FORM 8-A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 3
(Exact name of registrant as specified in its charter)
California 33-6163848
(State of incorporation (I.R.S. Employer
or organization) Identification No.)
3158 Redhill Avenue, Suite 120
Costa Mesa, California 92626
(Address of principal (Zip Code)
executive offices)
Securities to be registered pursuant to Section 12(b) of the Act: None
Securities to be registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
(Title of Class)
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INFORMATION REQUIRED IN REGISTRATION STATEMENT
Item 1. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
(a) Capital stock.
Inapplicable
(b) Debt securities.
Inapplicable
(c) Warrants and rights.
Inapplicable
(d) Other securities.
(i) General
WNC Housing Tax Credit Fund V, L.P., Series 3 (the "Partnership") was
formed under the California Revised Limited Partnership Act on March 28, 1995.
A public offering of 25,000 Units of Limited Partnership Interest in the
Partnership commenced on July 26, 1995 and terminated on or about June 30,
1996.
The governing instrument of the Partnership is its Agreement of Limited
Partnership (the "Partnership Agreement"), included as Exhibit 2.1 hereto.
(ii) Distribution and allocation rights
There is hereby incorporated herein by reference the information contained
in Article 4 of the Partnership Agreement.
(iii) Redemption provisions
There is hereby incorporated herein by reference the information contained
in Section 5.2.1(xii) of the Partnership Agreement.
(iv) Voting rights
There is hereby incorporated herein by reference the information contained
in Article 10 of the Partnership Agreement.
(v) Liquidation rights
There is hereby incorporated herein by reference the information contained
in Article 8 of the Partnership Agreement.
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(vi) Liability to assessment
There is hereby incorporated herein by reference the information contained
in Section 3.5 of the Partnership Agreement.
(vii) Restrictions on alienability
There is hereby incorporated herein by reference the information contained
in Article 7 of the Partnership Agreement.
(e) Market information for securities other than common equity.
Inapplicable
(f) American Depositary Receipts.
Inapplicable
Item 2. EXHIBITS
2.1 Agreement of Limited Partnership
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SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereto duly authorized.
Date: December 17, 1996 WNC HOUSING TAX CREDIT FUND V,
L.P., Series 3
By: WNC & Associates, Inc.,
General Partner
By: /s/ JOHN B. LESTER, JR.
John B. Lester, Jr.,
President
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INDEX TO EXHIBITS
Exhibit Number Exhibit
2.1 Agreement of Limited Partnership
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WNC HOUSING TAX CREDIT FUND V
AGREEMENT OF LIMITED PARTNERSHIP
Table of Contents
Page
ARTICLE 1 DEFINITIONS..............................................4
ARTICLE 2 FORMATION; NAME; PLACE OF BUSINESS;
PURPOSE AND TERM.........................................17
Section 2.1 Formation of Partnership........................17
Section 2.2 Name............................................17
Section 2.3 Place of Business...............................17
Section 2.4 Purpose.........................................17
Section 2.5 Agent for Service of Process....................18
Section 2.6 Term............................................18
ARTICLE 3 PARTNERS AND CAPITAL.....................................18
Section 3.1 General Partner.................................18
Section 3.2 Initial Limited Partner.........................18
Section 3.3 Additional Limited Partners;
Terms of Offering......................19
Section 3.4 Payment or Return of Additional
Limited Partners' Capital..............20
Section 3.5 Liability of Limited Partners...................23
Section 3.6 Miscellaneous...................................23
ARTICLE 4 DISTRIBUTIONS OF CASH; ALLOCATIONS OF
PROFITS AND LOSSES.......................................23
Section 4.1 Distributions of Cash Available
for Distribution.......................23
Section 4.2 Distributions of Sale or Refinancing Proceeds...23
Section 4.3 Profits and Losses..............................25
Section 4.4 Certain Provisions Related to Partnership
Allocations and Distributions..........26
Section 4.5 Allocation of Tax Credits.......................31
Section 4.6 Determinations of Allocations and Distributions
Within Classes of Partners.............32
Section 4.7 Installment Obligations.........................33
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ARTICLE 5 RIGHTS, POWERS AND DUTIES OF
GENERAL PARTNER..........................................35
Section 5.1 Management of the Partnership...................35
Section 5.2 General Authority of General Partner............35
Section 5.3 Authority of General Partner and its
Affiliates to Deal with Partnership....40
Section 5.4 Restrictions on Authority of General Partner....44
Section 5.5 Duties and Obligations of General Partner.......47
Section 5.6 Compensation of Sponsor.........................48
Section 5.7 Other Business of Partners......................51
Section 5.8 Limitation on Liability of
General Partner; Indemnification.......51
ARTICLE 6 ADMISSION OF SUCCESSOR AND ADDITIONAL
GENERAL PARTNERS; WITHDRAWAL OF
GENERAL PARTNER..........................................53
Section 6.1 Admission of Successor or
Additional General Partners............53
Section 6.2 Restrictions on Transfer of
General Partner's Interest.............54
Section 6.3 Consent of Limited Partners to
Admission of Successor or
Additional General Partners............54
Section 6.4 Event of Withdrawal of a General Partner........55
Section 6.5 Interest and Liability of a
Withdrawn General Partner..............55
Section 6.6 Valuation and Sale of Interest of
Former General Partner.................55
ARTICLE 7 TRANSFERABILITY OF UNITS.................................56
Section 7.1 Right to Transfer Units.........................56
Section 7.2 Restrictions on Transfers.......................56
Section 7.3 Assignees and Assignment Procedure..............59
Section 7.4 Substitute Limited Partners.....................61
ARTICLE 8 DISSOLUTION AND WINDING-UP OF
THE PARTNERSHIP..........................................61
Section 8.1 Events Causing Dissolution......................61
Section 8.2 Capital Contribution upon Dissolution...........62
Section 8.3 Liquidation.....................................62
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ARTICLE 9 BOOKS AND RECORDS, ACCOUNTING, REPORTS,
TAX ELECTIONS, ETC.......................................63
Section 9.1 Books and Records...............................63
Section 9.2 Accounting and Fiscal Year......................64
Section 9.3 Bank Accounts and Temporary Investments.........64
Section 9.4 Reports.........................................65
Section 9.5 Depreciation and Other Tax Elections............66
Section 9.6 Designation of Tax Matters Partner..............66
ARTICLE 10 MEETINGS AND VOTING RIGHTS
OF LIMITED PARTNERS.............................67
Section 10.1 Meetings and Actions Without Meetings...........67
Section 10.2 Voting Rights of Limited Partners...............67
Section 10.3 Limitations on Roll-Ups; Dissenters' Rights.....68
ARTICLE 11 SPECIAL POWER OF ATTORNEY................................70
ARTICLE 12 AMENDMENTS...............................................71
Section 12.1 Adoption of Amendments..........................71
Section 12.2 Filing of Required Documents....................72
Section 12.3 Required Change of Partnership Name.............72
ARTICLE 13 MISCELLANEOUS PROVISIONS.................................72
Section 13.1 Security Interest and Right of Set-Off..........72
Section 13.2 Notices.........................................73
Section 13.3 Execution.......................................73
Section 13.4 Binding Effect..................................73
Section 13.5 Applicable Law..................................73
Section 13.6 Counterparts....................................74
Section 13.7 Separability of Provisions......................74
Section 13.8 Captions........................................74
Section 13.9 Mandatory Arbitration...........................74
Section 13.10 Partnerships Treated as Separate................75
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AGREEMENT OF LIMITED PARTNERSHIP dated as of March 28, 1995 among WNC &
Associates, Inc., as General Partner, John B. Lester, Jr. as Initial Limited
Partner and those Persons who shall hereafter be admitted to the Partnership as
Additional Limited Partners, who hereby agree as follows:
ARTICLE 1
DEFINITIONS
The following terms used in this Agreement shall, unless the context
otherwise requires, have the meanings specified in this Article 1. The singular
shall include the plural and the masculine gender shall include the feminine and
neuter genders, and vice versa, as the context requires.
"Accountants" means Corbin & Wertz, Irvine, California, or such other firm
of independent public accountants as from time to time shall be engaged for the
Partnership by the General Partner.
"Acquisition Expenses" means expenses, including, but not limited to, legal
fees and expenses, travel and communications expenses, costs of appraisals,
non-refundable option payments on property not acquired, accounting fees and
expenses, title insurance and miscellaneous expenses related to selection and
acquisition by the Partnership of Local Limited Partnership Interests and the
selection and acquisition of Apartment Complexes by the Local Limited
Partnerships, whether or not acquired.
"Acquisition Fees" means the total of all fees and commissions paid by any
party in connection with the selection or purchase by the Partnership of any
Local Limited Partnership Interest, and the purchase, development or
construction of an Apartment Complex by a Local Limited Partnership, whether
designated as a real estate commission, acquisition fee, finders' fee, selection
fee, Development Fee, Construction Fee, nonrecurring management fee, consulting
fee or any fee of a similar nature however designated, with the exception of
Development Fees and Construction Fees paid to Persons not affiliated with the
Sponsor in connection with the actual development and construction of an
Apartment Complex. As used herein, a "Development Fee" shall be a fee for the
packaging of an Apartment Complex, including negotiating and approving plans,
and undertaking to assist in obtaining zoning and necessary variances, necessary
financing and Tax Credits for the Apartment Complex, either initially or at a
later date, and a "Construction Fee" shall be a fee or other remuneration for
acting as general contractor and/or construction manager to construct
improvements, supervise and coordinate projects or provide major repairs or
rehabilitation for an Apartment Complex.
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"Act" means the California Revised Limited Partnership Act (Corp. Code
Section 15611, et seq.), as now in effect and as the same may be amended from
time to time hereafter.
"Additional Limited Partners" means those Persons admitted to the
Partnership pursuant to Section 3.3 hereof.
"Adjusted Capital Account Deficit" means, with respect to each Partner, the
deficit balance in his Capital Account as of the end of the relevant fiscal
period of the Partnership, after giving effect to the following adjustments:
(a) Increasing such Capital Account by any amounts such Person is
obligated to restore under the standards set by Section
1.704-1(b)(2)(ii)(c) of the Regulations (or is deemed obligated to restore
under Section 1.704-2(g)(1) and (i)(5) of the Regulations); and
(b) Decreasing such Capital Account by the items described in
Section 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and
1.704-1(b)(2)(ii)(d)(6) of the Regulations.
"Adjusted Capital Contribution" means, for each fiscal period, the Limited
Partners' Capital Contribution reduced by all distributions of noninvested funds
pursuant to Section 3.4.2 hereof and distributions of Sale or Refinancing
Proceeds made to the Limited Partners through the end of such period.
"Affiliate" or "Affiliated Person" means, when used with reference to a
specified Person: (i) any Person who, directly or indirectly, controls or is
controlled by or is under common control with the specified Person; (ii) any
Person who is an officer of, partner in, or trustee of, or serves in a similar
capacity with respect to, the specified Person or of which the specified Person
is an officer, partner or trustee, or with respect to which the specified Person
serves in a similar capacity; (iii) any Person who, directly or indirectly, is
the beneficial owner of, or controls, 10% or more of any class of equity
securities of, or otherwise has a 10% or more beneficial interest in, the
specified Person; or (iv) any Person of which the specified Person is, directly
or indirectly, the owner of, or in control of, 10% or more of any class of
equity securities, or in which the specified Person has a 10% or more beneficial
interest.
"Agreement" means this Agreement of Limited Partnership, as originally
executed and as amended or restated from time to time. Words such as "herein,"
"hereinafter," "hereof," "hereto," "hereby" and "hereunder," when used with
reference to this Agreement, refer to this Agreement as a whole, unless the
context otherwise requires.
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"Apartment Complex" or "Property" means a multi-family residential rental
complex owned or under development or rehabilitation by a Local Limited
Partnership.
"Asset Based Fee" means compensation to the Sponsor computed in accordance
with Section IV.J. of the NASAA Guidelines. No Asset Based Fee shall be payable
to the Sponsor.
"Asset Management Fee" means the annual fee payable to the General Partner
or an Affiliate of the General Partner pursuant to Section 5.6.6.
"Capital Account" means, with respect to any Partner, the Capital Account
maintained for such Partner in accordance with the following provisions: (i) to
each Partner's Capital Account there shall be credited such Partner's Capital
Contribution and such Partner's distributive share of Profits for Tax Purposes
and (ii) to each Partner's Capital Account there shall be debited the amount of
cash and the net fair market value of property distributed to such Partner
pursuant to any provision of this Agreement and such Partner's distributive
share of Losses for Tax Purposes. In the event any interest in the Partnership
is transferred in accordance with the terms of this Agreement, the transferee
shall succeed to the Capital Account of the transferror to the extent it relates
to the transferred interest. Subject to Section 4.4.1, Capital Accounts shall be
maintained in accordance with Treasury Regulation Section 1.704-1(b)(2)(iv).
"Capital Contribution" means the total amount of cash contributed to the
Partnership (excluding any cash contributed by the General Partner pursuant to
the last sentence of Section 3.3.3 hereof) determined without inclusion of any
interest or late charges paid on the Promissory Notes and without reduction for
any discounts for Designated Investors and Discount Investors (prior to the
deduction of any Syndication Expenses) by all the Partners or any class of
Partners or any one Partner, as the case may be (or the predecessor holders of
the Interests of such Partners or Partner), reduced, in the case of the Limited
Partners, by the amount of any funds returned to them pursuant to Section 3.4.2.
"Cash Available for Distribution" means, with respect to any period, Cash
Flow less any amounts set aside from Cash Flow for the restoration or creation
of Reserves.
"Cash Flow" means, with respect to any period, (i) all cash funds provided
to the Partnership from Local Limited Partnership operations (exclusive of any
proceeds derived from the sale, disposition, financing or refinancing of
Apartment Complexes, or other Sale or Refinancing transactions) plus (ii) all
cash funds from Partnership operations (including any interest from Promissory
Notes, without
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deduction for depreciation, but after deducting cash funds used to pay all other
expenses, Debt Service and capital expenditures.
"Code" means the Internal Revenue Code of 1986, as amended, or any
corresponding provision or provisions of succeeding law.
"Competitive," when applied to a fee, commission or other payment for goods
supplied or services rendered, means a payment equal to the amount customarily
charged by Persons not Affiliated with the payee for such goods or services in
the geographic area in which such goods are supplied or services rendered.
"Consent" means either (i) the approval given by vote at a meeting called
and held in accordance with the provisions of Section 10.1, or (ii) a prior
written approval required or permitted to be given pursuant to this Agreement.
"Dealer-Manager" means WNC Capital Corporation.
"Dealer-Manager Fee" means the fee payable to the Dealer-Manager pursuant
to Section 5.6.2.
"Debt Service" means all payments required to be made in connection with
any loan to the Partnership or any loan secured by a lien on any of the
Apartment Complexes.
"Deemed Liquidation Distribution" means, with respect to the Limited
Partners, as a class, and the General Partner the amount that would be
distributed to them as of the end of each fiscal year of the Partnership if the
Partnership were dissolved and liquidated and (i) the assets of the Partnership
(other than Installment Obligations, as defined in Section 4.7.1) were sold for
cash equal to their Federal adjusted tax basis (or their Book Value, where
Section 4.4.2 applies); (ii) the liabilities of the Partnership were paid; and
(iii) the remaining cash of the Partnership were distributed to such class of
Partners in accordance with Section 4.2.1 (and not Section 4.2.2). For the
purposes of this definition, (a) the Capital Accounts of the Partners shall not
be adjusted for their shares of any Partnership Minimum Gain that would be
recognized as a result of a deemed sale of Properties or Local Limited
Partnership Interests; and (b) Installment Obligations shall be treated in the
manner provided in Section 4.7.
"Designated Investor" shall have the meaning specified in the Prospectus
under "Terms of the Offering and Plan of Distribution."
"Discount Investor" means any Additional Limited Partner (other than a
Designated Investor) who has paid or agreed to pay less than $1,000 per Unit
subscribed for by him on account of reduced selling commissions and/or reduced
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Sponsor Acquisition Fees attributable to his Units, as specified in the
Prospectus under "Terms of the Offering and Plan of Distribution."
"Economic Risk of Loss" means the extent to which a Partner or Related
Person bears the economic risk of loss for a Partnership liability as determined
under Treasury Regulation Section 1.752-2.
"Escrow Agent" means National Bank of Southern California, Newport Beach,
California, or any other escrow agent chosen by the General Partner to hold
funds from investors pending their admission to the Partnership.
"Event of Withdrawal" means the occurrence of any of the following events
as to a General Partner: (i) its withdrawal from the Partnership pursuant to
Section 15662 of the Act; (ii) its removal in accordance with this Agreement;
(iii) it (a) makes an assignment for the benefit of creditors, (b) files a
voluntary petition in bankruptcy, (c) is adjudged a bankrupt or insolvent, or
has entered against it an order for relief in any bankruptcy or insolvency
proceeding, (d) files a petition or answer seeking for itself any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any statute, law or regulation, (e) files an answer or
other pleading admitting or failing to contest the material allegations of a
petition filed against it in any proceeding of this nature, or (f) seeks,
consents to or acquiesces in the appointment of a trustee, receiver or
liquidator of itself or of all or any substantial part of its properties; (iv)
the lapse of 120 days after the commencement of any proceeding against it
seeking reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any statute, law or regulation, if during
such period the proceeding has not been dismissed, or the lapse of 90 days after
the appointment, without its consent or acquiescence, of a trustee, receiver or
liquidator of itself or of all or any substantial part of its properties, if
during such period the appointment is not vacated or stayed, or if within 90
days after the expiration of any such stay, the appointment is not vacated; (v)
in the case of a General Partner who is a natural person, (a) his death, or (b)
the entry by a court of competent jurisdiction adjudicating him incompetent to
manage his person or his property; (vi) in the case of a General Partner who is
acting as a general partner by virtue of being a trustee of a trust, the
termination of the trust (but not merely the substitution of a new trustee);
(vii) in the case of a General Partner which is a separate partnership, the
dissolution and commencement of winding up of the separate partnership; (viii)
in the case of a General Partner which is a corporation, the filing of a
certificate of dissolution, or its equivalent, for the corporation or the
revocation of its charter; or (ix) in the case of a General Partner which is an
estate, the distribution by the fiduciary of the estate's entire interest in the
Partnership. Notwithstanding the foregoing, an Event of Withdrawal shall not be
deemed to have occurred as to a General Partner under the preceding clause (iv)
until 120 days shall have elapsed
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after Notification has been given to the Limited Partners of the event which,
with or without lapse of time, would constitute an event contemplated by such
clause.
"FmHA" means the Farmers Home Administration of the United States
Department of Agriculture.
"Front-End Fees" means fees and expenses paid by any party for any services
rendered during the organizational and acquisition phases of the Partnership,
including Organizational and Offering Expenses, Acquisition Fees, Acquisition
Expenses, interest on deferred fees and expenses and any other similar fees,
however designated. Front-End Fees which are to be paid pursuant to this
Agreement from installment payments on the Promissory Notes shall be paid pro
rata as the installment payments are received by the Partnership.
"General Partner" means WNC & Associates, Inc., or any Person or Persons
who, at the time of reference thereto, has been admitted as a successor to any
such General Partner or as an additional General Partner, in each such Person's
capacity as a general partner. Restrictions placed on the rights and powers of
the "General Partner" throughout this Agreement also serve to restrict the
rights and powers of the Affiliates of the General Partner.
"Government Assistance" means any form of Federal, state or local
government assistance provided to Properties or their tenants or owners,
including mortgage insurance, rental assistance payments, permanent mortgage
financing, low interest mortgage loans, interest reduction payments and Tax
Credits.
"Gross Proceeds" means the gross proceeds of the Offering, determined
without inclusion of any interest or late charges paid on the Promissory Notes
and without reduction for any discounts for Designated Investors and Discount
Investors.
"HUD" means the United States Department of Housing and Urban Development
or any successor thereto.
"Historic Tax Credit" means the tax credit allowable pursuant to Section 47
of the Code for rehabilitation expenditures incurred with respect to certain
qualified buildings.
