AGREEMENT
OF
LIMITED PARTNERSHIP
OF
MARSHALL SENIOR HOUSING LIMITED PARTNERSHIP
DATED AS OF JANUARY 25, 2005
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TABLE OF CONTENTS
Page
Article I.
DEFINITIONS.........................................................2
Article II.
NAME..............................................................15
Article III. PRINCIPAL EXECUTIVE
OFFICE/AGENT FOR SERVICE.....................15
Section
3.1
Principal Executive Office.........................15
Section
3.2
Agent for Service of Process.......................15
Article IV.
PURPOSE...........................................................15
Section
4.1
Purpose of the Partnership.........................15
Section
4.2
Authority of the Partnership.......................16
Section
4.3
MHFA Provisions....................................16
Article V.
TERM...............................................................18
Article VI. GENERAL PARTNER'S CONTRIBUTIONS
AND LOANS.........................18
Section
6.1
Capital Contribution of General Partner............18
Section
6.2
Construction Obligations...........................18
Section
6.3
Operating Obligations..............................19
Section
6.4
Other General Partner Loans........................19
Article VII. CAPITAL CONTRIBUTIONS OF
LIMITED PARTNER AND SPECIAL LIMITED
PARTNER.......................................................................19
Section
7.1
Original Limited Partner...........................19
Section
7.2
Capital Contribution of Limited Partner and Special
Limited Partner....................................20
Section
7.3
Repurchase of Limited Partner's and Special Limited
Partner's Interests................................23
Section
7.4
Adjustment of Capital Contributions................24
Section
7.5
Return of Capital Contribution.....................26
Section
7.6
Liability of Limited Partner and Special Limited
Partner............................................26
Article VIII. WORKING CAPITAL AND
RESERVES....................................27
Section
8.1
Replacement and Reserve Account....................27
Section
8.2
[Reserved].........................................27
Section
8.3
Tax and Insurance Account..........................27
Section
8.4
[Reserved].........................................27
Section
8.5
Other Reserves.....................................27
Article IX. MANAGEMENT AND
CONTROL............................................28
Section
9.1
Power and Authority of General Partner.............28
Section
9.2
Payments to the General Partners and Others........28
Section
9.3
Specific Powers of the General Partner.............30
Section
9.4
Authority Requirements.............................30
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Section
9.5
Limitations on General Partner's Power and
Authority..........................................31
Section
9.6
Restrictions on Authority of General Partner.......32
Section
9.7
Duties of General Partner..........................34
Section
9.8
Obligations to Repair and Rebuild Apartment Housing
...................................................36
Section
9.9
Partnership Expenses...............................36
Section
9.10
General Partner Expenses...........................37
Section
9.11
Other Business of Partners.........................37
Section
9.12
Covenants, Representations and Warranties..........37
Section
9.13
Indemnification of the Partnership and the Limited
Partners...........................................41
Section
9.14
Option to Acquire..................................41
Section
9.15
Right of First Refusal.............................43
Article X. ALLOCATIONS OF INCOME, LOSSES
AND CREDITS..........................43
Section
10.1
General............................................43
Section
10.2
Allocations From Sale or Refinancing...............43
Section
10.3
Special Allocations................................44
Section
10.4
Curative Allocations...............................47
Section
10.5
Other Allocation Rules.............................47
Section
10.6
Tax Allocations: Code Section 704(c)...............48
Section
10.7
Allocation Among Limited Partners..................49
Section
10.8
Allocation Among General Partners..................49
Section
10.9
Modification of Allocations........................49
Article XI.
DISTRIBUTION......................................................49
Section
11.1
Distribution of Net Operating Income...............49
Section
11.2
Distribution of Sale or Refinancing Proceeds.......50
Article XII. TRANSFERS OF LIMITED PARTNER'S
AND SPECIAL LIMITED PARTNER'S
INTERESTS IN THE
PARTNERSHIP..................................................51
Section
12.1
Assignment of Interests............................51
Section
12.2
Effective Date of Transfer.........................51
Section
12.3
Invalid Assignment.................................52
Section
12.4
Assignee's Rights to Allocations and Distributions.52
Section
12.5
Substitution of Assignee as Limited Partner or
Special Limited Partner............................52
Section
12.6
Death, Bankruptcy, Incompetency, etc., of a Limited
Partner............................................52
Article XIII. WITHDRAWAL, REMOVAL AND
REPLACEMENT OF GENERAL PARTNER..........53
Section
13.1
Withdrawal of General Partner......................53
Section
13.2
Removal of General Partner.........................53
Section
13.3
Effects of a Withdrawal............................55
Section
13.4
Successor General Partner..........................57
Section
13.5
Admission of Additional or Successor General
Partner............................................57
Section
13.6
Transfer of Interest...............................58
Section
13.7
No Goodwill Value..................................58
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Article XIV. BOOKS AND ACCOUNTS, REPORTS,
TAX RETURNS, FISCAL YEAR AND
BANKING.......................................................................58
Section
14.1
Books and
Accounts.................................58
Section
14.2
Accounting Reports.................................59
Section
14.3
Other Reports......................................60
Section
14.4
Late Reports.......................................62
Section
14.5
Site Visits........................................62
Section
14.6
Tax Returns........................................62
Section
14.7
Fiscal Year........................................62
Section
14.8
Banking............................................62
Section
14.9
Certificates and Elections.........................63
Article XV. DISSOLUTION, WINDING UP,
TERMINATION AND LIQUIDATION OF THE
PARTNERSHIP...................................................................63
Section
15.1
Dissolution of Partnership.........................63
Section
15.2
Return of Capital Contribution upon Dissolution....63
Section 15.3
Distribution of Assets.............................64
Section
15.4
Deferral of Liquidation............................65
Section
15.5
Liquidation Statement..............................65
Section
15.6
Certificates of Dissolution; Certificate of
Cancellation of Certificate of Limited Partnership.65
Article XVI.
AMENDMENTS.......................................................65
Article XVII.
MISCELLANEOUS...................................................66
Section
17.1
Voting Rights......................................66
Section
17.2
Meeting of Partnership.............................66
Section
17.3
Notices............................................67
Section
17.4
Successors and Assigns.............................67
Section
17.5
Recording of Certificate of Limited Partnership....67
Section
17.6
Amendment of Certificate of Limited Partnership....67
Section
17.7
Counterparts.......................................68
Section
17.8
Captions...........................................68
Section
17.9
Saving Clause......................................68
Section
17.10
Certain Provisions.................................68
Section
17.11
Tax Matters Partner................................69
Section
17.12
Expiration of Compliance Period....................69
Section
17.13
Number and Gender..................................70
Section
17.14
Entire Agreement...................................70
Section
17.15
Governing Law......................................70
Section
17.16
Attorney's Fees....................................70
Section
17.17
Receipt of Correspondence..........................71
Section
17.18
Security Interest and Right of Set-Off.............71
EXHIBIT A Legal Description
EXHIBIT B Form of Legal Opinion
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EXHIBIT C Certification and Agreement
EXHIBIT D Form of Completion
Certificate
EXHIBIT E Accountant's Certificate
EXHIBIT F Contractor's Certificate
EXHIBIT G Depreciation Schedule
EXHIBIT H Report of Operations
EXHIBIT I Survey of Requirements
[List of Agreements Attached]
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AGREEMENT
OF LIMITED PARTNERSHIP OF
MARSHALL SENIOR HOUSING LIMITED PARTNERSHIP
This Agreement of Limited Partnership is being entered into
effective
as of the date written below by and between
Harold W. Teasdale, an individual
("Teasdale"), Thomas J. Cooper, an
individual ("Cooper"), and Marshall Senior
Housing, LLC, a Minnesota limited liability
company ("MSH, LLC"), as the general
partners (collectively, the "General
Partner"), WNC Housing Tax Credit Fund VI,
L.P., Series 12, a California limited
partnership, as the limited partner (the
"Limited Partner"), WNC Housing, L.P., a
California limited partnership, as the
special limited partner (the "Special
Limited Partner"), and Harold W. Teasdale,
an individual, as the withdrawing limited
partner (the "Original Limited
Partner").
RECITALS
WHEREAS, Marshall Senior Housing Limited Partnership, a
Minnesota
limited partnership (the "Partnership")
recorded a certificate of limited
partnership with the Minnesota Secretary of
State on September 9, 2003, and an
amendment to certificate of limited
partnership with the Minnesota Secretary of
State on January __ , 2005.
WHEREAS, the Partners desire to enter into this written Agreement
to
provide for, among other things, (i) the
continuation of the Partnership, (ii)
the admission of the Limited Partner and
the Special Limited Partner as partners
of the Partnership, (iii) the liquidation
of the Original Limited Partner's
Interest in the Partnership, (iv) the
payment of Capital Contributions by the
Limited Partner and the Special Limited
Partner to the Partnership, (v) the
allocation of Income, Losses, Tax Credits
and distributions of Net Operating
Income and other cash funds of the
Partnership among the Partners, (vi) the
determination of the respective rights,
obligations and interests of the
Partners to each other and to the
Partnership, and (vii) certain other matters.
NOW, THEREFORE, in consideration of their mutual agreements herein
set
forth, the Partners hereby agree to enter
into this Partnership Agreement to
provide as follows:
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ARTICLE I.
DEFINITIONS
"Accountant" shall mean Mahoney Ulbrich Christiansen Russ P.A., 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 Special Limited
Partner. Notwithstanding any provision of
this Agreement to the contrary, the
Special Limited Partner shall have the
discretion to dismiss the Accountant for
cause if such Accountant fails to provide,
or untimely provides, or inaccurately
provides, the information required in
Section 14.2 or Section 14.3 of this
Agreement.
"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.
"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
and not subsequently recaptured or
disallowed, representing 99.98% of the LIHTC
actually received by the Partnership, as
shown on the applicable tax returns of
the Partnership.
"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.
"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.
"Agreement" or "Partnership Agreement" shall mean this 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.
