AMENDED AND RESTATED AGREEMENT
OF
LIMITED PARTNERSHIP
OF
MEMPHIS 2004.0 LP
DATED AS OF AUGUST 30, 2005
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TABLE OF CONTENTS
PAGE
Article I.
DEFINITIONS.........................................................1
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...........................................................16
Section 4.1 Purpose of the
Partnership.....................................16
Section 4.2 Authority of the
Partnership...................................16
Article V.
TERM...............................................................16
Article VI. GENERAL PARTNER'S CONTRIBUTIONS
AND LOANS.........................16
Section 6.1 Capital
Contribution of General Partner........................16
Section 6.2 Construction
Obligations.......................................17
Section 6.3 Operating
Obligations..........................................17
Section 6.4 Other General
Partner Loans....................................18
Article VII. CAPITAL CONTRIBUTIONS OF
LIMITED PARTNER AND
SPECIAL LIMITED
PARTNER..........................................................18
Section 7.1 Original Limited
Partner.......................................18
Section 7.2 Capital
Contribution of Limited Partner and Special Limited
Partner........................................................18
Section 7.3 Repurchase of
Limited Partner's and Special Limited Partner's
Interests......................................................22
Section 7.4 Adjustment of
Capital Contributions............................23
Section 7.5 Return of
Capital Contribution.................................25
Section 7.6 Liability of
Limited Partner and Special Limited Partner.......25
Article VIII. WORKING CAPITAL AND
RESERVES....................................26
Section 8.1 Replacement and
Reserve Account................................26
Section 8.2 Intentionally
omitted..........................................26
Section 8.3 Tax and
Insurance Account......................................26
Article IX. MANAGEMENT AND
CONTROL............................................26
Section 9.1 Power and
Authority of General Partner.........................26
Section 9.2 Payments to the
General Partners and Others....................27
Section 9.3 Specific Powers
of the General Partner.........................28
Section 9.4 Authority
Requirements.........................................29
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Section 9.5 Limitations on
General Partner's Power and Authority...........29
Section 9.6 Restrictions on
Authority of General Partner...................31
Section 9.7 Duties of
General Partner......................................33
Section 9.8 Obligations to
Repair and Rebuild Project......................35
Section 9.9 Partnership
Expenses...........................................35
Section 9.10 General Partner
Expenses......................................36
Section 9.11 Other Business
of Partners....................................36
Section 9.12 Covenants,
Representations and Warranties.....................36
Section 9.13 Indemnification
of the Partnership and the Limited Partners...40
Section 9.14 Option to
Acquire.............................................40
Section 9.15 Right of First
Refusal........................................42
Article X. ALLOCATIONS OF INCOME, LOSSES
AND CREDITS..........................42
Section 10.1
General.......................................................42
Section 10.2 Allocations
From Sale or Refinancing..........................43
Section 10.3 Special
Allocations...........................................43
Section 10.4 Curative
Allocations..........................................46
Section 10.5 Other
Allocation Rules........................................46
Section 10.6 Tax
Allocations: Code Section 704(c)..........................47
Section 10.7 Allocation
Among Limited Partners.............................48
Section 10.8 Allocation
Among General Partners.............................48
Section 10.9 Modification of
Allocations...................................48
Article XI.
DISTRIBUTION......................................................49
Section 11.1 Distribution of
Net Operating Income..........................49
Section 11.2 Distribution of
Sale or Refinancing Proceeds..................49
Article XII. TRANSFERS OF LIMITED PARTNER'S
AND SPECIAL LIMITED PARTNER'S
INTERESTS IN THE
PARTNERSHIP.....................................50
Section 12.1 Assignment of
Interests.......................................50
Section 12.2 Effective Date
of Transfer....................................51
Section 12.3 Invalid
Assignment............................................51
Section 12.4 Assignee's
Rights to Allocations and Distributions............51
Section 12.5 Substitution of
Assignee as Limited Partner or Special Limited
Partner.......................................................51
Section 12.6 Death,
Bankruptcy, Incompetency, etc., of a Limited Partner...52
Article XIII. WITHDRAWAL, REMOVAL AND
REPLACEMENT OF GENERAL PARTNER..........52
Section 13.1 Withdrawal of
General Partner.................................52
Section 13.2 Removal of
General Partner....................................52
Section 13.3 Effects of a
Withdrawal.......................................54
Section 13.4 Successor
General Partner.....................................56
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Section 13.5 Admission of
Additional or Successor General Partner..........57
Section 13.6 Transfer of
Interest..........................................57
Section 13.7 No Goodwill
Value.............................................57
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............................................58
Section 14.3 Other
Reports.................................................59
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....................................62
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........................................63
Section 15.4 Deferral of
Liquidation.......................................64
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...........................................69
Section 17.11 Tax Matters
Partner..........................................69
Section 17.12 Expiration of
Compliance Period..............................70
Section 17.13 Number and
Gender............................................70
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Section 17.14 Entire
Agreement.............................................71
Section 17.15 Section 17.15
Governing Law..................................71
Section 17.16 Attorney's
Fees..............................................71
Section 17.17 Receipt of
Correspondence....................................71
Section 17.18 Security
Interest and Right of Set-Off.......................71
Number of Residential
Buildings...............................................11
Number of Total
Units.........................................................11
Number of Market
Units........................................................11
Number of Exempt Employee
Units...............................................11
EXHIBIT A Legal Description
EXHIBIT B Form of Legal Opinion
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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AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP OF
MEMPHIS 2004.0 LP
This Amended and Restated Agreement of Limited Partnership is
being
entered into effective as of the date
written below by and between Memphis 2004
LLC, a Tennessee limited liability company,
(the "General Partner"), United
Development Corporation, as the withdrawing
limited partner (the "Original
Limited Partner"), WNC Housing Tax Credit
Fund VI Series 12 L.P., a California
limited partnership, as the limited partner
(the "Limited Partner"), and WNC
Housing, L.P., a California limited
partnership, as the special limited partner
(the "Special Limited Partner.