"Independent Expert" means a Person with no material current or prior
business or personal relationship with the Sponsor who is engaged to a
substantial extent in the business of rendering opinions regarding the value of
assets of the type held by the Partnership, and who is qualified to perform such
work.
"Initial Limited Partner" means John B. Lester, Jr.
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"Interest" means the entire ownership interest of a Partner in the
Partnership at any particular time, including the right of such Partner to any
and all benefits to which a Partner may be entitled as provided in this
Agreement, together with the obligations of such Partner to comply with all the
terms and provisions of this Agreement. Reference to a majority, or specified
percentage, in interest of the Limited Partners means, Limited Partners whose
combined Capital Contribution represents over 50%, or such specified percentage,
respectively, of the Capital Contribution of all Limited Partners.
"Invested Assets" means the sum of the Partnership's Investment in Local
Limited Partnership Interests and the Partnership's allocable share of the
amount of the mortgage loans on, and other debts related to, the Apartment
Complexes owned by such Local Limited Partnerships.
"Investment Date" means, with respect to any Series, the date of the final
admission into the Partnership of Additional Limited Partners who purchased
Units during such Series.
"Investment in Local Limited Partnership Interests" means the amount of
Capital Contributions used by the Partnership to acquire Local Limited
Partnership Interests (except that, if a portion of the Partnership's investment
in a Local Limited Partnership is used to fund working capital reserves of the
Local Limited Partnership, there shall be excluded from this calculation any
amount which is used to fund working capital reserves which is in excess of 5%
of Gross Proceeds) plus Reserves of the Partnership, except that Reserves in
excess of 5% of Gross Proceeds shall not be included, but excluding Front-End
Fees. Notwithstanding the preceding, the total amount of Capital Contributions
used to fund Partnership Reserves or working capital reserves of the Local
Limited Partnerships which shall be included in Investment in Local Limited
Partnership Interests shall not exceed 5% of Gross Proceeds.
"Investor Closing" means a closing at which purchasers of Units are
admitted as Additional Limited Partners pursuant to Section 3.3 hereof.
"Limited Partner" means any Person who is a Limited Partner, whether an
Initial Limited Partner, an Additional Limited Partner or a Substitute Limited
Partner at the time of reference thereto, in such Person's capacity as a Limited
Partner of the Partnership.
"Local General Partners" (whether or not capitalized) means the Persons who
are from time to time general partners of Local Limited Partnerships, except
that where reference is made to Local General Partners in respect of any
guaranties or undertakings provided to the Partnership in connection with its
investment in a Local Limited Partnership, such term shall mean such Local
General Partners at the
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date of such investment or such other Persons (including Affiliates of such
Local General Partners) as actually provide such guaranties and undertakings.
"Local Limited Partnership" means a limited partnership which owns or is
developing or rehabilitating one or more rental housing projects to be qualified
under Section 42(g) of the Code.
"Local Limited Partnership Interest" means the limited partnership interest
of the Partnership in a Local Limited Partnership.
"Low Income Housing Credit" means the tax credit allowable under Section 42
of the Code for a qualified low income housing project.
"Mortgage" (whether capitalized or not) means any mortgage, deed of trust,
or similar security instrument and, where the sense of this Agreement so
requires, the indebtedness secured thereby.
"NASAA Guidelines" means the Statement of Policy Regarding Real Estate
Programs adopted by the North American Securities Administrators Association,
Inc., as in effect on the date of this Agreement.
"Net Proceeds" means the Gross Proceeds less Organizational and Offering
Expenses.
"Nonaccountable Expense Reimbursement" means the payment to be made to the
General Partner or an Affiliate of the General Partner pursuant to Section
5.6.3.
"Nonrecourse Deductions" has the meaning given it in Treasury Regulation
Section 1.704-2(b)(1).
"Nonrecourse Liability" means a Partnership liability with respect to which
no Partner or Related Person bears the Economic Risk of Loss.
"Note Capital Contribution" means that portion of a Limited Partner's
Capital Contribution, if any, paid in accordance with his Promissory Note.
"Notification" means a writing, containing the information required by this
Agreement to be communicated to any Person, personally delivered to such Person
or sent by registered, certified or regular mail, postage prepaid, to such
Person at the last known address of such Person. The date of personal delivery
or the date of mailing thereof, as the case may be, shall be deemed the date of
giving the Notification.
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"Offering" means, with respect to the Partnership, the offering and sale of
its Units pursuant to the Prospectus.
"Offering Commencement Date" means, with respect to an Offering, the
effective date of the registration statement or post-effective amendment thereto
filed with the Securities and Exchange Commission with respect to the Units.
"Operating Cash Expenses" means, with respect to any fiscal period, the
amount of cash disbursed by the Partnership in that period in the ordinary
course of business for the payment of its operating expenses, such as expenses
for management, utilities, repair and maintenance, insurance, investor
communications, legal, accounting, statistical and bookkeeping services, use of
computing or accounting equipment, travel and telephone expenses, salaries and
direct expenses of Partnership employees while engaged in Partnership business,
and any other operational and administrative expenses necessary for the prudent
operation of the Partnership. Without limiting the generality of the foregoing,
Operating Cash Expenses shall include the actual cost of goods, materials and
administrative services used for or by the Partnership, whether incurred by the
General Partner, an Affiliate of the General Partner or a non-Affiliated Person
in performing the foregoing functions. As used in the preceding sentence, actual
cost of goods and materials means the actual cost of goods and materials used
for or by the Partnership and obtained from entities not Affiliated with the
General Partner, and actual cost of administrative services means the pro rata
cost of personnel (as if such persons were employees of the Partnership)
associated therewith, but in no event to exceed the Competitive amount.
"Organizational and Offering Expenses" means all expenses incurred in
connection with the formation of the Partnership, the registration and
qualification of the Units under Federal and state securities laws and the
Offering, including selling commissions, the Dealer-Manager Fee, the
Nonaccountable Expense Reimbursement and all advertising expenses.
"Partner" means any General Partner or Limited Partner.
"Partner Nonrecourse Debt" has the meaning given it in Treasury Regulation
Section 1.704-2(b)(4).
"Partner Nonrecourse Debt Minimum Gain" means the amount determined in
accordance with the principles of Treasury Regulation Section 1.704-2(i)(3).
"Partnership" means the partnership formed under the terms of this
Agreement.
"Partnership Minimum Gain" means the amount determined in accordance with
the principles of Treasury Regulation Section 1.704-2(d).
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"Partnership Register" means the schedule listing the names and addresses
of all Limited Partners together with the amounts of their respective Capital
Contributions which shall be maintained by the General Partner in accordance
with Section 3.3.
"Person" means any individual, partnership, corporation, trust or other
legal entity.
"Prime Rate" means the prime or reference rate of interest from time to
time announced by National Bank of Southern California as being charged by it on
short-term unsecured loans to its most creditworthy customers.
"Profits" and "Losses" means, for each fiscal year or other relevant
period, an amount equal to the Partnership's taxable income or loss for such
year or period determined in accordance with Section 703(a) of the Code (for
this purpose all items of income, gain, loss or deduction required to be stated
separately pursuant to Section 703(a)(1) of the Code shall be included in
taxable income or loss), with the following adjustments: (i) any income of the
Partnership that is exempt from Federal income tax and not otherwise taken into
account in computing Profits or Losses pursuant to this definition shall be
added to such taxable income or loss; (ii) any expenditures of the Partnership
described in Section 705(a)(2)(B) of the Code or treated as such pursuant to
Treasury Regulation Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into
account in computing Profits or Losses pursuant to this definition, shall be
subtracted from such taxable income or loss; (iii) any adjustment pursuant to
Section 743(b) of the Code shall be allocated solely to the Partner to whom such
adjustment relates and shall not be taken into account in computing Profits or
Losses; (iv) any gain or loss which would have been realized by the Partnership
on the sale of assets distributed in kind to Partners, determined with reference
to the fair market value and the adjusted tax basis of such property for Federal
income tax purposes immediately prior to such distribution, shall be added to or
subtracted from such taxable income or loss; (v) notwithstanding any other
provision of this definition, any items that are specially allocated pursuant to
Section 4.4.3 shall not be taken into account in computing Profits or Losses;
and (vi) if required, the adjustments specified in Section 4.4.2 shall be taken
into account.
"Profits and Losses for Tax Purposes" means all items of Profits and Losses
as well as any items that are specifically excluded from Profits and Losses by
clause (v) of the definition thereof.
"Promissory Note" means the full recourse promissory note evidencing the
deferred installments, if any, of the Capital Contribution required to be made
for a Unit.
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"Property Management Fee" means a fee paid for day-to-day professional
property management services in connection with the Properties.
"Prospectus" means the prospectus contained in the registration statement
filed with the Securities and Exchange Commission with respect to the Units, in
the final form in which said prospectus is filed with said Commission and as
thereafter supplemented pursuant to Rule 424 under the Securities Act of 1933,
as amended.
"Purchase Price" means the price paid upon the purchase or sale of a
particular Local Limited Partnership Interest or Apartment Complex, as the case
may be, including the amount of Acquisition Fees and all liens and mortgages on
the Apartment Complex, but excluding points and prepaid interest.
"RECDS" means the Rural Economic and Community Development Services
(formerly, FmHA) of the United States Department of Agriculture.
"Registration Date" has the meaning given it in Section 7.3.2.
"Related Person" means a Person having a relationship with a Partner that
is described in Treasury Regulation Section 1.752-4(b).
"Reserves" means amounts set aside by the Partnership for working capital
or other obligations of the Partnership and contingencies related to the
ownership of Local Limited Partnership Interests.
"Return on Investment" means an annual, cumulative, but not compounded,
"return" to the Limited Partners as a class on their Adjusted Capital
Contributions commencing for each Limited Partner on the last day of the
calendar quarter during which the Limited Partner's Capital Contribution is
received by the Partnership, calculated at the following annual rates: (i) 14%
through December 31, 2006, and (ii) 6% for the balance of the Partnership's
term.
"Roll-Up" means a transaction involving the acquisition, merger, conversion
or consolidation, either directly or indirectly, of the Partnership and the
issuance of securities of a Roll-Up Entity. Such term does not include:
(i) any transaction if the securities of the Partnership have been for at
least twelve months traded on a national securities exchange or through the
National Association of Securities Dealers, Inc. Automated Quotation National
Market System; or
(ii) a transaction involving the conversion to corporate, trust or
association form of only the Partnership, if, as a consequence of the
transaction, there will be no significant adverse change in any of the
following: (a) the Limited Partners'
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voting rights; (b) the term of existence of the Partnership; (c) the terms of
compensation of the Sponsor; or (d) the Partnership's investment objectives.
"Roll-Up Entity" means the partnership, real estate investment trust,
corporation, trust or other entity that would be created or would survive after
the successful completion of a proposed Roll-Up transaction.
"SLP Affiliate" means an Affiliate of the Fund Manager in its capacity as a
limited partner of Local Limited Partnerships.
"Sale or Refinancing" means any Partnership or Local Limited Partnership
transaction not in the ordinary course of its business, including, without
limitation, sales, exchanges or other dispositions of Apartment Complexes, Local
Limited Partnership Interests and real or personal property of the Partnership,
or any borrowings or refinancings. Sale or Refinancing shall not include any
receipt of capital contributions by the Partnership or a Local Limited
Partnership; provided, however, that the receipt by the Partnership of a return
of all or a portion of its capital contribution to a Local Limited Partnership,
however funded, shall be treated as a Sale or Refinancing.
"Sale or Refinancing Proceeds" means all cash receipts of the Partnership
arising from a Sale or Refinancing less the following:
(i) the amount paid or to be paid in connection with or as an expense of
such Sale or Refinancing, and, with regard to damage recoveries or insurance or
condemnation proceeds, the amount paid or to be paid for repairs, replacements
or renewals resulting from damage to or partial condemnation of the affected
property;
(ii) the amount applied to the payment of the debts and obligations of the
Partnership; and
(iii) any Reserves funded with such proceeds.
"Sponsor" means any Person directly or indirectly instrumental in
organizing, wholly or in part, the Partnership, or any Person who will manage or
participate in the management of the Partnership, and any Affiliate of any such
Person, but does not include a Person whose only relation with the Partnership
is as that of an independent property manager whose only compensation is as
such. "Sponsor" does not include wholly independent third parties such as
attorneys, accountants and underwriters whose only compensation is for
professional services rendered in connection with the Offering. A Person may
also be a "Sponsor" of the Partnership by: (i) taking the initiative, directly
or indirectly, in founding or organizing the business or enterprise of the
Partnership, either alone or in conjunction with one or more Persons; (ii)
receiving a material participation in the Partnership in connection
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with the founding or organizing of the business of the Partnership, in
consideration of services or property, or both services or property; (iii)
having a substantial number of relationships and contacts with the Partnership;
(iv) possessing significant rights to control Partnership properties (other than
Local General Partners whose only association with the Partnership is as such);
(v) receiving fees for providing services to the Partnership which are paid on a
basis that is not customary in the industry; and (vi) providing goods or
services to the Partnership on a basis which was not negotiated at arm's length
with the Partnership.
"Subordinated Disposition Fee" means the fee payable to the General Partner
in connection with dispositions of Properties owned by Local Limited
Partnerships pursuant to Section 5.6.7.
"Substitute Limited Partner" means any Person admitted to the Partnership
as a Limited Partner pursuant to the provisions of Section 7.3 and 7.4 hereof.
"Syndication Expenses" means all expenditures classified as syndication
expenses pursuant to Treasury Regulation Section 1.709-2(b). Syndication
Expenses shall be taken into account under this Agreement at the time they would
be taken into account under the Partnership's method of accounting if they were
deductible expenses.
"Tax Credits" means any credit permitted under the Code against the Federal
income tax liability of any Partner as a result of activities or expenditures of
the Partnership or any Local Limited Partnership, including, without limitation,
Low Income Housing Credits and Historic Tax Credits.
"Temporary Investments" means United States Government securities,
securities issued or fully guaranteed by United States Government agencies,
certificates of deposit and time or demand deposits in, or repurchase agreements
constituting obligations of, commercial banks with deposits insured by the
Federal Deposit Insurance Corporation and other short-term, highly liquid
investments.
"Treasury Regulation or Regulations" means the Income Tax Regulations
promulgated under the Code, as such regulations may be amended from time to time
(including corresponding provisions of succeeding regulations).
"Unit" means the Interest of a Limited Partner attributable to a Capital
Contribution of $1,000 (determined without regard to any discounts for
Designated Investors and Discount Investors).
"Voluntary Withdrawal" by a General Partner means any withdrawal initiated
by the General Partner and excludes any withdrawal accomplished as the result of
a settlement, whether or not incorporated in a decree of a court or
administrative
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agency, between a withdrawing General Partner and one or more of any remaining
General Partners, a majority-in-interest of the Limited Partners or any
regulatory agency whether a Federal or state agency or a self-regulatory agency,
having jurisdiction over the affairs of the Partnership.
ARTICLE 2
FORMATION; NAME; PLACE OF BUSINESS; PURPOSE AND TERM
2.1. Formation of Partnership
The parties hereto hereby form the Partnership on the terms and conditions
set forth herein and pursuant to the provisions of the Act.
2.2. Name
The name of the Partnership shall be "WNC Housing Tax Credit Fund V, L.P.,
Series 3," or "WNC Housing Tax Credit Fund V, L.P., Series 4," as the case may
be. The General Partner, in its sole discretion, may change the name of the
Partnership at any time and from time to time provided that Notification thereof
is given to the Limited Partners within 30 days of the effective date thereof.
2.3. Place of Business
The Partnership shall continuously maintain an office in the State of
California which shall constitute its principal office and place of business and
at which the records required by Section 15615 of the Act and by Section 9.1 of
this Agreement shall be maintained. Such office shall initially be located at
3158 Redhill Avenue, Suite 120, Costa Mesa, California 92626, but may be changed
from time to time by the General Partner provided that Notification thereof is
given to the Limited Partners within 30 days of the effective date thereof.
The Partnership may maintain additional offices and places of business in
other locations selected by the General Partner.
2.4. Purpose
The purpose and character of the business of the Partnership shall be to
acquire, hold, sell, dispose of and otherwise invest in Local Limited
Partnership Interests and to engage in any other activities related or
incidental thereto. The investment objectives of the Partnership, in order of
importance, shall be to:
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(i) provide current tax benefits, primarily in the form of Tax Credits
which Limited Partners may use to offset Federal income tax liabilities;
(ii) preserve and protect the Partnership's capital; and
(iii) provide cash distributions from Sale or Refinancing transactions.
2.5. Agent for Service of Process
The Partnership shall continuously maintain an agent for service of process
on the Partnership at the Partnership's principal office in the State of
California. Such agent shall initially be David N. Shafer, Esq.
2.6. Term
The term of the Partnership shall commence on the date of the filing of its
Certificate of Limited Partnership with the office of the Secretary of State of
the State of California and shall continue in full force and effect until
December 31, 2050, or until the termination and winding up of the Partnership
prior to that time pursuant to the provisions of Article 8.
ARTICLE 3
PARTNERS AND CAPITAL
3.1. General Partner
The business address of the General Partner is 3158 Redhill Avenue, Suite
120, Costa Mesa, California 92626. The General Partner has made a Capital
Contribution to the Partnership of $100. Except as otherwise provided in Section
8.2 the General Partner shall have no personal liability for the repayment of
the Capital Contribution of any Limited Partner nor any other obligation to make
Capital Contributions, loans or advances to the Partnership.
3.2. Initial Limited Partner
The business address of the Initial Limited Partner is 3158 Redhill Avenue,
Suite 120, Costa Mesa, California 92626. The Initial Limited Partner has made a
Capital Contribution to the Partnership of $1,000. The Initial Limited Partner,
as such, shall not be required to make any additional Capital Contribution to
the Partnership.
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3.3. Additional Limited Partners; Terms of Offering
3.3.1. The Partnership intends to make a public Offering of not more than
50,000 additional Units and shall admit as Limited Partners the Persons whose
subscriptions for such Units are accepted by the General Partner (who may refuse
to accept any subscription for any reason). The names and the residence,
business or mailing addresses of the Additional Limited Partners and their
Capital Contributions shall be set forth in the Partnership Register.
3.3.2. The Capital Contribution required of each Additional Limited Partner
shall be not less than $5,000 and may be such greater integral multiple of
$1,000 (in each case determined without regard to any discounts for Designated
Investors and Discount Investors) as such Additional Limited Partner and the
General Partner shall agree upon. Notwithstanding the preceding, employees of
the General Partner and its Affiliates and/or investors in limited partnerships
previously sponsored by the Fund Manager may make a minimum Capital Contribution
of $2,000. Except with respect to subscribers who qualify for, and elect to
utilize, the installment payment procedure provided for in Section 3.4.1 below
for the payment of up to one-half their Capital Contributions, all of such
required Capital Contribution shall be paid in cash at the time of subscription
for the Units.
All subscribers whose subscriptions are acceptable to the General Partner
shall be admitted to the Partnership as Additional Limited Partners on or before
the last day of the calendar month during which such subscriptions were
accepted.
3.3.3. All cash and Promissory Notes received from subscribers for Units
shall be received by the Partnership in trust and deposited in an escrow account
with the Escrow Agent. Subscriptions for Units shall be accepted or rejected by
the General Partner within 30 days after their receipt by the Partnership. Upon
receipt and deposit into escrow of Capital Contributions in the amount of at
least $1,400,000, the Escrow Agent shall release to the Partnership such Capital
Contributions and the Promissory Notes evidencing any Note Capital
Contributions, and the subscribers for such Units shall be admitted to the
Partnership as Additional Limited Partners within 15 days after the date of such
release. Thereafter, subscribers whose subscriptions are acceptable to the
General Partner shall be admitted to the Partnership as Additional Limited
Partners on or before the last day of the calendar month during which such
subscriptions were accepted. All cash and Promissory Notes deposited by
subscribers whose subscriptions are rejected by the General Partner shall be
returned to such subscribers forthwith after such rejection. If the Escrow Agent
does not receive Capital Contributions in the amount of at least $1,400,000
within one year from the Offering Commencement Date, it shall within 30 days
thereafter return all cash and Promissory Notes deposited by subscribers for
Units. Any interest earned on subscription funds in the hands of the Escrow
Agent received by the Escrow Agent from any subscriber for Units shall be paid
to such
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subscriber promptly after the release of such subscription proceeds by the
Escrow Agent to the Partnership or to such subscriber, as the case may be. The
General Partner, in its sole discretion, may, but is not obligated to, increase
the total interest earned by the subscribers on funds held by the Escrow Agent.
