SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
F O R M 8-K
Current Report
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February 28, 1996
BOSTON CAPITAL TAX CREDIT FUND IV L.P.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
33-70564
04-3208648
(Commission File Number) (IRS Employer Identification No. )
c/o Boston Capital Partners, Inc.,
One Boston Place, Boston, Massachusetts 02108
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code (617) 624-8900
None
(Former name or former address, if changed since last report)
Item 5. Other Events
On February 28, 1996, Boston Capital Tax Credit Fund IV L.P., a
Delaware limited partnership, specifically Series 24 and Series 25
thereof (the "Partnership"), completed various agreements relating to
Laurelwood Park Limited Partnership, a Georgia limited partnership (the
"Operating Partnership"), including an Amended and Restated Agreement of
Limited Partnership of the Operating Partnership dated as of February 1,
1996 (the "Operating Partnership Agreement"), pursuant to which the
Partnership acquired a limited partner interest in the Operating
Partnership. Series 24 is referred to herein as the Class A Limited
Partner; Series 25 is referred to herein as the Class B Limited Partner.
Capitalized terms used and not otherwise defined herein have their
meanings set forth in the Operating Partnership Agreement, a copy of
which is attached hereto as Exhibit (2)(a).
The Operating Partnership owns and operates an apartment complex
in Highpoint, North Carolina which is known as Laurelwood Park
Apartments (the "Apartment Complex"). The Apartment Complex consists of
62 two-bedroom units and 38 three-bedroom units. The Apartment Complex
is currently in its lease-up phase.
Construction financing in the amount of $2,674,000 has been
provided by Midland Mortgage Investment Corporation, pursuant to a note,
mortgage and related security documents, each dated September 7, 1995.
The Construction Loan has a 24-month term and bears interest at the rate
of 10.5% per annum. Midland Affordable Housing Group Trust is expected
to provide permanent mortgage financing in the aggregate amount of
$2,115,000 (the "Mortgage Loan"). The Mortgage Loan is expected to have
an 18-year term with repayment based on a 30-year amortization schedule.
The Mortgage Loan is expected to bear interest at the rate of 8.875% per
annum.
100% of the apartment units (100 units) in the Apartment Complex
are believed to qualify for the low-income housing tax credit (the "Tax
Credits") under Section 42 of the Internal Revenue Code of 1986, as
amended (the "Code").
The General Partner is The Norsouth Corporation of Savannah,
Georgia. The General Partner has previously developed 3,000 multi-
family housing units.
The General Partner also serves as the management agent for the
Apartment Complex (the"Management Agent"). The Management Agent will
receive a monthly fee from the Operating Partnership equal to 6.5% of
gross revenues received during the previous month.
The Partnership acquired its interest in the Operating Partnership
directly from the Operating Partnership in consideration of an agreement
to make a Capital Contribution of $3,164,780 which has been or will be
payable to the Operating Partnership in three (3) Installments as
follows:
1. $2,127,107 on the latest of (i) the Admission Date, (ii) Tax
Credit Set Aside, (iii) Construction Mortgage Closing, (iv)
Permanent Mortgage Commitment or (v) Construction Permitting
Date;
2. $741,195 on the latest of (i) the Completion Date, (ii) Cost
Certification, (iii) receipt of a payoff letter from the
Contractor, (iv) receipt of an updated title insurance
policy satisfactory to the Investment Limited Partner, (v)
receipt of an estoppel letter from each Lender or (vi)
satisfaction of all conditions to payment of the First
Installment; and
3. $296,478 on the latest of (i) Breakeven Point, (ii)
Permanent Mortgage Commencement, (iii) Initial 95% Occupancy
Date, (iv) State Designation or (v) satisfaction of all
conditions to payment of the First and Second Installments.
The Capital Contribution of the Partnership will be paid 67% by
the Class A Limited Partner and 33% by the Class B Limited Partner. The
First Installment will be paid $1,425,162 by the Class A Limited Partner
and $701,945 by the Class B Limited Partner. The Second Installment
will be paid $496,601 by the Class A Limited Partner and $244,594 by the
Class B Limited Partner. The Third Installment will be paid $198,640 by
the Class A Limited Partner and $97,838 by the Class B Limited Partner.
The total Capital Contribution of the Partnership to the Operating
Partnership is based on the Operating Partnership receiving $5,444,960
of Tax Credits during the 10-year period commencing in 1996, of which
$5,390,510 will be allocated to the Partnership as the Investment
Limited Partner of the Operating Partnership. The allocation of Tax
Credits to the Partnership will be shared $3,611,640 by Series 24 and
$1,778,870 by Series 25. The Special Limited Partner of the Operating
Partnership is BCTC 94, Inc., an affiliate of the Partnership.
The Partnership believes that the Apartment Complex is adequately
insured.
Ownership interests in the Operating Partnership are as follows,
subject in each case to certain priority allocations and distributions:
Normal Capital Cash
Operations Transactions Flow
General Partner 1 % 50% 50%
Partnership 99% 49.999% 50%
Special Limited
Partner 0% 0.001% 0%
In the event a Refinancing Fee is paid in connection with a refinancing,
the distribution resulting from a Capital Transaction will be as
follows: Investment Limited Partners - 59.9999%, General Partner - 40%
and Special Limited Partner - .001%.
The Partnership used the funds obtained from the payments of the
holders of its beneficial assignee certificates to make the acquisition
of its interest in the Operating Partnership.
Boston Capital Partners, Inc. ("BCP"), an affiliate of the general
partner of the Partnership, or another affiliate thereof, will receive
an annual Asset Management Fee commencing in 1997 from the Operating
Partnership for services in connection with the Operating Partnership's
accounting matters and the preparation of tax returns and reports to the
Partnership. The Asset Management Fee will be in an annual amount equal
to the lesser of (i) $10,000 or (ii) one-half of one per cent (0.5%) of
the Aggregate Cost of the Apartment Complex. The Asset Management Fee
for each fiscal year will be payable from Cash Flow in the manner and
priority set forth in Article X of the Operating Partnership Agreement.
To the extent Cash Flow in any year is insufficient to pay the entire
amount of the Asset Management Fee, the amount of such deficiency shall
be paid directly by the General Partner to BCP as an Affiliate thereof
from its own funds.
The Operating Partnership will pay a Construction and Development
Fee in the amount of $521,603 to the General Partner (or its designee)
for its service in connection with the construction and development of
the Apartment Complex. Up to $2,292 of the Construction and Development
Fee may be deferred and paid from Cash Flow. The balance not so
deferred will be paid from the Capital Contribution of the Partnership.
The Operating Partnership will pay to the General Partner an Annual
Partnership Management Fee commencing in 1997 for its services in
connection with managing the day-to-day business of the Operating
Partnership in an amount equal to the lesser of (i) $10,000 per annum or
(ii) the excess of (A) one-half of one percent (0.5%) of the Aggregate
Cost of the Apartment Complex over (B) the amount of the Asset
Management Fee attributable to such year. The Annual Partnership
Management Fee for each fiscal year will be payable from Cash Flow in
the manner and priority set forth in Article X of the Operating
Partnership Agreement.
Item 7. Exhibits.
(a) and (b) There is no meaningful current or historic financial
information is available at this time.
(c) Exhibits. Page
(1)(a)1 Form of Dealer-Manager Agreement between Boston
Capital Services, Inc. and the Registrant
(including, as an exhibit thereto, the form of
Soliciting Dealer Agreement)
(2)(a) Amended and Restated Agreement of Limited
Partnership of Laurelwood Park Limited
Partnership
(2)(b) Certification and Agreement of Laurelwood Park
Limited Partnership
(4)(a)2 Agreement of Limited Partnership of the
Partnership
(16) None
(17) None
(21) None
(24) None
(25) None
(28) None
_______________
1 Incorporated by reference to Exhibit (1) to Registration Statement
No. 33-70564 on Form S-11, as filed with the Securities and Exchange
Commission.
2 Incorporated by reference to Exhibit (4) to Registration Statement
No. 33-99602 on Form S-11, as filed with the Securities and Exchange
Commission.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereto duly authorized.
Dated: March 24, 1997
BOSTON CAPITAL TAX CREDIT FUND IV L.P.
By: Boston Capital Associates IV L.P.,
its General Partner
By: C&M Associates, d/b/a Boston
Capital Associates, its
General Partner
By: /s/ Herbert F. Collins
Herbert F. Collins, Partner
BOS2: 54171_1
17537/1229
LAURELWOOD PARK LIMITED PARTNERSHIP
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
Dated as of February 1, 1996
LAURELWOOD PARK LIMITED PARTNERSHIP
TABLE OF CONTENTS
Page
Preliminary Statement.......................................... 1
ARTICLE I -- Defined Terms................................... 1
ARTICLE II -- Name and Business............................... 13
2.1 -- Name; Continuation.............................. 13
2.2 -- Office and Resident Agent....................... 13
2.3 -- Purpose......................................... 13
2.4 -- Term and Dissolution............................ 13
ARTICLE III -- Mortgage, Refinancing and Disposition
of Property................................... 14
ARTICLE IV -- Partners; Capital............................... 15
4.1 -- Capital and Capital Accounts.................... 15
4.2 -- General Partners................................ 16
4.3 -- Investment Limited Partners, Special Limited
Partner and Original Limited Partner.......... 16
4.4 -- Liability of the Limited Partners............... 16
4.5 -- Special Rights of the Investment
Limited Partners............................... 17
4.6 -- Meetings........................................ 18
ARTICLE V -- Capital Contributions of the
Investment Limited Partners and
the Special Limited Partner....................... 19
5.1 -- Payments........................................ 19
5.2 -- Return of Capital Contributions................. 22
ARTICLE VI -- Rights, Powers and Duties of General
Partners...................................... 25
6.1 -- Authorized Acts................................. 25
6.2 -- Restrictions on Authority....................... 26
6.3 -- Personal Services............................... 27
6.4 -- Business Management and Control;
Tax Matters Partner........................... 28
6.5 -- Duties and Obligations.......................... 28
6.6 -- Representations and Warranties.................. 31
Page
6.7 -- Liability on the Permanent Mortgage............. 34
6.8 -- Indemnification of the General
Partners...................................... 34
6.9 -- Indemnification of the Partnership
and the Limited Partners...................... 36
6.10 -- Operating Deficits.............................. 36
6.11 -- Obligation to Complete the Construction
of the Apartment Complex...................... 37
6.12 -- Certain Payments to the General
Partners and Others........................... 39
6.13 -- Delegation of General Partner
Authority..................................... 40
ARTICLE VII -- Withdrawal of a General Partner;
New General Partners.......................... 40
7.1 -- Withdrawal...................................... 40
7.2 -- Obligation to Continue.......................... 41
7.3 -- Withdrawal of All General Partners.............. 41
7.4 -- Interest of General Partner After
Permitted Withdrawal.......................... 41
7.5 Admission of Individual General Partners Under
Certain Circumstances......................... 42
ARTICLE VIII-- Transferability of Limited Partner
Interests..................................... 43
8.1 -- Assignments..................................... 43
8.2 -- Substituted Limited Partner..................... 43
8.3 -- Restrictions.................................... 44
ARTICLE IX -- Bridge Loan; Borrowings......................... 44
9.1 -- Bridge Loan..................................... 44
9.2 -- Borrowings...................................... 44
ARTICLE X -- Profits, Losses, Tax Credits, Distributions
and Capital Accounts.......................... 45
10.1 -- Profits, Losses and Tax Credits................. 45
10.2 -- Cash Distributions Prior to Dissolution......... 47
10.3 -- Distributions Upon Dissolution.................. 48
10.4 -- Special Provisions.............................. 49
10.5 -- Authority of the General Partners to Vary
Allocations to Preserve and Protect the
Partners' Intent................................ 52
Page
ARTICLE XI -- Management Agent................................ 53
ARTICLE XII-- Books and Records, Accounting, Tax
Elections, Etc................................ 54
12.1 -- Books and Records............................... 54
12.2 -- Bank Accounts................................... 55
12.3 -- Auditors........................................ 55
12.4 -- Cost Recovery and Elections..................... 56
12.5 -- Special Basis Adjustments....................... 56
12.6 -- Fiscal Year..................................... 56
12.7 -- Information to Partners......................... 56
12.8 -- Expenses of the Partnership..................... 59
ARTICLE XIII- General Provisions.............................. 60
13.1 -- Restrictions by Reason of Section 708
of the Code................................... 60
13.2 -- Amendments to Certificate....................... 61
13.3 -- Notices......................................... 61
13.4 -- Word Meanings................................... 61
13.5 -- Binding Effect.................................. 62
13.6 -- Applicable Law.................................. 62
13.7 -- Counterparts.................................... 62
13.8 -- Financing Regulations........................... 62
13.9 -- Separability of Provisions...................... 63
13.10 -- Paragraph Titles................................ 63
13.11 -- Amendment Procedure............................. 63
13.12 -- Time of Admission............................... 63
Guaranty....................................................... 65
Schedule A..................................................... 66
LAURELWOOD PARK LIMITED PARTNERSHIP
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
Preliminary Statement
LAURELWOOD PARK LIMITED PARTNERSHIP (the "Partnership") was
formed as a Georgia limited partnership pursuant to an Agreement of
Limited Partnership dated as of February 7, 1995 (the "Original
Agreement") by and among The Norsouth Corporation, a Georgia
corporation, as general partner (the "General Partner") and William E.
Johnston as the limited partner. The Original Agreement was modified
by an Amendment dated September 11, 1995 pursuant to which Boston
Capital Partners, Inc. was admitted as the sole limited partner (the
"Original Limited Partner") and William E. Johnston withdrew as the
limited partner. A Certificate of Limited Partnership with respect
thereto dated as of February 7, 1995 (the "Original Certificate") was
filed in the Filing Office on February 9, 1995. The Partnership's
Application for a Certificate of Authority to conduct business in
North Carolina was approved on February 28, 1995.
In consideration of mutual agreements set forth herein, it is
agreed and certified, and the Original Agreement is hereby amended and
restated in its entirety, as follows:
ARTICLE I
Defined Terms
The defined terms used in this Agreement shall have the meanings
specified below:
Actual Credit means, with respect to a particular year, the
total amount of Tax Credit properly allocable by the Partnership to
the Investment Limited Partners for such year. The Actual Credit
shall be retroactively revised if the amount of Tax Credit properly
allocable to the Investment Limited Partners is revised after audit or
recaptured.
Additional Limited Partner means any holder of an Interest
designated as an Additional Limited Partner pursuant to Section 4.5(b)
or Section 7.4.
Admission Date means the first date on which all parties hereto
execute this Agreement, or, if, pursuant to the Uniform Act, the
Investment Limited Partners shall not be deemed admitted to the
Partnership on such date, then the next date thereafter on which the
Investment Limited Partners shall be deemed to be admitted to the
Partnership under the Uniform Act.
Affiliate means (A) as to each Investment Limited Partner, the
Investment General Partner or Boston Capital, (i) such Person;
(ii) each member of the Immediate Family of such Person; (iii) each
legal representative, successor or assignee of any Person referred to
in the preceding clauses (i) or (ii); (iv) each trustee of a trust for
the benefit of any Person referred to in the preceding clauses (i) or
(ii); or (v) any other Person (a) who directly or indirectly controls,
is controlled by, or is under common control with such Person, (b) who
is an officer of, director of, partner in or trustee of, or serves in
a similar capacity with respect to, such Person or of which such
Person is an officer, director, partner or trustee, or with respect to
which such Person serves in a similar capacity, (c) who, directly or
indirectly, is the beneficial owner of 10% or more of any class of
equity securities of such Person or of which such Person is directly
or indirectly the owner of 10% or more of any class of equity
securities, (d) who is an officer, director, general partner, trustee
or holder of 10% or more of the voting securities or beneficial
interests of any Person referred to in the foregoing clauses (v)(a),
(v)(b) or (v)(c) or (e) who, whatever his title, performs functions
for such Person or any Affiliate of such Person similar to a Chairman
or member of the Board of Directors, or executive officer such as the
President, Executive Vice President or Senior Vice President,
Corporate Secretary, or Treasurer, or any Person holding a 5% or more
equity interest in such Person, or any Person having the power to
direct or cause the direction of such Person, whether through the
ownership of voting securities, by contract or otherwise; and (B) as
to any other named Person or Persons (i) such Person; (ii) each member
of the Immediate Family of such Person; (iii) each legal
representative, successor or assignee of any Person referred to in the
preceding clauses (i) or (ii); (iv) each trustee of a trust for the
benefit of any Person referred to in the preceding clauses (i) or
(ii); or (v) any other Person (a) who directly or indirectly controls,
is controlled by, or is under common control with such Person, (b) who
owns or controls 10% or more of the outstanding voting securities of
such Person, (c) of which 10% or more of the outstanding voting
securities is owned by such Person or any of the Persons referred to
in the foregoing clauses (i) through (iii), (d) who is an officer,
director, partner or trustee of such Person, or (e) for which such
Person acts in the capacity of officer, director, partner or trustee.
An Affiliate of an Investment Limited Partner or of the Investment
General Partner does not include a Person who is a partner in a
partnership or joint venture with the Investment Limited Partner or
any other Affiliate of the Investment Limited Partner if such Person
is not otherwise an Affiliate of the Investment Limited Partner or the
Investment General Partner. For purposes of this definition, the term
Affiliate shall not be deemed to include any law firm (or member or
associate thereof) providing legal services to the Investment Limited
Partner, the Investment General Partner or any Affiliate of either of
them.
Agency means, as applicable, the North Carolina Department of
Commerce and/or any other governmental agency which may provide
governmental assistance to the Apartment Complex.
Aggregate Cost means the sum of (i) the total Capital
Contributions made or anticipated to be made by the Investment Limited
Partners plus (ii) the proportionate amount of the mortgage loans on,
and other debts related to, the Apartment Complex, which proportionate
amount is equal to the Investment Limited Partners' initial pro rata
interest in the profits, losses, and tax credits of the Partnership.
The amount of the "Aggregate Cost" shall be determined upon the
occurrence of both (i) payment in full of the Capital Contribution of
the Investment Limited Partners and (ii) Permanent Mortgage
Commencement and shall not thereafter be reduced.
Agreement means this Amended and Restated Agreement of Limited
Partnership, including Schedule A, as amended from time to time.
Annual Partnership Management Fee means the fee payable to the
General Partners pursuant to the provisions of Section 6.12(c).
Apartment Complex means the real property located in High Point,
Guilford County, North Carolina, as more fully described in the
Mortgage, together with (i) all buildings and other improvements
constructed or to be constructed thereon and (ii) all furnishings,
equipment and personal property covered by the Mortgage.
Applicable Federal Rate means the "applicable federal rate" as
defined in Section 1274(d) of the Code.
Applicable Percentage has the meaning given to it in
Section 42(b) of the Code.
Asset Management Fee means the fee payable to BCCLP or an
Affiliate thereof pursuant to Section 6.12(a).
Auditors means Schell & Hogan of Hinesville, Georgia, or such
other firm of independent certified public accountants as may be
engaged by the General Partners with the consent of Boston Capital for
the purposes of preparing the Partnership income tax returns, auditing
the books and records of the Partnership and certifying financial
reports of the Partnership.
BCCLP means Boston Capital Communications Limited Partnership, a
Massachusetts limited partnership, and its successors and assigns.
Boston Capital means Boston Capital Partners, Inc., a
Massachusetts corporation.
Breakeven Point means the first time at which, as certified by
the General Partners, there have been three consecutive full calendar
months of operation occurring after the Completion Date and assuming
that all the terms of the Permanent Mortgage are in effect even if
Permanent Mortgage Commencement has not yet occurred, during which the
rental income (including government subsidies) of the Partnership
actually received on a cash basis (excluding prepaid rent) for each of
such three months shall have exceeded all the Partnership's expenses
for such month on an accrual basis (including, but not limited to,
(a) all operational costs and expenses, (b) all items payable in
connection with any Mortgage, and (c) the funding of any reserves
required by the Lenders and/or pursuant to the terms of this
Agreement), except for depreciation, distributions of Cash Flow and
Capital Transaction proceeds to the Partners and the fees payable
pursuant to this Agreement. For purposes of the foregoing, expenses
shall (i) include monthly payments of principal and interest in the
amount specified in the Permanent Mortgage regardless of any
forbearance thereof, (ii) include a ratable portion of the annual
amount (as estimated by the General Partners) of those seasonal
expenses (such as utilities and maintenance expense) which might
reasonably be expected to be incurred on an unequal basis during a
full annual period of operation, and (iii) be adjusted, if necessary,
so that the expenses of real estate taxes and insurance are based on
the General Partners' estimate of the full value of the Apartment
Complex after completion of construction.
Capital Account has the meaning specified in Section 4.1(b).
Capital Contribution means the total value of cash or property
contributed and agreed to be contributed to the Partnership by each
Partner, as shown in Schedule A. Any reference in this Agreement to
the Capital Contribution of a then Partner shall include a Capital
Contribution previously made by any prior Partner for the Interest of
such then Partner.
Capital Transaction means any transaction the proceeds of which
are not includable in determining Cash Flow including, without
limitation, the sale or other disposition of all or substantially all
of the assets of the Partnership.
Carryover Certification means the date upon which the Investment
Limited Partners shall have received, in a form and in substance
satisfactory to the Investment Limited Partners, the certification of
the Auditors that as of the date no later than December 31, 1995, the
Partnership had incurred capitalizable costs with respect to the
Apartment Complex of at least 10% of the Partnership's reasonably
expected basis in the Apartment Complex as of December 31, 1997, so
that each building in the Apartment Complex constitutes a "qualified
building" for the purposes of Section 42(h)(1)(E)(ii) of the Code.
Cash Flow means the profits or losses of the Partnership from
and after the Commencement Date subject to any applicable Agency or
Lender requirements and to the following adjustments:
(a) Cost recovery deductions of buildings, improvements
and personal property and amortization of any financing fees
shall not be deducted;
(b) Mortgage amortization shall be deducted;
(c) Mortgage interest which is included in determining
profits and losses but which is not currently payable in cash
shall be deducted when actually paid;
(d) Payments to reserves under Section 6.5(e) shall be
deducted;
(e) Any amounts paid for capital expenditures shall be
deducted, unless paid from any replacement reserve or funded
through insurance;
(f) The proceeds of any Construction Mortgage or
Permanent Mortgage refinancing, any sale, exchange, eminent
domain taking, damage or destruction (whether insured or
uninsured), or other disposition, of all or any part of the
Apartment Complex (other than the proceeds of any business or
rental interruption insurance) shall not be included;
(g) Any rent or interest subsidy payments shall be
included;
(h) The fees set forth in Sections 6.12 and any fee
payable in connection with any transaction referred to in clause
(f) above shall not be deducted; and
(i) Prior to Permanent Mortgage Commencement, an amount
equal to the amount, if any, of net rental income applied to
complete the construction of the Apartment Complex pursuant to
Section 6.11(a) shall be deducted.
Certificate means the Original Certificate as amended from time
to time.
Class A Limited Partner means Boston Capital Tax Credit
Fund IV L.P., Series 24, a Delaware limited partnership, and any
Person or Persons who replace it as Substituted Limited Partner, but
shall not include any Special Limited Partner or Additional Limited
Partner.
Class B Limited Partner means Boston Capital Tax Credit Fund IV,
L.P., Series 25, a Delaware limited partnership, and any Person or
Persons who replace it as Substituted Limited Partner, but shall not
include any Special Limited Partner or Additional Limited Partner.
Class Contribution means the aggregate Capital Contributions of
all members of a particular class of Partners (i.e., the General
Partners, the Investment Limited Partners, the Special Limited Partner
or any Additional Limited Partner).
Code means the Internal Revenue Code of 1986, as amended from
time to time, and the regulations (permanent or temporary) issued
thereunder. References herein to any Code section shall include any
successor provisions.
Commencement Date means the first day of the month in which the
Admission Date occurs.
Competitive Real Estate Commission means that real estate or
brokerage commission paid for the purchase or sale of the Apartment
Complex or other Partnership property which is reasonable, customary
and competitive in light of the size, type and location of the
Apartment Complex or other property.