"Apartment Housing" shall collectively mean the Marshall Senior
Housing
located on approximately 4.04 acres of land
at 400 Jewett, Marshall, Lyon
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County, Minnesota, 56258, as more fully described in Exhibit A
attached hereto
and incorporated herein by this reference,
and the Improvements.
"Architect of Record" shall mean Forum Architects and Consultants,
Inc.
The General Partner, on behalf of the
Partnership, has entered into a contract
with the Architect of Record to perform
certain duties and responsibilities
pursuant to the Abbreviated Standard Form
of Agreement between Owner and
Architect, dated September 8, 2004.
"Asset Management Fee" shall have the meaning set forth in
Section
9.2(d) hereof and the Minimum Amount (as
defined in Section 9.2(d)), shall be
paid annually to the Limited Partner.
"Assignee" shall mean a Person who has acquired all or a portion of
the
Limited Partner's or the Special Limited
Partner's beneficial interest in the
Partnership and who has not been
substituted in the stead of the transferor as a
Partner.
"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 other than as a
creditor, the commencement of any
bankruptcy, reorganization, insolvency or
other proceeding for the relief of
financially distressed debtors, the
appointment of a receiver, liquidator,
custodian or trustee, or the discounted
settlement of substantially all the
debts and obligations of a debtor; 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 any of the above has
occurred to that Partner.
"Breakeven Operations" shall mean at such time as the Partnership
has
Cash Receipts in excess of Cash Expenses,
as determined by the Accountant and
approved by the Special Limited Partner.
For purposes of this definition; (a)
any one-time up-front fee paid to the
Partnership from any source shall not be
included in Cash Receipts to calculate
Breakeven Operations; (b) Cash Expenses
shall include the currently payable portion
of any outstanding Partnership
obligations and any management fee or
portion thereof which is currently
deferred and not paid; and (c) Cash
Expenses shall include the amount of any
reserve required to be funded in accordance
with Article VIII that is currently
deferred and not paid. In addition,
Breakeven Operations shall not occur until
the Partnership has: (a) sufficiently
funded a tax and insurance reserve in an
amount equal to one year's property
insurance premium and the next full annual
installment of real estate taxes based upon
improved land; and (b) deposited
into the Operating Deficit Account an
amount equal to one month's mandatory debt
service payment and one month's operating
expenses.
"Budget" shall mean the annual operating budget of the Partnership
as
more fully described in Section 14.3 of
this Agreement.
"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
Section 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
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expenses or losses which are specially
allocated pursuant to Section 10.3
or Section 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 Regulations Section 1.704-1(b), as amended or any successor
thereto, and shall be interpreted and
applied in a manner
consistent with such
Treasury Regulations.
"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 such
capital which shall have been returned
pursuant to Section 7.3, Section 7.4, or
Section 7.5 of this Agreement. A loan to
the Partnership by a Partner shall not
be considered a Capital Contribution.
"Cash Expenses" shall mean all operating obligations of the
Partnership
(other than those covered by Insurance)
including without limitation, the
payment of the monthly Mortgage payments,
the Management Agent fees, the monthly
Asset Management Fee (but not including
fees payable to Partners that are
contingent on the availability of Net
Operating Income), the funding of reserves
in accordance with Article VIII of this
Agreement, advertising and promotion,
utilities, maintenance, repairs, Partner
communications, legal, telephone, any
other expenses which may reasonably be
expected to be paid in a subsequent
period but which on an accrual basis is
allocable to the period in question,
including, but not limited to, Insurance,
Real Estate Taxes and audit, tax or
accounting expenses (excluding deductions
for cost recovery of buildings;
improvements and personal property and
amortization of any financing fees) and
any seasonal expenses (such as snow
removal, the use of air conditioners in the
middle of the summer, or heaters in the
middle of the winter) which may
reasonably be expected to be paid in a
subsequent period shall be allocated
equally per month over the calendar year.
Cash Expenses payable to Partners or
Affiliates of Partners shall be paid after
Cash Expenses payable to third
parties. Development costs of any nature
whatsoever are not Cash Expenses and
shall not be paid from Cash Receipts. The
provisions of Section 6.2 govern the
payment of development costs.
"Cash Receipts" shall mean actual cash received on a cash basis by
the
Partnership from operating revenues of the
Partnership, including without
limitation rental income (but not any
subsidy thereof from the General Partner
or an Affiliate thereof), tenant security
deposits that have been forfeited by
tenants pursuant to the laws of the State,
laundry income, paid to the
Partnership, telephone hook-up or service
income, cable fees or hook-up costs,
telecommunications or satellite fees or
hook-up costs, but excluding
prepayments, security deposits, Capital
Contributions, borrowings, the Mortgage
Loan, lump-sum payments, any extraordinary
receipt of funds, and any income
earned on investment of its funds. Neither
the General Partner nor its
Affiliates shall be entitled to payment of
any Cash Receipts for any reason,
including but not limited to a separate
contract, agreement, obligation or the
like.
"Code" shall mean the Internal Revenue Code of 1986, as amended
from
time to time, or any successor statute.
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"Completion of Construction" shall mean the date the
Partnership
receives the required certificate of
occupancy (or the local equivalent) for all
90 apartment units, and by the issuance of
the Construction Inspector's
certification, in a form substantially
similar to the form attached hereto as
Exhibit D and incorporated herein by this
reference, with respect to completion
of all the apartment units in the Apartment
Housing. Completion of Construction
further means that the construction shall
be completed in good quality, and free
and clear of all mechanic, material and
similar liens. In addition to the above,
Completion of Construction shall occur only
when the statutory time period for
the filing of any liens by the Contractor,
subcontractors, material suppliers or
any one else entitled to file a lien
against the property has lapsed unless a
title endorsement has been issued insuring
over mechanic's liens, and unless any
filed liens, other than the Mortgage Loan,
have been bonded over and have been
approved by the Special Limited Partner;
and the Special Limited Partner has
approved the Completion of
Construction.
"Completion Date" shall mean August 1, 2005.
"Compliance Period" shall mean the period set forth in Section
42(i)(1)
of the Code, as amended, or any successor
statute, or such longer period as may
be required by the Tax Credit
Conditions.
"Consent of the Special Limited Partner" shall mean the prior
written
consent of the Special Limited Partner.
"Construction Completion, Operating Deficit and Tax Credit
Guaranty
Agreement" shall mean that agreement
entered into as of even date herewith, by
and between the Partnership, the Guarantor
and the Limited Partner and
incorporated herein by this reference.
"Construction Contract" shall mean the construction contract,
dated
January 31, 2005, in the amount of
$473,000, entered into between the
Partnership and the Contractor pursuant to
which the Improvements are being
constructed in accordance with the Plans
and Specifications. The Construction
Contract shall be a fixed price agreement
(includes materials and labor) at a
cost consistent with the Development
Budget. Any modifications to the
Construction Contract require the Consent
of the Special Limited Partner.
"Construction Draw Documents" shall mean those documents as set
forth
in Section 14.3 (a) of this Agreement.
"Construction Inspector" shall mean that person identified in the
MHFA
Disbursement Agreement.
"Contractor" shall mean Minnesota Brokerage Group, a Minnesota
corporation. Any substitution of Contractor
requires the Consent of the Special
Limited Partner.
"Debt Service Coverage" shall mean for the applicable period the
ratio
between the Net Operating Income (excluding
Mortgage payments and the Asset
Management Fee) 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. A
worksheet for the calculation of Debt
Service Coverage is found in the Report of
Operations attached hereto as Exhibit H and
incorporated herein by this
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reference. For purposes of this definition:
(a) any one-time up-front fee paid
to the Partnership from any source shall
not be included in Cash Receipts to
calculate Debt Service Coverage; (b) Cash
Expenses shall include the amount of
any Management Fee, or portion thereof,
which is currently deferred and not
paid; and (c) Cash Expenses shall include
the amount of any reserve required to
be funded in accordance with Article VIII
that is currently deferred and not
paid.
"Deferred Management Fee" shall have the meaning set forth in
Section
9.2(c) hereof.
"Developer" shall mean Marshall Senior Developer, LLC, a
Minnesota
limited liability company.
"Development Budget" shall mean the agreed upon cost of developing
the
Apartment Housing and Improvements,
including all construction costs based on
the Construction Contract, the Plans and
Specifications, land and soft costs
(which includes, but is not limited to,
financing charges, market study,
Development Fee, architect fees, etc.) The
final Development Budget is
referenced in the Development, Construction
and Operating Budget Agreement
entered into by and between the Partners on
even date herewith, and incorporated
herein by this reference.
"Development Fee" shall mean the fee payable to the Developer
for
services incident to the development and
construction of the Apartment Housing
in accordance with the Development Fee
Agreement between the Partnership and the
Developer dated the even date herewith and
incorporated herein by this
reference. Development activities do not
include services for the acquisition of
land or syndication activities, or
negotiations for permanent financing.
"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.
"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.
"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.
"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 or restraint.
"General Partner(s)" shall mean Harold W. Teasdale, Thomas J.
Cooper,
and Marshall Senior Housing, LLC and such
other Persons as are admitted to the
Partnership as additional or substitute
General Partners pursuant to this
6
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Agreement. If there is more than one General
Partner of the
Partnership,
the term "General Partner" shall be deemed
to collectively refer to such General
Partners or individually may mean any
General Partner as the context dictates.
"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 Special
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 definition to the extent
the General Partner determines that an
adjustment pursuant to Section (b) hereof
is necessary or appropriate in
connection with a transaction that would
otherwise result in an adjustment
pursuant to Section (d) of this
definition.
If the Gross Asset Value of an asset has been determined or
adjusted
pursuant to this definition, 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.
"Guarantor" shall mean collectively, Harold W. Teasdale, an
individual,
and Thomas J. Cooper, an individual.
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"Hazardous Substance" shall mean and include any substance,
material or
waste, including, but not limited to,
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.