RECITALS
WHEREAS, Memphis 2004.0 LP, a Tennessee limited partnership
(the
"Partnership") recorded a certificate of
limited partnership with the Tennessee
Secretary of State on November 16, 2004. A
limited partnership agreement dated
November 16, 2002 was entered into by and
between the General Partner and the
Original Limited Partner (the "Original
Partnership Agreement").
WHEREAS, the Partners desire to enter into this Agreement to
provide
for, among other things, (i) the
continuation of the Partnership, (ii) to admit
the Limited Partner and the Special Limited
Partner to the Partnership and allow
the Original Limited Partner to withdraw,
(iii) a restatement of the respective
rights, obligations and interests of the
Partners to each other and to the
Partnership, and (iv) certain other
matters.
WHEREAS, the Partners desire hereby to amend and restate the
Amended
and Restated Agreement.
NOW, THEREFORE, in consideration of their mutual agreements herein
set
forth, the Partners hereby agree to amend
and restate the Amended and Restated
Agreement in its entirety to provide as
follows:
ARTICLE I.
DEFINITIONS
"Accountant" shall mean Novogradac & Co., LLP, 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.
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"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 Amended
and
Restated Agreement of Limited Partnership,
as it may be amended from time to
time. Words such as "herein,"
"hereinafter," "hereof," "hereto," "hereby" and
"hereunder," when used with reference to
this Agreement, refers to this
Agreement as a whole, unless the context
otherwise requires,
"Architect of Record" shall mean Marshall Colvin. The General
Partner,
on behalf of the Partnership, shall enter
into a contract with the Architect of
Record to perform certain duties and
responsibilities including, but not limited
to: designing the Improvements; preparing
the construction blueprints, preparing
the property specifications manual;
contracting for administrative services;
completing the close-out procedures;
inspecting for and overseeing resolution of
the Contractor's final punch list;
receiving and approving operations and
maintenance manuals; and collecting,
reviewing, approving and forwarding to the
Partnership all product, material and
construction warranties.
"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 monthly 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.
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"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
which approval shall not be unreasonably
withheld. 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 amount 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 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
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.
3
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"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, 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.
Construction Loan interest and
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 and construction
interest.
"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
Construction Loan, 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.
"Completion of Construction" shall mean the date the
Partnership
receives the required certificate of
occupancy (or the local equivalent) for all
144 single family homes, 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 units in the Project. 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 such filed liens,
other than the Construction Loan, or
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 November 29, 2006.
4
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"Compliance Period" shall mean the period set forth in Section
42(i)(1)
of the Code, as amended, or any successor
statute.
"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
May
15, 2005 in the amount of $9,241,209,
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
Construction Monitoring Agreement entered
as of even date herewith.
"Construction Lender" shall mean a lender approved by the
Special
Limited Partner or any successor
thereto.
"Construction Loan" shall mean the loan obtained from
Construction
Lender in the principal amount of
$6,000,000 at an interest rate equal to the
Construction Lender Base Rate plus 2% per
annum with a maturity date of March 1,
2007 to provide funds for the acquisition,
renovation and/or construction and
development of the Project. Where the
context admits, the term "Construction
Loan" shall include any deed, deed of
trust, note, security agreement,
assumption agreement or other instrument
executed by, or on behalf of, the
Partnership or General Partner in
connection with the Construction Loan as
required by the Construction Lender.
"Contractor" shall
mean Harold E. Buehler, Sr. dba Buehler Affordable
Homes. 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
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
5
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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 United Development Corporation.
"Development Budget" shall mean the agreed upon cost of developing
the
Project 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 Project in
accordance with the Development Fee
Agreement between the Partnership and the
Developer dated the even date herewith and
incorporated herein by this
reference. 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 Memphis 2004 LLC, and such
other
Persons as are admitted to the Partnership
as additional or substitute General
Partners pursuant to this 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.
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"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 Harold E. Buehler, Sr. and Jo Ellen
Buehler.
"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
7
<PAGE>
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 new construction of 144 single
family
homes 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.
"In-Balance" shall mean, at any time when calculated, when the
cumulative amount of the undisbursed
Construction Loan and the undisbursed
Capital Contributions of the Limited
Partner and Special Limited Partner
required to be paid-in through and
including the Completion of Construction 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; (b) all soft costs in the
development of the Project and
Improvements, including but not limited to,
architect fees, land acquisition,
impact fees and costs of marketing,
maintenance and leasing of the Project
units; and (c) all interest and all other
sums accruing or payable under the
Construction Loan documents. In making a
determination that the financing is
In-Balance, the Special Limited Partner
will also consider whether the
undisbursed Capital Contributions of the
Limited Partner and Special Limited
Partner, the Mortgage and other sources of
permanent financing (but not Cash
Receipts) are adequate to retire the
Construction Loan at the earlier of the
time of Mortgage closing and funding, or
maturity of the Construction Loan.
"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 shall be computed by reference to
the Gross Asset Value of the property
8
<PAGE>
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 Project 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 Project 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;
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<PAGE>
(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;
(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 $1,000; 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.
"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 $8,640 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 Series
12,
L.P., 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 Project and which is on-site
at the Project. The initial Management
Agent shall be [Buehler Enterprises,
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 ___% of gross revenues. The
General Partner, on behalf of the
10
<PAGE>
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
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 units in the Project
to be occupied by tenants whose
incomes are equal to or less than the
required percentage of the area median
gross income. Notwithstanding the
foregoing, the General Partner has agreed that
20% of the units will be rented to tenants
with incomes of 50% or less of area
median income, adjusted for family size and
80% of the units will be rented to
tenants with incomes of 60% or less of area
median income, adjusted for family
size.
"Mortgage" or "Mortgage Loan" shall mean the permanent
nonrecourse
financing wherein the Partnership promises
to pay a lender a principal sum plus
interest on the principal per annum. 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 and the income and
expense statements for the Partnership
showing Cash Receipts and Cash Expenses
for each and every month since issuance of
the certificate of occupancy. Based
on the draft Mortgage documents and the
income and expense statements, if the
Debt Service Coverage of those Mortgage
Loans requiring an amortized monthly
principal and interest payment falls below
1.15 based on then current Cash
Expenses and Cash Receipts then the General
Partner shall adjust the principal
loan amount and close on a Mortgage which
will produce a 1.15 Debt Service
Coverage. The Mortgage funds shall be used
to retire the Construction Loan and
if there are any funds remaining the
Mortgage funds shall be used to retire any
outstanding hard construction costs
including labor and materials.
