SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 26, 1996
WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 3
(Exact name of registrant as specified in its charter)
California 33-91136 33-6163848
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
3158 Redhill Avenue, Suite 120, Costa Mesa, California 92626
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (714) 662-5565
N/A
Former name or former address, if changed since last report)
<PAGE>
Item 2. Acquisition or Disposition of Assets
WNC Housing Tax Credit Fund V, L.P., Series 3 ("Series 3") has become a
limited partner in Cascade Pines, L.P. II, a Georgia limited partnership
("CASCADE"); and Rosedale Limited Partnership, a New Mexico limited partnership
("ROSEDALE"). CASCADE and ROSEDALE are sometimes hereinafter referred to as the
"Local Limited Partnerships." CASCADE owns the Cascade Pines Apartments in
Atlanta, Georgia; and Rosedale owns the Valley View Apartments in Silver City,
New Mexico.
The following tables contain information concerning the Local Limited
Partnerships.
<PAGE>
<TABLE>
ACTUAL OR LOCAL LIMITED YEAR
ESTIMATED ESTIMATED PERMANENT PARTNERSHIP'S CREDITS
CONSTRUC- DEVELOP- MORTGAGE ANTICIPATED TO BE
LOCAL PROJECT TION MENT COST NUMBER OF BASIC LOAN AGGREGATE FIRST
LIMITED NAME/NUMBER LOCATION OF COMPLETION (INCLUDING APARTMENT MONTHLY PRINCIPAL TAX CREDITS AVAIL-
PARTNERSHIP OF BUILDINGS PROPERTY DATE LAND COST) UNITS RENTS AMOUNT (1) ABLE
<S> <C> <C> <C> <C> <C> <C>
CASCADE Cascade Pines Atlanta October $8,614,000 94 1BR units $329-$365 $2,465,000 $2,681,950 1996
Apartments (Fulton 1996 187 2BR units $399-$470 URFA (3)
Co.), 94 3BR units $499-$530
38 buildings Georgia $4,990,000
(2) URFA (3)
$1,100,000
URFA(3)
<S> <C> <C> <C> <C> <C> <C>
ROSEDALE Valley View Silver City January $1,408,660 6 1BR units $295 $ 1,330.000 $547,280 1996
Apartment (Grant 1996 19 2BR units $358 RECDS (4)
Co.), 6 3BR units $418
4 buildings New Mexico
<FN>
(1) Low Income Housing Credits are available over a 10-year period. For the year
in which the credit first becomes available, Series 3 will receive only that
percentage of the annual credit which corresponds to the number of months during
which Series 3 was a limited partner of the Local Limited Partnership, and
during which the Apartment Complex was completed and in service.
(2) Rehabilitation property.
<PAGE>
(3) Urban Residential Finance Authority (URFA) will provide the first mortgage
loan for a term of 15 years at an annual interest rate of 6.25%. Principal and
interest will be payable annually based on a 15-year amortization schedule. URFA
will provide the second mortgage loan for a term of 30 years at an annual
interest rate of 6.6%. Principal and interest will be payable annually based on
a 30-year amortization schedule. URFA will provide the third mortgage loan for a
term of 30 years at an annual interest rate of 7%. Principal and interest will
be payable annually based on a 30-year amortization schedule.
(4) RECDS provides mortgage loans under the RECDS Section 515 Mortgage Loan
Program. Each of these mortgage loans will be a 50-year loan and will bear
annual interest at a market rate prior to reduction of the interest rate by a
mortgage interest subsidy to an annual rate of 1%, with principal and interest
payable monthly based on a 50-year amortization schedule.
</FN>
</TABLE>
Atlanta (CASCADE): Atlanta (population 394,000) is the state capital of Georgia,
and is located in Fulton County at the intersection of Interstate Highways 85,
75 and 20. Atlanta is considered the commercial, transportation and financial
capital of the Southeast. It is the national headquarters for Coca-Cola, CNN,
Delta Air Lines, United Parcel Service, Home Depot, and Holiday Inn-Worldwide.
Silver City (ROSEDALE): Silver City (population 10,600) is the county seat of
Grant County in southwest New Mexico near the intersection of U.S. Highway 180
and State Highway 90. Major employers for Rosedale residents are Silver City
Daily Press and Southwest Transit Mix.
<PAGE>
<TABLE>
ESTIMATED
ACQUISI-
LOCAL SHARING RATIOS: TION FEES
GENERAL ALLOCATIONS (4) SERIES 3'S PAYABLE
LOCAL LOCAL PARTNERS' SHARING RATIOS: AND SALE OR CAPITAL TO
LIMITED GENERAL PROPERTY DEVELOPMENT CASH FLOW REFINANCING CONTRIBUTION FUND
PARTNERSHIP PARTNERS MANAGER FEE(3) (3) PROCEEDS(5) (6) MANAGER
<S> <C> <C> <C> <C> <C> <C>
CASCADE Urban Brencor Asset $1,333,381 WNC:greater of 98/2 $1,471,854 $147,000
Residential Management, 10% or $5,000 50/50
Management, Inc. (8) LGP: 45%
Inc. (7) Balance:
WNC:10.9%;
LGP:89.1%
<S> <C> <C> <C> <C> <C> <C>
ROSEDALE Deke Noftsker M-DC Group, $230,000 WNC:greater of 99/1 $308,762 $31,000
(13) Inc.dba 33% or $1,400 50/50
Alpha LGP: 67%
Management
Co, Inc. (14)
<FN>
(1) The maximum annual management fee payable to the property manager generally
is determined pursuant to lender regulations. Each Local General Partner is
authorized to employ either itself or one of its affiliates, or a third party,
as property manager for leasing and management of the apartment complex so long
as the fee therefor does not exceed the amount authorized and approved by the
lender for the apartment complex.
(2) Each Local Limited Partnership will pay its Local General Partner(s) a
development fee in the amount set forth, for services incident to the
development and construction of the apartment complex, which services include:
negotiating the financing commitments for the apartment complex; securing
necessary approvals and permits for the development and construction of the
apartment complex; and obtaining allocations of Low Income Housing Credits. This
payment will be made in installments after receipt of each installment of the
capital contributions made by Series 3.
(3) Reflects the amount of the net cash flow from operations, if any, to be
distributed to Series 3 ("WNC") and the Local General Partner(s) ("LGP") of the
Local Limited Partnership for each year of operations. Generally, to the extent
that the specific dollar amounts which are to be paid to Series 3 are not paid
annually, they will accrue and be paid from sale or refinancing proceeds as an
obligation of the Local Limited Partnership.
(4) Subject to certain special allocations, reflects the respective percentage
interests of Series 3 and the Local General Partner(s) in profits, losses and
Low Income Housing Credits commencing with entry of Series 3 as a limited
partner.
(5) Reflects the percentage interests of Series 3 and the Local General
Partner(s) in any net cash proceeds from sale or refinancing of the apartment
complex, after payment of the mortgage loan and other Local Limited Partnership
obligations (see, e.g., note 3), and the following, in the order set forth: the
capital contribution of Series 3; and the capital contribution of the Local
General Partner(s).
(6) Series 3 will make its capital contributions to each Local Limited
Partnership in stages, with each contribution due when certain conditions
regarding construction or operations of the apartment complex have been
fulfilled.
</FN>
</TABLE>
<PAGE>
Item 7. Financial Statements and Exhibits
a. Financial Statements of Businesses Acquired.
Financial Statements for ROSEDALE will be filed upon availability.
b. Proforma Financial Information
Proforma Financial Information will be filed upon availability.
c. Exhibits
10.1 Amended and Restated Agreement of Limited Partnership
of Cascade Pines, L.P. II
10.2 Amended and Restated Agreement of Limited Partnership
of Rosedale Limited Partnership
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 3
Date: May 7, 1996 By: WNC & Associates, Inc.,
General Partner
By: /s/ JOHN B. LESTER, JR.
John B. Lester, Jr.,
President
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Exhibit
10.1 Amended and Restated Agreement of Limited Partnership of Cascade Pines,
L.P. II
10.2 Amended and Restated Agreement of Limited Partnership of Rosedale
Limited Partnership
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF
CASCADE PINES, L.P. II
TABLE OF CONTENTS
Page
I. DEFINITIONS ......................................... 1
1.1 "Accountant" ................................... 1
1.2 "Acquisition Account" .......................... 1
1.3 "Act" .......................................... 2
1.4 "Actual Tax Credit"............................. 2
1.5 "Adjusted Capital Account Deficit" ............. 2
1.6 "Administrative Expenses Fund" ................. 2
1.7 "Affiliate" .................................... 2
1.8 "Agreement" or "Partnership Agreement".......... 2
1.9 "Annual Budget" ................................ 2
1.10 "Assignee" ..................................... 3
1.11 "Bankruptcy" or "Bankrupt"...................... 3
1.12 "Bond Fund" .................................... 3
1.13 "Bond Reserve Requirements" .................... 3
1.14 "Bonds" ........................................ 3
1.15 "Bond Year" .................................... 3
1.16 "Capital Account" .............................. 3
1.17 "Capital Contribution" ......................... 3
1.18 "Cash Flow From Operations" .................... 4
1.19 "Code" ......................................... 4
1.20 "Completion of Construction".................... 4
1.21 "Compliance Period"............................. 5
1.22 "Consent of the Limited Partner"................ 5
1.23 "Construction Contract"......................... 5
1.24 "Construction Loan" ............................ 5
1.25 "Contractor" ................................... 5
1.26 "Costs of Issuance Fund" ....................... 5
1.27 "Debt Service Coverage"......................... 5
1.28 "Debt Service Reserve Fund" .................... 6
1.29 "Deferred Management Fee"....................... 6
1.30 "Developer"..................................... 6
1.31 "Development Fee" .............................. 6
1.32 "Distributions" ................................ 6
1.33 "Fair Market Value" ............................ 7
1.34 "First Year Certificate" ....................... 7
1.35 "General Partner" .............................. 7
1.36 "Gross Asset Value" ............................ 7
1.37 "HAP Contract" ................................. 8
1.38 "HAP Payments" ................................. 8
1.39 "Hazardous Substance"........................... 8
1.40 "Improvements".................................. 8
1.41 "Incentive Management Fee"...................... 8
1.42 "Income and Losses"............................. 8
1.43 "Insurance and Tax Escrow Fund" ................ 10
1.44 "Interest" ..................................... 10
1.45 "Interest Payment Date" ........................ 10
1.46 "Involuntary Withdrawal"........................ 10
1.47 "Issuer" ....................................... 10
1.48 "LIHTC"......................................... 10
1.49 "Limited Partner"............................... 10
1.50 "Liquidation" .................................. 10
1.51 "Loan Agreement" ............................... 10
1.52 "Maintenance Reserve Fund" ..................... 11
1.53 "Management Agent".............................. 11
1.54 "Management Agreement".......................... 11
1.55 "Minimum Set-Aside Test"........................ 11
1.56 "Mortgage" or "Mortgage Loan"................... 11
1.57 "Mortgage Note"................................. 11
1.58 "Nonrecourse Deductions"........................ 11
1.59 "Nonrecourse Liability"......................... 11
1.60 "Operating Deficit" ............................ 12
1.61 "Operating Deficit Guarantee Period"............ 12
1.62 "Operating Loans"............................... 12
1.63 "Original Limited Partner" ..................... 12
1.64 "Partner" ...................................... 12
1.65 "Partner Nonrecourse Debt" ..................... 12
1.66 "Partner Nonrecourse Debt Minimum Gain" ........ 12
1.67 "Partner Nonrecourse Deductions" ............... 12
1.68 "Partnership" .................................. 12
1.69 "Partnership Minimum Gain" ..................... 12
1.70 "Permanent Mortgage Commencement" .............. 12
1.71 "Person" ....................................... 13
1.72 "Principal Payment Date" ....................... 13
1.73 "Project" ...................................... 13
1.74 "Project Documents" ............................ 13
1.75 "Projected Annual Tax Credits" ................. 13
1.76 "Projected Tax Credits" ........................ 13
1.77 "Qualified Income Offset Item" ................. 13
1.78 "Qualified Tenants" ............................ 13
1.79 "Rating Agency" ................................ 13
1.80 "Rebate Fund" .................................. 13
1.81 "Refinancing" .................................. 13
1.82 "Rehabilitation Account" ....................... 14
1.83 "Rent Restriction Test" ........................ 14
1.84 "Reporting Fee"................................. 14
1.85 "Revenue Fund" ................................. 14
1.86 "Revised Projected Tax Credits"................. 14
1.87 "Sale or Refinancing"........................... 14
1.88 "Sale or Refinancing Proceeds" ................. 14
1.89 "Special Limited Partner" ...................... 14
1.90 "State" ........................................ 14
1.91 "State Tax Credit Agency" ...................... 14
1.92 "Substitute Limited Partner" ................... 14
1.93 "Surplus Fund" ................................. 15
1.94 "Tax Credit" ................................... 15
1.95 "Tax Credit Conditions"......................... 15
1.96 "TRA 1986" ..................................... 15
1.97 "Transition Fund" .............................. 15
1.98 "Treasury Regulations" ........................ 15
1.99 "Trust Indenture" ............................. 15
1.100 "Trustee" ..................................... 15
1.101 "Withdrawing" or "Withdrawal".................. 15
II. NAME ................................................ 16
III. PRINCIPAL EXECUTIVE OFFICE/AGENT FOR SERVICE ........ 16
3.1 Principal Executive Office ..................... 16
3.2 Agent for Service of Process ................... 16
IV. PURPOSE ............................................. 16
V. TERM ................................................ 16
VI. GENERAL PARTNER'S CONTRIBUTIONS AND LOANS............ 16
6.1 Capital Contribution of General Partner......... 16
6.2 Construction and Operating Obligations;
General Partner Loans......................... 17
6.3 Partner Loans................................... 18
VII. CAPITAL CONTRIBUTIONS OF LIMITED PARTNER............. 18
7.1 Original Limited Partner........................ 18
7.2 Capital Contribution of Limited Partner......... 19
7.3 Repurchase of Limited Partner's Interest........ 20
7.4 Reduction of Limited Partner's
Capital Contribution.......................... 21
7.5 Return of Capital Contribution.................. 22
7.6 Liability of Limited Partner.................... 22
VIII. WORKING CAPITAL AND RESERVES ....................... 23
8.1 Reserve ........................................ 23
IX. MANAGEMENT AND CONTROL .............................. 23
9.1 Power and Authority of General Partner ......... 23
9.2 Payments to the General Partners and Others .... 24
9.3 Specific Powers of the General Partner ......... 26
9.4 Authority Requirements.......................... 27
9.5 Limitations on General Partner's
Power and Authority .......................... 28
9.6 Restrictions on Authority of General Partner.... 29
9.7 Duties of General Partner ...................... 30
9.8 Partnership Expenses ........................... 31
9.9 General Partner Expenses ....................... 32
9.10 Other Business of Partners ..................... 32
9.11 Covenants, Representations and Warranties....... 33
<PAGE>
X. ALLOCATIONS OF INCOME, LOSSES AND CREDITS ........... 36
10.1 General ........................................ 36
10.2 Allocations From Sale or Refinancing............ 36
10.3 Special Allocations............................. 37
10.4 Curative Allocations............................ 40
10.5 Other Allocation Rules.......................... 41
10.6 Tax Allocations: Code Section 704(c)........... 42
10.7 Allocation Among Limited Partners............... 42
10.8 Allocation Among General Partners .............. 42
10.9 Modification of Allocations .................... 42
XI. DISTRIBUTION ........................................ 43
11.1 Distribution of Cash Flow From Operations ...... 43
11.2 Distribution of Sale or Refinancing Proceeds.... 43
11.3 Additional Refinancing ......................... 43
XII. TRANSFERS OF LIMITED PARTNER'S AND SPECIAL LIMITED
PARTNER'S INTEREST IN THE PARTNERSHIP................ 44
12.1 Assignment of Limited Partner's
and Special Limited Partner's Interest ......... 44
12.2 Effective Date of Transfer ..................... 45
12.3 Invalid Assignment ............................. 45
12.4 Assignee's Rights to Allocations
and Distributions ............................ 45
12.5 Substitution of Assignee as Limited Partner
or Special Limited Partner ..................... 45
12.6 Death, Bankruptcy, Incompetency, etc.
of a Limited Partner ......................... 45
XIII. WITHDRAWAL, REMOVAL AND REPLACEMENT OF GENERAL
PARTNER ............................................
13.1 Withdrawal of General Partner .................. 46
13.2 Removal of General Partner ..................... 46
13.3 Admission of Substitute General Partner ........ 48
13.4 Continuing Liability ........................... 49
13.5 Transfer of Interest ........................... 50
13.6 Payment to General Partner Upon Resignation,
Death or Insanity .............................. 50
XIV. BOOKS AND ACCOUNTS, REPORTS, TAX RETURNS,
FISCAL YEAR AND BANKING ............................. 51
14.1 Books and Accounts ............................. 51
14.2 Accounting Reports ............................. 51
14.3 Other Reports .................................. 52
14.4 Late Reports ................................... 54
14.5 Annual Site Visits.............................. 54
14.6 Tax Returns..................................... 54
<PAGE>
14.7 Fiscal Year .................................... 54
14.8 Banking ........................................ 54
14.9 Certificates and Elections ..................... 55
XV. DISSOLUTION, WINDING UP, TERMINATION AND
LIQUIDATION OF THE PARTNERSHIP ...................... 55
15.1 Dissolution of Partnership ..................... 55
15.2 Return of Capital Contribution upon
Dissolution .................................. 55
15.3 Distributions of Assets ........................ 56
15.4 Deferral of Liquidation......................... 57
15.5 Liquidation Statement .......................... 57
15.6 Certificates of Dissolution; Certificate of
Cancellation of Certificate of Limited
Partnership .................................. 57
XVI. AMENDMENTS .......................................... 58
XVII. MISCELLANEOUS ......................................
17.1 Voting Rights .................................. 58
17.2 Meeting of Partnership ......................... 59
17.3 Notices ........................................ 59
17.4 Successors and Assigns ......................... 60
17.5 Recording of Certificate of Limited
Partnership. ................................... 60
17.6 Amendment of Certificate of Limited
Partnership .................................... 60
17.7 Counterparts ................................... 60
17.8 Captions ....................................... 61
17.9 Certain Provisions ............................. 61
17.10 Saving Clause.................................. 61
17.11 Number and Gender ............................. 62
17.12 Entire Agreement .............................. 62
17.13 Governing Law ................................. 62
17.14 Attorney's Fees ............................... 62
17.15 Receipt of Correspondence ..................... 62
EXHIBIT A - Legal Description...................... A-1 - A-2
EXHIBIT B - Form of Legal Opinion.................. B-1 - B-4
EXHIBIT C - Certification and Agreement............ C-1 - C-4
EXHIBIT D - General Partner Certification.......... D-1 - D-5
EXHIBIT E - Form of Completion Certificate......... E-1
EXHIBIT F - Accountant's Certificate............... F-1
EXHIBIT F - Report of Operations................... G-1 - G-10
DEVELOPMENT FEE AGREEMENT
GUARANTY AGREEMENT
<PAGE>
AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP OF
CASCADE PINES, L.P. II
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP is being entered
into effective as of the date written below by and between URBAN RESIDENTIAL
MANAGEMENT, INC., a Georgia corporation, as the general partner (the "General
Partner"), WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 3 as the limited partner
(the "Limited Partner), BRENCOR, INC., a Delaware corporation, as the
withdrawing limited partner (the "Original Limited Partner") and BRENCOR, INC.,
a Delaware corporation, as the Special Limited Partner (the "Special Limited
Partner").
RECITALS
WHEREAS, CASCADE PINES, L.P. II, a Georgia limited partnership (the
"Partnership") recorded a certificate of limited partnership with the Georgia
Secretary of State on July 14, 1995. A partnership agreement dated August 1,
1995 was entered into by and between the General Partner and the Original
Limited Partner.
WHEREAS, the Partners desire to enter into this Agreement to provide for,
among other things, (i) the continuation of the Partnership, (ii) the admission
of the Limited Partner as a partner of the Partnership, (iii) the admission of
the Special Limited Partner as a partner of the Partnership, (iv) the
liquidation of the Original Limited Partner's Interest in the Partnership, (v)
the payment of Capital Contributions by the Limited Partner to the Partnership,
(vi) the allocation of Income, Losses, Tax Credits and distributions of Cash
Flow From Operations and other cash funds of the Partnership among the Partners
(vii) the respective rights, obligations and interests of the Partners to each
other and to the Partnership, and (viii) certain other matters.
WHEREAS, the Limited Partner, the Special Limited Partner and the General
Partner desire hereby to amend and restate the Limited Partnership Agreement of
the Partnership dated August 1, 1995.
NOW, THEREFORE, in consideration of their mutual agreements herein set
forth, the Partners hereby agree to amend and restate the Agreement of Limited
Partnership of CASCADE PINES, L.P. II in its entirety to provide as follows:
ARTICLE I
DEFINITIONS
Section 1.1 "Accountant" shall mean Reznick, Fedder and Silverman, or such
other firm of independent certified public accountants as may be engaged for the
Partnership by the General Partner with the Consent of the Limited Partner.
<PAGE>
Section 1.2 "Acquisition Account" shall mean that account established and
maintained in accordance with the Trust Indenture and Section 9.2(c) of this
Agreement.
Section 1.3 "Act" shall mean the laws of the State governing limited
partnerships, as now in effect and as the same may be amended from time to time.
Section 1.4 "Actual Tax Credit" shall mean as of any point in time, the
total amount of the LIHTC actually allocated by the Partnership to the Limited
Partner, representing 98% of the LIHTC actually received by the Partnership, as
shown on the applicable tax returns of the Partnership.
Section 1.5 "Adjusted Capital Account Deficit" shall mean with respect to
any Partner, the deficit balance, if any, in such Partner's Capital Account as
of the end of the relevant fiscal period, after giving effect to the following
adjustments:
(a) Credit to such Capital Account any amounts which such Partner is
obligated to restore or is deemed to be obligated to restore pursuant to the
penultimate sentences of Treasury Regulations Sections 1.704-2(g)(1) and
1.704-2(i)(5); and
(b) Debit to such Capital Account the items described in Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6) of
the Treasury Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Treasury
Regulations and shall be interpreted consistently therewith.
Section 1.6 "Administrative Expenses Fund" shall mean the fund established
by the Trustee in accordance with the Trust Indenture. Amounts on deposit in the
Administrative Expenses Fund shall be used to pay the Issuer's Fee.
Section 1.7 "Affiliate" shall mean (a) any Person directly or indirectly
controlling, controlled by, or under common control with another Person; (b) any
Person owning or controlling 10% or more of the outstanding voting securities of
such other Person; (c) any officer, director, trustee, or partner of such other
Person; and (d) if such Person is an officer, director, trustee or general
partner, any other Person for which such Person acts in any such capacity.
Section 1.8 "Agreement" or "Partnership Agreement" shall mean this Amended
and Restated Agreement of Limited Partnership, as it may be amended from time to
time. Words such as "herein," "hereinafter," "hereof," "hereto," "hereby" and
"hereunder," when used with reference to this Agreement, refers to this
Agreement as a whole, unless the context otherwise requires.
<PAGE>
Section 1.9 "Annual Budget" shall mean the budget filed with the Issuer for
its approval and, promptly following such approval, to the Trustee, no later
than the first day of each fiscal year which shall show for each fiscal year:
(a) anticipated revenues and receipts dervied from the opertationof the Project,
including HAP Payments paid to or on behalf of the Partnership pursuant to the
HAP Contract, together with tenant rentals and all other income and moneys as
may be paid to or on behalf of the Partnership, excluding security deposit; and
(b) all current expenses of the Partnerhip in connection with the operation of
the Project which are not otherwise specifically described in the Debt Service
Reserve Fund or the Maintenance and Replacement Fund, including administrative
expenses and property management fees with respect ot the Project incurred in
its ordinary operations.
Section 1.10 "Assignee" shall mean a Person who has acquired all or a
portion of the Limited Partner's beneficial interest in the Partnership and has
not become a Substitute Limited Partner.
Section 1.11 "Bankruptcy" or "Bankrupt" shall mean the making of an
assignment for the benefit of creditors, becoming a party to any liquidation or
dissolution action or proceeding, the commencement of any bankruptcy,
reorganization, insolvency or other proceeding for the relief of financially
distressed debtors, or the appointment of a receiver, liquidator, custodian or
trustee and, if any of the same occur involuntarily, the same not being
dismissed, stayed or discharged within 90 days; or the entry of an order for
relief under Title 11 of the United States Code. A Partner shall be deemed
Bankrupt if the Bankruptcy of such Partner shall have occurred and be
continuing.
Section 1.12 "Bond Fund" shall mean the fund established by the Trustee in
accordance with the Trust Indenture whereby amounts on deposit in the Bond Fund
will be used solely to pay principal of, premium, if any, and interest on the
Bonds when due.
Section 1.13 "Bond Reserve Requirements" shall mean an amount not to exceed
$593,090 in Bond Years one through fifteen and $531,189 in Bond Years sixteen
through thirty.
Section 1.14 "Bonds" shall mean the Urban Residential Finance Authority of
the City of Atlanta, Georgia's $7,455,000 Multi-Family Housing Revenue Bonds,
(Cascade Pines Apartments) Series 1995.
Section 1.15 "Bond Year" shall mean the 12-month period (or portion thereof
as to the first Bond Year) ending on December 31 of each year.
Section 1.16 "Capital Account" shall mean, with respect to each Partner,
the account maintained for such Partner comprised of such Partner's Capital
Contribution as increased by allocations to such Partner of Partnership Income
(or items thereof) and any items in the nature of income or gain which are
<PAGE>
specially allocated pursuant to Section 10.3 or 10.4 hereof, and decreased by
the amount of any Distributions made to such Partner, and allocations to such
Partner of Partnership Losses (or items thereof) and any items in the nature of
expenses or losses which are specially allocated pursuant to Section 10.3 or
10.4 hereof.
In the event of any transfer of an interest in the Partnership in
accordance with the terms of this Agreement, the transferee shall succeed to the
Capital Account of the transferor to the extent it relates to the transferred
interest.
The foregoing definition and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Treasury Regulation Section 1.704-1(b), as amended or any successor thereto, and
shall be interpreted and applied in a manner consistent with such Treasury
Regulation.
Section 1.17 "Capital Contribution" shall mean the total amount of money,
or the Gross Asset Value of property contributed to the Partnership, if any, by
all the Partners or any class of Partners or any one Partner as the case may be
(or by a predecessor-in-interest of such Partner or Partners), reduced by any of
such capital which shall have been returned pursuant to Section 7.3, 7.4 or 7.5
of this Agreement. A loan to the Partnership by a Partner shall not be
considered a Capital Contribution.
Section 1.18 "Cash Flow From Operations" shall mean gross receipts (not
including Capital Contributions, Sale or Refinancing Proceeds or proceeds of
Partnership borrowings) from Partnership operations, determined on a cash basis,
less all funds retained by the Trustee for purpose of the Revenue Fund, the
Insurance and Tax Escrow Fund, the Bond Fund, the Debt Service Reserve Fund, the
Maintenance and Replacement Fund, the Rebate Fund (if necessary), the Surplus
Fund, the Transition Fund, the Administrative Expenses Fund and Trustee fees and
expenses. Cash Flow From Operations excludes calculation for deductions for cost
recovery of buildings, improvements and personal property amortization of any
financing fees. Any amounts in the Surplus Fund, after giving effect to the
above transfers and payment of the Issuer's fee and any Trustee's extraordinary
fees shall be transferred by the Trustee to the Partnership for distribution
pursuant to Section 11.1 of this Agreement but only if the Trustee receives and
the Issuer approves (a) the Project audit required by the Loan Agreement; and
(b) a verification of cash flows by an independent certified public accountant
or financial analyst acceptable to the Rating Agency using the same assumptions
as the cash flows submitted to the Rating Agency at the time of the original
rating of the Bonds demonstrating that: (i) the Debt Service Coverage was at
least 1.32% at the end of the first Bond Year, 1.37% for Bond Years two through
fifteen and 1.45% for Bond Years sixteen through thirty for the immediately
preceding fiscal year and is projected to do so for each fiscal year thereafter;
<PAGE>
(ii) Project revenues and investment earnings will be sufficient to pay
principal and interest on the bonds until maturity; and (iii) asset liability
parity does not fall below 100%.
Section 1.19 "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, or any successor statute.
Section 1.20 "Completion of Construction" shall mean the completion of
rehabilitation of the Project substantially in accordance with the Project
Documents, as amended from time to time, in order to obtain the required
certificates of occupancy (or the local equivalent) for all three hundred
seventy-six (376) apartment units as evidenced by the issuance of the
certificate of occupancy by the governmental agency having jurisdiction over the
Project or by the issuance of the inspecting architect's certification, in a
form substantially similar to that attached hereto as Exhibit "E". The
rehabilitation shall be completed in good workmanlike manner, free and clear of
all mechanic's, materialmen's or similar liens, and all other expenses and
costs, including but not limited to costs of financing, must be paid with
respect to the Project through completion.
Section 1.21 "Compliance Period" shall mean the period set forth in Section
42(i)(1) of the Code, as amended, or any successor statute.
Section 1.22 "Consent of the Limited Partner" shall mean the prior written
consent or approval of the Limited Partner.
Section 1.23 "Construction Contract" shall mean the stipulated sum
construction contract in the amount of $3,381,000, entered into between the
Partnership and the Contractor pursuant to which the Project is being
constructed.
Section 1.24 "Construction Loan" shall mean the Bonds and the Subordinate
Loan to provide funds for the acquisition, renovation and development of the
Project.
Section 1.25 "Contractor" shall mean Gardner Service Corporation, which is
the general construction contractor for the Project.
Section 1.26 "Costs of Issuance Fund" shall mean the fund established by
the Trustee in the amount of $254,494 for the payment of the costs of issuance
of the Bonds, including, without limitation, all printing expenses in connection
with the Bonds, the Trust Indenture, the Loan Agreement and any official
statement or offering document for the Bonds, the fees and expenses of the
Issuer and its counsel, acceptance and initial annual fee of the Trustee,
Trustee counsel fees and expenses, fees of the Rating Agency, underwriter's fee
and legal fees and expenses of Bond counsel, counsel to the underwriter, counsel
to the Partnership and such other initial development costs relative to the
<PAGE>
Project. Any amounts remaining in the Cost of Issuance Fund after transfer of
the above, on the date six months after the initial issuance and delivery of the
Bonds, shall be transferred by the Trustee to the Revenue Fund.
Section 1.27 "Debt Service Coverage" shall mean the ratio between the net
operating income and the debt service required to be paid on the Mortgage(s); as
example, a 1.15 Debt Service Coverage means that for every $1.00 of debt service
required to be paid there must be $1.15 of net operating income available.
Section 1.28 "Debt Service Reserve Fund" shall mean the fund established by
the Trustee in the initial amount of $593,090 to be disbursed by the Trustee to
the Bond Fund (a) on any Interest Payment Date whenever a deficiency in the
amount necessary to pay principal of and interest on the Bonds on such date
would otherwise exist after transfer therein of any balance in the Surplus Fund,
(b) on any Interest Payment Date when the amount on deposit therein exceeds the
Bond Reserve Requirement, but only such excess amount, (c) at such time as the
amount therein and in the Bond Fund, together with interest to accrue from the
investment thereof, would equal the amount necessary to pay principal of and
interest on the Bonds to maturity, and (d) at the end of the 16th Bond Year, and
only at the end of the 16th Bond Year, the amount of $61,901 to redeem Bonds.
Section 1.29 "Deferred Management Fee" shall have the meaning set forth in
Section 9.2(c) hereof.
Section 1.30 "Developer" shall mean Brencor, Inc. and Urban Residential
Development Corporation, a Georgia corporation.
Section 1.31 "Development Fee" shall mean the fee payable to the Developer
pursuant to Section 9.2(a) of this Agreement for services incident to the
development and rehabilitation of the Project in accordance with the Development
Fee Agreement between the Partnership and the Developer dated the even date
herewith and incorporated herein by this reference.
Section 1.32 "Distributions" shall mean the total amount of money, or the
Gross Asset Value of property (net of liabilities securing such distributed
property that such Partner is considered to assume or take subject to under
Section 752 of the Code), distributed to Partners with respect to their
Interests in the Partnership, but shall not include any payments to the General
Partner or its Affiliates for fees or other compensation as provided in this
Agreement or any guaranteed payment within the meaning of Section 707(c) of the
Code, as amended, or any successor thereto.
Section 1.33 "Fair Market Value" shall mean, with respect to any property,
real or personal, the price a ready, willing and able buyer would pay to a
ready, willing and able seller of the property, provided that such value is
reasonably agreed to between the parties in arm's-length negotiations and the
parties have sufficiently adverse interests.
<PAGE>
Section 1.34 "First Year Certificate" shall mean the certificate to be
filed by the General Partner with the Secretary of the Treasury as required by
Code Section 42(1)(1), as amended, or any successor thereto.
Section 1.35 "General Partner" shall mean URBAN RESIDENTIAL MANAGEMENT,
INC. and such other Persons as are admitted to the Partnership as additional or
substitute General Partners pursuant to this Agreement.
Section 1.36 "Gross Asset Value" shall mean with respect to any asset, the
asset's adjusted basis for federal income tax purposes, except as follows:
(a) The initial Gross Asset Value of any asset contributed by a Partner to
the Partnership shall be the Fair Market Value of such asset, as determined by
the contributing Partner and the General Partner, provided that, if the
contributing Partner is a General Partner, the determination of the Fair Market
Value of a contributed asset shall be determined by appraisal;
(b) The Gross Asset Values of all Partnership assets shall be adjusted to
equal their respective Fair Market Values, as determined by the General Partner,
as of the following times: (1) the acquisition of an additional Interest in the
Partnership by any new or existing Partner in exchange for more than a de
minimis Capital Contribution; (2) the distribution by the Partnership to a
Partner of more than a de minimis amount of Partnership property as
consideration for an Interest in the Partnership; and (3) the liquidation of the
Partnership within the meaning of Treasury Regulations Section
1.704-1(b)(2)(ii)(g); provided, however, that the adjustments pursuant to
clauses (1) and (2) above shall be made only with the Consent of the Limited
Partner and only if the General Partner reasonably determines that such
adjustments are necessary or appropriate to reflect the relative economic
interests of the Partners in the Partnership;
(c) The Gross Asset Value of any Partnership asset distributed to any
Partner shall be adjusted to equal the Fair Market Value of such asset on the
date of distribution as determined by the distributee and the General Partner,
provided that, if the distributee is a General Partner, the determination of the
Fair Market Value of the distributed asset shall be determined by appraisal; and
(d) The Gross Asset Values of Partnership assets shall be increased (or
decreased) to reflect any adjustments to the adjusted basis of such assets
pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent
that such adjustments are taken into account in determining Capital Accounts
pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m) and Section
10.3(g) hereof; provided however, that Gross Asset Values shall not be adjusted
<PAGE>
pursuant to this Section 1.36(d) to the extent the General Partner determines
that an adjustment pursuant to Section 1.36(b) hereof is necessary or
appropriate in connection with a transaction that would otherwise result in an
adjustment pursuant to this Section 1.36(d).
If the Gross Asset Value of an asset has been determined or adjusted
pursuant to Section 1.36(a), Section 1.36(b), or Section 1.36(d) hereof, such
Gross Asset Value shall thereafter be adjusted by the depreciation taken into
account with respect to such asset for purposes of computing Income and Losses.
Section 1.37 "HAP Contract" shall mean that certain Housing Assistance
Payment Contract dated September 27, 1995, between the Partnership and the
United States of America acting through the Department of Housing and Urban
Development ("HUD"), as amended and supplemented, for 70 designated units of the
Project.
Section 1.38 "HAP Payments" shall mean those moneys payable under the HAP
Contract with respect to the Project.
Section 1.39 "Hazardous Substance" shall mean, without limitation, any
petroleum, petroleum products or fractions or components thereof, flammable
explosives, radioactive materials, hazardous materials, hazardous wastes,
hazardous or toxic substances, or related materials, asbestos or any materials
containing asbestos, or any other similar substance or material as defined by
any Federal, state or local environmental law, ordinance, rule or regulation
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, the Hazardous Materials
Transportation Act, as amended, the Resource Conservation and Recovery Act, as
amended, and the regulations adopted and publications promulgated pursuant
thereto.
Section 1.40 "Improvements" shall mean the construction of a three hundred
seventy-six (376) unit apartment complex for families in a good and workmanlike
manner substantially in accordance with the plans and specifications and Project
Documents.
Section 1.41 "Incentive Management Fee" shall have the meaning set forth in
Section 9.2(e) hereof.
Section 1.42 "Income and Losses" shall mean, for each fiscal year or other
period, an amount equal to the Partnership's taxable income or loss for such
year or period, determined in accordance with Code Section 703(a) (for this
purpose, all items of income, gain, loss or deduction required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in taxable
income or loss), with the following adjustments:
(a) Any income of the Partnership that is exempt from federal income tax
and not otherwise taken into account in computing Income or Losses pursuant to
this Section 1.41 shall be added to such taxable income or loss;
<PAGE>
(b) Any expenditures of the Partnership described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to
Regulation Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in
computing Income and Losses pursuant to this Section 1.41 shall be subtracted
from such taxable income or loss;
(c) In the event the Gross Asset Value of any Partnership asset is adjusted
pursuant to Section 1.36(a) or (b) hereof, the amount of such adjustment shall
be taken into account as gain or loss from the disposition of such asset for
purposes of computing Income and Losses;
(d) Gain or loss resulting from any disposition of Partnership assets with
respect to which gain or loss is recognized for federal income purposes shall be
computed by reference to the Gross Asset Value of the property disposed of,
notwithstanding that the adjusted tax basis of such property differs from its
Gross Asset Value;
(e) In lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing such taxable income or loss, there
shall be taken into account depreciation for such fiscal year or other period,
computed as provided below; and
(f) Notwithstanding any other provision of this definition, any items which
are specially allocated pursuant to Sections 10.3 or 10.4 hereof shall not
otherwise be taken into account in computing Income or Losses.
Depreciation for each fiscal year or other period shall be calculated as
follows: an amount equal to the depreciation, amortization, or other cost
recovery deduction allowable with respect to an asset for such year or other
period for federal income tax purposes, except that if the Gross Asset Value of
an asset differs from its adjusted basis for federal income tax purposes at the
beginning of such year or other period, depreciation shall be an amount which
bears the same ratio to such beginning Gross Asset Value as the federal income
tax depreciation, amortization, or other cost recovery deduction for such year
or other period bears to such beginning adjusted tax basis. Provided, however,
that if the federal income tax depreciation, amortization, or other cost
recovery deduction for such year is zero, depreciation shall be determined with
reference to such beginning Gross Asset Value using any reasonable method
selected by the General Partner.
Section 1.43 "Insurance and Tax Escrow Fund" shall mean the fund
established by the Trustee in accordance with the Trust Indenture. Amounts on
deposit in this fund will be disbursed by the Trustee to pay the premiums of all
insurance on the Project and all taxes.
<PAGE>
Section 1.44 "Interest" shall mean 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 hereunder and
the obligation of such Partner to comply with the terms of this Agreement.
Section 1.45 "Interest Payment Date" shall mean March 1 and September 1 of
each year commencing March 1, 1996.
Section 1.46 "Involuntary Withdrawal" means any Withdrawal caused by the
death, adjudication of insanity or incompetence, or Bankruptcy of a General
Partner, or the removal of a General Partner pursuant to Section 13.2 hereof.
Section 1.47 "Issuer" shall mean the Urban Residential Finance Authority of
the City of Atlanta, Georgia, and its successors and assigns.
Section 1.48 "LIHTC" shall mean the low-income housing tax credit
established by TRA 1986 and which is provided for in Section 42 of the Code, as
amended, or any successor thereto.
Section 1.49 "Limited Partner" shall mean WNC HOUSING TAX CREDIT FUND V,
L.P., SERIES 3, a California limited partnership, and such other Persons as are
admitted to the Partnership as additional or Substitute Limited Partners
pursuant to this Agreement.
Section 1.50 "Liquidation" shall mean with respect to the Partnership the
orderly sale and liquidation of the Project and other Partnership property
following the first to occur of (a) the date upon which the Partnership is
terminated under Section 708(b)(1) of the Code unless continued by a vote of the
Partners, (b) the date upon which the Partnership ceases to be a going concern
(even though it may continue in existence for the purpose of winding up its
affairs, paying its debts and distributing any remaining balance to its
Partners), or (c) the date this Agreement terminates pursuant to its terms; and
means, with respect to a Partner at a time when the Partnership is not in
Liquidation, the liquidation of such Partner's interest in the Partnership under
Treasury Regulation 1.761-1(d), as amended, or any successor thereto.
Section 1.51 "Loan Agreement" shall mean that agreement between Urban
Residential Finance Authority of the City of Atlanta, Georgia and the
Partnership dated as of September 1, 1995, including any amendments thereto.
Said Loan Agreement is incorporated herein by this reference.
Section 1.52 "Maintenance and Replacement Fund" shall mean that fund
established by the Trustee. Amounts on deposit in the Maintenance and
Replacement Fund will be disbursed by the Trustee, upon written request of the
General Partner with the approval of the Issuer, for maintenance, repair and
<PAGE>
replacement which may be required at the Project, including, but not limited to,
replacement of equipment (including ranges and refrigerators), repair or
replacement of any roof or other structural component of the Project, exterior
painting, major floor covering replacement and major repairs to or replacement
of heating, air conditioning, plumbing and electrical systems, but in any case,
only if there are no funds available in the Rehabilitation Fund for such
purpose. The Maintenance and Replacement Fund will also be used to remedy any
deficiency in the Bond Fund after exhaustion of the Surplus Fund and the Debt
Service Reserve Fund without any prior consents.
Section 1.53 "Management Agent" shall mean the property management company
which oversees the property management functions for the Project and which is
on-site at the Project. The initial Management Agent shall collectively be
Brencor Asset Management, Inc. and Pointe Properties, Inc. d/b/a Metric Property
Services.
Section 1.54 "Management Agreement" shall mean the agreement between the
Partnership and the Management Agent for property management services.
Section 1.55 "Minimum Set-Aside Test" shall mean the 40-60 set-aside test
pursuant to Section 42(g), as amended and any successor thereto, of the Code
with respect to the percentage of apartment units in the Project to be occupied
by tenants whose incomes are equal to or less than the required percentage of
the area median gross income.
Section 1.56 "Mortgage" or "Mortgage Loan" shall mean any source of
permanent financing of the Project by a qualified commercial lender (as defined
in Section 42 of the Code) evidencing the indebtedness of the Partnership and
encumbering the Project. Where the context admits, the term "Mortgage" or
"Mortgage Loan" shall include any mortgage, deed, deed of trust, note,
regulatory agreement, security agreement, assumption agreement or other
instrument executed in connection with the Mortgage Note which is binding on the
Partnership; and in case any Mortgage is replaced or supplemented by any
subsequent mortgage or mortgages, the Mortgage shall refer to any such
subsequent mortgage or mortgages.
Section 1.57 "Mortgage Note" shall mean the nonrecourse promissory note
whereby the Partnership promises to pay Urban Residential Finance Authority, or
its successor or assignee, the principal sum of $2,465,000, plus interest on the
principal at 6.25% per annum over a term of fifteen years; the sum of
$4,990,000, plus interest on the principal at 6.60% over a term of thirty years;
and $1,100,000, plus interest on the principal at 7% over a term of thirty
years.
Section 1.58 "Nonrecourse Deductions" shall have the meaning given it in
Treasury Regulations Section 1.704-2(b)(1).
<PAGE>
Section 1.59 "Nonrecourse Liability" shall have the meaning given it in
Treasury Regulations Section 1.704-2(b)(3).
Section 1.60 "Operating Deficit" for any fiscal year shall mean the total
amount by which the sum of the Partnership's operating expenses (defined solely
as the expenses incurred in connection with the operation and maintenance of the
Project), debt service on the Mortgage Loan and other Partnership debt and net
additions to Partnership reserves required or permitted to be maintained under
this Agreement for such fiscal year, exceeds the cash revenues received in
respect of the operation of the Project for such fiscal year and available
reserves.
Section 1.61 "Operating Deficit Guarantee Period" shall mean the period
commencing with the date of this Agreement and ending four years following the
date of the Limited Partner's last Capital Contribution.
Section 1.62 "Operating Loans" shall mean loans made by the General Partner
to the Partnership pursuant to Article VI of this Agreement, which loans do not
bear interest and are repayable only as provided in Article XI of this
Agreement.
Section 1.63 "Original Limited Partner" shall mean BRENCOR, INC.
Section 1.64 "Partner" shall mean the General Partner and/or the Limited
Partner and/or the Special Limited Partner.
Section 1.65 "Partner Nonrecourse Debt" shall have the meaning set forth in
Section 1.704-2(b)(4) of the Treasury Regulations.
Section 1.66 "Partner Nonrecourse Debt Minimum Gain" shall mean an amount,
with respect to each Partner Nonrecourse Debt, equal to the Partnership Minimum
Gain that would result if such Partner Nonrecourse Debt were treated as a
Nonrecourse Liability (as defined in Section 1.704-2(b)(3) of the Treasury
Regulations), determined in accordance with Section 1.704-2(i)(3) of the
Treasury Regulations.
Section 1.67 "Partner Nonrecourse Deductions" shall have the meaning set
forth in Sections 1.704-2(i)(1) and 1.704-2(i)(2) of the Treasury Regulations.
Section 1.68 "Partnership" shall mean the limited partnership continued
under this Agreement.
Section 1.69 "Partnership Minimum Gain" shall mean the amount determined in
accordance with the principles of Treasury Regulation Sections 1.704-2(b)(2) and
1.704-2(d).
Section 1.70 "Permanent Mortgage Commencement" shall mean the first day on
which all of the following have occurred: (a) the principal amount, interest and
maturity date of the Mortgage and the Mortgage Note shall have been finally
determined; and (b) amortization of the Mortgage shall have commenced.
<PAGE>
Section 1.71 "Person" shall mean an individual, proprietorship, trust,
estate, partnership, joint venture, association, company, corporation or other
entity.
Section 1.72 "Principal Payment Date" shall mean any date on which
principal of the Bonds is payable pursuant to the Trust Indenture.
Section 1.73 "Project" shall mean the approximately 26.785 acres of land in
Atlanta, Fulton County, Georgia, as more fully described in Exhibit "A" attached
hereto and incorporated herein by this reference, and the Improvements.
Section 1.74 "Project Documents" shall mean and include all documents
delivered to or required by the Construction Loan and Mortgage Loan and/or any
governmental agency having jurisdiction over the Project in connection with the
development, construction and financing of the Project, including but not
limited to, the Trust Indenture, the Loan Agreement, Construction Contract and
approved plans and specifications for the development and rehabilitation of the
Project.
Section 1.75 "Projected Annual Tax Credits" shall mean LIHTC in the amount
of $109,513 for 1996, $262,831 per year for each of the years 1997 through 2005
and $153,318 for 2006, which the General Partner has projected to be the total
amount of LIHTC which will be allocated to the Limited Partner by the
Partnership; provided, however, that if the Actual Tax Credit allocated to the
Limited Partner is greater (or less than) $109,513 the Projected Annual Tax
Credit allocated to the Limited Partner for the year 2006 shall be reduced (or
increased) by an amount equal to the amount by which the Actual Tax Credit for
1996 exceeds (or is less than) $109,513. The Partners recognize that some of the
1996 LIHTCs had been allocated to the General Partner and the Original Limited
Partner prior to the admission of the Limited Partners, therefore, the Limited
Partner will not receive the full 98% of Projected Tax Credits.
