SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
August 20, 1996
Boston Capital Tax Credit Fund IV L.P.
(Exact name of registrant as specified in its charter)
Delaware 33-70564 04-3208648
(State or other (Commission File (IRS Employer
jurisdiction of Number)
Number)
Identification
incorporation)
c/o Boston Capital Partners, Inc.,
One Boston Place, 21st Floor
Boston, Massachusetts 02108-4406
(Address of principal executive offices)
Registrant's telephone number,including area code: (617) 624-8900
None
(Former Name or former address, if changed since last report)
Item 2. Acquisition or Disposition of Assets.
On August 20 11, 1994, Boston Capital Tax Credit Fund IV L.P.
(the
"Partnership") acquired a limited partnership interest in Pear Village
Limited, a Kentucky limited partnership ("Pear Village").
Pear Village was formed to develop, construct, own, maintain
and operate a 16-unit apartment complex, all of which units consist of three-
bedroom dwelling units for individuals and families of low and moderate
income, contained in eight single story buildings, known as Pear Village
Apartments, located in Leitchfield, Grayson County, Kentucky (the "Apartment
Complex"). Each dwelling unit in the Apartment Complex will contain a
refrigerator, electric oven, dishwater, disposal, washer/dryer and cable TV
hook-up and all units are handicap accessible. The Apartment Complex will
have a children's playground.
Construction of the Apartment Complex commenced in April, 1996,
and is expected to be substantially completed in December, 1996. The
Operating General Partners expect the Apartment Complex to be 100% occupied by
August, 1997.
Construction/permanent financing for the Apartment Complex is
being supplied from the proceeds of a non-recourse mortgage loan made by First
Federal Savings Bank of Leitchfield on August 20, 1996 in the original
principal amount of $227,000 (the "First Mortgage Loan"). During
construction, monthly payments on account of interest only (which accrues at
the Prime Rate of the First Federal Savings Bank of Leitchfield) are due and
payable by Pear Village. Thereafter, interest shall accrue on the principal
balance of the First Mortgage Loan at a rate of 2.5% per annum. Monthly
payments in the amount of $896.55 shall be due and payable by Pear Village
with an estimated balloon payment of $135,354.89 due and payable on April 1,
2012.
Additional construction/permanent financing is being supplied from
the proceeds of a non-recourse second mortgage loan in the original principal
amount of $300,000 which has be made by Kentucky Housing Corporation with
funds received from the Federal Home Loan Bank of Cincinnati pursuant to the
Federal Home Loan Bank's Affordable Housing Program (the "Second Mortgage
Loan"). The Second Mortgage Loan accrues interest at a rate of 1% based on a
25-year amortization schedule. The principal and accrued yet unpaid interest
on the Second Mortgage Loan matures on the earlier of February 1, 2027 or 25
years from the submission of the Rental Housing Project Completion Report by
Pear Village to HUD.
The Operating General Partner of Pear Village is Leitchfield
Affordable Housing, LLC, a Kentucky limited liability company. The property
management agents for the Apartment Complex will be Homeland, Inc. and The
Housing Foundation, Inc., which shall receive a combined management fee for
their property management services in an initial amount equal to six per cent
(6%) of the gross rental income of the Apartment Complex per year.
The Partnership acquired its interest in Pear Village directly
from Pear Village in consideration of its agreement to make capital
contributions to Pear Village in the aggregate amount of $488,822, payable in
four installments as follows: (i) a first installment of $244,412, which was
paid upon the Partnership's admission to Pear Village and Initial Closing;
(ii) a second installment of $122,205, which is conditional upon Substantial
Completion of construction of the Apartment Complex, State Designation and
eligible basis certification of the Apartment Complex, together with an
accountants' report thereon; (iii) a third installment of $112,205, which is
conditional upon achievement of 87% occupancy of the Apartment Complex and
Final Closing; and (iv) a fourth installment of $10,000, which is conditional
upon receipt by the Partnership of Pear Village's federal income tax return
for the year in which Rental Achievement occurred. The Partnership's total
capital contribution of $488,822 was determined based on Pear Village's
receipt of $836,880 of Federal Housing Tax Credits over the eleven-year period
consisting of the years 1997 through 2007.
The Partnership's interest in Pear Village constitutes a
98.99% interest in allocations of profits, losses and tax credits from normal
operations of Pear Village, a 50% interest in distributions of cash flow from
normal operations, and a 50% interest in allocations of profits and
distributions from the sale or refinancing of the Apartment Complex. In
conjunction with the admission of the Partnership to Pear Village, BCTC 94,
Inc., a Delaware corporation and a designee of the Partnership, also was
admitted to Pear Village as a special limited partner. In the event of the
removal by the Partnership of the Operating General Partner pursuant to the
Pear Village Operating Partnership Agreement, the interest of BCTC 94, Inc.
would be converted to a general partnership interest in Pear Village. The
Operating General Partner has made a capital contribution to Pear Village in
the aggregate amount of $100, and has retained an aggregate 1% interest in
allocations of profits, losses and tax credits from normal operations of Pear
Village, an aggregate 50% interest in distributions of cash from normal
operations, and an aggregate 50% interest in allocations of profits and
distributions from the sale or refinancing of the Apartment Complex. The
proceeds of the capital contributions of the Partnership will be used by Pear
Village to: (i) pay a development fee and a developer overhead allowance to
the Operating General Partner in the total amount of $200,000 and $1,922,
respectively, and (ii) pay direct development costs of the Apartment Complex
in the amount of $286,900.
Boston Capital Partners, Inc. will receive an annual Asset
Management Fee in the amount of $1,000, commencing in 1997, from the cash flow
of Pear Village for services in connection with Pear Village's accounting
matters relating to the Partnership and the preparation of tax returns and
reports for the Partnership. The Operating General Partner will receive a
partnership management fee from the net cash flow of Pear Village in the
annual amount of $1,000, commencing in 1997.
The Operating General Partner has agreed to provide all funds
necessary to pay any excess development costs which may arise in connection
with the development of the Apartment Complex and the closing of the First
Mortgage Loan and the Second Mortgage Loan. The Operating General Partner
also has agreed to loan to Pear Village funds in an amount not to exceed
$200,000 to pay operating deficits of Pear Village which may arise during the
Compliance period.
As of the Initial Closing, Pear Village will establish and fund,
from its operating income, a reserve fund for replacements as to the Apartment
Complex in the approximate amount of $4,000 per year.A separate interest-
bearing account shall be established and funded in the amount of $10,000 by
Pear Village upon the receipt of the Second Installment of Capital
Contributions from the Partnership (the "Operating Reserve Account"). Such
funds and all interest earnings on such funds shall be employed solely for the
payment of operating deficits. Withdrawals from the Operating Reserve Account
shall be made only with the consent or upon the direction of BCTC 94, Inc.
The Operating Reserve Account shall terminate upon the occurrence of Rental
Achievement. Funds remaining in the Operating Reserve Account upon the
occurrence of Rental Achievement, shall be released therefrom and shall be
paid by Pear Village to the Operating General Partner.
* * * * *
Item 7. Financial Statements and Exhibits
(a) Financial statements of business acquired.
(i) There are no meaningful financial statements for
Pear Village for any relevant time period, since there have not yet been any
substantial operations subsequent to the rehabilitation of the Apartment
Complex.
(b) Pro forma financial information.
(i) No pro forma statements of operations of Pear Village have
been prepared since there are no meaningful historical numbers which are
affected by the acquisition.
(c) Exhibits.
(1) (a)1
Form of proposed DealerManager Agreement between Boston Capital Services, Inc.
and the Registrant (including, as an exhibit thereto, the form of Soliciting
Dealer Agreement).
(2) (a) Agreement of Limited
Partnership of Pear Village Limited.
(b) Certification and Agreement
for Pear Village.
(4) (a)2
Agreement of Limited Partnership of Boston Capital Tax Credit Fund IV L.P.
(16) None
(17) None
(21) None
(24) None
(25) None
(28) None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BOSTON CAPITAL TAX CREDIT FUND IV L.P. By: Boston Capital Associates IV L.P.,
General Partner
By: Boston Capital Associates, its general partner
By: /s/ Herbert F. Collins Herbert F. Collins,
Partner
Date: ___________, 1996
Exhibit (2)(a)
Exhibit (2)(b)
AGREEMENT OF LIMITED PARTNERSHIP OF PEAR VILLAGE LIMITED
As of August 1, 1996
AGREEMENT OF LIMITED PARTNERSHIP OF
PEAR VILLAGE LIMITED
This Agreement of Limited Partnership is made and entered into as of
the 1st day of August, 1996, by and among the undersigned parties.
WHEREAS, on October 27, 1995, Wabuck Development Company, Inc., a
Kentucky corporation (the "Withdrawing Initial General Partner") as the
general partner and Garry D. Watkins and Dennis R. Buckles, each an individual
resident of the Commonwealth of Kentucky, (collectively, the "Withdrawing
Initial Limited Partners") as the limited partners, executed a Certificate of
Limited Partnership, pursuant to the Kentucky Revised Uniform Limited
Partnership Act (the "Act"), for the formation of Pear Village Limited (the
"Partnership"), which was filed in the Office of the Secretary of State of the
Commonwealth of Kentucky on December 5, 1995 (the "Certificate"); and
WHEREAS, the Partnership has been formed to develop, construct,
own, maintain and operate a 16-unit multifamily apartment complex intended
for rental to families and individuals of low income, to be known as Pear
Village Apartments, and located in Leitchfield, Grayson County, Kentucky (the
"Apartment Complex"); and
WHEREAS, First Federal Savings Bank of Leitchfield has issued to the
Partnership its commitment to provide a construction/permanent mortgage loan
for the Apartment Complex in a principal amount not to exceed $227,000 (the
"First Mortgage Loan"), which First Mortgage Loan is to be made to the
Partnership on or before Initial Closing; the Initial Closing is anticipated
to occur in August, 1996; and
WHEREAS, the Kentucky Housing Corporation has issued to the
Partnership a commitment to provide a construction/permanent mortgage loan for
the Apartment Complex in a principal amount not to exceed $300,000 (the
"Second Mortgage Loan"), which Second
Mortgage Loan is to be made to the Partnership or or before Initial Closing;
and
WHEREAS, the parties hereto now desire to enter into this Agreement
of Limited Partnership to (i) continue the Partnership; (ii) admit Leitchfield
Affordable Housing, LLC, a Kentucky limited liability company, to the
Partnership as the General Partner; (iii) withdraw the Withdrawing Initial
General Partner from the Partnership; (iv) admit Boston Capital Tax Credit
Fund IV L.P., a Delaware limited partnership, to the Partnership as a Limited
Partner; (v) withdraw the Withdrawing Initial Limited Partners from the
Partnership; (vi) admit BCTC 94, Inc., a Delaware corporation ("BCTC 94") as
the Special Limited Partner; (vii) reassign Interests in the Partnership; and
(viii) set forth all of the provisions governing the Partnership.
NOW, THEREFORE, in consideration of the foregoing, of mutual
promises of the parties hereto and of other good and valuable consideration,
the receipt and sufficiency of which hereby are acknowledged, the parties
hereby agree to continue the Partnership pursuant to the Act, as set forth in
this Agreement of Limited Partnership, which reads in its entirety as follows:
TABLE OF CONTENTS
ARTICLE I CONTINUATION OF PARTNERSHIP
1.01. Continuation 1
1.02. Name 1
1.03. Principal Executive Offices; Agent for
Service of Process 1
1.04. Term 1
1.05. Recording of Certificate 1
ARTICLE II DEFINED TERMS 2
ARTICLE III PURPOSE AND BUSINESS OF THE PARTNERSHIP
3.01. Purpose of the Partnership 13
3.02. Authority of the Partnership 13
ARTICLE IV REPRESENTATIONS, WARRANTIES AND COVENANTS;
DUTIES AND OBLIGATIONS
4.01. Representations, Warranties & Covenants
Relating to the Apartment Complex and the Partnership 16
4.02. Duties and Obligations Relating to the
Apartment Complex and the Partnership 19
ARTICLE V PARTNERS, PARTNERSHIP INTERESTS AND OBLIGATIONS
OF THE PARTNERSHIP
5.01. Partners, Capital Contributions and Partnership
Interests 22
5.02. Return of Capital Contribution 25
5.03. Withholding of Capital Contributions
Upon Default 25
5.04. Legal Opinions 26
5.05. Repurchase Obligation 27
5.06. Asset Management Fee 28
ARTICLE VI CHANGES IN PARTNERS
6.01. Withdrawal of a General Partner 29
6.02. Admission of a Successor or Additional General
Partners 29
6.03. Effect of Bankruptcy, Death, Withdrawal,
Dissolution or Incompetence of a General Partner 30
ARTICLE VII ASSIGNMENT TO THE PARTNERSHIP 32
ARTICLE VIII RIGHTS, OBLIGATIONS AND POWERS OF THE
GENERAL PARTNER
8.01. Management of the Partnership 33
8.02. Limitations Upon the Authority of the
General Partner 34
8.03. Management Purposes 35
8.04. Delegation of Authority 35
8.05. General Partner or Affiliates Dealing with
Partnership 35
8.06. Other Activities 36
8.07. Liability for Acts and Omissions 36
8.08. Net Worth of Sole Corporate or Limited
Liability Company General Partner 36
8.09. Construction of the Apartment Complex,
Construction Cost Overruns, Operating Deficits 36 8.10. Development
Fee; Developer Overhead Allowance 38
8.11. Incentive Management Fee; Partnership
Management Fee 39
8.12. Withholding of Fee Payments 39
8.13. Removal of the General Partner 40
8.14. Selection of Management Agent 42
8.15. Removal of the Management Agent 42
8.16. Replacement of the Management Agent 43
8.17. Loans to the Partnership 43
8.18. Reserve Fund for Replacements;
Operating Reserve Account 44
8.19 Right of First Refusal 45
ARTICLE IX TRANSFERS OF, AND RESTRICTIONS ON
TRANSFERS OF INTERESTS OF LIMITED PARTNERS
9.01. Acquisition for Investment 45
9.02. Restrictions on Transfer of Limited Partners'
Interests 45
9.03. Admission of Substitute Limited Partners 45
9.04. Rights of Assignee of Partnership Interest 47
ARTICLE X RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
10.01. Management of the Partnership 48
10.02. Limitation on Liability of Limited Partners 48
10.03. Other Activities 48
ARTICLE XI PROFITS, LOSSES AND DISTRIBUTIONS
11.01. Allocation of Profits, Losses, Credits and
Cash Distributions 49
11.02. Determination of Profits, Losses and Credits 50
11.03. Allocation of Gains and Losses 50
11.04. Distribution of Proceeds from Sale and Liquidation of Partnership
Property 51
11.05. Capital Accounts 52
11.06. Authority of General Partner to Vary
Allocations to Preserve and Protect Partners' Interest 53
11.07. Designation of Tax Matters Partner 54
11.08. Authority of Tax Matters Partner 54
11.09. Expenses of Tax Matters Partner 55
11.10. Minimum Gain Provisions 55
ARTICLE XII SALE, DISSOLUTION AND LIQUIDATION
12.01. Dissolution of the Partnership 57
12.02. Winding Up and Distribution 57
ARTICLE XIII BOOKS AND RECORDS, ACCOUNTING
TAX ELECTIONS, ETC.
13.01. Books and Records 59
13.02. Bank Accounts 59
13.03. Accountants 59
13.04. Reports to Partners 60
13.05. Section 754 Elections 63
13.06. Fiscal Year and Accounting Method 63
ARTICLE XIV AMENDMENTS
14.01. Proposal and Adoption of Amendments 64
ARTICLE XV CONSENTS, VOTING AND MEETINGS
15.01. Method of Giving Consent 64
15.02. Submissions to Limited Partners 64
15.03. Meetings; Submissions of Matters for Voting 64
ARTICLE XVI GENERAL PROVISIONS
16.01. Burden and Benefit 65
16.02. Applicable Law 65
16.03. Counterparts 65
16.04. Separability of Provisions 65
16.05. Entire Agreement 65
16.06. Liability of the Investment Partnership 65
16.07 Environmental Protection 66
16.08. Notices to the Investment Partnership 67
ARTICLE I.
CONTINUATION OF PARTNERSHIP
1.01. Continuation. The undersigned hereby continue the
Partnership
as a limited partnership under the Act.
1.02. Name. The name of the Partnership is PEAR VILLAGE LIMITED.
1.03. Principal Executive Offices; Agent for Service of Process.
The principal executive office of the Partnership shall be 1178 Owensboro
Road, P.O. Box 556, Leitchfield, Kentucky 42755. The Partnership may change
the location of its principal executive office to such other place or places
as may hereafter be determined by the General Partner. The General Partner
shall promptly notify all other Partners of any change in the principal
executive office. The Partnership may maintain such other offices at such
other place or places as the General Partner may from time to time deem
advisable.
The name and address of the Agent for service of process is Garry D.
Watkins, 1178 Owensboro Road, P.O. Box 556 Leitchfield, Kentucky 42755.
1.04. Term. The term of the Partnership commenced as of December
5,
1995, and shall continue until December 5, 2069, unless the Partnership is
sooner dissolved in accordance with the provisions of this Agreement.
1.05. Recording of Certificate. Upon the execution of this
Agreement by the parties hereto, the General Partner shall take all actions
necessary to assure the prompt execution of an amended and restated
Certificate and filing thereof with the Office of the Secretary of State of
the Commonwealth of Kentucky, and with the County Clerk of Grayson County,
Kentucky, as required by the Act. All fees for filing shall be paid out of
the Partnership's assets. The General Partner shall take all other necessary
action required by law to perfect and maintain the Partnership as a limited
partnership under the laws of the State, and shall register the Partnership
under any assumed or fictitious name statute or similar law in force and
effect in the State.
ARTICLE II.
DEFINED TERMS
In addition to the abbreviations of the parties set forth in the
preamble to this Agreement, the following defined terms used in this Agreement
shall have the meanings specified below:
"Accountants" means Daniel G. Drane, Certified Public Accountant, or
such other firm of independent certified public accountants as may be engaged
by the General Partner, with the Consent of BCTC 94, to prepare the
Partnership income tax returns and to provide general accounting services to
the Partnership.
"Act" means the Revised Uniform Limited Partnership Act of the
Commonwealth of Kentucky, as amended from time to time during the term of the
Partnership.
"Actual Credit" means as of any point in time, the total amount of
the Tax Credits actually allocated by the Partnership to the Investment
Partnership, representing ninetynine per cent (99%) of the Tax Credits
actually received by the Partnership.
"Admission Date" means the date upon which the Investment
Partnership is admitted to the Partnership.
"Affiliate" means any Person that directly or indirectly, through
one or more intermediaries, controls or is controlled by or is under common
control with a General Partner, or with another designated Person, as the
context may require.
"Agency" means the Kentucky Housing Corporation, the designated
agency of the Commonwealth of Kentucky to allocate LowIncome Housing Tax
Credits, acting through any authorized representative.
"Agreement" means this Agreement of Limited
Partnership, as amended from time to time.
"Apartment Complex" means the land owned by the Partnership in
Leitchfield, Grayson County, Kentucky and the 16 unit multifamily rental
housing development and other improvements located thereon, owned and being
constructed and operated thereon by the Partnership, and to be known as Pear
Village Apartments.
"Applicable Percentage" has the meaning given to it in Section 42(d)
of the Code.
"Asset Management Fee" means the fee payable by the Partnership to
BCCLP, or an Affiliate thereof, pursuant to Section 5.06.
