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) September 2,
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)
0-26200 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
As of September 2, 1998, Boston Capital Tax Credit Fund IV,
L.P., a Delaware limited partnership, specifically Series 22
thereof (the Partnership) entered into various agreements
relating to Lake City Limited Partnership, a Pennsylvania limited
partnership (the Operating Partnership), including the Second
Amended and Restated Agreement and Certificate of Limited
Partnership of the Operating Partnership dated as of August 1,
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 has renovated an existing
forty-four (44) unit apartment complex located at 1055 Cherry
Street, Lake City, Pennsylvania, which is known as Lake City
Townhomes (the Apartment Complex). The Apartment Complex
contains forty-four (44) 2-bedroom units housed within eleven
(11) buildings. Renovations were completed in July, 1998 and
100% Occupancy was achieved in September, 1998.
The Operating Partnership is currently receiving permanent
financing from the Rural Economic & Community Development Agency
of the United States Department of Agriculture (RECD) in the
aggregate amount of $1,174,169 (the Permanent Mortgage). The
Permanent Mortgage consists of two components. First, the
Operating Partnership assumed a loan from RECD in the amount of
$917,169 (the First Stage). This First Stage is evidenced by an
Assumption Agreement dated November 12, 1997. The First Stage
carries an interest rate of 7.25% and has a fifty (50) - year
term from its initial August 25, 1980 closing date. Second, the
Operating Partnership obtained additional financing from RECD in
the amount of $257,000 (the Second Stage). The Second Stage is
evidenced by a Promissory Note also dated November 12, 1997. In
addition, the Second Stage carries an interest rate of 7.25% and
has a fifty (50) year term. Both stages of the Permanent
Mortgage are receiving the benefit of an RECD interest credit
subsidy which serves to reduce the effective interest rate to 1%
per annum, provided that occupancy by eligible tenants is
maintained.
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 Partner of the Operating Partnership is Home
Properties of New York, L.P., (the General Partner), a New York
limited partnership. The General Partner also serves as the
Management Agent for the Apartment Complex. In addition,
Patterson-Erie Corporation, an affiliate of the General Partner,
served as the Builder for the renovation of the Apartment
Complex. As of August, 1998, the General Partner had 6,199 units
under management and had developed 17,000 apartment units. In
addition, Patterson-Erie Corporation had built 1,200 units.
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
$240,900 to the Operating Partnership in four installments as
follows:
(1) $144,540 (the First Installment) on the latest to
occur of (i) Admission Date, (ii) Tax Credit Set Aside, or
(iii) Permanent Mortgage Commitment;
(2) $48,180 (the Second Installment) on the later of (i)
the Completion Date, (ii) Cost Certification, or (iii)
receipt of an updated title insurance policy satisfactory to
the Partnership;
(3) $45,771 (the Third Installment) on the later of (i)
the Initial 100% Occupancy Date, (ii) the Breakeven Point,
(iii) Permanent Mortgage Closing or (iv) State Designation;
and
(4) $2,409 (the Fourth Installment) upon receipt of the
Operating Partnership tax return for the year in which
breakeven occurs.
All Installments have been paid in by the Partnership.
The total Capital Contribution of the Partnership to the
Operating Partnership is based on the Operating Partnership
receiving $354,300 of Tax Credits during the 11-year period
commencing in 1998 of which 99.99% ($348,358) would be allocated
to the Partnership as the Investment Limited Partner of the
Operating 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:
Profits, Losses and
Tax Credits from Capital
Normal Operations Transactions Cash Flow
Managing General
Partner .01% 66% .01%
Partnership 99.99% 33.999% 99.99%
Special Limited Partner 0% .001% 0%
The Special Limited Partner of the Operating Partnership is BCTC
94, Inc., an affiliate of the Partnership.
The Partnership used the funds obtained from the payments of
the holders of its beneficial assignee certificates to make the
acquisition of its interest in the Operating Partnership.
Boston Capital or an Affiliate thereof, began receiving a
fee (the Reporting Fee) (commencing in 1998) from the Operating
Partnership in the amount of $1,500 per annum for services in
connection with the Operating Partnership's accounting matters
relating to the Partnership. The Reporting Fee is 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 Reporting Fee, the General Partner shall be
obligated to make Subordinated Loans to the Operating Partnership
to cover the Reporting Fee.
Commencing in 1998, the Operating Partnership began paying
the General Partner a fee (the
Annual Partnership Management Fee) for services in connection
with the administration of the day-to-day business of the
Operating Partnership in an annual amount equal to $1,500. The
Annual Partnership Management Fee is 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 year.
The Operating Partnership is obligated to pay the General
Partner an annual fee (the Incentive Management Fee) for services
in achieving high operating efficiency of the Apartment Complex.
The Incentive Management Fee for each fiscal year shall be in an
amount equal to 90% of the available cash flow after payment of
any accrued and unpaid Reporting Fees, Annual Partnership
Management Fees, Subordinated Loans, and unpaid and accrued
interest on the Construction and Development Fee, as provided for
in Section 10.2(a) of the Operating Partnership Agreement.
In consideration of its consultation, advice and other
services in connection with the renovation and development of the
Apartment Complex and as consideration for the assignment
described in Section 6.14 of the Operating Partnership Agreement,
the Operating Partnership paid the General Partner a fee (the
Construction and Development Fee) in the amount of $54,313, which
fee was earned in full as to each building in the Apartment
Complex as of the date such building is completed. The
Construction and Development Fee was paid $6,234 from the
proceeds of the Second Installment, $45,771 from the proceeds of
the Third Installment and $2,308 from the proceeds of the Fourth
Installment.
The Builder for the renovation of the Apartment Complex
received total compensation of $24,000 which included a Builder's
Profit of $17,000. The Management Agent of the Apartment Complex
will receive a Management Fee from time to time from the
Operating Partnership in accordance with a management contract
approved by RECD or, should the Apartment Complex cease to be
subject to RECD regulation, in accordance with a reasonable and
competitive fee arrangement. The initial Management Fee is $39.00
per occupied unit per month.
Item 7. Exhibits.
(c) Exhibits.
(1) (a)[1] Form of Dealer-Manager Agreement between Boston
Capital Services, Inc. and the Registrant (including,
as an exhibit thereto, the form of Soliciting Dealer
Agreement)
(2) (a) Second Amended and Restated Agreement and Certificate
of Limited Partnership for Lake City Limited
Partnership
(2) (b) Certification and Agreement for Lake City Limited
Partnership
(4) (a)[2] Agreement of Limited Partnership of the Partnership
(16) None
(17) None
(20) None
(23) None
(24) None
(27) None
[1]. Incorporated by reference to Exhibit (1) to Registration
Statement No. 33-70564 on Form S-11, as filed with the Securities
and Exchange Commission.
[2] Incorporated by reference to Exhibit (4) to Registration
Statement No. 33-70564 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: February 2, 2000
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
LAKE CITY LIMITED PARTNERSHIP
SECOND AMENDED AND RESTATED
AGREEMENT AND CERTIFICATE OF LIMITED PARTNERSHIP
Dated as of August 1, 1998
LAKE CITY LIMITED PARTNERSHIP
TABLE OF CONTENTS
Page
Preliminary Statement ...................................
1
ARTICLE I Defined Terms ............................ 1
ARTICLE II Name and Business ........................
13
2.1 Name; Continuation ....................... 13
2.2 Office and Resident Agent ................ 13
2.3 Purpose .................................. 13
2.4 Term and Dissolution ..................... 13
ARTICLE III Mortgage, Refinancing and Disposition
of Property ............................ 14
ARTICLE IV Partners; Capital ........................
15
4.1 Capital and Capital Accounts ............. 15
4.2 General Partner .......................... 16
4.3 Investment Limited Partner, Special
Limited Partner and Original Limited
Partner ................................ 16
4.4 Liability of the Limited Partner ......... 17
4.5 Special Rights of the Investment
Limited Partner ........................ 17
4.6 Meetings ................................. 19
ARTICLE V Capital Contributions of the Investment
Limited Partner and the Special
Limited Partner ........................ 20
5.1 Payments ................................. 20
5.2 Return of Capital Contributions .......... 23
ARTICLE VI Rights, Powers and Duties of General
Partners ............................... 26
6.1 Authorized Acts .......................... 26
6.2 Restrictions on Authority ................ 27
6.3 Personal Services ........................ 29
6.4 Business Management and Control; Tax
Matters Partner ........................ 29
6.5 Duties and Obligations ................... 30
6.6 Representations and Warranties ........... 32
6.7 Liability on the Permanent Mortgage ...... 36
6.8 Indemnification of the General Partners .. 36
6.9 Indemnification of the Partnership and
the Limited Partners ................... 37
6.10 Operating Deficits ....................... 38
6.11 Obligation to Complete the Construction
of the Apartment Complex ............... 38
6.12 Certain Payments to the General Partners
and Others ............................. 40
6.13 Delegation of General Partner Authority .. 41
6.14 Assignment to Partnership ................ 41
ARTICLE VII Withdrawal of a General Partner; New
General Partners ....................... 42
7.1 Withdrawal ............................... 42
7.2 Obligation to Continue ................... 43
7.3 Withdrawal of All General Partners ....... 43
7.4 Interest of General Partner After
Permitted Withdrawal ................... 43
7.5 Admission of Additional General
Partner(s)under Certain Circumstances .. 44
ARTICLE VIII Transferability of Limited Partner
Interests .............................. 45
8.1 Assignments .............................. 45
8.2 Substituted Limited Partner .............. 45
8.3 Restrictions ............................. 46
ARTICLE IX Borrowings ..............
46
9.1 Borrowings ............................... 47
ARTICLE X Profits, Losses, Tax Credits,
Distributions and Capital Accounts ..... 47
10.1 Profits, Losses and Tax Credits .......... 47
10.2 Cash Distributions Prior to Dissolution .. 49
10.3 Distribution Upon Dissolution ............ 52
10.4 Special Provisions ....................... 53
10.5 Authority of the General Partners to
Vary Allocations to Preserve and
Protect the Partners' Intent ........... 57
ARTICLE XI Management Agent .........................
58
ARTICLE XII Books and Records, Accounting, Tax
Elections, Etc. ........................ 59
12.1 Books and Records ........................ 59
12.2 Bank Accounts ............................ 59
12.3 Auditors ................................. 59
12.4 Cost Recovery and Elections .............. 60
12.5 Special Basis Adjustments ................ 61
12.6 Fiscal Year .............................. 61
12.7 Information to Partners .................. 61
12.8 Expenses of the Partnership .............. 64
ARTICLE XIII General Provisions ....................... 66
13.1 Restrictions by Reason of Section 708 of
the Code ............................... 66
13.2 Amendments to Certificate ................ 66
13.3 Notices .................................. 66
13.4 Word Meanings ............................ 67
13.5 Binding Effect ........................... 67
13.6 Applicable Law ........................... 67
13.7 Counterparts ............................. 67
13.8 Financing Regulations .................... 67
13.9 Separability of Provisions ............... 68
13.10 Paragraph Titles .........................
68
13.11 Amendment Procedure ......................
68
13.12 Time of Admission ........................
68
LAKE CITY LIMITED PARTNERSHIP
AMENDED AND RESTATED AGREEMENT
AND CERTIFICATE OF LIMITED PARTNERSHIP
Preliminary Statement
Lake City Limited Partnership (the Partnership) was formed
as a Pennsylvania limited partnership pursuant to an Agreement
and Certificate of Limited Partnership dated February 4, 1997(the
Original Agreement) by and among Patterson-Erie Corporation, a
Delaware business corporation as general partner (the Original
General Partner) and William L. Patterson, Jr. as the limited
partner (the Original Limited Partner). The Original Agreement
was filed with the Filing Office on September 17, 1997. The
Original Agreement was amended by an Amendment to Agreement and
Certificate of Limited Partnership dated December 31, 1997, filed
with the Filing Office on May 14, 1998 and with the records of
Erie County, Pennsylvania at book 3838, page 683 (the Amended
Agreement), whereby, inter alia, the Original General Partner
withdrew from the Partnership and Home Properties of New York,
L.P., a New York limited partnership, was admitted as general
partner (the General Partner). (However, Lake City Limited
Partnership was incorrectly listed as a limited partner in the
Amended Agreement).
WHEREAS, the parties hereto now desire to enter into this
Second Amended and Restated Agreement of Limited Partnership to:
(i) continue the Partnership, (ii) acknowledge the withdrawal of
the William L. Patterson, Jr. as the Original Limited Partner,
(iii) reaffirm that Lake City Limited Partnership is not a
limited partner of the Partnership, (iv) admit Boston Capital Tax
Credit Fund, IV, L.P. to the Partnership as Investment Limited
Partner, (v) admit BCTC 94, Inc. as Special Limited Partner, (vi)
reassign the Interests in the Partnership and (vii) set forth all
of the provisions governing the Partnership and the Partners
herein. Certain capitalized terms used herein shall have the
respective meanings specified in Article I.
In consideration of mutual agreements set forth herein, it
is agreed and certified, and the Original Agreement and Restated
Agreement are hereby amended and restated, in their entirety, as
follows:
ARTICLE I
Defined Terms
The defined terms used in this Agreement shall have the
meanings specified below:
Actual Credit means, with respect to a particular year, the
total amount of Tax Credit properly allocable by the Partnership
to the Investment Limited Partner for such year. The Actual
Credit shall be retroactively revised if the amount of Tax Credit
properly allocable to the Investment Limited Partner is revised
after audit.
Additional Limited Partner means any holder of an Interest
designated as an Additional Limited Partner pursuant to Section
7.4.
Admission Date means the first date on which all parties
hereto shall have executed this Agreement, or, if, pursuant to
the Uniform Act, the Investment Limited Partner shall not be
deemed admitted to the Partnership on such date, then the next
date thereafter on which the Investment Limited Partner shall be
deemed to be admitted to the Partnership under the Uniform Act.
Affiliate means as to any named Person (or as to every
Partner if no Person is specifically named): (i) such Person or
any member of his Immediate Family; (ii) the legal
representative, successor or assignee of, or any trustee of a
trust for the benefit of, any such Person or member of his
Immediate Family; (iii) any Entity of which a majority of the
voting interests is owned by any one or more of the Persons
referred to in the preceding clauses (i) and (ii); (iv) any
officer, director, trustee, employee, stockholder (10% or more)
or partner of any Person referred to in the preceding clauses
(i), (ii) and (iii); and (v) any Person directly or indirectly
controlling, controlled by or under direct or indirect common
control with, any Person referred to in any of the preceding
clauses.
Agreement means this Second Amended and Restated Agreement
of Limited Partnership, including Schedule A, as amended from
time to time.
Amended & Restated Agreement has the meaning specified in
the Preliminary Statement.
Annual Partnership Management Fee means the fee payable to
the General Partners pursuant to the provisions of Section
6.12(a).
Apartment Complex means the real property located in Lake
City, Erie County, Pennsylvania as more fully described in the
Mortgage, together with (i) all buildings and other improvements
constructed or to be constructed thereon and (ii) all
furnishings, equipment and personal property covered by the
Mortgage.
Applicable Federal Rate means the applicable federal rate as
defined in Section 1274(d) of the Code.
Applicable Percentage has the meaning given to it in Section
42(b) of the Code.
Auditors means John Guelcher of McMahon, O'Polka, Guelcher &
Associates, 2809 West Eight Street, Erie, PA 16505 or such other
firm of independent certified public accountants as may be
engaged by the General Partners with the consent of Boston
Capital for the purposes of preparing the Partnership income tax
returns, auditing the books and records of the Partnership and
certifying financial reports of the Partnership.
Authority means Pennsylvania Housing Finance Agency.
BCCLP means Boston Capital Communications Limited
Partnership, a Massachusetts Limited Partnership, its successors
and assigns.
Boston Capital means Boston Capital Partners, Inc., a
Massachusetts corporation.
Breakeven Operations/Breakeven Point means the first time at
which, as certified by the General Partners, based upon three (3)
consecutive full calendar months of operation occurring after
Permanent Mortgage Commencement, with each month taken
individually, the rental income (including government subsidies)
of the Partnership actually received on a cash basis (excluding
prepaid rent) shall have exceeded all the Partnership's expenses
on an accrual basis (including the funding of any reserves
required pursuant to the terms of this Agreement), except for
depreciation, distributions of Cash Flow and Capital Transaction
proceeds to the Partners and the fees payable pursuant to this
Agreement. For purposes of the foregoing, expenses shall (i)
include monthly payments of principal and interest in the amount
specified in the Mortgage regardless of any forbearance thereof,
(ii) include a ratable portion of the annual amount (as estimated
by the General Partners) of those seasonal expenses (such as
utilities and maintenance expense) which might reasonably be
expected to be incurred on an unequal basis during a full annual
period of operation, and (iii) be adjusted, if necessary, so that
the expenses of real estate taxes and insurance are based on the
General Partners' estimate of the full value of the Apartment
Complex after completion of construction.
Capital Account has the meaning specified in Section 4.1(b).
Capital Contribution means the total value of cash or
property contributed and agreed to be contributed to the
Partnership by each Partner, as shown in Schedule A. Any
reference in this Agreement to the Capital Contribution of a then
Partner shall include a Capital Contribution previously made by
any prior Partner for the Interest of such then Partner.
Capital Transaction means any transaction the proceeds of
which are not includable in determining Cash Flow including,
without limitation, the sale or other disposition of all or
substantially all of the assets of the Partnership, but excluding
the payment of Capital Contributions.
Carryover Certification means the date upon 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 as of a date no later than
December 31, 1997, the Partnership had owned land or depreciable
property constituting part of the apartment complex and had
incurred capitalizable costs with respect to the Apartment
Complex of at least ten percent (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)(E)(ii) of the Code.
Cash Flow means the profits or losses of the Partnership
from and after the Commencement Date subject to any applicable
RECD or Lender requirements and to the following adjustments:
(a) Cost recovery deductions of buildings, improvements and
personal property and amortization of any financing fees shall
not be deducted;
(b) Mortgage amortization shall be deducted;
(c) Mortgage interest which is included in determining
profits and losses but which is not currently payable in cash
shall be deducted when actually paid;
(d) Payments to reserves under Section 6.5(e) shall be
deducted;
(e) Any amounts paid for capital expenditures shall be
deducted, unless paid from any replacement reserve or funded
through insurance;
(f) The proceeds of any Permanent Mortgage refinancing, any
sale, exchange, eminent domain taking, damage or destruction
(whether insured or uninsured), or other disposition, of all or
any part of the Apartment Complex (other than the proceeds of any
business or rental interruption insurance) shall not be included;
(g) Any rent or interest subsidy payments shall be
included;
(h) The fees set forth in Sections 6.12 and any fee payable
in connection with any transaction referred to in clause (f)
above shall not be deducted; and
(i) Prior to Permanent Mortgage Commencement, an amount
equal to the amount, if any, of net rental income applied to
complete the construction of the Apartment Complex pursuant to
Section 6.11(a) shall be deducted.
Class Contribution means the aggregate Capital Contributions
of all members of a particular class of Partners (i.e., the
General Partners, the Investment Limited Partner, the Special
Limited Partner or any Additional Limited Partner.)
Code means the Internal Revenue Code of 1986, as amended
from time to time, and the regulations (permanent or temporary)
issued thereunder. References herein to any Code section shall
include any successor provisions.
Commencement Date means the first day of the month in which
the Admission Date occurs.
Competitive Real Estate Commission means that real estate or
brokerage commission paid for the purchase or sale of the
Apartment Complex or other Partnership property which is
reasonable, customary and competitive in light of the size, type
and location of the Apartment Complex or other property.
Completion Date means the date upon which the Apartment
Complex has been completed as evidenced by the issuance by the
inspecting architect and by each governmental agency having
jurisdiction of certificates of substantial completion or
occupancy (or local equivalents) with respect to all 44 apartment
units in the Apartment Complex.
Consent of the Investment Limited Partner means the prior
written consent or approval of the Investment Limited Partner.
Construction and Development Fee means the fee described in
Section 6.12(b).
Consumer Price Index means the Consumer Price Index for all
Urban Consumers as published by the United States Department of
Labor (or, if publication is discontinued, by an appropriate
successor index) for the area including the location of the
Property.
Cost Certification means the date upon which the Investment
Limited Partner shall have received the written certification of
the Auditors, in a form and in substance satisfactory to the
Investment Limited Partner, as to the itemized amounts of the
construction and development costs of the Apartment Complex and
the Eligible Basis and Applicable Percentage pertaining to each
building in the Apartment Complex.
Credit Period means the period of ten tax years beginning
with the tax year in which the building is placed in service or,
at the election of the taxpayer, the succeeding tax year but only
if the building is a qualified low-income building as of the
close of the first year of that period.
Credit Recovery Loan means a constructive interest-bearing
advance of the Investment Limited Partner as more fully described
in Section 5.1(f). Credit Recovery Loans and interest thereon
shall not be treated as loans or interest, respectively, for
accounting, tax or liability purposes or for the purposes of
Section 6.2(a)(1). For the purposes of Article X, the term
Credit Recovery Loan shall not include any portion of such an
advance which shall have theretofore been paid to the Investment
Limited Partner.
Credit Shortfall has the meaning given to it in Section
5.1(f).
Disposition (including the forms Dispose and Disposing)
means, as to a Limited Partner, the assignment, sale, transfer,
exchange, or other disposition of all or any part of its
Interest.
89-12 Requirements means the requirements set forth in
Internal Revenue Procedure 89-12 which are prerequisites to the
issuance, assuming that each General Partner is a corporation, by
the Service of an advance ruling that the Partnership will be
taxed as a partnership and not as an association taxable as a
corporation for Federal income tax purposes.
Eligible Basis has the meaning given to it in Section 42 of
the Code.
Entity means any general partnership, limited partnership,
corporation, joint venture, trust, business trust, cooperative or
association.
Event of Bankruptcy means with respect to any Person,
(i) the entry of a decree or order for relief by a court
having jurisdiction in respect of such Person in a case under the
federal bankruptcy laws, as now or hereafter constituted, or any
other applicable federal or state bankruptcy, insolvency or other
similar law, or the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or similar official)
of such Person or for any substantial part of such Person's
property, or the issuance of an order for the winding-up or
liquidation of such Person's affairs and the continuance of any
such decree or order unstayed and in effect for a period of sixty
(60) consecutive days, or
(ii) the commencement by such Person of a proceeding seeking
any decree, order or appointment referred to in clause (i), the
consent by such Person to any such decree, order or the
appointment, or taking of any action by such Person in
furtherance of any of the foregoing.
