File No. 70-[ ]
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM U-1
APPLICATION OR DECLARATION
under
The Public Utility Holding Company Act of 1935
GEORGIA POWER COMPANY
333 Piedmont Avenue, N.E.
Atlanta, Georgia 30308
(Name of company or companies filing this statement
and addresses of principal executive offices)
THE SOUTHERN COMPANY
(Name of top registered holding company parent
of each applicant or declarant)
Judy M. Anderson, Vice President
and Corporate Secretary
Georgia Power Company
333 Piedmont Avenue, N.E.
Atlanta, Georgia 30308
(Name and address of agent for service)
The Commission is requested to mail signed copies of all
orders, notices and communications to:
W. L. Westbrook John F. Young
Financial Vice President Vice President
The Southern Company Southern Company Services, Inc.
64 Perimeter Center East One Wall Street, 42nd Floor
Atlanta, Georgia 30346 New York, New York 10005
John D. McLanahan, Esq.
Troutman Sanders
600 Peachtree Street, N.E.
Suite 5200
Atlanta, Georgia 30308-2216<PAGE>
INFORMATION REQUIRED
Item 1. Description of Proposed Transactions.
1.1 Background. Georgia Power Company ("Georgia Power") is
an electric utility company and a wholly-owned subsidiary of The
Southern Company, a registered holding company under the Public
Utility Holding Company Act of 1935, as amended (the "Act").
Georgia Power provides retail and wholesale electric service
throughout most of the State of Georgia.
Georgia Power proposes herein to invest up to $10 million
from time to time through December 31, 1997 to acquire limited
partnership units in one or more limited partnerships (each a
"Partnership") that will be organized for the purpose of
investing in low income housing projects in Georgia that qualify
for the low income housing tax credit ("LIHTC") provided under
Section 42 of the Internal Revenue Code of 1986, as amended (the
"Code"). It is contemplated that a separate Partnership would be
organized for each qualifying housing project in order to
facilitate compliance with the requirements of Section 42 and the
financing of the project on a stand-alone basis, and to insulate
each project from liabilities that may arise in connection with
the operation of other projects.
1.2 The Low-Income Housing Tax Credit. The LIHTC was added
to Section 42 of the Code as part of the Tax Reform Act of 1986,
and extended as a part of the Revenue Reconciliation Act of 1993.
In its current form, the LIHTC offers a substantial incentive to
the private sector to supply affordable housing to people with<PAGE>
lower incomes. The incentive is a stream of tax credits that
directly reduce an investor's federal income taxes on a dollar-
for-dollar basis. The credit is claimed pro-rata over ten years
and can be used in connection with both new dwellings and
rehabilitation of existing dwellings.
The Section 42 tax credits are allocated to the States
annually based on population, and reallocated in a competitive
process within each State by an agency created for that purpose.
In Georgia, that agency is the Georgia Housing and Finance
Authority. The tax credit is available to assist with either 30%
or 70% of the costs of the affordable housing units, depending
upon the nature of the housing project. The 30% level is for new
construction or rehabilitation of an existing building which is
subsidized under other federal housing programs, such as the
Department of Housing and Urban Development's "HOME PROGRAM".
The 70% level is for new construction or rehabilitation which is
not receiving any additional federal subsidies.
The LIHTC was intended to enable a housing project owner to
recapture approximately 90% of the property's original eligible
basis, determined on a building-by-building basis, less the
amount of any grants received. The amount is available in the
form of equal annual tax credits over a ten year term payable
over eleven years, with the first and last years pro-rated. In
exchange for receiving this credit, the project owner must agree
to rent the qualified dwelling units to individuals with lower
incomes at Section 42 rates for a minimum of 15 years.
-2-<PAGE>
Theoretically, the credit is designed to provide the additional
return that is necessary to compensate housing owners, allowing
them to pass the savings in a project's capital costs along to
residents in the project in the form of lower rents.
To qualify for the Section 42 tax credits, the property must
meet one of two minimum "set-aside" tests. The two minimum "set-
aside" tests are known as the 20-50 test and the 40-60 test. The
minimum "set-aside" test must be satisfied by the end of the
first year of the credit period, and then must be complied with
continuously thereafter. Under the 20-50 test, at least 20% of
the residential units of a project must be rent-restricted and
occupied by tenants whose gross income is 50% or less of the
county median gross income. Likewise, the 40-60 test requires at
least 40% of the residential units of the project be both rent-
restricted and occupied by tenants whose gross income is 60% or
less of the county median gross income.
Widely held corporate investors which are not subject to the
passive loss limitation rules under the Code are ideal equity
investors in Section 42 housing tax credit properties.
Corporations also do not have a limit on the amount of credits
they can use except to the extent of their taxable income.
1.3 Demand for Affordable Housing in Georgia Power's
Service Territory. There is a great demand for quality
affordable housing across the United States, including Georgia.
Millions of Americans can no longer afford a decent place to
live, due to rising housing costs, shrinking real wages, and
-3-<PAGE>
destruction of many affordable apartment units. "Affordable"
housing is described as being that which consumes no more than
30% of a household's income. Independent studies indicate that
39% of households in Georgia cannot afford fair market rents for
one-bedroom units, and 45% cannot afford two-bedroom units based
upon fair market rents. Georgia Power has identified seven
target communities* spanning eight counties within its service
territory with a chronic need for additional affordable housing.
While some States have consistently utilized the Section 42
tax credits allocated to them, Georgia has not done so, thereby
forfeiting this valuable form of federal assistance to other
States to which they are reallocated. In 1992, for example,
nearly half of the Section 42 tax credits allocated to Georgia
were unused. Significantly, between 1992-1993, Georgia had a 37%
decrease in multi-family housing starts, while States fully
utilizing the tax credits had an increase.
1.4 Terms of Limited Partnership Agreement. Georgia Power
proposes to acquire up to 20% of the aggregate interests of all
partners in each Partnership, subject to an aggregate investment
in all such Partnerships not to exceed $10 million. The sole
general partner of each Partnership will be Heartland Properties,
Inc., a subsidiary of WPL Holdings, Inc., an exempt holding
company, or an affiliate of Heartland Properties (the "General
Partner"). The remaining limited partnership interests of each
* Atlanta, Macon, Rome, Augusta, Athens, Columbus, and
Valdosta.
-4-<PAGE>
Partnership would be offered to one or more accredited investors,
including but not limited to other large Georgia corporations.
Attached hereto as Exhibit A is the form of partnership
agreement (the "Partnership Agreement") that would be used in
connection with each investment. Under the Partnership
Agreement, the limited partners would be comprised of Class A
Limited Partners and Class B Limited Partners (collectively, the
"Limited Partners"). Georgia Power will only acquire Class B
Limited Partner units.
The term of each Partnership shall be for 50 years. (Section
1.10). Contributions to the capital of each Partnership by the
Limited Partners, which will represent 99% of the aggregate of
all contributions by all partners, will be made in accordance
with a drawdown schedule that is appropriate for any particular
housing project. By way of illustration only, a typical funding
schedule might call for capital contributions to be made in three
equal installments, one each at the time of execution of the
Partnership Agreement, upon issuance of a certificate of
occupancy for the housing project, and on the "breakeven date,"
which is the date on which the rental income of the Partnership
has exceeded the sum of the Partnership's operational costs and
required deposits to reserves. (Section 2.02).
Generally, allocations of profits, losses and tax credits of
each Partnership shall be allocated to the Partners in accordance
with their respective partnership percentages (up to 20% in the
case of Georgia Power). (Section 3.01 -.02). Similarly, cash
-5-<PAGE>
flow and the net proceeds from any sale or refinancing of a
housing project will be distributed to the Partners in accordance
with their respective partnership percentages. (Section 4.01 -
.02).
The General Partner shall have full and exclusive control
over the affairs of each Partnership, subject to certain limited
approval rights that limited partners may hold under Delaware
law. (Section 5.01). As a Class B Limited Partner, however,
Georgia Power will have fewer approval rights than the Class A
Limited Partners. Specifically, without the consent of all
Limited Partners, including Georgia Power as a Class B Limited
Partner, the General Partner may not:
(a) take any action in contravention of the Partnership
Agreement;
(b) take any action that would make it impossible to carry
on the ordinary business of the Partnership;
(c) possess Partnership property or assign its rights
therein for other than a Partnership purpose;
(d) make, amend or revoke tax elections;
(e) materially change any accounting method or practice of
the Partnership;
(f) take any action that would cause a termination of the
Partnership for tax purposes;
(g) use Partnership property for any purpose other than as
a low income housing development as contemplated in Section
42 of the Code;
-6-<PAGE>
(h) materially change the nature of the business or purpose
of the Partnership;
(i) take any action or fail to take any action that would
cause or result in a breach of any representations or
covenants of the General Partner;
(j) except as otherwise specifically permitted, take any
action that would cause a dissolution of the Partnership;
and
(k) perform any act that would subject any Limited Partner
to liability as a general partner.
In contrast, unlike a Class A Limited Partner, Georgia Power
will have no consent or approval rights with respect to actions
by the General Partner involving sales of Partnership property,
incurrence of Partnership indebtedness, creation of mortgages and
liens of Partnership property, or admission of additional general
partners. (Section 5.02).
In addition to the limited number of approval rights that
Georgia Power would have, the Class A and Class B Limited
Partners, voting together, may remove the General Partner for
"cause." (Section 9.06). There shall be "cause" for removal of
the General Partner only if the General Partner (a) intentionally
and in bad faith violates the terms of the Partnership Agreement,
or (b) materially breaches the Partnership Agreement, and such
breach has an adverse effect on the tax benefits or cash flow
available to the Limited Partners.
-7-<PAGE>
Finally, Limited Partners are entitled to examine and copy
the books and records of the Partnership, to receive financial
reports, and to receive a detailed annual operating and capital
improvements budget. (Section 7.01 - .03).
The General Partner, or a separate management company with
which the Partnership may enter into a management agreement,
would manage the day to day operations of each housing project,
including leasing activities, rent collection, and property
maintenance. It is contemplated that, in the typical case, a
local real estate developer or property manager in the community
in which the project is located would be engaged to provide some
or all of these management services.
1.5 Tax Matters. The Section 42 tax credit will be
allocated to Georgia Power in accordance with Rule 45(c) and the
Southern System's currently authorized consolidated tax return
allocation agreement.
