SECOND AMENDED AND RESTATED AGREEMENT
OF
LIMITED PARTNERSHIP
OF
MEMPHIS 150
L.P. 2002
DATED AS OF APRIL 11, 2005
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TABLE OF CONTENTS
PAGE
ARTICLE I.
DEFINITIONS.........................................................2
ARTICLE II.
NAME..............................................................
ARTICLE III. PRINCIPAL EXECUTIVE
OFFICE/AGENT FOR SERVICE.....................16
Section
3.1
Principal Executive Office.........................16
Section
3.2
Agent for Service of Process.......................16
ARTICLE IV.
PURPOSE...........................................................16
Section
4.1
Purpose of the Partnership.........................16
Section
4.2
Authority of the Partnership.......................16
ARTICLE V.
TERM...............................................................17
ARTICLE VI. GENERAL PARTNER'S CONTRIBUTIONS
AND LOANS.........................17
Section
6.1
Capital Contribution of General Partner............17
Section
6.2
Construction Obligations...........................17
Section
6.3
Operating Obligations..............................18
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....................................19
Section
7.3
Repurchase of Limited Partner's and Special Limited
Partner's Interests................................23
Section
7.4
Adjustment of Capital Contributions................24
Section
7.5
Return of Capital Contribution.....................26
Section
7.6
Liability of Limited Partner and Special Limited
Partner............................................27
ARTICLE VIII. WORKING CAPITAL AND
RESERVES....................................27
Section
8.1
Replacement and Reserve Account....................27
Section
8.2
Intentionally omitted..............................27
Section
8.3
Tax and Insurance Account..........................27
Section
8.4
Operating Deficit Account..........................
Section
8.5
Other Reserves.....................................
ARTICLE IX. MANAGEMENT AND
CONTROL............................................28
Section
9.1
Power and Authority of General Partner.............28
Section
9.2
Payments to the General Partners and Others........28
Section
9.3
Specific Powers of the General Partner.............30
Section
9.4
Authority Requirements.............................30
Section
9.5
Limitations on General Partner's Power and
Authority..........................................31
Section
9.6
Restrictions on Authority of General Partner.......32
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Section
9.7
Duties of General Partner..........................34
Section
9.8
Obligations to Repair and Rebuild Project..........36
Section
9.9
Partnership Expenses...............................36
Section
9.10
General Partner Expenses...........................37
Section
9.11
Other Business of Partners.........................37
Section
9.12
Covenants, Representations and Warranties..........37
Section
9.13
Indemnification of the Partnership and the Limited
Partners...........................................41
Section
9.14
Option to Acquire..................................41
Section
9.15
Right of First Refusal.............................43
ARTICLE X. ALLOCATIONS OF INCOME, LOSSES
AND CREDITS..........................43
Section
10.1
General............................................43
Section
10.2
Allocations From Sale or Refinancing...............44
Section
10.3
Special Allocations................................44
Section
10.4
Curative Allocations...............................47
Section
10.5
Other Allocation Rules.............................47
Section
10.6
Tax Allocations: Code Section 704(c)...............49
Section
10.7
Allocation Among Limited Partners..................49
Section
10.8
Allocation Among General Partners..................49
Section
10.9
Modification of Allocations........................49
ARTICLE XI.
