SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
F O R M 8-K
Current Report
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) January 14, 1998
BOSTON CAPITAL TAX CREDIT FUND IV L.P.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
33-70564 04-3208648
(Commission File Number) (IRS Employer Identification No.)
c/o Boston Capital Partners, Inc.,
One Boston Place, Boston, Massachusetts 02108-4406
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 624-8900
None
(Former name or former address, if changed since last report)
Item 5. Other Events
On January 14, 1998, Boston Capital Tax Credit Fund IV L.P.,
a Delaware limited partnership, specifically Series 28 thereof
(the "Partnership") completed various agreements relating to
Sumner House Limited Partnership, a Connecticut limited
partnership (the "Operating Partnership"), including
the Agreement of Limited Partnership of the Operating Partnership
dated as of January 14, 1998 (the "Operating Partnership
Agreement"), pursuant to which the Partnership acquired a limited
partner interest in the Operating Partnership. Capitalized terms
used and not otherwise defined herein have their meanings set
forth in the Operating Partnership Agreement, a copy of which is
attached hereto as Exhibit (2)(a).
The Operating Partnership owns and is currently renovating
an apartment complex located at 57 Sumner Street, Hartford,
Connecticut, which is known as Sumner House (the "Apartment
Complex"). The Apartment Complex is comprised of one building
containing eighteen (18) studio apartment units, twenty-nine
(29) 1-bedroom apartment units and thirty-two (32) 2-bedroom
apartment units, for a total of seventy-nine (79) apartment
units. Renovation of the Apartment Complex is currently
anticipated to be completed in June 1998 and the Apartment
Complex is expected to achieve 100% occupancy by August, 1998.
The Operating Partnership is currently receiving
construction financing in the amount of $1,400,000 (the
"Construction Loan") from Boston Capital Mortgage Company
("BCMC"), an affiliate of the Partnership. The Construction Loan
has a 12 month term and bears interest at the treasuries rate
plus 210 basis points. The Operating Partnership also expects to
receive permanent mortgage financing in the amount of $1,150,000
(the "Permanent Loan") from BCMC. The Permanent Loan will be
payable over eighteen years based on a thirty year amortization
schedule and bear interest at the treasuries rate plus 210 basis
points.
It is expected that 100% of the rental apartment units in
the Apartment Complex will qualify for the low-income housing tax
credit (the "Tax Credits") under Section 42 of the Internal
Revenue Code of 1986, as amended (the "Code").
The General Partners of the Operating Partnership are D&B
Ventures II, LLC, a Connecticut limited liability company ("D&B")
and High Noon Associates LLC, a Connecticut limited liability
company ("High Noon"). D&B was formed for the single purpose of
acting as co-General Partner of the Operating Partnership, and
owns one-third of the general partnership interest in the
Operating Partnership. Edward A. Demko is the sole member of D&B
and the founder and Managing Director of D&B Ventures, Inc. He
has been involved in the tax credit program since its inception
in 1986. Incorporated in 1993 to capitalize on affordable
multi-family housing opportunities, D&B Ventures is experienced
in the utilization of Low Income Housing Tax Credits, tax-exempt
bond financings, partnership syndications and transactions with
federal, state and local agencies and has developed and/or
managed more than 2,500 rent restricted housing units. High
Noon, the other co-General Partner of the Operating Partnership,
is owned by Messrs. Stuart A. and Robert A. Epstein, who together
own a two-thirds general partnership interest in the Operating
Partnership. High Noon was created solely for the purpose of
developing the Apartment Complex. The Epstein brothers conveyed
the existing building to the Operating Partnership for $495,000,
which represents their cost. An additional $150,000 will be paid
by the Operating Partnership for repairs and improvements that
were made both prior to and since the acquisition. Stuart
Epstein, was until 1995, a principal and active practitioner at
the law firm of Cohen and Wolf, P.C. in Stamford, Connecticut.
Stuart Epstein is a graduate of Yale University Law School and
was admitted to the bar in 1962. He specialized in Real Estate
and Private Syndications of Real Estate. He retired in 1995 and
has been managing his own investment portfolio since retirement.
Robert Epstein resides in Naples, Florida and until recently was
a principal in the law firm of Epstein and Fogarty in Greenwich,
Connecticut. At the present time, Mr. Epstein is devoting his
efforts to real estate development in Connecticut and Florida.
Also a graduate of Yale University Law School, Robert Epstein was
admitted to the bar in 1954. Messrs. Epstein collectively own
and operate a real estate portfolio of Connecticut properties
that include approximately 600 units of market rate rental
housing.
The Partnership acquired its interest in the Operating
Partnership directly from the Operating Partnership in
consideration of an agreement to make a Capital Contribution of
$2,010,966 to the Operating Partnership in four (4) Installments
as follows:
I. $1,508,361 (the "First Installment") on the latest of
(A) the Admission Date, (B) the closing of the Construction
Loan, (C) the Permanent Loan Commitment Date, (D) Tax Credit
Set-Aside or (E) the Construction Permitting Date;
II. $276,508 (the "Second Installment"), on the latest
of (A) the Completion Date, (B) Cost Certification,
(C) receipt by the Partnership of evidence that all
materials required to achieve State Designation have been
submitted to the Credit Agency and all other applicable
Agencies, (D) receipt of an updated Title Policy in form and
substance satisfactory to the Special Limited Partner, which
policy in no event shall contain a survey exception,
(E) receipt by the Partnership of the Contractor Pay-Off
Letter or (F) receipt by the Partnership of an Estoppel
Letter from each Lender;
III. $201,097 (the "Third Installment") on the later of
(A) the Initial 100% Occupancy Date, (B) Permanent Mortgage
Commencement, (C) State Designation or (D) Rental
Achievement; and
IV. $25,000 (the "Fourth Installment") upon the receipt
by the Partnership of a copy of the properly filed Operating
Partnership federal income tax return and an audited
Operating Partnership financial statement for the year in
which Rental Achievement occurs.
The total Capital Contribution of the Partnership to
the Operating Partnership is based on the Operating Partnership
receiving $2,812,540 of Tax Credits during the 10-year period
commencing in 1998 of which the entire amount will be allocated
to the Partnership as the Investment Limited Partner of
the Operating Partnership. The Special Limited Partner of
the Operating Partnership is BCTC 94, Inc., an affiliate of
the Partnership.
The Partnership believes that the Apartment Complex is
adequately insured.
Ownership interests in the Operating Partnership are as
follows, subject in each case to certain priority allocations and
distributions as set forth in the Operating Partnership
Agreement:
Normal Capital Cash Tax
Operations Transactions Flow Credits
General Partner 1% 80.00% 80% 0%
Partnership 99% 19.999% 20% 100%
Special Limited
Partner 0% .001% 0% 0%
The Partnership used the funds obtained from the payments of
the holders of its beneficial assignee certificates to make
the acquisition of its interest in the Operating Partnership.
The Special Limited Partner or an affiliate thereof will
receive an Asset Management Fee commencing in 1998 from
the Operating Partnership for services in connection with
the Operating Partnership's accounting matters and
the preparation of tax returns and reports to the Partnership in
the annual amount of $5,000. The Asset Management Fee for each
Fiscal Year will be payable from Cash Flow in the manner and
priority set forth in Section 10.2(a) of the Operating
Partnership Agreement; provided, however, that if in any Fiscal
Year, Cash Flow is insufficient to pay the full amount of
the Asset Management Fee, the General Partners shall be obligated
to advance the amount of such deficiency to the Operating
Partnership as a Subordinated Loan. If for any reason the Asset
Management Fee is still not paid in any Fiscal Year, the unpaid
portion thereof shall accrue and be payable on a cumulative basis
in the first Fiscal Year in which there is sufficient Cash Flow
or Capital Proceeds as provided in Article X of the Operating
Partnership Agreement.
The Operating Partnership shall pay to the General Partners
an annual non-cumulative fee (the "Partnership Management
Fee") commencing in 1998 (prorated for such initial year based on
occupancy of the Apartment Complex) for their services in
connection with the administration of the day to day business of
the Operating Partnership in an annual amount of $5,000.
The Partnership Management Fee for each Fiscal Year of
the Operating Partnership shall be payable from Cash Flow in
the manner and priority set forth in Section 10.2(a) of
the Operating Partnership Agreement to the extent Cash Flow is
available therefor for such Fiscal Year.
As a reimbursement for certain advances and as compensation
for the Developer's services in connection with the development
and construction of the Apartment Complex, the Operating
Partnership shall pay to the Developer a Development Fee in
the amount of $232,000 in accordance with the terms of
the Development Agreement.
Item 7. Exhibits.
(c) Exhibits. Page
(1) (a)<F1> Form of Dealer-Manager Agreement between
Boston Capital Services, Inc. and
the Registrant (including, as an exhibit
thereto, the form of Soliciting Dealer
Agreement)
(2) (a) Agreement of Limited Partnership of
Sumner House Limited Partnership
(2) (b) General Partner's Payment Certificate
relating to Sumner House Limited
Partnership
(2) (c) Development Agreement relating to Sumner
House Limited Partnership
(4) (a)<F2> Agreement of Limited Partnership of
the Partnership
(16) None
(17) None
(21) None
(24) None
(25) None
(28) None
_______________
<F1>Incorporated by reference to Exhibit (1) to Registration
Statement No. 33-70564 on Form S-11, as filed with the Securities
and Exchange Commission.
<F2>Incorporated by reference to Exhibit (4) to Registration
Statement No. 33-70564 on Form S-11, as filed with the Securities
and Exchange Commission.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned hereto duly authorized.
Dated: April 22, 1998
BOSTON CAPITAL TAX CREDIT FUND IV L.P.
By: Boston Capital Associates IV L.P.,
its General Partner
By: C&M Associates, d/b/a Boston
Capital Associates, its
General Partner
By: /s/Herbert F. Collins
Herbert F. Collins, Partner
SUMNER HOUSE LIMITED PARTNERSHIP
AGREEMENT OF LIMITED PARTNERSHIP
Dated as of January 14, 1998
TABLE OF CONTENTS
Preliminary Statement 1
ARTICLE I 1
Defined Terms 1
ARTICLE II 21
Name and Business 21
2.1 Name; Continuation 21
2.2 Office and Resident Agent 21
2.3 Purpose 21
2.4 Term and Dissolution 21
ARTICLE III 22
Mortgage, Refinancing and Disposition of Property 22
3.1 Personal Liability 22
3.2 Refinancings 23
3.3 Sale of Assets 23
3.4 Real Estate Commissions 23
ARTICLE IV 23
Partners; Capital 23
4.1 Capital and Capital Accounts 23
4.2 General Partner 24
4.3 Investment Limited Partner, Special Limited
Partner and Original Limited Partner 25
4.4 Liability of the Limited Partners 25
4.5 Special Rights of the Special Limited Partner 25
4.6 Meetings 27
ARTICLE V 27
Capital Contributions of the Investment Limited Partner
and the Special Limited Partner 27
5.1 Payments 27
5.2 Return of Capital Contributions 30
ARTICLE VI 34
Rights, Powers and Duties of General Partner 34
6.1 Authorized Acts 34
6.2 Restrictions on Authority 35
6.3 Personal Services; Other Business Ventures 37
6.4 Business Management and Control 37
6.5 Duties and Obligations 38
6.6 Representations and Warranties 41
6.7 Liability on Mortgages 44
6.8 Indemnification of the General Partner 44
6.9 Indemnification of the Partnership and the Limited
Partners 45
6.10 Operating Deficits 46
6.11 Obligation to Complete the Construction of the
Apartment Complex 47
6.12 Certain Payments to the General Partner and Others 47
6.13 Delegation of General Partner Authority 48
6.14 Assignment to Partnership 48
6.15 Contracts with Affiliates 49
6.16 Tax Matters Partner 49
ARTICLE VII 50
Withdrawal of a General Partner; New General Partners 50
7.1 Voluntary Withdrawal 50
7.2 Reconstitution 50
7.3 Successor General Partner 51
7.4 Interest of Predecessor General Partner 51
7.5 Amendment of Certificate; Approval of Certain
Events 53
7.6 Valuation and Sale of Interest of Former General
Partner 53
7.7 Designation of New General Partners 54
ARTICLE VIII 54
Transferability of Limited Partner Interests 54
8.1 Assignments 54
8.2 Substituted Limited Partner 55
8.3 Restrictions 55
ARTICLE IX 56
Borrowings 56
ARTICLE X 56
Profits, Losses, Tax Credits, Distributions and Capital
Accounts 56
10.1 Profits, Losses and Tax Credits 56
10.2 Cash Distributions Prior to Dissolution 57
10.3 Distributions Upon Dissolution 59
10.4 Special Provisions 59
10.5 Authority of the General Partner to Vary
Allocations to Preserve and Protect the Partners'
Intent 64
10.6 Recapture Amount 65
ARTICLE XI 66
Management Agent 66
11.1 General 66
11.2 Fees 66
11.3 Removal and Replacement 66
11.4 Lack of Management Agent 67
ARTICLE XII 67
Books and Records, Accounting, Tax Elections, Etc. 67
12.1 Books and Records 67
12.2 Bank Accounts 67
12.3 Auditors 68
12.4 Cost Recovery and Elections 68
12.5 Special Basis Adjustments 69
12.6 Fiscal Year 69
12.7 Information to Partners 69
12.8 Expenses of the Partnership 72
ARTICLE XIII 73
General Provisions 73
13.1 Restrictions by Reason of Section 708 of the Code 73
13.2 Amendments to Certificates 73
13.3 Notices 74
13.4 Word Meanings 74
13.5 Binding Effect 74
13.6 Applicable Law 75
13.7 Counterparts 75
13.8 Financing Regulations 75
13.9 Separability of Provisions 75
13.10 Paragraph Titles 76
13.11 Amendment Procedure 76
13.12 Extraordinary Limited Partner Expenses 76
13.13 Time of Admission 76
13.14 Arbitration 76
SUMNER HOUSE LIMITED PARTNERSHIP
AGREEMENT OF LIMITED PARTNERSHIP
Preliminary Statement
Sumner House Limited Partnership (the "Partnership") was
formed as a Connecticut limited partnership pursuant to a
Certificate of Limited Partnership dated October 10, 1997 and
filed with the Filing Office on October 14, 1997, as amended by a
Certificate of Amendment to Certificate of Limited Partnership
dated January 12, 1998 (the "Certificate"), by and between HIGH
NOON ASSOCIATES LLC, a Connecticut limited liability company
("High Noon") and D & B VENTURES II, LLC, a Connecticut limited
liability company ("DBV II"), as general partners (collectively,
the "General Partner") and EDWARD DEMKO, as the limited partner
(the "Original Limited Partner").
The parties desire to (i) provide for the withdrawal from the
Partnership of the Original Limited Partner, (ii) provide for the
admission of BOSTON CAPITAL TAX CREDIT FUND IV L.P., a Delaware
limited partnership ("BCTCF"), as the Investment Limited Partner,
(iii) provide for the admission of BCTC 94, INC., a Delaware
corporation ("BCTC 94") as the Special Limited Partner, and (iv)
more fully set forth the rights and obligations of the Partners.
In consideration of the mutual agreements set forth herein,
it is agreed and certified as follows:
ARTICLE I
Defined Terms
The defined terms used in the Agreement shall have the
meanings specified below:
"Act" means the Revised Uniform Limited Partnership Act as
in effect in the State.
"Actual Credit" means, with respect to a particular Fiscal
Year, the total amount of Tax Credit properly allocable by the
Partnership to the Investment Limited Partner for such Fiscal
Year. The Actual Credit shall be retroactively revised if the
amount of Tax Credit properly allocable to the Investment Limited
Partner is revised as the result of an audit or is recaptured.
"Adjusted Capital Account Deficit" means, with respect to any
Partner, the deficit balance, if any, in such Partner's Capital
Account as of the end of the relevant Fiscal Year, after giving
effect to the following adjustments:
(i) Credit to such Capital Account any amounts
which such Partner is obligated to restore pursuant to
any provisions of this Agreement or is deemed to be
obligated to restore pursuant to the penultimate
sentences of Treasury Regulations Sections 1.704-
2(g)(1) and 1.704-2(i)(5), respectively; and
(ii) Debit to such Capital Account the items
described in Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-
1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6) of the
Treasury Regulations.
The foregoing definition of Adjusted Capital Account Deficit is
intended to comply with the provisions of Section 1.704-
1(b)(2)(ii)(d) of the Treasury Regulations and shall be
interpreted consistently therewith.
"Admission Date" means the first date on which all parties
hereto shall have executed this Agreement.
"Adverse Consequences" means all payments, actions, suits,
proceedings, hearings, investigations, charges, complaints,
claims, demands, injunctions, judgments, orders, decrees, rulings,
damages, dues, penalties, fines, costs, reasonable amounts paid in
settlement, liabilities, obligations, taxes, liens, losses,
expenses and fees, including court costs and reasonable attorneys'
fees and expenses.
"Affiliate" means as to a specified Person, (i) such Person;
(ii) each member of the Immediate Family of such Person; (iii)
each legal representative, successor or assignee of any Person
referred to in the preceding clauses (i) or (ii); (iv) each
trustee of a trust for the benefit of any Person referred to in
the preceding clauses (i) or (ii); or (v) any other Person (a) who
directly or indirectly controls, is controlled by, or is under
common control with such Person, (b) who is an officer of,
director of, partner in or trustee of, or serves in a similar
capacity with respect to, such Person or of which such Person is
an officer, director, partner or trustee, or with respect to which
such Person serves in a similar capacity, (c) who, directly or
indirectly, is the beneficial owner of ten percent (10%) or more
of any class of equity securities of such Person or of which such
Person is directly or indirectly the owner of ten percent (10%)
or more of any class of equity securities, (d) who is an officer,
director, general partner, trustee or holder of ten percent (10%)
or more of the voting securities or beneficial interests of any
Person referred to in the foregoing clauses (v) (b) or (v) (c), or
(e) who, whatever such Person's title, performs functions for such
Person or any Affiliate of such Person similar to a Chairman or
member of the Board of Directors, or executive officer such as the
President, Executive Vice President or Senior Vice President,
Corporate Secretary, or Treasurer, or any Person holding a five
percent (5%) or more equity interest in such Person, or any Person
having the power to direct or cause the direction of such Person
whether through the ownership of voting securities, by contract
or otherwise. An Affiliate of any Investment Limited Partner or
of any Investment General Partner does not include a Person who is
a partner in a Partnership or joint venture with any Investment
Limited Partner or any other Affiliate of any Investment Limited
Partner if such Person is not otherwise an Affiliate of any
Investment Limited Partner or any Investment General Partner. For
purposes of this definition, the term Affiliate shall not be
deemed to include any law firm (or member or associate thereof)
providing legal services to any Investment Limited Partner, any
Investment General Partner, the General Partner or any Affiliate
of any of them.
"AFR" means the "applicable federal rate" as defined and
determined in the manner set forth in Section 1274 of the Code.
"Agency" means the Credit Agency or any other Governmental
Authority with jurisdiction over the Apartment Complex, or the
business and operations of the Partnership.
"Agreement" means this Agreement of Limited Partnership,
including Schedule A, as amended from time to time.
"Allocation Regulations" means the Treasury Regulations
issued under Sections 704(b) and 752 of the Code, as the same may
be modified or amended from time to time. In the event that the
Allocation Regulations are revised or amended subsequent to the
date of this Agreement, references herein to sections or
paragraphs of the Allocation Regulations shall be deemed to be
references to the applicable sections or paragraphs of the
Allocation Regulations as then in effect.
"Apartment Complex" means the real property located in
Hartford, Hartford County, Connecticut, as more fully described in
Exhibit A attached hereto, together with (i) all buildings and
other improvements constructed or to be constructed thereon and
(ii) all furnishings, equipment and personal property located
thereon or otherwise covered by the Mortgages.
"Applicable Percentage" has the meaning set forth in Section
42(b) of the Code.
"Applied Amounts" shall have the meaning set forth in
Section 6.10.
"Asset Management Fee" means the fee payable to BCTCF or an
Affiliate thereof pursuant to the provisions of Section 6.12(b).
"Assignee" shall have the meaning set forth in Section
4.1(c).
"Auditors" means Kostin, Ruffkess & Company, LLC of West
Hartford, Connecticut, or such other firm of independent certified
public accountants as may be engaged by the General Partner with
the Consent of the Special Limited Partner for the purposes of
preparing the Partnership's income tax returns, auditing the books
and records of the Partnership and certifying financial reports of
the Partnership.
"BCTC 94" means BCTC 94, Inc., a Delaware corporation, and
its successors and assigns.
"BCTCF" means Boston Capital Tax Credit Fund IV L.P., a
Delaware limited partnership, and its successors and assigns.
"BCMC" means Boston Capital Mortgage Company Limited
Partnership, and its successors.
"Best Knowledge" shall mean and include, in the case of a
specified Person, (i) actual knowledge and (ii) that knowledge
which a prudent businessperson (including, in the case of an
Entity, the general or managing partners, officers, directors and
key employees of such Entity) should have obtained in the
management of his or her business affairs after making due inquiry
and exercising due diligence with respect thereto. In connection
therewith, the knowledge (both actual and constructive) of any
general or managing partner, director, officer or key employee of
an Entity shall be deemed to be the knowledge of the Entity.
"Capital Account" has the meaning set forth in Section
4.1(b).
"Capital Contribution" means the total value of cash or
property contributed and agreed to be contributed to the
Partnership by each Partner, as set forth in Schedule A. Any
reference in this Agreement to the Capital Contribution of a then
Partner shall include a Capital Contribution previously made by
any prior Partner for the Interest of such then Partner.
"Capital Proceeds" means the proceeds of a Capital
Transaction.
"Capital Transaction" means a refinancing of any Partnership
indebtedness or a sale, exchange, eminent domain taking, damage or
destruction (whether insured or uninsured), insured title defect
or other disposition of all or any portion of the Apartment
Complex (other than an event generating proceeds of any business
or rental interruption insurance), but excluding the payment of
Capital Contributions.
"Carryover Certification" means the date on which the
Investment Limited Partner shall have received, in a form and in
substance satisfactory to the Investment Limited Partner, the
certification of the Auditors that, with respect to the carryover
allocation of 1997 Tax Credits, as of a date no later than
December 31, 1997, the Partnership had incurred capitalizable
costs with respect to the Apartment Complex of at least ten per
cent (10%) of the Partnership's reasonably expected basis in the
Apartment Complex as of December 31, 1999, so that each building
in the Apartment Complex constitutes a "qualified building" for
the purposes of Section 42(h)(1)(E)(ii) of the Code.
"Cash Available for Debt Service Requirements" for any
period, means the excess of (i) all cash actually received by the
Partnership on a cash basis from normal operations during such
period, but specifically excluding the proceeds of insurance
(other than business or rental interruption insurance), loans,
Capital Transactions or Capital Contributions over (ii) all cash
requirements of the Partnership properly allocable to such period
of time on an accrual basis (not including distributions to
Partners out of Cash Flow of the Partnership or fees payable from
Cash Flow) and, on an annualized basis, all projected
expenditures, including those of a seasonal nature, which might
reasonably be expected to be incurred on an unequal basis during a
full annual period of operation as determined by the Auditors but
specifically excluding Debt Service Requirements. For purposes of
this definition, (i) cash requirements of the Partnership shall
include to the extent not otherwise covered above, full funding of
reserves (including, without limitation, funding of the
Replacement Reserve), normal repairs, real estate taxes at fully
assessed levels assuming a fully improved property and such
necessary capital improvements as are needed to operate the
Apartment Complex and (ii) if free rent or other rental
concessions shall have been granted to tenants, the calculation of
rental revenues under clause (i) of the preceding sentence shall
be adjusted so that the effect of such concessions is amortized
equally over the term of all leases (excluding renewal periods) to
which it applies.
"Cash Expenditures" means all disbursements of cash during a
specified Fiscal Year (other than distributions to Partners),
including, without limitation, payment of operating expenses,
payment of principal and interest on any Partnership indebtedness
(other than payments of principal and interest on any Subordinated
Loans or Voluntary Loans), the cost of repairs to the Apartment
Complex, amounts allocated to reserves by the General Partner and
the payment of any fees other than the Asset Management Fee, the
Partnership Management Fee, the Supervisory Management Fee and the
Development Fee. In addition, the net increase during such Fiscal
Year in any escrow account or reserve maintained by or for the
Partnership shall be considered a Cash Expenditure during such
Fiscal Year. The term Cash Expenditures shall not include
Development Costs. Cash Expenditures payable to Partners or
Affiliates of Partners shall be paid after Cash Expenditures
payable to third parties.
"Cash Flow" means the excess of Cash Receipts over Cash
Expenditures. Cash Flow shall be determined separately for each
Fiscal Year or portion thereof.
"Cash Receipts" means all cash receipts of the Partnership
from whatever source derived other than from a Capital
Transaction, including, without limitation, rental revenues,
government subsidy payments. In addition, the net reduction in
any Fiscal Year in the amounts of any escrow account or reserve
maintained by or for the Partnership (including, without
limitation, the Operating Reserve and the Replacement Reserve)
shall be considered a cash receipt of the Partnership for such
Fiscal Year. Notwithstanding the foregoing, at the election of
the General Partner, Cash Receipts received near the end of a
Fiscal Year and intended for use in meeting the Partnership's
obligations (including the cost of acquiring assets or paying
debts or expenses) in the subsequent Fiscal Year shall not be
deemed to be received until such following Fiscal Year.
"Certificate" shall have the meaning set forth in the
Preliminary Statement.
"Class Contribution" means the aggregate Capital
Contributions of all members of a particular class of Partners
(i.e., the General Partner, the Investment Limited Partner, the
Special Limited Partner or any Substituted Limited Partner).
"Code" means the Internal Revenue Code of 1986, as amended
from time to time, and the regulations (permanent and temporary)
issued thereunder. References herein to any Code section shall
include any successor provisions.
"Commencement Date" means the first day of the month in which
the Admission Date occurs.
"Competitive Real Estate Commission" means that real estate
or brokerage commission paid for the purchase or sale of the
Apartment Complex or other Partnership property which is
reasonable, customary and competitive in light of the size, type
and location of the Apartment Complex or other property.
"Completion Date" means the later of: (i) the date the
Investment Limited Partner shall have received copies of all
requisite certificates, permits or other documentation required by
local law permitting occupancy of 100% of the apartments units in
the Apartment Complex as issued by each Agency having
jurisdiction; provided, however, that if such documents are of a
temporary nature, the Completion Date shall not be deemed to have
occurred unless the General Partner certifies to the Investment
Limited Partner that any work remaining to be completed is for so-
called "punch list items" and the General Partner knows of no
reason why permanent permission to occupy will not be issued upon
completion of such "punch list items"; or (ii) the date as of
which the Inspecting Consultant certifies that the work to be
performed by the Contractor under the Construction Contract is
substantially complete. Any representation by the General Partner
under this Agreement that the Completion Date has occurred shall
be subject to reasonable confirmation by the Special Limited
Partner pursuant to a physical inspection of the Apartment
Complex; provided, however, that in the event that the Special
Limited Partner does not make such physical inspection of the
Apartment Complex within ten (10) business days after having
received a written representation of the General Partner that the
Completion Date has occurred, then the Special Limited Partner
will be deemed to have waived the physical inspection requirement,
and further provided that, in the event the Special Limited
Partner does not within five (5) business days of such inspection
give the General Partner notice that its inspection revealed that
the Completion Date had not occurred, the Special Limited Partner
will be deemed to have confirmed such date's occurrence.
"Compliance Period" means the fifteen (15)-year period
commencing with the first year of the Credit Period.
"Consent of the Investment Limited Partner" means the prior
written consent or approval of the Investment Limited Partner
which, unless otherwise specifically provided herein, may be given
or withheld in its sole discretion. The Consent of the Investment
Limited Partner shall be exercised by and through the Investment
General Partner, acting in the name and on behalf of the
Investment Limited Partner.
"Consent of the Special Limited Partner" means the prior
written consent or approval of the Special Limited Partner which,
unless otherwise specifically provided herein, may be given or
withheld in its sole discretion.
"Construction Contract" means the construction contract dated
as of October 1, 1997, by and between the Contractor and the
Partnership, as amended.
"Construction Lender" means BCMC or any other Lender
providing construction financing for the Apartment Complex.
"Construction Loan" means the construction loan, in the
amount of up to $1,400,000 to be provided by the Construction
Lender to the Partnership pursuant to the terms of the
Construction Loan Documents.
"Construction Loan Agreement" means the Loan Agreement to be
entered into by and between the Construction Lender and the
Partnership, as amended.
"Construction Loan Documents" means the Construction Note,
the Construction Mortgage, the Construction Loan Agreement and all
other documents executed and/or delivered in connection with the
Construction Loan.
"Construction Mortgage" means the Mortgage securing the
Partnership's obligations under the Construction Note.
"Construction Note" means the promissory note executed by the
Partnership to evidence its obligations with respect to the
Construction Loan, which note is or shall be secured by the
Construction Mortgage.
"Construction Permitting Date" means the first date upon
which the Partnership shall have received the Requisite Approvals
for the commencement of the rehabilitation and operation of the
Apartment Complex in accordance with the Plans and Specifications
therefor.
