such Person to become a General Partner in
replacement of the Retired General Partner.
8.5. Designation of New General Partners.
Subject to the provisions of Section 10.1, the General
Partner may, with the approval of the Lenders (if required), and
of any other Person required under the Property Documents and
with the Consent of each Limited Partner, at any time designate
additional General Partners each with such interest as a General
Partner in the Partnership as the General Partner may agree
upon.
Any incoming General Partners (other than a General Partner
admitted pursuant to Section 8.6) shall as a condition of
receiving any interest in the Partnership agree to be bound by
the Mortgages, all other Property Documents, and any other
documents required in connection therewith and by the provisions
of this Agreement, to the same extent and on the same terms as
any other then General Partner(s).
8.6. Additional and Substitute General Partners.
8.6.1. Upon the occurrence of any one or more of the
Events of Default set forth in Section 8.6.B below, the Special
Limited Partner shall have the right to cause itself or its
Affiliate to be admitted to the Partnership as an additional
General Partner as provided in Section 8.6.C, and/or to remove
the General Partner as provided in Section 8.6.D. Each of the
Partners hereby makes, constitutes, and appoints the Special
Limited Partner, with full power of substitution, the true and
lawful attorney of, and in the name, place and stead of, such
Partner, with power from time to time to take all action and do
all things necessary or appropriate to implement and carry out
the provisions of this Section 8.6. Such appointment shall
constitute a power coupled with an interest, shall be
irrevocable, shall survive the death, incompetency or dissolution
of any Partner and shall be binding on any assignee of all or any
portion of the interest of any Partner.
<PAGE>
8.6.2. The following shall each be an "Event of
Default":
1. Failure of a General Partner to observe or
perform any material obligation or covenant to be observed or
performed under this Agreement by such General Partner.
2. The Partnership shall be in material default
of any of its obligations under the Property Documents, which
default, in the reasonable judgment of the Special Limited
Partner, threatens an assignment or foreclosure of any Mortgage.
3. At any one time five percent or more of the
dwelling units in the Property shall not be in compliance with
Section 42 of the Code.
Any dispute or controversy as to whether any of the Events of
Default has occurred, or whether such event has been cured or is
susceptible of being cured within any grace period specified,
shall be initially determined solely by the Special Limited
Partner, whereupon the Special Limited Partner may exercise its
rights set forth in this Section 8.6. However, such
determination shall be subject to review in a judicial proceeding
brought by either the General Partner or the Special Limited
Partner in a court of general jurisdiction sitting in Iowa City,
Iowa. Any judicial findings which are contrary to the
determination of the Special Limited Partner shall not
retroactively impair or otherwise affect the rights and authority
of the Special Limited Partner hereunder prior to the issuance of
such findings. The Special Limited Partner shall indemnify and
hold harmless the General Partner for all claims, damages, loss
and expense arising from its actions as a General Partner
pursuant to this Section 8.6 prior to such judicial review if
such review shall conclude that an Event of Default did not in
fact occur. Each of the parties shall bear its own expense of
litigation.
8.6.3. If the Special Limited Partner elects to
admit itself or its Affiliate as an additional General Partner,
such admission shall occur automatically and without further
action by any Partner upon the giving of notice thereof by the
Special Limited Partner to the Partners, and each of the Partners
hereby agrees and consents in advance to the foregoing
admission. Upon the occurrence of such admission, any delegation
of authority agreed to between the General Partners in accordance
with Section 6.4.B hereof (whether expressly set forth in this
Agreement or otherwise) shall be cancelled and of no further
force and effect, and instead all of the other General Partners
shall be deemed to have delegated, automatically and without the
requirement of a writing or any other action other than as set
forth above, all their powers and authority (including, without
limitation, all right to deposit to, withdraw from and otherwise
control all Partnership bank accounts) to the Special Limited
Partner in its capacity as an additional General Partner as set
forth in Section 6.4.B. Notwithstanding its admission to the
Partnership, said additional General Partner shall not undertake
or assume, or be deemed to have undertaken or assumed, any
obligations or liabilities imposed on the General Partner
pursuant to this Agreement or which arise in any other manner
with respect to the Partnership or the Partners. Each Partner
agrees that the Special Limited Partner or any Person it causes
to be admitted as a General Partner pursuant to this Section 8.6
may withdraw as a General Partner without the consent of any
other Partner.