Item 2. Fees, Commissions and Expenses.
Estimates as to fees and expenses will be furnished by
amendment.
Item 3. Applicable Statutory Provisions.
Georgia Power believes that Section 9(c)(3) of the Act is
applicable to the proposed transaction. In this connection,
Georgia Power believes that the proposed investment in each
Partnership is consistent with the general policy of Rule
-8-<PAGE>
40(a)(5) under the Act and that such rule would exempt the
proposed transaction from Section 9(a)(1) but for the fact that
the amount of the investment proposed herein will exceed the
dollar limitation therein contained.
As a Class B Limited Partner, Georgia Power will not acquire
any "voting securities," as that term is defined in Section
2(a)(17) of the Act. Thus, no Partnership will be an "affiliate"
or "subsidiary company" of Georgia Power within the meaning of
the Act. Specifically, Georgia Power will not be entitled to
take part in the control, management or investment decisions of
any Partnership or, through such Partnership, the control or
management of any housing project in which such Partnership may
invest. As a Class B Limited Partner, Georgia Power will only be
entitled to receive notices and other information from the
General Partner, to inspect the Partnership's books and records,
and to vote on a limited number of actions that could
fundamentally change the structure and purposes of the
Partnership and its relationship with the General Partner.
Finally, Georgia Power will have no power to remove the General
Partner.
Rule 54 is also applicable to the proposed transaction.
Item 4. Regulatory Approval.
The transaction proposed herein is not subject to the
jurisdiction of any State commission or of any federal commission
other than the Securities and Exchange Commission.
-9-<PAGE>
Item 5. Procedure.
Georgia Power requests that the Commission's order be issued
as soon as the rules allow, and that there be no thirty-day
waiting period between the issuance of the Commission's order and
the date on which it is to become effective. Georgia Power
hereby waives a recommended decision by a hearing officer or
other responsible officer of the Commission and hereby consents
that the Division of Investment Management may assist in the
preparation of the Commission's decision and/or order in this
matter unless such Division opposes the matters covered hereby.
Georgia Power proposes to file with the Commission as soon
as practicable following each semi-annual period, commencing with
the semi-annual period ending June 30, 1995, a report pursuant to
Rule 24 which identifies each investment made by Georgia Power in
any Partnership during such semi-annual period and a general
description of the housing project owned by such Partnership; and
the cumulative amounts invested by Georgia Power through the end
of such semi-annual period in all such Partnerships.
Item 6. Exhibits and Financial Statements.
(a) Exhibits.
A - Form of Limited Partnership Agreement.
B - None.
C - None.
D - None.
-10-<PAGE>
E - None.
F - Opinion of Troutman Sanders, counsel to
Georgia Power. (To be filed by amendment).
G - Form of Federal Register Notice.
(b) Financial Statements.
None.
Item 7. Information as to Environmental Effects.
(a) In light of the nature of the proposed transactions, as
described in Item 1 hereof, the Commission's action in this
matter will not constitute any major federal action significantly
affecting the quality of the human environment.
(b) No other federal agency has prepared or is preparing an
environmental impact statement with regard to the proposed
transactions.
SIGNATURE
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, the undersigned company has duly caused this
statement to be signed on its behalf by the undersigned thereunto
duly authorized.
Dated: September 20, 1994
GEORGIA POWER COMPANY
By: Wayne Boston
Wayne Boston, Assistant Secretary
-11-<PAGE>
Exhibit A
____________ APARTMENTS, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
LIMITED PARTNERSHIP AGREEMENT<PAGE>
TABLE OF CONTENTS
Page
LIMITED PARTNERSHIP AGREEMENT . . . . . . . . . . . . . . . . 1
STATEMENT OF AGREEMENT . . . . . . . . . . . . . . . . . . . 1
ARTICLE 1: ORGANIZATION . . . . . . . . . . . . . . . . . . 1
Section 1.01 Formation . . . . . . . . . . . . . . . . 1
Section 1.02 Character and Purpose of Business . . . . 1
Section 1.03 Name of Partnership . . . . . . . . . . . 1
Section 1.04 Principal Place of Business . . . . . . . 1
Section 1.05 Principal Office . . . . . . . . . . . . 1
Section 1.06 Agent for Service of Process . . . . . . 1
Section 1.07 Name and Address of General Partner . . . 2
Section 1.08 Names and Addresses of Limited Partners . 2
Section 1.09 Governmental Filings . . . . . . . . . . 2
Section 1.10 Term of Partnership . . . . . . . . . . . 2
Section 1.11 Definitions . . . . . . . . . . . . . . . 2
ARTICLE 2: CAPITAL CONTRIBUTIONS . . . . . . . . . . . . . . 2
Section 2.01 General Partner's Capital Contributions . 2
Section 2.02 Limited Partner Capital Contributions . . 2
(a) Amount and Timing . . . . . . . . . . . . . . 2
(b) Additional Contributions . . . . . . . . . . . 3
Section 2.03 Interest on Capital Contributions . . . . 3
Section 2.04 Withdrawal and Return of Capital
Contributions . . . . . . . . . . . . . . . . . . . 3
Section 2.05 Capital Accounts . . . . . . . . . . . . 3
ARTICLE 3: ALLOCATION OF PROFITS, LOSSES AND TAX CREDITS . . 4
Section 3.01 Profit and Loss Allocations . . . . . . . 4
Section 3.02 Special Allocations . . . . . . . . . . . 4
(a) Tax Credits . . . . . . . . . . . . . . . . . 4
(b) [RESERVED] . . . . . . . . . . . . . . . 4
(c) Partnership Minimum Gain Chargeback . . . . . 4
(d) Partner Minimum Gain Chargeback . . . . . . . 5
(e) Qualified Income Offset . . . . . . . . . . . 5
(f) Gross Income Allocation . . . . . . . . . . . 5
(g) Nonrecourse Deductions . . . . . . . . . . . . 6
(h) Partner Nonrecourse Deductions . . . . . . . . 6
(i) Section 754 Adjustment . . . . . . . . . . . . 6
(j) Curative Allocations . . . . . . . . . . . . . 6
(k) Matching Income Allocations for Sales and
Refinancing Proceeds . . . . . . . . . . . . . 6
Section 3.03 Timing of Allocations . . . . . . . . . . 6
Section 3.04 Other Allocation Rules . . . . . . . . . 7
(a) Excess Nonrecourse Liabilities . . . . . . . . 7
(b) Effect of Cash Distributions . . . . . . . . . 7
(c) Recharacterization of Fee as Distribution . . 7
Section 3.05 Tax Effect of Allocations . . . . . . . . 7
i<PAGE>
ARTICLE 4: DISTRIBUTIONS . . . . . . . . . . . . . . . . . . 8
Section 4.01 Distribution of Cash Flow . . . . . . . . 8
Section 4.02 Net Proceeds . . . . . . . . . . . . . . 8
Section 4.03 Treatment of Distributions . . . . . . . 8
ARTICLE 5: POWERS, RIGHTS AND DUTIES OF GENERAL PARTNER . . 8
Section 5.01 Management of Partnership . . . . . . . . 8
Section 5.02 Restrictions on General Partner's
Authority . . . . . . . . . . . . . . . . . . . . . 8
Section 5.03 Representations, Warranties and
Covenants of the General Partner . . . . . . . . . 10
Section 5.04 Specific Obligations of General Partner . 10
(a) Securities Law Matters . . . . . . . . . . . . 10
(b) Limited Partnership Status . . . . . . . . . . 10
(c) Tax Matters Partner . . . . . . . . . . . . . 10
(d) Governmental Filings . . . . . . . . . . . . . 11
(e) Bank Accounts . . . . . . . . . . . . . . . . 11
(f) Project Property Sale . . . . . . . . . . . . 11
Section 5.05 Fees for Services Rendered . . . . . . . 11
Section 5.06 Reimbursement of Expenses . . . . . . . . 12
Section 5.07 Outside Ventures of Partners . . . . . . 12
ARTICLE 6: POWERS, RIGHTS AND DUTIES OF LIMITED PARTNERS . . 12
Section 6.01 Limitation of Liability . . . . . . . . . 12
Section 6.02 No Participation in Management . . . . . 12
Section 6.03 Partnership Decisions . . . . . . . . . . 12
ARTICLE 7: ACCOUNTING AND FISCAL AFFAIRS . . . . . . . . . . 12
Section 7.01 Books of Account . . . . . . . . . . . . 12
Section 7.02 Financial Reports . . . . . . . . . . . . 13
Section 7.03 Budgets . . . . . . . . . . . . . . . . . 13
Section 7.04 Tax Information . . . . . . . . . . . . . 13
ARTICLE 8: TRANSFER OF LIMITED PARTNER'S PARTNERSHIP
INTERESTS . . . . . . . . . . . . . . . . . . . . . . . 13
Section 8.01 Voluntary Transfers . . . . . . . . . . . 13
Section 8.02 General Partner's Consent to
Substitution as a Limited Partner . . . . . . . . . 13
Section 8.03 Involuntary Transfers . . . . . . . . . . 14
Section 8.04 Distributions and Allocations with
Respect to Transferred Partnership Interests . . . 14
Section 8.05 Voluntary Withdrawal . . . . . . . . . . 14
ARTICLE 9: TRANSFER OF GENERAL PARTNER'S PARTNERSHIP
INTERESTS . . . . . . . . . . . . . . . . . . . . . . . 14
Section 9.01 Voluntary Transfers . . . . . . . . . . . 14
Section 9.02 Involuntary Transfers . . . . . . . . . . 15
Section 9.03 Continuation of Partnership After
Involuntary Transfer of General Partner's
Partnership Interests . . . . . . . . . . . . . . . 15
Section 9.04 Distributions and Allocations with
Respect to Transferred Partnership Interests . . . 15
ii<PAGE>
Section 9.05 Voluntary Withdrawal . . . . . . . . . . 16
Section 9.06 Removal of General Partner . . . . . . . 16
ARTICLE 10: DISSOLUTION, WINDING UP AND TERMINATION . . . . 16
Section 10.01 Dissolution . . . . . . . . . . . . . . . 16
Section 10.02 Winding Up and Termination . . . . . . . 17
Section 10.03 Compliance with Liquidation Requirements
of Regulations . . . . . . . . . . . . . . . . . . 17
Section 10.04 Rights and Obligations of Limited
Partners Upon Dissolution . . . . . . . . . . . . . 18
Section 10.05 Waiver of Partition . . . . . . . . . . . 19
Section 10.06 Final Accounting . . . . . . . . . . . . 19
ARTICLE 11: MISCELLANEOUS . . . . . . . . . . . . . . . . . 19
Section 11.01 Notices and Addresses . . . . . . . . . . 19
Section 11.02 Pronouns and Plurals . . . . . . . . . . 19
Section 11.03 Counterparts . . . . . . . . . . . . . . 19
Section 11.04 Applicable Law . . . . . . . . . . . . . 19
Section 11.05 Successors . . . . . . . . . . . . . . . 19
Section 11.06 Severability . . . . . . . . . . . . . . 19
Section 11.07 Exhibits . . . . . . . . . . . . . . . . 20
Section 11.08 Amendment of Partnership Agreement . . . 20
iii<PAGE>
____________ APARTMENTS, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
LIMITED PARTNERSHIP AGREEMENT
This Limited Partnership Agreement (referred to herein
as the "Partnership Agreement") is entered into as of
_______________, 1994, by and among Heartland ___________, Inc.,
a Wisconsin corporation, as the General Partner,
_________________________, as the Class A Limited Partners, and
Georgia Power Company, a Georgia corporation, as the Class B
Limited Partner.