"Improvements" shall mean the substantial rehabilitation of 1
building
containing 90 apartment units and ancillary
and appurtenant facilities
(including those intended for commercial
use, if any) for elderly use and built
in accordance with the Project Documents.
It shall also include all furnishings,
equipment and personal property used in
connection with the operation thereof.
The total number of apartment units equal
85 LIHTC units and 5 market units.
"In-Balance" shall mean, at any time when calculated, when the
cumulative amount of the undisbursed
Capital Contributions of the Limited
Partner and Special Limited Partner
required to be paid-in through and including
the Completion of Construction and any
other funds available to the Partnership
are sufficient in the Special Limited
Partner's reasonable judgment to pay all
of the following sums: (a) all costs of
construction to achieve Completion of
Construction; and (b) all soft costs in the
development of the Apartment Housing
and Improvements, including but not limited
to, architect fees, land
acquisition, impact fees and costs of
marketing, maintenance and leasing of the
Apartment Housing units.
"Incentive Management Fee" shall have the meaning set forth in
Section
9.2(e) hereof.
"Income and Loss(es)" 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 shall be
added to such taxable income or loss;
(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
Treasury Regulations Section
1.704-1(b)(2)(iv)(i),
and not otherwise taken into
account in computing Income and Losses 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 the provisions of the definition thereof, 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 tax purposes
8
<PAGE>
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 Section 10.3 or
Section 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,
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.
For purposes of this Agreement, the term Income when used alone
shall
include all items of income or revenue
contemplated in this Section and the term
Losses when used alone shall include all
items of loss or deductions
contemplated in this Section.
"Insurance" shall mean:
(a) during
construction,
the Partnership will provide and maintain,
or
cause the Contractor to provide and
maintain, builder's
risk insurance in an
amount equal to 100% of the value of the Apartment Housing at the date of
completion; property damage coverage of not
less than $1,000,000 per occurrence
and comprehensive general liability insurance with
limits against bodily injury
of not less than $1,000,000 per occurrence, both with aggregate coverage of
$2,000,000; and worker's compensation insurance, within the State statutory
guidelines;
(b) during
operations the
Partnership will
provide and maintain
business
interruption coverage covering actual sustained loss for 12 months;
worker's
compensation; hazard coverage (including but not limited to fire, or other
casualty loss to any structure or building
on the Apartment Housing in an amount
equal to the full replacement value of the damaged property without deducting
for depreciation); and comprehensive general liability coverage against
liability claims for bodily injury or
property damage in the
minimum amount of
$1,000,000 per occurrence and an aggregate
of $2,000,000;
(c) all
liability coverage
shall include an umbrella liability coverage in
a minimum amount of $4,000,000 per
occurrence and an aggregate of $4,000,000;
(d) all
Insurance polices
shall name the Partnership as the named insured,
the Limited Partner as an additional
insured, and WNC & Associates, Inc. as the
certificate holder;
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<PAGE>
(e) all
Insurance policies shall include a provision to notify the
insured,
the Limited Partner and the certificate
holder prior to cancellation;
(f) hazard
coverage must include inflation and building or ordinance
endorsements;
(g) the
Insurance Policy or Policies shall not have a deductible
provision
in excess of $5,000; and
(h) the term "Insurance" specifically excludes co-insurance or
self-insurance.
"Insurance Company" shall mean any insurance company engaged by
the
General Partner for the Partnership with
the Consent of the Special Limited
Partner which Insurance Company shall have
an A rating or better for financial
safety by A.M. Best or Standard &
Poor's. Any substitution of Insurance Company
during the term of this Agreement requires
the Consent of the Special Limited
Partner, which shall not be unreasonably
withheld.
"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.
"Involuntary Withdrawal" shall mean any Withdrawal of a General
Partner
caused by death, adjudication of insanity
or incompetence, Bankruptcy, or the
removal of a General Partner pursuant to
Section 13.2 hereof.
"Land Acquisition Fee" shall mean the fee payable to the
General
Partner in an amount equal to $7,500 for
the General Partner's services in
locating, negotiating and closing on the
purchase of the real property upon
which the Improvements are, or will be,
erected or rehabilitated.
"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.
"Limited Partner" shall mean WNC Housing Tax Credit Fund VI,
L.P.,
Series 12, a California limited
partnership, and such other Persons as are
admitted to the Partnership as additional
or Substitute Limited Partners
pursuant to this Agreement.
"Management Agent" shall mean the property management company
which
oversees the property management functions
for the Apartment Housing and which
is on-site at the Apartment Housing. The
initial Management Agent shall be
Westport Properties Inc. Any substitution
of the Management Agent requires the
Consent of the Special Limited Partner.
"Management Agreement" shall mean the agreement between the
Partnership
and the Management Agent for property
management services. The management fee
shall equal 6% of gross revenues. The
General Partner, on behalf of the
Partnership, shall insure that neither the
Management Agreement nor any
ancillary agreement shall provide for an
initial rent-up fee, a set-up fee, any
other similar pre-management fee or
recurring fee for compliance monitoring or
the like payable to the Management Agent,
General Partner, or Developer. The
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<PAGE>
Management Agreement shall provide that it will be terminable
at will by
the Partnership at anytime following the Withdrawal or
removal of the General
Partner and, in any event, on any anniversary of the date of execution of
the
Management Agreement, without payment or
penalty for failure to renew the same.
"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
Apartment Housing to be occupied by
tenants whose incomes are equal to or less
than the required percentage of the
area median gross income. More
specifically, the General Partner has agreed that
there will be 6 one-bedroom units with 540
square feet at 60% or less of the
area median income, as adjusted for family
size; 44 one-bedroom units with 600
square feet at 60% or less of the area
median income, as adjusted for family
size; 37 one-bedroom units with 623 square
feet at 60% or less of the area
median income, as adjusted for family size;
and 3 two-bedroom units with 775
square feet at 60% or less of the area
median income, as adjusted for family
size.
"Mortgage" or "Mortgage Loan" shall mean the permanent
nonrecourse
financing wherein the Partnership promises
to pay: (a) Minnesota Housing Finance
Agency, or its successor or assignee, the
principal sum of $1,631,504, plus
interest on the principal at 6.45% per
annum over a term of 30 years and
amortized over 360 months financed from the
proceeds of the Tax-Exempt Bonds;
(b) and Minnesota Housing Finance Agency,
or its successor or assignee, the
principal sum of $1,491,393, plus interest
on the principal at 0.00% per annum
over a term of 30 years and payable in a
lump sum at maturity. 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 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 provided
the substitution or change has
received the Consent of the Special Limited
Partner. Prior to closing the
Mortgage, the General Partner shall provide
to the Special Limited Partner a
draft of the Mortgage documents for review
and approval.
"Net Operating Income" shall mean the cash available for
Distribution
on an annual basis, when Cash Receipts
exceed Cash Expenses.
"Nonrecourse Deductions" shall have the meaning given it in
Treasury
Regulations Section 1.704-2(b)(1).
"Nonrecourse Liability" shall have the meaning given it in
Treasury
Regulations Section 1.704-2(b)(3).
"Operating Deficit" shall mean, for the applicable period,
insufficient
funds to pay Partnership operating costs
when Cash Expenses exceed Cash
Receipts, as determined by the Accountant
and approved by the Special Limited
Partner.
"Operating Deficit Guarantee Period" shall mean the period
commencing
the date of this Agreement and ending 36
months following the achievement of
11
<PAGE>
three consecutive months of Breakeven
Operation provided that the Partnership
has achieved Completion of Construction of
the Apartment Housing.
"Operating Loans" shall mean loans made by the General Partner to
the
Partnership pursuant to Article VI of this
Agreement, which loans are repayable
only as provided in Article XI of this
Agreement.
"Original Limited Partner" shall mean Harold W. Teasdale.
"Partner(s)" shall collectively mean the General Partner, the
Limited
Partner and the Special Limited Partner or
individually may mean any Partner as
the context dictates.
"Partner Nonrecourse Debt" shall have the meaning set forth in
Section
1.704-2(b)(4) of the Treasury
Regulations.
"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, determined in accordance with
Section 1.704-2(i)(3) of the Treasury
Regulations.
"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.
"Partnership" shall mean the limited partnership continued under
this
Agreement.
"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).
"Permanent Mortgage Commencement" shall mean the first date on
which
(1) the Mortgage shall have closed and
funded; and (b) amortization of the
Mortgage shall have commenced.
"Person" shall mean an individual, proprietorship, trust,
estate,
partnership, joint venture, association,
company, corporation or other entity,
as the circumstances demonstrate.
"Plans and Specifications" shall mean the plans, blueprints and
specifications manual for the construction
of the Improvements which are
approved by the local city/county building
department with jurisdiction over the
construction of the Improvements and which
Plans and Specifications are referred
to in the Construction Contract. The
General Partner agrees to assure that the
Contractor completes construction in
accordance with the Plans and
Specifications. Any changes to the Plans
and Specifications after approval by
the appropriate government building
department shall require the Consent of the
Special Limited Partner.
"Project
Documents" shall mean all documents relating to the Mortgage
Loan, Construction Contract, Title Policy
and Partnership Agreement and
documents relating to the Tax-Exempt Bonds.
It shall also include all documents
required by any governmental agency having
jurisdiction over the Apartment
12
<PAGE>
Housing in connection with the development, construction and financing of
the Apartment Housing, including but not limited to, the approved
Plans and
Specifications for the development and
construction of the Apartment Housing.
"Projected Annual Tax Credits" shall mean LIHTC in the amount
of
$42,027 for 2005, $112,072 for each of the
years 2006 through 2014, and $70,045
for 2015, which the General Partner has
projected to be the total amount of
LIHTC which will be allocated to the
Limited Partner by the Partnership,
constituting 99.98% of the aggregate amount
of LIHTC of $1,120,940 to be
available to the Partnership.
"Projected Tax Credits" shall mean LIHTC in the aggregate amount
of
$1,120,716.