Notwithstanding the foregoing, if the
interest rate at the time of closing the
Mortgage is less than the amount stated,
the General Partner shall not increase
the principal amount of the Mortgage even
if the Debt Service Coverage remains
at or above 1.15.
"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).
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<PAGE>
"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 the first unit in the Project is
available for its intended use and
ending three years following the
achievement of three consecutive months of
Breakeven Operations. The Operating Deficit
Guarantee Period will not expire
unless the Partnership has achieved
Completion of Construction of the Project.
"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 United Development
Corporation.
"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
all of the following have occurred: (a) the
Construction Loan shall have been
repaid in full; (b) the Mortgage shall have
closed and funded; and (c)
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.
12
<PAGE>
"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" shall mean the 144 single family homes to be built on
scattered lots in qualified census tracts
in Memphis, Shelby County, Tennessee,
as more fully described in Exhibit A
attached hereto and incorporated herein by
this reference.
"Project Documents" shall mean all documents relating to the
Construction Loan, Mortgage Loan,
Construction Contract, Title Policy and
Partnership Agreement. It shall also
include all documents required by any
governmental agency having jurisdiction
over the Project in connection with the
development, construction and financing of
the Project, including but not
limited to, the approved Plans and
Specifications for the development and
construction of the Project.
"Projected Annual Tax Credits" shall mean LIHTC in the amount
of
$379,091 for 2007, $699,860 for 2008
through 2016, and $320,769 for 2017, 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 $7,000,000 to
be available to the Partnership.
"Projected Tax Credits" shall mean LIHTC in the aggregate amount
of
$7,000,000.
"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 Project
eligible for LIHTC.
"Real Estate Taxes" shall mean the sum required to be paid annually
by
the Partnership to the tax assessor, school
district or similar representative,
of Memphis/Shelby County, Tennessee for
real estate taxes assessed against the
Project. The Real Estate Taxes are payable
as follows: City of Memphis real
property taxes due date is June 1 and
Shelby County real property taxes due date
is October 1.
"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 units in
the Project 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 Project or any part
thereof, a claim against a title insurance
13
<PAGE>
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 Project.
"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 Tennessee.
"State Tax Credit Agency" shall mean the state agency of
Tennessee
which has the responsibility and authority
to administer the LIHTC program in
Tennessee.
"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.
"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 Project; 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. 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.
"Title Policy" shall mean the policy of insurance covering the
fee
simple title to the Project 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, if available. The Title Policy
14
<PAGE>
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 Construction
Loan 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."
"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 any of its
principals, 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 "Memphis 2004.0 LP."
ARTICLE III.
PRINCIPAL EXECUTIVE OFFICE/AGENT FOR SERVICE
Section 3.1 Principal Executive Office.
The principal executive office of the Partnership is located at
2531
Broad Avenue, Memphis, TN 38112 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 E. Buehler, Sr. , whose address is 2531 Broad Avenue,
Memphis,
Tennessee 38112.
15
<PAGE>
ARTICLE IV.
PURPOSE
Section 4.1 Purpose of the Partnership.
The purpose of the Partnership is to acquire, construct, own
and
operate the Project in order to provide, in
part, Tax Credits to the Partners in
accordance with the provisions of the Code
and the Treasury Regulations
applicable to LIHTC and to sell the Project
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.
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: acquire
ownership of the real property referred to
in Exhibit A attached hereto;
construct, renovate, rehabilitate, and own
the Project in accordance with the
Project Documents; 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; maintain and operate the Project,
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 Project during its rent-up
and after its rent-up period in accordance
with this Agreement; enter into the
Construction Loan and Mortgage; rent
dwelling units in the Project from time to
time, in accordance with the provisions of
the Code applicable to LIHTC; and do
any and all other acts and things necessary
or proper in accordance with this
Agreement.
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 Tennessee, and shall
continue until December 31, 2052
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.
16
<PAGE>
Section 6.2 Construction Obligations.
The General Partner hereby guarantees lien free Completion of
Construction of the Project on or before
the Completion Date ("Completion
Date"). The General Partner further
guarantees that the development of the
Project and Improvements will not exceed a
total development cost of $11,281,560
("Development Budget"), which includes all
hard and soft costs incident to the
acquisition, development and construction
of the Project in accordance with the
Development Budget and the Project
Documents. If the actual hard costs and soft
costs of developing and constructing the
Project 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 or the Construction
Lender, in good faith, determines
that the actual construction and
development costs exceed the 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 Construction Lender's
construction account, or similar
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 or Construction
Lender, 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 the
Construction Lender or this Agreement, the
General Partner shall advance and
deposit into the Construction Lender's
construction account, or similar
disbursement account, the amount requested
by the Special Limited Partner or
Construction Lender to 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 be repayable to the
General Partner as an interest free loan.
Section 6.3 Operating Obligations.
From the date the first unit in the Project 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 as an Operating Loan
pursuant to this Section 6.3, which
funds shall be repayable, shall not change
the Interest of any Partner and shall
not 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 $1,209,000, 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 the
available Net Operating Income or
Sale or Refinancing Proceeds in accordance
with Article XI of this Agreement.
17
<PAGE>
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 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 $5,249,475, as may be adjusted
in accordance with Section 7.4 of this
Agreement, in cash on the later of the
Limited Partner's receipt and approval of
the following documents.
(a) $150,000
(which includes the Special Limited Partner's Capital
Contribution of
$525 and a pre-development loan in the amount of
$135,000)
shall be payable
upon the Limited
Partner's receipt and approval of the
following
documents:
(i) payment of $15,000 for costs and expenses incurred in connection
with the Limited
Partner's or its
Affiliate's
underwriting of the Project
and
Improvements.
