LOS LUNAS APARTMENTS LIMITED PARTNERSHIP
FIRST AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
Dated as of August 1, 1996
TABLE OF CONTENTS
Preliminary Statement 1
ARTICLE I 1
Defined Terms 1
ARTICLE II 19
Name and Business 19
2.1 Name; Continuation 19
2.2 Office and Resident Agent 19
2.3 Purpose 19
2.4 Term and Dissolution 19
ARTICLE III 20
Mortgage, Refinancing and Disposition of Property 20
3.1 Personal Liability 20
3.2 Refinancings 21
3.3 Sale of Assets 21
3.4 Real Estate Commissions 21
ARTICLE IV 21
Partners; Capital 21
4.1 Capital and Capital Accounts 21
4.2 General Partner 22
4.3 Investment Limited Partner, Special Limited Partner and
Original Limited Partner 23
4.4 Liability of the Limited Partners 23
4.5 Special Rights of the Special Limited Partner 23
4.6 Meetings 26
ARTICLE V 26
Capital Contributions of the Investment Limited Partner
and the Special Limited Partner 26
5.1 Payments 26
5.2 Return of Capital Contributions 30
ARTICLE VI 33
Rights, Powers and Duties of General Partner 33
6.1 Authorized Acts 33
6.2 Restrictions on Authority 34
6.3 Personal Services; Other Business Ventures 36
6.4 Business Management and Control 36
6.5 Duties and Obligations 37
6.6 Representations and Warranties 40
6.7 Liability on Mortgages 43
6.8 Indemnification of the General Partner 44
6.9 Indemnification of the Partnership and the Limited Partners 45
6.10 Operating Deficits 45
6.11 Obligation to Complete the Construction of the Apartment
Complex 46
6.12 Certain Payments to the General Partner and Others 46
6.13 Delegation of General Partner Authority 47
6.14 Assignment to Partnership 48
6.15 Contracts with Affiliates 48
6.16 Tax Matters Partner 48
ARTICLE VII 50
Withdrawal of a General Partner; New General Partners 50
7.1 Voluntary Withdrawal 50
7.2 Reconstitution 50
7.3 Successor General Partner 51
7.4 Interest of Predecessor General Partner 52
7.5 Event of Bankruptcy as to a General Partner; Removal of a
General Partner and Transfer of Its Interest 53
7.6 Designation of New General Partners 54
7.7 Amendment of Certificate; Approval of Certain Events 55
7.8 Valuation and Sale of Interest of Former General Partner 55
ARTICLE VIII 56
Transferability of Limited Partner Interests 56
8.1 Assignments 56
8.2 Substituted Limited Partner 57
8.3 Restrictions 57
ARTICLE IX 58
Borrowings 58
ARTICLE X 58
Profits, Losses, Tax Credits, Distributions and Capital Accounts 58
10.1 Profits, Losses and Tax Credits 58
10.2 Cash Distributions Prior to Dissolution 59
10.3 Distributions Upon Dissolution 61
10.4 Special Provisions 62
10.5 Authority of the General Partner to Vary Allocations to
Preserve and Protect the Partners' Intent 66
ARTICLE XI 67
Management Agent 67
11.1 General 67
11.2 Fees 67
11.3 Removal and Replacement 68
11.4 Lack of Management Agent 68
ARTICLE XII 68
Books and Records, Accounting, Tax Elections, Etc. 68
12.1 Books and Records 68
12.2 Bank Accounts 69
12.3 Auditors 69
12.4 Cost Recovery and Elections 70
12.5 Special Basis Adjustments 70
12.6 Fiscal Year 70
12.7 Information to Partners 70
12.8 Expenses of the Partnership 73
ARTICLE XIII 75
General Provisions 75
13.1 Restrictions by Reason of Section 708 of the Code 75
13.2 Amendments to Certificates 75
13.3 Notices 75
13.4 Word Meanings 76
13.5 Binding Effect 76
13.6 Applicable Law 76
13.7 Counterparts 76
13.8 Financing Regulations 76
13.9 Separability of Provisions 77
13.10 Paragraph Titles 77
13.11 Amendment Procedure 77
13.12 Extraordinary Limited Partner Expenses 77
13.13 Time of Admission 78
13.14 HUD Provisions 78
LOS LUNAS APARTMENTS LIMITED PARTNERSHIP
FIRST AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
Preliminary Statement
Los Lunas Apartments Limited Partnership (the "Partnership") was formed
as a New Mexico limited partnership pursuant to an Agreement of Limited
Partnership dated August __, 1995 (the "Original Agreement") by and between
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇"), as general partner (the "General Partner") and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ and ▇. ▇▇▇▇ ▇▇▇▇▇, as the limited partners (the "Original
Limited Partners"), and a Certificate of Limited Partnership (the
"Certificate") filed in the Filing Office on October 5, 1995.
The parties desire to amend and restate the Original Agreement to (i)
provide for the withdrawal from the Partnership of the Original Limited
Partners, (ii) provide for the admission of BOSTON CAPITAL TAX CREDIT FUND IV
L.P., a Delaware limited partnership ("BCTCF"), as the Investment Limited
Partner, (iii) provide for the admission of BCTC 94, INC., a Delaware
corporation as the Special Limited Partner, and (iv) more fully set forth the
rights and obligations of the Partners.
In consideration of the mutual agreements set forth herein, it is agreed
and certified, and the Original Agreement is hereby amended and restated in its
entirety as follows:
ARTICLE I
Defined Terms
The defined terms used in the Agreement shall have the meanings specified
below:
"Act" means the Revised Uniform Limited Partnership Act as in effect in
the State.
"Actual Credit" means, with respect to a particular Fiscal Year, the
total amount of Tax Credit properly allocable by the Partnership to the
Investment Limited Partner for such Fiscal Year. The Actual Credit shall be
retroactively revised if the amount of Tax Credit properly allocable to the
Investment Limited Partner is revised as the result of an audit or is
recaptured.
"Additional Limited Partner" means any holder of an Interest designated
as an Additional Limited Partner pursuant to the provisions of Section 4.5(b)
or Section 7.4.
"Adjusted Capital Account Deficit" means, with respect to any Partner,
the deficit balance, if any, in such Partner's Capital Account as of the end of
a Partnership Fiscal Year, after giving effect to the following adjustments:
(i) Such Capital Account shall be increased by the amount of any
Deficit Restoration Obligation of such Partner.
(ii) Such Capital Account shall be decreased by the Qualified Income
Offset Items.
The foregoing definition of Adjusted Capital Account Deficit and the
application of such term in the manner provided in this Agreement is intended
to comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Allocation
Regulations and shall be interpreted consistently therewith.
"Admission Date" means the first date on which all parties hereto shall
have executed this Agreement.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, reasonable
amounts paid in settlement, liabilities, obligations, taxes, liens, losses,
expenses and fees, including court costs and reasonable attorneys' fees and
expenses.
"Affiliate" means as to a specified Person, (i) such Person; (ii) each
member of the Immediate Family of such Person; (iii) each legal representative,
successor or assignee of any Person referred to in the preceding clauses (i) or
(ii); (iv) each trustee of a trust for the benefit of any Person referred to in
the preceding clauses (i) or (ii); or (v) any other Person (a) who directly or
indirectly controls, is controlled by, or is under common control with such
Person, (b) who is an officer of, director of, partner in or trustee of, or
serves in a similar capacity with respect to, such Person or of which such
Person is an officer, director, partner or trustee, or with respect to which
such Person serves in a similar capacity, (c) who, directly or indirectly, is
the beneficial owner of ten percent (10%) or more of any class of equity
securities of such Person or of which such Person is directly or indirectly
the owner of ten percent (10%) or more of any class of equity securities, (d)
who is an officer, director, general partner, trustee or holder of ten percent
(10%) or more of the voting securities or beneficial interests of any Person
referred to in the foregoing clauses (v) (b) or (v) (c), or (e) who, whatever
such Person's title, performs functions for such Person or any Affiliate of
such Person similar to a Chairman or member of the Board of Directors, or
executive officer such as the President, Executive Vice President or Senior
Vice President, Corporate Secretary, or Treasurer, or any Person holding a five
percent (5%) or more equity interest in such Person, or any Person having the
power to direct or cause the direction of such Person whether through the
ownership of voting securities, by contract or otherwise. An Affiliate of any
Investment Limited Partner or of any Investment General Partner does not
include a Person who is a partner in a Partnership or joint venture with any
Investment Limited Partner or any other Affiliate of any Investment Limited
Partner if such Person is not otherwise an Affiliate of any Investment Limited
Partner or any Investment General Partner. For purposes of this definition,
the term Affiliate shall not be deemed to include any law firm (or member or
associate thereof) providing legal services to any Investment Limited Partner,
any Investment General Partner, the General Partner or any Affiliate of any of
them.
"AFR" means the "applicable federal rate" as defined and determined in
the manner set forth in Section 1274 of the Code.
"Agency" means the Credit Agency or any other Governmental Authority with
jurisdiction over the Apartment Complex, or the business and operations of the
Partnership.
"Agreement" means this First Amended and Restated Agreement of Limited
Partnership, including Schedule A, as amended from time to time.
"Allocation Regulations" means the Treasury Regulations issued under
Sections 704(b) and 752 of the Code, as the same may be modified or amended
from time to time. In the event that the Allocation Regulations are revised or
amended subsequent to the date of this Agreement, references herein to sections
or paragraphs of the Allocation Regulations shall be deemed to be references to
the applicable sections or paragraphs of the Allocation Regulations as then in
effect.
"Apartment Complex" means the real property located in Los Lunas,
Valencia County, New Mexico, as more fully described in Exhibit A attached
hereto, together with (i) all buildings and other improvements constructed or
to be constructed thereon and (ii) all furnishings, equipment and personal
property located thereon or otherwise covered by the Mortgages.
"Applicable Percentage" has the meaning set forth in Section 42(b) of the
Code.
"Applied Amounts" shall have the meaning set forth in Section 6.10.
"Asset Management Fee" means the fee payable to BCTCF or an Affiliate
thereof pursuant to the provisions of Section 6.12(b).
"Assignee" shall have the meaning set forth in Section 4.1(c).
"Auditors" means ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ of Albuquerque, New Mexico, or such other
firm of independent certified public accountants as may be engaged by the
General Partner with the Consent of the Special Limited Partner for the
purposes of preparing the Partnership's income tax returns, auditing the books
and records of the Partnership and certifying financial reports of the
Partnership.
"BCTC 94" means BCTC 94, Inc., a Delaware corporation, and its
successors.
"BCTCF" means Boston Capital Tax Credit Fund IV L.P., a Delaware limited
partnership, and its successors.
"Best Knowledge" shall mean and include, in the case of a specified
Person, (i) actual knowledge and (ii) that knowledge which a prudent
businessperson (including, in the case of an Entity, the general or managing
partners, officers, directors and key employees of such Entity) should have
obtained in the management of his or her business affairs after making due
inquiry and exercising due diligence with respect thereto. In connection
therewith, the knowledge (both actual and constructive) of any general or
managing partner, director, officer or key employee of an Entity shall be
deemed to be the knowledge of the Entity.
"Capital Account" has the meaning set forth in Section 4.1(b).
"Capital Contribution" means the total value of cash or property
contributed and agreed to be contributed to the Partnership by each Partner, as
set forth in Schedule A. Any reference in this Agreement to the Capital
Contribution of a then Partner shall include a Capital Contribution previously
made by any prior Partner for the Interest of such then Partner.
"Capital Proceeds" means the proceeds of a Capital Transaction.
"Capital Transaction" means a refinancing of any Partnership indebtedness
or a sale, exchange, eminent domain taking, damage or destruction (whether
insured or uninsured), insured title defect or other disposition of all or any
portion of the Apartment Complex (other than an event generating proceeds of
any business or rental interruption insurance), but excluding the payment of
Capital Contributions.
"Carryover Certification" means the date on which the Investment Limited
Partner shall have received, in a form and in substance satisfactory to the
Investment Limited Partner, the certification of the Auditors that, with
respect to the carryover allocation of 1994 Tax Credits, as of a date no later
than December 31, 1994, the Partnership had incurred capitalizable costs with
respect to the Apartment Complex of at least ten per cent (10%) of the
Partnership's reasonably expected basis in the Apartment Complex as of December
31, 1996, so that each building in the Apartment Complex constitutes a
"qualified building" for the purposes of Section 42(h)(1)(E)(ii) of the Code.
"Cash Available for Debt Service Requirements" for any period, means the
excess of (i) all cash actually received by the Partnership on a cash basis
from normal operations during such period, but specifically excluding the
proceeds of insurance (other than business or rental interruption insurance),
loans, Capital Transactions or Capital Contributions over (ii) all cash
requirements of the Partnership properly allocable to such period of time on an
accrual basis (not including distributions to Partners out of Cash Flow of the
Partnership or fees payable from Cash Flow) and, on an annualized basis, all
projected expenditures, including those of a seasonal nature, which might
reasonably be expected to be incurred on an unequal basis during a full annual
period of operation as determined by the Auditors but specifically excluding
Debt Service Requirements. For purposes of this definition, (i) cash
requirements of the Partnership shall include to the extent not otherwise
covered above, full funding of reserves (including, without limitation, funding
of the Replacement Reserve), normal repairs, real estate taxes at fully
assessed levels assuming a fully improved property and necessary capital
improvements and (ii) if free rent or other rental concessions shall have been
granted to tenants, the calculation of rental revenues under clause (i) of the
preceding sentence shall be adjusted so that the effect of such concessions is
amortized equally over the term of all leases (excluding renewal periods) to
which it applies.
"Cash Expenditures" means all disbursements of cash during a specified
Fiscal Year (other than distributions to Partners), including, without
limitation, payment of operating expenses, payment of principal and interest on
the Partnership's indebtedness (other than payments of principal and interest
on any Subordinated Loans or Voluntary Loans), the cost of repairs to the
Apartment Complex, amounts allocated to reserves by the General Partner and the
payment of any fees other than the Asset Management Fee, the Partnership
Management Fee and the Development Fee. In addition, the net increase during
such Fiscal Year in any escrow account or reserve maintained by or for the
Partnership shall be considered a Cash Expenditure during such Fiscal Year.
The term Cash Expenditures shall not include Development Costs. Cash
Expenditures payable to Partners or Affiliates of Partners shall be paid after
Cash Expenditures payable to third parties.
"Cash Flow" means the excess of Cash Receipts over Cash Expenditures.
Cash Flow shall be determined separately for each Fiscal Year or portion
thereof.
"Cash Receipts" means all cash receipts of the Partnership from whatever
source derived other than from a Capital Transaction, including, without
limitation, rental revenues, government subsidy payments, any amounts
attributable to construction savings and Capital Contributions (except to the
extent construction savings and/or Capital Contributions are used to pay
Development Costs). In addition, the net reduction in any Fiscal Year in the
amounts of any escrow account or reserve maintained by or for the Partnership
(including, without limitation, the Operating Reserve and the Replacement
Reserve) shall be considered a cash receipt of the Partnership for such Fiscal
Year. Notwithstanding the foregoing, at the election of the General Partner,
▇▇▇▇ Receipts received near the end of a Fiscal Year and intended for use in
meeting the Partnership's obligations (including the cost of acquiring assets
or paying debts or expenses) in the subsequent Fiscal Year shall not be deemed
to be received until such following Fiscal Year.