"Qualified Tenants" shall mean any tenants who have incomes of 60%
(or
such smaller percentage as the General
Partner shall agree) or less of the area
median gross income, as adjusted for family
size, so as to make the Apartment
Housing eligible for LIHTC.
"Real Estate Taxes" shall mean the sum of $34,000 required to be
paid
annually by the Partnership to the tax
assessor, school district or similar
representative, of the City of Marshall or
Lyon County for real estate taxes
assessed against the Apartment Housing. The
Real Estate Taxes are payable as
follows: 50% on May 15 and 50% on October
15.
"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 Apartment Housing cannot
exceed 30% of the qualifying income levels
of those units under Section 42.
"Revised Projected Tax Credits" shall have the meaning set forth
in
Section 7.4(a) hereof.
"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 Apartment Housing or any
part thereof, a claim against a title
insurance company, the refinancing of any
Mortgage 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."
"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 Apartment Housing.
"Special Limited Partner" shall mean WNC Housing, L.P., a
California
limited partnership, and such other Persons
as are admitted to the Partnership
as additional or substitute Special Limited
Partners pursuant to this Agreement.
"State" shall mean the State of Minnesota.
13
<PAGE>
"State Tax Credit Agency" or "MHFA" shall mean the state agency
of
Minnesota which has the responsibility and
authority to administer the LIHTC
program in Minnesota.
"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.
"Syndication Fee" shall mean the fee payable to the General Partner
in
an amount equal to $10,000 for the General
Partner's services in forming the
Partnership, locating and approving the
Limited Partner and the Special Limited
Partner as the investors in the
Partnership, negotiating and finalizing this
Partnership Agreement and for such other
services referenced in Treasury
Regulations Section 1.709-2(B).
"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.
"Tax Credit Compliance Fee" shall mean the fee payable to the
General
Partner in accordance with Section 9.2(f)
of this Agreement.
"Tax Credit Conditions" shall mean, for the duration of the
Compliance
Period, any and all restrictions including,
but not limited to: (a) the land use
restriction agreement required by the State
Tax Credit Agency to be recorded
against the Apartment Housing; and (b) any
applicable federal, state and local
laws, rules and regulations, which must be
complied with in order to qualify for
the LIHTC or to avoid an event of recapture
in respect of the LIHTC.
"Tax Credit Period" shall mean the 10-year time period referenced
in
Code Section 42(f)(1) over which the
Projected Tax Credits are allocated to the
Partners, plus for purposes of this
Agreement, the 11th year. It is the intent
of the Partners that the Projected Tax
Credits will be allocated during the Tax
Credit Period and not a longer term.
"Tax-Exempt Bonds" shall mean the bonds issued by MHFA, the
interest on
which is exempt from federal income tax
pursuant to Code Section 103 and the
proceeds of which will be used to finance
the Mortgage Loan made by MHFA.
"Title Policy" shall mean the policy of insurance covering the
fee
simple title to the Apartment Housing from
a company approved by the Special
Limited Partner. The Title Policy shall be
an ALTA owners title policy including
the following endorsements: non-imputation,
Fairways, access, contiguity,
survey, owner's comprehensive, zoning and
subdivision. The Title Policy shall
also insure against rights-of-way,
easements, blanket easement or claims of
easements, not shown by public records.
During construction of the Improvements,
the Title Policy shall be in an amount
equal to the Mortgage amount and the
Limited Partner's Capital Contribution.
Upon Permanent Mortgage Commencement,
the Title Policy shall be in an amount
equal to the Mortgage amount and the
Limited Partner's Capital Contribution. If
allowed by the title company, the
Title Policy shall name the Limited Partner
and the Special Limited Partner as
insured parties, or, if including the
Limited Partner and Special Limited
Partner as insured parties is not allowed,
the Title Policy shall reference them
"as their interests may appear in the
partnership agreement of the owner."
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<PAGE>
"TRA 1986" shall mean the Tax Reform Act of 1986.
"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).
"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,
Bankruptcy of such Partner or the last of
its original principals existing as of
the date of this Agreement, 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 "Marshall Senior Housing 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
5407
Excelsior Boulevard, Suite B, Minneapolis,
Minnesota 55416, 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
Harold W. Teasdale, whose address is 5407
Excelsior Boulevard, Suite B,
Minneapolis, Minnesota 55416.
ARTICLE IV.
PURPOSE
Section 4.1 Purpose of the
Partnership.
The purpose of the Partnership is to acquire, construct, own
and
operate the Apartment Housing 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 Apartment Housing at the
conclusion of the Compliance Period. The
Partnership shall not engage in any
business or activity that is not incident
to the attainment of such purpose.
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<PAGE>
Section 4.2 Authority of the
Partnership.
In order to carry out its purpose, the Partnership is empowered
and
authorized to do any and all acts and
things necessary, appropriate, proper,
advisable or incidental to the furtherance
and accomplishment of its purpose,
and for protection and benefit of the
Partnership in accordance with the
Partnership Agreement, including but not
limited to the following:
(a) acquire ownership of the real property referred to in Exhibit A
attached hereto;
(b) construct,
renovate, rehabilitate, and own the Apartment Housing in
accordance with the Project Documents;
(c) provide
housing to Qualified Tenants, subject to the Minimum
Set-Aside
Test and the Rent Restriction Test and consistent with the
requirements of the
Project Documents so long as any Project
Documents remain in force;
(d) maintain and operate the Apartment Housing, including hiring the
Management Agent (which Management Agent may be any of the Partners or an
Affiliate thereof) and entering into any
agreement for the management of the
Apartment Housing during its rent-up and
after its rent-up period in accordance
with this Agreement;
(e) enter into
the Mortgage Loan;
(f) rent
dwelling units in the Apartment Housing from time to time,
in
accordance with the provisions of the Code
applicable to LIHTC; and
(g) do any and
all other acts and things necessary or proper in
accordance
with this Agreement.
Section 4.3 MHFA
Provisions.
Notwithstanding anything to the contrary contained herein, the
following provisions shall control for so
long as MHFA holds a mortgage on the
Apartment Housing described in this
Agreement:
(a) Partnership Function. The Partnership's sole function shall be the
ownership and operation of the Apartment
Housing. The Partners do hereby confirm
that the Partnership is organized to
acquire, hold for
investment, lease,
and
sell the Apartment Housing; to receive,
allocate, and distribute income, sales
proceeds and other receipts with respect to the Apartment
Housing; to borrow
money from MHFA or from other sources and
to issue evidence of indebtedness and
to secure the same by mortgages,
pledges, or other
liens, in furtherance of any
and all of the purposes of the Partnership; and to engage in any and all
other
business activities incidental or related to the
acquisition and holding of the
Apartment Housing as determined advisable
from time to time by the Partners, to
the extent authorized by the provisions
hereof. It is understood that each of
the parties hereto is otherwise employed in business and no Partner shall be
required to devote his entire time to the
business of the
Partnership.
Further
no Partner shall have any duty to present
first to this Partnership any business
16
<PAGE>
opportunity of which he or she becomes aware or elects to investigate or
acquire, and any Partner may enter into a
like business
and compete
with the
business of the Partnership.
(b) MHFA Lender
Documents.
The Partnership is authorized to execute and
deliver mortgage notes and mortgages to
MHFA relating to the Apartment Housing,
and is also authorized to execute
regulatory agreements and such other documents
as are required by MHFA in connection with
such loans.
(c) Regulatory
Agreements.
The regulatory
agreements
shall be a binding
obligation upon the Partnership, its successors or assigns,
for so long as a
mortgage on the Apartment Housing which is held by MHFA is
outstanding.
The
regulatory agreements include within their
terms provisions limiting the use of
monies generated by the operation of the
Apartment Housing. Any incoming Partner
shall as a condition of receiving an Interest in the Partnership agree to be
bound by the terms of the mortgage notes,
mortgages,
and regulatory
agreements
and such other documents required by MHFA to the same extent and on the same
terms as the other Partners. Upon dissolution of the
Partnership,
no title or
right to possession and control of the Apartment Housing, and no right to
collect the rents therefrom shall pass to any person who is not
bound by the
regulatory agreements in. a manner
satisfactory to MHFA.
(d) Authorization. The Partnership is authorized to execute such
other
notes, mortgages, loan commitments or other documents or
agreements as may be
necessary to effectuate the purposes of
this Agreement.
(e) General Partner Withdrawal. No General Partner will withdraw
voluntarily from, or be substituted
by, the Partnership without MHFA's prior
written approval, which approval will not be
unreasonably withheld
if there is
one or more remaining or substitute
General Partners who,
in MHFA's opinion and
sole discretion, are financially capable and
competent to cause the Partnership
to have the capacity to own and operate the Apartment Housing effectively,
subject to the terms and provisions of the regulatory agreements and of this
Agreement.
(f) Amendments. No amendments will be made to this Agreement
which would
affect MHFA's rights under the mortgage
notes, mortgages, regulatory agreements,
or other agreements made between MHFA and
the Partnership,
without MHFA's prior
written approval in its sole
discretion.
(g) Dissolution.
For so long as the
Partnership owns the Apartment Housing
and MHFA holds a mortgage on the Apartment
Housing, the Partnership shall not be
dissolved without the prior written consent
of MHFA in its sole discretion.
(h) Limited
Liability Limited Partnership. The Partnership created by
this
Agreement may not become a limited
liability partnership
pursuant to
Minnesota
Statutes Section 323.44 or Section 322A or
any similar or amended
statute, or
file with the Secretary of State a registration as a limited liability
partnership pursuant to such statute or any
similar or amended
statute without
the express written consent of MHFA in its
sole discretion.
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<PAGE>
(i) Inconsistency. In the event that there is a
conflict or inconsistency
between any term or provision in this
Agreement and any term or provision in any
of MHFA loan documents, then the terms and provisions contained in the loan
documents shall control.