Section 1.76 "Projected Tax Credits" shall mean LIHTC in the aggregate
amount of $2,681,950.
Section 1.77 "Qualified Income Offset Item" shall have the meaning set
forth in Treasury Regulation Section 1.704-1(b)(2)(ii)(d), or any successor
provision.
Section 1.78 "Qualified Tenants" shall mean any tenants who have incomes of
60% or less of the area median gross income, as adjusted for family size, so as
to make the Project eligible for LIHTC.
<PAGE>
Section 1.79 "Rating Agency" shall mean Standard & Poor's Ratings Group, a
division of McGraw-Hill Financial Services Company.
Section 1.80 "Rebate Fund" shall mean the fund established by the Trustee
in accordance with the Trust Indenture.
Section 1.81 "Refinancing" shall mean the refinancing of the Project so as
to retire the Mortgage Note and create a new permanent lender who shall hold a
first deed of trust on the Project. No Refinancing shall be permitted without
approval from the Limited Partner.
Section 1.82 "Rehabilitation Account" shall mean that account established
by the Trustee in the amount of $3,056,000 and maintained in accordance with the
Trust Indenture and Section 9.2(e) of this Agreement.
Section 1.83 "Rent Restriction Test" shall mean the test pursuant to
Section 42 of the Code whereby the gross rent charged to tenants of the
low-income apartment units in the Project must not exceed 30% of the applicable
income standards.
Section 1.84 "Reporting Fee" shall have the meaning set forth in Section
9.2(d) hereof.
Section 1.85 "Revenue Fund" shall mean the fund established by the Trustee
in accordance with the Trust Indenture. All rental income, other Project income
and HAP Payments will be deposited into the Revenue Fund. If no Event of Default
has occurred and is continuing, amounts on deposit in the Revenue Fund will be
disbursed by the Trustee not later than the tenth day of each month as follows:
(a) To the Management Agent in an amount equal to the amount necessary to
pay the current expenses for the Project due or expected to become due in the
month in which such transfer is made;
(b) To the Insurance and Tax Escrow Fund in accordance with the Trust
Indenture;
(c) To the Bond Fund in the amounts required by the Trust Indenture for
payment of principal and interest on the Principal Payment Date and the Interest
Payment Date;
(d) To the Trustee in an amount to pay the Trustee Fee, if any;
(e) To the Debt Service Reserve Fund in an amount required so that the
balance therein equals the Bond Reserve requirement;
(f) To the Maintenance and Replacement Fund in accordance with the Trust
Indenture;
<PAGE>
(g) To the Rebate Fund in accordance with the Trust Indenture; and
(h) To the Surplus Fund in accordance with the Trust Indenture.
Section 1.86 "Revised Projected Tax Credits" shall have the meaning set
forth in Section 7.4(a) hereof.
Section 1.87 "Sale or Refinancing" shall mean any of the following items or
transactions: a sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Partnership, a condemnation of or
casualty at the Project or any part thereof, a claim against a title insurance
company, the refinancing or any Mortgage Note or other indebtedness of the
Partnership and any similar item or transaction; provided, however, that the
payment of Capital Contributions by the Partners shall not be included within
the meaning of the term "Sale or Refinancing."
Section 1.88 "Sale or Refinancing Proceeds" shall mean all cash receipts of
the Partnership arising from a Sale or Refinancing (including principal and
interest received on a debt obligation received as consideration in whole or in
part, on a Sale or Refinancing) less 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 Project.
Section 1.89 "Special Limited Partner" shall mean BRENCOR, INC., a Delaware
corporation.
Section 1.90 "State" shall mean the State of Georgia.
Section 1.91 "State Tax Credit Agency" shall mean the state agency of
Georgia which has the responsibility and authorization to administer the LIHTC
program in Georgia.
Section 1.92 "Substitute Limited Partner" shall mean any Person who is
admitted to the Partnership as a Limited Partner pursuant to Section 12.5 or
acquires the Interest of the Limited Partner pursuant to Section 7.3 of this
Agreement.
Section 1.93 "Surplus Fund" shall mean the fund established by the Trustee
in accordance with the Trust Indenture. In addition, on October 1 of each year,
any balance will be distributed as follows:
(a) To the Administrative Expenses Fund, the Issuer's Fee for the current
Fiscal Year to the extent amounts are not on deposit in the Administrative
Expenses Fund for such purpose, together with any Issuer's Fee remaining unpaid
from previous Fiscal Years;
<PAGE>
(b) To the Trustee, the amount of any Trustee's extraordinary fees then
due;
(c) To the Maintenance and Replacement Fund the amount required to fund any
scheduled replacements recommended by the Independent Architect; and
(d) To the Developer;
provided that the amounts described above will be distributed if and only
if the Trustee receives and the Issuer approves: (i) the Project audit required
by the Loan Agreement and (ii) a verification of cash flows by an independent
certified public accountant or financial analyst using the same assumptions as
the cash flows submitted to the Rating Agency at the time of the original rating
of the Bonds demonstrating that the (A) Debt Service Coverage was at least 1.32%
at the end of the first Bond Year, 1.37% for Bond Years two through fifteen and
1.45% for Bond Years sixteen through thirty for the immediately preceding Fiscal
Year and is projected to be so for the current Fiscal Year and each Fiscal Year
thereafter, (B) Project revenues and investment earnings will be sufficient to
pay principal and interest on the Bonds, fees and current expenses on each
Interest Payment Date until maturity, and (C) asset liability parity does not
fall below 100%.
Section 1.94 "Tax Credit" shall mean any credit permitted under the Code or
the law of any state against the federal or a state income tax liability of any
Partner as a result of activities or expenditures of the Partnership including,
without limitation, LIHTC.
Section 1.95 "Tax Credit Conditions" shall mean, for the duration of the
Compliance Period, any and all restrictions including, but not limited to,
applicable federal, state and local laws, rules and regulations, which must be
complied with in order to qualify for the Tax Credits or to avoid an event of
recapture in respect of the Tax Credits.
Section 1.96 "TRA 1986" shall mean the Tax Reform Act of 1986.
Section 1.97 "Transition Fund" shall mean the fund established by the
Trustee in accordance with the Trust Indenture. Amounts on deposit in this fund
shall be used by the Trustee to purchase United States Treasury Strip that
matures on August 15, 2010 and that, upon maturity, will pay to the Trustee, for
the benefit of the bondholders, the principal sum of $265,000.
Section 1.98 "Treasury Regulations" shall mean the Income Tax Regulations
promulgated under the Code, as such regulations may be amended from time to time
(including corresponding provisions of succeeding regulations).
<PAGE>
Section 1.99 "Trust Indenture" shall mean that agreement between Urban
Residential Finance Authority of the City of Atlanta, Georgia and Reliance Trust
Company dated as of September 1, 1995 and incorporated herein by this reference.
If the terms of this Agreement conflict, or are not in accordance with, the
terms of the Trust Indenture then the provisions of the Trust Indenture shall
govern.
Section l.100 "Trustee" shall mean Reliance Trust Company, or successor
thereto.
Section 1.101 "Withdrawing" or "Withdrawal" (including the verb form
"Withdraw" and the adjectival forms "Withdrawing" and "Withdrawn") shall mean,
as to a General Partner, the occurrence of the death, adjudication of insanity
or incompetence, or Bankruptcy of such Partner, or the withdrawal, removal or
retirement from the Partnership of such Partner for any reason, including any
sale, pledge, encumbering, assignment or other transfer of all or any part of
its General Partner Interest and those situations when a General Partner may no
longer continue as a General Partner by reason of any law or pursuant to any
terms of this Agreement.
ARTICLE III
NAME
The name of the Partnership shall be "CASCADE PINES, L.P. II."
ARTICLE III
PRINCIPAL EXECUTIVE OFFICE/AGENT FOR SERVICE
Section 3.1 Principal Executive Office. The principal executive office of
the Partnership is located at 100 Peachtree Street, N.W., Suite 400, Atlanta,
Georgia 30303, or at such other place or places within the State as the General
Partner may hereafter designate.
Section 3.2 Agent for Service of Process. The name of the agent for service
of process on the Partnership is Herbert Kohn, whose address is 100 Peachtree
Street, N.W., Suite 400, Atlanta, Georgia 30303.
ARTICLE IV
PURPOSE
The purpose of the Partnership is to acquire, construct, own and operate
the Project in order to provide, in part, Tax Credits to the Partners in
accordance with the provisions of the Code and the Treasury Regulations
applicable to LIHTC and to sell the Project after the Compliance Period. The
Partnership shall not engage in any business or activity which is not incident
to the attainment of such purpose.
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ARTICLE V
TERM
The Partnership term commenced upon the filing of the Certificate of
Limited Partnership in the office of, and on the form prescribed by, the
Secretary of State of the State, and shall continue until December 31, 2030
unless terminated earlier in accordance with the provisions of this Agreement or
as otherwise provided by law.
ARTICLE VI
GENERAL PARTNER'S CONTRIBUTIONS AND LOANS
Section 6.1 Capital Contribution of General Partner. The General Partner
shall make a Capital Contribution as required pursuant to the Loan Agreement or
required by the Trustee.
Section 6.2 Construction and Operating Obligations; General Partner Loans.
(a) The Special Limited Partner shall cause Completion of Construction in
accordance with the Project Documents, as amended from time to time, and shall
equip the Project or cause the same to be equipped with all necessary and
appropriate fixtures, equipment and articles of personal property, including
refrigerators and ranges. If costs and expenses necessary to effect Completion
of Construction exceed the sum of the Capital Contributions and the proceeds of
the Mortgage Note, the Special Limited Partner shall be responsible for and
shall be obligated to pay such deficiencies and shall, to the extent permitted
under the Project Documents and any applicable regulations or requirements of
Urban Residential Finance Authority of the City of Atlanta, Georgia, be
reimbursed at or prior to Permanent Mortgage Commencement only out of the
proceeds designated in this sentence available from time to time after payment
of all costs described in this sentence. Any such advances not reimbursed
through Permanent Mortgage Commencement shall not be reimbursable or otherwise
change the Interest of any Partner in the Partnership but shall be borne by the
Special Limited Partner as a Capital Contribution. In the event the Special
Limited Partner shall fail to fund any such deficiency as required by this
Section 6.2(a), any amounts otherwise payable to the Special Limited Partner or
any of its Affiliates as a Development Fee pursuant to Section 9.2 or any other
fee pursuant to this Agreement, shall be applied by the Partnership to meet such
obligation of the Special Limited Partner. Any such application of funds as
described in the immediately preceding sentence shall constitute a payment of
the obligation of the fee which such funds have been a payment of the obligation
of the fee which such funds have been earmarked to pay, and the obligation of
the Special Limited Partner to advance such amount under this Section 6.2(a)
shall be satisfied to the extent of such application.
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(b) During the Operating Deficit Guarantee Period, the Special Limited
Partner, as required from time to time, shall provide Operating Loans in amounts
necessary to cover any Operating Deficits. Each Operating Loan shall be
nonrecourse to the Partners and shall be repayable out of 50% of the available
Cash Flow From Operations or Sale or Refinancing Proceeds in accordance with
Article XI of this Agreement. In the event the Special Limited Partner shall
fail to make any Operating Loans required by this Section 6.2(b), the
Partnership shall withhold those funds otherwise payable to the Special Limited
Partner or its Affiliates pursuant to Section 9.2 ("Special Limited Partner
Funds") and utilize the withheld funds to meet the obligations of the Special
Limited Partner pursuant to this Section 6.2(b); any such use of Special Limited
Partner Funds will be deemed an Operating Loan of the Special Limited Partner
repayable to the Special Limited Partner as aforesaid. Such use of Special
Limited Partner Funds shall also constitute payment and satisfaction of amounts
payable to the Special Limited Partner or Affiliates thereof pursuant to Section
9.2, and the obligation of the Partnership to make such payments to the Special
Limited Partner or its Affiliates pursuant to Section 9.2 shall therefore be
deemed satisfied.
Section 6.3 Partner Loans. With the prior consent of the Limited Partner,
and if approved by Urban Residential Finance Authority of the City of Atlanta,
Georgia, the General Partner, or Special Limited Partner may loan to the
Partnership any sums required by the Partnership and not otherwise reasonably
available to it, at a rate of interest not to exceed the lesser of 2% per annum
above the then prevailing prime or reference rate charged by Bank of America
N.T. & S.A., Main Office, San Francisco, California, or the maximum legal rate.
This Section 6.3 shall not apply to the Operating Loans referenced in Article
VI. The amount and maturity date of any such loan and the rate of interest
thereon shall be evidenced by a written instrument. The General Partner shall
not charge a prepayment penalty on any such loan.
ARTICLE VII
CAPITAL CONTRIBUTIONS OF LIMITED PARTNER
Section 7.1 Original Limited Partner. The Original Limited Partner made a
Capital Contribution of $100. Effective as of the date of this Agreement, the
Original Limited Partner's Interest has been liquidated and the Partnership has
reacquired the Original Limited Partner's Interest in the Partnership. The
Original Limited Partner acknowledges that it has no further interest in the
Partnership as a limited partner as of the date of this Agreement, and has
released all claims, if any, against the Partnership arising out of its
participation as a limited partner.
Section 7.2 Capital Contribution of Limited Partner. The Limited Partner
shall make a total Capital Contribution in the amount of $1,471,854 in cash on
<PAGE>
the dates and subject to the conditions hereinafter set forth:
(a) The obligation of the Limited Partner to pay the aforesaid Capital
Contribution shall be subject to the satisfaction of the following conditions:
(1) prior to the initial payment of the Capital Contribution only, the
issuance to the Limited Partner of an opinion of the Partnership's legal
counsel, in a form substantially similar to the form of opinion attached hereto
as Exhibit "B" and incorporated herein by this reference;
(2) prior to the initial payment of the Capital Contribution only, the
General Partner shall deliver to the Limited Partner a fully executed
Certification and Agreement in the form attached hereto as Exhibit "C" and
incorporated herein by this reference;
(3) prior to the due date of each installment of such Capital Contribution
except the first payment, the General Partner shall deliver to the Limited
Partner a fully executed General Partner Certification in the form attached
hereto as Exhibit "D" and incorporated herein by this reference, to the effect
that all of the representations and warranties set forth in Article IX are
accurate;
(4) prior to the Capital Contribution payment referenced in Section
7.2(b)(3), the General Partner shall deliver to the Limited Partner the
following: (A) a certificate of occupancy on all the apartment units in the
Project; (B) a copy of the recorded grant deed (warranty deed); (C) a copy of an
ALTA Owner's Title Insurance Policy and any endorsements required by the Limited
Partner issued in an amount equal to the sum of the original principal amount of
the Mortgage and the aggregate amount of Capital Contributions set forth in
Sections 6.1 and 7.2; (D) an audited construction cost certification with an
itemized cost breakdown; (E) copies of all Mortgage Loan documents; and (F)
copies of all Mortgage Notes; and
(5) prior to the Capital Contribution payment referenced in Section
7.2(b)(3), the General Partner shall deliver to the Limited Partner Internal
Revenue Code Form 8609, or any successor form and a copy of the Declaration of
Restrictive Covenants/Extended Use Agreement entered into between the
Partnership and the State Tax Credit Agency.
(b) Provided the conditions of Section 7.2(a) of this Partnership Agreement
have been met, the Limited Partner shall make the following Capital
Contributions:
(1) The first payment shall equal $1,177,485 and will be payable upon
admittance of the Limited Partner into the Partnership, provided the conditions
of Section 7.2(a) have been met;
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(2) The second payment shall equal $147,185 and will be payable as follows:
(a) upon Completion of Construction as evidenced by the inspecting Architect's
certification, in a form substantially similar to the form attached hereto as
Exhibit "E" and incorporated herein by this reference; (b) receipt of a letter
from the Contractor stating that all amounts payable to the Contractor have been
paid in full and the Partnership is not in violation of the construction
contract; (c) the date the Project maintains a debt coverage ratio of 1.15 on
the Bonds for 90 consecutive days; (d) the Limited Partner's receipt of, and
review of, tenant income verification data to determine that 98% of the
apartments units in the Apartment Complex qualify under Section 42 of the
Internal Revenue Code (the Limited Partner will review the tenant income
verification in a reasonable time); (e) delivery of the Accountant's final Tax
Credit cost certification setting forth the Project's eligible basis and the
amount of the Tax Credits to which the Partnership is entitled, in a form
substantially similar to the form attached hereto as Exhibit "F" and
incorporated herein by this reference; and (f) delivery to the Limited Partner
of a fully executed set of the Mortgage documents; provided the conditions of
Section 7.2(a) have been met; and
(3) The final payment shall equal $147,184 and will be payable after all
the conditions above have been met and delivery of the IRS Form 8609, provided
the conditions of Section 7.2(a) have been met.
Section 7.3 Repurchase of Limited Partner's Interest. Within 60 days after
the General Partner receives written demand from the Limited Partner, the
Partnership shall repurchase the Limited Partner's Interest in the Partnership
by refunding to it in cash the full amount of the Capital Contribution which the
Limited Partner has theretofore made in the event that, for any reason, the
Partnership shall fail to:
(a) receive an allocation of LIHTC no later than the close of the calendar
year during which the Project is placed in service;
(b) cause the Project to be placed in service by September 1, 1996;
(c) achieve 90% occupancy of the Project by Qualified Tenants by December
1, 1996;
(d) obtain Permanent Mortgage Commencement by September 1, 1996; and
(e) meet both the Minimum Set-Aside Test and the Rent Restriction Test not
later than December 31 of the first year the Partnership elects the LIHTC to
<PAGE>
commence in accordance with the Code.
Section 7.4 Reduction of Limited Partner's Capital Contribution.
(a) If the anticipated amount of Tax Credits to be allocated to the Limited
Partner as evidenced by IRS Form 8609, and Schedule A thereto, and the audited
construction cost certification provided to the Limited Partner is less than
$2,628,311 (the "Revised Projected Tax Credits") then the Limited Partner's
Capital Contribution provided for in Section 7.2 shall be reduced by the amount
which will make the total Capital Contribution to be paid by the Limited Partner
to the Partnership equal to 56% of the Revised Projected Tax Credits so
anticipated to be allocated to the Limited Partner.
(b) The General Partner is required to use its best efforts to rent 100% of
the Project's apartment units to Qualified Tenants throughout the Compliance
Period. If at any time during the first five calendar years following the year
in which the Project is placed in service, the Actual Tax Credit for any fiscal
year or portion thereof is or will be less than the Projected Annual Tax Credit,
or the Revised Projected Tax Credit calculated on an annual basis ("Revised
Projected Annual Tax Credit"), if applicable, then, unless the shortfall shall
have previously been addressed under Section 7.4(a), the amount of the reduction
shall be applied to the next Capital Contribution owed by the Limited Partner,
if any, and any portion of such reduction in excess of such Capital Contribution
shall be applied to reduce succeeding Capital Contributions of the Limited
Partner, if any. If, at the time of determination thereof, the Capital
Contribution reduction referenced in Section 7.4(a) and/or this Section 7.4(b)
is greater than the balance of the Limited Partner's Capital Contribution
payments which is then due, if any ("Reduction Shortfall"), then the amount of
the Reduction Shortfall shall be paid by the Special Limited Partner to the
Limited Partner within ninety days of the Special Limited Partner receiving
notice of the Reduction Shortfall from the Limited Partner.
(c) In the event that, for any reason, at any time after the first five
calendar years following the year in which the Project is placed in service, the
amount of the Actual Tax Credit is less than the Projected Annual Tax Credit, or
the Revised Projected Annual Tax Credit, if applicable, (the "Annual Credit
Shortfall"), then, unless the Annual Credit Shortfall shall have previously been
addressed under Section 7.4(a) or Section 7.4(b), there shall be a reduction in
the Special Limited Partner's share of Cash Flow From Operations in an amount
equal to the Annual Credit Shortfall and said amount instead shall be paid to
the Limited Partner. In the event there are not sufficient funds to pay the full
Annual Credit Shortfall to the Limited Partner at the time of the next
Distribution of Cash Flow From Operations, then the Limited Partner shall be
treated as having made a constructive advance to the Partnership in an amount
equal to the Annual Credit Shortfall (a "Credit Shortfall Loan"), which shall be
deemed to have been made on January 1 of the year in which the Annual Credit
<PAGE>
Shortfall arises. Each Credit Shortfall Loan shall bear simple interest (not
compounded) from the date on which such loan is deemed to have been made under
this Section 7.4(c) at the rate equal to the 10-year Treasury money rate at the
time of the Credit Shortfall Loan, or, if lesser, the maximum legal rate. Credit
Shortfall Loans or any portion thereof shall be repaid in the next year in which
sufficient monies are available from the Special Limited Partner's Cash Flow
From Operations, with interest payable prior to principal. In the event a Sale
or Refinancing of the Project occurs prior to repayment in full of the Credit
Shortfall Loan then the excess will be paid in accordance with Section 11.2(b).
Section 7.5 Return of Capital Contribution. From time to time the
Partnership may have cash in excess of the amount required for the conduct of
the affairs of the Partnership, and the General Partner may, with the Consent of
the Limited Partner, determine that such cash should, in whole or in part, be
returned to the Limited Partner in reduction of its Capital Contribution. No
such return shall be made unless all liabilities of the Partnership (except
those to Partners on account of amounts credited to them pursuant to this
Agreement) have been paid or there remain assets of the Partnership sufficient,
in the sole discretion of the General Partner, to pay such liabilities.
Section 7.6 Liability of Limited Partner. The Limited Partner shall not be
liable for any of the debts, liabilities, contracts or other obligations of the
Partnership. The Limited Partner shall be liable only to make Capital
Contributions in the amounts and on the dates specified in this Agreement and,
except as otherwise expressly required hereunder, shall not be required to lend
any funds to the Partnership or, after their respective Capital Contributions
have been paid, to make any further Capital Contribution to the Partnership.
ARTICLE VIII
WORKING CAPITAL AND RESERVES
Section 8.1 Reserve. In accordance with the Trust Indenture, the
Partnership shall provide all revenue generated from the operations of the
Project to the Trustee who will deposit the funds into the Revenue Fund.
ARTICLE IX
MANAGEMENT AND CONTROL
Section 9.1 Power and Authority of General Partner. The General Partner
shall have complete and exclusive control over the management of the Partnership
business and affairs, and shall have the right, power and authority, on behalf
<PAGE>
of the Partnership, and in its name, to exercise all of the rights, powers and
authority of a partner of a partnership without limited partners. If there is
more than one General Partner, all acts, decisions or consents of the General
Partners shall require the concurrence of all of the General Partners. No
actions taken without the authorization of all the General Partners shall be
deemed valid actions taken by the General Partners pursuant to this Agreement.
If any General Partner should violate this Agreement, he shall indemnify and
hold the other General Partners harmless against all obligations and liabilities
arising or resulting from or incidental to said violation. No Limited Partner or
Special Limited Partner (except one who may also be a General Partner, and then
only in its capacity as General Partner within the scope of its authority
hereunder) shall have any right to be active in the management of the
Partnership's business or investments or to exercise any control thereover, nor
have the right to bind the Partnership in any contract, agreement, promise or
undertaking, or to act in any way whatsoever with respect to the control or
conduct of the business of the Partnership, except as otherwise specifically
provided in this Agreement.
Section 9.2 Payments to the General Partners and Others.
(a) The Partnership shall pay to the Developer a Development Fee in the
amount of $1,333,381 in accordance with the Development Fee Agreement between
the Partnership and the Developer dated as of the even date herewith and
incorporated herein by this reference.
(b) The Partnership shall collect the sum of $138,473 from the proceeds
established in Section 7.2(b) of this Agreement and transfer said amount to the
Trustee to be used for the acquisition, rehabilitation and development of the
Project. The Trustee shall receive the funds and place the same into the Project
Fund which consists of an Acquisition Account, Development Account and a
Rehabilitation Account. The Trustee shall determine to which account the funds
will be transferred. The General Partner shall confirm that the funds
established in this Section 9.2(b) are allocated to either the Acquisition
Account, Development Account and the Rehabilitation Account and are being
properly administered by the Trustee.
(c) Upon sale of the Bonds, there will be deposited in the Acquisition Fund
the amount of $2,697,265.25. The Trustee will disburse $1,641,265.25 from the
Acquisition Fund to HUD. In addition, the Trustee will disburse from the
Acquisition Fund the amount of $1,056,000.00 to the Issuer for the assignment
rights in connection with the purchase of the property.
(d) The Trustee shall use the Rehabilitation Fund solely to pay costs for
the Project. Before any payment shall be made from the Rehabilitation Fund, the
General Partner shall file with the Trustee a requisition and certificate,
approved by the inspecting architect. If prior to the Completion of
Construction, the Trustee has insufficient moneys on deposit in the Bond Fund to
<PAGE>
make all payments on the Bonds required to be made, the Trustee will transfer
from the Rehabilitation Fund to the Bond Fund an amount sufficient, when added
to amounts already on deposit in the Bond Fund, to enable the Trustee to make
payments due on the Bonds. Upon the occurrence of an Event of Default of the
Bonds, amounts on deposit in the Rehabilitation Fund will be transferred to the
Bond Fund. Following the Completion of Construction, and after payment of all
costs of the Project, the Trustee will call Bonds for redemption and will
transfer to the Bond Fund all amounts remaining on deposit in the Rehabilitation
Fund and not required to pay unpaid costs of the Project. Notwithstanding
anything to the contrary, the Trustee shall maintain a balance of not less than
$94,000 in the Rehabilitation Fund, which balance shall not be disbursed,
reduced or depleted without the prior written approval of HUD which shall be
attached to the required requisition.
(e) The Partnership shall pay to the Management Agent a property management
fee for the leasing and management of the Project in an amount in accordance
with the Management Agreement. The term of the Management Agreement shall not
exceed one year. If the Management Agent is an Affiliate of the General Partner
then commencing with the termination of the Operating Deficit Guarantee period
referenced in Section 6.2(b), in any year in which the Project has an Operating
Deficit, 40% of the management fee will be deferred ("Deferred Management Fee").
Deferred Management Fees, if any, shall be paid to the Management Agent solely
in accordance with and to the extent permitted by Section 11.1 of this
Agreement.
(1) The General Partner shall, upon receiving any request of the Mortgage
lender requesting such action, dismiss the Management Agent as the entity
responsible for management of the Project under the terms of the Management
Agreement; and, at the request of the Limited Partner, shall remove the
Management Agent in the event that the Management Agent experiences an event of
Bankruptcy, or in the event of any misconduct by the Management Agent or its
failure to exercise reasonable care in the discharge of its duties and
obligations as Management Agent.
(2) The appointment of any successor Management Agent is subject to the
Consent of the Limited Partner which may only be sought after the General
Partner has provided the Limited Partner accurate and complete disclosure
respecting the proposed Management Agent.
(f) The Partnership shall pay to the Limited Partner a fee (the "Reporting
Fee") commencing in 1997 equal to 10% of the Cash Flow From Operations but in no
event less than $5,000 per year for the Limited Partner's services in monitoring
the operations of the Partnership and for services in connection with the
Partnership's accounting matters and assisting with the preparation of tax
returns and the reports required in Sections 14.2 and 14.3 of this Agreement.
The Reporting Fee shall be payable each calendar year upon release by the
Trustee in accordance with the Trust Indenture and shall be payable from Cash
<PAGE>
Flow From Operations in the manner and priority set forth in Section 11.1 of
this Agreement; provided, however, that if in any year Cash Flow From Operations
is insufficient to pay the full $5,000, the unpaid portion thereof shall accrue
and be payable on a cumulative basis in the first year in which there is
sufficient Cash Flow From Operations, as provided in Section 11.1, or sufficient
Sale or Refinancing Proceeds, as provided in Section 11.2.
(g) The Partnership shall pay to Urban Residential Development Corporation
an Incentive Management Fee equal to 45% of the available Cash Flow From
Operations in accordance with Section 11.1 of this Agreement for each fiscal
year of the Partnership commencing in 1997 for services incident to the
administration of the business and affairs of the Partnership, which services
shall include, but not limited to, maintaining the books and records of the
Partnership, selecting and supervising the Partnership's Accountants,
bookkeepers and other Persons required to prepare and audit the Partnership's
financial statements and tax returns, and preparing and disseminating reports on
the status of the Project and the Partnership, all as required by Article XIV of
this Agreement. The Incentive Management Fee shall be payable each calendar year
upon release by the Trustee in accordance with the Trust Indenture and shall be
payable from Cash Flow From Operations in the manner and priority set forth in
Section 11.1. If the Incentive Management Fee is not paid in any year it shall
not accrue for payment in subsequent years.
Section 9.3 Specific Powers of the General Partner.
Subject to the other provisions of this Agreement, and with the approval of
the Special Limited Partner, the General Partner shall have the following
powers:
(a) In the Partnership's name and on its behalf, the General Partner may
acquire (including by fee or real estate contract), hold, sell, transfer,
assign, lease or otherwise deal with any real, personal or mixed property,
interest therein or appurtenance thereto;
(b) In the Partnership's name and on its behalf, the General Partner may
employ, contract and otherwise deal with, from time to time, Persons whose
services are necessary or appropriate in connection with management and
operation of the Partnership business, including, without limitation,
contractors, agents, brokers, accountants and attorneys, on such terms as the
General Partner shall determine;
(c) In the Partnership's name and on its behalf, the General Partner may
bring or defend, pay, collect, compromise, arbitrate, resort to legal action or
otherwise adjust claims or demands of or against the Partnership;
<PAGE>
(d) In the Partnership's name and on its behalf, the General Partner may
pay as a Partnership expense any and all costs and expenses associated with the
formation, development, organization and operation of the Partnership, including
the expense of annual audits, tax returns and LIHTC compliance;
(e) In the Partnership's name and on its behalf, the General Partner may
deposit, withdraw, invest, pay, retain and distribute the Partnership's funds in
a manner consistent with the provisions of this Agreement;
(f) The General Partner may require in any or all Partnership contracts
that the General Partner shall not have any personal liability thereunder but
that the Person contracting with the Partnership shall look solely to the
Partnership and its assets for satisfaction; and
(g) In the Partnership's name and on its behalf, the General Partner may
execute, acknowledge and deliver any and all instruments to effectuate any of
the foregoing.
Section 9.4 Authority Requirements. During the Compliance Period, the
following provisions shall apply:
(a) Each of the provisions of this Agreement shall be subject to, and the
General Partner covenants to act in accordance with, the Tax Credit Conditions
and all applicable federal, state and local laws and regulations;
(b) The Tax Credit Conditions and all such laws and regulations, as amended
or supplemented, shall govern the rights and obligations of the Partners, their
heirs, executors, administrators, successor and assigns, and they shall control
as to any terms in this Agreement which are inconsistent therewith, and any such
inconsistent terms of this Agreement shall be unenforceable by or against any of
the Partners;
(c) Upon any dissolution of the Partnership or any transfer of the Project,
no title or right to the possession and control of the Project and no right to
collect rent therefrom shall pass to any Person who is not, or does not become,
bound by the Tax Credit Conditions in a manner that, in the opinion of counsel
to the Partnership, would not avoid a recapture thereof on the part of the
former owners; and
(d) Any conveyance or transfer of title to all or any portion of the
Project required or permitted under this Agreement shall in all respects be
subject to the Tax Credit Conditions and all conditions, approvals or other
requirements of the rules and regulations of any authority applicable thereto.
Section 9.5 Limitations on General Partner's Power and Authority.
Notwithstanding the foregoing provisions of this Article IX, the General Partner
shall not:
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(a) Act in contravention of this Agreement;
(b) Act in any manner which would make it impossible to carry on the
ordinary business of the Partnership;
(c) Confess a judgment against the Partnership;
(d) Possess Partnership property, or assign the Partner's right in specific
Partnership property, for other than the exclusive benefit of the Partnership;
(e) Admit a Person as a General Partner except as provided in this
Agreement;
(f) Admit a Person as a Limited Partner except as provided in this
Agreement;
(g) Violate the Mortgage Loan or Mortgage Note;
(h) Cause the Project apartment units to be rented to anyone other than
Qualified Tenants;
(i) Violate the Minimum Set-Aside Test for the Project;
(j) Cause any recapture of the Tax Credits;
(k) Permit any creditor who makes a nonrecourse loan to the Partnership to
have, or to acquire at any time as a result of making such loan, any direct or
indirect interest in the profits, income, capital or other property of the
Partnership, other than as a secured creditor; or
(l) Except as provided in the Indenture of Trust, commingle funds of the
Partnership with the funds of another Person; provided, however, that the
General Partner may establish 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.
Section 9.6 Restrictions on Authority of General Partner. Without Consent
of the Limited Partner the General Partner and/or the Special Limited Partner
shall not:
(a) Sell, exchange, lease or otherwise dispose of all or a substantial part
of the assets of the Partnership;
(b) Incur indebtedness other than the Mortgage Loan in the name of the
Partnership, other than in the ordinary course of the Partnership's business;
<PAGE>
(c) Engage in any transaction not expressly contemplated by this Agreement
in which the General Partner has an actual or potential conflict of interest
with the Limited Partner;
(d) Admit a General Patner, or elect to continue the Partnership's business
after a General Partner ceases to be a General Partner (other than by removal)
where there is no remaining or surviving General Partner;
(e) Contract away the fiduciary duty owed to the Limited Partner at common
law; or
(f) Take any action which would cause the Project to fail to qualify, or
which would cause a termination or discontinuance of the qualification of the
Project, as a "qualified low income housing project" under Section 42(g)(1) of
the Code, as amended, or any successor thereto, or which would cause the Limited
Partner to fail to obtain the Projected Tax Credits or which would cause the
recapture of any LIHTC.
Section 9.7 Duties of General Partner. The General Partner agrees that it
shall at all times:
(a) Diligently and faithfully devote such of its time to the business of
the Partnership as may be necessary to properly conduct the affairs of the
Partnership;
(b) File and publish all certificates, statements or other instruments
required by law for the formation and operation of the Partnership as a limited
partnership in all appropriate jurisdictions;
(c) Cause the Partnership to carry adequate public liability insurance,
comprehensive casualty insurance for not less than the full insurable value of
the Project and such other insurance as is generally maintained for properties
similar to the Project;
(d) Have a fiduciary responsibility for the safekeeping and use of all
funds and assets of the Partnership, whether or not in its immediate possession
or control and not employ or permit another to employ such funds or assets in
any manner except for the benefit of the Partnership;
(e) Comply with all Code and state rules and regulations for rental housing
and LIHTC;
(f) Use its best efforts to keep the Project and Project dwelling units, in
decent, safe, sanitary and good condition, repair and working order, ordinary
use and obsolescence excepted, and make or cause to be made from time to time
all necessary repairs thereto (including external and structural repairs) and
renewals and replacements thereof;
<PAGE>
(g) Permit, and cause the Management Agent to permit, the Limited Partner
and its representatives to have access to the Project and personnel employed by
the Partnership and by the Management Agent who are concerned with management of
the Project at all reasonable times during normal business hours and to examine
all Tax Credit compliance data; and
(h) Perform such other acts as may be expressly required of it under the
terms of this Agreement.
Section 9.8 Partnership Expenses.
(a) 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 operating cash expenses and only subject to the limitations on
the reimbursement of such expenses set forth herein. As used in this Section 9.8
the term "operating cash expenses" shall mean, 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 advertising and promotion, management, utilities, repair and
maintenance, insurance, Partner 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 fees paid by the Partnership to the General Partner or any Affiliate of
the General Partner permitted by this Agreement and the actual cost of goods,
materials and administrative services used for or by the Partnership, whether
incurred by the Special Limited Partner, General Partner, an Affiliate of the
Special Limited Partner or the General Partner or a nonaffiliated 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 which are not Affiliates of
the General Partner or the Special Limited 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 amount which would be charged by nonaffiliated Persons for comparable
goods and services.
(b) Except for the Incentive Management Fee, reimbursement to the General
Partner, or the Special Limited Partner, or any of their Affiliates of operating
cash expenses pursuant to Subsection (a) hereof shall be subject to the
following:
(1) No such reimbursement shall be permitted for services for which the
Special Limited Partner or the General Partner or any of their Affiliates is
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entitled to compensation by way of a separate fee; and
(2) 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 Special Limited Partner
or the General Partner or any of their Affiliates. For the purposes of this
Section 9.8(b)(2), "controlling person" includes, but is not limited to, any
Person, however titled, who performs functions for the Special Limited Partner
or the General Partner or any of their Affiliates similar to those of: (i)
chairman or member of the board of directors; (ii) executive management, such as
president, vice president or senior vice president, corporate secretary or
treasurer; (iii) senior management, such as the vice president of an operating
division who reports directly to executive management; or (iv) those holding 5%
or more equity interest in such Special Limited Partner or General Partner or
any of their Affiliates or a person having the power to direct or cause the
direction of such Special Limited Partner or General Partner or any of their
Affiliates, whether through the ownership of voting securities, by contract or
otherwise.
Section 9.9 General Partner Expenses. The Special Limited Partner or the
General Partner or any of their Affiliates shall pay all Partnership expenses
which are not permitted to be reimbursed pursuant to Section 9.8 and all other
expenses which are unrelated to the business of the Partnership.
Section 9.10 Other Business of Partners. Any Partner may engage
independently or with others in other business ventures of every nature and
description, including, without limitation, the acquisition, development,
construction, operation and management of real estate projects and developments
of every type on their own behalf or on behalf of other partnerships, joint
ventures, corporations or other business ventures formed by them or in which
they may have an interest, including, without limitation, business ventures
similar to, related to or in direct or indirect competition with the Project
except if prohibited under a non-competition agreement. Neither the Partnership
nor any Partner shall have any right 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.
Section 9.11 Covenants, Representations and Warranties. The General Partner
covenants, represents and warrants that the following are presently true and
will be true during the term of this Agreement, to the extent then applicable:
(a) The Partnership is a duly organized limited partnership validly
existing under the laws of the State and has complied with all filing
requirements necessary for the protection of the limited liability of the
Limited Partner.
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(b) The Partnership Agreement and the Project Documents are in full force
and effect and neither the Partnership nor the General Partner is in breach or
violation of any provisions thereof.
(c) Existing Improvements, if any, on the Project have been completed
substantially in conformity with the Project Documents, and the Project is being
operated in accordance with standards and procedures which are prudent and
customary for the operation of properties similar to the Project.
(d) Additional Improvements on the Project, if any, shall be completed
substantially in conformity with the Project Documents and any other
requirements necessary to obtain Completion of Construction.
(e) No Partner has or will have any personal liability with respect to or
has or will have personally guaranteed the payment of the Mortgage.
(f) The Partnership is in compliance with all construction and use codes
applicable to the Project and is not in violation of any zoning, environmental
or similar regulations applicable to the Project.
(g) The Partnership owns the fee simple interest in the Project, subject
only to liens (except those with respect to which an adequate bond or other
financial security has been issued) which, in the aggregate, do not exceed
$10,000 and the Mortgage Loan.
(h) The Construction Contract has been entered into between the Partnership
and the Contractor; no other consideration or fee shall be paid to the
Contractor other than amounts set forth in the Construction Contract.
(i) A builder's risk insurance policy in favor of the Partnership will be
and is in full force and effect until Completion of Rehabilitation.
(j) As of the date hereof, at funding of the Construction Loan and upon
Permanent Mortgage Commencement, fire and extended coverage insurance for the
full replacement value of the Project (excluding the value of the land, site
utilities, landscaping and foundations) and worker's compensation and public
liability insurance, all in favor of the Partnership, is and will be in full
force and effect and will be kept in full force and effect during the term of
the Partnership; all such policies shall be in amounts and with insurers
satisfactory to Urban Residential Finance Authority. All such insurance policies
shall provide that they are not subject to cancellation without 30 days' prior
written notice to the Limited Partner and shall not contain any co-insurance
provisions.
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(k) The Management Agent shall obtain a fidelity bond or a blanket position
bond to minimally include (1) comprehensive employee dishonesty, disappearance
and destruction, covering all principals of the Management Agent and all persons
or positions which manage the Project's assets, including, but not limited to
rent, bank accounts and accounting records; (2) naming the Limited Partner as an
additional loss payee; and (3) insuring the Project for an amount equal to at
least two (2) months of the Project's gross potential income plus the Project's
total tenant security deposit liability.
(l) Except as otherwise disclosed to the Limited Partner in writing prior
to the execution of this Agreement, to the best of the General Partner's
knowledge based on the Phase I Environmental Report prepared for this Project:
(1) no Hazardous Substance has been disposed of, or released to or from, or
otherwise now exists in, on, under or around, the Project and (2) no aboveground
or underground storage tanks are now or have ever been located on or under the
Project. The General Partner will not install or allow to be installed any
aboveground or underground storage tanks on the Project. The General Partner
covenants that the Project shall be kept free of Hazardous Materials and shall
not be used to generate, manufacture, refine, transport, treat, store, handle,
dispose of, transfer, produce or process Hazardous Materials, except in
connection with the normal maintenance and operation of any portion of the
Project. The General Partner shall comply, or cause there to be compliance, with
all applicable Federal, state and local laws, ordinances, rules and regulations
with respect to Hazardous Materials and shall keep, or cause to be kept, the
Project free and clear of any liens imposed pursuant to such laws, ordinances,
rules and regulations. The General Partner must promptly notify the Limited
Partner in writing (3) if it knows, or suspects or believes there may be any
Hazardous Substance in or around any part of the Project, any Improvements
constructed on the Project, or the soil, groundwater or soil vapor, (4) if the
General Partner or the Partnership may be subject to any threatened or pending
investigation by any governmental agency under any law, regulation or ordinance
pertaining to any Hazardous Substance, and (5) of any claim made or threatened
by any Person, other than a governmental agency, against the Partnership or
General Partner arising out of or resulting from any Hazardous Substance being
present or released in, on or around any part of the Project.
(m) The General Partner has not executed and will not execute any
agreements with provisions contradictory to, or in opposition to, the provisions
of this Agreement.
(n) Delivery of the Projected Annual Tax Credits.
(o) No charges or encumbrances exist with respect to the Project other than
those which are created or permitted by the Project Documents or are noted or
excepted in the title policy for the Project.
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(p) The buildings on the Project site constitute or shall constitute a
"qualified low-income housing project" as defined in Section 42(g) of the Code,
and as amplified by the Treasury Regulations thereunder. In this connection, not
later than December 31 of the first year in which the Partners elect the LIHTC
to commence in accordance the Code, the Project will satisfy the Minimum
Set-Aside Test.
(q) As of the date of this Agreement all accounts of the Partnership
required to be maintained under the terms of the Project Documents, including,
without limitation, any account for replacement reserves, are currently funded
to required levels, including levels required by any authority.
(r) The General Partner has not lent or otherwise advanced any funds to the
Partnership other than its Capital Contribution and the Partnership has no
unsatisfied obligation to make any payments of any kind to the General Partner
or any Affiliate thereof outstanding as of the date of this Agreement.
(s) No event has occurred which with the giving of notice, the passage of
time or both would constitute a material default under any of the Project
Documents.
(t) No event or proceeding, including, but not limited to, any legal
actions or proceedings before any court, commission, administrative body or
other governmental authority, and acts of any governmental authority having
jurisdiction over the zoning or land use laws applicable to the Project, has
occurred the continuing effect of which has: (1) materially or adversely
affected the operation of the Partnership or the Project (except to the extent
the funds are available to the Partnership to correct or cure such event or
proceeding); (2) materially or adversely affected the ability of the General
Partner to perform its obligations hereunder or under any other agreement with
respect to the Project; or (3) prevented the completion of construction of the
Improvements in substantial conformity with the Project Documents, other than
legal proceedings which have been bonded against (or as to which other adequate
financial security has been issued) in a manner as to indemnify the Partnership
against loss; provided that the foregoing does not apply to matters of general
applicability which would adversely affect the Partnership, the General Partner,
Affiliates of the General Partner or the Project only insofar as they or any of
them are part of the general public.
(u) Neither the Partnership nor the General Partner has any liabilities,
contingent or otherwise, which have not been disclosed in writing to the Limited
Partner and which in the aggregate do affect the ability of the Limited Partner
to obtain the anticipated benefits of its investment in the Partnership.
(v) The Special Limited Partner and/or the General Partner has and shall
maintain a net worth equal to at least $500,000 computed in accordance with
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generally accepted accounting principles.
The Special Limited Partner or General Partner shall be liable to the
Limited Partner for any costs, damages, loss of profits, diminution in the value
of its investment in the Partnership, or other losses, of every nature and kind
whatsoever, direct or indirect, realized or incurred by the Limited Partner as a
result of any material breach of the representations and warranties set forth in
this Section 9.11.
ARTICLE X
ALLOCATIONS OF INCOME, LOSSES AND CREDITS
Section 10.1 General. All items includable in the calculation of Income or
Loss not arising from a Sale or Refinancing, and all Tax Credits, shall be
allocated 98% to the Limited Partner, 1% to the Special Limited Partner and 1%
to the General Partner.
Section 10.2 Allocations From Sale or Refinancing. All Income and Losses
arising from a Sale or Refinancing shall be allocated between the Partners as
follows:
(a) As to Income:
(1) First, an amount of Income equal to the aggregate negative balances (if
any) in the Capital Accounts of all Partners having negative Capital Accounts
(prior to taking into account the Sale or Refinancing and the Distribution of
the related Sale or Refinancing Proceeds, but after giving effect to
Distributions of Cash Flow From Operations and allocations of other Income and
Losses pursuant to this Article X up to the date of the Sale or Refinancing)
shall be allocated to such Partners in proportion to their negative Capital
Account balances until all such Capital Accounts shall have zero balances; and
(2) Second, an amount of Income sufficient to increase the Limited
Partner's and Special Limited Partner's positive Capital Account balance to
their Capital Contribution and to increase the Limited Partner's and Special
Limited Partner's positive Capital Account balance to an amount equal to their
Capital Contribution, shall be allocated to the Limited Partner and Special
Limited Partner, as applicable;
(3) Third, an amount of Income sufficient to increase the General Partner's
positive Capital Account balance to an amount equal to its Capital Contribution;
and
(4) The balance, if any, of such Income shall be allocated 50% to the
Limited Partner, 25% to the General Partner and 25% to the Special Limited
Partner.
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(b) As to Losses:
(1) an amount of Losses equal to the aggregate positive balances (if any)
in the Capital Accounts of all Partners having positive Capital Accounts (prior
to taking into account the Sale or Refinancing and the Distribution of the
related Sale or Refinancing Proceeds, but after giving effect to Distributions
of Cash Flow From Operations and allocations of Income and Losses pursuant to
Section 10.1 up to the date of the Sale or Refinancing) shall be allocated to
such Partners in proportion to their positive Capital Account balances until all
such Capital Accounts shall have zero balances; and
(2) the balance of any such Losses shall be allocated 98% to the Limited
Partner, 1% to the Special Limited Partner and 1% to the General Partner.
(c) Notwithstanding the foregoing provisions of Section 10.2(a) and (b), in
no event shall any Losses be allocated to the Limited Partner if and to the
extent that such allocation would create or increase an Adjusted Capital Account
Deficit for the Limited Partner. In the event an allocation of 98% of each item
includable in the calculation of Income or Loss not arising from a Sale or
Refinancing, would create or increase an Adjusted Capital Account Deficit for
the Limited Partner then so much of the items of deduction other than projected
depreciation shall be allocated to the General Partner instead of the Limited
Partner as is necessary to allow the Limited Partner to be allocated 98% of the
items of Income and Project depreciation without creating or increasing an
Adjusted Capital Account Deficit for the Limited Partner, it being the intent of
the parties that the Limited Partner always shall be allocated 98% of the items
of Income not arising from a Sale or Refinancing and 98% of the Project
depreciation.