"Bankruptcy" or "Bankrupt" as to any Person means the filing of a petition for
relief as to any such Person as
debtor or bankrupt under the Bankruptcy Act of 1898 or the Bankruptcy Code of
1978 or like provision of law (except if such petition is contested by such
Person and has been dismissed within 60 days); insolvency of such Person as
finally determined by a court proceeding; filing by such Person of a petition
or application to accomplish the same or for the appointment of a receiver or
a trustee for such Person or a substantial part of his assets; commencement of
any proceedings relating to such Person under any other reorganization,
arrangement, insolvency, adjustment of debt or liquidation law of any
jurisdiction, whether now in existence or hereinafter in effect, either by
such Person or by another, provided that if such proceeding is commenced by
another, such Person indicates his approval of such proceeding, consents
thereto or acquiesces therein, or such proceeding is contested by such Person
and has not been finally dismissed within 60 days.
"BCCLP" means Boston Capital Communications Limited Partnership, a
Massachusetts limited partnership, and its successors and assigns.
"BCTC 94" means BCTC 94, Inc., a Delaware corporation, which is the
Special Limited Partner of the Partnership, and its successors and assigns.
"Boston Capital" means Boston Capital Partners, Inc., a
Massachusetts corporation, and its successors and assigns.
"Capital Account" means the capital account of a
Partner as described in Section 11.05.
"Capital Contribution" means the total amount of money or other
property contributed or agreed to be contributed, as the context requires, to
the Partnership by each Partner pursuant to the terms of this Agreement. Any
reference to the Capital Contribution of a Partner shall include the Capital
Contribution made by a predecessor holder of the Interest of such Partner.
"Capital Transaction" means any transaction the proceeds of which
are not includable in determining Cash Flow, including without limitation the
disposition, whether by partial sale (except when such sale proceeds are to be
used pursuant to a plan or budget approved by all of the Partners), casualty
(where the proceeds are not to be used for reconstruction), condemnation,
refinancing or similar event of any part of the Apartment Complex, prior to
the sale of the Apartment Complex, where the gross proceeds from such sale or
event exceed $50,000.
"Cash Flow" means, with respect to any fiscal year of the
Partnership or other applicable period, from and after the first day of the
month in which the Admission Date occurs, (a) all Revenues received by the
Partnership during such period, plus (b) any amounts which the General
Partner, with the Consent of the First Mortgage Lender and the Second Mortgage
Lender , if required, and the Consent of BCTC 94, releases from the Reserve
Fund for Replacements as being no longer necessary to hold as part of the
Reserve Fund for Replacements, less (i) operating expenses of the Partnership
paid from Revenues during the applicable period, (ii) all cash payments made
from Revenues during such period to discharge Partnership indebtedness, and
(iii) all amounts from Revenues, if any,
added to the Reserve Fund for Replacements during such period. In no event
will deductions in determining Cash Flow pursuant to clauses (i) and (ii)
above include payments made on account of: the Asset Management Fee; amounts
due on any Subordinated Loans; and/or the Partnership Management Fee.
Cash Flow shall be determined separately for each fiscal year and
shall not be cumulative. Wherever there is a reference to the distribution of
Cash Flow pursuant to the provisions of this Agreement, Cash Flow shall be
deemed to be limited to Surplus Cash available for distribution.
"Certificate" has the meaning given to it in the preamble to this
Agreement, together with any certificate of limited partnership or any other
instrument or document which is required under the laws of the State to be
signed and sworn to by the Partners of the Partnership and filed in the
appropriate public offices within the State to perfect or maintain the
Partnership as a limited partnership under the laws of the State, to effect
the admission, withdrawal or substitution of any Partner of the Partnership,
or to protect the limited liability of the Limited Partners as limited
partners under the laws of the State.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, or any corresponding provision or provisions of succeeding law.
"Compliance Period" has the meaning, with respect to each building
in the Apartment Complex, set forth in Section 42(i)(1) of the Code.
"Consent" means the prior written consent or approval of the
Investment Partnership and/or any other Partner, as the context may require,
to do the act or thing for which the consent is solicited.
"Construction Contract" means the construction contract dated April
1, 1996 in the amount of $705,000 (including all exhibits, addenda and
attachments thereto) entered into between the Partnership and the Contractor,
pursuant to which the Apartment Complex is being constructed.
"Contractor" means Clayton Watkins Construction, Inc., a
Kentucky corporation, which is the general construction contractor for the
construction of the Apartment Complex.
"Cost Certification" has the meaning given to it in
Section 5.01(c)(2) of this Agreement.
"Counsel" or "Counsel for the Partnership" shall mean such attorney
or law firm upon which BCTC 94 and the General Partner shall agree; provided,
however, that if any section of this Agreement either (i) designates
particular counsel for the purpose described therein, or (ii) provides that
counsel for the purpose described therein shall be chosen by another method or
by another Person, then such designation or provision shall prevail over this
general definition.
"Developer" means Leitchfield Affordable Housing, LLC, of
Leitchfield, Kentucky in its capacity as developer of the Apartment Complex.
"Developer Overhead Allowance" means the allowance payable by the
Partnership to the Developer pursuant to Section 8.10(b) of this Agreement.
"Development Fee" means the fee payable by the Partnership to the
Developer pursuant to Section 8.10(a) of
this Agreement.
"Development Sources" means the aggregate of: (i) the proceeds of
the First Mortgage Loan and the Second Mortgage Loan; (ii) the Capital
Contributions of the General Partner; and (iii) the Capital Contributions of
the Investment Partnership to the Partnership.
"Eligible Basis" has the meaning given to it in Section 42(d) of the
Code.
"Excess Development Costs" means all funds in excess of the
Development Sources which are required to (i) complete construction of the
Apartment Complex, including paying any construction cost overruns and the
cost of any change orders which have been approved by the First Mortgage
Lender and/or the Second Mortgage Lender, as required, and which are not
funded from the Development Sources; (ii) achieve Substantial Completion,
(iii) achieve Initial Closing and Final Closing, effect funding of the First
Mortgage Loan and the Second Mortgage Loan, and satisfy any escrow deposit
requirements which are conditions to the Final Closing, including, without
limitation, any amounts necessary for local taxes, utilities, insurance
premiums, and other amounts which are required (provided, however, that if any
such deposits are made by the General Partner, and the funds, or any portion
thereof, subsequently are released from such deposit, the funds so released
shall be paid to the General Partner); (iv) pay any applicable loan assessment
fees, discounts or other expenses incurred by the Partnership as a result of
the occurrence of the Initial Closing and/or the
Final Closing; (v) make the required $10,000 deposit into the Operating
Reserve Account; and (vi) pay any Operating Deficits incurred by the
Partnership prior to the Final Closing;
"Final Closing" means the occurrence of all of the following: (i)
Substantial Completion; (ii) the filing of the Rental Housing Project
Completion Report with the U.S. Department of Housing and Urban Development,
acting through any authorized representative, (iii) the commencement of
amortization as to the First Mortgage Loan and (iv) the commencement of
amortization as to the Second
Mortgage Loan.
"First Mortgage" means the Mortgage to be given by the Partnership
on or before the Initial Closing in favor of the First Mortgage Lender and
which will constitute a first lien on the Apartment Complex and secures the
First Mortgage Loan.
"First Mortgage Lender" means First Federal Savings
Bank of Leitchfield, in its capacity as the maker of the First Mortgage Loan,
or its successors or assigns in such capacity, acting through any authorized
representative.
"First Mortgage Loan" means the nonrecourse construction/permanent
mortgage loan in an original principal amount not to exceed $227,000, to be
made to the Partnership with respect to the Apartment Complex by the First
Mortgage Lender on or before the Initial Closing, with non-federally sourced
funds received by the First Mortgage Lender from the Federal Home Loan Bank of
Cincinnati. The First Mortgage Loan shall bear interest and be payable as
follows: (i) during the period from the closing of the First Mortgage Loan
until Final Closing, monthly payments on account of interest only at the First
Mortgage Lender's "Prime Rate" shall be due and payable; (ii) from and after
Final Closing and continuing throughout the term of the First Mortgage Loan,
monthly payments of interest at a rate of two and one-half per cent (2.5%) per
annum, and principal, based upon a 30-year amortization schedule shall be due
and payable. The outstanding principal balance, together with accrued and
unpaid interest on the First Mortgage Loan, shall be due and payable on April
1, 2012.
"General Partner" means Leitchfield Affordable Housing, LLC, a
Kentucky limited liability company, and any other Person admitted as a general
partner pursuant to this Agreement, and their respective successors pursuant
to this Agreement, including particularly the provisions of Section 6.03, 8.01
and 8.13.
"HOME Set-Aside Test" means the requirement that at least 40% of the
units in the Apartment Complex must be occupied by individuals with incomes of
50% or less of area median income, as adjusted for family size.
"Incentive Management Fee" means the fee payable by the Partnership
to the General Partner pursuant to Section 8.11 of this Agreement.
"Initial Closing" means the first date upon which: (i) each of the
First Mortgage Loan and the Second Mortgage Loan have closed and (ii) the
initial draws of proceeds of the First Mortgage Loan and the Second Mortgage
Loan, respectively, have been disbursed to the Partnership; the Initial
Closing is expected to occur in August, 1996.
"Initial 87% Occupancy Date" means the first date upon which not
less than 87% of the apartment units (i.e., not less than 14 units) in the
Apartment Complex have been leased to, and are occupied by, qualified tenants
under executed Agency approved leases, if any such approval is required.
"Installment" means an Installment of the Investment Partnership's
Capital Contribution paid or payable to the Partnership pursuant to Section
5.01.
"Interest" or "Partnership Interest" means the ownership interest of
a Partner in the Partnership at any particular time,
including the right of such Partner to any and all benefits to which such
Partner may be entitled as provided in this Agreement and in the Act, together
with the obligations of such Partner to comply with all the terms and
provisions of this Agreement and of said Act. Such Interest of each Partner
shall, except as otherwise specifically provided herein, be that percentage of
the aggregate of such benefit or obligation specified by Section 5.01 as such
Partner's Percentage Interest.
"Interest Account" means the account to be established pursuant to
the requirements of Section 8.18(c) of this Agreement.
"Invested Amount" means, as to the Investment Partnership, the
aggregate amount of capital contributions made to the Investment Partnership
by its investors and attributable to the Partnership, which is an amount equal
to the Investment Partnership's paid-in Capital Contributions divided by 73%.
"Investment Partnership" means Boston Capital Tax
Credit Fund IV L.P., a Delaware limited partnership, which is a Limited
Partner of the Partnership.
"Land" means the tract of land upon which the Apartment Complex is
located.
"Lenders" means, collectively, the First Mortgage Lender and the
Second Mortgage Lender and/or their respective successor(s) and assign(s).
"Limited Partner" means the Investment Partnership and/or BCTC 94,
or any other Limited Partner in such Person's capacity as a limited partner of
the Partnership.
"Liquidator" means the General Partner or, if there is none at the
time in question, such other Person who may be appointed in accordance with
applicable law and who shall be responsible for taking all action necessary or
appropriate to wind up the affairs of, and distribute the assets of, the
Partnership upon its dissolution.
"Loan Agreements" means the construction loan agreements with
respect to the terms and conditions of the making of the First Mortgage Loan
and the Second Mortgage Loan, which shall be entered into on or before Initial
Closing.
"Low-Income Housing Tax Credit" means the low-income housing tax
credit allowed for low-income housing projects pursuant to Section 42 of the
Code.
"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.
"Minimum Set-Aside Test" means the set-aside test selected by the Partnership
pursuant to Section 42(g) of the Code with respect to the percentage of units
in its Apartment Complex to be occupied by tenants with incomes equal to no
more than a certain percentage of area median income. The Partnership has
selected or will select the 20-50 Set-Aside Test as the Minimum Set-Aside
Test.
"Net Capital Contribution" means an amount equal to a Partner's
paid-in Capital Contribution (but not including any Capital Contribution of
any prior Partner), less the aggregate amount of cash distributions, if any,
made to such Partner hereunder.
"Notice" means a writing containing the information required by this
Agreement to be communicated to a Partner and sent by registered or certified
mail, postage prepaid, return receipt requested, to such Partner at the last
known address of such Partner, the date of registry thereof or the date of the
certification receipt therefor being deemed the date of such Notice; provided,
however, that any written communication containing such information sent to
such Partner actually received by such Partner shall constitute Notice for all
purposes of this agreement.
"Operating Deficit" means the amount by which the income of the
Partnership from rental payments made by tenants of the Apartment Complex and
all other income of the Partnership (other than proceeds of any loans to the
Partnership and investment earnings on funds on deposit in the Reserve Fund
for Replacements and other such reserve or escrow funds or accounts) for a
particular period of time, is exceeded by the sum of all the operating
expenses, including all debt service payments due and payable with respect to
the First Mortgage Loan and the Second Mortgage Loan, as applicable, operating
and maintenance expenses, deposits into the Reserve Fund for Replacements, any
First Mortgage Lender and Second Mortgage Lender fee payments, and all other
Partnership obligations or expenditures, excluding payments for construction
of the Apartment Complex and fees and other
expenses and obligations of the Partnership to be paid from the Capital
Contributions of the Investment Partnership to the Partnership pursuant to
this Agreement, during the same period of time.
"Operating Reserve Account" means the account to be established
pursuant to the requirements of Section 8.18(b) of this Agreement.
"Partner" means any General Partner and any Limited Partner. "Partnership"
means Pear Village Limited. "Partnership Agreement" means this Agreement of
Limited
Partnership, as amended from time to time.
"Partnership Management Fee" means the fee payable by the
Partnership to the General Partner pursuant to Section 8.11 of this Agreement.
"Percentage Interest" means the percentage Interest of each
Partner
as set forth in Section 5.01.
"Person" means any individual, partnership, limited
liability company, corporation, trust or other entity.
"Project Documents" means and includes the First Mortgage, the Second
Mortgage, the Loan Agreements, the Regulatory Agreement, the Management
Agreement and all other instruments delivered to (or required by) the First
Mortgage Lender, the Second Mortgage Lender or the 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 Low-Income Housing Tax Credits in the
amount of $51,782 for 1997, $82,851 per year for each of the years 1998
through 2006, and $31,069 for 2007, which the General Partner has projected to
be the total amount of the Tax Credits which will be allocated to the
Investment Partnership by the Partnership, constituting ninety-nine per cent
(99%) of the Tax Credits which are projected to be available to the
Partnership; provided, however, that if the Actual Credit for 1997 is greater
than (or less than) $51,782, the Projected Credit for the year 2007 shall be
reduced (increased) by an amount equal to the amount by which the Actual
Credit for 1997 exceeds (is less than) $51,782.
"Regulatory Agreement" means the HOME Funding Agreement to be
entered into on or before Initial Closing by and between the Partnership and
the Second Mortgage Lender with respect to the Second Mortgage setting forth
certain terms and conditions under which the Apartment Complex is to be
operated.
"Rental Achievement" means the date upon which: (i) the total of
the rental and miscellaneous income from the normal operation of the Apartment
Complex received on a cash basis, for a period of three (3) consecutive
calendar months after the Final Closing, with each month taken individually,
(ii) exceeds all accrued operational costs and expenses of the Apartment
Complex, including but not limited to taxes, assessments, Reserve Fund for
Replacement deposits, scheduled debt service payments with respect to the
First Mortgage Loan and the Second Mortgage Loan, and a ratable portion of the
annual amount (as reasonably estimated by the General Partner) of those
seasonal and/or periodic expenses (such as utilities, maintenance expenses and
real estate taxes) which might reasonably be expected to be incurred on an
unequal basis during a full annual period of operation, for such period of
three (3) consecutive calendar months, with each month taken individually,
(iii) by an amount equal to or greater than fifteen per cent (15%) of the
total amount of the scheduled debt service payments with respect to the First
Mortgage Loan and the Second Mortgage Loan as aforesaid.
"Rental Achievement Confirmation" means the date on which BCTC
94 receives each of (a) a copy of the federal income tax return and audited
financial statements of the Partnership and (b) the financial reports to be
provided pursuant to Section 13.04(a)(i), in each case for the Partnership
fiscal year in which Rental Achievement shall have occurred, evidencing that
Rental Achievement occurred in such year.
"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 cannot exceed 30% of the qualifying income levels of those
units.
"Reserve Fund for Replacements" means the reserve fund
for replacements with respect to the Apartment Complex as is required by the
Lenders pursuant to the Regulatory Agreement and the Loan Agreements, as
described in Section 8.18(a) of this Agreement.
"Revenues" means all cash receipts of the Partnership during any
period, except for Capital Contributions, proceeds from the liquidation, sale
or refinancing of Partnership property or of a Capital Transaction, or the
proceeds of any loan to the Partnership.
"Second Mortgage" means the mortgage, together with all
amendments
thereto, to be given by the Partnership at the Initial
Closing to the Second Mortgage Lender, as maker of the Second Mortgage Loan,
which will constitute a second lien on the Apartment Complex, subject and
subordinate to the lien of the First Mortgage, and which will secure the
Second Mortgage Loan.
"Second Mortgage Lender" means the Agency, in its
capacity as the maker of the Second Mortgage Loan, or its successor(s) and
assign(s) in such capacity, acting through any authorized representative.
"Second Mortgage Loan" means the nonrecourse
construction/permanent
second mortgage loan, in an original principal amount not to exceed $300,000,
to be made to the Partnership with respect to the Apartment Complex by the
Second Mortgage Lender on or before Initial Closing with funds from the
Kentucky HOME Investment Partnerships Program. The Second Mortgage Loan is to
bear interest at the rate of one per cent (1%) per annum, which interest shall
be deferred until the maturity date of the Second Mortgage Loan. The
outstanding principal balance, together with accrued and unpaid interest based
on the aforesaid rate and a 25-year amortization schedule shall be due and
payable twenty-five (25) years from the occurrence of Final Closing.
"State" means the Commonwealth of Kentucky.
"State Designation" means, with respect to the
Apartment Complex, the final allocation by the Agency of LowIncome Housing Tax
Credits, as evidenced by the receipt by the Partnership of IRS Form 8609s
executed by the Agency as to all units in the Apartment Complex.
"Subordinated Loan" means any loan made by the General Partner to
the Partnership pursuant to Section 8.17.
"Substantial Completion" means the date upon which the
construction of the Apartment Complex has been completed, as evidenced by the
Partnership's receipt of all necessary permanent certificates of occupancy
from the applicable governmental jurisdiction(s) or authority(ies) for one
hundred per cent (100%) of the apartment units in the Apartment Complex.
"Substitute Limited Partner" means any Person admitted to the Partnership
as a Limited Partner pursuant to Section 9.03.
"Surplus Cash" means any cash from all sources
remaining at the end of an annual fiscal period (i) after the payment (on a
thirty day current basis) of (a) all sums due or currently required to be paid
under the terms of the First
Mortgage Loan and the Second Mortgage Loan, (b) any amounts required by the
Lenders to be deposited in the Reserve Fund for Replacements, and (c) all
obligations of the Apartment Complex, including operating expenses and escrow
deposits for taxes and insurance, other than the First Mortgage Loan and the
Second Mortgage Loan; and (ii) after the segregation of (a) an amount equal to
the aggregate of all special funds required to be maintained by the Apartment
Complex, and (b) all tenant security deposits held, together with accrued
interest thereon payable to the tenant pursuant to the laws of the State.
"Tax Credit" means the Low-Income Housing Tax Credit. "20-50 Set-Aside Test"
means the Minimum Set-Aside Test
whereby at least 20% of the units in the Apartment Complex must be occupied by
individuals with incomes of 50% or less of area median income, as adjusted for
family size.
"Watkins Loan Guaranty" means the personal guaranty to be
entered into by Garry D. Watkins and Linda Watkins in favor of the Second
Mortgage Lender in the maximum amount of $330,000
which shall terminate no later than one year from Final Closing.