"Certificate" shall have the meaning set forth in the Preliminary
Statement.
"Class Contribution" means the aggregate Capital Contributions of all
members of a particular class of Partners (i.e., the General Partner, the
Investment Limited Partner, the Special Limited Partner or any Additional
Limited Partner).
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and the regulations (permanent and temporary) issued thereunder.
References herein to any Code section shall include any successor provisions.
"Commencement Date" means the first day of the month in which the
Admission Date occurs.
"Competitive Real Estate Commission" means that real estate or brokerage
commission paid for the purchase or sale of the Apartment Complex or other
Partnership property which is reasonable, customary and competitive in light of
the size, type and location of the Apartment Complex or other property.
"Completion Date" means the later of: (i) the date the Investment Limited
Partner shall have received copies of all requisite certificates or permits
permitting occupancy of 100% of the apartments units in the Apartment Complex
as issued by each Agency having jurisdiction; provided, however, that if such
certificates or permits are of a temporary nature, the Completion Date shall
not be deemed to have occurred unless the General Partner certifies to the
Investment Limited Partner that any work remaining to be completed is for so-
called "punch list items" and the General Partner knows of no reason why
permanent certificates of occupancy will not be issued upon completion of such
"punch list items"; or (ii) the date as of which the Inspecting Consultant
certifies that the work to be performed by the Contractor under the
Construction Contract is substantially complete. Any representation by the
General Partner under this Agreement that the Completion Date has occurred
shall be subject to confirmation by the Special Limited Partner pursuant to a
physical inspection of the Apartment Complex; provided, however, that in the
event that the Special Limited Partner does not make such physical inspection
of the Apartment Complex within 10 business days after having received a
written representation of the General Partner that the Completion Date has
occurred, then the Special Limited Partner will be deemed to have waived the
physical inspection requirement.
"Compliance Period" means the fifteen (15)-year period commencing with
the first year of the Credit Period.
"Consent of the Investment Limited Partner" means the prior written
consent or approval of the Investment Limited Partner which, unless otherwise
specifically provided herein, may be given or withheld in its sole discretion.
The Consent of the Investment Limited Partner shall be exercised by and through
the Investment General Partner, acting in the name and on behalf of the
Investment Limited Partner.
"Consent of the Special Limited Partner" means the prior written consent
or approval of the Special Limited Partner which, unless otherwise specifically
provided herein, may be given or withheld in its sole discretion.
"Construction Contract" means the construction contract dated as of
July 10, 1995, by and between the Contractor and the Partnership, as amended.
"Construction Lender" means Ranchers Bank or any other Lender providing
construction financing for the Apartment Complex.
"Construction Loan" means the construction loan, in the amount of
$1,414,025 to be provided by the Construction Lender to the Partnership
pursuant to the terms of the Construction Loan Documents.
"Construction Loan Agreement" means the Loan Agreement dated September 6,
1995 by and between the Construction Lender and the Partnership, as amended.
"Construction Loan Documents" means the Construction Note, the
Construction Mortgage, the Construction Loan Agreement, and all other documents
executed and/or delivered in connection with the Construction Loan.
"Construction Mortgage" means the Mortgage securing the Partnership's
obligations under the Construction Note.
"Construction Note" means the promissory note executed by the Partnership
to evidence its obligations with respect to the Construction Loan, which note
is or shall be secured by the Construction Mortgage.
"Construction Permitting Date" means the first date upon which the
Partnership shall have received the Requisite Approvals for the commencement of
the construction and operation of the Apartment Complex in accordance with the
Plans and Specifications therefor.
"Contractor" means Mondel Enterprises, a New Mexico sole proprietorship,
and its successors.
"Controlling Person" has the meaning set forth in Section 15 of the
Securities Act of 1933, as amended.
"Cost Certification" means the date upon which each Limited Partner shall
have received the written certification of the Auditors, in a form and in
substance satisfactory to the Special Limited Partner, as to the itemized
amounts of the construction and development costs of the Apartment Complex and
the Actual Credit pertaining to each building in the Apartment Complex.
"Credit Agency" means the New Mexico State Housing Division, and its
successors.
"Credit Period" has the meaning set forth in Section 42(f)(1) of the
Code.
"Credit Recovery Loan" means a constructive interest-bearing advance of
the Investment Limited Partner, as more fully described in Section 5.1(g).
Credit Recovery Loans and interest thereon shall not be treated as loans or
interest, respectively, for accounting, tax or liability purposes or for the
purposes of Section 6.2(a)(i). For the purposes of Article X, the term Credit
Recovery Loan shall not include any portion of such a deemed advance which
shall have theretofore been paid to the Investment Limited Partner.
"Credit Shortfall" shall have the meaning set forth in Section 5.1(g).
"Debt Service Coverage Ratio" means, for any period with each month
considered individually, a fraction, the numerator of which is the Cash
Available for Debt Service Requirements with respect to such period and the
denominator of which is the Debt Service Requirements for such period. The
achievement by the Partnership of a specified Debt Service Coverage Ratio shall
be confirmed by the Auditors and shall be subject to the approval of the
Special Limited Partner, which shall not be unreasonably withheld, provided,
however, that no objection by the Special Limited Partner to the determination
of the Auditors shall be valid unless the General Partner is notified of such
objection, and the specific reasons therefor, within seven (7) business days
following the receipt by the Special Limited Partner of the Auditor's
determination letter and in the event that the Special Limited Partner does not
so notify the General Partner within such seven business day period, the
Special Limited Partner will be deemed to have waived its right to object to
such determination.
"Debt Service Requirements" means for any period, all debt service,
reserve, mortgage insurance premium, tax and insurance escrows and/or other
cash requirements imposed with respect to the Mortgage or any other
indebtedness (except for the Subordinated Loans and Voluntary Loans) properly
allocable to such period of time on an annualized accrual basis as determined
by the Auditors. To the extent the relevant period includes any period prior
to Permanent Mortgage Commencement, Debt Service Requirements for such period
shall be computed by adding to the foregoing amounts the amount (if any) by
which the debt service on such Permanent Loan for such period beginning after
principal amortization has commenced exceeds the actual debt service on such
Permanent Loan (and any previous Mortgage Loan which may have then been in
place) for the relevant period.
"Deficit Restoration Obligation" means, for each Partner, the sum of (i)
any amounts which such Partner is obligated to restore to the Partnership in
accordance with the provisions of Sections 1.704-1(b)(2)(ii)(c), 1.704-
1(b)(2)(ii)(h) or any other applicable provisions of the Allocation
Regulations, (ii) such Partner's Share of Partnership Minimum Gain if any, and
(iii) such Partner's Share of Partner Nonrecourse Debt Minimum Gain, if any.
"Designated Net Worth Requirements" means as of the date of
determination, such standards or criteria (relating to net worth or other
characteristics) as may be (i) set forth in Revenue Procedure 89-12 or any
other regulations, memoranda, published ruling or revenue procedure of the
Service for classification of the Partnership for federal income tax purposes
as a partnership rather than an association taxable as a corporation, or (ii)
sufficient to support the issuance by tax counsel approved by each Investment
Limited Partner of an opinion to the same effect.
"Developer" means ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, and its successors.
"Development Agreement" means the Development Agreement, dated as of
August 1, 1996, by and between the Developer and the Partnership.
"Development Costs" means any and all costs and expenses necessary to (i)
cause the construction of the Apartment Complex to be completed, in a good and
workmanlike manner, free and clear of all mechanics', materialmen's or similar
liens, in accordance with the Plans and Specifications, (ii) equip the
Apartment Complex with all necessary and appropriate fixtures, equipment and
articles of personal property (including, without limitation, refrigerators and
ranges), (iii) obtain all required certificates of occupancy for the apartment
units and other space in the Apartment Complex, (iv) pay the Development Fee,
(v) finance the construction of the Apartment Complex and achieve Permanent
Mortgage Commencement in accordance with the provisions of the Project
Documents, (vi) discharge all Partnership liabilities and obligations arising
out of any casualty generating insurance proceeds for the Partnership, (vii)
fund any Partnership reserves required hereunder or under any of the Project
Documents, (viii) repay and discharge the Construction Loan, and (ix) pay any
other costs or expenses necessary to achieve the Completion Date and Permanent
Mortgage Commencement.
"Development Fee" means the fees payable by the Partnership to the
Developer pursuant to the terms of the Development Agreement for its services
in connection with the development and construction of the Apartment Complex.
"Disposition" (including the forms Dispose and Disposing) means, as to a
specified Partner, the assignment, sale, transfer, exchange or other
disposition of all or any part of its Interest.
"Economic Risk of Loss" has the meaning set forth in Treasury Regulation
Section 1.752-2.
"Eligible Basis" has the meaning set forth in Section 42(d) of the Code.
"Entity" means any Person, general partnership, limited partnership,
limited liability company, corporation, joint venture, trust, business trust,
cooperative or association.
"Event of Bankruptcy" means with respect to any Person,
(i) the entry of a decree or order for relief by a court having
jurisdiction in respect of such Person in an involuntary case under
the federal bankruptcy laws, as now or hereafter constituted, or
any other applicable federal or state bankruptcy, insolvency or
other similar law, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or similar official) of such
Person or for any substantial part of his property, or ordering the
winding-up or liquidation of his affairs and the continuance of any
such decree or order unstayed and in effect for a period of sixty
(60) consecutive days;
(ii) the commencement by such Person of a voluntary case under the
federal bankruptcy laws, as now constituted or hereafter amended,
or any other applicable federal or state bankruptcy, insolvency or
other similar law, or the consent by him to the appointment of or
taking possession by a receiver, liquidator, assignee, trustee,
custodian, sequestrator (or similar official) of such Person or for
any substantial part of his property, or the making by him of any
assignment for the benefit of creditors, or the taking of corporate
action by the Person in furtherance of any of the foregoing; or
(iii) the commencement against such Person of an involuntary case under
the federal bankruptcy laws, as now constituted or hereafter
amended, which has not been vacated, discharged or bonded within
sixty (60) consecutive days.
"Event of Default" shall have the meaning set forth in Section 5.1(h).
"Extended Use Agreement" means the extended use housing commitment to be
executed by the Partnership in accordance with the requirements of the Credit
Agency and the provisions of Section 42(h)(6)(A) of the Code.
"Filing Office" means the Office of the Secretary of State of the State
of New Mexico.
"Fiscal Year" means the twelve-month period which begins on the first day
of January and ends on the thirty-first day of December of each calendar year
(or ends on the date of final dissolution for the year in which the Partnership
is wound up or dissolved).
"General Partner" means ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and any Person who becomes a
General Partner as provided herein, in its capacity as a general partner of the
Partnership. At any and all times where there is more than one General
Partner, the term General Partner shall mean such General Partners.
"Governmental Authority" means the Credit Agency or any other federal,
state or local governmental authority having jurisdiction over the particular
matter to which reference is being made.
"Gross Asset Value" means, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
(i) The initial Gross Asset Value of any asset contributed by a Partner
to the Partnership shall be the gross fair market value of such
asset, as determined by the contributing Partner and the
Partnership;
(ii) The Gross Asset Values of all Partnership assets shall be adjusted
to equal their respective gross fair market values, as determined
by the General Partner, as of the following times: (a) 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; (b) 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 (c) the
liquidation of the Partnership within the meaning of Section
1.704-1(b)(2)(ii)(g) of the Allocation Regulations; provided,
however, that the adjustments pursuant to clauses (a) and (b) above
shall be made 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;
(iii) The Gross Asset Value of any Partnership asset distributed to any
Partner shall be the gross fair market value of such asset on the
date of distribution; and
(iv) 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 Section
1.704-1(b)(2)(iv)(m) of the Allocation Regulations and Section 4.1
hereof; provided, however, that Gross Asset Values shall not be
adjusted pursuant to this clause (iv) to the extent that the
General Partner determines that an adjustment pursuant to clause
(ii) hereof is necessary or appropriate in connection with a
transaction that would otherwise result in an adjustment pursuant
to this clause (iv).
If the Gross Asset Value of an asset has been determined or adjusted
pursuant to Section (i), (ii) or (iv) hereof, such Gross Asset Value shall
thereafter be adjusted by the depreciation taken into account with respect to
such asset for purposes of computing Profits or Losses.
"Hazardous Material" has the collective meanings given to the terms
"hazardous material", "hazardous substances" and "hazardous wastes" in the
Federal Comprehensive Environmental Response, Compensation and Liability Act of
1980, 42 U.S.C. Sec. 9601 et seq., as amended, and to the term "radioactive
materials" in the context of the Atomic Energy Act, 28 U.S.C. Sec. 2344, and
also includes any meanings given to such terms in any similar state or local
statutes, ordinances, regulations or by-laws. The term Hazardous Material also
includes oil and any other substance known to be hazardous.
"HUD" means the United States Department of Housing and Urban
Development.
"Immediate Family" means with respect to any Person, such Person's
spouse, parents, parents-in-law, descendants, nephews, nieces, brothers,
sisters, brothers-in-law, sisters-in-law, children-in-law and
grandchildren-in-law.
"Includable Items" shall have the meaning set forth in Section 6.11.
"Initial Adjustment Date" shall have the meaning set forth in Section
5.1(e).
"Initial 100% Occupancy Date" means the first date on which not less than
100% of the 38 apartment units in the Apartment Complex shall have been leased
to, and not less than 100% of such apartments units shall be physically
occupied by tenants on such date meeting the terms of the Minimum Set-Aside
Test under executed leases at rentals meeting the requirements of the Rent
Restriction Test.
"Initial Operating Period" means the period commencing on the Completion
Date and ending on the last day of the sixtieth (60) month following such date.
"Inspecting Consultant" means the consultant retained by any Lender
(including, without limitation, the Construction Lender) to monitor the
progress of the construction of the Apartment Complex and to certify as to the
completion of such construction.
"Installment" means an installment of the Investment Limited Partner's
Capital Contribution paid or payable to the Partnership pursuant to
Section 5.1.
"Interest" means the entire 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.
"Invested Amount" means (i) as to the Investment Limited Partner, an
amount equal to the Capital Contribution of the Investment Limited Partner
divided by .73 and (ii) as to any other Partner, an amount equal to its paid-in
Capital Contribution.
"Investment General Partner" means Boston Capital Associates IV L.P., a
Delaware limited partnership, in its capacity as the general partner of the
Investment Limited Partner, and any other Person who may become a successor or
additional general partner of the Investment Limited Partner.
"Investment Limited Partner" means BCTCF and any Person or Persons who
replace it as Substituted Limited Partner, but shall not include any Additional
Limited Partner.