8.6.4. If the Special Limited Partner shall elect to
remove one or more of the General Partners, then such removal
shall occur automatically and without further action by any
Partner upon the giving of notice thereof by the Special Limited
Partner to the Partners. Any General Partner so removed shall
have the obligation to sell his Partnership interest to the
Special Limited Partner upon payment of the amount of the removed
General Partner's Capital Account; his right, if any, to be paid
all fees, repayments of loans and other payments by the
Partnership shall terminate and any delegation of authority
agreed to between the removed General Partner in accordance with
Section 6.4.B hereof (whether expressly set forth in this
Agreement or otherwise) shall be cancelled and of no further
force and effect. A General Partner so removed shall remain
liable for all obligations to the Partnership arising before and
after the effective date of his removal.
<PAGE>
8.7. Amendment of Certificate.
Upon the admission of an additional or replacement General
Partner, the Schedule shall be amended to reflect such admission
and an amendment to the Certificate of Limited Partnership, also
reflecting such admission, shall be filed in accordance with the
Uniform Act.
9. -- Limited Partner Transfers
9.1. Assignments.
9.1.1. An assignee of a Limited Partner who does not
become a Substitute Limited Partner in accordance with Section
9.2 shall have the right to receive the same share of profits,
losses, credits and distributions of the Partnership to which the
assigning Limited Partner would have been entitled if no such
assignment had been made by such Limited Partner.
9.1.2. In the event any assignment of a Limited
Partner's interest as a Limited Partner shall be made, there
shall be filed with the Partnership (and the Partnership need not
recognize such assignment until such filing) a duly executed and
acknowledged counterpart of the instrument making such
assignment. Such instrument must evidence the written acceptance
of the assignee to all the terms and provisions hereof.
9.1.3. Notwithstanding the foregoing, the
obligations of any assigning Limited Partner to pay Installments
to the Partnership shall be extinguished only by and to the
extent of the aggregate amount of Installments paid to the
Partnership by such assigning Limited Partner or on its behalf by
its assignee.
9.2. Substitute Limited Partners.
9.2.1. Each Limited Partner shall, without the
consent of any other Limited Partner, have the right to
substitute an assignee as a Limited Partner in its place. Any
Substitute Limited Partner shall, as a condition of receiving any
interest in the Partnership assets, agree to be bound to the
extent required under Section 3.6.B.
9.2.2. Upon the admission of a Substitute Limited
Partner, the Schedule shall be amended to reflect the name and
address of such Substitute Limited Partner and to eliminate the
name and address of the assigning Limited Partner, and, if
required under the Uniform Act, an amendment to the certificate
of limited partnership of the Partnership reflecting such
admission shall be filed in accordance with the Uniform Act.
Each Substitute Limited Partner shall execute such instrument or
instruments as shall be required by the General Partner to
signify its agreement to be bound by all the provisions hereof,
and shall pay reasonable legal and filing expenses in connection
with its substitution as a Limited Partner.
9.3. Restrictions.
9.3.1. In no event shall all or any part of a
Limited Partner interest in the Partnership be assigned or
transferred to a minor (other than to a member of a Limited
Partner's Immediate Family by reason of death) or to an
incompetent.
9.3.2. Any sale, exchange, transfer or other
disposition in contravention of any of the provisions of this
Section 9.3 shall be void and ineffectual and shall not bind or
be recognized by the Partnership.
9.4. Other Limited Partners.
The Special Limited Partner shall have the right at any time
and from time to time to substitute in its place as Special
Limited Partner any Person which (a) controls the Special Limited
Partner, (b) is owned in substantial part by the Special Limited
Partner or (c) is controlled by the Person controlling the
Special Limited Partner. Each Partner hereby consents to such
substitution(s) if and when it occurs, and agrees that the
substitute Special Limited Partner shall have all the rights,
benefits and duties set out in this Agreement for the Special
Limited Partner.
<PAGE>
10. -- General Provisions
10.1.Amendments to Certificate.
Within 120 days after the end of any fiscal year in which
the Limited Partners shall have received any distributions under
Article V hereof, the General Partner shall file if required
under the law of the State and elsewhere as the General Partner
deems appropriate or required an amendment to the Certificate of
Limited Partnership reducing by the amount of his allocable share
of such distribution the amount of Capital Contribution of each
Limited Partner as stated in the last previous amendment to the
Certificate of Limited Partnership. Nothing in this Section 10.1
shall authorize, however, any change in the Schedule.
10.2.Notices.
Except as otherwise specifically provided herein, all
notices, demands or other communications hereunder shall be in
writing and shall be deemed to have been given (i) four business
days after being deposited in the United States mail and sent by
certified or registered mail, postage prepaid, (ii) two business
days after being deposited with Federal Express or similar
overnight delivery service, (iii) on the business day after the
day of transmission by telecopier or other facsimile
transmission, answerback requested, or (iv) on the business day
following delivery personally, in each case to the parties at the
addresses set forth below or at such other addresses as such
parties may designate by notice to the Partnership: If to the
Partnership, at the principal office of the Partnership set forth
in Section 2.2, and if to a Partner, at his address set forth in
the Schedule, in each case with copies to:
(i) The Special Limited Partner, c/o Heartland
Properties, Inc., Hovde Building, 6th Floor, 122 West Washington
Avenue, Madison, WI 53703-2718 (Attention: Vice President-Real
Estate);
(ii) Morain, Burlingame and Pugh, P.L.C., 5400
University Avenue, West Des Moines, IA 50266 (Attention: Robert
A. Simons).
10.3.Word Meanings.