ARTICLE III.
PURPOSE AND BUSINESS OF THE PARTNERSHIP
3.01. Purpose of the Partnership. The Partnership has been
organized exclusively to acquire the Land and the Apartment Complex, and to
develop, finance, construct, own, maintain, operate and sell or otherwise
dispose of the Apartment Complex, in order to obtain long-term appreciation,
cash income, Tax Credits and tax losses.
3.02. Authority of the Partnership. In order to carry out its
purpose, the Partnership is empowered and authorized to do any and all acts
and things necessary, appropriate, proper, advisable, incidental to or
convenient for the furtherance and accomplishment of its purpose, and for the
protection and benefit of the Partnership, including but not limited to the
following:
(a) acquire ownership of the Land and the Apartment Complex;
(b) construct, operate, maintain, improve, buy, own, sell, convey,
assign, mortgage, rent or lease any real estate and any personal property
necessary to the operation of the Apartment Complex;
(c) provide housing, subject to the Minimum Set-Aside Test, the
HOME Set-Aside Test and the Rent Restriction Test and consistent with the
requirements of the Loan Agreements and the Regulatory Agreement so long as
the Loan Agreements and the Regulatory Agreement, as applicable, remain in
force;
(d) enter into any kind of activity, and perform and carry out
contracts of any kind necessary to, or in connection with, or incidental to,
the accomplishment of the purposes of the Partnership;
(e) borrow money and issue evidences of indebtedness in furtherance
of the Partnership business and secure any such indebtedness by mortgage,
pledge, or other lien, provided, however, that the First Mortgage Loan, the
Second Mortgage Loan and any evidences of indebtedness thereof and any
documents amending, modifying or replacing them shall have the legal
effect that the Partners shall have no personal liability for the repayment of
the principal of or payment of interest on the First Mortgage Loan, the Second
Mortgage Loan or other such indebtedness, and that, other than the Watkins
Loan Guaranty, the sole recourse of any lender with respect to the principal
thereof and interest thereon shall be to the property securing the First
Mortgage Loan and the Second Mortgage Loan or other such indebtedness; except
that any Partner shall be personally responsible (i) for funds or property of
the Apartment Complex coming into such party's hands, which, by the terms of
the Loan Agreements or the Regulatory Agreement, it is not entitled to retain,
and (ii) for such party's own acts and deeds, or the acts and deeds of others
which it has authorized, in violation of the provisions of the Regulatory
Agreement;
(f) maintain and operate the Apartment Complex, including hiring the
Management Agent (which Management Agent may be any of the Partners or an
Affiliate thereof) and entering into any agreement for
the management of the Apartment Complex during its rent-up and after its rent-
up period;
(g) subject to the approval of the Agency and the Lenders, if
required, and to other limitations expressly set forth elsewhere in this
Agreement, negotiate for and conclude agreements for the sale, exchange, lease
or other disposition of all or substantially all of the property of the
Partnership, or for the refinancing of any mortgage loan on the property of
the Partnership;
(h) enter into the Loan Agreements with the First
Mortgage Lender and the Second Mortgage Lender, and the Regulatory Agreement
with Second Mortgage Lender providing for regulations with respect to rents,
profits, dividends and the disposition of property;
(i) rent dwelling units in the Apartment Complex from time to
time,
in accordance with the provisions of the Code applicable to LowIncome Housing
Tax Credits and in accordance with applicable federal, state and local
regulations, collecting the rents therefrom, paying the expenses incurred in
connection with the Apartment Complex, and distributing the net proceeds to
the Partners, subject to any requirements which may be imposed by the
Regulatory Agreement and/or the Loan Agreements; and
(j) do any and all other acts and things necessary or proper in
furtherance of the Partnership business.
ARTICLE IV.
REPRESENTATIONS, WARRANTIES AND COVENANTS;
DUTIES AND OBLIGATIONS
4.01. Representations, Warranties and Covenants Relating to the
Apartment Complex and the Partnership. As of the date hereof, the General
Partner hereby represents, warrants and covenants to the Partnership and to
the Partners that:
(a) the construction and development of the Apartment Complex has begun and
shall be completed in a timely and workmanlike manner in accordance with (i)
all applicable requirements of the Loan Agreements and the Regulatory
Agreement, (ii) all applicable requirements of all appropriate governmental
entities, and (iii) the plans and specifications of the Apartment Complex that
have been or shall be hereafter approved by the Agency, the Lenders and any
other applicable governmental entities, as such plans and specifications may
be changed from time to time with the approval of the Agency, the Lenders and
any other applicable governmental entities, if such
approval shall be required;
(b) at the time of commencement of construction, at the Initial
Closing and as of the date hereof, the Land was, is and will be properly zoned
for the Apartment Complex, they have obtained all consents, permissions and
licenses required by all applicable governmental entities, and the Apartment
Complex conformed and conforms to all applicable federal, state and local land
use, zoning, environmental and other governmental laws and regulations;
(c) all appropriate public utilities, including
sanitary and storm sewers, water, gas and electricity, are currently available
and operating properly for all units in the Apartment Complex at the time of
first occupancy of such units;
(d) at Initial Closing and as of the date hereof, good and
marketable fee simple title to the Apartment Complex is and will be held by
the Partnership, and title insurance policies of a financially responsible
institution acceptable to the Agency, the Lenders, and BCTC 94, as applicable,
in the amount of the
replacement cost of the
Apartment Complex, which amount shall not be less than the aggregate of the
principal amounts of the First Mortgage Loan, the Second Mortgage Loan and the
Capital Contributions of the General Partner and the Investment Partnership
(as to the Partnership) and the principal amount of the First Mortgage Loan
and the Second Mortgage Loan (as to the First Mortgage Lender and the Second
Mortgage Lender), in favor of the Partnership, the First Mortgage Lender and
the Second Mortgage Lender, respectively, shall be issued on or before Initial
Closing, and shall remain in full force and effect, subject only to such
easements, covenants, restrictions and such other standard exceptions as are
normally included in owner's or mortgagee's title insurance policies and which
shall be acceptable to the Agency, the First Mortgage Lender and the Second
Mortgage Lender, as applicable; at Final Closing, a title insurance policy
acceptable to BCTC 94 in the principal amount of not less than the aggregate
of the principal amounts of the First Mortgage Loan, the Second Mortgage Loan
and the Capital Contributions of the General Partner and the Investment
Partnership, shall be issued in favor of the Partnership;
(e) there is and shall be no direct or indirect personal liability
of the Partnership or of any of the Partners for the repayment of the
principal of or payment of interest on either the First Mortgage Loan or the
Second Mortgage Loan, and, other than the Watkins Loan Guaranty, the sole
recourse of the First Mortgage Lender and the Second Mortgage Lender under the
First Mortgage Loan and the Second Mortgage Loan, respectively, with respect
to the principal thereof and interest thereon shall be to the property
securing the indebtedness;
(f) the General Partner is not aware of any default under any
agreement, contract, lease, or other commitment, or of any claim, demand,
litigation, proceedings or governmental investigation pending or threatened
against it, the Apartment Complex or the Partnership, or related to the
business or assets of the Partnership or of the Apartment Complex, which
claim, demand, litigation, proceeding or governmental investigation could
result in any judgment, order, decree, or settlement which would materially
and adversely affect the business or assets of the Partnership or of the
Apartment Complex;
(g) neither the General Partner nor any Affiliate nor the
Partnership, has entered, or shall enter, into any agreement or contract for
the payment of any First Mortgage Loan or Second Mortgage Loan discounts,
additional interest, yield maintenance or other interest charges or financing
fees or any agreement providing for the guarantee of payment of any such
interest charges or financing fees relating to the First Mortgage Loan or the
Second Mortgage Loan; in no event will the General Partner or the Partnership
enter into any such agreement or guaranty of any kind whatsoever (such as an
escrow arrangement or letter of credit arrangement) which would subject any of
the Partners to personal liability as to the First Mortgage Loan or the Second
Mortgage Loan;
(h) the execution of this Agreement, the incurrence of the
obligations set forth in this Agreement, and the consummation of the
transactions contemplated by this Agreement do not violate any provision of
law, any order, judgment or decree of any court binding on the Partnership,
the General Partner or its Affiliates, any provision of any indenture,
agreement, or other instrument to which the Partnership or the General Partner
is a party or by which the Partnership or the Apartment Complex is affected,
and is not in conflict with, and will not result in a breach of or constitute
a default under any such indenture, agreement, or other instrument or result
in creating or imposing any lien, charge, or encumbrance of any nature
whatsoever upon the Apartment Complex;
(i) the Construction Contract has been entered into between
the
Partnership and the Contractor; no other consideration or fee shall be paid to
the Contractor other than the amounts set forth in the Construction Contract;
(j) to the extent required by the First Mortgage
Lender and/or the Second Mortgage Lender, payment and performance bonds issued
by a nationally, financially recognized bonding company and in forms
acceptable to the First Mortgage Lender and/or the Second Mortgage Lender in
amounts satisfactory to the First Mortgage Lender and the Second Mortgage
Lender, will be obtained by the Contractor at or before Initial Closing and
shall remain in full force and effect under terms and conditions as shall be
acceptable to the First Mortgage Lender and the Second Mortgage Lender;
(k) at Initial Closing, a builder's risk insurance policy, as
required by the First Mortgage Lender and the Second Mortgage Lender in favor
of the Partnership, will be in full force and effect, and as of the date
hereof and at the Initial Closing fire and extended coverage insurance for the
full replacement value of the Apartment Complex (excluding the value of the
Land, site utilities, landscaping and foundations) and worker's compensation
and public liability insurance (in an amount not less than $1,000,000 per
occurrence, with a maximum amount of $2,000,000), all in favor of the
Partnership, will be in full force and effect and will be kept in full force
and effect during the term of the Partnership; all such policies are and shall
be in amounts and with insurers satisfactory to the First Mortgage Lender and
the Second Mortgage Lender, as applicable, and shall be paid for out of
Partnership assets;
(l) neither the General Partner, nor the Partnership, has
incurred any financial responsibility with respect to the Apartment Complex
prior to the date of execution of this Agreement, other than that disclosed to
the Investment Partnership;
(m) at the time of acquisition by the Partnership of
the Land, the time of execution of this Agreement, at Initial Closing and at
Final Closing, the Partnership was, is and will continue to be a valid limited
partnership, duly organized under the laws of the State, had, has and shall
continue to have full power and authority to acquire the Land and to develop,
construct, operate and maintain the Apartment Complex in accordance with the
terms of this Agreement, and had taken and shall continue to take all action
under the laws of the State and any other applicable jurisdiction that is
necessary to protect the limited liability of the Limited Partners and to
enable the Partnership to engage in its business;
(n) no restrictions on the sale or refinancing of the Apartment
Complex, other than the restrictions set forth and to be set forth in the
Regulatory Agreement, in an extended low income housing commitment pursuant to
Section 42(h)(6) of the Code and in Section 8.19 hereof, exist as of the date
hereof, and no such restrictions shall, at any time while the Investment
Partnership is a Limited Partner, be placed upon the sale or refinancing of
the Apartment Complex;
(o) the Apartment Complex is being developed and
operated in a manner which satisfies, and shall continue to satisfy, all
restrictions, including tenant income and rent restrictions, applicable to
projects generating Low-Income Housing Tax Credits under Section 42 of the
Code;
(p) the Projected Credits applicable to the Apartment Complex are
$51,782 of Low-Income Housing Tax Credits for 1997, $82,851 per year of Low-
Income Housing Tax Credits for each of the years 1998 through 2006, and
$31,069 of Low-Income Housing Tax Credits for 2007; provided, however, that if
the Actual Credit for 1997 is greater than (or less than) $51,782, the
Projected Credit for the year 2007 shall be reduced (increased) by an amount
equal to the amount by which the Actual Credit for 1997 exceeds (is less than)
$51,782;
(q) it shall cause the Partnership to enter into and
record, no later than December 31, 1997, an extended low-income housing
commitment in accordance with Section 42(h) of the Code; and
(r) it shall cause the Partnership to enter into and
timely deliver the Rental Housing Project Completion Report in connection with
the Second Mortgage Loan.
4.02. Duties and Obligations Relating to the
Apartment
Complex and
the Partnership. The General Partner shall have the following duties and
obligations with respect to the Apartment Complex and the Partnership:
(a) all requirements shall be met which are
necessary
to obtain or achieve (i) compliance with the Minimum Set-Aside Test, the HOME
Set-Aside Test, the Rent Restriction Test, and any other requirements
necessary for the Apartment Complex to initially qualify, and to continue to
qualify, for Tax Credits, (ii) issuance of all necessary certificates of
occupancy, including all governmental approvals required to permit occupancy
of all of the apartment units in the Apartment Complex, (iii) Initial Closing
and Final Closing, and (iv) compliance with all provisions of the Project
Documents;
(b) while conducting the business of the
Partnership,
it
shall not act in any manner which it knows or should have known after due
inquiry will (i) cause the termination of the Partnership for federal income
tax purposes without the Consent of the Investment Partnership, or (ii) cause
the Partnership to be treated for federal income tax purposes as an
association taxable as a corporation;
(c) the Apartment Complex shall be managed upon Substantial
Completion so that (i) no less than eighty per cent (80%) of the gross income
from the Apartment Complex in every year is rental income from dwelling units
in the Apartment Complex used to provide living accommodations not on a
transient basis; and (ii) the rental of all units in the Apartment Complex
comply with the tenant income limitations and other restrictions under the
Rent Restriction Test and as set forth in the Regulatory Agreement;
(d) it shall exercise good faith in all activities relating
to the conduct of the business of the Partnership, including the development,
operation and maintenance of the Apartment Complex, and it shall take no
action with respect to the business and property of the Partnership which is
not reasonably related to the achievement of the purpose of the Partnership;
(e) all of (i) the fixtures, maintenance supplies, tools,
equipment and the like now and to be owned by the Partnership or to be
appurtenant to, or to be used in the operation of the Apartment Complex, as
well as (ii) the rents, revenues and profits earned from the operation of the
Apartment Complex, will be free and clear of all security interests and
encumbrances except for the First Mortgage Loan and the First Mortgage and the
Second Mortgage Loan and the Second Mortgage, and any additional security
agreements executed in connection therewith;
(f) it will execute on behalf of the Partnership all
documents necessary to elect, pursuant to Sections 732, 743 and 754 of the
Code, to adjust the basis of the Partnership's property upon the request of
BCTC 94, if, in the sole opinion of BCTC 94, such election would be
advantageous to the Investment Partnership;
(g) it guarantees the repayment by the Partnership of
any
Credit Recovery Loan from the Investment Partnership to the Partnership made
pursuant to Section 5.01(d)(iii) and payment by the Partnership of
the Development Fee pursuant to the terms of Section 8.10(a), to the extent
that any Installment(s) are insufficient therefor; and
(h) it shall, during and after the period it is a Partner,
provide the Partnership with such information and sign such documents as are
necessary for the Partnership to make timely, accurate and complete
submissions of federal and state income tax returns.
ARTICLE V.
PARTNERS, PARTNERSHIP INTERESTS AND OBLIGATIONS OF THE PARTNERSHIP
5.01. Partners, Capital Contributions and Partnership Interests.
(a) The General Partner, its principal address or place
of business, Capital Contribution and Percentage Interest are as follows:
Leitchfield Affordable Housing, LLC $100 1.00% 1178 Owensboro Road,
P.O. Box 556
Leitchfield, Kentucky 42755
(b) (i) The Limited Partner, its principal office
or place of business, Capital Contribution and Percentage Interest is as
follows:
Boston Capital Tax Credit $488,822 as more 98.99%
Fund IV L.P. specificially set
c/o Boston Capital forth in subparagraph
Associates IV L.P. (c) immediately below
One Boston Place
21st Floor
Boston, MA 02210
(ii) The Special Limited Partner, its principal
office
or place of business, Capital Contribution and Percentage Interest is as
follows:
BCTC 94, Inc. $ 10.00 0.01%
c/o Boston Capital Partners, Inc.
One Boston Place, 21st Floor
Boston, MA 02210
(c) Subject to the provisions of this Agreement,
including without limitation, the provisions of Sections 5.01(d), 5.01(e) and
5.03, the Investment Partnership shall be obligated to make Capital
Contributions to the Partnership in the aggregate amount of $488,822 in four
installments (the "Installments"), which Installments shall be due and payable
in cash by the Investment Partnership, solely from Capital Contributions of
its investor limited partners to the Investment Partnership, on the date
twenty-one (21) days after the Investment Partnership shall have received
evidence, reasonably satisfactory to it, of the occurrence of each of the
conditions set forth below as to the applicable Installment, as follows:
(i) $244,412 upon the later to occur of (A) Initial
Closing or (B) the Admission Date (the "First Installment");
(ii) $122,205 upon the latest to occur of (A) State
Designation, or (B) Substantial Completion, or (C) receipt by the Investment
Partnership of a certification by the Accountants in form and substance
acceptable to the Investment Partnership, of the construction and development
costs of the Apartment Complex and the Eligible Basis of the Apartment Complex
for purposes of Tax Credits ("Cost Certification"), or (D) receipt by the
Investment Partnership of evidence from the Contractor that all amounts
payable to it pursuant to the Construction Contract have been paid in full, or
(E) satisfaction of the conditions to payment of the First Installment (the
"Second Installment"); (iii) $112,205 upon the latest to occur of (A) the
Initial 87%
Occupancy Date, or (B) the Final Closing, or (C) receipt by the
Investment Partnership of the legal opinion provided for in Section 5.04(b),
or (D) the occurrence of Rental Achievement, or (E) satisfaction of all
conditions to the payment of the First Installment and the Second Installment
(the "Third Installment"); and
(iv) $10,000 upon the later to occur of (A) Rental
Achievement Confirmation or (B) satisfaction of all conditions to the payment
of the First Installment, the Second Installment and the Third Installment
(the "Fourth Installment").
As an additional condition precedent to each payment set forth above
other than the First Installment, the General Partner shall, not less than
twenty (20) days nor more than thirty (30) days prior to the time any
Installment is due, give the Investment Partnership Notice in the form of a
written certification that: (A) the representations, warranties and covenants
given by the General Partner in Section 4.01(a) are valid and accurate, where
still applicable, with respect to the General Partner, the Partnership and/or
the Apartment Complex, as of the date of such certificate, and (B) to the best
of their knowledge, after due inquiry, no condition exists which would,
pursuant to Section 5.03, entitle the Investment Partnership to withhold the
payment of such Installment. Based upon the giving of such Notice, such
Installment shall be made on the due date therefor, or if such Notice is not
timely given, then within twenty (20) days after receipt of such Notice.
(d) (i) Upon the occurrence of Cost Certification and State
Designation,
if (A) ninety-nine per cent (99%) of the aggregate amount of Tax
Credits for the entire Compliance Period for which the Partnership would
be eligible with respect to the Apartment Complex as evidenced by State
Designation is less than (B) the aggregate amount of the Projected Credits for
the entire Compliance Period (the "Allocation Differential"), then the Capital
Contribution of the Investment Partnership shall be reduced by the "Adjustment
Amount", which shall be determined by dividing the Allocation Differential
into two parts. Part I of the Allocation Differential shall be the amount, if
any, equal to the product of the excess of the Applicable Percentage of 8.80%
(the assumed Applicable Percentage for purposes of determining the Projected
Credit) over the actual Applicable Percentage for the Apartment Complex
(but not less than 8.63%) multiplied by $951,000 (the assumed Eligible Basis
for determining the Projected Credit). Part II of the Allocation
Differential shall be the remaining amount, if any, of the Allocation
Differential. The Adjustment Amount shall be equal to 99% of the sum of
(A) the amount determined under Part I above multiplied by sixty-four and
nine-tenths per cent (64.9%) plus (B) the amount determined under Part
II above multiplied by fifty-nine per cent (59%). Any such reduction in
Capital Contribution pursuant to this Section 5.01(d)(i) shall be applied
to reduce the Second Installment. In the event that there is a reduction
in Capital Contributions equal to the Adjustment Amount, then the amount
of the Projected Credits shall be reduced to reflect the Allocation
Differential, and thereafter shall be referred to as the "Revised Projected
Credits".