"Contractor" means D & B Ventures Building Corporation, a
Texas corporation qualified to do business in Connecticut, and its
successors.
"Contractor Pay-Off Letter" means a letter in form and
substance reasonably satisfactory to the Special Limited Partner
delivered by the Contractor to the Partnership which certifies
that (i) all amounts due to the Contractor from the Partnership
have been paid, (ii) the Partnership is not in default under the
Construction Contract and (iii) the Contractor has paid in full
each materialman and subcontractor who performed work on the
Apartment Complex.
"Controlling Person" has the meaning set forth in Section 15
of the Securities Act of 1933, as amended.
"Cost Certification" means the date upon which each Limited
Partner shall have received the written certification of the
Auditors (or such other certified public accountant as the Special
Limited Partner shall approve), in a form reasonably satisfactory
to the Special Limited Partner, as to the itemized amounts of the
construction and development costs of the Apartment Complex and
the Actual Credit pertaining to each building in the Apartment
Complex.
"Credit Agency" means the Connecticut Housing Finance
Authority, and its successors.
"Credit Period" has the meaning set forth in Section 42(f)(1)
of the Code.
"Credit Recovery Loan" means a constructive interest-bearing
advance of the Investment Limited Partner, as more fully described
in Section 5.1(g). Credit Recovery Loans and interest thereon
shall not be treated as loans or interest, respectively, for
accounting, tax or liability purposes or for the purposes of
Section 6.2(a)(i). For the purposes of Article X, the term Credit
Recovery Loan shall not include any portion of such a deemed
advance which shall have theretofore been paid to the Investment
Limited Partner.
"Credit Shortfall" shall have the meaning set forth in
Section 5.1(g).
"DBV II" means D & B Ventures II, LLC, a Connecticut limited
liability company, and its successors.
"Debt Service Coverage Ratio" means, for any period with each
month considered individually, a fraction, the numerator of which
is the Cash Available for Debt Service Requirements with respect
to such period and the denominator of which is the Debt Service
Requirements for such period. The achievement by the Partnership
of a specified Debt Service Coverage Ratio shall be confirmed by
the Auditors and shall be subject to the approval of the Special
Limited Partner, which shall not be unreasonably withheld,
provided, however, that no objection by the Special Limited
Partner to the determination of the Auditors shall be valid unless
the General Partner is notified of such objection, and the
specific reasons therefor, within seven (7) business days
following the receipt by the Special Limited Partner of the
Auditor's determination letter and in the event that the Special
Limited Partner does not so notify the General Partner within such
seven business day period, the Special Limited Partner will be
deemed to have waived its right to object to such determination.
"Debt Service Requirements" means for any period, all debt
service, reserve, mortgage insurance premium, tax and insurance
escrows and/or other cash requirements imposed with respect to
the Mortgage or any other indebtedness (except for Subordinated
Loans and Voluntary Loans) properly allocable to such period of
time on an annualized accrual basis as determined by the Auditors.
To the extent the relevant period includes any period prior to
Permanent Mortgage Commencement, Debt Service Requirements for
such period shall be computed by adding to the foregoing amounts
the amount (if any) by which the debt service on such Permanent
Loan for such period beginning after principal amortization has
commenced exceeds the actual debt service on such Permanent Loan
(and any previous Mortgage Loan which may have then been in place)
for the relevant period.
"Deficit Restoration Obligation" means, for each Partner, the
sum of (i) any amounts which such Partner is obligated to restore
to the Partnership in accordance with the provisions of Sections
1.704-1(b)(2)(ii)(c), 1.704-1(b)(2)(ii)(h) or any other applicable
provisions of the Allocation Regulations, (ii) such Partner's
Share of Partnership Minimum Gain if any, and (iii) such Partner's
Share of Partner Nonrecourse Debt Minimum Gain, if any.
"Designated Net Worth Requirements" means as of the date of
determination, such standards or criteria (relating to net worth
or other characteristics) as may be sufficient to support the
issuance by tax counsel approved by the Investment Limited Partner
of an opinion to the same effect, provided, however, that the
conditions of this definition shall be deemed to be satisfied if
the General Partner maintains at all times during the Compliance
Period a collective aggregate net worth of not less than $300,000.
"Developer" means, collectively, DBV II and High Noon, and
their successors.
"Development Agreement" means the Development Agreement,
dated as of January 14, 1998, by and between the Developer and the
Partnership.
"Development Costs" means any and all costs and expenses
necessary to (i) cause the construction of the Apartment Complex
to be completed, in a good and workmanlike manner, free and clear
of all mechanics', materialmen's or similar liens, in accordance
with the Plans and Specifications, (ii) equip the Apartment
Complex with all necessary and appropriate fixtures, equipment and
articles of personal property (including, without limitation,
refrigerators and ranges), (iii) obtain all required certificates
of occupancy for the apartment units and other space in the
Apartment Complex, (iv) pay the Development Fee, (v) finance the
construction of the Apartment Complex and achieve Rental
Achievement in accordance with the provisions of the Project
Documents, (vi) discharge all Partnership liabilities and
obligations arising out of any casualty generating insurance
proceeds for the Partnership, (vii) fund any Partnership reserves
required hereunder or under any of the Project Documents, (viii)
repay and discharge the Construction Loan, and (ix) pay any other
costs or expenses necessary to achieve the Completion Date and
Rental Achievement.
"Development Fee" means the fees and overhead payable by the
Partnership to the Developer pursuant to the terms of the
Development Agreement for its services in connection with the
development and rehabilitation of the Apartment Complex.
"Disposition" (including the forms Dispose and Disposing)
means, as to a specified Partner, the assignment, sale, transfer,
exchange or other disposition of all or any part of its Interest.
"Due Diligence Recommendations" means those developmental
recommendations set forth on Exhibit C hereto.
"Economic Risk of Loss" has the meaning set forth in Treasury
Regulation Section 1.752-2.
"Eligible Basis" has the meaning set forth in Section 42(d)
of the Code.
"Entity" means any Person, general partnership, limited
partnership, limited liability company, corporation, joint
venture, trust, business trust, cooperative or association.
"Estoppel Letter" means an estoppel letter in form and
substance reasonably satisfactory to the Special Limited Partner
delivered to the Partnership from each Lender which certifies as
to each Mortgage Loan (i) that there is no default ongoing
pursuant to the Mortgage Loan Documents, (ii) the amounts of
interest and principal paid on such Mortgage Loan to date and (ii)
the outstanding principal balance of such Mortgage Loan.
"Event of Bankruptcy" means with respect to any Person,
(i) the entry of a decree or order for relief by a court
having jurisdiction in respect of such Person in an
involuntary case under the federal bankruptcy laws, as
now or hereafter constituted, or any other applicable
federal or state bankruptcy, insolvency or other
similar law, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or similar
official) of such Person or for any substantial part of
his property, or ordering the winding-up or liquidation
of his affairs and the continuance of any such decree
or order unstayed and in effect for a period of one
hundred twenty (120) consecutive days;
(ii) the commencement by such Person of a voluntary case
under the federal bankruptcy laws, as now constituted
or hereafter amended, or any other applicable federal
or state bankruptcy, insolvency or other similar law,
or the consent by him to the appointment of or taking
possession by a receiver, liquidator, assignee,
trustee, custodian, sequestrator (or similar official)
of such Person or for any substantial part of his
property, or the making by him of any assignment for
the benefit of creditors, or the taking of corporate
action by the Person in furtherance of any of the
foregoing; or
(iii) the commencement against such Person of an involuntary
case under the federal bankruptcy laws, as now
constituted or hereafter amended, which has not been
vacated, discharged or bonded within one hundred twenty
(120) consecutive days.
"Event of Default" shall have the meaning set forth in
Section 5.1(h).
"Extended Use Agreement" means the extended use housing
commitment to be executed by the Partnership in accordance with
the requirements of the Credit Agency and the provisions of
Section 42(h)(6)(A) of the Code.
"Filing Office" means the Office of the Secretary of State of
the State of Connecticut.
"Fiscal Year" means the twelve (12)-month period which begins
on the first day of January and ends on the thirty-first day of
December of each calendar year (or ends on the date of final
dissolution for the year in which the Partnership is wound up or
dissolved).
"General Partner" means, collectively, High Noon and DBV II,
and any Person who becomes a General Partner as provided herein,
in its capacity as a general partner of the Partnership. At any
and all times where there is more than one General Partner, the
term General Partner shall mean such General Partners,
collectively and jointly and severally.
"Governmental Authority" means the Credit Agency or any other
federal, state or local governmental authority having jurisdiction
over the particular matter to which reference is being made.
"Gross Asset Value" means, with respect to any asset, the
asset's adjusted basis for federal income tax purposes, except as
follows:
(i) The initial Gross Asset Value of any asset contributed
by a Partner to the Partnership shall be the gross fair
market value of such asset, as determined by the
contributing Partner and the Partnership;
(ii) The Gross Asset Values of all Partnership assets shall
be adjusted to equal their respective gross fair market
values, as determined by the General Partner, as of the
following times: (a) the acquisition of an additional
interest in the Partnership by any new or existing
Partner in exchange for more than a de minimis Capital
Contribution; (b) the distribution by the Partnership
to a Partner of more than a de minimis amount of
Partnership property as consideration for an interest
in the Partnership; and (c) the liquidation of the
Partnership within the meaning of Section
1.704-1(b)(2)(ii)(g) of the Allocation Regulations;
provided, however, that the adjustments pursuant to
clauses (a) and (b) above shall be made only if the
General Partner reasonably determines that such
adjustments are necessary or appropriate to reflect the
relative economic interests of the Partners in the
Partnership;
(iii) The Gross Asset Value of any Partnership asset
distributed to any Partner shall be the gross fair
market value of such asset on the date of distribution;
and
(iv) The Gross Asset Values of Partnership assets shall be
increased (or decreased) to reflect any adjustments to
the adjusted basis of such assets pursuant to Code
Section 734(b) or Code Section 743(b), but only to the
extent that such adjustments are taken into account in
determining Capital Accounts pursuant to Section
1.704-1(b)(2)(iv)(m) of the Allocation Regulations and
Section 4.1 hereof; provided, however, that Gross Asset
Values shall not be adjusted pursuant to this clause
(iv) to the extent that the General Partner determines
that an adjustment pursuant to clause (ii) hereof is
necessary or appropriate in connection with a
transaction that would otherwise result in an
adjustment pursuant to this clause (iv).
If the Gross Asset Value of an asset has been determined or
adjusted pursuant to Section (i), (ii) or (iv) hereof, such Gross
Asset Value shall thereafter be adjusted by the depreciation taken
into account with respect to such asset for purposes of computing
Profits or Losses.
"Guarantors" means, collectively, and jointly and severally,
Edward A. Demko, Robert A. Epstein and Stuart A. Epstein, and each
of their successors.
"Guaranty" means the Guaranty, dated as of January 14, 1998,
of the Guarantors of certain of the obligations of the General
Partner hereunder and of the Developer as set forth in the
Development Agreement, as amended.
"Hazardous Material" has the collective meanings given to the
terms "hazardous material", "hazardous substances", "hazardous
wastes", "toxic substances" and analogous terms, in the Federal
Comprehensive Environmental Response, Compensation and Liability
Act of 1980, 42 U.S.C. Sec. 9601 et seq., as amended, and to the
term "radioactive materials" in the context of the Atomic Energy
Act, 28 U.S.C. Sec. 2344, and also includes any meanings given to
such terms in any similar state or local statutes, ordinances,
regulations or by-laws. The term Hazardous Material also includes
oil and any other substance known to be hazardous.
"High Noon" means High Noon Associates LLC, a Connecticut
limited liability company, and its successors.
"Immediate Family" means with respect to any Person, such
Person's spouse, parents, parents-in-law, descendants, nephews,
nieces, brothers, sisters, brothers-in-law, sisters-in-law,
children, children-in-law, grandchildren and grandchildren-in-law.
"Includable Items" shall have the meaning set forth in
Section 6.11.
"Initial Adjustment Date" shall have the meaning set forth in
Section 5.1(e).
"Initial 100% Occupancy Date" means the first date on which
not less than 100% of the 79 apartment units in the Apartment
Complex shall have been leased to and shall have been initially
physically occupied by tenants on such date meeting the terms of
the Minimum Set-Aside Test under executed leases at rentals
meeting the requirements of the Rent Restriction Test.
"Initial Operating Period" means the period commencing upon
Cost Certification and ending on the second (2nd) anniversary of
the Completion Date.
"Inspecting Consultant" means the consultant retained by any
Lender (including, without limitation, the Construction Lender) or
the Partnership with the Consent of the Special Limited Partner to
monitor the progress of the rehabilitation of the Apartment
Complex and to certify as to the completion of such construction.
"Installment" means an installment of the Investment Limited
Partner's Capital Contribution paid or payable to the Partnership
pursuant to Section 5.1.
"Insurance Requirements" means the insurance which the
General Partner is required to cause the Partnership to maintain
during the term of the Partnership as set forth on Exhibit D
hereto.
"Interest" means the entire interest of a Partner in the
Partnership at any particular time, including the right of such
Partner to any and all benefits to which a Partner may be entitled
hereunder and the obligation of such Partner to comply with the
terms of this Agreement.
"Invested Amount" means (i) as to the Investment Limited
Partner, an amount equal to the Capital Contribution of the
Investment Limited Partner divided by 0.85 and (ii) as to any
other Partner, an amount equal to its paid-in Capital
Contribution.
"Investment General Partner" means Boston Capital Associates
IV L.P., a Delaware limited partnership, in its capacity as the
general partner of the Investment Limited Partner, and any other
Person who may become a successor or additional general partner of
the Investment Limited Partner.
"Investment Limited Partner" means BCTCF and any Person or
Persons who replace it as Substituted Limited Partner.
"Investment Partnership Agreement" means the Agreement of
Limited Partnership of the Investment Limited Partner, as amended
from time to time.
"Lender" means any Person (other than the General Partner or
its Affiliates) who makes a loan to the Partnership, whether or
not such loan is secured by a Mortgage, or the successors and
assigns of such Person in such capacity.
"Limited Partners" means the Investment Limited Partner, the
Special Limited Partner and any Substituted Limited Partner.
"Liquidating Event" shall have the meaning set forth in
Section 2.4.
"Managing General Partner" means any Person designated as
such pursuant to the provisions of Section 6.4.
"Management Agent" means Case Management, Inc., a Connecticut
corporation in its capacity as the initial management and rental
agent for the Apartment Complex, and any successor management and
rental agent designated or appointed at any time.
"Management Agreement" means the agreement between the
Partnership and the Management Agent providing for the management
of the Apartment Complex.
"Management Fee" means the Management Fee to which reference
is made in Section 11.1.
"Material Agreement" means any agreement to which the
Partnership is a party or to which the Apartment Complex is
subject, the termination of which would have a material adverse
impact on the Apartment Complex or the business and operations of
the Partnership.
"Material Event" means the occurrence of any of the following
events:
(i) a material breach by a General Partner (or
any of its Affiliates) in the performance of any of its
obligations under this Agreement, or any of the
Material Agreements;
(ii) a Terminating Event as to any General Partner
or an Event of Bankruptcy as to the Partnership;
(iii) a material violation by any General Partner
of its fiduciary duties as a General Partner of the
Partnership;
(iv) a violation by any General Partner of any
law, regulation or order applicable to the General
Partner or the Partnership which has or may have a
material adverse effect on the Partnership or the
Apartment Complex, including, without limitation, the
failure of the General Partner to cause to be installed
at the Partnership's expense (or if such funds are
insufficient, at the General Partner's expense as a
Subordinated Loan provided that such a Subordinated
Loan shall not count toward the $250,000 cap of such
loans set forth in Section 6.10) a sprinkler system if
required by any Governmental Authority (which failure
shall be deemed to have a material adverse effect on
the Apartment Complex);
(v) a material breach by the Partnership or any
General Partner (or any of their respective
Affiliates) under any Project Document or other
material agreement or document affecting the
Partnership or the Apartment Complex;
(vi) the failure to achieve the Completion Date by
December 31, 1998;
(vii) the failure to begin the Credit Period by
January 1, 1998;
(viii) the commencement of foreclosure
proceedings with respect to any Mortgage, which have
not been withdrawn or dismissed within thirty (30) days
after the date of such commencement;
(ix) the failure of the General Partner to make
any payment required to be made to the Investment
Limited Partner pursuant to the provisions of Section
5.1(e) or (f); or
(x) the fraud, bad faith, gross negligence, or
willful misconduct by a General Partner.
"Minimum Set-Aside Test" means the set aside test selected by
the Partnership pursuant to Section 42(g) of the Code whereby at
least 40% of the units in the Apartment Complex must be occupied
by individuals with incomes equal to 60% or less of area median
income, as adjusted for family size.
"Mortgage" means any mortgage indebtedness of the
Partnership evidenced by any Note and secured by any mortgage on
the Apartment Complex from the Partnership to any Lender; and,
where the context admits, the term "Mortgage" shall mean and
include any of the mortgages securing said indebtedness and any
other documents pertaining to said indebtedness which were
required by the Lender as a condition to making such Mortgage
Loan. In case any Mortgage is replaced by any subsequent mortgage
or mortgages, such term shall refer to any such subsequent
mortgage or mortgages. The term "mortgage" means any mortgage,
mortgage deed, deed of trust, deed to secure debt or any similar
security instrument, and "foreclose" and words of like import
include the exercise of a power of sale under a mortgage or
comparable remedies.
"Mortgage Loan" means a loan to the Partnership made by any
Lender and secured by a Mortgage.
"Mortgage Loan Documents" means the Construction Loan
Documents and/or the Permanent Loan Documents, as the context may
require.
"New Allocation" shall have the meaning set forth in
Section 10.5(b).
"Nonrecourse Debt" or "Nonrecourse Liability" means any
indebtedness for which none of the Partners has any Economic Risk
of Loss other than through his or its interest in the Partnership
Property securing such indebtedness, as defined in Section 1.752-
1(a)(2) of the Allocation Regulations.
"Nonrecourse Deductions" has the meaning set forth in Section
1.704-2(b)(1) of the Allocation Regulations.
"Note" means and includes any Note from the Partnership to a
Lender evidencing a Mortgage Loan, and shall also mean and include
any Note supplemental to said original Note issued to a Lender or
any Note issued to a Lender in substitution for any such original
Note.
"Operating Deficit" means, for any specified period of time,
the amount by which the Cash Receipts of the Partnership are less
than the amount necessary to pay all Cash Expenditures of the
Partnership.
"Operating Profits or Losses" means, with respect to any
Fiscal Year, the Profits or Losses of the Partnership for such
Fiscal Year other than Profits or Losses from a Capital
Transaction.
"Operating Reserve" shall have the meaning set forth in
Section 6.5(e)(ii).
"Original Agreement" has the meaning set forth in the
Preliminary Statement.
"Original Limited Partner" has the meaning set forth in the
Preliminary Statement.
"Partner" means any General Partner or Limited Partner.
"Partner Nonrecourse Debt" has the meaning set forth in
Section 1.704-2(b)(4) of the Allocation Regulations.
"Partner Nonrecourse Debt Minimum Gain" has the meaning set
forth in Sections 1.704-2(i)(2) and (3) of the Allocation
Regulations.
"Partner Nonrecourse Deductions" has the meaning set forth in
Section 1.704-2(i)(1) of the Allocation Regulations.
"Partnership" means the limited partnership continued
pursuant to this Agreement.
"Partnership Items" shall have the meaning set forth in
Section 10.4(b)(xvi).
"Partnership Management Fee" shall have the meaning set forth
in Section 6.12(c).
"Partnership Minimum Gain" has the meaning set forth in
Section 1.704-2(d) of the Allocation Regulations.
"Payment Certificate" shall have the meaning set forth in
Section 5.1(b)
"Percentage Interests" means the interests of the Partners in
Profits and Losses, tax-exempt income, non-deductible, non-
capitalizable expenditures and Tax Credits, as set forth in
Schedule A.
"Permanent Lender" means BCMC or any other Lender providing
permanent financing for the Apartment Complex who has been
approved by the Special Limited Partner and the General Partner,
except as otherwise provided in Section 3.2.
"Permanent Loan" means any permanent loan provided by the
Permanent Lender to the Partnership on the Permanent Loan
Conditions pursuant to the terms of the Permanent Loan Documents
and approved by the Special Limited Partner.
"Permanent Loan Commitment" means a commitment for permanent
financing from the Permanent Lender on the Permanent Loan
Conditions and in a form reasonably satisfactory to the Special
Limited Partner.
"Permanent Loan Commitment Date" means the date on which the
Partnership has received the Permanent Loan Commitment from the
Permanent Lender in form and substance satisfactory to the Special
Limited Partner.
"Permanent Loan Conditions" means, with respect to a proposed
Permanent Loan, that (a) such Permanent Loan (i) has a term of not
less than 18 years, (ii) has an amortization schedule not longer
than 30 years, (iii) is in a principal amount of not more than
$1,150,000 and (b) when such Permanent Loan is in place, the Debt
Service Coverage Ratio of the Partnership is projected to be not
less than 1.15 to 1.00.
"Permanent Loan Documents" means the Permanent Note, the
Permanent Mortgage and all other documents executed and/or
delivered in connection with the Permanent Loan.
"Permanent Mortgage" means the Mortgage securing the
Partnership's obligations under the Permanent Note.
"Permanent Mortgage Commencement" means the payment and
discharge of the Construction Loan and the execution and delivery
of the Permanent Loan Documents.
"Permanent Note" means the Note to be executed by the
Partnership to evidence its obligations with respect to the
Permanent Loan, which Note shall be secured by the Permanent
Mortgage.
"Person" means any individual or Entity.
"Plans and Specifications" means the plans and specifications
for the rehabilitation of the Apartment Complex, including,
without limitation, specifications for materials, and all properly
approved amendments and modifications thereof.
"Prime Rate" means the rate of interest announced from time
to time by The Wall Street Journal as its base rate.
"Profits or Losses" shall have the meaning set forth in
Section 10.4(b)(v).
"Project Documents" means and includes the Mortgage Loan
Documents, this Agreement, the Development Agreement, the Extended
Use Agreement, the Guaranty, the Supervisory Management Agreement,
the Management Agreement, all other instruments delivered to (or
required by) any Lender 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 $94,220 for 1998, $281,254 per annum
for each of the Fiscal Years 1999 through 2007 (inclusive) and
$187,034 for 2008, provided, however, that the Projected Credit
for 2008 shall be reduced by the amount, if any, by which the
Actual Credit for 1998 exceeds $94,220 and provided further that
upon the occurrence of any of the events described in Section
5.1(e), the Projected Credit shall thereafter be the Revised
Projected Credit.
"Projected Rents" means the rents described in Exhibit B
attached hereto and made a part hereof.
"Qualified Basis" has the meaning set forth in Section 42(c)
of the Code.
"Qualified Income Offset Item" means (1) an allocation of
loss or deduction that, as of the end of each year, reasonably is
expected to be made (a) pursuant to Section 704(e)(2) of the Code
to a donee of an interest in the Partnership, (b) pursuant to
Section 706(d) of the Code as the result of a change in any
Partner's Interest, or (c) pursuant to Treasury Regulation Section
1.751-1(b)(2)(ii) as the result of a distribution by the
Partnership of unrealized receivables or inventory items and (2) a
distribution that, as of the end of such year, reasonably is
expected to be made to a Partner to the extent it exceeds
offsetting increases to such Partner's Capital Account which
reasonably are expected to occur during or prior to the
Partnership taxable year in which such distribution reasonably is
expected to occur.
"Recapture Amount" shall have the meaning set forth in
Section 10.6.
"Recapture Event" shall have the meaning set forth in
Section 10.6(a).
"RECD" means the Rural Economic Community and Development
office of the United States Department of Agriculture.
"Reconstitution Period" shall have the meaning set forth in
Section 7.2(b).
"Recourse Obligations" shall have the meaning set forth in
Section 10.4(b)(i).
"Reduction Amount" shall have the meaning set forth in
Section 5.1(f).
"Reduction Year" shall have the meaning set forth in
Section 5.1(f).
"Regulations" means the rules and regulations applicable to
the Apartment Complex or the Partnership of the Credit Agency, the
City of Hartford and any other Governmental Authority having
jurisdiction over the Partnership and/or the Apartment Complex.
"Related Person" means a Person related to a Partner within
the meaning of Treasury Regulation Section 1.752-4(b).
"Remaining Interest" shall have the meaning set forth in
Section 7.4(d).
"Rent Restriction Test" means the test pursuant to Section 42
of the Code whereby the gross rent charged to tenants of the
low-income units in the Apartment Complex may not exceed thirty
percent (30%) of the qualifying income levels.
"Rental Achievement" means the first time following three (3)
consecutive full calendar months of operations after Permanent
Mortgage Commencement (with each month considered individually)
that the Apartment Complex generates a 1.15 to 1.00 Debt Service
Coverage Ratio.
"Replacement Reserve" shall have the meaning set forth in
Section 6.5(e).
"Repurchase Amount" shall have the meaning set forth in
Section 5.2(a).
"Requisite Approvals" means any required approvals of each
Lender and Agency to an action proposed to be taken by the
Partnership.
"Revised Projected Credit" has the meaning set forth in
Section 5.1(e).
"Schedule A" means Schedule A to this Agreement, as amended
from time to time.
"Service" means the Internal Revenue Service.
"Share of Partner Nonrecourse Debt Minimum Gain" means, for
each Partner an amount equal to his or its "share of partner
nonrecourse debt minimum gain" as determined in accordance with
Section 1.704-2(i)(5) of the Allocation Regulations.
"Share of Partnership Minimum Gain" means for each Partner,
an amount equal to his or its "share of partnership minimum gain"
as determined in accordance with Section 1.704-2(g) of the
Allocation Regulations.
"Site" has the meaning given to it in the Federal
Comprehensive Environmental Response, Compensation and Liability
Act of 1980, 42 U.S.C. Sec. 9601 et seq., as amended, and shall
also include any meaning given to it in any similar state or local
statutes, ordinances, regulations or by-laws.
"Special Limited Partner" means BCTC 94, and any Person who
becomes a Special Limited Partner as provided herein, in its
capacity as a special limited partner of the Partnership.
"Specified Proceeds" means (i) the proceeds of all Mortgage
Loans, (ii) the net rental income, if any, generated by the
Apartment Complex prior to Permanent Mortgage Commencement which
is permitted by the Lenders to be applied to the payment of
Development Costs, (iii) the Capital Contributions of the
Investment Limited Partner, (iv) the Capital Contributions of the
General Partner in the amounts set forth in Schedule A as of the
Admission Date and (v) any insurance proceeds arising out of
casualties occurring prior to Permanent Mortgage Commencement.
"State" means the State of Connecticut.
"State Designation" means the date on which the Partnership
receives an allocation in proper form pursuant to Section 42 of
the Code from the Credit Agency of 1997 Tax Credits, as evidenced
by the execution by or on behalf of the Credit Agency of one or
more Form(s) 8609. For the purposes of determining State
Designation, each building in the Apartment Complex shall be
treated as having received an allocation of Tax Credit in an
amount equal to the lesser of (i) the amount of Tax Credit
carryover allocation received from the Credit Agency as to such
building or (ii) the amount of Tax Credits set forth on the Form
8609 as to such building.
"Subordinated Loan" means any loan made by the General
Partner to the Partnership pursuant to Section 6.5(e)(i), Section
6.10 or any other provision of this Agreement which specifies
advances to be made as a Subordinated Loan.
"Subordinated Loan Period" shall have the meaning set forth
in Section 6.10.
"Substituted Limited Partner" means any Person who is
admitted to the Partnership as Limited Partner under Section 8.2
or acquires the Interest of a Limited Partner pursuant to Section
5.2.
"Supervisory Management Agreement" means that certain
Supervisory Management Agreement dated as of January 14, 1998 by
and between the Partnership and the General Partner pursuant to
which the General Partner shall be paid the Supervisory Management
Fee.
"Supervisory Management Fee" means the fee payable to the
General Partner pursuant to the Supervisory Management Agreement
for certain supplemental management services to be provided by the
General Partner in respect of the Apartment Complex.
"Syndication Expenses" means all expenditures classified as
syndication expenses pursuant to Treasury Regulation Section
1.709-2(b). Syndication Expenses shall be taken into account
under this Agreement at the time they would be taken into account
under the Partnership's method of accounting if they were
deductible expenses.
"Tax Accountants" means Reznick, Fedder & Silverman of
Bethesda, Maryland or such other firms of independent certified
public accountants as may be engaged by the Special Limited
Partner to review the Partnership income tax returns.
"Tax Credit" means the low-income housing tax credit
described in Section 42 of the Code.
"Tax Credit Set-Aside" means the date on which the
Partnership receives a carryover allocation of 1997 Tax Credits
from the Credit Agency in an annual dollar amount of not less than
$281,254.