The words such as "herein," "hereinbefore," "hereinafter,"
"hereof" and "hereunder" refer to this Agreement as a whole and
not merely to a subdivision in which such words appear unless the
context otherwise requires. The singular shall include the
plural and the masculine gender shall include the feminine and
neuter, and vice versa, unless the context otherwise requires.
10.4.Binding Provisions.
The covenants and agreements contained herein shall be
binding upon, and inure to the benefit of, the heirs, legal
representatives, successors and assigns of the respective parties
hereto.
10.5.Applicable Law.
This Agreement shall be construed and enforced in accordance
with the laws of the State.
10.6.Counterparts.
This Agreement may be executed in several counterparts and
all so executed shall constitute one agreement binding on all
parties hereto, notwithstanding that all the parties have not
signed the original or the same counterpart.
<PAGE>
10.7.Separability of Provisions.
Each provision of this Agreement shall be considered
separable and (a) if for any reason any provision or provisions
herein are determined to be invalid and contrary to any existing
or future law, such invalidity shall not impair the operation of
or affect those portions of this Agreement which are valid, or
(b) if for any reason any provision or provisions herein would
cause the Limited Partners to be bound by the obligations of the
Partnership under the laws of the State as the same may now or
hereafter exist, such provision or provisions shall be deemed
void and of no effect.
10.8.Paragraph Titles.
Paragraph titles are for descriptive purposes only and shall
not control or alter the meaning of the Agreement as set forth in
the text.
10.9.Amendments.
Except as otherwise provided in Section 5.4.H, this
Agreement may not be amended or modified except by a written
instrument signed by all of the Partners.
10.10. Time of Admission.
Each Limited Partner shall be deemed to have been admitted
to the Partnership as of the first day of the month during which
its actual admission occurs for all purposes of this Agreement
including Article V.
11. -- Defined Terms
Certain capitalized terms used in this Agreement shall have
the meanings specified below:
"Accountants" means the certified public accountant as may
-------------
be engaged by the Partnership in accordance with Section 7.3
hereof.
"Adjustment Amount" has the meaning set forth in Section 4.2.
------------------
"Admission Date" means the date on which this Agreement
-----------------
shall have been fully executed by, delivered among and become
binding on all of the Partners.
"Affiliate" means, as to any named Person or Persons (or as
-----------
to every General Partner if no Person is specifically named): (1)
such Person; (2) member of the Immediate Family of such Person;
(3) legal representative, successor or assignee of any Person
referred to in the preceding clauses (1) or (2); (4) trustee of a
trust for the benefit of any Person referred to in the preceding
clauses (1) or (2); or (5) any other Person (a) who directly or
indirectly controls, is controlled by, or is under common control
with such Person, (b) who owns or controls 10% or more of the
outstanding voting interests of such Person, (c) of which 10% or
more of the outstanding voting interests is owned by such Person
or any of the Persons referred to in the foregoing clauses (1)
through (3); (d) who is an officer, director, partner or trustee
of such Person, or (e) for which such Person acts in the capacity
of officer, director, partner or trustee.
<PAGE>
"Agreement" means this Amended and Restated Agreement of
-----------
Limited Partnership as it may be amended from time to time.
"Annual Reported Credit" has the meaning set forth in
-------------------------
Section 4.2.A.
"Basis Certification" means (a) the receipt by each Limited
----------------------
Partner of the written certification of the Accountants, in a
form and in substance satisfactory to the Special Limited Partner
and its accountants, as to the itemized amounts of the
construction and development costs of the Property and the
"eligible basis" and "applicable percentage" (as defined in the
Code) pertaining to each building in the Property following Full
Completion, and (b) the written acceptance of such certification
by the Special Limited Partner after review thereof by a
certified public accounting firm engaged by the Special Limited
Partner for such purpose.
"Capital Account" has the meaning set forth in Section 3.3.
----------------
"Capital Contribution" means the total amount of cash
------------------------
contributed or agreed to be contributed to the Partnership by
each Partner as shown in the Schedule, including any amounts
which are paid on behalf of the Investor Limited Partner pursuant
to the provisions of Section 4.2.C. herein. Any reference in
this Agreement to the Capital Contribution of a then Partner
shall include a Capital Contribution previously made by any prior
Partner with respect to the Partnership interest of such then
Partner.