Section 10.3 Special Allocations. The following special allocations shall
be made in the following order:
(a) Except as otherwise provided in Section 1.704-2(f) of the Treasury
Regulations, notwithstanding any other provisions of this Article X, if there is
a net decrease in Partnership Minimum Gain during any Partnership fiscal year,
each Partner shall be specially allocated items of Partnership income and gain
for such fiscal year (and, if necessary, subsequent fiscal years) in an amount
equal to such Person's share of the net decrease in Partnership Minimum Gain,
determined in accordance with Treasury Regulations Section 1.704-2(g).
Allocations pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Partner pursuant thereto.
The items to be so allocated shall be determined in accordance with Section
1.704-2(f)(6) and 1.704-2(j)(2) of the Treasury Regulations. This Section
10.3(a) is intended to comply with the minimum gain chargeback requirement in
<PAGE>
Section 1.704-2(f) of the Treasury Regulations and shall be interpreted
consistently therewith.
(b) Except as otherwise provided in Section 1.704-2(i)(4) of the Treasury
Regulations, notwithstanding any other provision of this Article X, if there is
a net decrease in Partner Nonrecourse Debt Minimum Gain attributable to a
Partner Nonrecourse Debt during any Partnership fiscal year, each Person who has
a share of the Partner Nonrecourse Debt Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with Section 1.704-2(i)(5) of
the Treasury Regulations, shall be specially allocated items of Partnership
income and gain for such fiscal year (and, if necessary, subsequent fiscal
years) in an amount equal to such Person's share of the net decrease in Partner
Nonrecourse Debt Minimum Gain attributable to such Partner Nonrecourse Debt,
determined in accordance with Treasury Regulations Section 1.704-2(i)(4).
Allocations pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Partner pursuant thereto.
The items to be so allocated shall be determined in accordance with Sections
1.704-2(i)(4) and 1.704-2(j)(2) of the Treasury Regulations. This Section
10.3(b) is intended to comply with the minimum gain chargeback requirement in
Section 1.704-2(i)(4) of the Treasury Regulations and shall be interpreted
consistently therewith.
(c) In the event any Partner unexpectedly receives any adjustments,
allocations, or distributions described in Treasury Regulations Section
1.704-1(b)(2)(ii)(d)(4), Section 1.704-1(b)(2)(ii)(d)(5), or Section
1.704-1(b)(2)(ii)(d)(6), items of Partnership income and gain shall be specially
allocated to each such Partner in an amount and manner sufficient to eliminate,
to the extent required by the Treasury Regulations, the Adjusted Capital Account
Deficit of such Partner as quickly as possible, provided that an allocation
pursuant to this Section 10.3(c) shall be made if and only to the extent that
such Partner would have an Adjusted Capital Account Deficit after all other
allocations provided for in this Section 10.3 have been tentatively made as if
this Section 10.3(c) were not in the Agreement.
(d) In the event any Partner has a deficit Capital Account at the end of
any Partnership fiscal year which is in excess of the sum of (i) the amount such
Partner is obligated to restore, and (ii) the amount such Partner is deemed to
be obligated to restore pursuant to the penultimate sentences of Treasury
Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), each such Partner shall be
specially allocated items of Partnership income and gain in the amount of such
excess as quickly as possible, provided that an allocation pursuant to this
Section 10.3(d) shall be made if and only to the extent that such Partner would
have a deficit Capital Account in excess of such sum after all other allocations
provided for in this Section 10.3 have been tentatively made as if this Section
10.3(d) and Section 10.3(c) hereof were not in the Agreement.
<PAGE>
(e) Nonrecourse Deductions for any fiscal year shall be specially allocated
98% to the Limited Partner, 1% to the Special Limited Partner and 1% to the
General Partner.
(f) Any Partner Nonrecourse Deductions for any fiscal year shall be
specially allocated to the Partner who bears the economic risk of loss with
respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse
Deductions are attributable in accordance with Treasury Regulations Section
1.704-2(i)(1).
(g) To the extent an adjustment to the adjusted tax basis of any
Partnership asset pursuant to Code Section 734(b) or Code Section 743(b) is
required, pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(2) or
Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital
Accounts as the result of a distribution to a Partner in complete liquidation of
his interest in the Partnership, the amount of such adjustment to the Capital
Accounts shall be treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases such basis) and such
gain or loss shall be specially allocated to the Partners in accordance with
their interests in the Partnership in the event that Treasury Regulations
Section 1.704-1 (b)(2)(iv)(m)(2) applies, or to the Partner to whom such
distribution was made in the event that Treasury Regulations Section
1.704-1(b)(2)(iv)(m)(4) applies.
(h) To the extent the Partnership has taxable interest income with respect
to any promissory note pursuant to Section 483 or Section 1271 through 1288 of
the Code:
(1) Such interest income shall be specially allocated to the Limited
Partner to whom such promissory note relates; and
(2) The amount of such interest income shall be excluded from the Capital
Contributions credited to such Partner's Capital Account in connection with
payments of principal with respect to such promissory note.
(i) 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 Code Section 50(c), such increase shall be specially 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.
(j) Any reduction in the adjusted tax basis (or cost) of Partnership
investment tax credit property pursuant to Code Section 50(c) shall be specially
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 Regulations Section 1.46-3(f)(2)(i).
<PAGE>
(k) Any income, gain, loss or deduction realized as a direct or indirect
result of the issuance of an interest in the Partnership by the Partnership to a
Partner (the "Issuance Items") shall be allocated among the Partners so that, to
the extent possible, the net amount of such Issuance Items, together with all
other allocations under this Agreement to each Partner, shall be equal to the
net amount that would have been allocated to each such Partner if the Issuance
Items had not been realized.
(l) If any Partnership expenditure treated as a deduction on its federal
income tax return is disallowed as a deduction and treated as a distribution
pursuant to Section 731(a) of the Code, there shall be a special allocation of
gross income to the Partner deemed to have received such distribution equal to
the amount of such distribution.
(m) The allocation to the General Partner of each material item of
Partnership income, loss, deduction or credit will not be less than 1% of each
such item at all times during the existence of the Partnership.
(n) Interest deduction on the Partnership indebtedness referred to in
Section 6.3 shall be allocated 100% to the General Partner.
Section 10.4 Curative Allocations. The allocations set forth in Sections
10.2(c), 10.3(a), 10.3(b), 10.3(c), 10.3(d), 10.3(e), 10.3(f), and 10.3(g)
hereof (the "Regulatory Allocations") are intended to comply with certain
requirements of the Treasury Regulations. It is the intent of the Partners that,
to the extent possible, all Regulatory Allocations shall 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 10.4.
Therefore, notwithstanding any other provision of this Article X (other than the
Regulatory Allocations), with the Consent of the Limited Partner, the General
Partner shall make such offsetting special allocations of Partnership income,
gain, loss, or deduction in whatever manner the General Partner, with the
Consent of the Limited Partner, 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 Agreement and all
Partnership items were allocated pursuant to Sections 10.1, 10.2(a), 10.2(b),
10.3(h), 10.3(i), 10.3(j), 10.3(k), 10.3(l), 10.3(m), 10.3(n) and 10.5. In
exercising its authority under this Section 10.4, the General Partner shall take
into account future Regulatory Allocations under Section 10.3(a) and 10.3(b)
that, although not yet made, are likely to offset other Regulatory Allocations
previously made under Sections 10.3(e) and 10.3(f).
<PAGE>
Section 10.5 Other Allocation Rules.
(a) The basis (or cost) of any Partnership investment tax credit property
shall be allocated among the Partners in accordance with Treasury Regulations
Section 1.46-3(f)(2)(i). All Tax Credits (other than the investment tax credit)
shall be allocated among the Partners in accordance with applicable law.
Consistent with the foregoing, the Partners intend that LIHTC will be allocated
98% to the Limited Partner, 1% to the Special Limited Partner and 1% to the
General Partner.
(b) In the event Partnership investment tax credit property is disposed of
during any taxable year, profits for such taxable year (and, to the extent such
profits are insufficient, profits for subsequent taxable years) in an amount
equal to the excess, if any, of (1) the reduction in the adjusted tax basis (or
cost) of such property pursuant to Code Section 50(c), over (2) any increase in
the adjusted tax basis of such property pursuant to Code Section 50(c) caused by
the disposition of such property, shall be excluded from the profits allocated
pursuant to Section 10.1 and Section 10.2(a) hereof and shall instead be
allocated among the Partners in proportion to their respective shares of such
excess, determined pursuant to Section 10.3(i) and 10.3(j) hereof. In the event
more than one item of such property is disposed of by the Partnership, the
foregoing sentence shall apply to such items in the order in which they are
disposed of by the Partnership, so the profits equal to the entire amount of
such excess with respect to the first such property disposed of shall be
allocated prior to any allocations with respect to the second such property
disposed of, and so forth.
(c) For purposes of determining the Income, Losses, or any other items
allocable to any period, Income, Losses, and any such other items shall be
determined on a daily, monthly, or other basis, as determined by the General
Partner with the Consent of the Limited Partner, using any permissible method
under Code Section 706 and the Treasury Regulations thereunder.
(d) Solely for purposes of determining a Partner's proportionate share of
the "excess nonrecourse liabilities" of the Partnership within the meaning of
Treasury Regulations Section 1.752-3(a)(3), the Partners' interests in
Partnership profits are as follows: Limited Partner: 98%; Special Limited
Partner: 1%; General Partner: 1%.
(e) To the extent permitted by Section 1.704-2(h)(3) of the Treasury
Regulations, the General Partner shall endeavor to treat 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 Partner who is not a General Partner.
Section 10.6 Tax Allocations: Code Section 704(c). In accordance with Code
Section 704(c) and the Treasury Regulations thereunder, income, gain, loss, and
<PAGE>
deduction with respect to any property contributed to the capital of the
Partnership shall, solely for tax purposes, be allocated among the Partners so
as to take account of any variation between the adjusted basis of such property
to the Partnership for federal income tax purposes and its initial Gross Asset
Value (computed in accordance with Section 1.25(a) hereof).
In the event the Gross Asset Value of any Partnership asset is adjusted
pursuant to Section 1.25(b) hereof, subsequent allocations of income, gain,
loss, and deduction with respect to such asset shall take account of any
variation between the adjusted basis of such asset for federal income tax
purposes and its Gross Asset Value in the same manner as under Code Section
704(c) and the Treasury Regulations thereunder.
Any elections or other decisions relating to such allocations shall be made
by the General Partner and the Special Limited Partner in any manner that
reasonably reflects the purpose and intention of this Agreement. Allocations
pursuant to this Section 10.6 are solely for purposes of federal, state, and
local taxes and shall not affect, or in any way be taken into account in
computing, any Person's Capital Account or share of Income, Losses, other items,
or distributions pursuant to any provision of this Agreement.
Section 10.7 Allocation Among Limited Partners. In the event that the
Interest of the Limited Partner hereunder is at any time held by more than one
Limited Partner all items which are specifically allocated to the Limited
Partner for any month pursuant to this Article X shall be apportioned among such
Persons according to the ratio of their respective profit-sharing interests in
the Partnership at the last day of such month.
Section 10.8 Allocation Among General Partners. In the event that the
Interest of the General Partner hereunder is at any time held by more than one
General Partner all items which are specifically allocated to the General
Partner for any month pursuant to this Article X shall be apportioned among such
Persons in such percentages as may from time to time be determined by agreement
among them without amendment to this Agreement.
Section 10.9 Modification of Allocations. The provisions of Articles X and
XI and other provisions of this Agreement are intended to comply with Treasury
Regulations Section 1.704 and shall be interpreted and applied in a manner
consistent with such section of the Treasury Regulations. In the event that the
General Partner determines, in its sole discretion, that it is prudent to modify
the manner in which the Capital Accounts of the Partners, or any debit or credit
thereto, are computed in order to comply with such section of the Treasury
Regulations, the General Partner may make such modification to the minimum
extent necessary, to effect the plan of allocations and Distributions provided
for elsewhere in this Agreement. Further, the General Partner shall make any
<PAGE>
appropriate modifications in the event it appears that unanticipated events
(e.g., the existence of a Partnership election pursuant to Code Section 754)
might otherwise cause this Agreement not to comply with Treasury Regulation
Section 1.704.
ARTICLE XI
DISTRIBUTION
Section 11.1 Distribution of Cash Flow From Operations. Cash Flow From
Operations for each fiscal year shall be distributed within seventy-five (75)
days following each calendar year and shall be applied in the following order of
priority:
(a) To pay the Deferred Management Fee, if any, but in no event shall this
payment exceed 50% of the Cash Flow From Operations;
(b) To pay the current Reporting Fee and then to pay any accrued Reporting
Fees which have not been paid in full from previous years;
(c) To pay the Development Fee in accordance with the Development Fee
Agreement;
(d) To pay the Operating Loans advanced by the Special Limited Partner, if
any, as referenced in Section 6.2(b) of this Agreement, limited to 50% of the
Cash Flow From Operations remaining after reduction for the payments made
pursuant to subsections (a) through (c) of this Section 11.1;
(e) To pay the Incentive Management Fee equal to 45% of the Cash Flow From
Operations remaining after reduction for the payments made pursuant to
subsections (a) through (d) of this Section 11.1; and
(f) The balance of the remaining Cash Flow From Operations to the Limited
Partner in an amount equal to 10.9%, to the General Partner in an amount equal
to 3.6% and to the Special Limited Partner in an amount equal to 85.5%.
Section 11.2 Distribution of Sale or Refinancing Proceeds. Sale or
Refinancing Proceeds shall be distributed in the following order, subject to
HUD's land use restriction:
(a) To the payment of the Mortgage Note and other matured debts and
liabilities of the Partnership, other than accrued payments, debts or other
liabilities owing to Partners or former Partners;
(b) To any accrued payments, debts or other liabilities owing to the
Partners or former Partners, including, but not limited to, accrued Reporting
Fees and Operating Loans, to be paid prorata if necessary;
<PAGE>
(c) To the establishment of any reserves which the General Partner, with
the Consent of the Limited Partner, shall deem reasonably necessary for
contingent, unmatured or unforeseen liabilities or obligations of the
Partnership;
(d) To the Limited Partner in an amount equal to its Capital Contribution;
(e) To the General Partner and the Special Limited Partner in an amount
equal to their Capital Contribution; and
(f) Thereafter, 50% to the Limited Partner, 25% to the General Partner and
25% to the Special Limited Partner.
Section 11.3 Additional Refinancing. Notwithstanding the Distribution
provisions of Section 11.2 of this Agreement, the Partners recognize that the
Partnership is seeking to refinance or add additional debt of up to $900,000
with the first $900,000 of available refinance proceeds, or additional financing
funds if applicable, distributed as follows: to the Special Limited Partner and
General Partner for payment of any unpaid Development Fee; and then for
reimbursement of expenses.
ARTICLE XII
TRANSFERS OF LIMITED PARTNER'S
AND SPECIAL LIMITED PARTNER'S
INTEREST IN THE PARTNERSHIP
Section 12.1 Assignment of Limited Partner's and Special Limited Partner's
Interest. The Limited Partner and Special Limited Partner shall not have the
right to assign all or any part of their respective Interests in the Partnership
to any other Person, whether or not a Partner, except:
(a) By a written instrument in form and substance satisfactory to the
General Partner and its counsel, setting forth the name and address of the
proposed transferee, the nature and extent of the Interest which is proposed to
be transferred and the terms and conditions upon which the transfer is proposed
to be made, stating that the Assignee accepts and agrees to be bound by all of
the terms and provisions of this Agreement, and providing for the payment of all
reasonable expenses incurred by the Partnership in connection with such
assignment, including but not limited to the cost of preparing any necessary
amendment to this Agreement;
(b) Upon consent of the General Partner to such assignment, which shall not
be unreasonably withheld;
(c) Upon receipt by the General Partner of an opinion of counsel acceptable
to the General Partner that such assignment complies with all applicable federal
and state securities laws; and
<PAGE>
(d) Upon receipt by the General Partner of the Assignee's written
representation that the Partnership Interest is to be acquired by the Assignee
for the Assignee's own account for long-term investment and not with a view
toward resale, fractionalization, division or distribution thereof.
THE LIMITED PARTNERSHIP INTEREST DESCRIBED HEREIN HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AS AMENDED OR UNDER ANY STATE SECURITIES LAW.
THE INTEREST MAY NOT BE SOLD OR OTHERWISE TRANSFERRED UNLESS REGISTERED UNDER
APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR UNLESS AN EXEMPTION FROM
REGISTRATION IS AVAILABLE.
Section 12.2 Effective Date of Transfer. Any assignment of a Limited
Partner's or Special Limited Partner's Interest pursuant to Section 12.1 shall
become effective as of the last day of the calendar month in which the last of
the conditions to such assignment are satisfied.
Section 12.3 Invalid Assignment. Any purported assignment of an Interest of
a Limited Partner or Special Limited Partner otherwise than in accordance with
Section 12.1 or Section 12.6 shall be of no effect as between the Partnership
and the purported assignee and shall be disregarded by the General Partner in
making allocations and Distributions hereunder.
Section 12.4 Assignee's Rights to Allocations and Distributions. An
Assignee shall be entitled to receive allocations of Partnership tax items and
Distributions from the Partnership attributable to the Interest acquired by
reason of any permitted assignment from and after the first day of the calendar
month following the month which ends with the effective date of the transfer of
such Interest as provided in Section 12.2. The Partnership and the General
Partner shall be entitled to treat the assignor of such Partnership Interest as
the absolute owner thereof in all respects, and shall incur no liability for
allocations of Partnership items and Distributions made in good faith to such
assignor, until such time as the written instrument of assignment has been
received by the Partnership.
Section 12.5 Substitution of Assignee as Limited Partner or Special Limited
Partner.
(a) An Assignee shall not have the right to become a Substitute Limited
Partner or Substitute Special Limited Partner in place of his assignor unless
the written consent of the General Partner to such substitution shall have been
obtained, which consent, in the General Partner's absolute discretion, may be
withheld. No consent or other action of any non-assigning Limited Partner shall
be required for the admission to the Partnership of any Substitute Limited
Partner.
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(b) A nonadmitted transferee of a Limited Partner's or Special Limited
Partner's Interest in the Partnership shall only be entitled to receive that
share of allocations, Distributions and the return of Capital Contribution to
which its transferor would otherwise be entitled with respect to the Interest
transferred, and shall have no right to obtain any information on account of the
Partnership's transactions, to inspect the Partnership's books and records or
have any other of the rights and privileges of a Limited Partner, provided,
however, that the Partnership shall, if a transferee and transferor jointly
advise the General Partner in writing of a transfer of an Interest in the
Partnership, furnish the transferee with pertinent tax information at the end of
each fiscal year of the Partnership.
(c) The General Partner may elect to treat a transferee of a Partnership
Interest who has not become a Substitute Limited Partner as a Substitute Limited
Partner, or Substitute Special Limited Partner as a Substitute Special Limited
Partner, as the case may be, in the place of its transferor should the General
Partner determine in its absolute discretion that such treatment is in the best
interest of the Partnership.
Section 12.6 Death, Bankruptcy, Incompetency, etc. of a Limited Partner or
Special Limited Partner. Upon the death, dissolution, adjudication of
bankruptcy, insanity or adjudication of incompetency of a Limited Partner or
Special Limited Partner, such Partner's executors, administrators or legal
representatives shall have all the rights of a Limited Partner for the purpose
of settling or managing such Partner's estate, including such power as such
Partner possessed to constitute a successor as a transferee of its Interest in
the Partnership and to join with such transferee in making the application to
substitute such transferee as a Partner. However, such executors, administrators
or legal representatives will not have the right to become Substitute Limited
Partners in the place of their respective predecessors-in-interest unless the
General Partner shall so consent.
ARTICLE XIII
WITHDRAWAL, REMOVAL AND REPLACEMENT OF
GENERAL PARTNER
Section 13.1 Withdrawal of General Partner. The General Partner may not
Withdraw (other than as a result of an Involuntary Withdrawal) without the
Consent of the Limited Partner, and, to the extent required, of Urban
Residential Finance Authority and the State Tax Credit Agency. Withdrawal shall
be conditioned upon the agreement of one or more Persons who satisfy the
requirements of Section 13.5 of this Agreement to be admitted as successor
General Partner(s).
<PAGE>
Section 13.2 Removal of General Partner.
(a) The Limited Partner may remove the General Partner:
(1) For cause if such General Partner has:
(A) Been subject to an event of Bankruptcy;
(B) Committed any fraud, willful misconduct, breach of fiduciary duty or
other grossly negligent conduct in the performance of its duties under this
Agreement;
(C) Been convicted of, or entered into a plea of guilty to, a felony;
(D) Made personal use of Partnership funds or properties;
(E) Violated the terms of the Mortgage Note, and such violation prompts
Urban Residential Finance Authority to issue a default letter or acceleration
notice to the Partnership or General Partner and such conduct caused the
Partnership to suffer an uninsurable loss;
(F) Failed to provide any loan, advance, Capital Contribution or any other
payment to the Partnership required under this Agreement;
(G) Materially breached any representation, warranty or covenant contained
in this Agreement, or failed to perform any other action which may be required
by this Agreement and such conduct caused the Partnership to suffer an
uninsurable loss;
(H) Violated any federal or state tax law which causes a recapture of
LIHTC; or
(I) Failed during any six-month period during the Compliance Period to
cause at least 85% of the total apartment units in the Project to qualify for
LIHTC, unless such failure is the result of fire, flood, earthquake or other act
of God or unless such failure is cured within 120 days after the end of the
six-month period.
(b) Written notice of the removal for cause of the General Partner shall be
served by the Limited Partner upon the General Partner either by certified or by
registered mail, return receipt requested, or by personal service. Such notice
shall set forth the reasons for the removal, if any, and the date upon which the
removal is to become effective.
(c) Upon receipt of such notice of removal for cause, the General Partner
shall cause an accounting to be prepared covering the transactions of the
Partnership from the end of the previous fiscal year through the date of receipt
<PAGE>
of such notice, and thereafter it shall not sell or dispose of Partnership
assets in the ordinary course of business of the Partnership or otherwise unless
such sale or disposition is subject to a contract entered into by and binding
upon the Partnership prior to the date upon which such notice was received by
the General Partner. The accounting shall be completed by the effective date of
the removal and shall be in sufficient detail to accurately and fully reflect
the earnings or losses for the period and the financial condition of the
Partnership. The expenses of the accounting shall be borne by the General
Partner.
Section 13.3 Admission of Substitute General Partner. No Person shall be
admitted as a substitute General Partner unless (i) such Person shall have
agreed to become a substitute General Partner by a written instrument which
shall include the acceptance and adoption of this Agreement; (ii) the Limited
Partner shall have consented in writing to the admission of such Person as a
substitute General Partner; (iii) such Person, if a corporation, shall satisfy
the "safe harbor" guidelines established by Revenue Procedure 89-12, 1989-7
I.R.B. or any successor Revenue Procedure; and (iv) such Person shall have
executed and acknowledged any other instruments which the withdrawing General
Partner shall reasonably deem necessary or appropriate to affect the admission
of such Person as a substitute General Partner. If the foregoing conditions are
satisfied, this Agreement shall be amended in accordance with the provisions of
the Act, and all other steps shall be taken which are reasonably necessary to
effect the withdrawal of the withdrawing General Partner and the substitution of
the substitute General Partner. Nothing contained herein shall reduce the
Limited Partner's interest in the Partnership.
Section 13.4 Continuing Liability. In the event a General Partner withdraws
from the Partnership or sells, transfers or assigns its entire interest pursuant
to this Article XIII, such General Partner shall be, and shall remain, liable
for all obligations and liabilities incurred by the General Partner and the
Partnership prior to the effective date of such event and shall be free of any
obligation or liability incurred on account of the activities of the Partnership
after such time.
Section 13.5 Transfer of Interest. Except as otherwise provided herein, the
General Partner may not assign, transfer, mortgage or sell any portion of its
interest in the Partnership, or enter into any agreement as the result of which
any Person shall obtain an Interest in the Partnership, without the consent of
the Limited Partner. A transferee of the General Partner's interest in the
Partnership shall not become a General Partner.
Section 13.6 Payment to General Partner Upon Resignation, Death or
Insanity.
(a) Upon the resignation of the General Partner pursuant to Section 13.1,
or the death or insanity of the General Partner if an individual, or dissolution
<PAGE>
of the General Partner if a corporation, partnership, trust or other form of
legal entity, and if the business of the Partnership is to be continued with one
or more successor or additional General Partner(s), the Partnership shall have
the right, with the approval of the Limited Partner to liquidate such General
Partner's Partnership Interest upon payment to such General Partner of the Fair
Market Value of such Interest as determined by two independent appraisers. If
the Partnership does not liquidate the General Partner's Partnership Interest
pursuant to the previous sentence, then the General Partner shall retain the
same Interest in the Income, Losses, Tax Credits, Distributions and Capital of
the Partnership as it previously held under this Agreement, but such Interest
shall be held as a special limited partner; and the General Partner shall not be
personally liable for Partnership debts incurred after such General Partner's
general partner Interest is liquidated. The resigning General Partner or its
representative as the case may be shall choose one appraiser and the successor
or continuing General Partner(s) shall choose one appraiser. If such appraisers
cannot agree upon the Fair Market Value of the General Partner's Partnership
Interest within 30 days after liquidation of the General Partner's Interest, the
two appraisers so chosen shall jointly choose a third appraiser. The Fair Market
Value of the General Partner's Partnership Interest shall be the appraisal
submitted by the third appraiser whose determination shall be final and binding.
Each of the parties shall compensate its own appraiser and the compensation of
the third appraiser shall be borne equally by such parties. If the continuing or
successor General Partner(s) fail to choose an appraiser, the Fair Market Value
of the General Partner's Partnership Interest shall be determined by the
appraiser chosen by the resigning General Partner or its representative as the
case may be. If the General Partner fails to choose an appraiser, the Fair
Market Value of the General Partner's Partnership Interest shall be determined
by the appraiser chosen by the continuing or successor General Partner(s).
(b) The purchase price of the General Partner's Partnership Interest upon
resignation, dissolution, death or insanity, as determined pursuant to Section
13.6(a), shall be paid by the Partnership by delivering to the General Partner
or its representative as the case may be the Partnership's unsecured promissory
note bearing interest at a rate which is equal to the lesser of 2% per annum in
excess of the then prevailing prime or reference rate charged by Bank of America
N.T. & S.A., Main Office, San Francisco, California, or the maximum legal rate.
Said note shall be payable upon Liquidation in accordance with state law
priority. The note shall also provide that the Partnership may prepay all or any
part thereof without penalty. Notwithstanding the foregoing: if such note is
delivered following the resignation of the General Partner then (i) such note
shall not bear interest and (ii) the principal payable to the resigned General
Partner shall be limited in amount and date of payment to Distributions which
such resigned General Partner would have received under this Agreement had the
General Partner not resigned.
<PAGE>
ARTICLE XIV
BOOKS AND ACCOUNTS, REPORTS,
TAX RETURNS, FISCAL YEAR AND BANKING
Section 14.1 Books and Accounts.
(a) The General Partner shall cause the Partnership to keep and maintain at
its principal executive office full and complete books and records which shall
include each of the following:
(1) a current list of the full name and last known business or residence
address of each Partner set forth in alphabetical order together with the
Capital Contribution and the share in Profits and Losses of each Partner;
(2) 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;
(3) copies of the Partnership's federal, state and local income tax
information returns and reports, if any, for the six most recent taxable years;
(4) copies of the original of this Agreement and all amendments thereto;
(5) financial statements of the Partnership for the six most recent fiscal
years; and
(6) the Partnership's books and records for at least the current and past
three fiscal years.
(b) Upon the request of the Limited Partner, the General Partner shall
promptly deliver to the Limited Partner, at the expense of the Partnership, a
copy of the information set forth in Section 14.1(a)(1), (2) or (4) above. The
Limited Partner shall have the right upon reasonable request and during normal
business hours to inspect and copy any of the foregoing, or any of the other
books and records of the Partnership or the Project at its own expense and, upon
reasonable 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.
Section 14.2 Accounting Reports.
(a) By March 1 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
their federal and state income tax returns and other tax returns with regard to
<PAGE>
the jurisdiction(s) in which the Partnership is formed and in which the Project
is located.
(b) By March 1 of each calendar year the General Partner shall send to each
Person who was a Limited Partner at any time during such fiscal year: (1) a
balance sheet as of the end of such fiscal year and statements of income,
Partners' equity and changes in financial position for such fiscal year prepared
in accordance with generally accepted accounting principles and accompanied by
an auditor's report containing an opinion of the Partnership's Accountants; (2)
a report (which need not be audited) of any Distributions made to Persons who
were Limited Partners at any time during the fiscal year, separately identifying
Distributions from Cash Flow From Operations for the fiscal year, Cash Flow From
Operations for prior years, Sale or Refinancing Proceeds, and reserves; (3) a
report setting forth the amount of all fees and other compensation and
Distributions and reimbursed expenses paid by the Partnership for the fiscal
year to the General Partner or Affiliates of the General Partner and the
services performed in consideration therefor, which report shall be verified by
the Partnership's 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; (4) a copy of the Project's rent roll for the
most recent calendar quarter; (5) a statement signed by the General Partner
indicating the number of apartment units which are occupied by Qualified
Tenants; and (6) a report of the significant activities of the Partnership
during the quarter.
(c) Within 60 days after the end of each fiscal quarter in which a Sale or
Refinancing of the Project occurs, the General Partner shall send to each Person
who was a Limited Partner at the time of the Sale or Refinancing a report as to
the nature of the Sale or Refinancing and as to the Profits and Losses for tax
purposes and Sale or Refinancing Proceeds arising from the Sale or Refinancing.
Section 14.3 Other Reports. The General Partner shall also provide to the
Limited Partner:
(a) During the period of construction, by the tenth day of each month a
copy of the previous month's Construction Loan draw request and the inspecting
architect's certification;
(b) During the rent-up phase, and continuing until the end of the first
six-month period during which the Project has a sustained occupancy of 95% or
better, by the tenth day of each month within such period a copy of the previous
<PAGE>
month's rent roll (through the last day of the month), a tenant LIHTC compliance
worksheet similar to the monthly initial tenant certification worksheet included
in Exhibit "G" attached hereto and incorporated herein by this reference, and
copies of all initial tenant files including completed applications, completed
questionnaires or checklists of income and assets, documentation of third party
verification of income and assets, income certification forms (LIHTC specific)
and executed lease agreements collected by the Management Agent, or General
Partner, verifying each tenant's eligibility as a Qualified Tenant;
(c) A quarterly tax credit compliance report similar to the worksheet
included in Exhibit "G". In order to verify the reliability of the information
being provided on the compliance report the Limited Partner may request a small
sampling of tenant files to be provided. The sampling will include, but not be
limited to, copies of tenant applications, certifications and third party
verifications used to qualify tenants. If any inaccuracies are found to exist on
the tax credit compliance report or any items of noncompliance are discovered
then the sampling will be expanded as determined by the Limited Partner.
(d) By September 15 of each year, an estimate of LIHTC for that year;
(e) If the Project receives a reservation of LIHTC in one year but will not
complete the construction and rent-up until a later year, the General Partner
will provide to the Limited Partner by December 31 of the year during which the
reservation is received an audited cost certification together with the
accountant's work papers verifying that the Partnership has expended the
requisite 10% of the reasonably expected cost basis to meet the carryover test
provisions of Section 42 of the Code;
(f) During the Compliance Period, no later than the day any such
certification is filed, copies of any certifications which the Partnership must
furnish to federal or state governmental authorities administering any Tax
Credit program including, but not limited to, copies of all annual tenant
recertifications required under Section 42 of the Code;
(g) On or before 30 days after each calendar quarter of every year the
Partnership shall send to the Limited Partner a report on operations, in the
form attached hereto as Exhibit "G", an unaudited income statement showing all
activity in the reserve accounts required to be maintained pursuant to Section
VIII of this Agreement and a Tax Credit compliance report similar in form to
that attached hereto as Exhibit "G";
(h) By the annual renewal date of each and every year, an executed original
or certified copy of each and every insurance policy required by the terms of
this Agreement;
<PAGE>
(i) On or before March 15th of each calendar year, the General Partner's
updated financial statement as of December 31 of the previous year;
(j) On or before November 1 of each calendar year, a copy of the following
year's proposed operating budget. Each such budget shall contain an amount
required for reserves in accordance with Article VIII and for the payment of
real estate taxes, insurance, debt service and other payments; and
(k) Notice of the occurrence, or of the likelihood of occurrence, of any
event which has had or is likely to have a material adverse effect upon the
Project or the Partnership, including, but not limited to, any breach of any of
the representations and warranties set forth in Section 9.11 of this Agreement,
and any inability of the Partnership to meet its cash obligations as they become
payable, within ten days after the occurrence of such event.
Section 14.4 Late Reports. If the General Partner or Special Limited
Partner does not cause the Partnership to fulfill its obligations under Sections
14.2 and 14.3 within the time periods set forth therein, the General Partner or
Special Limited Partner shall pay as damages the sum of $100.00 per week (plus
interest) to the Limited Partner until such obligations shall have been
fulfilled. Such damages shall be paid forthwith by the General Partner or
Special Limited Partner, and failure to so pay shall constitute a material
default of the General Partner hereunder. In addition, if the General Partner or
Special Limited Partner shall so fail to pay, the General Partner or Special
Limited Partner and their Affiliates shall forthwith cease to be entitled to the
annual Incentive Management Fee and to the payment of any Cash Flow From
Operations to which the General Partner or Special Limited Partner may otherwise
be entitled hereunder. Such payments of the Incentive Management Fee and Cash
Flow From Operations shall be restored only upon payment of such damages in full
and any amount of such damages not so paid shall be deducted against payments of
the Incentive Management Fee and Cash Flow From Operations otherwise due to the
General Partner or its Affiliates.
Section 14.5 Annual Site Visits. On an annual basis a representative of the
Limited Partner, at the Limited Partner's expense, will conduct a site visit
which will include, in part, an inspection of the property, a review of the
office and tenant files and an interview with the property manager. The Limited
Partner may, in its sole discretion, cancel all or any part of the annual site
visit.
Section 14.6 Tax Returns. The General Partner shall cause income tax
returns for the Partnership to be prepared and timely filed with the appropriate
federal, state and local taxing authorities. The General Partner shall be the
tax matters partner for purposes of Section 6231(a)(7) of the Code.
<PAGE>
Section 14.7 Fiscal Year. The fiscal year of the Partnership shall be the
calendar year or such other period as may be approved by the Internal Revenue
Service for federal income tax purposes.
Section 14.8 Banking. All funds of the Partnership shall be deposited in a
separate bank account or accounts as shall be determined by the General Partner.
All withdrawals therefrom shall be made upon checks signed by the General
Partner or by any person authorized to do so by the General Partner. The General
Partner shall provide to any Partner who requests same the name and address of
the financial institution, the account number and other relevant information
regarding any Partnership bank account.
Section 14.9 Certificates and Elections.
(a) The General Partner shall file the First Year Certificate within 90
days following the close of the taxable year during which Completion of
Construction occurs and thereafter shall timely file any certificates which the
Partnership must furnish to federal or state governmental authorities
administering the Tax Credit programs under Section 42 of the Code.
(b) The General Partner may, but is not required to, cause the Partnership
to make or revoke the election referred to in Section 754 of the Code, as
amended, or any similar provisions enacted in lieu thereof.
ARTICLE XV
DISSOLUTION, WINDING UP, TERMINATION
AND LIQUIDATION OF THE PARTNERSHIP
Section 15.1 Dissolution of Partnership. The Partnership shall be dissolved
upon the expiration of its term or the earlier occurrence of any of the
following events:
(a) The retirement, removal, Bankruptcy, dissolution, death or insanity of
the General Partner, unless (1) at the time there is at least one other General
Partner who will continue as General Partner, or (2) within 90 days after the
occurrence of any such event all of the Partners elect to continue the business
of the Partnership;
(b) The Sale of the Project and the receipt in cash of the full amount of
the proceeds of such Sale; or
(c) The Partnership becomes subject to Bankruptcy.
Notwithstanding the foregoing, however, in no event shall the Partnership
terminate prior to the expiration of its term if such termination would result
in a violation of the Mortgage Note or any other agreement with or rule or
regulation of Urban Residential Finance Authority to which the Partnership is
subject.
<PAGE>
Section 15.2 Return of Capital Contribution upon Dissolution. Except as
provided in Sections 7.3 and 7.4 of this Agreement, which provide for a
reduction or refund of the Limited Partner's Capital Contribution under certain
circumstances, and which shall represent the personal obligation of the General
Partner, as well as the obligation of the Partnership, each holder of a
Partnership Interest shall look solely to the assets of the Partnership for all
Distributions with respect to the Partnership (including the return of its
Capital Contribution) and shall have no recourse therefor (upon dissolution or
otherwise) against the General Partner or any Limited Partner. No Partner shall
have any right to demand or receive property other than money upon dissolution
and termination of the Partnership.
Section 15.3 Distributions of Assets. Upon a dissolution of the
Partnership, the General Partner (or, if there is no General Partner then
remaining, such other Person(s) designated as the liquidator of the Partnership
by the Limited Partner or by the court in a judicial dissolution) shall take
full account of the Partnership assets and liabilities and shall liquidate the
assets as promptly as is consistent with obtaining the fair value thereof.
(a) Upon dissolution and termination, after payment of, or adequate
provision for, the debts and obligations of the Partnership pursuant to Section
11.2(a) through and including 11.2(c), the remaining assets of the Partnership
(or the proceeds of sales or other dispositions in liquidation of the
Partnership assets as may be determined by the General Partner or other
liquidator) shall be distributed to the Partners in accordance with the positive
balances in their Capital Accounts. In order to make a final determination of
the Capital Account of each Partner:
(1) the allocations pursuant to Section 11.2(d), Section 11.2(e) and
Section 11.2(f) shall be made, but not distributed; and
(2) the Income and Losses of the Partnership upon Liquidation or
dissolution and winding up shall then be allocated among the Partners as set
forth in Section 10.2.
(b) In the event that a General Partner has a deficit balance in its
Capital Account following the liquidation of the Partnership or its Interest, as
determined after taking into account all Capital Account adjustments for the
Partnership's taxable year in which such liquidation occurs, such General
Partner shall pay to the Partnership the lesser of:
(1) the amount necessary to restore such deficit balance to zero in
compliance with Treasury Regulation Section 1.704-1(b)(2)(ii)(b)(3); or
(2) 1.01% of the Capital Contributions.
<PAGE>
(3) The deficit reduction amount shall be paid by the General Partner by
the end of such taxable year (or, if later, within 90 days after the date of
liquidation) and shall, upon Liquidation of the Partnership, be paid to
creditors of the Partnership or distributed to other Partners in accordance with
their positive Capital Account balances.
(c) With respect to assets distributed in kind to the Partners in
Liquidation or otherwise:
(1) unrealized appreciation or unrealized depreciation in the values of
such assets shall be deemed to be Income and Losses realized by the Partnership
immediately prior to the liquidation or other Distribution event; and
(2) such Income and Losses shall be allocated to the Partners in accordance
with Section 10.2 hereof, and any property so distributed shall be treated as a
Distribution of an amount in cash equal to the excess of such Fair Market Value
over the outstanding principal balance of and accrued interest on any debt by
which the property is encumbered.
(d) For the purposes of Section 15.3(c), "unrealized appreciation" or
"unrealized depreciation" shall mean the difference between the Fair Market
Value of such assets, taking into account the Fair Market Value of the
associated financing but subject to Section 7701(g) of the Code, and the
Partnership's adjusted basis in such assets for book purposes. Section 15.3(c)
is merely intended to provide a rule for allocating unrealized Income and Losses
upon liquidation or other Distribution event, and nothing contained in Section
15.3(c) or elsewhere in this Agreement is intended to treat or cause such
Distributions to be treated as sales for value. The Fair Market Value of such
assets shall be determined by an independent appraiser to be selected by the
General Partner.
Section 15.4 Deferral of Liquidation. If at the time of liquidation the
General Partner or other liquidator shall determine that an immediate sale of
part or all of the Partnership assets could cause undue loss to the Partners,
the liquidator may, in order to avoid loss, either defer liquidation and retain
all or a portion of the assets or distribute all or a portion of the assets to
the Partners in kind. In the event that the liquidator elects to distribute such
assets in kind, the assets shall first be assigned a value (by appraisal by an
independent appraiser) and the unrealized appreciation or depreciation in value
of the assets shall be allocated to the Partners' Capital Accounts, as if such
assets had been sold, in the manner described in Section 10.2, and such assets
shall then be distributed to the Partners as provided herein. In applying the
preceding sentence, the Project shall not be assigned a value less than the
unamortized principal balance of any loan secured thereby.
<PAGE>
Section 15.5 Liquidation Statement. Each of the Partners shall be furnished
with a statement prepared or caused to be prepared by the General Partner or
other liquidator, which shall set forth the assets and liabilities of the
Partnership as of the date of complete liquidation. Upon compliance with the
distribution plan as outlined in Sections 15.3 and 15.4, the Limited Partner
shall cease to be such and the General Partner shall execute, acknowledge and
cause to be filed those certificates referenced in Section 15.6.
Section 15.6 Certificates of Dissolution; Certificate of Cancellation of
Certificate of Limited Partnership.
(a) Upon the dissolution of the Partnership, the General Partner shall
cause to be filed in the office of, and on a form prescribed by the Secretary of
State of the State, a certificate of dissolution. The certificate of dissolution
shall set forth the Partnership's name, the Secretary of State's file number for
the Partnership, the event causing the Partnership's dissolution and the date of
the dissolution.
(b) Upon the completion of the winding up of the Partnership's affairs, the
General Partner shall cause to be filed in the office of, and on a form
prescribed by, the Secretary of State of the State, a certificate of
cancellation of the Certificate of Limited Partnership. The certificate of
cancellation of the Certificate of Limited Partnership shall set forth the
Partnership's name, the Secretary of State's file number for the Partnership,
and any other information which the General Partner determines to include
therein.
ARTICLE XVI
AMENDMENTS
This Agreement may be amended at any time by the Limited Partner; provided,
however, that this Agreement may be amended to add a Substitute Limited Partner
only as set forth in Article XII of this Agreement; and provided, further, that,
this Agreement may be amended from time to time by the General Partner, without
the consent of the Limited Partner, to add to the representations, duties or
obligations of the General Partner or its Affiliates or surrender any right or
power granted to the General Partner or Affiliates herein which may be
inconsistent with any other provisions herein. Notwithstanding the foregoing, no
amendment shall change the Partnership to a general partnership; extend the term
of the Partnership beyond the date provided for in this Agreement; modify the
limited liability of the Limited Partner; allow the Limited Partner to take
control of the Partnership's business within the meaning of the Act; reduce or
defer the realization of any Partner's interest in Income, Losses, Tax Credits,
Distributions or compensation hereunder, or increase any Partner's obligations
hereunder, without the consent of the Partner so affected; or change the
provisions of this Article XVI.
<PAGE>
ARTICLE XVII
MISCELLANEOUS
Section 17.1 Voting Rights.
(a) The Limited Partner shall have no right to vote upon any matters
affecting the Partnership, except as provided in this Agreement. Notwithstanding
the foregoing, the Limited Partner may, without the concurrence of the General
Partner:
(1) Approve, but not initiate, the Sale or Refinancing of the Project;
(2) Remove the General Partner for cause and elect a substitute General
Partner as provided in this Agreement;
(3) Elect a successor General Partner upon the Withdrawal of the General
Partner;
(4) Approve, but not initiate, the dissolution of the Partnership; or
(5) Subject to the provisions of Article XVI hereof, amend this Agreement.
(b) On any matter where the Limited Partner has the right to vote, votes
may only be cast at a duly called meeting of the Partnership or through written
action without a meeting.
Section 17.2 Meeting of Partnership. Meetings of the Partnership may be
called either: (a) at any time by the General Partner; or (b) upon the General
Partner's receipt of a written or facsimile request from the Limited Partner
setting forth the purpose of such meeting. Within ten days after receipt of the
Limited Partner's written or facsimile request for a meeting, the General
Partner shall provide all Partners with written notice of the meeting (which
shall be by telephone conference, or at the principal place of business of the
Partnership or such other location referenced in the notice) to be held not less
than 15 days nor more than 30 days after receipt of such written or facsimile
request from the Limited Partner, which notice shall specify the time and place
of such meeting and the purpose or purposes thereof. If the General Partner
fails to provide the written notice of the meeting within ten days after receipt
of the Limited Partner's request to hold a meeting, then the Limited Partner may
provide the written notice of the meeting to all the Partners, which notice
shall specify the time and place of such meeting and the purpose or purposes
thereof. All meetings and actions of the Limited Partner shall be governed in
all respects, including matters relating to notice, quorum, adjournment,
proxies, record dates and actions without a meeting, by the applicable
provisions of the Act, as it shall be amended from time to time.
<PAGE>
Section 17.3 Notices. Any notice given pursuant to this Agreement may be
served personally on the Partner to be notified, or may be mailed, first class
postage prepaid, to the following address, or to such other address as a party
may from time to time designate in writing:
To the General Partner: URBAN RESIDENTIAL MANAGEMENT, INC. 100 Peachtree
Street, N.W., Ste. 400 Atlanta, Georgia 30303
To the Limited Partner: WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 3 c/o
WNC & Associates, Inc. 3158 Redhill Ave., Suite 120 Costa Mesa, CA 92626-3416
Section 17.4 Successors and Assigns. All the terms and conditions of this
Agreement shall be binding upon and inure to the benefit of the successors and
assigns of the Partners.
Section 17.5 Recording of Certificate of Limited Partnership. If the
General Partner should deem it advisable to do so, the Partnership shall record
in the office of the County Recorder of the county in which the principal place
of business of the Partnership is located a certified copy of the Certificate of
Limited Partnership, or any amendment thereto, after such Certificate or
amendment has been filed with the Secretary of State of the State.
Section 17.6 Amendment of Certificate of Limited Partnership.
(a) The General Partner shall cause to be filed, within 30 days after the
happening of any of the following events, an amendment to the Certificate of
Limited Partnership reflecting the occurrence thereof:
(1) A change in the name of the Partnership.
(2) A change in the street address of the Partnership's principal executive
office.
(3) A change in the address, or the Withdrawal, of a General Partner, or a
change in the address of the agent for service of process, unless a corporate
agent is designated, or appointment of a new agent for service of process.
(4) The admission of a General Partner and that Partner's address.
(5) The discovery by the General Partner of any false or erroneous material
statement contained in the Certificate of Limited Partnership or any amendment
thereto.
<PAGE>
(b) The Certificate of Limited Partnership may also be amended in
conformity with this Agreement at any time in any other respect that the General
Partner determines.
(c) The General Partner shall cause the Certificate of Limited Partnership
to be amended, when required or permitted as aforesaid, by filing a certificate
of amendment thereto in the office of, and on a form prescribed by, the
Secretary of State of the State. The certificate of amendment shall set forth
the Partnership's name, the Secretary of State's file number for the Partnership
and the text of the amendment.
Section 17.7 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and said counterparts
shall constitute but one and the same instrument which may sufficiently be
evidenced by one counterpart.
Section 17.8 Captions. Captions to and headings of the Articles, Sections
and subsections of this Agreement are solely for the conveniences of the
parties, are not a part of this Agreement, and shall not be used for the
interpretation or determination of the validity of this Agreement or any
provision hereof.
Section 17.9 Certain Provisions. If the operation of any provision of this
Agreement would contravene the provisions of applicable law, or would result in
the imposition of general liability on any Limited Partner, such provisions
shall be void and ineffectual.