DISTRIBUTION......................................................50
Section
11.1
Distribution of Net Operating Income...............50
Section
11.2
Distribution of Sale or Refinancing Proceeds.......50
ARTICLE XII. TRANSFERS OF LIMITED PARTNER'S
AND SPECIAL LIMITED PARTNER'S
INTERESTS IN THE
PARTNERSHIP..................................................51
Section
12.1
Assignment of Interests............................51
Section
12.2
Effective Date of Transfer.........................52
Section
12.3
Invalid Assignment.................................52
Section
12.4
Assignee's Rights to Allocations and Distributions.52
Section
12.5
Substitution of Assignee as Limited Partner or
Special Limited Partner............................52
Section
12.6
Death, Bankruptcy, Incompetency, etc., of a Limited
Partner............................................53
ARTICLE XIII. WITHDRAWAL, REMOVAL AND
REPLACEMENT OF GENERAL PARTNER..........53
Section
13.1
Withdrawal of General Partner......................53
Section
13.2
Removal of General Partner.........................53
Section
13.3
Effects of a Withdrawal............................55
Section
13.4
Successor General Partner..........................57
Section
13.5
Admission of Additional or Successor General
Partner............................................58
Section
13.6
Transfer of Interest...............................58
Section
13.7
No Goodwill Value..................................58
ARTICLE XIV. BOOKS AND ACCOUNTS, REPORTS,
TAX RETURNS, FISCAL YEAR AND
BANKING.......................................................................59
Section
14.1
Books and Accounts.................................59
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Section
14.2
Accounting Reports.................................59
Section
14.3
Other Reports......................................60
Section
14.4
Late Reports.......................................62
Section
14.5
Site Visits........................................63
Section
14.6
Tax Returns........................................63
Section
14.7
Fiscal Year........................................63
Section
14.8
Banking............................................63
Section
14.9
Certificates and
Elections.........................63
ARTICLE XV. DISSOLUTION, WINDING UP,
TERMINATION AND LIQUIDATION OF THE
PARTNERSHIP...................................................................64
Section
15.1
Dissolution of Partnership.........................64
Section
15.2
Return of Capital Contribution upon Dissolution....64
Section
15.3
Distribution of Assets.............................64
Section
15.4
Deferral of Liquidation............................65
Section
15.5
Liquidation Statement..............................66
Section
15.6
Certificates of Dissolution; Certificate of
Cancellation of Certificate of Limited Partnership.66
ARTICLE XVI.
AMENDMENTS.......................................................66
ARTICLE XVII.
MISCELLANEOUS...................................................66
Section
17.1
Voting Rights......................................66
Section
17.2
Meeting of Partnership.............................67
Section
17.3
Notices............................................67
Section
17.4
Successors and Assigns.............................68
Section
17.5
Recording of
Certificate of Limited Partnership....68
Section
17.6
Amendment of Certificate of Limited Partnership....68
Section
17.7
Counterparts.......................................69
Section
17.8
Captions...........................................69
Section
17.9
Saving Clause......................................69
Section
17.10
Certain Provisions.................................70
Section
17.11
Tax Matters Partner................................70
Section
17.12
Expiration of Compliance Period....................71
Section
17.13
Number and Gender..................................71
Section
17.14
Entire Agreement...................................71
Section
17.15
Governing Law......................................72
Section
17.16
Attorney's Fees....................................72
Section
17.17
Receipt of Correspondence..........................72
Section
17.18
Security Interest and Right of Set-Off.............72
EXHIBIT A Legal Description
EXHIBIT B Form of Legal Opinion
EXHIBIT C Certification and Agreement
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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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SECOND AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP OF
MEMPHIS 150 L.P. 2002
This Second
Amended and Restated Agreement of Limited Partnership is being
entered into effective as of the date
written below by and between Harold E.
Buehler, Sr., an individual resident of Tennessee,
and Jo Ellen
Buehler, an
individual resident of Tennessee,
(collectively,
the "General
Partner"),
WNC
Housing Tax Credit Fund VI, L.P., Series
11, 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 150 L.P.
2002, a Tennessee limited partnership (the
"Partnership") recorded a certificate of limited
partnership with the Tennessee
Secretary of State on December 16, 2002. A
partnership agreement
dated December
13, 2002 was entered into by and between the General
Partner and the
Original
Limited Partner (the "Original Partnership
Agreement").
WHEREAS, on
August 31, 2004, the Original Partnership Agreement was amended
and restated to provide for the withdrawal
of United Development
Corporation as
the limited partner ("Original Limited Partner") and for the admission of
WNC
Holding, LLC as a limited partner ("WNC Holding") and the Special Limited
Partner ("Amended and Restated Partnership
Agreement")
WHEREAS,
on October 27, 2004, the Amended and Restated Partnership
Agreement was amended in part for the
withdrawal
of WNC Holding, LLC as the
limited partner and for admission of
Limited Partner ("First Amendment").
WHEREAS,
the Partners
desire to enter into
this Agreement to provide for,
among other things, (i) the continuation of
the Partnership, (ii) the payment of
Capital Contributions by the Limited
Partner and the Special Limited Partner to
the Partnership, (iii) the allocation of Income, Losses, Tax Credits and
distributions of Net Operating Income and other cash funds of the
Partnership
among the Partners, (iv) the determination
of the respective rights, obligations
and interests of the Partners to each other and to the
Partnership,
and (v)
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:
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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.
"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 Second 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
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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.