"Terminating Event" means the death or permanent disability
of, or a Final Determination of insanity or incompetence as to, an
individual General Partner (unless at least one of either High
Noon or DBV II remain as a General Partner or the Consent of the
Special Limited Partner to a substitute General Partner is
received, and such substitute General Partner is admitted to the
Partnership by the first to occur of (i) the sixtieth day
following such event or (ii) such earlier date as is necessary to
prevent a dissolution of the Partnership under the Act), the
Bankruptcy or dissolution of a General Partner, the transfer of
all of its Partnership Interest by a General Partner, or the
voluntary or involuntary withdrawal of the General Partner from
the Partnership. For purposes of the foregoing, an individual
General Partner shall be deemed to be permanently disabled if he
or she becomes disabled during the term of this Agreement through
any illness, injury, accident or condition of either a physical or
psychological nature and, as a result, is unable to perform
substantially all of his or her duties and responsibilities
hereunder for one hundred twenty (120) days during any period of
three hundred sixty-five (365) consecutive calendar days.
Involuntary withdrawal shall occur whenever a General Partner may
no longer continue as a General Partner by law or pursuant to any
terms of this Agreement. In the case of a General Partner which
is an Entity, a transfer of a majority of the voting stock (or
other beneficial interest) of the General Partner to a Person who
is not an Affiliate of the General Partner or any Entity
constituting the General Partner shall be deemed to be a transfer
by the General Partner of its Partnership Interest.
"Title Policy" means the owner's title insurance policy, or
at the option of the Special Limited Partner an endorsement
thereto, with an effective date on or after the Admission Date, in
the amount of not less than $3,160,966, issued by Lawyers Title
Insurance Corporation to the Partnership, evidencing the
Partnership's ownership of the Apartment Complex subject only to
such exclusions, exceptions, conditions and stipulations as may be
approved by the Special Limited Partner in its sole discretion and
endorsed with an endorsement insuring against all zoning defects
relating to the Apartment Complex, a Fairway endorsement and a
non-imputation endorsement.
"Vessel" has the meaning given to it in the Federal
Comprehensive Environmental Response, Compensation and Liability
Act of 1980, 42 U.S.C. Sec. 9601 et seq., as amended, and shall
also include any meaning given to it in any similar state or local
statutes, ordinances, regulations or by-laws.
"Voluntary Loans" shall have the meaning set forth in
Article IX.
"Withdrawal" (including the forms Withdraw, Withdrawing and
Withdrawn) means, as to a General Partner, the occurrence of
death, adjudication of insanity or incompetence, Event of
Bankruptcy, dissolution, liquidation, or voluntary or involuntary
withdrawal or retirement from the Partnership for any reason,
including whenever a General Partner may no longer continue as a
General Partner by law or pursuant to any terms of this Agreement.
Withdrawal also shall mean the sale, assignment, transfer or
encumbrance by a General Partner of its interest as a General
Partner other than a pledge or assignment by a General Partner of
its Interest required pursuant to the terms of the Construction
Loan Documents and as approved in writing by the Special Limited
Partner. A General Partner which is a corporation, limited
liability company or partnership shall be deemed to have sold,
assigned, transferred or encumbered its interest as a General
Partner in the event (as a result of one or more transactions) of
any sale, assignment or other transfer (but specifically excluding
any transfer occurring pursuant to the laws of descent and
distribution or, after the end of the Subordinated Loan Period,
any transfer to another principal of such Entity) or encumbrance
of a controlling interest in a corporate or limited liability
company General Partner or of a general partner interest in a
General Partner which is a partnership to a Person who is not an
Affiliate of the General Partner. For purposes of this definition
of Withdrawal, the term "controlling interest" shall mean the
power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise.
ARTICLE II
Name and Business
2.1 Name; Continuation
The name of the Partnership is "Sumner House Limited
Partnership". The Partners agree to continue the Partnership
which was formed pursuant to the provisions of the Act.
2.2 Office and Resident Agent
(a) The principal office of the Partnership is c/o D & B
Ventures II, LLC, 9 Woodhaven Drive, Simsbury, CT 06070, at which
office there shall be maintained those records required by the Act
to be kept by the Partnership. The Partnership may have such
other or additional offices as the General Partner shall deem
desirable. The General Partner may at any time change the
location of the principal office and shall give due notice thereof
to the Limited Partners, provided that doing so shall not
adversely affect the Investment Limited Partner for tax purposes.
(b) The resident agent for the Partnership in the State for
service of process is as follows:
Edward A. Demko
9 Woodhaven Drive
Simsbury, CT 06070
2.3 Purpose
The purpose of the Partnership is to acquire, hold, invest
in, secure financing for, construct, rehabilitate, develop,
improve, maintain, operate, lease and otherwise deal with the
Apartment Complex. The Partnership shall operate the Apartment
Complex in accordance with any applicable Regulations. The
Partnership shall not engage in any other business or activity.
2.4 Term and Dissolution
(a) The Partnership shall continue in full force and effect
until December 31, 2047, except that the Partnership shall be
dissolved and its assets liquidated prior to such date upon the
first to occur of the following events ("Liquidating Events"):
(i) The sale or other disposition of all or
substantially all of the assets of the Partnership;
(ii) The Withdrawal of a General Partner, unless the
Partnership is continued as provided in Section 7.2;
(iii) The election to dissolve the Partnership made in
writing by the General Partner with the Consent of the
Investment Limited Partner and any Requisite Approvals;
(iv) The entry of a final decree of dissolution of the
Partnership by a court of competent jurisdiction; or
(v) Any other event which causes the dissolution of
the Partnership under the Act if the Partnership is not
reconstituted pursuant to the provisions of Section 7.2 or
Section 7.3.
(b) Upon the dissolution of the Partnership, the General
Partner (or for purposes of this paragraph, its trustees,
receivers or successors) shall cause the cancellation of the
Certificate and shall liquidate the Partnership assets and apply
and distribute the proceeds thereof in accordance with the
provisions of Section 10.3, unless the Investment Limited Partner
elects to reconstitute the Partnership and continue its business
as provided in Section 7.2 or 7.3, in which case the Partnership
assets shall be transferred to the new Partnership as provided in
such Section. Notwithstanding the foregoing, if, during
liquidation, the General Partner shall determine that an immediate
sale of part or all of the Partnership's assets would be
impermissible, impractical or cause undue loss to the Partners,
the General Partner may defer liquidation of, and withhold from
distribution for a reasonable time, any assets of the Partnership
except those necessary to satisfy Partnership debts and
obligations (other than Subordinated Loans).
ARTICLE III
Mortgage, Refinancing and Disposition of Property
3.1 Personal Liability
The Partnership shall be authorized to obtain the
Construction Loan to finance the acquisition, development and
construction of the Apartment Complex and shall secure the
Construction Loan by the Construction Mortgage. The General
Partner and its Affiliates, jointly and severally, are hereby
authorized to incur personal liability for the repayment of funds
advanced by the Construction Lender (and interest thereon)
pursuant to the Construction Loan Documents. However, from and
after the date of Permanent Mortgage Commencement, neither the
General Partner nor any Related Person shall at any time bear, nor
shall the General Partner permit any other Partner or any Related
Person to bear, the Economic Risk of Loss for the payment of any
portion of any Mortgage Loan unless, prior to the effectiveness of
the transaction in which such Economic Risk of Loss is created or
assumed, the General Partner shall have obtained, at the expense
of the Partnership, an opinion from reputable tax counsel, in form
and substance reasonably satisfactory to the Special Limited
Partner, to the effect that such Economic Risk of Loss will not
result in the reallocation of Tax Credits or Losses from the
Investment Limited Partner and the Special Limited Partner to the
General Partner. The General Partner shall cause the Partnership
to elect promptly, to the extent permitted and in the manner
prescribed by any Agency or Lender having jurisdiction, that all
debt service payments made by the Partnership to the holder of the
Permanent Mortgage shall be applied first to interest determined
at the stated rate set forth in the Permanent Note, and then to
principal due with respect to the Permanent Note.
3.2 Refinancings
The Partnership may decrease, increase or refinance any
Mortgage Loan and may make any required transfer or conveyance of
Partnership assets for security or mortgage purposes, provided,
however, any such decrease, increase or refinancing of any
Mortgage Loan (except for the discharge of the Construction Loan
in accordance with the Construction Loan Documents and the
borrowing of the original principal amount of the Permanent Loan)
may be made by the General Partner only with the Consent of the
Special Limited Partner.
3.3 Sale of Assets
The Partnership may sell, lease, exchange or otherwise
transfer or convey all or substantially all the assets of the
Partnership only with the Consent of the Special Limited Partner.
Notwithstanding the foregoing and except as set forth in Section
6.2(a)(vi), no Consent of the Special Limited Partner shall be
required for the execution and delivery of the Construction Loan
Documents, the leasing of apartments to tenants in the normal
course of operations or the leasing of all or substantially all
the apartments to a public housing authority at rents satisfactory
to any Agency or Lender as expressed in writing, provided (subject
to the Rent Restriction Test) that such rents are not less than
the Projected Rents.
3.4 Real Estate Commissions
The total compensation to all Persons for the sale of the
Apartment Complex shall be limited to a Competitive Real Estate
Commission, which in no event shall exceed three percent (3%) of
the contract price for the sale of the Apartment Complex.
ARTICLE IV
Partners; Capital
4.1 Capital and Capital Accounts
(a) The capital of the Partnership shall be the aggregate
amount of the cash and the Gross Asset Value of property
contributed by the General Partner and by the Limited Partners as
set forth in Schedule A. No interest shall be paid by the
Partnership on any Capital Contribution to the Partnership.
Schedule A shall be amended from time to time to reflect the
withdrawal or admission of Partners, any changes in the
Partnership Interests held by a Partner arising from the transfer
of an Interest to or by such Partner and any change in the amounts
to be contributed or agreed to be contributed by any Partner. No
Partner shall have the right to withdraw or receive a return of
any of its Capital Contributions except as set forth in this
Agreement.
(b) An individual Capital Account shall be established and
maintained for each Partner, including any additional or
substituted Partner who shall hereafter receive an interest in the
Partnership. The Capital Account of each Partner shall be
maintained in accordance with the following provisions:
(i) To each Partner's Capital Account there shall be
credited such Partner's Capital Contributions, such Partner's
distributive share of Profits, and any items in the nature of
income or gain that are specially allocated pursuant to
Section 10.4 hereof, and the amount of any Partnership
liabilities that are assumed by such Partner or that are
secured by any Partnership Property distributed to such
Partner;
(ii) To each Partner's Capital Account there shall be
debited the amount of cash and the Gross Asset Value of any
Partnership Property distributed to such Partner pursuant to
any provision of this Agreement, such Partner's distributive
share of Losses, and any items in the nature of expenses or
losses that are specially allocated pursuant to Section 10.4
hereof, and the amount of any liabilities of such Partner
that are assumed by the Partnership or that are secured by
any property contributed by such Partner to the Partnership.
In the event that the Gross Asset Values of Partnership
assets are adjusted pursuant to this Agreement, the Capital
Accounts of all Partners shall be adjusted simultaneously to
reflect the aggregate net adjustment as if the Partnership
recognized gain or loss equal to the amount of such aggregate net
adjustment.
(c) The original Capital Account established for any
Assignee (as hereinafter defined) shall be in the same amount as,
and shall replace, the adjusted Capital Account of the Partner
which such Assignee succeeds, and, for the purpose of the
Agreement, such Assignee shall be deemed to have made the Capital
Contribution, to the extent actually paid in, of the Partner which
such Assignee succeeds. The term "Assignee," as used in this
paragraph, shall mean a Person who shall become entitled to
receive a share of the Profits, Losses, Tax Credits and
distributions of the Partnership by reason of such Person
succeeding to the Interest of a Partner by assignment of all or
any part of an Interest. To the extent an Assignee receives less
than 100% of the Interest of a Partner, such Assignee's Capital
Account and Capital Contribution shall be in proportion to the
Partnership Interest such Assignee receives, and the Capital
Account and Capital Contribution of the Partner who retains a
partial interest in the Partnership shall continue, and not be
replaced, in proportion to the Partnership Interest such Partner
retains.
(d) The foregoing provisions and other provisions of this
Agreement relating to the maintenance of the Capital Accounts are
intended to comply with the Allocation Regulations, and shall be
interpreted and applied in a manner consistent with such
Allocation Regulations.
4.2 General Partner
The name, address and Capital Contribution of the General
Partners are as set forth on Schedule A.
4.3 Investment Limited Partner, Special Limited Partner and
Original Limited Partner
(a) The Original Limited Partner hereby withdraws as a
limited partner of the Partnership and acknowledges that it no
longer has any Interest in, or rights or claims against, the
Partnership as a Partner as of the Admission Date.
(b) Each of the Special Limited Partner and the Investment
Limited Partner is hereby admitted to the Partnership as a Limited
Partner in substitution for the Original Limited Partner as of the
Admission Date and agrees to be bound by the terms and provisions
of the Project Documents and this Agreement. The name and address
of the Investment Limited Partner and the Special Limited Partner
are as set forth on Schedule A.
(c) Except as otherwise specifically set forth in Sections
4.5 or 7.4, the General Partner shall have no authority to admit
additional Limited Partners without the Consent of the Investment
Limited Partner.
4.4 Liability of the Limited Partners
Neither the Investment Limited Partner, the Special Limited
Partner nor any Person who becomes a Substituted Limited Partner
shall be liable for any debts, liabilities, contracts or
obligations of the Partnership; such Persons shall be liable only
to pay their respective Capital Contributions as and when the same
are due hereunder and under the Act. After its Capital
Contribution shall be fully paid, no Limited Partner shall, except
as otherwise required by the Act, be required to make any further
capital contributions or payments or lend any funds to the
Partnership.
4.5 Special Rights of the Special Limited Partner
(a) Notwithstanding any other provisions herein (other than
Sections 13.8 and 13.14), after thirty (30) days following notice
to the General Partner, to the extent the law of the State is not
inconsistent, the Special Limited Partner shall have the right,
subject to any Requisite Approvals and as to clauses (ii) and
(iii) below if after such thirty (30) days following notice to the
General Partner such event is continuing, to:
(i) amend this Agreement provided, however, that no
such amendment affect any vested rights (including, without
limitation, the right to receive any fees, allocable share of
Cash Flow or other distributions, or Profits or Losses and
Tax Credits hereunder) or increase any of the liabilities or
obligations of any General Partner without its prior written
consent;
(ii) dissolve the Partnership provided, however, that
such dissolution shall not be caused by the Special Limited
Partner unless the General Partner has violated a material
provision of any Project Document, which violation has not
been cured within any applicable cure period specified;
(iii) remove any General Partner and elect a new General
Partner (A) on the basis of the performance and discharge of
such General Partner's obligations constituting fraud, bad
faith, gross negligence, wilful misconduct or breach of
fiduciary duty, or (B) upon the occurrence of a Material
Event as set forth in subsections (ii) through (x) of the
definition of Material Default as set forth herein.
(iv) continue the business of the Partnership with a
substitute General Partner, provided that the General Partner
has been removed pursuant to Section 4.5(a)(iii) above; and
(v) approve or disapprove the sale of all or
substantially all of the assets of the Partnership.
(b) Upon the removal of a General Partner for cause
pursuant to Section 4.5(a)(iii),
(i) without any further action by any Partner,
the Special Limited Partner shall cause an Affiliate
automatically to become a General Partner (the
"Substitute General Partner") and acquire in
consideration of a cash payment of $100 such portion of
the Interest of the removed General Partner as counsel
to the Special Limited Partner shall determine is the
minimum appropriate interest in order to assure the
continued status of the Partnership as a partnership
under the Code and under the Act,
(ii) the remaining portion of the economic
Interest of the removed General Partner shall
automatically be forfeited to the Partnership, not as a
penalty but as liquidated damages to compensate the
Partnership for the action of such General Partner
leading to its removal, or for the fact of its
violation of the terms of this Agreement, and
(iii) the Substitute General Partner shall
automatically be irrevocably delegated all of the
powers and duties of the General Partners pursuant to
Section 6.13. A General Partner so removed will not be
liable as a general partner for any obligations of the
Partnership incurred after the effective date of its
removal. Each General Partner hereby grants to the
Special Limited Partner an irrevocable (to the extent
permitted by applicable law) power of attorney coupled
with an interest to execute and deliver any and all
documents and instruments on behalf of such General
Partner and the Partnership as the Special Limited
Partner may deem to be necessary or appropriate in
order to effect the provisions of this Section 4.5 and
to enable the new General Partner to manage the
business of the Partnership.
(c) The General Partner is hereby required, within five (5)
days after its receipt of any offer to purchase the Apartment
Complex or all of the Interests in the Partnership, to send a copy
of such offer (or a written description of any such oral offer) to
each of the Limited Partners. In connection with any proposed
sale of the Apartment Complex, the Special Limited Partner (or its
designee) shall have the right to (i) receive and review copies of
all documents relating to the proposed sale, (ii) participate in
the negotiations of the terms and conditions of the proposed sale,
(iii) meet with the proposed purchaser, (iv) solicit proposals for
alternative offers for the Apartment Complex, and (v) provide such
other services in connection with the proposed sale as it deems to
be appropriate.
4.6 Meetings
The General Partner or Limited Partners holding more than ten
percent (10%) of the then outstanding Limited Partner Interests
may call meetings of the Partnership for any matters for which the
Limited Partners may vote as set forth in this Agreement. A list
of the names and addresses of all Limited Partners shall be
maintained as part of the books and records of the Partnership and
shall be made available upon request to any Limited Partner or his
representative at his cost. Upon receipt of a written request
either in person or by certified mail stating the purpose(s) of
the meeting, the General Partner shall provide all Limited
Partners within ten (10) days after receipt of said request,
written notice of a meeting and the purpose of such meeting to be
held on a date not less than fifteen (15) nor more than sixty (60)
days after receipt of said request, at a time and place convenient
to the Limited Partners.
ARTICLE V
Capital Contributions of the Investment Limited Partner
and the Special Limited Partner
5.1 Payments
(a) The Special Limited Partner's Capital Contribution of
$10 shall be paid in full in cash on the Admission Date. The
Investment Limited Partner's Capital Contribution in the aggregate
amount of $2,010,966 shall be paid in cash installments (the
"Installments"), as follows:
(i) $1,508,361 (the "First Installment") on the latest
of (A) the Admission Date, (B) the closing of the
Construction Loan, (C) the Permanent Loan Commitment Date,
(D) Tax Credit Set-Aside or (E) the Construction Permitting
Date;
(ii) $276,508 (the "Second Installment"), on the latest
of (A) the Completion Date, (B) Cost Certification, (C)
receipt by the Investment Limited Partner of evidence that
all materials required to achieve State Designation have been
submitted to the Credit Agency and all other applicable
Agencies, (D) receipt of an updated Title Policy in form and
substance satisfactory to the Special Limited Partner, which
policy in no event shall contain a survey exception,
(E) receipt by the Investment Limited Partner of the
Contractor Pay-Off Letter or (F) receipt by the Investment
Limited Partner of an Estoppel Letter from each Lender;
(iii) $201,097 (the "Third Installment") on the later of
(A) the Initial 100% Occupancy Date, (B) Permanent Mortgage
Commencement, (C) State Designation or (D) Rental
Achievement; and
(iv) $25,000 (the "Fourth Installment") upon the
receipt by the Investment Limited Partner of a copy of the
properly filed Partnership federal income tax return and an
audited Partnership financial statement for the year in which
Rental Achievement occurs;
provided, however, that (x) the General Partner shall give the
Investment Limited Partner not less than ten (10) days' written
notice prior to the due date of each Installment subsequent to the
First Installment, and (y) no Installment shall be due unless and
until all conditions to the payment of all prior Installments have
been satisfied.
(b) The obligation of the Investment Limited Partner to pay
each Installment is conditioned upon delivery by the General
Partner to the Investment Limited Partner of a written certificate
(the "Payment Certificate") stating that as of the date of such
certificate (i) all the conditions to the payment of such
Installment and each prior Installment have been satisfied,
(ii) all representations and warranties of the General Partner
contained in this Agreement are true and correct and (iii) no
event has occurred which suspends or terminates the obligations of
the Investment Limited Partner to pay Installments under this
Agreement which has not been cured as herein provided, (iv) no
event has occurred which, with the giving of notice, would oblige
the General Partner to repurchase the Interests of the Investment
Limited Partner pursuant to Section 5.2(a). Except as provided in
the final sentence of this Section 5.1(b), acceptance by the
Partnership of any Installment shall constitute a confirmation
that, as of the date of payment, all such conditions are satisfied
and all such representations and warranties are materially true
and correct. The obligation of the Investment Limited Partner to
pay the First Installment is also conditioned upon delivery by the
General Partner to the Investment Limited Partner of (x) a legal
opinion of independent counsel to the Partnership, the General
Partner, the Developer and the Guarantors, which opinion(s) must
be satisfactory to the Investment Limited Partner as to form,
content and identity of counsel and (y) a photocopy of a binding
commitment, in form and substance satisfactory to the Special
Limited Partner, to issue the Title Policy and endorsements
thereto in form and substance satisfactory to the Special Limited
Partner insuring against all zoning defects of the Apartment
Complex, a Fairway endorsement and a non-imputation endorsement.
In no event shall any Installment become due until all of the
conditions for all of the Installments listed prior to the
Installment in question in Section 5.1(a) shall have been
satisfied and all of such prior Installments shall have become
due. Notwithstanding the foregoing, however, if at any time prior
to the date when an Installment becomes due and payable, the
Partnership has an Operating Deficit which the General Partner
would be required to fund pursuant to Section 6.10, then the
Investment Limited Partner may, at its option, waive the
requirement of the delivery of the Payment Certificate or any
other condition with respect to part or all of such Installment
and pay such part or all of such Installment, provided that the
proceeds of the amount so paid are used by the Partnership to
fully fund such Operating Deficit; provided, however, that if the
proceeds of such amount so paid are designated in Section 6.12 to
be used to pay fee(s), then such proceeds shall be utilized to pay
such fee(s) and the recipient(s) thereof shall be required to, and
hereby agree to, utilize the proceeds of such fee(s) to fund such
Operating Deficit, in which case the Investment Limited Partner is
hereby authorized to directly fund such Operating Deficit, with
the funds so applied being deemed to have been paid as aforesaid.
(c) The Payment Certificate for each Installment shall be
dated and delivered not less than ten (10) nor more than thirty
(30) days prior to the due date for such Installment.
(d) If, as of the date when an Installment would otherwise
be due, any statement required to be made in the Payment
Certificate for such Installment cannot be truthfully made, the
General Partner shall notify the Investment Limited Partner of the
reason why such statement would be untrue if made, and the
Investment Limited Partner shall not be required to pay such
Installment; provided, however, that if (i) any such statement can
subsequently be truthfully made and (ii) the Investment Limited
Partner shall not have irrevocably lost, in the judgment of the
Auditors, any material tax or other benefits hereunder (other than
tax benefits for which the Investment Limited Partner has been
fully compensated pursuant to the provisions of paragraphs (e),
(f) and (g) of this Section 5.1), then the Investment Limited
Partner shall pay such Installment to the Partnership thirty (30)
days after delivery by the General Partner to the Investment
Limited Partner of the Payment Certificate together with an
explanation of the manner in which each such statement had become
true.
(e) In the event that as of or any time prior to Cost
Certification (the "Initial Adjustment Date"), the Investment
Limited Partner shall receive a written certification of the
Auditors indicating that the aggregate Actual Credit during the
Credit Period will be less than the aggregate Projected Credit
during the Credit Period, then (i) the next succeeding
Installments of the Capital Contributions of the Investment
Limited Partner shall be reduced by an amount equal to the product
of (X) the difference between (1) the aggregate Projected Credit
during the Credit Period and (2) the aggregate Actual Credit
during the Credit Period and (Y) 0.715, and (ii) the Projected
Credit for each Fiscal Year shall thereafter be redefined to mean
the Actual Credit, as so determined (the "Revised Projected
Credit"). Any such reduction pursuant to this Section 5.1(e)
shall be made first to the Installment, if any, next due to be
paid by the Investment Limited Partner, and any balance of such
amount payable by the General Partner in excess of the amount of
such Installment shall be applied to succeeding Installments, if
any, provided that if the amount of any such reductions exceeds
the sum of the remaining Installments, if any, then an amount
equal to the amount of such excess shall be paid by the General
Partner to the Investment Limited Partner promptly after demand is
made therefor, as a payment of damages for breach of warranty,
regardless of the reason for the occurrence of such event (unless
such reduction was caused by an act or omission of the Investment
Limited Partner or its Affiliates, in which event no such
reduction or payment shall be required). No reduction of any
Installment or any payment by the General Partner pursuant to this
Section 5.1(e) shall be deemed to be a Capital Contribution by the
General Partner to the Partnership, nor shall any such payment
constitute a return of capital to the Investment Limited Partner.
(f) If with respect to any Fiscal Year all or a portion of
which occurs during the Initial Operating Period, the Actual
Credit is or was less than the Projected Credit (or the Revised
Projected Credit, if applicable) for such Fiscal Year (a
"Reduction Year"), then the General Partner shall pay to the
Investment Limited Partner the Reduction Amount. The Reduction
Amount shall be equal to the sum of (A) the excess of the
Projected Credit (or the Revised Projected Credit, if applicable)
for such Fiscal Year over the Actual Credit for such Fiscal Year
multiplied by 0.715 plus (B) the Recapture Amount as determined
pursuant to Section 10.6 and, to the extent not already accounted
for, any interest or penalties payable by the limited partners
and/or holders of beneficial assignee certificates of the
Investment Limited Partner as a result of such shortfall or
Recapture Event, assuming that each limited partner and/or holder
of a beneficial assignee certificate in the Investment Limited
Partner used all of the Tax Credits allocated to it in the Fiscal
Year of allocation. The Auditors shall make their determination
of the amount of the Actual Credit with respect to each Reduction
Year within thirty (30) days following the end of such Fiscal
Year. The Investment Limited Partner shall be eligible to be paid
a Reduction Amount as hereinabove described with respect to each
Reduction Year. Any Reduction Amount shall first be applied to
the Installment next due to be paid by the Investment Limited
Partner, with any portion of such Reduction Amount in excess of
the amount of such Installment then being applied to succeeding
Installments, provided that if no further Installments remain to
be paid or if the Reduction Amount shall exceed the sum of the
amounts of the remaining Installments, then the entire Reduction
Amount or the balance of the Reduction Amount, as the case may be,
shall be paid by the General Partner to the Investment Limited
Partner promptly after demand is made therefor, as a payment of
damages for breach of warranty, regardless of the reason for the
occurrence of such event (unless such reduction was caused by an
act or omission of the Investment Limited Partner or its
Affiliates, in which event no Reduction Amount shall be payable).
No payment by the General Partner pursuant to this Section 5.1(f)
shall be deemed to be a Capital Contribution to the Partnership
nor shall any such payment constitute a return of capital to the
Investment Limited Partner.
(g) In the event that, for any reason, at any time after
the end of the Initial Operating 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
of the Partnership (such difference being hereinafter referred to
as a "Credit Shortfall"), the Investment Limited Partner shall be
treated as having made a constructive advance to the Partnership
with respect to such Fiscal Year (a "Credit Recovery Loan"), which
shall be deemed to have been made on January 1 of such Fiscal Year
in an amount equal to the sum of (A) the Credit Shortfall for such
Fiscal Year plus (B) the Recapture Amount as determined pursuant
to Section 10.6 and, to the extent not already accounted for, any
interest or penalties payable by the limited partners and/or the
holders of beneficial assignee certificates of the Investment
Limited Partner as a result of the Credit Shortfall for such
Fiscal Year, assuming that each limited partner and/or holder of a
beneficial assignee certificate in the Investment Partnership used
all of the Tax Credits allocated to him in the Fiscal Year of
allocation. Credit Recovery Loans shall be deemed to bear simple
(not compounded) interest from the respective dates on which such
principal advances shall have been deemed to have been made under
this Section 5.1(g) at a rate of nine percent (9%) per annum.
Credit Recovery Loans shall be payable by the Partnership as
provided in Section 10.2(b), Clause Third.