If so, the amount of the increase in interest will be identified in the
Prospectus. Any funds necessary to pay such additional amount shall be
contributed to the Partnership by the General Partner.
3.3.4. The Offering shall be terminated not later than two years from the
Offering Commencement Date, and may be terminated earlier at the election of the
General Partner.
3.3.5. To accomplish the purpose of this Section 3.3, the General Partner
is hereby authorized to do all things necessary to admit such Additional Limited
Partners, including, but not limited to, registering the Units under the
Securities Act of 1933, as amended, qualifying the Units for sale with state
securities regulatory agencies or perfecting exemptions from qualification, and
entering into underwriting or agency arrangements for the Offering upon such
terms and conditions as the General Partner may deem advisable.
3.4. Payment or Return of Additional Limited Partners' Capital
3.4.1. (a) Each Limited Partner who subscribes for 10 or more Units may
elect to contribute only $500 in cash for each Unit which such Partner acquires,
provided that he also shall make a Note Capital Contribution in the amount of
$500 for each such Unit. The Note Capital Contribution of each such Limited
Partner shall be evidenced by a Promissory Note delivered upon subscription for
the Units. Each Promissory Note shall be payable in one installment of principal
on (i) March 31, 1996 if the maker subscribes for his Units between the date
hereof and December 31, 1995, (ii) January 31, 1997 if the maker subscribes for
his Units between January 1, 1996 and June 1, 1996, or (iii) the later of the
date of subscription or June 30, 1997 if the maker subscribes for his Units
after June 1, 1996. Each Promissory Note shall bear interest on the unpaid
balance as follows: (i) for purchasers of less than 500 Units, at a fixed rate
of 1.5% per annum above the Prime Rate, such interest rate to be determined at
the commencement of the Offering and identified in the Prospectus, or (ii) at a
fixed rate of 1% per annum above the 1-year Treasury Bill rate, such rate to be
determined on the date of purchase. Interest will be payable in arrears on the
principal payment dates.
(b) Each Limited Partner who elects to pay for his Units in the
manner described in Section 3.4.1.(a) (an "Installment Contributor Limited
Partner") hereby grants to the Partnership a security interest in the Limited
Partner's Units to secure all of the Limited Partner's obligations under the
Promissory Note, any
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modifications, renewals or extensions of the Promissory Note and all of the
Limited Partner's other obligations under this Section 3.4.1.
(c) If an Installment Contributor Limited Partner defaults under
his Promissory Note or under any modifications, renewals or extensions, thereof,
at the option of the Partnership, the entire unpaid principal balance of his
Promissory Note shall be immediately due and payable, the Promissory Note shall
continue to bear interest at the rate set forth in Section 3.4.1.(a), a late
charge shall be imposed in an amount equal to 5% of any delinquent payment and
the Partnership shall be entitled to retain and, in any event, set off against
the amount owed to the Partnership by the defaulting Limited Partner, all
distributions attributable to the Units of the defaulting Limited Partner. In
addition, the Partnership may pursue any remedy available (including those
available under the provisions of the Uniform Commercial Code) or in equity to
collect, enforce and satisfy the obligations of the defaulting Limited Partner,
including the filing of a suit to obtain a judgment against the defaulting
Limited Partner.
The defaulting Limited Partner shall pay to the Partnership all costs
incurred by the Partnership in enforcing the Promissory Note, including but not
limited to costs of obtaining money damages and attorneys' fees. Each
Installment Contributor Limited Partner acknowledges that the Partnership may
pledge his Promissory Note as collateral security for Partnership debt. In the
event of a default under the Promissory Note, the Partnership or any other
holder of the Promissory Note, as applicable, may foreclose upon the defaulting
Limited Partner's interest in the Partnership and sell the Units in a
commercially reasonable manner to non-defaulting Limited Partners or to other
qualified investors on terms approved by the Partnership or any holder of the
Promissory Note. It is acknowledged by each Installment Contributor Limited
Partner that the purchase of the Units is a suitable investment only for Persons
meeting certain suitability standards and that it will be difficult for the
Partnership to find a suitable purchaser of the Units and to make adequate
disclosure of all of the then existing risks of the investment to prospective
purchasers. The General Partner and its Affiliates may (but are not obligated
to) purchase any such Units, but only if such Units have first been offered to
the non-defaulting Limited Partners. If Units are offered to non-defaulting
Limited Partners, they will be sold on a first-come, first-sold basis in
increments of whole Units only.
Each Installment Contributor Limited Partner agrees that in the event of a
default under his Promissory Note and a foreclosure and sale of his Units by the
Partnership or any holder of his Promissory Note, as applicable, the purchaser
of the Units in such a sale may be substituted as a Limited Partner in place of
the defaulting Limited Partner without any further consent being required from
the defaulting Limited Partner, and specifically authorizes the General Partner
to execute on his behalf any amendment to the Partnership Agreement or other
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documentation necessary to effect the substitution. Units acquired by the
Partnership through a foreclosure sale or otherwise may be reissued by the
Partnership.
Each Promissory Note shall (i) be made with full recourse to the maker;
(ii) not be a negotiable instrument; (iii) be assignable only subject to the
defenses of the maker; (iv) be subject to venue for collection in the
jurisdiction in which the Installment Contributor Limited Partner resides; (v)
not be sold by the Partnership prior to maturity; (vi) provide that a default in
a payment due shall not occur until 30 days after its due date; provided, that
until 30 days after default and notice thereof and intent to foreclose has been
given to the defaulting Limited Partner, such Limited Partner shall have the
right to cure such default with interest due thereon without suffering any
reduction in Interest in the Partnership and the Partnership may not commence
proceedings to enforce its security interest in the defaulting Limited Partner's
Units; (vii) not contain any provision authorizing a confession of judgment; and
(viii) be prepayable at any time in whole (but not in part) without penalty.
Subject to the foregoing, the Partnership may pledge and grant security
interests in Promissory Notes as security for any Partnership obligation.
3.4.2. In the event that any portion of the amount available for Investment
in Local Limited Partnership Interests is not so invested within the later of
(i) 24 months after the Offering Commencement Date, or (ii) 12 months after
termination of the Offering, such uninvested portion (except for Reserves) shall
be distributed to the Limited Partners who invested in the Partnership as a
return of capital. In addition, in order to refund to the Limited Partners the
amount of Front-End Fees attributable to such returned capital, the General
Partner shall contribute to the Partnership and the Partnership shall distribute
pro rata to the Limited Partners the amount by which the quotient of (x) the
amount of uninvested capital distributed pursuant to the foregoing sentence,
divided by (y) the percentage of the Capital Contributions which remain after
payment of all Front-End Fees, exceeds the uninvested capital so distributed.
Any funds (i) with respect to the investment of which the Partnership has
executed a written agreement in principle, commitment letter, letter of intent
or understanding, option agreement or other similar understanding or contract,
or (ii) which the Partnership has set aside or temporarily invested for Reserves
or to fund capital contributions to any Local Limited Partnerships as of the
later of (i) the date 24 months after the Offering Commencement Date or (ii) the
date 12 months after termination of the Offering will be deemed invested on that
date and will not subsequently be returned to the Limited Partners even if
investment of such funds is not consummated or the contingent payments are not
made.
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3.5. Liability of Limited Partners
3.5.1. A Limited Partner shall be liable only to make his Capital
Contribution, including his Note Capital Contribution, and shall not be liable
for the debts, liabilities, contracts or any other obligations of the
Partnership.
3.5.2. A Limited Partner may be obligated to return a distribution of cash
or other property received by him from the Partnership to the extent that,
immediately after giving effect to the distribution, all liabilities of the
Partnership, other than liabilities to Limited Partners on account of their
Interests in the Partnership and liabilities as to which recourse of the
creditors is limited to specified property of the Partnership, exceed the fair
value of the Partnership's assets, provided that the fair value of any Property
that is subject to a liability as to which recourse of creditors is so limited
shall be included in the Partnership's assets only to the extent that the fair
value of the Property exceeds the liability.
3.6. Miscellaneous
3.6.1. No Partner shall be paid interest on any Capital Contribution.
3.6.2. No Partner shall have the right to withdraw prior to the dissolution
and winding up of the Partnership or to receive any return of his Capital
Contribution except as specifically provided in Article 4 and Sections 3.4.2 and
8.3. No Capital Contribution may be returned in the form of property other than
cash, except as specifically provided in Section 8.3.
3.6.3. A creditor who makes a nonrecourse loan to the Partnership will not
have or acquire, at any time as a result of making the loan, any direct or
indirect interest in the profits, capital or property of the Partnership other
than as a creditor.
ARTICLE 4
DISTRIBUTIONS OF CASH; ALLOCATIONS OF PROFITS AND LOSSES
4.1. Distributions of Cash Available for Distribution
Any Cash Available for Distribution at the end of any fiscal year shall be
distributed, within 120 days after the end of such fiscal year, 99% to the
Limited Partners and 1% to the General Partner.
4.2. Distributions of Sale or Refinancing Proceeds
4.2.1. Subject to other provisions of this Section 4.2, all Sale or
Refinancing Proceeds, to the extent not used to acquire Local Limited
Partnership Interests as
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permitted by Section 5.4.1(x), shall be distributed in the following amounts and
order of priority:
(i) First, to the Limited Partners in the amount of their Adjusted Capital
Contribution;
(ii) Second, to the Limited Partners as a class until they have received an
additional amount equal to (a) their Return on Investment minus (b) (i) any cash
distributed by the Partnership to the Limited Partners pursuant to Section 4.1
or this Section 4.2.1(ii) on or before the close of the year in which the
distribution of Sale or Refinancing Proceeds occurs, and (ii) an amount equal to
the Tax Credits allocated to the Limited Partners on or before the close of such
year (reduced by any recapture thereof arising other than as a result of the
disposition of a Unit by a Limited Partner);
(iii) Third, to the General Partner in an amount equal to (a) its Capital
Contribution minus (b) any amounts previously distributed to it from Sale or
Refinancing Proceeds; and
(iv) Fourth (after payment of any accrued but unpaid Subordinated
Disposition Fee), the balance 90% to the Limited Partners and 10% to the General
Partner.
4.2.2. Upon termination and winding up of the Partnership, after payment
of, or adequate provision for, the debts and obligations of the Partnership, and
the funding of any Reserves deemed reasonable by the General Partner, the
remaining assets of the Partnership shall be distributed to all Partners with
positive Capital Accounts in the ratio of their respective positive Capital
Accounts to the sum of all such positive Capital Accounts. For purposes of the
preceding sentence, the Capital Account of each Partner shall be determined
after all adjustments in accordance with this Article 4 resulting from
Partnership operations and from all Sales or Refinancings. If any assets of the
Partnership are to be conveyed to a liquidating trust for the Partners under
Section 8.3.2, then prior thereto the Capital Account of each Partner shall be
credited or charged in accordance with this Article 4 with the amount of Profits
and Losses for Tax Purposes that would have been credited or charged to reflect
the distribution of such assets as though the adjusted basis of such assets to
the Partnership were equal to the fair market value of such assets, as
determined under Section 8.3.2.
4.2.3. Notwithstanding any other provision of this Agreement to the
contrary, the interest of the General Partner and of its Affiliates in cash to
be distributed by the Partnership or by any Local Limited Partnership from Cash
Available for Distribution, from Sale or Refinancing Proceeds, or from similar
sources in the case of a Local Limited Partnership, will not exceed, in the case
of Cash Available for Distribution, 10% of total Cash Available for Distribution
and, in the case of Sale
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or Refinancing Proceeds, after the payment to Limited Partners of an amount
equal to 100% of their Capital Contributions and their Return on Investment, 15%
of remaining Sale or Refinancing Proceeds. Furthermore, the interest of the
General Partner and its Affiliates as Local General Partners and/or as the SLP
Affiliate in operating cash flow of all Local Limited Partnerships, plus the
Asset Management Fee payable pursuant to Section 5.6.6, will not in any year
exceed an amount equal to 0.5% of that portion of Invested Assets in Local
Limited Partnerships which are attributable to apartment units receiving
Government Assistance.
4.3. Profits and Losses
After taking into account all special allocations of income or gain and
Profits and Losses for Tax Purposes and otherwise adjusting the Partners'
Capital Accounts in accordance with the applicable provisions of Section 4.4,
any remaining Profits and Losses shall be allocated among the Partners in
accordance with this Section 4.3, subject to Section 4.7.
4.3.1. Unless Section 4.3.3 applies, if there is an aggregate Loss
remaining, such remaining aggregate Loss shall be allocated:
(i) First, to the extent of the positive Capital Account balances of the
Partners, in such manner and amount as is necessary to cause such balances, as
so adjusted, to be in the ratio of 99% to the Limited Partners and 1% to the
General Partner until such balances are reduced to zero;
(ii) Second, to the extent of the excess of Partnership Minimum Gain over
the aggregate negative Capital Account balances of the Partners with such
balances, to the General Partner and the Limited Partners in such manner and
amount as is necessary to cause their negative Capital Account balances, as so
adjusted, to be in the ratio of 99% to the Limited Partners and 1% to the
General Partner; and
(iii) Third, to the General Partner.
4.3.2. Unless Section 4.3.3 applies, if there is an aggregate Profit
remaining, such remaining aggregate Profit shall be allocated:
(i) First, in the event that the Limited Partners have an aggregate
positive Capital Account balance and the General Partner has a negative Capital
Account balance or vice versa, to the class of Partners with and to the extent
of such negative balances;
(ii) Second, to the extent of the aggregate negative Capital Account
balances of the Partners, to the Limited Partners and the General Partner in
such manner and
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amount as is necessary to cause the negative Capital Account balances of such
Partners, as so adjusted, to be in the ratio of 99% to the Limited Partners and
1% to the General Partner; and
(iii) Third, to the Limited Partners to the extent that their positive
Capital Account balances are less than their Adjusted Capital Contributions.
4.3.3. Notwithstanding any provision of this Section 4.3 to the contrary,
to the extent of (i) any aggregate Profit remaining after the allocations
provided in Section 4.3.2.(iii), or (ii) the lesser of the Partnership's
remaining aggregate Losses and the excess of the positive Capital Account
balances of the Limited Partners over their Adjusted Capital Contributions, any
such Profits or Losses shall be allocated among the Limited Partners and the
General Partner in such manner and amount as is necessary to cause the positive
Capital Account balances of the Partners to be equal to such Partners' Deemed
Liquidation Distribution.
4.3.4. Whenever in this Section 4.3 a reference is made to the Limited
Partners, such reference shall be deemed to be a reference to the Limited
Partners as a class.
4.3.5. Notwithstanding any provision of this Agreement to the contrary
other than Sections 4.4.3(i) and 4.4.3(v), in no event shall the General Partner
receive less than 1% of any cash distribution of the Partnership or be allocated
less than 1% of all Profits and Losses for Tax Purposes or Tax Credits, except
as otherwise required by Treasury Regulations. For the purpose of determining
the allocation of Profits and Losses for Tax Purposes to the General Partner,
the General Partner shall be deemed to have made a Capital Contribution to the
Partnership equal to 1.01% of the Capital Contributions of the Limited Partners
to the Partnership.
4.3.6. Profits and Losses for Tax Purposes and the amount of any
expenditure giving rise to a Tax Credit shall be determined and allocated with
respect to each fiscal year of the Partnership as of, and within 75 days after,
the end of such year.
4.4. Certain Provisions Related to Partnership Allocations and
Distributions
4.4.1.(i) The provisions of this Agreement related to the maintenance of
Capital Accounts, the allocation of Profits and Losses for Tax Purposes and Tax
Credits and the distribution of cash and property to the Partners are intended
to comply with the requirements of Treasury Regulation Section 1.704-1(b) by
causing the amount of such Profits and Losses for Tax Purposes to be allocated
among the Partners' Capital Accounts so that the amount in their Capital
Accounts as of the end of each fiscal year of the Partnership is equal to the
Partners' Deemed Liquidation Distributions. Where there would be no Deemed
Liquidation Distribution to the Partners, such provisions are intended to comply
with the above-referenced
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Treasury Regulations by (a) limiting the maximum negative balance in the Capital
Accounts of the Limited Partners, as a class, to an amount not in excess of
their aggregate share (determined in accordance with Treasury Regulation Section
1.704- 2(g)) of Partnership Minimum Gain, (b) allocating the Partnership's
aggregate Nonrecourse Deductions to cause the negative Capital Account balances
of the Limited Partners, as a class, and the General Partner to be in the ratio
of 99% to the Limited Partners and 1% to the General Partner, and (c) allocating
to the Partners an amount of gross income or gain of the Partnership to the
extent necessary to cause the Partnership to comply with clauses (a) and (b) of
this sentence at the end of each fiscal year of the Partnership. In addition,
such provisions are intended to cause the amount distributable to each Partner
in an actual distribution pursuant to Section 4.2.2 to equal the amount that
would be distributable to each Partner if Section 4.2.1 rather than Section
4.2.2 applied to such distribution.
(ii) If the Partnership is advised at any time by its Accountants or
counsel that the allocations of Profits and Losses for Tax Purposes and/or Tax
Credits are unlikely to be respected for Federal income tax purposes or that an
actual distribution to the Partners in accordance with Section 4.2.2 would not
result in each Partner receiving the amount that he would have received if
Section 4.2.1 rather than Section 4.2.2 applied to such distribution, the
General Partner is authorized and empowered, without any Consent of Limited
Partners, to amend this Agreement (other than Sections 4.1 and 4.2 hereof) to
cure such defect consistent with the principles of Section 4.4.1(i).
4.4.2. The Partners acknowledge that under certain circumstances specified
in the Treasury Regulations, the allocations of taxable income or loss and any
item thereof may not be respected for Federal income tax purposes, unless the
assets of the Partnership are revalued to reflect their fair market value and
the Capital Accounts of the Partners are properly adjusted to reflect the
difference between this fair market value (referred to herein as the "Book
Value") and the Partnership's tax basis in such assets (or, in the case of a
prior revaluation, the Partnership's prior Book Value). The circumstances in
which such revaluation may be required include, without limitation, the
contribution of property (other than cash) to the Partnership by a Partner and
certain distributions of property by the Partnership to a Partner, as well as
any deemed distribution and contribution in accordance with Treasury Regulation
Section 1.708-1(b)(1)(iv). This Agreement does not permit or provide for the
contribution of property (other than cash) to the Partnership and does not
provide for the distribution of property (other than cash) to the Partners,
except for distributions to a liquidating trust for the Partners under Section
8.3.2. However, in the event that the Treasury Regulations are determined to
require such a revaluation, the Capital Accounts of the Partners shall be
properly adjusted to reflect such revaluation and the effect of such
contribution or distribution on liabilities that the recipient assumes or to
which the revalued property is subject.
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Any allocation of Profits and Losses for Tax Purposes and any adjustment to the
Partners' Capital Accounts required by the Treasury Regulations as a result of
such required revaluation, including, without limitation, any adjustments
required by Section 704(c) of the Code, shall be made in accordance with the
principles of Section 4.4.1(i).
4.4.3.(i) In the event any Limited Partners unexpectedly receive any
adjustments, allocations, or distributions described in Treasury Regulation
Section 1.704-1(b)(2)(ii)(d)(4)-(ii)(d)(6), items of Partnership income and gain
(consisting of a pro rata portion of each item of the Partnership's income,
including gross income, and gain for such year) shall be specially allocated to
such Partners in an amount and manner sufficient to eliminate, to the extent
required by the Regulations, the Adjusted Capital Account Deficit created by
such adjustments, allocations, or distributions as quickly as possible.
(ii) In the event the adjusted tax basis of any investment tax credit
property that has been placed in service by the Partnership is increased
pursuant to Section 50(c)(2) of the Code, such increase shall be allocated among
the Partners (as an item in the nature of income or gain) in the same
proportions as the investment tax credit that is recaptured with respect to such
Property is shared among the Partners.