(j) Continuation. For so long as MHFA holds a
mortgage on the
Apartment
Housing, in the event of the retirement, death, insanity, incapacity,
withdrawal, liquidation, bankruptcy or assignment for the
benefit of creditors
of a Partner, the business of the
Partnership will be continued by the remaining
Partners.
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 Minnesota, and shall
continue until December 31, 2053
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 equal to
$100.
Section 6.2
Construction Obligations.
The General Partner hereby guarantees lien free Completion of
Construction of the Apartment Housing on or
before the Completion Date, which
date shall be extended by up to 3 months in
the event of Force Majeure. The
General Partner further guarantees that the
development of the Apartment Housing
and Improvements will not exceed a total
development cost of $4,011,102
("Development Budget"), which includes all
hard and soft costs incident to the
acquisition, development and construction
of the Apartment Housing in accordance
with the Development Budget and the Project
Documents. If the actual hard costs
and soft costs of developing and
constructing the Apartment Housing and
Improvements exceed the Development Budget
then the General Partner shall
advance the money to the Partnership to pay
the additional costs.
Notwithstanding the foregoing, at any time
during construction and prior to
Permanent Mortgage Commencement, if the
Special Limited Partner, in good faith,
determines that the actual construction and
development costs exceed the
aggregate line item costs (excluding the
Development Fee) referenced in the
Development, Construction and Operating
Budget Agreement then the General
Partner shall be responsible for and shall
be obligated to advance and deposit
into the disbursement agent's account, the
difference thereof for payment to the
Contractor or other vendors, suppliers, or
subcontractors. In addition, at any
time prior to Completion of Construction,
if the Special Limited Partner, in
good faith, determines that there are
insufficient funds to achieve Completion
of Construction or the funds are not
available in accordance with the funding
requirements of this Agreement, the General
Partner shall advance and deposit
into the disbursement agent's account, the
amount requested by the Special
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Limited Partner pay a current construction draw or an amount necessary to
achieve Completion of Construction. Said advance shall be made and
documented
with an approved draw request within 30 days of receiving
written notice from
the Special Limited Partner. Any advances by the General
Partner pursuant to
this Section shall not be repayable, shall not change the Interest of any
Partner in the Partnership and shall be considered a
guaranteed payment to
the
Partnership for cost overruns.
Section 6.3
Operating Obligations.
From the date the first apartment unit in the Apartment Housing
is
available for its intended use until 3
consecutive months of Breakeven
Operations, the General Partner will
immediately provide to the Partnership the
necessary funds to pay Operating Deficits,
which funds shall not be repayable,
shall not change the Interest of any
Partner and shall be considered a
guaranteed payment to the Partnership for
cost overruns. For the balance of the
Operating Deficit Guarantee Period the
General Partner will immediately provide
Operating Loans to pay any Operating
Deficits. The aggregate maximum amount of
the Operating Loan(s) the General Partner
will be obligated to lend will be
$451,798, which is equal to one year's
operating expenses (including debt and
reserves) as agreed to by the General
Partner and the Special Limited Partner.
Each Operating Loan shall be nonrecourse to
the Partners, and shall be repayable
out of 50% of the available Net Operating
Income or out of 100% of the Sale or
Refinancing Proceeds in accordance with
Article XI of this Agreement.
Section 6.4
Other General Partner Loans.
Unless provided elsewhere, after expiration of the Operating
Deficit
Guarantee Period, with the Consent of the
Special 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 10 year Treasury
money market rate in effect as of the
day of the General Partner loan, 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 Special 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. Notwithstanding
this provision, the General Partner remains
obligated to the Partnership,
Limited Partner and Special Limited Partner
as required in accordance with the
State limited partnership act, as amended
from time to time.
ARTICLE VII.
CAPITAL CONTRIBUTIONS OF LIMITED PARTNER
AND SPECIAL 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
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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 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 and Special
Limited Partner.
The Limited Partner and the Special Limited Partner shall make
a
Capital Contribution in the aggregate
amount of $818,205, 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) $564,587 (which includes the Special Limited Partner's Capital
Contribution of $82) shall be payable
upon the Limited
Partner's receipt and
approval of the following documents:
(1) a legal
opinion in a form substantially similar to the form of opinion
attached hereto as Exhibit B and
incorporated herein by this reference;
(2) a fully
executed Certification and Agreement in the form attached
hereto as Exhibit C and incorporated herein
by this reference;
(3) a copy of
the Title Policy;
(4) Insurance
required during construction;
(5) a copy of
the recorded grant deed (warranty deed);
(6) an executed
Disbursement Agreement;
(7) an
executed commitment from the Mortgage lender to provide the
Mortgage;
(8) an executed
Development, Construction and Operating Budget Agreement;
(9) an executed
Construction
Completion, Operating
Deficit and Tax Credit
Guaranty Agreement;
(10) an executed
Development
Fee Agreement and
Development
Fee Guaranty
Agreement; and
(11) payment of
$15,000 for costs and expenses incurred in connection with
the Limited Partner's or its Affiliate's
underwriting of the
Apartment Housing
and Improvements.
Notwithstanding the
foregoing, the first Capital Contribution payment
will be paid in installments based upon
approved draw requests in accordance
with the Disbursement Agreement.
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The Limited Partner shall provide collateral from the first
Capital
Contribution reasonably required for the
issuance of a $350,000 letter of credit
to be issued by Commerce Bank for the
benefit of the MHFA to secure a portion of
the Mortgage loan for a term of one year,
provided that the amount of collateral
required shall not exceed the amount of the
letter of credit and provided
further that the Partnership shall bear
cost of issuing the letter of credit
(expected to be $3,500) and the cost of
maintaining the letter of credit.
(b) $243,618 shall be payable upon the Limited Partner's receipt and
approval of the following documents:
(1) a
certificate of occupancy (or equivalent evidence of local occupancy
approval if a permanent certificate is not
available) on all the apartment units
in the Apartment Housing confirming the apartment units are being placed in
service for their intended purpose;
(2) a completion
certification in a
form substantially similar to the form
attached hereto as Exhibit D and incorporated herein by this reference,
indicating that the Improvements have been completed in accordance
with the
Project Documents;
(3) a letter
from the Contractor
in a form substantially similar to the
form attached hereto as Exhibit F and
incorporated
herein by this
reference
stating that all amounts payable to the Contractor have been paid in full and
that the Partnership is not in violation of
the Construction Contract;
(4) Insurance
required during operations;
(5) Mortgage
Loan documents signed and the Mortgage funded;
(6) an
updated Title Policy dated no more than 10 days prior to the
scheduled Capital Contribution confirming that there are no
liens, claims or
rights to a lien or judgments filed against the property or the Apartment
Housing during the time period since the
issuance of the Title Policy referenced
above in Section 7.2(a);
(7) an as-built
survey adhering to the requirements referenced in Exhibit I
attached hereto and incorporated herein and a surveyor's certification as
referenced in Exhibit I;
(8) the current
rent roll evidencing a
minimum 90% occupancy
by Qualified
Tenants for 90 consecutive days immediately
prior to funding;
(9) copies of
all initial tenant files including executed lease agreements,
completed applications, completed questionnaires or checklist of income and
assets, documentation of third party
verification of income and assets, income
certification forms (LIHTC specific) and
any other form or document collected by
the Management Agent, or General Partner,
verifying each
tenant's
eligibility
pursuant to the Minimum Set-Aside Test and other
applicable
guidelines
under
Section 42 of the Code. For purposes of this subsection only, the Limited
Partner only requires receipt of all the
tenant documents,
as described
above,
and approval of 10% of the initial tenant files;
(10) Completion
of Construction;
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(11) a
construction closeout
documents,
which shall include,
but not be
limited to, as-built drawings, all operating manuals, and all manufacturing
warranty agreements. In addition, the
Contractor shall provide the Partnership a
one-year warranty on all parts, materials
and work-quality;
(12) a copy of
the recorded
declaration of restrictive covenants/extended
use agreement entered into between the Partnership and the State Tax Credit
Agency;
(13)
an audited construction cost certification that includes an
itemization of development, acquisition, and construction or rehabilitation
costs of the Apartment Housing, the Land Acquisition Fee, the Syndication
Fee
and the eligible basis and applicable percentage of each building of the
Apartment Housing;
(14)
the Accountant's final Tax Credit certification in a form
substantially similar to the form attached
hereto as Exhibit E and incorporated
herein by this reference;
(15) Debt
Service Coverage of 1.15 for 90
consecutive
days immediately
prior to funding;
(16) a fully
signed Internal Revenue Code Form 8609, or any successor form;
(17) the
first year tax return in which Tax Credits are taken by the
Partnership, unless the Tax Credits are
deferred until the
following year and
such deferral has been approved by the
Special Limited Partner;
(18) the audited
Partnership financial
statements required by Section 14.2
for the year the Apartment Housing is
placed-in-service;
(19) the
renewal of the Housing Assistance Payments Contract for the
Apartment Housing for a term of 15 or more
years; and
(20) any
documents previously not provided to the Limited Partner but
required pursuant to this Section 7.2 and
Sections 14.3(a) and (b).
The Limited Partner and Special Limited Partner require receipt
and
approval of 100% of the initial tenant
files as specified in a subsequent
Capital Contribution payment. The time
required to collect, review and correct,
if applicable, tenant files can be
substantial. Therefore, to expedite the
process, the General Partner shall send
tenant files to the Special Limited
Partner as soon as the file is complete
instead of waiting to send the files all
at one time.
Notwithstanding the above conditions to this Capital
Contribution
payment, the Limited Partner's payment will
be held in escrow until copies of
all the signed Mortgage documents have been
received by the Limited Partner. In
addition, in the event that the Housing
Assistance Payments Contract for the
Apartment Housing has been not been renewed
for a term of 15 or more years, then
22
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the Limited Partner in its sole discretion, may hold $112,750 of the
Limited Partner's payment in a transition
reserve account,
to be released
upon
the renewal of the Housing Assistance Payments Contract for the Apartment
Housing for a term of 20 years with 5 year
renewal increments.