(ii) If at any time the Accountants determine
that, for any fiscal year or portion thereof during the Partnership's
operation, ending on the date five (5) years from and after the date of
Substantial Completion (the "Reduction Period"), the Actual Credit for such
fiscal year or
portion thereof is less than the Projected Credit, or the Revised Projected
Credit, if applicable, applicable to such fiscal year or portion thereof, then
the Capital Contribution of the Investment Partnership shall be reduced by the
Reduction Amount. The "Reduction Amount" shall be equal to the sum of (A) the
difference between the Projected Credit, or the Revised Projected Credit, if
applicable, and the Actual Credit multiplied by eighty per cent (80%), and (B)
the amount of any recapture, interest or penalty payable by the limited
partners of the Investment Partnership (assuming pass-through of all such
liability in the year incurred and a tax rate equal to the maximum individual
rate applicable in such year) as a result of the Credit Shortfall for such
year. Any reduction in Capital Contribution shall first be applied to reduce
the Installment next due to be paid by the Investment Partnership, and any
portion of such reduction in excess of such Installment shall be applied to
reduce succeeding Installments. If no further Installments are due to be
paid, then the entire amount of such reduction shall be repaid by the
Partnership to the Investment Partnership promptly after demand is made
therefor. The General Partner is obligated to provide such funds to the
Partnership as shall be necessary to cause the aforesaid payment to be made by
the Partnership to the Investment Partnership.
(iii) In the event that, for any reason, at any
time after the Reduction Period, the amount of the Actual Credit shall be less
than the Projected Credit (or the Revised Projected Credit, if applicable)
with respect to any fiscal year during the Partnership's operation (such
difference being hereinafter referred to as a "Credit Shortfall"), the
Investment Partnership 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 (A) the Credit Shortfall for such year, plus (B) the
amount of any recapture, interest or penalty payable by the limited
partners of the Investment Partnership (assuming pass-through of all such
liability in the year incurred and a tax rate equal to the maximum individual
rate applicable in such year) as a result of the Credit Shortfall for such
year. Credit Recovery Loans shall be deemed to bear simple (not compounded)
interest, from the respective dates on which such principal advances are
deemed to have been made under this Section 5.01(d)(iii) at 9% per annum.
Credit Recovery Loans shall be repayable by the Partnership as provided in
Section 11.04(c).
(e) Without the Consent of all of the Partners, no
additional Persons may be admitted as additional Limited Partners and Capital
Contributions may be accepted only as and to the extent expressly provided for
in this Article V.
5.02. Return of Capital Contribution. Except as
provided in this
Agreement, no Partner shall be entitled to demand or receive the return of his
Capital Contribution.
5.03. Withholding of Capital Contribution Upon
Default.
In the
event that: (a) the General Partner or any successor General Partner shall
not have substantially complied with any material provisions under this
Agreement, or (b) any financing commitment of the First Mortgage Lender, the
Second Mortgage Lender or any other lender, or any agreement entered into by
the Partnership for financing related to the Apartment Complex
shall have terminated prior to their respective termination date(s), or (c)
foreclosure proceedings shall have been commenced against the Apartment
Complex, then the Partnership and the General Partner shall be in default of
this Agreement, and the Investment Partnership, at its sole election, may
withhold payment of any Installment otherwise payable to the Partnership.
All amounts so withheld by the Investment Partnership under this
Section 5.03 shall be promptly released to the Partnership only after the
General Partner or the Partnership has cured the default justifying the
withholding, as demonstrated by evidence reasonably acceptable to BCTC 94.
5.04. Legal Opinions.
(a) As a condition precedent to payment of the First
Installment, the Investment Partnership shall have received the opinions of
David B. Vickery, Esquire, of Leitchfield, Kentucky, counsel to the
Partnership, the Withdrawing Initial General Partner, the Withdrawing Initial
Limited Partners, and the Guarantors, which opinions incorporate by reference
the opinions of Newberry, Hargrove and Rambicure of Lexington, Kentucky,
counsel to the General Partner and the Developer, and shall explicitly state
that Peabody & Brown, of Boston, Massachusetts, counsel to the Investment
Partnership, may explicitly rely upon them, inter alia, that:
(i) the Partnership is a duly formed and validly
existing limited partnership under the Act, and the Partnership has full power
and authority to own and operate the Apartment Complex and to conduct its
business hereunder; the Investment Partnership has been validly admitted as a
Limited Partner of the Partnership entitled to all the benefits of a Limited
Partner under this Agreement, and the Interest of the Investment Partnership
in the Partnership is the Interest of a limited partner with no personal
liability for the obligations of the Partnership;
(ii) the General Partner is a duly formed and validly existing
limited liability company pursuant to the laws of the State with full power
and authority to enter into and perform its obligations hereunder;
(iii) execution of this Agreement by the General Partner has
been duly and validly authorized by or on behalf of it and, having been
executed and delivered in accordance with its terms, this Agreement
constitutes the valid and binding agreement of the General Partner,
enforceable in accordance with its terms;
(iv) the Partnership owns fee simple, good and marketable legal
title to the Apartment Complex, subject only to the First Mortgage Loan, the
First Mortgage, the Second Mortgage Loan, the Second Mortgage, the Regulatory
Agreement and such other liens, charges, easements, restrictions and
encumbrances as are set forth in the title insurance policy issued to the
Partnership, none of which materially interfere with or adversely affect the
development or operation of the Apartment Complex;
(v) there is no direct or indirect personal
liability of the Partnership or of any of the Partners for the repayment of
the principal of and payment of interest on the First Mortgage Loan, and the
sole recourse of the First Mortgage Lender under the First Mortgage Loan, with
respect to the principal thereof and interest thereon, shall be to the
property securing the indebtedness;
(vi) there is no direct or indirect personal
liability of the Partnership or of any of the Partners for the repayment of
the principal of and payment of interest on the Second Mortgage Loan, and,
other than the Watkins Loan Guaranty, the sole recourse of the Second Mortgage
Lender under the Second Mortgage Loan, with respect to the principal thereof
and interest thereon, shall be to the property securing the indebtedness;
(vii) there are no defaults existing with respect to any of the
Project Documents; and
(viii) no event of Bankruptcy has occurred with
respect to the Partnership or the General Partner.
(b) As a condition precedent to payment of the Third
Installment, the Investment Partnership shall have received the opinions of
David B. Vickery, Esquire of Leitchfield, Kentucky, counsel to the
Partnership, which opinions incorporate by reference the opinions of Newberry,
Hargrove and Rambicure, of Lexington, Kentucky, counsel to the General Partner
and the Developer, and shall explicitly state that Peabody & Brown, of Boston,
Massachusetts, counsel to the Investment Partnership, may explicitly rely upon
them, that:
(i) the Partnership owns fee simple, good and marketable legal
title to the Apartment Complex, subject only to the First Mortgage Loan, the
Second Mortgage Loan, the First Mortgage, the Second Mortgage, the Regulatory
Agreement and such other liens, charges, easements, restrictions and
encumbrances as are set forth in the title insurance policy issued to the
Partnership, none of which materially interfere with or adversely affect the
development or operation of the Apartment Complex;
(ii) there are no defaults existing with respect to
any of the Project Documents; and
(iii) no event of Bankruptcy has occurred with
respect
to the Partnership, the General Partner or the Developer.
5.05. Repurchase Obligation.
(a) If (i) Substantial Completion has not occurred by
April 1, 1997; (ii) State Designation has not occurred by December 31, 1997;
(iii) the Apartment Complex has not achieved Rental Achievement within 12
months of the occurrence of Substantial Completion; (iv) the Partnership fails
to meet the Minimum Set-Aside Test, the HOME Set-Aside Test or Rent
Restriction Test at any time during the first 60 months after initial
achievement of the Minimum Set-Aside, the HOME SetAside Test and Rent
Restriction Tests; (v) Final Closing has not occurred by September 1, 1997 (or
such later date as may be consented to by the Investment Partnership); (vi)
the Partnership fails to meet the Minimum Set-Aside Test, the HOME Set-Aside
Test and the Rent Restriction Test within 12 months of the date that the
Apartment Complex is placed in
service or at any time prior to the date which is five (5) years from and
after the date upon which the Apartment Complex is placed in service; or (vii)
an event of default described in Section 5.03(a), (b) and/or (c) shall exist,
then the General Partner shall, within 15 days of the occurrence thereof, send
to the Investment Partnership Notice of such event and of its obligation to
purchase the Interest of the Investment Partnership hereunder and return to
the Investment Partnership the Invested Amount in the event the Investment
Partnership in its sole discretion requires such purchase of its Interest.
Thereafter, the General Partner, within 30 days of the mailing date of Notice
by the Investment Partnership of such election, shall acquire the entire
Interest of the Investment Partnership in the Partnership by making payment to
the Investment Partnership, in cash, of an amount equal to the Invested
Amount.
(b) If any Lender or the Agency shall disapprove the
Investment Partnership as a Partner hereunder within 180 days of its admission
to the Partnership, then the Investment Partnership shall, effective as of
such time (or such other time as may be specified by such Lender or the Agency
in its disapproval), cease to be a Limited Partner. The General Partner
shall, within 10 days of the effective date of such termination, purchase the
Interest of the Investment Partnership in the Partnership and pay to the
Investment Partnership an amount equal to its Net Capital Contribution.
(c) Upon receipt by the Investment Partnership of any
such payment of the Invested Amount or its Net Capital Contribution, as
applicable, the Interest of the Investment Partnership shall terminate, and
the General Partner shall indemnify and hold harmless the Investment
Partnership from any losses, damages, and/or liabilities to which the
Investment Partnership (as a result of its participation hereunder) may be
subject.
5.06. Asset Management Fee. The Partnership shall
pay
to Boston
Capital, or an Affiliate thereof, an Asset Management Fee in the amount of
$1,000 per annum beginning in 1997 for its services in assisting with the
preparation of the reports required pursuant to Section 13.04. The Asset
Management Fee shall be payable solely from Cash Flow and as provided in
Section 11.01(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 XI of this Agreement.
ARTICLE VI.
CHANGES IN PARTNERS
6.01. Withdrawal of a General Partner.
(a) A General Partner may withdraw from the
Partnership or sell, transfer or assign his or its Interest as General Partner
only with the prior Consent of BCTC 94, and only after being given written
approval by the necessary parties as provided in Section 6.02, of the General
Partner(s) to be substituted for him or it or to receive all or part of his or
its Interest as General Partner.
(b) In the event that a General Partner
withdraws from the Partnership or sells, transfers or assigns
his or its entire Interest pursuant to Section 6.01(a), he or it shall be and
shall remain liable for all obligations and liabilities incurred by him or it
as General Partner before such withdrawal, sale, transfer or assignment shall
have become effective, but shall be free of any obligation or liability
incurred on account of the activities of the Partnership from and after the
time such withdrawal, sale, transfer or assignment shall have become
effective.
6.02. Admission of a Successor or Additional General Partner. A
Person shall be admitted as a General Partner of the Partnership only if the
following terms and conditions are satisfied:
(a) the admission of such Person shall have been Consented to by
the General Partner or its successors and BCTC 94;
(b) the successor or additional Person shall have
accepted and agreed to be bound by (i) all the terms and provisions of this
Agreement, by executing a counterpart thereof, and (ii) all the terms and
provisions of the Regulatory Agreement, by executing a counterpart thereof,
and (iii) all the terms and provisions of such other documents or instruments
as may be required or appropriate in order to effect the admission of such
Person as a General Partner, and this Agreement evidencing the admission of
such Person as a General Partner shall have been filed and all other actions
required by Section 1.05 in connection with such admission shall have been
performed;
(c) if the successor or additional Person is a corporation, it
shall have provided the Partnership with evidence satisfactory to counsel for
the Partnership of its authority to become a General Partner, to do business
in the State and to be bound by the terms and provisions of this Agreement;
and
(d) counsel for the Partnership shall have rendered an
opinion that the admission of the successor or additional Person is in
conformity with the Act and that none of the actions taken in connection with
the admission of the successor Person will cause the termination or
dissolution of the Partnership or will cause it to be classified other than as
a partnership for federal income tax purposes.
6.03. Effect of Bankruptcy, Death, Withdrawal,
Dissolution orIncompetence of a General Partner.
(a) In the event of the Bankruptcy of a General Partner or the
withdrawal, death or dissolution of a General Partner or an adjudication that
a General Partner is incompetent (which term shall include, but not be limited
to, insanity) the business of the Partnership shall be continued by the other
General Partner(s) (and the other General Partners, by execution of this
Agreement, expressly so agree to continue the business of the Partnership);
provided, however, that if the withdrawn, Bankrupt, deceased, dissolved or
incompetent General Partner is then the sole General Partner, unless the
Investment Partnership within ninety (90) days after receiving Notice of such
Bankruptcy, withdrawal, death, dissolution or adjudication of incompetence
elects to designate a successor General Partner(s) and continue the
Partnership upon the admission of such successor General Partner(s) to the
Partnership, the Partnership shall be terminated.
(b) Upon the Bankruptcy, death, dissolution or
adjudication of incompetence of a General Partner, such General Partner shall
immediately cease to be a General Partner and his Interest shall without
further action be converted to a Limited Partner Interest; provided, however,
that if such Bankrupt, dissolved, incompetent or deceased General Partner is
the sole remaining General Partner, such General Partner shall cease to be a
General Partner only upon the expiration of ninety (90) days after Notice to
BCTC 94 and the Investment Partnership of the Bankruptcy, death, dissolution
or declaration of incompetence of such General Partner; and provided further
that if such Bankrupt, dissolved, incompetent or deceased General Partner is
the sole remaining General Partner, the converted Partnership Interest of such
replaced General Partner shall be ratably reduced to the extent necessary to
insure that the substitute General Partner(s) holds a 1% Percentage Interest
(as set forth in Section 5.01) and will receive a distribution pursuant to
Section 11.04(f).
Except as set forth above, such conversion of a
General Partner Interest to a Limited Partner Interest shall not affect any
rights, obligations or liabilities (including without limitation, any of the
General Partner's obligations under Section 8.09 herein) of the Bankrupt,
deceased, dissolved or incompetent General Partner existing prior to the
Bankruptcy, death, dissolution or incompetence of such person as a General
Partner (whether or not such rights, obligations or liabilities were known or
had matured).
(c) If, at the time of the withdrawal, Bankruptcy, death,
dissolution or adjudication of incompetence of a General Partner, the
Bankrupt, deceased, dissolved or incompetent General Partner was not the sole
General Partner of the Partnership, the remaining General Partner or General
Partners shall immediately (i) give Notice to the Limited Partners of such
Bankruptcy, death, dissolution or adjudication of incompetence, and (ii) make
such amendments to this Agreement and execute and file such amendments or
documents or other instruments as are necessary to reflect the conversion of
the Interest of the Bankrupt, deceased, dissolved or incompetent General
Partner and his having ceased to be a General Partner. The remaining General
Partner or General Partners are hereby granted an irrevocable power of
attorney to execute any or all documents on behalf of the Partners and the
Partnership and to file such documents as may be required to effectuate the
provisions of this Section 6.03.
ARTICLE VII.
ASSIGNMENT TO THE PARTNERSHIP
The General Partner hereby transfers and assigns to the Partnership
all of its right, title and interest in and to the Apartment Complex,
including the following:
(i) all contracts with architects, contractors and
supervising
architects with respect to the construction and development of the Apartment
Complex;
(ii) all plans, specifications and working drawings,
heretofore
prepared or obtained in connection with the Apartment Complex and all
governmental approvals obtained, including planning, zoning and building
permits;
(iii) any and all documentation with respect to the
First
Mortgage Loan and the Second Mortgage Loan; and
(iv) any other work product related to the Apartment
Complex.
ARTICLE VIII.
RIGHTS, OBLIGATIONS AND POWERS
OF THE GENERAL PARTNER
8.01. Management of the Partnership.
(a) Except as otherwise set forth in this Agreement,
the General Partner, within the authority granted to it under this Agreement,
shall have full, complete and exclusive discretion to manage and control the
business of the Partnership for the purposes stated in Article III, shall make
all decisions affecting the business of the Partnership and shall manage and
control the affairs of the Partnership to the best of its ability and use its
best efforts to carry out the purposes of the Partnership. In so doing, the
General Partner shall take all actions necessary or appropriate to protect the
interests of the Limited Partner and of the Partnership. The General Partner
shall devote such of its time as is necessary to the affairs of the
Partnership.
(b) Except as otherwise set forth in this Agreement
and subject to the applicable Agency rules and regulations and the provisions
of the Regulatory Agreement and the Loan Agreements, the General Partner
(acting for and on behalf of the Partnership), in extension and not in
limitation of the rights and powers given by law or by the other provisions of
this Agreement, shall, in its sole discretion, have the full and entire right,
power and authority in the management of the Partnership business to do any
and all acts and things necessary, proper, convenient or advisable to
effectuate the purpose of the Partnership. In furtherance and not in
limitation of the foregoing provisions, the General Partner is specifically
authorized and empowered to execute and deliver, on behalf of the Partnership,
the Loan Agreements, the Regulatory Agreement, the First Mortgage and the
Second Mortgage, and to execute any and all other instruments and documents,
and amendments thereto, as shall be required in connection with the First
Mortgage Loan and the Second Mortgage Loan, including, but not limited to,
executing any mortgage, note, contract, building loan agreement, bank
resolution and signature card, release, discharge, or any other document or
instrument in any way related thereto or necessary or appropriate in
connection therewith. All decisions made for and on behalf of the Partnership
by the General Partner shall be binding upon the Partnership. No person
dealing with the General Partner shall be required to determine its authority
to make any undertaking on behalf of the Partnership, nor to determine any
facts or circumstances bearing upon the existence of such authority.
8.02. Limitations Upon the Authority of the General
Partner.
(a) The General Partner shall not have any authority to:
(i) perform any act in violation of any applicable
law or regulation thereunder;
(ii) perform any act in violation of the provisions
of
the Loan Agreements, the Regulatory Agreement or any other Project Documents;
(iii) do any act required to be approved or ratified
in
writing by all Limited Partners under the Act unless the right to do so is
expressly otherwise given in this Agreement;
(iv) rent apartments in the Apartment Complex such
that the Apartment Complex would not meet the requirements of the Rent
Restriction Test, the HOME Set-Aside Test or Minimum SetAside Test; or
(v) borrow from the Partnership or commingle
Partnership funds with funds of any other Person.
(b) The General Partner shall not, without the Consent of
BCTC 94, have any authority to:
(i) sell or otherwise dispose of, at any time, all
or
substantially all of the assets of the Partnership;
(ii) make application(s) for an increase or
increases
in the First Mortgage Loan or the Second Mortgage Loan if such increase would
require an increase in the rental income of the Apartment Complex;
(iii) borrow in excess of $10,000 in the aggregate at
any one time outstanding on the general credit of the Partnership, except
borrowings constituting Subordinated Loans or Credit Recovery Loans;
(iv) following Final Closing, 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;
(v) acquire any real property in addition to the
Apartment Complex; or
(vi) following Final Closing, refinance the First
Mortgage Loan or the Second Mortgage Loan.
