EX. 3.2 REAL ESTATE ASSOCIATES LIMITED VII RESTATED CERTIFICATE AND AGREEMENT OF LIMITED PARTNERSHIP

 

                                                                   EXHIBIT 3.2

 

 

                      REAL ESTATE ASSOCIATES LIMITED VII

 

                           RESTATED CERTIFICATE AND

 

                       AGREEMENT OF LIMITED PARTNERSHIP

 

 

          This Restated Certificate and Agreement of Limited Partnership by and

among National Partnership Investments Corp., a California corporation with

principal offices at Suite 919, 1880 Century Park East, Los Angeles,

California 90067 (the "Corporate General Partner"), and National Partnership

Investments Associates II, a limited partnership ("NPIA II" or the

"Non-Corporate General Partner"), the general partner of which is Charles H.

Boxenbaum, an individual residing at 780 Latimer Road, Santa Monica,

California 90402 (hereinafter collectively referred to as the "General

Partner"), and Diane M. Forrest, an individual residing at 6362 Arcadia

Avenue, Agoura, California 91301 ("Initial Limited Partner"), is entered into

as of February 1, 1984. Such Initial Limited Partner, and any additional or

substituted limited partners hereinafter admitted to the Limited Partnership

as herein provided, is referred to collectively as the "Limited Partners" and

individually as a "Limited Partner." The term "Partners" shall mean all

General and Limited Partners, and the term "Partner" means any General or

Limited Partner.

 

                             W I T N E S S E T H :

 

         WHEREAS, on May 24, 1983, the Partnership was formed pursuant to the

laws of the State of California;

 

         WHEREAS, the General Partners and the initial Limited Partner desire

to change certain provisions in, and restate in full, the agreement; and

 

         WHEREAS, it is the intention of the parties thereto to admit

additional Limited Partners to the Partnership for the purpose of acquiring

additional capital therefor;

 

         NOW, THEREFORE, the parties hereto hereby agree as follows:

 

         SECTION 1. Formation.

 

         1.1 The General Partners and the Initial Limited Partner do hereby

form a limited partnership (the "Partnership") under the Limited Partnership

Act of the State of California.

 

         SECTION 2. Name.

 

         2.1 The business of the Partnership shall be conducted under the name

Real Estate Associates Limited VII, which name may be changed by the General

Partners by written notice to the Limited Partners.

 

         SECTION 3. Addresses of Parties.

 

         3.1 The principal place of business of the Partnership shall be at

1880 Century Park East, Suite 919, Los Angeles, California 90067, or at such

other place as the General Partners may from time to time designate in writing

to the Limited Partners. The Partnership may also maintain such other offices

at such other places as the General Partners may deem advisable.

 

         3.2 The addresses of the General Partners shall be those stated in

the first paragraph of this Agreement, or at such other places as the General

Partners may from time to time designate in writing to the Limited Partners.

The addresses of the Limited Partners shall be those stated after their names

on Schedule A hereto or in any amended certificate hereto. A Limited Partner

may change such address by written notice to the General Partners, which

notice shall become elective upon receipt.

 

         SECTION 4. Business of the Partnership.

 

         4.1 The business of the Partnership shall be:

 

         (a) primarily to acquire, directly or indirectly, interests as a

         limited partner or joint venturer in any partnership or joint venture

          which will (i) acquire, least, hold, finance, construct, improve,

         rehabilitate, manage, and/or operate government-assisted projects,

         including existing government-assisted projects, or other housing

         projects (the "Projects," and the interests of the Partnership in the

         local limited partnerships or joint ventures shall be referred to as

         "Project Interests"), (ii) monitor and supervise management of

         construction and operations of the Projects, (iii) arrange for and

         supervise the conversion of any Project to other uses, (iv) to

         acquire interests as a limited partner in any partnership or as a

         general partner or joint venturer in any joint venture which will

         acquire, lease, hold, finance, construct, improve, rehabilitate,

         manage and/or operate conventional housing projects which shall be

         included within the definition "Project," or (v) perform any act for

         a purpose authorized by this Agreement; or to directly acquire

         existing conventional housing projects (which shall be included

         within the definition "Projects");