STATEMENT OF AGREEMENT
The parties to this Partnership Agreement, each in
consideration of the acts, capital contributions and promises of
the other, agree as follows:
ARTICLE 1: ORGANIZATION
Section 1.01 Formation. The Partnership was formed by the
filing of a Certificate of Limited Partnership on ____________,
1994.
Section 1.02 Character and Purpose of Business. The sole
purpose of the business of the Partnership shall be: (a) to
acquire, construct, own, finance, lease and operate the Project
as a qualified low income housing project within the meaning of
Section 42 of the Code; (b) to eventually sell or otherwise
dispose of the Project in a manner consistent with the provisions
of this Partnership Agreement; and (c) to engage in all other
activities incidental or related thereto.
Section 1.03 Name of Partnership. The name of the
Partnership is __________ Apartments, Limited Partnership." The
Partnership may conduct its business under such other fictitious
names as the General Partner selects and the law permits.
Section 1.04 Principal Place of Business. The address of
the principal place of business of the Partnership shall be
________________________________________________________, or such
other address as may from time to time be selected by the
Partners.
Section 1.05 Principal Office. The address of the
principal office of the Partnership shall be its principal place
of business or such other address as may from time to time be
selected by the Partners.
1<PAGE>
Section 1.06 Agent for Service of Process. The initial
address of the Partnership's registered office in Delaware is
1209 Orange Street, Wilmington, Delaware, and its initial
registered agent at such address for service of process is the
Corporation Trust Company.
Section 1.07 Name and Address of General Partner. The
name and address of the General Partner is as follows:
Heartland _____________, Inc.
309 West Washington Avenue
Madison, Wisconsin 53703
Section 1.08 Names and Addresses of Limited Partners. The
names and addresses of the Limited Partners are as follows:
Class A Limited Partners Class B Limited Partner
Georgia Power Company
_____________________________ 333 Piedmont Avenue, N.E.
Atlanta, GA 30308
_____________________________
_____________________________
Section 1.09 Governmental Filings. The General Partner
shall make all governmental filings as are necessary or
appropriate to qualify the Partnership to do business in any
jurisdiction or to otherwise carry out the purposes and intent of
this Partnership Agreement.
Section 1.10 Term of Partnership. The term of the
Partnership began on the date its Certificate of Limited
Partnership was filed, and the Partnership shall continue in
existence until December 31, 2043, or such later date as is
agreed to by all the Partners, unless it is earlier dissolved and
terminated pursuant to the provisions of this Partnership
Agreement.
Section 1.11 Definitions. All capitalized words and
phrases used in this Partnership Agreement (other than the full
names and addresses of the Partners and governmental subdivisions
and agencies) shall have the meanings set forth in Exhibit A.
ARTICLE 2: CAPITAL CONTRIBUTIONS
Section 2.01 General Partner's Capital Contributions. The
General Partner has made an initial cash Capital Contribution to
the Partnership in the amount of $1,000, and shall make such
additional Capital Contributions as may be necessary to cause the
General Partner's total Capital Contributions to equal 1% of the
2<PAGE>
total Capital Contributions to the Partnership. The General
Partner's Capital Contributions shall be made on the dates the
Limited Partners make their Capital Contributions under Section
2.02.
Section 2.02 Limited Partner Capital Contributions.
(a) Amount and Timing. The Class A Limited Partners
shall contribute an aggregate of $___________ to the Partnership,
representing 79% of the Partners' total Capital Contributions.
The Class B Limited Partner shall contribute $__________ to the
Partnership, representing 20% of the Partners' total Capital
Contributions. Subject to the terms and conditions of the
Subscription Agreement, the Capital Contributions of the Class A
Limited Partners and the Class B Limited Partner shall be made in
three installments, as follows: (i) One-third upon execution of
this Agreement; (ii) One-third upon the issuance of a certificate
of occupancy for the Project; and (iii) One-third on the
Breakeven Date.
(b) Additional Contributions. No Limited Partner
shall be required to make additional Capital Contributions to the
Partnership, except as provided in Section 10.04.
Section 2.03 Interest on Capital Contributions. No
Partner shall be paid interest on its Capital Contribution.
Section 2.04 Withdrawal and Return of Capital
Contributions. No Partner shall have the right: (a) to withdraw
any part of its Capital Contribution from the Partnership; (b) to
demand a return of its Capital Contribution; or (c) to receive
property other than cash in return for its Capital Contribution.
Section 2.05 Capital Accounts. The Partnership shall
maintain for each Partner a separate Capital Account in
accordance with Section 1.704-1(b) of the Regulations. The
Capital Account of each Partner shall consist of the amount of
its Capital Contribution, increased by (a) the fair market value
of any property contributed by it to the Partnership, (b) the
amount of any Partnership liability assumed by such Partner or
which is secured by any Partnership Property distributed to such
Partner, and (c) its allocable share of Profits and any items of
income or gain specially allocated to it pursuant to Sections
3.02 (d) through (k), and shall be decreased by (w) the amount of
any cash distributed to it, (x) the fair market value of any
Partnership Property distributed to it, (y) the amount of any
liability of such Partner assumed by the Partnership or which is
secured by any property contributed by such Partner to the
Partnership, and (z) its allocable share of Losses and any items
of loss or deduction specially allocated to it pursuant to
Sections 3.02 (d) through (k).
3<PAGE>
If any Partnership Interests are transferred in
accordance with the terms of this Partnership Agreement, then the
transferee shall succeed to the Capital Account of the transferor
to the extent it relates to the transferred Partnership
Interests; provided, however, that if any such transfer causes a
termination of the Partnership for federal income tax purposes
pursuant to Section 708(b) of the Code, then the Capital Account
of the transferee (as well as those of the remaining Partners)
shall be adjusted to take into consideration the revaluation of
the Partnership Property mandated pursuant to Sections 1.704-
1(b)(2)(iv)(e), (f) and (l) of the Regulations. Upon the
occurrence of any of the following events, the Partnership
Property shall be revalued and the Partners' Capital Accounts
adjusted to reflect the gain (or loss) that would have been
allocated to each Partner if all the Partnership Property had
been sold at its fair market value immediately prior to the
occurrence of such event:
(i) The acquisition of an additional interest in
the Partnership by any new or existing Partner in exchange
for more than a de minimis Capital Contribution;
(ii) The distribution by the Partnership to a
Partner of more than a de minimis amount of property or
money in consideration for an interest in the Partnership;
or
(iii) The "liquidation" of the Partnership
within the meaning of Section 1.704-1(b)(2)(ii)(g) of the
Regulations.
The revaluation of the Partnership Property referred to in the
immediately preceding sentence shall be made in accordance with
Section 1.704-1(b)(2)(iv)(f) of the Regulation. The foregoing
provisions and all other provisions of this Partnership Agreement
relating to the maintenance of Capital Accounts are intended to
comply with Section 1.704-1(b) of the Regulations and shall be
interpreted and applied in a manner consistent with such
Regulations.
ARTICLE 3: ALLOCATION OF PROFITS, LOSSES AND TAX CREDITS
Section 3.01 Profit and Loss Allocations. Except as
otherwise provided in Section 3.02, Profits and Losses for any
fiscal year of the Partnership shall be allocated between the
Partners in accordance with their respective Partnership
Percentages. Unless and until adjusted by agreement among the
Partners, the Partnership Percentages shall be as follows:
General Partner 1%
Class A Limited Partners (as a group) 79%
4<PAGE>
Class B Limited Partner 20%
100%
Section 3.02 Special Allocations. Notwithstanding
anything to the contrary contained in Section 3.01, the following
special allocations shall in all events apply in determining the
allocation of Profits and Losses between the Partners and shall
be made prior to the allocations required under Section 3.01.
(a) Tax Credits. Tax Credits shall be allocated
between the Partners in accordance with the same percentages set
forth in Section 3.01 with respect to Profits and Losses.
(b) [RESERVED]
(c) Partnership Minimum Gain Chargeback.
Notwithstanding any other provision of this Article 3, if there
is a net decrease in Partnership Minimum Gain during any
Partnership fiscal year, then each Partner shall be specially
allocated items of Partnership income or gain for such fiscal
year (and, if necessary, subsequent fiscal years) in an amount
equal to the portion of such Partner's share of the net decrease
in the Partnership Minimum Gain (determined in accordance with
Section 1.704-2(g) of the Regulations). Any allocations made
pursuant to this subparagraph (c) shall be made in proportion to
the respective amounts required to be allocated to each of the
Partners. The items of Partnership income or gain to be
specially allocated under this subparagraph (c) shall be
determined in accordance with Section 1.704-2(f) of the
Regulations. This subparagraph (c) is intended to comply with
the minimum gain chargeback requirements of Section 1.704-2(f) of
the Regulations and shall be interpreted consistently therewith.