8.03. Management Purposes. In conducting the
business
of the Partnership, the General Partner shall be bound by the Partnership's
purpose(s) set forth in Article III.
8.04. Delegation of Authority. The General Partner
may
delegate all or any of its powers, rights and obligations hereunder, and may
appoint, employ, contract or otherwise deal with any Person for the
transaction of the business of the Partnership, which Person may, under
supervision of the General Partner, perform any acts or services for the
Partnership as the General Partner may approve.
8.05. General Partner or Affiliates Dealing with
Partnership.
(a) The General Partner or any Affiliate may act as
Management Agent on such terms and conditions permitted by applicable Lender
and/or Agency regulations, and may receive compensation at the highest rates
approved and permitted by the Lenders and/or the Agency at any time.
(b) The General Partner or any Affiliates
thereof shall have the right to contract or otherwise deal with the
Partnership for the sale of goods or services to the Partnership in addition
to those set forth herein, if (A) compensation paid or promised for such goods
or services is reasonable (i.e., at fair market value) and is paid only for
goods or services actually furnished to the Partnership, (B) the goods or
services to be furnished shall be reasonable for and necessary to the
Partnership, (C) the fees, terms and conditions of such transaction are at
least as favorable to the Partnership as would be obtainable in an arm's-
length transaction, (D) no agent, attorney, accountant or other independent
consultant or contractor who also is employed on a full-time basis by the
General Partner or any Affiliate shall be compensated by the Partnership for
his services.
Any contract covering such transactions shall be in
writing and shall be terminable without penalty on sixty (60) days Notice.
Any payment made to the General Partner or any Affiliate for such goods or
services shall be fully disclosed to all Limited Partners in the reports
required under Section 13.04. Neither the General Partner nor any Affiliate
shall, by the making of lump-sum payments to any other Person for disbursement
by such other Person, circumvent the provisions of this Section 8.05(b).
8.06. Other Activities. The General Partner and any
Affiliates thereof may engage in or possess interests in other business
ventures of every kind and description for their own account, including,
without limitation, serving as general partner of other partnerships which
own, either directly or through interests in other partnerships, government-
assisted housing projects similar to the Apartment Complex. Neither the
Partnership nor any of the Partners shall have any rights by virtue of this
Agreement in or to such other business ventures or to the income or profits
derived therefrom.
8.07. Liability for Acts and Omissions. No General
Partner shall be liable, responsible or accountable in damages or otherwise to
any of the Partners for any act or omission performed or omitted by him or it,
or any of them, in good faith on behalf of the Partnership and in a manner
reasonably believed by him or it or any of them to be within the scope of the
authority granted to him or it or any of them by this Agreement and in the
best interest of the Partnership, except for negligence, misconduct, fraud or
any breach of his or its or their fiduciary duty as General Partner with
respect to such acts or omissions. Any loss or damage incurred by any General
Partner by reason of any act or omission performed or omitted by him or it or
any of them in good faith on behalf of the Partnership and in a manner
reasonably believed by him or it or any of them to be within the scope of the
authority granted to him or it by this Agreement and in the best interests of
the Partnership (but not,
in any event, any loss or damage incurred by any General Partner by reason of
negligence, misconduct, fraud or any breach of his or its or their fiduciary
duty as General Partner with respect to such acts or omissions) shall be paid
from Partnership assets to the extent available (but the Limited Partners
shall not have any personal liability to any General Partner under any
circumstances on account of any such loss or damage incurred by any General
Partner or on account of the payment thereof).
8.08. Net Worth of Sole Corporate or Limited
Liability Company General Partner. In the event that the sole General Partner
is a corporation or a limited liability company, such General Partner shall
maintain a net worth that satisfies the requirements set forth in Internal
Revenue
Service Procedure 8912, as may be modified from time to time, which are
prerequisites to the issuance by the Internal Revenue 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.
8.09. Construction of the Apartment Complex, Construction
Cost
Overruns, Operating Deficits.
(a) (i) The Partnership has entered into the
Construction Contract. The General Partner shall be responsible for:
(A) achieving completion of construction of the Apartment Complex in
accordance with the Project Documents;
(B) meeting all requirements for obtaining all necessary
certificates of occupancy for all the apartment units in the Apartment
Complex;
(C) fulfilling all actions required of the Partnership to assure
that the Apartment Complex satisfies the Minimum Set Aside Test, the HOME Set-
Aside Test and the Rent Restriction Test; and
(D) causing the making of the First Mortgage Loan by the First
Mortgage Lender and the Second Mortgage Loan by the Second Mortgage Lender or
any other permanent lender.
(ii) The General Partner hereby is obligated to pay
all Excess Development Costs; the Partnership shall have no obligation to pay
any Excess Development Costs. Subject to the approval of the Lenders and/or
the Agency, if required, the General Partner shall have the right to utilize
any net rental income of the Partnership for the period prior to Final
Closing, to pay or reimburse the General Partner for any Excess Development
Costs, and the obligation of the General Partner to pay such Excess
Development Costs shall be satisfied to the extent of any such amounts so
available and utilized. If the General Partner has already advanced funds to
meet any Excess Development Costs, it may cause the Partnership to apply such
net rental income to the reimbursement of such advances.
(iii) In the event that the General Partner shall
fail to pay any such Excess Development Costs as required in this Section
8.09(a), an amount not in excess of the total of any remaining unpaid
installments of the Development Fee and the Developer Overhead Allowance due
the General Partner shall be applied by the Partnership to meet such
obligations of the General Partner.
Any such direction and application of funds otherwise payable to the
General Partner as aforesaid shall constitute reductions in the Development
Fee and/or the Developer Overhead Allowance, as applicable, and the
Partnership's obligation to make such installment payments to the General
Partner pursuant to Section 8.10, as well as the Investment Partnership's
obligation to make future Installments, shall be reduced correspondingly, and
the obligations of the General Partner pursuant to Sections 8.09(a)(i) or
8.09(a)(ii) shall be satisfied to the extent of the funds applied.
(b) In the event that, at any time from and after the
Final Closing through the last day of the Compliance Period, an Operating
Deficit shall exist, the General Partner shall provide such funds to the
Partnership as shall be necessary to pay such Operating Deficit(s), in an
aggregate amount not to exceed $200,000 during such term, in the form of
a loan to the Partnership (the "Operating Deficit Loan(s)"). An Operating
Deficit Loan shall be a Subordinated Loan in accordance with the provisions of
Section 8.17, provided, however, that an Operating Deficit Loan shall bear no
interest. In the event that the General Partner shall fail to make any such
Operating Deficit Loans as aforesaid, the Partnership shall utilize amounts
otherwise payable to the General Partner as installments of Development Fee
and/or Developer Overhead Allowance pursuant to Section 8.10 of this Agreement
to meet the obligations of the General Partner pursuant to this Section
8.09(b). Amounts so utilized shall also constitute payment and satisfaction
of installments of the Development Fee and/or Developer Overhead Allowance
payable to the General Partner under the aforesaid Section of this Agreement,
and the obligation of the Partnership to make such installment payments to the
General Partner, pursuant to such Section, as well as the Investment
Partnership's obligation to make future Installments, shall be reduced
correspondingly. For the purpose of this Section 8.09(b), all expenses shall
be paid on a sixty (60) day current basis.
8.10. Development Fee; Developer Overhead Allowance.
(a) The Partnership has entered into an Amended and
Restated Development Agreement of even date herewith with the General Partner
for its services in connection with the development and construction of the
Apartment Complex. In consideration for such services and for the assignments
to the Partnership pursuant to Article VII above, a fee (the "Development
Fee") in the total amount of $200,000 shall be payable by the Partnership to
the General Partner from Capital Contributions by the Investment Partnership
as follows:
(i) $77,795 upon receipt by the Partnership of the
Second
Installment;
(ii) $112,205 upon receipt by the Partnership of the
Third
Installment; and
(iii) $10,000 upon receipt by the Partnership of the
Fourth
Installment.
(b) Pursuant to the aforesaid Development Agreement,
the Partnership shall also pay to the General Partner a Developer Overhead
Allowance in the total amount of $1,922, payable solely upon receipt by the
Partnership of the Second Installment.
8.11. Incentive Management Fee; Partnership
Management
Fee.
(a) The Partnership shall pay to the General
Partner
a non-
cumulative fee (the "Incentive Management Fee") commencing in 1997 for its
services in supervising and monitoring the performance of the Management Agent
pursuant to Section 8.14 hereof and the Management Agreement in the annual
amount of 2% of gross rental income from the Apartment Complex. The Incentive
Management Fee shall be payable from Cash Flow in the manner and priority set
forth in Section 11.01(a).
(b) The Partnership has entered into a Partnership
Management
Services Agreement with the General Partner of even date
herewith for its services in managing the business of the Partnership for the
period from the date hereof throughout the term of the Partnership. Such
agreement includes provisions to the effect that in return for their services
in administering and directing the business of the Partnership, maintaining
appropriate books and records relating to all financial affairs of the
Partnership, and reporting periodically to the Partners, the Lenders and the
Agency with respect to the financial and administrative affairs of the
Partnership and the Apartment Complex, the Partnership shall pay to the
General Partner, solely from the Cash Flow of the Partnership available for
distribution and in accordance with Section 11.01(a), a noncumulative annual
Partnership Management Fee in the amount of $1,000 commencing in 1997. Such
fee shall be subject to Lender and/or Agency approval, if required.
8.12. Withholding of Fee Payments. In the event that
(a) the
General Partner or any successor General Partner shall not have substantially
complied with any material provisions under this Agreement, or (b) any
financing commitment of the First Mortgage Lender, the Second Mortgage Lender
or any other lender, or any agreement entered into by the Partnership for
financing related to the Apartment Complex shall have terminated prior to
their respective termination date(s), or (c) foreclosure proceedings shall
have been commenced against the Apartment Complex, then (i) the General
Partner shall be in default of this Agreement, and the Partnership shall
withhold payment of any installment of fees payable to the General Partner
pursuant to Sections 8.10 and/or 8.11, and (ii) the General Partner shall be
liable for the Partnership's payment of any and all installments of the unpaid
Development Fee payable pursuant to Section 8.10.
All amounts so withheld by the Partnership under this Section
8.12
shall be promptly released to the General Partner only after the General
Partner has cured the default justifying the withholding, as demonstrated by
evidence reasonably acceptable to BCTC 94.
8.13. Removal of the General Partner.
(a) BCTC 94, acting on behalf of the Investment
Partnership, so long as the Investment Partnership is a Partner,
shall have the right to remove a General
Partner (i)
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, or is likely to
result in, a material detriment to or an impairment of the Apartment Complex
or assets of the Partnership), or (ii) upon the occurrence of any of the
following:
(A) the General Partner shall have violated any
provisions of the Regulatory Agreement, or any provisions of any other Project
Document or other document required in connection with the First Mortgage Loan
or the Second Mortgage Loan, or any provisions of Agency regulations
applicable to the Apartment Complex;
(B) the General Partner shall have violated any
provision of this Agreement, or violated any provision of applicable
law;
(C) the General Partner shall have caused the First Mortgage Loan
or the Second Mortgage Loan to go into default; or
(D) the General Partner shall have conducted its own affairs or the
affairs of the Partnership in such manner as would:
(1) cause the termination of the Partnership for federal
income tax purposes; or
(2) cause the Partnership to be treated for federal
income tax purposes as an association, taxable as a corporation.
(b) BCTC 94 shall give Notice to all Partners of its
determination that the General Partner shall be removed. The General Partner
shall have thirty (30) days after receipt of such Notice to cure any default
or other reason for such removal, in which event it shall remain as General
Partner. If, at the end of thirty (30) days, the General Partner has not cured
any default or other reason for such removal, it shall cease to be General
Partner and the powers and authorities conferred on them as General Partner
under this Agreement shall cease and the Interests of such General Partner
shall be transferred to BCTC 94 which, without further action, shall become a
General Partner.
(c) (i) In the event that the General
Partner is
removed as aforesaid prior to the Final Closing, it shall be and shall remain
liable for all obligations and liabilities incurred by it as General Partner
of the Partnership before such removal shall become effective, including but
not limited to the obligations and liabilities of the General Partner with
respect to its obligations set forth in Section 8.09 of this Agreement with
regard to Excess Development Costs; provided however, that if amounts
otherwise payable to the General Partner as fees are applied to meet the
General Partner's obligations stated in Sections 5.03 and 8.09 of this
Agreement, such application shall serve to reduce any such liabilities of the
General Partner or any successor, except for any liability incurred as the
result of its negligence, misconduct, fraud or breach of its fiduciary
duties as General Partner of the Partnership.
If the General Partner is removed as a Partner of the Partnership
prior to the Final Closing as aforesaid, the General Partner shall not be
entitled to payment of any further installments of the Development Fee,
Developer Overhead Allowance, Incentive Management Fee, the Partnership
Management Fee or other fees which otherwise would have been due and payable
under various Sections of this Article VIII.
(ii) In the event that the General Partner is
removed as aforesaid after the Final Closing, it shall be and shall remain
liable for all obligations and liabilities
incurred by them as General Partner of the Partnership before such removal
shall become effective, including but not limited to the General Partner's
obligations and liabilities under Section 8.09(b) of this Agreement; provided,
however, that if amounts otherwise payable to the General Partner as fees are
applied by the Partnership to pay Operating Deficits, such application shall
serve to reduce any such liabilities after the Final Closing, except for any
liability incurred as the result of its negligence, misconduct, fraud or
breach of its fiduciary duty as General Partners of the Partnership. If the
General Partner is removed as a Partner of the Partnership at any time after
the Final Closing, the General Partner or its successor(s) shall continue to
be paid subsequent to such removal, in accordance with the terms and
conditions of this Agreement, any installments of Development Fee and/or
Developer Overhead Allowance which would have otherwise been due and payable
to it pursuant to Section 8.10 and which are not otherwise being withheld;
provided however, upon any such removal of the General Partner after the Final
Closing, no further installments of Partnership Management Fee or Incentive
Management Fee shall be paid which are attributable to any period after such
removal.
(d) BCTC 94 hereby is granted an irrevocable power of
attorney, coupled with an interest, to execute any and all documents on behalf
of the Partners and the Partnership as shall be legally necessary and
sufficient to effect all of the foregoing provisions of this Section 8.13.
The election by BCTC 94 to remove the General Partner under this Section shall
not limit or restrict the availability and use of any other remedy which the
Investment Partnership or any other Partner might have with respect to the
General Partner in connection with its undertakings and responsibilities under
this Agreement.
(e) Notwithstanding anything to the contrary in this
Section 8.13, in the event of (1) the withdrawal of a General Partner, or (2)
the failure of the General Partner to meet the requirements of Section
8.09(b), the Interest of BCTC 94 shall be transferred automatically and
without further action by it or any Partner, to that of a General Partner, and
BCTC 94 shall become the Managing General Partner. The General Partner hereby
agrees to take all action necessary to implement this Section 8.13. Further,
the General Partner agrees in such event to give prompt written Notice thereof
to the First Mortgage Lender, the Second Mortgage Lender and the Agency. If
any Lender or the Agency rejects the admission of BCTC 94 as a General
Partner, then BCTC 94 shall withdraw as a General Partner promptly after an
additional General Partner acceptable to the Investment Partnership, the
Lenders and the Agency is admitted to the Partnership; BCTC 94 hereby agrees
to use its best efforts to obtain such a General Partner acceptable to the
Lenders and the Agency.
8.14. Selection of Management Agent. The
Partnership,
with the
approval of the Agency, if required, shall engage such person, firm or company
as the General Partner may select, and as the Investment Partnership may
approve, which approval shall not be unreasonably withheld (hereinafter
referred to as "Management Agent") to manage the operation of the Apartment
Complex during the rent-up period and following Final Closing. The Management
Agent shall be paid a management fee subject to the approval of the Agency, if
required. The contract between the Partnership and the Management Agent and
the management plan for the Apartment Complex shall be in a form acceptable to
the Agency, if required. The Housing Foundation, Inc. and Homeland, Inc. are
hereby collectively approved by the parties hereto as the initial
Management Agent.
8.15. Removal of the Management Agent. The General
Partner (i) may, upon receiving any required approval of the Agency, dismiss
the Management Agent as the entity responsible for the Apartment Complex under
the terms of the contract between the Partnership and the Management Agent,
and (ii) at the request of BCTC 94, shall remove the Management Agent in the
event that the Management Agent is declared Bankrupt, is dissolved, or makes
an assignment for the benefit of its
creditors, or for any intentional misconduct by the Management Agent or
failure to exercise reasonable care in the discharge of its duties and
obligations as Management Agent, including, without limitation, for any action
or failure to take any action which:
(a) violates in any material respect any provision
of
the Management Agreement entered into with the Partnership and approved by the
Agency, and/or any provision of the Regulatory Agreement applicable to the
Apartment Complex, or the management plan for the Apartment Complex, or
(b) violates in any material respect any provision
of
this Agreement or provision of applicable law.
8.16. Replacement of the Management Agent. Upon the
removal of the Management Agent as the entity responsible for the management
of the Apartment Complex, a substitute Management Agent which is not an
Affiliate of the General Partner shall be named by the General Partner,
subject to the approval of the Agency, if required, and the approval of BCTC
94.
8.17. Loans to the Partnership. In the event that
additional funds are required by the Partnership for any purpose relating to
the business of the Partnership or for any of its obligations, expenses, costs
or expenditures, the Partnership may borrow such funds as are needed from any
Partner or other Person or organization, including the General Partner, for
such period of time and on such terms as the General Partner, BCTC 94 and the
Agency, if so required, may agree and at the rate of interest then prevailing
for comparable loans (except for Operating Deficit Loans made pursuant to
Section 8.09(b), which shall bear no interest); provided however, that no such
additional loans shall be secured by any mortgage or other encumbrance on the
property of the Partnership without the prior approval of BCTC 94 and the
Lenders, if required; except that such approvals shall not be required in the
case of the hypothecation of personal property purchased by the Partnership
and not included in the security agreements executed by the Partnership at the
time of Initial Closing. Loans made under this Section shall be repaid as set
forth in Section 11.01(a) of this Agreement, but any amount of any such loan
that is outstanding at the time of the occurrence of any of the events
described in Sections 11.04 or 12.01 shall be repaid as provided in Section
11.04.
8.18. Reserve Fund for Replacements; Operating
Reserve
Account.
(a) Reserve Fund for Replacements. On or before Final
Closing, the Partnership shall establish and maintain a Reserve Fund for
Replacements as a separate special account as required by the Second Mortgage
Lender and/or BCTC 94. The Partnership shall make monthly deposits into the
Reserve Fund for Replacements in the amount of $334, or such greater amount as
shall be required by the Second Mortgage Lender. Funds in the Reserve Fund
for Replacements are intended to be employed for the replacement as needed of
fixtures, equipment, structural elements
and other components of the Apartment Complex of a capital nature. All
interest earnings on funds on deposit in the Reserve Fund for Replacements
shall be retained therein for the
aforesaid purposes. Withdrawals from the Reserve Fund for Replacements shall
be made only with the consent, or upon the direction, of the Second Mortgage
Lender; provided, however, that if such consent of the Second Mortgage Lender
is not required, such withdrawals may be made only with the Consent, or upon
the direction, of BCTC 94.
(b) Operating Reserve Account. Upon receipt of the
Second Installment by the Partnership, the Partnership shall establish the
Operating Reserve Account as a separate special account in a financial
institution approved by BCTC 94, and the General Partner shall deposit therein
funds in the amount of $10,000. Funds in the Operating Reserve Account
shallbe employed solely for the payment of Operating Deficits. All interest
earnings on funds on deposit in the Operating Reserve Account shall be
retained therein for the aforesaid purposes. Withdrawals from the Operating
Reserve Account shall be made only with the Consent, or upon the direction, of
BCTC 94. The Operating Reserve Account shall terminate on the last day of the
Compliance Period, and all funds remaining therein shall be released therefrom
and paid by the Partnership to the General Partner.