(iii) The Capital Account of each Limited Partner shall be reduced by a
charge equal to the amount of the selling commission paid by the Partnership to
the soliciting dealers that is properly allocable to the Units held by such
Limited Partner. Notwithstanding any provision of this Agreement to the
contrary, the Partnership shall be deemed to have distributed to each Limited
Partner, and the Capital Account of each Limited Partner shall be reduced by a
charge equal to, the excess of a 7.5% selling commission over the amount charged
such Limited Partner's Capital Account as a selling commission in accordance
with the preceding sentence (the "Discount"). Any deemed distribution pursuant
to this Section 4.4.3(iii) shall not be deemed a return of a Partner's Capital
Contribution, but rather shall be deemed to be a compromise within the meaning
of Section 15636(c) of the Act, and no Partner shall be obligated to pay any
such amount to or for the benefit of the Partnership or any creditor of the
Partnership. With respect to each Designated Investor and each Discount
Investor: (a) the Capital Contribution of such Investor shall be deemed to be
equal to $1,000 for each Unit purchased; (b) the amount of the selling
commission paid by the Partnership that is properly allocable to the Units held
by such Investor shall be deemed to be the reduced selling commission; and (c)
such Investor shall not receive an actual distribution but shall be deemed to
have received a distribution pursuant to this Section 4.4.3(iii) equal to the
Discount. All other Syndication Expenses for any fiscal year or other period
shall be specially allocated to the Limited Partners in proportion to their
Units, provided that if additional Limited Partners are admitted to the
Partnership pursuant to Section 3.3 hereof on different dates, all of such other
Syndication
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Expenses shall be divided among the Partners who own Units from time to time so
that, to the extent possible, the cumulative amount of such other Syndication
Expenses allocated with respect to each Unit at any time is the same amount. In
the event the General Partner shall determine that such result is not likely to
be achieved through future allocations of such other Syndication Expenses, the
General Partner may allocate a portion of Profits and Losses for Tax Purposes so
as to achieve the same effect on the Capital Accounts of the Limited Partners
subject to the principles of Section 4.4.1.
(iv) Any reduction in the adjusted tax basis (or cost) of Partnership
property pursuant to Section 50(c)(1) of the Code shall be allocated among the
Partners (as an item in the nature of expenses or losses) in the same
proportions as the basis (or cost) of such property is allocated pursuant to
Treasury Regulation Section 1.46- 3(f)(2)(i).
(v) (a) Except as otherwise provided in Treasury Regulation Section 1.704-
2(f), if there is a net decrease in Partnership Minimum Gain during a fiscal
year of the Partnership, each Partner shall be allocated items of Partnership
income and gain for such year (and, if necessary, subsequent years) in
proportion to, and to the extent of, an amount equal to the portion of such
Partner's share of the net decrease in Partnership Minimum Gain during such
year.
(b) Except as otherwise provided in Treasury Regulation Section
1.704- 2(h), if there is a net decrease in Partner Nonrecourse Debt Minimum Gain
during a fiscal year of the Partnership determined in accordance with the
principles of Section 1.704-2(i) of the Regulations, each Partner who had a
share of Partner Nonrecourse Debt Minimum Gain at the beginning of such year
shall be allocated items of Partnership income and gain for such year (and, if
necessary, subsequent years) in proportion to, and to the extent of, an amount
equal to the portion of such Partner's share of the net decrease in Partner
Nonrecourse Debt Minimum Gain during such year that is allocable (in accordance
with the principles set forth in Treasury Regulation Section 1.704-2(i)) to the
disposition of Partnership property subject to the related Partner Nonrecourse
Debt.
(c) For the purposes of this Section 4.4.3(v), the date of any Sale
or Refinancing shall be treated as the end of a fiscal year of the Partnership.
The character and origin of any income or gain allocated in accordance with this
Section 4.4.3(v) shall be determined in accordance with Treasury Regulation
Section 1.704-2(j).
(vi) The allocations set forth in Sections 4.4.2 and 4.4.3 hereof, other
than this Section 4.4.3(vi) and Section 4.4.3(vii) hereof (the "Regulatory
Allocations") are intended to comply with certain requirements of Treasury
Regulations. It is the intent of the Partners that, to the extent possible, all
Regulatory Allocations shall
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be offset either with other Regulatory Allocations or with special allocations
of other items of Partnership income, gain, loss or deduction pursuant to this
Section 4.4.3(vi). Therefore, notwithstanding any other provision of this
Article 4 (other than the Regulatory Allocations), the General Partner shall
make such offsetting special allocations of Partnership income, gain, loss or
deductions in whatever amount it determines appropriate so that, after such
offsetting allocations are made, each Partner's Capital Account balance is, to
the extent possible, equal to the Capital Account balance such Partner would
have had if the Regulatory Allocations were not part of the Partnership
Agreement and all Partnership items were allocated pursuant to the provisions of
this Article 4 other than the Regulatory Allocations. In exercising its
discretion under this Section 4.4.3(vi), the General Partner shall take into
account future Regulatory Allocations under Section 4.4.3(v)(a) and (b) that,
although not yet made, are likely to offset other Regulatory Allocations
previously made under Sections 4.4.3(viii) and (ix).
(vii) In any fiscal year in which Section 4.3.1(i) or (ii) applies to the
allocation of Losses or Section 4.3.2(ii) applies to the allocation of Profits,
the General Partner shall be specially allocated an amount of income, including
gross income, or gain from such fiscal year to the extent necessary to cause the
Capital Accounts of the Limited Partners and the General Partner to be in the
ratios stated in whichever of such sections is applicable.
(viii) Notwithstanding Section 4.3.1, any deduction attributable to Partner
Nonrecourse Debt shall be allocated to the Partners that bear the Economic Risk
of Loss for the Partner Nonrecourse Debt.
(ix) Except as otherwise expressly provided herein, Nonrecourse Deductions
shall be allocated 99% to the Limited Partners and 1% to the General Partner.
4.4.4. For the purpose of making any allocation of Profit and Loss for Tax
Purposes, the Capital Account of each Partner shall first be deemed to have been
reduced by the amount of any distribution that, at the end of the fiscal year of
the Partnership with respect to which such allocation is to be made, was
reasonably anticipated to be made to such Partner pursuant to Section 4.1 or
Section 4.2.1, except to the extent that, in compliance with Treasury Regulation
Section 1.704- 1(b)(2)(ii)(d)(6), the General Partner reasonably anticipates
that the Partnership will subsequently have offsetting income or gains.
4.4.5. To the extent that any amount of gain from the sale or other
disposition of a Property is treated as gain subject to the provisions of
Section 1245 or 1250 of the Code (other than as a result of the application of
Section 291 of the Code), such gain shall be allocated between the Limited
Partners, as a class, and the General Partner in the manner and amount necessary
to offset the amount of depreciation previously allocated to them that is being
recaptured as a result of such sale or other
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disposition (including any amount so treated as a result of the application of
Section 50(c) of the Code); provided, however, that nothing in this Section
4.4.5 shall alter the aggregate amount of Profits and Losses for Tax Purposes
allocable to any Partner pursuant to this Article 4, and the character of other
items included in such Profits and Losses for Tax Purposes for the relevant
period shall be appropriately adjusted to give effect to this provision.
4.4.6. All amounts withheld pursuant to the Code or any provision of any
state or local tax law with respect to any distribution to, or allocable share
of, the Partners shall be treated as amounts distributed to the Partners
pursuant to this Article 4 for all purposes under this Agreement. The General
Partner may allocate any such amounts among the Limited Partners in any manner
that is in accordance with applicable law.
4.4.7. Where relevant in determining the allocation of Profits and Losses
for Tax Purposes among the Partners, including the character of any amount so
allocated, such Profits and Losses arising other than from a Sale or Refinancing
shall be allocated among the Partners before the allocation of such Profits and
Losses from a Sale or Refinancing, and where more than one Sale or Refinancing
occurs during the fiscal year, Profits and Losses for Tax Purposes from such
transactions shall be allocated among the Partners in chronological order.
4.4.8. To the extent permitted by Section 1.704-2(h)(3) of the Treasury
Regulations, the General Partner shall endeavor to treat Partnership
distributions as having been made from the proceeds of a Nonrecourse Liability
or a Partner Nonrecourse Debt only to the extent that such distributions would
cause or increase an Adjusted Capital Account Deficit for any Limited Partner.
4.5. Allocation of Tax Credits
4.5.1. Except as provided in Section 4.5.2, in accordance with Treasury
Regulation Section 1.704-1(b)(4)(ii), all expenditures giving rise to the
allowance of any Tax Credits shall be allocated among the Partners in the manner
in which the deductions arising from such expenditures are allocated among the
Partners for the relevant taxable year, it being the intention of the Partners
that such expenditures, including, without limitation, expenditures giving rise
to the allowance of Low Income Housing Credits, be allocated 99% to the Limited
Partners, as a class, and 1% to the General Partner.
4.5.2. For purposes of the investment tax credit, including the Historic
Tax Credit, each Partner shall be allocated a share of the Partnership's basis
in the property qualifying for the investment tax credit. Each Partner's share
of such basis shall be determined in accordance with the ratio in which the
Partners are allocated Profits of the Partnership (other than Profits from a
Sale or Refinancing) for the
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year during which the property is placed in service. If the Partnership realizes
no Profits during such year, then such share of such basis shall be determined
in accordance with the ratio in which the next dollar of such Profits would have
been allocated if such Profits had been realized.
4.5.3. Any recapture of any Tax Credits shall be allocated between the
Limited Partners, as a class, and the General Partner in the same manner in
which they shared the Tax Credits.
4.5.4. Notwithstanding Section 4.5.3, in the case of any recapture of any
Tax Credits resulting from the sale, exchange, transfer or assignment of any
Units, the Limited Partners holding such Units prior to the sale, exchange,
transfer or assignment shall indemnify the Partnership and the Partners not
transferring their Units for the consequences of such recapture in the
proportion in which such transferred Units shared the Tax Credits.
4.6. Determinations of Allocations and Distributions
Within Classes of Partners
4.6.1. All Cash Available for Distribution and Sale or Refinancing Proceeds
distributable to the Limited Partners as a class, and all Profits and Losses for
Tax Purposes and Tax Credits (including each item of income, gain, loss,
deduction or credit included therein, except as provided in Section 4.4)
allocable to the Limited Partners as a class, shall be distributed or allocated,
as the case may be, to each Limited Partner entitled to a distribution or
allocation, in the ratio which the number of Units held by each Limited Partner
bears to the total number of Units held by all Limited Partners entitled to the
distribution or allocation.
4.6.2. Except a provided in Sections 3.3.3, 4.6.3, 4.6.4, and 4.6.5, all
Profits and Losses for Tax Purposes not arising from a Sale or Refinancing and
all Tax Credits allocable to the Limited Partners as a class, shall be
allocated, and all Cash Available for Distribution distributable to the Limited
Partners as a class shall be distributed, to the Persons recognized (in
accordance with Section 7.3.3 in the case of a transfer of Units) as the holders
of Units for this purpose as of the last day of the fiscal period for which the
allocation or distribution is to be made.
4.6.3. Subject to Section 4.6.5, all Profits and Losses for Tax Purposes
not arising from a Sale or Refinancing and all Tax Credits for a fiscal year
allocable to any Unit which is transferred during the year shall be divided and
allocated between the transferee and the transferror based upon the number of
quarterly periods that each was recognized (in accordance with Section 7.3.3) as
the holder of the Unit for this purpose, without regard to whether Partnership
operations during particular quarterly periods of such fiscal year produced
profits or losses or cash distributions.
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4.6.4. All Profits and Losses for Tax Purposes arising from a Sale or
Refinancing allocable to the Limited Partners as a class shall be allocated, and
all Sale or Refinancing Proceeds distributable to the Limited Partners as a
class shall be distributed, to the Persons recognized (in accordance with
Section 7.3.3 in the case of a transfer of Units) as the holders of Units for
this purpose as of the date of the Sale or Refinancing, except as provided in
the following sentence. All Profits and Losses for Tax Purposes which are
attributable to, and all Sale or Refinancing Proceeds which represent, Sale or
Refinancing Proceeds not received by the Partnership as cash upon a sale but
later received by the Partnership as a result of an Installment Sale (as defined
in Section 4.7) or other deferred payment arrangement and distributable or
allocable to the Limited Partners as a class in accordance with Section 4.7,
shall be allocated or distributed, as the case may be, to the Persons recognized
as the holders of Units for this purpose as of the date the deferred Sale or
Refinancing Proceeds are received by the Partnership (or, in the case of a
transfer of such Unit that is treated, under Section 7.3.3, as occurring after
the date of such Installment Sale or other deferred payment arrangement, to the
transferee of such Unit).
4.6.5. In the event that there is more than one Investor Closing, all Cash
Available for Distribution and Profits and Losses for Tax Purposes not arising
from a Sale or Refinancing, distributable or allocable, as the case may be, to
the Limited Partners as a class for the period commencing with the first day of
the month of the Investor Closing and ending on the last day of the month of the
Investor Closing will be distributed or allocated, as the case may be, on a
monthly basis in accordance with Section 4.6.1 solely to the Limited Partners
admitted to the Partnership as of or prior to the Investor Closing date which
occurs during such month.
4.6.6. All Cash Available for Distribution, Sale or Refinancing Proceeds,
Profits and Losses for Tax Purposes and Tax Credits, prior to the date of the
initial Investor Closing shall be allocated 99% to the Initial Limited Partner
and 1% to the General Partner. For this purpose, the amount of Cash Available
for Distribution, Sale or Refinancing Proceeds, Profits and Losses for Tax
Purposes and Tax Credits, will be determined on a daily basis.
4.7. Installment Obligations
4.7.1. If as a result of the sale by a Local Limited Partnership of its
Property or of a sale by the Partnership of a Local Limited Partnership Interest
which results in the receipt of an installment obligation, including, without
limitation, a purchase money mortgage or a purchase contract prescribing one or
more payments following closing of the sale (an "Installment Obligation") as
part of the purchase price (an "Installment Sale"), after payment of, or
adequate provision for, the currently payable debts and obligations of the
Partnership and any Reserves deemed
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appropriate by the General Partner, the aggregate of the cash, if any, received
and the principal and interest payments to be made under the Installment
Obligation shall be distributed following actual receipt of such payments by the
Partnership between the General Partner and the Limited Partners as a class in
accordance with their Distribution Percentages in such sales proceeds. The
"Distribution Percentages" of the General Partner and the Limited Partners as a
class with respect to an Installment Obligation shall equal the percentage of
the total distributions that they would have been entitled to receive under the
provisions of Section 4.2, if the Partnership had received the amount of cash
actually received from such Installment Sale plus cash equal to the present
value of such Installment Obligation at the closing of the related Installment
Sale. The present value of an Installment Obligation shall be determined with
respect to the total payments of principal and interest to be made under the
Installment Obligation (without regard to any rights of prepayment or prepayment
premiums), by applying a discount rate equal to the current yield, on the date
of the Installment Sale, on a United States Treasury obligation, selected by the
General Partner, having a stated maturity comparable to the ultimate stated
maturity date of such Installment Obligation.
4.7.2. Notwithstanding the provisions of Section 4.3, any Profits and
Losses for Tax Purposes resulting from an Installment Sale (including, without
limitation, any amount of income or gain attributable to the relevant
Installment Obligation as a result of (i) the application of Section 453C of the
Code or (ii) the disposition thereof by the Partnership or Local Limited
Partnership, but excluding any interest income to which Section 4.7.3 applies)
shall be allocated between the General Partner and the Limited Partners as a
class in accordance with their Allocation Percentages in such Profits and Losses
for Tax Purposes. The Allocation Percentages of the General Partner and the
Limited Partners as a class shall equal the percentage of the total Profits and
Losses for Tax Purposes deemed recognized by the Partnership in accordance with
this sentence that would have been properly allocable to the General Partner and
the Limited Partners as a class under the provisions of Section 4.3 if the
Partnership had received the amount of cash actually received from such
Installment Sale plus cash equal to the present value of the Installment
Obligation at the closing of the Installment Sale, as determined under Section
4.7.1.
4.7.3. Any interest income on an Installment Obligation shall be allocated,
when and if accrued by the Partnership, between the General Partner and the
Limited Partners as a class in accordance with their Distribution Percentages in
such Installment Obligation.
4.7.4. For purposes of calculating each Partner's share of Profits and
Losses for Tax Purposes and Tax Credits, the Partnership will be deemed to have
distributed to the General Partner and the Limited Partners as a class their
respective Distribution Percentages, on the date of the closing of an
Installment
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Sale, of the present value of the Installment Obligation, as determined under
Section 4.7.1. Any amounts deemed to have been distributed to the Limited
Partners as a class will reduce Adjusted Capital Contributions and Capital
Accounts as of the date of the Installment Sale, and the actual receipt by the
Partners of any proceeds from an Installment Sale shall not further reduce
Adjusted Capital Contributions and Capital Accounts.
ARTICLE 5
RIGHTS, POWERS AND DUTIES OF GENERAL PARTNER
5.1. Management of the Partnership
5.1.1. Subject to the Consent of the Limited Partners (or of a specified
percentage thereof) where required by this Agreement, the General Partner shall
have the exclusive right and authority to manage and control the business of the
Partnership and is hereby authorized to take any action and to do anything it
deems necessary to achieve the purposes of the Partnership in accordance with
the provisions of this Agreement and applicable law.
5.1.2. The General Partner shall, except as otherwise provided in this
Agreement, have all rights and powers and shall be subject to all the
restrictions and liabilities of a partner in a partnership without limited
partners.
5.1.3. No Limited Partner (except one who may also be a General Partner,
and then only in its capacity as a General Partner) shall participate in or have
any control over the Partnership business or have any authority or right to act
for or bind the Partnership.
5.2. General Authority of General Partner
5.2.1. Subject to Sections 5.2.2, 5.3 and 5.4, the General Partner for, and
in the name and on behalf of, the Partnership is hereby authorized, without
limitation:
(i) to acquire, hold, encumber, sell, dispose of and otherwise deal with
Local Limited Partnership Interests, at such price and upon such terms as it
deems to be in the best interests of the Partnership, including exercise of the
Partnership's voting and other rights and powers as a limited partner in the
Local Limited Partnerships;
(ii) to acquire by purchase, lease, exchange or otherwise, any other real
or personal property;
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(iii) to borrow money and issue evidences of indebtedness, and to secure
the same by pledge or other lien on any Local Limited Partnership Interests or
other assets of the Partnership;
(iv) to employ agents, employees, managers, accountants, attorneys,
consultants and other Persons necessary or appropriate to carry out the business
and operations of the Partnership, and to pay fees, expenses, salaries, wages
and other compensation to such Persons;
(v) to pay, extend, renew, modify, adjust, submit to arbitration,
prosecute, defend or compromise, upon such terms as it may determine and upon
such evidence as it may deem sufficient, any obligation, suit, liability, cause
of action or claim, including taxes, either in favor of or against the
Partnership;
(vi) to cause the Partnership to make or revoke any of the elections
referred to in the Code;
(vii) to offer and sell Units in the Partnership to the public directly or
through any licensed Person and to employ personnel, agents and dealers for such
purpose;
(viii) to establish and maintain Reserves for such purposes and in such
amounts as it deems appropriate from time to time, it being understood and
agreed that, after the termination of the Offering, the General Partner shall
establish initial Reserves out of Capital Contributions, in the manner
contemplated by the Prospectus, in an amount equal to not less than 3% of such
Capital Contributions;
(ix) to invest the Net Proceeds in Temporary Investments prior to
investment in Local Limited Partnership Interests;
(x) to engage in any kind of activity necessary to, or in connection with,
or incidental to the accomplishment of the purposes of the Partnership;
(xi) to withhold income taxes as required by, and to otherwise comply with
and take actions necessary as a result of, provisions of the Code (or comparable
provisions of law in any state or other jurisdiction in which the Partnership
does business) requiring withholding; and
(xii) in the absolute discretion of the General Partner, at any time after
conclusion of the Offering, to repurchase any Units upon the request of the
holder thereof on terms mutually agreeable to the Partnership and such holder if
the repurchase does not impair the capital or the operations of the Partnership.