"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
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Section 10.4 hereof. In the event of any transfer of an interest in the
Partnership in accordance with the terms of
this Agreement, the transferee shall
succeed to the Capital Account of the
transferor to the extent it relates to the
transferred interest. The foregoing definition and the
other provisions of this
Agreement relating to the maintenance of
Capital Accounts are intended to comply
with Treasury Regulations Section 1.704-1(b), as amended or any successor
thereto, and shall be interpreted and
applied in a manner
consistent with such
Treasury Regulations.
"Capital
Contribution"
shall mean the total
amount of money, or the Gross
Asset Value of property contributed to the Partnership, if any, by all the
Partners or any class of Partners or any
one Partner as the case may be (or by a
predecessor-in-interest of such Partner or Partners), reduced by any such
capital which shall have been returned
pursuant to Section
7.3, Section 7.4, or
Section 7.5 of this Agreement. A loan to the Partnership by a
Partner shall not
be considered a Capital Contribution.
"Cash
Expenses" shall mean all operating
obligations of the
Partnership
(other than those covered by Insurance) including without limitation, the
payment of the monthly Mortgage payments,
the Management Agent fees, the monthly
Asset Management Fee, 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.
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"Completion of
Construction" shall
mean the date the Partnership receives
the required certificate of occupancy (or the local equivalent) for all 58
single family homes and 16 townhouse duplexes, 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 30, 2005.
"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 December
31, 2002 in the amount of $4,251,285,
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 South Trust Bank or any successor thereto.
"Construction
Loan" shall mean the
loan obtained from Construction Lender
in the principal amount of $2,450,000 at an
interest rate equal to South Trust
Bank Base Rate plus 2% per annum with a
maturity date of
September 24, 2004
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.
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"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
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.
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"Force
Majeure" shall mean any act of God, strike, lockout, or other
industrial disturbance, act of the public enemy, war,
blockage, public riot,
fire, flood, explosion, governmental
action, governmental delay or restraint.
"General
Partner(s)" shall mean Harold E. Buehler, Sr. and Jo Ellen
Buehler
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.
"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.
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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
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 74 buildings consisting
of 58 single family homes and 16 townhouse
duplexes for family
use and built in
accordance with the Project Documents. It shall also include all
furnishings,
equipment and personal property used in
connection with the operation thereof.
"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;
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<PAGE>
(b) any expenditures of the Partnership described in Code Section
705(a)(2)(B) or treated as Code Section
705(a)(2)(B)
expenditures
pursuant to
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 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;
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<PAGE>
(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;
(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 $5,925 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.
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<PAGE>
"Limited
Partner" shall mean
WNC Housing Tax Credit Fund VI, L.P., Series
11, 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 8% of gross revenues. The General Partner, on behalf of the Partnership,
shall insure that neither the Management
Agreement nor any
ancillary
agreement
shall provide for an initial rent-up fee, a set-up fee, any other similar
pre-management fee or recurring fee for compliance monitoring or the like
payable to the Management Agent,
General Partner, or
Developer. The
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
11
<PAGE>
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).
"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).
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<PAGE>
"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.
"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 58
single family homes and 16 townhouse duplexes
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
$93,598
for 2005, $337,535 for 2006, $365,930 for each of the years
2007 through 2014,
and $ $300,727 for 2015, which the General
Partner has projected to be the total
amount of LIHTC which will be allocated to the Limited Partner by the
Partnership, constituting 99.98% of the
aggregate amount of LIHTC of $3,660,030
to be available to the Partnership.
"Projected
Tax Credits" shall mean LIHTC in the aggregate amount of
$3,660,030.
"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.
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<PAGE>
"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
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.
"Syndication
Fee" shall mean the
fee payable to the General Partner in an
amount equal to $10,000 for the General Partner's services in forming the
Partnership, locating and approving the Limited
Partner and the Special Limited
Partner as the investors in the
Partnership,
negotiating
and finalizing
this
Partnership Agreement and for such other services referenced in Treasury
Regulations Section 1.709-2(B).
"Tax Credit"
shall mean any credit
permitted under the
Code or the law of
any state against the federal or a state
income tax liability of any Partner as
a result of activities or expenditures of the Partnership including, without
limitation, LIHTC.
"Tax
Credit Compliance Fee" shall mean the fee payable to the General
Partner in accordance with Section 9.2(f)
of this Agreement.