(c) Interest Account. On or before Final Closing, the
General Partner shall acquire a treasury bill or interest-bearing government
security in the amount of not less than $100,000 from its own funds and for
its own behalf and not on behalf of the Partnership. The aforementioned
treasury bill or government security shall be held in escrow pursuant to the
terms and conditions of the Escrow Agreement even date herewith by and among
the General Partner, the Investment Partnership and First Federal Savings Bank
of Leitchfield, in its capacity as an escrow agent (the "Escrow Agent"). Upon
acquisition of the aforementioned treasury bill or government security, the
General Partner shall establish a discrete depository account with the Escrow
Agent or such other with the financial institution acceptable to BCTC 94 (the
"Interest Account") in which the General Partner shall deposit all interest
earnings on the aforementioned treasury bill or government security upon
receipt thereof by the General Partner. Funds in the Interest Account shall
be employed by the General Partner solely for the purpose of paying Operating
Deficits pursuant to Section 8.09(b). The Interest Account shall terminate on
the last day of the Compliance Period; provided, however, that the Interest
Account shall sooner terminate if, for a period of twenty-four (24)
consecutive months, the total of the rental and miscellaneous income from the
normal operation of the Apartment Complex received on a cash basis with each
month taken individually less the total of all accrued operational costs and
expenses of the Apartment Complex including, without limitation, scheduled
debt service payments with respect to the First Mortgage Loan and the Second
Mortgage Loan, and a ratable portion of seasonal and periodic expenses which
are reasonably expected to be incurred for such period of twenty-four (24)
consecutive months with each month taken individually equals or exceeds one
hundred fifteen per cent (115%) of the total scheduled debt service payments
for such period as aforesaid, as certified in writing to the Investment
Partnership by the General Partner. Upon termination of the Interest Account,
all funds therein shall be released and returned to the General Partner.
8.19 Right of First Refusal. If, at any time during
the period
commencing on the first day following the end of the Compliance Period and
ending one hundred twenty (120) days thereafter, the General Partner receives
a bona fide offer to purchase the Apartment Complex and its related assets
and, if required, Consent of the Investment Partnership to the sale of the
Apartment Complex is obtained, then the General Partner, or any of member or
Affiliate thereof, to the extent such Person is an eligible purchaser under
Section 42(i) of the Code, shall have a right of first refusal to purchase the
Apartment Complex and its related assets exercisable within thirty (30) days
after receipt of written notification thereof by the Partnership and the
Limited Partners. The purchase price for the Apartment Complex and its
related assets (the "Purchase Price") shall be equal to the minimum purchase
price under Section 42(i)(7)(B) of the Code, which price shall be calculated
by taking into account, inter alia, the federal, state and local tax liability
of all partners of all Limited Partners which are pass-through Entities for
tax purposes.
ARTICLE IX.
TRANSFERS OF, AND RESTRICTIONS ON TRANSFERS
OF INTERESTS OF LIMITED PARTNERS
9.01. Acquisition for Investment.
(a) The Investment Partnership hereby represents and
warrants to the General Partner and to the Partnership that the acquisition of
its Interest is made as principal for its account for investment purposes only
and not with a view to the resale or distribution of such Interest, except
insofar as the Securities Act of 1933 and any applicable securities law of any
state or other jurisdiction permit such acquisitions to be made for the
account of others or with a view to the resale or distribution of such
Interest without requiring that such Interest, or the acquisition, resale or
distribution thereof, be registered under the Securities Act of 1933 or any
applicable securities law of any state or other jurisdiction.
(b) The Investment Partnership agrees that it will not
sell, assign or otherwise transfer its Interest or any fraction thereof to any
Person who does not similarly represent and warrant and similarly agree not to
sell, assign or transfer such Interest or fraction thereof to any Person who
does not similarly represent and warrant and agree.
9.02. Restrictions on Transfer of Limited Partners'
Interests.
(a) Under no circumstances will any offer, sale,
transfer, assignment, hypothecation or pledge of any Limited Partner Interest
be permitted unless the General Partner, in its reasonable discretion, shall
have Consented.
(b) The Limited Partner whose interest is
being transferred shall pay such reasonable expenses as may be incurred by the
Partnership in connection with such transfer.
9.03. Admission of Substitute Limited Partners.
(a) Subject to the other provisions of this Article
IX, an assignee of the Interest of a Limited Partner (which shall be
understood to include any purchaser, transferee, donee, or other recipient of
any disposition of such Interest) shall be deemed admitted as a Substitute
Limited Partner of the Partnership only upon the satisfactory completion of
the following:
(i) Consent of the General Partner (which may be
withheld in their reasonable discretion) and the consent of the Lenders, if
required, shall have been given, which consent may be
evidenced by the execution by the General Partner of an amended Certificate
evidencing the admission of such Person as a Limited Partner pursuant to the
requirements to the Act;
(ii) the assignee shall have accepted and agreed to
be
bound by the terms and provisions of this Agreement by executing a counterpart
thereof or an appropriate amendment
hereto, and such other documents or instruments as the General Partner may
require in order to effect the admission of such Person as a Limited Partner;
(iii) an amended Agreement and/or Certificate
evidencing the admission of such Person as a Limited Partner shall have been
filed for recording pursuant to the requirements to the Act;
(iv) the assignee shall have represented and agreed
in writing as required by Section 9.01;
(v) if the assignee is a corporation, the assignee
shall have provided the General Partner with evidence satisfactory to counsel
for the Partnership of its authority to become a Limited Partner under the
terms and provisions of this Agreement; and
(vi) the assignee or the assignor shall have
reimbursed the Partnership for all reasonable expenses, including all
reasonable legal fees and recording charges, incurred by the Partnership in
connection with such assignment.
(b) For the purpose of allocation of
profits, losses and credits, and for the purpose of distributing cash of the
Partnership, a Substitute Limited Partner shall be treated as having become,
and as appearing in, the records of the Partnership as a Partner upon his
signing of an amendment to this Agreement, agreeing to be bound hereby.
(c) The General Partner shall cooperate
with the Person seeking to become a Substitute Limited Partner by preparing
the documentation required by this Section and making all official filings and
publications. The Partnership shall take all such action, including the
filing of any amended Agreement and/or Certificate evidencing the admission of
any Person as a Limited Partner, and the making of any other official filings
and publications, as promptly as practicable after the satisfaction by the
assignee of the Interest of a Limited Partner of the conditions contained in
this Article IX to the admission of such Person as a Limited Partner of the
Partnership. Any cost or expense incurred in connection with such admission
shall be borne by the Partnership to the extent of available Partnership
assets, and otherwise by such assignee.
9.04. Rights of Assignee of Partnership Interest.
(a) Except as provided in this Article and as required by
operation of law, the Partnership shall not be obligated for any purpose
whatsoever to recognize the assignment by any Limited Partner of his (its)
Interest until the Partnership has received actual Notice thereof.
(b) Any Person who is the assignee of all or any portion
of a Limited Partner's Interest, but does not become a Substitute Limited
Partner and desires to make a further assignment of such Interest, shall be
subject to all the provisions of this Article IX to the same extent and in the
same manner as any Limited Partner desiring to make an assignment of his (its)
Interest.
ARTICLE X. RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
10.01. Management of the Partnership. No Limited
Partner shall take part in the management or control of the business of the
Partnership nor transact any business in the
name of the Partnership. Except as otherwise expressly provided in this
Agreement, no Limited Partner shall have the power or authority to bind the
Partnership or to sign any agreement or document in the name of the
Partnership. No Limited Partner shall have any power or authority with
respect to the Partnership except insofar as the consent of any Limited
Partner shall be expressly required and except as otherwise expressly provided
in this Agreement.
10.02. Limitation on Liability of Limited Partners. The liability of
each Limited Partner shall be limited to its Capital Contribution as and when
payable under the provisions of this Agreement. No Limited Partner shall have
any other liability to contribute money to, or in respect of the liabilities
or obligations of, the Partnership, nor shall any Limited Partner be
personally liable for any obligations of the Partnership. No Limited Partner
shall be obligated to make loans to the Partnership.
10.03. Other Activities. Any Limited Partner may engage in or
possess interests in other business ventures of every kind and description for
their own accounts, including without limitation, serving as general or
limited partner of other partnerships which own, either directly or through
interests in other partnerships, government-assisted housing projects similar
to the Apartment Complex. Neither the Partnership nor any of the Partners
shall have any right by virtue of this Agreement in or to such other business
ventures to the income or profits derived therefrom.
10.04 Ownership by Limited Partner of Corporate or Limited Liability
Company General Partner or Affiliate. No Limited Partner shall, at any time,
either directly or indirectly, own any stock or other membership interest in
any corporate or limited liability company General Partner if such ownership
by itself or in conjunction with other stock or other interests owned by other
Limited Partners would, in the opinion of Peabody & Brown or other tax counsel
to the Investment Partnership, jeopardize the classification of the
Partnership as a partnership for federal income tax purposes. In the event of
any violation of the provisions of this Section by any one or more Limited
Partners, such Limited Partner or Limited Partners shall either dispose of
their Interests in the Partnership (subject to and in compliance with the
provisions of Article IX) or of their stock or other interest in the corporate
General Partner or Affiliates to the extent necessary so that, in the opinion
of counsel for the Partnership, the classification of the Partnership as a
partnership for federal income tax purposes is no longer in jeopardy. The
obligation of any such disposition required of more than one Limited Partner
shall be shared among them on an equitable basis. Notwithstanding the
foregoing, neither the General Partner nor any Limited Partner shall be liable
in damages to the Partnership or to any Partner by reason of any violation of
this Section, except for damages arising (a) out of any material
misrepresentation by any Limited Partner relating to the ownership of stock or
other interest in a corporate or limited liability company General Partner or
any affiliate by him or by any member of his family (within the meaning of the
attribution rules set forth in Section 318 of Code), or (b) out of any failure
by any Limited Partner to dispose of his Interest in the Partnership or of his
stock or other interest in a corporate or limited liability company General
Partner or Affiliate within a reasonable time after Notice to such Limited
Partner by the Partnership of the obligations to make such
disposition.
ARTICLE XI.
PROFITS, LOSSES AND DISTRIBUTIONS
11.01. Allocation of Profits, Losses, Credits and Cash Distributions.
(a) All profits, losses and credits, except those gains
and losses referred to in Section 11.03, shall be allocated one per cent (1%)
to the General Partner, and ninety nine per cent (99%) to the Investment
Partnership. Subject to the approval of the Lenders, if required, Cash Flow
shall be applied and/or distributed in the following priority: (i) payment of
the Asset Management Fee currently due, together with any accrued but unpaid
Asset Management Fees; (ii) repayment of any amounts due with respect to the
Subordinated Loans; (iii) payment of the Partnership Management Fee for the
current year; (iv) payment of the Incentive Management Fee for the current
year; and (v) of any remaining sum, fifty per cent (50%) thereof to the
General Partner and fifty per cent (50%) thereof to the Investment
Partnership.
(b) In any year in which a Partner sells, assigns or transfers all or any
portion of an Interest to any Person who during such year is admitted as a
substitute Partner, the share of all profits and losses allocated to, and of
all Cash Flow and of all cash proceeds distributable under Section 11.04
distributed to, all Partners which is attributable to the Interest sold,
assigned or transferred shall be divided between the assignor and the assignee
using any one of the following methods as determined by agreement between the
assignor and assignee: (i) ratably on the basis of the number of days in such
year before, and the number of days on and after, the execution by the
assignee of this Agreement, or (ii) by dividing the Partnership fiscal year
into two segments, the first segment being the time period in such year before
the execution by the assignee of this Agreement and the second segment being
the time period in such year beginning on the date of execution of this
Agreement, and allocating profits and losses, Cash Flow, and all cash proceeds
distributable in each such segment among the persons who were Partners during
that segment, or (iii) such other method as provided by the Code or
regulations thereunder.
(c) The Partnership shall, subject to any applicable
limitation on the distribution of Cash Flow and any required approval by the
Agency or the Lenders, distribute Cash Flow not less frequently than annually
in the manner provided in Section 11.01(a).
(d) In the event that there is a determination that there
is any original issue discount or imputed interest attributable to the Capital
Contribution of any Partner, or any loan between a Partner and the
Partnership, any income or deduction of the Partnership attributable to such
imputed interest or original issue discount on such Capital Contribution or
loan (whether stated or unstated) shall be allocated solely to such Partner.
(e) In the event that the deduction of all or a portion
of any fee paid or incurred by the Partnership to a Partner or an Affiliate of
a Partner is disallowed for federal income tax purposes by the Internal
Revenue Service with respect to a taxable year of the Partnership, the
Partnership shall then allocate to such Partner an amount of gross income of
the Partnership for such year equal to the amount of such fee as to which the
deduction is disallowed.
(f) If any Partner's Interest in the Partnership is
reduced but not eliminated because of the
admission of new Partners or otherwise, or if any Partner is treated as
receiving any items of property described in Section 751(a) of the Code, the
Partner's Interest in such items of Section 751(a) property that was property
of the Partnership while such Person was a Partner shall not be reduced, but
shall be retained by the Partner so long as the Partner has an Interest in the
Partnership and so long as the Partnership has an Interest in such property.
11.02. Determination of Profits, Losses and Credits. Profits, losses
and credits for all purposes of this Agreement shall be determined in
accordance with the accrual accounting method, except that any adjustments
made pursuant to Section 754 of the Code, other than the adjustments made with
respect to the admission of the Investment Partnership to the Partnership,
shall not be taken into account. Every item of income, gain, loss, deduction,
credit or tax preference entering into the computation of such profits or
losses, or applicable to the period during which such profits and losses were
realized, shall be considered allocated to each Partner in the same proportion
as profits and losses are allocated to such Partner.
11.03. Allocation of Gains and Losses. Gains and losses recognized
by the Partnership upon the sale, exchange or other disposition of all or
substantially all of the property owned by the Partnership shall be allocated
in the following manner:
(a) gains shall be allocated (i) first, to the Partners
with negative Capital Account balances, that portion of gains (including any
gains treated as ordinary income for federal income tax purposes) which is
equal in amount to, and in proportion to, such Partners' respective negative
Capital Accounts in the Partnership; provided, that no gain shall be allocated
to a Partner once such Partner's Capital Account is brought to zero; and (ii)
second, gain in excess of the amount allocated under (i) shall be allocated to
the Partners in the amount and to the extent necessary to increase the
Partners' respective Capital Accounts so that the proceeds distributed under
Sections 11.04(d), (e) and (f) will be distributed in accordance with the
Partners' respective Capital Accounts.
(b) Losses shall be allocated (i) first, to
the extent and in such proportions as the respective balances in all Partners'
Capital Accounts; and (ii) second, any remaining loss to the Partners in
accordance with the manner in which they bear the economic risk of loss
associated with such loss or, if none, in accordance with their Partnership
Interests.
(c) Any portion of the gains treated as ordinary income
for federal income tax purposes under Sections 1245 and 1250 of the Code
("Recapture Amount") shall be allocated on a dollar for dollar basis to those
Partners to whom the items of Partnership deduction or loss giving rise to the
Recapture Amount had been previously allocated.
11.04. Distribution of Proceeds from Sale and Liquidation of
Partnership Property. Except as may be required under Section 12.02(b),
the proceeds resulting from the
liquidation of the Partnership assets pursuant to Section 12.02, and the net
proceeds resulting from any sale of the property of the Partnership or
refinancing of the Apartment Complex or a Capital Transaction, as the case may
be, shall be distributed and applied in the following order of priority:
(a) to the payment of all matured debts and
liabilities of the Partnership (including amounts due pursuant to
the First Mortgage Loan and the Second Mortgage Loan and all expenses of the
Partnership incident to any such sale or
refinancing), excluding (1) debts and liabilities of the Partnership to
Partners or any Affiliates, and (2) all unpaid fees owing to the General
Partner under this Agreement;
(b) to the setting up of any reserves which the
Liquidator (or the General Partner if the distribution is not pursuant to the
liquidation of the Partnership) deems reasonably necessary for contingent,
unmatured or unforeseen liabilities or obligations of the Partnership;
(c) to the payment of any debts and liabilities
(including unpaid fees) owed to the Partners or any Affiliates by the
Partnership for Partnership obligations, including the repayment of any loans
made pursuant to Sections 5.01(d)(iii), 8.09(b) or 8.17(a); provided, however,
that the foregoing debts and liabilities owed to Partners and their Affiliates
shall be paid or repaid, as applicable, in the following order of priority, if
and to the extent applicable: (i) any accrued and unpaid Asset Management
Fees, (ii) Credit Recovery Loans to the Investment Partnership, (iii)
Subordinated Loans to the General Partner, and (iv) any other such debts and
liabilities.
(d) to the Investment Partnership in an amount equal to
the Invested Amount, reduced (but not below zero) by all cash distributions
previously made to the Investment Partnership pursuant to this Section 11.04:
(e) to the General Partner in the total amount of its
Capital Contributions paid to or on behalf of the Partnership, reduced by all
cash distributions previously made to it pursuant to this Section 11.04;
(f) the balance of such remaining sum, fifty per cent
(50%) thereof to the General Partner, and fifty per cent (50%) thereof to the
Investment Partnership.
11.05. Capital Accounts. A separate Capital Account shall be
maintained and adjusted for each Partner. There shall be credited to each
Partner's Capital Account the amount of his Capital Contribution, the fair
market value of any property contributed to the Partnership (net of any
liabilities secured by such property) and such Partner's distributive share of
the profits for tax purposes of the Partnership; and there shall be charged
against each Partner's Capital Account the amount of all Cash Flow distributed
to such Partner, the fair market value of any property distributed to such
Partner (net of any liabilities secured by such property), the net proceeds
resulting from the liquidation of the Partnership's assets or from any sale or
refinancing of the Apartment Complex distributed to such Partner, and such
Partner's distributive share of the losses for tax purposes of the
Partnership. Each Partner's Capital Account shall be maintained and adjusted
in accordance with the Code and the Treasury Regulations thereunder. The
foregoing provisions and the other provisions of this Agreement relating to
the maintenance of Capital Accounts are intended to comply with Treas. Reg.
section 1.704-1(b), and shall be interpreted and applied in a manner
consistent with such regulations. It is the intention of the Partners that the
Capital Accounts maintained under this Agreement be determined and maintained
throughout the full term of this Agreement in accordance with the accounting
rules of Treas. Reg. section 1.704-1(b)(2)(iv).
11.06. Authority of General Partner to Vary
Allocations to Preserve and Protect Partners'
Intent.
(a) It is the intent of the Partners that each Partner's
distributive share of income, gain, loss, deduction, or credit (or item
thereof) shall be determined and allocated in accordance with this Article XI
and Section 5.01 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 Article XI and Section 5.01, the General Partner hereby
is authorized and directed to allocate income, gain, loss, deduction, or
credit (or item thereof) arising in any year differently than otherwise
provided for in this Article XI and Section 5.01 to the extent that allocating
income, gain, loss, deduction or credit (or item thereof) in the manner
provided for in Article XI and Section 5.01 would cause the determinations and
allocations of each Partner's distributive share of income, gain, loss,
deduction, or credit (or item thereof) not to be permitted by Section 704(b)
of the Code and Treasury Regulations promulgated thereunder. Any allocation
made pursuant to this Section 11.06 shall be deemed to be a complete
substitute for any allocation otherwise provided for in this Article XI and
Section 5.01 and no amendment of this Agreement or approval of any Partner
shall be required.