"Capital Transaction" means any transaction or other source
---------------------
of funds the proceeds of which are not includable in determining
Cash Flow including, without implied limitation, the sale or
other disposition of all or substantially all of the assets of
the Partnership and any refinancing of any Mortgage, but
excluding the payment of Capital Contributions by the Partners.
"Cash Flow" means for any period the excess of (a) Operating
----------
Revenues for such period over (b) the sum of Operating Expenses
and Debt Service for such period.
"Code" means the Internal Revenue Code of 1986, as amended
------
from time to time.
"Consent" of any Partner means the advance written consent
---------
or approval of such Partner.
"Compliance Period" means the "compliance period" as defined
-------------------
in Section 42 of the Code for the Property or any building
comprising a part of the Property.
"Credit Agency" means Iowa Finance Authority.
--------------
<PAGE>
"Credit Period" means the "credit period" for the Property
---------------
or any building comprising a part of the Property, as defined in
Section 42 of the Code.
"Debt Service" shall mean all payments of interest,
----------------
principal and recurring charges due and payable on the Mortgages
during a specified period.
"Debt Service Coverage" at a specified percentage shall be
-----------------------
deemed to have occurred at the end of a specified period,
commencing on or after the beginning of monthly payments of Debt
Service on the Permanent Mortgage, of three consecutive calendar
months during each of which months, as determined by the
Accountants, the Net Operating Income for such month divided by
all Debt Service required to be paid during such month shall
equal or exceed the specified percentage. "Net Operating Income"
for a particular month shall be the excess of Operating Revenue
actually received during such month by the Partnership on a cash
basis (excluding rent which is not paid by a Qualified Tenant)
over all Operating Expenses for such month (Operating Expenses
shall be equal to the higher of the pro forma amount set forth on
Exhibit 2 or actual Operating Expenses) determined on an
annualized accrual basis including a ratable share of seasonal
expenses which are normally incurred on an unequal basis during
each month of a full annual period of operation and real estate
taxes based on the proper valuation of the Property following
Full Completion.
"Development Agreement" means the Amended and Restated
-------------------------
Development and Construction Supervision Contract dated October
1,1999.
"Development Completion Obligation" means the obligation of
-------------------------------------
the General Partner to acquire and develop the Property for a
fixed turnkey price, as set forth in Section 6.9.
"Development Costs" means those costs related to the
--------------------
development and initial leaseup of the Property as more
specifically described in Section 6.9.
"Development Funds" means those sources of funds available
--------------------
to meet Development Costs as more specifically described in
Section 6.9.
"Development Services Fee" means the fee payable to the
---------------------------
General Partner pursuant to Section 6.11.A.
"Economic Risk of Loss" has the meaning set forth in
--------------------------
Treasury Regulation Section 1.752-2.
"8609 Issuance" means the receipt by the Partnership from
-----------------
the Credit Agency of Internal Revenue Service Form(s) 8609 with
respect to all buildings in the Property and allocating to the
Partnership Low Income Housing Credit in an amount of not less
than $85,170.
"Entity" means any general partnership, limited partnership,
-------
limited liability company, corporation, joint venture, trust,
business trust, cooperative or association.
<PAGE>
"Event of Bankruptcy" means with respect to any Person:
---------------------
(i) the entry of a decree or order for relief by a court
having jurisdiction in respect of such Person in a case under the
Federal bankruptcy laws, as now or hereafter constituted, or any
other applicable Federal or state bankruptcy, insolvency or other
similar law, or the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or similar official)
of such Person or for any substantial part of his property, or
the issuance of an order for the winding-up or liquidation of his
affairs and the continuance of any such decree or order unstayed
and in effect for a period of 60 consecutive days; or
(ii) the commencement by such Person of a proceeding seeking
any decree, order or appointment referred to in clause (i), the
consent by such Person to any such decree, order or the
appointment, or taking of any action by such Person in
furtherance of any of the foregoing.
"Facility" shall have the meaning given to it in the Federal
----------
Comprehensive Environmental Response, Compensation and Liability
Act of 1980, 42 U.S.C. Sec. 9601 et seq., as amended, and shall
also include any meaning given to analogous property under other
Hazardous Waste Laws.
"Filing Office" means the office of the Secretary of State
---------------
of the State.
"Full Completion" means the occurrence of (a) completion of
------------------
construction of the entire Property no later than December 31,
2000 and in substantial compliance with the Property Documents,
as such completion is evidenced by the receipt by the Partnership
of (i) written confirmation of completion from the inspecting
architect for the Property and (ii) written approval of occupancy
by all state and municipal agencies empowered or required to
issue such approval and (b) satisfaction of all requirements in
the Property Documents relating to completion of the entire
Property.