 

         (b) to acquire, hold (in the Partnership's name or under any other

         title arrangement selected by the General Partners), lease, sell,

         mortgage, convey, or refinance any real or personal property,

         including, but not limited to, the Project Interests described in

         paragraph (a) above;

 

         (c) to hold, own, maintain, manage, improve, develop, operate, sell,

         transfer, convey, lease, mortgage, exchange, or otherwise dispose of

         or deal in or with Projects and Project Interests described in

         paragraph (a) above; and

 

         (d) to perform any acts to accomplish the foregoing purposes.

 

         SECTION 5. Contributions to Capital; Additional Limited Partners.

 

         5.1 The capital of the Limited Partnership shall be divided into no

less than 1 and up to 20 General Partners Interests and no less than 480 and

up to 18,000 non-assessable limited partnership interests, each of which

limited partnership interest is hereinafter referred to as a "Limited

Partnership Interest."

 

         5.2 The General Partners shall contribute an aggregate of $15,000 to

the capital of the Partnership, for which the General Partners shall be

credited with the ownership of one General Partner's Interest, and shall have

such interest in and to the profits and losses thereof as is described in

Section 7 hereof. Upon liquidation of the Partnership, the General Partners

will discharge any debit balance in their capital accounts by contributing to

the Partnership an amount up to the difference between 1% of total capital

contributions to the Partnership and $15,000. The General Partners may, but

are not required to, purchase Limited Partnership Interests and will

accordingly have as Limited Partners such additional pro rata interest in and

to the profits and losses of the Partnership pursuant to Section 7 hereof.

 

         5.3(a) The Initial Limited Partner has contributed $4,550 to the

capital of the Partnership pursuant to a promissory note, for which she has

received a Unit and has the right, but not the obligation, to purchase

additional Units. Furthermore, upon the admission of additional Limited

Partners to the Partnership, the Initial Limited Partner may relinquish her

Unit, withdraw such investment, and cease to be a Limited Partner.

 

         (b) The General Partners are authorized to admit additional Limited

Partners to the Partnership by selling not more than 18,000 Limited

Partnership Interests for cash to selected persons as may apply to become

Limited Partners pursuant to the terms of an offering described in a

Prospectus (the "Prospectus") to which this Agreement will be annexed, by

completing a subscription agreement (the "Subscription Agreement") in the form

to be set forth in the Prospectus, provided that no person admitted as a

Limited Partner shall have been permitted to purchase more than 50 Units,

subject, however, to the right of the General Partners to establish special

requirements for larger subscriptions.

 

         (c) The Limited Partnership Interests shall be sold to Limited

Partners in "Units." The minimum investment shall be one Unit at a purchase

price of $5,000 per Unit. Each Unit shall consist of two Limited Partnership

Interests and two warrants, each of which will entitle the purchaser of a Unit

to acquire two Additional Limited Partnership Interests ("Additional Limited

Partnership Interests") during the period January 1, 1985 to and including

January 25, 1985 at $2,500 each. The Partnership shall have the right to offer

for sale, at the best prices reasonably obtainable (which may be less than

$2,500 per Limited Partnership Interest), any Additional Limited Partnership

Interest not purchased pursuant to the exercise of Warrants. The foregoing

sums relating to the purchase of Units and Additional Limited Partnership

Interests shall be paid to the Partnership concurrently with the recordation

in the Official Records of Los Angeles County, California, of an amendment of

this Agreement reflecting the admission of each Limited Partner to the

Partnership or increase in the number of Limited Partnership Interests held by

such Limited Partner, as the case may be. Investors whose subscriptions have

been accepted by the General Partners will be admitted as Limited Partners

within 15 days after the minimum of $1,200,000 from the sale of Units has been

received by the General Partners. Thereafter, investors will be admitted as

Limited Partners no later than the last day of the calendar month following

the date the General Partners accept their subscriptions. The General Partners

will accept or reject subscriptions within two business days after receipt

thereof. All proceeds of the offering will be held by the Partnership and will

be used only for the purposes permitted in this Agreement.