Section 17.10 Saving Clause. If any provision of this Agreement, or the
application of such provision to any Person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to Persons or circumstances other than those as to which it is held invalid,
shall not be affected thereby.
Section 17.11 Number and Gender. All pronouns and any variations thereof
shall be deemed to refer to the masculine, feminine, neuter, singular or plural
as the identity of the Person or Persons may require.
Section 17.12 Entire Agreement. This Agreement constitutes the entire
understanding between the parties with respect to the subject matter hereof and
all prior understandings and agreements between the parties, written or oral,
respecting this transaction are merged in this Agreement.
Section 17.13 Governing Law. This Agreement and its application shall be
governed by the laws of the State.
Section 17.14 Attorney's Fees. If a suit or action is instituted in
connection with an alleged breach of any provision of this Agreement, the
prevailing party shall be entitled to recover, in addition to costs, such sums
as the court may adjudge reasonable as attorney's fees, including fees on any
appeal.
<PAGE>
Section 17.15 Receipt of Correspondence. The Partners agree that the
General Partner shall send to the Limited Partner a copy of any correspondence
relative to the Project's noncompliance with the Mortgage Note, relative to the
acceleration of the Mortgage Note and/or relative to the disposition of the
Project.
IN WITNESS WHEREOF, this Amended and Restated Agreement of Limited
Partnership of CASCADE PINES, L.P. II, a Georgia limited partnership, is made
and entered into as of the day of , 1996.
GENERAL PARTNER
URBAN RESIDENTIAL MANAGEMENT, INC.
By: __________________________________
Herbert Kohn, President
WITHDRAWING ORIGINAL LIMITED PARTNER
BRENCOR, INC.
By: ___________________________________
Robert A. Crowder, President
SPECIAL LIMITED PARTNER
BRENCOR, INC.
By: _______________________________
Robert A. Crowder, President
LIMITED PARTNER
WNC HOUSING TAX CREDIT FUND V, L.P.,
SERIES 3
By: WNC & ASSOCIATES, INC.
General Partner
By: _________________________
John B. Lester, Jr.,
President
<PAGE>
EXHIBIT A TO PARTNERSHIP AGREEMENT
LEGAL DESCRIPTION
All that tract or parcel of land lying and being in Land Lots 218 and 231
of the 14th District of Fulton County, Georgia, and being more particularly
described as follows:
BEGINNING at an iron pin on the southwest side of Harbin Road, said iron
pin being 200 feet northwesterly, as measured along the southwesterly side of
Harbin Road from the intersection of the southwesterly side of Harbin Road with
the northwesterly side of Campbellton Road; and from said point of beginning
running thence south 73 degrees 47 minutes 45 seconds west, 399.85 feet to an
iron pin; thence south 48 degrees 44 minutes 30 seconds west, 199.30 feet to an
iron pin; thence north 27 degrees 18 minutes 15 seconds west, 149.33 feet to an
iron pin; thence south 48 degrees 22 minutes 15 seconds west, 1204.96 feet to an
iron pin; thence south 39 degrees 39 minutes 15 seconds east; 300 feet to an
iron pin; thence south 50 degrees 14 minutes 30 seconds west, 199.98 feet to an
iron pin; thence south 39 degrees 39 minutes 15 seconds east, 53.65 feet to an
iron pin located on the south line of said Land Lot 218; thence north 88 degrees
42 minutes 30 seconds west, along the south line of said Land Lot 218, a
distance of 228.37 feet to an iron pin; thence north 2 degrees 20 minutes east
600.32 feet to an iron pin; thence south 87 degrees 18 minutes west, 62.43 feet
to an iron pin; thence north 3 degrees 07 minutes west, 390.09 feet to an iron
pin; thence north 15 degrees 40 minutes west, 210.11 feet to an iron pin; thence
north 89 degrees 29 minutes 30 seconds west, 219.86 feet to an iron pin; thence
north 15 degrees 47 minutes 43 seconds west, 220.85 feet to an iron pin; thence
south 88 degrees 30 minutes 30 seconds east 1364.46 feet to an iron pin; thence
north 80 degrees 04 minutes 45 seconds east, 615.47 feet to an iron pin located
on the southwest side of Harbin Road; thence south 26 degrees 50 minutes east,
along the southwest side of Harbin Road, 188.10 feet to an iron pin and the
point of BEGINNING.
TOGETHER WITH a non-exclusive easement for ingress and egress more
particularly described as follows:
ALL THAT TRACT or parcel of land lying and being in Land Lot 218 of the
14th District of Fulton County, Georgia, and being more particularly described
as follows:
BEGINNING at an iron pin located on the northwest right of way of
Campbellton Road 32.85 feet northeasterly from the intersection of the northwest
right of way of Campbellton Road with the south line of Land Lot 218, which line
is also the north line of Land Lot 219; running thence north 39 degrees 39
minutes 15 seconds west, 500 feet to an iron pin; thence north 48 degrees 22
minutes 15 seconds east, 60.02 feet to a point; thence south 39 degrees 39
<PAGE>
minutes 15 seconds east, 503.50 feet to a point located on the northwest side of
the right of way of Campbellton Road; thence southwesterly along the northwest
right of way of Campbellton Road, 60 feet to an iron pin and the point of
BEGINNING.
LESS AND EXCEPT therefrom the following tract or parcel of land:
Beginning at a point on the northern right of way of Campbellton Road, S.W.
1,140 feet northeasterly as measured along said right of way from the
northeastern intersection of the rights of way of Campbellton Road, S.W. and
Childress Drive, S.W. said point being 32.85 feet northeasterly as measured
along the northern right of way of Campbellton Road from the intersection of
said right of way and the line forming the boundary of Land Lots 218 and 219 of
the 14th District of Fulton County, Georgia; thence running 5 feet northwesterly
along the property line of 2909 Campbellton Road along a bearing of N 39 degrees
39 minutes 15 seconds W to a point on said property line; thence running 60 feet
along a bearing of N 50 degrees 14 minutes 30 seconds E to a point on the
northeast property line of 2909 Campbellton Road; thence running 5 feet
southeasterly along said property line along a bearing of S 39 degrees 39
minutes 15 seconds E to a point on the northern right of way of Campbellton
Road, S.W.; thence running 60 feet southwesterly along the northern right of way
of Campbellton Road, S.W. to the Point of Beginning, and containing 300 square
feet (0.0069 acres).
Being the same property conveyed by Warranty Deed from John Hancock Mutual
Life Insurance Company to Deerfield Associates, a Georgia Limited Partnership
dated April 17, 1979, filed for record April 18, 1979 and recorded in Deed Book
7221, page 470, in the Office of the Clerk of the Superior Court of Fulton
County, Georgia.
<PAGE>
EXHIBIT B TO PARTNERSHIP AGREEMENT
FORM OF LEGAL OPINION
WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 3
c/o WNC & Associates, Inc.
3158 Redhill Avenue, Suite 120
Costa Mesa, California 92626
RE: CASCADE PINES, L.P. II
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in
connection with the investment by WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 3,
a California limited partnership (the "Limited Partner") in CASCADE PINES, L.P.
II (the "Partnership"), a Georgia limited partnership formed to own, develop,
(construct/-rehabilitate) finance and operate an apartment complex for
low-income persons (the "Apartment Complex") in Atlanta, Fulton County, Georgia.
The general partner(s) of the Partnership (is/are) URBAN RESIDENTIAL MANAGEMENT,
INC. (the "General Partner(s)").
In rendering the opinions stated below, we have examined and relied upon
the following:
(i) [Certificate of Limited Partnership];
(ii) [Agreement of Limited Partnership] (the "Partnership Agreement");
(iii) A preliminary reservation letter from [State Allocating Agency] (the
"State Agency") dated _________, 199___ conditionally awarding $_______________
in Federal tax credits annually for each of ten years and $_______________ in
California tax credits annually for each of four years for the Apartment
Complex; and
(iv) Such other documents, records and instruments as we have deemed
necessary in order to enable us to render the opinions referred to in this
letter.
For purposes of rendering the opinions stated below we have assumed that,
in those cases in which we have not been involved directly in the preparation,
execution or the filing of a document, that (a) the document reviewed by us is
an original document, or a true and accurate copy of the original document, and
has not been subsequently amended, (b) the signatures on each original document
are genuine, and (c) each party who executed the document had proper authority
and capacity.
<PAGE>
Based on the foregoing we are of the opinion that:
(a) ________________________, one of the General Partners, is a
[corporation/partnership] duly formed and validly existing under the laws of the
State of _____________________ and has full power and authority to enter into
and perform its obligations under the Partnership Agreement.
_____________________, one of the other General Partners, is a
[corporation/partnership] duly formed and validly existing under the laws of the
State of __________________ and has full power and authority to enter into and
perform its obligations under the Partnership Agreement.
(b) The Partnership is a limited partnership duly formed and validly
existing under the laws of the State of Georgia.
(c) The Partnership is validly existing under and subject to the laws of
Georgia with full power and authority to own, develop, [construct/rehabilitate],
finance and operate the Apartment Complex and to otherwise conduct business
under the Partnership Agreement.
(d) Execution of the Partnership Agreement by the General Partner(s) has
been duly and validly authorized by or on behalf of the General Partner(s) and,
having been executed and delivered in accordance with its terms, the Partnership
Agreement constitutes the valid and binding agreement of the General Partner(s),
enforceable in accordance with its terms.
(e) The execution and delivery of the Partnership Agreement by the General
Partner(s) does not conflict with and will not result in a breach of any of the
terms, provisions or conditions of any agreement or instrument known to counsel
to which any of the General Partner(s) or the Partnership is a party or by which
any of them may be bound, or any order, rule, or regulation to be applicable to
any of such parties of any court or governmental body or administrative agency
having jurisdiction over any of such parties or over the property.
(f) To the best of counsel's knowledge, after due inquiry, there is no
litigation or governmental proceeding pending or threatened against, or
involving the Apartment Complex, the Partnership or any General Partner which
would materially adversely affect the condition (financial or otherwise) or
business of the Apartment Complex, the Partnership or any of the Partners of the
Partnership.
(g) The Limited Partner has been admitted to the Partnership as a limited
partner of the Partnership under __________ law and are entitled to all of the
rights of limited partners under the Partnership Agreement. Except as described
<PAGE>
in the Partnership Agreement, no person is a partner of or has any legal or
equitable interest in the Partnership, and all former partners of record or
known to counsel have validly withdrawn from the Partnership and have released
any claims against the Partnership arising out of their participation as
partners therein.
(h) Liability of the Limited Partner for obligations of the Partnership is
limited to the amount of the Limited Partner's capital contributions required by
the Partnership Agreement.
(i) Neither the General Partner(s) of the Partnership nor the Limited
Partner will have any liability for the Mortgage Note or the Mortgage Loan
represented thereby (as those terms are defined in the Partnership Agreement,
and the lender of the Mortgage Loan will look only to its security in the
Apartment Complex for repayment of the Mortgage Loan.
(j) The Partnership owns a fee simple interest in the Apartment Complex.
(k) To the best of our actual knowledge and belief, after due inquiry, the
Partnership has obtained all consents, permissions, licenses, approvals, or
orders required by all applicable governmental or regulatory agencies for the
development, [construction/rehabilitation] and operation of the Apartment
Complex, and the Apartment Complex conforms to all applicable Federal, state and
local land use, zoning, health, building and safety laws, ordinances, rules and
regulations.
(l) The Apartment Complex has obtained a preliminary reservation of low
income housing tax credits ("LIHTC") from the State Agency. The final allocation
of the LIHTC and ultimately eligibility of the Apartment Complex for such final
allocation are subject to a series of requirements which must be met, performed
or achieved at various times prior to and after such final allocation. Assuming
all such requirements are met, performed or achieved at the time or times
provided by applicable laws and regulations, the Apartment Complex will qualify
for LIHTC.
All of the opinions set forth above are qualified to the extent that the
validity of any provision of any agreement may be subject to or affected by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the rights of creditors generally. We do not express any opinion as to
the availability of any equitable or specific remedy upon any breach of any of
the covenants, warranties or other provisions contained in any agreement. We
have not examined, and we express no opinion with respect to, the applicability
of, or liability under, any Federal, state or local law, ordinance or regulation
<PAGE>
governing or pertaining to environmental matters, hazardous wastes, toxic
substances or the like.
We express no opinion as to any matter except those set forth above. These
opinions are rendered for use by the Limited Partner and its legal counsel which
will rely on this opinion in connection with federal income tax opinions to be
rendered by that firm. This opinion may not be delivered to or relied upon by
any other person or entity without our express written consent.
Sincerely,
- --------------------
<PAGE>
EXHIBIT C TO PARTNERSHIP AGREEMENT
CERTIFICATION AND AGREEMENT
CERTIFICATION AND AGREEMENT made as of the date written below by CASCADE
PINES, L.P. II, a Georgia limited partnership (the "Partnership"); URBAN
RESIDENTIAL MANAGEMENT, INC. (collectively referred to as the "General
Partner"); and BRENCOR, INC. (collectively referred to as the "Original Limited
Partner") for the benefit of WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 3, a
California limited partnership (the "Investment Partnership"), and WNC &
ASSOCIATES, INC. ("WNC").
WHEREAS, the Partnership proposes to admit the Investment Partnership as a
limited partner thereof pursuant to an Amended and Restated Agreement of Limited
Partnership of the Partnership (the "Partnership Agreement"), in accordance with
which the Investment Partnership will make substantial capital contributions to
the Partnership; and
WHEREAS, the Investment Partnership and WNC have relied upon certain
information and representations described herein in evaluating the merits of
investment by the Investment Partnership in the Partnership;
NOW, THEREFORE, to induce the Investment Partnership to enter into the
Partnership Agreement and become a limited partner of the Partnership, and for
$1.00 and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the Partnership, the General Partner and the
Original Limited Partner hereby agree as follows for the benefit of the
Investment Partnership and WNC.
1. Representations, Warranties and Covenants of the Partnership, the
General Partner and the Original Limited Partner
The Partnership, the General Partner and the Original Limited Partner
jointly and severally represent, warrant and certify to the Investment
Partnership and WNC that, with respect to the Partnership, as of the date
hereof:
1.1 The Partnership is duly organized and in good standing as a limited
partnership pursuant to the laws of the state of its formation with full power
and authority to own its apartment complex (the "Apartment Complex") and conduct
its business; the Partnership, the General Partner and the Original Limited
Partner have the power and authority to enter into and perform this
Certification and Agreement; the execution and delivery of this Certification
and Agreement by the Partnership, the General Partner and the Original Limited
Partner have been duly and validly authorized by all necessary action; the
<PAGE>
execution and delivery of this Certification and Agreement, the fulfillment of
its terms and consummation of the transactions contemplated hereunder do not and
will not conflict with or result in a violation, breach or termination of or
constitute a default under (or would not result in such a conflict, violation,
breach, termination or default with the giving of notice or passage of time or
both) any other agreement, indenture or instrument by which the Partnership or
any General Partner or Original Limited Partner is bound or any law, regulation,
judgment, decree or order applicable to the Partnership or any General Partner
or Original Limited Partner or any of their respective properties; this
Certification and Agreement constitutes the valid and binding agreement of the
Partnership, the General Partner and the Original Limited Partner, enforceable
against each of them in accordance with its terms.
1.2 The General Partner has delivered to the Investment Partnership, WNC or
their affiliates all documents and information which would be material to a
prudent investor in deciding whether to invest in the Partnership. All factual
information provided to the Investment Partnership, WNC or their affiliates
either in writing or orally, did not, at the time given, and does not, on the
date hereof, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances under which they are made.
1.3 Each of the representations and warranties contained in the Partnership
Agreement is true and correct as of the date hereof.
1.4 Each of the covenants and agreements of the Partnership and the General
Partner contained in the Partnership Agreement has been duly performed to the
extent that performance of any covenant or agreement is required on or prior to
the date hereof.
1.5 All conditions to admission of the Investment Partnership as the
investment limited partner of the Partnership contained in the Partnership
Agreement have been satisfied.
1.6 No default has occurred and is continuing under the Partnership
Agreement or any of the Project Documents (as such term is defined in the
Partnership Agreement) for the Partnership.
1.7 The Projected Annual Tax Credits (as such term is defined in the
Partnership Agreement Section 1.50) are $44,699 for 1997, $268,195 per year for
each of the years 1998 through 2006, and $223,496 for 2007, which the General
Partner has projected to be the total amount of LIHTC which will be allocated to
the Investment Partnership by the Partnership, constituting 99% of the aggregate
<PAGE>
amount of LIHTC of $2,681,950 to be available to the Partnership; provided,
however, that if the Actual Tax Credit (as such term is defined in Section 1.3
of the Partnership Agreement) for 1997 is greater (or less than) $44,699, the
Projected Tax Credit for the year 2007 shall be reduced (increased) by an amount
equal to the amount by which the Actual Tax Credit for 1997 exceeds (is less
than) $44,699.
1.8 The General Partner agrees to take all actions necessary to claim the
Projected Tax Credit, including, without limitation, the filing of Form(s) 8609
with the Internal Revenue Service.
1.9 No person or entity other than the Partnership holds any equity
interest in the Apartment Complex.
1.10 The Partnership has the sole responsibility to pay all maintenance and
operating costs, including all taxes levied and all insurance costs,
attributable to the Apartment Complex.
1.11 The Partnership, except to the extent it is protected by insurance and
excluding any risk borne by lenders, bears the sole risk of loss if the
Apartment Complex is destroyed or condemned or there is a diminution in the
value of the Apartment Complex.
1.12 No person or entity except the Partnership has the right to any
proceeds, after payment of all indebtedness, from the sale, refinancing, or
leasing of the Apartment Complex.
1.13 No General Partner is related in any manner to the Investment
Partnership, nor is any General Partner acting as an agent of the Investment
Partnership.
2. Miscellaneous
2.1 This Certification and Agreement is made solely for the benefit of the
Investment Partnership and WNC, and their respective successors and assignees,
and no other person shall acquire or have any right under or by virtue of this
Agreement.
2.2 This Certification and Agreement may be executed in several
counterparts, each of which shall be deemed to be an original, all of which
together shall constitute one and the same instrument.
2.3 Capitalized terms used but not defined in this Certification Agreement
shall have the meanings given to them in the Partnership Agreement.
<PAGE>
IN WITNESS WHEREOF, this Certificate and Agreement is made and entered into
as of the day of , 1996.
PARTNERSHIP
CASCADE PINES, L.P. II
By: URBAN RESIDENTIAL MANAGEMENT, INC.,
General Partner
By:
Herbert Kohn, President
GENERAL PARTNER
By: URBAN RESIDENTIAL MANAGEMENT, INC.
By:
Herbert Kohn, President
ORIGINAL LIMITED PARTNER
By: BRENCOR, INC.
By:
Robert A. Crowder, President
<PAGE>
EXHIBIT D TO THE PARTNERSHIP AGREEMENT
GENERAL PARTNER CERTIFICATION
This General Partner Certification is being issued to WNC HOUSING TAX
CREDIT FUND V, L.P., SERIES 3 ("Limited Partner") by URBAN RESIDENTIAL
MANAGEMENT, INC., General Partner of CASCADE PINES, L.P. II, a Georgia limited
partnership ("Partnership") in accordance with Section 7.2 of the Amended and
Restated Agreement of Limited Partnership of the Partnership ("Partnership
Agreement").
Capitalized terms used but not defined in this General Partner
Certification shall have the meanings given to them in the Partnership
Agreement.
WHEREAS, the Limited Partner is scheduled to make a Capital Contribution to
the Partnership;
WHEREAS, the Partnership Agreement requires the General Partner to issue
this Certification prior to the Limited Partner's payment; and
WHEREAS, the Limited Partner shall rely on this Certification in evaluating
the continued merits of its investment in the Partnership;
NOW, THEREFORE, to induce the Limited Partner to make its scheduled Capital
Contribution to the Partnership, the General Partner represents and warrants to
the Limited Partner that the following are true and correct as of the date
written below:
(a) The Partnership is a duly organized limited partnership validly
existing under the laws of the State and has complied with all filing
requirements necessary for the protection of the limited liability of the
Limited Partner.
(b) The Partnership Agreement and the Project Documents are in full force
and effect and neither the Partnership nor the General Partner is in breach or
violation of any provisions thereof.
(c) Existing Improvements, if any, on the Project have been completed
substantially in conformity with the Project Documents, and the Project is being
operated in accordance with standards and procedures which are prudent and
customary for the operation of properties similar to the Project.
(d) Additional Improvements on the Project, if any, shall be completed
substantially in conformity with the Project Documents and any other
<PAGE>
requirements necessary to obtain Completion of Construction.
(e) No Partner has or will have any personal liability with respect to, or
has or will have personally guaranteed the payment of, the Mortgage.
(f) The Partnership is in compliance with all construction and use codes
applicable to the Project and is not in violation of any zoning, environmental
or similar regulations applicable to the Project.
(g) The Partnership owns the fee simple interest in the Project.
(h) The Construction Contract has been entered into between the Partnership
and the Contractor; no other consideration or fee shall be paid to the
Contractor other than amounts set forth in the Construction Contract.
(i) A builder's risk insurance policy in favor of the Partnership will be
and is in full force and effect until Completion of Rehabilitation.
(j) As of the date hereof, at funding of the Construction Loan and upon
Permanent Mortgage Commencement, fire and extended coverage insurance for the
full replacement value of the Project (excluding the value of the land, site
utilities, landscaping and foundations) and worker's compensation and public
liability insurance, all in favor of the Partnership, is and will be in full
force and effect and will be kept in full force and effect during the term of
the Partnership; all such policies shall be in amounts and with insurers
satisfactory to Urban Residential Finance Authority. All such insurance policies
shall provide that they are not subject to cancellation without 30 days' prior
written notice to the Limited Partner and shall not contain any co-insurance
provisions.
(k) The Management Agent shall obtain a fidelity bond or a blanket position
bond to minimally include (1) comprehensive employee dishonesty, disappearance
and destruction, covering all principals of the Management Agent and all persons
or positions which manage the Project's assets, including, but not limited to,
rent, bank accounts and accounting records; (2) naming the Limited Partner as an
additional loss payee; and (3) insuring the Project for an amount equal to at
least two (2) months of the Project's gross potential income plus the Project's
total tenant security deposit liability.
(l) Except as otherwise disclosed to the Limited Partner in writing prior
to the execution of the Partnership Agreement, to the best of the General
Partner's knowledge based on the Phase I Environmental Report prepared for this
<PAGE>
Project: (1) no Hazardous Substance has been disposed of, or released to or
from, or otherwise now exists in, on, under or around, the Project and (2) no
aboveground or underground storage tanks are now or have ever been located on or
under the Project. The General Partner will not install or allow to be installed
any aboveground or underground storage tanks on the Project. The General Partner
covenants that the Project shall be kept free of Hazardous Materials and shall
not be used to generate, manufacture, refine, transport, treat, store, handle,
dispose of, transfer, produce or process Hazardous Materials, except in
connection with the normal maintenance and operation of any portion of the
project. The General Partner shall comply, or cause there to be compliance, with
all applicable Federal, state and local laws, ordinances, rules and regulations
with respect to Hazardous Materials and shall keep, or cause to be kept, the
Project free and clear of any liens imposed pursuant to such laws, ordinances,
rules and regulations. The General Partner must promptly notify the Limited
Partner in writing (3) if it knows, or suspects or believes there may be any
Hazardous Substance in or around any part of the Project, any Improvements
constructed on the Project, or the soil, groundwater or soil vapor, (4) if the
General Partner or the Partnership may be subject to any threatened or pending
investigation by any governmental agency under any law, regulation or ordinance
pertaining to any Hazardous Substance, and (5) of any claim made or threatened
by any Person, other than a governmental agency, against the Partnership or
General Partner arising out of or resulting from any Hazardous Substance being
present or released in, on or around any part of the Project.
(m) The General Partner has not executed and will not execute any
agreements with provisions contradictory to, or in opposition to, the provisions
of the Partnership Agreement.
(n) Delivery of the Projected Annual Tax Credits.
(o) No charges or encumbrances exist with respect to the Project other than
those which are created or permitted by the Project Documents or are noted or
excepted in the title policy for the Project.
(p) The buildings on the Project site constitute or shall constitute a
"qualified low-income housing project" as defined in Section 42(g) of the Code,
and as amplified by the Treasury Regulations thereunder. In this connection, not
later than December 31 of the first year in which the Partners elect the LIHTC
to commence in accordance the Code, the Project will satisfy the Minimum
Set-Aside Test.
(q) As of the date of this Agreement all accounts of the Partnership
required to be maintained under the terms of the Project Documents, including,
<PAGE>
without limitation, any account for replacement reserves, are currently funded
to required levels, including levels required by any authority.
(r) The General Partner has not lent or otherwise advanced any funds to the
Partnership other than its Capital Contribution and the Partnership has no
unsatisfied obligation to make any payments of any kind to the General Partner
or any Affiliate thereof outstanding as of the date of this Agreement.
(s) No event has occurred which with the giving of notice, the passage of
time or both would constitute a material default under any of the Project
Documents.
(t) No event or proceeding, including, but not limited to, any legal
actions or proceedings before any court, commission, administrative body or
other governmental authority, and acts of any governmental authority having
jurisdiction over the zoning or land use laws applicable to the Project, has
occurred the continuing effect of which has: (1) materially or adversely
affected the operation of the Partnership or the Project (except to the extent
the funds are available to the Partnership to correct or cure such event or
proceeding); (2) materially or adversely affected the ability of the General
Partner to perform its obligations hereunder or under any other agreement with
respect to the Project; or (3) prevented the completion of construction of the
Improvements in substantial conformity with the Project Documents, other than
legal proceedings which have been bonded against (or as to which other adequate
financial security has been issued) in a manner as to indemnify the Partnership
against loss; provided that the foregoing does not apply to matters of general
applicability which would adversely affect the Partnership, the General Partner,
Affiliates of the General Partner or the Project only insofar as they or any of
them are part of the general public.
(u) Neither the Partnership nor the General Partner has any liabilities,
contingent or otherwise, which have not been disclosed in writing to the Limited
Partner and which in the aggregate do not affect the ability of the Limited
Partner to obtain the anticipated benefits of its investment in the Partnership.
(v) The Special Limited Partner and/or the General Partner has and shall
maintain a net worth equal to at least $500,000 computed in accordance with
generally accepted accounting principles.
<PAGE>
IN WITNESS WHEREOF, the undersigned have set their hands to this General
Partner Certification this day of 1996.
URBAN RESIDENTIAL MANAGEMENT, INC.
General Partner
By:
Herbert Kohn, President
<PAGE>
EXHIBIT E TO PARTNERSHIP AGREEMENT
FORM OF COMPLETION CERTIFICATE
(to be used when construction [rehabilitation] completed)
COMPLETION CERTIFICATE
The undersigned, an architect duly licensed and registered in the State of
Atlanta, Fulton County, Georgia, has prepared final working plans and detailed
specifications for CASCADE PINES, L.P. II, a Georgia limited partnership (the
Partnership"), between WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 3, a
California limited partnership ("Limited Partner") and the Partnership in
connection with the construction [rehabilitation] of improvements on certain
real property located in Atlanta, Fulton County, Georgia (the "Improvements").
The undersigned hereby certifies (i) that the Improvements have been
completed in accordance with the aforesaid plans and specifications, (ii) that a
permanent certificate of occupancy and all other permits required for the
continued use and occupancy of the Improvements have been issued with respect
thereto by the governmental agencies having jurisdiction thereof, (iii) that the
Improvements are in compliance with all requirements and restrictions of all
governmental authorities having jurisdiction over the Improvements, including,
without limitation, all applicable zoning, building, environmental, fire, and
health ordinances, rules and regulations and (iv) that all contractors,
subcontractors and workmen who worked on the Improvements have been paid in full
except for normal retainages and amounts in dispute.
- -----------------------------------
Project Architect
Date: ____________________________
Confirmed by:
- -----------------------------------
General Partner
Date: ____________________________
<PAGE>
EXHIBIT F TO PARTNERSHIP AGREEMENT
[ACCOUNTANT'S CERTIFICATE]
[Accountant's Letterhead]
_______________, 199____
WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 3 c/o WNC & Associates, Inc.
3158 Redhill Ave., Suite 120
Costa Mesa, California 92626
RE: Partnership
Certification as to Amount
of Eligible Tax Credit Base
Gentlemen:
In connection with the acquisition by WNC HOUSING TAX CREDIT FUND V, L.P.,
SERIES 3 (the "Limited Partner") of a limited partnership interest in CASCADE
PINES, L.P. II, a Georgia limited partnership (the "Partnership") which owns a
certain parcel of land located in Atlanta, Fulton County, Georgia and
improvements thereon (the "Project"), the Limited Partner has requested our
certification as to the amount of low-income housing tax credits ("Tax Credits")
available with respect to the Project under Section 42 of the Internal Revenue
Code of 1986, as amended (the "Code"). Based upon our review of [the financial
information provided by the Partnership] of the Partnership, we are prepared to
file the Federal information tax return of the Partnership claiming annual Tax
Credits in the amount of $_______________, which amount is based on an eligible
basis (as defined in Section 42(d) of the Code) of the Project of
$________________, a qualified basis (as defined in Section 42(c) of the Code)
of the Project of $_________________ and an applicable percentage (as defined in
Section 42(b) of the Code) of _____%.
Sincerely,
- -------------------------
<PAGE>
REPORT OF OPERATIONS
QUARTER ENDED:____________________________,199X
LOCAL PARTNERSHIP:
GENERAL PARTNER:
FIRM NAME:
ADDRESS:
CITY, STATE, ZIP:
PHONE:
PROPERTY NAME:
ADDRESS:
CITY, STATE, ZIP:
RESIDENT MANAGER:
PHONE:
ACCOUNTANT:
FIRM:
ADDRESS:
CITY, STATE, ZIP:
PHONE:
MANAGEMENT COMPANY
ADDRESS:
CITY, STATE, ZIP:
PHONE:
CONTACT:
OCCUPANCY INFORMATION
A. Number of Units ______ Number of RA Units _____
Number of Section 8 Tenants ________
B. Occupancy for the Quarter has: Increased____Decreased____
Remained the Same ______
C. Number of: Move-Ins______ Move-Outs________ % of Occupancy _______
D. Average length of tenant residency: 1-6 months_______6-12 months _______
1-3 years________Over 4 years_______
E. Number of Basic rent qualified applicants on waiting list:
F. If the apartments are less than 90% occupied, please explain why and
describe what efforts are being made to lease-up remaining units.
G. On site manager: Full Time__________ Part Time____________.
If part-time, the number of hours per week_____________.
<PAGE>
OPERATIONAL INFORMATION
Rent Schedule and Increases from Previous Quarter
--------- ------------ ------------------------- -----------
Number Monthly Rent Rent Increases Effective
-------------------------
of Units Basic / Market Amount Percent Date
--------- ------------- ------------------------- -----------
- ---------- --------- ------------- -------------- ------- -----------
1 Bedroom
- ---------- --------- ------------- -------------- ------- ------------
- ---------- --------- ------------- -------------- ------- ------------
2 Bedroom
- ---------- --------- ------------- -------------- ------- ------------
- ---------- --------- ------------- -------------- ------- ------------
3 Bedroom
- ---------- --------- ------------- -------------- ------- ------------
PROPOSED MAINTENANCE
- ------------------------------------------------------------------------------
Completed Funded by
Type Description or Operations or Amount
Planned Reserves
- -------------------------------------------------------------------------------
Interior Painting
- -------------------------------------------------------------------------------
Exterior Painting
- ------------------------------------------------------------------------------
Siding
- ------------------------------------------------------------------------------
Roofing
- ------------------------------------------------------------------------------
Drainage
- ------------------------------------------------------------------------------
Paving
- ------------------------------------------------------------------------------
Landscaping
- ------------------------------------------------------------------------------
Playground
- ------------------------------------------------------------------------------
Community Room
- ------------------------------------------------------------------------------
Laundry Room
- ------------------------------------------------------------------------------
Common Areas
- ------------------------------------------------------------------------------
Carpet
- ------------------------------------------------------------------------------
Appliances
- ------------------------------------------------------------------------------
Lighting
- ------------------------------------------------------------------------------
Other
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Please describe in detail any major repairs:
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
CONDITION OF PROPERTY
THE OVERALL APPEARANCE OF THE BUILDING(S) IS:
Excellent ______ Good ______ Fair ______ Bad _______
THE OVERALL APPEARANCE OF THE GROUNDS IS:
Excellent ______ Good ______ Fair ______ Bad ________
EXTERIOR CONDITION (Please Check Appropriate Box)
- -------------------------------------------------------------------------------
Type of Condition Excellent Good Fair Problems/Comments
- ---------------------------------------------------------- -------------------
- ------------------------------------------------------------------------------
Signage
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Parking Lots
- ------------------------------------------------------------------------------
Office/Storage
- ------------------------------------------------------------------------------
Equipment
- ------------------------------------------------------------------------------
Community Building
- ------------------------------------------------------------------------------
Laundry Room
- ------------------------------------------------------------------------------
Benches/Playground
- ------------------------------------------------------------------------------
Lawns, Plantings
- ------------------------------------------------------------------------------
Drainage, Erosion
- ------------------------------------------------------------------------------
Carports
- ------------------------------------------------------------------------------
Fences
- ------------------------------------------------------------------------------
Walks/Steps/Guardrails
- ------------------------------------------------------------------------------
Lighting
- ------------------------------------------------------------------------------
Painting
- ------------------------------------------------------------------------------
Walls/Foundation
- ------------------------------------------------------------------------------
Roof/Flashing/Vents
- ------------------------------------------------------------------------------
Gutters/Splashblocks
- ------------------------------------------------------------------------------
Balconies/Patios
- ------------------------------------------------------------------------------
Doors Windows/Screens
- ------------------------------------------------------------------------------
Elevators
- ------------------------------------------------------------------------------
INTERIOR CONDITION
- ------------------------------------------------------------------------------
Stairs
- ------------------------------------------------------------------------------
Flooring
- ------------------------------------------------------------------------------
Doors/Cabinets/Hardware
- ------------------------------------------------------------------------------
Drapes/Blinds
- ------------------------------------------------------------------------------
Interior Painting
- ------------------------------------------------------------------------------
Refrig/Stoves/Sinks
- ------------------------------------------------------------------------------
Bathroom/Tubs/Showers
Toilets
- ------------------------------------------------------------------------------
<PAGE>
FINANCIAL STATUS
A. Replacement Reserve is: Fully-funded_____ Under-funded____ Amount____
(complete attached schedule)
Tax/Insurance Escrow is:Fully-funded_____ Under-funded_____ Amount____
(complete attached schedule)
Property is operating at a: Surplus____ Deficit____ Amount _____
If deficit, General Partner funding? Yes____ No____ Amount____
Mortgage Payments are: On Schedule______ Delinquent____ Amount____
Are the taxes current? Yes____ No____
(please provide copy of paid tax bill)
Is the insurance current? Yes____ No____ Renewal Date
(please provide copy of yearly renewal)
B. Please note and explain any significant changes in the following:
Administrative Expense Increase____ Decrease____ Amount____
---------------------------------------------------------------------
---------------------------------------------------------------------
Repairs/Maintenance Expense Increase____ Decrease____ Amount____
---------------------------------------------------------------------
----------------------------------------------------------------------
Utility Expense Increase____ Decrease____ Amount____
---------------------------------------------------------------------
---------------------------------------------------------------------
Taxes/Insurance Expense Increase____ Decrease____ Amount____
---------------------------------------------------------------------
---------------------------------------------------------------------
C. Do you anticipate making a return to owner distribution? Yes__ No __
Explanation:
-----------------------------------------------------------------------
D. Please explain in detail any change in the financial condition:
---------------------------------------------------------------------
---------------------------------------------------------------------
E. Any insurance claims files? Yes______ No______
If yes, please explain:
----------------------------------------------------------------------
---------------------------------------------------------------------
<PAGE>
SCHEDULE OF RESERVES
Replacement Tax & Insurance Other Total
Beginning Balance:
Deposits:
------- ----------- ----------- -------- ---------
------- ----------- ----------- -------- ---------
------- ----------- ----------- -------- ---------
Total Deposits
----------- ----------- -------- ---------
Authorized Disbursements:
Description:
---------- ----------- ------------ -------- ---------
---------- ----------- ------------ -------- ---------
---------- ----------- ------------ -------- ---------
---------- ----------- ------------ -------- ---------
Total Disbursements:
----------- ------------ --------- ---------
Ending Balance: (1)
----------- ------------ --------- ---------
Required Balance:
----------- ----------- --------- ---------
Over/under funding:
----------- ----------- --------- ---------
(1) Must agree with amount shown on the balance sheet.
Prepared By: Date:
Firm: Telephone:
Reminder: Please include the following documents:
1. Completed Report of Operations
2. Balance Sheet
3. Statement of Income & Expenses
4. Rent roll for quarter ending
5. Tax Credit Compliance Report
<PAGE>
INITIAL TENANT CERTIFICATIONS
PARTNERSHIP NAME
Fund: Tax Credit Set-Asides Information: Loan/Regulatory Set-Asides:
Property Name: [ ] 20/50 or [ ] 40/60 Election
Address: Does the 51% average apply? [ ] Y [ ] N
Deeper Set-Aside __% @ 50% AMI
County:
Management Company
[ ] Multi-Family Contact Person:
[ ] Elderly
24 Number of Units Phone #
Number of Exempt
Units
LIHTC Project#
- -----------------------------------------------------------------------------
Gross Move-In
Unit First Time Move-In No. of No. in Income Income
No. Tenant Name Date Bdrms Sq. Ft. Set-Aside Unit Move-In Limits
- -------------------------------------------------------------------------------
BIN # Certificate of Occupancy Date:
- -----------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
BIN # Certificate of Occupancy Date:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
BIN # Certificate of Occupancy Date:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
INITIAL TENANT CERTIFICATIONS
PARTNERSHIP NAME
(CONTINUED)
Tenant Tenant
Income Income Asset Unit Rent Tenant Utility
Qualified Verification Verification Rent Subsidy Payment Allowance
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
INITIAL TENANT CERTIFICATIONS
PARTNERSHIP NAME
(CONTINUED)
Tenant Tenant Overall
Gross Maximum Rent Tenant
Rent Rent Qualified Eligible
- -------------------------------------------------------------------------------
YES YES
- -------------------------------------------------------------------------------
YES YES
- -------------------------------------------------------------------------------
YES YES
- -------------------------------------------------------------------------------
YES YES
- -------------------------------------------------------------------------------
YES YES
- -------------------------------------------------------------------------------
YES YES
- -------------------------------------------------------------------------------
YES YES
- -------------------------------------------------------------------------------
YES YES
- -------------------------------------------------------------------------------
YES YES
- -------------------------------------------------------------------------------
YES YES
- -------------------------------------------------------------------------------
YES YES
- -------------------------------------------------------------------------------
YES YES
- -------------------------------------------------------------------------------
YES YES
- -------------------------------------------------------------------------------
YES YES
- -------------------------------------------------------------------------------
<PAGE>
QUARTERLY TAX CREDIT COMPLIANCE REPORT
PROPERTY NAME
Quarter Ending: Tax Credit Set-Asides Information: Loan/Regulatory Set-Asides:
[ ] 20/50 or [ ] 40/60 Election
Does the 51% average apply? [ ] Y [ ] N
Deeper Set-Aside : ( List Details)
County: Allocation: Management Company:
Pre-1990 (Rent based on number of persons) Contact Person:
Elected to change No. Bedrm
Post-1989 (Based on number of Bedroom)
[ ] Multi-Family [ ] Elderly Phone No.
Number of Units
Number of Exempt Units Fax No.
Prepared by:
LIHTC Project#
- -----------------------------------------------------------------------------
Gross Annual
Unit Tenant Move-In No. Of Inc. Set- No. In Annual Income
No. Name Date Bdrms Pct. Aside Unit Income Limits
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
QUARTERLY TAX CREDIT COMPLIANCE REPORT
PROPERTY NAME
(CONTINUED)
Annual Tenant Less
Recert. Income Income Assets Unit Rent Tenant
Date Qualified Verified Verified Rent Subsidy Payment
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Tenant Tenant Overall
Utility Gross Maximum Rent Tenat
Allow. Rent Rent Qualified Eligible
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
Tenant Tax Credit Compliance Audit
Document Transmittal Checklist
Unit Number Property Name Date
Tenant Name Completed By:
Initial _________ Annual________
Check Box for Type of Certification Management Company
This Section For WNC Use Only
Check Documents Being Sent
Received. Reviewed
___Internal Checklist or worksheet
___Initial - Rental Application/ Rental
Agreement
___Initial - Questionnaire of
Income/Assets
___Recertification - Questionnaire of Income/Assets
___Recertification - Addendum to Lease
___Employment Verification
___Employment Termination Verification
___Military Verification
___Verification of Welfare Benefits
___Verification of Social Security
Benefits
___Verification of Disability Benefits
___Unemployment Verification
___Verification of Unemployment Compensation
___Verification Worksmen Compensation
___Retirement/Annuities Verification
___Verification of Veterans Pension
___Verification of Child Support
___Verification of Alimony Support
___Disposed of Assets Last 2 yrs.
___Real Estate
___Investment
___Assets Verifications (savings, stocks etc.)
___Trusts/with Current Tax Return
___Lump Sum Settlements
___Notarized Affidavit of Support
___Certification of Handicap
___Notarized Self-Employed-Tax Return
___Notarized statement of no income
___Tenant Certification
- ------------------------------------------------------------------------------
This Section For WNC Use Only
YES NO
Are all required forms completed?
Are all required forms dated?
Did the Manager and Tenant sign all documents?
Third party verification of income completed?
Third party verification of assets completed?
Are verifications completed for all members 18 yrs. and
over?
Did all the members of the household 18 yrs. and
over sign all documents?
Is lease completed with a minimum of six months/ SRO
monthly?
Addendum completed?
Tenant Certification completed?
Are all members of the household full-time students?
Is utility allowance
correct?
Is correct income limit being used?
Is correct rent limit being used?
For tenants with no income
Was notarized statement of no income obtained with tax
return?
or Were all sources verified (AFDC, Unemployment,
Soc. Sec., Disability)?
<PAGE>
TAX CREDIT COMPLIANCE MONITORING:
ANNUAL CERTIFICATION
As General Partner of CASCADE PINES, L.P. II, I hereby certify as to the
following:
1. CASCADE PINES, L.P. II owns a three hundred seventy-six (376) unit
project ("Project") in Atlanta, Fulton County, Georgia.
2. An annual income certification (including supporting documentation) has
been received from each tenant. The income certification reflects that the
tenant's income meets the income limitation applicable to the Project pursuant
to Section 42(g)(1) of the Internal Revenue Code ("Code").
3. The Project satisfies the requirements of the applicable minimum set
aside test as defined in Section 42(g)(1) of the Code.
4. Each unit within the Project is rent restricted as defined in Section
42(g)(2)of the Code.
5. Each unit in the Project is available for use by the general public and
not for use on a transient basis.
6. Each building in the Project is suitable for occupancy in accordance
with local health, safety, and building codes.
7. During the preceding calendar year, there had been no change in the
eligible basis, as defined in Section 42(d)of the Code, of any building within
the Project.
8. All common area facilities included in the eligible basis of the
Apartment Complex are provided to the tenants on a comparable basis without a
separate fee to any tenant in the Project.
9. During the preceding calendar year when a unit in the Project became
vacant reasonable attempts were made to rent that unit to tenants whose incomes
met the income limitation applicable to the Project pursuant to Section 42(g)(1)
of the Code and while that unit was vacant no units of comparable or smaller
size were rented to tenants whose income did not meet the income limitation
applicable to the Project pursuant to Section 42(g)(1) of the Code.
10. If the income of a tenant in a unit increased above the limit allowed
in Section 42(g)(2)(D)(ii), then the next available unit of comparable or
smaller size was rented to tenants whose incomes met the income limitation
applicable to the Project pursuant to Section 42(g)(1) of the Code.
IN VERIFICATION OF THE FOREGOING ENCLOSED HEREWITH IS A COPY OF THE ANNUAL
INCOME CERTIFICATION RECEIVED FROM EACH TENANT IN THE PROJECT. UPON REQUEST I
WILL PROVIDE COPIES OF ALL DOCUMENTATION RECEIVED FROM THE TENANT TO SUPPORT
THAT CERTIFICATION.
I declare under penalty of perjury under the law of the State of Georgia
that the foregoing is true and correct.
Executed this day of at , .
- ------------------------------------
<PAGE>
Calculation of Debt Service Coverage
Month 1 Month 2 Month 3
------------ ------------ ------------
INCOME
Gross Potential Rent
Other Income
Vacancy Loss ------------ ------------ ------------
Adjusted Gross Income ------------ ------------ ------------
OPERATING EXPENSES
Utilities
Maintenance
Management Fee
Administration
Insurance
Real Estate Taxes
Other Expenses ------------ ------------ ------------
Total Operating Expenses ------------ ------------ ------------
Net Operating Income (1)
Accrual adjustments for:
R/E Taxes
Insurance
Tax/ Accounting
Other
Replacement Reserves
============ ============ ============
Income for DSC Calculation
============ ============ ============
Stabilized Debt Service ------------ ------------ ------------
Debt Service Coverage (2) ------------ ------------ ------------
(1) This number should reconcile easily with the monthly financial
statements
(2) The ratio between the Income for DSC Calculation and Stabilized Debt
Service. As example, a 1.15 DSC means that for every $1.00 of Stabilized Debt
Service required to be paid there must be a $1.15 of Net Operating Income
available.
<PAGE>
DEVELOPMENT FEE AGREEMENT
This DEVELOPMENT FEE AGREEMENT, is entered into as of the date written
below by and between Brencor, Inc., a Delaware corporation and Urban Residential
Development Corporation, a Georgia corporation (collectively referred to as the
"Developer") and CASCADE PINES, L.P. II, a Georgia limited partnership
("Owner"). Developer and Owner collectively may be referred to as the "Parties"
or individually may be referred to as a "Party".
RECITALS
A. Owner has acquired the real property located in Atlanta, Fulton County,
Georgia, as more particularly described in Exhibit A attached hereto and
incorporated herein (the "Real Property").
B. Owner intends to develop on the Real Property a three hundred
seventy-six (376) unit low-income rental housing complex and other related
improvements, which is intended to qualify for federal low-income housing tax
credits (the "Project").
C. Pursuant to continuous verbal discussions and agreements between the
Developer and the Owner, the Developer has previously undertaken substantial
development activities with respect to the Project and has agreed to oversee the
development of the Project until all construction work is completed and to
provide certain services relating thereto. The Parties recognize and acknowledge
that the Developer is, and has been, an independent contractor in all services
rendered to, and to be rendered to, the Owner pursuant to this Development Fee
Agreement.
D. Owner desires to retain the services of Developer to manager, oversee,
and complete development of the Project. Developer is willing to assign all
development rights to the Project to Owner, to undertake performance of such
development services, and to fulfill all obligations of the Developer set forth
in this Agreement, in consideration of Owner's promise to pay to Developer the
fee specified in this Agreement.
NOW THEREFORE, in consideration of the foregoing recitals and the mutual
promises and undertakings in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Owner and Developer agree as follows.
SECTION I
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall, when capitalized,
have the following meanings:
<PAGE>
"Closing Date" means the date on which the Construction Loan is closed and
funded and the Limited Partner's initial Capital Contribution is made.
"Code" means the Internal Revenue Code of 1986, as amended.
"Construction Documents" means the contract documents between the Owner and
the Construction Lender pertaining to construction of the Project.
"Construction Lender" means the Urban Residential Finance Authority of the
City of Atlanta, Georgia, which has committed to make a loan to finance
construction of the Project.
"Construction Loan" means the loan to finance construction of the Project,
made to Owner by the Construction Lender.