Filing Office means the Office of the Secretary of State of
the Commonwealth of Pennsylvania and the office of the Recorder
of Deeds of Erie County, Pennsylvania.
General Partners means the Persons designated as the General
Partners on Schedule A and any Persons who become General
Partners as provided herein, in their capacities as general
partners of the Partnership. At any and all times where there is
only one General Partner, the term General Partners shall mean
such sole General Partner.
Hazardous Material shall have the collective meanings given
to the terms hazardous material, hazardous substances and
hazardous wastes in the Federal Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C. Sec.
9601 et seq., as amended, and shall also include any meanings
given to such terms in any similar state or local statutes,
ordinances, regulations or by-laws. In addition, the term
Hazardous Material shall also include oil and any other substance
known to be hazardous.
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-in-law and grandchildren-in-law.
Incentive Management Fee has the meaning specified in
Section 11.E.
Initial 100% Occupancy Date means the first date upon which
not less than one-hundred percent (100%) of the 44 apartment
units in the Apartment Complex shall have been leased to tenants
meeting the terms of the Minimum Set-Aside Test under executed
RECD-approved leases at rentals meeting the requirements of the
Rent Restriction Test.
Installment means an installment of the Investment Limited
Partner's Capital Contribution paid or payable to the Partnership
pursuant to Section 5.1.
Interest means the entire interest of a Partner in the
Partnership at any particular time, including the right of such
Partner to any and all benefits to which a Partner may be
entitled hereunder and the obligation of such Partner to comply
with the terms of this Agreement.
Invested Amount means (i) as to the Investment Limited
Partner, an amount equal to the paid-in Capital Contribution of
the Investment Limited Partner divided by .73 and (ii) as to any
other Partner, an amount equal to its paid-in Capital
Contribution.
Investment General 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 Boston Capital Tax Credit
Fund IV, L.P., particularly series __ thereof, a Delaware limited
partnership, and any Person or Persons who replace it as
Substituted Limited Partner, but shall not include any Special
Limited Partner or Additional Limited Partners.
Investment Partnership Agreement means the Agreement of
Limited Partnership of the Investment Limited Partner, as amended
from time to time.
Lender means RECD in its capacity as maker of a Mortgage
loan, or its successors and assigns in such capacity.
Limited Partners means the Investment Limited Partner, the
Special Limited Partner and any Additional Limited Partner.
Management Agent means the management and rental agent for
the Apartment Complex.
Management Agreement means the agreement between the
Partnership and the Management Agent providing for the management
of the Apartment Complex.
Management Fee means the Management Fee to which reference
is made in Article XI.A.
Minimum Set-Aside Test means the set aside test selected by
the Partnership pursuant to Section 42(g) of the Code whereby at
least 40% of the units in the Apartment Complex must be occupied
by individuals with incomes equal to 60% or less of area median
income, as adjusted for family size.
Mortgage means the mortgage indebtedness of the Partnership
to RECD; and where the context admits Mortgage shall mean and
include the mortgage note evidencing such indebtedness, the
mortgage or deed of trust and security agreement securing such
indebtedness, the loan agreement and all other documentation
related thereto which evidence and secure such indebtedness,
including any RECD documentation related thereto.
Original Agreement has the meaning specified in the
Preliminary Statement.
Original Certificate has the meaning specified in the
Preliminary Statement.
Original General Partner has the meaning specified in the
Preliminary Statement.
Original Limited Partner has the meaning specified in the
Preliminary Statement.
Partner means any General Partner or Limited Partner.
Partner Non-Recourse Debt means any Partnership liability
(a) that is considered non-recourse under Treasury Regulation
Section 1.1001-2 or for which the creditor's right to repayment
is limited to one or more assets of the Partnership and (b) for
which any Partner or Related Person bears the economic risk of
loss.
Partner Non-Recourse Debt Minimum Gain means, with respect
to any Partner, the sum of (a) the deductions attributable to
Partner Non-Recourse Debt that have been allocated to such
Partner and (b) the aggregate amount of distributions made to
such Partner of proceeds of such debt that are allocable to an
increase in minimum gain attributable to such debt (but only if
such Partner or a Related Person bears the economic risk of loss
for such debt) in excess of the sum of (c) such Partner's
aggregate share of the net decreases in minimum gain attributable
to such debt and (d) such Partner's share of the decreases in the
minimum gain attributable to such debt resulting from
revaluations of Partnership property subject to such debt. The
net increase (or decrease) in the minimum gain that is
attributable to Partner Non-Recourse Debt equals the sum of (i)
any increase (or decrease) in the net increase in Partnership
Minimum Gain during a year that would result if such Partner
NonRecourse Debt were treated as a Partnership Non-Recourse
Liability and (ii) any decrease (or increase) in the net decrease
in Partnership Minimum Gain during a year that would result if
such Partner Non-Recourse Debt were treated as a Partnership Non-
Recourse Liability.
Partnership means the limited partnership continued pursuant
to this Agreement.
Partnership Minimum Gain means the amount determined by
computing, with respect to each Partnership Non-Recourse
Liability, the amount of gain, if any, that would be realized by
the Partnership if it disposed of (in a taxable transaction) the
property subject to such liability in full satisfaction of such
liability, and by then aggregating the amounts so computed. Such
computations shall be made in a manner consistent with Treasury
Regulation Section 1.704-2(d).
Partnership Non-Recourse Liability means any Partnership
liability (or portion thereof) for which no Partner or Related
Person bears the economic risk of loss.
Permanent Lender means RECD, in its capacity as maker and
holder of the Permanent Mortgage, together with its successors
and assigns in such capacity.
Permanent Mortgage means the permanent financing provided,
or to be provided in the form of a Permanent Mortgage by the RECD
for the Apartment Complex following the completion thereof in the
aggregate principal amount of $1,174,169 consisting of two
components:
1. Assumption of a loan in the amount of $917,169 provided
pursuant to an Assumption Agreement dated November 12, 1997, by
and between the Partnership and RECD; and,
2. Equity financing in the amount of $257,000 provided
pursuant to a Promissory Note dated November 12, 1997.
Permanent Mortgage Commencement means the first date on
which all of the following shall have occurred: (a) the
Completion Date; (b) the principal amount and maturity date of
the Permanent Mortgage shall have been finally determined; and
(c) amortization of the Permanent Mortgage shall have commenced.
Person means any individual or Entity.
Project Documents means and includes the Permanent Mortgage,
the RECD Loan Agreement, the Rental Assistance Agreement, the
Management Agreement, all other instruments delivered to (or
required by) RECD 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 to the Investment Limited Partner means
$14,761 for 1998; $35,426 per annum for the years 1999 through
2007 (inclusive); and $14,759 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 $14,761.
Prospectus means the prospectus contained in the
registration statement (File No. 33-70564) filed with the
Securities and Exchange Commission on behalf of the Investment
Limited Partner for the registration of beneficial assignee
certificates and/or limited partnership interests under the
Securities Act of 1933 in the final form in which said prospectus
is filed with said Commission and as thereafter amended and/or
supplemented from time to time pursuant to Rule 424 under said
Act, or otherwise.
Qualified Income Offset Item means (1) an allocation of loss
or deduction that, as of the end of each year, reasonably is
expected to be made (a) pursuant to Section 704(e)(2) of the Code
to a donee of an interest in the Partnership, (b) pursuant to
Section 706(d) of the Code as the result of a change in any
Partner's Interest, or (c) pursuant to Regulation Section 1.751-
1(b)(2)(ii) as the result of a distribution by the Partnership of
unrealized receivables or inventory items and (2) a distribution
that, as of the end of such year, reasonably is expected to be
made to a Partner to the extent it exceeds offsetting increases
to such Partner's Capital Account which reasonably are expected
to occur during or prior to the Partnership taxable year in which
such distribution reasonably is expected to occur.
RECD means the Rural Economic & Community Development Agency
of the United States Department of Agriculture.
RECD Loan Agreement means the RECD Loan Agreement dated by
and between the Partnership and, as amended from time to time.
Related Person means a person related to a Partner within
the meaning of Treasury Regulation Section 1.752-4(b).
Rent Restriction Test means the test pursuant to Section 42
of the Code whereby the gross rent charged to tenants of the low-
income units in the Apartment Complex may not exceed thirty
percent (30%) of the qualifying income levels.
Rental Assistance Agreement means the Rental Assistance
Agreement, by and between the Partnership and RECD, as it may be
amended from time to time, and any successor agreement.
Reporting Fee means the fee payable to Boston Capital or an
Affiliate thereof pursuant to Section 6.12(c).
Schedule A means Schedule A to this Agreement as amended
from time to time.
Service means the Internal Revenue Service.
Site has the meaning given to it in the Federal
Comprehensive Environmental Response, Compensation and Liability
Act of 1980, 42 U.S.C. Sec. 9601 et seq., as amended, and shall
also include any meaning given to it in any similar state or
local statutes, ordinances, regulations or by-laws.
Special Limited Partner means BCTC 94, Inc., a Delaware
corporation, and any Person who becomes a Special Limited Partner
as provided herein, in its capacity as a special limited partner
of the Partnership.
State means the State of Pennsylvania.
State Designation means the date upon which the Partnership
receives the allocation by the authorized agency of the State of
a Tax Credit for the building(s) constituting the Apartment
Complex in an annual dollar amount of not less than $35,430 as
evidenced by the execution by or on behalf of such agency of
Form(s) 8609.
Subordinated Loan means any loan made by the General
Partners to the Partnership pursuant to Section 6.10.
Substituted Limited Partner means any Person who is admitted
to the Partnership as Limited Partner under Section 8.2 or
acquires the Interest of a Limited Partner pursuant to Section
5.2.
Tax Accountants means Reznick, Fedder & Silverman of
Bethesda, Maryland or such other firms of independent certified
public accountants as may be engaged by Boston Capital to review
the Partnership income tax returns.
Tax Credit means the low-income housing tax credit pursuant
to Section 42 of the Code.
Tax Credit Set-Aside means the date upon which the
Partnership receives a preliminary reservation by the authorized
agency of the State of Tax Credit for the building(s)
constituting the Apartment Complex in an annual dollar amount of
not less than $35,430.
Uniform Act means the Uniform Limited Partnership Act as
adopted by the State.
Vessel has the meaning given to it in the Federal
Comprehensive Environmental Response, Compensation and Liability
Act of 1980, 42 U.S.C. Sec. 9601 et seq., as amended, and shall
also include any meaning given to it in any similar state or
local statutes, ordinances, regulations or by-laws.
Withdrawal (including the forms Withdraw, Withdrawing and
Withdrawn) means, as to a General Partner, the occurrence of
death, adjudication of insanity or incompetence, Event of
Bankruptcy, dissolution, liquidation, or voluntary or involuntary
withdrawal or retirement from the Partnership for any reason,
including whenever a General Partner may no longer continue as a
General Partner by law or pursuant to any terms of this
Agreement. Withdrawal shall also mean the sale, assignment,
transfer or encumbrance by a General Partner of its interest as a
General Partner. A General Partner which is a corporation or
partnership shall be deemed to have sold, assigned, transferred
or encumbered its interest as a General Partner in the event (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) of a
controlling interest in a corporate General Partner or of a
general partner interest in a General Partner which is a
partnership. For purposes of this definition of Withdrawal,
controlling interest shall mean the power to direct the
management and policies of such person, directly or indirectly,
whether through the ownership of voting securities, by contract
or otherwise. Working Capital Loan means a loan made by the
General Partners to the Partnership as described in Section 9.2.
ARTICLE II
Name and Business
2.1 Name; Continuation
The name of the Partnership is Lake City Limited
Partnership. The Partners agree to continue the Partnership
which was formed pursuant to the provisions of the Uniform Act.
2.2 Office and Resident Agent
(a) The principal office of the Partnership is 850 Clinton
Square, Rochester, NY 14604 at which office there shall be
maintained those records required by the Uniform Act to be kept
by the Partnership. The Partnership may have such other or
additional offices as the General Partners shall deem desirable.
The General Partners may at any time change the location of the
principal office and shall give due notice thereof to the Limited
Partners.
(b) The resident agent in the State for the Partnership for
service of process is as follows:
Marilyn Thomas
1932B West Eighth Street
Erie, PA 16505
2.3 Purpose
The purpose of the Partnership is to acquire, hold, invest
in, construct, develop, improve, maintain, operate, lease and
otherwise deal with the Apartment Complex. The Partnership shall
operate the Apartment Complex in accordance with any applicable
RECD regulations and requirements. The Partnership shall not
engage in any other business or activity.
2.4 Term and Dissolution
The Partnership shall continue in full force and effect
until December 31, 2050 except that the Partnership shall be
dissolved and its assets liquidated prior to such date upon:
(a) The sale or other disposition of all or substantially
all of the assets of the Partnership;
(b) A General Partner dying, being adjudicated bankrupt,
insane or incompetent, (if a corporation or partnership) being
dissolved or liquidated, or voluntarily or involuntarily
withdrawing from the Partnership for any reason, including an
inability to continue serving as a General Partner by law or
pursuant to the terms of this Agreement, if (i) the remaining
General Partner(s), if any, shall fail to continue the business
of the Partnership and reconstitute the Partnership as a
successor limited partnership as provided in Section 7.2 and (ii)
the Investment Limited Partner shall fail to exercise the right
provided in Section 7.3;
(c) The election to dissolve the Partnership made in
writing by the General Partners with the Consent of the
Investment Limited Partner and the approval (if required) of
RECD;
(d) The entry of a final decree of dissolution of the
Partnership by a court of competent jurisdiction; or
(e) Any other event which causes the dissolution of the
Partnership under the Uniform Act if the Partnership is not
reconstituted pursuant to Section 7.2 or Section 7.3.
Upon dissolution of the Partnership, the General Partners
(or for purposes of this paragraph, their trustees, receivers or
successors) shall cause the cancellation of the Certificate,
liquidate the Partnership assets and apply and distribute the
proceeds thereof in accordance with Section 10.3.
Notwithstanding the foregoing, if, during liquidation, the
General Partners shall determine that an immediate sale of part
or all of the Partnership's assets would be impermissible,
impractical or cause undue loss to the Partners, the General
Partners may defer liquidation of, and withhold from distribution
for a reasonable time, any assets of the Partnership except those
necessary to satisfy Partnership debts and obligations (except
the Working Capital Loan and Subordinated Loans).
ARTICLE III
Mortgage, Refinancing and Disposition of Property
A. From and after Permanent Mortgage Commencement, neither
any General Partner nor any Related Person shall at any time
bear, nor shall the General Partners permit any other Partner or
any Related Person to bear, the economic risk of loss for the
payment of any portion of any Mortgage. The General Partners
promptly shall cause the Partnership to elect, to the extent
permitted and in the manner prescribed by RECD, that all debt
service payments made by the Partnership to RECD shall be applied
first to interest determined at the stated rate set forth in the
promissory note to RECD, all as provided under RECD regulations,
and then to principal due under the Permanent Mortgage.
B. The Partnership may decrease, increase or refinance the
Permanent Mortgage and may make any required transfer or
conveyance of Partnership assets for security or mortgage
purposes, provided, however, any such decrease (except through
the fifty year amortization schedule anticipated at Permanent
Mortgage Commencement), increase or refinancing of the Permanent
Mortgage may be made by the General Partners only with the
Consent of the Investment Limited Partner.
C. The Partnership may sell, lease, exchange or otherwise
transfer or convey all or substantially all the assets of the
Partnership only with the Consent of the Investment Limited
Partner. Notwithstanding the foregoing and except as set forth
in Section 6.2(a)(6), no Consent of the Investment Limited
Partner shall be required for the leasing of apartments to
tenants in the normal course of operations or the leasing of all
or substantially all the apartments to a public housing authority
at rents satisfactory to each RECD as expressed in writing.
D. The total compensation to all Persons for the sale of
the Apartment Complex shall be limited to a Competitive Real
Estate Commission, not to exceed six percent (6%) of the contract
price for the sale of the Apartment Complex.
ARTICLE IV
Partners; Capital
4.1 Capital and Capital Accounts
(a) The Capital Contribution of each Partner shall be as
set forth on Schedule A. No interest shall be paid on any
Capital Contribution. No Partner shall have the right to
withdraw its Capital Contribution or to demand and receive
property of the Partnership in return for its Capital
Contribution, except as may be specifically provided in this
Agreement or required by law.
(b) An individual Capital Account shall be established and
maintained on behalf of each Partner, including any additional or
substituted Partner who shall hereafter receive an interest in
the Partnership. In accordance with Treasury Regulation Section
1.704-1(b), the Capital Account of each Partner shall consist of
(i) the amount of cash such Partner has contributed to the
Partnership plus (ii) the fair market value of any property such
Partner has contributed to the Partnership net of any liabilities
assumed by the Partnership or to which such property is subject
plus (iii) the amount of profits or income (including tax-exempt
income) allocated to such Partner less (iv) the amount of losses
and deductions allocated to such Partner less (v) the amount of
all cash distributed to such Partner less (vi) the fair market
value of any property distributed to such Partner net of any
liabilities assumed by such Partner or to which such property is
subject less (vii) such Partner's share of any other expenditures
which are not deductible by the Partnership for Federal income
tax purposes or which are not allowable as additions to the basis
of Partnership property and shall be (viii) subject to such other
adjustments as may be required under the Code. The Capital
Account of a Partner shall not be affected by any adjustments to
basis made pursuant to Section 743 of the Code but shall be
adjusted with respect to adjustments to basis made pursuant to
Section 734 of the Code.
The original Capital Account established for any Substituted
Partner (as hereinafter defined) shall be in the same amount as,
and shall replace, the Capital Account of the Partner which such
Substituted Partner succeeds, and, for the purposes of this
Agreement, such Substituted Partner shall be deemed to have made
the Capital Contribution, to the extent actually paid in, of the
Partner which such Substituted Partner succeeds. The term
Substituted Partner as used in this paragraph, shall mean a
Person who shall become entitled to receive a share of the
allocations and distributions of the Partnership by reason of
such Person succeeding to all or any part of the Interest of a
Partner by assignment of all or any part of a Partner's Interest.
To the extent a Substituted Partner receives less than 100% of
the Interest of a Partner he succeeds, the original Capital
Account of such transferee Substituted Partner and his Capital
Contribution shall be in proportion to the portion of the
transferor Partner's Interest prior to the transfer which the
transferee receives, and the Capital Account of the transferor
Partner who retains a portion of his former Interest and his
Capital Contribution shall continue, and not be replaced, in
proportion to the portion of the transferor Partner's Interest
prior to the transfer which the transferor Partner retains.
Nothing in this Section 4.1(b) shall affect the limitations on
transferability of Interests set forth in Article VII or Article
VIII.
4.2 General Partner
The name, address and Capital Contribution of each General
Partner are as set forth on Schedule A.
4.3 Investment Limited Partner, Special Limited Partner and
Original Limited Partner
The Original Limited Partner hereby withdraws as a limited
partner of the Partnership and acknowledges that he no longer has
any Interest in, or rights or claims against, the Partnership as
a Limited Partner as of the Admission Date. The Investment
Limited Partner and the Special Limited Partner are hereby
admitted as the sole Limited Partners in substitution for the
Original Limited Partner as of the Admission Date and agree to be
bound by the terms and provisions of the Project Documents and
this Agreement. The names, addresses and Capital Contributions
of the Investment Limited Partner and the Special Limited Partner
are as set forth on Schedule A. The General Partners shall have
no authority to admit additional Limited Partners without the
Consent of the Investment Limited Partner and the Special Limited
Partner.
4.4 Liability of the Limited Partner
None of the Investment Limited Partner, the Special Limited
Partner and any Person who becomes an Additional Limited Partner
shall be liable for any debts, liabilities, contracts or
obligations of the Partnership and shall only be liable to pay
their respective Capital Contributions as and when the same are
due hereunder and under the Uniform Act.