"Investment Partnership Agreement" means the Agreement of Limited
Partnership of the Investment Limited Partner, as amended from time to time.
"Lender" means any Person (other than the General Partner or its
Affiliates) who makes a loan to the Partnership, whether or not such loan is
secured by a Mortgage, or the successors and assigns of such Person in such
capacity.
"Limited Partners" means the Investment Limited Partner, the Special
Limited Partner and any Additional Limited Partner.
"Liquidating Event" shall have the meaning set forth in Section 2.4.
"Managing General Partner" means any Person designated as such pursuant
to the provisions of Section 6.4.
"Management Agent" means Mondel Enterprises, a New Mexico corporation in
its capacity as the initial management and rental agent for the Apartment
Complex, and any successor management and rental agent designated or appointed
at any time.
"Management Agreement" means the agreement between the Partnership and
the Management Agent providing for the management of the Apartment Complex.
"Management Fee" means the Management Fee to which reference is made in
Section 11.1.
"Material Agreement" means any agreement to which the Partnership is a
party or to which the Apartment Complex is subject, the termination of which
would have a material adverse impact on the Apartment Complex or the business
and operations of the Partnership.
"Minimum Set-Aside Test" means the set aside test selected by the
Partnership pursuant to Section 42(g) of the Code whereby at least 40% of the
units in the Apartment Complex must be occupied by individuals with incomes
equal to 60% or less of area median income, as adjusted for family size.
"Mortgage" means any mortgage indebtedness of the Partnership evidenced
by any Note and secured by any mortgage on the Apartment Complex from the
Partnership to any Lender; and, where the context admits, the term "Mortgage"
shall mean and include any of the mortgages securing said indebtedness and any
other documents pertaining to said indebtedness which were required by the
Lender as a condition to making such Mortgage Loan. In case any Mortgage is
replaced by any subsequent mortgage or mortgages, such term shall refer to any
such subsequent mortgage or mortgages. The term "mortgage" means any mortgage,
mortgage deed, deed of trust, deed to secure debt or any similar security
instrument, and "foreclose" and words of like import include the exercise of a
power of sale under a mortgage or comparable remedies.
"Mortgage Loan" means a loan to the Partnership made by any Lender and
secured by a Mortgage.
"Mortgage Loan Documents" means the Construction Loan Documents and/or
the Permanent Loan Documents, as the context may require.
"Nonrecourse Debt" or "Nonrecourse Liability" means any indebtedness for
which none of the Partners has any Economic Risk of Loss other than through his
or its interest in the Partnership Property securing such indebtedness, as
defined in Section 1.752-1(a)(2) of the Allocation Regulations.
"Nonrecourse Deductions" has the meaning set forth in Section 1.704-
2(b)(1) of the Allocation Regulations.
"Note" means and includes any Note from the Partnership to a Lender
evidencing a Mortgage Loan, and shall also mean and include any Note
supplemental to said original Note issued to a Lender or any Note issued to a
Lender in substitution for any such original Note.
"Operating Deficit" means, for any specified period of time, the amount
by which the Cash Receipts of the Partnership are less than the amount
necessary to pay all Cash Expenditures of the Partnership.
"Operating Profits or Losses" means, with respect to any Fiscal Year, the
Profits or Losses of the Partnership for such Fiscal Year other than Profits or
Losses from a Capital Transaction.
"Operating Reserve" shall have the meaning set forth in Section
6.5(e)(ii).
"Original Agreement" has the meaning set forth in the Preliminary
Statement.
"Original Limited Partner" has the meaning set forth in the Preliminary
Statement.
"Partner" means any General Partner or Limited Partner.
"Partner Nonrecourse Debt" has the meaning set forth in Section 1.704-
2(b)(4) of the Allocation Regulations.
"Partner Nonrecourse Debt Minimum Gain" has the meaning set forth in
Sections 1.704-2(i)(2) and (3) of the Allocation Regulations.
"Partner Nonrecourse Deductions" has the meaning set forth in Section
1.704-2(i)(1) of the Allocation Regulations.
"Partnership" means the limited partnership continued pursuant to this
Agreement.
"Partnership Management Fee" shall have the meaning set forth in
Section 6.12(c).
"Partnership Minimum Gain" has the meaning set forth in Section
1.704-2(d) of the Allocation Regulations.
"Percentage Interests" means the interests of the Partners in Profits and
Losses, tax-exempt income, non-deductible, non-capitalizable expenditures and
Tax Credits, as set forth in Schedule A.
"Permanent Lender" means N.M. Mortgage Finance Authority or any other
Lender providing permanent financing for the Apartment Complex who has been
approved by the Special Limited Partner and the General Partner, except as
otherwise provided in Section 3.2.
"Permanent Loan" means any permanent loan provided by the Permanent
Lender to the Partnership pursuant to the terms of the Permanent Loan
Documents.
"Permanent Loan Commitment" means the commitment for permanent financing
from the Permanent Lender dated April 26, 1996.
"Permanent Loan Commitment Date" means the date on which the Partnership
has received a commitment for permanent financing from the Permanent Lender in
form and substance satisfactory to the Special Limited Partner.
"Permanent Loan Conditions" means, with respect to a proposed Permanent
Loan, that (a) such Permanent Loan (i) has a term of not less than 40 years,
(ii) has an amortization schedule not longer than 40 years, (iii) is in a
principal amount of not more than $1,250,000 and (b) when such Permanent Loan
is in place, the Debt Service Coverage Ratio of the Partnership is projected to
be not less than 1.15 to 1.00.
"Permanent Loan Documents" means the Permanent Note, the Permanent
Mortgage and all other documents executed and/or delivered in connection with
the Permanent Loan.
"Permanent Mortgage" means the Mortgage securing the Partnership's
obligations under the Permanent Note.
"Permanent Mortgage Commencement" means the payment and discharge of the
Construction Loan and the execution and delivery of the Permanent Loan
Documents.
"Permanent Note" means the Promissory Note to be executed by the
Partnership to evidence its obligations with respect to the Permanent Loan,
which Note shall be secured by the Permanent Mortgage.
"Person" means any individual or Entity.
"Plans and Specifications" means the plans and specifications for the
construction of the Apartment Complex, including, without limitation,
specifications for materials, and all properly approved amendments and
modifications thereof.
"Prime Rate" means the rate of interest announced from time to time by
the Wall Street Journal as its base rate.
"Profits or Losses" shall have the meaning set forth in Section
10.4(b)(v).
"Project Documents" means and includes the Mortgage Loan Documents, this
Agreement, the Development Agreement, the Extended Use Agreement, the
Management Agreement, all other instruments delivered to (or required by) any
Lender and all other documents relating to the Apartment Complex and by which
the Partnership is bound, as amended or supplemented from time to time.
"Projected Credit" means $66,665 for 1996, $187,650 per annum for each of
the Fiscal Years 1997 through 2005 (inclusive) and $118,516 for 2006, provided,
however, that the Projected Credit for 2006 shall be reduced by the amount, if
any, by which the Actual Credit for 1996 exceeds $66,665 and provided further
that upon the occurrence of any of the events described in Section 5.1(e), the
Projected Credit shall thereafter be the Revised Projected Credit.
"Projected Rents" means the rents described in Exhibit B attached hereto
and made a part hereof.
"Qualified Basis" has the meaning set forth in Section 42(c) of the Code.
"Qualified Income Offset Item" means (1) an allocation of loss or
deduction that, as of the end of each year, reasonably is expected to be made
(a) pursuant to Section 704(e)(2) of the Code to a donee of an interest in the
Partnership, (b) pursuant to Section 706(d) of the Code as the result of a
change in any Partner's Interest, or (c) pursuant to Treasury Regulation
Section 1.751-1(b)(2)(ii) as the result of a distribution by the Partnership of
unrealized receivables or inventory items and (2) a distribution that, as of
the end of such year, reasonably is expected to be made to a Partner to the
extent it exceeds offsetting increases to such Partner's Capital Account which
reasonably are expected to occur during or prior to the Partnership taxable
year in which such distribution reasonably is expected to occur.
"Reconstitution Period" shall have the meaning set forth in Section
7.2(b).
"Reduction Amount" shall have the meaning set forth in Section 5.1(f).
"Reduction Year" shall have the meaning set forth in Section 5.1(f).
"Regulations" means the rules and regulations applicable to the Apartment
Complex or the Partnership of the Credit Agency, the City of Los Lunas and any
other Governmental Authority having jurisdiction over the Partnership and/or
the Apartment Complex.
"Related Person" means a Person related to a Partner within the meaning
of Treasury Regulation Section 1.752-4(b).
"Rent Restriction Test" means the test pursuant to Section 42 of the Code
whereby the gross rent charged to tenants of the low-income units in the
Apartment Complex may not exceed thirty percent (30%) of the qualifying income
levels.
"Rental Achievement" means the first time following six (6) consecutive
full calendar months of operations after the Permanent Mortgage Commencement
(with each month considered individually) that the Apartment Complex generates
a 1.15 to 1.00 Debt Service Coverage Ratio.
"Replacement Reserve" shall have the meaning set forth in Section 6.5(e).
"Repurchase Amount" shall have the meaning set forth in Section 5.2(a).
"Requisite Approvals" means any required approvals of each Lender and
Agency to an action proposed to be taken by the Partnership.
"Revised Projected Credit" has the meaning set forth in Section 5.1(e).
"Schedule A" means Schedule A to this Agreement, as amended from time to
time.
"Service" means the Internal Revenue Service.
"Share of Partner Nonrecourse Debt Minimum Gain" means, for each Partner
an amount equal to his or its "share of partner nonrecourse debt minimum gain"
as determined in accordance with Section 1.704-2(i)(5) of the Allocation
Regulations.
"Share of Partnership Minimum Gain" means for each Partner, an amount
equal to his or its "share of partnership minimum gain" as determined in
accordance with Section 1.704-2(g) of the Allocation Regulations.
"Site" has the meaning given to it in the Federal Comprehensive
Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. Sec.
9601 et seq., as amended, and shall also include any meaning given to it in any
similar state or local statutes, ordinances, regulations or by-laws.
"Special Limited Partner" means BCTC 94, and any Person who becomes a
Special Limited Partner as provided herein, in its capacity as a special
limited partner of the Partnership.
"Specified Proceeds" means (i) the proceeds of all Mortgage Loans, (ii)
the net rental income, if any, generated by the Apartment Complex prior to
Permanent Mortgage Commencement which is permitted by the Lenders to be applied
to the payment of Development Costs, (iii) the Capital Contributions of the
Investment Limited Partner, (iv) the Capital Contributions of the General
Partner in the amounts set forth in Schedule A as of the Admission Date, and
(v) any insurance proceeds arising out of casualties occurring prior to
Permanent Mortgage Commencement.
"State" means the State of New Mexico.
"State Designation" means the date on which the Partnership receives an
allocation in proper form pursuant to Section 42 of the Code from the Credit
Agency of 1994 Tax Credits, as evidenced by the execution by or on behalf of
the Credit Agency of one or more Form(s) 8609. For the purposes of determining
State Designation, each building in the Apartment Complex shall be treated as
having received an allocation of Tax Credit in an amount equal to the lesser of
(i) the amount of Tax Credit carryover allocation received from the Credit
Agency as to such building or (ii) the amount of Tax Credits set forth on the
Form 8609 as to such building.
"Subordinated Loan" means any loan made by the General Partner to the
Partnership pursuant to Section 6.5(e) or Section 6.10.
"Subordinated Loan Period" shall have the meaning set forth in
Section 6.5(e).
"Substituted Limited Partner" means any Person who is admitted to the
Partnership as Limited Partner under Section 8.2 or acquires the Interest of a
Limited Partner pursuant to Section 5.2.
"Syndication Expenses" means all expenditures classified as syndication
expenses pursuant to Treasury Regulation Section 1.709-2(b). Syndication
Expenses shall be taken into account under this Agreement at the time they
would be taken into account under the Partnership's method of accounting if
they were deductible expenses.
"Tax Accountants" means ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ of Bethesda,
Maryland, or such other firms of independent certified public accountants as
may be engaged by the Special Limited Partner to review the Partnership income
tax returns.
"Tax Credit" means the low-income housing tax credit described in
Section 42 of the Code.
"Tax Credit Set-Aside" means the date on which the Partnership receives a
carryover allocation of 1994 Tax Credits from the Credit Agency in an annual
dollar amount of not less than $189,545.
"Title Policy" means the owner's title insurance policy, or at the option
of the Special Limited Partner an endorsement thereto, with an effective date
on or after the Admission Date, in the amount of not less than $2,336,935,
issued by Commonwealth Land Title Insurance Company to the Partnership,
evidencing the Partnership's ownership of the Apartment Complex subject only to
such exclusions, exceptions, conditions and stipulations as may be approved by
the Special Limited Partner in its sole discretion and endorsed with an
endorsement insuring against all zoning defects relating to the Apartment
Complex, a Fairway endorsement and a non-imputation endorsement.
"Vessel" has the meaning given to it in the Federal Comprehensive
Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. Sec.
9601 et seq., as amended, and shall also include any meaning given to it in any
similar state or local statutes, ordinances, regulations or by-laws.
"Voluntary Loans" shall have the meaning set forth in Article IX.
"Withdrawal" (including the forms Withdraw, Withdrawing and Withdrawn)
means, as to a General Partner, the occurrence of death, adjudication of
insanity or incompetence, Event of Bankruptcy, dissolution, liquidation, or
voluntary or involuntary withdrawal or retirement from the Partnership for any
reason, including whenever a General Partner may no longer continue as a
General Partner by law or pursuant to any terms of this Agreement. Withdrawal
also shall mean the sale, assignment, transfer or encumbrance by a General
Partner of its interest as a General Partner other than a pledge of assignment
by a General Partner of its Interest required pursuant to the terms of the
Construction Loan Documents and as approved in writing by the Special Limited
Partner. A General Partner which is a corporation, limited liability company
or partnership shall be deemed to have sold, assigned, transferred or
encumbered its interest as a General Partner in the event (as a result of one
or more transactions) of any sale, assignment or other transfer (but
specifically excluding any transfer occurring pursuant to the laws of descent
and distribution) or encumbrance of a controlling interest in a corporate or
limited liability company General Partner or of a general partner interest in a
General Partner which is a partnership to a Person who is not an Affiliate of
the General Partner. For purposes of this definition of Withdrawal, the term
"controlling interest" shall mean the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise.
ARTICLE II
Name and Business
2.1 Name; Continuation
The name of the Partnership is Los Lunas Apartments Limited Partnership.
The Partners agree to continue the Partnership which was formed pursuant to the
provisions of the Act.
2.2 Office and Resident Agent
(a) The principal office of the Partnership is c/o ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇,
▇▇▇▇▇ ▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇, at which office there shall be maintained those
records required by the Act to be kept by the Partnership. The Partnership may
have such other or additional offices as the General Partner shall deem
desirable. The General Partner may at any time change the location of the
principal office and shall give due notice thereof to the Limited Partners.