 

         (d) The Partnership presently contemplates the public offering of a

maximum of 2,000 Units at an offering price of $5,000 per Unit or an aggregate

offering price of $10,000,000. These Units represent 4,000 Limited Partnership

Interests and 4,000 Warrants to purchase an aggregate of 8,000 Additional

Limited Partnership Interests at a price of $2,500 per Additional Limited

Partnership Interest, or an aggregate exercise purchase price of $20,000,000,

provided, that if the Additional Limited Partnership Interests can not be sold

for $2,500 each, the General Partner shall have the authority to offer and

sell such Interests at the best prices that can be reasonably obtained. A

sales commission of 8 1/2% shall be paid to E.F. Hutton & Company Inc.

("Hutton") with respect to the sale of Units; a sales commission of 8 1/4%

shall be paid to Hutton with respect to the sale of Limited Partnership

Interests pursuant to the exercise of Warrants, provided, however, that the

sales commission to be charged on Limited Partnership Interests available for

sale by the Partnership upon failure to exercise Warrants shall be 8 1/2%. The

Partnership will also reimburse Hutton for certain expenses. In anticipation

of receipt of subscriptions for in excess of 2,000 Units, the Partnership will

register with the Securities and Exchange Commission a total of 2,600 Units

(covering an aggregate of 5,200 Limited Partnership Interests and Warrants to

purchase an aggregate of 10,400 Additional Limited Partnership Interests) and

will grant to Hutton the right, exercisable in its sole discretion, to sell

these additional Units so registered (on the same terms and conditions as the

other Units) on behalf of the Partnership. Such right to sell an additional

600 Units will expire on the date of termination of the offering and will

provide additional compensation for Hutton.

 

         (e) No Partner shall have the right, except as provided in Section

5.3(a), to withdraw or reduce his capital contribution. No Limited Partner

shall have the right to bring an action for partition against the Partnership

or to demand or receive property other than cash in return for his capital

contribution. No Limited Partner shall have priority over any other Limited

Partner, either as to the return of his capital contribution or as to profits,

losses, or distributions.

 

         (f) The net proceeds to the Partnership will be $4,575 for each Unit.

Except as otherwise provided in Section 7.3, a person acquiring Units will

participate with other Limited Partners in the income, gains, losses,

deductions, credits, and cash distributions on a pro rata basis in accordance

with the number of Limited Partnership Interests owned. A capital account

shall be maintained for each Partner. To each Account shall be credited (i)

the amount of money paid by a Partner to the Partnership to acquire his

Limited Partnership Interests (but not Warrants), (ii) the Partner's

distributive share of Profits, and (iii) the Partner's distributive share of

any Partnership income, and from each Capital Account there shall be debited

(iv) the net fair market value of property distributed to the Partner, (v) the

amount of money distributed to the Partner, (vi) the Partner's distributive

share of Losses and (vii) the Partner's distributive share of Partnership

expenditures not deductible in computing taxable income and not properly

capitalized.

 

         (g) To accomplish the purpose of this Section 5.3, the General

Partners are hereby authorized to do all things necessary to admit such

additional Limited Partners, including, but not limited to, registering the

Units and Additional Limited Partnership Interests under the Securities Act of

1933, as amended, pursuant to the rules and regulations of the Securities and

Exchange Commission, qualifying the Units and Additional Limited Partnership

Interests for sale with state securities regulatory authorities or perfecting

exemptions from qualification, and entering into such underwriting or agency

arrangements for the solicitation of the Units and Additional Limited

Partnership Interests upon such terms and conditions as the General Partners

may deem advisable.