5.2 Return of Capital Contributions
(a) Failure to Achieve Development and/or Tax Credit
Benchmarks and Standards. Upon the occurrence of any of the
events (a "Repurchase Event") listed below in this Section 5.2(a),
within five (5) days of the occurrence thereof, the General
Partner shall send to the Investment Limited Partner notice of
such event and of the General Partner's obligation to repurchase
the Interests of the Investment Limited Partner by paying to the
Investment Limited Partner an amount in cash (the "Repurchase
Amount") equal to each such Partner's Invested Amount (except for
a Repurchase Event resulting from the insufficiency of insurance
proceeds as set forth in subclause (xi) below, in which case the
Partner's paid-in Capital Contributions shall be substituted for
the Partner's Invested Amount) minus the portion, if any, of such
Partner's Capital Contribution which shall not yet have been paid
(or deemed to have been paid) to the Partnership plus the amount
of any third-party costs, including, without limitation,
attorney's fees incurred by or on behalf of such Partner in
implementing this Section 5.2(a) in the event the Investment
Limited Partner requires such a repurchase plus interest thereon
at the AFR commencing on the fifth (5th) day after delivery of the
notice referred to in the next sentence. If the Investment
Limited Partner elects to require a repurchase of its Interest and
the payment to it of an amount equal to its Repurchase Amount, it
shall send notice thereof to the Partnership within thirty (30)
days after the mailing date of the General Partner's notice, or at
any time after the occurrence of any of the foregoing if the
General Partner shall not have sent a notice thereof, and the
General Partner shall within ten (10) days after the Partnership
receives any such notice from a Partner requesting the purchase of
its Interest repurchase the Interest of such Partner by paying to
such Partner an amount equal to its Repurchase Amount. If,
following receipt of the General Partner's notice, the Investment
Limited Partner fails to send notice to the General Partner by the
end of such 30-day period requesting the General Partner to
purchase its Interest, the Investment Limited Partner, as the case
may be, shall be deemed to have waived its right to cause the
General Partner to purchase its Interest as a result of the event
described in the General Partner's notice. No such waiver,
however, shall affect the right of the Investment Limited Partner
to cause the General Partner to purchase its Interest upon the
occurrence of any other event described in this Section 5.2(a), or
upon any subsequent occurrence of the event described in the
General Partner's notice. The Repurchase Events are as follows:
(i) each of the buildings in the Apartment
Complex shall not have been placed in service by
December 31, 1999 (for purposes of satisfying the
requirements of Section 42(h)(1)(E)(i) of the Code with
respect to the 1997 Tax Credit allocation); or
(ii) by April 1, 1999, the Completion Date shall
not have occurred; or
(iii) construction or operation of the Apartment
Complex shall have been enjoined by a final order (from
which no further appeals are possible) of a court
having jurisdiction and such injunction shall continue
for a period of ninety (90) days; or
(iv) Permanent Mortgage Commencement shall not
have been achieved by the last date allowable by the
Permanent Loan Commitment (or any substitute commitment
reasonably acceptable to the Special Limited Partner);
or
(v) if at any time it shall be determined by the
Service or by the Tax Accountants that a Carryover
Certification could not be issued or was issued in
error; or
(vi) State Designation shall not have occurred by
December 31, 1999 (or any later date fixed by the
General Partner with the Consent of the Investment
Limited Partner) and by said date the General Partner
shall not have made any payment as described in the
next to last sentence of Section 5.1(e) or, if the
Investment Limited Partner shall have elected to have
all or a portion of any payment under Section 5.1(e)
applied toward future Installment obligations of the
Investment Limited Partner, amendments to this
Agreement shall not have been adopted and filed in the
Filing Office, reflecting such event; or
(vii) the Partnership shall fail to meet the
Minimum Set-Aside Test or the Rent Restriction Test by
the close of the first year of the Credit Period and/or
fails to continue to meet either of such tests at any
time during the sixty (60)-month period commencing on
such date; or
(viii) (A) foreclosure proceedings shall have
been completed under any Mortgage, (B) any of the
commitments of a Lender to provide a Mortgage Loan
and/or any subsidy financing shall be terminated or
withdrawn and not reinstated or replaced within ninety
(90) days with terms at least as favorable to the
Partnership or terms for which the Consent of the
Investment Limited Partner and any Requisite Approvals
shall have been obtained, or (C) the Construction
Lender, acting in good faith and in accordance with the
provisions of the Construction Loan Documents, shall
have irrevocably refused to make any further advances
under the Construction Loan Documents and such decision
shall not have been reversed or the Construction Lender
replaced within sixty (60) days; or
(ix) at any time the General Partner fails to
advance Subordinated Loans and such failure continues
for ten (10) days; or
(x) any action is commenced to foreclose any
mechanics, or any other lien (other than the lien of a
Mortgage) against the Apartment Complex and such action
has not within one hundred twenty (120) days been
either bonded against in such a manner as to preclude
the holder of such lien from having any recourse to the
Apartment Complex or to the Partnership for payment of
any debt secured thereby, or affirmatively insured
against by the title insurance policy or an endorsement
thereto issued to the Partnership by a reputable title
insurance company (which insurance company will not
have indemnity from or recourse against Partnership
assets by reason of any loss it may suffer by reason of
such insurance) in an amount satisfactory to the
Investment Limited Partner; or
(xii) a casualty occurs resulting in substantial
destruction of all or a portion of the Apartment
Complex, and the insurance proceeds (if any) are
insufficient to restore the Apartment Complex or the
Apartment Complex is not so restored within twenty-four
(24) months following such casualty.
(b) Lender/Agency Disapproval. If any Agency or Lender
(other than BCMC) shall disapprove, or fail to give any required
approval of, the Investment Limited Partner and/or the Special
Limited Partner as a Limited Partner hereunder within one hundred
eighty (180) days of the Admission Date, then the Partner being
disapproved or not approved shall, effective as of such time or
such later time as may be elected by the Partner being disapproved
or not approved as may be specified by such Agency or Lender in
its disapproval, at the option of the Partner being disapproved or
not approved (if not directed by such Agency or Lender to
withdraw), cease to be a Limited Partner and withdraw from the
Partnership. The General Partner shall, within sixty (60) days of
the effective date of such cessation, pay to the Partner being
disapproved or not approved an amount equal to its paid-in Capital
Contributions. As of the date hereof, the Limited Partners know
of no reason why either Entity would be disapproved by any Lender
or Agency.
(c) Substitution and Indemnification. Upon the receipt by
the Investment Limited Partner and/or the Special Limited Partner
of the amount due to it pursuant to either Section 5.2(a) or
Section 5.2(b), the Interest of such Partner shall terminate, and
the General Partner shall indemnify and hold harmless such Partner
from and against any Adverse Consequences to which such Partner
(as a result of its participation hereunder) may be subject,
provided that such Adverse Consequences do not result from such
Partner's acts or omissions.
(d) Waiver of Repurchase Right. Each of the Investment
Limited Partner and the Special Limited Partner shall have the
right to irrevocably waive its right to have its Interest
repurchased pursuant to any clause or clauses of Section 5.2(a),
or any portion thereof, at any time during which any of such
rights shall be in effect. Such a waiver shall be exercised by
delivery to the General Partner of a written notice stating that
the rights being waived pursuant to any specified clause or
clauses of Section 5.2(a), or any specified portion thereof, are
thereby waived for a specified period of time.
(e) Additional General Partner. If the General Partner
shall fail to make on the due date therefor any payment required
under Section 5.2(a) or Section 5.2(b), time being of the essence,
at any time thereafter the Special Limited Partner shall have the
option, exercisable in its sole discretion, to cause itself or its
designee to be admitted as an additional General Partner,
receiving from the existing General Partner, in consideration of
the payment of ten dollars ($10.00), a one per cent (1%) interest
in the Profits, Losses, Tax Credits and distributions of the
Partnership, with the Special Limited Partner retaining its status
as such and its economic interest in the Partnership as the
Special Limited Partner (or its designee as an additional General
Partner). If the Special Limited Partner exercises the option
described in this Section 5.2(e), each of the other General
Partner hereby agrees that all of its rights and powers hereunder
as a General Partner shall automatically be irrevocably delegated
to the Special Limited Partner pursuant to Section 6.13 without
the necessity of any further action by any Partner. Each Partner
hereby grants to the Special Limited Partner an irrevocable (to
the extent permitted by applicable law) power of attorney coupled
with an interest to take any action and to execute, deliver and
file or record any and all documents and instruments on behalf of
such Partner and the Partnership as the Special Limited Partner
may deem necessary or appropriate in order to effectuate the
provisions of this Section 5.2(e) and to allow the additional
General Partner to manage the business of the Partnership. The
admission of the Special Limited Partner or its designee as an
additional General Partner shall not relieve any other General
Partner of any of its economic obligations hereunder, and each
other General Partner shall fully indemnify and hold harmless the
additional General Partner on an after-tax basis from and against
any and all Adverse Consequences sustained by such additional
General Partner in connection with its status as a General Partner
(other than Adverse Consequences arising solely from the gross
negligence or willful misconduct of such additional General
Partner).
ARTICLE VI
Rights, Powers and Duties of General Partner
6.1 Authorized Acts
Subject to the provisions of Section 6.2, Section 6.3,
Section 6.15 and all other provisions of this Agreement, the
General Partner for, in the name and on behalf of the Partnership,
is hereby authorized, in furtherance of the purposes of the
Partnership:
(i) to acquire by purchase, lease, exchange or
otherwise any real or personal property;
(ii) to construct, rehabilitate, operate, maintain,
finance and improve, and to own, sell, convey, assign,
mortgage or lease any real estate and any personal property;
(iii) to borrow money and issue evidences of
indebtedness and to secure the same by mortgage, pledge or
other lien on the Apartment Complex or any other assets of
the Partnership;
(iv) to execute the Mortgage Loan Documents and the
other Project Documents and all such other documents as the
General Partner deems to be necessary or appropriate in
connection with the acquisition, development, construction
and financing of the Apartment Complex;
(v) subject to Section 3.2, to prepay in whole or in
part, refinance or modify any Mortgage Loan or other
financing affecting the Apartment Complex;
(vi) to employ the Management Agent (which may be an
Affiliate of the General Partner) and, subject to the
provisions of Article XI, to pay reasonable compensation for
its services;
(vii) to employ its Affiliates to perform services for,
or sell goods to, the Partnership provided that (except with
respect to any contract specifically authorized by this
Agreement) the terms of any such transaction with an
Affiliate shall not be less favorable to the Partnership than
would be arrived at by unaffiliated parties dealing at arms'
length;
(viii) to execute contracts with any Agency, the
State or any subdivision or agency thereof or any other
Governmental Authority to make apartments or tenants in the
Apartment Complex eligible for any public-subsidy program;
(ix) to execute leases of some or all of the apartment
units of the Apartment Complex to individuals and/or to a
public housing authority and/or to a non-profit corporation,
cooperative or other non-profit Entity;
(x) to employ or engage such engineers, architects,
technicians, accountants, attorneys and other Persons, as may
be necessary, convenient or incidental to the accomplishment
of the purposes of the Partnership; and
(xi) to enter into any kind of activity and to perform
and carry out contracts of any kind which may be lawfully
carried on or performed by a partnership and to file all
certificates and document which may be required under the
laws of the State.
6.2 Restrictions on Authority
(a) Notwithstanding any other Section of this Agreement,
the General Partner shall have no authority to perform any act in
violation of the Act, any other applicable law, Agency or other
government regulations, the requirements of any Lender, or the
Project Documents. In the event of any conflict between the terms
of this Agreement and any applicable Regulations or requirements
of any Lender, the terms of such Regulations or the requirements
of such Lender, as the case may be, shall govern. Subject to the
provisions of Section 6.2(b), the General Partner, acting in its
capacity as General Partner, shall not have the authority, without
the Consent of the Special Limited Partner:
(i) to have unsecured borrowings in excess of ten
thousand dollars ($10,000.00) in the aggregate at any one
time outstanding, except borrowings constituting Subordinated
Loans or Credit Recovery Loans;
(ii) to borrow from the Partnership or commingle
Partnership funds with the funds of any other Person;
(iii) following the Completion Date, to construct any
new or replacement capital improvements on the Apartment
Complex which substantially alter the character or use of the
Apartment Complex or which cost in excess of ten thousand
dollars ($10,000.00) in a single Fiscal Year, except (x)
replacements and remodeling in the ordinary course of
business or under emergency conditions or (y) construction
paid for from insurance proceeds;
(iv) to acquire any real property in addition to the
Apartment Complex;
(v) to increase, decrease or modify the terms of or
refinance any Mortgage Loan;
(vi) to rent apartments in the Apartment Complex such
that the Apartment Complex would not meet the requirements of
the Minimum Set-Aside Test or the Rent Restriction Test;
(vii) to sell, exchange or otherwise convey or transfer
the Apartment Complex or substantially all the assets of the
Partnership;
(viii) to terminate any Material Agreement;
(ix) to cause the Partnership to commence a proceeding
seeking any decree, relief, order or appointment in respect
to the Partnership under the federal bankruptcy laws, as now
or hereafter constituted, or under any other federal or state
bankruptcy, insolvency or similar law, or the appointment of
a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) for the Partnership or for
any other substantial part of the Partnership's business or
property, or to cause the Partnership to consent to any such
decree, relief, order or appointment initiated by any Person
other than the Partnership;
(x) to execute contracts with any Agency, the State or
any subdivision or agency thereof or any other Governmental
Authority to make apartments or tenants in the Apartment
Complex eligible for any public-subsidy program;
(xi) to amend any construction or rehabilitation
contract;
(xii) to pledge or assign any of the Capital
Contributions of the Investment Limited Partner or the
proceeds thereof (except to the extent required by the terms
of the Construction Loan Documents and agreed to in writing
by the Special Limited Partner);
(xiii) to amend any Project Document, or to
permit any party thereunder to waive any provision
thereof, to the extent that the effect of such
amendment or waiver would be to eliminate, diminish or
defer any obligation or undertaking of the Partnership,
the General Partner or its Affiliates which accrues,
directly or indirectly, to the benefit of, or provides
additional security or protection to, the Investment
Limited Partner (notwithstanding that the Investment
Limited Partner is neither a party to nor express
beneficiary of such provision or was not a partner when
such provision became effective);
(xiv) to approve any changes to the Plans and
Specifications for the Apartment Complex which would
result, either individually or in the aggregate, in an
overall development cost increase or decrease in excess
of $25,000;
(xv) to permit the merger, termination or
dissolution of the Partnership; or
(xvi) to do any act required to be approved or ratified
by all limited partners under the Act.
(b) In the event that any General Partner violates any
provision of Section 6.2(a) and such violation is continuing
thirty (30) days after the receipt of notice thereof, the Special
Limited Partner in its sole discretion and without prejudice to
its rights under Sections 4.5(b) and 7.6(a), may cause itself or
its designee to be admitted as an additional General Partner
without any further action by any other Partner. Upon any such
admission of an additional General Partner, each existing General
Partner shall be deemed to have assigned proportionally to the
additional General Partner, automatically and without further
action, such portion of its General Partnership Interest so that
the additional General Partner shall receive not less than a one
percent (1%) interest in the Profits, Losses, Tax Credits and
distributions of the Partnership in consideration of one dollar
($1.00) and any other consideration which may be agreed upon. An
additional General Partner so admitted shall automatically become
the Managing General Partner and shall be irrevocably delegated
all of the power and authority of all of the General Partner
pursuant to Section 6.13. Any such additional General Partner
shall have the right to withdraw as a General Partner at any time,
leaving the prior General Partner once again as the only General
Partner, the provisions of Article VII notwithstanding. Each
Partner hereby grants to the Special Limited Partner a special
power of attorney, irrevocable to the extent permitted by law and
coupled with an interest, to amend this Agreement and to do
anything else which, in view of the Special Limited Partner, may
be necessary or appropriate to accomplish the purposes of this
Section 6.2(b) or to enable any additional General Partner
admitted pursuant to this Section 6.2(b) to manage the business of
the Partnership. The admission of an additional General Partner
shall not relieve any other General Partner of any of its economic
obligations hereunder, and each other General Partner on an after-
tax basis shall fully indemnify and hold harmless the additional
General Partner from and against any and all Adverse Consequences
sustained by the additional General Partner in connection with its
status as a General Partner (other than Adverse Consequences
arising solely from the gross negligence or wilful misconduct of
such additional General Partner).
(c) Neither the Investment General Partner nor any
Affiliate thereof shall be given an exclusive right to sell, or
exclusive employment to sell, the Apartment Complex.
6.3 Personal Services; Other Business Ventures
No General Partner or Affiliate thereof shall receive any
salary or other direct or indirect compensation for any services
or goods provided in connection with the Partnership or the
Apartment Complex, except as may be specifically provided in
Section 6.12, Section 6.15 and Article XI or as to which the
Consent of the Special Limited Partner shall have been obtained to
the precise terms thereof prior to the commencement of such
services or the provision of such goods. Any Partner may engage
independently or with others in other business ventures of every
nature and description, including the ownership, operation,
management, syndication and development of real estate; neither
the Partnership nor any other Partner shall have any rights in and
to such independent ventures or the income or profits derived
therefrom.
6.4 Business Management and Control
(a) Subject to the provisions of this Agreement, the
General Partner shall have the exclusive right to control the
business of the partnership. If at any time there is more than
one General Partner, the powers and duties of the General Partners
hereunder shall be exercised in the first instance by a Managing
General Partner who, subject to the terms and provisions of this
Agreement, shall manage the business and affairs of the
Partnership. The Managing General Partner may bind the
Partnership by executing and delivering, in the name and on behalf
of the Partnership, any documents which this Agreement authorizes
the General Partners to execute hereunder without the requirement
that any other General Partner execute such documents. The
initial Managing General Partner shall be DBV II; if it is
unwilling or unable to serve in such capacity or shall cease to be
a General Partner, the remaining General Partners may from time to
time designate a new Managing General Partner. If for any reason
no designation is in effect, the powers of the Managing General
Partner shall be exercised by a majority in interest of the
General Partners. Any action required or permitted to be taken by
a corporate General Partner hereunder may be taken by such of its
proper officers or agents as it shall validly designate for such
purpose.
(b) The Managing General Partner shall have control over
the business of the Partnership and shall have all rights, powers
and authority conferred by law as necessary, advisable or
consistent in connection therewith. Without limiting the
generality of the foregoing, the Managing General Partner shall
have the right, power and authority to execute any documents
relating to the acquisition, financing, rehabilitation, operation
and sale of all or any portion of the Apartment Complex with the
prior approval of the other General Partners, if any. The
Managing General Partner shall be responsible for administering
any construction loan draw requests for the development of the
Apartment Complex.
(c) Neither the Investment Limited Partner nor the Special
Limited Partner shall have any right to take part in the
management or control of the business of the Partnership or to
transact any business in the name of the Partnership. No
provision of this Agreement which makes the Consent of the
Investment Limited Partner or the Consent of the Special Limited
Partner a condition for the effectiveness of an action taken by
the General Partner is intended, and no such provisions shall be
construed, to give the Investment Limited Partner or the Special
Limited Partner, as the case may be, any participation in the
control of the Partnership business. Each of the Special Limited
Partner and the Investment Limited Partner hereby consents to the
exercise by the General Partner of the powers conferred on it by
law and this Agreement, and the General Partner agrees to exercise
control of the business of the Partnership only in accordance with
the provisions of this Agreement. Notwithstanding the foregoing,
in no event may the provisions of this Section 6.4 be invoked by
any General Partner or by any other Person as a defense against or
as an impediment to the ability of either the Investment Limited
Partner or the Special Limited Partner to take any action
hereunder.
6.5 Duties and Obligations
(a) The General Partner shall manage the affairs of the
Partnership to the best of its ability, shall use its best efforts
to carry out the purpose of the Partnership, and shall devote to
the Partnership such time as may be necessary for the proper
performance of its duties and the business of the Partnership.
The General Partner shall promptly take all action which may be
necessary or appropriate for the proper development, construction,
maintenance and operation of the Apartment Complex in accordance
with the provisions of this Agreement, the Project Documents and
any applicable laws and Regulations. The General Partner is
responsible for the management and operation of the Partnership,
including the oversight of the rent-up and operational stages of
the Apartment Complex.
(b) Subject to the provisions of Section 6.5(g), the
General Partner shall use its diligent good faith efforts to cause
the Partnership to generate Cash Flow for distribution to the
Partners at the maximum realizable level in view of (i) any
applicable Regulations, (ii) the Minimum Set-Aside Test, (iii) the
Rent Restriction Test and (iv) the Projected Rents, and, if
necessary, the General Partner also shall use its best efforts to
obtain approvals and implementation of appropriate adjustments in
the rental schedule of the Apartment Complex.
(c) The General Partner shall cause the Partnership to
obtain and keep in force, during the term of the Partnership,
insurance policies in accordance with the Insurance Requirements
set forth on Exhibit C hereto. Throughout the term of the
Partnership, the General Partner shall provide copies of all such
policies (or binders) to the Investment Limited Partner within
thirty (30) days after their receipt thereof. The General Partner
shall cause the applicable insurer to name the Investment Limited
Partner as an "additional insured" on each Partnership insurance
policy. Each Partnership insurance policy shall include a
provision requiring the insurance company to notify the Investment
Limited Partner in writing no less than thirty (30) days prior to
any cancellation, non-renewal or material change in the terms and
conditions of coverage. The General Partner shall review
regularly all of the Partnership and Apartment Complex insurance
coverage to insure that it is adequate and continuing. In
particular, the General Partner shall review at least annually the
insurance coverage required by this Section 6.5(c) to insure that
it is in an amount at least equal to the then current full
replacement value of the Apartment Complex.
Without limitation of the foregoing, the General Partner
shall deliver to the Investment Limited Partner on or before the
Admission Date one or more certificates or memoranda of insurance,
in form reasonably acceptable to the Investment Limited Partner,
evidencing, (i) the existence of the insurance policies and
coverages specified on Exhibit C, (ii) that the Partnership and
its Partners (including the Investment Limited Partner) are named
insured on such policies, and (iii) that such insurance policies
will not be cancelled by the insurers except within thirty (30)
days' written notice to the Investment Limited Partner. From time
to time following the Admission Date, the General Partner shall
deliver to the Investment Limited Partner such further
certificates or memoranda of insurance as the Investment Limited
Partner may reasonably require to confirm that such insurance and
notice provisions with respect to insurance under this Agreement
have been complied with.
(d) If at any time there is more than one General Partner,
the obligations of the General Partners hereunder shall be the
joint and several obligations of each General Partner. Except as
otherwise provided in Sections 4.5(b) and 7.1, such obligations
shall survive any Withdrawal of a General Partner from the
Partnership.
(e) (i) The General Partner shall on and after the earlier
of the date which is six (6) months after the Completion Date and
Permanent Mortgage Commencement establish and maintain reasonable
reserves (the "Replacement Reserve") to provide for working
capital needs, improvements, replacements and any other
contingencies of the Partnership. At a minimum, the General
Partner shall cause the Partnership to annually deposit $15,800
from Cash Flow into the Replacement Reserve (which requirement
shall be offset against and not be in addition to any similar
capital replacement reserve requirement of any Lender); to the
extent that Cash Flow (as determined before deduction of such
reserve deposit) for any Fiscal Year shall be insufficient to make
such deposit in full, the General Partner shall fund such
shortfall from its own funds as a Subordinated Loan.
(ii) In addition to the requirements of Section
6.5(e)(i), in order to fund Operating Deficits, the General
Partner (or its designee), shall upon the satisfaction of the
conditions to the payment of the Second Installment deposit
$14,700 into a segregated reserve account (the "Operating
Reserve") to secure the General Partner's obligation to fund
Operating Deficits. Funds held in the Operating Reserve may be
released to pay operating expenses with the reasonable approval of
the Special Limited Partner. The funds, if any, remaining in the
Operating Reserve shall be returned to the General Partner (or its
designee) in accordance with the provisions of Section 10.2 upon
the later of (A) the third (3rd) anniversary of Rental Achievement
or (B) the achievement of 93% occupancy in the Apartment Complex
and a Debt Service Coverage Ratio of 1.15, in each case for a
period of twelve (12) consecutive months with each month
considered individually. Any funds utilized from the Operating
Reserve to pay Partnership operating expenses shall not constitute
Subordinated Loans. Upon the utilization of such funds from the
Operating Reserve, the General Partner shall use its best good
faith efforts to redeposit Partnership funds in the Operating
Reserve in an amount sufficient to maintain the minimum balances
required herein.
(f) Each General Partner shall be bound by the provisions
of the Project Documents, and no additional General Partner shall
be admitted if he, she or it has not first agreed to be bound by
this Agreement (and assume the obligations of a General Partner
hereunder) and by the Project Documents to the same extent and
under the same terms as each of the other General Partners.
(g) The General Partner shall take all actions appropriate
to ensure that the Investment Limited Partner receives the full
amount of the Projected Credit, including, without limitation, the
rental of apartments to appropriate tenants and the filing of
annual certifications as may be required. In this regard, the
General Partner shall, inter alia, cause (i) the Partnership to
satisfy the Minimum Set-Aside Test, the Rent Restriction Test and
all other requirements imposed from time to time under the Code
with respect to rental levels and occupancy by qualified tenants
by the close of the first year of the Credit Period and throughout
the Compliance Period so as to permit the Partnership to be
entitled to the maximum available Tax Credit (ii) the Partnership
to comply with all Tax Credit monitoring procedures of the State,
(iii) all dwelling units in the Apartment Complex to be leased for
initial periods of not less than six months to individuals
satisfying the Rent Restriction Test, (iv) the Partnership to make
all appropriate Tax Credit elections in a timely fashion, and (v)
all rental units in the Apartment Complex to be of equal quality
with comparable amenities available to low-income tenants on a
comparable basis without separate fees.
(h) [Reserved]
(i) The General Partner shall (i) not store or dispose of
(except in compliance with all laws, ordinances, and regulations
pertaining thereto) any Hazardous Material at the Apartment
Complex, or at or on any other Site or Vessel owned, occupied, or
operated either by any General Partner, any Affiliate of a General
Partner, or any Person for whose conduct any General Partner is or
was responsible; (ii) neither directly nor indirectly transport or
arrange for the transport of any Hazardous Material (except in
compliance with all laws, ordinances, and regulations pertaining
thereto); (iii) provide the Investment Limited Partner with
written notice (x) upon any General Partner's obtaining knowledge
of any potential or known release, or threat of release, of any
Hazardous Material at or from the Apartment Complex or any other
Site or Vessel owned, occupied, or operated by any General
Partner, any Affiliate of a General Partner or any Person for
whose conduct any General Partner is or was responsible or whose
liability may result in a lien on the Apartment Complex; (y) upon
any General Partner's receipt of any notice to such effect from
any federal, state, or other Governmental Authority; and (z) upon
any General Partner's obtaining knowledge of any incurrence of any
expense or loss by any such government authority in connection
with the assessment, containment, or removal of any Hazardous
Material for which expense or loss any General Partner may be
liable or for which expense or loss a lien may be imposed on the
Apartment Complex.
(j) The General Partner shall promptly request in writing
of the Permanent Lender that the Permanent Lender cause the
Special Limited Partner to be named as an "interested party" in
the Permanent Mortgage Loan Documents, so that the Permanent
Lender will notify the Special Limited Partner of any default
under the Permanent Mortgage or the General Partner shall itself
notify the Special Limited Partner of any such default.
(k) The General Partner shall provide the Special Limited
Partner with a true and accurate copy of each Construction Loan
requisition and any supporting documents and information which has
been submitted for approval by the Construction Lender (whether
submitted before or after the Admission Date).
(l) The General Partner shall have a fiduciary
responsibility for the safekeeping and use of all funds and assets
of the Partnership, whether or not in its immediate possession or
control. The General Partner shall not employ, or permit another
to employ, such funds or assets in any manner except for the
exclusive benefit of the Partnership. No General Partner shall
contract away the fiduciary duty owed at common law to the Limited
Partners.
6.6 Representations and Warranties
The General Partners, jointly and severally, represent and
warrant to the Investment Limited Partner and the Special Limited
Partner as follows:
(a) The Partnership is a duly organized limited partnership
validly existing and in good standing under the laws of the State
and has complied with all filing requirements necessary for its
existence and to preserve the limited liability of the Investment
Limited Partner and the Special Limited Partner.
(b) No event or proceeding has occurred or is pending or,
is to the Best Knowledge of the General Partner, threatened which
would (i) materially adversely affect the Partnership or its
properties, or (ii) materially adversely affect the ability of the
General Partner or any of its Affiliates to perform their
respective obligations hereunder or under any other agreement with
respect to the Apartment Complex, other than legal proceedings
which have been bonded against without recourse to Partnership
assets in such manner as to stay the effect of the proceedings or
otherwise have been adequately provided for. This subparagraph
shall be deemed to include, without limitation, the following:
(x) legal actions or proceedings before any court, commission,
administrative body or other Governmental Authority having
jurisdiction over the zoning applicable to the Apartment Complex;
(y) labor disputes; and (z) acts of any Governmental Authority.
(c) No default (or event which, with the giving of notice
or the passage of time or both, would constitute a default) has
occurred and is continuing under this Agreement or under any
material provision of the Project Documents, and the Project
Documents are in full force and effect.
(d) Except as specifically permitted under Section 3.1, no
Partner or Related Person bears (or will bear) the Economic Risk
of Loss with respect to the Permanent Mortgage Loan. No General
Partner has, either on its own behalf or on behalf of the
Partnership, incurred any financial obligation with respect to the
Partnership prior to the Admission Date, other than as disclosed
in writing to the Special Limited Partner prior to the Admission
Date.
(e) The Apartment Complex will be, is being or has been
constructed in a timely manner in conformity with the Project
Documents. There is no violation by the Partnership or the
General Partner of any zoning, or to the General Partner's Best
Knowledge, environmental or similar regulation applicable to the
Apartment Complex which could have a material adverse effect
thereon, and the Partnership has complied and will comply with all
applicable municipal and other laws, ordinances and regulations
relating to such construction and use of the Apartment Complex.
All appropriate public utilities, including, but not limited to,
water, electricity, gas (if called for in the Plans and
Specifications), and sanitary and storm sewers, are or will be
available and operating properly for each unit in the Apartment
Complex at the time of the initial occupancy of such unit.