(b) The resident agent for the Partnership in the State for service of
process is as follows:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
#▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
2.3 Purpose
The purpose of the Partnership is to acquire, hold, invest in, secure
financing for, construct, rehabilitate, develop, improve, maintain, operate,
lease and otherwise deal with the Apartment Complex. The Partnership shall
operate the Apartment Complex in accordance with any applicable Regulations.
The Partnership shall not engage in any other business or activity.
2.4 Term and Dissolution
(a) The Partnership shall continue in full force and effect until
December 31, 2041, except that the Partnership shall be dissolved and its
assets liquidated prior to such date upon the first to occur of the following
events ("Liquidating Events"):
(i) The sale or other disposition of all or substantially all of
the assets of the Partnership;
(ii) The Withdrawal of a General Partner, unless the Partnership
is continued as provided in Section 7.2(a);
(iii) The election to dissolve the Partnership made in writing by
the General Partner with the Consent of the Investment Limited Partner
and any Requisite Approvals;
(iv) The entry of a final decree of dissolution of the Partnership
by a court of competent jurisdiction; or
(v) Any other event which causes the dissolution of the
Partnership under the Act if the Partnership is not reconstituted
pursuant to the provisions of Section 7.2 or Section 7.3.
(b) Upon the dissolution of the Partnership, the General Partner (or
for purposes of this paragraph, its trustees, receivers or successors) shall
cause the cancellation of the Certificate and shall liquidate the Partnership
assets and apply and distribute the proceeds thereof in accordance with the
provisions of Section 10.3, unless the Investment Limited Partner elects to
reconstitute the Partnership and continue its business as provided in Section
7.2(b), in which case the Partnership assets shall be transferred to the new
Partnership as provided in such Section. Notwithstanding the foregoing, if,
during liquidation, the General Partner shall determine that an immediate sale
of part or all of the Partnership's assets would be impermissible, impractical
or cause undue loss to the Partners, the General Partner may defer liquidation
of, and withhold from distribution for a reasonable time, any assets of the
Partnership except those necessary to satisfy Partnership debts and obligations
(other than Subordinated Loans).
ARTICLE III
Mortgage, Refinancing and Disposition of Property
3.1 Personal Liability
The General Partner and its Affiliates, jointly and severally, are hereby
authorized to incur personal liability for the repayment of funds advanced by
the Construction Lender (and interest thereon) pursuant to the Construction
Loan Documents. However, from and after the date of Permanent Mortgage
Commencement, neither the General Partner nor any Related Person shall at any
time bear, nor shall the General Partner permit any other Partner or any
Related Person to bear, the Economic Risk of Loss for the payment of any
portion of any Mortgage Loan unless, prior to the effectiveness of the
transaction in which such Economic Risk of Loss is created or assumed, the
General Partner shall have obtained, at the expense of the Partnership, an
opinion from reputable tax counsel, in form and substance reasonably
satisfactory to the Special Limited Partner, to the effect that such Economic
Risk of Loss will not result in the reallocation of Tax Credits or Losses from
the Investment Limited Partner and the Special Limited Partner to the General
Partner. The General Partner shall cause the Partnership to elect promptly, to
the extent permitted and in the manner prescribed by any Agency or Lender
having jurisdiction, that all debt service payments made by the Partnership to
the holder of the Permanent Mortgage shall be applied first to interest
determined at the stated rate set forth in the Permanent Note, and then to
principal due with respect to the Permanent Note.
3.2 Refinancings
The Partnership may decrease, increase or refinance any Mortgage Loan and
may make any required transfer or conveyance of Partnership assets for security
or mortgage purposes, provided, however, any such decrease, increase or
refinancing of any Mortgage (except for the discharge of the Construction Loan
in accordance with the Construction Loan Documents and the borrowing of the
original principal amount of the Permanent Loan) may be made by the General
Partner only with the Consent of the Special Limited Partner.
3.3 Sale of Assets
The Partnership may sell, lease, exchange or otherwise transfer or convey
all or substantially all the assets of the Partnership only with the Consent of
the Special Limited Partner. Notwithstanding the foregoing and except as set
forth in Section 6.2(a)(vi), no Consent of the Special Limited Partner shall be
required for the execution and delivery of the Construction Loan Documents, the
leasing of apartments to tenants in the normal course of operations or the
leasing of all or substantially all the apartments to a public housing
authority at rents satisfactory to any Agency or Lender as expressed in
writing, provided (subject to the Rent Restriction Test) that such rents are
not less than the Projected Rents.
3.4 Real Estate Commissions
The total compensation to all Persons for the sale of the Apartment
Complex shall be limited to a Competitive Real Estate Commission, which in no
event shall exceed three percent (3%) of the contract price for the sale of the
Apartment Complex, without the consent of the Special Limited Partner.
ARTICLE IV
Partners; Capital
4.1 Capital and Capital Accounts
(a) The capital of the Partnership shall be the aggregate amount of the
cash and the Gross Asset Value of property contributed by the General Partner
and by the Limited Partners as set forth in Schedule A. No interest shall be
paid by the Partnership on any Capital Contribution to the Partnership.
Schedule A shall be amended from time to time to reflect the withdrawal or
admission of Partners, any changes in the Partnership Interests held by a
Partner arising from the transfer of an Interest to or by such Partner and any
change in the amounts to be contributed or agreed to be contributed by any
Partner. No Partner shall have the right to withdraw or receive a return of
any of its Capital Contributions except as set forth in this Agreement.
(b) An individual Capital Account shall be established and maintained
for each Partner, including any additional or substituted Partner who shall
hereafter receive an interest in the Partnership. The Capital Account of each
Partner shall be maintained in accordance with the following provisions:
(i) To each Partner's Capital Account there shall be credited
such Partner's Capital Contributions, such Partner's distributive share
of Profits, and any items in the nature of income or gain that are
specially allocated pursuant to Section 10.4 hereof, and the amount of
any Partnership liabilities that are assumed by such Partner or that are
secured by any Partnership Property distributed to such Partner;
(ii) To each Partner's Capital Account there shall be debited the
amount of cash and the Gross Asset Value of any Partnership Property
distributed to such Partner pursuant to any provision of this Agreement,
such Partner's distributive share of Losses, and any items in the nature
of expenses or losses that are specially allocated pursuant to Section
10.4 hereof, and the amount of any liabilities of such Partner that are
assumed by the Partnership or that are secured by any property
contributed by such Partner to the Partnership.
In the event that the Gross Asset Values of Partnership assets are
adjusted pursuant to this Agreement, the Capital Accounts of all Partners shall
be adjusted simultaneously to reflect the aggregate net adjustment as if the
Partnership recognized gain or loss equal to the amount of such aggregate net
adjustment.
(c) The original Capital Account established for any Assignee (as
hereinafter defined) shall be in the same amount as, and shall replace, the
adjusted Capital Account of the Partner which such Assignee succeeds, and, for
the purpose of the Agreement, such Assignee shall be deemed to have made the
Capital Contribution, to the extent actually paid in, of the Partner which such
Assignee succeeds. The term "Assignee," as used in this paragraph, shall mean
a Person who shall become entitled to receive a share of the Profits, Losses,
Tax Credits and distributions of the Partnership by reason of such Person
succeeding to the Interest of a Partner by assignment of all or any part of an
Interest. To the extent an Assignee receives less than 100% of the Interest of
a Partner, such Assignee's Capital Account and Capital Contribution shall be in
proportion to the Partnership Interest such Assignee receives, and the Capital
Account and Capital Contribution of the Partner who retains a partial interest
in the Partnership shall continue, and not be replaced, in proportion to the
Partnership Interest such Partner retains.
(d) The foregoing provisions and other provisions of this Agreement
relating to the maintenance of the Capital Accounts are intended to comply with
the Allocation Regulations, and shall be interpreted and applied in a manner
consistent with such Allocation Regulations.
4.2 General Partner
(a) The name, address and Capital Contribution of the General Partner
are as set forth on Schedule A.
(b) The General Partner has contributed $100 to the capital of the
Partnership as of the date hereof.
4.3 Investment Limited Partner, Special Limited Partner and Original
Limited Partner
(a) The Original Limited Partner ▇▇▇▇▇▇ withdraws as a limited partner
of the Partnership and acknowledges that it no longer has any Interest in, or
rights or claims against, the Partnership as a Partner as of the Admission
Date.
(b) Each of the Special Limited Partner and the Investment Limited
Partner is ▇▇▇▇▇▇ admitted to the Partnership as a Limited Partner in
substitution for the Original Limited Partner as of the Admission Date and
agrees to be bound by the terms and provisions of the Project Documents and
this Agreement. The name and address of the Investment Limited Partner and the
Special Limited Partner are as set forth on Schedule A.
(c) Except as otherwise specifically set forth in Sections 4.5 or 7.4,
the General Partner shall have no authority to admit additional Limited
Partners without the Consent of the Investment Limited Partner.
4.4 Liability of the Limited Partners
Neither the Investment Limited Partner, the Special Limited Partner nor
any Person who becomes an Additional Limited Partner shall be liable for any
debts, liabilities, contracts or obligations of the Partnership; such Persons
shall be liable only to pay their respective Capital Contributions as and when
the same are due hereunder and under the Act.
4.5 Special Rights of the Special Limited Partner
(a) Notwithstanding any other provisions herein (other than
Section 13.8), to the extent the law of the State is not inconsistent, the
Special Limited Partner shall have the right, subject to any Requisite
Approvals, to:
(i) amend this Agreement provided, however, that no such
amendment affect the vested rights (including, without limitation, the
right to receive any fees, allocable share of Cash Flow or other
distributions, or Profits or Losses and Tax Credits hereunder) or
increase any of the liabilities or obligations of any General Partner
without its prior written consent;
(ii) dissolve the Partnership provided, however, that such
dissolution shall not be caused by the Special Limited Partner unless the
General Partner has violated a material provision of any Project
Document, which violation has not been cured within any applicable cure
period specified;
(iii) remove any General Partner and elect a new General Partner
(A) on the basis of the performance and discharge of such General
Partner's obligations constituting fraud, bad faith, gross negligence,
wilful misconduct or breach of fiduciary duty, or (B) upon the occurrence
of any of the following:
(1) such General Partner shall have violated any material
provisions of any Project Document or other document required in
connection with any Mortgage which has resulted in notice of a
default thereunder, or shall have violated any material provisions
of any Regulations applicable to the Apartment Complex, in each
case which results in any Adverse Consequences to the Partnership
and has not been cured within any applicable cure period provided
therein;
(2) such General Partner shall have violated any material
provision of this Agreement, including, but not limited to, any
obligation to fund any Partnership expenses under Section 6.10 and
such default has not been cured within 10 days after written notice
from the Special Limited Partner to the General Partner, or such
General Partner shall have violated any provisions of applicable
law;
(3) any Mortgage shall be in default and such default shall
not be cured within any applicable cure period set forth in the
Mortgage Loan Documents, or
(4) such General Partner shall have conducted its own
affairs or the affairs of the Partnership in such a manner as would
(A) cause the termination of the Partnership for federal income tax
purpose or (B) cause the Partnership to be treated for federal
income tax purposes as an association taxable as a corporation;
(iv) continue the business of the Partnership with a substitute
General Partner, provided that the General Partner has been removed
pursuant to Section 4.5(a)(iii) above; and
(v) approve or disapprove the sale of all or substantially all of
the assets of the Partnership.
(b) Upon the removal of a General Partner,
(i) without any further action by any Partner, the Special
Limited Partner or its designee shall automatically become a General
Partner and acquire in consideration of a cash payment of $100 such
portion of the Interest of the removed General Partner as counsel to the
Investment Limited Partnership shall determine is the minimum appropriate
interest in order to assure the continued status of the Partnership as a
partnership under the Code and under the Act,
(ii) the remaining portion of the economic Interest of the removed
General Partner shall automatically be converted to an equal economic
Interest as an Additional Limited Partner,
(iii) the economic Interest of the Special Limited Partner as the
Special Limited Partner shall not be affected by the new status of the
Special Limited Partner or its designee as a General Partner, and
(iv) the new General Partner shall automatically be irrevocably
delegated all of the powers and duties of the General Partners pursuant
to Section 6.13. The Special Limited Partner or any successor General
Partner proposed by the Special Limited Partner shall have the option,
exercisable in its sole discretion, to acquire the Additional Limited
Partner Interest, or any portion thereof, of any removed General Partner
upon payment of the agreed or then present fair market value of such
Interest or portion thereof. If such value is not agreed to, the fair
market value of the Interest shall be as determined by a qualified, MAI-
designated state-licensed real estate appraiser selected by the removed
General Partner. If the Special Limited Partner does not accept such
value, it may select a second similarly-qualified appraiser. If the
values determined by both such appraisers differ by no more than 10%,
then the purchase price shall be the arithmetic mean of the two. If the
values differ by more than 10%, then the two appraisers shall appoint a
third similarly-qualified appraiser, who shall also determine a value.
In such a case, the final purchase price shall be the arithmetic mean of
the two values closest in absolute dollars. The method of payment to the
removed General Partner shall be fair; and must protect the solvency and
liquidity of the Partnership. The method of payment will be deemed
presumptively fair where it provides for a promissory note bearing
interest at the AFR payable from the proceeds of a Capital Transaction as
set forth in Section 10.2(b) hereof. In addition, upon removal, the
Partnership must promptly pay to the removed General Partner all amounts
then accrued and owing to the removed General Partner; provided, however,
that notwithstanding the language of Section 6.12, Article X, Article XI
and any other provision hereof, no removed General Partner or any
Affiliate thereof shall be entitled to receive any fee, compensation or
other remuneration from the Partnership, other than any such fee,
compensation or other remuneration which had already been earned in full
prior to the date of such removal. The Partnership is not authorized to
enter into any arrangement whereby any fee, compensation or other
remuneration could be payable directly or indirectly to any General
Partner or Affiliate thereof in a manner inconsistent with the
immediately preceding sentence unless the prior written consent of the
Special Limited Partner shall have been obtained to such particular
arrangement. The Partnership may offset against any payments to a
General Partner removed under this Section 4.5 any damages suffered by
the Partnership as a result of any breach of the obligations of such
General Partner hereunder. A General Partner so removed will not be
liable as a general partner for any obligations of the Partnership
incurred after the effective date of its removal. Each General Partner
hereby grants to the Special Limited Partner an irrevocable (to the
extent permitted by applicable law) power of attorney coupled with an
interest to execute and deliver any and all documents and instruments on
behalf of such General Partner and the Partnership as the Special Limited
Partner may deem to be necessary or appropriate in order to effect the
provisions of this Section 4.5 and to enable the new General Partner to
manage the business of the Partnership.