(ii) an executed Development, Construction and Operating Budget
Agreement;
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(iii) an executed Construction Completion, Operating Deficit and Tax
Credit Guaranty
Agreement; and
(iv) an executed Development Fee Agreement and Development Fee
Guaranty
Agreement.
(b) $1,950,105 shall be payable upon the Limited Partner's receipt and
approval of the
following documents:
(i) a legal opinion
in a form substantially similar to the form of
opinion
attached hereto as Exhibit B and incorporated herein by this
reference;
(ii) a fully executed Certification and Agreement in the form
attached
hereto as
Exhibit C and incorporated herein by this reference;
(iii) a copy of the Title Policy;
(iv) Insurance required during construction;
(v) a copy of the recorded grant deed (warranty deed);
(vi) an executed
commitment from the
Mortgage lender to
provide the
Mortgage;
(vii) a fully executed Construction Loan;
(viii) the construction draw disbursement procedure; and
(ix) an audited cost
certification
together with the Accountant's
workpapers
verifying that the Partnership has expended the requisite 10%
of
reasonably
expected cost basis to meet the carryover
test provisions of
Code Section
42.
Notwithstanding the foregoing, the second Capital Contribution
payment
will
be paid in installments based upon approved draw requests in
accordance with
the Construction Monitoring Agreement.
(c) $2,624,475 shall be payable upon the Limited Partner's receipt and
approval of the
following documents:
(i) the Construction
Inspector's
certification of 50%
completion of
the total
construction;
(ii) any documents
previously not provided to the Limited Partner but
required
pursuant to this Section 7.2 and Sections 14.3(a) and (b);
(iii) copies of all lien releases (partial or final, as applicable)
from the
Contractor and subcontractors; and
19
<PAGE>
(iv) a determination by the Special Limited Partner that the
construction and
financing are In-Balance.
(v) evidence that the General Partner has purchased and
implemented a
professional
property management software system that will include, but not
be limited to, a
rent roll, accounts payable, and general ledger system.
(d) $499,895 shall be payable upon the Limited Partner's receipt and
approval of the
following documents:
(i) a certificate
of occupancy (or equivalent evidence of local
occupancy
approval if a permanent certificate is not available) on
all the
units in the
Project confirming
the units are being
placed in service for
their intended
purpose;
(ii) 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;
(iii) 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;
(iv) Insurance required during operations;
(v) any documents
previously not provided to the Limited Partner but
required
pursuant to this Section 7.2 and Sections 14.3(a) and (b);
(vi) copies of all lien releases (partial or final, as applicable)
from the
Contractor and subcontractors; and
(vii) a determination
by the Special Limited
Partner that the amount
of the remaining
Capital Contributions
and other financing funds are equal
to or exceed the
difference between the
Construction Loan and
Mortgage in
order to retire
the Construction Loan.
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.
(viii) Mortgage Loan documents signed and the Mortgage funded;
(ix) 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 Project
during the time
period since the
issuance of the Title
Policy referenced
above in Section
7.2(a);
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(x) 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;
(xi) the current
rent roll evidencing a minimum 90% occupancy by
Qualified
Tenants for 90
consecutive days immediately prior to funding and
100% LIHTC
qualified units;
(xii) 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. Approval of the balance of the tenant files is
withheld for a
subsequent Capital Contribution payment;
(xiii) Completion of Construction;
(xiv) a construction
closeout binder, 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;
(xv) an audited
construction cost
certification
that includes an
itemization of
development, acquisition, and construction or rehabilitation
costs of the
Project, the Land Acquisition Fee, the Syndication Fee and the
eligible basis
and applicable
percentage of each
building of the Project;
and
(xvi) Debt
Service Coverage of 1.15 for 90 consecutive days
immediately
prior to funding.
(xvii) a
copy of the recorded declaration of restrictive
covenants/extended use
agreement entered into
between the Partnership and
the State Tax
Credit Agency;
(xviii) 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;
(xix) a fully signed Internal Revenue Code Form 8609, or any
successor
form;
(xx) 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;
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<PAGE>
(xxi) the audited Partnership financial statements required by
Section
14.2 for the
year the Project is placed-in-service ; and
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.
(e) $25,000
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 a
Capital Contribution payment until it has received all the
initial
tenant files and the same have been reviewed, corrected, and
approved.
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 Project to be placed in service within 6 months of the
Completion
Date;
(b) achieve 100%
occupancy of the
Project by Qualified
Tenants by January
1, 2008;
(c) obtain
Permanent Mortgage Commencement by April 1, 2008;
(d) at any time
before the
Completion
Date, prevent a foreclosure, or
abandonment
of the Project or fail to lift any order restricting
construction of
the Project;
(e) prior to
completion
of the Improvements, prevent the Construction
Lender from
sending a notice of default under the Construction Loan;
(f) replace a withdrawn Mortgage Loan commitment with a comparable
commitment
acceptable to the
Special Limited
Partner within a
reasonable
period of
time;
(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 commence in
accordance with the Code; or
22
<PAGE>
(h) obtain a
carryover allocation,
within the meaning of Section 42 of the
Code, from the
State Tax Credit Agency on or before the due date.
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
$0.75
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 $7,000,000 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 75% 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 Project's
units to Qualified Tenants throughout the Compliance
Period.
If, at the end
of any calendar year following the year in which the Project
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
and anticipated annual Tax Credit. The amount paid by the
General
Partner pursuant to this Section will be deemed to be a Capital
23
<PAGE>
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 $379,091 in 2007 and $699,860
in 2008. In the
event the total of the 2007 and 2008 Actual Tax Credits are
less than the
sum of such 2007 and 2008 Projected Annual Tax Credits then
the Limited
Partner's Capital
Contribution
shall be reduced by an
amount
equal to 75%
times the difference
between the sum of the Projected Annual
Tax Credits for 2007 and 2008 and the sum of
the Actual Tax Credits
for
2007 and 2008.
If the sum of the 2007
and 2008 Actual Tax Credits are less
than the sum of
the 2007 and 2008
Projected Annual Tax
Credits 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
Project
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 Project 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 Project 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
Project, 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
24
<PAGE>
Special
Limited Partner are entitled under the
terms of this Section 7.4,
the General Partner shall pay to the Limited Partner 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). 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.