(b) In making any allocation (the "new allocation") under
Section 11.06(a), the General Partner is authorized to act only after: (i)
having been advised by the Accountants that, under Section 704(b) of the Code
and the Treasury Regulations thereunder, (A) the new allocation is necessary,
and (B) the new allocation is the minimum modification of the allocations
otherwise provided for in this Article XI and Section 5.01 necessary in order
to assure that, either in the then current year or in any preceding year, each
Partner's distributive share of income, gain, loss, deduction, or credit (or
item thereof) is determined and allocated in accordance with this Article XI
and Section 5.01 to the fullest extent permitted by Section 704(b) of the Code
and the Treasury Regulations thereunder; and (ii) having received the approval
of BCTC 94 to such proposed new allocation.
(c) If the General Partner is required by Section 11.06(a) to make any new
allocation in a manner less favorable to the Limited Partners than is
otherwise provided for in this Article XI and Section 5.01, then the General
Partner is authorized and
directed, only after having been advised by the Accountants that it is
permitted by Section 704(b) of the Code, to allocate income, gain, loss,
deduction, or credit (or item thereof) arising in later years in such manner
so as to bring the allocations of income, gain, loss, deduction, or credit (or
item thereof) to the Limited Partners as nearly as possible to the allocations
thereof otherwise contemplated by this Article XI and Section 5.01.
(d) New allocations made by the General Partner under Section 11.06(a) and
Section 11.06(c) in reliance upon the
advice of the Accountants shall be deemed to be made pursuant to the fiduciary
obligation of the General Partner 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.
11.07. Designation of Tax Matters Partner. Leitchfield Affordable
Housing, LLC hereby is designated as Tax Matters Partner of the Partnership,
and shall engage in such undertakings as are required of the Tax Matters
Partner of the Partnership, as provided in regulations pursuant to Section
6231 of the Code. Each Partner, by its execution of this
Agreement, Consents to such designation of the Tax Matters Partner and agrees
to execute, certify, acknowledge, deliver, swear to, file and record
at the appropriate public offices such documents as may be necessary or
appropriate to evidence such Consent.
11.08. Authority of Tax Matters Partner. The Tax
Matters Partner is hereby authorized, but not required:
(a) to enter into any settlement with the Internal
Revenue Service or the Secretary with respect to any tax audit or judicial
review, in which agreement the Tax Matters Partner may expressly state that
such agreement shall bind the other Partners, except that such settlement
agreement shall not bind any Partner who (within the time prescribed pursuant
to the Code and regulations thereunder) files a statement with the Secretary
providing that the Tax Matters Partner shall not have the authority to enter
into a settlement agreement on behalf of such Partner;
(b) in the event that a notice of a final administrative
adjustment at the Partnership level of any item required to be taken into
account by a Partner for tax purposes (a "final adjustment") is mailed to the
Tax Matters Partner, to seek judicial review of such final adjustment,
including the filing of a petition for readjustment with the Tax Court, the
District Court of the United States for the district in which the
Partnership's principal place of business is located, or the United States
Claims Court;
(c) to intervene in any action brought by any other
Partner for judicial review of a final adjustment;
(d) to file a request for an administrative adjustment
with the Internal Revenue Service at any time and, if any part of such request
is not allowed by the Internal Revenue Service, to file a petition for
judicial review with respect to such request;
(e) to enter into an agreement with the Internal Revenue
Service to extend the period for assessing any tax which is attributable to
any item required to be taken into account by a Partner for tax purposes, or
an item affected by such item; and
(f) to take any other action on behalf of the Partners or
the Partnership in connection with any administrative or judicial tax
proceeding to the extent permitted by applicable law or regulations.
11.09. Expenses of Tax Matters Partner. The
Partnership shall indemnify and reimburse the Tax Matters Partner for all
expenses, including legal and accounting fees, claims, liabilities, losses and
damages incurred in connection with any administrative or judicial proceeding
with respect to the tax liability of the Partners. The payment of all such
expenses shall be made before any distributions are made from Cash Flow or any
discretionary reserves are set aside by the General Partner. The General
Partner shall have the obligation to provide funds for such purpose. The
taking of any action and the incurring of any expense by the Tax Matters
Partner in connection with any such proceeding, except to the extent required
by law, is a matter in the sole discretion of the Tax Matters Partner and the
provisions on limitations of liability of General Partner and indemnification
set forth in Section 8.07 of this Agreement shall be fully applicable to the
Tax Matters Partner in its capacity as such.
11.10. Minimum Gain Provisions.
(a) Notwithstanding any other provision of this Agreement, no
allocation of loss or deduction (or item thereof) attributable to any
nonrecourse debt of the Partnership shall be made by the Partnership to a
Partner if such allocation would cause the sum of the deficit capital account
balances of
the Partner or Partners otherwise receiving such allocation (excluding the
portion of such deficit balances that must be restored to the Partnership upon
liquidation, if any) to exceed the "Minimum Gain" (as defined in Treas. Reg.
section 1.7041(b)(4)(iv)(f) and determined at the end of the Partnership
taxable year to which the allocation relates).
(b) Notwithstanding any other provision of this
Agreement, if there is a net decrease in Partnership Minimum Gain during a
Partnership taxable year, all Partners with deficit Capital Account balances
at the end of such year (reduced by the portion of such deficit balances (i)
that must be restored upon liquidation, if any, and (ii) that would be
eliminated under applicable Regulations if the Partnership were liquidated at
such time, and increased by the items described in Treas. Reg.
1.7041(b)(2)(ii)(d)(4), (5) and (6)) shall be allocated items of income and
gain for such year in the amount and in the proportions needed to eliminate
such deficits, before any other allocation is made under this Agreement.
(c) In the event any Partner unexpectedly receives any adjustments,
allocations or distributions described in Treas. Reg. 1.7041(b)(2)(ii)(d)(4),
(5) or (6), items of
Partnership income and gain shall be specially allocated to each such Partner
in an amount and manner sufficient to eliminate (to the extent required by the
Regulations under Code Section 704(b)) to the deficit balance in each such
Partner's Capital Account as quickly as possible, provided that an allocation
pursuant to this Section 11.10(c) shall be made if and only to the extent that
such Partner would have a deficit Capital Account after all other allocations
provided for in this Article XI have been tentatively made as if this Section
11.10(c) were not in the Agreement.
(d) In the event any Partner has a deficit Capital
Account at
the end of any fiscal year in excess of the sum of (i) the amount that such
Partner must restore to the Partnership upon liquidation, if any, and (ii) the
amount such Partner is deemed obligated to restore pursuant to the penultimate
specially allocated items of Partnership income and gain in the amount of such
excess as quickly as possible, provided that an allocation pursuant to this
Section 11.10(d) shall be made if and only to the extent that such Partner
would have a deficit Capital Account in excess of such sum after all other
allocations provided for in this Article XI has been tentatively made as if
this Section 11.10(d) and Section 11.10(c) hereof were not in the Agreement.
(e) In the event that income, loss or items thereof are
allocated to one or more Partners pursuant to Sections 11.10(b), (c) or (d),
subsequent income, loss or items thereof shall be allocated (subject to the
provisions of Sections 11.10(b), (c) or (d)) to the Partners so that, to the
extent possible in the judgment of the General Partner, the net amount of
allocations shall be equal to the amount that would have been allocated had
Section 11.10 not been applied.
ARTICLE XII.
SALE, DISSOLUTION AND LIQUIDATION
12.01. Dissolution of the Partnership. The Partnership shall be
dissolved upon the earlier of the expiration of the term of the Partnership,
or upon:
(a) the withdrawal, Bankruptcy, death, dissolution
or
adjudication of incompetency of a General Partner who is at that time
the sole General Partner;
(b) the sale or other disposition of all or
substantially
all of the assets of the Partnership;
(c) the election by the General Partner, with the
Consent of
BCTC 94; or
(d) any other event causing the dissolution of the
Partnership under the laws of the State.
12.02. Winding Up and Distribution.
(a) Upon the dissolution of the Partnership pursuant to
Section 12.01, (i) a Certificate of Cancellation shall be filed in such
offices within the State as may be required or appropriate, and (ii) the
Partnership business shall be wound up and its assets liquidated as provided
in this Section 12.02 and the net proceeds of such liquidation, except as
provided in Section 12.02(b) below, shall be distributed in
accordance with Section 11.04.
(b) It is the intent of the Partners that, upon
liquidation of the Partnership, any liquidation proceeds available for
distribution to the Partners be distributed in accordance with the Partners'
respective Capital Account balances and the Partners believe that
distributions under Section 11.04 will effectuate such intent. In the event
that, upon liquidation, there is any conflict between a distribution pursuant
to the Partners' respective Capital Account balances and the intent of the
Partners with respect to distribution of proceeds as provided in Section
11.04, the Liquidator shall, notwithstanding the provisions of Sections 11.01,
11.02 and 11.03, allocate the Partnership's gains, profits and losses in a
manner that will cause the distribution of liquidation proceeds to the
Partners to be in accordance with the Partners' respective Capital Account
balances.
(c) The Liquidator shall file all certificates and
notices of the dissolution of the Partnership required by law. The Liquidator
shall proceed without any unnecessary delay to sell and otherwise liquidate
the
Partnership's property and assets; provided, however, that if the Liquidator
shall determine that an immediate sale of part or all of the Partnership
property would cause undue loss to the Partners, then in order to avoid such
loss, the Liquidator may, except to the extent provided by the Act, defer the
liquidation as may be necessary to satisfy the debts and liabilities of the
Partnership to Persons other than the Partners. Upon the complete liquidation
and distribution of the Partnership assets, the Partners shall cease to be
Partners of the Partnership, and the Liquidator shall execute, acknowledge and
cause to be filed all certificates and notices required by the law to
terminate the Partnership.
(d) Upon the dissolution of the Partnership pursuant to
Section 12.01, the Accountants shall promptly prepare, and the Liquidator
shall furnish to each Partner, a statement setting forth the assets and
liabilities of the Partnership upon its dissolution. Promptly following the
complete liquidation and distribution of the Partnership property and assets,
the Accountants shall prepare, and the Liquidator shall furnish to each
Partner, a statement showing the manner in which the Partnership assets were
liquidated and distributed.
ARTICLE XIII.
BOOKS AND RECORDS, ACCOUNTING TAX ELECTIONS, ETC.
13.01. Books and Records. The books and records of the Partnership
shall be maintained on an accrual basis in accordance
with sound federal income tax accounting principles. These and all other
records of the Partnership, including information relating to the status of
the Apartment Complex and information with respect to the sale by the General
Partner or any Affiliate of goods or services to the Partnership, shall be
kept at the principal office of the Partnership and shall be available for
examination there by any Partner, or his duly authorized representative, at
any and all reasonable times. Any Partner, or his duly authorized
representative, upon paying the costs of collection, duplication and mailing,
shall be entitled to a copy of the list of names and addresses of the Limited
Partners.
13.02. Bank Accounts. All funds of the Partnership not otherwise
invested shall be deposited in one or more accounts maintained in such banking
institutions as the General Partner shall determine, and withdrawals shall be
made only in the regular course of Partnership business on such signature or
signatures as the General Partner may, from time to time, determine. No funds
of the Partnership shall be deposited in any financial institution in which
any Partner is an officer, director or holder of any proprietary interest.
13.03. Accountants. The Accountants shall annually prepare for
execution by the General Partner all tax returns of the Partnership, shall
annually audit the books of the Partnership, and shall certify, in accordance
with generally accepted accounting principles, a balance sheet, a profit and
loss statement, and a cash flow statement. With respect to each fiscal year
during the Partnership's operations, at such time as the Accountants shall
have prepared the proposed tax return for such year, the Accountants shall
provide copies of such proposed tax return to the Investment Partnership and
to its accountants, Reznick Fedder & Silverman, of Bethesda, Maryland, for
their review and comment. Any changes in such proposed tax return recommended
by the Investment Partnership's accountants shall be made by the Accountants
prior to the completion of such tax return for execution by the General
Partner. The Partnership shall reimburse BCCLP, for its expenses incurred in
causing the Partnership's proposed tax return to be reviewed by the Investment
Partnership's accountants, if and to the extent that such review results in
modifications to such proposed tax return. A full detailed statement shall be
furnished to all Partners, showing such assets, properties, and net worth and
the profits and losses of the Partnership for the preceding fiscal year. All
Partners shall have the right and power to examine and copy, at any and all
reasonable times, the books, records and accounts of the Partnership.
13.04. Reports to Partners.
(a) The General Partner shall cause to be prepared and
distributed to all persons who were Partners at any time during a fiscal year
of the Partnership:
(i) By February 15 of the year after the end of
each
fiscal year of the Partnership, a year end financial compilation which shall
include (A) a balance sheet as of the end of such fiscal year and statements
of income, Partners' equity, and changes in financial position and a Cash Flow
statement, for the year then ended, all of which, except the Cash Flow
statement, shall be prepared in accordance with generally accepted accounting
principles and accompanied by the Accountants' report thereon, and (B) a
report of the activities of the Partnership during the period covered by the
report. Such report shall set forth distributions to Limited Partners for the
period covered thereby and 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 the Apartment Complex or any other
investments of the Partnership, and (4) reserves. With respect to any
distribution to the Investment Partnership, the report called for shall
separately identify distributions from (A) Cash Flow from operations during
the period, (B) Cash Flow from operations during a prior period which had been
held as reserves, (C) proceeds from disposition of property and investments,
(D) lease payments on net leases with builders and sellers, (E) reserves from
the gross proceeds of the offering originally obtained from the Investment
Partnership, (F) borrowed monies, (G) loans or contributions from the
Investment Partnership, and (H) transactions outside of the ordinary course of
business with a description thereof.
(ii) By February 15 of each odd year, commencing in
1997, through the year 2012 and in any year in which the Apartment Complex is
sold, the annual financial reports and related financial disclosure of the
Partnership shall be fully audited.
(iii) For each even year, commencing in 1996, the
General Partner shall provide to the Accountants, on or before January 15
following an even year-end, all documents required by the Accountants to
perform an abbreviated audit of the Partnership's operations for such even
year.
(iv) By February 1 of the year after the end of each
fiscal year of the Partnership, all information necessary for the preparation
of the Limited Partners' federal income tax returns, together with a draft of
the Partnership's federal income tax return for such fiscal year.
(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;
(C) the certification by the General Partner
that the Apartment Complex and all tenants thereof are in compliance with all
requirements and regulations applicable to Low-Income Housing Tax Credits; and
(D) other pertinent information regarding the
Partnership and its activities during the quarter covered by the report.
(b) Within ninety (90) days after the end of each fiscal
year of the Partnership the General Partner shall provide to the Investment
Partnership:
(i) A certification by the General Partner that (A)
all First Mortgage Loan and Second Mortgage Loan payments and taxes and
insurance payments with respect to the Apartment Complex are current as of the
date of the year-end report, (B) there is no default under the Project
Documents or this Agreement, or if there is any default, a description
thereof, and (C) there is no building, health or fire code violation or
similar violation of a governmental law, ordinance or regulation against the
Apartment Complex or, if there is any violation, a description thereof;
(ii) the information specified in Section 13.04(c);
(iii) a descriptive statement of all transactions
during the fiscal year between the Partnership and the General Partner and/or
any Affiliate, including the nature of the transaction and the payments
involved; and
(iv) a Cash Flow statement; and
(v) 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 Agency concerning the
same.
(c) Upon the written request of the Investment
Partnership for further information with respect to any matter covered in
items (a) or (b) above, the General Partner shall furnish such information
within 30 days of receipt of such request.
(d) Prior to October 15 of each year, the General Partner,
on behalf of the Partnership, shall send to the Investment Partnership an
estimate of the Investment Partnership'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 Partner and the
Accountants.
(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) the General Partner has received any notice of
a
material fact which may substantially affect further distributions, or
(iv) any Partner has pledged or collateralized his
Interest in the Partnership,
the General Partner shall send the Investment Partnership a detailed report of
such event.
(f) After the Admission Date, the General Partner, on
behalf of the Partnership, shall send to the Investment Partnership, on or
before the tenth day of each month, a copy of all applicable periodic reports
covering the
status of project operations from the previous period, as may be required by
the Agency. In addition, within thirty (30) days after the occurrence of
Substantial Completion, the General Partner, on behalf of the Partnership,
shall prepare and send to the Investment Partnership, a Credit Basis Worksheet
for each building in the Apartment Complex, in the format provided by Boston
Capital.
(g) (i) In the event that the reports or
information provided for in Sections 13.04(a)(i) and/or 13.04(a)(ii) above
are, at any time, not provided within the time period(s) specified in such
Sections, the General Partner shall be obligated to pay to the Investment
Partnership the sum of $250 per day, as liquidated damages, for each day from
the date upon
which such reports or information is(are) due pursuant to the provisions of
the aforesaid Sections until the date upon which such reports or information
is(are) provided.
(ii) In the event that the reporting requirements set
forth in any of the above provisions of this Section 13.04 are not met, BCTC
94, in its sole discretion, may direct the General Partner to dismiss the
Accountants, and to designate successor Accountants, subject to the approval
of BCTC 94; provided, however, that if the General Partner and BCTC 94 cannot
agree on the designation of successor Accountants, the successor Accountants
shall be designated by BCTC 94 in its sole discretion, and the fees of such
successor Accountants shall be paid by the General Partner.
13.05. Section 754 Elections. In the event of a
transfer of all or any part of the Interest of a General Partner or of a
Limited Partner, the Partnership may elect, pursuant to Sections 743 and 754
of the Code (or any corresponding provision of succeeding law), to adjust the
basis of the Partnership property if, in the opinion of BCTC 94, based upon
the advice of the Accountants, such election would be most advantageous to the
Investment Partnership. Each Partner agrees to furnish the Partnership with
all information necessary to give effect to such election.
13.06. Fiscal Year and Accounting Method. The fiscal year of the
Partnership shall be the calendar year. All Partnership accounts shall be
determined on the accrual basis.
ARTICLE XIV.
AMENDMENTS
14.01. Proposal and Adoption of Amendments. This Agreement may be
amended by the General Partner with the Consent of BCTC 94.
ARTICLE XV.
CONSENTS, VOTING AND MEETINGS
15.01. Method of Giving Consent. Any Consent required by this
Agreement may be given by a written Consent given by the consenting Partner
and received by the General Partner at or prior to the doing of the act or
thing for which the Consent is solicited.
15.02. Submissions to Limited Partners. The General Partner shall
give the Limited Partners Notice of any proposal or other matter required by
any provision of this Agreement or by law to be submitted for consideration
and approval of the
Limited Partners. Such Notice shall include any information required by the
relevant provision or by law.
15.03. Meetings; Submission of Matter for Voting. Subject to the
provisions of Section 10.01, a majority in Interest of the Limited Partners
shall have the authority to convene meetings of the Partnership and to submit
matters to a vote of the Partners.
ARTICLE XVI.
GENERAL PROVISIONS
16.01. Burden and Benefit. 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.
16.02. Applicable Law. This Agreement shall be construed and enforced
in accordance with the laws of the State.
16.03. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original copy and all of
which together shall constitute one agreement binding on all parties hereto,
notwithstanding that all the parties shall not have signed the same
counterpart.
16.04. Separability of Provisions. Each provision of this Agreement
shall be considered separable and if for any reason any provision which is not
essential to the effectuation of the basic purposes of this Agreement is
determined to be invalid and contrary to any existing or future law, such
invalidity shall not impair the operation of or affect those provisions of
this Agreement which are valid.