(c) In order to implement the provisions of Section 4.5(a)(v), the
General Partner is hereby required, within five (5) days after its receipt of
any offer to purchase the Apartment Complex or all of the Interests in the
Partnership, to send a copy of such offer (or a written description of any such
oral offer) to each of the Limited Partners. In connection with any proposed
sale of the Apartment Complex, the Special Limited Partner (or its designee)
shall have the right to (i) receive and review copies of all documents relating
to the proposed sale, (ii) participate in the negotiations of the terms and
conditions of the proposed sale, (iii) meet with the proposed purchaser,
(iv) solicit proposals for alternative offers for the Apartment Complex, and
(v) provide such other services in connection with the proposed sale as it
deems to be appropriate.
4.6 Meetings
The General Partner or Limited Partners holding more than ten percent
(10%) of the then outstanding Limited Partner Interests may call meetings of
the Partnership for any matters for which the Limited Partners may vote as set
forth in this Agreement. A list of the names and addresses of all Limited
Partners shall be maintained as part of the books and records of the
Partnership and shall be made available upon request to any Limited Partner or
his representative at his cost. Upon receipt of a written request either in
person or by certified mail stating the purpose(s) of the meeting, the General
Partner shall provide all Limited Partners within ten (10) days after receipt
of said request, written notice of a meeting and the purpose of such meeting to
be held on a date not less than fifteen (15) nor more than sixty (60) days
after receipt of said request, at a time convenient to the Limited Partners.
All meetings shall be held at the principal office of the Partnership.
ARTICLE V
Capital Contributions of the Investment Limited Partner
and the Special Limited Partner
5.1 Payments
(a) The Special Limited Partner's Capital Contribution of $10 shall be
paid in full in cash on the Admission Date. The Investment Limited Partner's
Capital Contribution shall be paid in cash installments (the "Installments"),
as follows:
(i) $706,007 (the "First Installment") on the latest of (A) the
Admission Date, (B) the closing of the Construction Loan, (C) the
Permanent Loan Commitment Date, (D) Tax Credit Set-Aside or (E) the
Construction Permitting Date;
(ii) $200,000 (the "Second Installment"), on the latest of (A) the
Completion Date, (B) Cost Certification, (C) State Designation, (D)
receipt of an updated Title Policy in form and substance satisfactory to
the Special Limited Partner, (E) receipt of payoff letter from the
Contractor 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, (F) receipt of estoppel letter from each Lender,
or (G) compliance with all due diligence recommendations of the
Investment Limited Partner;
(iii) $160,928 (the "Third Installment") on the latest of (A) the
Initial 100% Occupancy Date, (B) Permanent Mortgage Commencement, or
(C) Rental Achievement; and
(iv) $20,000 (the "Fourth Installment") upon the receipt of a tax
return and an audited financial statement for the year in which Rental
Achievement occurred;
provided, however, that (x) the General Partner shall give the Investment
Limited Partner not less than twenty-one (21) days' written notice prior to the
due date of each Installment subsequent to the First Installment, and (y) no
Installment shall be due unless and until all conditions to the payment of all
prior Installments have been satisfied.
(b) The obligation of the Investment Limited Partner to pay each
Installment is conditioned upon delivery by the General Partner to the
Investment Limited Partner of a written certificate (the "Payment Certificate")
stating that as of the date of such certificate (i) all the conditions to the
payment of such Installment have been satisfied and (ii) all representations
and warranties of the General Partner contained in this Agreement are true and
correct. Except as provided in the final sentence of this Section 5.1(b),
acceptance by the Partnership of any Installment shall constitute a
confirmation that, as of the date of payment, all such conditions are satisfied
and all such representations and warranties are true and correct. The
obligation of the Investment Limited Partner to pay the First Installment is
also conditioned upon delivery by the General Partner to the Investment Limited
Partner of (x) a legal opinion of independent counsel to the Partnership, the
General Partner, and the Developer, which opinion(s) must be satisfactory to
the Investment Limited Partner as to form, content and identity of counsel and
(y) a photocopy of a binding commitment, in form and substance satisfactory to
the Special Limited Partner, to issue the Title Policy and endorsements thereto
in form and substance satisfactory to the Special Limited Partner insuring
against all zoning defects of the Apartment Complex, a Fairway endorsement and
a non-imputation endorsement. In no event shall any Installment become due
until all of the conditions for all of the Installments listed prior to the
Installment in question in Section 5.1(a) shall have been satisfied and all of
such prior Installments shall have become due. Notwithstanding the foregoing,
however, if at any time prior to the date when an Installment becomes due and
payable, the Partnership has an Operating Deficit which the General Partner
would be required to fund pursuant to Section 6.10, then the Investment Limited
Partner may, at its option, waive the requirement of the delivery of the
Payment Certificate or any other condition with respect to part or all of such
Installment and pay such part or all of such Installment, provided that the
proceeds of the amount so paid are used by the Partnership to fully fund such
Operating Deficit; provided, however, that if the proceeds of such amount so
paid are designated in Section 6.12 to be used to pay fee(s), then such
proceeds shall be utilized to pay such fee(s) and the recipient(s) thereof
shall be required to, and hereby agree to, utilize the proceeds of such fee(s)
to fund such Operating Deficit, in which case the Investment Limited Partner is
hereby authorized to directly fund such Operating Deficit, with the funds so
applied being deemed to have been paid as aforesaid.
(c) The Payment Certificate for each Installment shall be dated and
delivered not less than ten (10) nor more than thirty (30) days prior to the
due date for such Installment.
(d) If, as of the date when an Installment would otherwise be due, any
statement required to be made in the Payment Certificate for such Installment
cannot be truthfully made, the General Partner shall notify the Investment
Limited Partner of the reason why such statement would be untrue if made, and
the Investment Limited Partner shall not be required to pay such Installment;
provided, however, that if (i) any such statement can subsequently be
truthfully made and (ii) the Investment Limited Partner shall not have
irrevocably lost, in the good faith judgment of the Investment General Partner,
any material tax or other benefits hereunder (other than tax benefits for which
the Investment Limited Partner has been fully compensated pursuant to the
provisions of paragraphs (e), (f) and (g) of this Section 5.1), then the
Investment Limited Partner shall pay such Installment to the Partnership thirty
(30) days after delivery by the General Partner to the Investment Limited
Partner of the Payment Certificate together with an explanation of the manner
in which each such statement had become true.
(e) In the event that on or at any time prior to the Completion Date
(the "Initial Adjustment Date"), the Investment Limited Partner shall receive a
written certification of the Auditors indicating that the aggregate Actual
Credit during the Credit Period will be less than the aggregate Projected
Credit during the Credit Period, then (i) the next succeeding Installments of
the Capital Contributions of the Investment Limited Partner shall be reduced by
an amount equal to the product of (X) the difference between (1) the aggregate
Projected Credit during the Credit Period and (2) the aggregate Actual Credit
during the Credit Period and (Y) 0.5742 and (ii) the Projected Credit for each
Fiscal Year shall thereafter be redefined to mean the Actual Credit, as so
determined (the "Revised Projected Credit"). Any such reduction pursuant to
this Section 5.1(e) shall be made first to the Installment, if any, next due to
be paid by the Investment Limited Partner, and any balance of such amount
payable by the General Partner in excess of the amount of such Installment
shall be applied to succeeding Installments, if any, provided that if the
amount of any such reductions exceeds the sum of the remaining Installments, if
any, then an amount equal to the amount of such excess shall be paid by the
General Partner to the Investment Limited Partner promptly after demand is made
therefor, as a payment of damages for breach of warranty, regardless of the
reason for the occurrence of such event (unless such reduction was caused by an
act or omission of the Investment Limited Partner or its Affiliates, in which
event no such reduction or payment shall be required). No reduction of any
Installment or any payment by the General Partner pursuant to this Section
5.1(e) shall be deemed to be a Capital Contribution by the General Partner to
the Partnership, nor shall any such payment constitute a return of capital to
the Investment Limited Partner.
(f) If with respect to any Fiscal Year all or a portion of which occurs
during the Initial Operating Period, the Actual Credit is or was less than the
Projected Credit (or the Revised Projected Credit, if applicable) for such
Fiscal Year (a "Reduction Year"), then the General Partner shall pay to the
Investment Limited Partner the Reduction Amount. The Reduction Amount shall be
equal to the sum of (A) the excess of the Projected Credit (or the Revised
Projected Credit, if applicable) for such Fiscal Year over the Actual Credit
for such Fiscal Year multiplied by .7866 plus (B) the amount of any recapture,
interest or penalty payable by the limited partners and/or holders of
beneficial assignee certificates of the Investment Limited Partner as a result
of such shortfall, assuming that each limited partner and/or holder of a
beneficial assignee certificate in the Investment Limited Partner used all of
the Tax Credits allocated to it in the Fiscal Year of allocation and that each
such Person was subject to interest at the rate set forth in Section 6621(a)(2)
of the Code and to the penalty for understatement of tax set forth in Section
6662(d) of the Code. The Auditors shall make their determination of the amount
of the Actual Credit with respect to each Reduction Year within thirty (30)
days following the end of such Fiscal Year. The Investment Limited Partner
shall be eligible to be paid a Reduction Amount as hereinabove described with
respect to each Reduction Year. Any Reduction Amount shall first be applied to
the Installment next due to be paid by the Investment Limited Partner, with any
portion of such Reduction Amount in excess of the amount of such Installment
then being applied to succeeding Installments, provided that if no further
Installments remain to be paid or if the Reduction Amount shall exceed the sum
of the amounts of the remaining Installments, then the entire Reduction Amount
or the balance of the Reduction Amount, as the case may be, shall be paid by
the General Partner to the Investment Limited Partner promptly after demand is
made therefor, as a payment of damages for breach of warranty, regardless of
the reason for the occurrence of such event (unless such reduction was caused
by an act or omission of the Investment Limited Partner or its Affiliates, in
which event no Reduction Amount shall be payable). No payment by the General
Partner pursuant to this Section 5.1(f) shall be deemed to be a Capital
Contribution to the Partnership nor shall any such payment constitute a return
of capital to the Investment Limited Partner.
(g) In the event that, for any reason, at any time after the end of the
Initial Operating Period, the amount of the Actual Credit shall be less than
the Projected Credit (or the Revised Projected Credit, if applicable) with
respect to any Fiscal Year of the Partnership (such difference being
hereinafter referred to as a "Credit Shortfall"), the Investment Limited
Partner shall be treated as having made a constructive advance to the
Partnership with respect to such Fiscal Year (a "Credit Recovery Loan"), which
shall be deemed to have been made on January 1 of such Fiscal Year in an amount
equal to the sum of (A) the Credit Shortfall for such Fiscal Year plus (B) the
amount of any recapture, interest or penalty payable by the limited partners
and/or the holders of beneficial assignee certificates of the Investment
Limited Partner as a result of the Credit Shortfall for such Fiscal Year,
assuming that each limited partner and/or holder of a beneficial assignee
certificate in the Investment Partnership used all of the Tax Credits allocated
to him in the Fiscal Year of allocation and that each such Person was subject
to interest at the rate set forth in Section 6621(a)(2) of the Code and to the
penalty for understatement of tax set forth in Section 6662(d) of the Code.
Credit Recovery Loans shall be deemed to bear simple (not compounded) interest
from the respective dates on which such principal advances shall have been
deemed to have been made under this Section 5.1(g) at a rate of nine percent
(9%) per annum. Credit Recovery Loans shall be payable by the Partnership as
provided in Section 10.2(b), Clause Third.
(h) At the request of the General Partner, the Investment Limited
Partner shall grant to the Partnership a security interest in the Investment
Limited Partner's Interest as collateral security for the payment, when due in
accordance with the terms of this Agreement, of the Capital Contributions of
the Investment Limited Partner. Except as hereinafter provided in Section
5.1(i), upon any default by the Investment Limited Partner in the payment of
its Capital Contributions as and when they are due and payable (an "Event of
Default"), which Event of Default has not been cured within ten (10) business
days following notice thereof by the Partnership to the Investment Limited
Partner, the Partnership or its assignee shall have all the rights and
remedies, with respect to the security interest hereby granted by such
Investment Limited Partner, of a secured party under Article 9 of the Uniform
Commercial Code as in effect in the State. Upon request, the Investment
Limited Partner will execute a UCC-1 financing statement evidencing the
security interest granted hereby and will deliver such statement to the
Partnership.
(i) Notwithstanding the provisions of Section 5.1(h) above, in the
event of a dispute regarding the existence of an Event of Default, such dispute
shall be resolved by binding arbitration and until the issuance of a final
arbitration award confirming the existence of an Event of Default, the
Partnership shall not be entitled to exercise any of its rights or remedies
under Section 5.1(h) above. Such arbitration shall be conducted in accordance
with the Rules of Commercial Arbitration of the American Arbitration
Association by a single arbitrator appointed pursuant to those rules. The
arbitration shall take place in the City of Boston, Massachusetts. The scope
of the arbitrator's award shall be solely limited to a determination of whether
an Event of Default has occurred. If the arbitrator determines that an Event
of Default has occurred, then if requested by the Investment Limited Partner
within twenty (20) days following receipt of the award, the arbitrator shall
provide the parties with a written explanation of the facts underlying the
determination, which shall become part of the award. The prevailing party
shall be awarded the costs of such arbitration, provided, however, that each
party shall bear the costs of its own attorneys and witnesses.