Completion Date means the date upon which the Apartment Complex
has been completed as evidenced by the issuance by the inspecting
architect and by each Agency, Lender and other governmental agency
having jurisdiction of certificates of substantial completion or
occupancy (or local equivalents) with respect to all 100 apartment
units in the Apartment Complex.
Consent of the Investment Limited Partners means the prior
written consent or approval of the Investment Limited Partners.
Construction and Development Fee has the meaning given to it in
Section 6.12(b).
Construction Lender means Midland Mortgage Investment
Corporation in its capacity as holder of the Construction Mortgage, or
its successors or assigns in such capacity.
Construction Mortgage means the financing for the construction
of the Apartment Complex provided by the Construction Lender in a
principal amount of up to $2,674,000.
Controlling Person has the meaning given to it in the context of
Section 15 of the Securities Act of 1933, as amended.
Cost Certification means the date upon which each Limited
Partner shall have received the written certification of the Auditors
and the Application to the Agency for Form 8609 as to the itemized
amounts of the construction and development costs of the Apartment
Complex and the Eligible Basis and Applicable Percentage pertaining to
each building in the Apartment Complex.
Construction Permitting Date means the date upon which the
Partnership shall have received all necessary governmental and other
permits and approvals indicating that construction of the Apartment
Complex may begin in accordance with the plans and specifications
submitted therefor.
Credit Period has the meaning given to it in Section 42(f)(1) of
the Code.
Credit Recovery Loan means a constructive interest-bearing
advance of the Investment Limited Partners as more fully described in
Section 5.1(f). Credit Recovery Loans and interest thereon shall not
be treated as loans or interest, respectively, for accounting, tax or
liability purposes or for the purposes of Section 6.2(a)(1). For the
purposes of Article X, the term Credit Recovery Loan shall not include
any portion of such an advance which shall have theretofore been paid
to an Investment Limited Partner.
Credit Shortfall has the meaning given to it in Section 5.1(f).
Disposition (including the forms Dispose and Disposing) means,
as to a Limited Partner, the assignment, sale, transfer, exchange or
other disposition of all or any part of its Interest.
Economic Risk of Loss has the meaning set forth in Treasury
Regulation Section 1.752-2.
89-12 Requirements means the requirements set forth in Internal
Revenue Procedure 89-12 which are prerequisites to the issuance,
assuming that each General Partner is a corporation, by the Service of
an advance ruling that the Partnership will be taxed as a partnership
and not as an association taxable as a corporation for Federal income
tax purposes.
Eligible Basis has the meaning given to it in Section 42(d) of
the Code.
Entity means any general partnership, limited partnership,
corporation, joint venture, trust, business trust, cooperative or
association.
Event of Bankruptcy means with respect to any Person,
(i) the entry of a decree or order for relief by a court
having jurisdiction in respect of such Person in a case under
the federal bankruptcy laws, as now or hereafter constituted, or
any other applicable federal or state bankruptcy, insolvency or
other similar law, or the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or similar official)
of such Person or for any substantial part of his property, or
the issuance of an order for the winding-up or liquidation of
his affairs and the continuance of any such decree or order
unstayed and in effect for a period of 60 consecutive days, or
(ii) the commencement by such Person of a proceeding
seeking any decree, order or appointment referred to in
clause (i), the consent by such Person to any such decree, order
or the appointment, or taking of any action by such Person in
furtherance of any of the foregoing.
Filing Office means the Secretary of State of the State.
General Partners means the Persons designated as General
Partners in Schedule A and any Persons who become General Partners as
provided herein, in their capacities as general partners of the
Partnership. At any and all times where there is only one General
Partner, the term General Partners shall mean such sole General
Partner.
General Partner Economic Interest means each General Partner's
proportionate share of the profits, losses, tax-exempt income, non-
deductible non-capitalizable expenditures, tax credits, Cash Flow and
Capital Transaction proceeds of the Partnership, all as set forth in
Article X herein.
Hazardous Material shall have the collective meanings given to
the terms "hazardous material", "hazardous substances" and "hazardous
wastes" in the Federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. Sec. 9601 et seq.,
as amended, and shall also include any meanings given to such terms in
any similar state or local statutes, ordinances, regulations or
by-laws. In addition, the term Hazardous Material shall also include
oil and any other substance known to be hazardous.
HUD means the United States Department of Housing and Urban
Development.
Immediate Family means with respect to any Person, his spouse,
parents, parents-in-law, descendants, nephews, nieces, brothers,
sisters, brothers-in-law, sisters-in-law, children-in-law and
grandchildren-in-law.
Initial 95% Qualified Occupancy Date means the first date upon
which not less than 95% of the 100 apartment units in the Apartment
Complex shall have been leased to and have been occupied by qualified
tenants on such date meeting the terms of the Minimum Set-Aside Test
under executed leases which shall have received any necessary Agency
or Lender approval, at rentals meeting the requirements of the Rent
Restriction Test.
Installment means an installment of the Investment Limited
Partners' Capital Contributions paid or payable to the Partnership
pursuant to Section 5.1.
Interest means the entire interest of a Partner in the
Partnership at any particular time, including the right of such
Partner to any and all benefits to which a Partner may be entitled
hereunder and the obligation of such Partner to comply with the terms
of this Agreement.
Invested Amount means (i) as to each Investment Limited Partner,
an amount equal to the paid-in Capital Contribution of the Investment
Limited Partner divided by 73% and (ii) as to any other Partner, an
amount equal to its paid-in Capital Contribution.
Investment General Partners means Capital Associates IV L.P., a
Delaware limited partnership, in its capacity as the general partner
of each Investment Limited Partner, and any other Person who may
become a successor or additional general partner of the Investment
Limited Partner.
Investment Limited Partner means the Class A Limited Partner and
the Class B Limited Partner and any Person or Persons who replace such
Partners as a Substituted Limited Partner, but shall not include any
Special Limited Partner or Additional Limited Partner.
Investment Partnership Agreement means the Agreement of Limited
Partnership of each Investment Limited Partner, as amended from time
to time.
Lender means the Construction Lender and the Permanent Lender,
each in its capacity as maker of a Mortgage loan, or its successors
and assigns in such capacity.
Limited Partners means the Investment Limited Partners, the
Special Limited Partner and any Additional Limited Partner.
Management Agent means the management and rental agent for the
Apartment Complex.
Management Agreement means the agreement between the Partnership
and the Management Agent providing for the management of the Apartment
Complex.
Management Fee means the Management Fee to which reference is
made in Article XI.A.
Minimum Set-Aside Test means the set aside test selected by the
Partnership pursuant to Section 42(g) of the Code whereby at least 40%
of the units in the Apartment Complex must be occupied by individuals
with incomes equal to 60% or less of area median income, as adjusted
for family size.
Mortgage means the mortgage indebtedness of the Partnership to
the Construction Lender and/or the Permanent Lender; and where the
context permits Mortgage shall mean and include the mortgage note
evidencing such indebtedness, the mortgage or deed of trust and
security agreement securing such indebtedness, the loan agreement and
all other documentation related thereto which evidence and secure such
indebtedness, including any Agency documentation related thereto.
Original Agreement has the meaning specified in the Preliminary
Statement.
Original Certificate has the meaning specified in the
Preliminary Statement.
Original Limited Partner has the meaning specified in the
Preliminary Statement.
Partner means any General Partner or Limited Partner.
Partner Non-Recourse Debt means any Partnership liability (a)
that is considered non-recourse under Treasury Regulation Section
1.1001-2 or for which the creditor's right to repayment is limited to
one or more assets of the Partnership and (b) for which any Partner or
Related Person bears the Economic Risk of Loss.
Partner Non-Recourse Debt Minimum Gain means the amount of
partner nonrecourse debt minimum gain and the net increase or decrease
in partner nonrecourse debt minimum gain determined in a manner
consistent with Treasury Regulation Sections 1.704-2(d), 1.704-2(g)(3)
and 1.704-2(k).
Partnership means the limited partnership continued pursuant to
this Agreement.
Partnership Minimum Gain means the amount determined by
computing, with respect to each Partnership Non-Recourse Liability,
the amount of gain, if any, that would be realized by the Partnership
if it disposed of (in a taxable transaction) the property subject to
such liability in full satisfaction of such liability, and by then
aggregating the amounts so computed. Such computations shall be made
in a manner consistent with Treasury Regulation Sections 1.704-2(d)
and 1.704-2(k).
Partnership Non-Recourse Liability means any Partnership
liability (or portion thereof) for which no Partner or Related Person
bears the Economic Risk of Loss.
Permanent Lender means Midland Affordable Housing Group Trust in
its capacity as holder of the Permanent Mortgage, or its successors or
assigns in such capacity.
Permanent Mortgage means the permanent financing to be provided
by the Permanent Lender for the Apartment Complex following the
completion thereof in the maximum principal amount of up to
$2,115,000.
Permanent Mortgage Commencement means the first date on which
all of the following shall have occurred: (a) the Completion Date
shall have occurred; (b) the principal amount and maturity date of the
Permanent Mortgage shall have been finally determined; and
(c) amortization of the Permanent Mortgage shall have commenced.
Permanent Mortgage Commitment means the first date upon which
the Partnership receives the written commitment of the Permanent
Lender to make the Permanent Mortgage.
Person means any individual or Entity.
Project Documents means and includes any and all documentation
evidencing the Construction Mortgage, the Permanent Mortgage, the
Management Agreement, all other instruments delivered to (or required
by) any Lender or Agency and all other documents relating to the
Apartment Complex and by which the Partnership is bound, as amended or
supplemented from time to time.
Projected Credit means $125,779 for 1996, $535,008 for 1997,
$539,051 per annum for each of the years 1998 through 2005
(inclusive), $413,272 for 2006, and $4,043 for 2007; provided,
however, that the Projected Credit for 2006 shall be reduced by the
amount, if any, by which the Actual Credit for 1996 exceeds $125,779
and provided further that upon the occurrence of any of the events
described in clauses (i) and (ii) of Section 5.1(g), the Projected
Credit shall thereafter be the Revised Projected Credit. The
Projected Credit shall be shared 67% by the Class A Limited Partner
and 33% by the Class B Limited Partner as follows: 1996, $84,272 to
the Class A Limited Partner and $41,507 to the Class B Limited
Partner; 1997, $358,455 to the Class A Limited Partner and $176,553 to
the Class B Limited Partner; 1998 through 2005 inclusive, $361,164 to
the Class A Limited Partner and $177,887 to the Class B Limited
Partner; 2006, $276,892 to the Class A Limited Partner and $136,380 to
the Class B Limited Partner; and 2007, $2,709 to the Class A Limited
Partner and $1,334 to the Class B Limited Partner.
Qualified Basis has the meaning given to it in Section 42(c) of
the Code.
Qualified Income Offset Item means (1) an allocation of loss or
deduction that, as of the end of each year, reasonably is expected to
be made (a) pursuant to Section 704(e)(2) of the Code to a donee of an
interest in the Partnership, (b) pursuant to Section 706(d) of the
Code as the result of a change in any Partner's Interest, or
(c) pursuant to Regulation Section 1.751-1(b)(2)(ii) as the result of
a distribution by the Partnership of unrealized receivables or
inventory items and (2) a distribution that, as of the end of such
year, reasonably is expected to be made to a Partner to the extent it
exceeds offsetting increases to such Partner's Capital Account which
reasonably are expected to occur during or prior to the Partnership
taxable year in which such distribution reasonably is expected to
occur.
Refinancing Fee means the fee payable to the General Partners or
an Affiliate thereof pursuant to Section 6.12(d).
Related Person means a person related to a Partner within the
meaning of Treasury Regulation Section 1.752-4(b).
Rent Restriction Test means the test pursuant to Section 42 of
the Code whereby the gross rent charged to tenants of the low-income
units in the Apartment Complex may not exceed 30% of the qualifying
income levels applicable to those units.
Schedule A means Schedule A to this Agreement as amended from
time to time.
Service means the Internal Revenue Service.
Site has the meaning given to it in the Federal Comprehensive
Environmental Response, Compensation and Liability Act of 1980, 42
U.S.C. Sec. 9601 et seq., as amended, and shall also include any
meaning given to it in any similar state or local statutes,
ordinances, regulations or by-laws.
Special Limited Partner means BCTC 94, Inc., a Delaware
corporation, and any Person who becomes a Special Limited Partner as
provided herein, in its capacity as a special limited partner of the
Partnership.
State means the State of Georgia.
State Designation means the date upon which the Partnership
receives the allocation from the Agency of Tax Credit for the
building(s) constituting the Apartment Complex in an annual dollar
amount of not less than $544,496, as evidenced by the execution by or
on behalf of such agency of Form(s) 8609. For the purposes of
determining State Designation, each building in the Apartment Complex
shall be treated as having received an allocation of Tax Credit in an
amount equal to the lesser of (i) the amount of the Tax Credit
carryover allocation received from the authorized agency of North
Carolina as to such building or (ii) the amount of the Tax Credit set
forth on the Form 8609 as to such building.
Subordinated Loan means any loan made by the General Partners to
the Partnership pursuant to Section 6.10.
Substituted Limited Partner means any Person who is admitted to
the Partnership as Limited Partner under Section 8.2 or acquires the
Interest of a Limited Partner pursuant to Section 5.2.
Tax Accountants means Reznick, Fedder & Silverman of Bethesda,
Maryland or such other firms of independent certified public
accountants as may be engaged by Boston Capital to review the
Partnership income tax returns.
Tax Credit means the low-income housing tax credit pursuant to
Section 42 of the Code.
Tax Credit Set-Aside means the date upon which the Partnership
receives a preliminary reservation by the authorized agency of the
State of Tax Credit for the building(s) constituting the Apartment
Complex in an annual dollar amount of not less than $544,496.
Title Policy means an owner's title insurance policy or an
endorsement thereto, issued to the Partnership with respect to the
Apartment Complex with an effective date on or after the Admission
Date, in an insured amount of not less than $5,257,173 from a title
insurance company reasonably satisfactory to the Investment Limited
Partner and evidencing the Partnership's ownership of the Apartment
Complex subject only to such exclusions, exceptions and stipulations
as shall be acceptable to the Investment Limited Partner, in its sole
discretion.
Uniform Act means the Uniform Limited Partnership Act as adopted
by the State.
Vessel has the meaning given to it in the Federal Comprehensive
Environmental Response, Compensation and Liability Act of 1980, 42
U.S.C. Sec. 9601 et seq., as amended, and shall also include any
meaning given to it in any similar state or local statutes,
ordinances, regulations or by-laws.
Withdrawal (including the forms Withdraw, Withdrawing and
Withdrawn) means, as to a General Partner, the occurrence of death,
adjudication of insanity or incompetence, Event of Bankruptcy,
dissolution, liquidation, or voluntary or involuntary withdrawal or
retirement from the Partnership for any reason, including whenever a
General Partner may no longer continue as a General Partner by law or
pursuant to any terms of this Agreement. Withdrawal shall also mean
the sale, assignment, transfer or encumbrance by a General Partner of
its interest as a General Partner. A General Partner which is a
corporation or partnership shall be deemed to have sold, assigned,
transferred or encumbered its interest as a General Partner in the
event of any sale, assignment or other transfer (but specifically
excluding any transfer occurring pursuant to the laws of descent and
distribution) or encumbrance of a controlling interest in a corporate
General Partner (but specifically excluding any encumbrance which
replaces the current pledge of the stock of The Norsouth Corporation
to Michael J. Kistler) or of a general partner interest in a General
Partner which is a partnership. For purposes of this definition of
Withdrawal, "controlling interest" shall mean the power to direct the
management and policies of such person, directly or indirectly,
whether through the ownership of voting securities, by contract or
otherwise.
ARTICLE II
Name and Business
2.1 Name; Continuation
The name of the Partnership is Laurelwood Park Limited
Partnership. The Partners agree to continue the Partnership which was
formed pursuant to the provisions of the Uniform Act.
2.2 Office and Resident Agent
(a) The principal office of the Partnership is 340 Eisenhower
Drive, Building 300, Savannah, Georgia 31406, at which office there
shall be maintained those records required by the Uniform Act to be
kept by the Partnership. The Partnership may have such other or
additional offices as the General Partners shall deem desirable. The
General Partners may at any time change the location of the principal
office and shall give due notice thereof to the Limited Partners.
(b) The registered agent in the State for the Partnership for
service of process is as follows:
William E. Johnston
Building 300
340 Eisenhower Drive
Savannah, Georgia 31406
2.3 Purpose
The purpose of the Partnership is to acquire, hold, invest in,
construct, develop, improve, maintain, operate, lease and otherwise
deal with the Apartment Complex. The Partnership shall operate the
Apartment Complex in accordance with any applicable Agency regulations
and Lender requirements. The Partnership shall not engage in any
other business or activity.
2.4 Term and Dissolution
The Partnership shall continue in full force and effect until
February 28, 2040, except that the Partnership shall be dissolved and
its assets liquidated prior to such date upon:
(a) The sale or other disposition of all or substantially all
of the assets of the Partnership;
(b) A General Partner dying, being adjudicated bankrupt,
insane or incompetent, (if a corporation or partnership) being
dissolved or liquidated, or voluntarily or involuntarily withdrawing
from the Partnership for any reason, including an inability to
continue serving as a General Partner by law or pursuant to the terms
of this Agreement, if (i) the remaining General Partner(s), if any,
shall fail to continue the business of the Partnership and
reconstitute the Partnership as a successor limited partnership as
provided in Section 7.2 and (ii) the Investment Limited Partners shall
fail to exercise the right provided in Section 7.3;
(c) The election to dissolve the Partnership made in writing
by the General Partners with the Consent of the Investment Limited
Partners and the approval (if required) of each Lender and (if
required) each Agency;
(d) The entry of a final decree of dissolution of the
Partnership by a court of competent jurisdiction; or
(e) Any other event which causes the dissolution of the
Partnership under the Uniform Act if the Partnership is not
reconstituted pursuant to Section 7.2 or Section 7.3.
Upon dissolution of the Partnership, the General Partners (or
for purposes of this paragraph, their trustees, receivers or
successors) shall cause the cancellation of the Certificate, liquidate
the Partnership assets and apply and distribute the proceeds thereof
in accordance with Section 10.3. Notwithstanding the foregoing, if,
during liquidation, the General Partners shall determine that an
immediate sale of part or all of the Partnership's assets would be
impermissible, impractical or cause undue loss to the Partners, the
General Partners may defer liquidation of, and withhold from
distribution for a reasonable time, any assets of the Partnership
except those necessary to satisfy Partnership debts and obligations
(except Subordinated Loans).
ARTICLE III
Mortgage, Refinancing and Disposition of Property
A. The General Partners and their Affiliates, jointly and
severally, are hereby authorized to incur personal liability for the
repayment of funds advanced by the Construction Lender (and interest
thereon) pursuant to the Construction Mortgage. However, from and
after Permanent Mortgage Commencement, neither any General Partner nor
any Related Person shall at any time bear, nor shall the General
Partners permit any other Partner or any Related Person to bear, the
Economic Risk of Loss for the payment of any portion of any Mortgage.
B. The Partnership may decrease, increase or refinance the
Permanent Mortgage and may make any required transfer or conveyance of
Partnership assets for security or mortgage purposes, provided,
however, any such decrease, increase or refinancing of the Permanent
Mortgage may be made by the General Partners only with the Consent of
the Investment Limited Partners.
C. The Partnership may sell, lease, exchange or otherwise
transfer or convey all or substantially all the assets of the
Partnership only with the Consent of the Investment Limited Partners.
Notwithstanding the foregoing and except as set forth in
Section 6.2(a)(6), no Consent of the Investment Limited Partners shall
be required for the leasing of apartments to tenants in the normal
course of operations or the leasing of all or substantially all the
apartments to a public housing authority at rents satisfactory to each
applicable Agency and Lender as expressed in writing.
D. The total compensation to all Persons for the sale of the
Apartment Complex shall be limited to a Competitive Real Estate
Commission, not to exceed six per cent (6%) of the contract price for
the sale of the Apartment Complex.
ARTICLE IV
Partners; Capital
4.1 Capital and Capital Accounts
(a) The Capital Contribution of each Partner shall be as set
forth on Schedule A. No interest shall be paid on any Capital
Contribution. No Partner shall have the right to withdraw its Capital
Contribution or to demand and receive property of the Partnership in
return for its Capital Contribution, except as may be specifically
provided in this Agreement or required by law.
(b) An individual Capital Account shall be established and
maintained on behalf of each Partner, including any additional or
substituted Partner who shall hereafter receive an interest in the
Partnership. In accordance with Treasury Regulation Section 1.704-
1(b), the Capital Account of each Partner shall consist of (i) the
amount of cash such Partner has contributed to the
Partnership plus (ii) the fair market value of any property such
Partner has contributed to the Partnership net of any liabilities
assumed by the Partnership or to which such property is subject plus
(iii) the amount of profits or income (including tax-exempt income)
allocated to such Partner less (iv) the amount of losses and
deductions allocated to such Partner less (v) the amount of all cash
distributed to such Partner less (vi) the fair market value of any
property distributed to such Partner net of any liabilities assumed by
such Partner or to which such property is subject less (vii) such
Partner's share of any other expenditures which are not deductible by
the Partnership for Federal income tax purposes or which are not
allowable as additions to the basis of Partnership property and shall
be (viii) subject to such other adjustments as may be required under
the Code. The Capital Account of a Partner shall not be affected by
any adjustments to basis made pursuant to Section 743 of the Code but
shall be adjusted with respect to adjustments to basis made pursuant
to Section 734 of the Code.
The original Capital Account established for any Substituted
Partner (as hereinafter defined) shall be in the same amount as, and
shall replace, the Capital Account of the Partner which such
Substituted Partner succeeds, and, for the purposes of this Agreement,
such Substituted Partner shall be deemed to have made the Capital
Contribution, to the extent actually paid in, of the Partner which
such Substituted Partner succeeds. The term "Substituted Partner," as
used in this paragraph, shall mean a Person who shall become entitled
to receive a share of the allocations and distributions of the
Partnership by reason of such Person succeeding to all or any part of
the Interest of a Partner by assignment of all or any part of a
Partner's Interest. To the extent a Substituted Partner receives less
than 100% of the Interest of a Partner he succeeds, the original
Capital Account of such transferee Substituted Partner and his Capital
Contribution shall be in proportion to the portion of the transferor
Partner's Interest prior to the transfer which the transferee
receives, and the Capital Account of the transferor Partner who
retains a portion of his former Interest and his Capital Contribution
shall continue, and not be replaced, in proportion to the portion of
the transferor Partner's Interest prior to the transfer which the
transferor Partner retains. Nothing in this Section 4.1(b) shall
affect the limitations on transferability of Interests set forth in
Article VII or Article VIII.
4.2 General Partners
The name, address and Capital Contribution of each General
Partner is as set forth on Schedule A.
4.3 Investment Limited Partners, Special Limited Partner and
Original Limited Partner
(a) The Original Limited Partner hereby withdraws as a limited
partner of the Partnership and acknowledges that it no longer has any
Interest in, or rights or claims against, the Partnership as a Limited
Partner as of the Admission Date. The Investment Limited Partners and
the Special Limited Partner are hereby admitted to the Partnership as
the sole Limited Partners in substitution for the Original Limited
Partner as of the Admission Date and agree to be bound by the terms
and provisions of the Project Documents and this Agreement. The name,
address and Capital Contribution of each of the Investment Limited
Partners and the Special Limited Partner are as set forth on Schedule
A.
(b) The General Partner shall have no authority to admit
additional Limited Partners without the Consent of the Investment
Limited Partners.
4.4 Liability of the Limited Partners
None of the Investment Limited Partners, the Special Limited
Partner and any Person who becomes an Additional Limited Partner shall
be liable for any debts, liabilities, contracts or obligations of the
Partnership and shall only be liable to pay its respective Capital
Contribution as and when the same is due hereunder and under the
Uniform Act.