4.5 Special Rights of the Investment Limited Partner
(a) Notwithstanding any other provision herein, to the
extent the law of the State is not inconsistent, each of the
Investment Limited Partner and the Special Limited Partner shall
have the right, subject to the prior written consent of RECD (if
such consent is required) to:
(i) amend this Agreement in any particular;
(ii) dissolve the Partnership;
(iii) remove the 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,
negligence, misconduct or breach of fiduciary duty, or (B) upon
the occurrence of any of the following: (1) such General Partner
shall have violated any provisions of any Project Document or
other document required in connection with any Mortgage, or any
provisions of the RECD regulations applicable to the Apartment
Complex; (2) such General Partner shall have violated any
provision of this Agreement or violated any provision of
applicable law; (3) any Mortgage shall have gone into default; or
(4) such General Partner shall have conducted its own affairs or
the affairs of the Partnership in such a manner as would (a)
cause the termination of the Partnership for Federal income tax
purposes; or (b) cause the Partnership to be treated for Federal
income tax purposes as an association taxable as a corporation;
(iv) continue the business of the Partnership with a
substitute General Partner; 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, (i) without any
further action by any Partner, the Special Limited Partner or its
designee shall automatically become a General Partner and acquire
in consideration of a cash payment of $100 such portion of the
Interest of the removed General Partner as counsel to the
Investment 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
Uniform Act, (ii) the remaining portion of the economic Interest
of the removed General Partner shall automatically be converted
to an equal economic Interest as an Additional Limited Partner,
(iii) the economic Interest of the Special Limited Partner as the
Special Limited Partner shall continue unaffected by the new
status of the Special Limited Partner or its designee as a
General Partner, and (iv) the new General Partner shall
automatically be irrevocably delegated all of the powers and
duties of the General Powers pursuant to Section 6.13. The
Special Limited Partner or any successor General partner proposed
by the Special Limited Partner shall have the option, exercisable
in its sole discretion, to acquire the Additional Limited Partner
Interest, or any portion thereof, of any removed General Partner
upon payment of the agreed upon then present fair market value of
such Interest or portion thereof. Any dispute as to the value of
the Interest or portion thereof to be acquired pursuant to the
immediately preceding sentence shall be submitted to a committee
composed of three qualified real estate appraisers, one chosen by
the removed General Partner, one chosen by the successor General
Partner, and the third chosen by the two so chosen. The
proceedings of such committee shall conform to the rules of the
American Arbitration Association, as far as appropriate, and its
decision shall be final and binding. The expense of arbitration
shall be born equally by the removed General Partner and the
Partnership. The method of payment to the removed General
Partner shall be fair and must protect the solvency and liquidity
of the Partnership. The method of payment will be deemed
presumptively fair where it provides for an interest-bearing
promissory note coming due in no less than five (5) years with
equal installments each year. In addition, upon removal, the
Partnership must promptly pay to the removed General Partner all
amounts then accrued and owing to the removed General Partner;
provided, however, that notwithstanding the language of Section
6.12, Article X, Article XI and any other provision hereof, no
removed General Partner or any Affiliate thereof shall be
entitled to receive any fee, compensation or other remuneration
from the Partnership, other than (i) the above-described payment
for the Interest, or portion thereof, of the removed General
Partner, and (ii) any such fee, compensation or other
remuneration which had already been earned in full prior the date
of such removal. The Partnership is not authorized to enter into
any arrangement whereby any fee, compensation or other
remuneration could be payable directly or indirectly to any
General Partner or Affiliate thereof in a manner inconsistent
with the immediately preceding sentence unless the prior written
consent of the Special Limited Partner shall have been obtained
to such particular agreement. The Partnership may offset against
any payments to a General Partner removed under this Section 4.5
any damages suffered by the Partnership as a result of any breach
of the obligations of such General Partner hereunder. A General
Partner so removed will not be liable as a General Partner for
any obligations of the Partnership 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) In order to implement Section 4.5(a)(v), the General
Partners are hereby required, within five (5) days after their
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. If, within thirty (30) days of its receipt of
any such copy of such an offer, the Special Limited Partner shall
send notice to the General Partners that the Special Limited
Partner desires that the Partnership accept such offer, then the
General Partners shall be required to accept such offer on behalf
of the Partnership and proceed with all deliberate speed to close
such transaction unless otherwise instructed by the Special
Limited Partner at any point prior to the closing of such
transaction. To the extent, if any, that the Special Limited
Partner shall determine, in its discretion, that the General
Partners are not proceeding appropriately with respect to any
such offer or closing, each Partner hereby grants to the Special
Limited Partner an irrevocable (to the extent permitted by law)
power of attorney coupled with an interest to execute and deliver
any and all documents and instruments on behalf of the
Partnership and any Partner as the Special Limited Partner may
deem to be necessary or appropriate in order to effect the
acceptance of and/or closing pursuant to any such offer in such a
manner as the Special Limited Partner shall, in its discretion,
determine 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 Partners shall
provide all Limited Partners within ten (10) days after receipt
of said request, written notice (either in person or by certified
mail) of a meeting and the purpose of such meeting to be held on
a date not less then fifteen (15) nor more than sixty (60) days
after receipt of said request, at a time convenient to the
Limited Partners. All meetings shall be held at the principal
office of the Partnership.
ARTICLE V
Capital Contributions of the Investment Limited 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 shall be paid
in cash installments (the Installments), as follows:
(1) $144,540 (the First Installment) on the latest to occur
of (i) the Admission Date, (ii) Tax Credit Set-Aside, or (iii)
Permanent Mortgage Commitment;
(2) $48,180, (the Second Installment) on the later of (i)
the Completion Date, (ii) Cost Certification, or (iii) receipt of
updated title insurance policy satisfactory to Investment Limited
Partner;
(3) $45,771 (the Third Installment) on the later of (i) the
Initial 100% Occupancy Date, (ii) the Breakeven Point; (iii)
Permanent Mortgage Closing; or (iv) State Designation; and
(4) $2,409 (the Fourth Installment) upon receipt of tax
return for the year in which Breakeven occurs;
provided, however, that the General Partners shall give the
Investment Limited Partner not less than 10 days' written notice
prior to the due date of each Installment subsequent to the First
Installment.
(b)(1) The obligation of the Investment Limited Partner
to pay each Installment is conditioned upon delivery by the
General Partners 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 have been satisfied and (ii) all representations and
warranties of the General Partners contained in this Agreement
are true and correct. Except as provided in the final sentence
of this Section 5.1(b), acceptance by the Partnership of any
Installment shall constitute a confirmation that, as of the date
of payment, all such conditions are satisfied and all such
representations and warranties are true and correct. The
obligation of the Investment Limited Partner to pay the First
Installment is also conditioned upon delivery by the General
Partners to the Investment Limited Partner of both (i) a legal
opinion of independent counsel to the Partnership, which opinion
must be satisfactory to the Investment Limited Partner as to
form, content and identity of counsel and (ii) an owner's title
insurance policy issued to the Partnership in an amount not less
than $1,423,450 which title policy must be acceptable to the
Investment Limited Partner as to form, content and identity of
title insurance company. 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 (expenses in excess of revenues which the
General Partners 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 or Section 10.2(c) to be used to pay
fees or special distribution(s), then such proceeds shall be
utilized to pay such fee(s) or special distribution(s) and the
recipient(s) thereof shall be required to, and hereby agree to,
utilize the proceeds of such fee(s) or special distribution(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 10 nor more than 30 days prior
to the due date for such Installment.
(d) If, as of the date when an Installment would otherwise
be due, any statement required to be made in the Payment
Certificate for such Installment cannot be truthfully made, the
General Partners shall notify the Investment Limited 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 has not irrevocably lost, in the good faith
judgment of the Investment General Partner, any material tax or
other benefits hereunder, then the Investment Limited Partner
shall pay such Installment to the Partnership thirty (30) days
after delivery by the General Partners 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) If with respect to any year all or a portion of which
occurs during the 60-month period commencing after the Completion
Date (a Reduction Year) the Actual Credit is or was less than the
Projected Credit, then the Capital Contribution of the Investment
Limited Partner shall be reduced by the Reduction Amount. The
Reduction Amount shall be equal to the sum of (A) the excess of
the Projected Credit for such year over the Actual Credit for
such year multiplied .69 (B) the amount of any recapture,
interest or penalty payable by the limited partners and/or the
holders of beneficial assignee certificates of the Investment
Limited Partner as a result of such shortfall, assuming that each
limited partner and/or each holder of a beneficial assignee
certificate in the Investment Limited Partner used all of the Tax
Credits allocated to him in the year of allocation. The Auditors
shall make their determination of the amount of the Actual Credit
with respect to each Reduction Year within 30 days following the
end of such year. The Capital Contribution of the Investment
Limited Partner shall be subject to reduction as hereinabove
described with respect to each Reduction Year. Any reduction in
the Capital Contribution of the Investment Limited Partner shall,
at the option of the Investment Limited Partner, either (i) first
be applied to reduce the Installment next due to be paid by the
Investment Limited Partner, with any portion of such reduction in
excess of the amount of such Installment then being applied to
reduce succeeding Installments, provided, that if no further
Installments remain to be paid or if the Reduction Amount exceeds
the sum of the amounts of the remaining Installments, then the
entire Reduction Amount, or the balance of the Reduction Amount,
as the case may be, shall be paid by the General Partners to the
Investment Limited Partner promptly after demand is made
therefor, as a payment of damages for breach of warranty, or (ii)
be paid in its entirety by the General Partners to the Investment
Limited Partner promptly after demand is made therefor, as a
payment of damages for breach of warranty.
(f) In the event that, for any reason, at any time after
the end of the year during which there occurs the 60-month
anniversary of the later of the Completion Date the amount of the
Actual Credit shall be less than the Projected Credit with
respect to any fiscal year of the Partnership (such difference
being hereinafter referred to as a Credit Shortfall), the
Investment Limited Partner shall be treated as having made a
constructive advance to the Partnership with respect to such year
(a Credit Recovery Loan), which shall be deemed to have been made
on January 1 of such year in an amount equal to the sum of (i)
the Credit Shortfall for such year plus (ii) the amount of any
recapture, interest or penalty payable by the limited partners
and/or the holders of beneficial assignee certificates of the
Investment Limited Partner as a result of the Credit Shortfall
for such year, assuming that each limited partner and/or each
holder of a beneficial assignee certificate in the Investment
Limited Partner used all of the Tax Credits allocated to him in
the 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(f) at 9% per annum. Credit
Recovery Loans shall be payable by the Partnership as provided in
Section 10.2(b), Clause Fourth.
(g) In the event that by the Completion Date, and based
upon the Cost Certification, it is determined that the product of
the Apartment Complex's Qualified Basis and its Applicable
Percentage is such that the Apartment Complex will not be
eligible to receive Tax Credit in an annual amount of at least
$35,430, or (iii) at any time after the Completion Date the
product of the Apartment Complex's Qualified Basis and its
Applicable Percentage is determined by the Auditors, the Tax
Accountants or the Service to be such that the Apartment Complex
will not be eligible to receive Tax Credit in an annual dollar
amount of at least $35,430, then (a) the General Partner shall
pay to the Investment Limited Partner an amount equal to 99.99%
of the product of (A) difference between (i) $35,430 and (ii) the
total amount of the actual annual Tax Credit allocated and
available to the Partnership and (B) 6.9 and (b) the Projected
Credit for each year shall thereafter be redefined to mean 99.99%
of the annual amount of Tax Credit actually so allocated to the
Partnership (the Revised Projected Credit). Any amount payable
by the General Partner to the Investment Limited Partner pursuant
to this Section 5.1(g) shall, at the option of the Investment
Limited Partner, (i) be applied 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 such amount payable by the
General Partner exceeds the sum of the remaining Installments, if
any, and/or (ii) be paid in its entirety by the General Partner
directly 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.
(h) Any provision of Section 5.1(e), (f) or (g) to the
contrary not withstanding, the Capital Contributions of the
Investment Limited Partner shall not be reduced and no Credit
Recovery Loans shall be deemed to have been made if the Actual
Credit is or was less than the Projected Credit solely as a
result in changes in the Code or the Regulations effected after
the Admission Date.
5.2 Return of Capital Contributions
(a) If (i) all 44 apartment units in the Apartment Complex
shall not have been placed in service by December 31, 1998 (or
any later date fixed by the General Partners with the Consent of
the Investment Limited Partner) or (ii) the Completion Date has
not occurred by September 1, 1999 (or any later date fixed by the
General Partners with the Consent of the Investment Limited
Partner), or (iii) Permanent Mortgage Commencement shall not have
occurred prior to December 31, 1999 (or any later date fixed by
the General Partners with the Consent of the Investment Limited
Partner), or (iv) State Designation shall not have occurred by
December 31, 1998 (or any later date fixed by the General Partner
with the Consent of the Investment Limited Partner), or (v) the
Partnership shall fail to meet the Minimum Set-Aside Test or the
Rent Restriction Test within 12 months of the date upon which the
final building in the Apartment Complex is placed in service
and/or fails to continue to meet either such Test at any time
during the sixty (60)-month period commencing on such date or
(vi) prior to Permanent Mortgage Commencement any of the
commitments to provide the Permanent Mortgage and/or any subsidy
financing shall be terminated or withdrawn and not reinstated or
replaced within ninety (90) days with terms equally or more
favorable to the Investment Limited Partner or terms for which
the Consent of the Investment Limited Partner shall have been
obtained, or (vii) if by Admission (or any later date fixed by
the General Partners with the Consent of the Investment Limited
Partner), the Investment Limited Partner shall not have received,
in form and substance satisfactory to the Investment Limited
Partner, the certification of the Auditors that as of a date no
later than December 31, 1997 the Partnership has incurred
capitalizable costs with respect to the Apartment Complex of at
least ten percent (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 is a qualified building
for the purposes of Section 42 (h)(1)(E)(ii) of the Code, or (ix)
if at any time it shall be determined by the Service or by the
Tax Accountants that as of December 31, 1997 the Partnership had
not incurred capitalizable costs with respect to the Apartment
Complex of at least ten percent (10%) of the Partnership's
reasonably expected basis in the Apartment Complex as of December
31, 1999, or (x) if Independent Cost Certification shall not have
occurred by December 31, 1998 (or any later date fixed by the
General Partners with the Consent of the Investment Limited
Partner), or (xi) the Breakeven Point has not occurred within
twelve (12) months of the Completion Date (or any later date
fixed by the General Partners with the Consent of the Investment
Limited Partner), or (xii) the General Partner fails to make any
Subordinated Loan as required by Sections 6.5, 6.10 and 6.12,
then the General Partners shall, within fifteen (15) days of the
occurrence thereof, send to the Investment Limited Partner and
the Special Limited Partner notice of such event and of their
obligation to repurchase the Interests of the Investment Limited
Partner and the Special Limited Partner by paying to the
Investment Limited Partner and the Special Limited Partner an
amount (the Repurchase Amount) equal to each such Partner's
Invested Amount minus the amount, 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, but not limited to, 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
and/or the Special Limited Partner requires such a repurchase.
If either the Special Limited Partner or the Investment Limited
Partner elects to require a repurchase of its Interest and the
payment to it of an amount equal to the Repurchase Amount, it
shall send notice thereof to the Partnership within thirty (30)
days after the mailing date of the General Partners' notice (or
at any time after the occurrence of any of the foregoing if the
General Partners shall not have sent such a notice thereof) and
the General Partners shall within thirty (30) days thereafter
repurchase the Interest of such Partner by paying to such Partner
an amount equal to its Repurchase Amount.
(b) Lender Disapproval. If RECD 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 selected by the Partner
being disapproved or not approved (or such other time as may be
specified by RECD in its disapproval), at the option of the
Partner being disapproved or not approved (if not directed by
RECD to withdraw), cease to be a Limited Partner. The General
Partners shall, within ten (10) days of the effective date of
such cessation, pay to the Partner being disapproved or not
approved an amount equal to its Capital Contribution minus the
amount, 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,
but not limited to attorney's fees, incurred by or on behalf of
such Partner in implementing this Section 5.2(b).
(c) Upon receipt by the Investment Limited Partner and/or
the Special Limited Partner of an 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 any losses, damages, and
liabilities to which such Partner (as a result of its
participation hereunder) may be subject.
(d) Waiver of Repurchase Right. The Investment Limited
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 Partners of a written
notice stating that the rights being waived pursuant to any
specified clause or clauses of Section 5.2(a), or any specified
portion thereof, are thereby waived from that date forward.
(e) Additional General Partner. If the General Partners
shall fail to make on the due date therefor any payment required
under Section 5.2(a) or Section 5.2(b), time being of the
essence, 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 pre-existing General Partners,
proportionally out of their Interests, in consideration of $10, a
one hundredth of one percent (0.01%) 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 not being affected thereby. Upon any such admission of
the Special Limited Partner or its designee as an additional
General Partner, each of the General Partners 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 against any and all losses, judgments, liabilities,
expenses and amounts paid in settlement of any claims sustained
in connection with its capacity as a General Partner.
(f) Any provisions of Section 4.5, 5.2(e), 6.1(b), 6.2(b)
or 6.10 to the contrary, no Additional General Partner shall be
admitted to the Partnership if the General Partners shall elect,
within five (5) days of notice of the proposed admission of such
Additional General Partner, to dispute in arbitration
(Arbitration) whether such Additional General Partner shall be
properly admitted under such Section. Such dispute (and any
other dispute to be settled by Arbitration hereunder) shall be
promptly submitted to a committee in Boston, Massachusetts,
composed of three qualified arbitrators, one chosen by the
General Partners, one chosen by the Special Limited Partner and a
third chosen by the two such chosen. The General Partners and
the Special Limited Partner shall each select their arbitrator
within 15 days notice of the Arbitration and the third arbitrator
shall be selected within 15 days after the appointment of the
first two arbitrators. The proceedings of such committee shall
conform to the rules of the American Arbitration Association and
its decision shall be final and binding. The expenses of
Arbitration shall be borne by the Partnership. Any other rights
and remedies hereunder relating to the subject of the Arbitration
shall not be exercised until the Arbitration has been concluded.
Notwithstanding the foregoing, in the event that the General
Partner elects to arbitrate the admittance of an Additional
General Partner, as provided for above, the Special Limited
Partner shall act as an interim Additional General Partner until
the arbitrators give their decision.
5.3 Default by Investment Limited Partner
(a) In the event that the Investment Limited Partner shall
fail to pay any Installment which shall become due to the
Partnership pursuant to Section 5.1 and such failure shall
continue for 21 days (or such additional time as may be provided
pursuant to Section 5.3(b) below) following the receipt of
written notice of such failure by the Investment Limited Partner
(the Cure Period), then the Investment Limited Partner shall be
in default hereunder (a Default) and the Partnership shall be
entitled to exercise all remedies at law and in equity, including
without limitation exercise of its rights as a secured creditor
as referred to below. Interest on any amounts in default shall
accrue from and after the Default at 9% per annum.
(b) In the event the Investment Limited Partner shall
dispute the claim by the General Partners that a particular
Installment is currently due and payable, it may send notice to
such effect to the General Partners stating the basis for its
dispute and offering to submit such dispute to arbitration as
provided in subparagraph (c) below. The Cure Period referred to
in subparagraph (a) above shall be suspended by the sending of
such notice and (i) shall recommence at the point of suspension
(i.e., beginning with the number of days elapsed when such
suspension occurred) upon delivery to the Investment Limited
Partner of the arbitrators' final determination (if adverse to
the Investment Limited Partner) as provided in subparagraph (c)
below or (ii) shall begin anew (i.e. a new 21-day Cure Period
shall begin to run) upon receipt by the Investment Limited
Partner of notice from the General Partners to the effect that
the General Partners have eliminated the cause for the dispute
and that the Installment in question is now due and payable.
(c) In the event the Investment Limited Partner elects to
arbitrate a dispute relating to the payment of an Installment
hereunder, such matter shall be submitted to Arbitration in the
manner provided in Section 5.2(f).
(d) The Investment Limited Partner hereby grants a separate
security interest to the Partnership in the Interest of the
Investment Limited Partner hereunder to secure the obligation of
the Investment Limited Partner to pay all Installments of its
Capital Contribution to the Partnership in accordance with this
Agreement.
(e) This Section 5.3 shall be void and of no further force
or effect from and after the date upon which the Partnership
receives the Fourth Installment of the Capital Contribution of
the Investment Limited Partner.
ARTICLE VI
Rights, Powers and Duties of General Partners
6.1 Authorized Acts
Subject to Section 6.2, Section 6.3, and all other
provisions of this Agreement, the General Partners for, in the
name and on behalf of the Partnership, are hereby authorized to
do the following in furtherance of the purposes of the
Partnership:
(1) To acquire by purchase, lease, exchange or otherwise
any real or personal property;
(2) To construct, operate, maintain, finance and improve,
and to own, sell, convey, assign, mortgage or lease any real
estate and any personal property;
(3) To borrow money and issue evidences of indebtedness and
to secure the same by mortgage, pledge or other lien on the
Apartment Complex or any other assets of the Partnership;
(4) To execute the Permanent Mortgage, the other Project
Documents and all such other documents as the General Partners
deem necessary or appropriate in connection with the acquisition,
development and financing of the Apartment Complex;
(5) To prepay in whole or in part, refinance or modify the
Permanent Mortgage or any other financing affecting the Apartment
Complex;
(6) To employ the Management Agent (which may be an
Affiliate of the General Partners) and to pay reasonable
compensation for its services;
(7) To employ their respective Affiliates to perform
services for, or sell goods to, the partnership;
(8) To execute contracts with RECD, the State or any
subdivision or agency thereof or any other government agency to
make apartments or tenants in the Apartment Complex eligible for
any public-subsidy program;
(9) To execute leases of some or all of the apartment units
of the Apartment Complex to a public housing authority and/or to
a non-profit corporation, cooperative or other non-profit Entity;
and
(10) To enter into any kind of activity and to perform and
carry out contracts of any kind which may be lawfully carried on
or performed by a partnership and to file all certificates and
documents which may be required under the laws of the State.
6.2 Restrictions on Authority
(a) Notwithstanding any other Section of this Agreement,
the General Partners shall have no authority to perform any act
in violation of applicable law, RECD or other government
regulations, requirements of any Lender, or the Project
Documents. In the event of any conflict between the terms of
this Agreement and any applicable RECD or other government
regulations or requirements of any Lender, the terms of such
regulations or requirements shall govern. Neither shall the
General Partners have any authority to do any of the following
acts without the Consent of the Special Limited Partner:
(1) To borrow in excess of $10,000 in the aggregate at any
one time outstanding on the general credit of the Partnership,
except borrowings constituting Subordinated Loans or the Working
Capital Loan;
(2) To borrow from the Partnership or commingle Partnership
funds with funds of any other Person;
(3) Following the Completion Date, to construct any new or
replacement capital improvements on the Apartment Complex which
substantially alter the Apartment Complex or its use or which are
at a cost in excess of $10,000 in a single Partnership fiscal
year, except (a) replacements and remodeling in the ordinary
course of business or under emergency conditions or (b)
construction paid for from insurance proceeds;
(4) To acquire any real property in addition to the
Apartment Complex;
(5) Following Permanent Mortgage Commencement, to increase,
decrease (except through the amortization schedule anticipated at
Permanent Mortgage Commencement) or refinance the Permanent
Mortgage;
(6) To rent apartments in the Apartment Complex such that
the Apartment Complex would not meet the requirements of the
Minimum Set-Aside Test or the Rent Restriction Test;
(7) To sell, exchange or otherwise convey or transfer the
Apartment Complex or substantially all the assets of the
Partnership;
(8) To terminate any agreement with RECD;
(9) To pledge or assign any of the Capital Contribution of
the Investment Limited Partner or the proceeds thereof; or
(10) To do any act required to be approved or ratified by
all limited partners under the Uniform Act.