(f) The Partnership owns good and marketable fee simple
title to the Apartment Complex, subject to no material liens,
charges or encumbrances other than those which (i) are both
permitted by the Project Documents and are noted or excepted in
the Title Policy, (ii) do not materially interfere with use of the
Apartment Complex (or any part thereof) for its intended purpose
or, other than the permitted Mortgages, have a material adverse
effect on the value of the Apartment Complex, or (iii) have been
bonded or insured against in such a manner as to preclude the
holder of such lien or such surety or insurer from having any
recourse to the Apartment Complex or the Partnership for payment
of any debt secured thereby, which bond(s) or insurance have been
approved by the Lenders.
(g) The execution and delivery of all instruments and the
performance of all acts heretofore or hereafter made or taken
pertaining to the Partnership or the Apartment Complex by each
Affiliate of a General Partner which is a corporation or limited
liability company have been or will be duly authorized by all
necessary corporate or other actions, and the consummation of any
such transactions with or on behalf of the Partnership will not
constitute a breach or violation of, or a default under, the
charter or by-laws of such Affiliate or any agreement by which
such Affiliate or any of its properties is bound, nor constitute a
violation of any law, administrative regulation or court decree.
(h) Any General Partner (or partner or member of a General
Partner) which is a corporation or limited liability company (a
"Corporation/LLC") has been duly organized, is validly existing
and in good standing under the laws of its state of organization
and has all requisite corporate and other power to be a General
Partner and to perform its duties and obligations as contemplated
by this Agreement and the Project Documents. Neither the
execution and delivery by any Corporation/LLC of this Agreement
nor the performance of any of the actions of any Corporation/LLC
contemplated hereby has constituted or will constitute a violation
of (a) the articles of incorporation, operating agreement, by-
laws and any other organizational documents of such
Corporation/LLC, (b) any agreement by which such Corporation/LLC
is bound or to which any of its property or assets is subject, or
(c) any law, administrative regulation or court decree.
(i) No Event of Bankruptcy has occurred with respect to the
Partnership, any General Partner or the Developer.
(j) All accounts of the Partnership required to be
maintained under the terms of the Project Documents, including,
but not necessarily limited to, any account for replacement
reserves, are currently funded to the levels required by any
Agency or Lender.
(k) If the only General Partner(s) are one or more
corporation(s) or limited liability company(ies), then the General
Partner(s) have a combined net worth which satisfies the
Designated Net Worth Requirements.
(l) All anticipated payments and expenses required to be
made or incurred in order to complete the construction of the
Apartment Complex in conformity with the Project Documents, to
fund any reserves hereunder or under any other Project Document
required to be funded at or prior to the later of the Admission
Date or Permanent Mortgage Commencement, to satisfy all
requirements under the Project Documents and to pay the
Development Fee and all other fees, have been or will be paid or
provided for utilizing only (i) the funds available from the
Construction Loan, (ii) the Capital Contributions of the
Investment Limited Partner, (iii) the Capital Contributions of the
General Partner in the amounts set forth on Schedule A as of the
Admission Date, (iv) the available net rental income, if any,
earned by the Partnership prior to Permanent Mortgage Commencement
(to the extent that it is permitted to be used for such purposes
by any Agency or Lender), (v) any Cash Flow generated subsequent
to Permanent Mortgage Commencement (to the extent provided in
Section 10.2(a)), (vi) any insurance proceeds and (vii) any funds
furnished by the General Partner pursuant to Sections 6.5(e) and
6.11(a).
(m) The aggregate amount of Tax Credit which is expected to
be allocated by the Partnership to the Investment Limited Partner
is $94,220 for 1998, $281,254 per annum for each of the years 1999
through 2007 (inclusive) and $187,034 for 2008, provided, however,
that the General Partner shall have no liability to the Investment
Limited Partner or the Special Limited Partner for any breach of
the representation contained in this paragraph (m) if (but only to
the extent that) the adjuster provisions set forth in Sections
5.1(e), (f) and (g) have become operative and all required
payments or adjustments have been made thereunder in accordance
with the terms thereof.
(n) The Apartment Complex will be, is being or has been
constructed and operated in a manner which satisfies Section 42 of
the Code and shall continue to satisfy all existing and
anticipated restrictions applicable to projects generating Tax
Credits.
(o) No General Partner, Affiliate of a General Partner or
Person for whose conduct any General Partner is or was responsible
has ever: (i) owned, occupied, or operated a Site or Vessel on
which any Hazardous Material was or is stored, transported, or
disposed of, except if such storage, transport or disposition was
and is at all times in compliance with all laws, ordinances, and
regulations pertaining thereto; (ii) directly or indirectly
transported, or arranged for transport, of any Hazardous Material
(except if such transport was and is at all times in compliance
with all laws, ordinances and regulations pertaining thereto);
(iii) caused or was legally responsible for any release or threat
of release of any Hazardous Material; (iv) received notification
from any federal, state or other Governmental Authority of (x) any
potential, known, or threat of release of any Hazardous Material
from the Apartment Complex or any other Site or Vessel owned,
occupied, or operated by any General Partner, by any Affiliate of
a General Partner, or by any Person for whose conduct any General
Partner is or was responsible or whose liability may result in a
lien on the Apartment Complex; or (y) the incurrence of any
expense or loss by any such Governmental Authority or by any other
Person in connection with the assessment, containment, or removal
of any release or threat of release of any Hazardous Material from
the Apartment Complex or any such Site or Vessel.
(p) To the Best Knowledge of the General Partner, no
Hazardous Material was ever or is now stored on, transported, or
disposed of on the land comprising the Apartment Complex, except
to the extent any such storage, transport or disposition was at
all times in compliance with all laws, ordinances, and regulations
pertaining thereto.
(q) The General Partner has fulfilled and will continue to
fulfill all of its duties and obligations under Section 6.5.
(r) The Partnership's basis in the Apartment Complex as of
December 31, 1997 will be greater than 10% of the Partnership's
reasonably expected basis in the Apartment Complex as of
December 31, 1999 and all conditions set forth in Section 42 of
the Code, the Treasury Regulations, Service notices, rulings or
releases and any other authorities to the validity of the
allocation of tax credit have been or will be satisfied in a
timely manner.
6.7 Liability on Mortgages
Neither any General Partner nor any Related Person shall at
any time bear the Economic Risk of Loss for the payment of any
portion of any Mortgage Loan, and the General Partner shall not
permit any other Partner or any Related Person to bear the
Economic Risk of Loss for the payment of any portion of any
Mortgage Loan, except as may be expressly permitted pursuant to
the provisions of Article III with the Consent of the Special
Limited Partner.
6.8 Indemnification of the General Partner
(a) Except as provided by Article V, no General Partner or
any Affiliate thereof shall have liability to the Partnership or
to any Limited Partner for any loss suffered by the Partnership
which arises out of any action or inaction of any General Partner
or Affiliate thereof if such General Partner or Affiliate thereof
in good faith determined that such course of conduct was in the
best interest of the Partnership and such course of conduct did
not constitute gross negligence or willful misconduct of such
General Partner or Affiliate thereof.
(b) A General Partner or any Affiliate thereof shall be
indemnified by the Partnership from and against any Adverse
Consequences sustained in connection with the business and
operations of the Partnership, provided that all of the following
conditions are met: (i) such General Partner has determined, in
good faith, that the course of conduct which caused the loss,
judgment, liability, expense or amount paid in settlement was in
the best interests of the Partnership; and (ii) such Adverse
Consequences were not the result of gross negligence or willful
misconduct on the part of such General Partner or Affiliate
thereof; and (iii) such indemnification or agreement to hold
harmless is recoverable only out of the assets of the Partnership,
and not from the Limited Partners.
(c) Notwithstanding the above, no Partner or any Affiliate
thereof performing services for the Partnership or any broker-
dealer shall be indemnified for any Adverse Consequences arising
from or out of an alleged violation of federal or state securities
laws unless there has been a successful adjudication on the merits
of each count involving securities laws violations as to the
particular indemnitee and the court finds that indemnification of
the settlement and related costs should be made. In any claim for
indemnification for federal or state securities law violations,
the party seeking indemnification shall, prior to seeking court
approval for such indemnification, place before the court the
positions of the Securities and Exchange Commission, the
Massachusetts Securities Division and any other applicable state
securities administrator with respect to the issue of
indemnification for securities law violations.
(d) The Partnership shall not incur the cost of the portion
of any insurance, other than public liability insurance or course
of construction insurance, which insures any party against any
liability as to which such party is herein prohibited from being
indemnified.
(e) The Partnership may indemnify Affiliates of a General
Partner under this Section 6.8 only if the loss involves an
activity in which such Affiliates acted in the capacity of a
General Partner.
(f) For purposes of this Section 6.8 only, the term
"Affiliate" shall mean (i) any Person performing services on
behalf of the Partnership who (x) directly or indirectly controls,
is controlled by or is under common control with a General
Partner; (y) owns or controls ten percent (10%) or more of the
outstanding voting securities of a General Partner or (z) is an
officer, director, partner, member, manager or trustee of a
General Partner; and (ii) any Person for whom the General Partner
acts as an officer, director, partner or trustee. For purposes of
this Section 6.8 only, the term "controls" and any form of such
term shall mean the power to direct the management and policies of
a Person, directly or indirectly, whether through ownership of
voting securities, by contract or otherwise.
6.9 Indemnification of the Partnership and the Limited
Partners
(a) The General Partner will indemnify and hold the
Partnership and the Limited Partners harmless from and against any
and all Adverse Consequences which the Partnership or any Limited
Partner may incur by reason of (i) the past, present or future
actions or omissions of the General Partner or any of its
Affiliates constituting gross negligence or willful misconduct, or
(ii) any liabilities to which either the Partnership or the
Apartment Complex is subject other than (x) any Mortgage or (y)
necessary contractual obligations incurred pursuant to the
requirements of any Agency or Lender in connection with the
operation of the Apartment Complex in the ordinary course of
business.
(b) Notwithstanding the foregoing, no General Partner shall
be liable to a Limited Partner or the Partnership for any act or
omission for which the Partnership is required to indemnify such
General Partner under Section 6.8, except as provided by
Article V.
(c) The General Partner shall indemnify, defend, and hold
the Limited Partners harmless on an after-tax basis from and
against any Adverse Consequences related to or arising out of the
presence of any Hazardous Material at the Apartment Complex (other
than any Adverse Consequences resulting from the acts or omissions
of the Limited Partners). Any claim or loss described in the
immediately preceding sentence may be defended, compromised,
settled, or pursued by the Limited Partners with counsel of the
Limited Partners' selection, but at the expense of the General
Partner. Notwithstanding anything else set forth herein, this
indemnification shall survive the withdrawal of any General
Partner and/or the termination of this Agreement.
6.10 Operating Deficits
Subject to any Requisite Approvals, the General Partners
jointly and severally shall be obligated during the period from
Rental Achievement until the third (3rd) anniversary of Rental
Achievement (the "Subordinated Loan Period"), to promptly advance
funds as a Subordinated Loan to eliminate any Operating Deficit,
provided however, that the General Partner shall not be obligated
to have Subordinated Loans outstanding at any one time in excess
of $250,000. In any case in which the General Partner otherwise
would be required to advance funds under this Section 6.10, any
amounts then held in the Operating Reserve may be released and
disbursed for the purpose of eliminating the Operating Deficit
before the General Partner shall be required to advance their own
funds. In the event that the General Partner shall fail to make
any such advance as aforesaid, (a) the Partnership shall utilize
amounts (the "Applied Amounts") otherwise payable to the General
Partner or its Affiliates under Section 6.12 and/or Article X to
meet the obligations of the General Partner pursuant to this
Section 6.10, with such utilization of Applied Amounts
constituting payment and satisfaction of the corresponding amounts
payable to the General Partner or its Affiliates under
Section 6.12 and/or Article X, with the proceeds thereof being
applied to such obligations, and with the obligation of the
Partnership to make such payments to the General Partner or its
Affiliates pursuant to Section 6.12 and/or Article X being deemed
to have been satisfied to the extent thereof and (b) the Special
Limited Partner shall have the option, exercisable in its sole
discretion, to cause it or one or more of its designees to be
admitted to the Partnership as additional General Partner(s). An
additional General Partner so admitted shall automatically,
without the need for any further action by any Partner, become the
Managing General Partner and shall be delegated all of the powers
and authority of all of the General Partners pursuant to Section
6.13, and each Partner hereby grants to any such additional
General Partner a power of attorney, coupled with an interest and
irrevocable to the extent permitted by law, to execute and deliver
any and all instruments and documents which it believes to be
necessary or appropriate in order to accomplish the purposes of
this Section 6.10 and to manage the business of the Partnership.
The admission of an additional General Partner shall not relieve
any other General Partner of any of its economic obligations
hereunder, and each other General Partner shall indemnify and hold
harmless the additional General Partner from and against any and
all Adverse Consequences sustained in connection with the
additional General Partner's status as a General Partner (other
than Adverse Consequences arising solely out of the negligence or
misconduct of such additional General Partner). For the purpose
of this Section 6.10, all expenses shall be paid on a sixty (60)-
day current basis. Moreover, the General Partner may in its sole
discretion at any time advance funds to the Partnership to pay
operating expenses and/or debt service of the Partnership in order
to facilitate the Partnership's compliance with the Rent
Restriction Test. All advances pursuant to Section 6.5(e) and
this Section 6.10 (including any Applied Amounts), except advances
from the Operating Reserve, shall constitute non-interest-bearing
Subordinated Loans. Subordinated Loans shall be repaid in
accordance with the provisions of Article X. The form and
provisions of all Subordinated Loans shall conform to any
applicable Regulations.
6.11 Obligation to Complete the Construction of the
Apartment Complex
(a) The Developer and the General Partner shall be
obligated to complete the construction of the Apartment Complex
and achieve Rental Achievement in the manner set forth in this
Agreement and the Development Agreement.
(b) The completion of the Apartment Complex shall be
secured by the Guaranty.
6.12 Certain Payments to the General Partner and Others
(a) As reimbursement for certain advances and as
compensation for the Developer's services in connection with the
development and rehabilitation of the Apartment Complex, the
Partnership shall pay to the Developer a development fee (the
"Development Fee") in the amount and at the times set forth in the
Development Agreement. If the Development Fee has not been fully
paid by the tenth (10th) anniversary of the Completion Date, the
General Partner shall make a Capital Contribution to the
Partnership in an amount sufficient to enable the Partnership to
pay any unpaid portion of the Development Fee.
(b) The Partnership shall pay to the Special Limited
Partner or an Affiliate thereof a fee (the "Asset Management Fee")
commencing in 1998 (prorated for such initial year based on
occupancy of the Apartment Complex) for its services in connection
with the Partnership's accounting matters relating to the
Investment Limited Partner and assisting with the preparation of
tax returns and the reports required by Section 12.7 in the annual
amount of $5,000. The Asset Management Fee shall be payable from
Cash Flow in the manner and priority set forth in Section 10.2(a);
provided however, that if in any Fiscal Year, Cash Flow is
insufficient to pay the full amount of the Asset Management Fee,
the General Partner shall advance the amount of such deficiency to
the Partnership as a Subordinated Loan. If for any reason the
Asset Management Fee still is not paid in any Fiscal Year, the
unpaid portion thereof shall accrue and be payable on a cumulative
basis in the first Fiscal Year in which there is sufficient Cash
Flow or Capital Proceeds as provided in Article X.
(c) In consideration of the services of the General Partner
in managing the day-to-day business and affairs of the
Partnership, the Partnership shall pay to the General Partner an
annual fee (the "Partnership Management Fee") commencing in 1998
(prorated for such initial year based on occupancy of the
Apartment Complex) in the amount of $5,000, payable from Cash Flow
in the manner set forth in Section 10.2(a). The Partnership
Management Fee shall be noncumulative so that if there is not
sufficient Cash Flow in any Fiscal Year to pay the amount of the
Partnership Management Fee specified for such use in Section
10.2(a), the Partnership shall have no obligation to pay such
shortfall in any future Fiscal Year.
6.13 Delegation of General Partner Authority
(a) If there shall be more than one General Partner serving
hereunder, each General Partner may from time to time, by an
instrument in writing, delegate all or any of his powers or duties
hereunder to another General Partner or General Partners.
(b) Each contract, deed, mortgage, lease and other
instrument executed by any General Partner shall be conclusive
evidence in favor of every Person relying thereon or claiming
thereunder that at the time of the delivery thereof (i) the
Partnership was in existence, (ii) this Agreement had not been
amended in any manner so as to restrict the delegation of
authority among General Partners (except as shown in certificates
or other instruments duly filed in the Filing Office) and (iii)
the execution and delivery of such instrument was duly authorized
by the General Partners. Any Person may always rely on a
certificate addressed to him and signed by any General Partner
hereunder:
(1) as to who are the General Partners or Limited
Partners hereunder;
(2) as to the existence or nonexistence of any fact
which constitutes a condition precedent to acts by the
General Partners or in any other manner germane to the
affairs of the Partnership;
(3) as to who is authorized to execute and deliver any
instrument or document of the Partnership;
(4) as to the authenticity of any copy of this
Agreement and any amendments thereto; or
(5) as to any act or failure to act by the Partnership
or as to any other matter whatsoever involving the
Partnership or any Partner.
6.14 Assignment to Partnership
The Developer and the General Partner hereby transfer and
assign to the Partnership all of their right, title and interest
in and to the Apartment Complex and in and to all of the Project
Documents, including, but not limited to, the following: (i) all
contracts with architects, supervising architects, engineers and
contractors with respect to the development of the Apartment
Complex; (ii) all plans, specifications and working drawings
heretofore prepared or obtained in connection with the Apartment
Complex; (iii) all governmental commitments and approvals
obtained, and applications therefore, including, but not limited
to those relating to planning, zoning, building permits and Tax
Credits; (iv) any and all commitments with respect to any
Mortgage(s); and (v) any and all contracts or rights with respect
to any agreements with any Agency or Lender.
6.15 Contracts with Affiliates
(a) The General Partner or any Affiliate thereof may act as
Management Agent upon the terms and conditions set forth in
Article XI.
(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 (i) 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, (ii) the goods or services to be furnished
shall be reasonable for and necessary to the Partnership, (iii)
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, and (iv) 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 written 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 Article XII. 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 6.15(b).
6.16 Tax Matters Partner
(a) The Managing General Partner 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 treasury regulations pursuant to
Section 6231 of the Code. Each Partner, by the 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.
(b) The Tax Matters Partner hereby is authorized, but not
required:
(i) to enter into any settlement agreement with the
Service 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 treasury
regulations thereunder) files a statement with the Service
providing that the Tax Matters Partner shall not have the
authority to enter into a settlement agreement on the behalf
of such Partner;
(ii) in the event that a notice of 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;
(iii) to intervene in any action brought by any other
Partner for judicial review of a Final Adjustment;
(iv) to file a request for an administrative adjustment
with the Service at any time and, if any part of such request
is not allowed by the Service, to file an appropriate
pleading (petition or complaint) for judicial review with
respect to such request;
(v) to enter into an agreement with the 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 effected by such item; and
(vi) 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.
(c) 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 Partnership funds for such purpose, but only to the extent
of available Partnership resources. 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 the
General Partner and indemnification set forth in Section 6.8 of
this Agreement shall be fully applicable to the Tax Matters
Partner in its capacity as such.
ARTICLE VII
Withdrawal of a General Partner; New General Partners
7.1 Voluntary Withdrawal
No General Partner shall have the right to Withdraw
voluntarily from the Partnership or to sell, assign or encumber
its Interest without the Consent of the Investment Limited Partner
and each of the other General Partners (if any) and, if required,
any Requisite Approvals.
7.2 Reconstitution
In the event of the Withdrawal of a General Partner, the
Partnership shall not be dissolved or required to be wound up if
(i) at the time of such Withdrawal there is at least one remaining
General Partner and that General Partner carries on the business
of the Partnership (any such remaining General Partner being
hereby authorized to carry on the business of the Partnership), or
(ii) within ninety (90) days after such Withdrawal all remaining
Partners agree in writing to continue the business of the
Partnership and to the appointment, effective as of the date of
such Withdrawal, of one or more additional General Partners.
Within ten (10) days after the occurrence of such Withdrawal, the
remaining General Partners, if any, shall notify the Investment
Limited Partner thereof:
(i) The reconstituted limited partnership shall
continue until the occurrence of a Liquidating Event as
provided in Section 2.4;
(ii) If the successor General Partner is not a
former General Partner, then the provisions of Section
7.4(d) shall apply; and
(iii) All necessary steps shall be taken to cancel
this Agreement and the Certificate and to enter into a
new partnership agreement and certificate of limited
partnership, and the successor General Partner shall be
obligated to take such steps.
7.3 Successor General Partner
(a) Upon the occurrence of any Withdrawal, the remaining
General Partners may designate a Person to become a successor
General Partner to the Withdrawing General Partner. Any Person so
designated, subject to any Requisite Approvals, the Consent of the
Investment Limited Partner and, if required by the Act or any
other applicable law, the consent of any other Partner so
required, shall become a successor General Partner upon his
written agreement to be bound by the Project Documents and by the
provisions of this Agreement.
(b) If any Withdrawal shall occur at a time when there is
no remaining General Partner and the Partners do not unanimously
elect to continue the business of the Partnership in accordance
with the provisions of clause (ii) of Section 7.2(a) above, then
the Investment Limited Partner shall have the right, subject to
any Requisite Approvals, to designate a Person to become a
successor General Partner upon his written agreement to be bound
by the Project Documents and by the provisions of this Agreement.
(c) If the Investment Limited Partner elects to
reconstitute the Partnership and admit a successor General Partner
pursuant to this Section 7.3, the relationship of the Partners in
the reconstituted Partnership shall be governed by this Agreement.
7.4 Interest of Predecessor General Partner
(a) No assignee or transferee of all or any part of the
Interest as a General Partner of a General Partner shall have any
automatic right to become a General Partner. Until the
acquisition of the Interest of a Withdrawing General Partner
pursuant to Section 7.4(d) or 7.6, such Interest shall be deemed
to be that of an assignee and the holder thereof shall be entitled
only to such rights as an assignee may have as such under the laws
of the State.
(b) Anything herein contained to the contrary
notwithstanding, any General Partner who Withdraws voluntarily in
violation of Section 7.1 shall remain liable for all of its
obligations under this Agreement, for all its other obligations
and liabilities hereunder incurred or accrued prior to the date of
its Withdrawal and for any loss or damage which the Partnership or
any of its Partners may incur as a result of such Withdrawal
(except as provided in Section 6.8(a)).
(c) The estate (which term, for purposes of this
Section 7.4(c), shall include the heirs, distributees, estate,
executors, administrators, guardian, committee, trustee or other
personal representative) of a Withdrawn General Partner shall be
liable for all his liabilities and obligations hereunder, except
as provided in this Section 7.4(c). In the event of the death,
insanity or incompetency of a General Partner, his estate shall
remain liable for all of his obligations and liabilities hereunder
incurred or accrued prior to the date of such event, and for any
damages arising out of any breach of this Agreement by him, but
his estate shall not have any obligation or liability on account
of the business of the Partnership or the activities of the other
General Partners after his death, insanity or incompetency unless
it becomes a General Partner pursuant to Section 7.3(a).
(d) The Disposition of the General Partner Interest of a
General Partner who or which Withdraws voluntarily in compliance
with this Agreement shall be accomplished in such manner as shall
be acceptable to the remaining General Partners and shall be
approved by Consent of the Investment Limited Partner. Except as
provided in the preceding sentence, upon the Withdrawal of a
General Partner (other than a General Partner who or which is
removed as such pursuant to Section 4.5), such Withdrawn General
Partner shall be deemed to have automatically transferred to the
remaining General Partners, in proportion to their respective
General Partner Interests, or, if there shall be no remaining
General Partner, then to the Partnership for the benefit of the
remaining Partners, all or such portion of the General Partner
Interest of such Withdrawn General Partner which, when aggregated
with the existing General Partner Interests of all such remaining
General Partners, will be sufficient to assure such remaining
General Partners a 1% interest in all Profits, Losses, Tax Credits
and distributions of the Partnership under Article X. No
documentation shall be necessary to effectuate such transfer,
which shall be automatic, and no consideration shall be payable
therefor. For the purposes of Article X, the effective date of
the transfer pursuant to the provisions of this Section 7.4(d) of
the General Partner Interest of a Withdrawn General Partner shall
be deemed to be the date on which such Withdrawal occurs. That
portion of the General Partner Interest (the "Remaining Interest")
of the Withdrawing General Partner which shall not have been
transferred pursuant to this Section 7.4(d) (except in respect of
a removed General Partner), shall be retained by such Withdrawing
General Partner (or pass to legal representatives thereof) who or
which shall have the status of a special Limited Partner, but with
the right to receive only that share of the Profits, Losses, Tax
Credits and distributions of the Partnership to which the
Withdrawing General Partner, as such, would have been entitled had
he or it remained, reduced to the extent of the General Partner
Interest transferred hereunder, but such Withdrawing Partner (or
his or its legal representatives, as the case may be) shall not be
considered to be a Special Limited Partner for the purpose of
exercising any rights reserved to the Special Limited Partner
under this Agreement or sharing the benefits allocated to the
Special Limited Partner under Article X hereof and shall not
participate in the votes or consents of the Limited Partners
hereunder; provided, however, that in the case of a General
Partner who or which Withdraws involuntarily without violation of
this Agreement, the Partnership shall have the option (but not the
obligation), exercisable by notice to the holder of such Interest
within six (6) months following the date of such Withdrawal, to
acquire the Remaining Interest of such Withdrawing General Partner
(or the Special Limited Partner Interest deriving therefrom) in
accordance with the valuation and payment provisions of Section
7.6.
7.5 Amendment of Certificate; Approval of Certain Events
(a) Upon the admission of a new General Partner pursuant to
the preceding provisions of this Article VII, Schedule A shall be
amended to reflect such admission and an amendment to the
Certificate, also reflecting such admission, shall be filed as
required by the Act.
(b) Each Partner hereby consents to and authorizes any
admission or substitution of a General Partner or any other
transaction, including, without limitation, the continuation of
the Partnership business, which has been authorized under the
provisions of this Agreement, and hereby ratifies and confirms
each amendment of this Agreement necessary or appropriate to give
effect to any such transaction.
7.6 Valuation and Sale of Interest of Former General
Partner
(a) Subject to the provisions of Section 7.4(d), if the
business of the Partnership is continued after the Withdrawal of a
General Partner, or if, following such event, the Partnership is
reconstituted and continued, in each case as contemplated by this
Agreement, the Partnership shall purchase such General Partner's
Interest if such removal is without cause or if such Withdrawal is
not in violation of this Agreement (which term, and words of like
import, as used in this Section 7.6 shall refer only to the
"Remaining Interest" of such Withdrawing General Partner as
defined in Section 7.4(d) in all cases where applicable) each for
a price equal to the fair market value thereof. Such fair market
value shall be determined by two independent appraisers, one
selected by the former General Partner or its representative and
one by the Partnership. If such appraisers are unable to agree on
the value of the former General Partner's Interest, they shall
jointly appoint a third independent appraiser whose determination
shall be final and binding. The appraisers may act with or
without a hearing, and the cost of the appraisal will be shared
equally between such former General Partner and the Partnership.
If a General Partner is removed by the Investment Limited Partner
for cause, or if a General Partner has voluntarily withdrawn from
the Partnership in contravention of the terms of this Agreement,
the General Partner shall forfeit its Interest to the Partnership,
not as a penalty but as liquidated damages to compensate the
Partnership for the action of such General Partner leading to its
removal, or for the fact of its violation of the terms of this
Agreement.
(b) Promptly after the determination of the purchase price
of a former General Partner's Interest pursuant to Section 7.6(a),
the Partnership shall deliver to such former General Partner a
promissory note of the Partnership for such purchase price,
payable in five equal consecutive annual installments commencing
on the first anniversary of the date of such note. Such
promissory note shall bear simple interest at the rate per annum
which is at all times the AFR, payable on the last day of each
calendar quarter during which such note is outstanding. Within
one hundred twenty (120) days after the determination of the
purchase price of the former General Partner's Interest, the
Partnership may, with the consent of all remaining General
Partners and the Consent of the Investment Limited Partner, sell
such Interests to one or more Persons, who may be Affiliates of
the remaining General Partner or General Partners, and admit such
Person or Persons to the Partnership as substitute General
Partners; provided, however, that the purchase price to be paid to
the Partnership for the Interest of the former General Partner
shall not be less than its purchase price as determined by the
appraisal and, if applicable, arbitration described above. Such
substitute General Partners may pay said purchase price in
installments in the manner set forth above in this Section 7.6(b).
7.7 Designation of New General Partners
The General Partner may, with the written consent of all
Partners, at any time designate new General Partners, each with
such Interest as a General Partner in the Partnership as the
General Partner may specify, subject to any Requisite Approvals.
Any new General Partner shall, as a condition of receiving
any interest in the Partnership property, agree to be bound by the
Project Documents and any other documents required in connection
therewith and by the provisions of this Agreement, to the same
extent and on the same terms as any other General Partner.