25
<PAGE>
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
cause the Partnership to deposit thereinto
an annual amount equal to $300 per
residential unit per year for the purpose
of capital improvements. Said deposit
shall be made monthly in equal
installments. The Replacement and Reserve Account
shall require the joint signature of the
Special Limited Partner for any
withdrawals in excess of $5,000 per
occurrence or $15,000 in aggregate per
calendar year. Except with respect to a
sale of the Project to the General
Partner or its designee, any balance
remaining in the account at the time of a
sale of the Project shall be allocated and
distributed equally between the
General Partner and the Limited Partner.
After the mandatory Compliance Period
and upon re-purchase of the Limited
Partners' interests, the replacement reserve
shall be transferred to the General Partner
or his designee with the Partnership
and shall not be included as part of equity
for purposes of the calculation of
the re-purchase price.
Section 8.2 Intentionally omitted.
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
of the Partnership 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 installment of real estate taxes based
on improved land. Except with
respect to a sale of the Project to the
General Partner or its designee, any
balance remaining in the account at the
time of a sale of the Project shall be
allocated and distributed equally between
the General Partner and the Limited
Partner. Any amount remaining after the
mandatory Compliance Period and upon
repurchase of the Limited Partner Interests
shall be transferred to the General
Partner or its designee with the
Partnership and shall not be included as part
of equity. The Partnership is required to
pay real estate taxes each year within
30 days after receipt of notice thereof
from government entity assessing such
real estate taxes.
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
26
<PAGE>
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
$975,000 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 Project 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 and
the Construction
Loan retired, then the
remainder shall: first
be paid to
the Developer in payment of the Development Fee; second 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
fee for the leasing and management of the Project in an amount in
accordance
with the Management Agreement. The term of the Management
Agreement shall
not exceed 1 year, and renewal of the Management Agreement
shall be
automatic provided there is no material default by the General
Partner
hereunder
or by the Management Agent under the Management
Agreement.
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.
27
<PAGE>
(i) The General
Partner shall
dismiss the
Management
Agent at the
request of the
Special Limited
Partner if the
Management
Agent fails to
provide or
inaccurately provides the information requested in Sections
14.2
or 14.3 of this
Agreement or for other cause.
(ii) The appointment of any successor Management Agent is subject to
the Consent of the
Special Limited Partner which consent shall not be
unreasonably
withheld, 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) The
Partnership
shall pay to the
Limited Partner an annual Asset
Management
Fee commencing in 2007 equal to $9,000, increasing by 3%
annually,
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 Asset Management Fee of $9,000 shall be
payable in
monthly equal installments; provided, however, that if in any
year Net
Operating Income is insufficient to pay the full $9,000, 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) The
Partnership shall pay to the General Partner through the
Compliance
Period an annual
Incentive Management Fee equal to 40% of Net
Operating
Income
commencing
in 2007 for
overseeing
the marketing, lease-up and
continued
occupancy of the
Partnership's 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
Project 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.
The Incentive
Management
Fee shall be paid at the end of each
calendar quarter payable from Net
Operating
Income in the manner
and priority
set forth in Section
11.1 of
this Agreement.
If the Incentive
Management Fee is not paid in any year it
shall not accrue
for payment in subsequent years.
(f) The Partnership
shall pay to the General Partner through the Compliance
Period an annual
Tax Credit Compliance
Fee equal to 40% of
Net Operating
Income
commencing
in 2007 for the
services of the General Partner in
ensuring
compliance by the
Partnership and the Project with all Tax Credit
rules and
regulations. The Tax
Credit Compliance Fee
shall be paid at the
end of each
calendar quarter payable from Net Operating Income in the
manner and
priority set forth in Section 11.1 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:
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<PAGE>
(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
Construction Loan and 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 Project,
no title or
right to the possession and control of the Project and no right
to collect rent
therefrom shall pass
to any Person who is not, or does not
become, bound by
the Tax Credit Conditions in a manner that, in the opinion
of counsel to
the Partnership,
would 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
Project required
or permitted under this Agreement shall in all respects be
subject to the
Tax Credit Conditions and all conditions, approvals or other
requirements
of the rules and regulations of any authority applicable
thereto.
Section 9.5 Limitations on General Partner's
Power and Authority.
Notwithstanding the provisions of this Article IX, the General
Partner
shall not:
29
<PAGE>
(a) except as required by Section 9.4, act in contravention of this
Agreement;
(b) act in any
manner which would make it impossible to carry on the
ordinary
business of the Partnership;
(c) confess a
judgment against the Partnership;
(d) possess
Partnership property, or assign the Partner's right in specific
Partnership
property, for other than the exclusive benefit of the
Partnership;
(e) admit a Person as a General Partner except as provided in this
Agreement;
(f) directly or
indirectly transfer control of the General Partner;
(g) admit a
Person as a Limited
Partner or Special
Limited Partner except
as provided in
this Agreement;
(h) violate any
provision of the Mortgage;
(i) cause the
Project units to be rented to anyone
other than
Qualified
Tenants;
(j) violate the
Minimum Set-Aside Test or the Rent Restriction Test for the
Project;
(k) allow the
Insurance to expire;
(l) permit the
Project to be without
utility service except when caused by
failure of the
utility company to provide such services to the Project;
(m) cause any
recapture of the Tax Credits;
(n) 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;
(o) commingle
funds of the Partnership with the funds of another Person;
(p) fail to
cause the Partnership to make the Mortgage payment if the
Partnership
fails to pay the same
when due, subject to
available funds,
including funds
provided under Section 6.3 or Section 6.4;
(q) fail to
cause the Accountant to issue the reports specified in Sections
14.2(a) and (b)
of this Agreement;
(r) 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;
30
<PAGE>
(s) allow the
Real Estate Taxes to
be unpaid if the
Partnership fails
to
pay the same
when due;
(t) pay any
real estate commission for the sale or refinancing of the
Project;
(u) take any
action that would cause a termination of the Partnership;
(v) encumber the
Project, except as provided herein;
(w) execute an
assignment for the benefit of creditors; or
(x) 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 Project;
(b) incur indebtedness in the name of the Partnership other than the
Construction
Loan and Mortgage, including, but not limited to, refinancing,
prepaying, or
modifying the Construction Loan or 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 Project to
fail to qualify,
or
which would
cause a termination or
discontinuance of the
qualification of
the Project,
as a "qualified
low income
housing project" under Section
42(g)(1) of the
Code, as amended, or
any successor thereto, or which would
cause the
Limited Partner to
fail to obtain the
Projected Tax Credits
or
which would
cause the recapture of any LIHTC;
(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;
(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;
31
<PAGE>
(j) acquire any
real or personal
property (tangible or intangible) in
addition to the
Project the aggregate
value of which shall exceed $10,000
(other than
easement or similar
rights necessary or
appropriate
for the
operation of the
Project);
(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 Project 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
except in the
normal day to day business of rent collections and evictions;
(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 in
amounts greater
than $5,000, agree or
consent to any
material changes in the Plans and
Specifications,
to any
change orders,
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
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
32
<PAGE>
(v) make any tax
election not
contemplated by this
Agreement or amend
or
revoke any tax
election.