(b) In the event that any General Partner violates any
provision of Section 6.2(a), the Special Limited Partner, in its
sole discretion, may cause itself or its designee to be admitted
as an additional General Partner without any further action by
any other Partner. Upon any such admission of an additional
General Partner, each pre-existing General Partner shall be
deemed to have assigned proportionally to the additional General
Partner, automatically and without further action, such portion
of its General Partner interest so that the additional General
Partner shall receive not less than one hundredth of one percent
(0.01%) interest in the profits, losses, tax credits and
distributions of the Partnership in consideration of $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 be irrevocably delegated all of the
power and authority of all of the General Partners pursuant to
Section 6.13. Any such additional General Partner shall have the
right to withdraw as a General Partner at any time, leaving the
pre-existing General Partners once again as the only General
Partners, the provisions of Article VII notwithstanding. Each
Partner hereby grants to the Special Limited Partner a special
power of attorney, irrevocable to the extent permitted by law and
coupled with an interest, to amend the Certificate and this
Agreement and to do anything else which, in the view of the
Special Limited Partner, may be necessary or appropriate to
accomplish the purposes of this Section 6.2(b) or to enable any
additional General Partner admitted pursuant to this Section
6.2(b) to manage the business of the Partnership. The admission
of an additional General Partner shall not relieve any other
General Partner of any of its economic obligations hereunder, and
each other General Partner shall fully indemnify and hold
harmless the additional General Partner from and against any and
all losses, judgments, liabilities, expenses and amounts paid in
settlement of any claims sustained in connection with its
capacity as a General Partner.
(c) Neither the Investment General Partner nor any Affiliate
thereof shall be given an exclusive right to sell, or exclusive
employment to sell, the Apartment Complex.
6.3 Personal Services
No General Partner or Affiliate thereof shall receive any
salary or other 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 and Article XI or as to which the prior written
consent of the Special Limited Partner shall have been obtained
to the precise terms thereof prior to the commencement of such
services or the provision of such goods. Any Partner may engage
independently or with others in other business ventures of every
nature and description including the ownership, operation,
management, syndication and development of competing real estate;
neither the Partnership nor any other Partner shall have any
rights in and to such independent ventures or the income or
profits derived therefrom.
6.4 Business Management and Control; Tax Matters Partner
Subject to the provisions of this Agreement, the General
Partners shall have the exclusive right to control the business
of the Partnership. The Investment Limited Partner shall have no
right to take part in the management or control of the business
of the Partnership or to transact any business in the name of the
Partnership. No provision of this Agreement which makes the
Consent of the Investment Limited Partner a condition for the
effectiveness of an action taken by the General Partners is
intended, and no such provision shall be construed, to give the
Investment Limited Partner any participation in the control of
the Partnership business. Each of the Investment Limited Partner
and the Special Limited Partner hereby consents to the exercise
by the General Partners of the powers conferred on them by law
and this Agreement, and the General Partners agree to exercise
control of the business of the Partnership only in accordance
with the provisions of this Agreement. 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 an
impediment to the ability of either the Investment Limited
Partner or the Special Limited Partner to take any action
hereunder. All Partners hereby agree that Home Properties of New
York, L.P. shall serve as the Tax Matters Partner. In the case of
litigation, the Tax Matters Partner is required to file suit in
the United States Tax Court unless the Consent of the Investment
Limited Partner is obtained to file suit in the United States
Claims Court or the United States District Court. Nothing herein
shall be construed to restrict the Partnership from engaging the
Auditors to assist the Tax Matters Partner in discharging its
duties hereunder. Notwithstanding any provision to the contrary,
the Partnership shall utilize a 40-year depreciation schedule
unless and until all of the partners agree to modify said
depreciation schedule.
6.5 Duties and Obligations
(a) The General Partners shall manage the affairs of the
Partnership to the best of their ability, shall use their best
efforts to carry out the purpose of the Partnership, and shall
devote to the Partnership such time as may be necessary for the
proper performance of their duties and the business of the
Partnership. The General Partners shall promptly take all action
which may be necessary or appropriate for the proper development,
maintenance and operation of the Apartment Complex in accordance
with the provisions of this Agreement, the Project Documents and
applicable laws and regulations including, without limitation,
funding the Construction and Development Fee to the extent
Capital Contributions are insufficient. The General Partners are
responsible for the management and operation of the Partnership,
including the oversight of the rent-up and operational stages of
the Apartment Complex.
(b) The General Partners shall use their best efforts to
cause the Partnership to generate Cash Flow for distribution to
the Partners at the maximum realizable level in view of (i) any
applicable RECD and other regulations, (ii) the Minimum Set-Aside
Test and (iii) the Rent Restriction Test, and, if necessary, the
General Partners shall also use their best efforts to obtain
approvals and implementation of appropriate adjustments in the
rental schedule of the Apartment Complex.
(c) The General Partners shall cause the Partnership to
obtain and keep in force, during the term of the Partnership,
comprehensive casualty insurance, including, but not limited to,
fire and other risks generally included under extended coverage
policies, workmen's compensation and public liability insurance
in favor of the Partnership (i) with such companies and in such
amounts as shall be satisfactory to RECD, or, if the Apartment
Complex is no longer subject to RECD regulation or requirements,
as shall be customary for apartment complexes such as the
Apartment Complex and (ii) in amounts which shall be (A) no less
than those amounts which are customary in the area for apartment
complexes similar to the Apartment Complex, (B) no less than such
amounts as may be reasonably requested by the Investment Limited
Partner and/or Special Limited Partner from time to time, and (C)
in any event, sufficient to prevent the Partnership from becoming
a co-insurer under any such policies. No deductibles on such
policies may exceed $1,000. The public liability insurance in
favor of the Partnership shall be in an amount not less than
$6,000,000 (of which up to $5,000,000 may be provided under an
umbrella policy). Through the Completion Date, or such later
date as may be required by RECD, the General Partners shall also
cause the Partnership to obtain and keep in force a builder's
risk policy in favor of the Partnership in an amount not less
than the greater of (i) the full replacement value of the
Apartment Complex (excluding the value of the underlying land,
the site utilities and the foundations) or (ii) such other amount
as shall be required by RECD. Throughout the term of the
Partnership, the General Partners shall provide copies of all
such policies (or binders) to the Investment Limited Partner
promptly after their receipt thereof. Upon the request of the
Investment Limited Partner to the General Partners, the General
Partners shall cause the applicable insurer to name the
Investment Limited Partner as an additional insured on each
Partnership insurance policy.
(d) The obligations of the General Partners hereunder shall
be the joint and several obligations of each General Partner.
Except as otherwise provided in Sections 4.5(b) and 7.1, such
obligations shall survive any Withdrawal of a General Partner
from the Partnership.
(e)(1) The General Partner shall establish and maintain
reasonable reserves 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 $14,130 from its Cash Flow into
replacement reserves. The General Partners shall be obligated
from the later to occur of (i) Permanent Mortgage Commencement or
(ii) the Admission Date and for a period of three (3) years
thereafter, to the extent that Cash Flow (as determined before
deduction of this reserve deposit) for any such year shall be
insufficient to make such deposit in full, to fund such shortfall
from their own funds as a Subordinated Loan. Funding of this
account may be suspended in any period during which this account
has a balance of $141,300 or as allowed by RECD.
(e)(2) Upon admission of the Investment Limited Partner, the
General Partners shall establish an operating reserve account in
such amounts as shall be required by RECD and/or the Authority to
provide for operating deficits. Funds in the operating reserve
account may be released to the General Partners as allowed by the
Lenders.
(f) Each General Partner shall be bound by the Project
Documents, and no additional General Partner shall be admitted if
he, she or it has not first agreed to be bound by this Agreement
(and assume the obligations of a General Partner hereunder) and
by the Project Documents to the same extent and under the same
terms as the other General Partners.
(g) The General Partners shall take all actions necessary
to ensure that the Investment Limited 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 Partners shall, inter alia, cause (i) the Partnership to
satisfy all requirements imposed from time to time under the Code
with respect to rental levels and occupancy by qualified tenants
by the end of the first year of the credit period so as to permit
the Partnership to be entitled to the Tax Credit throughout the
compliance period specified in the Code, (ii) all dwelling units
in the Apartment Complex to be leased for periods of not less
than six months to persons satisfying the Rent Restriction Test,
(iii) the Partnership to make all appropriate Tax Credit
elections in a timely fashion, and (iv) all rental units in the
Apartment Complex to be of equal quality with comparable
amenities available to low-income tenants on a comparable basis
without separate fees.
(h) On or before the Admission Date, the General Partners
shall provide to the Investment Limited Partner either (i) an
appraisal of the Apartment Complex prepared by a competent
independent appraiser or (ii) completed RECD 1924-13 (estimate
and certificate of actual cost) and 1930-7 (statement of budget,
income and expense) or HUD project cost and budget analysis on
Form 2264, or any successor RECD or HUD form, any comparable form
of a state or other governmental agency, including any applicable
Tax Credit allocation agency, setting forth estimates with
respect to construction and mortgage financing costs and initial
rental income and operating expense figures for the Apartment
Complex.
(i) On or before the Admission Date, the General Partners
shall provide to the Investment Limited partner, in form and
substance satisfactory to the Investment Limited Partner, a
certification of the Tax Accountants that as of a date no later
than December 31, 1997, the Partnership has incurred
capitalizable costs with respect to the Apartment Complex of at
least ten percent (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 is a qualified building
for the purposes of Section 42(h)(1)(E)(ii) of the Code.
(j) The General Partners shall (i) not store (except in
compliance with all laws, ordinances, and regulations pertaining
thereto) or dispose of any Hazardous Material at the Apartment
Complex, or at or on any other Site or Vessel owned, occupied, or
operated either by any General Partner, any Affiliate of a
General Partner, or any Person for whose conduct any General
Partner is or was responsible; (ii) neither directly nor
indirectly transport or arrange for the transport of any
Hazardous Material (except in compliance with all laws,
ordinances, and regulations pertaining thereto); (iii) provide
the Investment Limited Partner with written notice (x) upon any
General Partner's obtaining knowledge of any potential or known
release, or threat of release, of any Hazardous Material at or
from the Apartment Complex or any other Site or Vessel owned,
occupied, or operated by any General Partner, any Affiliate of a
General Partner or any Person for whose conduct any General
Partner is or was responsible or whose liability may result in a
lien on the Apartment Complex; (y) upon any General Partner's
receipt of any notice to such effect from any Federal, state, or
other governmental authority; and (z) upon any General Partner's
obtaining knowledge of any incurrence of any expense or loss by
any such governmental authority in connection with the
assessment, containment, or removal of any Hazardous Material for
which expense or loss any General Partner may be liable or for
which expense or loss a lien may be imposed on the Apartment
Complex.
6.6 Representations and Warranties
The General Partners represent and warrant to the Investment
Limited Partner and the Special Limited Partner as follows:
(1) The Partnership is a duly organized limited partnership
validly existing and in good standing under the law of the state
of Pennsylvania. The Partnership is duly qualified to carry on
its business in the State and has complied with all filing
requirements necessary for its existence in the State and to
preserve the limited liability of the Investment Limited Partner
and the Special Limited Partner.
(2) No event or proceeding has occurred or is pending or
threatened which would (a) materially adversely affect the
Partnership or its properties, or (b) materially adversely affect
the ability of the General Partners or any of their Affiliates to
perform their respective obligations hereunder or under any other
agreement with respect to the Apartment Complex, other than
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.
(3) No default (or event which, with the giving of notice
or the passage of time or both, would constitute a default) has
occurred and is continuing under this Agreement or under any
material provision of the Project Documents, and the same are in
full force and effect.
(4) No Partner or Related Person bears the economic risk of
loss with respect to the Permanent Mortgage.
(5) The Apartment Complex is being or has been completed in
a timely manner in conformity with the Project Documents. There
is no violation by the Partnership or the General Partners of any
zoning, environmental or similar regulation applicable to the
Apartment Complex which could have a material adverse effect
thereon, and the Partnership has complied with all applicable
municipal and other laws, ordinances and regulations relating to
such construction and use of the Apartment Complex. All
appropriate public utilities, including, but not limited to,
water, electricity, gas (if called for in the plans and
specifications), and sanitary and storm sewers, are or will be
available and operating properly for each unit in the Apartment
Complex at the time of the first occupancy of such unit.
(6) The Partnership owns good and marketable fee simple
title to the Apartment Complex, subject to no material liens,
charges or encumbrances other than those which (a) are both
permitted by the Project Documents and are noted or excepted in
the title insurance policy submitted to the Investment Limited
Partner as a precondition to payment of the First Installment,
and (b) do not materially interfere with use of the Apartment
Complex (or any part thereof) for its intended purpose or have a
material adverse effect on the value of the Apartment Complex.
(7) The execution and delivery of all instruments and the
performance of all acts heretofore or hereafter made or taken
pertaining to the Partnership or the Apartment Complex by each
Affiliate of a General Partner which is a corporation have been
or will be duly authorized by all necessary corporate or other
action, and the consummation of any such transactions with or on
behalf of the Partnership will not constitute a breach or
violation of, or a default under, the charter or by-laws of such
Affiliate or any agreement by which such Affiliate or any of its
properties is bound, nor constitute a violation of any law,
administrative regulation or court decree.
(8) Any General Partner which is a corporation (a
Corporation) has been duly organized, is validly existing and in
good standing under the laws of its state of incorporation and
has all requisite corporate power to be a General Partner and to
perform its duties and obligations as contemplated by this
Agreement and the Project Documents. Neither the execution and
delivery by any Corporation of this Agreement nor the performance
of any of the actions of any Corporation contemplated hereby has
constituted or will constitute a violation of (a) the articles of
organization or by-laws of such Corporation, (b) any agreement by
which such Corporation is bound or to which any of its property
or assets is subject, or (c) any law, administrative regulation
or court decree.
(9) No Event of Bankruptcy has occurred with respect to any
General Partner.
(10) All accounts of the Partnership required to be
maintained under the terms of the RECD Loan Agreement, including,
but not necessarily limited to, any account for replacement
reserves, are currently funded to the levels required by RECD.
(11) If the only General Partners or Partners are
corporations, then the General Partner(s) have a net worth which
satisfies the 89-12 Requirements.
(12) All payments and expenses required to be made or
incurred in order to complete construction of the Apartment
Complex in conformity with the Project Documents, to fund any
reserves hereunder or under any other Project Document required
to be funded at or prior to the later of the Admission Date or
Permanent Mortgage Commencement, to satisfy all requirements
under the Project Documents and/or which form the basis for
determining the principal sum of the Permanent Mortgage and to
pay the Construction and Development Fee have been or will be
paid or provided for utilizing only (a) the Capital Contribution
of the Investment Limited Partner, (b) the Capital Contributions
of the General Partners in the amounts set forth on Schedule A as
of the Admission Date, (c) 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 RECD), (d) any insurance proceeds and (e) the
funds furnished by the General Partners pursuant to Sections
6.5(a) and 6.11(a).
(13) The amount of Tax Credit which is expected to be
allocated by the Partnership to the Investment Limited Partner is
$14,761 for 1998; $35,426 per annum for the years 1999 through
2007 (inclusive); and $14,759 for 2008.
(14) The Apartment Complex is being developed in a manner
which satisfies and shall continue to satisfy, all restrictions,
including tenant income and rent restrictions, applicable to
projects generating Tax Credits.
(15) No General Partner, any Affiliate of a General Partner
or Person for whose conduct any General Partner is or was
responsible has ever: (i) owned, occupied, or operated a Site or
Vessel on which any Hazardous Material was or is stored,
transported, or disposed of, except if such storage,
transportation or disposition was 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 or is at all times in compliance with all laws, ordinances
and regulations pertaining thereto); (iii) caused or was legally
responsible for any release or threat of release of any Hazardous
Material; (iv) received notification from any Federal, state or
other governmental authority of (x) any potential, known, or
threat of release of any Hazardous Material from the Apartment
Complex or any other Site or Vessel owned, occupied, or operated
by any General Partner, by 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; or (y) the incurrence of any expense or loss
by any such governmental authority or by any other Person in
connection with the assessment, containment, or removal of any
release or threat of release of any Hazardous Material from the
Apartment Complex or any such Site or Vessel.
(16) To the best of the General Partners' knowledge, no
Hazardous Material was ever or is now stored on, transported, or
disposed of on the land comprising the Apartment Complex, except
to the extent any such storage, transport or disposition was at
all times in compliance with all laws, ordinances, and
regulations pertaining thereto.
(17) The General Partners have fulfilled and will continue
to fulfill all of their duties and obligations under Section 6.5.
(18) Rental Assistance shall be provided for all 44 units in
the Apartment Complex by RECD.
(19) The General Partner shall make a capital contribution
upon Admission in the amount of $100.
(20) No building which constitutes any part of the Apartment
Complex was last placed in service for any purpose within ten
years of the date such building was purchased by the Partnership,
the General Partners, or any of them, or any Affiliate of any
General Partner.
(21) No building which constitutes any part of the Apartment
Complex has ever been placed into service by any General Partner,
or any them, or any Person related to the General Partners or any
of them, within the meaning of Section 42 of the Code.
(22) No building which constitutes any part of the Apartment
Complex has received an allocation of low-income housing tax
credit for which the fifteen year compliance period is still in
effect.
(23) Within the ten years prior to the Partnership's
acquisition of the Apartment Complex, no rehabilitation work has
been performed, on any building which constitutes any part of the
Apartment Complex, the cost for which was greater than 25% of
such building's adjusted basis.
(24) The total cost of rehabilitation expenses, as that term
is defined in Section 42 of the Code, incurred during any 24
month period with respect to each building constituting any part
of the Apartment Complex was equal to, or greater than, the
greater of (a) ten percent (10%) of such building's unadjusted
basis, or $3,000 per low-income housing unit in such building.
(25) The Partnership has fulfilled all requirements set
forth in Section 42 of the Code for each building to qualify for
the acquisition and rehabilitation tax credits as set forth in
said Section.
6.7 Liability on the Permanent Mortgage
Neither any General Partner nor any Related Person shall at
any time bear the economic risk of loss for the payment of any
portion of any Mortgage, and the General Partners shall not
permit any other Partner or any Related Person to bear the
economic risk of loss for the payment of any portion of any
Mortgage.
6.8 Indemnification of the General Partners
(a) No General Partner nor any Affiliate thereof shall have
liability to the Partnership or to any Limited Partner for any
loss suffered by the Partnership which arises out of any action
or inaction of any General Partner or Affiliate thereof if such
General Partner or Affiliate thereof in good faith determined
that such course of conduct was in the best interest of the
Partnership and such course of conduct did not constitute
negligence or misconduct of such General Partner or Affiliate
thereof.
(b) A General Partner or any Affiliate thereof shall be
indemnified by the Partnership against losses, judgments,
liabilities, expenses and amounts paid in settlement of any
claims sustained in connection with the Partnership, provided
that all of the following conditions are met: (i) such General
Partner has determined, in good faith, that the course of conduct
which caused the loss, judgment, liability, expense or amount
paid in settlement was in the best interests of the Partnership;
and (ii) such loss, judgment, liability, expense or amount paid
in settlement was not the result of negligence or misconduct on
the part of the General Partner or Affiliate thereof; and (iii)
such indemnification or agreement to hold harmless is recoverable
only out of the assets of the Partnership, and not from the
Limited Partners.
(c) Notwithstanding the above, no General Partner or any
Affiliate thereof performing services for the Partnership or any
broker-dealer shall be indemnified for any losses, liabilities or
expenses arising from or out of an alleged violation of Federal
or state securities laws unless (i) there has been a successful
adjudication on the merits of each count involving securities
laws violations as to the particular indemnitee and, the court
approves the indemnification of such litigation costs, (ii) such
claims have been dismissed with prejudice on the merits by a
court of competent jurisdiction as to the particular indemnitee
and, the court approves the indemnification of such litigation
costs or (iii) a court of competent jurisdiction approves a
settlement of the claims against a particular indemnitee and the
court finds that indemnification of the settlement and related
costs should be made. In any claim for indemnification for
Federal or state securities law violations, the party seeking
indemnification shall, prior to seeking court approval for such
indemnification, place before the court the positions of the
Securities and Exchange Commission, the Pennsylvania Securities
Division and any other applicable state securities administrator
with respect to the issue of indemnification for securities law
violations.
(d) The Partnership shall not incur the cost of the portion
of any insurance, other than public liability insurance, which
insures any party against any liability as to which such party is
herein prohibited from being indemnified.
(e) The Partnership may indemnify Affiliates of the General
Partner under this Section 6.8 only if the loss involves activity
in which such Affiliates acted in the capacity of a General
Partner.
(f) For purposes of this Section 6.8 only, the term
Affiliate shall mean any Person performing services on behalf of
the Partnership who (i) directly or indirectly controls, is
controlled by or is under common control with a General Partner;
(ii) owns or controls ten percent (10%) or more of the
outstanding voting securities of a General Partner; (iii) is an
officer, director, partner or trustee of a General Partner; or
(iv) if a General Partner is an officer, director, partner or
trustee, is any company for which such General Partner acts in
any such capacity.
6.9 Indemnification of the Partnership and the Limited
Partners
(a) The General Partners will indemnify and hold the
Partnership and the Limited Partners harmless from and against
any and all losses, damages and liabilities which the Partnership
or any Limited Partner may incur by reason of the (a) past,
present or future actions or omissions of the General Partner or
any of their Affiliates, or (b) any liabilities to which either
the Partnership or the Apartment Complex is subject; provided,
however, that the foregoing indemnification shall not apply to
(i) any Mortgage or (ii) necessary contractual obligations
incurred pursuant to RECD requirements in connection with the
operation of the Apartment Complex in the ordinary course of
business.
(b) Notwithstanding the foregoing, no General Partner shall
be liable to a Limited Partner or the Partnership for any act or
omission for which the Partnership is required to indemnify such
General Partner under Section 6.8.
(c) The General Partners shall indemnify, defend, and hold
the Investment Limited Partner harmless from and against any
claim brought or threatened against the Investment Limited
Partner or loss (as well as from any and all attorneys' fees and
expenses incurred in connection with any such claim or loss) on
account of the presence of any Hazardous Material at the
Apartment Complex. Any claim or loss described in the
immediately preceding sentence may be defended, compromised,
settled, or pursued by the Investment Limited Partner with
counsel of the Investment Limited Partner's selection, but at the
expense of the General Partners. Notwithstanding anything else
set forth herein, this indemnification shall survive the
withdrawal of any General Partner and/or the termination of this
Agreement.