ARTICLE VIII
Transferability of Limited Partner Interests
8.1 Assignments
(a) Except by operation of law (including the laws of
descent and distribution) or pursuant to the provisions of Section
8.1(b), no Limited Partner may assign all or any part of its
Interest without the written consent of the General Partner, the
giving or withholding of which is exclusively within its
discretion.
(b) A Limited Partner, without the consent of the General
Partner, may assign to any Person all or any portion of the
economic benefits of the ownership of such Limited Partner's
Interest; provided, however, that such assignment shall not be
binding on the Partnership until there shall have been filed with
the Partnership by registered mail certified copies of an executed
and acknowledged assignment and the written acceptance by the
assignee of all the terms and provisions of this Agreement; if
such assignment and acceptance are not so filed, the Partnership
need not recognize such assignment for any purpose. An assignee
of a Limited Partner who does not become a Substituted Limited
Partner shall have the right to receive the allocable share of any
Profits, Losses, Tax Credits or distributions of the Partnership
to which the assigning Limited Partner would have been entitled
with respect to the Interest (or portion thereof) so assigned if
no such assignment had been made by such Limited Partner. Any
assigning Limited Partner whose permitted assignee becomes a
Substituted Limited Partner shall thereupon cease to be a Limited
Partner and shall no longer have any of the rights or privileges
of a Limited Partner. Where the assignee does not become a
Substituted Limited Partner, the Partnership shall recognize such
assignment not later than the last day of the calendar month
following receipt of notice of assignment and all documentation
required in connection therewith.
(c) Each assignee of a Limited Partner Interest (or any
portion thereof) who desires to make a further assignment of its
Interest shall be subject to all the provisions of this Article
VIII.
8.2 Substituted Limited Partner
(a) No Limited Partner shall have the right to substitute
an assignee as Limited Partner in its place. Subject to the
provisions of Section 8.3, the General Partner may, in its sole
discretion, permit an assignee to become a Substituted Limited
Partner. The consent of the General Partner to an assignment of a
Limited Partner's Interest under Section 8.1 shall not, in and of
itself, constitute its consent to the admission of the assignee as
a Substituted Limited Partner under this Section 8.2.
(b) Any Substituted Limited Partner shall execute such
instrument or instruments as shall be required by the General
Partner to signify the agreement of such Substituted Limited
Partner to be bound by all the provisions of this Agreement and
shall pay the Partnership's reasonable legal fees and filing costs
in connection with its substitution as a Limited Partner.
8.3 Restrictions
(a) No Disposition of a Limited Partner Interest may be
made if such Disposition would violate the provisions of
Sections 8.1, 8.2 or 13.1.
(b) In no event shall all or any part of a Limited Partner
Interest be Disposed of to a minor (other than to a descendant by
reason of death) or to an incompetent.
(c) The General Partner may, in addition to any other
requirement it may impose, require as a condition of any
Disposition of a Limited Partner Interest that the transferor (i)
assume all costs incurred by the Partnership in connection
therewith and (ii) furnish the Partnership and the other Partners
with an opinion of counsel satisfactory to counsel to the
Partnership that such Disposition complies with applicable federal
and state securities laws.
(d) Any sale, exchange, transfer or other Disposition of a
Limited Partner Interest in contravention of any of the provisions
of this Section 8.3 shall be void and ineffectual and shall not
bind or be recognized by the Partnership.
(e) Notwithstanding any other provision contained in this
Article VIII, if at any time there is more than one Investment
Limited Partner, each Investment Limited Partner shall have a
right of first refusal to purchase the Interest of any other
Investment Limited Partner who wishes to sell or otherwise
transfer its Interest at a price equal to and on terms identical
to those of the prospective purchaser thereof, to the extent
reasonably practical, and shall have at least fifteen (15)
business days in which to exercise such right after receiving
notice thereof. If there shall be more than two non-selling or
transferring Investment Limited Partners, each of which desires to
exercise such a right of first refusal, they may do so pro rata
or, to the extent one does not so desire to exercise such right,
to the extent of the entire Interest being so sold or transferred.
ARTICLE IX
Borrowings
All Partnership borrowings shall be subject to the terms of
this Agreement and the Project Documents and may be made from any
source, including Partners and their Affiliates. Any Partnership
borrowings from any Partner shall be subject to any Requisite
Approvals. If any Partner shall lend any monies to the
Partnership, the amount of any such loan shall not increase such
Partner's Capital Contribution. If any Partner shall so lend
monies, each such loan (a "Voluntary Loan") shall be an obligation
of the Partnership and (except for Subordinated Loans) shall be
repayable to such Partner on the same basis and with the same rate
of interest as would be applicable to a comparable loan to the
Partnership from a third party. Funds advanced by the General
Partner to the Partnership as Subordinated Loans shall not
constitute borrowings for the purposes of this Article IX or for
any other purposes.
ARTICLE X
Profits, Losses, Tax Credits, Distributions and Capital Accounts
10.1 Profits, Losses and Tax Credits
(a) Subject to the provisions of Section 10.1(b) and
Section 10.4, for each Partnership Fiscal Year or portion thereof,
all Operating Profits and Losses, tax-exempt income, losses, non-
deductible non-capitalizable expenditures and Tax Credits incurred
or accrued on or after the Commencement Date shall be allocated
ninety-nine percent (99%) to the Investment Limited Partner and
one percent (1%) to the General Partner, provided, however, that
in any Fiscal Year in which Operating Profits are generated, such
Operating Profits shall be allocated to and among the Partners in
the same percentages as distributions of Cash Flow are made
pursuant to Clause Eighth of Section 10.2(a).
(b) Except as otherwise specifically provided in this
Article, all Profits and Losses arising from a Capital Transaction
shall be allocated to the Partners as follows:
As to Profits:
First, that portion of Profits (including any
Profits treated as ordinary income for federal income
tax purposes) shall be allocated to the Partners who
have negative Capital Account balances in proportion to
the amounts of such balances, provided that no Profits
shall be allocated to a Partner under this Clause First
to increase any such Partner's Capital Account above
zero; and
Second, Profits in excess of the amounts allocated
under Clause First above shall be allocated to and
among the Partners in the same percentages as cash is
distributed under Clauses Sixth, Seventh and Eighth of
Section 10.2(b);
As to Losses:
First, an amount of Losses shall be allocated to
the Partners to the extent and in such proportions as
shall be necessary such that, after giving effect
thereto, the respective balances in all Partners'
Capital Accounts shall be in the ratio of 99% for the
Investment Limited Partner and 1% for the General
Partner;
Second, an amount of Losses shall be allocated to
the Partners until the balance in each Partner Capital
Account equals the amount of such Partner's Capital
Contribution (after the allocation under Clause First
above);
Third, an amount of Losses shall be allocated to
the Partners to the extent of and in proportion to such
Partners' Capital Account balances (after the
allocations under Clauses First and Second above); and
Fourth, any remaining amount of Losses after the
allocation under Clauses First, Second and Third above
shall be allocated to the Partners in accordance with
the manner in which they bear the Economic Risk of Loss
associated with such Loss; provided, however, that in
the event that no Partner bears an Economic Risk of
Loss then any remaining Losses shall be allocated 99%
to the Investment Limited Partner and 1% to the General
Partner.
10.2 Cash Distributions Prior to Dissolution
(a) Cash Flow
Subject to any Requisite Approvals, Cash Flow for each
Fiscal Year or portion thereof shall be applied as follows:
First, to the payment of the Asset Management Fee
for such Fiscal Year and for any previous Fiscal
Year(s) as to which the Asset Management Fee shall not
yet have been paid in full;
Second, to the payment of any unpaid portion of
the Development Fee;
Third, to the repayment of any Subordinated Loans;
Fourth, to the distribution to the General Partner
(or its designee) of any portion of the Operating
Reserve which may be released and disbursed in
accordance with the provisions of Section 6.5(e)(ii);
Fifth, to the payment of the Partnership
Management Fee for such Fiscal Year;
Sixth, to the payment of the Supervisory
Management Fee;
Seventh, the next $100,000 to the General Partner;
and
Eighth, the balance thereof, if any, shall be
distributed annually, seventy-five (75) days after the
end of the Fiscal Year, 20% to the Investment Limited
Partner and 80% to the General Partner.
(b) Distributions of Capital Proceeds
Prior to dissolution, if Capital Proceeds are available
for distribution from a Capital Transaction, such Capital Proceeds
shall be applied or distributed as follows:
First, to the payment of all matured debts and
liabilities of the Partnership (including, but not
limited to, all expenses of the Partnership incident to
such Capital Transaction), excluding (i) debts and
liabilities of the Partnership to Partners or their
Affiliates, (ii) all unpaid fees owing to the General
Partner or its Affiliates and (iii) notes delivered and
payable pursuant to Section 7.6(b); and to the
establishment of any reserves which the General Partner
and the Auditors shall deem reasonably necessary for
contingent, unmatured or unforeseen liabilities or
obligations of the Partnership;
Second, to the payment of any accrued and unpaid
Asset Management Fees;
Third, to the payment to the Investment Limited
Partner of the full amount (including interest) of any
Credit Recovery Loans;
Fourth, to the repayment of any Subordinated
Loans;
Fifth, to the repayment of any remaining unpaid
debts and liabilities owed to Partners or Affiliates
thereof by the Partnership for Partnership obligations
(exclusive of Credit Recovery Loans and Subordinated
Loans) to any of them, including, but not limited to,
accrued and unpaid amounts due in respect of any and
all fees (including but not limited to the Development
Fee) due and payable to the General Partner or its
Affiliates as set forth in Section 6.12; provided,
however, that any debts or obligations to be repaid to
any Limited Partner or Affiliate thereof pursuant to
this Clause Fifth shall be repaid prior to the
repayment of any such debts or obligations to any
General Partner or Affiliate thereof;
Sixth, to the payment to each Limited Partner of
an amount equal to its Invested Amount, in each case
minus any prior distributions made to such Partner
under this Clause Sixth, but never an amount less than
zero;
Seventh, to the payment to each General Partner of
an amount equal to its Invested Amount in each case
minus any prior distributions made to such Partner
under this Clause Seventh, but never an amount less
than zero; and
Eighth, subject to the provisions of Section
10.3(a), any balance 19.999% to the Investment Limited
Partner, .001% to the Special Limited Partner and 80%
to the General Partner.
10.3 Distributions Upon Dissolution
(a) Upon dissolution and termination, after payment of, or
adequate provision for, the debts and obligations of the
Partnership, the remaining assets of the Partnership shall be
distributed to the Partners in accordance with the positive
balances in their Capital Accounts after taking into account all
Capital Account adjustments for the Partnership Fiscal Year,
including adjustments to Capital Accounts pursuant to Sections
10.1(b) and 10.3(b). In the event that a General Partner has a
negative balance in its Capital Account following the liquidation
of the Partnership or such Partner's Interest, after taking into
account all Capital Account adjustments for the Partnership Fiscal
Year in which such liquidation occurs, such Partner shall pay to
the Partnership in cash an amount equal to the negative balance in
such Partner's Capital Account. Such payment shall be made by the
end of such Fiscal Year (or, if later, within ninety (90) days
after the date of such liquidation) and shall, upon liquidation of
the Partnership, be paid to recourse creditors of the Partnership
or distributed to other Partners in accordance with the positive
balances in their Capital Accounts.
(b) With respect to assets distributed in kind to the
Partners in liquidation or otherwise, (i) any unrealized
appreciation or unrealized depreciation in the values of such
assets shall be deemed to be Profits and Losses realized by the
Partnership immediately prior to the liquidation or other
distribution event; and (ii) such Profits and Losses shall be
allocated to the Partners in accordance with the provisions of
Section 10.1(b), and any property so distributed shall be treated
as a distribution of an amount in cash equal to the excess of such
fair market value over the outstanding principal balance of and
accrued interest on any debt by which the property is encumbered.
For the purposes of this Section 10.3(b), the terms "unrealized
appreciation" or "unrealized depreciation" shall mean the
difference between the fair market value of such assets, taking
into account the fair market value of the associated financing
(but subject to the provisions of Section 7701(g) of the Code),
and the Partnership's adjusted basis for such assets as determined
under the applicable provisions of the Allocation Regulations.
This Section 10.3(b) is merely intended to provide a rule for
allocating unrealized gains and losses upon liquidation or other
distribution event, and nothing contained in this Section 10.3(b)
or elsewhere herein is intended to treat or cause such
distributions to be treated as sales for value. The fair market
value of such assets shall be determined by an appraiser to be
selected by the General Partner with the Consent of the Special
Limited Partner.
10.4 Special Provisions
(a) Except as otherwise provided in this Agreement, all
Profits, tax-exempt income, Losses, non-deductible non-
capitalizable expenditures, Tax Credits and cash distributions
shared by a class of Partners shall be shared by each Partner in
such class in the ratio of such Partner's paid-in Capital
Contribution to the paid-in Class Contribution of the class of
Partners of which such Partner is a member.
(b) Notwithstanding the foregoing provisions of this
Article X:
(i) If (a) the Partnership incurs recourse obligations
or Partner Nonrecourse Debt (including, without limitation,
Voluntary Loans or Subordinated Loans) or (b) the Partnership
incurs Losses from extraordinary events which are not
recovered from insurance or otherwise (collectively "Recourse
Obligations") in respect of any Partnership Fiscal Year, then
the calculation and allocation of Profits and Losses shall be
adjusted as follows: first, an amount of deductions
attributable to the Recourse Obligations shall be allocated
to the General Partner; and second, the balance of such
deductions shall be allocated as provided in Section 10.1(a).
(ii) If any Profits arise from the sale or other
disposition of any Partnership asset which shall be treated
as ordinary income under the depreciation recapture
provisions of the Code, then the full amount of such ordinary
income shall be allocated among the Partners in the
proportions that the Partnership deductions from the
depreciation giving rise to such recapture were actually
allocated. In the event that subsequently-enacted provisions
of the Code result in other recapture income, no allocation
of such recapture income shall be made to any Partner who has
not received the benefit of those items giving rise to such
other recapture income.
(iii) If the Partnership shall receive any purchase
money indebtedness in partial payment of the purchase price
of the Apartment Complex and such indebtedness is distributed
to the Partners pursuant to the provisions of Section 10.2(b)
or Section 10.3, the distributions of the cash portion of
such purchase price and the principal amount of such purchase
money indebtedness hereunder shall be allocated among the
Partners in the following manner: On the basis of the sum of
the principal amount of the purchase money indebtedness and
cash payments received on the sale (net of amounts required
to pay Partnership obligations and fund reasonable reserves),
there shall be calculated the percentage of the total net
proceeds distributable to each class of Partners based on
Section 10.2(b) or Section 10.3, as applicable, treating cash
payments and purchase money indebtedness principal
interchangeably for this purpose, and the respective classes
shall receive such respective percentages of the net cash
purchase price and purchase money principal. Payments on
such purchase money indebtedness retained by the Partnership
shall be distributed in accordance with the respective
portions of principal allocated to the respective classes of
Partners in accordance with the preceding sentence, and if
any such purchase money indebtedness shall be sold, the sale
proceeds shall be allocated in the same proportion.
(iv) Income, gain, loss and deduction with respect to
any asset which has a variation between its basis computed in
accordance with the applicable provisions of the Allocation
Regulations and its basis computed for federal income tax
purposes shall be shared among the Partners so as to take
account of such variation in a manner consistent with the
principles of Section 704(c) of the Code and Section 1.704-
1(b)(2)(iv)(g) of the Allocation Regulations.
(v) The terms "Profits" and "Losses" used in this
Agreement shall mean income and losses, and each item of
income, gain, loss, deduction or credit entering into the
computation thereof, as determined in accordance with the
accounting methods followed by the Partnership and computed
in accordance with Treasury Regulation Section 1.704-
1(b)(2)(iv). Profits and Losses for federal income tax
purposes shall be allocated in the same manner as set forth
in this Article X, except as provided in Section 10.4(b)(iv).
(vi) Nonrecourse Deductions shall be allocated to and
among the Partners in the same manner as depreciation and
cost recovery deductions are allocated pursuant to Section
10.4(b)(xxiii) below.
(vii) Partner Nonrecourse Deductions shall be allocated
to and among the Partners in the manner provided in the
Allocation Regulations.
(viii) Subject to the provisions of Section
10.4(b)(xix), if there is a net decrease in Partnership
Minimum Gain for a Partnership Fiscal Year, the Partners
shall be allocated items of Partnership income and gain in
accordance with the provisions of Section 1.704-(2)(f) of the
Allocation Regulations.
(ix) Subject to the provisions of Section 10.4(b)(xix),
if there is a net decrease in Partner Nonrecourse Debt
Minimum Gain for a Partnership Fiscal Year then any Partner
with a Share of such Partner Nonrecourse Debt Minimum Gain
shall be allocated items of Partnership income and gain in
accordance with the provisions of Section 1.704-2(i)(4) of
the Allocation Regulations.
(x) Subject to the provisions of 10.4(b)(vi) through
10.4(b)(ix) above, in the event that any Limited Partner
unexpectedly receives any adjustments, allocations or
distributions described in Section 1.704-1(b)(2)(ii)(d)(4),
(5) or (6) of the Allocation Regulations, 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 Allocation
Regulations, the Adjusted Capital Account Deficit of such
Limited Partner as quickly as possible. This Section
10.4(b)(x) is intended to constitute a "qualified income
offset" provision within the meaning of the Allocation
Regulations and shall be interpreted consistently therewith.
(xi) Subject to the provisions of Sections 10.4(b)(vi)
through 10.4(b)(x) above, in no event shall any Limited
Partner be allocated Losses which would cause it to have an
Adjusted Capital Account Deficit as of the end of any
Partnership Fiscal Year. Any Losses which are not allocated
to a Limited Partner by reason of the application of the
provisions of this Section 10.4(b)(xi) shall be allocated to
the General Partner.
(xii) Subject to the provisions of Sections 10.4(b)(vi)
through 10.4(b)(xi) above, in the event that any Limited
Partner has an Adjusted Capital Account Deficit at the end of
any Partnership Fiscal Year, items of Partnership income and
gain shall be specially allocated to each such Limited
Partner in the amount of such Adjusted Capital Account
Deficit as quickly as possible.
(xiii) Syndication Expenses for any Fiscal Year or
other period shall be specially allocated to the Investment
Limited Partner.
(xiv) For purposes of determining the Profits, Losses,
Tax Credits or any other items allocable to any period,
Profits, Losses, Tax Credits and any such other items shall
be determined on a daily, monthly, or other basis, as
determined by the General Partner using any permissible
method under Code Section 706 and the Treasury Regulations
thereunder.
(xv) To the extent that interest on loans (or other
advances which are deemed to be loans) made by a General
Partner to the Partnership is determined to be deductible by
the Partnership in excess of the amount of interest actually
paid by the Partnership, such additional interest
deduction(s) shall be allocated solely to such General
Partner.
(xvi) Except as provided in Section 10.4(b)(xxiii)
below, the General Partner (or, if there is more than one
General Partner, all of the General Partners as a group)
shall be allocated not less than 1% of each material item of
Partnership income, gain, loss, deduction and credit
("Partnership Items") at all times during the existence of
the Partnership. Subject to the foregoing, in the event that
there is no allocation of a material Partnership Item to the
General Partner(s) hereunder or if the amount of any material
Partnership Item allocable to the General Partner(s)
hereunder shall not equal 1% of the aggregate amount
allocable to all the Partners without giving effect to this
provision, then the amount of such Partnership Item(s)
otherwise allocable to the Limited Partners hereunder shall
be correspondingly reduced in order to assure the General
Partner(s) of its or their 1% share. Any such reduction
shall be applied to reduce the share of all classes of
Limited Partners in proportion to their respective Interests.
(xvii) For purposes of determining each Partner's
proportionate share of the excess Nonrecourse Liabilities of
the Partnership pursuant to Section 1.752-3(a)(3) of the
Allocation Regulations, the Investment Limited Partner shall
be deemed to have a 99% interest in Profits and the General
Partner shall be deemed to have a 1% interest in Profits.
(xviii) Tax Credits and any Tax Credit recapture
shall be allocated to and among the Partners in the same
manner as depreciation and cost recovery deductions are
allocated pursuant to Section 10.4(b)(xxiii) below.
(xix) If for any Fiscal Year the application of the
minimum gain chargeback provisions of Section 10.4(b)(viii)
or Section 10.4(b)(ix) of this Agreement would cause
distortion in the economic arrangement among the Partners and
it is not expected that the Partnership will have sufficient
other income to correct that distortion, the General Partner
may request a waiver from the Commissioner of the Service of
the application in whole or in part of Section 10.4(b)(viii)
or Section 10.4(b)(ix) in accordance with Section 1.704-
2(f)(4) of the Allocation Regulations. Furthermore, if
additional exceptions to the minimum gain chargeback
requirements of the Allocation Regulations have been provided
through revenue rulings or other Service pronouncements, the
General Partner is authorized to cause the Partnership to
take advantage of such exceptions if to do so would be in the
best interest of a majority in interest of the Partners.
(xx) In the event that any fee payable to any General
Partner or any Affiliate thereof shall instead be determined
to be a non-deductible, non-capitalizable distribution from
the Partnership to a Partner for federal income tax purposes,
then there shall be allocated to such General Partner an
amount of gross income equal to the amount of such
distribution.
(xxi) In applying the provisions of Article X with
respect to distributions and allocations, the following
ordering of priorities shall apply:
(1) Capital Accounts shall be deemed to be
reduced by Qualified Income Offset Items.
(2) Capital Accounts shall be reduced by
distributions of Cash Flow under Clause
Eighth of Section 10.2(a).
(3) Capital Accounts shall be reduced by
distributions of Capital Proceeds under
Clauses Sixth, Seventh or Eighth of Section
10.2(b).
(4) Capital Accounts shall be increased by any
minimum gain chargeback under Section
10.4(b)(viii) or Section 10.4(b)(ix).
(5) Capital Accounts shall be increased by any
qualified income offset required under
Section 10.4(b)(x).
(6) Capital Accounts shall be increased by
allocations of Operating Profits under
Section 10.1(a).
(7) Capital Accounts shall be reduced by
allocations of Operating Losses under Section
10.1(a).
(8) Capital Accounts shall be reduced by
allocations of Losses under Section 10.1(b).
(9) Capital Accounts shall be increased by
allocations of Profits under Section 10.1(b).
(xxii) To the maximum extent permitted under the
Code, allocations of Profits and Losses shall be modified so
that the Partners' Capital Accounts reflect the amount they
would have reflected if adjustments required by Sections
10.4(b)(x), 10.4(b)(xi) and 10.4(b)(xii) had not occurred.
(xxiii) All depreciation and cost recovery deductions
generated by the Apartment Complex shall be allocated to the
Investment Limited Partner.
10.5 Authority of the General Partner to Vary Allocations to
Preserve and Protect the Partners' Intent
(a) It is the intent of the Partners that each Partner's
distributive share of Profits, tax-exempt income, Losses, non-
deductible non-capitalizable expenditures and Tax Credits (and
items thereof) shall be determined and allocated in accordance
with this Agreement to the fullest extent permitted by Section
704(b) of the Code and the Allocation Regulations. In order to
preserve and protect the determinations and allocations provided
for in this Agreement, the General Partner is hereby authorized
and directed to allocate Profits, tax-exempt income, Losses, non-
deductible non-capitalizable expenditures and credits (and items
thereof) arising in any Fiscal Year differently than otherwise
provided for in this Agreement to the extent that allocating
Profits, tax-exempt income, Losses, non-deductible non-
capitalizable expenditures or credits (or any item thereof) in the
manner provided for herein would cause the determinations and
allocations of each Partner's distributive share of Profits, tax-
exempt income, Losses, non-deductible non-capitalizable
expenditures or credits (or any item thereof) not to be permitted
by Section 704(b) of the Code. Any allocation made pursuant to
this Section 10.5 shall be deemed to be a complete substitute for
any allocation otherwise provided for in this Agreement, and no
amendment of this Agreement or approval of any Partner shall be
required.
(b) In making any allocation (the "New Allocation") under
Section 10.5(a), the General Partner is authorized to act only
after having been advised in writing by the Tax Accountants that,
under Section 704(b) of the Code and/or the Allocation
Regulations, (i) the New Allocation is necessary, and (ii) the New
Allocation is the minimum modification of the allocations
otherwise provided for in this Agreement necessary in order to
assure that, either in the then-current Fiscal Year or in any
preceding Fiscal Year, each Partner's distributive share of
Profits, tax-exempt income, Losses, non-deductible non-
capitalizable expenditures and Tax Credits (or any item thereof)
is determined and allocated in accordance with this Agreement to
the fullest extent permitted by Section 704(b) of the Code and the
Allocation Regulations.
(c) If the General Partner is required by Section 10.5(a)
to make any New Allocation in a manner less favorable to the
Limited Partners than is otherwise provided for herein, then the
General Partner is authorized and directed, only after having been
advised in writing by the Tax Accountants that such an allocation
is permitted by Section 704(b) of the Code and the Allocation
Regulations, to allocate Profits, tax-exempt income, Losses, non-
deductible non-capitalizable expenditures and credits (and any
item thereof) arising in later years in such manner so as to bring
the allocations of Profits, tax-exempt income, Losses, non-
deductible non-capitalizable expenditures and credits (and each
item thereof) to the Limited Partners as nearly as possible to the
allocations thereof otherwise contemplated by this Agreement.
(d) New Allocations made by the General Partner under
Section 10.5(a) and Section 10.5(c) in reliance upon the advice of
the Tax Accountants shall be deemed to be made pursuant to the
fiduciary obligation of the General 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.
10.6 Recapture Amount
(a) If at any time during the "compliance period" (as
defined in Section 42(i)(1) of the Code), the Apartment Complex
ceases to be a "qualified low income housing project" (as defined
in Section 42(g)(1) of the Code) or any Low-Income Unit in the
Apartment Complex ceases to be a "low income unit" (as defined in
Section 42(i)(3) of the Code), and as a result thereof all or any
portion of credits allowed to the Partnership and its Partners
under Section 42 of the Code are subject to recapture pursuant to
Section 42(j) of the Code (such an occurrence being referred to
herein as a "Recapture Event"), the Investment Limited Partner
shall become entitled to additional cash distributions equal to
the "Recapture Amount".
(b) The Recapture Amount is an amount that, after deduction
of all federal income taxes payable by the Investment Limited
Partner (or its partners) as computed under Section 10.6(d) below,
is equal to the sum of (i) the "credit recapture amount" allocable
to the Investment Limited Partner as defined in Section 42(j) of
the Code plus (ii) the amount of credits allocable to the
Investment Limited Partner which are disallowed in the year of the
Recapture Event and in each subsequent year.
(c) Any Recapture Amount distributable to the Investment
Limited Partner pursuant to the foregoing provisions shall be
distributed as funds become available for such distributions, but
such distributions shall not be made prior to (i) in the case of
the "credit recapture amount", the year of the Recapture Event and
(ii) in the case of any credits disallowed with respect to any
year subsequent to the Recapture Event, in each such subsequent
year.
(d) Determination of the Recapture Amount shall be made on
the assumption that receipt or accrual by each partner of the
Investment Limited Partner of any amounts distributable to such
partner under Subsection (c) above will currently be subject to
United States federal income tax at the highest marginal rate
applicable to corporations for the year(s) in question (and
assuming the non-applicability of the alternative minimum tax).
(e) All computations required under this Section 10.6 shall
be made reasonably by the Investment Limited Partner, and the
results of such computations, together with a statement describing
in reasonable detail the manner in which such computations were
made, shall be delivered to the Managing General Partner in
writing. Within fifteen (15) days following receipt of such
computation, the Managing General Partner may request that the
Auditors determine whether such computations are reasonable and
are not erroneous. If the Auditors determine that such
computations are unreasonable or contain errors, then the Auditors
shall determine what they believe to be the appropriate
computations. If the Investment Limited Partner does not agree
with the determination of the Auditors, then another accounting
firm other than the Auditors to be selected jointly by the
Investment Limited Partner and the Managing General Partner or, if
they cannot agree, by the American Arbitration Association, from
among the ten largest national accounting firms, shall make such
computations. The computations of the Investment Limited Partner,
the Auditors, or the other accounting firm so selected, whichever
is applicable, shall be final, binding and conclusive upon the
parties. All fees and expenses payable to an accounting firm
other than the Auditors under this paragraph shall be borne solely
by the Partnership. All fees and expenses payable to the American
Arbitration Association shall be borne equally by the General
Partner and the Investment Limited Partner.
ARTICLE XI
Management Agent
11.1 General
The General Partner shall engage the Management Agent to
manage the Apartment Complex pursuant to the Management Agreement.
The Management Agent shall receive a Management Fee of those
amounts payable from time to time by the Partnership to the
Management Agent for management services in accordance with a
management contract approved by any Agency or Lender with the
right to approve the same, or, when any such management contract
is not subject to the approval of any Agency or Lender, in
accordance with a reasonable and competitive fee arrangement. The
initial Management Agent shall be Case Management, Inc. From and
after the Admission Date, the Partnership shall not enter into any
Management Agreement or modify or extend any Management Agreement
unless (i) the General Partner shall have obtained the prior
Consent of the Special Limited Partner to the identity of the
Management Agent and the terms of the Management Agreement or the
modification or extension thereof and (ii) such new Management
Agreement or modified or extended Management Agreement provides
that it is terminable by the Partnership on thirty (30) days'
notice by the Partnership in the event of any change in the
identity of the General Partner. The Management Agent shall
maintain insurance in accordance with the applicable Insurance
Requirements set forth in Exhibit D. Copies of such policies (or
binders) shall be provided to the Partnership and the Investment
Limited Partner within thirty (30) days after the effective date
of the Management Agreement and annually thereafter.