 

         5.4 Proceeds from contributions for Units and Additional Limited

Partnership Interests and other Partnership funds shall be held by the General

Partners as fiduciaries for the exclusive use of the Partnership and after the

start of Partnership operations shall be temporarily invested in U.S. Treasury

Bills and Bonds, bank certificates of deposit, bank repurchase obligations,

commercial paper (investment grade), and tax-exempt notes and bonds, or

registered investment companies holding such securities. Interest thereon

shall inure to the benefit of the Partnership, and the Limited Partners, as

such, shall not receive interest on funds contributed by them. Any funds

(other than designated reserves) not invested or committed for investment in

Projects or Project Interests within 18 months from the effective date of the

Prospectus shall be distributed pro rata to the Limited Partners as a return

of capital.

 

         SECTION 6. Organizational Expenses.

 

         6.1 The Partnership shall pay all costs of qualifying and offering

the Units and Additional Limited Partnership Interests (including sales

commissions) and all formation and organization expenses, including expenses

associated with the selection and acquisition of Projects (which expenses are,

however, subject to the limitation set forth in Section 9.6.1 hereof). The

General Partners will be liable for the amount, if any, by which the aggregate

organizational expenses and sales commissions exceed 15% of the gross proceeds

from the sale of Units and Additional Limited Partnership Interests.

 

         SECTION 7. Profits and Losses.

 

         7.1 Prior to the amendment to this Agreement for the purpose of

admitting additional Limited Partners to the Partnership in accordance with

Section 5.3(b) hereof, the General Partners shall be allocated, as they may

agree between themselves, 99% of each item of income, gain, loss, deduction,

and credit (collectively, "Partnership Tax Items" and individually

"Partnership Tax Item"). During such period, the Initial Limited Partner shall

be allocated 1% of each Partnership Tax Item. At all times thereafter, except

as provided in Section 7.2 and the remainder of this Section, the General

Partners shall be allocated 1% and the Limited Partners as a class shall be

allocated 99% of each Partnership Tax Item. Income recognized by the

Partnership upon expiration of Warrants shall be allocated 1% to the General

Partners and 99% to the non-exercising Limited Partners in proportion to their

respective Limited Partnership Interests.

 

         7.2 Upon the total or partial liquidation of the Partnership or the

disposition or partial disposition of a Project or Project Interest, income

and losses of the Partnership shall be allocated as follows. Income not

exceeding an amount equal to the sum of the negative adjusted capital account

balances of all Partners with such balances (computed after any distributions

made under Section 9.6.2) shall be allocated among such Partners in proportion

to their respective negative capital account balances and without regard to

Section 7.3; and income in excess thereof shall be allocated 1% to the General

Partners and 99% to the Limited Partners as a class. Losses not exceeding an

amount equal to the sum of the positive adjusted capital account balances of

all Partners with such balances (computed after any distributions under

Section 9.6.2) shall be allocated among such Partners in proportion to their

respective positive adjusted capital account balances and without regard to

Section 7.3; and losses in excess thereof shall be allocated 1% to the General

Partners and 99% to the Limited Partners as a class. Notwithstanding any other

provision of this Agreement, the General Partners shall be allocated at least

1% of each Partnership Tax Item.

 