6.10 Operating Deficits
Subject to the prior written consent of each RECD (if such
consent shall be required under applicable RECD regulations), the
General Partners shall be obligated from the later to occur of
(i) Permanent Mortgage Commencement or (ii) the Admission Date to
advance funds to meet operating expenses and debt service of the
Partnership which exceed operating income available for the
payment thereof. In the event that the General Partners shall
fail to make any such advance as aforesaid, the Partnership shall
utilize amounts (the Applied Fees) otherwise payable to the
General Partners or Affiliates thereof under Section 6.12 to meet
the obligations of the General Partners pursuant to this Section
6.10. Such Applied Fees shall also constitute payment and
satisfaction of amounts payable to the General Partners or
Affiliates thereof under Section 6.12, with the proceeds thereof
being applied to such obligations, and the obligation of the
Partnership to make such installment payments to the General
Partners or the Affiliates thereof pursuant to Section 6.12 shall
be deemed satisfied to the extent thereof. For the purpose of
this Section 6.10, all expenses shall be paid on a sixty (60) day
current basis. Moreover, the General Partners may in their
discretion at any time advance funds to the Partnership to pay
operating expenses of the Partnership in order to facilitate the
Partnership's compliance with the Rent Restriction Test. All
advances pursuant to this Section 6.10 (including any Applied
Fees) shall be Subordinated Loans repayable without interest in
accordance with the provisions of Article X. The form and
provisions of all Subordinated Loans shall conform to applicable
rules and regulations.
6.11 Obligation to Complete the Construction of the
Apartment Complex
(a) The General Partners shall complete the construction of
the Apartment Complex substantially in accordance with the plans
and specifications approved by RECD and the Lenders and all
requirements necessary to obtain the required certificates of
occupancy for dwelling units, or cause the same to be completed,
in a good and workmanlike manner, free and clear of all
mechanics', materialmen's or similar liens, and shall equip the
Apartment Complex or cause the same to be equipped with all
necessary and appropriate fixtures, equipment and articles of
personal property, including refrigerators and ranges, and shall
cause all necessary certificates of occupancy for all apartment
units in the Apartment Complex to be obtained, all in accordance
with the Project Documents. If the proceeds of the net rental
income, if any, of the Apartment Complex generated prior to the
later of Permanent Mortgage Commencement or the Admission Date
and which is permitted by RECD to be utilized for any of the
purposes hereinafter set forth, the Capital Contribution of the
Investment Limited Partner, the Capital Contributions of the
General Partners in the amounts set forth on Schedule A as of the
Admission Date, and any insurance proceeds arising out of
casualties prior to the later of Permanent Mortgage Commencement
or the Admission Date as available from time to time are
insufficient to (i) acquire and complete the construction of the
Apartment Complex and satisfy all other obligations, all as
provided in the first sentence of this Section 6.11(a), (ii) make
the special distributions to the General Partners described in
Section 10.2(c), (iii) pay the Construction and Development Fee,
(iv) arrive at Permanent Mortgage Commencement in conformity with
the Project Documents, (v) discharge all Partnership liabilities
and obligations arising out of any casualty giving rise to any
such insurance proceeds, and (vi) provide for all other payments
and expenses required to be made or incurred through the later of
Permanent Mortgage Commencement or the Admission Date, including
the funding of any reserves required hereunder or under any other
Project Document, the General Partners shall be responsible for
and obligated to pay such deficiencies and shall, to the extent
permitted under the Project Documents and any applicable
regulations or requirements of RECD, be reimbursed at or prior to
the later of Permanent Mortgage Commencement or the Admission
Date only out of the proceeds designated in this sentence
available from time to time after payment of all costs described
in this sentence. Any amounts advanced not reimbursed through
Permanent Mortgage Commencement or from the proceeds of the
Capital Contribution of the Investment Limited Partner as
provided in Section 5.1 shall not be reimbursable or otherwise
change the Interest of any Person in the Partnership but shall be
borne by the General Partners. In the event that the General
Partners shall fail to fund any such deficiency as required by
this Section 6.11(a), an amount not in excess of the next
installment of the Construction and Development Fee due to the
General Partners or any of their Affiliates under Section 6.12 or
any other provision hereof shall be applied by the Partnership to
meet such obligation of the General Partners, and, to the extent
there may still be a deficiency, any amounts otherwise payable as
the Annual Partnership Management Fee may also be so applied.
Any such application of funds as described in the immediately
preceding sentence shall constitute a payment of the amount of
the Fee or such other item which such funds had been earmarked to
pay, and the obligation of the General Partners to advance such
amount under this Section 6.11(a) shall be satisfied to the
extent of such application.
(b) The completion of the Apartment Complex shall be secured
by a completion bond in an amount at least equal to the full
amount of the construction contract for the Apartment Complex or
by other security satisfactory to the Investment Limited Partner,
which other security may include, but shall not be limited to,
the following:
(i) a written guaranty of completion by a Person, supported
by financial statements demonstrating sufficient net worth or
adequately collateralized by other real or personal properties or
other Persons' guarantees; and/or
(ii) a retention of a reasonable portion of the Capital
Contribution of the Investment Limited Partner and/or fees to the
General Partner as a potential offset in the event the General
Partners do not perform in accordance with this Agreement.
6.12 Certain Payments to the General Partners and Others
(a) The Partnership shall pay to the General Partners a non-
cumulative fee (the Annual Partnership Management Fee) commencing
in 1998 for their services in connection with the administration
of the day to day business of the Partnership in an annual amount
equal to $1,500 per annum. The Annual Partnership Management Fee
for each fiscal year of the Partnership shall be payable from
Cash Flow in the manner and priority set forth in Section 10.2(a)
to the extent Cash Flow is available therefor for such year.
(b) In consideration of their consultation, advice and other
services in connection with the construction and development of
the Apartment Complex and as consideration for the assignment
described in Section 6.14, the Partnership shall pay to the
General Partners (or their designee) a construction and
development fee (the Construction and Development Fee) in the
principal amount of $54,313, which fee shall be earned in full as
to each building in the Apartment Complex as of the date such
building is completed. The Construction and Development Fee
shall be payable $6,234 from the proceeds of the Second
Installment, $45,771 from the proceeds of the Third Installment
and $2,308 from the proceeds of the Fourth Installment. Any
portion of the Construction and Development Fee which shall not
have been paid after payment of the Installments shall be payable
from cash flow as set forth in Section 10.2, with the deferred
developer's fee being paid in full by the tenth year of
operations. Any amount remaining to be paid at that time will
be paid in full by the General Partner on such date in an amount
equal to the aggregate amount of such unpaid portion(s) of the
Construction and Development Fee; immediately upon receipt by the
Partnership of such funds from the General Partner, the
Partnership shall pay all unpaid portion(s) of the Construction
and Development Fee to the recipient thereof in accordance with
the provisions of this Section 6.12(b).
(c) The Partnership shall pay to Boston Capital or an
Affiliate thereof a fee (the Reporting Fee) commencing in 1998
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, said Reporting Fee to be in the amount of $1,500.
The Reporting Fee shall be payable from Cash Flow in the manner
and priority set forth in Section 10.2(a); provided, however,
that if in any fiscal year commencing with 1998, Cash Flow is
insufficient to pay the full amount of the Reporting Fee, the
General Partner shall be obligated to make Subordinated Loans to
the Partnership to cover the Reporting Fee.
6.13 Delegation of General Partner Authority
If there shall be more than one General Partner serving
hereunder, each General Partner may from time to time, by an
instrument in writing, delegate all or any of his powers or
duties hereunder to another General Partner or General Partners.
Every contract, deed, mortgage, lease and other instrument
executed by any General Partner shall be conclusive evidence in
favor of every Person relying thereon or claiming thereunder that
at the time of the delivery thereof (a) the Partnership was in
existence, (b) this Agreement had not been amended in any manner
so as to restrict the delegation of authority among General
Partners (except as shown in certificates or other instruments
duly filed in the Filing Office) and (c) the execution and
delivery of such instrument was duly authorized by the General
Partners. Any Person may always rely on a certificate addressed
to him and signed by any General Partner hereunder:
(1) As to who are the General Partners or Limited Partners
hereunder;
(2) As to the existence or nonexistence of any fact which
constitutes a condition precedent to acts by the General Partners
or in any other manner germane to the affairs of the Partnership;
(3) As to who is authorized to execute and deliver any
instrument or document of the Partnership;
(4) As to the authenticity of any copy of this Agreement
and amendments thereto; or
(5) As to any act or failure to act by the Partnership or
as to any other matter whatsoever involving the Partnership or
any Partner.
6.14 Assignment to Partnership
The General Partners 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 therefor, including, but not limited
to, those relating to planning, zoning, building permits and Tax
Credit; (iv) any and all commitments with respect to any
Mortgage(s); (v) any and all contracts or rights with respect to
any agreements with RECD; and (vi) any other work product related
to the Apartment Complex and/or the Partnership.
ARTICLE VII
Withdrawal of a General Partner; New General Partners
7.1 Withdrawal
(a) No General Partner shall Withdraw from the Partnership
(other than by reason of death or adjudication of incompetence or
insanity) or sell, assign or encumber its Interest without the
Consent of the Investment Limited Partner and all the other
General Partners except that if the Special Limited Partner or a
designee thereof becomes a General Partner pursuant to Section
4.5(b), Section 5.2(e), Section 6.2 (b) or Section 6.10, it shall
not require the consent of any other General Partner to transfer
all or any portion of its interest as a General Partner, other
than as may be required under the Uniform Act. In the event of
any Withdrawal by a General Partner in violation of this Section
7.1, such General Partner, in addition to being subject to any
and all other legal remedies which may be pursued by the
Partners, shall forfeit to the remaining Special Limited Partner
such General Partner's Interest and all unpaid fees from the
Partnership and shall remain liable for all his obligations under
this Agreement. In addition, upon such Withdrawal and transfer,
the Special Limited Partner or its designee shall automatically
become a General Partner without further action by the
Withdrawing General Partner or any other Partner, and each
Partner hereby consents to such transfer and to the admission of
the Special Limited Partner or its designee as a General Partner
in such a situation. Such transfer shall occur automatically
upon such Withdrawal without further action by such Withdrawing
General Partner. Notwithstanding the foregoing, the Investment
Limited Partner and the Special Limited Partner acknowledge that
Home Properties is approved as an eligible Substitute General
Partner.
(b) If at any time the only General Partners of the
Partnership shall be one or more corporations (or partnerships
with corporations as sole general partners), they shall be
obligated to have a net worth which satisfies the 89-12
Requirements. If the General Partners shall at any time fail to
meet the requirements of this Section 7.1(b), then they shall be
deemed to have withdrawn from the Partnership in violation of the
provisions of this Section 7.1 and shall be subject to the
provisions of Section 7.1(a). Notwithstanding the foregoing, the
provisions of this Section 7.1(b) shall not apply to the Special
Limited Partner or its designee in the event it becomes the sole
General Partner.
7.2 Obligation to Continue
Upon the Withdrawal of a General Partner, the remaining
General Partners shall have the right and obligation to continue
the business of the Partnership employing its assets and name,
all as contemplated by the Uniform Act. Within 30 days after
they obtain knowledge of the Withdrawal of a General Partner, the
remaining General Partners shall notify the Investment Limited
Partner of such Withdrawal.
7.3 Withdrawal of All General Partners
If, following the Withdrawal of a General Partner, there is
no remaining General Partner, the Investment Limited Partner
and/or the Special Limited Partner may elect to reconstitute the
Partnership and continue the business of the Partnership for the
balance of the term specified in Section 2.4 by selecting a
successor General Partner. If the Investment Limited Partner
and/or the Special Limited Partner elects to reconstitute the
Partnership pursuant to this Section 7.3 and admit the designated
successor General Partner, the relationship among the then
Partners shall be governed by this Agreement.
7.4 Interest of General Partner After Permitted Withdrawal
In the event of the Withdrawal of a General Partner not in
violation of Section 7.1, the Withdrawing General Partner hereby
covenants and agrees to transfer to the remaining General
Partners or to a successor General Partner selected in accordance
with Section 7.3, as the case may be, such portion of the
Withdrawing General Partner's Interest as such remaining or
successor General Partners may designate, such transfer to be
made in consideration of the payment by the transferee of either
the agreed value of such Interest or, if such value is not agreed
to, the fair market value of such Interest as determined by a
committee of three qualified real estate appraisers, one selected
by the Withdrawing General Partner, one selected by the
transferee and a third selected by the other two. The portion of
the Withdrawing General Partners Interest designated to be
transferred in accordance with the provisions of this Section 7.4
shall be sufficient to ensure the continued treatment of the
Partnership as a partnership under the Code and as a limited
partnership under the Uniform Act, and, for the purposes of
Article X, shall be deemed to be effective as of the date of
Withdrawal, but the Partnership shall not make any distributions
to the designated transferee until the transfer has been made.
Any holder of any portion of the Interest of a Withdrawing
General Partner which is not designated to be transferred to the
remaining or successor General Partners pursuant to the
provisions of this Section 7.4 shall become an Additional Limited
Partner but (i) with the same share of the profits, losses, tax
credits, Cash Flow and other distributions to which the holder of
such Interest was entitled when held as a General Partner
Interest, and shall not participate in the votes or Consents of
the Investment Limited Partner hereunder. The admission of any
successor or additional General Partner shall be subject to the
consent of RECD (if required) and the Consent of the Investment
Limited Partner.
7.5 Admission of Additional General Partner(s) under
Certain Circumstances
In the event each of the General Partners is a corporation
and the General Partners at any time, or from time to time, fail
to have a net worth which satisfies the 89-12 Requirements, the
Special Limited Partner or its designee(s) shall be admitted (and
each hereby agrees to be admitted], automatically and without
further action by them or any Partner, as additional General
Partner(s), notwithstanding any other provision of this
Agreement. The General Partners hereby agree to take all action
necessary to implement this Section 7.5. Further, the General
Partners agree in such event to give prompt written notice
thereof to each Lender and to RECD. If any Lender or RECD
rejects the admission of any additional General Partner so
admitted as a General Partner, then such additional General
Partner shall withdraw as a General Partner promptly after an
additional General Partner acceptable to each Lender and RECD is
admitted to the Partnership. Simultaneously with such admission,
each of the previously admitted General Partners shall be deemed
to have assigned proportionally to the additional General
Partner(s), automatically and without further action, such
portion of its General Partner Interest so that the additional
General Partner shall receive not less than a one hundredth of
one percent (0.01%) interest (or such greater percentage as may
be required either (i) in the opinion of the Tax Accountants, to
assure the partnership status of the Partnership for Federal
income tax purposes or (ii) by RECD) in the profits, losses, tax
credits and distributions of the Partnership in consideration of
$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 be irrevocably delegated all of
the power and authority of all of the General Partners pursuant
to Section 6.13. Each such additional General Partner shall
remain a General Partner until a Lender or RECD shall object
thereto in writing or until such time as, in the opinion of the
Tax Accountants, the Partnership would continue to be treated as
a partnership for Federal income tax purposes notwithstanding
their Withdrawal. At such time, each such additional General
Partner may, at its option, then Withdraw without the approval of
the Limited Partners upon reassignment of its entire Interest to
the remaining General Partners. Each partner hereby grants to
the Special Limited Partner a special power of attorney,
irrevocable to the extent permitted by law and coupled with an
interest, to amend the Certificate and this Agreement and to do
anything else which, in the view of the Special Limited Partner,
may be necessary or appropriate to accomplish the purposes of
this Section 7.5 or to manage the business of the Partnership.
The admission of an additional General Partner shall not relieve
any other General Partner of any of its economic obligations
hereunder, and each other General Partner shall fully indemnify
and hold harmless the additional General Partner from and against
any and all losses, judgments liabilities, expenses and amounts
paid in settlement of any claims sustained in connection with its
capacity as a General Partner.
ARTICLE VIII
Transferability of Limited Partner Interests
8.1 Assignments
(a) Except by operation of law (including the laws of
descent and distribution) or Section 8.1(b), no Limited Partner
may assign all or any part of its Interest without the written
consent of the General Partners, the giving or withholding of
which is exclusively within their discretion.
(b) A Limited Partner, without the consent of the General
Partners, may assign to any Person all or any portion of the
economic benefits of the ownership of its Interest; provided,
however, that such assignment shall not be binding on the
Partnership until there shall have been filed with the
Partnership by registered mail certified copies of an executed
and acknowledged assignment and the written acceptance by the
assignee of all the terms and provisions of this Agreement; if
such assignment and acceptance are not so filed, the Partnership
need not recognize such assignment for any purpose. An assignee
of a Limited Partner who does not become a Substituted Limited
Partner shall have, and shall only have, the right to receive the
share of allocations and distributions of the Partnership to
which the assigning Limited Partner would have been entitled with
respect to the Interest (or portion thereof) so assigned if no
such assignment had been made by such Limited Partner. Any
assigning Limited Partner whose permitted assignee becomes a
Substituted Limited Partner shall thereupon cease to be a Limited
Partner and shall no longer have any of the rights or privileges
of a Limited Partner. Where the assignee does not become a
Substituted Limited Partner, the Partnership shall recognize such
assignment not later than the last day of the calendar month
following receipt of notice of assignment and all documentation
required in connection therewith.
(c) Every assignee of a Limited Partner Interest (or any
portion thereof) who desires to make a further assignment of its
Interest shall be subject to all the provisions of this Article
VIII.
8.2 Substituted Limited Partner
No Limited Partner shall have the right to substitute an
assignee as Limited Partner in its place. Subject to Section
8.3, the General Partners may, however, in their sole discretion,
permit an assignee to become a Substituted Limited Partner. The
consent of the General Partners to an assignment of a Limited
Partner Interest under Section 8.1 shall not, in and of itself,
constitute permission under this Section 8.2.
Any Substituted Limited Partner shall execute such
instrument or instruments as shall be required by the General
Partners to signify the agreement of such Substituted Limited
Partner to be bound by all the provisions of this Agreement and
shall pay the Partnership's reasonable legal fees and filing
costs in connection with its substitution as a Limited Partner.
8.3 Restrictions
(a) No Disposition may be made if such Disposition would
violate Section 13.1.
(b) In no event shall all or any part of a Limited Partner
Interest be Disposed of to a minor (other than to a descendant by
reason of death) or to an incompetent.
(c) The General Partners may, in addition to any other
requirement they may impose, require as a condition of any
Disposition that the transferor (i) assume all costs incurred by
the Partnership in connection therewith and (ii) furnish the
Partnership and the other Partners with an opinion of counsel
satisfactory to counsel to the Partnership that such Disposition
complies with applicable Federal and state securities laws.
(d) Any sale, exchange, transfer or other Disposition in
contravention of any of the provisions of this Section 8.3 shall
be void and ineffectual and shall not bind or be recognized by
the Partnership.
ARTICLE IX
Borrowings
9.1 Borrowings
All Partnership borrowings shall be subject to the terms of
this Agreement, including, but not limited to, the restrictions
of Section 6.2, and may be made from any source, including
Partners and their Affiliates. Any Partnership borrowings from
any Partner shall be subject to the prior written consent of RECD
(if required under applicable RECD regulations or requirements).
If any Partner shall lend any monies to the Partnership, the
amount of any such loan shall not be an increase of such
Partner's Capital Contribution. If any Partner shall so lend
monies, such loans shall be an obligation of the Partnership and
(except for advances required by Section 6.11(a), Section 9.1 and
Subordinated Loans) shall be repayable to such Partner on the
same basis and with the same rate of interest as would be
applicable to a comparable loan to the Partnership from a third
party.
ARTICLE X
Profits, Losses, Tax Credits,
Distributions and Capital Accounts
10.1 Profits, Losses and Tax Credits
(a) Subject to Section 10.1(c) and Section 10.4 hereof, for
each Partnership fiscal year or portion thereof, all profits,
tax-exempt income, losses, non-deductible, non-capitalizable
expenditures, and tax credits incurred or accrued on or after the
Commencement Date, other than those arising from a Capital
Transaction, shall be allocated 99.99% to the Investment Limited
Partner and 0.01% to the General Partners.
(b) Except as otherwise specifically provided in this
Article, all profits and losses arising from a Capital
Transaction shall be allocated to the Partners as follows:
As to profits:
First, that portion of profits (including any profits
treated as ordinary income for Federal income tax purposes) shall
be allocated to the Partners who have negative Capital Account
balances in proportion to the amounts of such balances, provided
that no profits shall be allocated to a Partner under this Clause
First to increase any such Partner's Capital Account above zero;
Second, profits in excess of the amounts allocated under
Clause First above shall be allocated to the Investment Limited
Partner in an amount equal to the amount of cash required to pay
to the Investment Limited Partner the full amount (including
interest) of any Credit Recovery Loans; and,
Third, profits in excess of the amounts allocated under
Clauses First and Second above shall be allocated to the Partners
in the same percentages as cash is distributed under Clause Sixth
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 99.99% for the Investment Limited Partner and 0.01% for the
General Partners;
Second, an amount of losses shall be allocated to the
Partners until the balance in each Partner's Capital Account
equals the amount of such Partner's Capital Contribution (after
the allocation under Clause First above);
Third, an amount of losses shall be allocated to the
Partners to the extent of and in proportion to such Partners'
Capital Account balances (after the allocations under Clauses
First and Second above); and
Fourth, any remaining amount of losses after the allocations
under Clauses First, Second and Third above shall be allocated to
the Partners in accordance with the manner in which they bear the
economic risk of loss associated with such loss; provided,
however, that in the event that no Partner bears an economic risk
of loss, then any remaining losses shall be allocated 99.99% to
the Investment Limited Partner and 0.01% to the General Partners.
(c) Notwithstanding the foregoing provisions of Sections
10.1(a) and 10.1(b), in no event shall any losses be allocated to
the Investment Limited Partner, the Special Limited Partner or
any additional limited partner admitted pursuant to Sections
4.5(b), 5.2(e), 6.2(b), 6.10 or 7.5, if and to the extent that
such allocation would cause, as of the end of the Partnership
taxable year, the negative balance in the Investment Limited
Partner's Capital Account to exceed the Investment Limited
Partner's share of Partnership Minimum Gain plus the Investment
Limited Partner's share, if any, of Partner Non-Recourse Debt
Minimum Gain. Any losses which are not allocated to the
Investment Limited Partner by virtue of the application of this
Section 10.1(c) shall be allocated to the General Partners. For
purposes of this Section 10.1(c), a Partner's Capital Account
shall be treated as reduced by Qualified Income Offset Items.