Neither the Partnership nor the General Partner shall, at any time, have any
obligation whatsoever to repurchase any Units.
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5.2.2. Notwithstanding any provision in this Agreement to the contrary, it
is understood and agreed that in selecting Local Limited Partnership Interests
for investment by the Partnership the General Partner shall be bound by the
following investment policies which may not be changed, altered or amended,
except as provided in Section 10.2:
(i) the Partnership shall make investments only in Local Limited
Partnerships which own completed Apartment Complexes or are in the process of
developing new Apartment Complexes or rehabilitating Apartment Complexes which
shall be eligible, in the opinion of counsel, (a) for the Low Income Housing
Credit, and (b) the Historic Tax Credit, provided that none of the Net Proceeds
may be invested in Local Limited Partnerships that own Apartment Complexes
eligible for Historic Tax Credits but not Low Income Housing Credits;
(ii) the Partnership shall not acquire any Local Limited Partnership
Interest unless the Partnership has received, with respect to the Apartment
Complex of such Local Limited Partnership, either (i) an appraisal prepared by a
competent, independent appraiser or (ii) RECDS Forms 1924-13 (estimate and
certificate of actual cost) and 1930-7 (statement of budget, income and expense)
or HUD project cost and budget analysis on Form 2264, or a comparable form of
any successor of RECDS or HUD or 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 expenses, which in either case shall be maintained in the
Partnership's records for at least five years, and shall be available for
inspection and duplication by any Partner;
(iii) no part of the Partnership's investment in a Local Limited
Partnership (other than a Local Limited Partnership which owns a completed
Apartment Complex at the time of the Partnership's initial investment therein)
shall be made prior to receipt of a commitment for the construction loan, and no
more than 75% of the Partnership's investment in such a Local Limited
Partnership shall be made prior to receipt of a commitment for the permanent
loan;
(iv) the agreements with respect to each Local Limited Partnership (other
than a Local Limited Partnership which owns a completed Apartment Complex at the
date of the Partnership's initial investment therein) must contain provisions
whereby the completion of construction of the Apartment Complex at the price
contracted is secured by an adequate completion bond or other satisfactory
arrangements. For the purposes of this Section 5.2.2(iv), other satisfactory
arrangements include, but are not limited to, the following:
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(a) a written guarantee of completion by the Local General Partner
supported by financial statements demonstrating sufficient net worth or
adequately collateralized by other real or personal properties or other Persons'
guarantees; or
(b) a retention of a reasonable portion of the purchase
consideration as a potential offset to such purchase consideration in the event
the Local General Partner does not perform in accordance with such agreement.
(v) the Partnership shall not invest in any Local Limited Partnership
unless an experienced real estate developer has agreed in writing for a minimum
term acceptable to the General Partner to supervise management of the Property
or to serve as its managing Local General Partner or Property manager;
(vi) the Partnership shall invest only in Local Limited Partnerships which
restrict the payment of real estate commissions by any Person to any Person upon
resale of an Apartment Complex to a maximum of the lesser of (a) a Competitive
real estate commission or (b) 6% of the sales price of the Apartment Complex
(including the amount of the commission paid);
(vii) the Partnership shall invest only in Local Limited Partnerships as
follows:
(a) If the Local General Partner of the Local Limited Partnership
is a Sponsor, the partnership agreement of the Local Limited Partnership must
include provisions (1) complying with Section IX.F. of the NASAA Guidelines, (2)
acknowledging privity between the Local General Partner and the Limited
Partners, (3) providing that the compensation payable to the Sponsor in the
aggregate from both the Partnership and the Local Limited Partnership shall not
exceed the amounts permitted under Section IV. of the NASAA Guidelines, (4)
providing that the Local Limited Partnership have as its limited partners only
publicly registered partnerships, except that special limited partners not
affiliated with the Sponsor shall be permitted if the interests taken by the
special limited partners result in no diminution in the control exercisable by
the other limited partners of the Local Limited Partnership, and (5) providing
that the Partnership's investment in the Local Limited Partnership shall not be
structured through more than a two-tier arrangement;
(b) If the Local General Partner of the Local Limited Partnership
is not a Sponsor, the partnership agreement of the Local Limited Partnership
must include provisions which contain in their partnership agreements provisions
not less favorable to the limited partners therein than those contained in
Sections 3.3.3 (respecting admissions), 3.6.2, 5.4.2, 5.5.4, 5.5.5, 5.5.6, 5.8,
6.1, 9.1, 9.4.1, 9.4.2, 9.4.3, 10.1.1, 10.1.2, 10.2.1, 10.2.3, 12.1.2 and
Article 7 hereof;
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(viii) the Partnership shall invest in Local Limited Partnerships jointly
with other limited partnerships (including limited partnerships which are
controlled by or otherwise affiliated with the General Partner) (the Partnership
and any other limited partnership being referred to hereinafter as a "Program")
only if each of the following conditions is satisfied:
(a) the two Programs have substantially identical investment objectives;
(b) there are no duplicate property management or other fees;
(c) the compensation to the sponsor of each Program is substantially
identical in each Program;
(d) each Program will have a right of first refusal if the other Program
wishes to sell its Local Limited Partnership Interest;
(e) the investment of each Program is on substantially the same terms and
conditions;
(f) if the other Program is controlled by or otherwise affiliated with the
General Partner, the other Program must be publicly registered under the
Securities Act of 1933; and
(g) if the other Program is not controlled by or otherwise affiliated with
the General Partner, the Partnership must acquire a Controlling Interest in the
joint venture. For this purpose the phrase "Controlling Interest" means
possessing the power to direct or cause the direction of the activities and
policies of the joint venture, whether through ownership of securities, by
contract, by the exercise of a power of veto over its activities and policies
other than in the ordinary course of business, or otherwise; and
(ix) The Partnership shall commit a percentage of the Limited Partners'
Capital Contributions to Investment in Local Limited Partnership Interests which
is at least equal to the greater of (i) 80% of the Capital Contributions reduced
by 0.1625% for each 1% of the aggregate indebtedness secured or to be secured by
all liens and mortgages encumbering Properties owned by Local Limited
Partnerships or (ii) 70% of the Capital Contributions. For purposes of this
calculation, the percentage of "aggregate indebtedness secured or to be secured
by all liens and mortgages encumbering Properties owned by Local Limited
Partnerships" is the percentage resulting when the Partnership's share of such
aggregate indebtedness is divided by the Partnership's share of the aggregate of
the Purchase Prices of all Properties held by Local Limited Partnerships,
excluding Front-End Fees. If the total amount of Front-End Fees must be reduced
in order to enable the Partnership to satisfy the foregoing restrictions, the
General Partner shall, and shall cause its Affiliates or
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other Persons to, reimburse the Partnership for the amount of Front-End Fees
received by them as necessary to enable the Partnership to meet this investment
requirement.
5.2.3. With respect to each of its obligations, powers and responsibilities
under this Agreement, the General Partner is authorized to execute and deliver,
for and on behalf of the Partnership, such notes and other evidences of
indebtedness, contracts, agreements, assignments, deeds, leases, loan
agreements, mortgages and other security instruments and agreements as it deems
proper, all on such terms and conditions as it deems proper.
5.2.4. Any Person dealing with the Partnership or the General Partner may
rely upon a certificate signed by the General Partner as to:
(i) the identity of the General Partner or any Limited Partner;
(ii) the Persons who are authorized to execute and deliver any instrument
or document of or on behalf of the Partnership;
(iii) the existence or non-existence of any fact or facts which constitute
a condition precedent to acts by the General Partner or in any other manner are
germane to the affairs of the Partnership; or
(iv) any act or failure to act by the Partnership or as to any other matter
whatsoever involving the Partnership or any Partner.
5.3. Authority of General Partner and its Affiliates to Deal with
Partnership
5.3.1. Without limitation upon the other powers set forth herein, the
General Partner is expressly authorized for, in the name of, and on behalf of,
the Partnership to:
(i) subject to the limitations set forth herein, pay to the General Partner
or any of its Affiliates designated by them the compensation provided for in
Section 5.6 hereof;
(ii) borrow funds from the General Partner or any of its Affiliates;
provided, however, that such borrowings may only be made on a short-term basis
(not to exceed one year) and provided further that the Partnership may not pay
in connection therewith (a) interest or other financing charges or fees in
excess of the amounts which would be charged by unrelated lending institutions
on comparable loans for the same purpose in the same locality (and in no event
may interest on
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such borrowings exceed 2% per annum above the Prime Rate, or (b) any
prepayment charge or penalty;
(iii) in connection with the organization of the Partnership and the
Offering, the Partnership shall pay, or reimburse the General Partner or its
Affiliates for advances made to cover, Organizational and Offering Expenses,
including salaries and direct expenses of employees of the General Partner and
its Affiliates directly engaged in the organization and Offering of the
Partnership to the extent such salaries and expenses are allocable thereto;
provided that the General Partner or its Affiliates shall pay all Organizational
and Offering Expenses (with the exception of retail selling commissions equal to
7.5% of the Capital Contributions, the Dealer-Manager Fee, and the
Nonaccountable Expense Reimbursement) in excess of 4% of the Capital
Contributions. However, if and to the extent Acquisition Expenses are less than
the maximum permitted amount, as set forth in Section 5.3.1(iv), the difference
between the actual Acquisition Expenses and the maximum permitted amount of
Acquisition Expenses will reduce the General Partner's obligation to pay such
Organizational and Offering Expenses, provided, however, that in any event the
General Partner shall pay all such Organizational and Offering Expenses which
exceed 5% of the Capital Contributions. In addition, the General Partner shall
pay any Organizational and Offering Expenses (including retail selling
commissions equal to 7.5% of the Capital Contributions, the Dealer-Manager Fee,
and the Nonaccountable Expense Reimbursement) in excess of 14.5% of the Capital
Contributions. The limitations set forth herein shall be applied as if WNC
Housing Tax Credit Fund V, L.P., Series 3 and Series 4 were conducting a single
Offering, rather than a series of Offerings. In the event that Organizational
and Offering Expenses on a per-Unit basis are higher for one such issuer than
for another (excluding discounts attributable to Designated Investors and
Discount Investors), the total of Organizational and Offering Expenses incurred
by all such issuers shall be allocated among them so that the per-Unit amount is
the same (excluding discounts);
(iv) in connection with the acquisition by the Partnership of investments
in Local Limited Partnerships, the Partnership shall pay, or reimburse the
General Partner or its Affiliates for advances made to cover, Acquisition
Expenses, provided that the General Partner shall pay any Acquisition Expenses
in excess of 1% of Capital Contributions;
(v) deal with, or otherwise engage in business with, or provide services to
and receive compensation therefor from, any Person who has provided any services
to, lent money to, sold property to, or purchased property from, the General
Partner or any of its Affiliates;
(vi) require in any or all Partnership contracts that the General Partner
shall not have any personal liability thereon but that the Person contracting
with the
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Partnership shall look solely to the Partnership and its assets for
satisfaction; however, if any additional cost is imposed upon the Partnership as
a result of such a requirement, such additional cost shall be paid by the
General Partner from its own funds, without recourse to the funds of the
Partnership;
(vii) subject to the provisions of Section 5.2.2(vii) hereof, exercise the
right to cause an Affiliate of the General Partner to become a Local General
Partner, including the sole Local General Partner, in the event of the
bankruptcy, death, dissolution, withdrawal, removal or adjudication of
incompetence of a Local General Partner, or in the event of a material default
by a Local General Partner or any of its Affiliates on any obligations of such
Local General Partner or Affiliate to the Local Limited Partnership or to the
Partnership, if the General Partner determines that the exercise of such right
would best protect the interest of the Partnership in such Local Limited
Partnership; and
(viii) exercise the right to cause the SLP Affiliate to become a special
limited partner of each Local Limited Partnership upon the terms and for the
interest in the Local Limited Partnership described in the Prospectus.
5.3.2. Other than as specifically authorized in this Section 5.3, the
General Partner is prohibited from entering into any agreements, contracts or
arrangements on behalf of the Partnership with the General Partner or any
Affiliate of the General Partner. Such prohibition shall include, without
limitation, the following:
(i) the Partnership shall not purchase any Local Limited Partnership
Interest or Apartment Complex from the Sponsor unless such Person purchased the
Local Limited Partnership Interest or the Apartment Complex which is the
principal asset of the Local Limited Partnership in its name in order to
facilitate the acquisition of such Local Limited Partnership Interest or
Apartment Complex by the Partnership; provided, however, that in the event of
such an acquisition from the Sponsor (a) the purchase price paid by the
Partnership may not (except to the extent of any reimbursement by the
Partnership of carrying costs) exceed the cost of such Local Limited Partnership
Interest or Apartment Complex to the seller; (b) no compensation or other
benefit from the transaction may accrue to the Sponsor except as otherwise
permitted by this Agreement; (c) the seller has not held the Local Limited
Partnership Interest or Apartment Complex for a period in excess of twelve
months prior to commencement of the Offering; (d) there is no difference in
interest terms of the loans secured by the Local Limited Partnership Interest or
Apartment Complex at the time acquired by the Sponsor and the time acquired by
the Partnership; (e) all income and expense which accrues to the Sponsor as a
result of the ownership of such Local Limited Partnership Interest or Apartment
Complex shall be treated as belonging to the Partnership; and (f) the seller is
not a Program in which the General Partner has an interest. For this purpose,
the term "Program" shall mean a limited or general partnership, joint venture,
unincorporated
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association or similar organization other than a corporation formed and operated
for the primary purpose of investment in and the operation of or gain from an
interest in real property including such entities formed to make or invest in
mortgage loans;
(ii) neither the General Partner nor any of its Affiliates shall enter into
an agreement or contract with a Local Limited Partnership for the development of
any Apartment Complex or the construction of improvements with respect to any
Apartment Complex;
(iii) neither the General Partner nor any of its Affiliates shall receive
directly or indirectly a commission or fee in connection with the reinvestment
of the proceeds of the sale, exchange or refinancing of any Local Limited
Partnership Interest or any Apartment Complex;
(iv) neither the General Partner nor any of its Affiliates shall receive an
insurance brokerage fee or write any insurance policy covering the Partnership
or any Apartment Complex;
(v) neither the General Partner nor any of its Affiliates shall be given an
exclusive right to sell or exclusive employment to sell any Local Limited
Partnership Interest for the Partnership or any Apartment Complex for any Local
Limited Partnership;
(vi) except as provided in Section 5.3.1(viii) hereof, neither the
Partnership nor any Local Limited Partnership shall sell any Local Limited
Partnership Interest or Apartment Complex to, or lend any funds to, the General
Partner or any of its Affiliates; and
(vii) no rebates or give-ups may be received by the General Partner or any
of its Affiliates, nor may the General Partner or any of its Affiliates
participate in any reciprocal business arrangement which would have the effect
of circumventing any of the provisions of this Agreement.
5.3.3. All of the Partnership's expenses shall be billed directly to and
paid by the Partnership to the extent practicable. Reimbursements to the General
Partner or any of its Affiliates by the Partnership shall be allowed only for
the Partnership's Organizational and Offering Expenses, Acquisition Expenses and
Operating Cash Expenses and only subject to the limitations on the reimbursement
of such expenses
set forth herein.
5.3.4. Reimbursement to the General Partner or any of its Affiliates of
Operating Cash Expenses pursuant to Section 5.3.3 hereof shall be subject to the
following:
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(i) No such reimbursement shall be permitted for services for which the
General Partner or any of its Affiliates is entitled to compensation by way of a
separate fee; and
(ii) No such reimbursement shall be made for (a) rent or depreciation,
utilities, capital equipment or other such administrative items, and (b)
salaries, fringe benefits, travel expenses and other administrative items
incurred or allocated to any "controlling person" of the General Partner or any
Affiliate of the General Partner. For the purposes of this Section 5.3.4(ii),
"controlling person" includes, but is not limited to, any Person, however
titled, who performs functions for the General Partner or any Affiliate of the
General Partner similar to those of: (1) chairman or member of the board of
directors; (2) executive management, such as president, vice president or senior
vice president, corporate secretary or treasurer; (3) senior management, such as
the vice president of an operating division who reports directly to executive
management; or (4) those holding 5% or more equity interest in the General
Partner or any Affiliate of the General Partner or a person having the power to
direct or cause the direction of the General Partner or any Affiliate of the
General Partner, whether through the ownership of voting securities, by contract
or otherwise.
5.4. Restrictions on Authority of General Partner
5.4.1. The General Partner shall not:
(i) do any act in contravention of this Agreement;
(ii) do any act which would make it impossible to carry on the ordinary
business of the Partnership;
(iii) possess Partnership property, or assign the Partnership's rights in
specific Partnership property, for other than a Partnership purpose;
(iv) admit a Person as a General Partner, except as provided in this
Agreement;
(v) admit a Person as a Limited Partner, except as provided in this
Agreement;
(vi) directly or indirectly pay or award any commissions or other
compensation to any Person engaged by a potential investor in the Partnership
for investment advice as an inducement to such adviser to advise the purchase of
Units, but this clause shall not prohibit the payment of the selling commissions
and other underwriting compensation contemplated herein or in the Prospectus to
a registered broker-dealer or other properly-licensed Person for selling Units;
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(vii) cause the Partnership to lend any funds to any Person (other than in
connection with Temporary Investments), except that the General Partner may
cause the Partnership to make loans to or to post letters of credit for Local
Limited Partnerships in which the Partnership is expected to own a Local Limited
Partnership Interest, provided that in the case of any such loan (a) the loan is
made prior to the date that the Partnership makes its initial capital
contribution to the Local Limited Partnership, (b) the total amount of all such
loans does not exceed 50% of the Limited Partners' Capital Contribution
committed to the investment in such Local Limited Partnership, and (c) such
borrowings may only be made on a short-term basis (not to exceed one year) and
must, unless earlier repaid, be repaid from the Partnership's initial capital
contribution to the Local Limited Partnership at the time such initial capital
contribution is made;
(viii) cause the Partnership to acquire unimproved or nonincome producing
property (but this clause shall not restrict the rights of the Partnership to
invest in Local Limited Partnerships owning Apartment Complexes under
construction or rehabilitation or Apartment Complexes as to which construction
or rehabilitation has not commenced but with respect to which closing of the
construction loan has occurred or the Apartment Complex site has been acquired
and a construction loan commitment has been obtained);
(ix) cause the Partnership to utilize Cash Available for Distribution to
acquire Local Limited Partnership Interests;
(x) cause the Partnership to reinvest Sale or Refinancing Proceeds unless a
sufficient portion thereof is distributed to the Limited Partners to enable each
Limited Partner, assuming that he is in a combined Federal, state and local
marginal income tax bracket of 30%, to pay the Federal, state and local income
tax liability arising from the Sale or Refinancing which generated such
proceeds, and in any event Sale or Refinancing Proceeds shall not be reinvested
following the second anniversary of the first day of the calendar quarter in
which the Investment Date occurs, except to the extent of any Reserves retained
therefrom;
(xi) cause the Partnership to acquire any Local Limited Partnership
Interest in exchange for Units;
(xii) change the Partnership's purposes from those set forth in Section
2.4;
(xiii) facilitate or recognize the trading of Units on an established
securities market or on a secondary market, if, in the opinion of counsel, such
action would result in the Partnership being classified as a publicly traded
partnership under Section 7704 of the Code and such classification would have
material adverse tax consequences for the Limited Partners;
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(xiv) cause the Partnership to invest in Local Limited Partnerships under
circumstances where duplicate fees for the same service may be payable by the
Partnership and/or the particular Local Limited Partnership;
(xv) except as set forth below in this subsection, following the
termination of the offering of Units, cause the total amount of indebtedness
incurred by the Partnership to at any time exceed the sum of 85% of the
aggregate purchase price of all Apartment Complexes which have not been
refinanced, and 85% of the aggregate fair market value of all Apartment
Complexes which have been refinanced, as determined by the lender as of the date
of refinancing. Notwithstanding the preceding, with respect to all indebtedness
insured or guaranteed by the full faith and credit of the United States
government, a state or local government, or an agency or instrumentality of any
of them, and with respect to all indebtedness provided by any such Person, the
total amount of indebtedness incurred by the Partnership shall at no time exceed
the sum of 100% of the aggregate purchase price of all Apartment Complexes which
have not been refinanced, and 100% of the aggregate fair market value of all
Apartment Complexes which have been refinanced, as determined by the lender as
of the date of refinancing. For purposes of this subsection only, the term
"indebtedness" shall include the principal of any loan together with any
interest that may be deferred pursuant to the terms of the loan agreement which
exceeds 5% per annum of the principal balance of such indebtedness (excluding
contingent participations in income and/or appreciation in the value of the
Apartment Complexes), and shall exclude any indebtedness incurred by the
Partnership for necessary working capital reserves;
(xvi) cause the Partnership to invest in a Local Limited Partnership under
circumstances where the General Partner or any of its Affiliates would receive
compensation for administrative services performed on behalf of the Local
Limited Partnership;
(xvii) cause the Partnership to pay aggregate Acquisition Fees to all
Persons in an amount which exceeds the lesser of (a) the Competitive rate or (b)
18% of the Gross Proceeds. The foregoing limitation shall be complied with at
any given time and on an ongoing basis; or
(xviii) cause the Partnership to invest in junior trust deeds or other
similar obligations, except for junior trust deeds which arise from the sale of
Properties.