4.5 Special Rights of the Investment Limited Partners
(a) Notwithstanding any other provision herein, to the extent
the law of the State is not inconsistent, each of the Investment
Limited Partners and the Special Limited Partner shall have the right,
subject to the prior written consent of each Agency (if such consent
is required) to:
(i) dissolve the Partnership;
(ii) remove any General Partner and elect a new General
Partner (A) for any intentional misconduct or failure to
exercise reasonable care with respect to any material matter in
the discharge of its duties and obligations as a General Partner
(provided that such violation results in a material detriment to
or an impairment of the Apartment Complex or assets of the
Partnership), or (B) upon the occurrence of any of the
following: (1) such General Partner shall have violated any
material provisions of any Agency regulations applicable to the
Apartment Complex; (2) such General Partner shall have violated
any material provision of this Agreement, or such General
Partner shall have violated any material provision of applicable
law; (3) an event of default shall have occurred under any
Mortgage; or (4) such General Partner shall have conducted its
own affairs or the affairs of the Partnership in such a manner
as would (a) cause the termination of the Partnership for
Federal income tax purpose; or (b) cause the Partnership to be
treated for Federal income tax purposes as an association
taxable as a corporation; provided, however, that with respect
to subsections (B)(1),(2) and (4) preceding, prior to exercising
their rights the Investment Limited Partners and/or the Special
Limited Partner shall first give notice to the General Partner
of such event and the General Partner shall have thirty (30)
days to cure such violation;
(iii) continue the business of the Partnership with a
substitute General Partner; or
(iv) approve or disapprove the sale of all or
substantially all of the assets of the Partnership.
(b) Upon the removal of a General Partner pursuant to Section
4.5(a)(ii) above, (i) without any further action by any Partner, the
Special Limited Partner or its designee shall automatically become a
General Partner and acquire in consideration of a cash payment of $100
a 1% interest in the profits, losses, tax credits, Cash Flow and
Capital Transaction distributions of the Partnership or such portion
of the Interest of the removed General Partner as counsel to the
Investment Limited Partnership shall determine is the minimum
appropriate interest in order to assure the continued status of the
Partnership as a partnership under the Code and under the Uniform Act,
(ii) the remaining portion of the removed General Partner Economic
Interest shall automatically be converted to an equal economic
Interest as an Additional Limited Partner, (iii) the economic Interest
of the Special Limited Partner as the Special Limited Partner shall
continue unaffected by the new status of the Special Limited Partner
or its designee as a General Partner, and (iv) the new General Partner
shall automatically be irrevocably delegated all of the powers and
duties of the General Partners pursuant to Section 6.13. The Special
Limited Partner or any successor General Partner proposed by the
Special Limited Partner shall have the option, exercisable in its sole
discretion, to acquire the Interest of any removed General Partner
upon payment of the agreed or then present fair market value of such
Interest. Any dispute as to such value shall be submitted to a
committee composed of three qualified real estate appraisers, one
chosen by the removed General Partner, one chosen by the successor
General Partner and the third chosen by the two so chosen. The
proceedings of such committee shall conform to the rules of the
American Arbitration Association, as far as appropriate, and its
decision shall be final and binding. The expense of arbitration shall
be born equally by the removed General Partner and the Partnership.
The method of payment to the removed General Partner shall be fair and
must protect the solvency and liquidity of the Partnership. The
method of payment will be deemed presumptively fair where it provides
for an interest-bearing promissory note coming due in five (5) years
with equal installments of principal and interest each year. Interest
shall be equal to the "prime rate" of the Bank of Boston plus one
percent. In addition, upon removal, the Partnership must promptly pay
to the removed General Partner all amounts then accrued and owing to
the removed General Partner; provided, however, that notwithstanding
the language of Section 6.12, Article X, Article XI and any other
provision hereof, no removed General Partner or any Affiliate thereof
shall be entitled to receive any fee, compensation or other
remuneration from the Partnership, other than (i) the above-described
payment for the Interest, or portion thereof, of the removed General
Partner, and (ii) any such fee, compensation or other remuneration
which had already been earned in full prior to the date of such
removal. The Partnership is not authorized to enter into any
arrangement whereby any fee, compensation or other remuneration could
be payable directly or indirectly to any General Partner or Affiliate
thereof in a manner inconsistent with the immediately preceding
sentence unless the prior written consent of the Special Limited
Partner shall have been obtained to such particular arrangement. The
Partnership may offset against any payments to a General Partner so
removed any damages suffered by the Partnership as a result of any
breach of the obligations of such General Partner hereunder. A
General Partner so removed will not be liable as a general partner for
any obligations of the Partnership after the effective date of its
removal. Each General Partner hereby grants to the Special Limited
Partner an irrevocable (to the extent permitted by applicable law)
power of attorney coupled with an interest to execute and deliver any
and all documents and instruments on behalf of such General Partner as
the Special Limited Partner may deem to be necessary or appropriate in
order to effect the provisions of this Section 4.5 and to enable the
new General Partner to manage the business of the Partnership.
4.6 Meetings
The General Partners or Limited Partners holding more than 10%
of the then outstanding Limited Partner Interests may call meetings of
the Partnership for any matters for which the Limited Partners may
vote as set forth in this Agreement. A list of the names and
addresses of all Limited Partners shall be maintained as part of the
books and records of the Partnership and shall be made available upon
request to any Limited Partner or his representative at his cost.
Upon receipt of a written request either in person or by certified
mail stating the purpose(s) of the meeting, the General Partners shall
provide all Limited Partners within ten (10) days after receipt of
said request, written notice (either in person or by certified mail)
of a meeting and the purpose of such meeting to be held on a date not
less then fifteen (15) nor more than sixty (60) days after receipt of
said request, at a time convenient to the Limited Partners. All
meetings shall be held at the principal office of the Partnership.
ARTICLE V
Capital Contributions of the Investment
Limited Partners and the Special Limited Partner
5.1 Payments
(a) The Special Limited Partner's Capital Contribution of $100
shall be paid in full on the Admission Date. The Investment Limited
Partners' Capital Contribution shall be paid in cash installments (the
"Installments"), as follows:
(1) $2,127,107 (the "First Installment") shall be paid
on the latest of (i) the Admission Date, (ii) Tax Credit Set-
Aside, (iii) Permanent Mortgage Commitment, (iv) the
Construction Permitting Date and (v) closing of the Construction
Mortgage;
(2) $741,195 (the "Second Installment") shall be paid on
the latest of (i) the Completion Date, (ii) Cost Certification,
(iii) satisfaction of all the conditions to payment of the First
Installment, (iv) receipt of a current endorsement to the Title
Policy, (v) receipt of a payoff letter from the Contractor, and
(vi) receipt of an estoppel letter from each Lender; and
(3) $296,478 (the "Third Installment") shall be paid on
the latest of (i) the Initial 95% Qualified Occupancy Date,
(ii) achievement of the Breakeven Point, (iii) Permanent
Mortgage Commencement, (iv) State Designation, or (v)
satisfaction of all the conditions to the payment of the First
and Second Installments;
provided, however, that the General Partners shall give to the
Investment Limited Partner not less than 21 days' written notice prior
to the due date of each Installment subsequent to the First
Installment.
The Capital Contribution of the Investment Limited Partners will
be paid 67% by the Class A Limited Partner and 33% by the Class B
Limited Partner. The First Installment of $2,127,107 will be paid to
the Partnership on the Admission Date, $1,425,162 by the Class A
Limited Partner and $701,945 by the Class B Limited Partner. The
Second Installment will be paid $496,601 by the Class A Limited
Partner and $244,594 by the Class B Limited Partner. The Third
Installment will be paid $198,640 by the Class A Limited Partner and
$97,838 by the Class B Limited Partner.
(b) The obligation of each Investment Limited Partner to pay
each Installment is conditioned upon delivery by the General Partners
to such Investment Limited Partner of a written certificate (the
"Payment Certificate") stating that as of the date of such certificate
(i) all the conditions to the payment of such Installment have been
satisfied and (ii) all representations and warranties of the General
Partners contained in this Agreement are true and correct. Except as
provided in the final sentence of this Section 5.1(b), acceptance by
the Partnership of any Installment shall constitute a confirmation
that, as of the date of payment, all such conditions are satisfied and
all such representations and warranties are true and correct. The
obligation of the Investment Limited Partners to pay the First
Installment is also conditioned upon delivery by the General Partners
to such Investment Limited Partners of (i) a legal opinion of
independent counsel to the Partnership, which opinion must be
satisfactory to the Investment Limited Partners as to form, content
and identity of counsel and (ii) a photocopy of the Title Policy. In
no event shall any Installment become due until all Installments
listed prior to the Installment in question in Section 5.1(a) shall
have become due. Notwithstanding the foregoing, however, if at any
time prior to the date when an Installment becomes due and payable,
the Partnership has an "Operating Deficit" (expenses in excess of
revenues which the General Partners would be required to fund pursuant
to Section 6.10), then the Investment Limited Partners may, at their
option, waive the requirement of the delivery of the Payment
Certificate or any other condition with respect to part or all of such
Installment and pay such part or all of such Installment, provided
that the proceeds of the amount so paid are used by the Partnership to
fully fund such Operating Deficit; provided, however, that if the
proceeds of such amount so paid are designated in Section 6.12 to be
used to pay fee(s), then such proceeds shall be utilized to pay such
fee(s) and the recipient(s) thereof shall be required to, and hereby
agree to, utilize the proceeds of such fee(s) to fund such Operating
Deficit, in which case the Investment Limited Partners are hereby
authorized to directly fund such Operating Deficits with such funds
then being deemed to have been paid as aforesaid.
(c) The Payment Certificate for each Installment shall be
dated and delivered not less than 10 nor more than 30 days prior to
the due date for such Installment.
(d) If, as of the date when an Installment would otherwise be
due, any statement required to be made in the Payment Certificate for
such Installment cannot be truthfully made, the General Partners shall
notify the Investment Limited Partners of the reason why such
statement would be untrue if made, and such Investment Limited
Partners shall not be required to pay such Installment; provided,
however, that if (i) any such statement can subsequently be truthfully
made and (ii) the Investment Limited Partners have not irrevocably
lost, in the good faith judgment of the Investment General Partner,
any material tax or other benefits hereunder, then the Investment
Limited Partners shall pay such Installment to the Partnership 30 days
after delivery by the General Partners to the Investment Limited
Partners of the Payment Certificate together with an explanation of
the manner in which each such statement had become true.
(e) If with respect to any year all or a portion of which
occurs during the 60-month period commencing on the later of
(i) Admission Date or (ii) the date on which the first building in the
Apartment Complex is placed in service for the purposes of Section 42
of the Code (a "Reduction Year") the Actual Credit is or was less than
95% of the Projected Credit, then the Capital Contribution of the
Investment Limited Partners shall be reduced by their proportionate
shares of the Reduction Amount, 67% to the Class A Limited Partner and
33% to the Class B Limited Partner. The Reduction Amount shall be
equal to the sum of (A) the excess of the Projected Credit for such
year over the Actual Credit for such year multiplied by .746 plus (B)
the amount of any recapture, interest or penalty payable by the
limited partners and/or holders of beneficial assignee certificates of
each Investment Limited Partners as a result of such shortfall,
assuming that each limited partner and/or holder of a beneficial
assignee certificate in each Investment Limited Partner used all of
the Tax Credits allocated to him in the year of allocation and that
each such Person was subject to interest at the rate set forth in
Section 6621(a)(2) of the Code and to the penalty for understatement
of tax set forth in Section 6662(d) of the Code. The Auditors shall
make their determination of the amount of the Actual Credit with
respect to each Reduction Year within 30 days following the end of
such year. The Capital Contribution of the Investment Limited
Partners shall be subject to reduction as hereinabove described with
respect to each Reduction Year. Any Reduction Amount shall, at the
option of the Investment Limited Partners, either first be applied to
reduce the Installment next due to be paid by the Investment Limited
Partners, with any portion of such reduction in excess of the amount
of such Installment then being applied to reduce succeeding
Installments, provided that if no further Installments remain to be
paid or if the Reduction Amount shall exceed the sum of the amounts of
the remaining Installments, then the entire Reduction Amount or the
balance of the Reduction Amount, as the case may be, shall be paid by
the General Partners to the Investment Limited Partners promptly after
demand is made therefor, as a payment of damages for breach of
warranty or (ii) be paid in its entirety by the General Partners to
the Investment Limited Partners promptly after demand is made
therefor, as a payment of damages for breach of warranty, regardless
of the reason for such reduction.
(f) In the event that, for any reason, at any time after the
end of the year during which there occurs the 60-month anniversary of
the later of (i) the Admission Date or (ii) the date on which the
first building in the Apartment Complex is placed in service for the
purposes of Section 42 of the Code, the amount of the Actual Credit
shall be less than the Projected Credit with respect to any fiscal
year of the Partnership (such difference being hereinafter referred to
as a "Credit Shortfall"), the Investment Limited Partners shall be
treated as having made a constructive advance to the Partnership with
respect to such year (a "Credit Recovery Loan"), which shall be deemed
to have been made on January 1 of such year in an amount equal to the
sum of (i) the Credit Shortfall for such year plus (ii) the amount of
any recapture, interest or penalty payable by the limited partners
and/or holders of beneficial assignee certificates of such Investment
Limited Partner as a result of such Investment Limited Partner's
Credit Shortfall for such year, assuming that each limited partner
and/or holder of a beneficial assignee certificates in the Investment
Limited Partner used all of the Tax Credits allocated to him in the
year of allocation and that each such Person was subject to interest
at the rate set forth in Section 6621(a)(2) of the Code and to the
penalty for understatement of tax set forth in Section 6662(d) of the
Code. Any Credit Recovery Loan amounts shall be allocated 67% to the
Class A Limited Partner and 33% to the Class B Limited Partner. The
Credit Recovery Loans shall be deemed to bear simple (not compounded)
interest from the respective dates on which such principal advances
shall have been deemed to have been made under this Section 5.1(f) at
9% per annum. Credit Recovery Loans shall be payable by the
Partnership as provided in Section 10.2(b), Clause Third.
(g) In the event that at any time after the Completion Date
the product of the Apartment Complex's "qualified basis" and its
"applicable percentage" (as such terms are defined in Section 42 of
the Code) is determined by the Auditors, Tax Accountants or the
Service to be such that the Partnership will not be eligible to
receive Tax Credit in an annual dollar amount of at least $544,496,
then (a) the General Partners shall pay to the Investment Limited
Partners promptly after demand is made therefor, as a payment of
damages for breach of warranty, an amount equal to 5.5 multiplied by
the difference between (i) $544,496 and (ii) 99% of the total amount
of Tax Credit allocated and available to the Partnership and (b) the
Projected Credit for each year shall thereafter be redefined to mean
99% of the total amount of Tax Credit actually so allocated and
available to the Partnership for such year (the "Revised Projected
Credit"). Any payments made pursuant to this Section 5.1(g) shall be
shared 67% by the Class A Limited Partner and 33% by the Class B
Limited Partner.
5.2 Return of Capital Contributions
(a) Failure to Complete and Loss of the Tax Credit. If
(i) all 100 apartment units in the Apartment Complex shall not have
been placed in service by December 31, 1996 (or any later date fixed
by the General Partners with the consent of the Investment Limited
Partners), or (ii) by June 30, 1997 (or any later date fixed by the
General Partners with the Consent of the Investment Limited Partners)
less than 100 apartment units in the Apartment Complex shall have been
initially occupied by tenants meeting the terms of the Minimum Set-
Aside Test under executed leases which shall have received any
necessary Agency or Lender approvals at rental levels meeting the
requirements of the Rent Restriction Test, or (iii) Permanent Mortgage
Commencement shall not have occurred prior to December 31, 1997 (or
any later date fixed by the General Partners with the Consent of the
Investment Limited Partners), or (iv) State Designation shall not have
occurred by June 30, 1997 (or any later dates fixed by the General
Partners with the Consent of the Investment Limited Partners), or
(v) the Partnership shall fail to meet the Minimum Set-Aside Test or
the Rent Restriction Test within 12 months of the date upon which the
final building in the Apartment Complex is placed in service and/or
fails to continue to meet either such Test at any time during the 60-
month period commencing on such date, or (vi) the Breakeven Point has
not been achieved within twelve months from the Completion Date, or
(vii) prior to Permanent Mortgage Commencement, (a) foreclosure
proceedings shall have commenced under the Construction Mortgage and
such proceedings shall not have been dismissed within 60 days, (b) any
of the commitments of the Permanent Lender or any Agency to provide
the Permanent Mortgage and/or any subsidy financing shall have been
terminated or withdrawn and not reinstated or replaced within 90 days
with terms equally or more favorable to the Investment Limited
Partners or terms for which the Consent of the Investment Limited
Partners and (to the extent required) the approval of each Agency and
Lender shall have been obtained, or (c) the Construction Lender shall
have irrevocably refused to make any further advances under the
Construction Mortgage and such decision shall not have been reversed
or the Construction Lender replaced within 60 days, (viii) if at any
time it shall be determined by the Service or by the Tax Accountants
that as of December 31, 1995 the Partnership had not incurred
capitalizable costs with respect to the Apartment Complex of at least
10% of the Partnership's reasonably expected basis in the Apartment
Complex as of December 31, 1997, (ix) by January 31, 1996 the
Partnership shall not have received from the duly authorized agency of
the State a "carryover allocation" of Tax Credit pursuant to Section
42(h)(1)(E) of the Code dated no later than December 31, 1995 in an
annual dollar amount of not less than $544,496, or (x) if by
December 31, 1995 the Investment Limited Partners shall not have
received the Carryover Certification, in form and substance
satisfactory to the Investment Limited Partners then the General
Partners shall, within 15 days of the occurrence thereof, send to the
Investment Limited Partners and the Special Limited Partner notice of
such event and of their obligation to repurchase the Interest of the
Investment Limited Partners and the Special Limited Partner by paying
to the Investment Limited Partners and the Special Limited Partner an
amount equal to each such Partner's Invested Amount in the event the
Investment Limited Partners and the Special Limited Partner so
requires. If either the Special Limited Partner or the Investment
Limited Partners elects to require a repurchase of its Interest and
the payment to it of an amount equal to its Invested Amount, it shall
send notice thereof to the Partnership within 30 days after the
mailing date of the General Partners' notice (or at any time after the
occurrence of any of the foregoing if the General Partners shall not
have sent such a notice thereof), and the General Partners shall
within 30 days thereafter repurchase the Interest of such Partner by
paying to such Partner an amount equal to its Invested Amount plus the
amount of any third party costs incurred by or on behalf of such
Partner in implementing this Section 5.2(a).
(b) Lender or Agency Disapproval. If any Lender or Agency
shall disapprove, or fail to give any required approval of, the
Investment Limited Partners or the Special Limited Partner as a
Limited Partner hereunder within 180 days of its admission to the
Partnership, then such Partner shall, effective as of such time or
such later time as may be selected by the Investment General Partner
(or such other time as may be specified by the Lender or Agency in its
disapproval), at the option of the Partner being disapproved or not
approved (if not directed by a Lender or Agency to withdraw) cease to
be a Limited Partner. The General Partners shall, within 10 days of
the effective date of the termination, pay to the Partner being
disapproved or not approved an amount equal to its Invested Amount.
(c) Substitution and Indemnification. Upon receipt by the
Investment Limited Partners and/or the Special Limited Partner of the
amount due to it pursuant to either Section 5.2(a) or Section 5.2(b),
the Interest of such Partner shall terminate, and the General Partners
shall indemnify and hold harmless such Partner from any losses,
damages, and liabilities to which such Partner (as a result of its
participation hereunder) may be subject.
(d) Waiver of Repurchase Right. The Investment Limited
Partners shall have the right to irrevocably waive their right to have
their Interests repurchased pursuant to any clause or clauses of
Section 5.2(a), or any portion thereof, at any time during which any
of such rights shall be in effect (the "Repurchase Period"). Such a
waiver shall be exercised by delivery to the General Partners of a
written notice stating that the rights being waived pursuant to any
specified clause or clauses of Section 5.2(a), or any specified
portion thereof, are thereby waived from that date forward.
(e) Additional General Partner. If the General Partners shall
fail to make on the due date therefor any payment required under
Section 5.2(a) or Section 5.2(b), time being of the essence, then the
Special Limited Partner, in its sole discretion, may cause itself or
its designee to be admitted as an additional General Partner without
any further action by any other Partner. Upon any such admission of
an additional General Partner, each pre-existing General Partner shall
be deemed to have assigned proportionally to the additional General
Partner, automatically and without further action, such portion of its
General Partner Economic Interest so that the additional General
Partner shall receive not less than a one per cent (1%) interest in
the profits, losses, tax credits, Cash Flow and Capital Transaction
distributions of the Partnership in consideration of $100.00 and any
other consideration which may be agreed upon. The pre-existing
General Partners shall retain the remaining portion of the General
Partner Economic Interest. An additional General Partner so admitted
shall automatically become the Managing General Partner and be
irrevocably delegated all of the power and authority of all of the
General Partners pursuant to Section 6.13. Any such additional
General Partner shall have the right to withdraw as a General Partner
at any time, leaving the pre-existing General Partners once again as
the only General Partners, the provisions of Article VII
notwithstanding. Each Partner hereby grants to the Special Limited
Partner a special power of attorney, irrevocable to the extent
permitted by law and coupled with an interest, to amend the
Certificate and this Agreement and to do anything else which, in the
view of the Special Limited Partner, may be necessary or appropriate
to accomplish the purposes of this Section 5.2(e) or to enable any
additional General Partner admitted pursuant to this Section 5.2(e) to
manage the business of the Partnership. The admission of an
additional General Partner shall not relieve any other General Partner
of any of its economic obligations hereunder, and each other General
Partner shall fully indemnify and hold harmless the additional General
Partner from and against any and all losses, judgments, liabilities,
expenses and amounts paid in settlement of any claims sustained in
connection with its capacity as a General Partner, which claims result
from the actions or omissions of the General Partners prior to the
admission of the additional General Partner.
ARTICLE VI Rights, Powers and Duties of General Partners
6.1 Authorized Acts
Subject to Section 6.2, Section 6.3, Section 6.5(j) and all
other provisions of this Agreement, the General Partners for, in the
name and on behalf of the Partnership are hereby authorized to do the
following in furtherance of the purposes of the Partnership:
(1) To acquire by purchase, lease, exchange or otherwise
any real or personal property;
(2) To construct, operate, maintain, finance and
improve, and to own, sell, convey, assign, mortgage or lease any
real estate and any personal property;
(3) To borrow money and issue evidences of indebtedness
and to secure the same by mortgage, pledge or other lien on the
Apartment Complex or any other assets of the Partnership;
(4) To execute the Construction and Permanent Mortgages,
the other Project Documents and all such other documents as the
General Partners deem necessary or appropriate in connection
with the acquisition, development and financing of the Apartment
Complex;
(5) To prepay in whole or in part, refinance or modify
the Construction and Permanent Mortgages or any other financing
affecting the Apartment Complex;
(6) To employ the Management Agent (which may be an
Affiliate of the General Partners) and to pay reasonable
compensation for its services;
(7) To employ their respective Affiliates to perform
services for, or sell goods to, the Partnership;
(8) To execute contracts with any Agency, the State or
any subdivision or agency thereof or any other government agency
to make apartments or tenants in the Apartment Complex eligible
for any public-subsidy program;
(9) To execute leases of some or all of the apartment
units of the Apartment Complex to a public housing authority
and/or to a non-profit corporation, cooperative or other non-
profit Entity; and
(10) To enter into any kind of activity and to perform
and carry out contracts of any kind which may be lawfully
carried on or performed by a partnership and to file all
certificates and documents which may be required under the laws
of the State.