         7.3 Each Limited Partner shall be allocated the same fractional share

of each Partnership Tax Item allocable to Limited Partners as a class as the

total number of Limited Partnership Interests owned by him divided by the

total number of Limited Partnership Interests outstanding, subject to the

following exception. Commencing on January 1, 1985, and thereafter, each

Partnership Tax Item allocable to Limited Partners as a class shall be

allocated 80% to holders of Additional Limited Partnership Interests, and 20%

to holders of Limited Partnership Interests acquired prior to January 1, 1985

until the total amount of each Partnership Tax Item allocated to each

Additional Limited Partnership Interest equals the total amount of each

Partnership Tax Item (based upon a weighted average of each Partnership Tax

Item attributable to Limited Partnership Interests acquired prior to January

1, 1985) allocated to each Partnership Interest acquired prior to January 1,

1985. The weighted average of each Partnership Tax Item attributable to

Limited Partnership Interests acquired prior to January 1, 1985 shall be a

fraction, the numerator of which is an amount, consisting of the product, for

each month until January 1, 1985, of the total amount of that Partnership Tax

Item allocated to the group comprised of Limited Partnership Interests

purchased through that month times the number of months remaining, including

the month in question, until January 1, 1985, and the denominator of which is

an amount, consisting of the product, for each month until January 1, 1985, of

Limited Partnership Interests purchased through that month times the number of

months remaining, including the month in question, with January 1, 1985. As

each Partnership Tax Item is so equalized between Limited Partnership

Interests acquired prior to January 1, 1985 and Additional Limited Partnership

Interests acquired on or subsequent to January 1, 1985, this allocation shall

cease as to that Partnership Tax Item.

 

         7.4 In determining whether Partnership Tax Items are realized, paid,

accrued, or incurred during any period in which any Limited Partner is a

member of the Partnership, such Items shall be allocated on any basis

permitted by Section 706(c) of the Internal Revenue Code of 1954, as

determined by the General Partners. In the event of the transfer of a Limited

Partnership Interest, the distributive share of these Partnership Tax Items

(in respect of the Limited Partnership Interest so transferred) shall be

allocated between the transferor and the transferee in accordance with this

Section.

 

         SECTION 8. Cash Distributions.

 

         8.1 The General Partners shall distribute annually substantially all

of the Partnership's Net Cash Flow as defined herein. Except as provided in

Section 8.2 hereof, the General Partners shall be entitled to receive 1% of

the Net Cash Flow to be distributed, but any such distributions to the General

Partners shall be reduced by the amount paid as an Annual Management Fee as

set forth in Section 9.5 hereof. The Limited Partners as a class shall receive

the balance of the distributed Net Cash Flow, which shall be distributed among

Limited Partners as Partnership Tax Items are allocated to them under Section

7.3.

 

         8.2 Upon the total or partial liquidation of the Partnership or the

disposition or partial disposition of a Project or Project Interest, net

assets available for distribution remaining after all distributions required

to be made under Section 9.6.2 shall be distributed to the Partners in

proportion to their positive adjusted capital account balances (computed after

the allocation of income or loss under Section 7.2).

 

         8.3 "Net Cash Flow" shall mean the Partnership's share of all

receipts derived from the ownership of Projects and Project Interests therein

(exclusive of any proceeds from the sale or financing of Projects or Project

Interests, refinancing or other extraordinary transactions not in the ordinary

course of business) less (a) expenses, (b) such reserves as the General

Partners deem reasonably necessary for the proper operation of the

Partnership's business, and (c) any fees and expenditures authorized by this

Agreement (except for construction expenditures paid out of capital or loan

proceeds). The General Partners may at their discretion reinvest or distribute

all or any portion of the proceeds from the disposition or refinancing of any

Project or Project Interest therein, provided that in the event of a sale, the

Partners shall have first received any distributions to which they are

entitled under Section 9.6.2. To the extent that such proceeds are not

reinvested or committed within twelve months from the date of the receipt of

such proceeds, they shall be distributed. Distributions of the net proceeds

from the sale or financing of Projects or Project Interests, refinancing

thereof, or other extraordinary transactions not in the ordinary course of

business shall be distributed to the General and Limited Partners in the same

manner as net cash is distributed under Section 8.2.

 

         8.4 The General Partners shall designate a record date to determine

Partners entitled to cash distributions, which shall not be less than 15 days

nor more than 30 days before each cash distribution. The Partnership shall

cause to be maintained records reflecting the name, address, and number of

Limited Partnership Interests and General Partners Interests held by each

Partner for the purpose of determining recipients of cash distributions and

notices.