"General Partner" means all Persons designated as General
-------------------
Partners in the Schedule and all Persons who become General
Partners as provided herein, in each such Person's capacity as a
General Partner of the Partnership, and if there be more than one
General Partner at any time, such term shall refer to all such
General Partners collectively.
"Guaranteed Development Cost" means the amount payable to
-------------------------------
the General Partner pursuant to Section 6.9.A.
"HAF Loan" means the Housing Assistance Fund loan being made
----------
by the Credit Agency in the principal amount of $24,000.
"Hazardous Material" shall have the collective meanings
---------------------
given to the terms "hazardous material," "hazardous substances,"
"hazardous wastes," "toxic substances" and analogous terms in the
Hazardous Waste Laws. In addition, the term "Hazardous Material"
shall also include oil and any other substance known to be
hazardous.
<PAGE>
"Hazardous Waste Laws" means and includes the Federal
------------------------
Comprehensive Environmental Response, Compensation and Liability
Act of 1980; the Resource Conservation and Recovery Act; the
Toxic Substances Control Act and any other federal, state or
local statutes, ordinances, regulations or by-laws dealing with
Hazardous Material, as the same may be amended from time to time
and including any regulations promulgated thereunder.
"Home Loan" means the Home loan being made by the Iowa
-----------
Department of Economic Development in the principal amount of
$533,132.
"Immediate Family" means, with respect to any Person, his
-------------------
spouse, parents, parents-in-law, descendants, nephews, nieces,
brothers, sisters, brothers-in-law, sisters-in-law,
children-in-law and grandchildren-in-law.
"Incentive Management Fee" means the fee payable by the
---------------------------
Partnership pursuant to Section 6.12.D hereof.
"Installment" means a portion of the Capital Contribution
-------------
due from the Investor Limited Partner as more fully set forth in
Article IV.
"Investment Expenses" shall mean the sum of the legal and
---------------------
accounting expenses incurred by the Investor Limited Partner
which are attributable to its investment in Partnership.
"Investor Limited Partner" means Alliant Energy Investments,
-------------------------
Inc., an Iowa corporation, or any Person who becomes a Substitute
Investor Limited Partner as provided herein, in each such
Person's capacity as the Investor Limited Partner of the
Partnership.
"Lenders" means the lenders with respect to the Permitted
----------
Loans.
"Limited Partner" or "Limited Partners" means the Investor
------------------------------------------
Limited Partner and the Special Limited Partner.
"Low Income Housing Credit" means the amount of low-income
----------------------------
housing tax credit, as certified by the Accountants, which the
Partnership and/or its Partners has or will claim pursuant to
Section 42 of the Code (or successor provisions) with respect to
the Property.
"Management Agent" means the managing and rental agent for
-------------------
the Property engaged by the Partnership pursuant to Section 6.12.
"Management Agreement" means the agreement between the
------------------------
Partnership and the Management Agent in effect from time to time
providing for management services to the Property.
"Management Fee" means the amount payable from time to time
-----------------
by the Partnership to the Management Agent (or to the General
Partner if there shall be no Management Agent serving hereunder)
on an annual basis for management services in accordance with the
Management Agreement.
<PAGE>
"Management Fee Note Rate Rent" means the rent calculated by
---------------------------------
adding the operating budget to the debt service of the Permanent
Mortgage loan at 95% of the total eligible USDA-Rural Development
costs at the Permanent Mortgage loan interest rate.
"Minimum Set Aside" means occupancy of dwelling units in all
-------------------
of the Property sufficient to satisfy the "40-60 test" set forth
in Section 42(g) of the Code within the time period required
thereunder.
"Mortgage" or "Mortgages" means any or all of the
-----------------------------
indebtedness of the Partnership evidenced by the Permitted Loans,
and any other indebtedness secured by a mortgage of the
Property. Where the context admits, the term Mortgage shall
include any mortgage, deed, note, security agreement or other
instrument executed in connection with a Mortgage which is
binding on the Partnership; and in case a Mortgage is replaced or
supplemented by any subsequent mortgage or mortgages, such term
shall refer to any such subsequent mortgage or mortgages.
"Operating Deficit" means the excess (if any) of the sum of
-------------------
Operating Expenses and Debt Service over Operating Revenues for a
particular period, as more specifically described in Section 6.10.
"Operating Deficit Loan" means a loan made to the
-----------------------------
Partnership pursuant to Section 6.10 and which is repayable
without interest and only as provided under this Agreement.