(d) Partner Minimum Gain Chargeback. Notwithstanding
any other provision of this Article 3 (except subparagraph (c) of
this Section 3.02), if there is a net decrease in Partner Minimum
Gain attributable to a Partner Nonrecourse Debt during any
Partnership fiscal year, then each Partner who has a share of the
Partner Minimum Gain attributable to such Partner Nonrecourse
Debt (as determined in accordance with Section 1.704-2(i)(5) of
the Regulations) shall be specially allocated items of
Partnership income and gain for such fiscal year (and if
necessary, subsequent fiscal years) in an amount equal to the
portion of such Partner's share of the net decrease in Partner
Minimum Gain attributable to such Partner Nonrecourse Debt (as
determined in accordance with Section 1.704-2(i)(4) of the
Regulations). Any allocations made pursuant to this subparagraph
(d) shall be made in proportion to the respective amounts
required to be allocated to each Partner. The items of
Partnership income or gain to be specially allocated under this
subparagraph (d) shall be determined in accordance with Section
1.704-2(i)(4) of the Regulations. This subparagraph (d) is
5<PAGE>
intended to comply with the minimum gain chargeback requirements
of Section 1.704-2(i)(4) of the Regulations and shall be
interpreted consistently therewith.
(e) Qualified Income Offset. If a Limited Partner
unexpectedly receives any adjustments, allocations or
distributions described in Section 1.704-1(b)(2)(ii)(d)(4), (5)
or (6) of the Regulations, then items of Partnership income or
gain shall be specially allocated to such Limited Partner in an
amount and manner sufficient to eliminate, to the extent required
by the Regulations, the Adjusted Capital Account Deficit of the
Limited Partner as quickly as possible. The special allocations
required pursuant to this subparagraph (e) shall be made only if
and to the extent that a Limited Partner would have an Adjusted
Capital Account Deficit after all other allocations provided for
in this Article 3 have been tentatively made as if this
subparagraph (e) were not in the Partnership Agreement. This
subparagraph (e) is intended to comply with the qualified income
offset requirements of Section 1.704-1(b)(2)(ii)(d) of the
Regulations and shall be interpreted consistently therewith.
(f) Gross Income Allocation. If a Limited Partner has
a deficit balance in its Capital Account at the end of any
Partnership fiscal year which exceeds the sum of (i) the amount
the Limited Partner is obligated to restore pursuant to any
provision of this Partnership Agreement and (ii) the amount the
Limited Partner is deemed to be obligated to restore pursuant to
the penultimate sentences of Section 1.704-2(g)(1) and 1.704-
2(i)(5) of the Regulations, then the Limited Partner shall be
specially allocated items of Partnership income or gain in the
amount of such excess as quickly as possible. The special
allocations required pursuant to this subparagraph (f) shall be
made only if and to the extent that a Limited Partner would have
a deficit Capital Account in excess of the aforementioned sum
after all of the allocations provided for in this Article 3 have
been tentatively made as if subparagraph (e) and this
subparagraph (f) were not in the Partnership Agreement.
(g) Nonrecourse Deductions. Nonrecourse Deductions
shall be specially allocated between the Partners in accordance
with the same percentages set forth in Section 3.01 with respect
to Profits and Losses.
(h) Partner Nonrecourse Deductions. Partner
Nonrecourse Deductions shall be specially allocated to the
Partner which bears the economic risk of loss with respect to the
Partner Nonrecourse Debt to which such Partner Nonrecourse
Deductions are attributable in accordance with Section 1.704-2(i)
of the Regulations.
(i) Section 754 Adjustment. To the extent an
adjustment to the adjusted tax basis of any Partnership Property
6<PAGE>
undertaken pursuant to Section 734(b) or 743(b) of the Code is
required to be taken into account in determining the Capital
Accounts of the Partners under Section 1.704-1(b)(2)(iv)(m) of
the Regulations, then the amount of such adjustment to the
Capital Accounts shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the
adjustment decreases such basis) and such gain or loss shall be
specially allocated to the Partners in a manner consistent with
the manner in which their Capital Accounts are required to be
adjusted pursuant to the aforementioned section of the
Regulations.
(j) Curative Allocations. The special allocations set
forth in subparagraphs (c) through (h) of this Section 3.02 are
intended to comply with the requirements of Section 1.704-1(b) of
the Regulations. These special allocations may lead to results
which are inconsistent with the Partners' intentions concerning
their sharing in Partnership distributions. Accordingly, the
General Partner is hereby authorized and directed to specially
allocate other items of Partnership income, gain, loss and
deduction between the Partners so as to prevent the special
allocations required under subparagraphs (c) through (h) of this
Section 3.02 from distorting the Partners' understanding of the
manner in which Partnership distributions are to be made to the
Partners upon the dissolution and termination of the Partnership.
In general, it is anticipated that the special allocations, if
any, which will be made under this subparagraph (j) will be made
by specially allocating other items of Partnership income, gain,
loss and deduction between the Partners so that the sum of the
special allocations made to each Partner pursuant to
subparagraphs (c) through (h) of this Section 3.02 equals the sum
of the special allocations made under this subparagraph (j).
(k) Matching Income Allocations for Sales and
Refinancing Proceeds. All or a portion of the remaining items of
Partnership income or gain for the year, if any, shall be
specially allocated to the Partners in proportion to the
cumulative distributions each has received pursuant to Section
4.02(b) and Section 10.02(d) hereof from the commencement of the
Partnership to a date thirty (30) days after the end of such
fiscal year until the aggregate amounts allocated to each Partner
pursuant to this Section 3.02(k) for such fiscal years and all
previous fiscal years is equal to the cumulative amount of such
distributions to such Partner.
Section 3.03 Timing of Allocations. Except as otherwise
expressly provided herein, all allocations of Profits, Losses and
Tax Credits shall be made as of the last day of each fiscal year
of the Partnership.
Section 3.04 Other Allocation Rules. The following rules
shall apply for the purpose of interpreting and applying the
7<PAGE>
provisions of this Article 3 relating to the allocation of
Profits, Losses and Tax Credits between the Partners:
(a) Excess Nonrecourse Liabilities. Solely for
purposes of determining a Partner's proportionate share of the
"excess nonrecourse liabilities" of the Partnership within the
meaning of Section 1.752-3(a)(3) of the Regulations, the
Partners' respective interests in Partnership Profits shall be
those percentage interests set forth in Section 3.01 (determined
without regard to Section 3.02).
(b) Effect of Cash Distributions. To the extent
permitted by Section 1.704-2(h) and Section 1.704-2(i)(6) of the
Regulations, the General Partner shall endeavor to treat
distributions of Cash Flow as having been made from the proceeds
of a Nonrecourse Liability or a Partner Nonrecourse Debt only to
the extent that such distributions would cause or increase an
Adjusted Capital Account Deficit for a Limited Partner.
(c) Recharacterization of Fee as Distribution. If any
fee payable to any Partner or any Affiliate thereof is determined
to be a nondeductible distribution from the Partnership to a
Partner for federal income tax purposes, there shall be allocated
to such Partner an amount of gross income equal to such
distribution.
Section 3.05 Tax Effect of Allocations. Except as
otherwise provided herein, the allocation of Profits, Losses and
Tax Credits to any Partner under this Article 3 shall be deemed
an allocation to that Partner of the same proportionate part of
each separate item of Partnership taxable income, gain, loss,
deduction or credit which comprise such Profits, Losses and Tax
Credits, including, without limitation, any "unrealized
receivable" or "substantially appreciated inventory item" under
Section 751 of the Code. The Partners are aware of the income
tax consequences of the allocations made pursuant to this
Article 3 and hereby agree to be bound by the provisions of this
Article 3 in reporting their respective shares of Partnership
income, gain, loss, deduction and credit for income tax purposes.
Notwithstanding anything to the contrary contained in
this Article 3, income, gain, loss, deduction and credit with
respect to any Partnership Property contributed to the capital of
the Partnership by any Partner shall, solely for tax purposes, be
allocated between the Partners so as to take into account any
variation between the adjusted tax basis of such Partnership
Property to the Partnership for federal income tax purposes and
the value assigned to such Partnership Property for the purposes
of the computation of the Partners' Capital Accounts. If any
revaluation of the Partnership Property is made by the General
Partner with the consent of the Limited Partners, then any
subsequent allocations of income, gain, loss, deduction and
8<PAGE>
credit with respect to such Partnership Property shall take into
account any variation between the adjusted tax basis of such
Partnership Property for federal income tax purposes and the
value assigned to such Partnership Property as a result of such
revaluation. All allocations required under this paragraph of
Section 3.05 are solely for purposes of federal, state and local
income taxes and shall not affect or in any way be taken into
account in computing any Partner's Capital Account or any
Partner's share of Profits, Losses, Tax Credits or other items or
distributions required or permitted to be made pursuant to any
provision of this Partnership Agreement.
ARTICLE 4: DISTRIBUTIONS
Section 4.01 Distribution of Cash Flow. Cash Flow shall
be distributed among the Partners based on their Partnership
Percentages.
Section 4.02 Net Proceeds. Except as otherwise provided
in Article 10 hereof (pertaining to the liquidation and
dissolution of the Partnership), Net Proceeds shall be
distributed among the Partners based on their Partnership
Percentages.
Section 4.03 Treatment of Distributions. Distributions to
a Partner of Cash Flow shall be considered draws against such
Partner's allocable share of the Partnership's Profits and
Losses.
ARTICLE 5: POWERS, RIGHTS AND DUTIES OF GENERAL PARTNER
Section 5.01 Management of Partnership. The Partnership
shall be managed by the General Partner, who shall exercise full
and exclusive control over the affairs of the Partnership,
subject, however, to the limitations on its authority set forth
in this Partnership Agreement (including, without limitation,
Sections 5.02 and 5.03). The General Partner shall be under a
fiduciary duty to conduct and manage the affairs of the
Partnership in a prudent, businesslike and lawful manner and
shall devote such part of its time to the affairs of the
Partnership as shall be deemed necessary and appropriate to
pursue the business and carry out the purposes of the Partnership
as contemplated in this Partnership Agreement. The General
Partner shall use its best efforts and exercise good faith in all
activities related to the business of the Partnership.
Section 5.02 Restrictions on General Partner's Authority.