(c) $10,000
shall be payable upon the Special Limited Partner's approval of
the initial tenant files and any documents previously not provided to the
Limited Partner but required pursuant to this Section 7.2 and
Sections 14.3(a)
and (b). The initial tenant files will be reviewed at the Limited
Partner's
expense by an independent third-party. In the event that the independent
third-party and the Special Limited Partner
recommend corrections
to an initial
tenant file, the General Partner will cause
the Management Agent
to correct the
tenant file and provide the corrected
tenant file to the
Limited Partner.
The
Limited Partner may withhold all or any portion of this
Capital Contribution
payment until it has received all the initial tenant files and the same have
been reviewed, corrected, and approved.
(d) $350,000
shall be payable upon the release of, or return to the Limited
Partner of, the collateral required to be provided for the issuance of the
letter of credit referenced in Section
7.2(a) above.
Section 7.3
Repurchase of Limited Partner's and Special Limited
Partner's Interests.
Within 60 days after the General Partner receives written demand
from
the Limited Partner and/or the Special
Limited Partner, the Partnership shall
repurchase the Limited Partner's Interest
and/or the Special Limited Partner's
Interest in the Partnership by refunding to
it in cash the full amount of the
Capital Contribution which the Limited
Partner and/or the Special Limited
Partner has theretofore made in the event
that, for any reason, the Partnership
shall fail to:
(a) cause the
Apartment Housing to
be placed in service within 6 months of
the Completion Date;
(b) achieve 90%
occupancy of the Apartment Housing by Qualified Tenants
by
October 1, 2005;
(c) obtain
Permanent Mortgage Commencement by March 1, 2006;
(d) at any time
before the
Completion
Date, prevent a foreclosure, or
abandonment of the Apartment Housing or fail to lift any order restricting
construction of the Apartment Housing;
(e) replace a withdrawn Mortgage Loan commitment with a comparable
commitment acceptable to the Special Limited
Partner within a reasonable period
of time;
(f) receive a
renewal of the Housing
Assistance Payments
Contract for the
Apartment Housing for a term not shorter
than 15 years by December 31, 2005; or
(g) 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
23
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commence in accordance with the Code.
Section 7.4
Adjustment of Capital Contributions.
(a) The amounts of the
Limited Partner's and
the Special Limited Partner's
Capital Contributions were determined in part upon the amount of Tax
Credits
that were expected to be available to the Partnership at a cost of $0.73 for
each dollar of Tax Credit received, and were based on the assumption
that the
Partnership would be eligible to claim,
in the aggregate, the Projected Tax
Credits. If the anticipated amount of Projected Tax Credits to
be allocated to
the Limited Partner and Special Limited Partner as evidenced by
IRS Form 8609,
Schedule A thereto, or by the tax certification required in accordance with
Section 7.2, provided to the Limited
Partner and Special
Limited Partner are
different than 99.99% of $1,120,828 then
the new Projected Tax Credit amount, if
applicable, shall be referred to as the
"Revised Projected
Tax Credits." The
Limited Partner's and Special Limited
Partner's Capital
Contribution
provided
for in Section 7.2 shall be equal to 73%
times the Projected
Tax Credits or the
Revised Projected Tax Credits, if
applicable, anticipated to be allocated to the
Limited Partner and Special Limited Partner. If any Capital Contribution
adjustment referenced in this Section 7.4(a) is a reduction which is greater
than the remaining Capital Contribution to
be paid by the Limited Partner, then
the General Partner shall have 90 days from the date the General Partner
receives notice from either the Limited
Partner or the Special
Limited Partner
to pay the shortfall to the Partner whose Capital Contribution is being
adjusted. The amount paid by the General
Partner pursuant to
this Section will
be deemed to be a Capital Contribution by the General
Partner.
Notwithstanding
anything to the contrary in this Agreement, the General Partner's Capital
Contribution required to be paid by this Section shall be disbursed to the
Limited Partner as a return of capital. If
the Capital
Contribution
adjustment
referenced in this Section 7.4(a) is an increase then the
Partner whose Capital
Contribution is being adjusted shall have 90 days from the date the
Limited
Partner and Special Limited Partner have received notice from the General
Partner to pay the increase.
(b) The General
Partner is required to use its best efforts to rent 100% of
the Apartment Housing's low income housing tax credit apartment units to
Qualified Tenants throughout the Compliance Period. If, at the end of any
calendar year following the year in which the Apartment Housing is placed in
service, the Actual Tax Credit for the
applicable fiscal year or portion thereof
is or will be less than the Projected
Annual Tax Credit, or the Projected Annual
Tax Credit as modified by Section
7.4(a) of this
Agreement if
applicable (the
"Annual Credit Shortfall"), then the next Capital Contribution owed by the
Limited Partner shall be reduced by the
Annual Credit Shortfall amount, and any
portion of such Annual Credit Shortfall in excess of such
Capital
Contribution
shall be applied to reduce succeeding Capital Contributions of the Limited
Partner. If the Annual Credit Shortfall is greater than the
Limited Partner's
remaining Capital Contributions, then the General Partner shall pay to the
Limited Partner the excess of the Annual
Credit Shortfall over the remaining
Capital Contributions. The General Partner shall have 60
days to pay the Annual
Credit Shortfall from the date the General
Partner receives notice from the
Special Limited Partner. The provisions of this Section 7.4(b) shall apply
equally to the Special Limited Partner in
proportion to its Capital Contribution
24
<PAGE>
and anticipated annual Tax Credit. The amount paid by the General
Partner
pursuant to this Section will be deemed to be a Capital
Contribution
by the
General Partner. Notwithstanding anything
to the contrary in this Agreement, the
General Partner's Capital Contribution required by this Section shall be
disbursed to the Limited Partner as a
return of capital.
(c) The General
Partner has represented, in part, that the Limited
Partner
will receive Projected Annual Tax Credits of $42,027 in
2005 and $112,072
in
2006. In the event the 2005 or 2006
Actual Tax Credits are less than projected
then the Limited Partner's Capital Contribution shall be reduced by an amount
equal to 73% times the difference
between the Projected
Annual Tax Credits
for
2005 or 2006 and the Actual Tax
Credits for 2005 or 2006. If the 2005 or 2006
Actual Tax Credits are less than
projected then the
Special Limited
Partner's
Capital Contribution shall be reduced
following the same equation referenced in
the preceding sentence. If, at the time of determination
thereof, the Capital
Contribution adjustment referenced in this Section
7.4(c) is greater than
the
balance of the Limited Partner's or Special Limited Partner's Capital
Contribution payment which is then due, if any,
then the excess amount shall be
paid by the General Partner to the Limited
Partner and/or the
Special Limited
Partner within 60 days of the General
Partner receiving
notice of the reduction
from the Limited Partner and/or the Special
Limited Partner. The
amount paid by
the General Partner pursuant to this Section will be deemed to be a Capital
Contribution by the General Partner.
Notwithstanding anything to the contrary in
this Agreement, the General Partner's Capital Contribution required by this
Section shall be disbursed to the Limited
Partner as a return of capital.
(d) The Partners
recognize and acknowledge that the Limited Partner and the
Special Limited Partner are making their
Capital Contribution,
in part, on the
expectation that the Projected Tax Credits are allocated to the
Partners over
the Tax Credit Period. If the Projected Tax Credits are not allocated to
the
Partners during the Tax Credit Period then the Limited
Partner's and Special
Limited Partner's Capital Contribution
shall be reduced by an amount agreed upon
by the Partners, in good faith, to provide the Limited Partner and
the Special
Limited Partner with their anticipated
internal rate of return.
(e) In the event
there is: (1) a filing of a tax return by the Partnership
evidencing a reduction in the qualified
basis or eligible basis of the Apartment
Housing causing a recapture of Tax Credits
previously
allocated to the
Limited
Partner or an adjustment to Schedule K-1 or
a loss of future Tax Credits; (2) a
filing of a tax return by the Partnership evidencing a disposition of the
Apartment Housing prior to the expiration of the Compliance Period causing a
recapture of Tax Credits previously allocated to the Limited
Partner, or an
adjustment to Schedule K-1, or a loss of
future Tax Credits;
(3) a reduction in
the qualified basis or eligible basis of the Apartment
Housing for income
tax
purposes following an examination or review by the Internal
Revenue Service
("IRS") resulting in a recapture or
reduction of Tax Credits previously claimed
or an adjustment to Schedule K-1; (4) a
decision by any court or administrative
body upholding an assessment of deficiency
against the
Partnership with respect
to any Tax Credit previously claimed or tax losses previously claimed, in
connection with the Apartment Housing, unless the Partnership shall timely
appeal such decision and the collection of such assessment shall be stayed
pending the disposition of such appeal;
or (5) a decision of a
court affirming
such decision upon such appeal then, in
addition to any other
payments to which
the Limited Partner and/or the Special
Limited Partner are entitled under the
terms of this Section 7.4, the General
Partner shall pay to
the Limited Partner
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and the Special Limited Partner within 60
days of receiving notice from the
Limited Partner and/or the Special Limited
Partner the sum of (A) the amount of
the Tax Credit recapture, (B) the cumulative tax effect of a
decrease in loss
allocated to the Limited Partner and
Special Limited Partner by the Partnership;
(C) any interest and penalties imposed on
the Limited Partner or Special Limited
Partner with respect to such recapture;
(D) the cumulative
increase of
taxable
income allocated to the Limited Partner and Special Limited Partner by the
Partnership; (E) an amount equal to the product of the Tax Credit pricing
percentage referenced in Section 7.4(a) and future Tax Credits unable to be
taken due to one of the above actions;
and (F) an amount
sufficient to pay
any
tax liability owed by the Limited Partner
or Special Limited
Partner resulting
from the receipt of the amounts
specified in (A),
(B), (C) and (D),
provided,
however, that the General Partner shall
have no liability under this Section to
the extent that the recapture or reduction of Tax Credits results from a
legislative amendment to the Code following the date of this Agreement. The
amount paid by the General Partner pursuant
to this Section will be deemed to be
a Capital Contribution by the General
Partner.