5.2 Return of Capital Contributions
(a) Failure to Achieve Development and/or Tax Credit Benchmarks and
Standards. If (i) all 38 apartment units in the Apartment Complex shall not
have been placed in service by December 31, 1996 (for purposes of satisfying
the requirements of Section 42(h)(1)(E)(i) of the Code with respect to the 1994
Tax Credit allocation), or (ii) by 12 months from the Completion Date, fewer
than 38 of the apartment units in the Apartment Complex shall have been
occupied by tenants meeting the terms of the Minimum Set-Aside Test under
executed leases which shall have received any Requisite Approvals at rental
levels meeting the requirements of the Rent Restriction Test, or (iii)
Permanent Mortgage Commencement shall not have occurred prior to January 1,
1997 (or any later date fixed by the General Partner with the Consent of the
Special Limited Partner), or (iv) State Designation shall not have occurred by
January 31, 1997 (or any later date fixed by the General Partner with the
Consent of the Special Limited Partner) and by said date the General Partner
shall not have made any payment as described in the next to last sentence of
Section 5.1(e) or, if the Investment Limited Partner shall have elected to have
all or a portion of any payment under Section 5.1(e) applied toward future
Installment obligations of the Investment Limited Partner, amendments to this
Agreement shall not have been adopted and filed in the Filing Office,
reflecting such event, or (v) the Partnership shall fail to meet the Minimum
Set-Aside Test or the Rent Restriction Test by the close of the first year of
the Credit Period and/or fails to continue to meet either of such tests at any
time during the sixty (60)-month period commencing on such date, or (vi) prior
to Permanent Mortgage Commencement, (A) foreclosure proceedings shall have
commenced under any Mortgage and such proceedings shall not have been dismissed
within thirty (30) days, (B) any of the commitments of a Lender to provide a
Mortgage Loan and/or any subsidy financing shall be terminated or withdrawn and
not reinstated or replaced within sixty (60) days with terms at least as
favorable to the Partnership or terms for which the Consent of the Special
Limited Partner and any Requisite Approvals shall have been obtained, or (C)
the Construction Lender, acting in good faith and in accordance with the
provisions of the Construction Loan Documents, shall have irrevocably refused
to make any further advances under the Construction Loan Documents and such
decision shall not have been reversed or the Construction Lender replaced
within thirty (30) days or (vii) if by ____ __, 199_ (or any later date fixed
by the General Partner with the Consent of the Special Limited Partner), the
Special Limited Partner shall not have received, in form and substance
satisfactory to the Special Limited Partner, a Carryover Certification, or
(viii) if at any time it shall be determined by the Service or by the Tax
Accountants that a Carryover Certification could not be issued or was issued in
error, or (ix) if by the date which is twelve (12) months following the
Completion Date, Rental Achievement shall not have been achieved, or (x) at any
time the General Partner fails to make a Subordinated Loan and such failure
continues for ten (10) days, then within five (5) days of the occurrence
thereof, the General Partner shall send to the Investment Limited Partner and
the Special Limited Partner notice of such event and of the General Partner's
obligation to repurchase the Interests of the Investment Limited Partner and
the Special Limited Partner by paying to the Investment Limited Partner and the
Special Limited Partner an amount (the "Repurchase Amount") equal to each such
Partner's Invested Amount minus the portion, if any, of such Partner's Capital
Contribution which shall not yet have been paid (or deemed to have been paid)
to the Partnership plus the amount of any third-party costs, including, without
limitation, attorney's fees incurred by or on behalf of such Partner in
implementing this Section 5.2(a) in the event the Investment Limited Partner
and/or the Special Limited Partner require(s) such a repurchase. If either the
Special Limited Partner or the Investment Limited Partner elects to require a
repurchase of its Interest and the payment to it of an amount equal to its
Repurchase Amount, it shall send notice thereof to the Partnership within
thirty (30) days after the mailing date of the General Partner's notice, or at
any time after the occurrence of any of the foregoing if the General Partner
shall not have sent a notice thereof, and the General Partner shall within ten
(10) days after the Partnership receives any such notice from a Partner
requesting the purchase of its Interest repurchase the Interest of such Partner
by paying to such Partner an amount equal to its Repurchase Amount. If,
following receipt of the General Partner's notice, either the Special Limited
Partner or the Investment Limited Partner fails to send notice to the General
Partner by the end of such 30-day period requesting the General Partner to
purchase its Interest, the Special Limited Partner and/or the Investment
Limited Partner, as the case may be, shall be deemed to have waived its right
to cause the General Partner to purchase its Interest as a result of the event
described in the General Partner's notice. No such waiver, however, shall
affect the right of the Special Limited Partner and/or the Investment Limited
Partner to cause the General Partner to purchase its Interest upon the
occurrence of any other event described in this Section 5.2(a), or upon any
subsequent occurrence of the event described in the General Partner's notice.
(b) Lender Disapproval. If any Agency or Lender shall disapprove,
or fail to give any required approval of, the Investment Limited Partner and/or
the Special Limited Partner as a Limited Partner hereunder within one hundred
eighty (180) days of the Admission Date, then the Partner being disapproved or
not approved shall, effective as of such time or such later time as may be
elected by the Partner being disapproved or not approved as may be specified by
such Agency or Lender in its disapproval, at the option of the Partner being
disapproved or not approved (if not directed by such Agency or Lender to
withdraw), cease to be a Limited Partner. The General Partner shall, within
ten (10) days of the effective date of such cessation, pay to the Partner
being disapproved or not approved an amount equal to its Invested Amount minus
the amount, if any, of such Partner's Capital Contribution which shall not yet
have been paid (or deemed to have been paid) to the Partnership plus the amount
of any third party costs, including, but not limited to attorney's fees,
incurred by or on behalf of such Partner in implementing this Section 5.2(b).
(c) Substitution and Indemnification. Upon the receipt by the
Investment Limited Partner and/or the Special Limited Partner of the amount due
to it pursuant to either Section 5.2(a) or Section 5.2(b), the Interest of such
Partner shall terminate, and the General Partner shall indemnify and hold
harmless such Partner from and against any Adverse Consequences to which such
Partner (as a result of its participation hereunder) may be subject, provided
that such Adverse Consequences do not result from such Partner's acts or
omissions.
(d) Waiver of Repurchase Right. Each of the Investment Limited Partner
and the Special Limited Partner shall have the right to irrevocably waive its
right to have its Interest repurchased pursuant to any clause or clauses of
Section 5.2(a), or any portion thereof, at any time during which any of such
rights shall be in effect. Such a waiver shall be exercised by delivery to the
General Partner of a written notice stating that the rights being waived
pursuant to any specified clause or clauses of Section 5.2(a), or any specified
portion thereof, are thereby waived for a specified period of time.
(e) Additional General Partner. If the General Partner shall fail to
make on the due date therefor any payment required under Section 5.2(a) or
Section 5.2(b), time being of the essence, at any time thereafter the Special
Limited Partner shall have the option, exercisable in its sole discretion, to
cause itself or its designee to be admitted as an additional General Partner,
receiving from the existing General Partner, in consideration of the payment of
ten dollars ($10.00), a one per cent (1%) interest in the Profits, Losses, Tax
Credits and distributions of the Partnership, with the Special Limited Partner
retaining its status as such and its economic interest in the Partnership as
the Special Limited Partner (or its designee as an additional General Partner).
If the Special Limited Partner exercises the option described in this
Section 5.2(e), each of the other General Partner ▇▇▇▇▇▇ agrees that all of its
rights and powers hereunder as a General Partner shall automatically be
irrevocably delegated to the Special Limited Partner pursuant to Section 6.13
without the necessity of any further action by any Partner. Each Partner
hereby grants to the Special Limited Partner an irrevocable (to the extent
permitted by applicable law) power of attorney coupled with an interest to take
any action and to execute, deliver and file or record any and all documents and
instruments on behalf of such Partner and the Partnership as the Special
Limited Partner may deem necessary or appropriate in order to effectuate the
provisions of this Section 5.2(e) and to allow the additional General Partner
to manage the business of the Partnership. The admission of the Special
Limited Partner or its designee as an additional General Partner shall not
relieve any other General Partner of any of its economic obligations hereunder,
and each other General Partner shall fully indemnify and hold harmless the
additional General Partner from and against any and all Adverse Consequences
sustained by such additional General Partner in connection with its status as a
General Partner (other than Adverse Consequences arising solely from the gross
negligence or willful misconduct of such additional General Partner).
ARTICLE VI
Rights, Powers and Duties of General Partner
6.1 Authorized Acts
Subject to the provisions of Section 6.2, Section 6.3, Section 6.15 and
all other provisions of this Agreement, the General Partner for, in the name
and on behalf of the Partnership, is hereby authorized, in furtherance of the
purposes of the Partnership:
(i) to acquire by purchase, lease, exchange or otherwise any real
or personal property;
(ii) to construct, rehabilitate, operate, maintain, finance and
improve, and to own, sell, convey, assign, mortgage or lease any real
estate and any personal property;
(iii) to borrow money and issue evidences of indebtedness and to
secure the same by mortgage, pledge or other lien on the Apartment
Complex or any other assets of the Partnership;
(iv) to execute the Mortgage Loan Documents and the other Project
Documents and all such other documents as the General Partner deems to be
necessary or appropriate in connection with the acquisition, development,
construction and financing of the Apartment Complex;
(v) to prepay in whole or in part, refinance or modify any
Mortgage Loan or other financing affecting the Apartment Complex;
(vi) to employ the Management Agent (which may be an Affiliate of
the General Partner) and, subject to the provisions of Article XI, to pay
reasonable compensation for its services;
(vii) to employ its Affiliates to perform services for, or sell
goods to, the Partnership;
(viii) to execute contracts with any Agency, the State or any
subdivision or agency thereof or any other Governmental Authority to make
apartments or tenants in the Apartment Complex eligible for any
public-subsidy program;
(ix) to execute leases of some or all of the apartment units of
the Apartment Complex to individuals and/or to a public housing authority
and/or to a non-profit corporation, cooperative or other non-profit
Entity;
(x) to employ or engage such engineers, architects, technicians,
accountants, attorneys and other Persons, as may be necessary, convenient
or incidental to the accomplishment of the purposes of the Partnership;
and
(xi) to enter into any kind of activity and to perform and carry
out contracts of any kind which may be lawfully carried on or performed
by a partnership and to file all certificates and document which may be
required under the laws of the State.
6.2 Restrictions on Authority
(a) Notwithstanding any other Section of this Agreement, the General
Partner shall have no authority to perform any act in violation of any
applicable law, Agency or other government regulations, the requirements of any
Lender, or the Project Documents. In the event of any conflict between the
terms of this Agreement and any applicable Regulations or requirements of any
Lender, the terms of such Regulations or the requirements of such Lender, as
the case may be, shall govern. Subject to the provisions of Section 6.2(b),
the General Partner, acting in its capacity as General Partner, shall not have
the authority, without the Consent of the Special Limited Partner:
(i) to have unsecured borrowings in excess of ten thousand
dollars ($10,000.00) in the aggregate at any one time outstanding, except
borrowings constituting Subordinated Loans or Credit Recovery Loans;
(ii) to borrow from the Partnership or commingle Partnership funds
with the funds of any other Person;
(iii) following the Completion Date, to construct any new or
replacement capital improvements on the Apartment Complex which
substantially alter the character or use of the Apartment Complex or
which cost in excess of ten thousand dollars ($10,000.00) in a single
Fiscal Year, except (x) replacements and remodeling in the ordinary
course of business or under emergency conditions or (y) construction paid
for from insurance proceeds;
(iv) to acquire any real property in addition to the Apartment
Complex;
(v) following Permanent Mortgage Commencement, and except as
otherwise specifically provided in Section 3.2, to increase, decrease or
modify the terms of or refinance any Mortgage Loan;
(vi) to rent apartments in the Apartment Complex such that the
Apartment Complex would not meet the requirements of the Minimum
Set-Aside Test or the Rent Restriction Test;
(vii) to sell, exchange or otherwise convey or transfer the
Apartment Complex or substantially all the assets of the Partnership;
(viii) to terminate any Material Agreement;
(ix) to cause the Partnership to commence a proceeding seeking any
decree, relief, order or appointment in respect to the Partnership under
the federal bankruptcy laws, as now or hereafter constituted, or under
any other federal or state bankruptcy, insolvency or similar law, or the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) for the Partnership or for any other
substantial part of the Partnership's business or property, or to cause
the Partnership to consent to any such decree, relief, order or
appointment initiated by any Person other than the Partnership;
(x) to execute contracts with any Agency, the State or any
subdivision or agency thereof or any other Governmental Authority to make
apartments or tenants in the Apartment Complex eligible for any
public-subsidy program;
(xi) to amend any construction or rehabilitation contract;
(xii) to pledge or assign any of the Capital Contributions of the
Investment Limited Partner or the proceeds thereof (except to the extent
required by the terms of the Construction Loan Documents and agreed to in
writing by the Special Limited Partner); or
(xiii) to do any act required to be approved or ratified by all
limited partners under the Act.
(b) In the event that any General Partner violates any provision of
Section 6.2(a), the Special Limited Partner in its sole discretion, may cause
itself or its designee to be admitted as an additional General Partner without
any further action by any other Partner. Upon any such admission of an
additional General Partner, each existing General Partner shall be deemed to
have assigned proportionally to the additional General Partner, automatically
and without further action, such portion of its General Partnership Interest so
that the additional General Partner shall receive not less than a one percent
(1%) interest in the Profits, Losses, Tax Credits and distributions of the
Partnership in consideration of one dollar ($1.00) and any other consideration
which may be agreed upon. An additional General Partner so admitted shall
automatically become the Managing General Partner and shall be irrevocably
delegated all of the power and authority of all of the General Partner pursuant
to Section 6.13. Any such additional General Partner shall have the right to
withdraw as a General Partner at any time, leaving the prior General Partner
once again as the only General Partner, the provisions of Article VII
notwithstanding. Each Partner hereby grants to the Special Limited Partner a
special power of attorney, irrevocable to the extent permitted by law and
coupled with an interest, to amend this Agreement and to do anything else
which, in view of the Special Limited Partner, may be necessary or appropriate
to accomplish the purposes of this Section 6.2(b) or to enable any additional
General Partner admitted pursuant to this Section 6.2(b) to manage the business
of the Partnership. The admission of an additional General Partner shall not
relieve any other General Partner of any of its economic obligations hereunder,
and each other General Partner shall fully indemnify and hold harmless the
additional General Partner from and against any and all Adverse Consequences
sustained by the additional General Partner in connection with its status as a
General Partner (other than Adverse Consequences arising solely from the gross
negligence or wilful misconduct of such additional General Partner).
(c) Neither the Investment General Partner nor any Affiliate thereof
shall be given an exclusive right to sell, or exclusive employment to sell, the
Apartment Complex.
6.3 Personal Services; Other Business Ventures
No General Partner or Affiliate thereof shall receive any salary or other
direct or indirect compensation for any services or goods provided in
connection with the Partnership or the Apartment Complex, except as may be
specifically provided in Section 6.12, Section 6.15 and Article XI or as to
which the Consent of the Special Limited Partner shall have been obtained to
the precise terms thereof prior to the commencement of such services or the
provision of such goods. Any Partner may engage independently or with others
in other business ventures of every nature and description, including the
ownership, operation, management, syndication and development of real estate;
neither the Partnership nor any other Partner shall have any rights in and to
such independent ventures or the income or profits derived therefrom.
6.4 Business Management and Control
(a) Subject to the provisions of this Agreement, the General Partner
shall have the exclusive right to control the business of the partnership. If
at any time there is more than one General Partner, the powers and duties of
the General Partners hereunder shall be exercised in the first instance by a
Managing General Partner who, subject to the terms and provisions of this
Agreement, shall manage the business and affairs of the Partnership. The
Managing General Partner may bind the Partnership by executing and delivering,
in the name and on behalf of the Partnership, any documents which this
Agreement authorizes the General Partners to execute hereunder without the
requirement that any other General Partner execute such documents. The initial
Managing General Partner shall be ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇; if it is unwilling or
unable to serve in such capacity or shall cease to be a General Partner, the
remaining General Partners may from time to time designate a new Managing
General Partner. If for any reason no designation is in effect, the powers of
the Managing General Partner shall be exercised by a majority in interest of
the General Partners. Any action required or permitted to be taken by a
corporate General Partner hereunder may be taken by such of its proper officers
or agents as it shall validly designate for such purpose.
(b) The Managing General Partner shall have control over the business
of the Partnership and shall have all rights, powers and authority conferred by
law as necessary, advisable or consistent in connection therewith. Without
limiting the generality of the foregoing, the Managing General Partner shall
have the right, power and authority to execute any documents relating to the
acquisition, financing, construction, operation and sale of all or any portion
of the Apartment Complex with the prior approval of the other General Partners,
if any. The Managing General Partner shall be responsible for administering
any construction loan draw requests for the development of the Apartment
Complex.