10.2 Cash Distributions Prior to Dissolution
(a) Cash Flow
Subject to RECD approval (if required), Cash Flow for each
fiscal year or portion thereof of the Partnership shall be
applied as follows:
First, to the payment of the Reporting Fee for such year and
for any previous year(s) as to which the Reporting Fee shall not
yet have been paid in full;
Second, to the payment of any accrued and unpaid interest on
the Construction and Development Fee;
Third, to the repayment of any Subordinated Loans;
Fourth, in an amount not to exceed the difference between
(i) $1,500 and (ii) the amount of Cash Flow for such year applied
under Clause Second above, to the payment of the Annual
Partnership Management Fee attributable to such year;
Fifth, to the Payment of the Incentive Management Fee for
such year, as defined in Section 11.E.; and,
Sixth, the balance thereof, if any, shall be distributed
annually, within seventy-five (75) days after the end of the
fiscal year, 99.99% to the Investment Limited Partner and .01% to
the General Partners; provided, however, that during such time as
RECD regulations are applicable to the Apartment Complex, the
total amount of Cash Flow which may be so distributed to the
Partners in respect to any fiscal year shall not exceed such
amounts as RECD regulations permit to be distributed.
(b) Distributions of other than Cash Flow
Prior to dissolution, if the General Partners shall
determine from time to time that cash is available for
distribution from a Capital Transaction, such cash shall be
applied or distributed as follows:
First, to the payment of all matured debts and liabilities
of the Partnership (including, but not limited to, all expenses
of the Partnership incident to the Capital Transaction),
excluding (i) debts and liabilities of the Partnership to
Partners or their Affiliates (except as otherwise provided in
Section 12.3) and (ii) all unpaid fees owing to the General
Partners or their Affiliates; and to the establishment of any
reserves which the General Partners and the Auditors shall deem
reasonably necessary for contingent, unmatured or unforeseen
liabilities or obligations of the Partnership;
Second, if the Permanent Mortgage is in place at the time of
such Capital Transaction of if such Capital Transaction
constitutes a refinancing of the Permanent Mortgage, to the
General Partners in an aggregate amount equal to 5% of the
proceeds remaining after the payment of the items set forth in
Clause First of this Section 10.2(b);
Third, to the payment of the Reporting Fee for such year and
for any previous year as to which the Reporting Fee has not been
paid in full.
Fourth, to the payment to the Investment Limited Partner of
the full amount (including interest) of any Credit Recovery
Loans;
Fifth, to the repayment of any Subordinated Loans;
Sixth, to the repayment of any then-unpaid debts and
liabilities owed to Partners or Affiliates thereof by the
Partnership for Partnership obligations (exclusive of Credit
Recovery Loans and Subordinated Loans) to any of them, including,
but not limited to, accrued and unpaid interest on the
Construction and Development Fee and/or the Developer's Overhead
or Asset Management Fee, if any, the Annual Partnership
Management Fee for the fiscal year of the Capital Transaction,
but excluding the Working Capital Loan; provided, however, that
any debts or obligations to be repaid to any Limited Partner or
any 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 any Affiliate thereof;
Seventh, to the Investment Limited Partner and the General
Partner, pro rata in the amount of their Invested Amounts,
however, the amount received by the General Partner pursuant to
this Clause Seventh shall be reduced by any amounts received
pursuant to Clause Second of this Section 10.2(b).
Eighth, to the payment to each Limited Partner of an amount
equal to its Invested Amount and to the repayment to any other
Limited Partner of its paid-in Capital Contribution, in each
case, minus any prior distributions made to such Limited Partner
under this Clause Ninth, but never an amount less than zero;
Ninth, to the repayment to the General Partners of their
paid-in Capital Contributions minus any prior distributions made
to them under this Clause Eighth, and under Section 10.2(c), but
never an amount less than zero;
Tenth, except in the case of a refinancing, to each partner
in an amount equal to the positive balance in its Capital
Account, after adjustments pursuant to Clause First through Ninth
of this Section 10.2(b);
Eleventh, to the repayment of the Working Capital Loan;
Twelfth, 67% to the Investment Limited Partner and 33% to
the General Partners until the Investment Limited Partner shall
have received the return of its Invested Amount; and
Thirteenth, any balance 33.999% to the Investment Limited
Partner, .001% to the Special Limited Partner and 66% to the
General Partners.
Notwithstanding the foregoing, however, for the purpose of
determining the amounts to be distributed under Clauses Ninth and
Twelfth for a particular Capital Transaction, any distribution to
the General Partners under Clause Second for such Capital
Transaction shall be credited against and reduce any
distributions which would otherwise be made to the General
Partners under Clauses Ninth and Twelfth (with such credit
operating first against Clause Ninth distributions and then
against Clause Twelfth distributions); and the amount not
distributed to the General Partners under Clauses Ninth and
Twelfth as a result thereof shall be distributed as if it were
additional proceeds of such Capital Transaction. Any proceeds of
a Capital Transaction distributed to the General Partners under
Clause Second which are not currently credited against a
distribution to the General Partners under either of Clause Ninth
or Clause Twelfth from such Capital Transaction shall be applied
as additional credits against any distributions to the General
Partners under any of Clauses Ninth and Twelfth which may be the
result of any future Capital Transactions.
(c) Special Distributions
The Partnership shall make special cash distributions in the
form of developer's overhead to the General Partners totaling
$101 payable $101 from the proceeds of the Fourth Installment.
These special cash distributions shall be treated as
distributions pursuant to Section 731 of the Code.
10.3 Distributions Upon Dissolution
(a) Upon dissolution and termination, after payment of, or
adequate provision for, the debts and obligations of the
Partnership, the remaining assets of the Partnership shall be
distributed to the Partners in accordance with the positive
balances in their Capital Accounts after taking into account all
Capital Account adjustments for the Partnership taxable year,
including adjustments to Capital Accounts pursuant to Sections
10.1(b) and 10.3(b). In the event that a General Partner or
Additional Limited Partner has a negative balance in its Capital
Account following the liquidation of the Partnership or such
Partner's Interest, after taking into account all Capital Account
adjustments for the Partnership taxable year in which such
liquidation occurs, such Partner shall pay to the Partnership in
cash an amount equal to the negative balance in such Partner's
Capital Account. Such payment shall be made by the end of such
taxable year (or, if later, within 90 days after the date of such
liquidation) and shall, upon liquidation of the Partnership, be
paid to recourse creditors of the Partnership or distributed to
other Partners in accordance with the positive balances in their
Capital Accounts.
(b) With respect to assets distributed in kind to the
Partners in liquidation or otherwise, (i) any unrealized
appreciation or unrealized depreciation in the values of such
assets shall be deemed to be profits and losses realized by the
Partnership immediately prior to the liquidation or other
distribution event; and (ii) such profits and losses shall be
allocated to the Partners in accordance with Section 10.1(b), and
any property so distributed shall be treated as a distribution of
an amount in cash equal to the excess of such fair market value
over the outstanding principal balance of and accrued interest on
any debt by which the property is encumbered. For the purposes
of this Section 10.3(b), unrealized appreciation or unrealized
depreciation shall mean the difference between the fair market
value of such assets, taking into account the fair market value
of the associated financing (but subject to Section 7701(g) of
the Code), and the Partnership's adjusted basis for such assets
as determined under Regulation Section 1.704-1(b). This Section
10.3(b) is merely intended to provide a rule for allocating
unrealized gains and losses upon liquidation or other
distribution event, and nothing contained in this Section 10.3(b)
or elsewhere herein is intended to treat or cause such
distributions to be treated as sales for value. The fair market
value of such assets shall be determined by an appraiser to be
selected by the General Partner with the Consent of the
Investment Limited Partner.
10.4 Special Provisions
(a) Except as otherwise provided in this Agreement, all
profits, tax exempt income, losses, non-deductible non-
capitalizable expenditures, tax credits and cash distributions
shared by a class of Partners shall be shared by each Partner in
such class in the ratio of such Partner's paid-in Capital
Contribution to the paid-in Class Contribution of the class of
Partners of which such Partner is a member.
(b) Notwithstanding the foregoing provisions of this
Article X:
(i) If (a) the Partnership incurs recourse obligations or
Partner Non-Recourse Debt (including, without limitation,
Subordinated Loans) or (b) the Partnership incurs losses from
extraordinary events which are not recovered from insurance or
otherwise (collectively Recourse Obligations) in respect of any
Partnership taxable year, then the calculation and allocation of
profits and losses shall be adjusted as follows: first, an amount
of deductions attributable to the Recourse Obligations shall be
allocated to the General Partners; and second, the balance of
such deductions shall be allocated as provided in Section
10.1(a).
(ii) If any profit arises from the sale or other
disposition of any Partnership asset which shall be treated as
ordinary income under the depreciation recapture provisions of
the Code, then the full amount of such ordinary income shall be
allocated among the Partners in the proportions that the
Partnership deductions from the depreciation giving rise to such
recapture were actually allocated. In the event that
subsequently-enacted provisions of the Code result in other
recapture income, no allocation of such recapture income shall be
made to any Partner who has not received the benefit of those
items giving rise to such other recapture income.
(iii) If the Partnership shall receive any purchase money
indebtedness in partial payment of the purchase price of the
Apartment Complex and such indebtedness is distributed to the
Partners pursuant to the provisions of Section 10.2(b) or Section
10.3, the distributions of the cash portion of such purchase
price and the principal amount of such purchase money
indebtedness hereunder shall be allocated among the Partners in
the following manner: On the basis of the sum of the principal
amount of the purchase money indebtedness and cash payments
received on the sale (net of amounts required to pay Partnership
obligations and fund reasonable reserves), there shall be
calculated the percentage of the total net proceeds distributable
to each class of Partners based on Section 10.2(b) or Section
10.3, as applicable, treating cash payments and purchase money
indebtedness principal interchangeably for this purpose, and the
respective classes shall receive such respective percentages of
the net cash purchase price and purchase money principal.
Payments on such purchase money indebtedness retained by the
Partnership shall be distributed in accordance with the
respective portions of principal allocated to the respective
classes of Partners in accordance with the preceding sentence,
and if any such purchase money indebtedness shall be sold, the
sale proceeds shall be allocated in the same proportion.
(iv) Income, gain, loss and deduction with respect to any
asset which has a variation between its basis computed in
accordance with Treasury Regulation Section 1.704-1(b) and its
basis computed for Federal income tax purposes shall be shared
among the Partners so as to take account of such variation in a
manner consistent with the principles of Section 704(c) of the
Code and Treasury Regulation Section 1.704-l(b)(2)(iv)(g).
(v) The terms profits and losses used in this Agreement
shall mean income and losses, and each item of income, gain,
loss, deduction or credit entering into the computation thereof,
as determined in accordance with the accounting methods followed
by the Partnership and computed in accordance with Treasury
Regulation Section 1.704-1(b)(2)(iv). Profits and losses for
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) If there is a net decrease in Partnership Minimum Gain
during a Partnership taxable year, each Partner will be allocated
items of income and gain for such year (and, if necessary,
subsequent years) in proportion to, and to the extent of, an
amount equal to such Partner's share of the net decrease in
Partnership Minimum Gain during the year, before any other
allocation of Partnership items for each taxable year. A Partner
shall not be subject to this mandatory allocation of income or
gain to the extent that any of the exceptions provided in
Treasury Regulation Section 1.704-2(f)(2) applies. All
allocations pursuant to this Section 10.4(b)(vi) shall be in
accordance with Treasury Regulation Section 1.704-2(f). This
provision is a minimum gain chargeback within the meaning of
Treasury Regulation Section 1.704-2(f) and shall be construed as
such.
(vii) If there is a net decrease in Partner Non-Recourse
Debt Minimum Gain during a Partnership taxable year, then each
Partner with a share of the minimum gain attributable to such
debt at the beginning of such year will be allocated items of
income and gain for such year (and, if necessary, subsequent
years) in an amount equal to such Partner's share of the net
decrease in Partner Non-Recourse Debt Minimum Gain. A Partner is
not subject to this Partner Non-Recourse Debt Minimum Gain
chargeback to the extent that any of the exceptions provided in
Treasury regulation Section 1.704-2(i)(4) applied consistently
with Treasury Regulation Section 1.704-2(f)(2)-(5) applies. Such
allocations shall be made in a manner consistent with the
requirements of Treasury Regulation Section 1.704-2(i)(4) under
Section 704 of the Code.
(viii) If a Limited Partner unexpectedly receives (a) an
allocation of loss or deduction or expenditures described in
Section 705(a)(2)(B) of the Code made (1) pursuant to Section
704(e)(2) of the Code to a donee of an Interest, (2) pursuant to
Section 706(d) of the Code as the result of a change in any
Partner's Interest, or (3) pursuant to Regulation Section 1.751-
1(b)(2)(ii) as a result of a distribution by the Partnership of
unrealized receivables or inventory items or (b) a distribution,
and such allocation and/or distribution would cause the negative
balance in such Partner's Capital Account to exceed (i) such
Partner's share of Partnership Minimum Gain plus (ii) the amount
of such Partner's obligation, if any, to restore a negative
balance in such Partner's Capital Account, then such Partner
shall be allocated items of income and gain in an amount and
manner sufficient to eliminate such negative balance as quickly
as possible. For purposes of this Section 10.4(b)(viii), a
Partner's Capital Account shall be treated as reduced by
Qualified Income Offset Items.
(ix) In the event that any fee payable to the General
Partner or any Affiliate thereof shall instead be determined to
be a non-deductible, non-capitalizable distribution from the
Partnership to a Partner for Federal income tax purposes, then
there shall be allocated to such General Partner an amount of
gross income equal to the amount of such distribution.
(x) In applying the provisions of Article X with respect to
distributions and allocations, the following ordering of
priorities shall apply:
(1) Capital Accounts shall be deemed to be reduced by
Qualified Income Offset Items.
(2) Capital Accounts shall be reduced by distributions of
Cash Flow under Section 10.2(a).
(3) Capital Accounts shall be reduced by distributions from
Capital Transactions under Section 10.2(b).
(4) Capital Accounts shall be increased by any minimum gain
chargeback under Section 10.4(b)(vi) or Section 10.4(b)(vii).
(5) Capital Accounts shall be increased by any qualified
income offset under Section 10.4(b)(viii).
(6) Capital Accounts shall be increased by allocations of
profits under Section 10.1(a).
(7) Capital Accounts shall be reduced by allocations of
losses under Section 10.1(a).
(8) Capital Accounts shall be reduced by allocations of
losses under Section 10.1(b).
(9) Capital Accounts shall be increased by allocations of
profits under Section 10.1(b).
(xi) To the maximum extent permitted under the Code,
allocations of profits and losses shall be modified so that the
Partners' Capital Accounts reflect the amounts they would have
reflected if adjustments required by Sections 10.4(b)(vi),
10.4(b)(vii) and 10.4(b)(viii) had not occurred.
10.5 Authority of the General Partners to Vary Allocations to
Preserve and Protect the Partners' Intent
(a) It is the intent of the Partners that each Partner's
distributive share of profits, tax-exempt income, losses, non-
deductible non-capitalizable expenditures and credits (and items
thereof) shall be determined and allocated in accordance with
this Agreement to the fullest extent permitted by Section 704(b)
of the Code. In order to preserve and protect the determinations
and allocations provided for in this Agreement, the General
Partners are hereby authorized and directed to allocate profits,
tax-exempt income, losses, nondeductible non-capitalizable
expenditures and credits (and items thereof) arising in any year
differently than otherwise provided for in this Agreement to the
extent that allocating profits, tax-exempt income, losses,
nondeductible non-capitalizable expenditures or credits (or any
item thereof) in the manner provided for herein would cause the
determinations and allocations of each Partner's distributive
share of profits, tax-exempt income, losses, non-deductible non-
capitalizable expenditures, or credits (or any item thereof) not
to be permitted by Section 704(b) of the Code and the Treasury
Regulations promulgated thereunder. Any allocation made pursuant
to this Section 10.5 shall be deemed to be a complete substitute
for any allocation otherwise provided for in this Agreement, and
no amendment of this Agreement or approval of any Partner shall
be required.
(b) In making any allocation (the New Allocation) under
Section 10.5(a), the General Partners are authorized to act only
after having been advised in writing by the Tax Accountants that,
under Section 704(b) of the Code and the Treasury Regulations
thereunder, (i) the New Allocation is necessary, and (ii) the New
Allocation is the minimum modification of the allocations
otherwise provided for in this Agreement necessary in order to
assure that, either in the then-current year or in any preceding
year, each Partner's distributive share of profits, tax-exempt
income, losses, non-deductible non-capitalizable expenditures,
and credits (or any item thereof) is determined and allocated in
accordance with this Agreement to the fullest extent permitted by
Section 704(b) of the Code and the Treasury Regulations
thereunder.
(c) If the General Partners are required by Section 10.5(a)
to make any New Allocation in a manner less favorable to the
Limited Partners than is otherwise provided for herein, then the
General Partners are authorized and directed, only after having
been advised in writing by the Tax Accountants that such an
allocation is permitted by Section 704(b) of the Code, to
allocate profits, tax-exempt income, losses, non-deductible non-
capitalizable expenditures, and credits (and any item thereof)
arising in later years in such manner so as to bring the
allocations of profits, tax-exempt income, losses, non-deductible
non-capitalizable expenditures, and credits (and each item
thereof) to the Limited Partners as nearly as possible to the
allocations thereof otherwise contemplated by this Agreement.
(d) New Allocations made by the General Partners under
Section 10.5(a) and Section 10.5(c) in reliance upon the advice
of the Tax Accountants shall be deemed to be made pursuant to the
fiduciary obligation of the General Partners to the Partnership
and the Limited Partners, and no such allocation shall give rise
to any claim or cause of action by any Limited Partner.
ARTICLE XI
Management Agent
A. The General 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 RECD or, when the Apartment
Complex is not subject to RECD regulation, in accordance with a
reasonable and competitive fee arrangement. From and after the
Admission Date, the Partnership shall not enter into any
Management Agreement or modify or extend any Management Agreement
unless (i) the General Partners shall have obtained the prior
written consent of the Special Limited Partner to the identity of
the Management Agent and the terms of the Management Agreement or
the modification or extension thereof and (ii) such new
Management Agreement or modified or extended Management Agreement
provides that it is terminable by the Partnership on thirty (30)
days' notice by the Partnership in the event of any change in the
identity of the General Partners.
B. Notwithstanding the foregoing, however, should the
Investment General Partner or an Affiliate thereof perform
property management services for the Partnership, property
management, rent-up or leasing fees shall be paid to the
Investment General Partner or such Affiliate only for services
actually rendered and shall be in an amount equal to the lesser
of (i) fees competitive in price and terms with those of non-
affiliated Persons rendering comparable services in the locality
where the Apartment Complex is located and which could reasonably
be available to the Partnership, or (ii) 6%, as permitted by
RECD, of the gross revenues of the Apartment Complex. No
duplicate property management fees shall be paid to any Person.
Furthermore, the parties acknowledge that upon Admission, the
initial Management Agent will be Home Properties.
C. If (i) the Management Agent is the General Partner or
an Affiliate of the General Partner, and (a) the Apartment
Complex shall be subject to a substantial building code violation
which shall not have been cured within six months after notice
from the applicable governmental agency or department or (ii) an
Event of Bankruptcy shall occur with respect to the Management
Agent, or (iii) the Management Agent shall commit willful
misconduct or gross negligence in its conduct of its duties and
obligations under the Management Agreement, then, upon request by
the Special Limited Partner and subject to RECD approval, if
required, the General Partners must 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 which shall not be not an Affiliate of the
General Partner. Each General Partner hereby grants to the
Special Limited Partner an irrevocable (to the extent permitted
by applicable law) power of attorney coupled with an interest to
take any action and to execute and deliver any and all documents
and instruments on behalf of such General Partner and the
Partnership as the Special Limited Partner may deem to be
necessary or appropriate in order to effectuate the provisions of
this Article XI.C. Subject to RECD approval, if required, 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.
Without limiting the foregoing, the Investment Limited Partner
and/or the Special Limited Partner agrees to take into
consideration whether any absence of Cash Flow results from
factors beyond the reasonable control of the Management Agent and
the General Partners.
D. The General Partners shall have the duty to manage the
Apartment Complex during any period when there is no Management
Agent.
E. The Partnership shall pay to the General Partners an
annual fee (the Incentive Management Fee) for their services (in
their dual capacities as General Partners and Management Agent)
in achieving high operating efficiency of the Apartment Complex,
which fee for each fiscal year shall be in an amount equal to 90%
of the available Cash Flow (after payment of any accrued and
unpaid Reporting Fees, Asset Management Fees, Subordinated Loans,
and unpaid and accrued interest on the Construction of
Development Fee, as provided for in Section 10.2(a)).
ARTICLE XII
Books and Records, Accounting, Tax Elections, Etc.
12.1 Books and Records
The Partnership shall maintain all books and records which
are required under the Uniform Act or by any governmental agency
having jurisdiction and may maintain such other books and records
as the General Partners in their discretion deem advisable.
Every Limited Partner, or its duly authorized representatives,
shall at all times have access to the records of the Partnership
at the principal office of the Partnership at any and all
reasonable times, and may inspect and copy any of such records.
A list of the names and addresses of all of the Limited Partners
shall be maintained as part of the books and records of the
Partnership and shall be mailed to any Limited Partner upon
request. A reasonable charge for copy work may be charged by the
Partnership. The General Partners shall maintain and store all
original tenant files in fire proof cabinets in a secure
location. Microfiche or other similar storage technologies that
are acceptable to the Investment Limited Partner may also be
utilized.
12.2 Bank Accounts
The bank accounts of the Partnership shall be maintained in
the Partnership's name with such financial institutions as the
General Partners shall determine. Withdrawals shall be made only
in the regular course of Partnership business on such signature
or signatures as the General Partners may determine. All
deposits (including security deposits and other funds required to
be escrowed by RECD) 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 RECD or Mortgage requirements, in
interest-bearing accounts or invested in United States Government
obligations maturing within one year.
12.3 Auditors
(a) The Auditors shall review and sign the tax returns of
the Partnership which are prepared by the General Partners.
Prior to the filing of the Partnership tax returns, and in no
event later than February 1 of each year, the General Partners
shall deliver the tax returns for such year to the Tax
Accountants for their review and comment. If a dispute arises
between the Auditors and the Tax Accountants over the proper
preparation of the tax returns, which cannot be resolved, then
the Tax Accountants shall make the final decision on whether any
changes are necessary. The Partnership shall reimburse Boston
Capital Communications Limited Partnership for all costs and
expenses paid to the Tax Accountants for the aforementioned
services.