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 Project 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 units in the
Project; (3) compliance with all provisions of the Project
Documents and
(4) a reservation and
allocation of LIHTC from the State Tax
Credit
Agency;
(g) make
inspections
of the Project and assure that the Project 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) pay,
before the same shall become delinquent and before penalties
accrue thereon
all Partnership taxes,
assessments and other
governmental
charges
against the
Partnership or its
properties,
and all of its
other
liabilities,
except to the extent and so long as the same are being
contested in
good faith by
appropriate
proceedings in such manners as not
to cause any material adverse effect on the Partnership's property,
financial
condition or business operations, with adequate reserves
provided
for such
payments;
(i) pay, before
the same becomes due or expires, the Insurance premium and
utilities for
the Project;
(j) permit,
and cause the
Management Agent to permit, the Special Limited
Partner
and its representatives: (1) to have access to the Project and
33
<PAGE>
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 Project, 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) 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) pay, before
the same becomes due, the Real Estate Taxes;
(p) cause the
Management Agent to
manage the Project in such a manner that
the Project
will be eligible to
receive LIHTC with
respect to 100% of the
units in the
Project. 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
Project as
required, for at least
the duration of the
Compliance Period;
(3) to operate
the Project
and cause the
Management
Agent to manage
the
Project so as to
comply with the requirements of Section 42 of the Code, as
amended, or any
successor thereto,
including, but not
limited to, Section
42(g) and
Section 42(i)(3)
of the Code,
as amended, or any successors
thereto;
(4) to make all
certifications
required by Section
42(l) of the
Code, as
amended, or any successor thereto; and (5) to operate the Project
and cause the
Management
Agent to manage the
Project 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
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.
(t)
Intentionally omitted.
34
<PAGE>
Section 9.8 Obligations to Repair and Rebuild
Project.
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 Project will be utilized to
repair and rebuild the Project 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 to rebuild the
unit or units damaged by such fire or
casualty.
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 by
operation of law
in accordance with the
State limited
partnership act as
amended,
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 except for
the
reimbursement of
expenses expended by the General Partner prior to the date
hereof
(which shall be repaid out of the
initial capital contribution)
shall be subject
to the following:
(i) no such
reimbursement shall be
permitted for services
for which
the General
Partner or any of its Affiliates is entitled to compensation by
way of a
separate fee; and
(ii) no such reimbursement shall be made for (A) rent or
depreciation,
utilities,
capital equipment or
other such
administrative items,
and (B)
salaries,
fringe benefits,
travel expenses and
other administrative items
incurred or
allocated to any "controlling person" of the General Partner or
any Affiliate of the General Partner. For the purposes of this Section
9.9(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
35
<PAGE>
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 wholly unrelated to the
Partnership business of every nature and
description, including, without limitation,
the acquisition, development,
construction, operation and management of
real estate projects and developments
of every type on their own behalf or on
behalf of other partnerships, joint
ventures, corporations or other business
ventures formed by them or in which
they may have an interest, including,
without limitation, business ventures
similar to, related to or in direct or
indirect competition with the Project.
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 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 Project.
(d) The
Project is being operated in accordance with standards and
procedures
that are prudent and
customary for the
operation of properties
similar to the
Project.
36
<PAGE>
(e) All
conditions to the funding of the Construction Loan have been
met.
(f) No Partner
has or will have any personal liability with respect to or
has or will have
personally guaranteed the payment of the Mortgage.
(g) The
Partnership is in
compliance with all
construction and use
codes
applicable
to the Project and is not in violation of any zoning,
environmental or
similar regulations applicable to the Project.
(h) All
appropriate public utilities, including sanitary and storm
sewers,
water, gas and
electricity, are
currently available
and will be operating
properly
for all units in the
Project at the time of first occupancy and
throughout the
term of the Partnership.
(i) All roads
necessary for the full utilization of the Improvements have
either been
completed or the
necessary rights of
way therefore have
been
acquired by the
appropriate
governmental authority
or have been dedicated
to public use
and accepted by said governmental authority.
(j) The
Partnership has Insurance written by an Insurance Company.
(k) The
Partnership owns the fee simple interest in the Project.
(l) The
Construction Contract has been entered into between the
Partnership
and the
Contractor;
no other consideration or fee shall be paid to the
Contractor other
than amounts set forth in the Construction Contract.
(m) The General Partner will require the Accountant to depreciate
Partnership
items in accordance with Exhibit G attached hereto and
incorporated
herein by this reference and provide the information required
by Sections
14.2(a) and (b) of this Agreement.
(n) To the
best of the General Partner's knowledge: (1) no Hazardous
Substance
has been disposed of, or released to or
from, or otherwise
now
exists in, on,
under or around,
the Project and (2) no aboveground or
underground
storage tanks are now or have ever been located on or under the
Project.