"Operating Expenses" means all the costs and expenses of any
---------------------
type which are incident to the ownership and operation of the
Property, whether or not such costs and expenses are "eligible"
expenses under USDA-Rural Development, including, without
limitation, real estate and other taxes, the cost of capital
improvements properly attributable to the period in question, the
cost of operations (including the cost of any services provided
to residents), maintenance and repairs, Management Fees, fees
payable pursuant to Section 6.12.E, the funding of any reserves
required to be maintained by the Lenders or pursuant to Section
6.14, and all amounts due with respect to Partnership
indebtedness, but excluding Debt Service, the cost of those items
which are included in Development Costs pursuant to Section 6.9,
payments made pursuant to Section 5.2.A or 5.2.B, depreciation
and other non-cash charges and cash distributions to Partners.
"Operating Revenue" means all rental revenue, laundry
---------------------
income, parking revenue and other incidental revenues which are
received by the Partnership and arise from the operation of the
Property as a rental apartment property.
"Outstanding Capital" means, as to any Partner at any point
---------------------
in time, the excess of: (a) the amount of the Capital
Contributions paid in by such Partner through such time (in the
case of the Investor Limited Partner, including both amounts
paid pursuant to Section 4.1, all amounts paid or payable on
behalf of the Investor Limited Partner by the General Partner
pursuant to Section 4.2 and, for purposes of computing
Outstanding Capital only, the Investment Expenses, and, in the
case of the General Partner, including only amounts paid by the
General Partner pursuant to Section 6.9.C), over (b) amounts
which have previously been distributed to such Partner pursuant
to Section 5.2.B as returns of Outstanding Capital.
<PAGE>
"Partner" or "Partners" means any or all of the General
------------------------
Partners and the Limited Partners.
"Partner Non-Recourse Debt" means any Partnership liability
----------------------------
(1) that is considered non-recourse under Regulation Section
1.1001-2 or for which the creditor's right to repayment is
limited to one or more assets of the Partnership and (2) for
which no Partner or Related Person bears the Economic Risk of
Loss.
"Partner Non-Recourse Debt Minimum Gain" means the amount of
-----------------------------------------
partner non-recourse debt minimum gain and the net increase or
decrease in partner non-recourse debt minimum gain determined in
a manner consistent with Treasury Regulation Sections 1.704-2(d)
and 1.704-2(g)(3).
"Partnership" means the limited partnership governed by this
-------------
Agreement as said limited partnership may from time to time be
constituted and amended.
"Partnership Minimum Gain" means the amount determined by
----------------------------
computing, with respect to each Partnership Non-Recourse
Liability, the amount of gain, if any, that would be realized by
the Partnership if it disposed of (in a taxable transaction) the
property subject to such liability in full satisfaction of such
liability, and by then aggregating the amounts so computed. Such
computations shall be made in a manner consistent with Treasury
Regulation Section 1.704-2(d).
"Partnership Non-Recourse Liability" means any Partnership
-------------------------------------
liability (or portion thereof) for which no Partner or Related
Person bears the Economic Risk of Loss.
"Permanent Mortgage" means the Mortgage made by USDA-Rural
--------------------
Development ("Lender") in the principal amount of $250,000 and
evidenced by a Promissory Note from Partnership to Lender dated
March 15, 2000.
"Permitted Loans" means the Permanent Mortgage, the HAF Loan
----------------
and the Home Loan.
"Person" means any individual or Entity, and the heirs,
-------
executors, administrators, legal representatives, successors and
assigns of such Person where the context so admits; and, unless
the context otherwise requires, the singular shall include the
plural, and the masculine gender shall include the feminine and
the neuter and vice versa.
"Plans and Specifications" means the plans and
-------------------------------
specifications for the Property as last revised prior to the date
hereof, together with future revisions thereof which, if such
future revision constitutes a change in the design, scope or
value of the Property, shall have received the Consent of the
Special Limited Partner.
"Prime Rate" means the prime interest rate as announced from
------------
time to time by Norwest Bank Minnesota, N.A., or its successor.
<PAGE>
"Projected Credit" means the projected amounts of Low Income
------------------
Housing Credit set forth in the table in Section 4.2.A.
"Property" means the real property located at 2803 A Avenue
----------
in Fort Madison, Iowa, which real property is more fully
described in Exhibit 1 attached hereto.
"Property Documents" means all promissory notes, mortgages,
---------------------
agreements and other instruments executed in connection with any
of the Mortgages; the Plans and Specifications; the Management
Agreement; the Incentive Management Agreement; the Turnkey
Development Agreement; all applications, reservations, carryover
allocations, restrictive covenants and extended use agreements
and all other agreements and documents related to the Low Income
Housing Credit; agreements relating to real estate taxation and
assessments relating to the Property; agreements relating to the
availability of parking for users of the Property; and any other
agreement or instrument relating to the Property or under which
the Partnership is bound.