 

         SECTION 9. The General Partners.

 

         9.1 The General Partners shall have complete discretion in the

management and control of the business of the Partnership for the purposes

herein stated, shall make all decisions affecting the business of the

Partnership and shall manage and control the affairs of the Partnership to the

best of their abilities and use their best efforts to carry out the purposes

of the Partnership. The powers of the General Partners include, but are not

limited to, the powers:

 

         (a) to expend the capital and profits of the Partnership in

         furtherance of the Partnership's business;

 

         (b) to acquire, hold (in the Partnership's name or, in the best

         interest of the Partnership, under any other title arrangement

         selected by the General Partners), lease, sell, mortgage, convey, or

         refinance any real or personal property, including Projects and

         Project Interests, at such price and upon such terms, as they deem to

         be in the best interests of the Partnership, including the power to

         vote to amend a local limited partnership agreement or joint venture

         agreement in such a manner as to reduce the limited partnership

         interest or joint venture interest of the Partnership in the local

         limited partnership or joint venture, to vote to reduce the

         Partnership's interests in the profits, losses, and special

         allocations of the local limited partnership or joint ventures and

         assign a part of the limited partnership interest or joint venture

         interest in such partnership, provided that such action is necessary

         to preserve the economic value of the Partnership's Project Interest;

 

         (c) to monitor the construction and operations of any of the

         Projects, Project Interests, or other Partnership property and to

         make recommendations with respect thereto;

 

         (d) to retain independent consultants to evaluate the Projects,

         Project Interests, and other Partnership property;

 

         (e) to borrow money and execute promissory notes and to secure the

         same by mortgage upon the Partnership's property;

 

         (f) to invest in short-term debt obligations (including obligations

         of federal and state governments and their agencies, bank repurchase

          obligations, commercial paper, and certificates of deposit of

         commercial banks, savings banks, or savings and loan associations)

         such funds as are temporarily not required for investment in

         Projects, Project Interests, or other Partnership property;

 

         (g) to lend money or provide advances in furtherance of the

         Partnership's purposes; and

 

         (h) to enter into and carry out agreements of any kind, provided that

         all contracts with the General Partners or their affiliates must

         provide for termination by the Partnership on 60 days written notice,

         without penalty, and to do any and all other acts and things

         necessary, proper, convenient, or advisable to effectuate and carry

         out the purposes of the Partnership. The limitation contained in the

         proviso in the preceding sentence shall not apply to any agreement

         entered into in connection with the proposed Sale.

 

         9.2 The General Partners shall (a) diligently and faithfully devote

such of their time to the business of the Partnership as they deem necessary

to conduct it for the greatest advantage of the Partnership; (b) file and

publish all certificates, notices, statements, or other instruments required

by law for formation and operation of the Partnership in all appropriate

jurisdictions; (c) cause the Partnership to carry adequate public liability,

property damage, and other insurance, any or all of which may name the General

Partners as the sole insured; (d) indemnify and hold the Partnership harmless

from any loss, damage or liability due to, or arising out of, any General

Partner's breach of fiduciary duty; and (e) maintain capital accounts on the

books and records of the Partnership in respect of each interest in the

Partnership. The General Partners may become Limited Partners and thereby

become entitled to all of the rights of Limited Partners to the extent of the

Limited Partnership Interests so acquired, provided that such acquisition of

Limited Partnership Interests shall not reduce any liability of the General

Partners under this Agreement. Notwithstanding the foregoing, the General

Partners shall have fiduciary responsibility for the safekeeping and use of

all funds and assets of the Partnership, whether or not in their immediate

possession or control and they shall not employ, or permit another to employ,

such funds, or assets in any manner except for the exclusive benefit of the

Partnership.