16.05. Entire Agreement. This Agreement sets forth all (and is
intended by all parties to be an integration of all) of the representations,
promises, agreements and understandings among the parties hereto with respect
to the Partnership, the Partnership business and the property of the
Partnership, and there are no representations, promises, agreements or
understandings, oral or written, express or implied, among them other than as
set forth or incorporated herein.
16.06. Liability of the Investment Partnership. Notwithstanding
anything to the contrary contained herein, neither the Investment Partnership
nor any of its partners, general or limited, shall have any personal liability
to any of the parties to this Agreement with regard to the representations and
covenants extended, or the obligations undertaken, by the Investment
Partnership under this Agreement. In the event that the Investment Partnership
shall be in default under any of the terms of this Agreement, the sole
recourse of any party hereto for any indebtedness due hereunder, or for any
damages resulting from any such default by the Investment Partnership, shall
be against the capital contributions of the investor limited partners of the
Investment Partnership allocated to, and remaining for investment in, the
Partnership; provided however, that under no circumstances shall the liability
of the Investment Partnership for any such default be in excess of the amount
of Capital Contribution payable by the Investment Partnership to the
Partnership, under the terms of this Agreement, at the time of such default.
16.07. Environmental Protection.
(a) The General Partner represents and warrants, that (i)
it has no knowledge of any deposit, storage, disposal, burial, discharge,
spillage, uncontrolled loss, seepage or filtration of any Hazardous Substances
at,
upon, under or within the Land or any contiguous real estate, and (ii) it has
not caused or permitted to occur, and it shall not permit to exist, any
condition which may cause a discharge of any Hazardous Substances at, upon,
under or within the Land or on any contiguous real estate.
(b) The General Partner further represents and warrants,
that (i) neither it nor any other party has been, is or will be involved in
operations at or, pursuant to its best efforts, near the Land, which
operations could lead to (A) the imposition of liability under the Hazardous
Waste Laws on the Partnership or on any other subsequent or former owner of
the Land or (B) the creation of a lien on the Land under the Hazardous Waste
Laws or under any similar laws or regulations; and (ii) the General Partner
has not permitted, and will not permit, any tenant or occupant of the
Apartment Complex to engage in any activity that could impose liability under
the Hazardous Waste Laws on such tenant or occupant, on the Land or on any
other owner of the Apartment Complex.
(c) The General Partner shall comply strictly and in all
respects with the requirements of the Hazardous Waste Laws and related
regulations and with all similar laws and regulations.
(d) The General Partner shall at all times indemnify and
hold harmless the Investment Partnership against and from any and all claims,
suits, actions, debts, damages, costs, charges, losses, obligations,
judgments, and expenses, of any nature whatsoever, suffered or incurred by the
Investment Partnership, under or on account of the Hazardous Waste Laws or any
similar laws or regulations, including the assertion of any lien thereunder.
(e) For purposes of this Section 16.07, "Hazardous
Substances" means oil, petroleum or chemical liquids or solids, liquid or
gaseous products or any hazardous wastes or hazardous substances, as those
terms are used in the Hazardous Waste Laws; and "Hazardous Waste Laws" means
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, and any other federal, state or local law governing Hazardous
Substances, as such laws may be amended from time to time.
16.08. Notices to the Investment Partnership. Any Notice required
by the provisions of this Agreement to be given to the Investment Partnership
shall be addressed as follows:
Boston Capital Tax Credit Fund IV L.P.
c/o Boston Capital Partners, Inc.
One Boston Place
Boston, Massachusetts 02108
And a copy to: Peabody & Brown
101 Federal Street
Boston, MA 02110
Attention: Syndication Department
IN WITNESS WHEREOF, the parties have affixed their signatures and seals
to this Agreement of Pear Village Limited as of the date
first written above.
GENERAL PARTNER:
WITNESS:
___________________________ LEITCHFIELD AFFORDABLE
HOUSING, LLC
By: Wabuck Development Company, Inc.
By: /s/Garry D. Watkins
Garry D. Watkins, its President
By: The Housing Foundation, Inc.
By: /s/ Sharon K. Cook
Its: Vice President
LIMITED PARTNER:
BOSTON CAPITAL TAX CREDIT FUND IV L.P.,
a Delaware limited partnership
WITNESS: 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/ Anthony A. Nickas
Anthony A. Nickas, Attorney-In-Fact
for John P. Manning, a General
Partner
SPECIAL LIMITED PARTNER:
WITNESS: BCTC 94, Inc.
____________________________By: /s/ Anthony A. Nickas
Anthony A. Nickas,
Attorney-In-Fact for
John P. Manning, its President
WITHDRAWING INITIAL GENERAL
WITNESS: PARTNER:
_________________________ WABUCK DEVELOPMENT COMPANY, INC.
By: /s/Garry D. Watkins
Its: President
WITHDRAWING INITIAL LIMITED
WITNESS: PARTNERS:
__________________________ /s/Garry D. Watkins
GARRY D. WATKINS
__________________________ /s/ Dennis R. Buckles
DENNIS R. BUCKLES
COUNTY OF SUFFOLK )
: ss
COMMONWEALTH OF MASSACHUSETTS )
Before me, the undersigned Notary Public in and for the aforesaid
County and Commonwealth, personally appeared Anthony A. Nickas, Attorney-in-
Fact for John P. Manning, known to me to be (i) a general partner of C & M
Associates d/b/a Boston Capital Associates, which is the general partner of
Boston Capital Associates IV L.P., Boston Capital Associates IV being the
general partner of Boston Capital Tax Credit Fund IV L.P., and (ii) President
of BCTC 94, Inc. who, being duly sworn, acknowledged the execution of the
foregoing Agreement of Limited Partnership.
Witness my hand and notarial seal this ____ day of
___________, 1996.
___________________________
Notary Public
My Commission Expires: ______, 199_
COUNTY OF GRAYSON )
: ss
COMMONWEALTH OF KENTUCKY )
Before me, the undersigned Notary Public in and for the aforesaid
County and Commonwealth, personally appeared Garry D. Watkins, (i) to be the
President of Wabuck Development, Inc., a member of of Leitchfield Affordable
Housing, LLC and (ii) individually, who, being duly sworn, acknowledged the
execution of the foregoing Agreement of Limited Partnership.
Witness my hand and notarial seal this ____ day of ________,
1996.
___________________________ Notary Public
My Commission Expires:
COUNTY OF GRAYSON )
: ss
COMMONWEALTH OF KENTUCKY )
Before me, the undersigned Notary Public in and for the aforesaid
County and Commonwealth, personally appeared _______________ known to me to be
the _______________ of The Housing Foundation, Inc., a Member of Leitchfield
Affordable Housing, LLC, who, being duly sworn, acknowledged the execution of
the foregoing Agreement of Limited Partnership.
Witness my hand and notarial seal this ____ day of ________,
1996.
___________________________ Notary Public
My Commission Expires:
COUNTY OF GRAYSON )
: ss
COMMONWEALTH OF KENTUCKY )
Before me, the undersigned Notary Public in and for the
aforesaid
County and Commonwealth, personally appeared Dennis R. Buckles, who, being
duly sworn, acknowledged the execution of the foregoing Agreement of Limited
Partnership.
Witness my hand and notarial seal this ____ day of
_________, 1996.
__________________________ Notary Public
My Commission Expires:
BOSTON CAPITAL TAX CREDIT FUND IV L.P. _______________________________________
CERTIFICATION AND AGREEMENT
OF
PEAR VILLAGE LIMITED _______________________________________
CERTIFICATION AND AGREEMENT made as of August 1, 1996, by PEAR VILLAGE
LEITCHFIELD AFFORDABLE HOUSING, LLC, a Kentucky limited liability company (the
"Operating General Partner"); WABUCK DEVELOPMENT COMPANY, INC., a Kentucky
corporation (the "Original General Partner"); and GARRY D. WATKINS and DENNIS
R. BUCKLES (the "Original Limited Partners") for the benefit of BOSTON CAPITAL
TAX CREDIT FUND IV L.P., a Delaware limited partnership (the "Investment
Partnership"), BCTC 94, INC., a Delaware corporation ("Boston Capital"),
PEABODY & BROWN and certain other persons or entities described herein.
WHEREAS, the Operating Partnership proposes to admit the Investment
Partnership and Boston Capital as limited partners thereof pursuant to an
Agreement of Limited Partnership of the Operating Partnership dated as of
August 1, 1996 (the "Operating Partnership Agreement"), in accordance with
which the Investment Partnership will make substantial capital contributions
to the Operating Partnership;
WHEREAS, the Investment Partnership and Boston Capital have relied
upon
certain information and representations described herein in evaluating the
merits of investment by the Investment Partnership in the Operating
Partnership; and
WHEREAS, Peabody & Brown, as counsel for the Investment
Partnership and Boston Capital, 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 Partnership and Boston
Capital
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, the Original General Partner and
the Original Limited Partners hereby agree as follows for the benefit of the
Investment Partnership, Boston Capital, Peabody & Brown and certain other
persons hereinafter described.
1. Representations, Warranties and Covenants of the Operating Partnership,
the Operating GeneralPartner, the Original General Partner and theOriginal
Limited Partners
The Operating Partnership, the Operating General Partner, the
Original General Partner and the Original Limited Partners jointly and
severally represent, warrant and certify to the Investment Partnership, 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 with full power and authority to own its apartment complex (the
"Apartment Complex") and conduct its business; the Operating Partnership, the
Operating General Partner, the Original General Partner and the Original
Limited Partners 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, the
Original General Partner and the Original Limited Partners 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, Original 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, Original
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, the
Original General Partner and the Original Limited Partners, enforceable
against each of them in accordance with its terms.
1.02 The Original General Partner and Operating General Partner
have delivered to the Investment Partnership, 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 Partnership, 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. Since the date of the financial statements for the
Operating General Partner previously delivered, there has been
no material adverse change in the financial position of the Operating 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 Original General Partner and 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, the Original General Partner and the Original Limited Partners 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
Partnership and Boston Capital as the investment limited partner and the
special limited partner, respectively, 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 The Operating General Partner is not related in any manner to
the Investment Partnership, nor is the Operating General Partner acting as an
agent of the Investment Partnership.
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 the Operating General Partner, the Original General
Partner or either of the 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 As of December 31, 1995, the Operating Partnership owned the
Apartment Complex for Federal income tax purposes and had a basis in the
Apartment Complex equal to at least 10% of its anticipated basis in the
Apartment Complex as of December 31, 1997, and all buildings in the Apartment
Complex will be placed in service for purposes of Section 42 of the Code not
later than December 31, 1997.
1.17 The Apartment Complex does not receive
assistance under the HUD Section 8 Moderate Rehabilitation Program other than
under the Stewart B. McKinney Homeless Assistance Act of 1988.
1.18 The Apartment Complex is not in violation of any State or local
health or building code or regulation.
2. Indemnification
2.01 The Operating General Partner and the Original General Partner
(for purposes of this Section 2.01, the "Indemnifying Parties" or,
individually, an "Indemnifying Party") each agree to indemnify and hold
harmless the Investment Partnership 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, leadbased 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 no Indemnifying
Party shall 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 such Indemnifying Party 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 an Indemnifying Party 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 noti-fied, 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
General Partner, the Original
Limited Partners and Boston Capital, Peabody & Brown and the Investment
Partnership (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 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 dand
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
PEAR VILLAGE LIMITED
By: Leitchfield Affordable Housing, LLC
By: Wabuck Development Company, Inc. a member
By: /s/ Garry D. Watkins
Garry D. Watkins, President
By: The Housing Foundation, Inc.
By: /s/Sharon K. Cook
Its: Vice President
OPERATING GENERAL PARTNER
LEITCHFIELD AFFORDABLE HOUSING, LLC
By: Wabuck Development Company, Inc., a member
By: /s/Garry D. Watkins
Garry D. Watkins, President
By: The Housing Foundation, Inc.
By: /s/Sharon K. Cook
Its Vice President
ORIGINAL LIMITED PARTNERS
/s/Garry D. Watkins
GARRY D. WATKINS
/s/Dennis R. Buckles
DENNIS R. BUCKLES
ORIGINAL GENERAL PARTNER
WABUCK DEVELOPMENT COMPANY, INC.
By: /s/Garry D. Watkins
Garry D. Watkins, President
Exhibit A
PEAR VILLAGE
FACT SHEET
1. Construction/Permanent Financing
A. First Mortgage Loan
1. Lender: First Federal Savings
Bank of Leitchfield
2. Mortgage Amount: $227,000
3. Note Date: anticipated July, 1996
4. Interest Rate:
Lender's Prime Rate during the
construction period; 2.5%
per annum thereafter based on a 30
year amortization period.
5. Term: 15 years from Final
Closing
(with an estimated $135,354.89
balloon payment at maturity)
6. Guarantors: None
B. Second Mortgage Loan
1. Lender: The Kentucky Housing Corpor
ation
(with Kentucky HOME Investment
Partnerships Program funds)
2. Mortgage Amount: $300,000
3. Note Date: anticipated July, 1996.
4. Interest Rate: fixed at 1% per annum based
on a
25-year
amortization period
(interest
deferred until maturity)
5. Term: 25 years
6. Guarantors: Garry D. Watkins and Linda
Watkins
(in the maximum
amount of $330,000
until approximately
one year from
the date of Final
Closing
2. Eligible Basis: $951,000
3. Qualified Basis: $951,000
4. GP Capital Contribution: $100
5. Type of Credit: 9%
6. Rent-up Schedule:
13% occupancy by January 31, 1997
26% occupancy by February 28, 1997
39% occupancy by March 31, 1997
52% occupancy by April 30, 1997
65% occupancy by May 31, 1997
78% occupancy by June 30, 1997
91% occupancy by July 31, 1997
100% occupancy by August 31, 1997
7. Projected Credit to the
Investment Partnership: $828,511
A. $51,782 for 1997,
B. $82,851 per annum for each of the years 1998
Through 2006, and
C. $ 31,069 for 2007.
8. Total Projected Credit: $836,880
A. $52,305 for 1997,
B. $83,688 per annum for each of the years 1998 through 2006,
and
C. $31,383 for 2007.
9. Tax Credit Approval:
A. Application
1. Date: August 23, 1995
2. Credit Amount Requested: Not listed in application
B. Reservation
1. Date: October 2, 1995
2. Credit Amount Reserved: $85,140
C. Allocation
1. Date: December 28, 1995
2. Credit Amount Allocated: $85,140
D. LIHC Rate on Form 8609 N/A
10. Apartment Complex:
A. Name: Pear Village Apartments
B. Address: Lots 71-78, Meadow
Brook
Estates Section 4,
Leitchfield,
Kentucky
C. County: Grayson
D. Type of Project: Family
11. Area Median Income: $23,400
12. Type of Apartments:
Unit Tax Credit Utility
Number Square Ft. Rent Allowance
3-Bedroom 16 1,200 $200 $74
13. Rental Assistance: None
14. Annual Operating Expenses
(beginning 1998): $26,960
15. Operating Reserve Account $10,000 from the Second Installment
16. Projected gross annual
Cash Flow: $____________
(beginning 1998)
17. Amount of Annual Asset
Management Fee to Boston
Capital $ 1,000
(cumulative, beginning 1997)
18. Amount of Partnership Management
Fee to General Partner:
(non-cumulative, beginning 1997) $1,000
19. Amount of Annual Incentive
Management Fee from available: 2% of gross rental income
Cash Flow (non-cumulative, beginning 1997)
20. Amount of Total Depreciable
Base Allocated to Personal
Property: $38,400
21. Projected Completion Date: April 30, 1997
22. Total Capital Contribution of
Investment Partnership: $488,822
23. Schedule of Capital Contributions
A. $244,412 on the later of
(i) the Admission Date or
(ii) Initial Closing;
B. $122,205 on the later of
(i) State Designation;
(ii) Substantial Completion;
(iii) Cost Certification; or
(iv) receipt by the Investment Partnership of evidence from
the
Contractor that all amounts payable to it pursuant
to the
Construction Contract have been paid in full;
C. $112,205 on the later of
(i) the Initial 87% Occupancy Date;
(ii) Final Closing;
(iii) receipt by Investment Partnership of the legal opinion
provided for in Section 5.04(b) of the Operating Partnership
Agreement; or
(iv) Rental Achievement; and
D. $10,000 on Rental Achievement Confirmation.
24. Fees, Special Distributions and Other Items to be paid from
Capital Contributions
A. Construction and Development Fee: $200,000
B. Development Overhead: $1,922
C. Direct Development Costs: $286,900
25. Construction and Development Fee
Interest Payable From Cash Flow: None
26. General Partner(s): Leitchfield Affordable Housing, LLC
Address: c/o Wabuck Development Company, Inc.
1178 Owensboro Road
P.O. Box 556
Leitchfield, KY 42755
Telephone Number: (502) 259-5607
Contact Person: Garry D.Watkins
27. Ownership Interests
Normal Capital Cash
Operation Transaction Flow
General Partner 1% 50% 50
Investment Partnership 98.99% 50% 50%
Special Limited Partner .01% none none
28. Management Agent: Homeland, Inc.
Contact Person: Suzanne Russell, President
Address: 135 East Market Street,
Suite 2, P.O. Box 576
Leitchfield, Kentucky 42755
Telephone Number: (502) 259-5461
Amount of Fee: 6% of gross revenues
29. Builder: Clayton Watkins Construction, Inc.
Address: 1178 Owensboro Road
Leitchfield, Kentucky 42754
Amount of Compensation: $705,000
Builder's Profit: $60,000
30. Architect: Bill G. Finley, AIA
Address: P.O. Box 196
Bowling Green, Kentucky 42101
Amount of Fee: $12,000
31. Auditor: Reznick, Fedder & Silverman, CPA's
Address: 4520 East-West Highway
Suite 300
Bethesda, MD 20814
Telephone Number: (310) 652-9100
32. Tax Return Preparer: Daniel G. Drane, CPA
Address 209 East Third Street
Hardinsburg, Kentucky 40143
Telephone Number: (502) 756-5704
33. Federal Taxpayer ID Number: 61-1292537
34. Operating Deficit Guaranty:
The General Partner shall be obligated commencing from and after the
Final Closing Date through the end of the Compliance Period to advance funds
in an aggregate amount not to exceed $200,000, which will be necessary to meet
Operating Deficits. In order to fund Operating Deficits, the General Partner
is required to purchase a treasury bill or interest-bearing government
security in an amount of not less than $100,000, which shall be held in escrow
by First Federal Savings Bank of Leitchfield, Kentucky (the "Escrow Agent")
pursuant to an Escrow Agreement of even date herewith by and between the
General Partner, the Investment Limited Partner and the Escrow Agent.
Interest received by the General Partner on the treasury bill or government
security shall be deposited in a depository account with the Escrow Agent (the
"Interest Account") pursuant to Section 8.18(c) of the Partnership Agreement
to be used solely by the General Partner for the purpose of funding Operating
Deficits.
35. Replacement Reserve: The General Partner shall cause the
Partnership to deposit at least
$4,000 annually into the
Replacement
Reserve.
36. Building Breakdown:
#1 #2 #3 #4 #5 #6
#7 #8
A. # of Units 2 2 2 2 2 2 2 2
B. Unit #s 2 2 2 2 2 2 2 2
C. Bin # KY95- 13401 13402 13403 13404 13405 13406 13407 13408
cc: Boston Capital Communications Limited Partnership Accounting Department
Exhibit B
certificate of Operating Partnership,
Operating General Partner, Original General Partner and
Original Limited Partners
Re: Lack of Disqualifications
The Operating Partnership, its Operating General Partner, its
Original General Partner and its Original Limited Partners (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, Original General Partner or 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
misde-meanor 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, embezzlement, 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, consumer goods and services,
or is subject 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).