"Qualified Tenant" means a tenant who meets the income
-------------------
requirements for a "low income unit" (as defined in Section 42 of
the Code) and who occupies a dwelling unit in the Property
pursuant to an executed lease which is for a term of at least
twelve months, conforms to all requirements of the Property
Documents and will not prevent the Partnership from obtaining the
Low Income Housing Credit with respect to such dwelling unit.
"Qualified Income Offset Item" means (1) an allocation of
--------------------------------
loss or deduction that, as of the end of each year, reasonably is
expected to be made (a) pursuant to Section 704(e)(2) of the Code
to a donee of an interest in the Partnership, (b) pursuant to
Section 706(d) of the Code as the result of a change in any
Partner's Interest, and (c) pursuant to Regulation Section
1.751-1(b)(2)(ii) as the result of a distribution by the
Partnership of unrealized receivables or inventory items and (2)
a distribution that, as of the end of such year, reasonably is
expected to be made to a Partner to the extent it exceeds
offsetting increases to such Partner's Capital Account which
reasonably are expected to occur during or prior to the
Partnership taxable year in which such distribution reasonably is
expected to occur.
"Related Person" has the meaning set forth in Treasury
-----------------
Regulation Section 1.752-4(b) or any successor regulation
thereto.
"Rent-Up Reserve" shall mean the reserve maintained pursuant
-----------------
to Section 6.14.A to fund operating deficits occurring during
rent-up of the Property.
"Replacement Reserve" shall mean the reserve maintained
----------------------
pursuant to Section 6.14.B to make capital repairs and
improvements.
"Retirement" (including the verb form "Retire" and the
------------
adjective form "Retiring") means as to a General Partner, the
occurrence of death, adjudication of insanity or incompetence,
Event of Bankruptcy, dissolution, or voluntary or involuntary
withdrawal from the Partnership for any reason, and shall
constitute "retirement" for purposes of the Uniform Act.
"Retirement" shall also mean the sale, assignment, transfer or
<PAGE>
encumbrance by a General Partner of its interest as a General
Partner. A General Partner which is a corporation, limited
liability company or partnership shall be deemed to have sold,
assigned, transferred or encumbered its interest as a General
Partner in the event of any sale, assignment, transfer or
encumbrance of a controlling interest in a corporate or limited
liability company General Partner or of a general partner
interest in a General Partner which is a partnership.
"Schedule" means Schedule A of Partners annexed hereto as
----------
amended from time to time and as so amended at the time of
reference thereto.
"Special Limited Partner" means Heartland Special Limited,
---------------------------
Inc., a Wisconsin corporation, or such other Person as it may
substitute pursuant to Section 9.4 hereof.
"Stabilized Occupancy" means the achievement of occupancy of
-----------------------
at least 90% of the dwelling units in the Property by Qualified
Tenants at rent levels not less than the rents set forth on
Exhibit 2 hereto for each of three consecutive months following
Full Completion.
"State" means the State of Iowa.
-------
"Substitute Limited Partner" means any Person who is
-------------------------------
admitted to the Partnership as a Limited Partner under the
provisions of Sections 9.2 or 9.4.
"Uniform Act" means the Uniform Limited Partnership Act as
-------------
adopted by the State.
"Vessel" shall have the meaning given to it in the Federal
--------
Comprehensive Environmental Response, Compensation and Liability
Act of 1980, 42 U.S.C. Sec. 9601 et seq., as amended, and shall
also include any meaning given to analogous property under other
Hazardous Waste Laws.
12. -- USDA-Rural Development Regulations
12.1.Change in General Partner.
Notwithstanding any provisions in this Partnership Agreement
to the contrary, so long as the Partnership has a loan made or
insured by the United States of American acting through
USDA-Rural Development, the Partners will not change the
membership by either the admission or voluntary withdrawal of any
General Partner(s), nor permit the General Partner(s) to maintain
less than a five percent (5%) financial interest in the
Partnership, nor cause or permit voluntary dissolution of the
Partnership, nor alter, amend or repeal this Partnership
Agreement without the written consent of USDA-Rural Development.
Furthermore, after payment of the debts and liabilities of the
Partnership, not less than five percent (5%) of the remaining
assets from the sale of refinancing of the Property shall be
distributed to the General Partner(s).
12.2.USDA-Rural Development Loan.