6.2 Restrictions on Authority
(a) Notwithstanding any other Section of this Agreement, the
General Partners shall have no authority to perform any act in
violation of applicable law, Agency or other government regulations,
requirements of any Lender, or the Project Documents. In the event of
any conflict between the terms of this Agreement and any applicable
Agency or other government regulations or requirements of any Lender,
the terms of such regulations or requirements shall govern. Neither
shall the General Partners have any authority to do any of the
following acts without the Consent of the Investment Limited Partners:
(1) To have borrowings (which shall not be deemed to
mean trade payables) in excess of $20,000 in the aggregate at
any one time outstanding on the general credit of the
Partnership, except borrowings constituting Subordinated Loans;
(2) To borrow from the Partnership or commingle
Partnership funds with funds of any other Person;
(3) Following the Completion Date, to construct any new
or replacement capital improvements on the Apartment Complex
which substantially alter the Apartment Complex or its use or
which are at a cost in excess of $10,000 in a single Partnership
fiscal year, except (a) replacements and remodeling in the
ordinary course of business or under emergency conditions or
(b) construction paid for from insurance proceeds;
(4) To acquire any real property in addition to the
Apartment Complex;
(5) Following Permanent Mortgage Commencement, to
increase, modify the terms of or refinance the Permanent
Mortgage;
(6) To rent apartments in the Apartment Complex such
that the Apartment Complex would not meet the requirements of
the Minimum Set- Aside Test or the Rent Restriction Test;
(7) To sell, exchange or otherwise convey or transfer
the Apartment Complex or substantially all the assets of the
Partnership;
(8) To terminate any agreement with an Agency;
(9) To cause the Partnership to commence a proceeding
seeking any decree, relief, order or appointment in respect to
the Partnership under the federal bankruptcy laws, as now or
hereafter constituted, or under any other federal or state
bankruptcy, insolvency or similar law, or the appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator
(or similar official) for the Partnership or for any substantial
part of the Partnership's business or property, or to cause the
Partnership to consent to any such decree, relief, order or
appointment initiated by any Person other than the Partnership;
(10) To pledge or assign any of the Capital Contribution
of the Investment Limited Partners or the proceeds thereof; or
(11) To do any act required to be approved or ratified by
all limited partners under the Uniform Act.
(b) In the event that any General Partner violates any
provision of Section 6.2(a), the Special Limited Partner shall give
notice to the General Partners of such violation. If such violation
has not been cured within five (5) business days of receipt of such
notice, then the Special Limited Partner, in its sole discretion, may
cause itself or its designee to be admitted as an additional General
Partner without any further action by any other Partner. Upon any
such admission of an additional General Partner, each pre-existing
General Partner shall be deemed to have assigned proportionally to the
additional General Partner, automatically and without further action,
such portion of its General Partner Economic Interest so that the
additional General Partner shall receive not less than a one per cent
(1%) interest in the profits, losses, tax credits, Cash Flow and
Capital Transaction distributions of the Partnership in consideration
of $100.00 and any other consideration which may be agreed upon. The
pre-existing General Partners shall retain the remaining portion of
the General Partner Economic Interest. An additional General Partner
so admitted shall automatically become the Managing General Partner
and be irrevocably delegated all of the power and authority of all of
the General Partners pursuant to Section 6.13. Any such additional
General Partner shall have the right to withdraw as a General Partner
at any time, leaving the pre-existing General Partners once again as
the only General Partners, the provisions of Article VII
notwithstanding. Each Partner hereby grants to the Special Limited
Partner a special power of attorney, irrevocable to the extent
permitted by law and coupled with an interest, to amend the
Certificate and this Agreement and to do anything else which, in the
view of the Special Limited Partner, may be necessary or appropriate
to accomplish the purposes of this Section 6.2(b) or to enable any
additional General Partner admitted pursuant to this Section 6.2(b) to
manage the business of the Partnership. The admission of the Special
Limited Partner or its designee as an additional General Partner shall
not relieve any other General Partner of the Special Limited Partner
or its designee as any of its economic obligations hereunder, and each
other General Partner shall fully indemnify and hold harmless the
additional General Partner from and against any and all losses,
judgments, liabilities, expenses and amounts paid in settlement of any
claims sustained in connection with its capacity as a General Partner,
which claims result from the actions or omissions of the General
Partners prior to the admission of the additional General Partner.
(c) Neither the Investment General Partner nor any Affiliate
thereof shall be given an exclusive right to sell, or exclusive
employment to sell, the Apartment Complex.
6.3 Personal Services
No General Partner or Affiliate thereof shall receive any salary
or other compensation except as may be provided in Section 6.12 and
Article XI or as to which the prior written consent of the Special
Limited Partner shall have been obtained to the precise terms thereof
prior to the commencement of such services or the provision of such
goods. Any Partner may engage independently or with others in other
business ventures of every nature and description including the
ownership, operation, management, syndication and development of
competing real estate; neither the Partnership nor any other Partner
shall have any rights in and to such independent ventures or the
income or profits derived therefrom.
6.4 Business Management and Control; Tax Matters Partner
Subject to the provisions of this Agreement, the General
Partners shall have the exclusive right to control the business of the
Partnership. The Investment Limited Partners shall have no right to
take part in the management or control of the business of the
Partnership or to transact any business in the name of the
Partnership. No provision of this Agreement which makes the Consent
of the Investment Limited Partners a condition for the effectiveness
of an action taken by the General Partners is intended, and no such
provision shall be construed, to give the Investment Limited Partner
any participation in the control of the Partnership business. The
Investment Limited Partners and the Special Limited Partner hereby
consent to the exercise by the General Partners of the powers
conferred on them by law and this Agreement, and the General Partners
agree to exercise control of the business of the Partnership only in
accordance with the provisions of this Agreement. All Partners hereby
agree that The Norsouth Corporation shall serve as the "Tax Matters
Partner." In the case of litigation, the Tax Matters Partner is
required to file suit in the United States Tax Court unless the
Consent of the Investment Limited Partners is obtained to file suit in
the United States Claims Court or the United States District Court.
Nothing herein shall be construed to restrict the Partnership from
engaging the Auditors to assist the Tax Matters Partner in discharging
its duties hereunder.
6.5 Duties and Obligations
(a) The General Partners shall manage the affairs of the
Partnership to the best of their ability, shall use their best efforts
to carry out the purpose of the Partnership, and shall devote to the
Partnership such time as may be necessary for the proper performance
of their duties and the business of the Partnership. The General
Partners shall promptly take all action which may be necessary or
appropriate for the proper development, maintenance and operation of
the Apartment Complex in accordance with the provisions of this
Agreement, the Project Documents and applicable laws and regulations
including, without limitation, funding the Construction and
Development Fee to the extent Capital Contributions are insufficient.
The General Partners are responsible for the management and operation
of the Partnership, including the oversight of the rent-up and
operational stages of the Apartment Complex.
(b) The General Partners shall use their best efforts to cause
the Partnership to generate Cash Flow for distribution to the Partners
at the maximum realizable level in view of (i) any applicable Agency
regulations, (ii) all Lender requirements, (iii) the Minimum Set-Aside
Test and (iv) the Rent Restriction Test, and, if necessary, the
General Partners shall also use their best efforts to obtain approvals
and implementation of appropriate adjustments in the rental schedule
of the Apartment Complex.
(c) The General Partners shall obtain and keep in force,
during the term of the Partnership, comprehensive casualty insurance,
including, but not limited to fire and other risks generally included
under "extended coverage" policies, workmen's compensation and public
liability insurance in favor of the Partnership (i) with such
companies and in such amounts as shall be satisfactory to each Agency
and Lender, or, if the Apartment Complex is no longer subject to
Agency or Lender regulation or requirements, as shall be customary for
apartment complexes such as the Apartment Complex and (ii) in amounts
which shall be (A) no less than those amounts which are customary in
the area for apartment complexes similar to the Apartment Complex,
(B) no less than such amounts as may be reasonably requested by the
Investment Limited Partners from time to time, and (C) in any event,
sufficient to prevent the Partnership from becoming a co-insurer under
any such policies. No deductibles on such policies may exceed $1,000.
The public liability insurance in favor of the Partnership shall be in
an amount not less than $5,000,000. Through the Completion Date, or
such later date as may be required by the Construction Lender, the
General Partners shall also cause the Partnership to obtain and keep
in force a builder's risk policy in favor of the Partnership in an
amount not less than the greater of (i) the full replacement value of
the Apartment Complex (excluding the value of the underlying land, the
site utilities and the foundations) or (ii) such other amount as shall
be required by the Construction Lender. Throughout the term of the
Partnership, the General Partners shall provide copies of all such
policies (or binders) to the Investment Limited Partner promptly after
their receipt thereof.
(d) The obligations of the General Partners hereunder shall be
the joint and several obligations of each General Partner. Except as
otherwise provided in Sections 4.5(b) and 7.1, such obligations shall
survive any Withdrawal of a General Partner from the Partnership.
(e)(1) The General Partners shall establish and maintain
reasonable reserves to provide for working capital needs,
improvements, replacements and any other contingencies of the
Partnership. At a minimum, beginning at the time of Permanent
Mortgage Commencement, the General Partners shall cause the
Partnership to annually deposit $15,000 from its Cash Flow into
replacement reserves; to the extent that Cash Flow (as determined
before deduction of this reserve deposit) for any year shall be
insufficient to make such deposit in full, the General Partners shall
fund such shortfall from their own funds as a Subordinated Loan.
(e)(2) In addition to the requirements of Section 6.5(e)(1), in
order to meet operating expenses of the Partnership which exceed
operating income available for the payment thereof as required by
Section 6.10 herein, the General Partners (or their designee), in
their capacity as the recipient of the Construction and Development
Fee, shall deposit a total of $97,029, $40,000 from the proceeds of
the portion of the Construction and Development Fee which is payable
from the proceeds of the First Installment, $50,000 from the proceeds
of the portion of the Construction and Development Fee which is
payable from the proceeds of the Second Installment and $7,029 from
the proceeds of the Construction and Development Fee which is payable
from the proceeds of the Third Installment into a segregated reserve
account in the names of the General Partner and Boston Capital to
secure the General Partner's obligation to fund operating expenses.
Any funds utilized from such reserve to pay Partnership operating
expenses shall constitute Subordinated Loans. Any funds in excess of
$48,514 remaining in this reserve at the time of achievement of
Breakeven shall be returned to the General Partners. All funds
remaining in the reserve account will be returned to the General
Partners only after Permanent Mortgage Commencement and on the date
upon which the Apartment Complex has achieved twelve months of an
aggregate debt service ratio of 1.15 or better. The twelve months of
1.15 debt service coverage may commence prior to Permanent Mortgage
Commencement, although unused funds may not be released prior to
Permanent Mortgage Commencement. For purposes of calculating the debt
service-coverage ratio, the Permanent Mortgage debt service will be
used and expenses shall include all accrued operating expenses,
reserves required pursuant to Section 6.5(e)(1) herein and a ratable
portion of the amount of these expenses which might reasonably be
expected to be incurred during a full stabilized annual period of
operation.
(f) Each General Partner shall be bound by the Project
Documents, and no additional General Partner shall be admitted if he,
she or it has not first agreed to be bound by this Agreement (and
assume the obligations of a General Partner hereunder) and by the
Project Documents to the same extent and under the same terms as the
other General Partners.
(g) The General Partners shall take all actions necessary to
ensure that the Investment Limited Partners receive the full amount of
the Projected Credit, including, without limitation, the rental of
apartments to appropriate tenants and the filing of annual
certifications as may be required. In this regard, the General
Partners shall, inter alia, cause (i) the Partnership to satisfy all
requirements imposed from time to time under the Code with respect to
rental levels and occupancy by qualified tenants within twelve (12)
months after the date that the Apartment Complex is placed in service
so as to permit the Partnership to be entitled to the Tax Credit
throughout the compliance period specified in the Code, (ii) the
Partnership to comply with all State Tax Credit monitoring procedures,
(iii) all dwelling units in the Apartment Complex to be leased for
periods of not less than six months to persons satisfying the Rent
Restriction Test, (iv) the Partnership to make all appropriate Tax
Credit elections in a timely fashion, and (v) all rental units in the
Apartment Complex to be of equal quality with comparable amenities
available to low-income tenants on a comparable basis without separate
fees.
(h) On or before the Admission Date, the General Partners
shall provide to the Investment Limited Partners either (i) an
appraisal of the Apartment Complex prepared by a competent independent
appraiser or (ii) completed Farmers Home Administration Forms 1924-13
(estimate and certificate of actual
cost) and 1930-7 (statement of budget, income and expense) or HUD
project cost and budget analysis on Form 2264, or any successor
Farmers Home Administration, HUD or Agency form, any comparable form
of a state or other governmental agency, including any applicable Tax
Credit allocation agency, setting forth estimates with respect to
construction and mortgage financing costs and initial rental income
and operating expense figures for the Apartment Complex.
(i) The General Partners shall (i) not store (except in
compliance with all laws, ordinances, and regulations pertaining
thereto) or dispose of any Hazardous Material at the Apartment
Complex, or at or on any other Site or Vessel owned, occupied, or
operated either by any General Partner, any Affiliate of a General
Partner, or any Person for whose conduct any General Partner is or was
responsible; (ii) neither directly nor indirectly transport or arrange
for the transport of any Hazardous Material (except in compliance with
all laws, ordinances, and regulations pertaining thereto);
(iii) provide the Investment Limited Partner with written notice
(x) upon any General Partner's obtaining knowledge of any potential or
known release, or threat of release, of any Hazardous Material at or
from the Apartment Complex or any other Site or Vessel owned,
occupied, or operated by any General Partner, any Affiliate of a
General Partner or any Person for whose conduct any General Partner is
or was responsible or whose liability may result in a lien on the
Apartment Complex; (y) upon any General Partner's receipt of any
notice to such effect from any Federal, state, or other governmental
authority; and (z) upon any General Partner's obtaining knowledge of
any incurrence of any expense or loss by any such governmental
authority in connection with the assessment, containment, or removal
of any Hazardous Material for which expense or loss any General
Partner may be liable or for which expense or loss a lien may be
imposed on the Apartment Complex.
(j) The General Partners shall use their best efforts to cause
each Investment Limited Partner to be named as an "interested party"
in the Permanent Mortgage documents, so that the Permanent Lender will
be required to notify the Investment Limited Partners of any default
or other problem under the Permanent Mortgage.
6.6 Representations and Warranties
The General Partners represent and warrant to the Investment
Limited Partners and the Special Limited Partner as follows:
(1) The Partnership is a duly organized limited
partnership validly existing and in good standing under the laws
of the State and has complied with all filing requirements
necessary to preserve the limited liability of the Investment
Limited Partners. The Partnership is duly qualified as a
foreign limited partnership and is in good standing under the
laws of the State of North Carolina.
(2) No event or proceeding has occurred or is pending or
threatened which would (a) materially adversely affect the
Partnership or its properties, or (b) materially adversely
affect the ability of the General Partners or any of their
Affiliates to perform their respective obligations hereunder or
under any other agreement with respect to the Apartment Complex,
other than legal proceedings which have been bonded against in
such manner as to stay the effect of the proceedings or
otherwise have been adequately provided for. This subparagraph
shall be deemed to include, without limitation, the following:
(x) legal actions or proceedings before any court, commission,
administrative body or other governmental authority having
jurisdiction over the zoning applicable to the Apartment
Complex; (y) labor disputes; and (z) acts of any governmental
authority.
(3) No default (or event which, with the giving of
notice or the passage of time or both, would constitute a
default) has occurred and is continuing under this Agreement or
under any material provision of the Project Documents, and the
same are in full force and effect.
(4) No Partner or Related Person bears the Economic Risk
of Loss with respect to the Permanent Mortgage. No General
Partner has, either on its own behalf or on behalf of the
Partnership, incurred any financial responsibility with respect
to the Partnership prior to the Admission Date, other than as
disclosed in writing to the Investment Limited Partners prior to
the Admission Date.
(5) The Apartment Complex is being or has been completed
in conformity with the Project Documents. There is no violation
by the Partnership or the General Partners of any zoning,
environmental or similar regulation applicable to the Apartment
Complex which could have a material adverse effect thereon, and
the Partnership has complied with all applicable municipal and
other laws, ordinances and regulations relating to such
construction and use of the Apartment Complex. All appropriate
public utilities, including, but not limited to, water,
electricity, gas (if called for in the plans and
specifications), and sanitary and storm sewers, are or will be
available and operating properly for each unit in the Apartment
Complex at the time of the first occupancy of such unit. All
permits necessary to begin construction have been obtained and
all appeal periods have expired.
(6) The Partnership owns good and marketable fee simple
title to the Apartment Complex, subject to no material liens,
charges or encumbrances other than those which (a) are both
permitted by the Project Documents and are noted or excepted in
the Title Policy and (b) do not materially interfere with use of
the Apartment Complex (or any part thereof) for its intended
purpose or have a material adverse effect on the value of the
Apartment Complex.
(7) The execution and delivery of all instruments and
the performance of all acts heretofore or hereafter made or
taken pertaining to the Partnership or the Apartment Complex by
each Affiliate of a General Partner which is a corporation have
been or will be duly authorized by all necessary corporate or
other action, and the consummation of any such transactions with
or on behalf of the Partnership will not constitute a breach or
violation of, or a default under, the charter or by-laws of such
Affiliate or any agreement by which such Affiliate or any of its
properties is bound, nor constitute a violation of any law,
administrative regulation or court decree.
(8) Any General Partner which is a corporation (a
"Corporation") has been duly organized, is validly existing and
in good standing under the laws of its state of incorporation
and has all requisite corporate power to be a General Partner
and to perform its duties and obligations as contemplated by
this Agreement and the Project Documents. Neither the execution
and delivery by any Corporation of this Agreement nor the
performance of any of the actions of any Corporation
contemplated hereby has constituted or will constitute a
violation of (a) the articles of organization or by-laws of such
Corporation, (b) any agreement by which such Corporation is
bound or to which any of its property or assets is subject, or
(c) any law, administrative regulation or court decree.
(9) No Event of Bankruptcy has occurred with respect to
any General Partner.
(10) All accounts of the Partnership required to be
maintained under the terms of any agreement with any Agency or
Lender, including, but not necessarily limited to, any account
for replacement reserves, are currently funded to the levels
required by such Agency or Lender.
(11) If the only General Partner(s) are one or more
corporation(s), then the General Partner(s) have a net worth
which satisfies the 89-12 Requirements.
(12) All payments and expenses required to be made or
incurred in order to complete construction of the Apartment
Complex in conformity with the the Project Documents, to fund
any reserves hereunder or under any other Project Document
required to be funded at or prior to the later of the Admission
Date or Permanent Mortgage Commencement to satisfy all
requirements under the Project Documents and/or which form the
basis for determining the principal sum of the Permanent
Mortgage and to pay the Construction and Development Fee have
been or will be paid or provided for utilizing only (a) the
funds available from the Construction Mortgage, (b) the Capital
Contribution of the Investment Limited Partners, (c) the Capital
Contributions of the General Partners in the amounts set forth
on Schedule A as of the Admission Date, (d) the available net
rental income, if any, earned by the Partnership prior to
Permanent Mortgage Commencement (to the extent that it is
permitted to be used for such purposes by each applicable Agency
and Lender), (e) any insurance proceeds and (f) the funds
furnished by the General Partners pursuant to Sections 6.5(a)
and 6.11(a).
(13) The total amount of Tax Credit which is expected to
be allocated by the Partnership to the Investment Limited
Partners is $125,779 for 1996, $535,008 for 1997 $539,051 per
annum for each of the years 1998 through 2005 (inclusive),
$413,272 for 2006 and $4,403 for 2007.
(14) The Apartment Complex is being developed in a manner
which satisfies and shall continue to satisfy, all restrictions,
including tenant income and rent restrictions, applicable to
projects generating Tax Credits.
(15) No General Partner, Affiliate of a General Partner
or Person for whose conduct any General Partner is or was
responsible has ever: (i) owned, occupied, or operated a Site
or Vessel on which any Hazardous Material was or is stored,
transported, or disposed of, except if such storage,
transportation or disposition was or is at all times in
compliance with all laws, ordinances, and regulations pertaining
thereto; (ii) directly or indirectly transported, or arranged
for transport, of any Hazardous Material (except if such
transport was or is at all times in compliance with all laws,
ordinances and regulations pertaining thereto); (iii) caused or
was legally responsible for any release or threat of release of
any Hazardous Material; (iv) received notification from any
Federal, state or other governmental authority of (x) any
potential, known, or threat of release of any Hazardous Material
from the Apartment Complex or any other Site or Vessel owned,
occupied, or operated either by any General Partner, Affiliate
of a General Partner, or Person for whose conduct any General
Partner is or was responsible or whose liability may result in a
lien on the Apartment Complex; or (y) the incurrence of any
expense or loss by any such governmental authority or by any
other Person in connection with the assessment, containment, or
removal of any release or threat of release of any Hazardous
Material from the Apartment Complex or any such Site or Vessel.
(16) To the best of the General Partners' knowledge, no
Hazardous Material was ever or is now stored on, transported, or
disposed of on the land comprising the Apartment Complex, except
to the extent any such storage, transport or disposition was at
all times in compliance with all laws, ordinances, and
regulations pertaining thereto.
(17) The General Partners have fulfilled and will
continue to fulfill all of their duties and obligations under
Section 6.5.
6.7 Liability on the Permanent Mortgage
Neither any General Partner nor any Related Person shall at any
time bear the Economic Risk of Loss for the payment of any portion of
any Mortgage, and the General Partners shall not permit any other
Partner or any Related Person to bear the Economic Risk of Loss for
the payment of any portion of any Mortgage, except as may be expressly
permitted with respect to the Construction Mortgage pursuant to
Article III.
6.8 Indemnification of the General Partners
(a) No General Partner nor any Affiliate thereof shall have
liability to the Partnership or to any Limited Partner for any loss
suffered by the Partnership which arises out of any action or inaction
of any General Partner or Affiliate thereof if such General Partner or
Affiliate thereof in good faith determined that such course of conduct
was in the best interest of the Partnership and such course of conduct
did not constitute negligence or misconduct of such General Partner or
Affiliate thereof.
(b) A General Partner or any Affiliate thereof may be
indemnified by the Partnership against losses, judgments, liabilities,
expenses and amounts paid in settlement of any claims sustained in
connection with the Partnership, provided that all of the following
conditions are met: (i) such General Partner has determined, in good
faith, that the course of conduct which caused the loss, judgment,
liability, expense or amount paid in settlement was in the best
interests of the Partnership; and (ii) such loss, judgment, liability,
expense or amount paid in settlement was not the result of negligence
or misconduct on the part of such General Partner or Affiliate
thereof; and (iii) such indemnification or agreement to hold harmless
is recoverable only out of the assets of the Partnership, and not from
the Limited Partners.
(c) Notwithstanding the above, no General Partner or any
Affiliate thereof performing services for the Partnership or any
broker-dealer shall be indemnified for any losses, liabilities or
expenses arising from or out of an alleged violation of Federal or
state securities laws unless (i) there has been a successful
adjudication on the merits of each count involving securities laws
violations as to the particular indemnitee and, the court approves the
indemnification of such litigation costs, (ii) such claims have been
dismissed with prejudice on the merits by a court of competent
jurisdiction as to the particular indemnitee and, the court approves
the indemnification of such litigation costs or (iii) a court of
competent jurisdiction approves a settlement of the claims against a
particular indemnitee and the court finds that indemnification of the
settlement and related costs should be made. In any claim for
indemnification for Federal or state securities law violations, the
party seeking indemnification shall, prior to seeking court approval
for such indemnification, place before the court the positions of the
Securities and Exchange Commission, the Massachusetts Securities
Division, the Tennessee Securities Division, and any other applicable
state securities administrator with respect to the issue of
indemnification for securities law violations.
(d) The Partnership shall not incur the cost of the portion of
any insurance, other than public liability insurance, which insures
any party against any liability as to which such party is herein
prohibited from being indemnified.
(e) The Partnership may indemnify Affiliates of a General
Partner under this Section 6.8 only if the loss involves activity in
which such Affiliates acted in the capacity of a General Partner.
(f) For purposes of this Section 6.8 only, the term
"Affiliate" shall mean any Person performing services on behalf of the
Partnership who (i) directly or indirectly controls, is controlled by
or is under common control with a General Partner; (ii) owns or
controls 10% or more of the outstanding voting securities of a General
Partner; (iii) is an officer, director, partner or trustee of a
General Partner; or (iv) if a General Partner is an officer, director,
partner or trustee, is any company for which the General Partner acts
in any such capacity.