5.4.2. Without the Consent of a majority-in-interest of the Limited
Partners, the General Partner may not:
(i) sell at one time all or substantially all the assets of the
Partnership, except in connection with the liquidation and winding up of the
Partnership's business upon its dissolution; or
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(ii) elect to dissolve the Partnership.
5.4.3. The General Partner shall not sell, assign or otherwise transfer the
Promissory Notes at a discount; provided that this restriction shall not
prohibit the General Partner from pledging or otherwise granting a security
interest in the Promissory Notes as security for any Partnership obligation.
5.5. Duties and Obligations of General Partner
5.5.1. The General Partner shall take such actions as may be necessary or
appropriate to form, qualify and continue the Partnership as a limited
partnership under the laws of the State of California and in order to form or
qualify the Partnership under the laws of any other jurisdiction in which the
Partnership is doing business or in which such formation or qualification is
necessary to protect the limited liability of the Limited Partners or in order
to continue in effect such formation or qualification. In this connection the
General Partner shall cause a Certificate of Limited Partnership to be filed on
behalf of the Partnership in the office of the California Secretary of State,
and shall cause an amendment to the Certificate to be filed in such office, and
in each other public office in which the Certificate was previously filed,
within 30 days after the happening of any of the following events:
(i) A change in the name of the Partnership;
(ii) A change in the address of the Partnership office;
(iii) A change in the name or address of the Partnership's agent for
service of process;
(iv) The withdrawal of a General Partner;
(v) The admission of a General Partner; or
(vi) The discovery by a General Partner of any false or erroneous material
statement contained in the Certificate.
5.5.2. The General Partner shall prepare or cause to be prepared and shall
file on or before the due date (or any extension thereof) any Federal, state or
local tax returns required to be filed by the Partnership.
5.5.3. The General Partner shall use its best efforts to assure that the
Partnership shall not be deemed an investment company as such term is defined in
the Investment Company Act of 1940 and shall use its best efforts to obtain from
the Securities and Exchange Commission an order exempting the Partnership from
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the provisions of the Investment Company Act of 1940. The General Partner,
acting by and through its general partner, is expressly authorized to prepare,
execute and file with the Securities and Exchange Commission an application
pursuant to Section 6(c) of the Investment Company Act of 1940 for an exemption
from all the provisions of such Act, together with such other documents, and to
do such other acts and things, as may be necessary or convenient in seeking such
an exemption. In the event that delay is encountered in obtaining such order,
the General Partner is authorized to rely upon an opinion of counsel to the
effect that the Partnership is exempt from the provisions of the Investment
Company Act of 1940 until such time as such order is obtained, if ever.
5.5.4. The General Partner shall have fiduciary responsibility for the
safekeeping and use of all funds and assets of the Partnership, whether or not
in its immediate possession or control. The General Partner shall not employ, or
permit another to employ, such funds or assets in any manner except for the
exclusive benefit of the Partnership.
5.5.5. The funds of the Partnership shall not be commingled with the funds
of any other Person. Nothing contained in this Section 5.5.5, however, shall
prohibit the General Partner or an Affiliate of the General Partner from
establishing a master fiduciary account pursuant to which separate subtrust
accounts are established for the benefit of Affiliated limited partnerships,
provided that Partnership funds are protected from claims of such other
partnerships and/or their creditors.
5.5.6. The General Partner shall not contract away the fiduciary duty owed
at common law to the Limited Partners.
5.5.7. The General Partner is authorized, in its discretion, to cause the
Partnership to acquire policies of limited partnership liability insurance,
insuring the Partners and their Affiliates against liabilities in connection
with the business of the Partnership and insuring the Partnership against
liabilities with respect to any indemnification it is legally required or
permitted to provide Partners and their Affiliates; subject to the provisions of
Section 5.8.4 hereof.
5.6. Compensation of Sponsor
5.6.1. The Sponsor shall not receive any salary, fees, profits,
distributions or allocations from the Partnership or any Local Limited
Partnership in which the Partnership invests except as expressly allowed by this
Agreement.
5.6.2. The Dealer-Manager shall be entitled to receive from the Partnership
retail selling commissions and the Dealer-Manager Fee in respect of the sale of
Units, all as set forth in the Prospectus.
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5.6.3. In connection with the Offering of the Units, the Dealer-Manager
shall receive from the Partnership a Nonaccountable Expense Reimbursement in an
amount equal to 1% of the Capital Contributions.
5.6.4. For services actually rendered or to be rendered, directly or
indirectly, by the Sponsor in connection with acquiring Local Limited
Partnership Interests (including services performed for the Partnership in
connection with Local Limited Partnership Interests which are the subject of
review, evaluation and, ultimately, rejection as potential acquisitions for the
Partnership), which services may include selecting, evaluating, structuring,
negotiating and closing the Partnership's investments in Local Limited
Partnership Interests, the Partnership and/or the Local Limited Partnerships
shall pay to the Sponsor an amount equal to 7.5% of the Capital Contributions,
provided that the amount payable may be reduced by the General Partner in its
sole discretion. Such Acquisition Fee shall be payable at the time Gross
Proceeds are received. Notwithstanding the amount of Sponsor Acquisition Fees
set forth herein, the total amount thereof shall be reduced in connection with
the purchase of Units by Discount Investors, as described in the Prospectus
under "Terms of the Offering and Plan of Distribution." The amount of such
reduction shall be treated as a distribution to a Discount Investor but shall
not be deemed a return of the Discount Investor's Capital Contribution; rather,
the reduction amount shall be deemed to be a compromise within the meaning of
Section 15636(c) of the Act, and no Discount Investor shall be obligated to pay
any such amount to or for the benefit of the Partnership or any creditor of the
Partnership. Except as set forth in this Section 5.6.4, no Acquisition Fees
shall be paid to the Sponsor.
5.6.5. For any property management services actually rendered by the
General Partner or its Affiliates respecting the Properties owned by Local
Limited Partnerships, the General Partner or any such Affiliate may receive
Competitive property management or leasing fees from the Local Limited
Partnerships. Included in any such property management fee shall be bookkeeping
services and fees paid to non-Affiliated Persons for property management
services. In no event shall any leasing fee be paid to the General Partner or to
any of its Affiliates for performing leasing services unless the services are
necessary for the leasing of space in a Property of a Local Limited Partnership
and would be required to be performed by a non-Affiliated Person but for their
performance by the General Partner or an Affiliate of the General Partner. The
maximum property management fees paid to the General Partner or any of its
Affiliates (including all leasing and releasing fees and bonuses and other
payments for leasing related services, paid to any Person) shall be the lesser
of 5% of the gross revenues from the Property or a Competitive amount.
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5.6.6. For services rendered by the General Partner or an Affiliate of the
General Partner in connection with the administration of the affairs of the
Partnership, the General Partner or any such Affiliate shall receive from the
Partnership in 1995 and 1996 an annual Asset Management Fee in an amount equal
to the greater of (i) $2,000 for each Apartment Complex, or (ii) 0.275% of Gross
Proceeds (the "Base Fee Amount"). On January 1, 1997 and each January 1
thereafter the Base Fee Amount shall be multiplied by the CPI factor and
increased or decreased accordingly. For purposes hereof, the "CPI factor" means
the Consumer Price Index for Urban Wage Earners and Clerical Workers, United
States, all items (1967=100), or any successor index, as published by the Bureau
of Labor Statistics of the United States Department of Labor. Notwithstanding
the preceding, the annual Asset Management Fee shall not exceed 0.2% of that
portion of Invested Assets in Local Limited Partnerships which are attributable
to apartment units receiving Government Assistance. The Asset Management Fee
shall be payable with respect to the previous calendar quarter on the first day
of each calendar quarter during the year, provided that the Asset Management Fee
shall only accrue and be payable as follows: (i) if the Asset Management Fee is
equal to $2,000 for each Apartment Complex, the $2,000 portion of the total
Asset Management Fee attributable to any Apartment Complex shall only accrue and
be payable commencing with the date on which such Apartment Complex commences
operations; and (ii) if the Asset Management Fee is equal to 0.275% of Gross
Proceeds, the total Asset Management Fee shall be allocated among the Apartment
Complexes in proportion to the amount of the Partnership's capital contribution
to each Local Limited Partnership, and the portion of the Asset Management Fee
so attributable to any Apartment Complex shall only accrue and be payable
commencing with the date on which such Apartment Complex commences operations.
Accrued but unpaid Asset Management Fees for any year shall be deferred without
interest and shall be payable in subsequent years from any funds available to
the Partnership after payment of all other costs and expenses of the
Partnership, including any Reserves then determined by the General Partner to no
longer be necessary to be retained by the Partnership, or from the proceeds of a
Sale or Refinancing.
5.6.7. For services rendered by the General Partner or an Affiliate of the
General Partner in connection with the sale of any Property owned by a Local
Limited Partnership, the General Partner shall receive from the Partnership a
Subordinated Disposition Fee in an amount equal to 1% of the sales price of such
Property if the General Partner or its Affiliate provides a substantial amount
of services in the sales effort. This fee shall be payable only after the
distributions in Section 4.2.1(i), (ii) and (iii) have been made, and may accrue
if there are insufficient Sale or Refinancing Proceeds payable to the
Partnership upon any such sale. This fee is subject to the limitations imposed
by Section 5.2.2(vi).
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5.7. Other Business of Partners
5.7.1. The General Partner shall devote to the affairs of the Partnership
such time as may be necessary for the proper performance of its duties
hereunder, but neither the General Partner, its general partner, any of the
officers and directors of such general partner nor any successors to such
parties shall be expected to devote their full time to the performance of such
duties.
5.7.2. Any Partner or any of his Affiliates may engage independently or
with others in other business ventures of every nature and description,
including, without limitation, the rendering of advice or services to other
investors and the making or management of other investments, including
investments in real properties receiving Government Assistance. Neither the
Partnership nor any Partner shall have any rights by virtue of this Agreement or
the partnership relationship created hereby in or to such other ventures or
activities or to the income or proceeds derived therefrom, provided that nothing
in this Section 5.7.2 shall relieve the General Partner of its general fiduciary
obligation to the Partnership.
5.7.3. The Sponsor may be presented with an investment opportunity which
could be availed of by the Partnership and one or more other entities which the
Sponsor or one of its Affiliates manages. The decision as to the particular
entity which shall make the investment shall be based upon such factors as the
effect of the acquisition on diversification of each entity's portfolio, the
estimated income tax effects of the purchase on each entity, the amount of funds
of each entity available for investment and the length of time such funds have
been available for investment. If a particular investment is determined to be
suitable for more than one entity, priority generally shall be given to the
entity having uninvested funds for the longest period of time; except that (i) a
partnership which was formed to invest primarily in apartment complexes eligible
for state low income housing credits as well as the Low Income Housing Credit
shall be given priority over the Partnership and other partnerships which are
not seeking to provide such state tax credits with respect to any investment
which is eligible for such state tax credits and (ii) the Partnership or any
other partnership which was formed to invest primarily in apartment complexes
eligible only for the Low Income Housing Credit shall be given priority with
respect to any investment which is not eligible for state tax credits over any
partnerships (or series thereof) which are seeking to provide such state tax
credits as well as the Low Income Housing Credit.
5.8. Limitation on Liability of General Partner; Indemnification
5.8.1. Neither the General Partner nor any Designated Affiliate (as defined
in Section 5.8.5) shall have any liability to the Partnership or to any Partner
for any loss suffered by the Partnership which arises out of any action or
inaction of such General Partner or Designated Affiliate if the General Partner,
in good faith,
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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 Designated Affiliate. The General Partner
and each of its Designated Affiliates shall be indemnified by the Partnership
against any losses, judgments, liabilities, expenses and amounts paid in
settlement of any claims sustained by them when acting on behalf of, or
performing services for, the Partnership, provided that the same were not the
result of negligence or misconduct on the part of such General Partner or
Designated Affiliate and were the result of a course of conduct which the
General Partner, in good faith, determined was in the best interest of the
Partnership. Any indemnity under this Section 5.8 shall be provided out of and
to the extent of Partnership assets only, and no Limited Partner shall have any
personal liability on account thereof.
5.8.2. Notwithstanding anything to the contrary contained in Section 5.8.1,
neither the General Partner, any Person acting as a broker-dealer, nor any
Designated Affiliate 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 alleged securities law violations as to the
particular indemnitee and the court approves indemnification of litigation
costs, or (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 indemnification of litigation costs, or (iii) a court of competent
jurisdiction approves a settlement of the claims against a particular indemnitee
and finds that indemnification of the settlement and related costs should be
made.
5.8.3. In any claim for indemnification for Federal or state securities law
violations, the party seeking such indemnification shall place before the court
the positions of the Securities and Exchange Commission, the California
Commissioner of Corporations, the Missouri Securities Division and any state
securities regulatory authority in which Units of the Partnership were offered
and sold as to indemnification for violations of securities laws; provided that
the court need only be advised of and consider the positions of the securities
regulatory authorities of those states (i) which are specifically set forth in
this Section 5.8.3 and (ii) in which plaintiffs claim they were sold Units.
5.8.4. The Partnership shall not pay for any insurance covering liability
of any party as to which such party is hereby prohibited from being indemnified;
provided, however, that nothing contained herein shall preclude the Partnership
from purchasing and paying for such types of insurance, including extended
coverage liability and casualty and workers' compensation, as would be customary
for any Person owning comparable assets and engaged in a similar business, or
from naming the General Partner or a Designated Affiliate as additional insured
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parties thereunder, provided that such addition does not add to the premiums
payable by the Partnership.
5.8.5. As used in this Section 5.8, a "Designated Affiliate" is an
Affiliate performing services on behalf of the Partnership, within the scope of
the authority of the General Partner: (i) which directly or indirectly controls,
is controlled by, or is under common control with the General Partner; (ii)
which owns or controls 10% or more of the outstanding voting securities of the
General Partner; (iii) which is an officer, director, partner or trustee of the
General Partner; (iv) which is a company for which the General Partner acts in
the capacity of officer, director, partner or trustee; or (v) as to which the
General Partner owns or controls 10% or more of the outstanding voting
securities.
5.8.6. The Partnership may advance funds to the General Partner and each
Designated Affiliate for legal expenses and other costs incurred by them in
connection with any legal action brought against them, provided that each of the
following is satisfied: (i) the legal action relates to acts or omissions with
respect to the performance of duties or services on behalf of the Partnership;
(ii) the legal action is initiated by a third party who is not a Limited
Partner, or the legal action is initiated by a Limited Partner and a court of
competent jurisdiction specifically approves the advancement of funds; and (iii)
the General Partner or Designated Affiliate receiving the funds undertakes to
repay the funds to the Partnership in the event he is not entitled to
indemnification at the conclusion of such legal action.
ARTICLE 6
ADMISSION OF SUCCESSOR AND ADDITIONAL
GENERAL PARTNERS; WITHDRAWAL OF GENERAL PARTNER
6.1. Admission of Successor or Additional General Partners
6.1.1. With the Consent of all other General Partners, if any, and the
Consent of at least a majority-in-interest of the Limited Partners, any General
Partner may at any time designate one or more Persons to be its successor or to
be an additional General Partner, with such Interest in the Partnership as such
General Partner and the successor or additional General Partner agree upon,
provided that the Interests of the other Partners shall not be affected thereby.
6.1.2. If at any time any material reduction shall occur in the aggregate
net worth of the General Partner and its general partner, the General Partner
shall consult with legal counsel and, if such counsel is of the opinion that
such reduction might adversely affect the treatment of the Partnership as such
for Federal income tax purposes, the General Partner shall use its best efforts
either (i) to admit as
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General Partners one or more Persons having a net worth sufficient to offset
such reduction, the additional General Partner or General Partners to have
whatever participation in the General Partner's Interests the General Partner
and the additional General Partners agree upon, provided that the additional
General Partners have no authority to manage or control the Partnership, there
is no change in the identity of the Persons who have authority to manage or
control the Partnership, and the admission of the additional General Partners
does not materially affect the Interests of the Limited Partners; or (ii) if
necessary in the opinion of legal counsel, to obtain additional capitalization
sufficient to satisfy any then existing requirements of the Internal Revenue
Service for a ruling that an entity, whether or not a corporation, has
sufficient net worth so that a limited partnership of which it is a general
partner has the characteristic of unlimited liability.
6.1.3. Except in connection with a transfer to a successor or additional
General Partner pursuant to Section 6.1.1. or 6.1.2., the General Partner shall
have no right to retire or withdraw voluntarily from the Partnership or to sell,
transfer, or assign all or any portion of its Interest, except that it may
substitute in its stead as General Partner any entity which has, by merger,
consolidation or otherwise, acquired substantially all of its assets or stock
and continued its business.
6.1.4. Any Voluntary Withdrawal by the General Partner from the Partnership
or any sale, transfer or assignment by the General Partner of its Interest shall
be effective only upon the admission in accordance with this Section 6.1 and
Section 13.3 of a successor or additional General Partner, as the case may be.
6.1.5. No assignee or transferee of all or any part of the Interest of the
General Partner shall have any right to become a General Partner except as
provided in this Article 6.
6.2. Restrictions on Transfer of General Partner's Interest
Notwithstanding anything to the contrary in this Article 6, the assignment
or transfer of the General Partner's Interest shall at all times be subject to
the same restrictions applicable to an assignment or transfer of Units set forth
in Sections 7.2.1 and 7.2.2.
6.3. Consent of Limited Partners to Admission of Successor or
Additional General Partners
Each of the Limited Partners, by the execution of this Agreement, Consents
for all purposes of the Act to the admission of any Person as a successor or
additional General Partner for which the express Consent of a
majority-in-interest of the Limited Partners has been obtained at the time
pursuant to Section 6.1. Upon receipt of such a Consent to such admission from a
majority-in-interest of the
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Limited Partners, then, subject to the provisions of Section 6.2, the admission
shall, without any further Consent or approval of the Limited Partners, be an
act of all the Limited Partners.
6.4. Event of Withdrawal of a General Partner
If, at the time of an Event of Withdrawal of a General Partner, such
General Partner was not the sole General Partner, the remaining General Partner
or General Partners shall immediately: (i) give Notification to the Limited
Partners of such event; and (ii) make any amendments to this Agreement and
execute and file for recordation any amended Certificates or other instruments
necessary to reflect the termination of the Interest of the General Partner as
to which such event has occurred and such General Partner's having ceased to be
a General Partner.
6.5. Interest and Liability of a Withdrawn General Partner
6.5.1. Upon an Event of Withdrawal as to a General Partner, such General
Partner shall immediately cease to be a General Partner, and its Interest shall
be subject to purchase in accordance with Section 6.6; provided, however, that
such a termination shall not affect any rights of such General Partner which
arose prior to such event, or the value, if any, at the time of such event of
the Interest of such General Partner.