11.2 Fees
Notwithstanding the provisions of Section 11.1, however,
should the Investment General Partner or an Affiliate thereof
perform property management services for the Partnership, property
management, rent-up or leasing fees shall be paid to the
Investment General Partner or such Affiliate only for services
actually rendered and shall be in an amount equal to the lesser of
(i) fees competitive in price and terms with those of
non-affiliated Persons rendering comparable services in the
locality where the Apartment Complex is located and which could
reasonably be available to the Partnership, or (ii) five percent
(5%) of the gross revenues of the Apartment Complex. No duplicate
property manager fees shall be paid to any Person.
11.3 Removal and Replacement
If (i) the Apartment Complex shall be subject to a
substantial building code violation which shall not have been
cured within six (6) months after notice from a Governmental
Authority or (ii) the Partnership shall not have achieved a 1.15
to 1.00 Debt Service Coverage Ratio during any Fiscal Year
commencing on January 1, 1999, or (iii) an Event of Bankruptcy
shall occur with respect to the Management Agent, or (iv) the
Management Agent shall commit willful misconduct or gross
negligence in its conduct of its duties and obligations under the
Management Agreement or (v) there is any change in the Persons
acting as General Partners (to which the Special Limited Partner
has not consented), or (vi) the Management Agent is cited by the
Credit Agency or any other Tax Credit monitoring or compliance
agency of the State or any other Governmental Authority for a
violation or alleged violation of any applicable rules,
regulations or requirements, including, without limitation,
non-compliance with the Minimum Set-Aside Test, the Rent
Restriction Test or any other Tax Credit-related provision, then,
upon request by the Special Limited Partner and subject to Agency
and Lender approval, if required, the General Partner shall cause
the Partnership to promptly terminate the Management Agreement
with the Management Agent and appoint a new Management Agent
selected by the Special Limited Partner with the reasonable
approval of the General Partner, which new Management Agent shall
not be an Affiliate of a General Partner. Each General Partner
hereby grants to the Special Limited Partner an irrevocable (to
the extent permitted by applicable law) power of attorney coupled
with an interest to take any action and to execute and deliver any
and all documents and instruments on behalf of such General
Partner and the Partnership as the Special Limited Partner may
deem to be necessary or appropriate in order to effectuate the
provisions of this Article XI. Subject to any Requisite
Approvals, the Partnership shall not enter into any future
management arrangement or renew or extend any existing management
arrangement unless such arrangement is terminable without penalty
upon the occurrence of the events described in this Article XI.
11.4 Lack of Management Agent
The General Partner shall have the duty to manage the
Apartment Complex during any period when there is no Management
Agent.
ARTICLE XII
Books and Records, Accounting, Tax Elections, Etc.
12.1 Books and Records
The Partnership shall maintain all books and records which
are required under the Act or by any Governmental Authority and
may maintain such other books and records as the General Partner
in its discretion deems advisable. Each Limited Partner, or its
duly authorized representatives, shall have access to the records
of the Partnership at the principal office of the Partnership at
any and all reasonable times, and may inspect and copy any of such
records. A list of the name and addresses of all of the Limited
Partners shall be maintained as part of the books and records of
the Partnership and shall be mailed to any Limited Partner upon
request. The Partnership may require reimbursement for any out of
pocket expenses which it incurs as a result of the exercise by any
Limited Partner of its rights under this Section 12.1, including,
without limitation, photocopying expenses.
12.2 Bank Accounts
The bank accounts of the Partnership shall be maintained in
the Partnership's name with such financial institutions as the
General Partner shall determine. Withdrawals shall be made only
in the regular course of Partnership business on such signature or
signatures as the General Partner may determine. All deposits
(including security deposits and other funds required to be
escrowed by any Lender or Agency) and other funds not needed in
the operation of the business shall be deposited, if required by
applicable law and to the extent permitted by applicable Agency or
Lender requirements, in interest bearing accounts or invested in
United States Government obligations maturing within one year.
12.3 Auditors
(a) The Auditors shall prepare, for execution by the
General Partner, all tax returns of the Partnership. Prior to the
filing of the Partnership tax returns, and in no event later than
February 15 of each Fiscal Year, the Auditors shall deliver the
tax returns for the prior Fiscal Year to the Tax Accountants for
their review and comment. If a dispute arises between the
Auditors and the Tax Accountants over the proper preparation of
the tax returns and such dispute cannot be resolved by the
Auditors and the Tax Accountants by March 1 of such Fiscal Year,
then the Tax Accountants shall make the final decision with
respect to whether any changes are necessary. The Partnership
shall reimburse the Investment Limited Partner and its Affiliates
for all costs and expenses paid to the Tax Accountants for the
aforementioned services.
(b) The Auditors shall audit all annual financial reports
in accordance with generally accepted auditing standards.
(c) If the Partnership fails to fulfill any of its
obligations under Section 12.7(a)(i) and/or Section 12.7(a)(ii)
within the time periods set forth therein, at any time thereafter
upon written notice from the Special Limited Partner, the General
Partner shall appoint replacement Auditors. If no such notice
from the Special Limited Partner is delivered, the Consent of the
Special Limited Partner must be received to the appointment of
replacement Auditors. If the General Partner fails to appoint
replacement Auditors within thirty (30) days of the notice from
the Special Limited Partner to replace the Auditors, then the
Special Limited Partner shall appoint replacement Auditors of its
own choosing, the cost of which shall be borne by the Partnership
as a Partnership expense. All of the Partners hereby grant to the
Special Limited Partner a special power of attorney, irrevocable
to the extent permitted by law, coupled with an interest, to so
appoint replacement Auditors and to anything else which in the
judgment of the Special Limited Partner may be necessary or
appropriate to accomplish the purposes of this Section 12.3(c).
(d) On or prior to the date which is thirty (30) days after
the Admission Date, the General Partner shall cause the
Partnership (i) in writing, to engage the Auditors to perform the
services required herein and (ii) to deliver to the Investment
Limited Partner copies of all such engagement letters and
agreements.
12.4 Cost Recovery and Elections
(a) With respect to all depreciable assets for which cost
recovery deductions are permitted, the Partnership shall elect to
use, so far as permitted by the provisions of the Code,
accelerated cost recovery methods. However, the Partnership may
change to another method of cost recovery if such other method is,
in the opinion of the Auditors, more advantageous to the
Investment Limited Partner (and the limited partners and/or
holders of beneficial assignee certificates thereof).
(b) Subject to the provisions of Section 12.5, all other
elections required or permitted to be made by the Partnership
under the Code shall be made by the General Partner in such manner
as will, in the opinion of the Auditors, be most advantageous to
the Investment Limited Partner and the limited partners and/or
holders of beneficial assignee certificates thereof.
12.5 Special Basis Adjustments
In the event of a transfer of all or any part of the Interest
of the Investment Limited Partner or a transfer of all or any part
of an interest of a partner and/or a holder of a beneficial
assignee certificate of the Investment Limited Partner, the
Partnership shall elect, upon the request of the Investment
Limited Partner, pursuant to Section 754 of the Code, to adjust
the basis of the Partnership property. Any adjustments made
pursuant to said Section 754 shall affect only the successor in
interest to the transferring Partner or partner or holder of a
beneficial assignee certificate thereof. Each Partner will
furnish the Partnership all information necessary to give effect
to any such election.
12.6 Fiscal Year
Unless otherwise required by law, the Fiscal Year and tax
year of the Partnership shall be the calendar year. The books of
the Partnership shall be maintained on an accrual basis.
12.7 Information 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) Within sixty (60) days after the end of each
Fiscal Year of the Partnership, (A) a balance sheet as of the
end of such Fiscal Year, a statement of income, a statement
of partners' equity, and a statement of cash flows, each for
the Fiscal Year then ended, all of which, except the
statement of cash flows, shall be prepared in accordance with
generally accepted accounting principles and accompanied by a
report of the Auditors containing an opinion of the Auditors,
and (B) a report of the activities of the Partnership during
the period covered by the report. With respect to any
distribution to the Investment Limited Partner, the report
called for shall separately identify distributions from (1)
Cash Flow from operations during the period, (2) Cash Flow
from operations during a prior period which had been held as
reserves, (3) proceeds from disposition of property and
investments, (4) lease payments on net leases with builders
and sellers, (5) reserves from the gross proceeds of the
Capital Contributions of the Investment Limited Partner, (6)
borrowed monies, and (7) transactions outside of the ordinary
course of business with a description thereof.
(ii) Within forty-five (45) days after the end of each
Fiscal Year of the Partnership, all information relating to
the Partnership and/or the Apartment Complex which is
necessary, in the view of the Tax Accountants, for the
preparation of the Limited Partners' federal income tax
returns for the prior 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;
(B) a statement of income for the quarter then
ended, which may be unaudited;
(C) a statement of cash flows for the quarter
then ended, which may be unaudited;
(D) a certification of the General Partner that
to its Best Knowledge the Apartment Complex and its
tenants are in compliance with all applicable federal,
state and local requirements and regulations;
(E) a Tax Credit monitoring form, a copy of the
rent roll for the Apartment Complex for each month
during such quarter, a statement of income and
expenses, an operating statement and an
Occupancy/Rental Report, all in a form specified by the
Special Limited Partner;
(F) all other information which would be
pertinent to a reasonable investor regarding the
Partnership and its activities during the quarter
covered by the report; and
(b) Within sixty (60) days after the end of each Fiscal
Year of the Partnership a copy of the annual report to be filed
with the United States Treasury concerning the status of the
Apartment Complex as low-income housing and, if required, a
certificate to the appropriate state agency concerning the same.
(c) Upon the written request of the Investment Limited
Partner for further information with respect to any matter covered
in item (a) or item (b) above, the General Partner shall furnish
such information within thirty (30) days of receipt of such
request.
(d) Prior to October 15 of each Fiscal Year, the
Partnership shall send to the Investment Limited Partner an
estimate of the Investment Limited Partner's share of the Tax
Credits, Profits and Losses of the Partnership for federal income
tax purposes for the current Fiscal Year. Such estimate shall be
prepared by the General Partner and the Auditors and shall be in
the form specified by the Special Limited Partner.
(e) The General Partner shall send the Investment Limited
Partner a detailed report within fifteen (15) days after the end
of any calendar quarter during which any of the following events
occur:
(i) there is a material default by the Partnership
under any Project Document or in the payment of any mortgage,
taxes, interest or other obligation on secured or unsecured
debt,
(ii) any reserve has been reduced or terminated by
application of funds therein for purposes materially
different from those for which such reserve was established,
(iii) any General Partner has received any notice of a
material fact which may substantially affect further
distributions or Tax Credit allocations to any Limited
Partner, or
(iv) any Partner has pledged or collateralized its
Interest in the Partnership.
(f) After the Admission Date, the Partnership shall send to
the Investment Limited Partner copies of all applicable periodic
reports covering the status of project operations and any matters
relating to the Tax Credit as are required by any Lender or
Agency.
(g) On or before May 1 of each Fiscal Year, the Partnership
shall send to the Investment Limited Partner a report on
operations, in the form supplied by the Special Limited Partner.
(h) The General Partner hereby consents to each Lender or
Agency providing the Special Limited Partner with copies of all
material communications between any such Lender or Agency and the
General Partner and/or the Partnership, including, but not limited
to, any notices of default.
(i) If the earlier of (A) the Completion Date or (B) the
date upon which tenants first occupied apartment units in the
Apartment Complex after the construction of such units, shall have
occurred six (6) months or more prior to the date on which the
Investment Limited Partner acquired its Interest in the
Partnership, then the General Partner shall cause to be prepared
and delivered to the Investment Limited Partner within sixty (60)
days of the Admission Date the following items:
(i) An unaudited statement of income of the
Partnership for the year (or such shorter period as there may
be from the date of the most recent audited statement of
income of the Partnership) ended on the date upon which the
Investment Limited Partner acquired its Interest in the
Partnership; and
(ii) An audited statement of income of the Partnership
for any fiscal year of the Partnership ending between (A) the
earlier of (1) the Completion Date or (2) the date upon which
tenants first occupied apartment units in the Apartment
Complex after the rehabilitation of such units and (B) the
date upon which the Investment Limited Partner acquired its
Interest in the Partnership.
(j) Within thirty (30) days following the Completion Date,
the General Partner shall prepare, or cause the Auditors to
prepare, and deliver to each Limited Partner a Tax Credit basis
worksheet for each building in the Apartment Complex, all in a
form specified by the Special Limited Partner.
(k) Promptly after Permanent Mortgage Commencement, the
General Partner shall send to the Special Limited Partner a
closing binder containing photocopies of the fully executed
versions of all documents signed in connection with the Permanent
Mortgage. From and after any date upon which the General Partner
receives notice from the Special Limited Partner that the Special
Limited Partner would like copies of the monthly rent rolls for
the Apartment Complex to be sent to the Special Limited Partner,
the General Partner shall send copies of the rent rolls to the
Special Limited Partner no later than ten (10) days after the
expiration of each month.
(l) If the General Partner does not cause the Partnership
to fulfill its obligations under Section 12.7(a)(i) and/or Section
12.7(a)(ii) within the time periods set forth therein, the General
Partner shall pay as damages the sum of $100 per day to the
Investment Limited Partner until such obligations shall have been
fulfilled. Such damages shall be paid forthwith by the General
Partner, and the failure to pay any such damages shall constitute
a material default by the General Partner hereunder. In addition,
if the General Partner shall fail to pay any such damages, the
General Partner and its Affiliates shall forthwith cease to be
entitled to the distribution of any Cash Flow or Capital Proceeds
to which they may otherwise be entitled hereunder. Such
distributions of Cash Flow and Capital Proceeds shall be restored
only upon the payment of such damages in full, and any amount of
such damages not so paid shall be deducted against distributions
of Cash Flow and Capital Proceeds otherwise due to the General
Partner or its Affiliates.
(m) On or before December 1 of each Fiscal Year, the
General Partner shall cause the Partnership to send to the
Investment Limited Partner an operating budget of the Apartment
Complex for the upcoming Fiscal Year.
12.8 Expenses of the Partnership
(a) All expenses of the Partnership shall be billed
directly to and paid by the Partnership.
(b) Except in extraordinary circumstances, neither the
Investment General Partner nor any Affiliate thereof shall be
permitted to contract or otherwise deal with the Partnership for
the sale of goods or services or the lending of money to the
Partnership or the General Partners, except for (i) management
services, subject to the restrictions set forth in Article XI,
(ii) loans made by, or guaranteed by, the Investment General
Partner or any of its Affiliates and (iii) those dealings,
contracts or provision of services described in the Investment
Partnership Agreement. Extraordinary circumstances shall only be
presumed to exist where there is an emergency situation requiring
immediate action and the services required are not immediately
available from unaffiliated parties. All services rendered under
such circumstances must be rendered pursuant to a written contract
which must contain a clause allowing termination without penalty
on sixty (60) days' notice. Goods and services provided under
such circumstances must be provided at the lesser of actual cost
or the price charged for such goods or services by independent
parties.
(c) In the event that extraordinary circumstances arise,
the Investment General Partner and its Affiliates may provide
construction services in connection with the Apartment Complex.
Neither the Investment General Partner nor any of its Affiliates
shall provide such services unless it believes it has an adequate
staff to do so and unless such provision of goods and construction
services is part of its ordinary and ongoing business in which it
has previously engaged, independent of the activities of the
Investment Limited Partner. Any such services must be reasonable
for and necessary to the Partnership, actually furnished to the
Partnership, and provided at the lower of one hundred percent
(100%) of the construction contract rate with respect to the
Apartment Complex or ninety percent (90%) of the competitive price
charged for such services by independent parties for comparable
goods and services in the same geographic location (except that in
the case of transfer agent, custodial and similar banking-type
fees, and insurance fees, the compensation, price or fee shall be
at the lesser of costs or the compensation, price or fee of any
other Person rendering comparable services as aforesaid). Cost of
services as used herein means the pro rata cost of personnel,
including an allocation of overhead directly attributable to such
personnel, based on the amount of time such personnel spend on
such services or other method of allocation acceptable to the
accountants for the Investment Limited Partner.
(d) All services provided by the Investment General Partner
or any Affiliate thereof pursuant to Section 12.8(c) must be
rendered pursuant to the Investment Partnership Agreement or a
written contract which precisely describes the services to be
rendered and all compensation to be paid and shall contain a
clause allowing termination without penalty upon sixty (60) days'
notice to the Investment General Partner by a vote of a majority
in interest of the limited partners and assignees of beneficial
interests in the Investment Limited Partner.
(e) No compensation or fees may be paid by the Partnership
to the Investment General Partner or its Affiliates except as
described in the Investment Partnership Agreement.
ARTICLE XIII
General Provisions
13.1 Restrictions by Reason of Section 708 of the Code
No Disposition of an Interest may be made if the Interest
sought to be Disposed of, when added to the total of all other
Interests Disposed of within the period of twelve (12) consecutive
months prior to the proposed date of the Disposition, would, in
the opinion of the Tax Accountants or tax counsel to the
Partnership, result in the termination of the Partnership under
Section 708 of the Code. This Section 13.1 shall have no
application to any required repurchase of the Investment Limited
Partner's Interest. Any Disposition in contravention of any of
the provisions of this Section 13.1 shall be void ab initio and
ineffectual and shall not bind or be recognized by the
Partnership. Notwithstanding the foregoing provisions of this
Section 13.1, however, the Investment Limited Partner may waive
the provisions of this Section 13.1 at any time as to a
Disposition or series of Dispositions, and in the event of such a
waiver, this Section 13.1 shall have no force or effect upon such
Disposition or series of Dispositions.
13.2 Amendments to Certificates
Within one hundred twenty (120) days after the end of the
Partnership Fiscal Year in which the Investment Limited Partner
shall have received any distributions under Article X, the General
Partner shall file an amendment to the Certificate reducing the
amount of its allocable share of such distribution the amount of
Capital Contribution of the Investment Limited Partner as stated
in the last previous amendment to the Certificate. However,
Schedule A shall not be amended on account of any such
distribution.
The Partnership shall amend the Certificate at least once
each calendar quarter to effect the substitution of Substitute
Limited Partners, although the General Partner may elect to do so
more frequently. In the case of assignments, where the assignee
does not become a Substitute Limited Partner, the Partnership
shall recognize the assignment not later than the last day of the
calendar month following receipt of notice of assignment and all
documentation required in connection therewith hereunder.
Notwithstanding the foregoing provisions of this
Section 13.2, no such amendments to the Certificate need be filed
by the General Partner if the Certificate is not required to and
does not identify the Limited Partners or their Capital
Contributions in such capacity.
13.3 Notices
Except as otherwise specifically provided herein, all
notices, demands or other communications hereunder shall be in
writing and shall be deemed to have been given when the same are
(i) deposited in the United States mail and sent by certified or
registered mail, postage prepaid, (ii) delivered to a nationally
recognized overnight delivery service, (iii) sent by telecopier or
other facsimile transmission, answerback requested, or (iv)
delivered personally, in each case, to the parties at the
addresses set forth below or at such other addresses as such
parties may designate by notice to the Partnership:
(a) If to the Partnership, at the office of the Partnership
set forth in Section 2.2.
(b) If to a Partner, at its address set forth in the
Schedule, with copies to William F. Machen, Esq., Sherburne,
Powers & Needham, P.C., One Beacon Street, 32nd Floor, Boston, MA,
02108 and Daniel S. Nagel, Esq., Cohen and Wolf, P.C., 1115 Broad
Street, Bridgeport, CT 06604.
13.4 Word Meanings
The words such as "herein," "hereinafter," "hereof" and
"hereunder" refer to this Agreement as a whole and not merely to a
subdivision in which such words appear unless the context
otherwise requires. The singular shall include the plural, and
vice versa, and each gender (masculine, feminine and neuter) shall
include the other genders, unless the context requires otherwise.
Each reference to a "Section" or an "Article" refers to the
corresponding Section or Article of this Agreement, unless
specified otherwise. References to Treasury Regulations
(permanent or temporary) or Revenue Procedures shall include any
successor provisions.
13.5 Binding Effect
The covenants and agreements contained herein shall be
binding upon and inure to the benefit of the heirs, executors,
administrators, successors and assigns of the respective parties
hereto.
13.6 Applicable Law
This Agreement shall be construed and enforced in accordance
with the laws of the State.
13.7 Counterparts
This Agreement may be executed in several counterparts and
all so executed shall constitute one agreement binding on all
parties hereto, notwithstanding that all the parties have not
signed the original or the same counterpart.
13.8 Financing Regulations
(a) So long as any of the Project Documents are in effect,
(i) each of the provisions of this Agreement shall be subject to,
and the General Partner covenants to act in accordance with, the
Project Documents; (ii) the Project Documents shall govern the
rights and obligations of the Partners, their heirs, executors,
administrators, successors and assigns to the extent expressly
provided therein; (iii) upon any dissolution of the Partnership or
any transfer of the Apartment Complex, no title or right to the
possession and control of the Apartment Complex and no right to
collect the rent therefrom shall pass to any Person who is not, or
does not become, bound by the Project Documents in a manner
satisfactory to the Lenders and any Agency (to the extent that its
approval is required); (iv) no amendment to any provision of the
Project Documents shall become effective without the prior written
consent of any Lender and/or Agency (to the extent that its
approval is required); and (v) the affairs of the Partnership
shall be subject to the Regulations, and no action shall be taken
which would require the consent or approval of any Lender and/or
Agency unless the prior consent or approval of such Lender and/or
Agency, as the case may be, shall have been obtained. No new
Partner shall be admitted to the Partnership, and no Partner shall
withdraw from the Partnership or be substituted for without the
consent of any Lender and/or Agency (if such consent is then
required). No amendment to this Agreement relating to matters
governed by the Regulations or requirements shall become effective
until any Requisite Approvals to such amendment shall have been
obtained.
(b) Any conveyance or transfer of title to all or any
portion of the Apartment Complex required or permitted under this
Agreement shall in all respects be subject to all conditions,
approvals and other requirements of any Regulations applicable
thereto.
13.9 Separability of Provisions
Each provision of this Agreement shall be considered
separable and (a) if for any reason any provision is determined to
be invalid, such invalidity shall not impair the operation of or
affect those portions of this Agreement which are valid, and (b)
if for any reason any provision would cause the Investment Limited
Partner or the Special Limited Partner (in its capacity as a
Limited Partner) to be bound by the obligations of the Partnership
(other than the Regulations and the other requirements of any
Agency or Lender), such provision or provisions shall be deemed
void and of no effect.
13.10 Paragraph Titles
All article and section headings in this Agreement are for
convenience of reference only and are not intended to qualify the
meaning of any article or section.
13.11 Amendment Procedure
This Agreement may be amended by the General Partner only
with the Consent of the Investment Limited Partner and the Consent
of the Special Limited Partner.
13.12 Extraordinary Limited Partner Expenses
(a) Any and all costs and expenses incurred by the
Investment Limited Partner and/or the Special Limited Partner in
connection with exercising rights and remedies against the General
Partner with respect to this Agreement, including, without
limitation, reasonable attorneys' fees, shall be paid by the
General Partner on demand. All amounts due to the Investment
Limited Partner and/or the Special Limited Partner pursuant to
this provision shall bear interest from demand at a rate of nine
percent (9%) per annum.
(b) If any General Partner breaches any provision of this
Agreement, the Investment Limited Partner and/or the Special
Limited Partner may employ an attorney or attorneys to protect
its rights hereunder, and the General Partner shall pay on demand
the reasonable attorneys' fees and expenses incurred by the
Investment Limited Partner and/or the Special Limited Partner,
whether or not a legal action is actually commenced against any
General Partner by reason of such breach. All amounts due to the
Investment Limited Partner and/or the Special Limited Partner
pursuant to this provision shall bear interest from demand at a
rate equal to nine percent (9%) per annum.
13.13 Time of Admission
The Investment Limited Partner shall be deemed to have been
admitted to the Partnership as of the Commencement Date for all
purposes of this Agreement, including Article X, provided,
however, that if treasury regulations are issued under the Code or
an amendment to the Code is adopted which would require, in the
opinion of the Auditors, that the Investment Limited Partner be
deemed admitted on a date other than as of the Commencement Date,
then the General Partner shall select a permitted admission date
which is most favorable to the Investment Limited Partner.
13.14 Arbitration
Notwithstanding anything to the contrary set forth herein, in
the event of a dispute regarding the existence of a default or
other violation of the terms hereof, such dispute shall be
resolved by binding arbitration and until the issuance of a final
arbitration award confirming the existence of a default or other
violation, as applicable, no party shall be entitled to exercise
any of its rights or remedies hereunder. Such arbitration shall
be conducted in accordance with the Rules of Commercial
Arbitration of the American Arbitration Association by a single
arbitrator appointed pursuant to those rules. The arbitration
shall take place in the City of Hartford, Connecticut. The scope
of the arbitrator's award shall be solely limited to a
determination of whether a default or other violation, as
applicable, has occurred. If the arbitrator determines that a
default or other violation, as applicable, has occurred, then if
requested by any party hereto within twenty (20) days following
receipt of the award, the arbitrator shall provide the parties
with a written explanation of the facts underlying the
determination, which shall become part of the award. The
prevailing party shall be awarded the costs of such arbitration,
provided, however, that each party shall bear the costs of its own
attorneys and witnesses.
WITNESS the execution hereof under seal as of the date first
written above.
ORIGINAL (WITHDRAWING) GENERAL PARTNERS:
LIMITED PARTNER:
D & B VENTURESD II, LLC, a Connecticut
limited liability company
/s/Edward A. Demko
Edward A. Demko
By: /s/Edward A. Demko
Edward A. Demko, Member
HIGH NOON ASSOCIATES LLC, a
Connecticut limited liability
company
By: /s/Stuart A. Epstein
Stuart A. Epstein, Member
SPECIAL LIMITED PARTNER:
BCTC 94, INC.,a Delaware
corporation
By: /s/Bonnie Kate Fox
Bonnie Kate Fox, as
Attorney-in-Fact for John
P. Manning, President
INVESTMENT LIMITED PARTNER:
BOSTON CAPITAL TAX CREDIT FUND
IV L.P., a Delaware limited
partnership, by its general
partner, Boston Capital
Associates IV L.P., a Delaware
limited partnership, by its
general partner, C&M Associates
d/b/a Boston Capital
Associates, a Massachusetts
general partnership
By: /s/Bonnie Kate Fox
Bonnie Kate Fox, as
Attorney-in-Fact for John
P. Manning, a Partner
CONSENTS AND AGREEMENTS
The undersigned hereby executes this Agreement for the sole
purpose of agreeing to the provisions of Article XI of the
foregoing Agreement of Limited Partnership notwithstanding any
provision of the Management Agreement to the contrary.
CASE MANAGEMENT, INC., a Connecticut
corporation
By: /s/
The undersigned hereby executes this Agreement for the sole
purpose of agreeing to the provisions of Sections 6.11 and 6.12(a)
of the foregoing Agreement of Limited Partnership.
D & B VENTURES II, LLC, a
Connecticut limited liability
company
By: /s/Edward A. Demko
Edward A. Demko, Member
HIGH NOON ASSOCIATES LLC, a
Connecticut limited liability
company
By: /s/Stuart A. Epstein
Stuart A. Epstein, Member
SUMNER HOUSE LIMITED PARTNERSHIP
SCHEDULE A
As of January 14, 1998
General Partners Capital Percentage Interests
Contribution of Operating Percentage Interests
Profits and Losses of Tax Credits
D & B Ventures II, $100 0.334% 0%
Inc.
9 Woodhaven Drive
Simsbury, CT 02070
High Noon Associates $100 0.666% 0%
LLC
88 Field Point Road
Greenwich, CT 06836
Special Limited Capital Percentage Interests Percentage Interests
Partner Contribution of Operating Profits of Tax Credits
and Losses and Tax
Credits
BCTC 94, Inc. $10 0% 0%
c/o Boston Capital
Partners, Inc.
One Boston Place,
21st Floor
Boston, MA 02108
Investment Total Agreed-to Paid-In Capital Percentage Percentage
Limited Partner Capital Contribution* Interests of Interests of
Contriubtion Operating Credits
Profits and
Losses
Boston Capital
Corporate Tax Credit
Fund X, A Limited
Partnership
One Boston Place,
21st Floor
Boston, MA 02108 $2,010,966 $1,508,361 99% 100%
*Paid-in Capital Contribution as of the date of this Schedule A.
Future Installments of Capital Contribution are subject to
adjustment and are due at the times and subject to the conditions
set forth in the Agreement to which this Schedule is attached.