The General Partner shall not have the authority to take any of
those actions specifically set forth below unless the prior
consent of all Limited Partners is obtained in the case of those
9<PAGE>
actions set forth in subparagraphs (a) through (c), (h) through
(k), (n), (o), (q) and (r); and otherwise unless the prior
consent of the Class A Limited Partners is obtained:
(a) Do any act which is in contravention of or
inconsistent with this Partnership Agreement or any other
agreement to which the Partnership is a party;
(b) Do any act which would make it impossible to carry
on the ordinary business of the Partnership;
(c) Possess Partnership Property or assign its rights
in specific Partnership Property for other than a Partnership
purpose;
(d) Sell or otherwise transfer any interest in the
Project Property or any interest therein (other than leases of
residential units in the ordinary course of the Partnership's
business);
(e) Incur any liability on behalf of the Partnership
in the ordinary course of the Partnership's business in excess of
$50,000, other than those liabilities (or agreements relating
thereto) which have theretofore been disclosed to and approved in
writing by the Class A Limited Partners;
(f) Acquire any interest in real property or acquire
any item of personal property having a purchase price of more
than $50,000;
(g) Refinance or prepay any mortgage or long-term
liability of the Partnership;
(h) Make, amend or revoke any tax election required of
or permitted to be made by the Partnership under the Code or the
Regulations, including, without limitation, any election under
Section 42 or Section 754 of the Code;
(i) Materially change any accounting method or
practice of the Partnership;
(j) Take any action which would cause the termination
of the Partnership for federal income tax purposes;
(k) Use or cause the Project Property to be used for
any purpose other than as a low income housing development as
contemplated under Section 42 of the Code;
(l) Mortgage, pledge or encumber any interest in any
Partnership Property, including, without limitation, the Project
Property;
10<PAGE>
(m) Enter into any agreement which contemplates or
requires the General Partner to take any action on behalf of the
Partnership with respect to any matter for which the prior
written consent of the Class A Limited Partners is a prerequisite
to action under this Section 5.2;
(n) Materially change the nature of the business or
purpose of the Partnership;
(o) Take any action (or fail to take any action) which
would cause or result in a breach of any of the representations,
warranties or covenants of the General Partner set forth in this
Partnership Agreement, including, without limitation, those set
forth in Section 5.03;
(p) Admit any other person or entity as a General
Partner;
(q) Except as permitted by Section 10.01 (pertaining
to dissolution of the Partnership), take any action that will
cause the dissolution of the Partnership; or
(r) Perform any act that would subject any Limited
Partner to liability as a general partner in any jurisdiction.
Section 5.03 Representations, Warranties and Covenants of
the General Partner. The General Partner makes no
representation, covenants or warranties with respect to the
Partnership other than those set forth in the Subscription
Agreement.
Section 5.04 Specific Obligations of General Partner. The
General Partner shall, on behalf of and in the name of the
Partnership and in addition to any obligations placed upon them
elsewhere in this Partnership Agreement, have the following
specific obligations.
(a) Securities Law Matters. The General Partner shall
prepare and file all appropriate reports for the Partnership with
the Securities and Exchange Commission and state securities
administrators.
(b) Limited Partnership Status. The General Partner
shall (i) file such certificates and do such other acts as may be
required to qualify and maintain the Partnership as a limited
partnership under the Act and to qualify the Partnership to
transact business in all such jurisdictions as may be required
under applicable provisions of law and (ii) take or cause the
Partnership to take all reasonable steps deemed necessary by
counsel to the Partnership to assure that the Partnership is at
all times classified as a partnership for federal income tax
purposes.
11<PAGE>
(c) Tax Matters Partner. For the purposes of
Subchapter C of Chapter 63 of the Code, the General Partner shall
serve as the "Tax Matters Partner" of the Partnership and, as
such, shall have all of the rights and obligations given to a Tax
Matters Partner under said Subchapter. Notwithstanding anything
to the contrary contained herein, the General Partner, in its
capacity as the Tax Matters Partner, shall not take any of the
following actions, without first obtaining the prior written
consent of all Limited Partners.
(i) Extend the statute of limitations for
assessing or computing any tax liability against the Partnership
(or the amount or character of any Partnership tax item);
(ii) Settle any audit with the IRS concerning the
adjustment or readjustment of any Partnership tax item;
(iii) File a request for an administrative
adjustment with the IRS at any time or file a petition for
judicial review with respect to any IRS adjustment;
(iv) Initiate or settle any judicial review or
action concerning the amount or character of any Partnership tax
item;
(v) Intervene in any action brought by any other
Partner for judicial review of a final adjustment of any
Partnership tax item; or
(vi) Take any other action which would have the
affect of finally resolving a tax matter affecting the rights of
the Partnership and its Partners.
The General Partner shall keep the Limited Partners advised of
any dispute the Partnership may have with any federal, state or
local taxing authority and shall afford the Limited Partners the
right to participate directly in negotiations with any such
taxing authority in an effort to resolve any such dispute.
(d) Governmental Filings. The General Partner shall
prepare and submit to the Secretary of the Treasury, the
applicable state housing agency and any other governmental
authority having jurisdiction over the Project Property, on a
timely basis, any and all annual reports, information returns and
other certifications and information required by any such
governmental agency. The General Partner shall comply with all
other applicable requirements of any federal, state or local
agency having jurisdiction over the Project Property, including,
without limitation, any requirements of any such governmental
agency with respect to the funding and maintenance of any
operating or capital improvement reserves for the Project
Property.
12<PAGE>
(e) Bank Accounts. The General Partner shall
establish in the name and on behalf of the Partnership such bank
accounts as shall be required to facilitate the operation of the
Partnership's business. The Partnership's funds shall not be
commingled with any other funds of the General Partner or any of
its Affiliates. Promptly upon the request of a Limited Partner,
the General Partner shall obtain and deliver to such Limited
Partner full, complete and accurate statements of the amount and
status of all Partnership bank accounts and all withdrawals
therefrom and deposits thereto.
(f) Project Property Sale. The General Partner shall
investigate and report to the Limited Partners with respect to
the sale of the Project Property at such time as it is in the
best interests of the Limited Partners to consider any offer to
purchase or resyndicate the Project Property.
Section (5.05) Fees for Services Rendered. The Partnership
shall pay the following described fees to the Persons indicated
below:
(a) The Management Fee shall be paid to
_______________________ as provided in the Management Agreement;
(b) The General Partner shall be paid the fees
provided in the Subscription Agreement as provided therein.
None of the payments or reimbursements to any of the
Persons indicated above shall be considered a distribution of
Cash Flow to any Partner.
Section (5.06) Reimbursement of Expenses. The Partnership
shall reimburse each Partner for all out-of-pocket costs and
expenses incurred by it or its Affiliates in connection with the
formation of the Partnership. In addition, the Partnership shall
reimburse each Partner for all reasonable out-of-pocket costs and
expenses incurred by it or its Affiliates in connection with the
operation of the Partnership's business.
Section 5.07 Outside Ventures of Partners. Any Partner
may engage in or possess an interest in any other business
venture of any type or description, independently or with others
(including, without limitation, any venture which may be
competitive with the business being conducted by the Partnership)
and neither the Partnership, nor any Partner will, by virtue of
this Partnership Agreement, have any right, title or interest in
or to such outside ventures or the income or other benefits
derived therefrom.
ARTICLE 6: POWERS, RIGHTS AND DUTIES OF LIMITED PARTNERS
13<PAGE>
Section 6.01 Limitation of Liability. Except as otherwise
required under Sections 17-607(b) and 17-607(c) of the Act
(relating to a limited partner's liability under certain
circumstances to refund to the Partnership distributions of cash
previously made to it), the Limited Partners shall not be
personally liable for any loss or liability of the Partnership
beyond the amount of the Limited Partners' agreed-upon Capital
Contributions.
Section 6.02 No Participation in Management. Except as
otherwise expressly provided in this Partnership Agreement, no
Limited Partner shall participate in the operation, management or
control of the Partnership's business, transact any business in
the Partnership's name or have any power to sign documents for or
otherwise bind the Partnership.
Section 6.03 Partnership Decisions. Decisions to be made
by all Limited Partners hereunder shall be made by Limited
Partners with an aggregate Partnership Percentage in excess of
49.5%. Decisions to be made by the Class A Limited Partners
shall be made by Class A Limited Partners with an aggregate
Partnership Percentage in excess of 39.5%. Decisions to be made
by the Partners under this Agreement shall be made by Partners
owning an aggregate Partnership Percentage in excess of 50%.
ARTICLE 7: ACCOUNTING AND FISCAL AFFAIRS
Section 7.01 Books of Account. The General Partner shall
keep proper books of account for the Partnership. Such books of
account shall be kept at the principal office of the Partnership
and shall be open at all times for examination and copying by the
Limited Partner or its authorized representatives. The
Partnership shall utilize a calendar year and the accrual method
for tax and accounting purposes.
Section 7.02 Financial Reports. No later than February 28
following the close of each calendar year, the General Partner
shall provide the Limited Partners with financial statements for
the Partnership consisting of (a) a balance sheet and income
statement prepared in accordance with generally accepted
accounting principles; (b) a cash flow statement; (c) a statement
and reconciliation of the Partners' Capital Accounts in the
Partnership; and (d) a summary and computation of all fees paid
or payable to the General Partner and its Affiliates with respect
to the calendar year. The General Partner shall also provide
quarterly reports reflecting the operating results of the
Partnership within thirty (30) days following the close of each
calendar quarter. Such reports shall contain such information as
the Limited Partners shall reasonably require.
14<PAGE>
Section 7.03 Budgets. The General Partner shall provide
the Limited Partners, at least thirty (30) days prior to the
close of each calendar year, with a reasonably detailed annual
operating and capital improvements budget for the Partnership for
the following calendar year.
Section 7.04 Tax Information. The General Partner shall
prepare the annual partnership information return for each
taxable year of the Partnership, including Schedule K-1, no later
than March 1 of the following calendar year.