6.5.2. Any General Partner who voluntarily or involuntarily for any reason
(including bankruptcy, death, dissolution or adjudication of incompetence)
withdraws from the Partnership or sells, transfers or assigns its Interest shall
be and shall remain liable for all obligations and liabilities incurred by the
Partnership prior to the time the withdrawal, sale, transfer or assignment
becomes effective, but it shall be free of any obligation or liability incurred
on account of the activities of the Partnership after that time.
6.6. Valuation and Sale of Interest of Former General Partner
6.6.1. If the business of the Partnership is continued after the Event of
Withdrawal of a General Partner, or if, following such event, the Partnership is
reconstituted, in each case as contemplated by Section 8.1, the Partnership
shall purchase such General Partner's Interest for a price equal to the then
present fair market value thereof. Such fair market value shall be determined by
agreement of the former General Partner and the Partnership, or, if they cannot
agree, by arbitration in accordance with the current rules of the American
Arbitration Association. The expense of arbitration will be shared equally
between such former General Partner and the Partnership.
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6.6.2. Promptly after determination of the fair market value of a former
General Partner's Interest pursuant to Section 6.6.1, the Partnership shall
deliver to such former General Partner a promissory note of the Partnership for
such fair market value payable in no less than five equal consecutive annual
installments commencing on the first anniversary of the date of such note. Such
promissory note shall bear simple interest at the rate per annum which is at all
times equal to the Prime Rate, but not to exceed the maximum rate permitted by
law, payable on the last day of each calendar quarter while such note is
outstanding; provided, however, that if such note is delivered following an
Event of Withdrawal of a General Partner which is a Voluntary Withdrawal on its
part then (i) such note shall neither be secured nor bear interest and (ii) the
principal payable to the withdrawing General Partner shall be limited in amount
and date of payment to distributions which such withdrawing General Partner
would have received under this Agreement had it not withdrawn. Within 120 days
after the determination of the fair market value of the former General Partner's
Interest, the Partnership may, with the Consent of all remaining General
Partners and the Consent of a majority-in-interest of the Limited Partners, sell
such Interest to one or more Persons, who may be Affiliates of the remaining
General Partner or General Partners, and admit such Persons to the Partnership
as substitute General Partners; provided, however, that the purchase price to be
paid to the Partnership for the Interest of the former General Partner shall not
be less than its fair market value as determined by the procedure set forth in
Section 6.6.1. above. Such substitute General Partner or Partners may pay said
purchase price in installments in the manner set forth above in this Section
6.6.2.
ARTICLE 7
TRANSFERABILITY OF UNITS
7.1. Right to Transfer Units
A Limited Partner may assign his Units by a written instrument of
assignment, the terms of which shall conform to the provisions of this
Agreement.
7.2. Restrictions on Transfers
7.2.1. No sale, exchange, transfer or assignment of any Units may be made
if, in the opinion of counsel to the Partnership, such sale, exchange, transfer
or assignment would:
(i) when added to the total of all other Units sold or exchanged within a
period of 12 consecutive months prior thereto, result in the Partnership being
considered to have terminated within the meaning of Section 708 of the Code and
such termination would have adverse tax consequences to any Partner; provided,
that any deferred sales or exchanges shall be made (in chronological order to
the extent
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practicable) as of the first day of a fiscal quarter after the end of any
such 12-month period, subject to the provisions of this Article 7;
(ii) cause the Partnership to become a publicly-traded partnership for
Federal income tax purposes, and such result would have material adverse tax
consequences to any Partner;
(iii) cause the Partnership to cease to qualify under Section 42(j)(5)(B)
of the Code;
(iv) result in the Partnership or any other Partner being required to
recapture any Tax Credits unless the holder of such Units indemnifies the
Partnership and its Partners for such recapture; or
(v) result in the Partnership being treated as an association taxable as a
corporation for Federal income tax purposes and, in this connection, no Limited
Partner shall at any time, either directly or indirectly, own any stock or other
interest in the General Partner or in any Affiliate of the General Partner if
such ownership, by itself or in conjunction with the stock or other interest
owned by other Limited Partners, would, in the opinion of counsel for the
Partnership, jeopardize the classification of the Partnership as a partnership
for Federal income tax purposes.
7.2.2. No sale, exchange, transfer or assignment of any Unit shall be made
to any Person exempt from Federal income tax under Section 501 of the Code, to
any Person defined in Section 168(h)(2) of the Code, to any Individual
Retirement Account as defined in Section 408(a) of the Code, to any Keogh Plan,
to any nonresident alien, or to any foreign Person.
7.2.3. Any transfer of a Unit to a Person who makes a market in securities
shall be void ab initio unless such Person shall certify to the General Partner
that it has acquired such Unit solely for investment purposes and not for the
purpose of resale.
7.2.4. No purported sale, exchange, transfer or assignment by a transferror
of a Unit shall be permitted unless the transferror shall have represented that
such transfer:
(i) was effected through a broker-dealer or matching agent whose procedures
with respect to the transfer of Units have been approved by the General Partner
as not being incident to trading on an established securities market or a
secondary market and not through any other broker-dealer or matching agent; or
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(ii) otherwise was not effected through an established securities market or
through a broker-dealer or matching agent which makes a market in Units or which
provides a readily available, regular and ongoing opportunity to the holders of
Units to sell or exchange their Units through a public means of obtaining or
providing information of offers to buy, sell or exchange Units.
7.2.5. All Units shall be subject to, and all documents of assignment and
transfer evidencing such Units shall bear, the following legend condition:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR
WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."
Such restriction shall be noted in the appropriate records of the
Partnership, and no transfer of any interest in the Partnership shall be made
except in compliance with the terms of such legend condition.
7.2.6. No sale, exchange, transfer or assignment of any Unit shall be made
to any Person who does not satisfy the investor suitability standards imposed by
the Partnership in connection with the public Offering of the Units or such more
restrictive standards, if any, as may be required under applicable state
securities laws.
7.2.7. No purported sale, exchange, assignment or transfer by a Limited
Partner of any Unit after which any transferror or transferee would hold any
fraction of a Unit, will be permitted or recognized (except for transfers by
gift, inheritance, bequest or family dissolution, or transfers to Affiliates of
the transferror).
7.2.8. The General Partner (i) shall be entitled to make any reasonable
inquiry of the Limited Partners and prospective Limited Partners in connection
with the provisions of this Section 7.2, and (ii) may, in its sole discretion,
on behalf of the Partnership, impose any restrictions on transfers of Units or
any other additional procedures or requirements which it deems appropriate in
order to prevent the Partnership from being treated for tax purposes as an
"association" taxable as a corporation or as a publicly-traded partnership, if,
in the opinion of counsel, such treatment would have material adverse tax
consequences for the Partners, or to give effect to the intent of this Section
7.2, and shall be permitted, in order to give effect to any such restriction,
procedures or requirements, to amend this Agreement without the Consent of the
Limited Partners. The General Partner shall give
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Notification to all Limited Partners in the event that sales, exchanges,
transfers or assignments have generally been suspended.
7.2.9. The General Partner will review from time to time the limitations
and restrictions on the sale, exchange, transfer or assignment of Units and will
eliminate or modify such limitations or restrictions to make them less
restrictive if the Partnership shall have received an opinion of counsel that
such elimination or modification may be made without material adverse tax
consequences to the Partners.
7.3. Assignees and Assignment Procedure
7.3.1. If a Limited Partner who is an individual dies or a court of
competent jurisdiction adjudges him to be incompetent to manage his person or
his property, such Limited Partner's executor, administrator, guardian,
conservator or other legal representative may exercise all of such Limited
Partner's rights for the purposes of settling his estate or administering his
property, including any power under this Agreement to join with a proposed
assignee in satisfying conditions precedent to the assignment of his Interest to
such assignee and to such assignee becoming a Substitute Limited Partner. If a
Limited Partner which is not an individual is dissolved or terminated, the
powers of that Limited Partner may be exercised by its legal representative or
successor. Notwithstanding the foregoing, the Partnership shall not be under any
duty to recognize the authority of any such executor, administrator, guardian,
conservator or other legal representative or successor's rights unless and until
the Partnership shall have received such evidence of the authority of such party
as counsel for the Partnership may request. The death, dissolution, adjudication
of incompetence or bankruptcy of a Limited Partner shall not dissolve the
Partnership.
7.3.2. In order to give effect to the restrictions on transfer of Units
contained in this Article 7, a purported or proposed assignment of a Unit shall
not take effect for any purpose until it has been registered on the Partnership
Register (the date of such registration being called the "Registration Date").
The General Partner shall not be under any duty to cause any assignment to be so
registered until (i) the assigning Limited Partner and/or the proposed assignee,
as applicable, shall have delivered to the Partnership a duly executed and
acknowledged counterpart of the instrument of assignment, signed by both the
assignor and the assignee, evidencing written acceptance by the assignee of all
the terms and provisions of this Agreement and representing that the assignment
was made in accordance with all applicable laws and regulations (including
investment suitability requirements); (ii) the Partnership shall have received a
fee in an amount established by it from time to time sufficient to reimburse it
for all its actual costs in connection with such assignment, including, but not
by way of limitation, any advice of counsel contemplated by this Agreement in
connection with such assignment, and, if the
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Partnership has made an election under Section 754 of the Code, any incremental
accounting fees resulting from compliance with Section 754 in connection with
such assignment; provided, however, that the amount of such fee shall in no
event exceed the lower of the Partnership's actual costs in connection with the
transfer or $100; (iii) the Partnership shall have received such evidence of the
authority of the parties to such assignment as counsel for the Partnership may
request; (iv) if a Promissory Note of the transferror has not been paid in full,
the Partnership shall have received a written statement signed by the assignee
or transferee which acknowledges the material terms of the Promissory Note,
including the payment due date, the status of payments, the Partnership's
security interest in the Units, the terms of default, the consequences thereof,
and the terms for curing the default; and (v) the Partnership shall have
received such further evidence of compliance of such assignment with the terms
and conditions of this Agreement and the Prospectus as the Partnership may
reasonably request, including, but not by way of limitation, instruments
complying with Section 13.3 and any required consent to such assignment of the
Commissioner of Corporations of the State of California. The General Partner
shall cause such an assignment, upon compliance with the foregoing conditions
and the conditions of Section 7.2, to be registered on the Partnership Register
promptly following satisfaction of such conditions.
7.3.3. Except as otherwise provided in this Section 7.3.3, if an assignment
of a Unit is registered on the Partnership Register as provided in Section
7.3.2, the assignee of such Unit shall: (i) for the purposes of Sections 4.6.2
and 4.6.3, be recognized as a holder of the Unit as of the first day of the
fiscal quarter following the fiscal quarter in which the Registration Date
occurs; and (ii) for the purposes of Section 4.6.4, be recognized as a holder of
the Unit as of the date specified by the parties in the instrument of assignment
provided for in Section 7.3.2, or if no date is specified therein, the first day
of the fiscal quarter following the fiscal quarter in which the Registration
Date occurs.
7.3.4. The rights of an assignee of a Unit who does not become a Substitute
Limited Partner shall be limited to the right to receive his share of Cash
Available for Distribution, Sale or Refinancing Proceeds, Profits and Losses for
Tax Purposes and Tax Credits, as determined under Article 4. Any assignee of all
or any of the Units of a Limited Partner who does not become a Substitute
Limited Partner and desires to make a further assignment of any of such Units
shall be subject to all the provisions of this Article 7 to the same extent and
in the same manner as any Limited Partner desiring to make an assignment of his
Units.
7.3.5. Upon receipt of documents purporting to create or release a pledge
or other security interest in a Limited Partner's Interest, the General Partner
shall promptly cause such transaction to be registered on the Partnership
Register. Any purported or proposed pledge of, or other security interest in,
any Limited Partner's Interest shall not take effect for any purpose or be
deemed perfected unless and until
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the same has been registered on the Partnership Register and shall be subject to
any existing pledge and security interest granted to the Partnership pursuant to
Section 13.1. The Partnership may charge a fee in an amount established by it
from time to time sufficient to reimburse it for all its actual costs in
connection with such pledge, including but not by way of limitation, any advice
of counsel in connection with such pledge, and no pledge shall be effective
until such fee is paid.
7.3.6. The General Partner shall provide to each Limited Partner and
registered pledgee, if any, from time to time the transaction statements
required to be provided to such respective parties by Section 8408 of the
California Commercial Code.
7.4. Substitute Limited Partners
Subject to the Consent of the General Partner (which Consent may be
withheld for any reason), the assignee of any Units duly transferred to him
pursuant to this Section 7 shall be admitted to the Partnership as a Substitute
Limited Partner upon satisfaction of the conditions contained in Section 13.3.
The Partnership Register shall be amended not less often than quarterly to
recognize the admission of Substitute Limited Partners.
ARTICLE 8
DISSOLUTION AND WINDING-UP OF THE PARTNERSHIP
8.1. Events Causing Dissolution
8.1.1. The Partnership shall dissolve and its affairs shall be wound up
upon the happening of any of the following events: (i) an Event of Withdrawal
shall occur as to a General Partner; (ii) the sale or other disposition of all
the Local Limited Partnership Interests and other assets of the Partnership;
(iii) the election by the General Partner pursuant to Section 5.4.2, or the vote
by the Limited Partners pursuant to Section 10.2.1(ii), to dissolve the
Partnership; or (iv) the expiration of the term of the Partnership specified in
Section 2.6.
8.1.2. Notwithstanding the foregoing, the Partnership shall not be
terminated, liquidated or wound up upon the occurrence of an event specified in
clause 8.1.1(i) above if (a) a remaining General Partner, if any, elects within
120 days after such an event to continue the business of the Partnership, or,
(b) a majority-in-interest of the Limited Partners elect within 120 days after
such event to admit a successor General Partner effective as of the date of such
event and to continue the business of the Partnership.
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8.1.3. Dissolution of the Partnership shall be effective on the day on
which the event occurs giving rise to the dissolution, but the Partnership shall
not terminate until the Partnership's Certificate of Limited Partnership shall
have been canceled and the assets of the Partnership shall have been distributed
as provided in Section 8.3. Notwithstanding the dissolution of the Partnership,
until the termination of the Partnership the business and affairs of the
Partnership shall continue to be governed by this Agreement.
8.2. Capital Contribution upon Dissolution
Upon the winding-up of the Partnership, the General Partner shall
contribute to the capital of the Partnership an amount equal to the lesser of:
(i) any negative balance in its Capital Account existing after the distributions
and allocations required by Article 4 and Section 8.3; or (ii) the excess of
1.01% of the Capital Contributions made by the Limited Partners over the amount
of capital previously contributed by the General Partner. Any amount so
contributed by the General Partner shall be distributed first to any Partnership
creditors entitled thereto, and the balance shall be included among the general
assets of the Partnership.
8.3. Liquidation
8.3.1. Upon dissolution of the Partnership, unless the business of the
Partnership is continued pursuant to Section 8.1, the General Partner shall
liquidate the assets of the Partnership and apply and distribute the proceeds
thereof as contemplated by this Section 8.3. After payment of liabilities owing
to creditors of the Partnership, the General Partner shall set aside as a
Reserve such amount as it deems reasonably necessary for any contingent
liabilities or obligations of the Partnership. Said Reserve may be paid over by
the General Partner to a bank, to be held in Temporary Investments for the
purpose of paying any such contingent liabilities or obligations and, at the
expiration of such period as the General Partner may deem advisable, the amount
in such Reserve shall be distributed to the Partners in accordance with Section
4.2.2.
8.3.2. Notwithstanding the foregoing, in the event the General Partner
determines that an immediate sale of part or all of the Partnership assets would
cause undue loss to the Partners, the General Partner, in order to avoid any
such loss may, after having given Notification to all the Limited Partners, to
the extent not then prohibited by applicable law, either defer liquidation of
and withhold from distribution for a reasonable time any assets of the
Partnership except those necessary to satisfy the Partnership's debts and
obligations, or convey the remaining assets of the Partnership to a liquidating
trust for the benefit of the Partners. In such event, the trustee will be a bank
authorized to accept such trusts, having deposits insured by the Federal Deposit
Insurance Corporation and having a combined capital and surplus of not less than
$50,000,000; such trustee will
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liquidate such assets in an orderly manner and distribute the proceeds of such
liquidation, net of costs associated therewith, to the Partners in accordance
with Section 4.2. The fair market value of any assets conveyed to such
liquidating trust shall be determined, promptly after such conveyance, by an
independent appraiser to be selected by random number from a list of three
qualified appraisers obtained by the General Partner from the American Institute
of Real Estate Appraisers.
8.3.3. The General Partner shall cause the business of the Partnership to
be wound up and cause the cancellation of the Partnership's Certificate of
Limited Partnership following the liquidation and distribution of all the
Partnership's assets.
ARTICLE 9
BOOKS AND RECORDS, ACCOUNTING,
REPORTS, TAX ELECTIONS, ETC.
9.1. Books and Records
(a) The General Partner shall cause the Partnership to keep and maintain
full and complete books and records which shall include each of the following:
(i) a current list (updated at least quarterly) of the full name
and last known business or residence address and business telephone of each
Partner set forth in alphabetical order together with the Capital
Contribution and the share in Profits and Losses of each Partner (the
"Participant List");
(ii) a copy of the Certificate of Limited Partnership and all
certificates of amendment thereto, together with executed copies of any
powers of attorney pursuant to which any certificate has been executed;
(iii) copies of the Partnership's Federal, state and local income
tax information returns and reports, if any, for the six most recent
taxable years;
(iv) copies of the original of this Agreement and all amendments
thereto;
(v) financial statements of the Partnership for the six most recent fiscal
years; and
(vi) the Partnership's books and records for at least the current
and past three fiscal years.
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(b) Upon the request of a Limited Partner, the General Partner shall within
10 days of the receipt of the request mail to the Limited Partner copies of the
Participant List (which shall be on white paper in a readily readable form of no
less than 10-point type), and the information set forth in Section 9.1(a)(ii) or
(iv) above and of the provisions of the Act described in Section 10.1.2 of this
Agreement. A reasonable charge for copy work may be charged by the Partnership.
Each Limited Partner shall have the right upon request and during normal
business hours to inspect and copy any of the foregoing records at his own
expense, and, upon request, to obtain from the General Partner copies of the
Partnership's Federal, state and local income tax or information returns,
promptly after such returns become available.
(c) If the Sponsor neglects or refuses to exhibit, produce or mail a copy
of the Participant List as requested, the Sponsor shall be liable to any Limited
Partner requesting the list for costs, including attorneys' fees, incurred by
the Limited Partner for compelling the production of the Participant List, and
for actual damages suffered by the Limited Partner by reason of such refusal or
neglect. It shall be a defense that the actual purpose and reason for the
requests for inspection or for a copy of the information is to secure the list
of Limited Partners or other information for the purpose of selling such list or
information or copies thereof, or of using the same for a commercial purpose
other than in the interest of the requesting Person as a Limited Partner
relative to the affairs of the Partnership. The Sponsor may require the Limited
Partner requesting the Participant List to represent that the list is not
requested for a commercial purpose unrelated to the Limited Partner's interest
in the Partnership. The remedies provided hereunder to Limited Partners
requesting copies of the Participant List are in addition to, and shall not in
any way limit, other remedies available to Limited Partners under Federal law,
or the laws of any state.
9.2. Accounting and Fiscal Year
The books of the Partnership shall be kept on the accounting method
selected by the General Partner. The fiscal year of the Partnership shall end on
December 31 in each year, or on such other date as the General Partner
determines.
9.3. Bank Accounts and Temporary Investments
The bank accounts of the Partnership shall be maintained in banking
institutions determined by the General Partner, and withdrawals shall be made
only in the regular course of Partnership business on signatures determined by
the General Partner. All deposits and other funds not needed in the operation of
the business or not yet invested may be invested in Temporary Investments.