The Partnership is authorized to execute all documents
required by USDA-Rural Development with respect the Permanent
Loan and the construction, development and operation of the
Property subject to the Permanent Mortgage and all other
agreements with USDA-Rural Development. All incoming Partners as
a condition to being admitted to the Partnership as a Partner
shall by execution of a counterpart hereof agree to be bound by
such documents in the same manner and on the same terms as the
other Partners. Upon the Partnership's dissolution, no title or
right to possession and control of the Property and no rights to
collect rents therefrom shall pass to any person not bound by
such USDA-Rural Development documents in the same manner as the
Partners. If there is any inconsistency between this Agreement
and such USDA-Rural Development documents and regulations, the
USDA-Rural Development documents and regulations shall prevail.
<PAGE>
WITNESS the execution hereof as of the 1st day of March, 2000.
GENERAL PARTNER SPECIAL LIMITED PARTNER
Burns & Burns, L.C. Heartland Special Limited, Inc.
By: -------------------------- By: --------------------------
Robert P. Burns, Manager Ruth A. Domack, President
INVESTOR LIMITED PARTNER WITHDRAWING LIMITED PARTNER
Alliant Energy Investments, Inc. Jesse D. Burns
By: -------------------------------
Thomas L. Aller, Vice President
STATE OF IOWA )
) ss.
COUNTY OF JOHNSON )
On this _______ day of March, 2000, before me, the
undersigned, a Notary Public in and for said State, personally
came Robert P. Burns, known to me to be Manager of Burns & Burns,
L.C., who executed the above instrument on behalf of said limited
liability company and acknowledged to me that he executed the
same as his free act and deed and the free act and deed of said
entity.
______________________________
Notary Public
My commission expires:_________
<PAGE>
STATE OF IOWA )
) ss.
COUNTY OF LINN )
On this _______ day of March, 2000, before me, the
undersigned, a Notary Public in and for said State, personally
came Thomas L. Aller, known to me to be Vice President of Alliant
Energy Investments, Inc., who executed the above instrument on
behalf of said corporations and acknowledged to me that he
executed the same as his free act and deed and the free act and
deed of said corporation.
______________________________
Notary Public
My commission expires:_________
STATE OF WISCONSIN )
) ss.
COUNTY OF DANE )
On this _______ day of March, 2000, before me, the
undersigned, a Notary Public in and for said State, personally
came Ruth A. Domack, known to me to be President of Heartland
Special Limited, Inc., who executed the above instrument on
behalf of said corporations and acknowledged to me that she
executed the same as her free act and deed and the free act and
deed of said corporation.
______________________________
Notary Public
My commission expires:_________
<PAGE>
FORT MADISON IHA II SENIOR HOUSING LIMITED PARTNERSHIP
Schedule A -- Schedule of Partners
Total Paid-in Share of
Agreed-to Capital Total
GENERAL PARTNERS Capital Contribution* Partner Class
----------------- Contribution ------------ Interest
------------- ------------
Burns & Burns, L.C. $100 $100 100%
319 E. Washington Street
Suite 111
Iowa City, IA 52244
LIMITED PARTNERS
----------------
Special Limited Partner
-----------------------
Heartland Special
Limited, Inc. $100 $100 0.01%
Hovde Building, 6th Floor
122 West Washington
Avenue
Madison, WI 53703-2718
Investor Limited Partner
------------------------
Alliant Energy
Investments, Inc. $592,000 $473,600 99.99%
Heartland Special
Limited, Inc.
Hovde Building, 6th Floor
122 West Washington
Avenue
Madison, WI 53703-2718
___________________
* Paid-in Capital Contribution as of the date of this Schedule
A. Future Installments of Capital Contribution are due from the
Investor Limited Partner at the times set forth in this
Partnership Agreement.
<PAGE>
Exhibit 1
LEGAL DESCRIPTION OF PROPERTY
<PAGE>
Exhibit 2
PROJECTED INITIAL RENT LEVELS
AND OPERATING EXPENSES
<PAGE>
Exhibit 3
REPORTING GUIDELINES
<PAGE>
Response to SEC request
File No. 70-9323
Reporting period 1/1/00 through 6/30/00
Exhibit C
4. The amounts of investment made by HPI during the Reporting
Period in the LIHTC properties authorized in the SEC's order
dated August 13, 1999 are as follows:
7/1/99 - 12/31/99
-----------------
Fort Madison IHA Senior Housing Limited Partnership $521,436
Wagon Wheel Limited Partnership 864,756
Fond du Lac Senior Housing Limited Partnership 200
1/1/00 - 6/30/00
----------------
Pickerel Park Associates Limited Partnership 451,721
Meadow Wood Associates of Carroll Phase II, L.P. 578,505
Fort Madison IHA II Senior Housing Limited Partnership 473,700
-----------
$ 2,890,318
The cumulative amount of investment made by HPI in the LIHTC
properties authorized in the SEC's order dated August 13,
1999 is $ 2,890,318 leaving a balance available for
investment of $47,109,682.