ARTICLE 8: TRANSFER OF LIMITED PARTNER'S PARTNERSHIP INTERESTS
Section 8.01 Voluntary Transfers. A Limited Partner may
at any time make a Voluntary Transfer of all or any part of its
Partnership Interests, so long as such Voluntary Transfer
complies with the following conditions: (a) the General Partner
has received a written instrument of transfer of all such
Partnership Interests, which instrument shall be signed by the
transferor Limited Partner and the transferee and shall contain
the name and address of the transferee and the transferee's
express acceptance of and agreement to be bound by all of the
terms and conditions of this Partnership Agreement; (b) all
requirements of applicable state and federal securities laws have
been complied with; (c) such Voluntary Transfer will not result
in the Partnership's loss of any exemption (federal or state)
from the registration of the sale of securities relied upon in
its offering of the Partnership Interests; and (d) such Voluntary
Transfer will not result in the Partnership being classified as
an "association" which is taxable as a corporation for federal
income tax purposes. Upon compliance with all of the conditions
of this Section 8.01, such Voluntary Transfer of a Limited
Partner's Partnership Interests shall bind the Partnership and
the General Partner, no such transfer shall cause the dissolution
and termination of the Partnership and the transferee shall
automatically be deemed to be an Assignee with respect to such
Partnership Interests.
Section 8.02 General Partner's Consent to Substitution as
a Limited Partner. Notwithstanding anything to the contrary
contained in Section 8.01, an Assignee of a Limited Partner's
Partnership Interests shall not become a Substituted Limited
Partner unless and until the General Partner consents in writing
to such substitution, which consent may be arbitrarily withheld.
The effective date of the substitution of the Assignee as a
Substituted Limited Partner shall be the date on which the
General Partner gives its written consent to the assignment. If
the General Partner does not consent to the substitution of an
Assignee of a Limited Partner's Partnership Interests, then the
transferor Limited Partner shall retain all the rights of a
transferor of a limited partnership interest under the Act and,
15<PAGE>
except as otherwise provided in Section 8.04, the Assignee shall
not be treated as owning any interest in the Partnership. In
particular, an Assignee of a Limited Partner's Partnership
Interests who is not admitted as a Substituted Limited Partner
under this Section 8.02 shall not be entitled to: (a) require
any accounting of the Partnership's transactions; (b) inspect the
Partnership's books and records; (c) require any information from
the Partnership; or (d) exercise any privilege or right of a
Limited Partner which is not specifically granted to a
nonsubstituted transferee of a limited partnership interest under
the Act.
Section 8.03 Involuntary Transfers. The Involuntary
Transfer of all or any part of any Limited Partner's Partnership
Interests shall not cause the dissolution and termination of the
Partnership, but rather the business of the Partnership shall be
continued without interruption in accordance with the provisions
of this Section 8.03. Upon an Involuntary Transfer of all or any
part of any Limited Partner's Partnership Interests, such Limited
Partner's successor or legal representative shall automatically
be deemed to be a Substituted Limited Partner.
Section 8.04 Distributions and Allocations with Respect to
Transferred Partnership Interests. If any transfer (whether a
Voluntary or Involuntary Transfer) of Partnership Interests is
recognized by the Partnership under this Article 8, then all
allocations of Profits and Losses attributable to the transferred
Partnership Interests shall be divided and allocated between the
transferor and the transferee by taking into account their
varying interests during such fiscal period, using any convention
or method of allocation selected by the General Partner which is
then permitted under Section 706 of the Code and the Regulations
promulgated thereunder. All distributions of Cash Flow made
prior to the effective date of any such transfer shall be made to
the transferor and any such distributions made after the
effective date of such transfer shall be made to the transferee.
Section 8.05 Voluntary Withdrawal. A Limited Partner
shall not be permitted to voluntarily withdraw from the
Partnership.
ARTICLE 9: TRANSFER OF GENERAL PARTNER'S PARTNERSHIP INTERESTS
Section 9.01 Voluntary Transfers. The Partnership shall
not recognize any Voluntary Transfer of a General Partner's
Partnership Interests unless all Limited Partners have consented
in writing to such Voluntary Transfer, which consent may be
arbitrarily withheld. An authorized transfer of a General
Partner's Partnership Interests shall bind the Partnership and
all the Limited Partners and no such Voluntary Transfer shall
cause the termination of the Partnership. In addition, effective
16<PAGE>
as of the date of full compliance with the requirements of this
Section 9.01, the transferee of a General Partner's Partnership
Interests shall be admitted as a new General Partner of the
Partnership and shall be vested with all the powers and
obligations with respect to the management of the Partnership as
are granted to and placed upon the transferor General Partner
under this Partnership Agreement.
Section 9.02 Involuntary Transfers. An Involuntary
Transfer of a General Partner's Partnership Interests at such
time as there is more than one General Partner shall not dissolve
the Partnership, but rather the business of the Partnership shall
be continued without interruption and all of the management
powers and authority granted herein to the General Partner making
such Involuntary Transfer shall automatically be placed upon the
remaining General Partner(s), unless the Limited Partner
otherwise elects within ten days after the occurrence of such
Involuntary Transfer to dissolve the Partnership and have the
Partnership's affairs and business wound up and terminated
pursuant to Article 10. An Involuntary Transfer of a General
Partner's Partnership Interests when there is no other General
Partner in existence shall dissolve the Partnership and the
Partnership's affairs and business shall be wound up and
terminated under Article 10, unless the Limited Partners agree in
writing to the continuation of the business of the Partnership
and the appointment of a new General Partner pursuant to the
provisions of Section 9.03.
Section 9.03 Continuation of Partnership After Involuntary
Transfer of General Partner's Partnership Interests. Upon an
Involuntary Transfer of the last remaining General Partner's
Partnership Interests, the Partnership shall be dissolved and the
affairs and business of the Partnership shall be wound up and
terminated under Article 10, unless within 90 days after the
occurrence of such Involuntary Transfer, the Limited Partners
agree in writing to the continuation of the business of the
Partnership and the appointment of a new General Partner. Unless
such an election is made within such 90-day period, the
Partnership shall conduct only those activities which are
necessary to wind up and terminate its affairs and business. If
such an election is made within such 90-day period, then:
(a) the reconstituted partnership shall continue until the end of
the term of the Partnership's existence set forth in this
Partnership Agreement; and (b) immediately upon its receipt of
cash in an amount equal to the greater of (i) $100 or (ii) the
then positive balance in its Capital Account, the former General
Partner shall automatically (and without the need for the
execution of any further documentation) be deemed to have
assigned its entire Partnership Interest to the new General
Partner.
17<PAGE>
Section 9.04 Distributions and Allocations with Respect to
Transferred Partnership Interests. If any transfer (whether a
Voluntary or Involuntary Transfer) of a General Partner's
Partnership Interests is recognized by the Partnership under this
Article 9, then all allocations of Profits and Losses
attributable to the transferred Partnership Interests shall be
divided and allocated between the transferor and the transferee
by taking into account their varying interests during such fiscal
period, using any convention or method of allocation selected by
the Limited Partner which is then permitted under Section 706 of
the Code and the Regulations promulgated thereunder. Any
distributions of Cash Flow made prior to the effective date of
any such transfer shall be made to the transferor and any such
distributions made after the effective date of such transfer
shall be made to the transferee. Neither the Partnership nor any
Limited Partner shall incur any liability for making allocations
and distributions in accordance with the provisions of this
Section 9.04.
Section 9.05 Voluntary Withdrawal. The General Partner
shall not be permitted to voluntarily withdraw from the
Partnership.
Section 9.06 Removal of General Partner. Except in the
case of an Involuntary Transfer, the General Partner shall not be
removed as General Partner unless the Limited Partners determine
that there is cause for removal of the General Partner. There
shall be cause for removal of the General Partner only if (a) the
General Partner intentionally and in bad faith violates the terms
of this Agreement or the Subscription Agreement; or (b) there is
a material breach of this Agreement or the Subscription
Agreement, and such breach has an adverse effect the tax benefits
or cash flow available to the Limited Partners. The removal of the
General Partner shall be effective five (5) business
days following receipt of a written removal notice by the General
Partner. Upon the effective date of removal, the General
Partner's interest in the Partnership shall be converted to a
limited partnership interest representing an identical share of
Partnership Cash Flow, Net Proceeds and tax items as the
surrendered general partnership interest. For the purposes of
determining the effect of the removal of the General Partner upon
the Partnership, such removal shall be treated as an Involuntary
Transfer of the General Partner's Partnership Interests pursuant
to Sections 9.02 and 9.03 hereof; provided, however, that
notwithstanding such removal, the General Partner shall remain
liable to the Partnership and the Limited Partners for (i) all
obligations and liabilities incurred by it as a General Partner
before the effective date of such removal but shall be free of
any obligations and liabilities incurred on account of
Partnership activities from and after the time of such removal
and (ii) all damages and other amounts recoverable or payable
hereunder or under applicable law by or to the Partnership or the
18<PAGE>
Limited Partners as a result of the occurrence of the event
giving rise to such removal.
ARTICLE 10: DISSOLUTION, WINDING UP AND TERMINATION
Section 10.01 Dissolution. The Partnership shall dissolve
upon the occurrence of any of the following events:
(a) The expiration of the term of the Partnership's
existence;
(b) The sale or other disposition of all or
substantially all of the Partnership Property and the
Partnership's receipt of all or substantially all of the proceeds
therefrom;
(c) The Partners' mutual election to dissolve the
Partnership;
(d) The failure of the Limited Partners to agree in
writing at the time and in the manner provided in Section 9.03 to
the continuation of the business of the Partnership and the
appointment of a new General Partner upon the occurrence of an
Involuntary Transfer of the last remaining General Partner's
Partnership Interests or the removal of the General Partner; and
(e) The Limited Partners' election pursuant to Section
9.02 to dissolve the Partnership upon the occurrence of an
Involuntary Transfer of a General Partner's Partnership
Interests, notwithstanding the fact that one or more other
General Partners are in existence at such time.
Section 10.02 Winding Up and Termination. Upon the
dissolution of the Partnership, the affairs and business of the
Partnership shall be wound up and terminated, the Partnership's
liabilities shall be discharged and the Partnership Property
shall be liquidated and distributed in the manner hereinafter
described. A reasonable time shall be allowed for the orderly
winding up of the affairs and business of the Partnership so as
to enable the Partnership to minimize the normal losses attendant
to the winding up and termination period. The winding up and
termination of the affairs and business of the Partnership shall
be supervised and conducted by the Liquidation Manager. The
Liquidation Manager shall have the exclusive power and authority
to act on behalf of the Partnership to wind up and terminate the
affairs and business of the Partnership, to sell and convey the
Partnership Property to such Persons (including, without
limitation, any Partner or any Affiliate thereof) for such
consideration and upon such terms and conditions as it deems
necessary or appropriate, to discharge the Partnership's
liabilities, to establish any reserves that it deems necessary or
19<PAGE>
appropriate for any contingent or unforeseen liabilities or
obligations of the Partnership, and to distribute the liquidation
proceeds in the manner hereinafter described.