Notwithstanding
anything to the
contrary in this Agreement, the General Partner's Capital
Contribution required
by this Section shall be disbursed to the Limited Partner as a return of
Capital.
(f) The increase
in the Capital Contribution of the Limited Partner and the
Special Limited Partner pursuant to Section 7.4(a) shall be subject to the
Limited Partner and Special Limited Partner having funds available to
pay any
such increase at the time of its notification of such increase. For these
purposes, any funds theretofore previously earmarked by the
Limited Partner or
Special Limited Partner to make other investments, or to be held as required
reserves, shall not be considered available
for payment hereunder.
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
Special Limited Partner, determine that
such cash should, in whole or in part, be
returned to the Partners, pro rata, in
reduction of their 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 and Special Limited
Partner.
The Limited Partner and Special Limited Partner shall not be liable
for
any of the debts, liabilities, contracts or
other obligations of the
Partnership. The Limited Partner and
Special 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.
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ARTICLE VIII.
WORKING CAPITAL AND RESERVES
Section 8.1
Replacement and Reserve Account.
The General Partner, on behalf of the Partnership, shall open a
Replacement and Reserve Account with a
financial banking institution and shall
deposit thereinto an annual amount equal to
$265 per residential unit per year
for the purpose of capital improvements.
Said deposit shall be made monthly in
equal installments beginning the month
following the placed in service date or
such earlier time or in such greater
amounts as required by MHFA. Prior to
seeking withdrawals from the Replacement
and Reserve Account exceeding either
(i) $5,000 individually, or (ii) $10,000
cumulative for any calendar year, the
written consent of the Special Limited
Partner shall be required. Any balance
remaining in the account at the time of a
sale of the Apartment Housing shall be
allocated and distributed in accordance
with Section 11.2.
Section 8.2
[Reserved].
Section 8.3 Tax
and Insurance Account.
The General Partner, on behalf of the Partnership, shall open a tax
and
insurance account (the "T & I Account")
for the purpose of making the requisite
Insurance premium payments and the real
estate tax payments. The annual deposit
to the T & I Account shall equal the
total annual Insurance payment and the
total annual real estate tax payment. Said
amount shall be deposited monthly in
an amount equal to 1/12th of the annual
required amount. Notwithstanding the
foregoing, as part of its obligation to
achieve Breakeven Operations, the
General Partner shall cause the Partnership
to prefund the T & I Account in an
amount equal to one year's property
insurance premium and the next full
semiannual installment of real estate taxes
based on improved land. The written
consent of the Special Limited Partner
shall be required for any withdrawals
from the T & I Account made by the
Partnership. If the T & I Account is held and
disbursed by MHFA, the Partnership shall
provide written notice of any
disbursement to the Special Limited
Partner. Any balance remaining in the
account at the time of a sale of the
Apartment Housing shall be allocated and
distributed in accordance with Section
11.2. The Partnership is required to pay
real estate taxes on May 15 and October 15
of each year.
Section 8.4
[Reserved].
Section 8.5
Other Reserves.
The General Partner, on behalf of the Partnership, may 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 Tax
Credit Conditions; and (b) any 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
27
<PAGE>
necessary.
ARTICLE IX.
MANAGEMENT AND CONTROL
Section 9.1 Power and Authority of
General Partner.
Subject to the Consent of the Special Limited Partner or the
consent of
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. If a
General Partner takes action without the
authorization of all the General
Partners then such act, decision, etc.
shall not be deemed a valid action taken
by the General Partners pursuant to this
Agreement. 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 $425,000 in accordance with the
Development Fee Agreement entered into
by and between the Developer and the Partnership on even date herewith. The
Development Fee Agreement provides, in part, that the Development Fee shall
first be paid from available proceeds in accordance with
Section 9.2(b) of this
Agreement and if not paid in full then the
balance of the
Development Fee
will
be paid in accordance with Section 11.1 of
this Agreement.
(b) The Partnership shall utilize the proceeds from the Capital
Contributions paid pursuant to Section 7.2 of this Agreement for costs
associated with the development and construction of the Apartment Housing
including, but not limited to, land costs,
Land Acquisition Fee,
architectural
fees, survey and engineering costs,
financing costs, loan fees, Syndication Fee,
building materials and labor. If any
Capital Contribution proceeds are remaining
after Completion of Construction and all acquisition, development and
construction costs, excluding the Development
Fee, are paid in full,
then the
remainder shall: first be paid to the Developer in
payment of the
Development
Fee; second be used in repayment of any
Operating Loans;
third be paid to
the
General Partner as a reduction of the
General Partner's
Capital Contribution;
and any remaining Capital Contribution proceeds shall be paid to the General
Partner as a Partnership oversight fee.
(c) The
Partnership shall pay to the Management Agent a property
management
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fee for the leasing and management of the
Apartment Housing in an amount in
accordance with the Management Agreement. The term of the Management
Agreement
shall not exceed 1 year, and the execution or renewal of any Management
Agreement shall be subject to the prior
Consent of the Special Limited Partner.
If the Management Agent is an Affiliate of the
General Partner and
there is an
Operating Deficit following the termination of the
Operating Deficit Guarantee
Period or the depletion of the maximum
Operating Deficit amount pursuant to
Section 6.3, whichever occurs first, then 40% of the management fee will be
deferred ("Deferred Management Fees"). Deferred Management Fees, if any,
shall
be paid to the Management Agent in accordance with 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 Apartment Housing under the terms of the
Management Agreement; or, the General
Partner shall dismiss the Management Agent
at the request of the Special Limited
Partner.
(2) The
appointment
of any successor
Management
Agent is subject to
the
Consent of the Special Limited Partner, which may only be sought
after the
General Partner has provided the Special Limited Partner with accurate and
complete disclosure respecting the proposed
Management Agent.
(d) Subject to MHFA approval, the Partnership shall pay to the Limited
Partner an annual Asset Management Fee commencing in 2005 equal to 10% of
Net
Operating Income but in no event less than
$5,000 (the "Minimum Amount") for the
Limited Partner's services in assisting with the
preparation of tax returns and
the reports required in Section 14.2 and Section 14.3 of this
Agreement.
The
Minimum Amount shall be payable in monthly equal installments; provided,
however, that if in any year Net Operating
Income 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
Net Operating
Income, as provided in Section 11.1, or
sufficient Sale or Refinancing Proceeds,
as provided in Section 11.2. The General Partner shall ensure that any
accrued
Asset Management Fee will be reflected in the annual audited financial
statement.
(e) Subject to MHFA approval, the Partnership shall pay to the General
Partner an annual Incentive Management Fee equal to 35% of Net
Operating Income
commencing in 2005 for overseeing the marketing, lease-up and continued
occupancy of the Partnership's apartment units, obtaining and monitoring the
Mortgage Loan, 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 Apartment
Housing and the Partnership, all as required by Article XIV of
this Agreement.
The Partners acknowledge that the Incentive
Management Fee is
being paid as an
inducement to the General Partner to operate the
Partnership
efficiently,
to
maximize occupancy and to increase the Net
Operating Income. The Incentive
Management Fee shall be payable from Net Operating Income in the manner and
priority set forth in Section 11.1 of this Agreement upon completion and
delivery of the annual audit pursuant to
Section 14.2(a) of this Agreement. If
the Incentive Management Fee is not paid in any year it
shall not accrue
for
payment in subsequent years.
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(f) Subject to MHFA approval, the Partnership shall pay to the General
Partner an annual Tax Credit Compliance Fee
equal to 35% of Net Operating Income
commencing in 2005 for the services of the General Partner in ensuring
compliance by the Partnership and the Apartment Housing with all Tax Credit
rules and regulations. The Tax Credit Compliance Fee shall be payable
from Net
Operating Income in the manner and
priority set forth in Section 11.1 of
this
Agreement upon completion and delivery of the
annual audit pursuant to Section
14.2(a) of this Agreement. If the Tax Credit Compliance 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, the General
Partner,
in the Partnership's name and on its
behalf, may:
(a) 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 Accountant or
Management Agent has
received the Consent of
the Special Limited Partner) and attorneys,
on such terms as the General Partner
shall determine within the scope of this
Agreement;
(b) 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;
(c) deposit,
withdraw, invest, pay, retain and distribute the Partnership's
funds in a manner consistent with the
provisions of this Agreement;
(d) execute the
Mortgage; and
(e) 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
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Apartment Housing, no title or right to the
possession and control of the
Apartment Housing 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 avoid a
recapture of Tax Credits thereof on the
part of the former owners.
(d) Any
conveyance
or transfer of title to all or any portion of the
Apartment Housing 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 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) possess
Partnership property, or assign the Partner's right in specific
Partnership property, for other than the
exclusive benefit of the Partnership;
(d) admit a Person as a General Partner except as provided in this
Agreement;
(e) admit a
Person as a Limited
Partner or Special
Limited Partner except
as provided in this Agreement;
(f) violate any
provision of the Mortgage;
(g) cause the Apartment Housing apartment units to be rented to anyone
other than Qualified Tenants;
(h) violate the
Minimum Set-Aside Test or the Rent Restriction Test for the
Apartment Housing;
(i) allow the
Insurance to expire;
(j) permit the
Apartment Housing to be without utility service;
(k) cause any
recapture of the Tax Credits;
(l) 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;
(m) commingle
funds of the Partnership with the funds of another Person; or
(n) cause
the Partnership to fail to make the Mortgage payment if the
Partnership fails to pay the same when due, subject to available funds,
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including funds provided under Section 6.3
or Section 6.4;
(o) cause the
Accountant to fail to issue the reports specified in Sections
14.2(a) and (b) of this Agreement;
(p) take any
action which
requires the Consent of the Special Limited
Partner or the consent of the Limited Partner unless the General Partner has
received said Consent;
(q) allow the
Real Estate Taxes to
be unpaid if the
Partnership fails
to
pay the same when due;
(r) take any
action that would cause a termination of the Partnership;
(s) encumber the
Apartment Housing, except as provided herein;
(t) execute an
assignment for the
benefit of creditors;
or (u) permit the
Partnership to make loans to any
Person.