"Contractor" means Gardner Service Corporation.
"Department" means the Georgia agency responsible for the reservation and
allocation of Tax Credits.
"Development Fee" means the fee for development services described in
Section 2 of this Agreement.
"Permanent Loan" means the permanent mortgage to finance the Project and to
retire the Construction Loan.
"Permanent Loan Funding Date" means the date on which the Permanent Loan is
closed and funded; all construction costs are paid in full and the Construction
Loan repaid in full; and the issuance of a certificate of occupancy by the
governmental agency having jurisdiction over the Project.
"Tax Credit Program" means Section 42 of the Code, and all rules,
regulations, rulings, notices and other Internal Revenue Service promulgations
thereunder, relating to low-income housing tax credits.
"Tax Credits" means low-income housing tax credits under the Tax Credit
Program.
SECTION 2
ENGAGEMENT OF DEVELOPER; FEE; SERVICES
2.1 Engagement; Term. Owner hereby confirms the engagement of Developer to
act as developer of the Project, and to perform the various covenants and
obligations of the Developer under this Agreement. Developer hereby confirms and
accepts such engagement, and agrees to perform fully and timely each and every
one of its obligations under this Agreement. The term of such engagement shall
commence on the date hereof and subject to the pre-payment provisions of Section
3 shall expire on December 31, 2005.
<PAGE>
2.2 Development Fee. In consideration of Developer's agreement to provide
development services during the term of this Agreement and the assignment of all
development rights for the Project, Owner agrees to pay the Developer a
Development Fee in the amount of $________. The Development Fee shall be payable
in accordance with Section 3 of this Agreement.
2.3 Development Services.
(a) Owner acknowledges that Developer has, prior to the date hereof,
performed substantial development services relating to the Project. Owner
further acknowledges that as of the date of this Agreement construction of the
property is substantially complete. Such services (the "Prior Services") have
included the following:
(1) Developer has analyzed the market and demographic environment to
determine the feasibility of the Project.
(2) Developer has created, refined and analyzed the financial projections
for the Project.
(3) Developer has negotiated, conferred, and worked with the Project
architects, engineers and Contractor with regard to preparation, refinement, and
finalization of the plans and specifications for the Project, and projected
construction schedules and costs.
(4) Developer has applied for land use approvals and development permits
necessary for the Project, and has conferred and worked with the City of Atlanta
planning and building agencies with regard to such approvals and permits.
(5) Developer has negotiated and conferred with the Construction Lender to
obtain the Construction Loan.
(6) Developer shall oversee construction of the Project on Owner's behalf.
Owner shall allow Developer full access to the Project during the construction
period. Developer and Developer's agents shall perform their work in a manner
that minimizes interference with the management and operation of the Project.
(A) Developer shall exert its best efforts to ensure that the Contractor
performs its obligations under the Construction Documents in a diligent and
timely manner.
(B) Developer shall participate in and provide assistance with regard to
pre-construction conferences and pre-construction documents, including drawings,
specifications, contracts, and schedules.
<PAGE>
(C) Developer shall review all Project construction documents, identify
construction issues and participate in the resolution of such issues.
(D) Developer shall attend construction progress meetings at the Project
site to monitor construction progress and advise Owner and the Contractor with
respect to the resolution of construction issues.
(E) Developer shall review the Contractor's monthly pay applications.
(F) Developer shall monitor the Contractor's progress with respect to the
approved Project schedule and keep the Owner informed of all pertinent Project
issues and construction progress.
(G) Developer shall advise Owner with respect to relations with engineers,
architects, and other construction professionals.
(H) Developer shall be available for immediate response in critical
situations arising during the construction of the Project.
(I) Developer shall coordinate relations with the City of Atlanta and other
governmental authorities having jurisdiction over development of the Project.
(7) From the date hereof through the completion of construction of the
Project, the Developer shall provide the following services to owner with regard
to the Tax Credits and the Tax Credit Program which services do not constitute
the rendering of legal or tax advice:
(A) Developer shall consult with and advise Owner concerning construction
issues that could affect the amount of Tax Credits for which the Project is
eligible.
(B) Developer shall consult with and advise Owner with respect to the
requirements of the Department as they relate to the construction and
development of the Project.
(C) Developer shall monitor construction progress with respect to the
Project schedule agreed to with the Department, if any.
(D) Developer shall coordinate and participate in any conferences with the
Department relating to the Project and construction matters.
<PAGE>
(c) Assignment of Development Rights. Developer hereby assigns to Owner all
rights to the development of the Project, including but not limited to, all
tangible and intangible rights arising with respect to the name CASCADE PINES,
L.P. II, the design of the Project, the plans and specifications for the Project
and all rights arising under the agreements with Project architects, engineers
and other Project design and construction professionals.
SECTION 3
DEVELOPMENT FEE PAYMENTS
For Development services to be performed under this Contract, the Owner
shall pay the Developer a Development Fee on the Permanent Loan Funding Date. If
the Development Fee is not paid in full upon the Permanent Loan Funding Date
then the Development Fee shall be paid from available Cash Flow From Operations
in accordance with the terms of Section 11.1 of the Amended and Restated
Agreement of Limited Partnership for CASCADE PINES, L.P. II, a Georgia limited
partnership (said agreement is incorporated herein by this reference) but in no
event later than December 31, 2005.
SECTION 4
TERMINATION
Neither Party to this Agreement shall have the right to terminate this
Agreement prior to the expiration of the term without cause. Owner may terminate
this Agreement without further liability, for cause, which shall mean any one of
the following:
(a) A material breach by Developer of its obligations under this Agreement
that is not cured within thirty (30) days after notice thereof (or, as to any
non-monetary obligations that is not reasonably capable of cure within 30 days,
and provided that cure is commenced within 10 days of notice and diligently
pursued thereafter to completion, within such time as may reasonably be
necessary to complete such cure);
(b) A fraudulent or intentionally incorrect report by Developer to Owner
with respect to the Project; or
(c) Any intentional misconduct or gross negligence by Developer with
respect to its duties under this Contract.
Upon proper termination of this Agreement by Owner pursuant to this Section
4, all rights of Developer to receive unearned Development Fees pursuant to this
Agreement with respect to services not yet performed shall terminate. Developer
shall receive the full Development Fee for Prior Services and shall receive a
portion of the Development Fee for Future Services based on the percentage of
completion of construction of the Project at the time of termination. Nothing in
<PAGE>
this Section 4 shall be deemed to prevent Owner from bringing an action against
Developer to recover fully all damages resulting from any of the causes set
forth in paragraphs (a), (b) or (c) above, or to prevent Owner from contending
in any action or proceeding that the Future Services were not earned by
Developer.
SECTION 5
GENERAL PROVISIONS
5.1 Notices. Notices required or permitted to be given under this Agreement
shall be in writing sent by registered or certified mail, postage prepaid,
return receipt requested, to the Parties at the following addresses, or such
other address as is designated in writing by the Party, the date of registry
thereof, or the date of certification receipt therefor being deemed the date of
such notice; provided, however, that any written communication containing such
information sent to a Party actually received by a Party shall constitute notice
for all purposes of this Agreement.
If to Developer: Brencor, Inc.
5214 Maryland Way, Suite 310
Brentwood, Tennessee 37027
Urban Residential Development Corporation
100 Peachtree Street, N.W., Suite 400
Atlanta, Georgia 30303
If to Owner: CASCADE PINES, L.P. II
100 Peachtree Street, N.W., Suite 400
Atlanta, Georgia 30303
5.2 Interpretation.
(a) Headings. The section headings in this Agreement are included for
convenience only; they do not give full notice of the terms of any portion of
this Agreement and are not relevant to the interpretation of any provision of
this Agreement.
(b) Relationship of the Parties. Neither Party hereto shall be deemed an
agent, partner, joint venturer, or related entity of the other by reason of this
Agreement and as such neither Party may enter into contracts or agreements which
bind the other Party.
(c) Governing Law. The Parties intend that this Agreement shall be governed
by and construed in accordance with the laws of the state of Georgia applicable
to contracts made and wholly performed within Georgia by persons domiciled in
Georgia.
(d) Severability. Any provision of this Agreement that is deemed invalid or
unenforceable shall be ineffective to the extent of such invalidity or
unenforceability, without rendering invalid or unenforceable the remaining
<PAGE>
provisions of this Agreement.
5.3 Integration; Amendment. This Agreement constitutes the entire agreement
of the Parties relating to the subject matter hereof. There are no promises,
terms, conditions, obligations, or warranties other than those contained herein.
This Agreement supersedes all prior communications, representations, or
agreements, verbal or written, among the Parties relating to the subject matter
hereof. This Agreement may not be amended except in writing.
5.4 Attorney' Fees. If any suit or action arising out of or related to this
Agreement is brought by any Party to any such document, the prevailing Party
shall be entitled to recover the costs and fees (including without limitation
reasonable attorneys' fees and costs of experts and consultants, copying,
courier and telecommunication costs, and deposition costs and all other costs of
discovery) incurred by such Party in such suit or action, including without
limitation to any post-trial or appellate proceeding.
5.5 Binding Effect. This Agreement shall bind and inure to the benefit of,
and be enforceable by, the Parties hereto and their respective successors,
heirs, and permitted assigns.
5.6 Assignment. Neither Party may assign this Agreement without the consent
of the other Party. No assignment shall relieve any Party of liability under
this Agreement unless agreed in writing to the contrary.
5.7 Third-Party Beneficiary Rights. No person not a Party to this Agreement
is an intended beneficiary of this Agreement, and no person not a Party to this
Agreement shall have any right to enforce any term of this Agreement.
5.8 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one agreement binding
on all the Parties, notwithstanding that all Parties are not signatories to the
same counterpart.
5.9 Further Assurances. Each Party agrees, at the request of the other
Party, at any time and from time to time after the date hereof, to execute and
deliver all such further documents, and to take and forbear from all such
action, as may be reasonably necessary or appropriate in order more effectively
to perfect the transfers or rights contemplated herein or otherwise to confirm
or carry out the provisions of this Agreement.
5.10 Mandatory Arbitration. Any person enforcing this Agreement may require
that all disputes, claims, counterclaims, and defenses ("Claims") relating in
<PAGE>
any way to this Agreement or any transaction of which this Agreement is a part
(the "Transaction"), be settled by binding arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association and Title 9
of the U.S. Code. All claims will be subject to the statutes of limitation
applicable if they were litigated.
If arbitration occurs, one neutral arbitrator will decide all issues unless
either Party's Claim is $100,000.00 or more, in which case three neutral
arbitrators will decide all issues. All arbitrators will be active Georgia State
Bar members in good standing. In addition to all other powers, the arbitrator(s)
shall have the exclusive right to determine all issues of arbitrability.
Judgment on any arbitration award may be entered in any court with jurisdiction.
If either Party institutes any judicial proceeding relating to the
Transaction, such action shall not be a waiver of the right to submit any Claim
to arbitration. In addition, both Parties have the right before, during, and
after any arbitration to exercise any of the following remedies, in any order or
concurrently: (i) setoff, (ii) self-help repossession, (iii) judicial or
non-judicial foreclosure against real or personal property collateral, (iv)
provisional remedies, including injunction, appointment of receiver, attachment,
claim and delivery, and replevin.
This arbitration clause cannot be modified or waived by either Party except
in a writing that refers to this arbitration clause and is signed by both
Parties.
IN WITNESS WHEREOF, the Parties have caused this Development Fee Agreement
to be executed as of ________________________, 1996.
DEVELOPER: BRENCOR, INC.
By: ______________________________
Robert A. Crowder, President
URBAN RESIDENTIAL DEVELOPMENT CORPORATION
By: _________________________
Herbert Kohn, President
OWNER: CASCADE PINES, L.P. II
By: URBAN RESIDENTIAL MANAGEMENT, INC.
By: _________________________
Herbert Kohn, President
<PAGE>
EXHIBIT A
All that tract or parcel of land lying and being in Land Lots 218 and 231
of the 14th District of Fulton County, Georgia, and being more particularly
described as follows:
BEGINNING at an iron pin on the southwest side of Harbin Road, said iron
pin being 200 feet northwesterly, as measured along the southwesterly side of
Harbin Road from the intersection of the southwesterly side of Harbin Road with
the northwesterly side of Campbellton Road; and from said point of beginning
running thence south 73 degrees 47 minutes 45 seconds west, 399.85 feet to an
iron pin; thence south 48 degrees 44 minutes 30 seconds west, 199.30 feet to an
iron pin; thence north 27 degrees 18 minutes 15 seconds west, 149.33 feet to an
iron pin; thence south 48 degrees 22 minutes 15 seconds west, 1204.96 feet to an
iron pin; thence south 39 degrees 39 minutes 15 seconds east; 300 feet to an
iron pin; thence south 50 degrees 14 minutes 30 seconds west, 199.98 feet to an
iron pin; thence south 39 degrees 39 minutes 15 seconds east, 53.65 feet to an
iron pin located on the south line of said Land Lot 218; thence north 88 degrees
42 minutes 30 seconds west, along the south line of said Land Lot 218, a
distance of 228.37 feet to an iron pin; thence north 2 degrees 20 minutes east
600.32 feet to an iron pin; thence south 87 degrees 18 minutes west, 62.43 feet
to an iron pin; thence north 3 degrees 07 minutes west, 390.09 feet to an iron
pin; thence north 15 degrees 40 minutes west, 210.11 feet to an iron pin; thence
north 89 degrees 29 minutes 30 seconds west, 219.86 feet to an iron pin; thence
north 15 degrees 47 minutes 43 seconds west, 220.85 feet to an iron pin; thence
south 88 degrees 30 minutes 30 seconds east 1364.46 feet to an iron pin; thence
north 80 degrees 04 minutes 45 seconds east, 615.47 feet to an iron pin located
on the southwest side of Harbin Road; thence south 26 degrees 50 minutes east,
along the southwest side of Harbin Road, 188.10 feet to an iron pin and the
point of BEGINNING.
TOGETHER WITH a non-exclusive easement for ingress and egress more
particularly described as follows:
ALL THAT TRACT or parcel of land lying and being in Land Lot 218 of the
14th District of Fulton County, Georgia, and being more particularly described
as follows:
BEGINNING at an iron pin located on the northwest right of way of
Campbellton Road 32.85 feet northeasterly from the intersection of the northwest
right of way of Campbellton Road with the south line of Land Lot 218, which line
is also the north line of Land Lot 219; running thence north 39 degrees 39
minutes 15 seconds west, 500 feet to an iron pin; thence north 48 degrees 22
minutes 15 seconds east, 60.02 feet to a point; thence south 39 degrees 39
minutes 15 seconds east, 503.50 feet to a point located on the northwest side of
the right of way of Campbellton Road; thence southwesterly along the northwest
right of way of Campbellton Road, 60 feet to an iron pin and the point of
BEGINNING.
LESS AND EXCEPT therefrom the following tract or parcel of land:
Beginning at a point on the northern right of way of Campbellton Road, S.W.
1,140 feet northeasterly as measured along said right of way from the
northeastern intersection of the rights of way of Campbellton Road, S.W. and
<PAGE>
Childress Drive, S.W. said point being 32.85 feet northeasterly as measured
along the northern right of way of Campbellton Road from the intersection of
said right of way and the line forming the boundary of Land Lots 218 and 219 of
the 14th District of Fulton County, Georgia; thence running 5 feet northwesterly
along the property line of 2909 Campbellton Road along a bearing of N 39 degrees
39 minutes 15 seconds W to a point on said property line; thence running 60 feet
along a bearing of N 50 degrees 14 minutes 30 seconds E to a point on the
northeast property line of 2909 Campbellton Road; thence running 5 feet
southeasterly along said property line along a bearing of S 39 degrees 39
minutes 15 seconds E to a point on the northern right of way of Campbellton
Road, S.W.; thence running 60 feet southwesterly along the northern right of way
of Campbellton Road, S.W. to the Point of Beginning, and containing 300 square
feet (0.0069 acres).
Being the same property conveyed by Warranty Deed from John Hancock Mutual
Life Insurance Company to Deerfield Associates, a Georgia Limited Partnership
dated April 17, 1979, filed for record April 18, 1979 and recorded in Deed Book
7221, page 470, in the Office of the Clerk of the Superior Court of Fulton
County, Georgia.
<PAGE>
GUARANTY AGREEMENT
FOR VALUE RECEIVED, the receipt and sufficiency of which is hereby
acknowledged, and in consideration of the agreement of Brencor, Inc., a Delaware
corporation and Urban Residential Development Corporation, a Georgia corporation
(collectively referred to as the "Developer") to permit deferral of the $_______
due from CASCADE PINES, L.P. II a Georgia limited partnership ("Debtor") to the
Developer, the undersigned Guarantor(s), hereby unconditionally guaranty the
full and prompt payment when due, whether by acceleration or otherwise of that
certain Developer Fee from Debtor to the Developer, evidenced by the Development
Fee Agreement dated the even date herewith, and incorporated herein by this
reference. The foregoing described debt is referred to hereinafter as the
"Liabilities" or "Liability."
The undersigned further agree to pay all expenses paid or incurred by the
Developer in endeavoring to collect the Liabilities, or any part thereof, and in
enforcing the Liabilities or this Guaranty Agreement (including reasonable
attorneys' fees if collected or enforced by law or through an attorney-at-law).
The undersigned hereby represent and warrant that the extension of credit or
other financial accommodations by the Developer to Debtor will be to the
interest and advantage of the undersigned, and acknowledge that this Guaranty
Agreement is a substantial inducement to the Developer to extend credit to
Debtor and that the Developer would not otherwise extend credit to Debtor.
The Developer may, from time to time, without notice to or consent of the
undersigned, (a) retain or obtain a security interest in any property to secure
any of the Liabilities or any obligation hereunder, (b) retain or obtain the
primary or secondary liability of any party or parties, in addition to the
undersigned, with respect to any of the Liabilities, (c) extend or renew for any
period (whether or not longer than the original period) or alter any of the
Liabilities, (d) release or compromise any Liability of the undersigned
hereunder or any Liability of any other party or parties primarily or
secondarily liable on any of the Liabilities, (e) release, compromise or
subordinate its title or security interest, or any part thereof, if any, in all
or any property now or hereafter securing any of the Liabilities or any
obligation hereunder, and permit any substitution or exchange for any such
property, and (f) resort to the undersigned for payment of any of the
Liabilities, whether or not the Developer shall have resorted to any property
securing any of the Liabilities or any obligation hereunder or shall have
preceded against any other party primarily or secondarily liable on any of the
Liabilities.
The undersigned hereby expressly waive: (a) notice of the existence or
creation of all or any of the Liabilities, (b) notice of any amendment or
modification of any of the instruments or documents evidencing or securing the
<PAGE>
Liabilities, (c) presentment, demand, notice of dishonor and protest, (d) all
diligence in collection or protection of or realization upon the Liabilities or
any thereof, any obligation hereunder, or any security for any of the foregoing,
and (e) the right to require the Developer to proceed against Debtor on any of
the Liabilities.
In the event any payment of Debtor to the Developer is held to constitute a
preference under the bankruptcy laws, or if for any other reason the Developer
is required to refund such payment or pay the amount thereof to any other party,
such payment by Debtor to the Developer shall not constitute a release of
Guarantor from any Liability hereunder, but Guarantor agrees to pay such amount
to the Developer upon demand and this Guaranty shall continue to be effective or
shall be reinstated, as the case may be, to the extent of any such payment or
payments.
No delay or failure on the part of the Developer in the exercise of any
right or remedy shall operate as a waiver thereof, and no single or partial
exercise by the Developer of any right or remedy shall preclude other or future
exercise thereof or the exercise of any other right or remedy. No action of the
Developer permitted hereunder shall in any way impair or affect this Guaranty
Agreement. For the purpose of this Guaranty Agreement, the Liabilities of Debtor
to the Developer are guaranteed notwithstanding any right or power of Debtor or
anyone else to assert any claim or defense as to the invalidity or
unenforceability of any such obligation, and no such claim or defense shall
impair or affect the obligations of the undersigned hereunder.
This Guaranty Agreement shall be binding upon the undersigned, and upon the
legal representatives, heirs, successors and assigns of the undersigned.
This Guaranty Agreement has been made and delivered in the state of Georgia
and shall be construed and governed under Georgia law.
Whenever possible, each provision of the Guaranty Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Guaranty Agreement shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition of invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Guaranty Agreement.
Whenever the singular or plural number, masculine or feminine or neuter is
used herein, it shall equally include the other where applicable. In the event
this Guaranty Agreement is executed by more than one guarantor, this Guaranty
Agreement and the obligations hereunder are the joint and several obligation of
the undersigned.
<PAGE>
Guarantor consents to the jurisdiction of the courts in the State of
Georgia and/or to the jurisdiction and venue of any United States District Court
in the State of Georgia having jurisdiction over any action or judicial
proceeding brought to enforce, construe or interpret this Guaranty. Guarantor
agrees to stipulate in any such proceeding that this Guaranty is to be
considered for all purposes to have been executed and delivered within the
geographical boundaries of the State of Georgia, even if it was, in fact,
executed and delivered elsewhere.
IN WITNESS WHEREOF, the undersigned have hereunto caused this Guaranty
Agreement to be executed as of _____________________, 1996.
Signed, sealed and delivered GUARANTOR:
in the presence of:
____________________________ BRENCOR, INC.
Witness
By: __________________________
____________________________ Robert A. Crowder,
Notary Public President
My Commission Expires:
Address for Guarantor:
- ----------------------------
5214 Maryland Way, Suite 310
(NOTARY SEAL) Brentwood, Tennessee 37027
<PAGE>
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF
ROSEDALE LIMITED PARTNERSHIP
<PAGE>
TABLE OF CONTENTS
Page
I. DEFINITIONS ......................................... 1
1.1 "Accountant" ................................... 1
1.2 "Act" .......................................... 1
1.3 "Actual Tax Credit"............................. 1
1.4 "Adjusted Capital Account Deficit" ............. 1
1.5 "Affiliate" .................................... 2
1.6 "Agreement" or "Partnership Agreement".......... 2
1.7 "Assignee" ..................................... 2
1.8 "Capital Account" .............................. 2
1.9 "Capital Contribution" ......................... 3
1.10 "Cash Flow From Operations" .................... 3
1.11 "Code" ......................................... 3
1.12 "Completion of Construction".................... 3
1.13 "Construction Contract"......................... 3
1.14 "Construction Loan" ............................ 4
1.15 "Contractor" ................................... 4
1.16 "Development Fee" .............................. 4
1.17 "Distributions" ................................ 4
1.18 "Equity Loan" .................................. 4
1.19 "Event of Bankruptcy" .......................... 5
1.20 "Fair Market Value" ............................ 5
1.21 "Financial Interest" ........................... 5
1.22 "First Year Certificate" ....................... 5
1.23 "FmHA" ......................................... 5
1.24 "FmHA Interest Credit Agreement" ............... 5
1.25 "FmHA Loan Agreement" .......................... 5
1.26 "General Partner" .............................. 6
1.27 "Gross Asset Value" ............................ 6
1.28 "Income and Losses"............................. 7
1.29 "Interest" ..................................... 8
1.30 "LIHC" ......................................... 8
1.31 "Limited Partner" .............................. 8
1.32 "Liquidation" .................................. 8
1.33 "Minimum Set-Aside Test" ....................... 8
1.34 "Mortgage" or "Mortgage Loan" .................. 8
1.35 "Mortgage Note" ................................ 9
1.36 "Operating Deficit" ............................ 9
1.37 "Original Limited Partner" ..................... 9
1.38 "Partner" ...................................... 9
1.39 "Partner Nonrecourse Debt" ..................... 9
1.40 "Partner Nonrecourse Debt Minimum Gain" ........ 9
1.41 "Partner Nonrecourse Deductions" ............... 9
1.42 "Partnership" .................................. 9
1.43 "Partnership Administration Fee" ............... 9
1.44 "Partnership Minimum Gain" ..................... 10
1.45 "Permanent Mortgage Commencement" .............. 10
1.46 "Person" ....................................... 10
1.47 "Project" ...................................... 10
1.48 "Project Documents" ............................ 10
1.49 "Projected Tax Credits" ........................ 10
1.50 "Qualified Income Offset Item" ................. 11
<PAGE>
1.51 "Qualified Tenants" ............................ 11
1.52 "Refinancing" .................................. 11
1.53 "Rent Restriction Test" ........................ 11
1.54 "Sale" ......................................... 11
1.55 "Sale or Refinancing Proceeds" ................. 11
1.56 "State" ........................................ 11
1.57 "State Tax Credit Agency" ...................... 11
1.58 "Substitute Limited Partner" ................... 11
1.59 "Tax Credit" ................................... 12
1.60 "TRA 1986" ..................................... 12
1.61 "Treasury Regulations" ......................... 12
II. NAME ................................................ 12
III. PRINCIPAL EXECUTIVE OFFICE/AGENT FOR SERVICE ........ 12
3.1 Principal Executive Office ..................... 12
3.2 Agent for Service of Process ................... 12
IV. PURPOSE ............................................. 12
V. TERM ................................................ 13
VI. GENERAL PARTNER'S CONTRIBUTIONS AND LOANS ........... 13
6.1 Capital Contribution of General Partner ........ 13
6.2 Construction and Operating Obligations ......... 13
6.3 General Partner Loans .......................... 14
VII. LIMITED PARTNER'S CAPITAL CONTRIBUTIONS ............. 14
7.1 Original Limited Partner ....................... 14
7.2 Capital Contribution of Limited Partner ........ 14
7.3 Repurchase of Limited Partner's Interest ....... 16
7.4 Reduction of Capital Contribution............... 17
7.5 Return of Capital Contribution ................. 18
7.6 Liability of Limited Partner ................... 19
VIII. WORKING CAPITAL AND RESERVES ....................... 19
8.1 Operation and Maintenance Reserve............... 19
8.2 Reserve for Replacements........................ 19
8.3 Other Reserves.................................. 19
IX. MANAGEMENT AND CONTROL .............................. 20
9.1 Power and Authority of General Partner ......... 20
9.2 Payments to the General Partners and Others .... 20
9.3 Specific Powers of the General Partner ......... 22
<PAGE>
9.4 Limitations on General Partner's
Power and Authority ............................ 22
9.5 Restrictions on Authority of General Partner.... 23
9.6 Duties of General Partner ...................... 24
9.7 Partnership Expenses ........................... 25
9.8 General Partner Expenses ....................... 26
9.9 Other Business of Partners ..................... 26
9.10 Covenants, Representations and Warranties....... 26
X. ALLOCATIONS OF INCOME, LOSSES AND CREDITS ........... 29
10.1 General ........................................ 29
10.2 Allocations From Sale or Refinancing............ 29
10.3 Special Allocations............................. 30
10.4 Curative Allocations............................ 33
10.5 Other Allocation Rules.......................... 33
10.6 Tax Allocations: Code Section 704(c)........... 34
10.7 Allocation Among Limited Partners
and Assignees .................................. 34
10.8 Allocation Among General Partners .............. 35
10.9 Modification of Allocations .................... 35
XI. DISTRIBUTION ........................................ 35
11.1 Distribution of Cash Flow From Operations ...... 35
11.2 Distribution Upon Sale or Refinancing .......... 35
XII. VOLUNTARY TRANSFERS OF LIMITED PARTNER'S INTEREST
IN THE PARTNERSHIP................................... 36
12.1 Assignment of Limited Partner's Interest ....... 36
12.2 Effective Date of Transfer ..................... 37
12.3 Invalid Assignment ............................. 37
12.4 Assignee's Rights to Allocations and
Distributions .................................. 37
12.5 Substitution of Assignee as Limited Partner .... 37
12.6 Death, Bankruptcy, Incompetency, etc.
of a Limited Partner ........................... 38
12.7 Assignment ..................................... 38
XIII. RESIGNATION, REMOVAL AND REPLACEMENT OF GENERAL
PARTNER ............................................ 38
13.1 Resignation of General Partner ................. 38
13.2 Removal of General Partner ..................... 38
13.3 Admission of Substitute General Partner ........ 40
13.4 Continuing Liability ........................... 40
13.5 Transfer of Interest ........................... 40
13.6 Payment to General Partner Upon Resignation,
Death or Insanity .............................. 41
XIV. BOOKS AND ACCOUNTS, REPORTS, TAX RETURNS,
FISCAL YEAR AND BANKING ............................. 42
<PAGE>
14.1 Books and Accounts ............................. 42
14.2 Accounting Reports ............................. 43
14.3 Other Reports .................................. 44
14.4 Late Reports ................................... 45
14.5 Annual Site Visits ............................. 46
14.6 Tax Returns .................................... 46
14.7 Fiscal Year .................................... 46
14.8 Banking ........................................ 46
14.9 Certificates and Elections ..................... 46
XV. DISSOLUTION, WINDING UP, TERMINATION AND
LIQUIDATION OF THE PARTNERSHIP ...................... 46
15.1 Dissolution of Partnership ..................... 46
15.2 Return of Capital Contribution upon
Dissolution .................................... 47
15.3 Distributions of Assets ........................ 47
15.4 Deferral of Liquidation......................... 49
15.5 Liquidation of Statement ....................... 49
15.6 Certificates of Dissolution; Certificate of
Cancellation of Certificate of Limited
Partnership ................................... 49
XVI. AMENDMENTS .......................................... 50
XVII. MISCELLANEOUS ...................................... 50
17.1 Voting Rights ................................. 50
17.2 Meeting of Partnership ........................ 51
17.3 Notices ....................................... 51
17.4 Successors and Assigns ........................ 51
17.5 FmHA Regulations .............................. 51
17.6 Recording of Certificate of Limited
Partnership. .................................. 52
17.7 Amendment of Certificate of Limited
Partnership ................................... 53
17.8 Counterparts .................................. 53
17.9 Captions ...................................... 53
17.10 Certain Provisions ............................ 53
17.11 Saving Clause ................................. 54
17.12 Number and Gender ............................. 54
17.13 Entire Agreement .............................. 54
17.14 Governing Law ................................. 54
17.15 Attorney's Fees ............................... 54
17.16 Receipt of FmHA Correspondence ................ 54
17.17 Security Interest and Right of Set-Off ........ 54
<PAGE>
EXHIBIT A - Legal Description...................... A-1
EXHIBIT B - Form of Legal Opinion.................. B-1 - B-4
EXHIBIT C - Certification and Agreement............ C-1 - C-4
EXHIBIT D - General Partner Certification.......... D-1 - D-5
EXHIBIT E - Form of Completion Certificate......... E-1
EXHIBIT F - Accountant's Certificate............... F-1
EXHIBIT G - Report of Operations................... G-1 - G-8
<PAGE>
AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP OF
ROSEDALE LIMITED PARTNERSHIP
ROSEDALE LIMITED PARTNERSHIP , a New Mexico limited partnership (the
"Partnership") recorded a certificate of limited partnership with the New Mexico
Secretary of State on January 24, 1994. A partnership agreement dated March 4,
1993 was entered into by and between DEKE NOFTSKER and ABO CORPORATION as
General Partners and DEKE NOFTSKER as the Limited Partner.
A First Amendment to the Certificate and Agreement of Limited
Partnership of Rosedale Limited Partnership dated January 19, 1994, ("First
Amendment") was filed with the Secretary of State of the State of New Mexico on
June 8, 1995. The First Amendment documented the withdrawal of ABO CORPORATION
as the general partner and the withdrawal of DEKE NOFTSKER as the limited
partner. As a result of the First Amendment, DEKE NOFTSKER remained as the
general partner (the "General Partner") and ABO CORPORATION was readmitted as
the limited partner (the "Original Limited Partner").
Effective as of the date written below, WNC HOUSING TAX CREDIT FUND V,
L.P., SERIES 3, a California limited partnership (the "Limited Partner") has
been admitted to the Partnership as successor limited partner and the Original
Limited Partner has liquidated its interest in the Partnership. The Limited
Partner and the General Partner desire hereby to amend and restate the Limited
Partnership Agreement of the Partnership dated March 4, 1993.
NOW, THEREFORE, in consideration of their mutual agreements herein set
forth, the Partners hereby agree to amend and restate the Agreement of Limited
Partnership of ROSEDALE LIMITED PARTNERSHIP in its entirety to provide as
follows:
ARTICLE I
DEFINITIONS
Section 1.1 "Accountant" shall mean Pulakos & Alongi, Ltd., or such
other firm of independent certified public accountants as may be engaged for the
Partnership by the General Partner with the consent of the Limited Partner.
<PAGE>
Section 1.2 "Act" shall mean the laws if the State governing limited
partnerships, as now in effect and as the same may be amended from time to time.
Section 1.3 "Actual Tax Credit" shall mean as of any point in time, the
total amount of the LIHC actually allocated by the Partnership to the Limited
Partner, representing 99% of the LIHCs actually received by the Partnership, as
shown on the applicable tax return of the Partnership.
Section 1.4 "Adjusted Capital Account Deficit" shall mean with respect
to any Partner, the deficit balance, if any, in such Partner's Capital Account
as of the end of the relevant fiscal period, after giving effect to the
following adjustments:
(a) Credit to such Capital Account any amounts which such Partner is
obligated to restore or is deemed to be obligated to restore pursuant to the
penultimate sentences of Treasury Regulations Sections 1.704-2(g)(1) and
1.704-2(i)(5); and
(b) Debit to such Capital Account the items described in Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6) of
the Treasury Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Treasury
Regulations and shall be interpreted consistently therewith.
Section 1.5 "Affiliate" shall mean (i) any Person directly or
indirectly controlling, controlled by, or under common control with another
Person; (ii) any Person owning or controlling 10% or more of the outstanding
voting securities of such other Person; (iii) any officer, director, trustee, or
partner of such other Person; and (iv) if such Person is an officer, director,
trustee or general partner, any company for which such Person acts in any such
capacity.
Section 1.6 "Agreement" or "Partnership Agreement" shall mean this
Amended and Restated Agreement of Limited Partnership, as it may be amended from
time to time. Words such as "herein", "hereinafter", "hereof", "hereto", hereby"
and "hereunder", when used with referenced to this Agreement, refers to this
Agreement as a whole, unless the context otherwise requires.
<PAGE>
Section 1.7 "Assignee" shall mean a Person who has acquired all or a
portion of the Limited Partner's beneficial interest in the Partnership and has
not become a substitute Limited Partner.
Section 1.8 "Bankruptcy" or "Bankrupt" shall mean the making of an
assignment for the benefit of creditors, becoming a party to any liquidation or
dissolution action or proceeding, the commencement of any bankruptcy,
reorganization, insolvency or other proceeding for the relief of financially
distressed debtors, or the appointment of a receiver, liquidator, custodian or
trustee and, if any of the same occur involuntarily, the same not being
dismissed, stayed or discharged within 90 days, or the entry of any order for
relief under Title 11 of the United States Code. A Partner shall be deemed
Bankrupt if the Bankruptcy of such Partner shall have occurred and be
continuing.
Section 1.9 "Capital Account" shall mean, with respect to each Partner,
the account maintained for such Partner comprised of such Partner's Capital
Contribution as increased by allocations to such Partner of Partnership Income
(or items thereof) and any items in the nature of income or gain which are
specially allocated pursuant to Section 10.3 or 10.4 hereof, and decreased by
the amount of any Distributions made to such Partner, and allocations to such
Partner of Partnership Losses (or items thereof) and any items in the nature of
expenses or losses which are specially allocated pursuant to Article X hereof.
In the event of any transfer of an interest in the Partnership in
accordance with the terms of this Agreement, the transferee shall succeed to the
Capital Account of the transferor to the extent it relates to the transferred
interest.
The foregoing definition and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Treasury Regulation Section 1.704-1(b), as amended or any successor thereto, and
shall be interpreted and applied in a manner consistent with such Treasury
Regulation.
Section 1.10 "Capital Contribution" shall mean the total amount of
money, or the initial Gross Asset Value of property contributed to the
Partnership, if any, by all the Partners or any class of Partners or any one
Partner as the case may be (or by a predecessor-in-interest of such Partner or
Partners), reduced by any of such capital which shall have been returned
pursuant to Section 7.3, 7.4 or 7.5 of this Agreement. A loan to the Partnership
by a Partner shall not be considered a Capital Contribution.
<PAGE>
Section 1.11 "Cash Flow From Operations" shall mean gross receipts (not
including Capital Contributions, Sale or Refinancing Proceeds or proceeds of
Partnership borrowings) from Partnership operations, determined on a cash basis,
less debt payments, capital expenditures to the extent not paid from borrowings
or reserves, amounts set aside as reserves pursuant to Article VIII and
operating expenses associated with rental and maintenance of the Project; but
excluding deductions for cost recovery of buildings, improvements and personal
property amortization of any financing fees.
Section 1.12 "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, or any successor statute.
Section 1.13 "Completion of Construction" shall mean the completion of
construction of the Project substantially in accordance with the Project
Documents in order to obtain the required certificates of occupancy (or the
local equivalent) for all thirty-two (32) apartment units as evidenced by the
issuance of the certificate of occupancy by the inspecting architect, the FmHA
or the governmental agency having jurisdiction over the Project or by the
issuance of the inspecting architect's certification, in a form substantially
similar to that attached hereto Exhibit "E". The construction shall be completed
in good workmanlike manner, free and clear of all mechanics, materialmen's or
similar liens and all other expenses and costs, including but not limited to
costs of financing, must be paid with respect to the Project through completion.
Section 1.14 "Compliance Period" shall mean the period set forth in
Section 42(I)(1) of the Code, as amended, or any successor statute.
Section 1.15 "Consent of the Limited Partner" shall mean the prior
written consent or approval of the Limited Partner.
Section 1.16 "Debt Service Coverage" shall mean the ratio between the
net operating income and the debt service required to be paid on the
Mortgage(s); as example, a 1.15 Debt Service Coverage means that for every $1.00
of debt service required to be paid there must be $1.15 of net operating income
available. For purposes of this definition net operating income is the actual
receipt on a cash basis by the Partnership of revenues from operations of the
<PAGE>
Partnership, including, without limitation, rental income (but not any subsidy
thereof from the General Partner or an Affiliate thereof), but excluding
prepayments, security deposits and interest thereon, less all cash operating
obligations of the Partnership (other than those covered by insurance) in
accordance with the applicable budget adopted by the Partnership in accordance
with Section 14.3(j) of this Agreement (the "Budget"), including, without
limitation, the payment of Management Agent fees (which shall be deemed to
include that portion of such fees which is deferred and not concurrently paid)
and the funding of reserves in accordance with Article VIII of this Agreement,
and a reserve for all taxes or payments in lieu of taxes and any other expenses
which may reasonably be expected to be paid in a subsequent period but which on
an accrual basis are allocable to the period in question, such as insurance
premiums, audit, tax or accounting expenses. Without limiting the generality of
the foregoing, the Partnership's gross revenues for purposes of this Section
shall not include Capital Contributions, borrowings, any lump-sum payment or any
other extraordinary receipt of funds thereby, or interest or any other income
earned on investment of its funds, and unless otherwise provided in a Budget,
the cash operating obligations of the Partnership shall be deemed to include
real estate taxes for the period at the fully assessed rate. A worksheet for the
calculation of Debt Service Coverage is found in the Report of Operations
exhibit attached to this Agreement and incorporated herein by this reference.
Section 1.17 "Deferred Management Fee" shall have the meaning set
forth in Section 9.2(c) hereof.
Section 1.18 "Development Fee" shall mean the fee payable to the
General Partner or an Affiliate of the General Partner pursuant to Section
9.2(a) for services incident to the development and construction of the Project
in accordance with the Development Fee Agreement between the Partnership and the
Developer, dated the been date herewith and incorporated herein by this
reference.
Section 1.19 "Distributions" shall mean the total amount of money, or
the Gross Asset Value of property (net of liabilities securing such distributed
property that such Partner is considered to assume or take subject to under
Section 752 of the Code), distributed to Partners with respect to their
interests in the Partnership, but shall not include any payments to the General
<PAGE>
Partner or its Affiliates for fees or other compensation as provided in this
Agreement or any guaranteed payment within the meaning of Section 707(c) of the
Code, as amended, or any successor thereto.
Section 1.20 "Fair Market Value" shall mean, with respect to any
property, real or personal, the price a ready, willing and able buyer would pay
to a ready, willing and able seller of the property, provided that such value is
reasonably agreed to between the parties in arm's-length negotiations and the
parties have sufficiently adverse interests.
Section 1.21 "First Year Certificate" shall mean the certificate to be
filed by the General Partner with the Secretary of the Treasury as required by
Code Section 42(1)(1), as amended, or any successor thereto.
Section 1.22 "FmHA" shall mean the Farmers Home Administration of the
United States Department of Agriculture.
Section 1.23 "FmHA Interest Credit Agreement" shall mean the Multiple
Family Housing Interest Credit and Rental Assistance Agreement (Form FmHA 1944-7
or any successor thereof) between the FmHA and the Partnership whereby the FmHA
will provide a monthly credit subsidy to the Partnership's Mortgage account when
the Partnership makes each monthly payment on the Mortgage.
Section 1.24 "FmHA Loan Agreement" shall mean the Loan Agreement for an
RRH Loan to a Limited Partnership Operating on a Limited Profit Basis (Form FmHA
1944-34 or any successor thereof) between the FmHA and the Partnership made in
consideration of the Mortgage Loan to the Partnership by the FmHA pursuant to
Section 515(b) of the Housing Act of 1949 to build a low to moderate income
apartment complex.
Section 1.25 "General Partner" shall mean DEKE NOFTSKER and such other
Persons as are admitted to the Partnership as additional or substitute General
Partners pursuant to this Agreement.
Section 1.26 "Gross Asset Value" shall mean with respect to any asset,
the asset's adjusted basis for federal income tax purposes, except as follows:
(a) The initial Gross Asset Value of any asset contributed by a Partner
to the Partnership shall be the Fair Market Value of such asset, as determined
by the contributing Partner and the General Partner, provided that, if the
contributing Partner is a General Partner, the determination of the Fair Market
Value of a contributed asset shall be determined by appraisal;
<PAGE>
(b) The Gross Asset Values of all Partnership assets shall be adjusted
to equal their respective Fair Market Values, as determined by the General
Partner, as of the following times: (i) the acquisition of an additional
interest in the Partnership by any new or existing Partner in exchange for more
than a de minimis Capital Contribution; (ii) the distribution by the Partnership
to a Partner of more than a de minimis amount of Partnership property as
consideration for an interest in the Partnership; and (iii) the liquidation of
the Partnership within the meaning of Treasury Regulations Section
1.704-1(b)(2)(ii)(g): provided, however, that the adjustments pursuant to
clauses (i) and (ii) above shall be made only with the Consent of the Limited
Partner and only if the General Partner reasonably determines that such
adjustments are necessary or appropriate to reflect the relative economic
interests of the Partners in the Partnership;
(c) The Gross Asset Value of any Partnership asset distributed to any
Partner shall be adjusted to equal the Fair Market Value of such asset on the
date of distribution as determined by the distributee and the General Partner,
provided that, if the distributee is a General Partner, the determination of the
fair market value of the distributed asset shall be determined by appraisal; and
(d) The Gross Asset Values of Partnership assets shall be increased (or
decreased) to reflect any adjustments to the adjusted basis of such assets
pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent
that such adjustments are taken into account in determining Capital Accounts
pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m) and Section
10.3(g) hereof; provided however, that Gross Asset Values shall not be adjusted
pursuant to this Section 1.26(d) to the extent the General Partners determines
that an adjustment pursuant to Section 1.26(b) hereof is necessary or
appropriate in connection with a transaction that would otherwise result in an
adjustment pursuant to this Section 1.26(d).
If the Gross Asset Value of an asset has been determined or adjusted pursuant to
Section 1.26(a), Section 1.26(b), or Section 1.26(d) hereof, such Gross Asset
Value shall thereafter be adjusted by the depreciation taken into account with
respect to such asset for purposes of computing Income and Losses.
<PAGE>
Section 1.27 "Hazardous Substance" shall mean and include any
substance, material or waste, including asbestos, petroleum and petroleum
products (including crude oil), that is or becomes designated, classified or
regulated as "toxic" or "hazardous" or a "pollutant" or that is or becomes
similarly designated, classified or regulated, under any federal, state or local
law, regulation or ordinance including, without limitation, Compensation and
Liability Act of 1980, as amended, the hazardous Materials Transportation Act,
as amended, the Resource Conservation and Recovery Act, as amended, and the
regulations adopted and publications promulgated pursuant thereto.
Section 1.28 "Improvements" shall mean the construction of a 32
(thiry-two) unit apartment complex for families in a good and workmanlike manner
substantially in accordance with the plans and specifications and Project
Documents.
Section 1.29 "Incentive Management Fee" shall have the meaning set
forth in Section 9.2(e) hereof.
Section 1.30 "Income and Losses" shall mean, for each fiscal year or
other period, an amount equal to the Partnership's taxable income or loss for
such year or period, determined in accordance with Code Section 703(a) (for this
purpose, all items of income, gain, loss or deduction required to be stated
separately pursuant to Code Section 703(a)(1) 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 Income or Losses pursuant
to this definition shall be added to such taxable income or loss;
(ii) Any expenditures of the Partnership described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to
Regulation Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in
computing Income and Losses pursuant to this definition, shall be subtracted
from such taxable income or loss;
(iii) In the event the Gross Asset Value of any Partnership asset is
adjusted pursuant to Section 1.26(a) or (b) thereof shall be taken into account
as gain or loss from the disposition of such asset for purposes of computing
Income and Losses;
<PAGE>
(iv) Gain or loss resulting from any disposition of Partnership assets
with respect to which gain or loss is recognized for federal income purposes
shall be computed by reference to the Gross Asset Value of the property disposed
of, notwithstanding that the adjusted tax basis of such property differs from
its Gross Asset Value;
(v) In lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing such taxable income or loss, there
shall be taken into account depreciation for such fiscal year or other period,
computed as provided below; and
(vi) Notwithstanding any other provision of this definition, any items
which are specially allocated pursuant to Sections 10.3 or 10.4 hereof shall not
otherwise be taken into account in computing Income or Losses.
Depreciation for each fiscal year or other period shall be calculated
as follows: an amount equal to the depreciation, amortization, or other cost
recovery deduction allowable with respect to an asset for such year or other
period for federal income tax purposes, except that if the Gross Asset Value of
an asset differs from its adjusted basis for federal income tax purposes at the
beginning of such year or other period, depreciation shall be an amount which
bears the same ratio to such beginning Gross Asset Value as the federal income
tax depreciation, amortization, or other cost recovery deduction for such year
or other period bears to such beginning adjusted tax basis. Provided, however,
that if the federal income tax depreciation, amortization, or other cost
recovery deduction for such year is zero, depreciation shall be determined with
reference to such beginning Gross Asset Value using any reasonable method
selected by the General Partner.
Section 1.31 "Interest" shall mean 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 hereunder and
the obligation of such Partner to comply with the terms of this Agreement.
Section 1.32 "Involuntary Withdrawal" means any Withdrawal caused by
the death, adjudication of insanity or incompetence, or Bankruptcy of a General
Partner, or the removal of a General Partner pursuant to Section 13.2 hereof.
<PAGE>
Section 1.33 "LIHC" shall mean the low-income housing tax credit
established by TRA 1986 and which is provided for in Section 42 of the Code, as
amended, or any successor thereto.
Section 1.34 "Limited Partner" shall mean WNC HOUSING TAX CREDIT FUND
V, L.P., SERIES 3, a California limited partnership, and such other Persons as
are admitted to the Partnership as additional or Substitute Limited Partners
pursuant to this Agreement.