The General Partner
will not install or allow to be installed any
aboveground
or underground storage tanks on the Project. The General
Partner
covenants that the Project shall be kept free of Hazardous
Substance
and shall not be used to generate, manufacture, refine,
transport,
treat, store, handle,
dispose of, transfer,
produce or process
Hazardous
Substance,
except in connection
with the normal maintenance and
operation of any
portion of the Project. The General Partner shall
comply,
or cause there
to be compliance,
with all applicable
Federal, state and
local laws,
ordinances,
rules and regulations with respect to Hazardous
Substance and
shall keep, or cause
to be kept, the
Project free and clear
of any liens imposed pursuant to such laws, ordinances, rules and
regulations.
The General
Partner must promptly
notify the Limited Partner
and the Special
Limited Partner in
writing (3) if it knows, or suspects or
believes there
may be any Hazardous
Substance in or around any part of the
Project,
any Improvements constructed on the Project, or the soil,
groundwater or
soil vapor, (4) if the
General Partner or the
Partnership
may be subject to any threatened or pending investigation by any
governmental
agency under any law,
regulation or
ordinance pertaining
to
37
<PAGE>
any Hazardous Substance, and (5) of any claim made or
threatened by any
Person,
other than a
governmental
agency, against the Partnership or
General
Partner arising out of or resulting from
any Hazardous
Substance
being present or
released in, on or around any part of the Project.
(o) The General Partner has not executed and will not execute any
agreements
with provisions contradictory to, or in opposition of the
provisions of
this Agreement.
(p) The
Partnership
will allocate to the Limited
Partner the
Projected
Annual Tax
Credits, or the Revised Projected Tax Credits, if applicable.
(q) No charges,
liens or encumbrances exist with respect to the Project
other than those
which are created or permitted by the Project Documents or
Mortgage or are
noted or excepted in the Title Policy.
(r) The Partnership shall retain the Construction Inspector whose
responsibilities
include, but are not
limited to, preparing and overseeing
the construction
close-out procedures
upon completion;
inspecting for and
overseeing
resolution of the Contractor's final punch list items;
receiving
and approving
operation and
maintenance manuals;
collecting,
reviewing,
approving and
forwarding to the Partnership all warranties, check key count
and key
schedules; and confirming turnover of spare parts and
materials.
(s) The
buildings on the
Project site
constitute
or shall constitute a
"qualified
low-income
housing project" as
defined in Section 42(g) of the
Code,
and as amplified by the Treasury
Regulations
thereunder.
In this
connection,
not later than December 31 of the first year in which the
Partners
elect the LIHTC to
commence in accordance with the Code, the
Project will
satisfy the Minimum Set-Aside Test.
(t) All accounts
of the Partnership
required to be
maintained
under the
terms of the
Project Documents, including, without limitation, any reserves
in accordance
with Article VIII
hereof, are currently
funded to required
levels,
including levels required by any governmental or lending
authority.
(u) The General
Partner has not lent or otherwise advanced any funds to the
Partnership
other than its Capital Contribution, or Operating Deficit Loan,
if applicable,
and the Partnership
has no unsatisfied
obligation to make
any payments of
any kind to the General Partner or any Affiliate thereof.
(v) No event has
occurred which constitutes a default under any of the
Project
Documents.
(w) No event has
occurred which has caused, and the General Partner has not
acted in any
manner which will cause (1) the Partnership to be treated for
federal income
tax purposes as an association taxable as a corporation, (2)
the Partnership
to fail to qualify as a limited partnership under the Act,
or (3) the
Limited Partner to be liable for Partnership obligations;
provided
however, the General Partner shall not be in breach of this
representation
if the action causing
the Limited Partner to
be liable for
the Partnership
obligations is undertaken by the Limited Partner.
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(x) No event or
proceeding,
including,
but not limited to, any legal
actions or
proceedings before any court, commission, administrative body
or
other governmental authority, and
acts of any governmental authority having
jurisdiction
over the zoning or
land use laws
applicable to the
Project,
has occurred the continuing effect of which has: (1) materially or
adversely
affected the operation
of the Partnership
or the Project;
(2)
materially
or adversely affected the ability of the General
Partner to
perform its
obligations hereunder or under any other agreement with respect
to the Project;
or (3) prevented the
Completion
of Construction of the
Improvements in
substantial conformity
with the Project
Documents, other
than legal
proceedings which have been bonded against (or as to which
other
adequate
financial security has been issued) in a manner as to
indemnify
the Partnership
against loss;
provided, however, the foregoing does not
apply to matters
of general
applicability which would adversely affect the
Partnership,
the General Partner,
Affiliates of the General Partner or the
Project only
insofar as they or any of them are part of the general public.
(y) Neither the
Partnership nor the
General Partner has
any liabilities,
contingent
or otherwise,
which have not been
disclosed in writing
to the
Limited
Partner and the
Special Limited Partner and which in the aggregate
affect
the ability of the Limited Partner to obtain the anticipated
benefits of its
investment in the Partnership.
(z) Upon signing
of the Construction
Loan and receipt of
the Construction
Lender's written
start order, the
General Partner will cause construction
of the
Improvements to commence and thereafter will cause the Contractor
to
diligently
proceed with
construction of the Improvements according to the
Plans and
Specifications
so that the
Improvements can be completed by the
Completion
Date.
(aa) The General
Partner has contacted
the local tax assessor, or similar
representative,
and has determined
that the Real Estate Taxes are accurate
and correct,
and that the
Partnership will not be required to pay any more
for real estate
taxes, or property
taxes, than the amount of Real Estate
Taxes,
referenced in this Agreement, except for annual increases imposed
on
all real estate
within the same county as the Project and increases caused
by reappraisal
of all real estate within the same county. In the event the
actual real
estate taxes,
or property
taxes, are greater than the Real
Estate Taxes
specified in this Agreement and as a result of the higher real
estate tax, or
property tax,
the Debt Service
Coverage falls below 1.15
then the General
Partner will
contribute additional
capital to lower
the
principal
of the mortgage and reamortize the Mortgage so that the Debt
Service
Coverage is at a sustainable 1.15, as approved by the Special
Limited Partner.