6.9 Indemnification of the Partnership and the Limited
Partners
(a) The General Partners will indemnify and hold the
Partnership and the Limited Partners harmless from and against any and
all losses, damages and liabilities which the Partnership or any
Limited Partner may incur by reason of the (a) past, present or future
actions or omissions of the General Partners or any of their
Affiliates, or (b) any liabilities to which either the Partnership or
the Apartment Complex is subject; provided, however, that the
foregoing indemnification shall not apply to (i) any Mortgage or
(ii) necessary contractual obligations incurred pursuant to Agency or
Lender requirements in connection with the operation of the Apartment
Complex in the ordinary course of business.
(b) Notwithstanding the foregoing, no General Partner shall be
liable to a Limited Partner or the Partnership for any act or omission
for which the Partnership is required to indemnify such General
Partner under Section 6.8.
(c) The General Partners shall indemnify, defend, and hold the
Limited Partners harmless from and against any claim brought or
threatened against the Limited Partners or loss (as well as from any
and all attorneys' fees and expenses incurred in connection with any
such claim or loss) on account of the presence of any Hazardous
Material at the Apartment Complex. Any claim or loss described in the
immediately preceding sentence may be defended, compromised, settled,
or pursued by the Limited Partners with counsel of the Limited
Partners' selection, but at the expense of General Partners.
Notwithstanding anything else set forth herein, this indemnification
shall survive the withdrawal of any General Partner and/or the
termination of this Agreement.
6.10 Operating Deficits
Subject to the prior written consent of each Lender (if such
consent shall be required under applicable Lender regulations), the
General Partners shall be obligated for a 120 month period beginning
on Permanent Mortgage Commencement to promptly advance funds to meet
operating expenses (including, without limitation, at least $5,000 per
annum of the Asset Management Fee) and debt service of the Partnership
which exceed operating income available for the payment thereof;
provided, however, that in no event shall the General Partners be
required to advance funds in excess of $600,000, which $600,000
includes the $97,029 reserve required by Section 6.5(e)(2) herein.
In the event that the General Partners shall fail to make any
such advance as aforesaid, (a) the Partnership shall utilize amounts
(the "Applied Amounts") otherwise payable to the General Partners or
Affiliates thereof under Section 6.12 and/or Article X to meet the
obligations of the General Partners pursuant to this Section 6.10,
(including, without limitation, payment of at least $10,000 per annum
of the Asset Management Fee) and debt service, with such utilization
of Applied Amounts constituting payment and satisfaction of the
corresponding amounts payable to the General Partners or Affiliates
thereof under Section 6.12 and/or Article X, with the proceeds thereof
being applied to such obligations, and with the obligation of the
Partnership to make such payments to the General Partners or the
Affiliates thereof pursuant to Section 6.12 and/or Article X, and
(b) the Special Limited Partner, in its sole discretion, may cause
itself or its designee to be admitted as an additional General Partner
without any further action by any other Partner. Upon any such
admission of an additional General Partner, each pre-existing General
Partner shall be deemed to have assigned proportionally to the
additional General Partner, automatically and without further action,
such portion of its General Partner interest so that the additional
General Partner shall receive not less than a one per cent (1%)
interest in the profits, losses, tax credits, Cash Flow and Capital
Transaction distributions of the Partnership in consideration of $100
and any other consideration which may be agreed upon. The pre-
existing General Partners shall retain the remaining portion of the
General Partners Economic Interest. An additional General Partner so
admitted shall automatically become the Managing General Partner and
be irrevocably delegated all of the power and authority of all of the
General Partners pursuant to Section 6.13. Any such additional
General Partner shall have the right to withdraw as a General Partner
at any time, leaving the pre-existing General Partners once again as
the only General Partners, the provisions of Article VII
notwithstanding. Each Partner hereby grants to the Special Limited
Partner a special power of attorney, irrevocable to the extent
permitted by law and coupled with an interest, to amend the
Certificate and this Agreement and to do anything else which, in the
view of the Special Limited Partner, may be necessary or appropriate
to accomplish the purposes of this Section 6.2(b) or to enable any
additional General Partner admitted pursuant to this Section 6.2(b) to
manage the business of the Partnership. The admission of the Special
Limited Partner or its designee as an additional General Partner shall
not relieve any other General Partner of any of its economic
obligations hereunder, and each other General Partner shall fully
indemnify and hold harmless the additional General Partner from and
against any and all losses, judgments, liabilities, expenses and
amounts paid in settlement of any claims sustained in connection with
its capacity as a General Partner, which claims result from the
actions or omissions of the General Partners prior to the admission of
the additional General Partner.
For the purpose of this Section 6.10, all expenses shall be paid
on a sixty (60) day current basis. Moreover, the General Partners may
in their sole discretion at any time advance funds to the Partnership
to pay operating expenses of the Partnership in order to facilitate
the Partnership's compliance with the Rent Restriction Test. All
advances pursuant to this Section 6.10 (including any Applied Fees)
shall be Subordinated Loans repayable without interest in accordance
with the provisions of Article X. The form and provisions of all
Subordinated Loans shall conform to applicable rules and regulations.
6.11 Obligation to Complete the Construction of the Apartment
Complex
(a) The General Partners shall complete the construction of
the Apartment Complex substantially in accordance with the plans and
specifications approved by each Agency and Lender whose approval is
required and all requirements necessary to obtain the required
certificates of occupancy for dwelling units, or cause the same to be
completed, in a good and workmanlike manner, free and clear of all
mechanics', materialmen's or similar liens, and shall equip the
Apartment Complex or cause the same to be equipped with all necessary
and appropriate fixtures, equipment and articles of personal property,
including refrigerators and ranges, and shall cause all necessary
certificates of occupancy for all apartment units in the Apartment
Complex to be obtained, all in accordance with the Project Documents.
If the proceeds of the Permanent Mortgage, the net rental income, if
any, of the Apartment Complex generated prior to Permanent Mortgage
Commencement and which is permitted by each applicable Agency and
Lender to be utilized for any of the purposes hereinafter set forth,
the Capital Contributions of the Investment Limited Partners, the
Capital Contributions of the General Partners in the amounts set forth
on Schedule A as of the Admission Date, and any insurance proceeds
arising out of casualties prior to Permanent Mortgage Commencement as
available from time to time are insufficient to (i) acquire and
complete the construction of the Apartment Complex and satisfy all
other obligations all as provided in the first sentence of this
Section 6.11(a), (ii) pay the Construction and Development Fee,
(iii) arrive at Permanent Mortgage Commencement in conformity with the
Project Documents, (iv) discharge all Partnership liabilities and
obligations arising out of any casualty giving rise to any such
insurance proceeds, and (v) provide for all other payments and
expenses required to be made or incurred through the later of
Permanent Mortgage Commencement or the Admission Date, including the
funding of any reserves required hereunder or under any other Project
Document, the General Partners shall make an additional Capital
Contribution in the amount of such deficiencies which shall be repaid
as provided in Section 10.2 herein. In the event that the General
Partners shall fail to fund any such deficiency as required by this
Section 6.11(a), an amount not in excess of the next installment of
the Construction and Development Fee due to the General Partners or
any of their Affiliates under Section 6.12 or any other provision
hereof shall be applied by the Partnership to meet such obligation of
the General Partners. Any such application of funds as described in
the immediately preceding sentence shall constitute a payment of the
amount of the Fee or such other item which such funds had been
earmarked to pay, and the obligation of the General Partners to
advance such amount under this Section 6.11(a) shall be satisfied to
the extent of such application.
(b) The completion of the Apartment Complex shall be secured
by a completion bond in an amount at least equal to the full amount of
the construction contract for the Apartment Complex or by other
security satisfactory to the Investment Limited Partner, which other
security may include, but shall not be limited to, the following:
(i) a written guaranty of completion by a Person,
supported by financial statements demonstrating sufficient
net worth or adequately collateralized by other real or
personal properties or other Persons' guarantees; and/or
(ii) a retention of a reasonable portion of the
Capital Contribution of the Investment Limited Partner
and/or fees to the General Partners as a potential offset in
the event the General Partners do not perform in accordance
with this Agreement.
By execution of this Agreement, each Limited Partner represents
that it is satisfied by the completion guaranty set forth in this
Agreement.
6.12 Certain Payments to the General Partners and Others
(a) The Partnership shall pay to Boston Capital or an Affiliate
thereof a fee (the "Asset Management Fee") commencing in 1997 for its
services in connection with the Partnership's accounting matters
relating to the Investment Limited Partner and assisting with the
preparation of tax returns and the reports required by Section 12.7 in
the annual amount of the lesser of (i) $10,000 or (ii) one-half of one
per cent (0.5%) of the Aggregate Cost of the Apartment Complex. The
Asset Management Fee shall be payable from Cash Flow in the manner and
priority set forth in Section 10.2(a); provided, however, that if in
any fiscal year commencing with 1997, Cash Flow is insufficient to pay
the full amount of the Asset Management Fee, the unpaid portion
thereof shall accrue and be payable on a cumulative basis in the first
year in which there is sufficient Cash Flow or from the proceeds of a
Capital Transaction as provided in Article X.
(b) In consideration of their consultation, advice and other
services in connection with the construction and development of the
Apartment Complex, the Partnership shall pay to the General Partners a
construction and development fee in the amount of $521,603 (the
"Construction and Development Fee") pursuant to the terms of a
Development Agreement dated November 1, 1995, as such Development
Agreement may be modified or amended. To the extent that any of the
Development Fee cannot be paid from the total development proceeds
available (the "Deferred Development Fee") then any remainder up to
$2,292 shall be paid from Cash Flow of the Partnership. If any
portion of the Deferred Development Fee remains unpaid at the end of
the Credit Period, the General Partners shall make a Capital
Contribution to the Partnership in order to discharge this obligation.
(c) The Partnership shall pay to the General Partners a non-
cumulative fee (the "Annual Partnership Management Fee") commencing in
1997 for their services in connection with the administration of the
day to day business of
the Partnership in an annual amount equal to the lesser of (i) $10,000
per annum or (ii) the excess of (A) one-half of one per cent (0.5%) of
the Aggregate Cost of the Apartment Complex over (B) the amount of the
Asset Management Fee attributable to such year. The Annual
Partnership Management Fee for each fiscal year of the Partnership
shall be payable from Cash Flow in the manner and priority set forth
in Section 10.2(a) to the extent Cash Flow is available therefor for
such year.
(d) The Partnership shall pay to the General Partners or their
Affiliate a one-time fee for their services in obtaining one
refinancing of the Permanent Mortgage in an amount equal to 2% of the
gross proceeds of the refinancing (the "Refinancing Fee"). The
Refinancing Fee shall be paid as provided in Section 10.2(b) herein.
6.13 Delegation of General Partner Authority
If there shall be more than one General Partner serving hereunder,
each General Partner may from time to time, by an instrument in
writing, delegate all or any of his powers or duties hereunder to
another General Partner or General Partners.
Every contract, deed, mortgage, lease and other instrument
executed by any General Partner shall be conclusive evidence in favor
of every Person relying thereon or claiming thereunder that at the
time of the delivery thereof (a) the Partnership was in existence,
(b) this Agreement had not been amended in any manner so as to
restrict the delegation of authority among General Partners (except as
shown in certificates or other instruments duly filed in the Filing
Office) and (c) the execution and delivery of such instrument was duly
authorized by the General Partners. Any Person may always rely on a
certificate addressed to him and signed by any General Partner
hereunder:
(1) As to who are the General Partners or Limited
Partners hereunder;
(2) As to the existence or nonexistence of any fact
which constitutes a condition precedent to acts by the General
Partners or in any other manner germane to the affairs of the
Partnership;
(3) As to who is authorized to execute and deliver any
instrument or document of the Partnership;
(4) As to the authenticity of any copy of this Agreement
and amendments thereto; or
(5) As to any act or failure to act by the Partnership
or as to any other matter whatsoever involving the Partnership
or any Partner.
ARTICLE VII
Withdrawal of a General Partner; New General Partners
7.1 Withdrawal
(a) No General Partner shall Withdraw from the Partnership
(other than by reason of death or adjudication of incompetence or
insanity) or sell, assign or encumber its Interest without the Consent
of the Investment Limited Partners and all the other General Partners,
except that if the Special Limited Partner or a designee thereof
becomes a General Partner pursuant to Section 4.5(b), Section 5.2(e),
Section 6.2(b) or Section 6.10, it shall not require the consent of
any other General Partner to transfer all or any portion of its
interest as a General Partner, other than as may be required under the
Uniform Act. In the event of any Withdrawal by a General Partner in
violation of this Section 7.1, such General Partner, in addition to
being subject to any and all other legal remedies which may be pursued
by the Partners, shall forfeit to the remaining General Partners or,
if there are none, to the Special Limited Partner or its designee,
such General Partner's Interest and all unpaid fees from the
Partnership and shall remain liable for all his obligations under this
Agreement. In addition, upon such Withdrawal and transfer, the
Special Limited Partner or its designee shall automatically become a
General Partner without further action by the Withdrawing General
Partner or any other Partner, and each Partner hereby consents to such
transfer and to the admission of the Special Limited Partner or its
designee as a General Partner in such a situation. Such transfer
shall occur automatically upon such Withdrawal without further action
by such Withdrawing General Partner.
(b) If at any time the only General Partners of the
Partnership shall be one or more corporations (or partnerships with
corporations as sole general partners), they shall be obligated to
have a net worth which satisfies the 89-12 Requirements. If the
General Partners shall at any time fail to meet the requirements of
this Section 7.1(b) and no additional General Partner has been
admitted to the Partnership pursuant to Section 7.5, then the General
Partners shall be deemed to have withdrawn from the Partnership in
violation of the provisions of this Section 7.1 and shall be subject
to the provisions of Section 7.1(a).
7.2 Obligation to Continue
Upon the Withdrawal of a General Partner, the remaining General
Partners shall have the right and obligation to continue the business
of the Partnership employing its assets and name, all as contemplated
by the Uniform Act. Within 30 days after they obtain knowledge of the
Withdrawal of a General Partner, the remaining General Partners shall
notify the Investment Limited Partners of such Withdrawal.
7.3 Withdrawal of All General Partners
If, following the Withdrawal of a General Partner, there is no
remaining General Partner, the Investment Limited Partners may elect
to reconstitute the Partnership and continue the business of the
Partnership for the balance of the term specified in Section 2.4 by
selecting a successor General Partner. If the Investment Limited
Partners elect to reconstitute the Partnership pursuant to this
Section 7.3 and admit the designated successor General Partner, the
relationship among the then Partners shall be governed by this
Agreement.
7.4 Interest of General Partner After Permitted Withdrawal
In the event of the Withdrawal of a General Partner not in
violation of Section 7.1 and except as otherwise provided in
Section 4.5(b), the Withdrawing General Partner hereby covenants and
agrees to transfer to the remaining General Partners or to a successor
General Partner selected in accordance with Section 7.3, as the case
may be, such portion of the Withdrawing General Partner's Interest as
such remaining or successor General Partners may designate, such
transfer to be made in consideration of the payment by the transferee
of either the agreed value of such Interest or, if such value is not
agreed to, the fair market value of such Interest as determined by a
committee of three qualified real estate appraisers, one selected by
the Withdrawing General Partner, one selected by the transferee and a
third selected by the other two. The portion of the Withdrawing
General Partner's Interest designated to be transferred in accordance
with the provisions of this Section 7.4 shall be sufficient to ensure
the continued treatment of the Partnership as a partnership under the
Code and as a limited partnership under the Uniform Act, and, for the
purposes of Article X, shall be deemed to be effective as of the date
of Withdrawal, but the Partnership shall not make any distributions to
the designated transferee until the transfer has been made. Any
holder of any portion of the Interest of a Withdrawing General Partner
which is not designated to be transferred to the remaining or
successor General Partners pursuant to the provisions of this
Section 7.4 shall become an Additional Limited Partner but (i) with
the same share of the profits, losses, tax credits, Cash Flow and
other distributions to which the holder of such Interest was entitled
when held as a General Partner Interest, and (ii) shall not
participate in the votes or Consents of the Investment Limited Partner
hereunder. The admission of any successor or additional General
Partner shall be subject to the consent of each Agency and Lender (if
required) and the Consent of the Investment Limited Partners.
7.5 Admission of Individual General Partners under Certain
Circumstances
In the event The Norsouth Corporation at any time, or from time
to time, fails to have a net worth which satisfies the 89-12
Requirements, William E. Johnston shall be admitted (and hereby agrees
to be admitted), automatically and without further action by him or
any Partner, as additional General Partners, notwithstanding any other
provision of this Agreement. The General Partners hereby agree to
take all action necessary to implement this Section 7.5. Further, the
General Partners agree in such event to give prompt written notice
thereof to each Lender and Agency. If any Lender or Agency rejects
the admission of William E. Johnston as General Partner, then he shall
withdraw as General Partner promptly after an additional General
Partner acceptable to each Lender and Agency is admitted to the
Partnership; William E. Johnston hereby agrees to use his best efforts
to obtain such a General Partner acceptable to each Lender and Agency.
Simultaneously with such admission, The Norsouth Corporation shall be
deemed to have assigned to William E. Johnston, automatically and
without further action, a not less than one per cent (1%) interest (or
such greater percentage as may be required, in the opinion of the
Auditors, to assure the partnership status of the Partnership for
Federal income tax purposes) in profits, losses, tax credits and
distribution of the Partnership in consideration of $1.00 and any
other consideration which may be agreed upon. Each such additional
General Partner shall remain a General Partner until a Lender or
Agency shall object thereto in writing or until such time as, in the
opinion of the Auditors, the Partnership would continue to be treated
as a partnership for Federal income tax purposes notwithstanding their
Withdrawal. At such time, they may then Withdraw without the approval
of the Limited Partners upon reassignment of their entire Interest to
the remaining General Partners.
ARTICLE VIII
Transferability of Limited Partner Interests
8.1 Assignments
(a) Except by operation of law (including the laws of descent
and distribution) or Section 8.1(b), no Limited Partner may assign all
or any part of its Interest without the written consent of the General
Partners, the giving or withholding of which is exclusively within
their discretion.
(b) A Limited Partner, without the consent of the General
Partners, may assign to any Person all or any portion of the economic
benefits of the ownership of its Interest; provided, however, that
such assignment shall not be binding on the Partnership until there
shall have been filed with the Partnership by registered mail
certified copies of an executed and acknowledged assignment and the
written acceptance by the assignee of all the terms and provisions of
this Agreement; if such assignment and acceptance are not so filed,
the Partnership need not recognize such assignment for any purpose.
An assignee of a Limited Partner who does not become a Substituted
Limited Partner shall have, and shall only have, the right to receive
the share of allocations and distributions of the Partnership to which
the assigning Limited Partner would have been entitled with respect to
the Interest (or portion thereof) so assigned if no such assignment
had been made by such Limited Partner. Any assigning Limited Partner
whose permitted assignee becomes a Substituted Limited Partner shall
thereupon cease to be a Limited Partner and shall no longer have any
of the rights or privileges of a Limited Partner. Where the assignee
does not become a Substituted Limited Partner, the Partnership shall
recognize such assignment not later than the last day of the calendar
month following receipt of notice of assignment and all documentation
required in connection therewith.
(c) Every assignee of a Limited Partner Interest (or any
portion thereof) who desires to make a further assignment of its
Interest shall be subject to all the provisions of this Article VIII.
8.2 Substituted Limited Partner
No Limited Partner shall have the right to substitute an
assignee as Limited Partner in its place. Subject to Section 8.3, the
General Partners may, however, in their sole discretion, permit an
assignee to become a Substituted Limited Partner. The consent of the
General Partners to an assignment of a Limited Partner Interest under
Section 8.1 shall not, in and of itself, constitute permission under
this Section 8.2.
Any Substituted Limited Partner shall execute such instrument or
instruments as shall be required by the General Partners to signify
the agreement of such Substituted Limited Partner to be bound by all
the provisions of this Agreement and shall pay the Partnership's
reasonable legal fees and filing costs in connection with its
substitution as a Limited Partner.
8.3 Restrictions
(a) No Disposition may be made if such Disposition would
violate Section 13.1.
(b) In no event shall all or any part of a Limited Partner
Interest be Disposed of to a minor (other than to a descendant by
reason of death) or to an incompetent.
(c) The General Partners may, in addition to any other
requirement they may impose, require as a condition of any Disposition
that the transferor (i) assume all costs incurred by the Partnership
in connection therewith and (ii) furnish the Partnership and the other
Partners with an opinion of counsel satisfactory to counsel to the
Partnership that such Disposition complies with applicable Federal and
state securities laws.
(d) Any sale, exchange, transfer or other Disposition in
contravention of any of the provisions of this Section 8.3 shall be
void and ineffectual and shall not bind or be recognized by the
Partnership.
ARTICLE IX
Bridge Loan; Borrowings
9.1 Bridge Loan
The Investment Limited Partners made a Bridge Loan to the
Partnership pending the Admission Date in the aggregate amount of
$1,927,107. The Bridge Loan bears interest and is repayable in
accordance with the terms of the Bridge Note.
The proceeds of the First Installment of the Capital
Contributions of the Investment Limited Partners shall be applied to
repay all amounts due under the Bridge Loan, including all accrued
interest.
The proceeds of the Bridge Loan were deposited by the
Partnership into a special escrow account to be disbursed by the
Construction Lender pursuant to the terms of the Memorandum of
Understanding dated as of September 11, 1995 between the Partnership,
the Construction Lender and the Investment Limited Partners.
9.2 Borrowings
All Partnership borrowings shall be subject to the terms of this
Agreement, including, but not limited to, the restrictions of
Section 6.2, and may be made from any source, including Partners and
their Affiliates. Any Partnership borrowings from any Partner shall
be subject to the prior written consent of each Agency and Lender (if
required under applicable Agency and/or Lender regulations or
requirements). If any Partner shall lend any monies to the
Partnership, the amount of any such loan shall not be an increase of
such Partner's Capital Contribution. If any Partner shall so lend
monies, such loans shall be an obligation of the Partnership and
(except for advances required by Section 6.11(a) and Subordinated
Loans) shall be repayable to such Partner on the same basis and with
the same rate of interest as would be applicable to a comparable loan
to the Partnership from a third party.
ARTICLE X
Profits, Losses, Tax Credits, Distributions and Capital Accounts
10.1 Profits, Losses and Tax Credits
(a) Subject to Section 10.4 hereof, for each Partnership
fiscal year or portion thereof, all profits, tax-exempt income,
losses, non-deductible noncapitalizable expenditures, and tax credits
incurred or accrued on or after the Commencement Date, other than
those arising from a Capital Transaction, shall be allocated 99% to
the Investment Limited Partners and 1% to the General Partners.
(b) Except as otherwise specifically provided in this Article,
all profits and losses arising from a Capital Transaction shall be
allocated to the Partners as follows:
As to profits:
First, that portion of profits (including any
profits treated as ordinary income for Federal income tax
purposes) shall be allocated to the Partners who have
negative Capital Account balances in proportion to the
amounts of such balances, provided that no profits shall
be allocated to a Partner under this Clause First to
increase any such Partner's Capital Account above zero;
Second, profits in excess of the amounts allocated
under Clause First above shall be allocated to the
Investment Limited Partners in an amount equal to the
amount of cash required to pay to the Investment Limited
Partners the full amount (including interest) of the
Credit Recovery Loans;
Third, profits in excess of the amounts allocated
under Clauses First and Second above shall be allocated
(i) to each Investment Limited Partner in an amount equal
to the sum of (a) its Invested Amount plus (b) the full
amount (including interest) of any Credit Recovery Loans
and (ii) to each other Limited Partner in an amount equal
to the amount of its respective Invested Amount, reduced
(but not below zero) in the case of each Limited Partner
(whether under clause (i) or clause (ii)) by the sum of
(A) the total amount of all prior cash distributions made
to such Limited Partner pursuant to Section 10.2(b),
Clause Seventh plus (B) the positive balance in the
Capital Account of such Limited Partner prior to the
allocation made pursuant to this Clause Third;
Fourth, profits in excess of the amounts allocated
under Clauses First, Second and Third above shall be
allocated to the General Partners in the amount of their
Capital Contributions reduced (but not below zero) by the
sum of (i) the total amount of distributions previously
made to them pursuant to Section 10.2(a), Clause Second
and Section 10.2(b), Clause Eighth plus (ii) the positive
balance in the General Partners' respective Capital
Accounts prior to the allocations made pursuant to this
Clause Fourth; and
Fifth, profits in excess of the amounts allocated
under Clauses First, Second, Third and Fourth above shall
be allocated to each class of Partners with the percentage
shares set forth in Section 10.2(b) Tenth.