Section 9.6
Restrictions on Authority of General Partner.
Without
the Consent of the Special
Limited Partner the General Partner
shall not:
(a) sell,
exchange, lease (except in the normal course of business to
Qualified Tenants) or otherwise dispose of
the Apartment Housing;
(b) other than
as permitted by this
Agreement, incur
indebtedness in
the
name of the Partnership other than the
Mortgage, including,
but not limited to,
refinancing, prepaying, or modifying the
Mortgage;
(c) use
Partnership assets,
property or Improvements to secure the debt of
any Partners, their Affiliates, or any
third party;
(d) 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 or the Special
Limited Partner;
(e) contract
away the fiduciary
duty owed to the
Limited Partner and
the
Special Limited Partner at common law;
(f) take any
action which
would cause the Apartment Housing to fail to
qualify, or which would cause a termination or discontinuance of the
qualification of the Apartment Housing, 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;
(g) 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 approved by the Special Limited
Partner, as provided in Section 14.3(i)
hereof;
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(h) cause the
merger or other reorganization of the Partnership;
(i) dissolve the
Partnership,
or sell or dispose of
all or
substantially
all of the Partnership's assets;
(j) acquire any
real or personal
property (tangible or intangible) in
addition to the Apartment Housing the aggregate value of which shall exceed
$10,000 (other than easement or similar
rights necessary or
appropriate for the
operation of the Apartment Housing);
(k) become personally liable on or in respect of, or guarantee, the
Mortgage or any other indebtedness of the
Partnership or any Person;
(l) loan any
money on behalf of the Partnership or pay any salary, fees or
other compensation to a General Partner or any Affiliate
thereof, except as
authorized by Section 9.2 and Section 9.9
hereof or specifically provided for in
this Agreement;
(m) substitute the Accountant, Construction Inspector, Contractor or
Management Agent, as named herein, or terminate, amend or modify the
Construction Contract or any other Project Document, or grant any material
waiver or consent thereunder;
(n) change
the nature of the business of the Partnership or cause the
Partnership to redeem or repurchase all or any portion of the Interest of a
Partner;
(o) cause the
Partnership to convert
the Apartment Housing
to cooperative
or condominium ownership;
(p) cause or
permit the Partnership to make loans to the General Partner or
any Affiliate;
(q) bring or
defend, pay, collect,
compromise, arbitrate,
resort to legal
action or otherwise adjust claims or
demands of or against the Partnership;
(r) reduce the
amount of a
construction budget
line item (other than
the
construction contingency) to provide funds for an overage in another
construction budget line item, agree or consent
to any changes in the Plans and
Specifications, to any change orders which
cumulatively exceed $5,000, or to any
of the terms and provisions of the
Construction Contract;
(s) cause any
funds to be paid to the General Partner or its Affiliates for
laundry service, cable hook-up, telephone
connection, computer access, satellite
connection, compliance monitoring, initial
rental set-up fee or similar service
or fee;
(t) on behalf
of the Partnership, file or cause to be filed a
voluntary
petition in bankruptcy under the Federal
Bankruptcy Code, or file or cause to be
filed a petition or answer seeking any
reorganization, arrangement, composition,
readjustment, liquidation, dissolution or
similar relief under any statute, law
or rule;
(u) settle any
audit with the
Internal Revenue Service concerning the
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<PAGE>
adjustment or readjustment of any Partnership tax item, extend any statute of
limitations, or initiate or settle any judicial
review or action concerning the
amount or character of any Partnership tax
item; or
(v) make, amend
or revoke any tax election;
(w) confess a
judgment against the Partnership;
(x) pay any
real estate commission for the sale or refinancing of the
Apartment Housing; or
(y) directly or
indirectly transfer control of the General Partner.
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 Insurance from an Insurance Company;
(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;
(e) have a
fiduciary responsibility to not use or permit another to use
Partnership funds or assets in any manner except for the benefit of the
Partnership;
(f) use its best
efforts so that all
requirements
shall be met which
are
reasonably necessary to obtain or achieve (1) compliance with the Minimum
Set-Aside Test, the Rent Restriction Test,
and any other requirements necessary
for the Apartment Housing to initially
qualify, and to
continue to qualify, for
LIHTC; (2) issuance of all necessary
certificates of
occupancy, including
all
governmental approvals required to permit occupancy of all of the apartment
units in the Apartment Housing; and (3) compliance with all provisions of the
Project Documents;
(g) make
inspections of the Apartment Housing and assure that the
Apartment
Housing is 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;
(h) cause the
Partnership to 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
34
<PAGE>
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;
(i) cause the
Partnership to pay,
before the same
becomes due or expires,
the Insurance premium and utilities for the
Apartment Housing;
(j) permit,
and cause the
Management Agent to permit, the Special Limited
Partner and its representatives: (1) to
have access to the Apartment Housing and
personnel employed by the Partnership and by
the Management Agent
at all times
during normal business hours after reasonable notice; (2) to examine all
agreements, LIHTC compliance data and Plans
and Specifications;
and (3) to make
copies thereof;
(k) exercise
good faith in all
activities
relating to the
conduct of the
business of the Partnership, including the development, operation and
maintenance of the Apartment Housing, and shall take no action with
respect to
the business and property of the
Partnership which is not reasonably related to
the achievement of the purpose of the
Partnership;
(l) make any
Capital Contributions,
advances or loans
required to be made
by the General Partner under the terms of
this Agreement;
(m) cause the
Partnership to
establish and maintain all reserves required
to be established and maintained under the
terms of this Agreement;
(n) cause the
Partnership to pay, before the same becomes due, the Mortgage
payment, subject to available funds,
including funds provided under Section 6.3
or Section 6.4;
(o) cause the
Partnership
to pay, before the same becomes due, the Real
Estate Taxes;
(p) cause the
Management
Agent to manage the
Apartment Housing in
such a
manner that the Apartment Housing will be
eligible to receive LIHTC with respect
to 100% of the apartment units in the Apartment Housing. To that end, the
General Partner agrees, without limitation:
(1) to make all
elections requested
by the Special Limited Partner under Section 42 of the Code to allow the
Partnership or its Partners to claim the
Tax Credit; (2) to
file Form 8609 with
respect to the Apartment Housing as required, for at least the duration of
the
Compliance Period; (3) to operate the
Apartment Housing and cause the Management
Agent to manage the Apartment Housing 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; (4) to make all
certifications
required by Section 42(l) of
the Code, as amended, or any successor
thereto; and (5) to operate the Apartment
Housing and cause the Management Agent to
manage the Apartment
Housing so as to
comply with all other Tax Credit
Conditions;
(q) cause the Accountant to issue the
information
required in
accordance
with Sections 14.2(a) and (b);
(r) perform
such other acts as may
be expressly
required of it under
the
35
<PAGE>
terms of this Agreement;
(s) maintain on its staff during construction and rent-up a trained and
experienced project manager who is responsible for the development and
construction of the Improvements, and responsible for obtaining
Completion of
Construction. In lieu of this employee, or if the project manager position
remains vacant for 21 days, the General Partner shall retain the services
of a
construction management firm, which firm shall be pre-approved
by the Special
Limited Partner; and
(t) cause at
least 50% of the
aggregate basis of the land and buildings
comprising the Apartment Housing for purposes of Code
Section 42(h)(4) to
be
financed with the proceeds of the
Tax-Exempt Bonds.
Section 9.8
Obligations to Repair and Rebuild Apartment Housing.
With the approval of any lender, if such approval is required,
any
Insurance proceeds received by the
Partnership due to fire or other casualty
affecting the Apartment Housing will be
utilized to repair and rebuild the
Apartment Housing in satisfaction of the
conditions contained in Section
42(j)(4) of the Code and to the extent
required by any lender. Any such proceeds
received in respect of such event occurring
after the Compliance Period shall be
so utilized or, if permitted by the Project
Documents and with the Consent of
the Special Limited Partner, shall be
treated as Sale or Refinancing Proceeds.
Section 9.9
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 from
the Partnership's Cash Expenses.
The General Partner
shall not be reimbursed if
the General Partner is obligated to pay the
same as an Operating
Deficit during
the Operating Deficit Guarantee Period, or subject to the limitations on
the
reimbursement of such expenses set forth herein in which case the General
Partner shall be responsible for payment of the expense.
For purposes of
this
Section, 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 cost of the goods or services
must be no greater and
preferably
less than
the cost of the same goods or services from
non-Affiliated vendors, contractors,
or managers in the market area, 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:
(1) no such
reimbursement
shall be permitted for services for which the
36
<PAGE>
General Partner or any of its Affiliates is
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 General
Partner or any
Affiliate of the General Partner. For the purposes of this Section
9.9(b)(2),
"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: (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 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.
Section 9.10 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 9.9 and all expenses which are
unrelated to the business of the
Partnership.
Section 9.11 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 Apartment Housing.
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, incomes or proceeds by
virtue of such other ventures or
activities of any Partner.
Section 9.12 Covenants,
Representations and Warranties.
The General Partner covenants, represents and warrants that the
following are presently true, will be true
at the time of each Capital
Contribution payment made by the Limited
Partner 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 and the Special 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
37
<PAGE>
violation of any provisions thereof.
(c) Improvements will be completed in a timely and
worker-like manner
in
accordance with all applicable requirements of all appropriate governmental
entities and the Plans and Specifications
of the Apartment Housing.
(d) The
Apartment Housing is
being operated in
accordance with
standards
and procedures that are prudent and customary for the operation of
properties
similar to the Apartment Housing.
(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 Apartment Housing and is not in violation of any zoning,
environmental or similar regulations
applicable to the Apartment Housing.
(g) All
appropriate publ