(c) Neither the Investment Limited Partner nor the Special Limited
Partner shall have any right to take part in the management or control of the
business of the Partnership or to transact any business in the name of the
partnership. No provision of this Agreement which makes the Consent of the
Investment Limited Partner or the Consent of the Special Limited Partner a
condition for the effectiveness of an action taken by the General Partner is
intended, and no such provisions shall be construed, to give the Investment
Limited Partner or the Special Limited Partner, as the case may be, any
participation in the control of the Partnership business. Each of the Special
Limited Partner and the Investment Limited Partner hereby consents to the
exercise by the General Partner of the powers conferred on it by law and this
Agreement, and the General Partner agrees to exercise control of the business
of the Partnership only in accordance with the provisions of this Agreement.
Notwithstanding the foregoing, in no event may the provisions of this Section
6.4 be invoked by any General Partner or by any other Person as a defense
against or as an impediment to the ability of either the Investment Limited
Partner or the Special Limited Partner to take any action hereunder.
6.5 Duties and Obligations
(a) The General Partner shall manage the affairs of the Partnership to
the best of its ability, shall use its best efforts to carry out the purpose of
the Partnership, and shall devote to the Partnership such time as may be
necessary for the proper performance of its duties and the business of the
Partnership. The General Partner shall promptly take all action which may be
necessary or appropriate for the proper development, construction, maintenance
and operation of the Apartment Complex in accordance with the provisions of
this Agreement, the Project Documents and any applicable laws and Regulations.
The General Partner is responsible for the management and operation of the
Partnership, including the oversight of the rent-up and operational stages of
the Apartment Complex.
(b) Subject to the provisions of Section 6.5(g), the General Partner
shall use its diligent good faith efforts to cause the Partnership to generate
Cash Flow for distribution to the Partners at the maximum realizable level in
view of (i) any applicable Regulations, (ii) the Minimum Set-Aside Test, (iii)
the Rent Restriction Test and (iv) the Projected Rents, and, if necessary, the
General Partner also shall use its best efforts to obtain approvals and
implementation of appropriate adjustments in the rental schedule of the
Apartment Complex.
(c) The General Partner shall cause the Partnership to obtain and keep
in force, during the term of the Partnership, comprehensive casualty insurance,
including, but not limited to, fire, earthquakes and other risks generally
included under "extended coverage" policies, workers compensation and public
liability insurance in favor of the Partnership (i) with such companies and in
such amounts as shall be satisfactory to the Lenders, or, if the Lenders
impose no specific requirements, as shall be customary for apartment complexes
similar to the Apartment Complex, and (ii) in amounts which shall be (A) no
less than those amounts which are customary in the area for apartment complexes
such as the Apartment Complex, (B) no less than such amounts as may be
reasonably requested by the Special Limited Partner from time to time, and (C)
in any event, sufficient to prevent the Partnership from becoming a co-insurer
under any such policies. No deductibles on such policies may exceed $2,500.
The public liability insurance in favor of the Partnership shall be in an
amount not less than $6,000,000 (up to $5,000,000 of which may be covered by an
umbrella policy). Through the Completion Date, or such later date as may be
required by any Agency or any Lender, the General Partner also shall cause the
Partnership to obtain and keep in force a builder's risk policy in favor of the
Partnership in an amount not less than the greater of (i) the full replacement
value of the Apartment Complex (excluding the value of the underlying land, the
site utilities and the foundations) or (ii) such other amount as shall be
required by any Agency or Lender. Throughout the term of the Partnership, the
General Partner shall provide copies of all such policies (or binders) to the
Special Limited Partner promptly after their receipt thereof. The General
Partner shall cause the applicable insurer to name each of the Investment
Limited Partner and the Special Limited Partner as an "additional insured" on
each Partnership insurance policy.
(d) If at any time there is more than one General Partner, the
obligations of the General Partners hereunder shall be the joint and several
obligations of each General Partner. Except as otherwise provided in Sections
4.5(b) and 7.1, such obligations shall survive any Withdrawal of a General
Partner from the Partnership.
(e) (i) The General Partner shall establish and maintain reasonable
reserves (the "Replacement Reserve") to provide for working capital needs,
improvements, replacements and any other contingencies of the Partnership. At
a minimum, the General Partner shall cause the Partnership to annually deposit
$7,600 from Cash Flow into the Replacement Reserve; to the extent that Cash
Flow (as determined before deduction of such reserve deposit) for any Fiscal
Year shall be insufficient to make such deposit in full, the General Partner
shall fund such shortfall from its own funds as a Subordinated Loan. Funds
held in the Replacement Reserve may be released only with the approval of the
Special Limited Partner; and
(ii) In addition to the requirements of Section 6.5(e)(i), in
order to fund Cash Expenditures of the Partnership which exceed Cash Receipts
available for the payment thereof, on or prior to the Admission Date, the
General Partner (or its designee), shall deposit $60,000 into a segregated
reserve account (the "Operating Reserve") to secure the General Partner's
obligation to fund operating expenses. Funds held in the Operating Reserve may
be released to pay operating expenses only with the approval of the Special
Limited Partner. Upon the achievement of Rental Achievement, up to $30,000 of
the funds remaining in the Operating Reserve shall be returned to the General
Partner (or its designee) in accordance with the provisions of Section 10.2.
The remaining funds in the Operating Reserve shall be returned to the General
Partner in accordance with the provisions of Section 10.2 48 months after
Rental Achievement, provided that the Partnership achieves 6 consecutive months
of Debt Service Coverage Ratio of 1.15 to 1.00 in the fourth year after
Completion and the management of the Apartment Complex is in compliance with
the terms of the Partnership Agreement. Any funds utilized from the Operating
Reserve to pay Partnership operating expenses shall constitute Subordinated
Loans. Upon the utilization of such funds from the Operating Reserve, the
General Partner shall use its best good faith efforts to redeposit Partnership
funds in the Operating Reserve in an amount sufficient to maintain the minimum
balances required herein.
(f) Each General Partner shall be bound by the provisions of the
Project Documents, and no additional General Partner shall be admitted if he,
she or it has not first agreed to be bound by this Agreement (and assume the
obligations of a General Partner hereunder) and by the Project Documents to the
same extent and under the same terms as each of the other General Partners.
(g) The General Partner shall take all actions appropriate to ensure
that the Investment Limited Partner receives the full amount of the Projected
Credit, including, without limitation, the rental of apartments to appropriate
tenants and the filing of annual certifications as may be required. In this
regard, the General Partner shall, inter alia, cause (i) the Partnership to
satisfy the Minimum Set-Aside Test, the Rent Restriction Test and all other
requirements imposed from time to time under the Code with respect to rental
levels and occupancy by qualified tenants by the close of the first year of the
Credit Period and throughout the Compliance Period so as to permit the
Partnership to be entitled to the maximum available Tax Credit (ii) the
Partnership to comply with all State Tax Credit monitoring procedures, (iii)
all dwelling units in the Apartment Complex to be leased for initial periods of
not less than six months to individuals satisfying the Rent Restriction Test,
(iv) the Partnership to make all appropriate Tax Credit elections in a timely
fashion, and (v) all rental units in the Apartment Complex to be of equal
quality with comparable amenities available to low-income tenants on a
comparable basis without separate fees.
(h) On or before the Admission Date, the General Partner shall provide
to the Special Limited Partner either (i) an appraisal of the Apartment Complex
prepared by a competent independent appraiser or (ii) completed FmHA Forms
1924-13 (estimate and certificate of actual cost) and 1930-7 (statement of
budget, income and expense) or HUD project cost and budget analysis on Form
2264, or any successor FmHA or HUD form, any comparable form of a state or
other Governmental Authority, including any applicable Credit Agency, setting
forth estimates with respect to construction, rehabilitation and mortgage
financing costs and initial rental income and operating expense figures for the
Apartment Complex.
(i) The General Partner shall (i) not store or dispose of (except in
compliance with all laws, ordinances, and regulations pertaining thereto) any
Hazardous Material at the Apartment Complex, or at or on any other Site or
Vessel owned, occupied, or operated either by any General Partner, any
Affiliate of a General Partner, or any Person for whose conduct any General
Partner is or was responsible; (ii) neither directly nor indirectly transport
or arrange for the transport of any Hazardous Material (except in compliance
with all laws, ordinances, and regulations pertaining thereto); (iii) provide
the Investment Limited Partner with written notice (x) upon any General
Partner's obtaining knowledge of any potential or known release, or threat of
release, of any Hazardous Material at or from the Apartment Complex or any
other Site or Vessel owned, occupied, or operated by any General Partner, any
Affiliate of a General Partner or any Person for whose conduct any General
Partner is or was responsible or whose liability may result in a lien on the
Apartment Complex; (y) upon any General Partner's receipt of any notice to such
effect from any federal, state, or other Governmental Authority; and (z) upon
any General Partner's obtaining knowledge of any incurrence of any expense or
loss by any such government authority in connection with the assessment,
containment, or removal of any Hazardous Material for which expense or loss any
General Partner may be liable or for which expense or loss a lien may be
imposed on the Apartment Complex.
(j) The General Partner shall promptly request in writing of the
Permanent Lender that the Permanent Lender cause the Special Limited Partner to
be named as an "interested party" in the Permanent Mortgage Loan Documents, so
that the Permanent Lender will notify the Special Limited Partner of any
default under the Permanent Mortgage or the General Partner shall itself notify
the Special Limited Partner of any such default.
(k) The General Partner shall provide the Special Limited Partner with
a true and accurate copy of each Construction Loan requisition and any
supporting documents and information which has been submitted for approval by
the Construction Lender (whether submitted before or after the Admission Date).
(l) The General Partner shall 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. The General Partner shall not employ,
or permit another to employ, such funds or assets in any manner except for the
exclusive benefit of the Partnership. No General Partner shall contract away
the fiduciary duty owed at common law to the Limited Partners.
6.6 Representations and Warranties
The General Partner represents and warrants to the Investment Limited
Partner and the Special Limited Partner as follows:
(a) The Partnership is a duly organized limited partnership validly
existing and in good standing under the laws of the State and has complied with
all filing requirements necessary for its existence and to preserve the limited
liability of the Investment Limited Partner and the Special Limited Partner.
(b) No event or proceeding has occurred or is pending or, is to the
Best Knowledge of the General Partner, threatened which would (i) materially
adversely affect the Partnership or its properties, or (ii) materially
adversely affect the ability of the General Partner or any of its Affiliates to
perform their respective obligations hereunder or under any other agreement
with respect to the Apartment Complex, other than legal proceedings which have
been bonded against without recourse to Partnership assets in such manner as
to stay the effect of the proceedings or otherwise have been adequately
provided for. This subparagraph shall be deemed to include, without
limitation, the following: (x) legal actions or proceedings before any court,
commission, administrative body or other Governmental Authority having
jurisdiction over the zoning applicable to the Apartment Complex; (y) labor
disputes; and (z) acts of any Governmental Authority.
(c) No default (or event which, with the giving of notice or the
passage of time or both, would constitute a default) has occurred and is
continuing under this Agreement or under any material provision of the Project
Documents, and the Project Documents are in full force and effect.
(d) Except as specifically permitted under Section 3.1, no Partner or
Related Person bears (or will bear) the Economic Risk of Loss with respect to
the Permanent Mortgage Loan. No General Partner has, either on its own behalf
or on behalf of the Partnership, incurred any financial obligation with respect
to the Partnership prior to the Admission Date, other than as disclosed in
writing to the Special Limited Partner prior to the Admission Date.
(e) The Apartment Complex will be, is being or has been constructed in
a timely manner in conformity with the Project Documents. There is no
violation by the Partnership or the General Partner of any zoning,
environmental or similar regulation applicable to the Apartment Complex which
could have a material adverse effect thereon, and the Partnership has complied
and will comply with all applicable municipal and other laws, ordinances and
regulations relating to such construction and use of the Apartment Complex.
All appropriate public utilities, including, but not limited to, water,
electricity, gas (if called for in the Plans and Specifications), and sanitary
and storm sewers, are or will be available and operating properly for each unit
in the Apartment Complex at the time of the initial occupancy of such unit.
(f) The Partnership owns good and marketable fee simple title to the
Apartment Complex, subject to no material liens, charges or encumbrances other
than those which (i) are both permitted by the Project Documents and are noted
or excepted in the Title Policy, (ii) do not materially interfere with use of
the Apartment Complex (or any part thereof) for its intended purpose or, other
than the permitted Mortgages, have a material adverse effect on the value of
the Apartment Complex, or (iii) have been bonded or insured against in such a
manner as to preclude the holder of such lien or such surety or insurer from
having any recourse to the Property or the Partnership for payment of any debt
secured thereby, which bond(s) or insurance have been approved by the Lenders.
(g) The execution and delivery of all instruments and the performance
of all acts heretofore or hereafter made or taken pertaining to the Partnership
or the Apartment Complex by each Affiliate of a General Partner which is a
corporation or limited liability company have been or will be duly authorized
by all necessary corporate or other actions, and the consummation of any such
transactions with or on behalf of the Partnership will not constitute a breach
or violation of, or a default under, the charter or by-laws of such Affiliate
or any agreement by which such Affiliate or any of its properties is bound, nor
constitute a violation of any law, administrative regulation or court decree.
(h) Any General Partner (or partner or member of a General Partner)
which is a corporation or limited liability company (a "Corporation/LLC") has
been duly organized, is validly existing and in good standing under the laws of
its state of organization and has all requisite corporate and other power to be
a General Partner and to perform its duties and obligations as contemplated by
this Agreement and the Project Documents. Neither the execution and delivery
by any Corporation/LLC of this Agreement nor the performance of any of the
actions of any Corporation/LLC contemplated hereby has constituted or will
constitute a violation of (a) the articles of incorporation, operating
agreement, by-laws and any other organizational documents of such
Corporation/LLC, (b) any agreement by which such Corporation/LLC is bound or to
which any of its property or assets is subject, or (c) any law, administrative
regulation or court decree.
(i) No Event of Bankruptcy has occurred with respect to any General
Partner.
(j) All accounts of the Partnership required to be maintained under the
terms of the Project Documents, including, but not necessarily limited to, any
account for replacement reserves, are currently funded to the levels required
by any Agency or Lender.
(k) If the only General Partner(s) are one or more corporation(s) or
limited liability company(ies), then the General Partner(s) have a combined net
worth which satisfies the Designated Net Worth Requirements.