"Tax Credit
Conditions"
shall mean,
for the duration of the Compliance
Period, any and all restrictions including,
but not limited to: (a) the land use
restriction agreement required by the State Tax Credit
Agency to be
recorded
against the Project; and (b) any applicable
federal, state and local laws, rules
14
<PAGE>
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 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 150 L.P. 2002."
15
<PAGE>
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.
ARTICLE IV.
PURPOSE
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 4.1
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.
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<PAGE>
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.
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
$5,158,590
("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.
17
<PAGE>
Section 6.3
Operating Obligations.
(a) 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 $542,000, 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 50% of the available Net Operating
Income or Sale or Refinancing Proceeds in accordance with Article XI of this
Agreement.
Section 6.4
Other General Partner Loans.
Unless
provided elsewhere, after expiration of the Operating Deficit
Guarantee Period, with the Consent of the Special
Limited Partner, the
General
Partner may loan to the Partnership any
sums required by the Partnership and not
otherwise reasonably available to it. Any such loan
shall bear simple interest
(not compounded) at the 10-year
Treasury money market
rate in effect as of the
day of the General Partner loan, or, if lesser, the maximum legal rate. The
maturity date and repayment schedule of any such loan shall be
as agreed to by
the General Partner and the Special Limited
Partner. The terms of
any such loan
shall be evidenced by a written instrument.
The General Partner shall not charge
a prepayment penalty on any such loan. Any
loan in contravention of this Section
shall be deemed an invalid action taken by
the General Partner
and such advance
will be classified as a General
Partner Capital
Contribution.
Notwithstanding
this provision, the General Partner remains obligated to the Partnership,
Limited Partner and Special Limited Partner as required in
accordance with the
State limited partnership act, as amended
from time to time.
ARTICLE VII.
CAPITAL CONTRIBUTIONS OF LIMITED PARTNER
AND SPECIAL LIMITED PARTNER
Section 7.1
Original Limited Partner.
The Original
Limited Partner made a Capital Contribution of $100 Effective
as of the date of this Agreement,
the Original Limited
Partner's Interest has
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.
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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 $2,708,151, 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 or approval of
the Limited Partner's Acquisition Committee
approval, provided,
however that if
the Limited Partner's Acquisition Committee's approval is not granted for
any
reason on or before November 30, 2004, then the Limited Partner and Special
Limited Partner shall withdraw from the Partnership and neither the Limited
Partner nor the Special Limited Partner shall be obligated to make
any further
Capital Contribution payments.
(a) $1,354,211 (which includes the Special Limited Partner's Capital
Contribution of $271 of total equity shall
be payable upon the Limited Partner's
receipt and approval of the following
documents:
(1) a legal
opinion in a form substantially similar to the form of opinion
attached hereto as Exhibit B and
incorporated herein by this reference;
(2) a fully
executed Certification and Agreement in the form attached
hereto as Exhibit C and incorporated herein
by this reference;
(3) a copy of
the Title Policy;
(4) Insurance
required during construction;
(5) a copy of
the recorded grant deed (warranty deed);
(6) an
executed commitment from the Mortgage lender to provide the
Mortgage;
(7) a fully
executed Construction Loan;
(8) an executed
Development, Construction and Operating Budget Agreement;
(9) an executed
Construction
Completion, Operating
Deficit and Tax Credit
Guaranty Agreement;
(10) an executed
Development
Fee Agreement and
Development
Fee Guaranty
Agreement;
(11) the
construction draw disbursement procedure;
(12)
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;
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(13) 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.
Notwithstanding
the foregoing, the
first Capital Contribution payment will
be paid in installments based upon approved
draw requests in accordance with the
Construction Monitoring Agreement.
(b) $270,788 shall be payable upon the Limited Partner's receipt and
approval of the following documents:
(1) the
Construction
Inspector's
certification
of 25% completion of
the
total construction;
(2) any
documents previously not provided to the Limited Partner but
required pursuant to this Section 7.2 and
Sections 14.3(a) and (b); and
(3) copies of
all lien releases
(partial or final, as applicable) from the
Contractor and subcontractors; and
(4) a
determination by the
Special Limited
Partner that the
construction
and financing are In-Balance.
(c) $406,182 shall be payable upon the Limited Partner's receipt and
approval of the following documents:
(1) the
Construction
Inspector's
certification
of 50% completion of
the
total construction;
(2) any
documents previously not provided to the Limited Partner but
required pursuant to this Section 7.2 and
Sections 14.3(a) and (b);
(3) copies of
all lien releases
(partial or final, as applicable) from the
Contractor and subcontractors; and
(4) a
determination by the
Special Limited
Partner that the
construction
and financing are In-Balance.