EXHIBIT A
LEGAL DESCRIPTION
EXHIBIT B
PROJECTED RENTS
EXHIBIT C
DUE DILIGENCE RECOMMENDATIONS
EXHIBIT D
INSURANCE REQUIREMENTS
The General Partner shall cause the Partnership to maintain
insurance for the term of the Partnership in accordance with the
following:
I. Comprehensive Casualty.
The General Partner shall cause to be maintained
comprehensive casualty insurance including, but not limited to,
fire, earthquakes and other risks generally included under
"extended coverage" policies in favor of the Partnership in an
amount not less than the replacement value of the Apartment
Complex and shall include loss of rents coverage in an amount not
less than the Apartment Complex's projected annual gross rent, an
agreed amount endorsement covering all property and rental
values, and a standard building laws endorsement which includes
coverage for building ordinance compliance, demolition and any
increased cost of construction of the Apartment Complex.
II. Comprehensive General Liability.
The General Partner shall cause to be maintained
commercial general liability insurance in favor of the
Partnership in an amount not less than $1,000,000 per occurrence
(combined single limit) and $2,000,000 in the aggregate.
III. Worker's Compensation and Employer's Liability.
The General Partner shall cause to be maintained
worker's compensation and employer's liability insurance in favor
of the Partnership in an amount equal to the greater of (i) the
amount required by the State's laws governing such insurance or
(ii) $1,000,000.
IV. Comprehensive Automobile.
The General Partner shall cause to be maintained
comprehensive automobile, including non-owned automobile
liability, insurance in favor of the Partnership in an amount not
less than $1,000,000 (combined single limit).
V. Excess or Umbrella Liability.
The General Partner shall cause to be maintained excess
or umbrella liability insurance in favor of the Partnership in an
amount not less than $5,000,000 (combined single limit).
VI. Builder's Risk.
Through the Completion Date, or such later date as may
be required by any Agency or any Lender, the General Partner
shall cause the Partnership to maintain builder's risk insurance
in favor of the Partnership in an amount not less than the
greater of (i) the full replacement value of the Apartment
Complex (excluding the value of the underlying land, the site
utilities and the foundations) or (ii) such other amount as shall
be required by any Agency or Lender.
VII. Management Agent.
The Management Agent shall maintain for the term of the
Management Agreement liability insurance in the amount of
$1,000,000 per incident and $2,000,000 in the aggregate, worker's
compensation insurance in accordance with the State's laws
governing such insurance, a fidelity bond in the amount of not
less than six (6) months of the Apartment Complex's projected
gross rent, auto liability insurance in the amount of $1,000,000
per incident and error and omissions insurance in the amount of
$1,000,000 per incident.
VIII. General Requirements.
All of the policies required above, including those to
be maintained by the Management Agent, shall be issued by
insurance carriers which are currently rated by Standard & Poors
as A or better. No deductibles on such policies shall exceed
$2,500.
GENERAL PARTNERS' PAYMENT CERTIFICATE
(First Installment)
Certificate, dated as of January 14, 1998 (this
"Certificate"), of D & B VENTURES II, LLC, a Connecticut limited
liability company and HIGH NOON ASSOCIATES LLC, a Connecticut
limited liability company (collectively, the "General Partners").
This Certificate is delivered pursuant to the provisions of
Section 5.1 of the Agreement of Limited Partnership dated as of
January 14, 1998 (the "Partnership Agreement") of Sumner House
Limited Partnership, a Connecticut limited partnership (the
"Partnership").
The undersigned hereby certify that:
(i) The General Partners have satisfied and
continue to satisfy all of their material obligations
under the Partnership Agreement.
(ii) The covenants, representations and warranties
set forth in Sections 6.5 and 6.6 of the Partnership
Agreement are true and correct as of the date hereof.
(iii) The Partnership is not in default under any
of the Project Documents or any other material
obligation of the Partnership.
(iv) The covenants, representations and warranties
set forth in the Tax Certificate issued by the General
Partners to Boston Capital Tax Credit Fund IV L.P., a
Delaware limited partnership and dated as of January
14, 1998 are correct as of the date hereof in all
material respects.
(v) The facts and representations set forth in
the Fact Sheet attached hereto as Exhibit A are true
and correct as of the date hereof.
(vi) Each of the conditions precedent to the
payment of the First Installment (as such term is
defined in the Partnership Agreement) has been
satisfied as of the date hereof.
IN WITNESS WHEREOF, the undersigned has caused this
Certificate to be executed as of the day and year set forth above.
GENERAL PARTNERS: D & B VENTURES II, LLC, a Connecticut
limited liability company
By: /s/Edward A. Demko
Edward A. Demko, Member
HIGH NOON ASSOCIATES LLC, a
Connecticut limited liability company
By: /s/Stuart A. Epstein
Stuart A. Epstein, Member
Exhibit A
FACT SHEET
SUMNER HOUSE LIMITED PARTNERSHIP
1. Sources and Uses of Funds
SOURCES OF FUNDS APPLICATIONS OF FUNDS
Financing #1 $1,150,000 Land and Building $495,000
Investment Limited Construction Hard
Partner Capital $2,010,966 Costs $1,982,000
General Partner Construction Soft
Capital $100 Costs $402,066
Deferred Construction
Development Fee $0 Contingency $50,000
Development Fee $232,000
TOTAL $3,161,066 TOTAL $3,161,066
2. Financing
Construction
A. Lender: Boston Capital Mortgage Company
B. Mortgage Amount: $1,400,000
C. Note Date: January, 1998
D. Interest Rate: Treasuries plus 210 bp
E. Amortization: None
F. Maturity Date: 12 month term
G. Guarantors: Edward Demko, Robert
Epstein, Stuart Epstein
Permanent
A. Lender: Boston Capital Mortgage Company
B. Mortgage Amount: $1,150,000
C. Note Date: To be determined
D. Interest Rate: Treasuries plus 210 bp
E. Amortization: 30 years
F. Maturity Date: 18 years from Permanent
Mortgage Commencement
G. Guarantors: Edward Demko, Robert
Epstein, Stuart Epstein (for
nonrecourse carve-outs only)
3. Eligible Basis: $2,578,741
4. Qualified Basis: $3,352,363
(130% of Eligible Basis)
5. GP Capital Contribution: $100
6. Type of Credit: 9%, Rehabilitation
7. Rent-up Schedule:
33% by June 30, 1998;
66% by July 31, 1998; and
100% by August 31, 1998;
8. Projected Credit to the
Investment Partnership:
A. $94,220 for 1998,
B. $281,254 per annum for each of the years 1999
through 2007 (inclusive), and
C. $187,034 for 2008.
9. Total Projected Credit:
A. $94,220 for 1998,
B. $281,254 per annum for each of the years 1999
through 2007 (inclusive), and
C. $187,034 for 2008.
10. Tax Credit Application:
A. Reservation Date: June 5, 1997
B. Reservation Amount: $281,254/year
C. Carryover Allocation Date: December 30, 1997
D. Carryover Allocation Amount: $281,254/year
E. Tax Credit Rate on 8609: To be determined
11. Apartment Complex:
A. Name: Sumner House
B. Address: 57 Sumner Street
Hartford, CT
C. County: Hartford County
D. MSA: Hartford
E. Type of Project: Elderly
12. Median Income: $58,900 (Family of Four, 1997)
13. Kind of Apartments:
Number of Number of Total Basic Utility
Bedrooms Units Sq. Ft. Rent Allowance
Studio 18 490/unit $188/month $55
1BR 2 675/unit $202/month $58
1BR 27 675/unit $450/month $58
2BR 32 930/unit $550/month $78
14. Rental Assistance: N/A
15. Annual Operating Expense: $237,125 (plus 3% annual
(beginning 1998) inflation)
16. Replacement Reserve Account: $15,800/year
(beginning 1998)
17. Maximum Yearly Distribution of
Cash Flow permitted: N/A
18. Amount of Asset Management Fee
to Boston Capital: $5,000/year
(commencing 1998, prorated for
initial year)
19. Amount of Total Depreciable Base
Allocated to Personal Property: $58,155
20. Completion Date: June 30, 1998 (anticipated)
21. Total Capital Contribution of
Investment Partnership: $2,010,966
22. Schedule of Capital Contributions
Amount Installment Conditions on Capital Contributions
$1,508,361 First on the latest of (A) the Admission Date, (B)
the closing of the Construction Loan, (C) the
Permanent Loan Commitment Date, (D) Tax
Credit Set-Aside or (E) the Construction
Permitting Date
$276,508 Second on the latest of (A) the Completion Date, (B)
Cost Certification, (C) receipt by the
Investment Limited Partner of evidence that
all materials required to achieve State
Designation have been submitted to the Credit
Agency and all other applicable Agencies, (D)
receipt of an updated Title Policy in form
and substance satisfactory to the Special
Limited Partner, which policy in no event
shall contain a survey exception, (E) receipt
by the Investment Limited Partner of the
Contractor Pay-Off Letter or (F) receipt by
the Investment Limited Partner of an Estoppel
Letter from each Lender
$201,097 Third on the later of (A) the Initial 100%
Occupancy Date, (B) Permanent Mortgage
Commencement, (C) State Designation or (D)
Rental Achievement
$25,000 Fourth upon the receipt by the Investment Limited
Partner of a copy of the properly filed
Partnership federal income tax return and an
audited Partnership financial statement for
the year in which Rental Achievement occurs
23. Fees and Special Distributions to be paid from Capital Contributions:
It is anticipated that the entire Development Fee
shall be paid from Capital Contributions.
24. General Partners: D & B Ventures II, LLC High Noon Associates LLC
Contact: Edward A. Demko Stuart A. Epstein
Address: 9 Woodhaven Drive 43 High Noon Road
Simsbury, CT 06070 Weston, CT 06887
Telephone: (860) 651-3976 (203) 227-9089
Fax: (860) 651-9281 (203) 227-4369
25. Ownership Interests:
Partner Normal Capital Cash Tax
Operations Transactions Flow Credits
General Partners 1% 80% 80% 0%
Investment Limited 99% 19.999% 20% 100%
Partner
Special Limited 0% .001% 0% 0%
Partner
26. Management Agent: Chase Management, Inc.
Contact: Christine M. Nassau
Address: 887 Asylum Avenue
Hartford, CT 06105
Telephone: (860) 247-3020
Fax: (860) 525-0524
Amount of Fee: 5% of collected rents
27. Builder: D & B Building Corporation, a
Texas corporation
Builder's Profit: $128,225
Builder's Overhead: $42,775
28. Tax Return Preparer/Auditor: Kostin, Ruffkess &
Company, LLC
Address: 345 North Main Street
West Hartford, CT 06117
Telephone: (860) 236-1975
29. Partnership Federal ID Number: 06-1497496
30. Operating Deficit Guarantees: Maximum of $250,000 for
three (3) years after Rental
Achievement
31. Building Breakdown:
BIN # of Units
To be 79
determined
___
TOTAL 79
DEVELOPMENT AGREEMENT
AGREEMENT made as of January 14, 1998 by and between SUMNER
HOUSE LIMITED PARTNERSHIP, a Connecticut limited partnership (the
"Partnership") and HIGH NOON ASSOCIATES LLC, a Connecticut limited
liability company ("High Noon") and D & B VENTURES II, LLC, a
Connecticut limited liability company (collectively, the
"Developer") in their capacities as the Developer of the Apartment
Complex and not as General Partners of the Partnership.
Recitals
1. The Partnership was formed to acquire, rehabilitate,
develop, improve, maintain, own, operate, lease, dispose of and
otherwise deal with an apartment project located in Hartford,
Connecticut, known as the Sumner House (the "Apartment Complex").
2. Capitalized terms used herein and not otherwise defined
shall have the meanings set forth in the Agreement of Limited
Partnership of the Partnership of even date herewith (the
"Partnership Agreement").
3. The Apartment Complex, following the completion of
rehabilitation, is expected to constitute a "qualified low-income
housing project" (as defined in Section 42(g)(1) of the Code).
4. The Developer has already provided and will continue to
provide certain services with respect to the Apartment Complex
during the acquisition, development, rehabilitation and initial
operating phases thereof.
5. In consideration for such services, past and future,
the Partnership has agreed to pay to the Developer certain fees
computed and paid in the manner stated herein.
NOW, THEREFORE, in consideration of the mutual covenants and
conditions set forth herein and other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
Section 1. Defined Terms.
"Development Advances" has the meaning set forth in Section
2.
"Development Costs" means any and all costs and expenses
necessary to (i) cause the rehabilitation of the Apartment Complex
to be completed, in a good and workmanlike manner, free and clear
of all mechanics', materialmen's or similar liens, in accordance
with the Plans and Specifications, (ii) equip the Apartment
Complex with all necessary and appropriate fixtures, equipment and
articles of personal property (including, without limitation,
refrigerators and ranges), (iii) obtain all required certificates
of occupancy for the apartment units and other space in the
Apartment Complex, (iv) pay the Development Fee, (v) finance the
rehabilitation of the Apartment Complex and achieve Rental
Achievement in accordance with the provisions of the Project
Documents, (vi) discharge all Partnership liabilities and
obligations arising out of any casualty generating insurance
proceeds for the Partnership, (vii) fund any Partnership reserves
required hereunder or under any of the Project Documents, (viii)
repay and discharge the Construction Loan, and (ix) pay any other
costs or expenses necessary to achieve the Completion Date and
Rental Achievement.
"Specified Proceeds" means (i) the proceeds of all Mortgage
Loans, (ii) the net rental income, if any, generated by the
Apartment Complex prior to Permanent Mortgage Commencement which
is permitted by the Lenders to be applied to the payment of
Development Costs, (iii) the Capital Contributions of the
Investment Limited Partner and the Special Limited Partner, (iv)
the Capital Contributions of the General Partners in the amounts
set forth in Schedule A of the Partnership Agreement as of the
Admission Date and (v) any insurance proceeds arising out of
casualties occurring prior to Permanent Mortgage Commencement.
Section 2. Obligation to Complete Rehabilitation and to Pay
Development Costs.
The Developer shall complete the rehabilitation of the
Apartment Complex or cause the same to be completed in a good and
workmanlike manner, free and clear of all mechanics',
materialmen's or similar liens and shall equip the Apartment
Complex or cause the same to be equipped with all necessary and
appropriate fixtures, equipment and articles of personal property,
including without limitation, refrigerators and ranges, provided
for in the Project Documents and the Plans and Specifications.
The Developer also shall cause the achievement of Permanent
Mortgage Commencement in accordance with the terms of the
Partnership Agreement. If the Specified Proceeds as available
from time to time are insufficient to pay all Development Costs
and achieve Permanent Mortgage Commencement, the Developer shall
advance or cause to be advanced to the Partnership from time to
time as needed all such funds as are required to pay such
deficiencies. Any such advances ("Development Advances") shall,
to the extent permitted under the Project Documents and any
applicable Regulations or requirements of any Lender or Agency (or
otherwise with any Requisite Approvals), be reimbursed at or prior
to Permanent Mortgage Commencement only out of Specified Proceeds
available from time to time after payment of all Development
Costs. Any balance of the amount of each Development Advance not
reimbursed through Permanent Mortgage Commencement shall not be
reimbursable, shall not be credited to the Capital Account of any
Partner, or otherwise change the interest of any Person in the
Partnership, but shall be borne by the Developer under the terms
of this Agreement.
Section 3. Development Services.
(a) The Developer has heretofore performed certain services
relating to the development of the Apartment Complex and shall
continue to oversee the rehabilitation and development of the
Apartment Complex, and shall perform the services and carry out
the responsibilities with respect to the Apartment Complex as are
set forth herein, and such additional duties and responsibilities
as are reasonably within the general scope of such services and
responsibilities and are designated from time to time by the
General Partners.
(b) The Developer's services shall be performed in the name
and on behalf of the Partnership and shall consist of the duties
set forth in subparagraphs (i)-(xv) below of this Section 3(b) and
as provided elsewhere in this Agreement; provided, however, that
if the performance of any duty of the Developer set forth in this
Agreement is beyond the reasonable control of the Developer, the
Developer shall nonetheless be obligated to (i) use its best
efforts to perform such duty and (ii) promptly notify the General
Partners that the performance of such duty is beyond its
reasonable control. The Developer has performed or shall perform
the following:
(i) Negotiate and cause to be executed in the
name and on behalf of the Partnership any agreements
for architectural, engineering, testing or consulting
services for the Apartment Complex, and any agreements
for the rehabilitation of any improvements or tenant
improvements to be constructed or installed by the
Partnership or the furnishing of any supplies,
materials, machinery or equipment therefor, or any
amendments thereof, provided that no agreement shall be
executed nor binding commitment made until the terms
and conditions thereof and the party with whom the
agreement is to be made have been approved by the
General Partners unless the terms, conditions, and
parties comply with guidelines issued by the General
Partners concerning such agreements;
(ii) Advise the Partnership as to the steps
necessary to qualify the Apartment Complex during the
compliance period defined in Section 42(i)(1) of the
Code as a "qualified low-income housing project" under
Section 42(g)(1) of the Code;
(iii) Assist the Partnership in preparing and
processing an application for a low-income housing tax
credit allocation for the Apartment Complex under
Section 42 of the Code;
(iv) Advise the Partnership as to federal, state
and local subsidy programs available for the Apartment
Complex;
(v) Establish and implement appropriate
administrative and financial controls for the design
and rehabilitation of the Apartment Complex, including
but not limited to:
(A) coordination and administration of the
Apartment Complex architect, the general contractor,
and other contractors, professionals and consultants
employed in connection with the design or
rehabilitation of the Apartment Complex;
(B) administration of any construction contracts
on behalf of the Partnership;
(C) participation in conferences and the
rendering of such advice and assistance as will aid in
developing economical, efficient and desirable design
and rehabilitation procedures;
(D) the rendering of advice and recommendations
as to the selection of subcontractors and suppliers;
(E) the review and submission to the General
Partners for approval of all requests for payments
under any architectural agreement, general contractor's
agreement, or any loan agreements with any lending
institutions providing funds for the benefit of the
Partnership for the design or rehabilitation of any
improvements;
(F) the submission of any suggestions or requests
for changes which could in any reasonable manner
improve the design, efficiency or cost of the Apartment
Complex;
(G) applying for and maintaining in full force
and effect any and all governmental permits and
approvals required for the lawful rehabilitation of the
Apartment Complex;
(H) compliance with all terms and conditions
applicable to the Partnership or the Apartment Complex
contained in any governmental permit or approval
required or obtained for the lawful rehabilitation of
the Apartment Complex, or in any insurance policy
affecting or covering the Apartment Complex, or in any
surety bond obtained in connection with the Apartment
Complex;
(I) furnishing such consultation and advice
relating to the Apartment Complex as may be reasonably
requested from time to time by the General Partners;
(J) keeping the General Partners fully informed
on a regular basis of the progress of the design and
rehabilitation of the Apartment Complex, including the
preparation of such reports as are provided for herein
or as may reasonably be requested by the General
Partners and which are of a nature generally requested
or expected of construction managers or similar owner's
representatives on similar projects;
(K) giving or making the Partnership's
instructions, requirements, approvals and payments
provided for in the agreements with the Apartment
Complex architect, general contractor, and other
contractors, professionals and consultants retained for
the Apartment Complex; and
(L) at the Partnership's expense, filing on
behalf of and as the attorney-in-fact for the
Partnership any notices of completion required or
permitted to be filed upon the completion of any
improvement(s) and taking such actions as may be
required to obtain any certificates of occupancy or
equivalent documents required to permit the occupancy
of the Apartment Complex.
(vi) Inspect the progress of the course of the
rehabilitation of the Apartment Complex, including
verification of the materials and labor being furnished
to and on such rehabilitation so as to be fully
competent to approve or disapprove requests for payment
made by the Apartment Complex architect and the
general contractor, or by any other parties with
respect to the design or rehabilitation of the
Apartment Complex, and in addition to verify that the
rehabilitation is being carried out substantially in
accordance with the Plans and Specifications approved
by the General Partners or, in the event that the
rehabilitation is not being so carried out, to promptly
notify the General Partners;
(vii) If requested to do so by the General
Partners, perform on behalf of the Partnership all
obligations of the Partnership with respect to the
design or rehabilitation of the Apartment Complex
contained in any loan agreement or security agreement
entered into in connection with any construction or
long-term financing for the Apartment Complex, or in
any lease or rental agreement relating to space in the
Apartment Complex, or in any agreement entered into
with any governmental body or agency relating to the
terms and conditions of such rehabilitation, provided
that copies of such agreements have been provided by
the Partnership to the Developer or the Partnership has
otherwise notified the Developer in writing of such
obligations;
(viii) To the extent requested to do so by the
General Partners, prepare and distribute to the General
Partners a critical path schedule, and periodic updates
thereto as necessary to reflect any material changes,
but in any event not less frequently than quarterly,
other design or rehabilitation cost estimates as
required by the General Partners, and financial
accounting reports, including monthly progress reports
on the quality, progress and cost of the rehabilitation
and recommendations as to the drawing of funds from any
loans arranged by the Partnership to cover the cost of
design and rehabilitation of the Apartment Complex, or
as to the providing of additional capital contributions
should such loan funds for any reason be unavailable or
inadequate;
(ix) At the Partnership's expense, obtain and
maintain insurance coverage for the Apartment Complex,
the Partnership, and the Developer and its employees,
at all times until final completion of the
rehabilitation of the Apartment Complex, in accordance
with an insurance schedule approved by the General
Partners, which insurance shall include general public
liability insurance covering claims for personal
injury, including but not limited to bodily injury, or
property damage, occurring in or upon the Property or
the streets, passageways, curbs and vaults adjoining
the Property. Such insurance shall be in a liability
amount approved by the General Partners;
(x) Comply with all applicable present and future
laws, ordinances, orders, rules, regulations and
requirements (hereinafter in this subparagraph (x)
called "laws") of all federal, state and municipal
governments, courts, departments, commissions, boards
and offices, any national or local Board of Fire
Underwriters or Insurance Services Offices having
jurisdiction in the county in which the Apartment
Complex is located or any other body exercising
functions similar to those of any of the foregoing, or
any insurance carriers providing any insurance coverage
for the Partnership or the Apartment Complex, which may
be applicable to the Apartment Complex or any part
thereof. Any such compliance undertaken by the
Developer on behalf of and in the name of the
Partnership, in accordance with the provisions of this
Agreement, shall be at the Partnership's expense. The
Developer shall likewise ensure that all agreements
between the Partnership and independent contractors
performing work in connection with the Apartment
Complex shall include the agreement of said independent
contractors to comply with all such applicable laws;
(xi) Assemble and retain all contracts, agreements
and other records and data as may be necessary to carry
out the Developer's functions hereunder. Without
limiting the foregoing, the Developer will prepare,
accumulate and furnish to the General Partners and the
appropriate governmental authorities, as necessary,
data and information sufficient to identify the market
value of improvements in place as of each real property
tax lien date, and will make application for
appropriate exclusions from the capital costs of the
Apartment Complex for purposes of real property ad
valorem taxes;
(xii) Coordinate and administer the design and
rehabilitation of all interior tenant improvements to
the extent required under any leases or other occupancy
agreements to be constructed or furnished by the
Partnership with respect to the initial leasing of
space in the Apartment Complex, whether involving
building standard or non-building standard work;
(xiii) Use its best efforts to accomplish the
timely completion of the Apartment Complex in
accordance with the approved Plans and Specifications
and the time schedules for such completion approved by
the General Partners;
(xiv) At the direction of the General Partners,
implement any decisions of the General Partners made in
connection with the design, rehabilitation and
development of the Apartment Complex or any policies
and procedures relating thereto, exclusive of leasing
activities; and
(xv) Perform and administer any and all other
services and responsibilities of the Developer which
are set forth in any other provisions of this
Agreement, or which are requested to be performed by
the General Partners and are within the general scope
of the services described herein.
Section 4. Limitations and Restrictions.
Notwithstanding any provisions of this Agreement, the
Developer shall not take any action, expend any sum, make any
decision, give any consent, approval or authorization, or incur
any obligation with respect to any of the following matters unless
and until the same has been approved by the General Partners:
(a) Approval of all construction and architectural
contracts and all architectural plans, specifications and drawings
prior to the rehabilitation and/or alteration of any improvements
contemplated thereby, except for such matters as may be expressly
delegated in writing to the Developer by the General Partners;
(b) Any proposed change in the work of the rehabilitation
of the Apartment Complex, or in the Plans and Specifications
therefor as previously approved by the General Partners, or in the
cost thereof, or any other change which would affect the design,
cost, value or quality of the Apartment Complex, except for such
matters as may be expressly delegated in writing to the Developer
by the General Partners;
(c) Making any expenditure or incurring any obligation by
or on behalf of the Partnership or the Apartment Complex involving
a sum in excess of $25,000 or involving a sum of more than $5,000
where the same relates to a component part of any work, the
combined cost of which exceeds $25,000, except for expenditures
made and obligations incurred pursuant to and specifically set
forth in a construction budget approved by the General Partners
(the "Construction Budget") or for such matters as may be
otherwise expressly delegated to the Developer by the General
Partners;
(d) Making any expenditure or incurring any obligation
which, when added to any other expenditure, exceeds the
Construction Budget or any line item specified in the Construction
Budget, except for such matters as may be otherwise expressly
delegated in writing to the Developer by the General Partners; or
(e) Expending more than what the Developer in good faith
believes to be the fair and reasonable market value at the time
and place of contracting for any goods purchased or leased or
services engaged on behalf of the Partnership or otherwise in
connection with the Apartment Complex.
Section 5. Accounts and Records.
(a) The Developer on behalf of the Partnership, shall keep
such books of account and other records as may be required and
approved by the General Partners, including, but not limited to,
records relating to the costs of rehabilitation and rehabilitation
advances. The Developer shall keep vouchers, statements,
receipted bills and invoices and all other records, in the form
approved by the General Partners, covering all collections, if
any, disbursements and other data in connection with the Apartment
Complex prior to the Completion Date. All accounts and records
relating to the Apartment Complex, including all correspondence,
shall be surrendered to the Partnership, upon demand without
charge therefor.
(b) The Developer shall cooperate with the Management Agent
to facilitate the timely preparation by the Management Agent of
such reports and financial statements as the Management Agent is
required to furnish pursuant to the Management Agreement.
(c) All books and records prepared or maintained by the
Developer shall be kept and maintained at all times at the place
or places approved by the General Partners, and shall be available
for and subject to audit, inspection and copying by the Management
Agent, the General Partners or any representative or auditor
thereof or supervisory or regulatory authority, at the times and
in the manner set forth in the Partnership Agreement.
Section 6. Development Fees.
For its services in connection with the development of the
Apartment Complex and the supervision of the rehabilitation of the
Apartment Complex, and as reimbursement for Development Advances,
the Developer shall receive a fee (the "Development Fee") in the
amount of $232,000. $46,400 of such fee will be earned by the
Developer as of December 31, 1997 and will be accrued as of
December 31, 1997. The remainder of the Development Fee shall be
deemed to have been earned as and when the Developer's services
are rendered and such Development Fee shall be paid out of
Specified Proceeds. If Specified Proceeds are insufficient to pay
the Development Fee, such unpaid amounts shall be paid out of Cash
Flow as set forth in Section 10.2(a) of the Partnership Agreement.
In any event, the General Partners shall cause the Partnership to
pay such Development Fee only after the payment of all Development
Costs (other than the Development Fee). If the Development Fee
has not been fully paid by the tenth anniversary of the Completion
Date, the General Partners shall make a Capital Contribution to
the Partnership in an amount sufficient to enable the Partnership
to pay any unpaid portion of the Development Fee.
Section 7. Applicable Law.
This Agreement, and the application or interpretation hereof,
shall be governed by and construed in accordance with the laws of
the State of Connecticut.
Section 8. Binding Agreement.
This Agreement shall be binding on the parties hereto, their
heirs, executors, personal representatives, successors and
assigns. As long as the Developer is not in default under this
Agreement, the obligation of the Partnership to pay the
Development Fee shall not be affected by any change in the
identity of the General Partners of the Partnership.
Section 9. Headings.
All section headings in this Agreement are for convenience of
reference only and are not intended to qualify the meaning of any
section.
Section 10. Terminology.
All personal pronouns used in this Agreement, whether used in
the masculine, feminine or neuter gender, shall include all other
genders, the singular shall include the plural, and vice versa as
the context may require.
Section 11. Benefit of Agreement.
The obligations and undertakings of the Developer set forth
in this Agreement are made for the benefit of the Partnership and
its Partners and shall not inure to the benefit of any creditor of
the Partnership other than a Partner, notwithstanding any pledge
or assignment by the Partnership of this Agreement or any rights
hereunder.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed as of the date first written above.
PARTNERSHIP: SUMNER HOUSE LIMITED PARTNERSHIP, a
Connecticut limited partnership, by
its general partners
D & B Ventures II, LLC, a
Connecticut limited liability
company
By: /s/Edward A. Demko
Edward A. Demko, Member
High Noon Associates LLC, a
Connecticut limited liability
company
By: /s/Stuart A. Epstein
Stuart A. Epstein, Member
DEVELOPER: D & B VENTURES II, LLC, a Connecticut
limited liability company
By: /s/Edward A.Demko
Edward A. Demko, Member
HIGH NOON ASSOCIATES LLC, a
Connecticut limited liability company
By: /s/Stuart A. Epstein
Stuart A. Epstein, Member