 

         9.3 Notwithstanding any provision in this Agreement to the contrary,

it is understood and agreed that (i) in conducting, carrying on, and managing

the business of the Partnership, the General Partners shall be bound by the

following investment policies, which may not be changed, altered, or amended

except as provided in Section 14 hereof and (ii) the General Partners shall

endeavor to conduct the Partnership's business in accordance with the policies

set forth in the Prospectus:

 

         (a) except for interim commitments in short-term government

         obligations, commercial paper (investment grade), certificates of

         deposit, bank repurchase obligations, and tax-exempt notes and bonds

         or registered investment companies holding such securities,

         investments will be initially limited to Project Interests, provided

         that (i) not less than 75% of the amount of public offering proceeds

         available for investment will be invested in Project Interests in

         partnerships or joint ventures which will own or lease federal,

         state, or local government-assisted housing projects including

         existing government-assisted housing (the Partnership will have the

         right to invest up to 25% of the aggregate amount available in

         housing projects which are not government-assisted or in local

         limited partnerships or joint ventures which will own or lease

         housing projects which are not government-assisted) and (ii) the

         Partnership may subsequently refinance or convert such Project

         Interests to other uses (consistent with partnership objectives) with

         a view to realizing higher revenue or capital gains, although

         reinvestment of cash flow (excluding proceeds resulting from a

         disposition or refinancing of property) shall not be allowed.

 

         (b) Projects or Project Interests will be acquired with a view toward

         maximizing tax deductions, with cash income and long-term

         appreciation as additional considerations, and not with a view to

         early resale;

 

         (c) the Partnership will seek to avoid depreciation recapture and

         defer taxes by not selling any Projects or Project Interests within

         ten years, except (i) to qualified tenant cooperatives as defined in

         the Internal Revenue Code, and (ii) under circumstances described in

         the Prospectus;

 

         (d) upon any sale or refinancing the Partnership shall not reinvest

         any proceeds thereof;

 

         (e) the Partnership may (i) borrow money only against individual

         Projects or Project Interests to acquire Projects or interests

         therein, to defray expenses or preserve its interest in each

         individual Project or interest therein, but may not pledge or

         encumber other Projects or Project Interests for this purpose, and

         (ii) borrow only such amount for which the Partnership can reasonably

         expect to meet debt service requirements from anticipated Net Cash

         Flow. The Partnership may make or cause its affiliates to make loans

         or advances for the acquisition of Projects or Project Interests, but

         such affiliates may not receive interest or other financing charges

         or fees in excess of the amounts which would be charged by unrelated

         banks for comparable loans for the same purpose in the locality of

         the Project or in amounts which otherwise are unreasonable or require

         any prepayment charge or penalty, provided that in connection with

         any of the foregoing transactions, (A) the Partnership shall not

         enter into transactions involving the use of "all-inclusive" or

         "wrap-around" notes except as permitted by the Rules of the

         Department of Corporations of the State of California, and (B) the

         Partnership shall not incur any indebtedness whereby the lender will

         have or acquire, at any time as a result of making such loan, any

         direct or indirect interest in the profits, capital, or property of

         the Partnership other than as a secured creditor;

 

         (f) the Partnership shall not (i) issue senior securities, except as

         set forth in the preceding paragraph and even then only at par or at

         a premium, (ii) invest in other issuers for the purpose of exercising

         control (other than local limited partnerships owning or leasing

         projects), (iii) underwrite the securities of other issuers, or (iv)

         offer Units or Limited Partnership Interests in exchange for

         property;

 

         (g) except in the case in which a single Project investment exceeds

         this limitation, the Partnership shall not sell and reinvest more

         than 25% of its portfolio of Projects or Project Interests within any

         single year, unless by exempted sales to qualified tenant

         cooperatives;

 

         (h) the Partnership shall not make loans to the General Partners or

         their affiliates and will not make loans to others except (i) to

         developers in connection with the acquisition of Projects or Project

         Interests (and then only if such loans do not exceed, in the

         aggregate, 5% o