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9.4. Reports
9.4.1. Within 60 days after the end of each of the first three quarters of
each fiscal year of the Partnership, the General Partner shall send to each
Person who was a Limited Partner at any time during such quarter one or more
reports which, taken together, provide the following information (which need not
be audited): (i) a balance sheet as at the end of such quarter; (ii) a statement
of operations for such quarter; (iii) a statement of cash flows for such
quarter; (iv) a statement setting forth the amount of all fees and other
compensation and distributions and reimbursed expenses paid by the Partnership
for the quarter to the General Partner or any Affiliate of the General Partner;
(v) a report of the significant activities of the Partnership during the
quarter; and (vi) until the Limited Partners' Capital Contributions (except for
any amounts utilized to pay Organizational and Offering Expenses, Acquisition
Fees, Acquisition Expenses or Operating Cash Expenses, or any amounts set aside
for Reserves) are fully invested, a special report of Local Limited Partnership
Interests acquired during the quarter, describing the terms of such investments.
If the Partnership acquires a Local Limited Partnership Interest during the last
quarter of any fiscal year, a report containing the information described in the
preceding clause (vi) shall be sent on or before the date of transmission of the
report for such year required by Section 9.4.3. Until all Promissory Notes have
been paid in full, each quarterly report shall reflect any defaults in the
payment of the Promissory Notes, actions taken by the Partnership in response to
any defaults, and a discussion and analysis of the impact thereof on capital
requirements of the Partnership.
9.4.2. Within 75 days after the end of each calendar year, the General
Partner shall provide to each Person who was a Limited Partner at any time
during the fiscal year ending during that calendar year all tax information
necessary for the preparation of his Federal and state income tax returns and
other tax returns with regard to jurisdictions in which the Partnership or a
Local Limited Partnership is formed or qualified or owns Properties.
9.4.3. Within 120 days after the end of each fiscal year of the
Partnership, the General Partner shall send to each Person who was a Limited
Partner at any time during such fiscal year: (i) a balance sheet as of the end
of such fiscal year and statements of operations, partners' equity and cash
flows for such fiscal year prepared in accordance with generally accepted
accounting principles and accompanied by an auditor's report containing an
opinion of the Accountants; (ii) a report (which need not be audited) setting
forth any distributions made to Persons who were Limited Partners at any time
during the fiscal year, separately identifying distributions from (a) Cash Flow
from Local Limited Partnership or Partnership operations during the fiscal year,
(b) Cash Flow from Local Limited Partnership or Partnership operations during a
prior fiscal year which had been held as Reserves, (c) Sale or Refinancing
Proceeds, and (d) amounts previously set aside as Reserves
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from Gross Proceeds; (iii) a report of the significant activities of the
Partnership during the year; (iv) a special report setting forth the amount of
all fees and other compensation and distributions and reimbursed expenses paid
by the Partnership and the Local Limited Partnerships for the fiscal year to the
General Partner or any Affiliate of the General Partner and the services
performed in consideration therefor, which report shall be verified by the
Accountants, with the method of verification to include, at a minimum, a review
of the time records of individual employees, the costs of whose services were
reimbursed, and a review of the specific nature of the work performed by each
such employee, all in accordance with generally accepted auditing standards and,
accordingly, including such tests of the accounting records and such other
auditing procedures as the Accountants consider appropriate in the
circumstances. The additional costs of such special report shall be itemized by
the Accountants among all programs sponsored by the General Partner and its
Affiliates on a program-by-program basis and may be reimbursed to the General
Partner or its Affiliates to the extent that such reimbursement, when added to
the cost for administrative services rendered, does not exceed the Competitive
rate for such services. Until all Promissory Notes have been paid in full, such
annual report shall reflect any defaults in the payment of the Promissory Notes,
actions taken by the Partnership in response to any defaults, and a discussion
and analysis of the impact thereof on capital requirements of the Partnership.
9.5. Depreciation and Other Tax Elections
The Partnership may elect to use with respect to depreciable assets of the
Partnership any depreciation method which is permitted by the Code and
appropriate in the opinion of the General Partner. All other Federal income tax
elections required or permitted to be made for or by the Partnership shall be
made by the General Partner after consulting with the Accountants. The General
Partner may, but shall not be under any duty to, cause the Partnership to make
an election under Section 754 of the Code (or any successor provision thereto).
9.6. Designation of Tax Matters Partner
The General Partner is hereby designated as the "Tax Matters Partner" of
the Partnership under Section 6231(a)(7) of the Code and, in connection
therewith and in addition to all powers given thereunto, shall have all other
powers needed to fully perform as the Tax Matters Partner, including, without
limitation, the power to retain all attorneys and accountants of its choice, the
right to settle any audits without the consent of the Limited Partners and the
right to challenge any final partnership administrative adjustment in a court
action. The designation made in this Section is hereby expressly consented to by
each Limited Partner as an express condition to becoming a Limited Partner.
Expenses of any administrative proceedings undertaken by the Tax Matters Partner
will be paid for out of
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Partnership assets. Each Limited Partner who elects to participate in the
proceedings will be responsible for any expenses incurred by him in connection
with his participation, and the cost of any resulting audits or adjustments of a
Limited Partner's tax return will be borne solely by the affected Limited
Partner. The General Partner is hereby designated as the "notice partner" under
Section 6231(a)(8) of the Code to receive any notice provided by the Internal
Revenue Service to the Limited Partners as a group in accordance with Section
6223(b)(2) of the Code.
ARTICLE 10
MEETINGS AND VOTING RIGHTS OF LIMITED PARTNERS
10.1. Meetings and Actions Without Meetings
10.1.1. Meetings of the Limited Partners for any purpose may be called by
the General Partner at any time, and shall be called by the General Partner upon
receipt of a request in writing, containing a proposal for the holding of such a
meeting, signed by 10% or more in interest of the Limited Partners and stating
the purpose of the meeting. In addition, the General Partner may, and, upon
receipt of a proposal in writing signed by the holders of 10% or more in
interest of the Limited Partners shall, submit any matter (upon which the
Limited Partners are entitled to act) to the Limited Partners for a vote by
written Consent without a meeting.
10.1.2. All meetings and actions of the Limited Partners shall be governed
in all respects, including matters relating to notice, quorum, adjournment,
proxies, record dates and actions without a meeting, by the provisions of
Section 15637 of the Act, as said Section 15637 shall be amended from time to
time. Notwithstanding the foregoing, upon receipt of a written request for a
Partnership meeting from one or more Limited Partners either in person or by
certified mail stating the purpose(s) of the meeting, the General Partner shall
provide all Limited Partners, within 10 days after receipt of said request,
written notice (either in person or by certified mail) of the meeting and the
purpose of such meeting to be held on a date not less than 15 days nor more than
60 days after receipt of said request, at a time and place convenient to the
Limited Partners.
10.2. Voting Rights of Limited Partners
10.2.1. The holders of a majority of the outstanding Units may, without the
concurrence of the General Partner:
(i) amend this Agreement, subject to the provisions of Section 12.1 hereof;
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(ii) dissolve the Partnership;
(iii) remove the General Partner and elect a replacement General Partner;
(iv) approve or disapprove the sale of all or substantially all of the
assets of the Partnership in a single transaction other than in connection with
the liquidation of the Partnership; or
(v) if the Partnership invests in a Local Limited Partnership of which the
Local General Partner is a Sponsor, to direct the General Partner (acting on
behalf of the Partnership) to take any action permitted to be taken by the
Partnership pursuant to the partnership agreement of the Local Limited
Partnership.
10.2.2. Notwithstanding any provision of the Act to the contrary, the
Limited Partners shall only have the right to vote on the matters set forth in
Paragraph 10.2.1. of this Agreement.
10.2.3. In any vote of the Limited Partners, each Limited Partner shall be
entitled to cast one vote for each Unit which he owns as of the designated
record date. Notwithstanding any other provision of this Agreement, any Units
held by the Sponsor will not be entitled to vote, and will not be considered to
be "outstanding" Units for purposes of any vote, upon matters which involve a
conflict between the interests of such Sponsor and the Partnership, including,
but not limited to, any vote on the proposed removal of the General Partner or
regarding any transaction between the Partnership and the Sponsor.
10.3. Limitations on Roll-Ups; Dissenters' Rights
10.3.1. In connection with a proposed Roll-Up, an appraisal of all
Partnership assets shall be obtained from a competent, Independent Expert. If
the appraisal will be included in a prospectus used to offer the securities of a
Roll-Up Entity, the appraisal shall be filed with the Securities and Exchange
Commission and the states as an exhibit to the registration statement for the
offering. Accordingly, an issuer using the appraisal shall be subject to
liability for violation of Section 11 of the Securities Act of 1933 and
comparable provisions under state laws for any material misrepresentations or
material omissions in the appraisal. Partnership assets shall be appraised on a
consistent basis. The appraisal shall be based on an evaluation of all relevant
information, and shall indicate the value of the Partnership's assets as of a
date immediately prior to the announcement of the proposed Roll-Up. The
appraisal shall assume an orderly liquidation of Partnership assets over a
12-month period. The terms of the engagement of the Independent Expert shall
clearly state that the engagement is for the benefit of the Partnership and its
Limited Partners. A summary of the independent appraisal, indicating all
material assumptions
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underlying the appraisal, shall be included in a report to the Limited Partners
in connection with a proposed Roll-Up.
10.3.2. In connection with a proposed Roll-Up, the Person sponsoring the
Roll-Up shall offer to Limited Partners who vote "no" on the proposal the choice
of:
(i) accepting the securities of the Roll-Up Entity offered in the proposed
Roll- Up; or
(ii) one of the following: (a) remaining as Limited Partners in the
Partnership, and preserving their interests therein on the same terms and
conditions as existed previously; or (b) receiving cash in an amount equal to
the Limited Partners' pro-rata share of the appraised value of the net assets of
the Partnership.
10.3.3. The Partnership shall not participate in any proposed Roll-Up which
would result in Limited Partners having democracy rights which are less than
those provided for under this Agreement. If the Roll-Up Entity is a corporation,
the voting rights of Limited Partners shall correspond to the voting rights
provided for in this Agreement to the greatest extent possible.
10.3.4. The Partnership shall not participate in any proposed Roll-Up which
includes provisions which would operate to materially impede or frustrate the
accumulation of shares by any purchaser of the securities of the Roll-Up Entity
(except to the minimum extent necessary to preserve the tax status of the
Roll-Up Entity). The Partnership shall not participate in any proposed Roll-Up
which would limit the ability of a Limited Partner to exercise the voting rights
of the securities of the Roll-Up Entity on the basis of the number of Units held
by that Limited Partner.
10.3.5. The Partnership shall not participate in any proposed Roll-Up in
which Limited Partners' rights of access to the records of the Roll-Up Entity
will be less than those provided for under this Agreement.
10.3.6. The Partnership shall not participate in any proposed Roll-Up in
which any of the costs of the transaction would be borne by the Partnership if
the Roll-Up is not approved by the Limited Partners.
10.3.7. In addition to those set forth above, Limited Partners who dissent
with respect to a proposed Roll-Up will have the rights provided under Sections
15679.1 through 15679.14 of the Act.
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ARTICLE 11
SPECIAL POWER OF ATTORNEY
Each Limited Partner, including each Additional Limited Partner and
Substitute Limited Partner, by the execution of this Agreement, irrevocably
constitutes and appoints the General Partner, with full power of substitution in
the premises, his true and lawful attorney-in-fact with full power and authority
in his name, place and stead to execute, acknowledge, deliver, swear to, file
and record at the appropriate public offices any documents necessary or
appropriate to carry out the provisions of this Agreement, including, but not
limited to:
(i) all certificates and other instruments (including counterparts of this
Agreement), and any amendment thereof, which the General Partner deems
appropriate in order to form, qualify or continue the Partnership as a limited
partnership (or a partnership in which the Limited Partners will have limited
liability comparable to that provided by the Act) in the State of California and
in the jurisdictions in which the Partnership may conduct business or in which
formation, qualification or continuation is, in the opinion of the General
Partner, necessary or desirable to protect the limited liability of the Limited
Partners;
(ii) all amendments to this Agreement adopted in accordance with its terms,
and all instruments which the General Partner deems appropriate to reflect a
change or modification of the Partnership in accordance with the terms of this
Agreement;
(iii) all financing statements, continuation statements or other documents
and amendments thereto which the General Partner deems appropriate to perfect or
continue the perfection of the Partnership's security interest in his Units
provided for in Section 13.1, and, if the Limited Partner is an Installment
Contributor Limited Partner, Section 3.4.1(b), of this Agreement, and all
instruments relating to the admission of any Additional or Substitute Limited
Partner, including any amendment to this Agreement which substitutes as a
Limited Partner the purchaser at a foreclosure sale of Units previously given as
security by a defaulting Limited Partner for his Promissory Note; and
(iv) all conveyances and other instruments which the General Partner deems
appropriate to implement the provisions of this Agreement or to reflect the
dissolution and winding up of the Partnership in accordance with the terms of
this Agreement.
The appointment by each of the Limited Partners of the General Partner as
his attorney-in-fact shall be deemed to be a power coupled with an interest, in
recognition of the fact that each of the Partners under this Agreement will be
relying upon the power of the General Partner to act as contemplated by this
Agreement in
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any filing and other action by it on behalf of the Partnership, and shall
survive and shall not be affected by the subsequent bankruptcy, death,
adjudication of incompetence or insanity, disability, incapacity or dissolution
of any Person hereby giving the power nor by the transfer or assignment of all
or any part of the Units of any such Person; provided, however, that in the
event of the transfer by a Limited Partner of all of his Units, the foregoing
power of attorney of a transferror Limited Partner shall survive the transfer
only until the transferee is admitted to the Partnership as a Substitute Limited
Partner and all required documents and instruments are duly executed, filed and
recorded to effect the substitution.
ARTICLE 12
AMENDMENTS
12.1. Adoption of Amendments
12.1.1. In addition to the amendments authorized herein, amendments may be
made to this Agreement from time to time by a majority-in-interest of the
Limited Partners, without the Consent of the General Partner; provided that no
such amendment shall (a) in any manner allow the Limited Partners to take any
action which would constitute their participation in the control of the
Partnership's business within the meaning of Section 15632 of the Act, or
otherwise cause the loss of their limited liability, nor (b) without the Consent
of the General Partner, alter the rights, power, duties or compensation of the
General Partner or any of its Affiliates or its (or any of its Affiliates')
interest in Profits and Losses for Tax Purposes, Tax Credits, Cash Available for
Distribution or Sale or Refinancing Proceeds or alter any of the provisions of
Sections 6.6 or 8.2 or this Section 12.1.1.
12.1.2. In addition to the amendments otherwise authorized herein,
amendments may be made to this Agreement from time to time by the General
Partner, without the Consent of any of the Limited Partners: (i) to add to the
representations, duties or obligations of the General Partner or surrender any
right or power granted to the General Partner herein, for the benefit of the
Limited Partners; (ii) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other provision herein, or
to make any other provisions with respect to matters or questions arising under
this Agreement which will not be inconsistent with the provisions of this
Agreement; and (iii) to delete or add any provision of this Agreement required
to be deleted or added by the staff of the Securities and Exchange Commission or
other Federal agency or by a state "Blue Sky" commissioner or similar official
and deemed by the Commission, agency, commissioner or official to be for the
benefit or protection of the Limited Partners.
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No amendment shall be adopted pursuant to this Section 12.1.2 (except under
the preceding clause (iii)) unless its adoption: (i) is for the benefit of or
not adverse to the interests of the Limited Partners; (ii) is consistent with
Section 5.1 hereof; (iii) does not affect the distribution of Cash Available for
Distribution or Sale or Refinancing Proceeds or the allocation of Profits and
Losses for Tax Purposes or of Tax Credits among the Partners or between the
Limited Partners as a class and the General Partner; and (iv) does not, in the
opinion of counsel for the Partnership, affect the limited liability of the
Limited Partners under the Act or the status of the Partnership as a partnership
for Federal income tax purposes.
In addition to the amendments otherwise authorized herein, notwithstanding
the preceding paragraph, amendments may be made to this Agreement without the
Consent of any Limited Partner with respect to the provisions of Article 4 of
this Agreement in accordance with Section 4.4.1 and/or Section 4.4.2.
12.2. Filing of Required Documents
In making any amendments, there shall be prepared and filed for recordation
by the General Partner all documents and certificates required to be prepared
and filed under the Act and under the laws of any other jurisdictions under the
laws of which the Partnership is then formed or qualified.
12.3. Required Change of Partnership Name
If at any time there is no General Partner which is an Affiliate of WNC &
Associates, Inc., a California corporation (or any successor thereto), the
Partnership shall forthwith change its name in such a manner as not to include
the initials "WNC." All parties to this Agreement recognize that damages at law
may be an inadequate remedy for breach of the foregoing covenant, and consent
that the same may be enforced by specific performance, injunction or equitable
remedy as well as in an action at law.
ARTICLE 13
MISCELLANEOUS PROVISIONS
13.1. Security Interest and Right of Set-Off
As security for any withholding tax or other liability or obligation to
which the Partnership may be subject as a result of any act or status of any
Limited Partner, or to which the Partnership becomes subject with respect to the
Interest of any Limited Partner, the Partnership shall have (and each Limited
Partner hereby grants to the Partnership) a security interest in all Cash
Available for Distribution and Sale
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or Refinancing Proceeds distributable to the Limited Partner to the extent of
the amount of the withholding tax or other liability or obligation.
13.2. Notices
Except as otherwise specifically provided herein, all notices, demands or
other communications hereunder shall be in writing and shall be deemed to have
been given, if given in any manner specified in the definition of "Notification"
herein, when dispatched, and shall be sent to the respective addresses referred
to in such definition.
13.3. Execution
Each Limited Partner, including any Additional Limited Partner and
Substitute Limited Partner, additional General Partner and successor General
Partner, shall become a Partner in the Partnership by signing counterpart
signature pages to this Agreement or a power of attorney to the General Partners
therefor, and any other instrument or instruments deemed necessary by the
General Partners. By so signing, each Limited Partner, including any Additional
Limited Partner and Substitute Limited Partner, additional General Partner or
successor General Partner, as the case may be, shall be deemed to have adopted,
and to have agreed to be bound by, all the provisions of this Agreement. A
Person may be admitted as an Additional Limited Partner and shall become bound
by this Agreement (i) if such Person (or a representative authorized by such
Person orally, in writing or by other action such as payment for his Units)
executes this Agreement or any other writing, including without limitation, the
Subscription Agreement included with the Prospectus, evidencing the intent of
such Person to become an Additional Limited Partner or (ii) without such
execution, if such Person (or a representative authorized by such Person orally,
in writing or by other action such as payment for his Units) complies with the
conditions for becoming an Additional Limited Partner as set forth in this
Agreement and requests (orally, in writing or by other action such as payment
for his Units) that the Partnership Register reflect such admission.
13.4. Binding Effect
The covenants and agreements contained herein shall be binding upon, and
inure to the benefit of, the heirs, executors, administrators, personal
representatives, successors and assigns of the respective parties hereto.
13.5. Applicable Law
This Agreement shall be construed and enforced in accordance with the laws
of the State of California.
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13.6. Counterparts
This Agreement may be executed in several counterparts, all of which
together shall constitute one agreement binding on all parties hereto,
notwithstanding that all the parties have not signed the same counterpart.
13.7. Separability of Provisions
Each provision of this Agreement shall be considered separable, and if for
any reason any provision or provisions hereof are determined to be invalid and
contrary to any existing or future law, no such invalidity shall impair the
operation or affect those portions of this Agreement which are valid.
13.8. Captions
Section titles and the table of contents are for convenience of reference
only and shall not control or limit the meaning of this Agreement as set forth
in the text hereof.
13.9. Mandatory Arbitration
Except as provided in Article 6 hereof, mandatory arbitration shall not be
required in connection with any dispute between a Limited Partner and the
Sponsor or the Partnership. Nothing contained in this Section 13.9 shall apply
to pre-existing contracts between Limited Partners and their broker-dealers.
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13.10. Partnerships Treated as Separate
This Partnership Agreement shall apply to each Partnership separately, and
each Partnership shall file its own Certificate of Limited Partnership.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
General Partner:
WNC & Associates, Inc.,
General Partner
By: /s/ JOHN B. LESTER, JR.
John B. Lester, Jr.,
President
Initial Limited Partner:
/S/JOHN B. LESTER, JR.
John B. Lester, Jr.
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