Upon completion of the winding up of the affairs and
business of the Partnership, the liquidation proceeds shall be
distributed by the Liquidation Manager in the following manner
and order of priority:
(a) First, such liquidation proceeds shall be applied
to the payment of debts and liabilities of the Partnership
(including any loans from any Partner to the Partnership) and the
payment of expenses of the winding up of the affairs and business
of the Partnership;
(b) Second, such liquidation proceeds shall be applied
to the setting up of any reserves (to be held by the Liquidation
Manager in an interest-bearing account) which the Liquidation
Manager may deem necessary or appropriate for any contingent or
unforeseen liabilities or obligations of the Partnership;
provided, however, that at the expiration of such time as the
Liquidation Manager deems necessary or appropriate, the balance
of such reserves remaining after payment of such liabilities or
obligations shall be distributed by the Liquidation Manager in
the manner hereinafter set forth in this Section 10.02;
(c) Third, such liquidation proceeds shall be
distributed to the Partners in accordance with the positive
balances in their respective Capital Accounts following the
allocation of Partnership Profits and Losses. Such distributions
shall be made not later than the last to occur of (i) the end of
the year in which the liquidation occurs, or (ii) 90 days after
the liquidation.
Section 10.03 Compliance with Liquidation Requirements of
Regulations. If the Partnership is "liquidated" within the
meaning of Section 1.704-1(b)(2)(ii)(g) of the Regulations, then:
(a) Distributions shall be made pursuant to Section
10.2 (if such "liquidation" constitutes a dissolution and
termination of the Partnership) to the Partners who have positive
balances in their Capital Accounts in compliance with Section
1.704-1(b)(2)(ii)(b)(2) of the Regulations;
(b) If the General Partner has a deficit balance in
its Capital Account (after giving effect to all contributions,
distributions and allocations for all taxable years, including,
without limitation, the taxable year in which such liquidation
occurs), then the General Partner shall contribute to the capital
of the Partnership the amount necessary to restore the balance in
its Capital Account to zero in compliance with Section 1.704-
1(b)(2)(ii)(b)(3) of the Regulations; and
20<PAGE>
(c) If a Limited Partner has a deficit balance in its
Capital Account (after giving effect to all contributions,
distributions and allocations for all taxable years, including,
without limitation, the taxable year in which such liquidation
occurs), then the Limited Partner shall pay to the Partnership
the limited dollar amount, if any, of its Capital Account deficit
which the Limited Partner has expressly agreed in writing to
restore to the capital of the Partnership pursuant to Section
10.04; and
(d) Any such contribution by a Partner shall be made
on or before the later of (i) the end of the taxable year of the
"liquidation" or (ii) 90 days after the date of the
"liquidation."
Notwithstanding anything to the contrary contained in
this Section 10.03, in the event the Partnership is "liquidated"
within the meaning of Section 1.704-1(b)(2)(ii)(g) of the
Regulations, but such "liquidation" does not constitute a
dissolution and termination of the Partnership pursuant to this
Partnership Agreement, then no distributions shall be made
pursuant to Section 10.02. Instead, the Partnership shall be
deemed to have distributed the Partnership Property in kind to
the Partners, who shall be deemed to have assumed and taken
subject to all Partnership liabilities, all in accordance with
their respective Capital Accounts. Immediately thereafter, the
Partners shall be deemed to have recontributed the Partnership
Property in kind to the Partnership, which shall be deemed to
have assumed and taken subject to all such liabilities.
Section 10.04 Rights and Obligations of Limited Partners
Upon Dissolution. Except as otherwise expressly provided in
Section 10.03(b), the Limited Partners shall look solely to the
assets of the Partnership for the return of their Capital
Contributions. Except as otherwise elected by a Limited Partner
pursuant to this Section 10.04, a Limited Partner shall not have
any obligation to restore any deficit in its Capital Account upon
the liquidation of the Partnership. Notwithstanding anything to
the contrary contained in this Partnership Agreement, the Limited
Partner may from time to time elect to be obligated to restore a
deficit in its Capital Account up to a limited dollar amount.
Such election shall be made by the Limited Partner's delivery of
a written notice of election to the General Partner no later than
April 15 following the taxable year for which such election is to
be effective and shall specify the dollar amount of the deficit
in its Capital Account that the Limited Partner agrees to
restore. Such election shall be irrevocable and shall be binding
on subsequent transferees of the Limited Partner's Partnership
Interests.
21<PAGE>
Section 10.05 Waiver of Partition. Each Partner hereby
waives any right to partition or cause a partition of the
Partnership Property.
Section 10.06 Final Accounting. The Liquidation Manager
shall furnish each of the Partners with a statement setting forth
the assets and liabilities of the Partnership as of the date of
the completion of the winding up and termination of the affairs
and business of the Partnership. Upon completion of the
distribution plan set forth in this Article 10, the Liquidation
Manager shall cause to be executed by the appropriate parties all
documents which the Liquidation Manager deems necessary or
appropriate to effect the dissolution and termination of the
Partnership.
ARTICLE 11: MISCELLANEOUS
Section 11.01 Notices and Addresses. All notices,
consents, demands, requests, or other communications which may or
are required to be given hereunder shall be in writing and shall
be sent by telefax, overnight courier or United States mail,
registered or certified, return receipt requested, postage
prepaid to the Partnership at the address of the Partnership's
principal office and to the Partners at the addresses set forth
after their respective names in Article 1. The Partnership and
any Partner may change it or his address for the giving of
notices, consents, demands, requests, or other communications by
delivering written notice to the Partnership and to all the
Partners of it or his new address for such purpose. Notices,
consents, demands, requests, or other communications shall be
deemed given or served on the day when sent by telefax, one
business day after deposit with an overnight courier or two (2)
business days after deposit in the United States mail.
Section 11.02 Pronouns and Plurals. All pronouns and any
variations thereof shall be deemed to refer to the masculine,
feminine, neuter, singular or plural, as the identity of the
person or persons may require.
Section 11.03 Counterparts. This Partnership Agreement may
be executed in several counterparts all of which shall constitute
one agreement, binding on all parties hereto, notwithstanding
that all the parties are not signatories to the same counterpart.
Section 11.04 Applicable Law. This Partnership Agreement
and the rights of the Partners hereunder shall be interpreted in
accordance with the laws of the State of Delaware.
Section 11.05 Successors. This Partnership Agreement shall
inure to the benefit of, be binding upon, and be enforceable by
22<PAGE>
and against the parties hereto, their heirs, executors,
administrators, successors, and assigns.
Section 11.06 Severability. The invalidity or
unenforceability of any provision of this Partnership Agreement
in a particular respect shall not affect the validity and
enforceability of any other provisions of this Partnership
Agreement or of the same provision in any other respect.
Section 11.07 Exhibits. All exhibits attached hereto or
referred to herein are incorporated herein by this reference.
Section 11.08 Amendment of Partnership Agreement. This
Partnership Agreement may not be amended in whole or in part
except by a written instrument signed by the General Partner and
Limited Partners.
The Partners have executed this Partnership Agreement as of
the date first set forth at the beginning hereof.
GENERAL PARTNER:
HEARTLAND ________________, INC.
By:
Thomas A. Landgraf, President
CLASS A LIMITED PARTNERS:
CLASS B LIMITED PARTNER:
GEORGIA POWER COMPANY
By:
23<PAGE>
EXHIBIT A
DEFINITIONS
The capitalized words and phrases used in the Limited
Partnership Agreement for ____________________________
Apartments, Limited Partnership, shall have the following
meanings (such meanings to be equally applicable to both the
singular and plural forms of such words and phrases):
"Act" means the Delaware Revised Uniform Limited
Partnership Act, as the same may be amended from time to time (or
any corresponding provisions of any successor law).
"Adjusted Capital Account Deficit" means, with respect
to any Partner, the deficit balance, if any, in such Partner's
Capital Account as of the end of the relevant fiscal period after
giving effect to the following adjustments: (a) the credit to
such Capital Account of any amounts which such Partner is
obligated to restore under this Partnership Agreement or is
deemed to be obligated to restore pursuant to the penultimate
sentences of Section 1.704-2(g)(1) and Section 1.704-2(i)(5) of
the Regulations; and (b) the debit to such Capital Account of the
amounts described in Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6)
of the Regulations. The foregoing definition of Adjusted Capital
Account Deficit is intended to comply with the provisions of
Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be
interpreted consistently therewith.
"Affiliate" means, with respect to any Person: (a) any
Person directly or indirectly controlling, controlled by or under
common control with such Person; (b) any Person owning or
controlling 10% or more of the outstanding voting securities of
such Person; (c) any officer, director or general partner of such
Person; or (d) any Person who is an officer, director, general
partner, trustee or holder of 10% or more of the voting
securities of any Person described in clauses (a) through (c) of
this subparagraph.
"Assignee" means a Person to whom all or any part of a
Limited Partner's Partnership Interest has been transferred in a
manner permitted under this Partnership Agreement, but who has
not been admitted to the Partnership as a Substituted Limited
Partner with respect to the transferred Partnership.
"Breakeven Date" means the first day of the calendar
month following the first full calendar month in which the rental
income of the Partnership (including rent subsidies) actually
received has exceeded the sum of (i) the Partnership's
operational costs and expenses (including ratable accruals of
expenses which are reasonably expected to be incurred on other
A-1<PAGE>
than a monthly basis); and (ii) required deposits to reserves
under the Subscription Agreement.
"Capital Account" means, with respect to any Partner,
the capital account maintained for such Partner pursuant to
Section 2.05.
"Capital Contribution" means, with respect to any
Partner, the amount of money and the fair market value of
property contributed to the Partnership by such Partner.
"Cash Flow" means the gross cash receipts received by
the Partnership from any source, excluding Net Proceeds and
Capital Contributions, reduced by (a) payments with respect to
Partnership indebtedness; (b) ordinary operating expenses,
including but not limited to, maintenance expenses, utilities,
trash removal and groundskeeping expenses; (c) deposits to
reserves for payment of insurance or real estate taxes, or any
other reserves required by lenders or the Subscription Agreement;
and (d) the Management Fees.