(5) 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) $270,788 shall be payable upon the Limited Partner's receipt and
approval of the following documents:
(1) the
Construction
Inspector's
certification
of 75% completion of
the
total construction;
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<PAGE>
(2) any
documents previously not provided to the Limited Partner but
required pursuant to this Section 7.2 and
Sections 14.3(a) and (b);
(3) copies of
all lien releases
(partial or final, as applicable) from the
Contractor and subcontractors; and
(4) a
determination by the
Special Limited
Partner that the
construction
and financing are In-Balance.
(e) $135,394 shall be payable upon the Limited Partner's receipt and
approval of the following documents:
(1) a
certificate of occupancy (or equivalent evidence of local occupancy
approval if a permanent certificate is not available) on all the units in
the
Project confirming the units are being placed in service for their intended
purpose;
(2) a completion
certification in a
form substantially similar to the form
attached hereto as Exhibit D and incorporated herein by this reference,
indicating that the Improvements have been completed in accordance
with the
Project Documents;
(3) a letter
from the Contractor
in a form substantially similar to the
form attached hereto as Exhibit F and
incorporated
herein by this
reference
stating that all amounts payable to the Contractor have been paid in full and
that the Partnership is not in violation of
the Construction Contract;
(4) Insurance
required during operations;
(5) any
documents previously not provided to the Limited Partner but
required pursuant to this Section 7.2 and
Sections 14.3(a) and (b);
(6) copies of
all lien releases
(partial or final, as applicable) from the
Contractor and subcontractors; and
(7) 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.
(f) $189,552 shall be payable upon the Limited Partner's receipt and
approval of the following documents:
(1) Mortgage
Loan documents signed and the Mortgage funded;
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(2) 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);
(3) 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;
(4) 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;
(5) 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;
(6) Completion
of Construction;
(7) 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;
(8) any
documents previously not provided to the Limited Partner but
required pursuant to this Section 7.2 and
Sections 14.3(a) and (b);
(9) 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
(10) Debt Service Coverage of 1.15 for 90
consecutive
days immediately
prior to funding.
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.
(g) $71,236 shall be payable upon the Limited Partner's receipt and
approval of the following documents:
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<PAGE>
(1) a copy of
the recorded
declaration of
restrictive
covenants/extended
use agreement entered into between the Partnership and the State Tax Credit
Agency;
(2) 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;
(3) a fully
signed Internal Revenue Code Form 8609, or any successor form;
(4) 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;
(5) the audited
Partnership financial
statements required by
Section 14.2
for the year the Project is
placed-in-service ; and
(6) any
documents previously not provided to the Limited Partner but
required pursuant to this Section 7.2 and
Sections 14.3(a) and (b).
(h) $10,000
shall be payable upon the Special Limited Partner's approval of
the initial tenant files and any documents previously not provided to the
Limited Partner but required pursuant to this Section 7.2 and
Sections 14.3(a)
and (b). The initial tenant files will be reviewed at the Limited
Partner's
expense by an independent third-party. In the event that the independent
third-party and the Special Limited Partner
recommend corrections
to an initial
tenant file, the General Partner will cause
the Management Agent
to correct the
tenant file and provide the corrected
tenant file to the
Limited Partner.
The
Limited Partner may withhold all or any portion of 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 November
30, 2006;
(c) obtain
Permanent Mortgage Commencement by November 30, 2006;
23
<PAGE>
(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
(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 $0.74 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 $3,660,030 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 74%
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
24
<PAGE>
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
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 $93,598 in
2005 and $337,535
in
2006. In the event the total of the 2005
and 2006 Actual Tax
Credits are less
than the sum of such 2005 and 2006
Projected Annual Tax Credits then the Limited
Partner's Capital Contribution shall be reduced by
an amount equal to 74% times
the difference between the sum of the Projected Annual Tax Credits for 2005
and2006 and the sum of the Actual Tax
Credits for 2005 and
2006. If the sum
of
the 2005 and 2006 Actual Tax Credits are less than
the sum of the 2005 and 2006
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.
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<PAGE>
(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 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.
26
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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.
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.
27
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ARTICLE IX.
MANAGEMENT AND CONTROL
Section 9.1
Power and Authority of General Partner.