(b) The Auditors shall review all annual financial
statements to the Partners in accordance with generally accepted
auditing standards.
(c) If the Partnership fails to fulfill any of its
obligations under Section 12.7(a)(i) and/or Section 12.7(a)(ii)
within the time periods set forth therein, at any time thereafter
upon notice from the Special Limited Partner that a change in the
identity of the Auditors is desired, the General Partners, on
behalf of the Partnership, shall promptly terminate the
Partnership's engagement of the Auditors, and the prior written
consent of the Special Limited Partner must be received to the
appointment of replacement Auditors. If no such consent is
received to the appointment of replacement Auditors within thirty
(30) days of the notice from the Special Limited Partner to
replace the Auditors, then the Special Limited Partner shall
appoint replacement Auditors of its own choosing, the cost of
which shall be borne by the Partnership as a Partnership expense.
All Partners hereby grant to the Special Limited Partner a
special power of attorney, irrevocable to the extent permitted by
law, coupled with an interest, to so appoint replacement Auditors
and to anything else which in the view of the Special Limited
Partner may be necessary or appropriate to accomplish the
purposes of this Section 12.3(c).
12.4 Cost Recovery and Elections
(a) With respect to all depreciable assets for which cost
recovery deductions are permitted, the Partnership shall elect to
use, so far as permitted by the provisions of the Code,
accelerated cost recovery methods. However, the Partnership may
change to another method of cost recovery if such other method
is, in the opinion of the Auditors, more advantageous to the
Investment Limited Partner and the limited partners and/or
holders of beneficial assignee certificates thereof.
Notwithstanding the foregoing, however, unless the Consent of the
Investment Limited Partner is received permitting a different
cost recovery schedule, the Partnership shall depreciate its
personal and real property utilizing the alternative depreciation
system of Section 168(g)(2) of the Code.
(b) Subject to the provisions of Section 12.5, all other
elections required or permitted to be made by the Partnership
under the Code shall be made by the General Partners in such
manner as will, in the opinion of the Auditors, be most
advantageous to the Investment Limited 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 holders of
beneficial assignee certificates 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
beneficial assignee certificate thereof. Each Partner will
furnish the Partnership all information necessary to give effect
to such election.
12.6 Fiscal Year
The fiscal and tax year of the Partnership shall be the
calendar year. The books of the Partnership shall be kept on an
accrual basis.
12.7 Information to Partners
(a) The General Partners shall cause to be prepared and
distributed to all Persons who were Partners at any time during a
fiscal year of the Partnership:
(i) By February 15 of each Calendar Year, an audited
financial statement which includes (A) a balance sheet as of the
end of such fiscal year, a statement of income, a statement of
Partners' equity, and a statement of cash flows, each for the
year then ended, all of which, except the statement of cash
flows, shall be prepared in accordance with generally accepted
accounting principles, and (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
Contribution of the Investment Limited Partner, (6) borrowed
monies, and (7) transactions outside of the ordinary course of
business with a description thereof.
(ii) By February 1 of each Calendar Year, 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.
(iii) Within thirty (30) days after the end of each quarter
of a fiscal year of the Partnership, a report containing:
(A) a balance sheet, which may be unaudited;
and
(B) a statement of income for the quarter then ended, which
may be unaudited; and
(C) a statement of cash flows for the quarter then ended,
which may be unaudited; and
(D) all other information which would be pertinent to a
reasonable investor regarding the Partnership and its activities
during the quarter covered by the report.
(b) Within sixty (60) days after the end of each fiscal
year of the Partnership a copy of the annual report to be filed
with the United States Treasury concerning the status of the
Apartment Complex as low-income housing and, if required, a
certificate to the appropriate state agency concerning the same.
(c) Upon the written request of the Investment Limited
Partner for further information with respect to any matter
covered in item (a) or item (b) above, the General Partners shall
furnish such information within thirty (30) days of receipt of
such request.
(d) Prior to October 15 of each 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 Partners and the Auditors.
(e) Within 15 days after the end of any calendar quarter
during which:
(i) there is a material default by the Partnership under
the Project Documents or in payment of any mortgage, taxes,
interest or other obligation on secured or unsecured debt,
(ii) any reserve has been reduced or terminated by
application of funds therein for purposes materially different
from those for which such reserve was established,
(iii) the General Partners have received any notice of a
material fact which may substantially affect further
distributions, or
(iv) any Partner has pledged or collaterized its Interest
in the Partnership, the General Partners shall send the
Investment Limited Partner a detailed report of such event.
(f) After the Admission Date, the Partnership shall send to
the Investment Limited Partner, on or before the tenth day of
each month, the monthly housing credit monitoring form, and
copies of all applicable periodic reports covering the status of
project operations from the previous period, as may be required
by RECD.
(g) Within 15 days after each quarter of the Partnership's
fiscal year, the Partnership shall send to the Investment Limited
Partner a report on operations, in the form supplied by the
Investment Limited Partner.
(h) Upon receipt, the Partnership shall send to the
Investment Limited Partner copies of the Form(s) 8609 evidencing
the Tax Credit allocation.
(i) If the earlier of (A) the Completion Date or (B) the
date upon which tenants first occupied apartment units in the
Apartment Complex shall have occurred six months or more prior to
the date upon which the Investment Limited Partner acquired its
Interest in the Partnership, then the General Partners shall
cause to be prepared and delivered to the Investment Limited
Partner within 60 days of the Admission Date the following items:
(i) An unaudited statement of income of the Partnership for
the year (or such shorter period as there may be from the date of
the most recent audited statement of income of the Partnership)
ended on the date upon which the Investment Limited Partner
acquired its Interest in the Partnership; and
(ii) An audited statement of income of the Partnership for
any fiscal year of the Partnership ending between (A) the earlier
of (1) the Completion Date or (2) the date upon which tenants
first occupied apartment units in the Apartment Complex and (B)
the date upon which the Investment Limited Partner acquired its
Interest in the Partnership.
(j) Within thirty (30) days of 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 BCCLP.
(k) By December 1 of each year, the Partnership shall send
to the Investment Limited Partner the Property's operating budget
for the following year.
(l) If the General Partners do not cause the Partnership to
fulfill its obligations under Section 12.7(a)(i) and/or Section
12.7(a)(ii) within the time periods set forth therein, the
General Partners may be required by the Investment Limited
Partner to pay as damages the sum of $150 per day to the
Investment Limited Partner until such obligations shall have been
fulfilled. Such damages shall be paid forthwith by the General
Partners, and failure to so pay shall constitute a material
default of the General Partners hereunder. In addition, if the
General Partners shall so fail to pay, the General Partners and
their Affiliates shall forthwith cease to be entitled to the
Annual Partnership Management Fee, and to the payment of any Cash
Flow or Capital Transaction proceeds to which they may otherwise
be entitled hereunder. Such payments of the Annual Partnership
Management Fee, Cash Flow and Capital Transaction 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
payments of the Annual Partnership Management Fee, Cash Flow and
Capital Transaction proceeds otherwise due to the General
Partners or their Affiliates.
12.8 Expenses of the Partnership
(a) All expenses of the Partnership shall be billed
directly to and paid by the Partnership.
(b) Except in extraordinary circumstances, neither the
Investment General Partner nor any Affiliate thereof shall be
permitted to contract or otherwise deal with the Partnership for
the sale of goods or services or the lending of money to the
Partnership or the General Partners, except for (1) management
services, subject to the restrictions set forth in Article XI.B.,
(ii) loans made by, or guaranteed by, the Investment General
Partner or any of its Affiliates, and (iii) those dealings,
contracts or provision of services described in the Investment
Partnership Agreement or in the Prospectus. Extraordinary
circumstances shall only be presumed to exist where there is an
emergency situation requiring immediate action and the services
required are not immediately available from unaffiliated parties.
All services rendered under such circumstances must be rendered
pursuant to a written contract which must contain a clause
allowing termination without penalty on sixty (60) days' notice.
Goods and services provided under such circumstances must be
provided at the lesser of actual cost or the price charged for
such goods or services by independent parties.
(c) In the event extraordinary circumstances arise, the
Investment General Partner and its Affiliates may provide
construction services in connection with the Apartment Complex.
Neither the Investment General Partner nor any of its Affiliates
shall provide such services unless it believes it has an adequate
staff to do so and unless such provision of goods and
construction services is part of its ordinary and ongoing
business in which it has previously engaged, independent of the
activities of the Investment Limited Partner. Any such services
must be reasonable for and necessary to the Investment Limited
Partner, actually furnished to the Investment Limited Partner,
and provided at the lower of 10% of the construction contract
rate with respect to the Apartment Complex or 90% of the
competitive price charged for such services by independent
parties for comparable goods and services in the same geographic
location (except that in the case of transfer agent, custodial
and similar banking-type fees, and insurance fees, the
compensation, price or fee shall be at the lesser of costs or the
compensation, price or fee of any other Person rendering
comparable services as aforesaid). Cost of services as used
herein means the pro rata cost of personnel, including an
allocation of overhead directly attributable to such personnel,
based on the amount of time such personnel spent on such services
or other method of allocation acceptable to the accountants for
the Investment Limited 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 or in the
Prospectus.
ARTICLE XIII
General Provisions
13.1 Restrictions by Reason of Section 708 of the Code
No Disposition may be made if the Interest sought to be
Disposed of, when added to the total of all other Interests
Disposed of within the period of twelve consecutive months prior
to the proposed date of the Disposition, could, in the opinion of
tax counsel to the Partnership, result in the termination of the
Partnership under Section 708 of the Code. This Section 13.1
shall have no application to any required repurchase of 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 a 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 Dispositions.
13.2 Amendments to Certificate
Within one hundred twenty (120) days after the end of any
Partnership fiscal year in which the Investment Limited Partner
shall have received any distributions under Article X, the
General Partners shall file an amendment to this Agreement
reducing by 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 this
Agreement. However, Schedule A shall not be amended on account
of any such distribution.
The Partnership shall amend the Certificate at least once
each calendar quarter to effect the substitution of Substituted
Limited Partners, although the General Partners may elect to do
so more frequently. In the case of assignments, where the
assignee does not become a Substituted Limited Partner, the
Partnership shall recognize the assignment not later than the
last day of the calendar month following receipt of notice of
assignment and all documentation required in connection therewith
hereunder.
Notwithstanding the foregoing provisions of this Section
13.2, no such amendments to this Agreement need be filed by the
General Partners if the Agreement is not required to and does not
identify the Limited Partners or their Capital Contributions in
such capacity.
13.3 Notices
Any notice called for under this Agreement shall be in
writing and shall be deemed adequately given if actually
delivered or if sent by registered or certified mail, postage
prepaid, to the party for whom such notice is intended at such
party's last address of record on the Partnership books.
13.4 Word Meanings
The words such as herein, hereinafter, hereof and hereunder
refer to this Agreement as a whole and not merely to a
subdivision in which such words appear unless the context
otherwise requires. The singular shall include the plural, and
vice versa, and each gender (masculine, feminine and neuter)
shall include the other genders, unless the context requires
otherwise. Each reference to a Section or an Article refers to
the corresponding Section or Article of this Agreement, unless
specified otherwise. References to Treasury Regulations
(permanent or temporary) or Revenue Procedures shall include any
successor provisions.
13.5 Binding Effect
The covenants and agreements contained herein shall be
binding upon and inure to the benefit of the heirs, executors,
administrators, successors and assigns of the respective parties
hereto.
13.6 Applicable Law
This Agreement shall be construed and enforced in accordance
with the laws of the State.
13.7 Counterparts
This Agreement may be executed in several counterparts and
all so executed shall constitute one agreement binding on all
parties hereto, notwithstanding that all the parties have not
signed the original or the same counterpart.
13.8 Financing Regulations
So long as any of the Project Documents are in effect, (a)
each of the provisions of this Agreement shall be subject to, and
the General Partners covenant to act in accordance with, the
Project Documents; (b) the Project Documents shall govern the
rights and obligations of the Partners, their heirs, executors,
administrators, successors and assigns to the extent expressly
provided therein; (c) upon any dissolution of the Partnership or
any transfer of the Apartment Complex, no title or right to the
possession and control of the Apartment Complex and no right to
collect the rent therefrom shall pass to any Person who is not,
or does not become, bound by the Project Documents and other RECD
documents in a manner satisfactory to the RECD; (d) no amendment
to any provision of the Project Documents shall become effective
without the prior written consent of RECD (if required); and (e)
the affairs of the Partnership shall be subject to RECD
regulation and no action shall be taken which would require the
consent or approval of RECD unless the same is first obtained.
No new Partner shall be admitted to the Partnership, and no
Partner shall withdraw from the Partnership or be substituted for
without the consent of RECD (if such consent is then required).
No amendment to this Agreement relating to matters governed by
RECD regulations or requirements shall become effective until the
prior written consent of RECD (if required) to such amendment
shall have been obtained.
Any conveyance or transfer of title to all or any portion of
the Apartment Complex required or permitted under this Agreement
shall in all respects be subject to all conditions, approvals and
other requirements of RECD rules and 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 to be bound by the obligations of the Partnership
(other than the rules and regulations of RECD and the
requirements of any other Lender), such provision or provisions
shall be deemed void and of no effect.
13.10 Paragraph Titles
All article and section headings in this Agreement are for
convenience of reference only and are not intended to qualify the
meaning of any article or section.
13.11 Amendment Procedure
This Agreement may be amended by the General Partners only
with the Consent of the Investment Limited Partner and the
Special Limited Partner.
13.12 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 hereof; provided,
however, that if regulations are issued under the Code or an
amendment to the Code is adopted which would require, in the
opinion of the Auditors, that the Investment Limited Partner be
deemed admitted on a date other than as of the Commencement Date,
then the General Partners shall select a permitted admission date
which is most favorable to the Investment Limited Partner.
[NO FURTHER TEXT ON THIS PAGE]
WITNESS the execution hereof under seal as of the 1st day of
August, 1998.
ORIGINAL LIMITED PARTNER: SPECIAL LIMITED PARTNER:
BCTC 94, Inc.
/s/ William L. Patterson, Jr. By: /s/ Bonnie Kate Fox
William L. Patterson, Jr. Bonnie Kate Fox,
John P. Manning, its
President
INVESTMENT LIMITED PARTNER: GENERAL PARTNER
BOSTON CAPITAL TAX CREDIT Home Properties of New
FUND IV, L.P., York, L.P., a New York
a Delaware limited partnership limited partnership
By: Boston Capital Associates IV, By: Home Properties of
L.P., a Delaware limited New York, Inc.,
partnership, its general partner its general partner
By: C & M Associates d/b/a
Boston Capital Associates, By:/s/ C. Terence Butwid
its general partner C. Terence Butwid,
its duly authorized
Vice President
By: /s/ Bonnie Kate Fox
Bonnie Kate Fox,
Attorney-in-Fact for
John P. Manning,
a general partner
STATE OF ___________________ )
) ss.
COUNTY OF __________________ )
BEFORE ME, the undersigned Notary Public in and for said
County and Commonwealth, personally appeared the above-named
William L. Patterson, Jr. who, being duly sworn, acknowledged
that he did sign the foregoing instrument, that the statements
therein contained are true and that the same is his free act and
deed.
WITNESS my hand and official seal this ______ day of
_________, 1998.
_________________________
Notary Public
_________________________
Name (Printed)
My Commission Expires:
My County of Residence:
STATE OF ___________________ )
) ss.
COUNTY OF __________________ )
BEFORE ME, the undersigned Notary Public in and for said
County and Commonwealth, personally appeared the above-named C.
Terence Butwid, the duly authorized Vice President of Home
Properties of New York, Inc., which is the general partner of
Home Properties of New York, L.P., who, being duly sworn,
acknowledged that he did sign the foregoing instrument, that the
statements therein contained are true and that the same is the
duly authorized free act and deed of Home Properties of New York,
L.P.
WITNESS my hand and official seal this ______ day of
_________, 1998.
_________________________
Notary Public
_________________________
Name (Printed)
My Commission Expires:
My County of Residence:
COMMONWEALTH OF MASSACHUSETTS )
)ss.
COUNTY OF SUFFOLK )
BEFORE ME, the undersigned Notary Public in and for said
County and Commonwealth, personally appeared the above-named
Bonnie Kate Fox, Attorney-in-Fact for John P. Manning, known to
me to be a general partner of C & M Associates d/b/a Boston
Capital Associates, which is the general partner of Boston
Capital Associates IV, L.P., which is the general partner of
Boston Capital Tax Credit Fund IV, L.P., who, being duly sworn,
acknowledged that she did sign the foregoing instrument, that the
statements therein contained are true and that the same is the
duly authorized free act and deed of Boston Capital Tax Credit
Fund IV, L.P..
WITNESS my hand and official seal this ______ day of
_________, 1998.
_________________________
Notary Public
_________________________
Name (Printed)
My Commission Expires:
My County of Residence:
COMMONWEALTH OF MASSACHUSETTS )
) ss.
COUNTY OF SUFFOLK )
BEFORE ME, the undersigned Notary Public in and for said
county and commonwealth, personally appeared the above-named
Bonnie Kate Fox, Attorney-in-Fact for John P. Manning, known to
me to be the President of BCTC 94, Inc., who, being duly sworn,
acknowledged that she did sign the foregoing instrument and that
the same is the duly authorized free act and deed of BCTC 94,
Inc.
WITNESS my hand and official seal this ___ day of
_____________ 1998.
__________________________
Notary Public
__________________________
Name (Printed)
My Commission Expires:
My County of Residence:
LAKE CITY LIMITED PARTNERSHIP
Schedule A
As of
August 1, 1998
General Partners Capital Contribution
Home Properties of New York, L.P. $100
850 Clinton Square
Rochester, NY 14604
Special Limited Partner
BCTC 94, Inc. $10
c/o Boston Capital Partners
One Boston Place
Boston, MA 02108
Investment Total Agreed-to Paid-In
Limited Partner Capital Contribution Capital
Contribution*
Boston Capital $240,900 $144,540
Tax Credit Fund
IV, L.P.
c/o Boston Capital
Partners, Inc.
One Boston Place
Boston, MA 02108
____________________________
*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.
BOSTON CAPITAL TAX CREDIT FUND IV, L.P.
LAKE CITY LIMITED PARTNERSHIP
CERTIFICATION AND AGREEMENT
CERTIFICATION AND AGREEMENT made as of August 1, 1998, by
Lake City Limited Partnership, a Pennsylvania limited partnership
(the Operating Partnership); Home Properties of New York, L.P., a
New York limited partnership (the Operating General Partner) and
William L. Patterson, Jr. (the Original Limited Partner) for the
benefit of BOSTON CAPITAL TAX CREDIT FUND IV, L.P., a Delaware
limited partnership (the Investment Partnership), BOSTON CAPITAL
ASSOCIATES IV, L.P., a Delaware limited partnership (Boston
Capital), PERKINS, SMITH & COHEN, LLP and certain other persons
or entities described herein.
WHEREAS, the Operating Partnership proposes to admit the
Investment Partnership as a limited partner thereof pursuant to a
Second Amended and Restated Agreement of Limited Partnership of
the Operating Partnership dated as of August 1, 1998 (the
Operating Partnership Agreement), in accordance with which the
Investment Partnership will make substantial capital
contributions to the Operating Partnership;
WHEREAS, the Investment Partnership and Boston Capital have
relied upon certain information and representations described
herein in evaluating the merits of investment by the Investment
Partnership in the Operating Partnership; and
WHEREAS, Perkins, Smith & Cohen, LLP, as counsel for the
Investment Partnership, will rely upon such information and
representations in connection with its delivery of certain
opinions with respect to this transaction;
NOW, THEREFORE, to induce the Investment Partnership to
enter into the Operating Partnership Agreement and become a
limited partner of the Operating Partnership, and for $1.00 and
other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the Operating Partnership, the
Operating General Partner and the Limited Partner hereby agree as
follows for the benefit of the Investment Partnership, Boston
Capital, Perkins, Smith & Cohen, LLP and certain other persons
hereinafter described.
1. Representations, Warranties and Covenants of the
Operating Partnership, the Operating General
Partner and the Limited Partner
The Operating Partnership, the Operating General Partners
and the Original Limited Partner jointly and severally represent,
warrant and certify to the Investment Partnership, Boston
Capital, and Perkins, Smith & Cohen, LLP, that, with respect to
the Operating Partnership, as of the date hereof:
1.01 The Operating Partnership is duly organized
and in good standing as a limited partnership pursuant to the
laws of the state of its formation with full power and authority
to own its apartment complex (the Apartment Complex) and conduct
its business; the Operating Partnership, the Operating General
Partners and the Original Limited Partner have the power and
authority to enter into and perform this Certification and
Agreement; the execution and delivery of this Certification and
Agreement by the Operating Partnership, the Operating General
Partners and the Original Limited Partner have been duly and
validly authorized by all necessary action; the execution and
delivery of this Certification and Agreement, the fulfillment of
its terms and consummation of the transactions contemplated
hereunder do not and will not conflict with or result in a
violation, breach or termination of or constitute a default under
(or would not result in such a conflict, violation, breach,
termination or default with the giving of notice or passage of
time or both) any other agreement, indenture or instrument by
which the Operating Partnership or any Operating General Partner
or Original Limited Partner is bound or any law, regulation,
judgment, decree or order applicable to the Operating Partnership
or any Operating General Partner or the Original Limited Partner
or any of their respective properties; this Certification and
Agreement constitutes the valid and binding agreement of the
Operating Partnership, the Operating General Partners and the
Original Limited Partner, enforceable against each of them in
accordance with its terms.
1.02 The Operating General Partners have delivered
to the Investment Partnership, Boston Capital or their affiliates
all documents and information which would be material to a
prudent investor in deciding whether to invest in the Operating
Partnership. All factual information, including without
limitation the information set forth in Exhibit A hereto,
provided to the Investment Partnership, Boston Capital or their
affiliates either in writing or orally, did not, at the time
given, and does not, on the date hereof, contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances under which
they are made. Since the date of the financial statements for
the Operating General Partners previously delivered, there has
been no material adverse change in the financial position of the
Operating General Partners. The estimates of occupancy rates,
operating expenses, depreciation and tax credits set forth on
Exhibit A are reasonable in light of the knowledge and experience
of the Operating General Partners.