Section 1.35 "Liquidation" shall mean with respect to the Partnership
the orderly sale and liquidation of the Project and other Partnership property
following the first to occur of (a) the date upon which the Partnership is
terminated under Section 708(b)(1) of the Code unless continued by a vote of the
Partners, (b) the date upon which the Partnership ceases to be a going concern
(even though it may continue in existence for the purpose of winding up its
affairs, paying its debts and distributing any remaining balance to its
Partners), or (c) the date this Agreement terminates pursuant to its terms; and
means, with respect to a Partner at a time when the Partnership is not in
Liquidation, the liquidation of such Partner's interest in the Partnership under
Treasury Regulation 1.761-1(d), as amended, or any successor thereto.
Section 1.36 "Management Agent" shall mean the property management
company which oversees the property management functions for the Project and
which is on-site at the Project. The initial Management Agent shall be M-DC
Group, Inc., dba Alpha Management.
Section 1.37 "Management Agreement" shall mean the agreement between
the Partnership and the Management Agent for property management services.
Section 1.38 "Minimum Set-Aside Test" shall mean the 40-60 set-aside
test pursuant to Section 42(g), as amended and any successor thereto, of the
Code with respect to the percentage of apartment units in the Project to be
occupied by tenants whose incomes are less than the required percentage of the
area median gross income.
Section 1.39 "Mortgage" or "Mortgage Loan" shall mean any source of
permanent financing of the Project by a qualified commercial lender (as defined
in Section 42 of the Code) evidencing the indebtedness of the Partnership and
encumbering the Project. Where the context admits, the term "Mortgage" or
"Mortgage Loan" shall include any mortgage, deed, deed of trust, note,
regulatory agreement, security agreement, assumption agreement or other
instrument executed in connection with the Mortgage Note which is binding on the
Partnership; and in case any Mortgage is replaced or supplemented by any
subsequent mortgage or mortgages, the Mortgage shall refer to any such
subsequent mortgage or mortgages.
<PAGE>
Section 1.40 "Mortgage Note" shall mean the nonrecourse promissory note
whereby the Partnership promises to pay Farmers Home Administration, or its
successor or assignee, the principal sum of $1,330,000, plus interest on the
principal at 7.5% per annum over a term of 50 years.
Section 1.41 "Nonrecourse Liability" shall have the meaning given it in
Treasury Regulations Section 1.704-2(b)(3).
Section 1.42 "Operating Deficit" for any fiscal year shall mean the
total amount by which the sum of the Partnership's operating expenses (defined
solely as the expenses incurred in connection with the operation and maintenance
of the Project), debt service on the Mortgage Loan and other Partnership debt
and net additions to Partnership reserves required or permitted to be maintained
under this Agreement for such fiscal year, exceeds the cash revenues received in
respect of the operation of the Project for such fiscal year (not including
Capital Contributions, Sale or Refinancing Proceeds or proceeds of Partnership
borrowings).
Section 1.43 "Operating Deficit Guarantee Period" shall mean the period
commencing with the date of this Agreement and ending four years after the
project attains 100% occupancy.
Section 1.44 "Operating Loans" shall mean loans made by the General
Partner to the Partnership pursuant to Article VI of this Agreement, which loans
do not bear interest and are repayable only as provided in Article XI of this
Agreement.
Section 1.45 "Original Limited Partner" shall mean ABO CORPORATION.
Section 1.46 "Partner" shall mean either the General Partner or the
Limited Partner.
Section 1.47 "Partner Nonrecourse Debt" shall have the meaning set
forth in Section 1.704-2(b)(4) of the Treasury Regulations.
<PAGE>
Section 1.48 "Partner Nonrecourse Debt Minimum Gain" shall mean an
amount, with respect to each Partner Nonrecourse Debt, equal to the Partnership
Minimum Gain that would result if such Partner Nonrecourse Debt were treated as
a Nonrecourse Liability (as defined in Section 1.704-2 (b)(3) of the Treasury
Regulations), determined in accordance with Section 1.704-2(i)(3) of the
Treasury Regulations.
Section 1.49 "Partner Nonrecourse Deductions" shall mean the definition
set forth in Sections 1.704-2 (i)(1) and 1.704-2(i)(2) of the Treasury
Regulations.
Section 1.50 "Partnership" shall mean the limited partnership continued
under this Agreement.
Section 1.51 "Partnership Administration Fee" shall mean the fee
payable to the General Partner pursuant to Section 9.2 for services incident to
the administration of the business and affairs of the Partnership, which
services shall include, but not be limited to, maintaining the books and records
of the Partnership, selecting and supervising the Partnership's accountants,
bookkeepers and other Persons required to prepare and audit the Partnership's
financial statements and tax returns, and preparing and disseminating reports on
the status of the Project and the Partnership, all as required by Article XIV of
this Agreement.
Section 1.52 "Partnership Minimum Gain" shall mean the amount
determined by computing, with respect to each nonrecourse liability of the
Partnership, the amount of gain, if any, that would be realized by the
Partnership if a reduction occurs in the amount by which the nonrecourse
liability exceeds the adjusted basis in the Project encumbered by the
nonrecourse liability. Such computation shall be made in a manner consistent
with Treasury Regulation Sections 1.704-2(b)(2) and 1.704-2(d) .
Section 1.53 "Permanent Mortgage Commencement" shall mean the first day
on which all of the following have occurred: (a) the Construction Loan shall
have been repaid in full; and (b) the closing of the Mortgage shall have
occurred and amortization of the Mortgage shall have commenced.
Section 1.54 "Person" shall mean an individual, proprietorship, trust,
estate, partnership, joint venture, association, company, corporation or other
entity.
<PAGE>
Section 1.55 "Project" shall mean the approximately 3.81 acres of land
in Silver City, Grant County, New Mexico, as more fully described in Exhibit "A"
attached hereto and incorporated herein by this reference, and the Improvements.
Section 1.56 "Project Documents" shall mean and include all documents
delivered to or required by Mortgage Loan and/or any governmental agency having
jurisdiction over the Project in connection with the development, construction
and financing of the Project, including but not limited to, the approved plans
and specifications for the development and construction of the Project.
Section 1.57 "Projected Annual Tax Credits" shall mean LIHC in the
amount of $36,120 for 1996, $54,180 per year for each of the years 1997 through
2005, and $4,515 for 2006, which the General Partner has projected to be the
total amount of LIHC which will be allocated to the Limited Partner by the
Partnership, constituting ninety-nine percent (99%) of the aggregate amount of
LIHC of $547,280 to be available to the Partnership; provided, however, that if
the Actual Tax Credit for 1996 is greater (or less than) $36,120, the Projected
Tax Credit for the year 2006 shall be reduced (increased) by an amount equal to
the amount by which the Actual Credit for 1996 exceeds (is less than) $36,120.
Section 1.58 "Qualified Income Offset Item" shall have the meaning set
forth in Treasury Regulation Section 1.704-1(b)(2)(ii)(d), or any successor
provision.
Section 1.59 "Qualified Tenants" shall mean any tenants who have
incomes of 60% or less of the area median gross income, as adjusted for family
size, so as to make the Project eligible for LIHC.
Section 1.60 "Rent Restriction Test" shall mean the test pursuant to
Section 42 of the Code whereby the gross rent charged to tenants of the
low-income apartment units in the Project must not exceed 30% of the applicable
income standards.
Section 1.61 "Reporting Fee" shall have the meaning set forth in
Section 9.2(d) hereof.
Section 1.62 "Revised Projected Tax Credits" shall have the meaning
set forth in Section 7.4(a) hereof.
<PAGE>
Section 1.63 "Sale or Refinancing" shall mean any of the following
items or transactions: a sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Partnership, a condemnation of or
casualty at the Project or any part thereof, a claim against a title insurance
company, the refinancing or any Mortgage Note or other indebtedness of the
Partnership and any similar item or transaction; provided, however, that the
payment of Capital Contributions by the Partners shall not be included within
the meaning of the term "Sale or Refinancing."
Section 1.64 "Sale or Refinancing Proceeds" shall mean all cash
receipts of the Partnership arising from a Sale or Refinancing (including
principal and interest received on a debt obligation received as consideration
in whole or in part, on a Sale or Refinancing) less 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 Project.
Section 1.65 "State" shall mean the State of New Mexico.
Section 1.66 "State Tax Credit Agency" shall mean the state agency of
New Mexico has the responsibility and authorization to administer the LIHC
program in New Mexico.
Section 1.67 "Substitute Limited Partner" shall mean any Person who is
admitted to the Partnership as a Limited Partner pursuant to Section 12.5 or
acquires the Interest of the Limited Partner pursuant to Section 7.3 of this
Agreement.
Section 1.68 "Tax Credit" shall mean any credit permitted under the
Code or the law of any state against the federal or a state income tax liability
of any Partner as a result of activities or expenditures of the Partnership
including, without limitation, LIHC.
Section 1.69 "Tax Credit Conditions" shall mean, for the duration of
the Compliance Period, any and all restrictions including, but not limited to,
applicable federal, state and local laws, rules and regulations, which must be
complied with in order to qualify for the Tax Credits or to avoid an event of
recapture in respect of the Tax Credits.
Section 1.70 "TRA 1986" shall mean the Tax Reform Act of 1986.
<PAGE>
Section 1.71 "Treasury Regulations" shall mean the Income Tax
Regulations promulgated under the Code, as such regulations may be amended from
time to time (including corresponding provisions of succeeding regulations).
Section 1.72 "Withdrawing" or "Withdrawal" (including the verb form
"Withdraw" and the adjectival forms "Withdrawing" and "Withdrawn") shall mean,
as to a General Partner, the occurrence of the death, adjudication of insanity
or incompetence, or Bankruptcy of such Partner, or the withdrawal, removal or
retirement from the Partnership of such Partner for any reason, including any
sale, pledge, encumbering, assignment or other transfer of all or any part of
its General Partner Interest and those situations when a General Partner may no
longer continue as a General Partner by reason of any law or pursuant to any
terms of this Agreement.
ARTICLE II
NAME
The name of the Partnership shall be "ROSEDALE LIMITED PARTNERSHIP."
ARTICLE III
PRINCIPAL EXECUTIVE OFFICE/AGENT FOR SERVICE
Section 3.1 Principal Executive Office. The principal executive office
of the Partnership is located at 3825 Hawkins NE, Albuquerque, New Mexico 87109,
or at such other place or places within the State as the General Partner may
hereafter designate.
Section 3.2 Agent for Service of Process. The name of the agent for
service of process on the Partnership is Deke Noftsker, whose address is 3825
Hawkins NE, Albuquerque, New Mexico 87109.
ARTICLE IV
PURPOSE
The purpose of the Partnership is to acquire, construct, own and
operate the Project in order to provide, in part, Tax Credits to the Partners in
accordance with the provisions of the Code and the Treasury Regulations
applicable to LIHC, the rules and regulations of FmHA relating to rural rental
housing projects financed or subsidized by FmHA and to sell the Project after
<PAGE>
the 15-year Tax Credit compliance period. The Partnership shall not engage in
any business or activity which is not incident to the attainment of such
purpose.
ARTICLE V
TERM
The Partnership term commenced upon the filing of the Certificate of
Limited Partnership in the office of, and on the form prescribed by, the
Secretary of State of the State, and shall continue until December 31, 2047
unless terminated earlier in accordance with the provisions of this Agreement or
as otherwise provided by law.
ARTICLE VI
GENERAL PARTNER'S CONTRIBUTIONS AND LOANS
Section 6.1 Capital Contribution of General Partner. The General
Partner shall make a Capital Contribution in the amount of $70,000.
Section 6.2 Construction and Operating Obligations; General Partner
Loans.
(a) The General Partner shall cause Completion of Construction in
accordance with the Project Documents, and shall equip the Project or cause the
same to be equipped with all necessary and appropriate fixtures, equipment and
articles of personal property, including refrigerators and ranges. If costs and
expenses necessary to effect Completion of Construction exceed the sum of the
Capital Contributions and the proceeds of the Mortgage Note, the General Partner
shall be responsible for and shall be obligated to pay such deficiencies and
shall, to the extent permitted under the Project Documents and any applicable
regulations or requirements of the FmHA, be reimbursed at or prior to Permanent
Mortgage Commencement only out of the proceeds designated in this sentence
available from time to time after payment of all costs described in this
sentence. Any such advances not reimbursed through Permanent Mortgage
Commencement shall not be reimbursable or otherwise change the Interest of any
Partner in the Partnership but shall be borne by the General Partner as a
Capital Contribution. In the event the General Partner cost overrun and not be
repayable. In addition, if (1) the Improvements are not completed on or before
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May 1, 1996 ("Completion Date") (which date may be extended in the events of
force majeure, but in no event longer than three months from the Completion
Date. For purposes of this Agreement force majeure shall mean any act of God,
strike, lockout, or other industrial disturbance, act of the public enemy, war,
blockage, public riot, fire, flood, explosion, governmental action, governmental
delay, restraint or inaction and any other cause or event, whether of the kind
enumerated specifically herein, or otherwise, which is not reasonably within the
control of a Partner to this Agreement claiming such suspension); (2) prior to
completing the Improvements, there is an uncured default under or termination of
the Construction Loan, Mortgage Loan commitment, or other material documents; or
(3) a foreclosure action is commenced against the Partnership, then at the
Limited Partner's election, either the General Partner will be removed from the
Partnership and the Limited Partner, or an assignee, will be admitted as
successor General Partner, all in accordance with Article XIII hereof, or the
General Partner will repurchase the Interest of the Limited Partner for an
amount equal to the amounts theretofore paid by the Limited Partner, and the
Limited Partner shall have no further Interest in the Partnership. If the
Limited Partner elects to have the General Partner repurchase the Interest of
the Limited Partner then the repurchase shall occur within 60 days after the
General Partner receives written demand from the Limited Partner.
(b) During the Operating Deficit Guarantee Period, the General Partner,
as required from time to time, shall provide Operating Loans in amounts
necessary to cover any Operating Deficits. Each Operating Loan shall be
nonrecourse to the Partners and shall be repayable out of 50% of the available
Cash Flow From Operations or Sale or Refinancing Proceeds in accordance with
Article XI of this Agreement. In the event the General Partner shall fail to
make any Operating Loans required by this Section 6.2(b), the Partnership shall
withhold those funds otherwise payable to the General Partner or its Affiliates
pursuant to Section 9.2 ("General Partner Funds") and utilize the withheld funds
to meet the obligations of the General Partner pursuant to this Section 6.2(b);
any such use of General Partner Funds will be deemed an Operating Loan of the
General Partner repayable to the General Partner as aforesaid. Such use of
General Partner Funds shall also constitute payment and satisfaction of amounts
payable to the General Partner or Affiliates thereof pursuant to Section 9.2,
and the obligation of the Partnership to make such payments to the General
Partner or its Affiliates pursuant to Section 9.2 shall therefore be deemed
satisfied.
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(b) The General Partner shall promptly provide funds necessary to cover
any Operating Deficits for u31. In the event the General Partner shall fail to
make any such advances as provided in this Section 6.2(b) the Partnership shall
utilize those funds otherwise payable to the General Partner or its Affiliates
pursuant to Section 9.2 ("General Partner Funds") to meet the obligations of the
General Partner pursuant to this Section. Such General Partner Funds shall also
constitute payment and satisfaction of amounts payable to the General Partner or
Affiliates thereof pursuant to Section 9.2, and the obligation of the
Partnership to make such installment payments to the General Partner or its
Affiliates pursuant to Section 9.2 shall be reduced proportionally. If the
Operating Deficit guarantee period referenced above has not expired, but all
General Partner Funds have been distributed, then the General Partner shall pay
additional Capital Contributions to the Partnership to meet the Partnership's
financial obligations. Notwithstanding, after expiration of the Operating
Deficit guarantee period referenced above, the General Partner may advance funds
to the Partnership to pay operating expenses of the Partnership in order to
facilitate the Partnership's compliance with the Rent Restriction Test or to
cure Operating Deficits. All General Partner advances not satisfied from General
Partner Funds shall constitute an additional Capital Contribution of the General
Partner.
Section 6.3 Other General Partner Loans. After expiration of the
Operating Deficit Guarantee Period, with the Consent of the Limited Partner, the
General Partner may loan to the Partnership any sums required by the Partnership
and not otherwise reasonably available to it. Any such loan shall bear simple
interest (not compounded) at the rate of 2% per annum above the then prevailing
prime or reference rate charged by Bank of America N.T. & S.A., Main Office, San
Francisco, California, or, if lesser, the maximum legal rate. The maturity date
and repayment schedule of any such loan shall be as agreed to by the General
Partner and the Limited Partner. The terms of any such loan shall be evidenced
by a written instrument. The General Partner shall not charge a prepayment
penalty on any such loan. Any loan in contravention of this Section shall be
deemed an invalid action taken by the General Partner and such advance will be
classified as a General Partner Capital Contribution.
<PAGE>
ARTICLE VII
LIMITED PARTNER'S CAPITAL CONTRIBUTIONS
Section 7.1 Original Limited Partner. The Original Limited Partner made
a Capital Contribution of $1.00. Effective as of the date of this Agreement, the
Original Limited Partner's Interest has been liquidated and the Partnership has
reacquired the Original Limited Partner's Interest in the Partnership. The
Original Limited Partner acknowledges that it has no further interest in the
Partnership as a limited partner as of the date of this Agreement, and has
released all claims, if any, against the Partnership arising out of its
participation as a limited partner.
Section 7.2 Capital Contribution of Limited Partner. The Limited
Partner shall make a total Capital Contribution in the amount of $308,762, as
may be adjusted in accordance with Section 7.4 of this Agreement, in cash on the
dates and subject to the conditions hereinafter set forth:
(a) The obligation of the Limited Partner to pay the aforesaid Capital
Contribution shall be subject to the satisfaction of the following conditions:
(1) prior to the initial payment of the Capital Contribution
only, the issuance to the Limited Partner of an opinion of the Partnership's
legal counsel, in a form substantially similar to the form of opinion attached
hereto as Exhibit "B" and incorporated herein by this reference.
(2) prior to the initial payment of the Capital Contribution
only, the General Partner shall deliver to the Limited Partner a fully executed
Certification and Agreement in the form attached hereto as Exhibit "C" and
incorporated herein by this reference;
(3) prior to the due date of each installment of such Capital
Contribution except the first payment, the General Partner shall deliver to the
Limited Partner a fully executed General Partner Certification in the form
attached hereto as Exhibit "D" and incorporated herein by this reference, to the
effect that all of the representations and warranties set forth in Article IX
are accurate;
(4) prior to the Capital Contribution payment referenced in
Section 7.2(b)(1), the General Partner shall deliver to the Limited Partner the
following: (A) a certificate of occupancy on all the apartment units in the
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Project; (B) a copy of the recorded grant deed (warranty deed); (C) a copy of an
ALTA Owner's Title Insurance Policy and any endorsements required by the Limited
Partner issued in an amount equal to the sum of the original principal amount of
the Mortgage and the aggregate amount of Capital Contributions set forth in
Sections 6.1 and 7.2; (D) an audited construction cost certification with an
itemized cost breakdown; (E) copies of all Mortgage Loan documents; and (F)
copies of all Mortgage Notes; and
(5) prior to the Capital Contribution payment referenced in
Section 7.2(b)(2), the General Partner shall deliver to the Limited Partner
Internal Revenue Code Form 8609, or any successor form and a copy of the
Declaration of Restrictive Covenants/Extended Use Agreement entered into between
the Partnership and the State Tax Credit Agency.
(6) not later than the Capital Contribution payment referenced
in Section 7.2(b)(2), the General Partner shall deliver to the Limited Partner
Internal Revenue Code Form 8609, or any successor form.
(b) Provided the conditions of Section 7.2(a) of this Partnership
Agreement have been met, the Limited Partner shall make the following Capital
Contributions:
(1) $154,381 will be payable upon admittance of the Limited
Partner into the Partnership provided the conditions of Section 7.2(a) have
been met; and
(2) $154,381 will be payable after the Project maintains a
debt service coverage of 1.10 for 90 consecutive days and receipt of tenant
income verification data to determine that 100% of the units in the Project
qualify under Section 42 of the Internal Revenue Code provided, the conditions
of Section 7.2(a) have been met.
Section 7.3 Repurchase of Limited Partner's Interest. Within 60 days
after the General Partner receives written demand from the Limited Partner, the
Partnership shall repurchase the Limited Partner's Interest in the Partnership
by refunding to it in cash the full amount of the Capital Contribution which the
Limited Partner has theretofore made in the event that, for any reason, the
Partnership shall fail to:
<PAGE>
(a) receive an allocation of LIHTC no later than the close of the
calendar year during which the Project is placed in service;
(b) cause the Project to be placed in service by May 1, 1996;
(c) achieve 90% occupancy of the Project by Qualified Tenants by
June 1, 1996;
(d) obtain Permanent Mortgage Commencement by May 1, 1996;
(e) meet both the Minimum Set-Aside Test and the Rent Restriction Test
not later than December 31 of the first year the Partnership elects the LIHTC to
commence in accordance with the Code; and
(f) obtain a carryover allocation, within the meaning of Section
42 of the Code, from the State Tax Credit Agency on or before December 31, 1994.
Section 7.4 Reduction of Limited Partner's Capital Contribution.
(a) If the anticipated amount of Tax Credits to be allocated to the
Limited Partner as evidenced by IRS Form 8609, and Schedule A thereto, and the
audited construction cost certification provided to the Limited Partner is less
than $528,353 (the "Revised Projected Tax Credits") then the Limited Partner's
Capital Contribution provided for in Section 7.2 shall be reduced by the amount
which will make the total Capital Contribution to be paid by the Limited Partner
to the Partnership equal to 59% of the Revised Projected Tax Credits so
anticipated to be allocated to the Limited Partner.
(b) The General Partner is required to use its best efforts to rent
100% of the Project's apartment units to Qualified Tenants throughout the
Compliance Period. If at any time during the first five calendar years following
the year in which the Project is placed in service, the Actual Tax Credit for
any fiscal year or portion thereof is or will be less than the Projected Annual
Tax Credit, or the Revised Projected Tax Credit calculated on an annual basis
("Revised Projected Annual Tax Credit"), if applicable, then, unless the
shortfall shall have previously been addressed under Section 7.4(a), the amount
<PAGE>
of the reduction shall be applied to the next Capital Contribution owed by the
Limited Partner, if any, and any portion of such reduction in excess of such
Capital Contribution shall be applied to reduce succeeding Capital Contributions
of the Limited Partner, if any. If, at the time of determination thereof, the
Capital Contribution reduction referenced in Section 7.4(a) and/or this Section
7.4(b) is greater than the balance of the Limited Partner's Capital Contribution
payments which is then due, if any ("Reduction Shortfall"), then the amount of
the Reduction Shortfall shall be paid by the General Partner to the Limited
Partner within ninety days of the General Partner receiving notice of the
Reduction Shortfall from the Limited Partner.
(c) In the event that, for any reason, at any time after the first five
calendar years following the year in which the Project is placed in service, the
amount of the Actual Tax Credit is less than the Projected Annual Tax Credit, or
the Revised Projected Annual Tax Credit, if applicable, (the "Annual Credit
Shortfall"), then, unless the Annual Credit Shortfall shall have previously been
addressed under Section 7.4(a) or Section 7.4(b), there shall be a reduction in
the General Partner's share of Cash Flow From Operations in an amount equal to
the Annual Credit Shortfall and said amount instead shall be paid to the Limited
Partner. In the event there are not sufficient funds to pay the full Annual
Credit Shortfall to the Limited Partner at the time of the next Distribution of
Cash Flow From Operations, then the Limited Partner shall be treated as having
made a constructive advance to the Partnership in an amount equal to the Annual
Credit Shortfall (a "Credit Shortfall Loan"), which shall be deemed to have been
made on January 1 of the year in which the Annual Credit Shortfall arises. Each
Credit Shortfall Loan shall bear simple interest (not compounded) from the date
on which such loan is deemed to have been made under this Section 7.4(c) at the
rate equal to the 10-year Treasury money rate at the time of the Credit
Shortfall Loan, or, if lesser, the maximum legal rate. Credit Shortfall Loans or
any portion thereof shall be repaid in the next year in which sufficient monies
are available from the General Partner's Cash Flow From Operations, with
interest payable prior to principal. In the event a Sale or Refinancing of the
Project occurs prior to repayment in full of the Credit Shortfall Loan then the
excess will be paid in accordance with Section 11.2(b).
(d) In the event there is a reduction in the qualified basis of the
Project for income tax purposes following an audit by the Internal Revenue
Service (IRS) resulting in a recapture of Tax Credits previously claimed, then,
in addition to any other payments to which the Limited Partner is entitled under
<PAGE>
the terms of this Section 7.4 the General Partner shall pay to the Limited
Partner the sum of (1) the deficiency assessed against the Limited Partner as a
result of the Tax Credit recapture, (2) any interest and penalties imposed on
the Limited Partner with respect to such deficiency, and (3) an amount
sufficient to pay any tax liability owed by the Limited Partner resulting from
the receipt of the amounts specified in (1) and (2).
Section 7.5 Return of Capital Contribution. From time to time the
Partnership may have cash in excess of the amount required for the conduct of
the affairs of the Partnership, and the General Partner may, with the consent of
the Limited Partner, determine that such cash should, in whole or in part, be
returned to the Limited Partner in reduction of its Capital Contribution. No
such return shall be made unless all liabilities of the Partnership (except
those to Partners on account of amounts credited to them pursuant to this
Agreement) have been paid or there remain assets of the Partnership sufficient,
in the sole discretion of the General Partner, to pay such liabilities.
Section 7.6 Liability of Limited Partner. The Limited Partner shall not
be liable for any of the debts, liabilities, contracts or other obligations of
the Partnership. The Limited Partner shall be liable only to make Capital
Contribution in the amounts and on the dates specified in this Agreement and,
except as otherwise expressly required hereunder, shall not be required to lend
any funds to the Partnership or, after their respective Capital Contributions
have been paid, to make any further Capital Contribution to the Partnership.
ARTICLE VIII
WORKING CAPITAL AND RESERVES
Section 8.1 Operation and Replacement Reserve Account. The Partnership
shall establish an operating and maintenance reserve account and a replacement
reserve account and shall deposit thereinto an annual amount equal to $200 per
residential unit per year for the purpose of repairs, maintenance and capital
repairs. Said deposit shall be made monthly in equal installments. Any balance
remaining in these accounts at the time of a sale of the Project shall be
allocated and distributed equally between the General Partner and the Limited
Partner.
Section 8.2 Reserve for Replacements. The General Partner shall fund,
establish and maintain a reserve account in an amount required by the FmHA Loan
<PAGE>
Agreement which funds shall be used in accordance with FmHA Regulation 7 CFR
Part 1930-C, or any successor thereof, as evidenced by the FmHA Loan Agreement.
Section 8.3 Other Reserves. The General Partner shall establish out of
funds available to the Partnership a reserve account sufficient in its sole
discretion to pay any unforeseen contingencies which might arise in connection
with the furtherance of the Partnership business including, but not limited to,
(a) any rent subsidy required to maintain rent levels in compliance with the
Code and applicable FmHA regulations; and (b) any real estate taxes, insurance,
debt service or other payments for which other funds are not provided for
hereunder or otherwise expected to be available to the Partnership. The General
Partner shall not be liable for any good-faith estimate which it shall make in
connection with establishing or maintaining any such reserves nor shall the
General Partner be required to establish or maintain any such reserves if, in
its sole discretion, such reserves do not appear to be necessary.
ARTICLE IX
MANAGEMENT AND CONTROL
Section 9.1 Power and Authority of General Partner. Subject to the
receipt of Consent to the Limited Partner where required by this Agreement, and
subject to the other limitations and restrictions included in this Agreement,
the General Partner shall have complete and exclusive control over the
management of the Partnership business and affairs, and shall have the right,
power and authority, on behalf of the Partnership, and in its name, to exercise
all of the rights, powers and authority of a partner of a partnership without
limited partners. If there is more than one General Partner, all acts, decisions
or consents of the General Partners shall require the concurrence of all of the
General Partners. No actions taken without the authorization of all the General
Partners shall be deemed valid actions taken by the General Partners pursuant to
this Agreement. No Limited Partner (except one who may also be a General
Partner, and then only in its capacity as General Partner within the scope of
its authority hereunder) shall have any right to be active in the management of
the Partnership's business or investments or to exercise any control thereover,
nor have the right to bind the Partnership in any contract, agreement, promise
or undertaking, or to act in any way whatsoever with respect to the control or
conduct of the business of the Partnership, except as otherwise specifically
provided in this Agreement.
<PAGE>
Section 9.2 Payments to the General Partners and Others.
(a) The Partnership shall pay to the General Partner or an Affiliate of
the General Partner, a Development Fee in the amount of $230,000, in accordance
with the Development Fee Agreement between the Partnership and the Developer.
Such fee shall be deemed paid by the Partnership and deemed received by the
General Partner (and includable in the taxable income of the General Partner)
when the Project is placed-in-service.
(b) Notwithstanding the preceding, the Partnership shall retain the sum
of $78,762 from the Capital Contributions paid pursuant to Section 7.2(b) of
this Agreement to be used for supplemental development costs including, but not
limited to, land costs, architectural fees, survey and engineering costs,
financing costs, loan fees, building materials and labor, but the amount
retained shall in no event be greater than the difference between the
Construction Loan and the Mortgage Loan. If any such funds are remaining after
the Completion of Construction and all construction costs are paid in full and
the Construction Loan retired, then the remainder shall first be paid to the
General Partner in an amount equal to any unpaid Development Fee and the
balance, if any, shall be paid to the General Partner as a reduction of the
General Partner's Capital Contribution and/or an incentive rent-up fee.
(c) The Partnership shall pay to the Management Agent a property
management fee for the leasing and management of the Project in an amount in
accordance with the Management Agreement. The term of the Management Agreement
shall not exceed one year. If the Management Agent is an Affiliate of the
General Partner then commencing with the termination of the Operating Deficit
Guarantee period referenced in Section 6.2(b), in any year in which the Project
has an Operating Deficit, 40% of the management Fees, if any, shall be paid to
the Management Agent solely in accordance with and to the extent permitted by
Section 11.1 of this Agreement.
(1) The General Partner shall, upon receiving any request of
the Mortgage lender requesting such action, dismiss the Management Agent as the
entity responsible for management of the Project under the terms of the
Management Agreement; and, at the request of the Limited Partner, shall remove
the Management Agent in the event that the Management Agent experiences an event
of Bankruptcy, or in the event of any misconduct by the Management Agent or its
failure to exercise reasonable care in the discharge of its duties and
obligations as Management Agent.
<PAGE>
(2) The appointment of any successor Management Agent is
subject to the Consent of the Limited Partner which may only be sought after the
General Partner has provided the Limited Partner accurate and complete
disclosure respecting the proposed Management Agent.
(d) The Partnership shall pay to the Limited Partner a fee (the
"Reporting Fee") commencing in 1996 equal to 33% of the Cash Flow From
Operations but in no event less than $1,400 for the Limited Partner's services
in monitoring the operations of the Partnership and for services in connection
with the Partnership's accounting matters and assisting with the preparation of
tax returns and the reports required in Sections 14.2 and 14.3 of this
Agreement. The Reporting Fee shall be payable within seventy-five (75) days
following each calendar year and shall be payable from Cash Flow From Operations
in the manner and priority set forth in Section 11.1 of this Agreement;
provided, however, that if in any year Cash Flow From Operations is insufficient
to pay the full $1,400, the unpaid portion thereof shall accrue and be payable
on a cumulative basis in the first year in which there is sufficient Cash Flow
From Operations, as provided in Section 11.1, or sufficient Sale or Refinancing
Proceeds, as provided in Section 11.2.
(e) The Partnership shall pay to the General Partner an Incentive
Management Fee equal to 67% of the available Cash Flow From Operations in
accordance with Section 11.1 of this Agreement for each fiscal year of the
Partnership commencing in 1996 for services incident to the administration of
the business and affairs of the Partnership, which services shall include, but
not limited to, maintaining the books and records of the Partnership, selecting
and supervising the Partnership's Accountants, bookkeepers and other Persons
required to prepare and audit the Partnership's financial statements and tax
returns, and preparing and disseminating reports on the status of the Project
and the Partnership, all as required by Article XIV of this Agreement. The
Incentive Management Fee shall be payable within seventy-five (75) days
following each calendar year and shall be payable from Cash Flow From Operations
in the manner and priority set forth in Section 11.1. If the Incentive
Management Fee is not paid in any year it shall not accrue for payment in
subsequent years.
<PAGE>
Section 9.3 Specific Powers of the General Partner.
(a) In the Partnership's name and behalf, the General Partner may hold,
sell, transfer, lease or otherwise deal with any real, personal or mixed
property, interest therein or appurtenance thereto in accordance with the
purpose of this Agreement as indicated in Article IV hereto;
(b) In the Partnership's name and behalf, the General Partner may
employ, contract and otherwise deal with, from time to time, Persons whose
services are necessary or appropriate in connection with management and
operation of the Partnership business, including, without limitation,
contractors, agents, brokers, Accountants and Management Agents (provided that
the selection of any Management Agent has received the Consent of the Limited
Partner) and attorneys, on such terms as the General Partner shall determine;
(c) In the Partnership's name and on its behalf, the General Partner
may bring or defend, pay, collect, compromise, arbitrate, resort to legal action
or otherwise adjust claims or demands of or against the Partnership.
(d) In the Partnership's name and behalf, the General Partner may pay
as a Partnership expense any and all costs and expenses associated with the
formation, development, organization and operation of the Partnership, including
the expense of annual audits, tax returns and FmHA, LIHC compliance.
(e) In the Partnership's name and on its behalf, the General Partner
may deposit, withdraw, invest, pay, retain and distribute the Partnership's
funds in a manner consistent with the provisions of this Agreement;
(f) In the Partnership's name and on its behalf, the General Partner
is authorized to execute the Construction Loan and the Mortgage;
(g) The General Partner may require in any or all Partnership contracts
that the General Partner shall not have any personal liability thereunder but
that the Person contracting with the Partnership shall look solely to the
Partnership and its assets for satisfaction.
<PAGE>
(h) In the Partnership's name and behalf, the General Partner may
execute, acknowledge and deliver any and all instruments to effectuate any of
the foregoing.
(i) The General Partner shall operate the Project and shall cause the
Management Agent to manage the Project in such a manner that the Project will be
eligible to receive a Tax Credit with respect to 100% of the apartment units in
the Project. To that end, the General Partner agrees, without limitation, to
make all elections requested by the Limited Partner under Section 42 of the Code
to allow the Partnership or its Partners to claim the Tax Credit, to file Form
8609 with respect to the Project as required, for at least the duration of the
Compliance Period to operate the Project and cause the Management Agent to
manage the Project so as to comply with the requirements of Section 42 of the
Code, as amended, or any successor thereto, including, but not limited to,
Section 42(g) and Section 42(i)(3) of the Code, as amended, or any successors
thereto, to make all certifications required by Section 42(l) of the Code, as
amended, or any successor thereto, and to operate the Project and cause the
Management Agent to manage the Project so as to comply with all other Tax Credit
Conditions.
Section 9.4 Authority Requirements. During the Compliance Period, the
following provisions shall apply:
(a) Each of the provisions of this Agreement shall be subject to, and
the General Partner covenants to act in accordance with, the Tax Credit
Conditions and all applicable federal, state and local laws and regulations;
(b) The Tax Credit Conditions and all such laws and regulations, as
amended or supplemented, shall govern the rights and obligations of the
Partners, their heirs, executors, administrators, successor and assigns, and
they shall control as to any terms in this Agreement which are inconsistent
therewith, and any such inconsistent terms of this Agreement shall be
unenforceable by or against any of the Partners;
(c) Upon any dissolution of the Partnership or any transfer of the
Project, no title or right to the possession and control of the Project and no
right to collect rent therefrom shall pass to any Person who is not, or does not
become, bound by the Tax Credit Conditions in a manner that, in the opinion of
counsel to the Partnership, would not avoid a recapture thereof on the part of
the former owners; and
<PAGE>
(d) Any conveyance or transfer of title to all or any portion of the
Project required or permitted under this Agreement shall in all respects be
subject to the Tax Credit Conditions and all conditions, approvals or other
requirements of the rules and regulations of any authority applicable thereto.
Section 9.4 Limitations on General Partner's Power and Authority.
Notwithstanding the foregoing provisions of this Article IX, the General Partner
shall not:
(a) Except as required by Section 9.4, act in contravention of this
Agreement;
(b) Act in any manner which would make it impossible to carry on the
ordinary business of the Partnership;
(c) Confess a judgment against the Partnership;
(d) Possess Partnership property, or assign the Partner's right in specific
Partnership property, for other than the exclusive benefit of the Partnership;
(e) Admit a Person as a General Partner except as provided in this
Agreement;
(f) Admit a Person as a Limited Partner except as provided in this
Agreement;
(g) Violate any provision of the Mortgage Loan or Mortgage Note;
(h) Cause the Project apartment units to be rented to anyone other than
Qualified Tenants;
(i) Violate the Minimum Set-Aside Test or the Rent Restriction Test for the
Project;
(j) Cause any recapture of the Tax Credits;
(k) Permit any creditor who makes a nonrecourse loan to the Partnership to
have, or to acquire at any time as a result of making such loan, any direct or
indirect interest in the profits, income, capital or other property of the
Partnership, other than as a secured creditor;
<PAGE>
(l) Commingle funds of the Partnership with the funds of another Person;
(m) Take any action which requires the Consent of the Limited Partner
unless the General Partner has received the Consent of the Limited Partner.
Section 9.5 Restrictions on Authority of General Partner. Without consent
of the Limited Partner the General Partner shall not:
(a) Sell, exchange, lease or otherwise dispose of the Project;
(b) Incur indebtedness other than the Construction Loan and Mortgage Loan
in the name of the Partnership, other than in the ordinary course of the
Partnership's business;
(c) Engage in any transaction not expressly contemplated by this Agreement
in which the General Partner has an actual or potential conflict of interest
with the Limited Partner;
(d) Contract away the fiduciary duty owed to the Limited Partner at common
law;
(e) Take any action which would cause the Project to fail to qualify, or
which would cause a termination or discontinuance of the qualification of the
Project, as a "qualified low income housing project" under Section 42(g)(1) of
the Code, as amended, or any successor thereto, or which would cause the Limited
Partner to fail to obtain the Projected Tax Credits or which would cause the
recapture of any LIHC.
(f) Make any expenditure of funds, or commit to make any such expenditure,
other than in response to an emergency, except as provided for in the annual
budget as provided in Section 14.3(i) hereof;
(g) Cause the merger or other reorganization of the Partnership; or
(h) Dissolve the Partnership.
<PAGE>
Section 9.6 Duties of General Partner. The General Partner agrees that it
shall at all times:
(a) Diligently and faithfully devote such of its time to the business of
the Partnership as may be necessary to properly conduct the affairs of the
Partnership;
(b) File and publish all certificates, statements or other instruments
required by law for the formation and operation of the Partnership as a limited
partnership in all appropriate jurisdictions;
(c) Cause the Partnership to carry adequate public liability insurance,
comprehensive casualty insurance for not less than the full insurable value of
the Project and such other insurance as is required under Section 9.11(j)
hereof;
(d) Have a fiduciary responsibility for the safekeeping and use of all
funds and assets of the Partnership, whether or not in its immediate possession
or control and not employ or permit another to employ such funds or assets in
any manner except for the benefit of the Partnership;
(e) Comply with all FmHA, Code and state rules and regulations for rural
rental housing, LIHC; and
(f) Use its best efforts to keep the Project and Project dwelling units, in
decent, safe, sanitary and good condition, repair and working order, ordinary
use and obsolescence excepted, and make or cause to be made from time to time
all necessary repairs thereto (including external and structural repairs) and
renewals and replacements thereof;
(g) Pay, before the same shall become delinquent and before penalties
accrue thereon all Partnership taxes, assessments and other governmental charges
against the Partnership or its properties, and all of its other liabilities,
except to the extent and so long as the same are being contested in good faith
by appropriate proceedings in such manners as not to cause any material adverse
effect on the Partnership's property, financial condition or business
operations, with adequate reserves provided for such payments;
(h) Permit, and cause the Management Agent to permit, the Limited Partner
and its representatives to have access to the Project and personnel employed by
the Partnership and by the Management Agent who are concerned with management of
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the Project at all reasonable times during normal business hours and to examine
all agreements, Tax Credit compliance data and plans and specifications and
deliver copies thereof and such reports as may reasonably be required by the
Limited Partner. The General Partner shall provide the Limited Partner with
copies of all correspondence, notices and reports sent pursuant to or received
under the Project Documents or any authority with respect to the Project at the
time such correspondence, notices or reports are sent or received, copies of all
other correspondence of substantial importance which a prudent investor would
wish to examine in connection with the transaction at the time such
correspondence is sent or received, and all reports required by Article XIV
within the required time periods set forth therein.
(i) Make any Capital Contributions, advances or loans required to be made
by the General Partner under the terms of this Agreement;
(j) Establish and maintain all reserves required to be established and
maintained under the terms of this Agreement;
(k) Comply with each and every covenant, representation and warranty set
forth in Section 9.11; and
(l) Perform such other acts as may be expressly required of it under the
terms of this Agreement.
Section 9.7 Partnership Expenses.
(a) 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 operating cash expenses and only subject to the limitations on
the reimbursement of such expenses set forth herein. As used in this Section 9.7
the term "operating cash expenses" shall mean, with respect to any fiscal
period, the amount of cash disbursed by the Partnership for Partnership business
in that period in the ordinary course of business for the payment of its
operating expenses, such as expenses for advertising and promotion, management,
utilities, repair and maintenance, insurance, Partner communications, legal,
accounting, statistical and bookkeeping services, use of computing or accounting
<PAGE>
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 fees paid by the Partnership to the General Partner
or any Affiliate of the General Partner permitted by this Agreement and 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 nonaffiliated 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 which are not Affiliates of 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 amount which would be charged by nonaffiliated Persons
for comparable goods and services.
(b) Reimbursement to the General Partner or any of its Affiliates of
operating cash expenses pursuant to Subsection (a) hereof shall be subject to
the following:
(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
9.8(b)(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 such
General Partner or any such Affiliate of the General Partner or a person having
the power to direct or cause the direction of such General Partner or any such
Affiliate of the General Partner, whether through the ownership of voting
securities, by contract or otherwise.
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Section 9.8 General Partner Expenses. The General Partner or Affiliates
of the General Partner shall pay all Partnership expenses which are not
permitted to be reimbursed pursuant to Section 9.8 and all other expenses which
are unrelated to the business of the Partnership.
Section 9.9 Other Business of Partners. Any Partner may engage
independently or with others in other business ventures of every nature and
description, including, without limitation, the acquisition, development,
construction, operation and management of real estate projects and developments
of every type on their own behalf or on behalf of other partnerships, joint
ventures, corporations or other business ventures formed by them or in which
they may have an interest, including, without limitation, business ventures
similar to, related to or in direct or indirect competition with the Project
except if prohibited under a non-competition agreement. Neither the Partnership
nor any Partner shall have any right 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. Conversely, no person
shall have any rights to Partnership assets, income or proceeds by virtue of
such other ventures or activities of any Partner.
Section 9.10 Covenants, Representations and Warranties. The General
Partner covenants, represents and warrants that the following are presently true
and will be true during the term of this Agreement, to the extent then
applicable:
(a) The Partnership is a duly organized limited partnership validly
existing under the laws of the State and has complied with all filing
requirements necessary for the protection of the limited liability of the
Limited Partner.
(b) The Partnership Agreement and the Project Documents are in full
force and effect and neither the Partnership nor the General Partner is in
breach or violation of any provisions thereof or of any FmHA regulation.
(c) Existing improvements, if any, on the Project have been completed
substantially in conformity with the Project Documents, and the Project is being
operated in accordance with standards and procedures which are prudent and
customary for the operation of properties similar to the Project.
<PAGE>
(d) Additional Improvements on the Project, if any, shall be completed
substantially in conformity with the Project Documents and any other
requirements necessary to obtain Completion of Construction.
(e) No Partner has or will have any personal liability with respect to
or has or will have personally guaranteed the payment of the Mortgage.
(f) The Partnership is in compliance with all construction and use
codes applicable to the Project and is not in violation of any zoning,
environmental or similar regulations applicable to the Project.
(g) The Partnership owns the fee simple interest in the Project.
(h) The Construction Contract has been entered into between the
Partnership and the Contractor; no other consideration or fee shall be paid to
the Contractor other than amounts set forth in the Construction Contract.
(i) A builder's risk insurance policy in favor of the Partnership is in
full force and effect and will remain in full force and effect until Completion
of Construction.
(j) As of the date hereof and throughout the term of the Partnership,
fire and extended coverage insurance for the full replacement value of the
Project (excluding the value of the land, site utilities, landscaping and
foundations) and worker's compensation and public liability insurance, all in
favor of the Partnership, are in full force and effect and will be kept in full
force and effect throughout the term of the Partnership; all such policies shall
be amounts and with insurers satisfactory to Farmers Home Administration. All
such insurance policies shall provide that they are not subject to cancellation
without 30 days' prior written notice to the Limited Partner and shall not
contain any co-insurance provisions.
(k) The Management Agent has obtained or, upon commencement of
management functions, will obtain a fidelity bond or a blanket position bond (1)
to include, at a minimum, comprehensive employee dishonesty, disappearance and
destruction, covering all principals of the Management Agent and all persons or
positions which manage the Project's assets, including, but not limited to rent,
bank accounts and accounting records; (2) naming the Limited Partner as an
additional loss payee; and (3) insuring the Project for an amount equal to at
least two (2) months of the Project's gross potential income plus the Project's
total tenant security deposit liability.
<PAGE>
(l) Except as otherwise disclosed to the Limited Partner in writing
prior to the execution of this Agreement, to the best of the General Partner's
knowledge: (1) no Hazardous Substance has been disposed of, or released to or
from, or otherwise now exists in, on, under or around, the Project and (2) no
aboveground or underground storage tanks are now or have ever been located on or
under the Project. The General Partner will not install or allow to be installed
any aboveground or underground storage tanks on the Project. The General Partner
covenants that the Project shall be kept free of Hazardous Materials and shall
not be used to generate, manufacture, refine, transport, treat, store, handle,
dispose of, transfer, produce or process Hazardous Materials, except in
connection with the normal maintenance and operation of any portion of the
Project. The General Partner shall comply, or cause there to be compliance, with
all applicable Federal, state and local laws, ordinances, rules and regulations
with respect to Hazardous Materials and shall keep, or cause to be kept, the
Project free and clear of any liens imposed pursuant to such laws, ordinances,
rules and regulations. The General Partner must promptly notify the Limited
Partner in writing (3) if it knows, or suspects or believes there may be any
Hazardous Substance in or around any part of the Project, any Improvements
constructed on the Project, or the soil, groundwater or soil vapor, (4) if the
General Partner or the Partnership may be subject to any threatened or pending
investigation by any governmental agency under any law, regulation or ordinance
pertaining to any Hazardous Substance, and (5) of any claim made or threatened
by any Person, other than a governmental agency, against the Partnership or
General Partner arising out of or resulting from any Hazardous Substance being
present or released in, on or around any part of the Project.
(m) The General Partner has not executed and will not execute any
agreements with provisions contradictory to, or in opposition to, the provisions
of this Agreement.
(n) The Projected Tax Credits applicable to the Project are $36,120 for
1996, $54,180 per year for each of the years 1997 through 2005, and $4,515 for
2006, which the General Partner has projected to be the total amount of LIHC
which will be allocated to the Limited Partner by the Partnership, constituting
<PAGE>
ninety-nine percent (99%) of the aggregate amount of LIHC of $547,280 to be
available to the Partnership; provided, however, that if the Actual Tax Credit
for 1996 is greater (or less than) $36,120, the Projected Tax Credit for the
year 2006 shall be reduced (increased) by an amount equal to the amount by which
the Actual Credit for 1996 exceeds (is less than) $36,120.