Subject to the
Consent of the Special Limited Partner or the consent of the
Limited Partner where required by this Agreement, and subject to the other
limitations and restrictions included in this Agreement, the General Partner
shall have complete and exclusive control
over the management of the Partnership
business and affairs, and shall have the right, power
and authority, on
behalf
of the Partnership, and in its name, to exercise all
of the rights, powers
and
authority of a partner of a partnership
without limited
partners. If there is
more than one General Partner, all acts, decisions or consents of the
General
Partners shall require the concurrence of all of the General Partners. If a
General Partner takes action without the authorization of all the General
Partners then such act, decision,
etc. shall not be
deemed a valid action taken
by the General Partners pursuant to this Agreement. No Limited Partner or
Special Limited Partner (except one who may
also be a General Partner, and then
only in its capacity as General Partner within the scope of its authority
hereunder) shall have any right to be active in the management of the
Partnership's business or investments or to
exercise any control thereover, nor
have the right to bind the Partnership in any contract,
agreement,
promise or
undertaking, or to act in any way whatsoever with respect to the control or
conduct of the business of the Partnership, except as otherwise specifically
provided in this Agreement.
Section 9.2
Payments to the General Partners and Others.
(a) The
Partnership
shall pay to the
Developer a
Development Fee in
the
amount of $375,000 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
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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.
(7) 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.
(8) 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 2006 equal to
15% of Net Operating Income but in no
event less than $7,000 (the "Minimum
Amount") for the Limited Partner's services
in assisting with the preparation of tax returns and the reports
required in
Section 14.2 and Section 14.3 of this Agreement. The minimum annual Asset
Management Fee of $7,000 shall be payable in monthly equal installments;
provided, however, that if in any year Net Operating
Income is insufficient to
pay the full $7,000, 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 35% of Net
Operating Income
commencing in 2006 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 35% of Net
Operating Income
commencing in 2006 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
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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:
(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.
(b) 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.
(c) 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.
(d) 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.
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<PAGE>
(e) 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:
(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;
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<PAGE>
(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;
(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;
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<PAGE>
(h) cause the
merger or other reorganization of the Partnership;
(i) dissolve the
Partnership,
or sell or dispose of
all or
substantially
all of the Partnership's assets;
(j) acquire any
real or personal
property (tangible or intangible) in
addition to the 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;
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<PAGE>
(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
(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;
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<PAGE>
(j) permit,
and cause the
Management Agent to permit, the Special Limited
Partner and its representatives: (1) to
have access to the Project and personnel
employed by the Partnership and by the Management Agent at all times during
normal business hours after reasonable notice; (2) to examine all agreements,
LIHTC compliance data and Plans and Specifications; and (3) to make copies
thereof;
(k) exercise
good faith in all
activities
relating to the
conduct of the
business of the Partnership, including the development, operation and
maintenance of the 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.
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<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 return
of capital 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:
(1) 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
(2) no such
reimbursement
shall be made for (A) rent or depreciation,
utilities, capital equipment or other such administrative items, and (B)
salaries, fringe benefits, travel expenses and other administrative items
incurred or allocated to any "controlling
person" of the General
Partner or any
Affiliate of the General Partner. For the purposes of this Section
9.9(b)(2),
"controlling person" includes, but is not limited to, any Person, however
titled, who performs functions for the General Partner
or any Affiliate of the
General Partner similar to those of: (i) chairman or member of the board of
directors; (ii) executive management, such as president, vice president or
senior vice president, corporate secretary or treasurer; (iii) senior
management, such as the vice president of an operating division who reports
directly to executive management; or (iv) those holding 5% or more equity
36
<PAGE>
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.
(e) All
conditions to the funding of the Construction Loan have been
met.
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<PAGE>
(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
38
<PAGE>
ordinance pertaining to any Hazardous
Substance,
and (5) of any claim
made or
threatened by any Person, other than a governmental agency, against the
Partnership or General Partner arising out of or resulting from
any Hazardous
Substance being present or released in, on
or around any part of the Project.
(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
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causing the Limited Partner to be liable for the
Partnership
obligations
is
undertaken by the Limited Partner.
(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
$5,000,000computed
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:
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<PAGE>
(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 (ii) the "Tax
Amount" as hereinafter defined. The Fair Market Value of the
Partnership shall
be determined after reduction for repayment of all
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 19.99% 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 apprais