As to losses:
First, an amount of losses shall be allocated to the
Partners to the extent and in such proportions as shall be
necessary such that, after giving effect thereto, the
respective balances in all Partners' Capital Accounts
shall be in the ratio of 99% for the Investment Limited
Partners and 1% for the General Partners;
Second, an amount of losses shall be allocated to
the Partners until the balance in each Partner's Capital
Account equals the amount of such Partner's Capital
Contribution (after the allocation under Clause First
above);
Third, an amount of losses shall be allocated to the
Partners to the extent of and in proportion to such
Partners' Capital Account balances (after the allocations
under Clauses First and Second above); and
Fourth, any remaining amount of losses after the
allocations under Clauses First, Second and Third above
shall be allocated to the Partners in accordance with the
manner in which they bear the economic risk of loss
associated with such loss; provided, however, that in the
event that no Partner bears an economic risk of loss, then
any remaining losses shall be allocated 99% to the
Investment Limited Partners and 1% to the General
Partners.
(c) Notwithstanding the foregoing provisions of
Sections 10.1(a) and 10.1(b), in no event shall any losses be
allocated to the Investment Limited Partners if and to the extent that
such allocation would cause, as of the end of the Partnership taxable
year, the negative balance in each Investment Limited Partner's
Capital Account to exceed the Investment Limited Partner's share of
Partnership Minimum Gain plus the Investment Limited Partner's share,
if any, of Partner Non-Recourse Debt Minimum Gain. Any losses which
are not allocated to the Investment Limited Partners by virtue of the
application of this Section 10.1(c) shall be allocated to the General
Partners. For purposes of this Section 10.1(c), a Partner's Capital
Account shall be treated as reduced by Qualified Income Offset Items.
10.2 Cash Distributions Prior to Dissolution
(a) Cash Flow
Subject to Agency and Lender approval (if required), Cash Flow
for each fiscal year or portion thereof of the Partnership shall be
applied as follows:
First, to the payment of the Asset Management Fee for such year
and for any previous year(s) as to which the Asset Management Fee
shall not yet have been paid in full;
Second, to the repayment of any Deferred Development Fee and
after it is repaid then to the repayment of any Subordinated Loans;
Third, to the payment of the Annual Partnership Management Fee;
and
Fourth, the balance thereof, if any, shall be distributed
annually, within 75 days after the end of the fiscal year, 50% to the
Investment Limited Partners and 50% to the General Partners; provided,
however, that during such time as Agency regulations are applicable to
the Apartment Complex, the total amount of Cash Flow which may be so
distributed to the Partners in respect to any fiscal year shall not
exceed such amounts as Agency regulations permit to be distributed.
(b) Distributions of other than Cash Flow
Prior to dissolution, if the General Partners shall determine
from time to time that cash is available for distribution from a
Capital Transaction, such cash shall be applied or distributed as
follows:
First, to the payment of all matured debts and liabilities of
the Partnership (including, but not limited to, all expenses of the
Partnership incident to the Capital Transaction), excluding (i) debts
and liabilities of the Partnership to Partners or their Affiliates and
(ii) all unpaid fees owing to the General Partners or their
Affiliates; and to the establishment of any reserves which the General
Partners and the Auditors shall deem reasonably necessary for
contingent, unmatured or unforeseen liabilities or obligations of the
Partnership;
Second, to the payment of the Asset Management Fee for such year
and for any previous year as to which the Asset Management Fee has not
been paid in full;
Third, in the event of a refinancing of the Permanent Mortgage,
to the payment of the Refinancing Fee;
Fourth, to the payment to the Investment Limited Partners of the
full amount (including interest) of any Credit Recovery Loans;
Fifth, to the repayment of any Subordinated Loans;
Sixth, to the repayment of any then-unpaid debts and liabilities
owed to Partners or Affiliates thereof by the Partnership for
Partnership obligations (exclusive of Credit Recovery Loans and
Subordinated Loans) to any of them, including, but not limited to, the
Annual Partnership Management Fee for the year of the Capital
Transaction; provided, however, that any debts or obligations to be
repaid to any Limited Partner or Affiliate thereof pursuant to this
Clause Sixth shall be repaid prior to the repayment of any such debts
or obligations to any General Partner or Affiliate thereof;
Seventh, to the payment to each Limited Partner of an amount
equal to the Invested Amount of such Limited Partner, minus the amount
of any prior distributions made to such Limited Partner under this
Clause Seventh, but never an amount less than zero;
Eighth, to the payment to the General Partners of an amount
equal to their paid-in Capital Contributions minus the amount of any
prior distributions made to them under this Clause Eighth and under
Section 10.2(a) Second, but never an amount less than zero;
Ninth, except in the case of a refinancing of the Permanent
Mortgage, to each Partner in an amount equal to the positive balance,
if any, in such Partner's Capital Account as of the date of the
Capital Transaction which shall have given rise to the distribution,
adjusted for operations and distributions to that date, after the
allocation of any profits realized from the Capital Transaction which
shall have given rise to the distribution; and
Tenth, any balance thereof shall be distributed 49.999% to the
Investment Limited Partners .001% to the Special Limited Partner and
50% to the General Partners; provided, however, that in the event that
a Refinancing Fee is paid pursuant to a refinancing, then any balance
shall be distributed 59.999% to the Investment Limited Partners, .001%
to the Special Limited Partner and 40% to the General Partners.
10.3 Distributions Upon Dissolution
(a) Upon dissolution and termination, after payment of, or
adequate provision for, the debts and obligations of the Partnership,
the remaining assets of the Partnership shall be distributed to the
Partners in accordance with the positive balances in their Capital
Accounts after taking into account all Capital Account adjustments for
the Partnership taxable year, including adjustments to Capital
Accounts pursuant to Sections 10.1(b) and 10.3(b). In the event that
a General Partner or an Additional Limited Partner has a negative
balance in its Capital Account following the liquidation of the
Partnership or such Partner's Interest, after taking into account all
Capital Account adjustments for the Partnership taxable year in which
such liquidation occurs, such Partner shall pay to the Partnership in
cash an amount equal to the negative balance in such Partner's Capital
Account. Such payment shall be made by the end of such taxable year
(or, if later, within 90 days after the date of such liquidation) and
shall, upon liquidation of the Partnership, be paid to recourse
creditors of the Partnership or distributed to other Partners in
accordance with the positive balances in their Capital Accounts.
(b) With respect to assets distributed in kind to the Partners
in liquidation or otherwise, (i) any unrealized appreciation or
unrealized depreciation in the values of such assets shall be deemed
to be profits and losses realized by the Partnership immediately prior
to the liquidation or other distribution event; and (ii) such profits
and losses shall be allocated to the Partners in accordance with
Section 10.1(b), and any property so distributed shall be treated as a
distribution of an amount in cash equal to the excess of such fair
market value over the outstanding principal balance of and accrued
interest on any debt by which the property is encumbered. For the
purposes of this Section 10.3(b), "unrealized appreciation" or
"unrealized depreciation" shall mean the difference between the fair
market value of such assets, taking into account the fair market value
of the associated financing (but subject to Section 7701(g) of the
Code), and the Partnership's adjusted basis for such assets as
determined under Regulation Section 1.704-1(b). This Section 10.3(b)
is merely intended to provide a rule for allocating unrealized gains
and losses upon liquidation or other distribution event, and nothing
contained in this Section 10.3(b) or elsewhere herein is intended to
treat or cause such distributions to be treated as sales for value.
The fair market value of such assets shall be determined by an
appraiser to be selected by the General Partners with the Consent of
the Investment Limited Partner.
10.4 Special Provisions
(a) Except as otherwise provided in this Agreement, all
profits, tax-exempt income, losses, non-deductible non-capitalizable
expenditures, tax credits and cash distributions shared by a class of
Partners shall be shared by each Partner in such class in the ratio of
such Partner's paid-in Capital Contribution to the paid-in Class
Contribution of the class of Partners of which such Partner is a
member.
(b) Notwithstanding the foregoing provisions of this
Article X:
(i) If (a) the Partnership incurs recourse obligations
or Partner Non-Recourse Debt (including, without limitation,
Subordinated Loans) or (b) the Partnership incurs losses from
extraordinary events which are not recovered from insurance or
otherwise (collectively "Recourse Obligations") in respect of
any Partnership taxable year, then the calculation and
allocation of profits and losses shall be adjusted as follows:
first, an amount of deductions attributable to the Recourse
Obligations shall be allocated to the General Partners; and
second, the balance of such deductions shall be allocated as
provided in Section 10.1(a).
(ii) If any profit arises from the sale or other
disposition of any Partnership asset which shall be treated as
ordinary income under the depreciation recapture provisions of
the Code, then the full amount of such ordinary income shall be
allocated among the Partners in the proportions that the
Partnership deductions from the depreciation giving rise to such
recapture were actually allocated. In the event that
subsequently-enacted provisions of the Code result in other
recapture income, no allocation of such recapture income shall
be made to any Partner who has not received the benefit of those
items giving rise to such other recapture income.
(iii) If the Partnership shall receive any purchase money
indebtedness in partial payment of the purchase price of the
Apartment Complex and such indebtedness is distributed to the
Partners pursuant to the provisions of Section 10.2(b) or
Section 10.3, the distributions of the cash portion of such
purchase price and the principal amount of such purchase money
indebtedness hereunder shall be allocated among the Partners in
the following manner. On the basis of the sum of the principal
amount of the purchase money indebtedness and cash payments
received on the sale (net of amounts required to pay Partnership
obligations and fund reasonable reserves), there shall be
calculated the percentage of the total net proceeds
distributable to each class of Partners based on Section 10.2(b)
or Section 10.3, as applicable, treating cash payments and
purchase money indebtedness principal interchangeably for this
purpose, and the respective classes shall receive such
respective percentages of the net cash purchase price and
purchase money principal. Payments on such purchase money
indebtedness retained by the Partnership shall be distributed in
accordance with the respective portions of principal allocated
to the respective classes of Partners in accordance with the
preceding sentence, and if any such purchase money indebtedness
shall be sold, the sale proceeds shall be allocated in the same
proportion.
(iv) Income, gain, loss and deduction with respect to any
asset which has a variation between its basis computed in
accordance with Treasury Regulation Section 1.704-1(b) and its
basis computed for Federal income tax purposes shall be shared
among the Partners so as to take account of such variation in a
manner consistent with the principles of Section 704(c) of the
Code and Treasury Regulation Section 1.704-1(b)(2)(iv)(g).
(v) The terms "profits" and "losses" used in this
Agreement shall mean income and losses, and each item of income,
gain, loss, deduction or credit entering into the computation
thereof, as determined in accordance with the accounting methods
followed by the Partnership and computed in accordance with
Treasury Regulation Section 1.704-1(b)(2)(iv). Profits and
losses for tax purposes shall be allocated in the same manner as
set forth in this Article X, except as provided in
Section 10.4(b)(iv).
(vi) If there is a net decrease in Partnership Minimum
Gain during a Partnership taxable year, each Partner will be
allocated items of income and gain for such year (and, if
necessary, subsequent years) in proportion to, and to the extent
of, an amount equal to such Partner's share of the net decrease
in Partnership Minimum Gain during the year before any other
allocation of Partnership items for such taxable year. A
Partner shall not be subject to this mandatory allocation of
income or gain to the extent that any of the exceptions provided
in Treasury Regulation Section 1.704-2(f)(2)-(5) applies. All
allocations pursuant to this Section 10.4(b)(vi) shall be in
accordance with Treasury Regulation Section 1.704-2(f). This
provision is a "minimum gain chargeback" within the meaning of
Treasury Regulation Section 1.704-2(f) and shall be construed so
as to be interpreted as such.
(vii) If there is a net decrease in Partner Non-Recourse
Debt Minimum Gain during a Partnership taxable year, then each
Partner with a share of the minimum gain attributable to such
debt at the beginning of such year will be allocated items of
income and gain for such year (and, if necessary, subsequent
years) in an amount equal to such Partner's share of the net
decrease in Partner Non-Recourse Debt Minimum Gain.
Notwithstanding the foregoing, however, unless the Consent of
the Investment Limited Partner is received permitting a
different cost recovery schedule, the Partnership shall
depreciate its personal and real property utilizing the
alternative depreciation system of Section 168(g)(2) of the
Code. Such allocations shall be made in a manner consistent
with the requirements of Treasury Regulation
Section 1.704-2(i)(4) under Section 704 of the Code.
(viii) If a Limited Partner unexpectedly receives (a) an
allocation of loss or deduction or expenditures described in
Section 705(a)(2)(B) of the Code made (1) pursuant to
Section 704(e)(2) of the Code to a donee of an Interest,
(2) pursuant to Section 706(d) of the Code as the result of a
change in any Partner's Interest, or (3) pursuant to Regulation
Section 1.751-1(b)(2)(ii) as a result of a distribution by the
Partnership of unrealized receivables or inventory items or
(b) a distribution, and such allocation and/or distribution
would cause the negative balance in such Partner's Capital
Account to exceed (i) such Partner's share of Partnership
Minimum Gain plus (ii) the amount of such Partner's obligation,
if any, to restore a negative balance in such Partner's Capital
Account plus (iii) such Partner's share of Partner Non-Recourse
Debt Minimum Gain with respect to which such Partner or a
Related Person to such Partner bears the Economic Risk of Loss,
then such Partner shall be allocated items of income and gain in
an amount and manner sufficient to eliminate such negative
balance as quickly as possible. For purposes of this
Section 10.4(b)(viii), a Partner's Capital Account shall be
treated as reduced by Qualified Income Offset Items.
(ix) In the event that any fee payable to any General
Partner or any Affiliate thereof shall instead be determined to
be a non-deductible, non-capitalizable distribution from the
Partnership to a Partner for Federal income tax purposes, then
there shall be allocated to such General Partner an amount of
gross income equal to the amount of such distribution.
(x) In applying the provisions of Article X with respect
to distributions and allocations, the following ordering of
priorities shall apply:
(1) Capital Accounts shall be deemed to be reduced
by Qualified Income Offset Items.
(2) Capital Accounts shall be reduced by
distributions of Cash Flow under Section 10.2(a).
(3) Capital Accounts shall be reduced by
distributions from Capital Transactions under
Section 10.2(b).
(4) Capital Accounts shall be increased by any
minimum gain chargeback under Section 10.4(b)(vi) or
10.4(b)(vii).
(5) Capital Accounts shall be increased by any
qualified income offset under Section 10.4(b)(viii).
(6) Capital Accounts shall be increased by
allocations of profits under Section 10.1(a).
(7) Capital Accounts shall be reduced by allocations
of losses under Section 10.1(a).
(8) Capital Accounts shall be reduced by allocations
of losses under Section 10.1(b).
(9) Capital Accounts shall be increased by
allocations of profits under Section 10.1(b).
(xi) To the maximum extent permitted under the Code,
allocations of profits and losses shall be modified so that the
Partners' Capital Accounts reflect the amounts they would have
reflected if adjustments required by Sections 10.4(b)(vi),
10.4(b)(vii) and 10.4(b)(viii) had not occurred.
10.5 Authority of the General Partners to Vary Allocations to
Preserve and Protect the Partners' Intent
(a) It is the intent of the Partners that each Partner's
distributive share of profits, tax-exempt income, losses, non-
deductible non-capitalizable expenditures and credits (and items
thereof) shall be determined and allocated in accordance with this
Agreement to the fullest extent permitted by Section 704(b) of the
Code. In order to preserve and protect the determinations and
allocations provided for in this Agreement, the General Partners are
hereby authorized and directed to allocate profits, tax-exempt income,
losses, non-deductible non-capitalizable expenditures and credits (and
items thereof) arising in any year differently than otherwise provided
for in this Agreement to the extent that allocating profits, tax-
exempt income, losses, non-deductible non-capitalizable expenditures
or credits (or any item thereof) in the manner provided for herein
would cause the determinations and allocations of each Partner's
distributive share of profits, tax-exempt income, losses, non-
deductible non-capitalizable expenditures, or credits (or any item
thereof) not to be permitted by Section 704(b) of the Code and the
Treasury Regulations promulgated thereunder. Any allocation made
pursuant to this Section 10.5 shall be deemed to be a complete
substitute for any allocation otherwise provided for in this
Agreement, and no amendment of this Agreement or approval of any
Partner shall be required.
(b) In making any allocation (the "New Allocation") under
Section 10.5(a), the General Partners are authorized to act only after
having been advised in writing by the Tax Accountants that, under
Section 704(b) of the Code and the Treasury Regulations thereunder,
(i) the New Allocation is necessary, and (ii) the New Allocation is
the minimum modification of the allocations otherwise provided for in
this Agreement necessary in order to assure that, either in the
then-current year or in any preceding year, each Partner's
distributive share of profits, tax-exempt income, losses, non-
deductible non-capitalizable expenditures, and credits (or any item
thereof) is determined and allocated in accordance with this Agreement
to the fullest extent permitted by Section 704(b) of the Code and the
Treasury Regulations thereunder.
(c) If the General Partners are required by Section 10.5(a) to
make any New Allocation in a manner less favorable to the Limited
Partners than is otherwise provided for herein, then the General
Partners are authorized and directed, only after having been advised
in writing by the Tax Accountants that such an allocation is permitted
by Section 704(b) of the Code, to allocate profits, tax-exempt income,
losses, non-deductible non-capitalizable expenditures, and credits
(and any item thereof) arising in later years in such manner so as to
bring the allocations of profits, tax-exempt income, losses, non-
deductible non-capitalizable expenditures, and credits (and each item
thereof) to the Limited Partners as nearly as possible to the
allocations thereof otherwise contemplated by this Agreement.
(d) New Allocations made by the General Partners under Section
10.5(a) and Section 10.5(c) in reliance upon the advice of the Tax
Accountants shall be deemed to be made pursuant to the fiduciary
obligation of the General Partners to the Partnership and the Limited
Partners, and no such allocation shall give rise to any claim or cause
of action by any Limited Partner.
ARTICLE XI
Management Agent
A. The General Partners shall engage the Management Agent to
manage the Apartment Complex pursuant to the Management Agreement.
The Management Agent shall receive a Management Fee of those amounts
payable from time to time by the Partnership to the Management Agent
for management services in accordance with a management contract
approved by each Agency and/or Lender whose consent thereto is
required or, when the Apartment Complex is not subject to any such
Agency or Lender consent, in accordance with a reasonable and
competitive fee arrangement. From and after the Admission Date, the
Partnership shall not enter into any Management Agreement or modify or
extend any Management Agreement unless (i) the General Partners shall
have obtained the prior written consent of the Special Limited Partner
to the identity of the Management Agent and the terms of the
Management Agreement or the modification or extension thereof and (ii)
such new Management Agreement or modified or extended Management
Agreement provides that it is terminable by the Partnership on thirty
(30) days' notice by the Partnership in the event of any change in the
identity of the General Partners.
B. Notwithstanding the foregoing, however, should the
Investment General Partner or an Affiliate thereof perform property
management services for the Partnership, property management, rent-up
or leasing fees shall be paid to the Investment General Partner or
such Affiliate only for services
actually rendered and shall be in an amount equal to the lesser of
(i) fees competitive in price and terms with those of non-affiliated
Persons rendering comparable services in the locality where the
Apartment Complex is located and which could reasonably be available
to the Partnership, or (ii) 5% of the gross revenues of the Apartment
Complex, provided, however, that the 5% of gross revenues limitation
may be increased with the Consent of the Investment Limited Partners.
No duplicate property management fees shall be paid to any Person.
C. If (i) the Management Agent is a General Partner or an
Affiliate of a General Partner, and (a) the Apartment Complex shall be
subject to a substantial building code violation which shall not have
been cured within six months after notice from the applicable
governmental agency or department or (b) the Apartment Complex is
operating at a deficit and the General Partners have not met their
obligations under Section 6.10 herein, or (ii) an Event of Bankruptcy
shall occur with respect to the Management Agent, or (iii) the
Management Agent shall commit willful misconduct or gross negligence
in its conduct of its duties and obligations under the Management
Agreement, then, upon request by the Special Limited Partner and
subject to any Agency and/or Lender approval, if required, the General
Partners must promptly terminate the Management Agreement with the
Management Agent and appoint a new Management Agent selected by the
Special Limited Partner, which new Management Agent shall not be not
an Affiliate of a General Partner. Each General Partner hereby grants
to the Special Limited Partner an irrevocable (to the extent permitted
by applicable law) power of attorney coupled with an interest to take
any action and to execute and deliver any and all documents and
instruments on behalf of such General Partner and the Partnership as
the Special Limited Partner may deem to be necessary or appropriate in
order to effectuate the provisions of this Article XI.C. Subject to
any Agency and/or Lender approval, if required, the Partnership shall
not enter into any future management arrangement unless such
arrangement is terminable upon the occurrence of the events described
in this Article XI.
D. The General Partners shall have the duty to manage the
Apartment Complex during any period when there is no Management Agent.
ARTICLE XII
Books and Records, Accounting, Tax Elections, Etc.
12.1 Books and Records
The Partnership shall maintain all books and records which are
required under the Uniform Act or by any governmental agency having
jurisdiction and may maintain such other books and records as the
General Partners in their discretion deem advisable. Every Limited
Partner, or its duly authorized representatives, shall at all times
have access to the records of the Partnership at the principal office
of the Partnership at any and all reasonable times, and may inspect
and copy any of such records. A list of the names and addresses of
all of the Limited Partners shall be maintained as part of the books
and records of the Partnership and shall be mailed to any Limited
Partner upon request. A reasonable charge for copy work may be
charged by the Partnership.
12.2 Bank Accounts
The bank accounts of the Partnership shall be maintained in the
Partnership's name with such financial institutions as the General
Partners shall determine. Withdrawals shall be made only in the
regular course of Partnership business on such signature or signatures
as the General Partners may determine. All deposits (including
security deposits and other funds required to be escrowed by any
Agency or Lender) and other funds not needed in the operation of the
business shall be deposited, if required by applicable law and to the
extent permitted by applicable Agency, Lender or Mortgage
requirements, in interest-bearing accounts or invested in United
States Government obligations maturing within one year.
12.3 Auditors
(a) The Auditors shall prepare, for execution by the General
Partners, all tax returns of the Partnership. Prior to the filing of
the Partnership tax returns, and in no event later than February 1st
of each year, the Auditors shall deliver the tax returns for such year
to the Tax Accountants for their review and comment. If a dispute
arises between the Auditors and the Tax Accountants over the proper
preparation of the tax returns, which cannot be resolved, then the Tax
Accountants shall make the final decision on whether any changes are
necessary. The Partnership shall reimburse BCCLP for all costs and
expenses paid to the Tax Accountants for the aforementioned services.
(b) The Auditors shall audit and certify all annual financial
reports to the Partners in accordance with generally accepted auditing
standards.
(c) If the Partnership fails to fulfill any of its obligations
under Section 12.7(a)(i) and/or Section 12.7(a)(ii) within the time
periods set forth therein, at any time thereafter upon notice from the
Special Limited Partner that a change in the identity of the Auditors
is desired, the General Partners, on behalf of the Partnership, shall
promptly terminate the Partnership's engagement of the Auditors, and
the prior written consent of the Special Limited Partner must be
received to the appointment of replacement Auditors. If no such
consent is received to the appointment of replacement Auditors within
thirty (30) days of the notice from the Special Limited Partner to
replace the Auditors, then the Special Limited Partner shall appoint
replacement Auditors of its own choosing, the cost of which shall be
borne by the Partnership as a Partnership expense. All Partners
hereby grant to the Special Limited Partner a special power of
attorney, irrevocable to the extent permitted by law, coupled with an
interest, to so appoint replacement Auditors and to anything else
which in the view of the Special Limited Partner may be necessary or
appropriate to accomplish the purposes of this Section 12.3(c).