1.03 As of the date hereof, each of the
representations contained in Exhibit B attached hereto is true,
accurate and complete as to each of the Operating Partnership,
the Operating General Partners and the Original Limited Partner
and as to any of their affiliates, any of their predecessors and
their affiliates' predecessors, any of their directors, officers,
general partners and/or beneficial owners of ten per cent (10%)
or more of any class of their equity securities (beneficial
ownership meaning the power to vote or direct the vote and/or the
power to dispose or direct the disposition of such securities),
as the case may be, and any promoters presently connected with
them in any capacity.
1.04 Each of the representations and warranties
contained in the Operating Partnership Agreement is true and
correct as of the date hereof.
1.05 Each of the covenants and agreements of the
Operating Partnership and the Operating General Partners
contained in the Operating Partnership Agreement has been duly
performed to the extent that performance of any covenant or
agreement is required on or prior to the date hereof.
1.06 All conditions to admission of the Investment
Partnership as the investment limited partner of the Operating
Partnership contained in the Operating Partnership Agreement have
been satisfied.
1.07 No default has occurred and is continuing
under the Operating Partnership Agreement or any of the Project
Documents (as said term is defined in the Operating Partnership
Agreement for the Operating Partnership.
1.08 The Operating General Partners agree to take
all actions necessary to claim the Projected Credit, including,
without limitation, the filing of Form(s) 8609 with the Internal
Revenue Service.
1.09 No person or entity other than the Operating
Partnership holds any equity interest in the Apartment Complex.
1.10 The Operating Partnership has the sole
responsibility to pay all maintenance and operating costs,
including all taxes levied and all insurance costs, attributable
to the Apartment Complex.
1.11 The Operating Partnership, except to the
extent it is protected by insurance and excluding any risk borne
by lenders, bears the sole risk of loss if the Apartment Complex
is destroyed or condemned or there is a diminution in the value
of the Apartment Complex.
1.12 No person or entity except the Operating
Partnership has the right to any proceeds, after payment of all
indebtedness, from the sale, refinancing, or leasing of the
Apartment Complex.
1.13 No Operating General Partner is related in
any manner to the Investment Partnership, nor is the Operating
General Partner acting as an agent of the Investment Partnership.
1.14 The Apartment Complex contains no substance
known to be hazardous, such as hazardous waste, lead-based paint,
asbestos, methane gas, urea formaldehyde insulation, oil, toxic
substances, underground storage tanks, polychlorinated biphenyls
(PCBs), and radon; the Apartment Complex is not affected by the
presence of oil, toxic substances, or other pollutants that could
be a detriment to the Apartment Complex nor is the Operating
Partnership in violation of any local, state, or federal law or
regulation; and no violation of the Clean Air Act, Clean Water
Act, Resource Conservation and Recovery Act, Toxic Substance
Control Act, Safe Drinking Water Control Act, Comprehensive
Environmental Resource Compensation and Liability Act, or
Occupational Safety and Health Act has occurred or is continuing.
Neither the Operating Partnership nor any Operating General
Partner or Original Limited Partner has received any notice from
any source whatsoever of the existence of any such hazardous
condition relating to the Apartment Complex or of any violation
of any local, state or federal law or regulation with respect to
the Apartment Complex.
1.15 The fair market value of the Apartment
Complex exceeds the total amount of indebtedness encumbering the
Apartment Complex and is expected to continue to do so throughout
the term of such indebtedness.
2. Indemnification
2.01 The Operating General Partners (for purposes
of this Section 2.01, the Indemnifying Parties or, individually,
an Indemnifying Party) agree to indemnify and hold harmless the
Investment Partnership and Boston Capital (for purposes of this
Section 2.01, the Indemnified Parties or, individually, an
Indemnified Party) and each officer, director, employee and
person, if any, who controls any party against any losses,
claims, damages or liabilities (collectively, Liabilities), joint
or several, to which any Indemnified Party or such officer,
director, employee or controlling person may become subject,
insofar as such Liabilities or actions in respect thereof arise
out of or are based upon (i) a breach by such Indemnifying Party
of any of his representations, warranties or covenants to such
Indemnified Party or any such of its officers, directors,
employees or controlling persons under this Certification and
Agreement or (ii) liability under any statute, regulation,
ordinance, or other provision of federal, state, or local law or
any civil action pertaining to the protection of the environment
or otherwise pertaining to public health or employee health and
safety, including, without limitation, protection from hazardous
waste, leadbased paint, asbestos, methane gas, urea formaldehyde
insulation, oil, toxic substance, underground storage tanks,
polychlorinated biphenyls (PCBs), and radon; and to reimburse
each such Indemnified Party and each such officer, director,
employee or controlling person for any legal or other expenses
reasonably incurred by it or them in connection with
investigating or defending against any such Liability or action;
provided, however, that the Indemnifying Party shall not be
required to indemnify any Indemnified Party or any such officer,
director, employee or controlling person for any payment made to
any claimant in settlement of any Liability or action unless such
payment is approved by the Indemnifying Party or by a court
having jurisdiction of the controversy. This indemnity agreement
shall remain in full force and effect notwithstanding any
investigation made by any party hereto, shall survive the
termination of any agreement which refers to this indemnity and
shall be in addition to any liability which the Indemnifying
Party may otherwise have.
2.02 No Indemnifying Party shall be liable under
the indemnity agreements contained in Section 2.01 unless the
Indemnified Party shall have notified the Indemnifying Party in
writing within forty-five (45) business days after the summons or
other first legal process giving information of the nature of the
claim shall have been served upon the Indemnified Party or any
such of its officers, directors, employees or controlling
persons, but failure to notify an Indemnifying Party of any such
claim shall not relieve it from any liability which it may have
to the Indemnified Party or any such of its officers, directors,
employees or controlling persons against whom action is brought
otherwise than on account of its indemnity agreement contained in
Section 2.01. In case any action is brought against any
Indemnified Party or any such of its officers, directors,
employees or controlling persons upon any such claim, and it
notifies the Indemnifying Party of the commencement thereof as
aforesaid, the Indemnifying Party shall be entitled to
participate at its own expense in the defense, or, if it so
elects, in accordance with arrangements satisfactory to the other
Indemnifying Party or parties similarly notified, to assume the
defense thereof, with counsel who shall be satisfactory to such
Indemnified Party or any such of its officers, directors,
employees or controlling persons and any other Indemnified
Parties who are defendants in such action; and after notice from
the Indemnifying Party to such Indemnified Party or any such of
its officers, directors, employees or controlling persons of its
election so to assume the defense thereof and the retaining of
such counsel by the Indemnifying Party, the Indemnifying Party
shall not be liable to such Indemnified Party or any such of its
officers, directors, employees or controlling persons for any
legal or other expenses subsequently incurred by such Indemnified
Party or any such of its officers, directors, employees or
controlling persons in connection with the defense thereof, other
than the reasonable costs of investigation.
3. Miscellaneous
3.01 This Certification and Agreement is made
solely for the benefit of the Operating Partnership, the
Operating General Partners, the Original Limited Partner, Boston
Capital, Perkins, Smith & Cohen, LLP, and the Investment
Partnership (and, to the extent provided in Section 2, the
officers, directors, partners, employees and controlling persons
referred to therein), and their respective successors and
assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement.
3.02 This Certification and Agreement may be
executed in several counterparts, each of which shall be deemed
to be an original, all of which together shall constitute one and
the same instrument.
3.03 Terms defined in the Operating Partnership
Agreement and used but not otherwise defined herein shall have
the meanings given to them in the Operating Partnership
Agreement.
IN WITNESS WHEREOF, the undersigned have set their hands and
seals as of the date first above written.
OPERATING PARTNERSHIP:
LAKE CITY LIMITED PARTNERSHIP
By: Home Properties of New York, L.P.
By: Home Properties of New York, Inc.,
its general partner
By: /s/ C. Terence Butwid
C. Terence Butwid, its
duly authorized
Vice President
ORIGINAL LIMITED PARTNER:
/s/ William L. Patterson, Jr.
William L. Patterson, Jr.
OPERATING GENERAL PARTNER:
Home Properties of New York, L.P.
By: Home Properties of New York, Inc.,
its general partner
By: /s/ C. Terence Butwid
C. Terence Butwid, its
duly authorized
Vice President
Exhibit A
LAKE CITY LIMITED PARTNERSHIP
FACT SHEET
1. Sources & Uses of Funds
A. Sources
Permanent Mortgage - $1,174,169 (82%)
G.P. Capital - $ 100 ( 1%)
Partnership Reserve Draw $ 8,381 ( 1%)
Syndication Proceeds - $ 240,900 (16%)
$1,423,550 (100%)
B. Uses
Total Construction Hard Cost - $ 362,084 (25%)
Soft Construction Costs - $ 38,582 ( 3%)
Development Fee to G.P. - $ 54,313 ( 4%)
Buildings - $ 928,289 (64%)
Land - $ 40,181 ( 3%)
Developer's Overhead - $ 101 ( 1%)
$1,423,550 (100%)
2. Permanent Financing (First Stage (Assumed))
A. Lender RECD
B. Mortgage Amount: $917,169
C. Obligation Date: November 12, 1997
D. Assumption Date: November 12, 1997
E. Interest Rate: 7.25%
F. Term: 50 years
G. Amortization: 50 years
3. Permanent Financing (Second Stage (Rehabilitation))
A. Lender: RECD
B. Mortgage Amount: $257,000
C. Obligation Date: January 3, 1997
D. Note Date: November 12, 1997
E. Interest Rate: 7.25%
F. Term: 50 years
G. Amortization 50 years
4. Eligible Basis: $454,979 (Rehabilitation)
$928,289 (Acquisition)
5. Qualified Basis: $454,979 (Rehabilitation)
$928,289 (Acquisition)
6. Operating General Partner
Capital Contribution: $ 100
7. Working Capital Loan
Amount: $0
8. Type of Credit: 3.58%
9. Rent-up Schedule: 100% by July 1, 1998
10. Projected Credit to the
Investment Partnership (99.99%) $348,358
A. $14,761 for 1998;
B. $35,426 per annum for each of the years 1999
through 2007; and,
C. $14,759 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 $14,761)
11. Total Projected Credit to the
Operating Partnership (100%) $354,300
A. $20,668 for 1998;
B. $35,430 per annum for each of the years 1999
through 2007; and,
C. $14,760 for 2008
12. Tax Credit Approval:
A. Application: __________
Amount: $_________
B. Reservation: September 9, 1997
Amount: $35,430
C. Carryover Allocation: November 18, 1997
Amount: $35,430
13. Apartment Complex:
A. Name: Lake City Apartments
B. Address: Cherry Street
Lake City, PA
C. County: Erie
D. Type of Project: Family
14. Area Median Income: $39,100 (1998)
15. Type of Apartments:
Unit Basic Utility Market
Number Sq. Ft. Rent Allowance Rent
2-Bedroom 44 ____ $306 $65 $434
16. Annual Operating Expenses
(beginning 2000): $102,895
17A. Reserve Account
1. Annual: $14,130
2. Total: $141,300
17B. Operating Reserve: $0
18. Amount of Annual Reporting Fee
to Boston Capital: $1,500
19. Amount of Annual Partnership
Management Fee: $1,500
20. Amount of Total Depreciable
Base Allocated to Personal
Property: $27,383 (1.98%)
21. Completion Date: December 1998
22. Total Capital Contribution of
Investment Partnership: $240,900
23. Schedule of Capital Contributions
A. $144,540 on the latest to occur of (i) Admission Date,
(ii) Tax Credit Set Aside, or (iii) Permanent
Mortgage Commitment;
B. $48,180 on the later of (i) the Completion Date,
(ii) Cost Certification; or (ii) receipt of
an updated title insurance policy
satisfactory to the Investment Limited
Partner;
C. $45,771 on the later of (i) the Initial 100%
Occupancy Date, (ii) the Breakeven Point,
(iii) Permanent Mortgage Closing or (iv)
State Designation; and
D. $2,409 upon Receipt of Tax Return for Breakeven
Year.
24. Fees and Other Items to be paid from Capital Contributions
Development Costs: $186,486
Construction and Development
Fee: $54,313
Developer's Overhead: $101
25. Operating General Partners: Home Properties of
New York, L.P.
Address: 850 Clinton Square
Rochester, NY 14604
Telephone Number: (716) 546-4908
Contact Person: C. Terence Butwid
26. Ownership Interests
Tax Credits &
Cost Recovery
(Depreciation) Profits and Capital Cash
Deductions Other Losses Transactions Flow
Operating G.P.: 0.01% 0.01% 66% 0.01%
Special L.P.: 0% 0% .001% 0%
Investment L.P.: 99.99% 99.99 33.999% 99.99%
27. Management Agent: Home Properties
Contact Person: C. Terence Butwid
Address: 850 Clinton Square
Rochester, NY 14606
Telephone Number: (716) 546-4900
Amount of Fees: $39 per unit occupied on
1st of each month. Max.
Annual compensation of
$20,496.
28. Builder: Patterson-Erie Corporation
Address: 1250 Tower Lane
Erie, PA 16505
Amount of Compensation: $_________
Builder's Profit: $_________
29. Intentionally Omitted
30. Auditor and Tax
Return Preparer: McMahon, O'Polka,
Guelcher & Associates
Contact Person: John Guelcher
Address: 2809 West Eight Street
Erie, PA 16505
Telephone Number: (814) 838-8524
31. Federal Taxpayer ID Number: ____________
32. Building Breakdown:
A. # of Units 44
B. # of Building 11
C. BIN #PA97-01067
PA97-02067
PA97-03067
PA97-04067
PA97-05067
PA97-06067
PA97-07067
PA97-08067
PA97-09067
PA97-10067
PA97-11067
cc: Boston Capital Communications Limited Partnership
Accounting Department
Exhibit B
Certificate of Operating Partnership,
Operating General Partners and Original Limited
Partner Re: Lack of Disqualifications
The Operating Partnership, its Operating General Partners
and its Original Limited Partner (as identified on the
Certification and Agreement to which this Certificate is attached
as Exhibit B) hereby represent to you that neither (i) the
Operating Partnership, (ii) any predecessor of the Operating
Partnership, (iii) any of the Operating Partnership's affiliates
(affiliate meaning a person that controls or is controlled by, or
is under common control with, the Operating Partnership), (iv)
any sponsor (meaning any person who (1) is directly or indirectly
instrumental in organizing the Operating Partnership or (2) will
directly or indirectly manage or participate in the management of
the Operating Partnership or (3) will regularly perform, or
select the person or entity who will regularly perform, the
primary activities of the Operating Partnership), (v) any
officer, director, principal or general partner of the Operating
Partnership or of any sponsor, (vi) any officer, director,
principal, promoter or general partner of the Operating General
Partner, (vii) any beneficial owner of ten per cent or more of
any class of the equity securities of the Operating Partnership
or of any sponsor (beneficial ownership meaning the power to vote
or direct the vote and/or the power to dispose or direct the
disposition of such securities), (viii) any promoter of the
Operating Partnership (meaning any person who, acting alone or in
conjunction with one or more other persons, directly or
indirectly has taken, is taking or will take the initiative in
founding and organizing the business of the Operating Partnership
or any person who, in connection with the founding and organizing
of the business or enterprise of the Operating Partnership,
directly or indirectly receives in consideration of services or
property, or both services and property, ten per cent or more of
any class of securities of the Operating Partnership or ten per
cent or more of the proceeds from the sale of any class of such
securities; provided, however, a person who receives such
securities or proceeds either solely as underwriting commissions
or solely in consideration of property shall not be deemed a
promoter if such person does not otherwise take part in founding
and organizing the enterprise) presently connected with the
Operating Partnership in any capacity:
(1) Has filed a registration statement which is the subject
of any pending proceeding or examination under the securities
laws of any jurisdiction, or which is the subject of any refusal
order or stop order thereunder entered within five years prior to
the date hereof;
(2) Has been convicted of or pleaded nolo contendere to a
misdemeanor or felony or, within the last ten years, been held
liable in a civil action by final judgment of a court based upon
conduct showing moral turpitude in connection with the offer,
purchase or sale of any security, franchise or commodity (which
term, for the purposes of this Certificate shall hereinafter
include commodity futures contracts) or any other aspect of the
securities or commodities business, or involving racketeering,
the making of a false filing or a violation of Sections 1341,
1342 or 1343 of Title 18 of the United States Code or arising out
of the conduct of the business of an issuer, underwriter, broker,
dealer, municipal securities dealer, or investment adviser, or
involving theft, conversion, misappropriation, fraud, breach of
fiduciary duty, deceit or intentional wrongdoing including, but
not limited to, forgery, embezzlement, obtaining money under
false pretenses, larceny fraudulent conversion or
misappropriation of property or conspiracy to defraud, or which
is a crime involving moral turpitude, or within the last five
years of a misdemeanor or felony which is a criminal violation of
statutes designed to protect consumers against unlawful practices
involving insurance, securities, commodities, real estate,
franchises, business opportunities, consumer goods or other goods
and services;
(3) Is subject to (a) any administrative order, judgment or
decree entered within five years prior to the date hereof entered
or issued by or procured from a state securities commission or
administrator, the Securities and Exchange Commission (SEC), the
Commodities Futures Trading Commission or the U.S. Postal
Service, or to (b) any administrative order or judgment, arising
out of the conduct of the business of an underwriter, broker,
dealer, municipal securities dealer, or investment adviser, or
involving deceit, theft, fraud or fraudulent conduct, or breach
of fiduciary duty, or which is based upon a state banking,
insurance, real estate or securities law or (c) has been the
subject of any administrative order, judgment or decree in any
state in which fraud, deceit, or intentional wrongdoing,
including, but not limited to, making untrue statements of
material fact or omitting to state material facts, was found;
(4) Is subject to any pending proceeding in any jurisdiction
relating to the exemption from registration of any security or
offering, or to any order, judgment or decree in which
registration violations were found or which prohibits, denies or
revokes the use of any exemption from registration in connection
with the offer, purchase or sale of securities, or to an SEC
censure or other order based on a finding of false filing;
(5) Is subject to any order, judgment or decree of any court
or regulatory authority of competent jurisdiction entered within
five years prior to the date hereof, temporarily, preliminarily
or permanently restraining or enjoining such persons from
engaging in or continuing any conduct or practice in connection
with any aspect of the securities or commodities business or
involving the making of any false filing or arising out of the
conduct of the business of an underwriter, broker, dealer,
municipal securities dealer, or investment adviser, or which
restrains or enjoins such person from activities subject to
federal or state statutes designed to protect consumers against
unlawful or deceptive practices involving insurance, banking,
commodities, real estate, franchises, business opportunities,
consumer goods and services, or is subject to a United States
Postal Service false representation order entered within five
years prior to the date hereof, or is subject to a temporary
restraining order or preliminary injunction with respect to
conduct alleged to have violated section 3005 of Title 39, United
States Code;
(6) Is suspended or expelled from membership in, or
suspended or barred from association with a member of, an
exchange registered as a national securities exchange, an
association registered as a national securities association, or
any self-regulatory organization registered pursuant to the
Securities Exchange Act of 1934, or a Canadian securities
exchange, or association or self-regulatory organization
operating under the authority of the Commodity Futures Trading
Commission, or is subject to any currently effective order or
order entered within the past five years of the SEC, the
Commodity Futures Trading Commission or any state securities
administrator denying registration to, or revoking or suspending
the registration of, such person as a broker-dealer, agent,
futures commission merchant, commodity pool operator, commodity
trading adviser or investment adviser or associated person of any
of the foregoing, or prohibiting the transaction of business as a
broker-dealer or agent;
(7) Has, in any application for registration or in any
report required to be filed with, or in any proceeding before the
SEC or any state securities commission or any regulatory
authority willfully made or caused to be made any statement which
was at the time and in the light of the circumstances under which
it was made false or misleading with respect to any material
fact, or has willfully omitted to state in any such application,
report or proceeding any material fact which is required to be
stated therein or necessary in order to make the statements made,
in the light of the circumstances under which they are made, not
misleading, or has willfully failed to make any required
amendment to or supplement to such an application, report or
statement in a timely manner;
(8) Has willfully violated any provision of the Securities
Act of 1933, the Securities Exchange Act of 1934, the Trust
Indenture Act of 1939, the Investment Advisers Act of 1940, the
Investment Company Act of 1940, the Commodity Exchange Act of
1974 or the securities laws of any state, or any predecessor law,
or of any rule or regulation under any of such statutes;
(9) Has willfully aided, abetted, counseled, commanded,
induced or procured the violation by any other person of any of
the statutes or rules or regulations referred to in subsection
(8) hereof;
(10) Has failed reasonably to supervise his agents, if he is
a broker-dealer, or his employees, if he is an investment
adviser, but no person shall be deemed to have failed in such
supervision if there have been established procedures, and a
system for applying such procedures, which would reasonably be
expected to prevent and detect, insofar as practicable, any
violation of statutes, rules or orders described in subsection
(8) and if such person has reasonably discharged the duties and
obligations incumbent upon him by reason of such procedures and
system without reasonable cause to believe that such procedures
and system were not being complied with;
(11) Is subject to a currently effective state
administrative order or judgment procured by a state securities
administrator within five years prior to the date hereof or is
subject to a currently effective United States Postal Service
fraud order or has engaged in dishonest or unethical practices in
the securities business or has taken unfair advantage of a
customer or is the subject of sanctions imposed by any state or
federal securities agency or self-regulatory agency;
(12) Is insolvent, either in the sense that his liabilities
exceed his assets or in the sense that he cannot meet his
obligations as they mature, or is in such financial condition
that he cannot continue his business with safety to his
customers, or has not sufficient financial responsibility to
carry out the obligations incident to his operations or has been
adjudged a bankrupt or made a general assignment for the benefit
of creditors; or
(13) Is selling or has sold, or is offering or has offered
for sale, in any state securities through any unregistered agent
required to be registered under the Pennsylvania Securities Act
of 1972, as amended (the Pennsylvania Act) or for any broker-
dealer or issuer with knowledge that such broker-dealer or issuer
had not or has not complied with the Pennsylvania Act.
If the Operating Partnership is subject to the requirements
of Section 12, 14 or 15(d) of the Securities Exchange Act of
1934, then the Operating Partnership has filed all reports
required by those Sections to be filed during the 12 calendar
months preceding the date hereof (or for such shorter period that
the Operating Partnership was required to file such reports).