If the Mortgage lender
will not or cannot
reamortize the
loan as specified in
this Section, and the
General Partner
cannot obtain
another
mortgage, then the General Partner will contribute additional
capital as
determined by the Special Limited Partner to the T & I
Account
in an amount
equal to the annual difference between the actual real estate
tax,
or property tax, over the Real Estate Taxes specified in this
Agreement
times the number of years remaining on the 15-year LIHTC
compliance
term. Any payment by the General Partner pursuant to this
section
shall be in addition
to the General
Partner's obligation
to fund
Operating
Deficits.
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<PAGE>
(bb) The
Partnership will maintain a Debt Service Coverage of not less
than
1.15 and will
not close on a permanent loan or refinance a Mortgage loan if
the Debt Service
Coverage would fall below 1.15.
(cc) The General
Partner will ensure that the Architect of Record will have
a policy of
professional
liability insurance in an amount not less than
$1,000,000,
which policy should
remain in force for a period of at least 2
years after the
closing and funding of the Mortgage.
(dd) The
General Partner and the Guarantor have and shall maintain an
aggregate
net worth equal to at
least $5,000,000
computed in
accordance
with generally
accepted accounting principles.
(ee) The
Partnership
is in compliance
with and will maintain
compliance
with the
requirements
of the federal
Fair Housing Act of
1968 (42 U.S.C.
3600 et seq.) as
amended, with respect to the Project.
(ff) Neither the
General Partner nor its Affiliates will take any action or
agree to any
terms or conditions
that are contrary to, or in disagreement
with, the tax
credit application
used to secure the LIHTC, or the land use
restriction
agreement required to be recorded against the Project.
The General Partner shall be liable to the Limited Partner for
any
costs, damages, loss of profits, diminution
in the value of its investment in
the Partnership, or other losses, of every
nature and kind whatsoever, direct or
indirect, realized or incurred by the
Limited Partner as a result of any
material breach of the representations and
warranties set forth in this Section
9.12.
Section 9.13 Indemnification of the Partnership
and the Limited Partners.
The General Partner will indemnify and hold the Partnership and
the
Limited Partners harmless from and against
any and all losses, damages and
liabilities (including reasonable
attorney's fees) which the Partnership or any
Limited Partner may incur by reason of the
past, present, or future actions or
omissions of the General Partner or any of
its Affiliates that constitute gross
negligence or willful misconduct, fraud,
malfeasance, breach of fiduciary duty,
or breach of any material provision of this
Agreement that has a material
adverse effect on the Project, the
Partnership or any Limited Partner.
Section 9.14 Option to Acquire.
At any time after expiration of the Compliance Period, the
General
Partner may give notice (the "GP Notice")
to the Limited Partner that it desires
to purchase the entire Interest of each of
the Limited Partner and the Special
Limited Partner in the Partnership. Upon
receipt by the Limited Partner and the
Special Limited Partner, the following
events shall occur:
(a) The purchase
price of the Interests
shall be determined as of the date
of the GP
Notice. The purchase price shall be the greater of (i) the
aggregate of the
Fair Market Value of
the Interest of the Limited Partner
and the Fair
Market Value of the Interest of the Special Limited Partner or
40
<PAGE>
(ii) the "Tax
Amount" as hereinafter
defined. The Fair Market Value of the
Interests
shall be determined after taking into consideration any
outstanding
loans and accrued fees
due under this
Agreement. The
parties
hereto agree
that the value of the Limited Partner's and Special Limited
Partner's
Interests shall be
calculated by determining the amount that the
Limited
Partner and Special
Limited Partner would receive upon the sale of
the Project
(i.e., the Limited
Partner would receive 9.99% and the Special
Limited
Partner would receive 0.01% of the net amount equal to the
appraised value
less the amount of any outstanding debts and accrued fees).
(b) The Limited
Partner and the
Special Limited
Partner shall
negotiate
with the
General Partner for a period of 30 days
after the GP Notice
is
received to
agree upon the Fair Market Value of their respective Interests.
In the event an
agreement is not
reached within such 30
day period, then
the General
Partner or the Special
Limited Partner may request that Fair
Market Value be
determined in
accordance with the
process set forth below
by sending
notice (the "Appraisal Notice") of same to the other party
within 15 days
after the expiration
of the 30 day period.
If an Appraisal
Notice is not
sent by either party
within such 15 day period, then the
General
Partner's option shall expire.
(c) If the
respective
Fair Market
Value of the
Interests of the
Limited
Partner
and the Special Limited Partner are not agreed upon as
provided
above and either
the General Partner or
the Special Limited Partner issues
to the other
Person an Appraisal Notice, then the Fair Market Value of such
Interests
shall be determined by an appraisal. The appraisal shall be
conducted by an
independent appraiser
satisfactory to the
General Partner
and the Special
Limited Partner or, in the event that a single independent
appraiser
cannot be agreed upon
within 30 days
following the date of
the
Appraisal
Notice, the General Partner and the Special Limited Partner
shall
each select an
independent
appraiser and the
appraisers so selected shall
select a third
independent appraiser. All appraisers so designated shall be
experienced in
accounting, business or real estate appraisal. The appraiser
or appraisers
shall determine the Fair Market Value of the Interest of each
of the
Limited Partner and the Special Limited Partner and the parties
hereto
agree that the
appraisal shall be based on the income valuation
approach.
The decision of the
appraisers (if more
than one) shall be made
by the
majority of such
appraisers.
The appraiser or appraisers shall
render
a written report setting forth the Fair Market Value of such
Interests, which
decision shall be rendered as expeditiously as possible by
the appraiser or
appraisers and which
decision shall be
final and binding
upon the
parties. The
reasonable
fees and expenses of the appraiser or
appraisers
shall be paid
one-half by the
General Partner and
one-half by
the Limited
Partner. For purposes
of this calculation,
the amount of the
replacement
reserve or any other
reserves required
hereunder shall not be
taken into
account in determining Fair Market Value.
(d) The "Tax
Amount" shall mean the dollar amount computed in the following
fashion:
(i) The Limited
Partner and the Special Limited Partner shall be
deemed to have
gain in an amount
equal to the
difference
between their
respective
basis in the Project and an amount equal