"Class A Limited Partners" means
__________________________.
"Class B Limited Partner" means Georgia Power Company.
"Code" means the Internal Revenue Code of 1986, as the
same may be amended from time to time (or any corresponding
provisions of any successor law).
"Compliance Period" means, with respect to the Project
Property, the 15-year compliance period specified in Section
42(i)(1) of the Code.
"General Partner" means Heartland ________________,
Inc., or any other Person who becomes a successor general partner
pursuant to Section 9.01 or Section 9.03.
"Involuntary Event" means, with respect to any Partner
any one of the following events: (i) the making of an assignment
for the benefit of creditors by the Partner; (ii) the filing of a
voluntary petition in bankruptcy by the Partner; (iii) the
adjudication of the Partner as a bankrupt or insolvent; (iv) the
filing of a petition or answer by the Partner seeking a
reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any statute, law
or rule; (v) the seeking, consenting to or acquiescence of the
Partner in the appointment of a trustee, receiver, or liquidator
of the Partner or of all or any substantial part of the Partner's
properties; (vi) the death of any Partner who is a natural
person; or (vii) the termination of the legal existence of any
Partner who is other than a natural person.
A-2<PAGE>
"Involuntary Transfer" means any transfer of any
Partner's Partnership Interests effected by operation of law as a
result of the occurrence of an Involuntary Event.
"Limited Partners" means the Class A Limited Partners
and the Class B Limited Partner, as well as any Person who
becomes a Substituted Limited Partner for any such Person
pursuant to Section 8.01 or Section 8.02.
"Liquidation Manager" means any Person selected by the
Limited Partner.
"Management Agreement" means the agreement between the
Partnership and ___________________________.
"Net Proceeds" means, with respect to any fiscal year
of the Partnership, the cash proceeds from Partnership sales or
refinancings reduced by (a) all reasonable costs and expenses
incurred by the Partnership in connection with such sale or
refinancing, and (b) all principal and interest payments and
other sums paid on or with respect to any indebtedness of the
Partnership. Net Proceeds shall include all principal and
interest payments with respect to any note or other obligation
received by the Partnership in connection with the sale or other
disposition of Project Property.
"Nonrecourse Deduction" has the meaning set forth in
Section 1.704-2(b)(1) of the Regulations. The amount of
Nonrecourse Deductions for any fiscal year of the Partnership
equals the excess, if any, of the net increase, if any, in the
amount of Partnership Minimum Gain during that fiscal year
reduced (but not below zero) by the aggregate amount of any
distributions during that fiscal year of proceeds of a
Nonrecourse Liability that are allocable to an increase in
Partnership Minimum Gain, determined in accordance with Section
1.704-2(c) of the Regulations.
"Nonrecourse Liability" has the meaning set forth in
Section 1.704-2(b)(3) of the Regulations.
"Partner" means the General Partner or the Limited
Partners.
"Partner Minimum Gain" means an amount, with respect to
each Partner Nonrecourse Debt, equal to the Partnership Minimum
Gain that would result if such Partner Nonrecourse Debt were
treated as a Nonrecourse Liability, determined in accordance with
Section 1.704-2(i) of the Regulations.
"Partner Nonrecourse Debt" has the meaning set forth in
Section 1.704-2(b)(4) of the Regulations.
A-3<PAGE>
"Partner Nonrecourse Deductions" has the meaning set
forth in Section 1.704-2(i)(2) of the Regulations. The amount of
Partner Nonrecourse Deductions with respect to a Partner
Nonrecourse Debt for a Partnership fiscal year equals the net
increase during that fiscal year in Partner Nonrecourse Debt
reduced (but not below zero) by the proceeds of the Partner
Nonrecourse Debt distributed during that fiscal year to the
Partner bearing the economic risk of loss for the Partner
Nonrecourse Debt that are both attributable to the Partner
Nonrecourse Debt and allocable to an increase in Partner Minimum
Gain, as determined in accordance with Section 1.704-2(i)(2) of
the Regulations.
"Partnership" means ________________ Apartments Limited
Partnership.
"Partnership Agreement" means the Limited Partnership
Agreement, as the same may be amended from time to time. Words
such as "herein," "hereinafter," "hereof," "hereto" and
"hereunder" refer to this Partnership Agreement as a whole,
unless the context otherwise requires.
"Partnership Interest" means the entire ownership
interest of a Partner, including, without limitation, the rights
and obligations of such Partner under this Partnership Agreement
and the Act.
"Partnership Minimum Gain" has the meaning set forth in
Section 1.704-2(d) of the Regulations.
"Partnership Percentage" shall mean the percentage that
a Partner's Capital Contributions bears to the aggregate Capital
Contributions of all Partners.
"Partnership Property" means all real and personal
property acquired by the Partnership and any improvements
thereto, and shall include both tangible and intangible property.
"Person" means any individual, partnership,
corporation, trust or other entity.
"Profits" and "Losses" mean, for each fiscal year of
the Partnership, an amount equal to the Partnership's taxable
income or loss for such period from all sources, determined in
accordance with Section 703(a) of the Code, adjusted in the
following manner: (a) the income of the Partnership that is
exempt from federal income tax shall be added to such taxable
income or loss; (b) any expenditures of the Partnership which are
not deductible in computing its taxable income and not properly
chargeable to capital account under either Section 705(a)(2)(B)
of the Code or the Regulations promulgated under Section 704(b)
of the Code shall be subtracted from such taxable income or loss;
A-4<PAGE>
(c) in the event any Partnership Property is revalued in
accordance with Section 1.704-1(b)(2)(iv)(f) of the Regulations,
then the amount of any adjustment to the value of such
Partnership Property shall be taken into account as gain or loss
from the disposition of such Partnership Property for purposes of
computing Profits or Losses; (d) gain or loss resulting from any
disposition of Partnership Property which has been revalued
pursuant to Section 1.704-1(b)(2)(iv)(f) of the Regulations and
with respect to which gain or loss is recognized for Federal
income tax purposes shall be computed by reference to the
adjusted value of such Partnership Property, notwithstanding that
the adjusted tax basis of such Partnership Property differs from
the adjusted value; (e) any depreciation, amortization or other
cost recovery deductions taken into account in computing such
taxable income or loss shall be recomputed based upon the
adjusted value of any Partnership Property which has been
revalued in accordance with Section 1.704-1(b)(2)(iv)(f) of the
Regulations; and (f) any items of income, gain, loss, deduction
or credit which are specially allocated pursuant to Sections 3.2
(d) through (k) shall not be taken into account in computing
Profits or Losses.
"Project Property" or "Project" means the ___________
Apartments located in __________, Georgia.
"Regulations" means the Federal Income Tax Regulations
(including without limitation, Temporary Regulations) promulgated
under the Code, as the same may be amended from time to time
(including corresponding provisions of successor regulations).
"Subscription Agreement" means the Subscription
Agreement dated _______________, by and among the Class A Limited
Partners, the Class B Limited Partner, the General Partner and
the Partnership, setting forth the terms and conditions of the
Limited Partners' Capital Contributions to the Partnership and
the General Partner's representations and warranties in
connection therewith.
"Substituted Limited Partner" means a Person who is
admitted as a Limited Partner to the Partnership pursuant to
Section 8.01 or Section 8.02 in place of and with all the rights
of a limited partner under the Partnership Agreement and the Act.
"Tax Credit" means the low income housing tax credit
under Section 42 of the Code.
"Tax Matters Partner" means the General Partner acting
in the capacity described in Section 5.05(c).
A-5<PAGE>
"Voluntary Transfer" means any sale, assignment,
transfer, pledge, or hypothecation of any Partnership Interests
by a Partner, except for an Involuntary Transfer.
A-6<PAGE>
EXHIBIT G
FORM OF NOTICE
Georgia Power Company ("Georgia Power"), 333 Piedmont
Avenue, N.E., Atlanta, Georgia 30308, a wholly-owned subsidiary
of The Southern Company, a registered holding company under the
Public Utility Holding Company Act of 1935 (the "Act"), has filed
an application-declaration under Section 9(c)(3) of the Act.
Georgia requests authority to invest up to $10 million from
time to time through December 31, 1997 in the Class B Limited
Partnership units of one or more Delaware limited partnerships
(each a "Partnership") to be formed for the purpose of
developing, constructing, financing, managing and operating low-
income housing projects located in Georgia Power's retail and
wholesale electric service territory in Georgia. The general
partner of each Partnership will be Heartland Properties Inc., a
subsidiary of WPL Holdings, Inc., an exempt holding company under
the Act, or an affiliate thereof. Georgia Power will commit to
provide no more than 20% of the contributed capital of all
partners in any one Partnership. Commitments to purchase the
remaining limited partnership interests of each Partnership will
be obtained from other qualified investors, including other large
Georgia companies.
Each Partnership will invest in qualifying low income
housing properties within the meaning of Section 42 of the
Internal Revenue Code of 1986, as amended. Under Section 42, the
owners of a qualifying housing property are entitled to income
tax credits, provided that various restrictions and limitations<PAGE>
on the income level of tenants and on the rents charged by the
owners are satisfied.
As a Class B Limited Partner in each Partnership, Georgia
Power will have access to the books and records of the
Partnership and will be entitled to receive copies of all notices
and reports sent to partners. In addition, Georgia Power will
have the right to vote with all other limited partners to remove
the general partner for "cause," and to approve certain limited
actions by the general partner that would fundamentally change
the business purpose of the Partnership or its relationship to
the general partner. Broader approval rights over other actions
of the general partner will be given to Class A Limited Partners.
In all other respects, e.g., for purposes of allocations of
profit, loss, and tax credits, and distributions of cash flow and
net proceeds, Class A and Class B Limited Partners will be
treated equally.
Georgia Power is proposing to invest indirectly through each
Partnership in qualifying low-income housing properties in order
to support the construction or rehabilitation of housing units in
communities in Georgia in which there currently exists a
demonstrated shortage. The Section 42 tax credit provides a
substantial incentive to companies such as Georgia Power to make
such an investment. In its application, Georgia Power states
that, unlike other States, Georgia has not utilized the full
amount of Section 42 tax credits allocated to Georgia for this
purpose.<PAGE>