12.4 Cost Recovery and Elections
(a) With respect to all depreciable assets for which cost
recovery deductions are permitted, the Partnership shall elect to use,
so far as permitted by the provisions of the Code, accelerated cost
recovery methods. However, the Partnership may change to another
method of cost recovery if such other method is, in the opinion of the
Auditors, more advantageous to the Investment Limited Partners and the
limited partners and/or holders of beneficial assignee certificates
thereof.
(b) Subject to the provisions of Section 12.5, all other
elections required or permitted to be made by the Partnership under
the Code shall be made by the General Partners in such manner as will,
in the opinion of the Auditors, be most advantageous to the Investment
Limited Partners and the limited partners and/or holders of beneficial
assignee certificates thereof.
12.5 Special Basis Adjustments
In the event of a transfer of all or any part of the Interest of
an Investment Limited Partner or a transfer of all or any part of an
interest of a partner and/or a holder of a beneficial assignee
certificate of an Investment Limited Partner, the Partnership shall
elect upon the request of such Investment Limited Partner, pursuant to
Section 754 of the Code, to adjust the basis of the Partnership
property. Any adjustments made pursuant to said Section 754 shall
affect only the successor in interest to the transferring Partner or
partner or holder of beneficial assignee certificate thereof. Each
Partner will furnish the Partnership all information necessary to give
effect to such election.
12.6 Fiscal Year
The fiscal and tax year of the Partnership shall be the calendar
year. The books of the Partnership shall be kept on an accrual basis.
12.7 Information to Partners
(a) The General Partners shall cause to be prepared and
distributed to all Persons who were Partners at any time during a
fiscal year of the Partnership:
(i) Within forty-five (45) days after the end of each
fiscal year of the Partnership, (A) a balance sheet as of the
end of such fiscal year, a statement of income, a statement of
Partners' equity, and a statement of cash flows, each for the
year then ended, all of which, except the statement of cash
flows, shall be prepared in accordance with generally accepted
accounting principles and accompanied by a report of the
Auditors containing an opinion of the Auditors, and (B) a report
of the activities of the Partnership during the period covered
by the report. With respect to any distribution to the
Investment Limited Partners, the report called for shall
separately identify distributions from (1) Cash Flow from
operations during the period, (2) Cash Flow from operations
during a prior period which had been held as reserves,
(3) proceeds from disposition of property and investments,
(4) lease payments on net leases with builders and sellers,
(5) reserves from the gross proceeds of the Capital
Contributions of the Investment Limited Partners, (6) borrowed
monies, and (7) transactions outside of the ordinary course of
business with a description thereof.
(ii) Within thirty (30) days after the end of each fiscal
year of the Partnership, all information which is necessary, in
the view of the Tax Accountants, for the preparation of the
Limited Partners' Federal income tax returns.
(iii) Within thirty (30) days after the end of each
quarter of a fiscal year of the Partnership, a report
containing:
(A) a balance sheet, which may be unaudited; and
(B) a statement of income for the quarter then
ended, which may be unaudited; and
(C) a Cash Flow statement for the quarter then
ended, which may be unaudited; and
(D) a certification of the General Partners that
the Apartment Complex and its tenants are in compliance
with all applicable federal, state and local requirements
and regulations;
(E) a low-income housing tax credit monitoring
form, a copy of the rent roll for the Apartment Complex, a
statement of income and expenses, an operating statement
and an Occupancy/Rental Report, all in the form specified
by BCCLP; and
(F) all other information which would be pertinent
to a reasonable investor regarding the Partnership and its
activities during the quarter covered by the report.
(b) Within sixty (60) days after the end of each fiscal year
of the Partnership a copy of the annual report to be filed with the
United States Treasury concerning the status of the Apartment Complex
as low-income housing and, if required, a certificate to the
appropriate state agency concerning the same.
(c) Upon the written request of an Investment Limited Partner
for further information with respect to any matter covered in item (a)
or item (b) above, the General Partners shall furnish such information
within 30 days of receipt of such request.
(d) Prior to October 15 of each year, the Partnership shall
send to each Investment Limited Partner an estimate of the Investment
Limited Partner's share of the tax credits, profits and losses of the
Partnership for Federal income tax purposes for the current fiscal
year. Such estimate shall be prepared by the General Partners and the
Auditors and shall be in the form specified by BCCLP.
(e) Within 15 days after the end of any calendar quarter
during which:
(i) there is a material default by the Partnership under
the Project Documents or in payment of any mortgage, taxes,
interest or other obligation on secured or unsecured debt,
(ii) any reserve has been reduced or terminated by
application of funds therein for purposes materially different
from those for which such reserve was established,
(iii) any General Partner has received any notice of a
material fact which may substantially affect further
distributions, or
(iv) any Partner has pledged or collateralized its
Interest in the Partnership,
the General Partners shall send the Investment Limited Partner a
detailed report of such event.
(f) After the Admission Date, the Partnership shall send to
each Investment Limited Partner, on or before the tenth day of each
month, the monthly housing credit monitoring form, and copies of all
applicable periodic reports covering the status of project operations
from the previous period, as may be required by any Agency or Lender.
(g) On or before May 1st of each year, the Partnership shall
send to each Investment Limited Partner a report on operations, in the
form supplied by BCCLP.
(h) The General Partners shall cause the Partnership to send
to each Investment Limited Partner a copy of each Construction Loan
draw requisition and any notification or correspondence from the
Construction Lender indicating that any such draw will not be paid as
requisitioned. Upon receipt, the Partnership shall send to the
Investment Limited Partner copies of the Form(s) 8609 evidencing the
Tax Credit allocation.
(i) If the earlier of (A) the Completion Date or (B) the date
upon which tenants first occupied apartment units in the Apartment
Complex shall have occurred six months or more prior to the date upon
which an Investment Limited Partner acquired its Interest in the
Partnership, then the General Partners shall cause to be prepared and
delivered to such Investment Limited Partner within 60 days of the
Admission Date the following items:
(i) An unaudited statement of income of the Partnership
for the year (or such shorter period as there may be from the
date of the most recent audited statement of income of the
Partnership) ended on the date upon which the Investment Limited
Partner acquired its Interest in the Partnership; and
(ii) An audited statement of income of the Partnership
for any fiscal year of the Partnership ending between (A) the
earlier of (1) the Completion Date or (2) the date upon which
tenants first occupied apart-ment units in the Apartment Complex
and (B) the date upon which such Investment Limited Partner
acquired its Interest in the Partnership.
(j) Within thirty (30) days of the Completion Date, the
General Partners shall prepare, or cause the Auditors to prepare, and
deliver to each Limited Partner a Tax Credit basis worksheet for each
building in the Apartment Complex, all in a form specified by BCCLP.
(k) If the General Partners do not cause the Partnership to
fulfill its obligations under Section 12.7(a)(i) and/or
Section 12.7(a)(ii) within the time periods set forth therein, the
General Partners shall pay as damages the sum of $100 per day (plus
interest at a rate equal to the general base rate of interest
established by The Bank of Boston or its successors and assigns and
announced by it as the rate charged by it to its prime commercial
customers on short-term unsecured borrowings as its "base rate" from
time to time in effect plus 3%) to the Investment Limited Partners
until such obligations shall have been fulfilled. Such damages shall
be paid forthwith by the General Partners, and failure to so pay shall
constitute a material default of the General Partners hereunder. In
addition, if the General Partners shall so fail to pay, the General
Partners and their Affiliates shall forthwith cease to be entitled to
the Annual Partnership Management Fee and the payment of any Cash Flow
or Capital Transaction proceeds to which they may otherwise be
entitled hereunder. Such payments shall be restored only upon the
payment of such damages in full, and any amount of such damages not so
paid shall be deducted against payments of the Annual Partnership
Management Fee and Cash Flow or Capital Transaction proceeds otherwise
due to the General Partners or their Affiliates.
12.8 Expenses of the Partnership
(a) All expenses of the Partnership shall be billed directly
to and paid by the Partnership.
(b) Except in extraordinary circumstances, neither the
Investment General Partner nor any Affiliate thereof shall be
permitted to contract or otherwise deal with the Partnership for the
sale of goods or services or the lending of money to the Partnership
or the General Partners, except for (i) management services, subject
to the restrictions set forth in Article XI.B., (ii) loans made by, or
guaranteed by, the Investment General Partner or any of its
Affiliates, and (iii) those dealings, contracts or provision of
services described in the Investment Partnership Agreement or in the
Prospectus. Extraordinary circumstances shall only be presumed to
exist where there is an emergency situation requiring immediate action
and the services required are not immediately available from
unaffiliated parties. All services rendered under such circumstances
must be rendered pursuant to a written contract which must contain a
clause allowing termination without penalty on sixty (60) days'
notice. Goods and services provided under such circumstances must be
provided at the lesser of actual cost or the price charged for such
goods or services by independent parties.
(c) In the event extraordinary circumstances arise, the
Investment General Partner and its Affiliates may provide construction
services in connection with the Apartment Complex. Neither the
Investment General Partner nor any of its Affiliates shall provide
such services unless it believes it has an adequate staff to do so and
unless such provision of goods and construction services is part of
its ordinary and ongoing business in which it has previously engaged,
independent of the activities of the Investment Limited Partners. Any
such services must be reasonable for and necessary to the Investment
Limited Partners, actually furnished to the Investment Limited
Partners, and provided at the lower of 10% of the construction
contract rate with respect to the Apartment Complex or 90% of the
competitive price charged for such services by independent parties for
comparable goods and services in the same geographic location (except
that in the case of transfer agent, custodial and similar banking-type
fees, and insurance fees, the compensation, price or fee shall be at
the lesser of costs or the compensation, price or fee of any other
Person rendering comparable services as aforesaid). Cost of services
as used herein means the pro rata cost of personnel, including an
allocation of overhead directly attributable to such personnel, based
on the amount of time such personnel spent on such services or other
method of allocation acceptable to the accountants for the Investment
Limited Partners.
(d) All services provided by the Investment General Partner or
any Affiliate thereof pursuant to Section 12.8(c) must be rendered
pursuant to the Investment Partnership Agreement or a written contract
which precisely describes the services to be rendered and all
compensation to be paid and shall contain a clause allowing
termination without penalty upon sixty (60) days' notice to the
Investment General Partner by a vote of a majority in interest of the
limited partners and assignees of beneficial interests in each
Investment Limited Partner.
(e) No compensation or fees may be paid by the Partnership to
the Investment General Partner or its Affiliates except as described
in the Investment Partnership Agreement or in the Prospectus.
ARTICLE XIII
General Provisions
13.1 Restrictions by Reason of Section 708 of the Code
No Disposition may be made if the Interest sought to be Disposed
of, when added to the total of all other Interests Disposed of within
the period of twelve consecutive months prior to the proposed date of
the Disposition, could, in the opinion of tax counsel to the
Partnership, result in the termination of the Partnership under
Section 708 of the Code. This Section 13.1 shall have no application
to any required repurchase of each Investment Limited Partner's
Interest. Any Disposition in contravention of any of the provisions
of this Section 13.1 shall be void ab initio and ineffectual and shall
not bind or be recognized by the Partnership. Notwithstanding the
foregoing provisions of this Section 13.1, however, each Investment
Limited Partner may waive the provisions of this Section 13.1 at any
time as to a Disposition or series of Dispositions, and in the event
of such a waiver, this Section 13.1 shall have no force or effect upon
such Disposition or series of Dispositions.
13.2 Amendments to Certificate
Within 120 days after the end of any Partnership fiscal year in
which an Investment Limited Partner shall have received any
distributions under Article X, the General Partners shall file an
amendment to the Certificate reducing by the amount of its allocable
share of such distribution the amount of Capital Contribution of each
Investment Limited Partner as stated in the last previous amendment to
the Certificate. However, Schedule A shall not be amended on account
of any such distribution.
The Partnership shall amend the Certificate at least once each
calendar quarter to effect the substitution of substituted Limited
Partners, although the General Partners may elect to do so more
frequently. In the case of assignments, where the assignee does not
become a Substituted Limited Partner, the Partnership shall recognize
the assignment not later than the last day of the calendar month
following receipt of notice of assignment and all documentation
required in connection therewith hereunder.
Notwithstanding the foregoing provisions of this Section 13.2,
no such amendments to the Certificate need be filed by the General
Partners if the Certificate is not required to and does not identify
the Limited Partners or their Capital Contributions in such capacity.
13.3 Notices
Any notice called for under this Agreement shall be in writing
and shall be deemed adequately given if actually delivered or if sent
by registered or certified mail, postage prepaid, or by an express
overnight mail delivery service, to the party for whom such notice is
intended at such party's last address of record on the Partnership
books.
13.4 Word Meanings
The words such as "herein," "hereinafter," "hereof" and
"hereunder" refer to this Agreement as a whole and not merely to a
subdivision in which such words appear unless the context otherwise
requires. The singular shall include the plural, and vice versa, and
each gender (masculine, feminine and neuter) shall include the other
genders, unless the context requires otherwise. Each reference to a
"Section" or an "Article" refers to the corresponding Section or
Article of this Agreement, unless specified otherwise. References to
Treasury Regulations (permanent or temporary) or Revenue Procedures
shall include any successor provisions.
13.5 Binding Effect
The covenants and agreements contained herein shall be binding
upon and inure to the benefit of the heirs, executors, administrators,
successors and assigns of the respective parties hereto.
13.6 Applicable Law
This Agreement shall be construed and enforced in accordance
with the laws of the State.
13.7 Counterparts
This Agreement may be executed in several counterparts and all
so executed shall constitute one agreement binding on all parties
hereto, notwithstanding that all the parties have not signed the
original or the same counterpart, except that no counterpart shall be
binding unless signed by a General Partner.
13.8 Financing Regulations
So long as any of the Project Documents are in effect, (a) each
of the provisions of this Agreement shall be subject to, and the
General Partners covenant to act in accordance with, the Project
Documents; (b) the Project Documents shall govern the rights and
obligations of the Partners, their heirs, executors, administrators,
successors and assigns to the extent expressly provided therein;
(c) upon any dissolution of the Partnership or any transfer of the
Apartment Complex, no title or right to the possession and control of
the Apartment Complex and no right to collect the rent therefrom shall
pass to any Person who is not, or does not become, bound by the
Project Documents and other Agency or Lender documents in a manner
satisfactory to the applicable Agency or Lender; (d) no amendment to
any provision of the Project Documents shall become effective without
the prior written consent of each Agency and Lender (if required); and
(e) the affairs of the Partnership shall be subject to Agency and
Lender regulation and no action shall be taken which would require the
consent or approval of any Agency or Lender unless the same is first
obtained. No new Partner shall be admitted to the Partnership, and no
Partner shall withdraw from the Partnership or be substituted for
without the consent of each Agency and Lender (if such consent is then
required). No amendment to this Agreement relating to matters
governed by Agency or Lender regulations or requirements shall become
effective until the prior written consent of each Agency and Lender
(if required) to such amendment shall have been obtained.
Any conveyance or transfer of title to all or any portion of the
Apartment Complex required or permitted under this Agreement shall in
all respects be subject to all conditions, approvals and other
requirements of Agency rules and regulations and Lender requirements
applicable thereto.
13.9 Separability of Provisions
Each provision of this Agreement shall be considered separable
and (a) if for any reason any provision is determined to be invalid,
such invalidity shall not impair the operation of or affect those
portions of this Agreement which are valid, and (b) if for any reason
any provision would cause the Investment Limited Partner to be bound
by the obligations of the Partnership (other than the rules and
regulations of an Agency and the requirements of any Lender), such
provision or provisions shall be deemed void and of no effect.
13.10 Paragraph Titles
All article and section headings in this Agreement are for
convenience of reference only and are not intended to qualify the
meaning of any article or section.
13.11 Amendment Procedure
This Agreement may be amended by the General Partners with the
Consent of the Investment Limited Partners.
13.12 Time of Admission
The Investment Limited Partners shall be deemed to have been
admitted to the Partnership as of the Commencement Date for all
purposes of this Agreement, including Article X hereof; provided,
however, that if regulations are issued under the Code or an amendment
to the Code is adopted which would require, in the opinion of the
Auditors, that the Investment Limited Partners be deemed admitted on a
date other than as of the Commencement Date, then the General Partners
shall select a permitted admission date which is most favorable to the
Investment Limited Partner.
WITNESS the execution hereof under seal as of the 1st day of
February, 1996.
GENERAL PARTNER: INVESTMENT LIMITED
PARTNERS:
THE NORSOUTH CORPORATION BOSTON CAPITAL TAX
CREDIT FUND IV L.P.,
Series 24
By:/s/ William E. Johnston
William E. Johnston, President
By: Boston Capital
Associates IV
L.P.,
Attest:/s/ Faith M. Williams its general partner
Faith M. Williams, Secretary
By: C & M
Associates d/b/a
SPECIAL LIMITED PARTNER: Boston Capital
Associates,
its general
partner
BCTC 94, INC.
By:/s/ Bonnie Kate Fox, By: /s/Bonnie Kate Fox
Bonnie Kate Fox, as Attorney- Bonnie Kate Fox, as
in-Fact for John P. Manning, Attorney-in-Fact for
President John P. Manning,
General Partner
ORIGINAL (WITHDRAWING) INVESTMENT LIMITED
LIMITED PARTNER: PARTNER:
BOSTON CAPITAL PARTNERS, INC. BOSTON CAPITAL TAX
CREDIT FUND IV L.P.,
Series 25
By: Boston Capital
By:/s/ Bonnie Kate Fox Associates IV L.P.,
Bonnie Kate Fox, Attorney- its general partner
in-Fact for John P. Manning,
General Partner By: C&M Associates
d/b/a Boston Capital
Associates, its
general partner
By:/s/ Bonnie Kate
Fox
Bonnie Kate Fox,
as
Attorney-in-Fact
for
John P.
Manning,
General Partner
GUARANTY
The undersigned unconditionally guarantees the performance by
the General Partner of all of its obligations under Sections 5.1, 5.2,
6.5, 6.10, 6.11(a) and 12.7(k) of the Amended and Restated Agreement
of Limited Partnership of Laurelwood Park Limited Partnership (the
"Partnership Agreement") and hereby waives any right to require that
any action be brought against any other Person or to require that
resort be made to any security prior to enforcement of this guaranty.
The undersigned also guarantees to perform his obligations under
Section 7.5 of the Partnership Agreement if the situation described in
Section 7.5 arises. The obligations of the undersigned hereunder shall
be binding upon his respective heirs, executors and legal
representatives. Execution of this Agreement by the undersigned is
solely for the purposes of undertaking this guaranty and shall not be
deemed to make the undersigned a partner of the Partnership.
/s/ William E. Johnston
William E. Johnston
LAURELWOOD PARK LIMITED PARTNERSHIP
Schedule A
As of
February 1, 1996
General Partner: Capital Contributions
The Norsouth Corporation
$100
340 Eisenhower Drive
320 Central Park
Savannah, GA 31416
Special Limited Partner:
BCTC 94, Inc.
$100
c/o Boston Capital
Partners, Inc.
One Boston Place
Boston, MA 02108
Investment Total Agreed-to
Paid-In
Limited Partners: Capital Contribution
Capital Contribution*
Boston Capital Tax $2,120,403
$1,425,162
Credit Fund IV L.P.,
Series 24
c/o Boston Capital
Partners, Inc.
One Boston Place
Boston, Massachusetts 02108
BCTC IV L.P., Series 25 $1,044,377
$701,945
c/o Boston Capital
Partners, Inc.
One Boston Place
Boston, MA 02108
_____________________
*Paid-in Capital Contributions as of the date of this Schedule A.
Future payments of Capital Contribution are subject to adjustment
and are due at the times and subject to the conditions set forth in
the Agreement to which this Schedule is attached.
BOSTON CAPITAL TAX CREDIT FUND IV L.P. (SERIES 24)
BOSTON CAPITAL TAX CREDIT FUND IV L.P. (SERIES 25)
LAURELWOOD PARK LIMITED PARTNERSHIP
_______________________________________
CERTIFICATION AND AGREEMENT
_______________________________________
CERTIFICATION AND AGREEMENT made as of February _, 1996 by
LAURELWOOD PARK LIMITED PARTNERSHIP, a Georgia limited partnership
(the "Operating Partnership"); THE NORSOUTH CORPORATION (the
"Operating General Partner"); and WILLIAM E. JOHNSTON (the "Original
Limited Partner") for the benefit of BOSTON CAPITAL TAX CREDIT FUND
IV L.P. (Series 24) and BOSTON CAPITAL CORPORATE TAX CREDIT FUND
IV L.P. (Series 25) each a Delaware limited partnership (the
"Investment Partnerships"), BOSTON CAPITAL ASSOCIATES IV L.P. ("Boston
Capital"), PEABODY & BROWN and certain other persons or entities
described herein.
WHEREAS, the Operating Partnership proposes to admit the
Investment Partnerships as limited partners thereof pursuant to an
Amended and Restated Agreement of Limited Partnership of the Operating
Partnership dated as of February 1, 1996 (the "Operating Partnership
Agreement"), in accordance with which the Investment Partnerships will
make substantial capital contributions to the Operating Partnership;
WHEREAS, the Investment Partnerships and Boston Capital have
relied upon certain information and representations described herein
in evaluating the merits of investment by the Investment Partnerships
in the Operating Partnership; and
WHEREAS, Peabody & Brown, as counsel for the Investment
Partnerships, will rely upon such information and representations in
connection with its delivery of certain opinions with respect to this
transaction;
NOW, THEREFORE, to induce the Investment Partnerships to enter
into the Operating Partnership Agreement and become limited partners
of the Operating Partnership, and for $1.00 and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Operating Partnership, the Operating General Partner
and the Original Limited Partner hereby agree as follows for the
benefit of the Investment Partnerships, Boston Capital, Peabody &
Brown and certain other persons hereinafter described.
1. Representations, Warranties and Covenants of the
Operating Partnership, the Operating General
Partner and the Original Limited Partner
The Operating Partnership, the Operating General Partner and the
Original Limited Partner jointly and severally represent, warrant and
certify to the Investment Partnerships, Boston Capital, and Peabody &
Brown that, with respect to the Operating Partnership, as of the date
hereof:
1.01 The Operating Partnership is duly organized and in
good standing as a limited partnership pursuant to the laws of the
state of its formation and in North Carolina with full power and
authority to own its apartment complex (the "Apartment Complex") and
conduct its business; the Operating Partnership, the Operating General
Partner and the Original Limited Partner have the power and authority
to enter into and perform this Certification and Agreement; the
execution and delivery of this Certification and Agreement by the
Operating Partnership, the Operating General Partner and the Original
Limited Partner have been duly and validly authorized by all necessary
action; the execution and delivery of this Certification and
Agreement, the fulfillment of its terms and consummation of the
transactions contemplated hereunder do not and will not conflict with
or result in a violation, breach or termination of or constitute a
default under (or would not result in such a conflict, violation,
breach, termination or default with the giving of notice or passage of
time or both) any other agreement, indenture or instrument by which
the Operating Partnership or any Operating General Partner or Original
Limited Partner is bound or any law, regulation, judgment, decree or
order applicable to the Operating Partnership or any Operating General
Partner or Original Limited Partner or any of their respective
properties; this Certification and Agreement constitutes the valid and
binding agreement of the Operating Partnership, the Operating General
Partner and the Original Limited Partner, enforceable against each of
them in accordance with its terms.
1.02 The Operating General Partner has delivered to the
Investment Partnerships, Boston Capital or their affiliates all
documents and information which would be material to a prudent
investor in deciding whether to invest in the Operating Partnership.