(o) No charges, lien or encumbrances exist with respect to the Project
other than those which are created or permitted by the Project Documents or are
noted or excepted in the title policy for the Project.
(p) The buildings on the Project site constitute or shall constitute a
"qualified low-income housing project" as defined in Section 42(g) of the Code,
and as amplified by the Treasury Regulations thereunder. In this connection, not
later than December 31 of the first year in which the Partners elect the LIHC to
commence in accordance with the Code, the Project will satisfy the Minimum
Set-Aside Test.
(q) All accounts of the Partnership required to be maintained under the
terms of the Project Documents, including, without limitation, any account for
replacement reserves, are currently funded to required levels, including levels
required by any authority.
(r) The General Partner has not lent or otherwise advanced any funds to
the Partnership other than its Capital Contribution and the Partnership has no
unsatisfied obligation to make any payments of any kind to the General Partner
or any Affiliate thereof.
(s) No event has occurred which constitutes a default under any of
the Project Documents.
(t) No event or proceeding, including, but not limited to, any (A)
legal actions or proceedings before any court, commission, administrative body
or other governmental authority, and (B) acts of any governmental authority
having jurisdiction over the zoning or land use laws applicable to the Project,
has occurred the continuing effect of which has: (i) materially or adversely
affected the operation of the Partnership or the Project; (ii) materially or
adversely affected the ability of the General Partner to perform its obligations
hereunder or under any other agreement with respect to the Project; or (iii)
prevented the completion of construction of the improvements in substantial
<PAGE>
conformity with the Project Documents, other than legal proceedings which have
been bonded against (or as to which other adequate financial security has been
issued) in a manner as to indemnify the Partnership against loss; provided that
the foregoing does not apply to matters of general applicability which would
adversely affect the Partnership, the General Partner, Affiliates of the General
Partner or the Project only insofar as they or any of them are part of the
general public.
(u) Neither the Partnership nor the General Partner has any
liabilities, contingent or otherwise, which have not been disclosed in writing
to the Limited Partner and which in the aggregate do affect the ability of the
Limited Partner to obtain the anticipated benefits of its investment in the
Partnership.
(v) The General Partner has and shall maintain a net worth equal to at
least $500,000 computed in accordance with generally accepted accounting
principles.
The General Partner shall be liable to the Limited Partner for any costs,
damages, loss of profits, diminution in the value of its investment in the
Partnership, or other losses, of every nature and kind whatsoever, direct or
indirect, realized or incurred by the Limited Partner as a result of any
material breach of the representations and warranties set forth in this Section
9.11.
ARTICLE X
ALLOCATIONS OF INCOME, LOSSES AND CREDITS
Section 10.1 General. All items includable in the calculation of Income
or Loss not arising from a Sale or Refinancing, and all Tax Credits, shall be
allocated 99% to the Limited Partner and 1% to the General Partner.
Section 10.2 Allocations From Sale or Refinancing. All Income and
Losses arising from a Sale or Refinancing shall be allocated between the
Partners as follows:
(a) As to Income:
(1) First, an amount of Income equal to the aggregate negative
balances (if any) in the Capital Accounts of all Partners having negative
Capital Accounts (prior to taking into account the Sale or Refinancing and the
Distribution of the related Sale or Refinancing Proceeds, but after giving
<PAGE>
effect to Distributions of Cash Flow From Operations and allocations of Income
and Losses pursuant to this Article X up to the date of the Sale or Refinancing
shall be allocated to such Partners in proportion to their negative Capital
Account balances until all such Capital Accounts shall have zero balances; and
(2) Second, an amount of Income sufficient to increase the
Limited Partner's positive Capital Account balance to its Capital Contribution
and to increase the Limited Partner's positive Capital Account balance to an
amount equal to its Capital Contribution, shall be allocated to the Limited
Partner;
(3) Third, an amount of Income sufficient to increase the
General Partner's positive Capital Account balance to an amount equal to its
Capital Contribution; and
(4) the balance, if any, of such Income shall be allocated
99% to the Limited Partner and 1% to the General Partner.
(b) As to Losses:
(1) an amount of Losses equal to the aggregate positive
balances (if any) in the Capital Accounts of all Partners having positive
Capital Accounts (prior to taking into account the Sale or Refinancing and the
Distribution of the related Sale or Refinancing Proceeds, but after giving
effect to Distributions of Cash Flow From Operations and allocations of Income
and Losses pursuant to Section 10.1 up to the date of the Sale or Refinancing
shall be allocated to such Partners in proportion to their positive Capital
Account balances until all such Capital Accounts shall have zero balances; and
(2) the balance of any such Losses shall be allocated 99% to
the Limited Partner and 1% to the General Partner.
(c) Notwithstanding the foregoing provisions of Section 10.2(a) and
(b), in no event shall any Losses be allocated to the Limited Partner if and to
the extent that such allocation would create or increase an Adjusted Capital
Account Deficit for the Limited Partner. In the event an allocation of 99% of
each item includable in the calculation of Income or Loss not arising from a
Sale or Refinancing, would create or increase an Adjusted Capital Account
Deficit for the Limited Partner, then so much of the items of deduction other
than projected depreciation shall be allocated to the General Partner instead of
the Limited Partner as is necessary to allow the Limited Partner to be allocated
<PAGE>
99% of the items of income and Project depreciation without creating or
increasing an Adjusted Capital Account Deficit for the Limited Partner, it being
the intent of the parties that the Limited Partner always shall be allocated 99%
of the items of Income not arising from a Sale or Refinancing and 99% of the
Project depreciation.
Section 10.3 Special Allocations. The following special allocations shall
be made in the following order:
(a) Except as otherwise provided in Section 1.704-2(f) of the Treasury
Regulations, notwithstanding any other provisions of this Article X, if there is
a net decrease in Partnership Minimum Gain during any Partnership fiscal year,
each Partner shall be specially allocated items of Partnership Income and gain
for such fiscal year (and, if necessary, subsequent fiscal years) in an amount
equal to such Person's share of the net decrease in Partnership Minimum Gain,
determined in accordance with Treasury Regulations Section 1.704-2(g).
Allocations pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Partner and pursuant
thereto. The items to be so allocated shall be determined in accordance with
Section 1.704-2(f)(6) and 1.704-2(j)(2) of the Treasury Regulations. This
Section 10.3(a) is intended to comply with the minimum gain chargeback
requirement in Section 1.704-2(f) of the Treasury Regulations and shall be
interpreted consistently therewith.
(b) Except as otherwise provided in Section 1.704-2(i)(4) of the
Treasury Regulations, notwithstanding any other provision of this Article X, if
there is a net decrease in Partner Nonrecourse Debt Minimum Gain attributable to
a Partner Nonrecourse Debt during any Partnership fiscal year, each Person who
has a share of the Partner Nonrecourse Debt Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with Section 1.704-2(i)(5) of
the Treasury Regulations, shall be specially allocated items of Partnership
Income and gain for such fiscal year (and, if necessary, subsequent fiscal
years) in an amount equal to such Person's share of the net decrease in Partner
Nonrecourse Debt Minimum Gain attributable to such Partner Nonrecourse Debt,
determined in accordance with Treasury Regulations Section 1.704-2(i)(4).
Allocations pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Partner pursuant thereto.
The items to be so allocated shall be determined in accordance with Sections
1.704-2(i)(4) and 1.704-2(j)(2) of the Treasury Regulations. This Section
10.3(b) is intended to comply with the minimum gain chargeback requirement in
Section 1.704-2(i)(4) of the Treasury Regulations and shall be interpreted
consistently therewith.
<PAGE>
(c) In the event any Partner unexpectedly receives any adjustments,
allocations, or distributions described in Treasury Regulations Section
1.704-1(b)(2)(ii)(d)(4), Section 1.704-1(b)(2)(ii)(d)(5), or Section
1.704-1(b)(2)(ii)(d)(6), items of Partnership Income and gain shall be specially
allocated to each such Partner in an amount and manner sufficient to eliminate,
to the extent required by the Treasury Regulations, the Adjusted Capital Account
Deficit of such Partner as quickly as possible, provided that an allocation
pursuant to this Section 10.3(c) shall be made if and only to the extent that
such Partner would have an Adjusted Capital Account Deficit after all other
allocations provided for in this Section 10.3 have been tentatively made as if
this Section 10.3(c) were not in the Agreement.
(d) In the event any Partner has a deficit Capital Account at the end
of any Partnership fiscal year which is in excess of the sum of (i) the amount
such Partner is obligated to restore, and (ii) the amount such Partner is deemed
to be obligated to restore pursuant to the penultimate sentences of Treasury
Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), each such Partner shall be
specially allocated items of Partnership Income and gain in the amount of such
excess as quickly as possible, provided that an allocation pursuant to this
Section 10.3(d) shall be made if and only to the extent that such Partner would
have a deficit Capital Account in excess of such sum after all other allocations
provided for in this Section 10.3 have been tentatively made as if this Section
10.3(d) and Section 10.3(c) hereof were not in the Agreement.
(e) Nonrecourse Deductions for any fiscal year shall be specially
allocated 99% to the Limited Partner and 1% to the General Partner.
(f) Any Partner Nonrecourse Deductions for any fiscal year shall be
specially allocated to the Partner who bears the economic risk of loss with
respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse
Deductions are attributable in accordance with Treasury Regulations Section
1.704-2(i)(1).
(g) To the extent an adjustment to the adjusted tax basis of any
Partnership asset pursuant to Code Section 734(b) or Code Section 743(b) is
required, pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(2) or
Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital
<PAGE>
Accounts as the result of a distribution to a Partner in complete liquidation of
his interest in the Partnership, the amount of such adjustment to the Capital
Accounts shall be treated as an item of gain (if the adjustment increases the
basis of the asset) or Loss (if the adjustment decreases such basis) and such
gain or Loss shall be specially allocated to the Partners in accordance with
their interests in the Partnership in the event that Treasury Regulations
Section 1.704-1 (b)(2)(iv)(m)(2) applies, or to the Partner to whom such
distribution was made in the event that Treasury Regulations Section
1.704-1(b)(2)(iv)(m)(4) applies.
(h) To the extent the Partnership has taxable interest income with
respect to any promissory note pursuant to Section 483 or Section 1271 through
1288 of the Code:
(a) Such interest income shall be specially allocated to the Limited
Partner to whom such promissory note relates; and
(b) The amount of such interest income shall be excluded from the Capital
Contributions credited to such Partner's Capital Account in connection with
payments of principal with respect to such promissory note.
(i) 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 Code Section 50(c), such increase shall be specially 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.
(j) Any reduction in the adjusted tax basis (or cost) of Partnership
investment tax credit property pursuant to Code Section 50(c) shall be specially
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 Regulations Section 1.46-3(f)(2)(i).
(k) Any income, gain, loss, or deduction realized as a direct or
indirect result of the issuance of an interest in the Partnership by the
Partnership to a Partner (the "Issuance Items") shall be allocated among the
Partners so that, to the extent possible, the net amount of such Issuance Items,
<PAGE>
together with all other allocations under this Agreement to each Partner, shall
be equal to the net amount that would have been allocated to each such Partner
if the Issuance Items had not been realized.
(l) If any Partnership expenditure treated as a deduction on its
federal income tax return is disallowed as a deduction and treated as a
distribution pursuant to Section 731(a) of the Code, there shall be a special
allocation of gross income to the Partner deemed to have received such
distribution equal to the amount of such distribution.
(m) The allocation to the General Partner of each material item of
Partnership income, loss, deduction or credit will not be less than 1% of each
such item at all times during the existence of the Partnership.
(n) Interest deduction on the Partnership indebtedness referred to
in Section 6.3 shall be allocated 100% to the General Partner.
Section 10.4 Curative Allocations. The allocations set forth in
Sections 10.2(c), 10.3(b), 10.3(c), 10.3(d), 10.3(e), 10.3(f), and 10.3(g)
hereof (the "Regulatory Allocations") are intended to comply with certain
requirements of the Treasury Regulations. It is the intent of the Partners that,
to the extent possible, all Regulatory Allocations shall 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 10.4.
Therefore, notwithstanding any other provision of the Article X (other than the
Regulatory Allocations), with the Consent of the Limited Partner, the General
Partner shall make such offsetting special allocations of Partnership income,
gain, loss, or deduction in whatever manner the General Partner, with the
Consent of the Limited Partner, 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 Agreement and all
Partnership items were allocated pursuant to Sections 10.1, 10.2(a), 10.2(b),
10.3(h), 10.3(i), 10.3(j), 10.3(k), 10.3(l), 10.3(n) and 10.5. In exercising its
authority under this Section 10.4, the General Partner shall take into account
future Regulatory Allocations under Section 10.3(a) and 10.3(b) that, although
not yet made, are likely to offset other Regulatory Allocations previously made
under Sections 10.3(e) and 10.3(f).
<PAGE>
Section 10.5 Other Allocation Rules.
(a) The basis (or cost) of any Partnership investment tax credit property
shall be allocated among the Partners in accordance with Treasury Regulations
Section 1.46-3 (f)(2)(i). All Tax Credits (other than the investment tax credit)
shall be allocated among the Partners in accordance with applicable law.
Consistent with the foregoing, the Partners intend that LIHC will be allocated
99% to the Limited Partner and 1% to the General Partner.
(b) In the event Partnership investment tax credit property is disposed of
during any taxable year, profits for such taxable year (and, to the extent such
profits are insufficient, profits for subsequent taxable years) in an amount
equal to the excess, if any, of (i) the reduction in the adjusted tax basis (or
cost) of such property pursuant to Code Section 50(c), over (ii) any increase in
the adjusted tax basis of such property pursuant to Code Section 50(c) caused by
the disposition of such property, shall be excluded from the profits allocated
pursuant to Section 10.1 and Section 10.2(a) hereof and shall instead be
allocated among the Partners in proportion to their respective shares of such
excess, determined pursuant to Section 10.3(i) and 10.3(j) hereof. In the event
more than one item of such property is disposed of by the Partnership, the
foregoing sentence shall apply to such items in the order in which they are
disposed of by the Partnership, so the profits equal to the entire amount of
such excess with respect to the first such property disposed of shall be
allocated prior to any allocations with respect to the second such property
disposed of, and so forth.
(c) For purposes of determining the Income, Losses, or any other items
allocable to any period, Income, Losses, and any such other items shall be
determined on a daily, monthly, or other basis, as determined by the General
Partners using any permissible method under Code Section 706 and the Treasury
Regulations thereunder.
(d) Solely for purposes of determining a Partner's proportionate share of
the "excess nonrecourse liabilities" of the Partnership within the meaning of
Treasury Regulations Section 1.752-3(a)(3), the Partners' interests in
Partnership profits are as follows: Limited Partner: 99%; General Partner: 1%.
(e) To the extent permitted by Section 1.704-2(h)(3) of the Treasury
Regulations, the General Partner shall endeavor to treat Distributions as having
been made from the proceeds of a Nonrecourse Liability or a Partner Nonrecourse
<PAGE>
Debt only to the extent that such Distributions would cause or increase an
Adjusted Capital Account Deficit for any Partner who is not a General Partner.
Section 10.6 Tax Allocations: Code Section 704(c). In accordance with
Code Section 704(c) and the Treasury Regulations thereunder, income, gain, loss,
and deduction with respect to any property contributed to the capital of the
Partnership shall, solely for tax purposes, be allocated among the Partners so
as to take account of any variation between the adjusted basis of such property
to the Partnership for federal income tax purposes and its initial Gross Asset
Value (computed in accordance with Section 1.25(a) hereof).
In the event the Gross Asset Value of any Partnership asset is adjusted pursuant
to Section 1.25(b) hereof, subsequent allocations of income, gain, loss, and
deduction with respect to such asset shall take account of any variation between
the adjusted basis of such asset for federal income tax purposes and its Gross
Asset Value in the same manner as under Code Section 704(c) and the Treasury
Regulations thereunder.
Any elections or other decisions relating to such allocations shall be made by
the General Partner in any manner that reasonably reflects the purpose and
intention of this Agreement. Allocations pursuant to this Section 10.6 are
solely for purposes of federal, state, and local taxes and shall not affect, or
in any way be taken into account in computing, any Person's Capital Account or
share of Income, Losses, other items, or distributions pursuant to any provision
of this Agreement.
Section 10.7 Allocation Among Limited Partners and Assignees. In the
event that the Interest of the Limited Partner hereunder is at any time held by
more than one Limited Partner items which are specifically allocated to the
Limited Partner for any month pursuant to this Article X shall be apportioned
among such Persons according to the ratio of their respective profit-sharing
interests in the Partnership at the last day of such month.
Section 10.8 Allocation Among General Partners. In the event that the
Interest of the General Partner hereunder is at any time held by more than one
General Partner all items which are specifically allocated to the General
Partner for any month pursuant to this Article X shall be apportioned among such
Persons in such percentages as may from time to time be determined by agreement
<PAGE>
among them without amendment to this Agreement.
Section 10.9 Modification of Allocations. The provisions of Articles X
and XI and other provisions of this Agreement are intended to comply with
Treasury Regulation Section 1.704 and shall be interpreted and applied in a
manner consistent with such section of the Treasury Regulations. In the event
that the General Partner determines, in its sole discretion, that it is prudent
to modify the manner in which the Capital Accounts of the Partners, or any debit
or credit thereto, are computed in order to comply with such section of the
Treasury Regulations, the General Partner may make such modification, to the
minimum extent necessary, to effect the plan of allocations and Distributions
provided for elsewhere in this Agreement. Further, the General Partner shall
make any appropriate modifications in the event it appears that unanticipated
events (e.g., the existence of a Partnership election pursuant to Code Section
754) might otherwise cause this Agreement not to comply with Treasury Regulation
Section 1.704.
ARTICLE XI
DISTRIBUTION
Section 11.1 Distribution of Cash Flow From Operations.
Cash Flow Form Operations for each fiscal year shall be distributed
within seventy-five(75) days following each calendar year and shall be applied
in the following order of priority:
(a) To pay the Deferred Management Fee, if any, but in no event shall
this payment exceed 50% of the Cash Flow From Operations;
(b) To pay the current Reporting Fee and then to pay any accrued
Reporting Fees which have not been paid in full from previous years;
(c) To pay the Development Fee in accordance with the Development Fee
Agreement;
(d) To pay the Operating Loans, if any, as referenced in Section 6.2(b)
of this Agreement, limited to 50% of the Cash Flow From Operations remaining
after reduction for the payments made pursuant to subsections (a) through (c) of
this Section 11.1;
<PAGE>
(e) To pay the Incentive Management Fee equal to 67% of the Cash Flow
From Operations remaining after reduction for the payments made pursuant to
subsections (a) through (d) of this Section 11.1; and
(f) To the Limited Partner in an amount equal to 50% of the remaining
Cash Flow From Operations and to the General Partner in an amount equal to 50%
of the remaining Cash Flow From Operations.
Section 11.2 Distribution of Sale or Refinancing Proceeds. Sale or
Refinancing Proceeds shall be distributed in the following order:
(a) To the payment of the Mortgage Note and other matured debts and
liabilities of the Partnership, other than accrued payments, debts or other
liabilities owing to Partners or former Partners if applicable;
(b) To any accrued payments, debts or other liabilities owing to the
Partners or former Partners, including, but not limited to, accrued Reporting
Fees and Operating Loan;
(c) To the establishment of any reserves which the General Partner, with
the Consent of the Limited Partner, shall deem reasonably necessary for
contingent, unmatured or unforeseen liabilities or obligations of the
Partnership;
(d) To the Limited Partner in an amount equal to its Capital Contribution;
(e) To the General Partner in an amount equal to its Capital Contribution;
and
(f) Thereafter, 99% to the Limited Partner and 1% to the General Partner.
ARTICLE XII
VOLUNTARY TRANSFERS OF LIMITED
PARTNER'S INTEREST IN THE PARTNERSHIP
Section 12.1 Assignment of Limited Partner's Interest. The Limited
Partner shall not have the right to assign all or any part of their respective
Interests in the Partnership to any other Person, whether or not a Partner,
except upon satisfaction of each of the following:
<PAGE>
(a) By a written instrument in form and substance satisfactory to the
General Partner and its counsel, setting forth the name and address of the
proposed transferee, the nature and extent of the interest which is proposed to
be transferred and the terms and conditions upon which the transfer is proposed
to be made, stating that the Assignee accepts and agrees to be bound by all of
the terms and provisions of this Agreement, and providing for the payment of all
reasonable expenses incurred by the Partnership in connection with such
assignment, including but not limited to the cost of preparing any necessary or
appropriate amendment to this Agreement;
(b) Upon consent of the General Partner to such assignment, which shall not
be unreasonably withheld;
(c) Upon receipt by the General Partner of the Assignee's written
representation that the Partnership Interest is to be acquired by the Assignee
for the Assignee's own account for long-term investment and not with a view
toward resale, fractionalization, division or distribution thereof.
THE LIMITED PARTNERSHIP INTEREST DESCRIBED HEREIN HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED OR UNDER ANY STATE
SECURITIES LAW. THE INTEREST MAY NOT BE SOLD OR OTHERWISE TRANSFERRED UNLESS
REGISTERED UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR UNLESS AN
EXEMPTION FROM REGISTRATION IS AVAILABLE.
Section 12.2 Effective Date of Transfer. Any assignment of a Limited
Partner's Interest pursuant to Section 12.1 shall become effective as of the
last day of the calendar month in which the last of the conditions to such
assignment are satisfied.
Section 12.3 Invalid Assignment. Any purported assignment of an
Interest of a Limited Partner otherwise than in accordance with Section 12.1 or
Section 12.6 shall be of no effect as between the Partnership and the purported
assignee and shall be disregarded by the General Partner in making allocations
and Distributions hereunder.
Section 12.4 Assignee's Rights to Allocations and Distributions. An
Assignee shall be entitled to receive allocations and Distributions from the
Partnership attributable to the Interest acquired by reason of any permitted
<PAGE>
assignment from and after the first day of the calendar month following the
month which ends with the effective date of the transfer of such interest as
provided in Section 12.2. The Partnership and the General Partner shall be
entitled to treat the assignor of such Partnership interest as the absolute
owner thereof in all respects, and shall incur no liability for allocations and
Distributions made in good faith to such assignor, until such time as the
written instrument of assignment has been received by the Partnership.
Section 12.5 Substitution of Assignee as Limited Partner.
(a) An Assignee shall not have the right to become a substitute Limited
Partner in place of his assignor unless the written consent of the General
Partner to such substitution shall have been obtained, which consent, in the
General Partner's absolute discretion, may be withheld.
(b) A nonadmitted transferee of a Limited Partner's Interest in the
Partnership shall only be entitled to receive that share of allocations,
Distributions and the return of Capital Contribution to which its transferor
would otherwise have been entitled with respect to the interest transferred, and
shall have no right to obtain any information on account of the Partnership's
transactions, to inspect the Partnership's books and records or have any other
of the rights and privileges of a Limited Partner, provided, however, that the
Partnership shall, if a transferee and transferor jointly advise the General
Partner in writing of a transfer of an Interest in the Partnership, furnish the
transferee with pertinent tax information at the end of each fiscal year of the
Partnership.
(c) The General Partner may elect to treat a transferee of a
Partnership Interest who has not become a Substitute Limited Partner as the case
may be, in the place of its transferor should the General Partner determine in
its absolute discretion that such treatment is in the best interest of the
Partnership.
Section 12.6 Death, Bankruptcy, Incompetency, etc. of a Limited
Partner. Upon the death, dissolution, adjudication of bankruptcy or adjudication
of incompetency or insanity of a Limited Partner, such Partner's executors,
administrators or legal representatives shall have all the rights of a Limited
Partner for the purpose of settling or managing such Partner's estate, including
such power as such Partner possessed to constitute a successor as a transferee
<PAGE>
of its Interest in the Partnership and to join with such transferee in making
the application to substitute such transferee as a Partner. However, such
executors, administrators or legal representatives will not have the right to
become Substitute Limited Partners in the place of their respective predecessors
unless the General Partner shall so consent.
ARTICLE XIII
WITHDRAWAL, REMOVAL AND REPLACEMENT OF
GENERAL PARTNER
Section 13.1 Withdrawal of General Partner.
(a) The General Partner may not Withdraw (other than as a result of an
Involuntary Withdrawal) without the Consent of the Limited Partner, and, to the
extent required, of Farmers Home Administration and the State Tax Credit Agency.
Withdrawal shall be conditioned upon the agreement of one or more Persons who
satisfy the requirements of Section 13.5 of this Agreement to be admitted as
successor General Partner(s).
(b) Each General Partner shall indemnify and hold harmless the
Partnership and all Partners from its Withdrawal in violation of Section 13.1(a)
hereof. Each General Partner shall be liable for damages to the Partnership
resulting from its Withdrawal in violation of Section 13.1(a).
Section 13.2 Removal of General Partner.
(a) The Limited Partner may remove the General Partner:
(1) For cause if such General Partner has:
(A) Been subject to an Event of Bankruptcy;
(B) Committed any fraud, willful misconduct,
breach of fiduciary duty or other negligent conduct in the performance of its
duties under this Agreement;
(C) Been convicted of, or entered into a plea of
guilty to a felony;
(D) Made personal use of Partnership funds or
properties;
(E) Violated the terms of the FmHA loan
Agreement, the FmHA Interest Credit Agreement or any FmHA rule or regulation
applicable to the Partnership Mortgage Note, and such violation prompts the
<PAGE>
FmHA to issue a default letter or acceleration notice to the Partnership
or General Partner and such conduct caused the Partnership to suffer an
uninsurable loss;
(F) Failed to provide any loan, advance, Capital
Contribution or any payment the Partnership required under this Agreement;
(G) Failed to obtain the Consent of the Limited
Partner prior to any decision, act or omission under circumstances where this
Agreement requires that such consent be obtained;
(H) Breached any representation, warranty or
covenant contained in this Agreement or failed to perform any action which may
be required by this Agreement;
(G) Violated any federal or state tax law which
causes a recapture of LIHC; or
(H) Failed during any six-month period during
the Compliance Period to cause at least 85% of the total apartment units in
the Project to qualify for LIHC, unless such failure is the result of fire,
flood, earthquake or other act of God or unless such failure is cured within
120 days after the end of the six-month period.
(2) As provided in Section 6.2(a) hereof.
(b) Written notice of the removal for cause of the General Partner
shall be served by the Limited Partner upon the General Partner either by
certified or by registered mail, return receipt requested, or by personal
service. Such notice shall set forth the reasons for the removal, if any, and
the date upon which the removal is to become effective.
(c) Upon receipt of such notice of removal for cause, the General
Partner shall cause an accounting to be prepared covering the transactions of
the Partnership from the end of the previous fiscal year through the date of
receipt of such notice, and thereafter it shall not sell or dispose of
Partnership assets under any circumstances. The accounting shall be completed by
the effective date of the removal and shall be in sufficient detail to
accurately and fully reflect the earnings or losses for the period and the
financial condition of the Partnership. If the General Partner fails to cause
<PAGE>
the accounting to be prepared within 30 days of receipt of the notice of removal
for cause then the Limited Partner may cause the accounting to be prepared. The
expenses of the accounting shall be borne by the General Partner.
Section 13.3 Effects of a Withdrawal. In the event of a Withdrawal, the
entire Interest of the Withdrawing General Partner shall immediately and
automatically terminate on the effective date of such Withdrawal, and such
General Partner shall immediately cease to be a General Partner, shall have no
further right to participate in the management or operation of the Partnership
or the Project or to receive any allocations or Distributions from the
Partnership or any other funds or assets of the Partnership, except as
specifically set forth below. In the event of a Withdrawal, any or all executory
contracts, including but not limited to the Management Agreement, between the
Partnership and the Withdrawing General Partner or its Affiliates may be
terminated by the Partnership.
Furthermore, notwithstanding such Withdrawal, the Withdrawing General
Partner shall be and shall remain, liable as a General Partner for all
liabilities and obligations incurred by the Partnership or by the General
Partner prior to the effective date of the Withdrawal, or which may arise upon
such Withdrawal. Any remaining Partner shall have all other rights and remedies
against the Withdrawing General Partner as provided by law or under this
Agreement.
The General Partner agrees that in the event of its Withdrawal it will
indemnify and hold the Limited Partner harmless from and against all losses,
costs and expenses incurred in connection with the Withdrawal, including,
without limitation, all legal fees and other expenses of the Limited Partner in
connection with the transaction.
The following additional provisions shall apply in the event of a
Withdrawal:
(a) In the event of a Withdrawal which is not an Involuntary
Withdrawal, the Withdrawing General Partner shall have no further right to
receive any future allocations or Distributions from the Partnership or any
other funds or assets of the Partnership, nor shall it be entitled to receive or
to be paid by the Partnership any further payments of fees (including fees which
have been earned but are unpaid) or to be repaid any outstanding advances or
loans made by it to the Partnership or to be paid any amount for its former
<PAGE>
Interest. From and after the effective date of such Withdrawal, the former
rights of the Withdrawing General Partner to receive or to be paid such
allocations, Distributions, funds, assets, fees or repayments shall be assigned
to the other General Partner or General Partners (which may include the Limited
Partner), or if there is no other general partner of the Partnership at that
time, to the Limited Partner.
(b) In the event of an Involuntary Withdrawal, except as provided in
Section 13.3(b)(3) below, the Withdrawing General Partner shall have no further
right to receive any future allocations or Distributions from the Partnership or
any other funds or assets of the Partnership, provided that accrued and payable
fees (i.e., fees earned but unpaid as of the date of Withdrawal) owed to the
Withdrawing General Partner, and any outstanding loans of the Withdrawing
General Partner to the Partnership, shall be paid to the Withdrawing General
Partner in the manner and at the times such fees and loans would have been paid
had the Withdrawing General Partner not Withdrawn. The Interest of the General
Partner shall be purchased as follows:
(1) If the Involuntary Withdrawal arises from removal for
cause as set forth in Section 13.2(a) hereof, the Withdrawn General Partner
shall be entitled to receive as its sole compensation for its Interest in the
Partnership an amount equal to its positive Capital Account balance determined
as of the effective date of the removal, if any, payable upon the dissolution
and termination of the Partnership after all of the Partners have been
distributed the positive balances in their Capital Accounts.
(2) If the Involuntary Withdrawal does not arise from removal
for cause under Section 13.2(a) hereof, and if the Partnership is to be
continued with one or more remaining or successor General Partner(s), the
Partnership, with the Consent of the Limited Partner, may, but is not obligated
to, purchase the Interest of the Withdrawing General Partner in Partnership
allocations, Distributions and capital. The purchase price of such Interest
shall be its Fair Market Value as determined by agreement between the
Withdrawing General Partner and the Limited Partner, or, if they cannot agree,
by arbitration in accordance with the then current rules of the American
Arbitration Association. The cost of such arbitration shall be borne equally by
the Withdrawing General Partner and the Partnership. The purchase price shall be
paid by the Partnership by delivering to the General Partner or its
<PAGE>
representative the Partnership's non-interest bearing unsecured promissory note
payable, if at all, upon liquidation of the Partnership in accordance with
Section 11.2(b). The note shall also provide that the Partnership may prepay all
or any part thereof without penalty.
(3) If the Involuntary Withdrawal does not arise from removal
for cause under Section 13.2(a) hereof, and if the Partnership is to be
continued with one or more remaining or successor General Partner(s), and if the
Partnership does not purchase the Interest of the Withdrawing General Partner in
Partnership allocations, Distributions and capital, then the Withdrawing General
Partner shall retain its Interest in such items, but such Interest shall be held
as a special limited partner.
Section 13.4 Successor General Partner. Upon the occurrence of an event
giving rise to a Withdrawal of a General Partner, any remaining General Partner,
or, if there be no remaining General Partner, the Withdrawing General Partner or
its legal representative, shall promptly notify the Limited Partner of such
Withdrawal (the "Withdrawal Notice"). Whether or not the Withdrawal Notice shall
have been sent as provided herein, the Limited Partner shall have the right to
become a successor General Partner (and to become the successor managing General
Partner if the Withdrawing General Partner was previously the managing General
Partner). In order to effectuate the provisions of this Section 13.4 and the
continuance of the Partnership, the Withdrawal of a General Partner shall not be
effective until the expiration of 120 days from the date on which occurred the
event giving rise to the Withdrawal, unless the Limited Partner shall have
elected to become a successor General Partner as provided herein prior to
expiration of such 120-day period, whereupon the Withdrawal of the General
Partner shall be deemed effective upon the notification of all the other
Partners by the Limited Partner of such election.
Section 13.5 Admission of Additional or Successor General Partner. No
Person shall be admitted as an additional or successor General Partner unless
(a) such Person shall have agreed to become a General Partner by a written
instrument which shall include the acceptance and adoption of this Agreement;
(b) the Consent of the Limited Partner to the admission of such Person as a
substitute General Partner, which consent may be withheld in the discretion of
the Limited Partner, shall have been given; and (c) such Person shall have
executed and acknowledged any other instruments which the Limited Partner shall
reasonably deem necessary or appropriate to affect the admission of such Person
as a substitute General Partner. If the foregoing conditions are satisfied, this
<PAGE>
Agreement shall be amended in accordance with the provisions of the Act, and all
other steps shall be taken which are reasonably necessary to effect the
Withdrawal of the Withdrawing General Partner and the substitution of the
successor General Partner. Nothing contained herein shall reduce the Limited
Partner's Interest in the Partnership.
Section 13.6 Transfer of Interest. Except as otherwise provided herein,
the General Partner may not Withdraw from the Partnership, or enter into any
agreement as the result of which any Person shall become interested in the
Partnership, without the Consent of the Limited Partner.
Section 13.7 No Goodwill Value. At no time during continuation of the
Partnership shall any value ever be placed on the Partnership name, or the right
to its use, or to the goodwill appertaining to the Partnership or its business,
either as among the Partners or for the purpose of determining the value of any
Interest, nor shall the legal representatives of any Partner have any right to
claim any such value. In the event of a termination and dissolution of the
Partnership as provided in this Agreement, neither the Partnership name, nor the
right to its use, nor the same goodwill, if any, shall be considered as an asset
of the Partnership, and no valuation shall be put thereon for the purpose of
liquidation or distribution, or for any other purpose whatsoever.
ARTICLE XIV
BOOKS AND ACCOUNTS, REPORTS,
TAX RETURNS, FISCAL YEAR AND BANKING
Section 14.1 Books and Accounts.
(a) The General Partner shall cause the Partnership to keep and
maintain at its principal executive office full and complete books and records
which shall include each of the following:
(1) a current list of the full name and last known business or
residence address of each Partner set forth in alphabetical order together with
the Capital Contribution and the share in Income and Losses of each Partner;
(2) 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;
<PAGE>
(3) copies of the Partnership's federal, state and local
income tax information returns and reports, if any, for the six most recent
taxable years;
(4) copies of the original of this Agreement and all
amendments thereto;
(5) financial statements of the Partnership for the six most
recent fiscal years; and
(6) the Partnership's books and records for at least the
current and past three fiscal years.
(b) Upon the request of the Limited Partner, the General Partner shall
promptly deliver to the Limited Partner, at the expense of the Partnership, a
copy of the information set forth in Section 14.1(a) above. The Limited Partner
shall have the right upon reasonable request and during normal business hours to
inspect and copy any of the foregoing or any of the other books and records of
the Partnership or the Project at its own expense.
Section 14.2 Accounting Reports.
(a) By March 1 of each calendar year the General Partner shall provide
to the Limited Partner all tax information necessary for the preparation of his
federal and state income tax returns and other tax returns with regard to the
jurisdiction(s) in which the Partnership is formed and in which the Project is
located.
(b) By March 1 of each calendar year the General Partner shall send to
the Limited Partner: (i) a balance sheet as of the end of such fiscal year and
statements of income, Partners, equity and changes in cash flow for such fiscal
year prepared in accordance with generally accepted accounting principles and
accompanied by an auditor's report containing an opinion of the Partnership's
Accountants; (ii) a report (which need not be audited) of any Distributions made
to at any time during the fiscal year, separately identifying Distributions from
Cash Flow From Operations for the fiscal year, Cash Flow From Operations for
prior years, Sale or Refinancing Proceeds and reserves; (iii) a report setting
forth the amount of all fees and other compensation and Distributions and
reimbursed expenses paid by the Partnership for the fiscal year to the General
Partner or Affiliates of the General Partner and the services performed in
<PAGE>
consideration therefor, which report shall be verified by the Partnership's
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; (iv) a copy of the Project's rent roll for the most recent
calendar quarter; (v) a statement signed by the General Partner indicating the
number of apartment units which are occupied by Qualified Tenants; and (vi) a
report of the significant activities of the Partnership during the year.
(c) Within 60 days after the end of each fiscal quarter in which a Sale
or Refinancing of the Project occurs, the General Partner shall send to the
Limited Partner a report as to the nature of the Sale or Refinancing and as to
the Income and Losses for tax purposes and proceeds arising from the Sale or
Refinancing.
Section 14.3 Other Reports. The General Partner shall also provide to the
Limited Partner:
(a) During the period of construction, by the tenth day of each month a
copy of the previous month's Construction Loan draw request and the inspecting
architect's certification;
(b) During the rent-up phase, and continuing until the end of the first
six-month period during which the Project has a sustained occupancy of 95% or
better, by the tenth day of each month within such period a copy of the previous
month's rent roll (through the last day of the month), a tenant LIHC compliance
worksheet similar to the monthly initial tenant certification worksheet included
in Exhibit "C" attached hereto and incorporated herein by this reference, and
copies of all initial tenant files including completed applications, completed
questionnaires or checklists of income and assets, documentation of third party
verification of income and assets, income certification forms and executed lease
agreements collected by the Management Agent, or General Partner, verifying each
tenant's eligibility as a Qualified Tenant; compliance worksheet similar to the
form in Exhibit D attached
(c) A quarterly tax credit compliance report similar to the worksheet
included in Exhibit "G". In order to verify the reliability of the information
being provided on the compliance report the Limited Partner may request a small
sampling of tenant files to be provided. The sampling will include, but not be
<PAGE>
limited to, copies of tenant applications, certifications and third party
verifications used to qualify tenants. If any inaccuracies are found to exist on
the tax credit compliance report or any items of non-compliance are discovered
then the sampling will be expanded as determined by the Limited Partner.
(d) By September 15 of each year, an estimate of LIHC for that year;
(d) If the Project receives a reservation of LIHCs in one year but will not
complete the construction and rent-up until a later year, the General Partner
will provide to the Limited Partner by December 31 of the year during which the
reservation is received an audited cost certification together with the
accountant's work papers verifying that the Partnership has expended the
requisite 10% of the reasonably expected cost basis to meet the carryover test
provisions of Section 42 of the Code;
(e) During the Compliance Period, no later than the day any such
certification is filed, copies of any certifications which the Partnership must
furnish to federal or state governmental authorities administering any Tax
Credit programs under Section 42 of the Code including, but not limited to,
copies of all annual tenant recertification required under Section 42 of the
Code;
(f) On or before 30 days after each calendar quarter of every year the
Partnership shall send to the Limited Partner a report on operations, in the
form attached hereto as Exhibit "G" an audited income statement showing all
activity in the reserve accounts required to be maintained pursuant to Section
VIII of this Agreement and a Tax Credit compliance report similar in form to
that attached hereto as Exhibit "G";
(g) By the annual renewal date of each and every year, an executed
original or certified copy of each and every insurance policy required by the
terms of this Agreement;
(h) On or before March 15th of each calendar year, the General Partner's
updated financial statement as of December 31 of the previous year;
(h) On or before November 30 of each calendar year, the General Partner
shall send a copy of the following year's proposed operating budget. Each such
budget shall contain an amount required for reserves in accordance with Article
VIII and for the payment of real estate taxes, insurance, debt service and other
<PAGE>
payments;
(i) If the Limited Partner is required by the Securities Exchange
Commission to file a post-effective amendment to its offering document, an
audited operating statement for the Project within 30 days of the request
therefor by the Limited Partner, covering the Project's operating history from
the Completion of Construction to the date requested by the Limited and in a
form required by the Securities and Exchange Commission; and
(j) Notice of the occurrence, or of the likelihood of occurrence, of
any event which has had or is likely to have a material adverse effect upon the
Project or the Partnership, including, but not limited to, any breach of any of
the representations and warranties set forth in Section 9.10 of this Agreement,
and any inability of the Partnership to meet its cash obligations as they become
payable, within ten days after the occurrence of such event.
Section 14.4 Late Reports. If the General Partner does not cause the
Partnership to fulfill its obligations under Sections 14.2 and 14.3 within the
time periods set forth therein, the General Partner, using his own funds, shall
pay as damages the sum of $100.00 per week (plus interest at the rate
established by Section 6.3 hereof) to the Limited Partner until such obligations
shall have been fulfilled. Such damages shall be paid forthwith by the General
Partner, and failure to so pay shall constitute a material default of the
General Partner hereunder and cause for removal under Section 13.2 hereof. In
addition, if the General Partner shall so fail to pay, the General Partner and
its Affiliates shall forthwith cease to be entitled to any fees hereunder (other
than the Development Fee) and/or to the payment of any Cash Flow From Operations
or Sale or Refinancing Proceeds to which the General Partner may otherwise be
entitled hereunder. Payments of fees and Distributions shall be restored only
upon payment of such damages in full.
Section 14.5 Annual Site Visits. On an annual basis a representative of
the Limited Partner, at the Limited Partner's expense, will conduct a site visit
which will include, in part, an inspection of the property, a review of the
office and tenant files and an interview with the property manager. The Limited
Partner may, in its sole discretion, cancel all or any part of the annual visit.
<PAGE>
Section 14.6 Tax Returns. The General Partner shall cause income tax
returns for the Partnership to be prepared and timely filed with the appropriate
federal, state and local taxing authorities.
Section 14.7 Fiscal Year. The fiscal year of the Partnership shall be
the calendar year or such other period as may be approved by the Internal
Revenue Service for federal income tax purposes.
Section 14.8 Banking. All funds of the Partnership shall be deposited
in a separate bank account or accounts as shall be determined by the General
Partner. All withdrawals therefrom shall be made upon checks signed by the
General Partner or by any person authorized to do so by the General Partner. The
General Partner shall provide to any Partner who requests same the name and
address of the financial institution, the account number and other relevant
information regarding any Partnership bank account.
Section 14.9 Certificates and Elections.
(a) The General Partner shall file the First Year Certificate within 90
days following the close of the taxable year during which Completion of
Construction occurs and thereafter shall timely file any certificates which the
Partnership must furnish to federal or state governmental authorities
administering the Tax Credit programs under Section 42 of the Code.
(b) The General Partner may, but is not required to, cause the
Partnership to make or revoke the election referred to in Section 754 of the
Code, as amended, or any similar provisions enacted in lieu thereof.
ARTICLE XV
DISSOLUTION, WINDING UP, TERMINATION
AND LIQUIDATION OF THE PARTNERSHIP
Section 15.1 Dissolution of Partnership. The Partnership shall be
dissolved upon the expiration of its term or the earlier occurrence of any of
the following events:
(a) The effective date of the Withdrawal or removal of the General
Partner, unless (i) at the time there is at least one other General Partner
(which may be the Limited Partner if it elects to serve as successor General
Partner under Section 13.4 hereof) who will continue as General Partner, or (ii)
<PAGE>
within 120 days after the occurrence of any such event the Limited Partner
elects to continue the business of the Partnership;
(b) The sale of the Project and the receipt in cash of the full amount
of the proceeds of such sale; or
(c) The written election to do so of the Limited Partner;
Notwithstanding the foregoing, however, in no event shall the
Partnership terminate prior to the expiration of its term if such termination
would result in a violation of the FmHA Loan Agreement, the FmHA Interest Credit
Agreement or any other agreement with or rule or regulation of FmHA to which the
Partnership is subject.
Section 15.2 Return of Capital Contribution upon Dissolution. Except as
provided in Sections 7.3, 7.4 and 7.6 of this Agreement, which provide for a
reduction or refund of the Limited Partner's Capital Contribution under certain
circumstances, and which shall represent the personal obligation of the General
Partner, as well as the obligation of the Partnership, each Partner shall look
solely to the assets of the Partnership for all Distributions with respect to
the Partnership (including the return of its Capital Contribution) and shall
have no recourse therefor (upon dissolution or otherwise) against any General
Partner. No Partner shall have any right to demand property other than money
upon dissolution and termination of the Partnership.
Section 15.3 Distributions of Assets. Upon a dissolution of the
Partnership, the General Partner (or, if there is no General Partner then
remaining, such other Person(s) designated as the liquidator of the Partnership
by the Limited Partner or by the court in a judicial dissolution) shall take
full account of the Partnership assets and liabilities and shall liquidate the
assets as promptly as is consistent with obtaining the fair value thereof.
(a) Upon dissolution and termination, after payment of, or adequate
provision for, the debts and obligations of the Partnership pursuant to Section
11.2(a) through and including 11.2(c), the remaining assets of the Partnership
shall be distributed to the Partners in accordance with the positive balances in
their Capital Accounts, after taking into account all allocations under Article
X hereof.
(b) In the event that a General Partner has a deficit balance in its
Capital Account following the Liquidation of the Partnership or its Interest, as
<PAGE>
determined after taking into account all Capital Account adjustments for the
Partnership taxable year in which such liquidation occurs, such General Partner
shall pay to the Partnership the lesser of:
(1) the amount necessary to restore such deficit balance to zero in
compliance with Treasury Regulation Section 1.704-1(b)(2)(ii)(b)(3); or
(2) 1.01% of the Capital Contributions.
The deficit make-up shall be paid by the General Partner by the end of
such taxable year and shall, upon liquidation of the Partnership, be paid to
creditors of the Partnership or distributed to other Partners in accordance with
their positive Capital Account balances. Notwithstanding, if the Limited Partner
has become successor General Partner, it shall not be responsible for any
deficit balance in its Capital Account which arose during the time the former
General Partner served as General Partner.
(c) With respect to assets distributed in kind to the Partners in
liquidation or otherwise:
(1) unrealized appreciation or unrealized depreciation in the
values of such assets shall be deemed to be Income and Losses realized by the
Partnership immediately prior to the liquidation or other Distribution event;
and
(2) such Income and Losses shall be allocated to the Partners
in accordance with Section 10.2 hereof, and any property so distributed shall be
treated as a Distribution of an amount in cash equal to the excess of such Fair
Market Value over the outstanding principal balance of and accrued interest on
any debt by which the property is encumbered.
(d) For the purposes of Section 15.3(c), "unrealized appreciation" or
"unrealized depreciation" shall mean the difference between the Fair Market
Value of such assets, taking into account the Fair Market Value of the
associated financing but subject to Section 7701(g) of the Code, and the
Partnership's adjusted basis in such assets for book purposes. Section 15.3(c)
is merely intended to provide a rule for allocating unrealized Income and Losses
upon Liquidation or other Distribution event, and nothing contained in Section
15.3(c) or elsewhere in this Agreement is intended to treat or cause such
<PAGE>
Distributions to be treated as sales for value. The Fair Market Value of such
assets shall be determined by an independent appraiser to be selected by the
General Partner with the Consent of the Limited Partner.
Section 15.4 Deferral of Liquidation. If at the time of liquidation the
General Partner or other liquidator shall determine that an immediate sale of
part or all of the Partnership assets could cause undue loss to the Partners,
the liquidator may, in order to avoid loss, but only with the Consent of the
Limited Partner, either defer liquidation and retain all or a portion of the
assets or distribute all or a portion of the assets to the Partners in kind. In
the event that the liquidator elects to distribute such assets in kind, the
assets shall first be assigned a value (by appraisal by an independent
appraiser) and the unrealized appreciation or depreciation in value of the
assets shall be allocated to the Partners' Capital Accounts, as if such assets
had been sold, in the manner described in Section 10.2, and such assets shall
then be distributed to the Partners as provided herein. In applying the
preceding sentence, the Project shall not be assigned a value less than the
unamortized principal balance of any loan secured thereby.