All factual information, including without limitation the information
set forth in Exhibit A hereto, provided to the Investment
Partnerships, Boston Capital or their affiliates either in writing or
orally, did not, at the time given, and does not, on the date hereof,
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances under
which they are made. There has been no material adverse change in the
financial position of the Operating General Partner from that shown on
the December 31, 1994 financial statement of the General Partner. The
estimates of occupancy rates, operating expenses, cash flow,
depreciation and tax credits set forth on Exhibit A are reasonable in
light of the knowledge and experience of the Operating General
Partner.
1.03 As of the date hereof, each of the representations
contained in Exhibit B attached hereto is true, accurate and complete
as to each of the Operating Partnership, the Operating General Partner
and the Original Limited Partner and as to any of their affiliates,
any of their predecessors and their affiliates' predecessors, any of
their directors, officers, general partners and/or beneficial owners
of ten per cent (10%) or more of any class of their equity securities
(beneficial ownership meaning the power to vote or direct the vote
and/or the power to dispose or direct the disposition of such
securities), as the case may be, and any promoters presently connected
with them in any capacity.
1.04 Each of the representations and warranties
contained in the Operating Partnership Agreement is true and correct
as of the date hereof.
1.05 Each of the covenants and agreements of the
Operating Partnership and the Operating General Partner contained in
the Operating Partnership Agreement has been duly performed to the
extent that performance of any covenant or agreement is required on or
prior to the date hereof.
1.06 All conditions to admission of the Investment
Partnerships as the investment limited partners of the Operating
Partnership contained in the Operating Partnership Agreement have been
satisfied.
1.07 No default has occurred and is continuing under the
Operating Partnership Agreement or any of the Project Documents (as
said term is defined in the Operating Partnership Agreement) for the
Operating Partnership.
1.08 The Operating General Partner agrees to take all
actions necessary to claim the Projected Credit, including, without
limitation, the filing of Form(s) 8609 with the Internal Revenue
Service.
1.09 No person or entity other than the Operating
Partnership holds any equity interest in the Apartment Complex.
1.10 The Operating Partnership has the sole
responsibility to pay all maintenance and operating costs, including
all taxes levied and all insurance costs, attributable to the
Apartment Complex.
1.11 The Operating Partnership, except to the extent it
is protected by insurance and excluding any risk borne by lenders,
bears the sole risk of loss if the Apartment Complex is destroyed or
condemned or there is a diminution in the value of the Apartment
Complex.
1.12 No person or entity except the Operating
Partnership has the right to any proceeds, after payment of all
indebtedness, from the sale, refinancing, or leasing of the Apartment
Complex.
1.13 No Operating General Partner is related in any
manner to the Investment Partnerships, nor is any Operating General
Partner acting as an agent of the Investment Partnerships.
1.14 The Apartment Complex contains no substance known
to be hazardous, such as hazardous waste, lead-based paint, asbestos,
methane gas, urea formaldehyde insulation, oil, toxic substances,
underground storage tanks, polychlorinated biphenals (PCBs), and
radon; the Apartment Complex is not affected by the presence of oil,
toxic substances, or other pollutants that could be a detriment to the
Apartment Complex nor is the Operating Partnership in violation of any
local, state, or federal law or regulation; and no violation of the
Clean Air Act, Clean Water Act, Resource Conservation and Recovery
Act, Toxic Substance Control Act, Safe Drinking Water Control Act,
Comprehensive Environmental Resource Compensation and Liability Act,
or Occupational Safety and Health Act has occurred or is continuing.
Neither the Operating Partnership nor any Operating General Partner or
Original Limited Partners has received any notice from any source
whatsoever of the existence of any such hazardous condition relating
to the Apartment Complex or of any violation of any local, state or
federal law or regulation with respect to the Apartment Complex.
1.15 The fair market value of the Apartment Complex
exceeds the total amount of indebtedness encumbering the Apartment
Complex and is expected to continue to do so throughout the term of
such indebtedness.
1.16 Payment of $273,687 of the total Development Fee
of $521,603 by December 31, 1995 was reasonable for the services
rendered to the Partnership for the development of the Apartment
Complex by such date and is not a prepayment for future services;
furthermore, The Norsouth Corporation will report the $273,687 as
income on its 1995 income tax returns.
2. Indemnification
2.01 The Operating General Partner and the Original
Limited Partner (for purposes of this Section 2.01, the "Indemnifying
Parties" or, individually, an "Indemnifying Party") jointly and
severally agree to indemnify and hold harmless the Investment
Partnerships and Boston Capital (for purposes of this Section 2.01,
the "Indemnified Parties" or, individually, an "Indemnified Party")
and each officer, director, employee and person, if any, who controls
any party against any losses, claims, damages or liabilities
(collectively, "Liabilities"), joint or several, to which any
Indemnified Party or such officer, director, employee or controlling
person may become subject, insofar as such Liabilities or actions in
respect thereof arise out of or are based upon (i) a breach by such
Indemnifying Party of any of his representations, warranties or
covenants to such Indemnified Party or any such of its officers,
directors, employees or controlling persons under this Certification
and Agreement or (ii) liability under any statute, regulation,
ordinance, or other provision of federal, state, or local law or any
civil action pertaining to the protection of the environment or
otherwise pertaining to public health or employee health and safety,
including, without limitation, protection from hazardous waste, lead-
based paint, asbestos, methane gas, urea formaldehyde insulation, oil,
toxic substance, underground storage tanks, polychlorinated biphenals
(PCBs), and radon; and to reimburse each such Indemnified Party and
each such officer, director, employee or controlling person for any
legal or other expenses reasonably incurred by it or them in
connection with investigating or defending against any such Liability
or action; provided, however, that the Indemnifying Parties shall not
be required to indemnify any Indemnified Party or any such officer,
director, employee or controlling person for any payment made to any
claimant in settlement of any Liability or action unless such payment
is approved by the Indemnifying Parties or by a court having
jurisdiction of the controversy. This indemnity agreement shall
remain in full force and effect notwithstanding any investigation made
by any party hereto, shall survive the termination of any agreement
which refers to this indemnity and shall be in addition to any
liability which the Indemnifying Parties may otherwise have.
2.02 No Indemnifying Party shall be liable under the
indemnity agreements contained in Section 2.01 unless the Indemnified
Party shall have notified the Indemnifying Party in writing within
forty-five (45) business days after the summons or other first legal
process giving information of the nature of the claim shall have been
served upon the Indemnified Party or any such of its officers,
directors, employees or controlling persons, but failure to notify an
Indemnifying Party of any such claim shall not relieve it from any
liability which it may have to the Indemnified Party or any such of
its officers, directors, employees or controlling persons against whom
action is brought otherwise than on account of its indemnity agreement
contained in Section 2.01. In case any action is brought against any
Indemnified Party or any such of its officers, directors, employees or
controlling persons upon any such claim, and it notifies the
Indemnifying Party of the commencement thereof as aforesaid, the
Indemnifying Party shall be entitled to participate at its own expense
in the defense, or, if it so elects, in accordance with arrangements
satisfactory to any other Indemnifying Party or parties similarly
notified, to assume the defense thereof, with counsel who shall be
satisfactory to such Indemnified Party or any such of its officers,
directors, employees or controlling persons and any other Indemnified
Parties who are defendants in such action; and after notice from the
Indemnifying Party to such Indemnified Party or any such of its
officers, directors, employees or controlling persons of its election
so to assume the defense thereof and the retaining of such counsel by
the Indemnifying Party, the Indemnifying Party shall not be liable to
such Indemnified Party or any such of its officers, directors,
employees or controlling persons for any legal or other expenses
subsequently incurred by such Indemnified Party or any such of its
officers, directors, employees or controlling persons in connection
with the defense thereof, other than the reasonable costs of
investigation.
3. Miscellaneous
3.01 This Certification and Agreement is made solely
for the benefit of the Operating Partnership, the Operating General
Partner, the Original Limited Partner, Boston Capital, Peabody & Brown
and the Investment Partnerships (and, to the extent provided in
Section 2, the officers, directors, partners, employees and
controlling persons referred to therein), and their respective
successors and assigns, and no other person shall acquire or have any
right under or by virtue of this Certification and Agreement.
3.02 This Certification and Agreement may be executed
in several counterparts, each of which shall be deemed to be an
original, all of which together shall constitute one and the same
instrument.
3.03 Terms defined in the Operating Partnership
Agreement and used but not otherwise defined herein shall have the
meanings given to them in the Operating Partnership Agreement.
IN WITNESS WHEREOF, the undersigned have set their hands and
seals as of the date first above written.
OPERATING PARTNERSHIP:
LAURELWOOD PARK LIMITED PARTNERSHIP
By: THE NORSOUTH CORPORATION,
General Partner
By:/s/ William E. Johnston
William E. Johnston,
President
OPERATING GENERAL PARTNER:
THE NORSOUTH CORPORATION
By:/s/ William E. Johnston
William E. Johnston, President
ORIGINAL LIMITED PARTNER:
/s/ William E. Johnston
WILLIAM E. JOHNSTON
Exhibit A
LAURELWOOD PARK LIMITED PARTNERSHIP
FACT SHEET
1. Construction Mortgage
A. Lender: Midland Mortgage
Investment Corporation
B. Mortgage Amount: $2,674,000
C. Note Date: September 7, 1995
D. Interest Rate: 10.5%
E. Term: 24 months
F. Guarantors: William E.
Johnston and
The Norsouth
Corporation
G. Fees: $53,480
2. Permanent Mortgage
A. Lender Midland
Affordable Housing
Group Trust
B. Maximum Mortgage Amount: $2,115,000
C. Obligation Date: September 1,1995
D. Interest Rate: 8.875%
E. Term: 18 years
F. Amortization Term: 30 years
G. Fees: $63,450
3. Eligible Basis: $4,978,222
4. Qualified Basis: $6,471,689
5. GP Capital Contribution: $50,000
Georgia
Power Grant
6. Operating Deficit Escrow: $97,029
7. Type of Credit: 9%
8. Rent-up Schedule:
Thirteen units a month in each of June, 1996
through November, 1996; 11 units in December, 1996;
6 units in January, 1997; and 5 units in February, 1997.
9. Total Projected Credit* to the
Investment Limited Partners: $5,390,510
A. $125,779 for 1996,
B. $535,008 for 1997,
C. $539,051 per annum for each of the years 1998 through
2005,
D. $413,272 for 2006, and
E. $4,043 for 2007.
10. Total Projected Credit: $5,444,960
A. $127,049 for 1996,
B. $540,412 for 1997,
C. $544,496 per annum for each of the years 1997 through
2005,
D. $417,447 for 2006, and
E. $4,084 for 2007.
11. Tax Credit Approval:
A. Application
1. Date: Feb. 28, 1995
2. Credit Amount Requested: $544,983
B. Reservation
1. Date: May 22, 1995
2. Credit Amount Reserved: $544,496
C. Carryover Reservation
1. Date: November 14, 1995
2. Credit Amount Allocated: $544,496
12. Apartment Complex:
A. Name: Laurelwood
Park
Apartments
B. Address: Burton
Avenue
High Point,
N.C.
C. County: Guilford
D. Type of Project: Family
13. Area Median Income: $38,800
14. Type of Apartments:
______________
* Class A Class B
d
1996 $ 84,272 $ 41,507
1997 $358,455 $176,553
'98-05 $361,164 $177,887
2006 $276,892 $136,380
2007 $ 2,709 $ 1,334
Unit
Utility
Number Square Ft. Rent Allowance
2-Bedroom 62 1,004 $393 $77
3-Bedroom 38 1,168 $460 $85
15. A. Annual Operating Expenses
(beginning 1997): $248,422
B. Projected Annual Cash Flow
(beginning 1999): $1,244
16. Rental Assistance: N/A
17. Replacement Reserve $15,000 per
annum
18. Amount of Annual Reporting Fee
to Boston Capital: $10,000
19. Amount of Annual Partnership
Management Fee: $10,000
20. Amount of Total Depreciable
Base Allocated to Personal
Property: $142,067
21. Completion Date: August, 1996
22. Total Capital Contribution of
the Investment Limited Partners: $3,164,780
Class A Limited Partner: $2,120,403
Class B Limited Partner $1,044,377
23. Schedule of Capital Contributions
A. $2,127,107 * ($1,425,162 by the Class A Limited
Partner,
$701,945 by the Class B Limited Partner) on
the latest of (i) the Admission Date,
(ii) Tax Credit Set-Aside, (iii) Permanent
Mortgage Commitment, (iv) Construction
Permitting Date or (v) closing of the
Construction Mortgage;
B. $741,195 ($496,601 by the Class A Limited Partner,
$244,594 by the Class B Limited Partner) on
the latest of (i) Cost Certification or
(ii) the Completion Date; and
_____________________
*At the time of the First Installment, the Operating Partnership
will repay the Investment Partnerships for the Bridge Loan in the
amount of $1,927,107 which was made to the Operating Partnership
at the time of the closing of the Construction Mortgage.
C. $296,479 ($198,640 by the Class A Limited Partner,
$97,838 by the Class B Limited Partner) on
the latest of (i) the Initial 95% Qualified
Occupancy Date, (ii) achievement of the
Breakeven Point, (iii) State Designation or
(iv) Permanent Mortgage Commencement.
24. Fees, Special Distributions and Other Items to be paid from
Capital Contributions
A. Construction and Development
Fee:
B. Special Distributions: None
C. Direct Development Costs: $2,643,178
25. Consulting Fee Payable by the $ 200,000
General Partner to Boston Capital:
26. General Partner: The Norsouth Corporation
Address: 340 Eisenhower Drive
320 Central Park
Savannah, Georgia 31406
Telephone Number: (912) 354-6096
Telecopier Number: (912) 352-3451
27. Ownership Interests
Normal Capital
Cash
Operations Transactions
Flow*
General Partners: 1% 50% 50%
Class A Limited Partner: 66.3% 33.5% 45%
Class B Limited Partner 32.7% 16.5% 5%
28. Management Agent: The Norsouth
Corporation
Contact Person: William E. Johnston
Address: Building 300
340 Eisenhower Drive
Savannah, GA 31416
Telephone Number: (912) 354-6096
______________________
*See Section 10.2(a) for a detailed description of Cash Flow sharing.
Amount of Fee: 6.5% gross collected income
29. Builder: The Norsouth Corporation
Address: Building 300
340 Eisenhower Drive
Savannah, Georgia 31416
Amount of Construction Contract: $4,080,929
Builder's Profit and Overhead: $278,245
30. Architect: Martin Riley Associates - Architects
Address: 201 Swanton Way, Suite 200
Decatur, Georgia 30030
Amount of Fee: $69,000
31. Auditor/Tax Return Preparer: David Pelliccione, CPA
Contact Person: (same)
Address: P.O. Box 1
Savannah, Georgia 31402
Telephone Number: (912)234-1999
32. Federal Taxpayer ID Number: 58-2157019
33. Operating Deficit Guaranty: The General Partner shall be
obligated for 120 months beginning on Permanent Mortgage Commencement
to advance any funds necessary to meet cash operating expenses which
exceed cash operating income up to a maximum amount outstanding from
time to time of $600,000 (which amount includes the Operating Deficit
Escrow of $97,029).
34. Replacement Reserve: The General Partner shall cause the
Partnership to deposit at least $15,000 annually into a Replacement
Reserve.
35. Building Breakdown: Eleven buildings number NC-95-00011
through NC-95-00021.
cc: Boston Capital Communications Limited Partnership
Accounting Department
Exhibit B
Certificate of Operating Partnership,
Operating General Partner and Original
Limited Partner Re: Lack of Disqualifications
The Operating Partnership, its Operating General Partner and
Original Limited Partner (as identified on the Certification and
Agreement to which this Certificate is attached as Exhibit B) hereby
represent to you that neither (i) the Operating Partnership, (ii) any
predecessor of the Operating Partnership, (iii) any of the Operating
Partnership's affiliates ("affiliate" meaning a person that controls
or is controlled by, or is under common control with, the Operating
Partnership), (iv) any sponsor (meaning any person who (1) is directly
or indirectly instrumental in organizing the Operating Partnership or
(2) will directly or indirectly manage or participate in the
management of the Operating Partnership or (3) will regularly perform,
or select the person or entity who will regularly perform, the primary
activities of the Operating Partnership), (v) any officer, director,
principal or general partner of the Operating Partnership or of any
sponsor, (vi) any officer, director, principal, promoter or general
partner of any Operating General Partner, (vii) any beneficial owner
of ten per cent or more of any class of the equity securities of the
Operating Partnership or of any sponsor (beneficial ownership meaning
the power to vote or direct the vote and/or the power to dispose or
direct the disposition of such securities), (viii) any promoter of the
Operating Partnership (meaning any person who, acting alone or in
conjunction with one or more other persons, directly or indirectly has
taken, is taking or will take the initiative in founding and
organizing the business of the Operating Partnership or any person
who, in connection with the founding and organizing of the business or
enterprise of the Operating Partnership, directly or indirectly
receives in consideration of services or property, or both services
and property, ten per cent or more of any class of securities of the
Operating Partnership or ten per cent or more of the proceeds from the
sale of any class of such securities; provided, however, a person who
receives such securities or proceeds either solely as underwriting
commissions or solely in consideration of property shall not be deemed
a promoter if such person does not otherwise take part in founding and
organizing the enterprise) presently connected with the Operating
Partnership in any capacity:
(1) Has filed a registration statement which is the
subject of any pending proceeding or examination under the securities
laws of any jurisdiction, or which is the subject of a any refusal
order or stop order thereunder entered within five years prior to the
date hereof;
(2) Has been convicted of or pleaded nolo contendere
to a misdemeanor or felony or, within the last ten years, been held
liable in a civil action by final judgment of a court based upon
conduct showing moral turpitude in connection with the offer, purchase
or sale of any security, franchise or commodity (which term, for the
purposes of this Certificate shall hereinafter include commodity
futures contracts) or any other aspect of the securities or
commodities business, or involving racketeering, the making of a false
filing or a violation of Sections 1341, 1342 or 1343 of Title 18 of
the United States Code or arising out of the conduct of the business
of an issuer, underwriter, broker, dealer, municipal securities
dealer, or investment adviser, or involving theft, conversion,
misappropriation, fraud, breach of fiduciary duty, deceit or
intentional wrongdoing including, but not limited to, forgery, em-
bezzlement, obtaining money under false pretenses, larceny fraudulent
conversion or misappropriation of property or conspiracy to defraud,
or which is a crime involving moral turpitude, or within the last five
years of a misdemeanor or felony which is a criminal violation of
statutes designed to protect consumers against unlawful practices
involving insurance, securities, commodities, real estate, franchises,
business opportunities, consumer goods or other goods and services;
(3) Is subject to (a) any administrative order,
judgment or decree entered within five years prior to the date hereof
entered or issued by or procured from a state securities commission or
administrator, the Securities and Exchange Commission ("SEC"), the
Commodities Futures Trading Commission or the U.S. Postal Service, or
to (b) any administrative order or judgment, arising out of the
conduct of the business of an underwriter, broker, dealer, municipal
securities dealer, or investment adviser, or involving deceit, theft,
fraud or fraudulent conduct, or breach of fiduciary duty, or which is
based upon a state banking, insurance, real estate or securities law
or (c) has been the subject of any administrative order, judgment or
decree in any state in which fraud, deceit, or intentional wrongdoing,
including, but not limited to, making untrue statements of material
fact or omitting to state material facts, was found;
(4) Is subject to any pending proceeding in any
jurisdiction relating to the exemption from registration of any
security or offering, or to any order, judgment or decree in which
registration violations were found or which prohibits, denies or
revokes the use of any exemption from registration in connection with
the offer, purchase or sale of securities, or to an SEC censure or
other order based on a finding of false filing;
(5) Is subject to any order, judgment or decree of any
court or regulatory authority of competent jurisdiction entered within
five years prior to the date hereof, temporarily, preliminarily or
permanently restraining or enjoining such persons from engaging in or
continuing any conduct or practice in connection with any aspect of
the securities or commodities business or involving the making of any
false filing or arising out of the conduct of the business of an
underwriter, broker, dealer, municipal securities dealer, or
investment adviser, or which restrains or enjoins such person from
activities subject to federal or state statutes designed to protect
consumers against unlawful or deceptive practices involving insurance,
banking, commodities, real estate, franchises, business opportunities,
con to a United States Postal
Service false representation order entered within five years prior to
the date hereof, or is subject to a temporary restraining order or
preliminary injunction with respect to conduct alleged to have
violated section 3005 of Title 39, United States Code;
(6) Is suspended or expelled from membership in, or
suspended or barred from association with a member of, an exchange
registered as a national securities exchange, an association
registered as a national securities association, or any self-
regulatory organization registered pursuant to the Securities Exchange
Act of 1934, or a Canadian securities exchange, or association or
self-regulatory organization operating under the authority of the
Commodity Futures Trading Commission, or is subject to any currently
effective order or order entered within the past five years of the
SEC, the Commodity Futures Trading Commission or any state securities
administrator denying registration to, or revoking or suspending the
registration of, such person as a broker-
dealer, agent, futures commission merchant, commodity pool operator,
commodity trading adviser or investment adviser or associated person
of any of the foregoing, or prohibiting the transaction of business as
a broker-dealer or agent;
(7) Has, in any application for registration or in any
report required to be filed with, or in any proceeding before the SEC
or any state securities commission or any regulatory authority
willfully made or caused to be made any statement which was at the
time and in the light of the circumstances under which it was made
false or misleading with respect to any material fact, or has
willfully omitted to state in any such application, report or
proceeding any material fact which is required to be stated therein or
necessary in order to make the statements made, in the light of the
circumstances under which they are made, not misleading, or has
willfully failed to make any required amendment to or supplement to
such an application, report or statement in a timely manner;
(8) Has willfully violated any provision of the
Securities Act of 1933, the Securities Exchange Act of 1934, the Trust
Indenture Act of 1939, the Investment Advisers Act of 1940, the
Investment Company Act of 1940, the Commodity Exchange Act of 1974 or
the securities laws of any state, or any predecessor law, or of any
rule or regulation under any of such statutes;
(9) Has willfully aided, abetted, counseled,
commanded, induced or procured the violation by any other person of
any of the statutes or rules or regulations referred to in subsection
(8) hereof;
(10) Has failed reasonably to supervise his agents, if
he is a broker-dealer, or his employees, if he is an investment
adviser, but no person shall be deemed to have failed in such
supervision if there have been established procedures, and a system
for applying such procedures, which would reasonably be expected to
prevent and detect, insofar as practicable, any violation of statutes,
rules or orders described in subsection (8) and if such person has
reasonably discharged the duties and obligations incumbent upon him by
reason of such procedures and system without reasonable cause to
believe that such procedures and system were not being complied with;
(11) Is subject to a currently effective state
administrative order or judgment procured by a state securities
administrator within five years prior to the date hereof or is subject
to a currently effective United States Postal Service fraud order or
has engaged in dishonest or unethical practices in the securities
business or has taken unfair advantage of a customer or is the subject
of sanctions imposed by any state or federal securities agency or
self-regulatory agency;
(12) Is insolvent, either in the sense that his
liabilities exceed his assets or in the sense that he cannot meet his
obligations as they mature, or is in such financial condition that he
cannot continue his business with safety to his customers, or has not
sufficient financial responsibility to carry out the obligations
incident to his operations or has been adjudged a bankrupt or made a
general assignment for the benefit of creditors; or
(13) Is selling or has sold, or is offering or has
offered for sale, in any state securities through any unregistered
agent required to be registered under the Pennsylvania Securities Act
of 1972, as amended (the "Pennsylvania Act") or for any broker-dealer
or issuer with knowledge that such broker- dealer or issuer had not or
has not complied with the Pennsylvania Act.
If the Operating Partnership is subject to the requirements of
Section 12, 14 or 15(d) of the Securities Exchange Act of 1934, then
the Operating Partnership has filed all reports required by those
Sections to be filed during the 12 calendar months preceding the date
hereof (or for such shorter period that the Operating Partnership was
required to file such reports).
BOS2: 54171_1