Section 15.5 Liquidation Statement. Each of the Partners shall be
furnished with a statement prepared or caused to be prepared by the General
Partner or other liquidator, which shall set forth the assets and liabilities of
the Partnership as of the date of complete liquidation. Upon compliance with the
distribution plan as outlined in Sections 15.3 and 15.4, the Limited Partner
shall cease to be such and the General Partner shall execute, acknowledge and
cause to be filed those certificates referenced in Section 15.6.
Section 15.6 Certificates of Dissolution; Certificate of Cancellation of
Certificate of Limited Partnership.
(a) Upon the dissolution of the Partnership, the General Partner shall
cause to be filed in the office of, and on a form prescribed by the Secretary of
State of the State, a certificate of dissolution. The certificate of dissolution
shall set forth the Partnership's name, the Secretary of State's file number for
the Partnership, the event causing the Partnership's dissolution and the date of
the dissolution.
(b) Upon the completion of the winding up of the Partnership's affairs,
the General Partner shall cause to be filed in the office of, and on a form
prescribed by, the Secretary of State of the State, a certificate of
<PAGE>
cancellation of the Certificate of Limited Partnership. The certificate of
cancellation of the Certificate of Limited Partnership shall set forth the
Partnership's name, the Secretary of State's file number for the Partnership,
and any other information which the General Partner determines to include
therein.
ARTICLE XVI
AMENDMENTS
This Agreement may be amended at any time by the Limited Partner. This
Agreement may be amended by the General Partner absent the Consent of the
Limited Partner. Notwithstanding the foregoing, no amendment shall change the
Partnership to a general partnership; extend the term of the Partnership beyond
the date provided for in this Agreement; modify the limited liability of the
Limited Partner; allow the Limited Partner to take control of the Partnership's
business within the meaning of the Act; reduce or defer the realization of any
Partner's interest in allocations, Distributions, or compensation hereunder, or
increase any Partner's obligations hereunder, without the consent of the Partner
so affected; or change the provisions of this Article XVI.
ARTICLE XVII
MISCELLANEOUS
Section 17.1 Voting Rights.
(a) The Limited Partner shall have no right to vote upon any matters
affecting the Partnership, except as provided in this Agreement. Notwithstanding
the foregoing, the Limited Partner may, without the concurrence of the General
Partner:
(1) Approve or disapprove, but, except as otherwise expressly provided
herein, not initiate, the Sale or Refinancing of the Project;
(2) Remove the General Partner and elect a substitute General Partner as
provided in this Agreement;
(3) Elect a successor General Partner upon the withdrawal of the General
Partner;
(4) Approve or disapprove, but not initiate, the dissolution of the
Partnership; or
<PAGE>
(5) Subject to the provisions of Article XVI hereof, amend this Agreement.
(b) On any matter where the Limited Partner has the right to vote, votes
may only be cast at a duly called meeting of the Partnership or through written
action without a meeting.
(c) The Limited Partner shall have the right to consent to those actions or
inactions of the Partnership and/or General Partner as otherwise set forth in
this Agreement, and the General Partner is prohibited from any action or
inaction requiring such consent unless such consent has been obtained.
Section 17.2 Meeting of Partnership. Meetings of the Partnership may be
called either: at any time by the General Partner; or upon the General Partner's
receipt of a written or facsimile request from the Limited Partner setting forth
the purpose of such meeting. Within ten days after receipt of the Limited
Partner's written or facsimile request for a meeting, the General Partner shall
provide all Partners with written notice of the meeting (which shall be by
telephone conference, or at the principal place of business of the Partnership
or such other location referenced in the notice) to be held not less than 15
days nor more than 30 days after receipt of such written or facsimile request
from the Limited Partner, which notice shall specify the time and place of such
meeting and the purpose or purposes thereof. If the General Partner fails to
provide the written notice of the meeting within ten days after receipt of the
Limited Partner's request to hold a meeting, then the Limited Partner may
provide the written notice of the meeting to all the Partners, which notice
shall specify the time and place of such meeting and the purpose or purposes
thereof. All meetings and actions of the Limited Partner shall be governed in
all respects, including matters relating to notice, quorum, adjournment,
proxies, record dates and actions without a meeting, by the applicable
provisions of the Act, as it shall be amended from time to time.
Section 17.3 Notices. Any notice given pursuant to this Agreement may
be served personally on the Partner to be notified, or may be mailed, first
class postage prepaid, to the following address, or to such other address as a
party may from time to time designate in writing:
<PAGE>
To the General Partner: DEKE NOFTSKER
3825 Hawkins NE, Albuquerque, New Mexico 87109
To the Limited Partner: WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 3
c/o WNC California Tax Credit
Partners IV
3158 Redhill Ave., Suite 120
Costa Mesa, CA 92626-3416
Section 17.4 Successors and Assigns. All the terms and conditions of
this Agreement shall be binding upon the successors and assigns of the Partners.
Section 17.5 FmHA Regulations. Notwithstanding any other provisions of
this Agreement, the following will take precedence:
(a) The Partnership is authorized to execute any documents required by
FmHA in connection with the FmHA Loan Agreement. The General Partner hereby
covenants to act in accordance with the Project Documents. Any incoming General
Partner shall, as a condition of receiving a Partnership interest, agree to be
bound by the Project Documents, and all other documents executed in connection
with the FmHA Loan Agreement to the same extent and on the same terms as any
other General Partner. Upon any dissolution, no title or right to possession and
control of the Project, and no right to collect the rents therefrom, shall pass
to any Person who is not bound in a manner consistent with Section 515 of the
Housing Act and the rules and regulations thereunder.
(b) In the event that any provision of this Agreement in any way tends
to contradict, modify or in any way change the terms of the Project Documents or
any other agreement related to the Project entered into, or to be entered into,
by or on behalf of the Partnership with FmHA, the terms of the Project Documents
or such other agreements with FmHA shall prevail and govern.
(c) Any amendment or revision of this Agreement, transfer of a
Partnership interest or other action requiring approval shall be subject to the
written approval of FmHA, if such approval is required, and any amendment
without the prior written approval of FmHA shall be subject to later amendment
to comply with the requirements of FmHA; provided, however, that no such
approval of FmHA shall be required for any amendment of this Agreement the sole
purpose of which is to provide for the admission of additional or substituted
<PAGE>
limited partners so long as any such additional or substituted limited partner
so admitted shall own in the aggregate less than a 10% limited partner interest
in the Partnership.
(d) Any conveyance or transfer of title to all or any portion of the
Project required or permitted under this Agreement shall in all respects be
subject to all conditions, approvals and other requirements of FmHA rules and
regulations applicable thereto.
(e) The General Partner will at all times maintain the FmHA required
Financial Interest in the Partnership.
The foregoing paragraphs (a), (b), (c), (d), and (e) will automatically
become void and of no further force and effect with respect to FmHA at such time
as the Mortgage is no longer being provided by FmHA.
Section 17.6 Recording of Certificate of Limited Partnership. If the
General Partner should deem it advisable to do so, the Partnership shall record
in the office of the County Recorder of the county in which the principal place
of business of the Partnership is located a certified copy of the Certificate of
Limited Partnership, or any amendment thereto, after such Certificate or
amendment has been filed with the Secretary of State of the State.
Section 17.7 Amendment of Certificate of Limited Partnership.
(a) The General Partner shall cause to be filed, within 30 days after
the happening of any of the following events, an amendment to the Certificate of
Limited Partnership reflecting the occurrence thereof:
(1) A change in the name of the Partnership.
(2) A change in the street address of the Partnership's principal executive
office.
(3) A change in the address, or the Withdrawal, of a General Partner, or a
change in the address of the agent for service of process, or appointment of a
new agent for service of process.
(4) The admission of a General Partner and that Partner's address.
<PAGE>
(5) The discovery by the General Partner of any false or erroneous material
statement contained in the Certificate of Limited Partnership or any amendment
thereto.
(b) The Certificate of Limited Partnership may also be amended in
conformity with this Agreement at any time in any other respect that the General
Partner determines.
(c) The General Partner shall cause the Certificate of Limited Partnership
to be amended, when required or permitted as aforesaid, by filing a certificate
of amendment thereto in the office of, and on a form prescribed by, the
Secretary of State of the State. The certificate of amendment shall set forth
the Partnership's name, the Secretary of State's file number for the Partnership
and the text of the amendment.
Section 17.8 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, and said
counterparts shall constitute but one and the same instrument which may
sufficiently be evidenced by one counterpart.
Section 17.9 Captions. Captions to and headings of the Articles,
Sections and subsections of this Agreement are solely for the conveniences of
the parties, are not a part of this Agreement, and shall not be used for the
interpretation or determination of the validity of this Agreement or any
provision hereof.
Section 17.10 Certain Provisions. If the operation of any provision of
this Agreement would contravene the provisions of applicable law, or would
result in the imposition of general liability on any Limited Partner, such
provisions shall be void and ineffectual.
Section 17.11 Saving Clause. If any provision of this Agreement, or the
application of such provision to any Person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to Persons or circumstances other than those as to which it is held invalid,
shall not be affected thereby.
Section 17.12 Tax Matters Partner. All the Partners hereby agree that
the Limited Partner shall be the "Tax Matters Partner" pursuant to the Code and
in connection with any audit of the Federal income tax returns of the
Partnership; provided, however that if the Limited Partner shall withdraw from
<PAGE>
the Partnership or become Bankrupt, the General Partner shall thereafter be the
"Tax Matters Partner". If the Tax Matters Partner shall determine to litigate
any administrative determination relating to federal income tax matters, it
shall litigate such matter in such court as the Tax Matters Partner shall decide
in its sole discretion. In discharging its duties and responsibilities, the Tax
Matters Partner shall act as a fiduciary (i) to the Limited Partner (to the
exclusion of the other Partners) insofar as tax matters related to the Tax
Credits are concerned, and (ii) to all of the Partners in other respects.
Section 17.13 Expiration of Compliance Period.
(a) Notwithstanding any provision hereof to the contrary (other than
this Section 17.11), the Limited Partner shall have the right at any time after
the beginning of the last year of the Compliance Period to require, by written
notice to the General Partner, that the General Partner promptly submit a
written request to the applicable State Tax Credit Agency pursuant to Section
42(h) of the Code (or any successor provision) that such agency endeavor to
locate within one year from the date of such written request a purchaser for the
Project who will continue to operate the Project as a qualified low income
property, at a purchase price that is not less than the minimum amount set forth
in Section 42(h)(6) of the Code (or any successor provision). In the event that
the State Tax Credit Agency obtains an offer satisfying the conditions of the
preceding sentence, the General Partner shall promptly notify the Limited
Partner in writing with respect to the terms and conditions of such offer, and,
if the Limited Partner notifies the General Partner that such offer should be
accepted, the General Partner shall cause the Partnership promptly to accept
such offer and to proceed to sell the Project pursuant to such offer.
(b) Notwithstanding any other provision of this Agreement to the
contrary, the Limited Partner shall have the right at any time after the end of
the Compliance Period to require, by written notice to the General Partner (the
"Required Sale Notice"), that the General Partner promptly use its best efforts
to obtain a buyer for the Project on the most favorable terms then available.
The General Partner shall submit the terms of any proposed sale to the Limited
Partner for its approval in the manner set forth in Section 17.11(a) hereof. If
<PAGE>
the General Partner shall fail to so obtain a buyer for the Project within six
months of receipt of the Required Sale Notice or if the Consent of the Limited
Partner in its sole discretion shall be withheld to any proposed sale, then the
Limited Partner shall have the right at any time thereafter to obtain a buyer
for the Project on terms acceptable to the Limited Partner (but not less
favorable to the Partnership than any proposed sale previously rejected by the
Limited Partner). In the event that the Limited Partner so obtains a buyer, it
shall notify the General Partner in writing with respect to the terms and
conditions of the proposed sale and the General Partner shall cause the
Partnership promptly to sell the Project to such buyer.
(c) A sale of the Project prior to the end of the Compliance Period may
only take place if the conditions of Section 42(j)(6) of the Code (or any
successor provision) will be satisfied upon such sale by having the purchaser of
the Project post the required bond on behalf of the Partnership.
Section 17.14 Number and Gender. All pronouns and any variations
thereof shall be deemed to refer to the masculine, feminine, neuter, singular or
plural as the identity of the Person or Persons may require.
Section 17.15 Entire Agreement. This Agreement constitutes the entire
understanding between the parties with respect to the subject matter hereof and
all prior understandings and agreements between the parties, written or oral,
respecting this transaction are merged in this Agreement.
Section 17.16 Governing Law. This Agreement and its application shall be
governed by the laws of the State.
Section 17.17 Attorney's Fees. If a suit or action is instituted in
connection with an alleged breach of any provision of this Agreement, the
prevailing party shall be entitled to recover, in addition to costs, such sums
as the court may adjudge reasonable as attorney's fees, including fees on any
appeal.
Section 17.18 Receipt of FmHA Correspondence. The Partners agree that
the FmHA and the General Partner shall send to the Limited Partner a copy of any
correspondence relative to the Project's noncompliance with the Mortgage Note
and FmHA rules and regulations, relative to the acceleration of the Mortgage
Note and/or relative to the disposition of the Project.
Section 17.19 Security Interest and Right of Set-Off. As security for
the performance of the respective obligations to which any Partner may be
subject under this Agreement, the Partnership shall have (and each Partner
hereby grants to the Partnership) a security interest in all funds distributable
<PAGE>
to said Partner to the extent of the amount of such obligation.
IN WITNESS WHEREOF, this Amended and Restated Agreement of Limited
Partnership of ROSEDALE LIMITED PARTNERSHIP, a New Mexico limited partnership,
is made and entered into as of the day of 1996.
GENERAL PARTNER
----------------------------------------
DEKE NOFTSKER
WITHDRAWING ORIGINAL LIMITED PARTNER
ABO CORPORATION
By: ___________________________________
LIMITED PARTNER
WNC HOUSING TAX CREDITS V, L.P.,
SERIES 3,
a California limited partnership
By: WNC & ASSOCIATES, INC.
General Partner
By: _________________________
John B. Lester, Jr.
President
<PAGE>
EXHIBIT A TO PARTNERSHIP AGREEMENT
LEGAL DESCRIPTION
ALL THOSE PARTS OF THE NORTHEAST 1/4 SOUTHEAST 1/4 OF SECTION 35, T.17S.,
R.14W., N.M.P.M., TOWN OF SILVER CITY, GRANT COUNTY, NEW MEXICO, DESCRIBED AS
FOLLOWS:
Beginning at the Southeast Corner of this Tract, a point which bears, in
two courses: N23 degrees 25' 44" W, 1821.95 feet and N00degrees 10' 12" W, 50.00
feet from the Southeast Corner of Section 35; thence S89 degrees 12' 00" W,
521.96 feet to the Southwest corner of this Tract, a point on the East Line of
Memory Lane; thence N00 degrees 28' 43" W along said Line, 146.17 feet to the
Northwest Corner of this Tract; thence N89 degrees 12' 00" E, 357.90 feet;
thence N00 degrees 10' 12" W, 121.28 feet; thence N79 degrees 13' 33" E, 166.96
feet to the Northeast Corner of this Tract; thence S00 degrees 10' 12" E, 296.37
feet to the point of beginning; containing 2.265 acres more or less; and also:
Beginning at the Southwest Corner of this Tract, a point on the East Line
of Memory Lane which bears in four courses: N23 degrees 25' 44W", 1821.95 feet;
N00 degrees 10' 12" W, 50.00 feet; S89 degrees 12' 00" W, 521.96 feet and N00
degrees 28' 43" W, 146.17 feet from the Southeast Corner of Section 35; thence
N00 degrees 28' 43" W along the East Line of Memory Lane, 58.02 feet to the
Northwest Corner of this Tract; thence N79 degrees 13' 33" E, 365.15 feet;
thence S00 degrees 10' 12" E, 121.28 feet to the Southeast Corner of this Tract;
thence S89 degrees 12' 00" W, 357.90 feet to the point of beginning; containing
0.737 acre more or less.
<PAGE>
EXHIBIT B TO PARTNERSHIP AGREEMENT
FORM OF LEGAL OPINION
WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 3 WNC & Associates, Inc.
3158 Redhill Avenue, Suite 120
Costa Mesa, California 92626
RE: ROSEDALE LIMITED PARTNERSHIP
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in connection
with the investment by WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 3, a
California limited partnership (the "Limited Partner") in ROSEDALE LIMITED
PARTNERSHIP (the "Partnership"), a New Mexico limited partnership formed to own,
develop, (construct/rehabilitate) finance and operate an apartment complex for
low-income persons (the "Apartment Complex") in Silver City, Grant County, New
Mexico. The general partner(s) of the Partnership (is/are) DEKE NOFTSKER (the
"General Partner(s)").
In rendering the opinions stated below, we have examined and relied upon the
following:
(i) [Certificate of Limited Partnership];
(ii) [Agreement of Limited Partnership] (the "Partnership Agreement");
(iii) A preliminary reservation letter from [State Allocating Agency] (the
"State Agency") dated _________, 199___ conditionally awarding $_______________
in Federal tax credits annually for each of ten years and $_______________ in
California tax credits annually for each of four years for the Apartment
Complex; and
(iv) Such other documents, records and instruments as we have deemed
necessary in order to enable us to render the opinions referred to in this
letter.
For purposes of rendering the opinions stated below we have assumed that, in
those cases in which we have not been involved directly in the preparation,
execution or the filing of a document, that (a) the document reviewed by us is
<PAGE>
an original document, or a true and accurate copy of the original document, and
has not been subsequently amended, (b) the signatures on each original document
are genuine, and (c) each party who executed the document had proper authority
and capacity.
Based on the foregoing we are of the opinion that:
(a) ________________________, one of the General Partners, is a
[corporate/partnership] duly formed and validly existing under the laws of the
State of _____________________ and has full power and authority to enter into
and perform its obligations under the Partnership Agreement.
_____________________, one of the other General Partners, is a
[corporation/partnership] duly formed and validly existing under the laws of the
State of __________________ and has full power and authority to enter into and
perform its obligations under the Partnership Agreement.
(b) The Partnership is and after the [filing or execution] of the
Amended [Partnership Agreement] [Certificate] will continue to be a limited
partnership duly formed and validly existing under the laws of the State of New
Mexico.
(c) The Partnership is and after the filing of the Amended [Partnership
Agreement] [Certificate] will continue to be validly existing under and subject
to the laws of New Mexico with full power and authority to own, develop,
[construct/rehabilitate], finance and operate the Apartment Complex and to
otherwise conduct business under the Partnership Agreement.
(d) Execution of the Partnership Agreement by the General Partner(s)
has been duly and validly authorized by or on behalf of the General Partner(s)
and, having been executed and delivered in accordance with its terms, the
Partnership Agreement constitutes the valid and binding agreement of the General
Partner(s), enforceable in accordance with its terms.
(e) The execution and delivery of the Amended and Restated Agreement of
Limited Partnership by the General Partners does not conflict with and will not
result in a breach of any of the terms, provisions or conditions of any
agreement or instrument known to counsel to which any of the General Partners or
the Partnership is a party or by which any of them may be bound, or any order,
rule, or regulation to be applicable to any of such parties of any court or
governmental body or administrative agency having jurisdiction over any of such
parties or over the property.
(f) To the best of counsel's knowledge, after due inquiry, there is no
litigation or governmental proceeding pending or threatened against, or
involving the Project, the Partnership or any General Partner which would
materially adversely affect the condition (financial or otherwise) or business
of the Project, the Partnership or any of the Partners of the Partnership prior
to or following execution and filing of the Amended and Restated Agreement of
Limited Partnership, or the Limited Partner or the Special Limited Partner.
<PAGE>
(g) Upon the execution and delivery of the Amended and Restated
Agreement of Limited Partnership providing for the admission of the Limited
Partner as substitute limited partner [and the filing] the Limited Partner will
be the limited partners of the Partnership entitled to all of the rights of
limited partners under the Amended and Restated Agreement of Limited
Partnership. Except as described in the Amended and Restated Agreement of
Limited Partnership, no person is a partner of or has any legal or equitable
interest in the Partnership, and all former partners of record or known to
counsel have validly withdrawn from the Partnership and have released any claims
against the Partnership arising out of their participation as partners therein.
(h) Liability of the Limited Partner for obligations of the Partnership
is limited to the amount of the Limited Partner's capital contributions required
by the Partnership Agreement.
(i) Neither the General Partner(s) of the Partnership nor the Limited
Partner will have any liability for the Mortgage Note or the Mortgage Loan
represented thereby (as those terms are defined in the Amended and Restated
Agreement of Limited Partnership), and the lender of the Mortgage Loan will look
only to its security in the Project for repayment of the Mortgage Loan.
(j) The Partnership owns a fee simple interest in the Project.
(k) To the best of our actual knowledge and belief, after due inquiry,
the Partnership has obtained all consents, permissions, licenses, approvals, or
orders required by all applicable governmental or regulatory agencies for the
development, [construction/rehabilitation] and operation of the Project, and the
Project conforms to all applicable Federal, state and local land use, zoning,
health, building and safety laws, ordinances, rules and regulations.
<PAGE>
(l) The Project has obtained a preliminary reservation of low income
housing tax credits ("LIHTC") from the State Agency. The final allocation of the
LIHTC and ultimately eligibility of the Project for such final allocation are
subject to a series of requirements which must be met, performed or achieved at
various times prior to and after such final allocation. Assuming all such
requirements are met, performed or achieved at the time or times provided by
applicable laws and regulations, the Project will qualify for LIHTC.
All of the opinions set forth above are qualified to the extent that the
validity of any provision of any agreement may be subject to or affected by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the rights of creditors generally. We do not express any opinion as to
the availability of any equitable or specific remedy upon any breach of any of
the covenants, warranties or other provisions contained in any agreement. We
have not examined, and we express no opinion with respect to the applicability
of, or liability under, any Federal, state or local law, ordinance or regulation
governing or pertaining to environmental matters, hazardous wastes, toxic
substances or the like.
We express no opinion as to any matter except those set forth above. These
opinions are rendered for use by the Limited Partner and its legal counsel. We
understand that WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 3's legal counsel
will rely on this opinion in connection with federal income tax opinions to be
rendered by that firm. This opinion may not be delivered to or relied upon by
any other person or entity without our express written consent.
Sincerely,
- --------------------
<PAGE>
EXHIBIT C TO PARTNERSHIP AGREEMENT
CERTIFICATION AND AGREEMENT
CERTIFICATION AND AGREEMENT made as of the date written below by
ROSEDALE LIMITED PARTNERSHIP, a New Mexico limited partnership (the
"Partnership"); DEKE NOFTSKER (collectively referred to as the "General
Partner"); and ABO CORPORATION (collectively referred to as the "Original
Limited Partner") for the benefit of WNC HOUSING TAX CREDIT FUND V, L.P., SERIES
3, a California limited partnership (the "Investment Partnership"), and WNC &
ASSOCIATES, INC. ("WNC").
WHEREAS, the Partnership proposes to admit the Investment Partnership
as a limited partner thereof pursuant to an Amended and Restated Agreement of
Limited Partnership of the Partnership (the "Partnership Agreement"), in
accordance with which the Investment Partnership will make substantial capital
contributions to the Partnership; and
WHEREAS, the Investment Partnership and WNC have relied upon certain
information and representations described herein in evaluating the merits of
investment by the Investment Partnership in the Partnership;
NOW, THEREFORE, to induce the Investment Partnership to enter into the
Partnership Agreement and become a limited partner of the Partnership, and for
$1.00 and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the Partnership, the General Partner and the
Original Limited Partner hereby agree as follows for the benefit of the
Investment Partnership and WNC.
1. Representations, Warranties and Covenants of the Partnership, the
General Partners and the Original Limited Partners
The Partnership, the General Partner and the Original Limited Partner
jointly and severally represent, warrant and certify to the Investment
Partnership and WNC that, with respect to the Partnership, as of the date
hereof:
1.1 The Partnership is duly organized and in good standing as
a limited partnership pursuant to the laws of the state of its formation with
full power and authority to own its apartment complex (the "Apartment Complex")
and conduct its business; the Partnership, the General Partner and the Original
Limited Partner have the power and authority to enter into and perform this
<PAGE>
Certification and Agreement; the execution and delivery of this Certification
and Agreement by the Partnership, the General Partner and the Original Limited
Partner have been duly and validly authorized by all necessary action; the
execution and delivery of this Certification and Agreement, the fulfillment of
its terms and consummation of the transactions contemplated hereunder do not and
will not conflict with or result in a violation, breach or termination of or
constitute a default under (or would not result in such a conflict, violation,
breach, termination or default with the giving of notice or passage of time or
both) any other agreement, indenture or instrument by which the Partnership or
any General Partner or Original Limited Partner is bound or any law, regulation,
judgment, decree or order applicable to the Partnership or any General Partner
or Original Limited Partner or any of their respective properties; this
Certification and Agreement constitutes the valid and binding agreement of the
Partnership, the General Partner and the Original Limited Partner, enforceable
against each of them in accordance with its terms.
1.2 The General Partner has delivered to the Investment Partnership, WNC or
their affiliates all documents and information which would be material to a
prudent investor in deciding whether to invest in the Partnership. All factual
information provided to the Investment Partnership, WNC or their affiliates
either in writing or orally, did not, at the time given, and does not, on the
date hereof, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances under which they are made.
1.3 Each of the representations and warranties contained in the Partnership
Agreement is true and correct as of the date hereof.
1.4 Each of the covenants and agreements of the Partnership and the General
Partner contained in the Partnership Agreement has been duly performed to the
extent that performance of any covenant or agreement is required on or prior to
the date hereof.
1.5 All conditions to admission of the Investment Partnership as the
investment limited partner of the Partnership contained in the Partnership
Agreement have been satisfied.
1.6 No default has occurred and is continuing under the Partnership
Agreement or any of the Project Documents (as such term is defined in the
Partnership Agreement) for the Partnership.
<PAGE>
1.7 The Projected Tax Credits (as such term is defined in the Partnership
Agreement Section 1.43) are $36,120 for 1996, $54,180 per year for each of the
years 1997 through 2005, and $4,515 for 2006, which the General Partner has
projected to be the total amount of LIHC which will be allocated to the Limited
Partner by the Partnership, constituting ninety-nine percent (99%) of the
aggregate amount of LIHC of $547,280 to be available to the Partnership;
provided, however, that the Actual Tax Credit for 1996 is greater (or less than)
$36,120, the Projected Tax Credit for the year 2006 shall be deduced (increased)
by an amount equal to the amount by which the Actual Credit for 1996 exceeds (is
less than) $36,120.
1.8 The General Partner agrees to take all actions necessary to claim the
Projected Tax Credit, including, without limitation, the filing of Form(s) 8609
with the Internal Revenue Service.
1.9 No person or entity other than the Partnership holds any equity
interest in the Apartment Complex.
1.10 The Partnership has the sole responsibility to pay all maintenance and
operating costs, including all taxes levied and all insurance costs,
attributable to the Apartment Complex.
1.11 The Partnership, except to the extent it is protected by insurance and
excluding any risk borne by lenders, bears the sole risk of loss if the
Apartment Complex is destroyed or condemned or there is a diminution in the
value of the Apartment Complex.
1.12 No person or entity except the Partnership has the right to any
proceeds, after payment of all indebtedness, from the sale, refinancing, or
leasing of the Apartment Complex.
1.13 No General Partner is related in any manner to the Investment
Partnership, nor is any General Partner acting as an agent of the Investment
Partnership.
2. Miscellaneous
2.1 This Certification and Agreement is made solely for the
benefit of the Partnership, the General Partner, the Original Limited Partner
and WNC, and the Investment Partnership and their respective successors and
assignees, and no other person shall acquire or have any right under or by
virtue of this Agreement.
2.2 This Certification and Agreement may be executed in
<PAGE>
several counterparts, each of which shall be deemed to be an original, all of
which together shall constitute one and the same instrument.
2.3 Capitalized terms used but not defined in this
Certification Agreement shall have the meanings given to them in the Partnership
Agreement.
IN WITNESS WHEREOF, this Certificate and Agreement is made and entered
into as of the day of , 1996.
PARTNERSHIP
ROSEDALE LIMITED PARTNERSHIP
By:
DEKE NOFTSKER,
General Partner
GENERAL PARTNER
- -----------------------------
DEKE NOFTSKER
ORIGINAL LIMITED PARTNER
ABO CORPORATION
By:
<PAGE>
EXHIBIT D TO THE PARTNERSHIP AGREEMENT
GENERAL PARTNER CERTIFICATION
This General Partner Certification is being issued to WNC HOUSING TAX
CREDIT FUND V, L.P., SERIES 3 ("WNC") by DEKE NOFTSKER, General Partner of
ROSEDALE LIMITED PARTNERSHIP, a New Mexico limited partnership ("Partnership")
in accordance with Section 7.2 of the Amended and Restated Agreement of Limited
Partnership of the Partnership.
WHEREAS, WNC is scheduled to make a Capital Contribution to the
Partnership, however, the Partnership Agreement requires the General Partner of
the Partnership issue this Certification prior to WNC's payment; and
WHEREAS, WNC shall rely on this Certification in evaluating the continued
merits of its investment in the Partnership;
NOW, THEREFORE, to induce WNC to make its scheduled Capital Contribution to
the Partnership, the General Partner represents and warrants to WNC that the
following are true and correct as of the date written below:
(a) The Partnership is a duly organized limited partnership validly
existing under the laws of the State and has complied with all filing
requirements necessary for the protection of the limited liability of its
Limited Partners.
(b) This Partnership Agreement and the Project Documents are in full force
and effect and neither the Partnership nor the General Partner is in breach or
violation of any provisions thereof.
(c) Existing improvements, if any, on the Project have been completed
substantially in conformity with the Project Documents, and the Project is being
operated in accordance with standards and procedures which are prudent and
customary for the operation of properties similar to the Project.
(d) Additional construction on the Project, if any, shall be completed
substantially in conformity with the Project Documents and any other
requirements necessary to obtain Completion of Construction.
(e) No Partner has any personal liability with respect to or has personally
guaranteed the payment of the permanent Mortgage.
<PAGE>
(f) The Partnership is in compliance with all construction and use codes
applicable to the Project and is not in violation of any zoning, environmental
or similar regulations applicable to the Project.
(g) The Partnership owns the fee simple interest in the Project, subject
only to liens (except those with respect to which an adequate bond or other
financial security has been issued) which, in the aggregate, do not exceed
$10,000 and the Mortgage Loan.
(h) The Construction Contract has been entered into between the Partnership
and the Contractor; no other consideration or fee shall be paid to the
Contractor other than amounts set forth in the Construction Contract.
(i) A builder's risk insurance policy in favor of the Partnership will be
and is in full force and effect until Completion of Construction.
(j) As of the date hereof, at funding of the Construction Loan and upon
Permanent Mortgage Commencement, fire and extended coverage insurance for the
full replacement value of the Project (excluding the value of the land, site
utilities, landscaping and foundations) and worker's compensation and public
liability insurance, all in favor of the Partnership, is and will be in full
force and effect and will be kept in full force and effect during the term of
the Partnership; all such policies shall be amounts and with insurers
satisfactory to the permanent lender and shall be paid out of Partnership
assets.
(k) The Projected Tax Credits applicable to the Project are $36,120 for
1996, $54,180 per year for each of the years 1997 through 2005, and $4,515 for
2006, which the General Partner has projected to be the total amount of LIHC
which will be allocated to the Limited Partner by the Partnership, constituting
ninety-nine percent (99%) of the aggregate amount of LIHC of $547,280 to be
available to the Partnership; provided, however, that if the Actual Tax Credit
for 1996 is greater (or less than) $36,120, the Projected Tax Credit for the
year 2006 shall be reduced (increased) by an amount equal to the amount by which
the Actual Credit for 1996 exceeds (is less than) $36,120.
(l) No charges or encumbrances exist with respect to the Project other than
those which are created or permitted by the Project Documents or are noted or
excepted in the title policy for the Project.
(m) The buildings on the Project site shall constitute a "qualified
low-income housing project" as defined in Section 42(g) of the Code, and as
<PAGE>
amplified by the Treasury Regulations thereunder. In this connection, not later
than December 31 of the first year the Partners elect the LIHC to commence in
accordance with the Code and the Minimum Set-Aside Test and the Rent Restriction
Test shall be met.
(n) No event or proceeding, including, but not limited to, any (A) legal
actions or proceedings before any court, commission, administrative body or
other governmental authority, and (B) acts of any governmental authority having
jurisdiction over the zoning or land use laws applicable to the Project, has
occurred the continuing effect of which has: (i) materially or adversely
affected the operation of the Partnership or the Project (except to the extent
that funds are available to the Partnership to correct or cure such event or
proceeding); (ii) materially or adversely affected the ability of the General
Partner to perform its obligations hereunder or under any other agreement with
respect to the Project; or (iii) prevented the completion of construction of the
improvements in substantial conformity with the Project Documents, other than
legal proceedings which have been bonded against (or as to which other adequate
financial security has been issued) in a manner as to indemnify the Partnership
against loss; provided that the foregoing does not apply to matters of general
applicability which would adversely affect the Partnership, the General Partner,
Affiliates of the General Partner or the Project only insofar as they or any of
them are part of the general public.
(o) Neither the Partnership nor the General Partner has any liabilities,
contingent or otherwise, which have not been disclosed in writing to the Limited
Partner and which in the aggregate do not affect the ability of the Limited
Partner to obtain the anticipated benefits of its investment in the Partnership.
(p) The General Partner has and shall maintain a net worth equal to at
least $500,000.
Capitalized terms used but not defined in this General Partner
Certification shall have the meanings given to them in the Partnership
Agreement.
IN WITNESS WHEREOF, the undersigned have set their hands to this
General Partner Certification this day of 1996.
DEKE NOFTSKER,
General Partner
<PAGE>
EXHIBIT E TO PARTNERSHIP AGREEMENT
FORM OF COMPLETION CERTIFICATE
(to be used when construction [rehabilitation] completed)
COMPLETION CERTIFICATE
The undersigned, an architect duly licensed and registered in the State of New
Mexico, has prepared final working plans and detailed specifications for
ROSEDALE LIMITED PARTNERSHIP, a New Mexico limited partnership (the
"Partnership"), between WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 3, a
California limited partnership ("Limited Partner") and the Partnership in
connection with the construction [rehabilitation] of improvements on certain
real property located in Silver City, Grant County, New Mexico (the
"Improvements").
The undersigned hereby certifies (i) that the Improvements have been completed
in accordance with the aforesaid plans and specifications, (ii) that a permanent
certificate of occupancy and all other permits required for the continued use
and occupancy of the Improvements have been issued with respect thereto by the
governmental agencies having jurisdiction thereof, (iii) that the Improvements
are in compliance with all requirements and restrictions of all governmental
authorities having jurisdiction, including, without limitation, all applicable
zoning, building, environmental, fire, and health ordinances, rules and
regulations and (iv) that all contractors, subcontractors and workmen who worked
on the Improvements have been paid in full except for normal retainages and
amounts in dispute.
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Project Architect
Date: ____________________________
Confirmed by:
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General Partner
Date: ____________________________
<PAGE>
EXHIBIT F TO PARTNERSHIP AGREEMENT
[ACCOUNTANT'S CERTIFICATE]
[Accountant's Letterhead]
_______________, 199____
WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 3
c/o WNC & Associates, Inc.
3158 Redhill Ave., Suite 120
Costa Mesa, California 92626
RE: Partnership
Certification as to Amount
of Eligible Tax Credit Base
Gentlemen:
In connection with the acquisition by WNC HOUSING TAX CREDIT FUND V, L.P.,
SERIES 3 (the "Limited Partner") of a limited partnership interest in ROSEDALE
LIMITED PARTNERSHIP, a New Mexico limited partnership (the "Partnership") which
owns a certain parcel of land located in Silver City, Grant County, New Mexico
and improvements thereon (the "Project"), the Limited Partner has requested our
certification as to the amount of low-income housing tax credits ("Tax Credits")
available with respect to the Project under Section 42 of the Internal Revenue
Code of 1986, as amended (the "Code"). Based upon our review of [the financial
information provided by the Partnership] of the Partnership, we are prepared to
file the Federal information tax return of the Partnership claiming annual Tax
Credits in the amount of $_______________, which amount is based on an eligible
basis (as defined in Section 42(d) of the Code) of the Project of
$________________, a qualified basis (as defined in Section 42(c) of the Code)
of the Project of $_________________ and an applicable percentage (as defined in
Section 42(b) of the Code) of _____%.
Sincerely,
- -------------------
<PAGE>
EXHIBIT G TO THE PARTNERSHIP
REPORT OF OPERATIONS
QUARTER ENDED:
LOCAL PARTNERSHIP: ROSEDALE LIMITED PARTNERSHIP
GENERAL PARTNER: DEKE NOFTSKER
DDRESS: Silver City, Grant County, New Mexico
CITY, STATE, ZIP:
PHONE:
PROPERTY NAME:
ADDRESS:
CITY, STATE, ZIP:
RESIDENT MNGR:
PHONE:
ACCOUNTANT:
FIRM:
ADDRESS:
CITY, STATE, ZIP:
PHONE:
MANAGEMENT COMPANY:
ADDRESS:
CITY, STATE, ZIP:
PHONE:
CONTACT:
OCCUPANCY INFORMATION
A. No. of Units: thirty-two (32) No. of Vacancies:
B. Occupancy for the quarter has: Increased/Decreased/Remained the Same
(Circle One)
C. Number of: Move-Ins Move-Outs
D. Average length of tenant residency:1-6 mos. 6-12 mos. 1-3 yrs
Over 4 yrs.
E. Number of basic rent qualified applicants on waiting list:
F. If the apartment complex is less than 90% occupied, please explain why,
and describe what efforts are being made to lease-up the remaining units.
G. On site manager: Full Time _______ Part-Time ________.
If part-time, the number of hours per week _________________.
<PAGE>
OPERATIONAL INFORMATION
Rent Schedule and Increases From Previous Quarter
Monthly Rent Increases Effective
No. of Units Rent Amount Percent Date
1 Bdrm.
2 Bdrm.
3 Bdrm.
Provide copy of rent roll through the last day of the calendar quarter. On an
annual basis provide the annual income recertification received from each
tenant.
PROPOSED MAINTENANCE
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FUNDED BY
COMPLETED OR OPERATIONS
TYPE DESCRIPTION PLANNED OR RESERVES AMOUNT
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INTERIOR PAINTING
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EXTERIOR PAINTING
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SIDING
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ROOFING
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DRAINAGE
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PAVING
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LANDSCAPING
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PLAYGROUND
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COMMUNITY ROOM
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LAUNDRY ROOM
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COMMON AREAS
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CARPET
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APPLIANCES
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LIGHTING
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OTHER
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Please describe in detail any major repairs or replacements of property.
<PAGE>
CONDITION OF PROPERTY
(Check One Box For Each)
Excellent Good Fair Problem
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LANDSCAPE CONDITION
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COMMON AREA - CLEAN
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PARKING LOT CONDITION
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SIDEWALKS
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PROPERTY ENTRANCE
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SIGN CONDITION
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EXTERIOR PAINTING AND CAULKING
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ROOF
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WINDOWS
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DOORS
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SCREENS
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GUTTERS & DOWNSPOUTS
=============================================================================
MAILBOXES
=============================================================================
DUMPSTER, ODOR
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LAUNDRY ROOM
=============================================================================
OUTSIDE NIGHT LIGHTING
=============================================================================
SMOKE ALARM
=============================================================================
HEATING & AIR CONDITIONING UNITS
=============================================================================
WATER HEATERS
=============================================================================
APPLIANCES
=============================================================================
PEST CONTROL
=============================================================================
CURB APPEAL
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OTHER
============================================================================
Comments: ____________________________________________________________
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<PAGE>
FINANCIAL STATUS
A. Replacement Reserves are: Fully-funded Under-funded Balance
If Under-funded, by how much:
Tax/Insurance Escrows are: Fully-funded Under-funded Balance
If Under-funded, by how much:
Property is operating at a:Surplu Deficit Amt. $
--- ---
Property Taxes paid?
(please provide copy of paid tax bill) yes no
Property Insurance paid?
(please provide copy of yearly renewal) yes no
Mortgage Payments are: On Schedule Delinquent Amt. $
B. Please note and explain any significant changes in the following:
Admin. Expenses Increase Decrease Amount $
Repairs/Maint. Increase Decrease Amount $
Utilities Increase Decrease Amount $
Taxes/Insurance Increase Decrease Amount $
C. Do you anticipate making a return to owner distribution? Yes No
Explanation:
D. Please explain in detail any change in the financial condition:
E. Any insurance claims filed? Yes _____ No _____
If yes, please explain:
Prepared By: Date:
Firm: Telephone:
<PAGE>
STATEMENT OF INCOME AND EXPENSES
QUARTER ENDED: _______________
Previous Current Budget
Quarter Quarter YTD Amount Various
INCOME
Net Rental Income
Other Income
TOTAL INCOME
Renting Expense
Admin. Expense
Operating Expense
Maintenance Expense
Depreciation
Taxes & Insurance
Interest Expense
Other
Transfer to Replacement
Reserve account
TOTAL EXPENSES
NET INCOME (LOSS)
NOTE: Please be sure to include Depreciation and Interest.
Prepared by: Date:
Firm: Telephone:
<PAGE>
UNAUDITED BALANCE SHEET
QUARTER ENDED: ______________
ASSETS
Unrestricted Cash
Restricted Reserves
Buildings, personal property
net of accumulated depreciation
Land
Capital Contributions Receivable
Other
TOTAL
LIABILITIES
Mortgage Payable
Accounts Payable
Operating Deficit Loan
Working Capital Loan
Other
PARTNERS' EQUITY
Limited Partner Equity Paid
Limited Partner Equity Receivable
General Partner Equity
Other Equity
Cumulative Losses
TOTAL LIABILITIES AND NET WORTH
DISTRIBUTIONS TO GENERAL PARTNER OR ANY AFFILIATE
Fees or Compensation
Reimbursed Expenses
Partnership Cash Distributions
*Depreciation should be computed over the term approved by the Limited Partner
for the building improvements, and the applicable Federal tax lives and rates
for personal property.
Prepared by: Date:
Firm: Telephone:
<PAGE>
INITIAL TENANT CERTIFICATIONS
PARTNERSHIP NAME
Fund: Tax Credit Set-Asides Information: Loan/Regulatory Set-Asides:
Property Name: [ ] 20/50 or [ ] 40/60 Election
Address: Does the 51% average apply? [ ] Y [ ] N
Deeper Set-Aside __% @ 50% AMI
County:
Management Company
[ ] Multi-Family Contact Person:
[ ] Elderly
24 Number of Units Phone #
Number of Exempt
Units
LIHTC Project#
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Gross Move-In
Unit First Time Move-In No. of No. in Income Income
No. Tenant Name Date Bdrms Sq. Ft. Set-Aside Unit Move-In Limits
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BIN # Certificate of Occupancy Date:
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BIN # Certificate of Occupancy Date:
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BIN # Certificate of Occupancy Date:
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<PAGE>
INITIAL TENANT CERTIFICATIONS
PARTNERSHIP NAME
(CONTINUED)
Tenant Tenant
Income Income Asset Unit Rent Tenant Utility
Qualified Verification Verification Rent Subsidy Payment Allowance
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<PAGE>
INITIAL TENANT CERTIFICATIONS
PARTNERSHIP NAME
(CONTINUED)
Tenant Tenant Overall
Gross Maximum Rent Tenant
Rent Rent Qualified Eligible
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YES YES
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YES YES
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YES YES
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YES YES
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YES YES
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YES YES
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YES YES
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YES YES
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YES YES
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YES YES
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YES YES
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YES YES
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YES YES
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YES YES
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<PAGE>
QUARTERLY TAX CREDIT COMPLIANCE REPORT
PROPERTY NAME
Quarter Ending: Tax Credit Set-Asides Information: Loan/Regulatory Set-Asides:
[ ] 20/50 or [ ] 40/60 Election
Does the 51% average apply? [ ] Y [ ] N
Deeper Set-Aside : ( List Details)
County: Allocation: Management Company:
Pre-1990 (Rent based on number of persons) Contact Person:
Elected to change No. Bedrm
Post-1989 (Based on number of Bedroom)
[ ] Multi-Family [ ] Elderly Phone No.
Number of Units
Number of Exempt Units Fax No.
Prepared by:
LIHTC Project#
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Gross Annual
Unit Tenant Move-In No. Of Inc. Set- No. In Annual Income
No. Name Date Bdrms Pct. Aside Unit Income Limits
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<PAGE>
QUARTERLY TAX CREDIT COMPLIANCE REPORT
PROPERTY NAME
(CONTINUED)
Annual Tenant Less
Recert. Income Income Assets Unit Rent Tenant
Date Qualified Verified Verified Rent Subsidy Payment
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Tenant Tenant Overall
Utility Gross Maximum Rent Tenat
Allow. Rent Rent Qualified Eligible
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<PAGE>
TAX CREDIT COMPLIANCE MONITORING:
ANNUAL CERTIFICATION
As General Partner of ROSEDALE LIMITED PARTNERSHIP, I hereby certify as
to the following:
1. ROSEDALE LIMITED PARTNERSHIP owns a thirty-two (32) unit project
("Project") in Silver City, Grant County, New Mexico.
2. An annual income certification (including supporting documentation) has
been received from each tenant. The income certification reflects that the
tenant's income meets the income limitation applicable to the Project pursuant
to Section 42(g)(1) of the Internal Revenue Code ("Code").
3. The Project satisfies the requirements of the applicable minimum set
aside test as defined in Section 42(g)(1) of the Code.
4. Each unit within the Project is rent restricted as defined in Section
42(g)(2)of the Code.
5. Each unit in the Project is available for use by the general public and
not for use on a transient basis.
6. Each building in the Project is suitable for occupancy in accordance
with local health, safety, and building codes.
7. During the preceding calendar year, there had been no change in the
eligible basis, as defined in Section 42(d)of the Code, of any building within
the Project.
8. All common area facilities included in the eligible basis of the
Apartment Complex are provided to the tenants on a comparable basis without a
separate fee to any tenant in the Project.
9. During the preceding calendar year when a unit in the Project became
vacant reasonable attempts were made to rent that unit to tenants whose incomes
met the income limitation applicable to the Project pursuant to Section 42(g)(1)
of the Code and while that unit was vacant no units of comparable or smaller
size were rented to tenants whose income did not meet the income limitation
applicable to the Project pursuant to Section 42(g)(1) of the Code.
10. If the income of a tenant in a unit increased above the limit allowed
in Section 42 (g)(2)(D)(ii), then the next available unit of comparable or
smaller size was rented to tenants whose incomes met the income limitation
applicable to the Project pursuant to Section 42(g)(1) of the Code.
IN VERIFICATION OF THE FOREGOING ENCLOSED HEREWITH IS A COPY OF THE ANNUAL
INCOME CERTIFICATION RECEIVED FROM EACH TENANT IN THE PROJECT. UPON REQUEST I
WILL PROVIDE COPIES OF ALL DOCUMENTATION RECEIVED FROM THE TENANT TO SUPPORT
THAT CERTIFICATION.
I declare under penalty of perjury under the law of the State of New
Mexico that the foregoing is true and correct.
Executed this day of at , .
<PAGE>