(l) All anticipated payments and expenses required to be made or
incurred in order to complete the construction of the Apartment Complex in
conformity with the Project Documents, to fund any reserves hereunder or under
any other Project Document required to be funded at or prior to the later of
the Admission Date or Permanent Mortgage Commencement, to satisfy all
requirements under the Project Documents and to pay the Development Fee and all
other fees, have been or will be paid or provided for utilizing only (i) the
funds available from the Construction Loan, (ii) the Capital Contributions of
the Investment Limited Partner, (iii) the Capital Contributions of the General
Partner in the amounts set forth on Schedule A as of the Admission Date, (iv)
the available net rental income, if any, earned by the Partnership prior to
Permanent Mortgage Commencement (to the extent that it is permitted to be used
for such purposes by any Agency or Lender), (v) any Cash Flow generated
subsequent to Permanent Mortgage Commencement (to the extent provided in
Section 10.2(a)), (vi) any insurance proceeds and (vii) any funds furnished by
the General Partner pursuant to Sections 6.5(e) and 6.11(a).
(m) The aggregate amount of Tax Credit which is expected to be
allocated by the Partnership to the Investment Limited Partner is $66,665 for
1996, $187,650 per annum for each of the years 1997 through 2005 (inclusive)
and $118,516 for 2006, provided, however, that the General Partner shall have
no liability to the Investment Limited Partner or the Special Limited Partner
for any breach of the representation contained in this paragraph (m) if (but
only to the extent that) the adjuster provisions set forth in Sections 5.1(e),
(f) and (g) have become operative and all required payments or adjustments have
been made thereunder in accordance with the terms thereof.
(n) The Apartment Complex will be, is being or has been constructed and
operated in a manner which satisfies Section 42 of the Code and shall continue
to satisfy all existing and anticipated restrictions applicable to projects
generating Tax Credits.
(o) No General Partner, Affiliate of a General Partner or Person for
whose conduct any General Partner is or was responsible has ever: (i) owned,
occupied, or operated a Site or Vessel on which any Hazardous Material was or
is stored, transported, or disposed of, except if such storage, transport or
disposition was and is at all times in compliance with all laws, ordinances,
and regulations pertaining thereto; (ii) directly or indirectly transported, or
arranged for transport, of any Hazardous Material (except if such transport was
and is at all times in compliance with all laws, ordinances and regulations
pertaining thereto); (iii) caused or was legally responsible for any release or
threat of release of any Hazardous Material; (iv) received notification from
any federal, state or other Governmental Authority of (x) any potential, known,
or threat of release of any Hazardous Material from the Apartment Complex or
any other Site or Vessel owned, occupied, or operated by any General Partner,
by any Affiliate of a General Partner, or by any Person for whose conduct any
General Partner is or was responsible or whose liability may result in a lien
on the Apartment Complex; or (y) the incurrence of any expense or loss by any
such Governmental Authority or by any other Person in connection with the
assessment, containment, or removal of any release or threat of release of any
Hazardous Material from the Apartment Complex or any such Site or Vessel.
(p) To the Best Knowledge of the General Partner, no Hazardous Material
was ever or is now stored on, transported, or disposed of on the land
comprising the Apartment Complex, except to the extent any such storage,
transport or disposition was at all times in compliance with all laws,
ordinances, and regulations pertaining thereto.
(q) The General Partner has fulfilled and will continue to fulfill all
of its duties and obligations under Section 6.5.
6.7 Liability on Mortgages
Neither any General Partner nor any Related Person shall at any time bear
the Economic Risk of Loss for the payment of any portion of any Mortgage Loan,
and the General Partner shall not permit any other Partner or any Related
Person to bear the Economic Risk of Loss for the payment of any portion of any
Mortgage Loan, except as may be expressly permitted pursuant to the provisions
of Article III with the Consent of the Special Limited Partner.
6.8 Indemnification of the General Partner
(a) No General Partner or any Affiliate thereof shall have liability to
the Partnership or to any Limited Partner for any loss suffered by the
Partnership which arises out of any action or inaction of any General Partner
or Affiliate thereof if such General Partner or Affiliate thereof in good faith
determined that such course of conduct was in the best interest of the
Partnership and such course of conduct did not constitute gross negligence or
willful misconduct of such General Partner or Affiliate thereof.
(b) A General Partner or any Affiliate thereof shall be indemnified by
the Partnership from and against any Adverse Consequences sustained in
connection with the business and operations of the Partnership, provided that
all of the following conditions are met: (i) such General Partner has
determined, in good faith, that the course of conduct which caused the loss,
judgment, liability, expense or amount paid in settlement was in the best
interests of the Partnership; and (ii) such Adverse Consequences were not the
result of gross negligence or willful misconduct on the part of such General
Partner or Affiliate thereof; and (iii) such indemnification or agreement to
hold harmless is recoverable only out of the assets of the Partnership, and not
from the Limited Partners.
(c) Notwithstanding the above, no Partner or any Affiliate thereof
performing services for the Partnership or any broker-dealer shall be
indemnified for any Adverse Consequences arising from or out of an alleged
violation of federal or state securities laws unless there has been a
successful adjudication on the merits of each count involving securities laws
violations as to the particular indemnitee and the court finds that
indemnification of the settlement and related costs should be made. In any
claim for indemnification for federal or state securities law violations, the
party seeking indemnification shall, prior to seeking court approval for such
indemnification, place before the court the positions of the Securities and
Exchange Commission, the Massachusetts Securities Division and any other
applicable state securities administrator with respect to the issue of
indemnification for securities law violations.
(d) The Partnership shall not incur the cost of the portion of any
insurance, other than public liability insurance or course of construction
insurance, which insures any party against any liability as to which such party
is herein prohibited from being indemnified.
(e) The Partnership may indemnify Affiliates of a General Partner under
this Section 6.8 only if the loss involves an activity in which such Affiliates
acted in the capacity of a General Partner.
(f) For purposes of this Section 6.8 only, the term "Affiliate" shall
mean any Person performing services on behalf of the Partnership who (i)
directly or indirectly controls, is controlled by or is under common control
with a General Partner; (ii) owns or controls ten percent (10%) or more of the
outstanding voting securities of a General Partner; (iii) is an officer,
director, partner or trustee of a General Partner; or (iv) if a General Partner
is an officer, director, partner or trustee, in any company for which such
General Partner acts in any such capacity. For purposes of this Section 6.8
only, the term "controls" and any form of such term shall mean the power to
direct the management and policies of a Person, directly or indirectly, whether
through ownership of voting securities, by contract or otherwise.
6.9 Indemnification of the Partnership and the Limited Partners
(a) The General Partner will indemnify and hold the Partnership and the
Limited Partners harmless from and against any and all Adverse Consequences
which the Partnership or any Limited Partner may incur by reason of (i) the
past, present or future actions or omissions of the General Partner or any of
its Affiliates constituting gross negligence or willful misconduct, or (ii) any
liabilities to which either the Partnership or the Apartment Complex is subject
other than (x) any Mortgage or (y) any payables or necessary contractual
obligations incurred pursuant to the requirements of any Agency or Lender in
connection with the operation of the Apartment Complex in the ordinary course
of business.
(b) Notwithstanding the foregoing, no General Partner shall be liable
to a Limited Partner or the Partnership for any act or omission for which the
Partnership is required to indemnify such General Partner under Section 6.8.
(c) The General Partner shall indemnify, defend, and hold the Limited
Partners harmless from and against any Adverse Consequences related to or
arising out of the presence of any Hazardous Material at the Apartment Complex
(other than any Adverse Consequences resulting from the acts or omissions of
the Limited Partners). Any claim or loss described in the immediately
preceding sentence may be defended, compromised, settled, or pursued by the
Limited Partners with counsel of the Limited Partners' selection, but at the
expense of General Partner. Notwithstanding anything else set forth herein,
this indemnification shall survive the withdrawal of any General Partner and/or
the termination of this Agreement.
6.10 Operating Deficits
Subject to any Requisite Approvals, the General Partner shall be
obligated to promptly advance funds to eliminate any Operating Deficit. In any
case in which the General Partner otherwise would be required to advance funds
under this Section 6.10, any amounts then held in the Operating Reserve may be
released and disbursed for the purpose of eliminating the Operating Deficit
before the General Partner shall be required to advance their own funds. In
the event that the General Partner shall fail to make any such advance as
aforesaid, (a) the Partnership shall utilize amounts (the "Applied Amounts")
otherwise payable to the General Partner or its Affiliates under Section 6.12
and/or Article X to meet the obligations of the General Partner pursuant to
this Section 6.10, with such utilization of Applied Amounts constituting
payment and satisfaction of the corresponding amounts payable to the General
Partner or its Affiliates under Section 6.12 and/or Article X, with the
proceeds thereof being applied to such obligations, and with the obligation of
the Partnership to make such payments to the General Partner or its Affiliates
pursuant to Section 6.12 and/or Article X being deemed to have been satisfied
to the extent thereof and (b) the Special Limited Partner shall have the
option, exercisable in its sole discretion, to cause it or one or more of its
designees to be admitted to the Partnership as additional General Partner(s).
An additional General Partner so admitted shall automatically, without the need
for any further action by any Partner, become the Managing General Partner and
shall be delegated all of the powers and authority of all of the General
Partners pursuant to Section 6.13, and each Partner hereby grants to any such
additional General Partner a power of attorney, coupled with an interest and
irrevocable to the extent permitted by law, to execute and deliver any and all
instruments and documents which it believes to be necessary or appropriate in
order to accomplish the purposes of this Section 6.10 and to manage the
business of the Partnership. The admission of an additional General Partner
shall not relieve any other General Partner of any of its economic obligations
hereunder, and each other General Partner shall indemnify and hold harmless the
additional General Partner from and against any and all Adverse Consequences
sustained in connection with the additional General Partner's status as a
General Partner (other than Adverse Consequences arising solely out of the
negligence or misconduct of such additional General Partner). For the purpose
of this Section 6.10, all expenses shall be paid on a sixty (60)-day current
basis. Moreover, the General Partner may in its sole discretion at any time
advance funds to the Partnership to pay operating expenses and/or debt service
of the Partnership in order to facilitate the Partnership's compliance with the
Rent Restriction Test. All advances pursuant to Section 6.5(e) and this
Section 6.10 (including any Applied Amounts), except advances from the
Operating Reserve, shall constitute non-interest-bearing Subordinated Loans.
Subordinated Loans shall be repaid in accordance with the provisions of Article
X. The form and provisions of all Subordinated Loans shall conform to any
applicable Regulations.
6.11 Obligation to Complete the Construction of the Apartment Complex
(a) The Developer shall be obligated to complete the construction of
the Apartment Complex and achieve Permanent Mortgage Commencement in the manner
set forth in this Agreement and the Development Agreement.
(b) The completion of the Apartment Complex shall be secured by a
completion bond in an amount at least equal to the full amount of the
Construction Contract for the Apartment Complex or by other security
satisfactory to the Special Limited Partner, which other security may included,
but shall not be limited to, the following:
(i) a written guaranty of completion by a Person, supported by
financial statements demonstrating sufficient net worth or adequately
collateralized by other real or personal properties or other Persons'
guarantees; and/or
(ii) a retention of a reasonable portion of the Capital
Contribution of the Investment Limited Partner and/or fees to the General
Partner as a potential offset in the event the General Partner does not
perform in accordance with this Agreement.
6.12 Certain Payments to the General Partner and Others
(a) As reimbursement for certain advances and as compensation for the
Developer's services in connection with the development and construction of the
Apartment Complex, the Partnership shall pay to the Developer a development fee
(the "Development Fee") in the amount and at the times set forth in the
Development Agreement. If the Development Fee has not been fully paid by the
tenth (10th) anniversary of the Completion Date, the General Partner shall make
a Capital Contribution to the Partnership in an amount sufficient to enable the
Partnership to pay any unpaid portion of the Development Fee.
(b) The Partnership shall pay to the Special Limited Partner or an
Affiliate thereof a fee (the "Asset Management Fee") commencing in 1996 for its
services in connection with the Partnership's accounting matters relating to
the Investment Limited Partner and assisting with the preparation of tax
returns and the reports required by Section 12.7 in the annual amount of
$5,000. The Asset Management Fee shall be payable from Cash Flow in the manner
and priority set forth in Section 10.2(a); provided however, that if in any
Fiscal Year, Cash Flow is insufficient to pay the full amount of the Asset
Management Fee, the General Partner shall advance the amount of such deficiency
to the Partnership as a Subordinated Loan.
(c) In consideration of the services of the General Partner in managing
the day-to-day business and affairs of the Partnership, the Partnership shall
pay to the General Partner an annual fee (the "Partnership Management Fee")
commencing in 1996 in the amount of up to $5,000, payable from Cash Flow in the
manner set forth in Section 10.2(a). The Partnership Management Fee shall be
noncumulative so that if there is not sufficient Cash Flow in any Fiscal Year
to pay the amount of the Partnership Management Fee specified in Section
10.2(a), clause Fifth, the Partnership shall have no obligation to pay such
shortfall in any future Fiscal Year.
6.13 Delegation of General Partner Authority
(a) If there shall be more than one General Partner serving hereunder,
each General Partner may from time to time, by an instrument in writing,
delegate all or any of his powers or duties hereunder to another General
Partner or General Partners.
(b) Each contract, deed, mortgage, lease and other instrument executed
by any General Partner shall be conclusive evidence in favor of every Person
relying thereon or claiming thereunder that at the time of the delivery thereof
(i) the Partnership was in existence, (ii) this Agreement had not been amended
in any manner so as to restrict the delegation of authority among General
Partners (except as shown in certificates or other instruments duly filed in
the Filing Office) and (iii) the execution and delivery of such instrument was
duly authorized by the General Partners. Any Person may always rely on a
certificate addressed to him and signed by any General Partner hereunder:
(1) as to who are the General Partners or Limited Partners
hereunder;
(2) as to the existence or nonexistence of any fact which
constitutes a condition precedent to acts by the General Partners or in
any other manner germane to the affairs of the Partnership;
(3) as to who is authorized to execute and deliver any instrument
or document of the Partnership;
(4) as to the authenticity of any copy of this Agreement and any
amendments thereto; or
(5) as to any act or failure to act by the Partnership or as to
any other matter whatsoever involving the Partnership or any Partner.
6.14 Assignment to Partnership
The Developer and the General Partner hereby transfer and assign to the
Partnership all of their right, title and interest in and to the Apartment
Complex and in and to all of the Project Documents, including, but not limited
to, the following: (i) all contracts with architects, supervising architects,
engineers and contractors with respect to the development of the Apartment
Complex; (ii) all plans, specifications and working drawings heretofore
prepared or obtained in connection with the Apartment Complex; (iii) all
governmental commitments and approvals obtained, and applications therefore,
including, but not limited to those relating to planning, zoning, building
permits and Tax Credits; (iv) any and all commitments with respect to any
Mortgage(s); and (v) any and all contracts or rights with respect to any
agreements with any Agency or Lender.
6.15 Contracts with Affiliates
(a) The General Partner or any Affiliate thereof may act as Management
Agent upon the terms and conditions set forth in Article XI.
(b) The General Partner or any Affiliates thereof shall have the right
to contract or otherwise deal with the Partnership for the sale of goods or
services to the Partnership in addition to those set forth herein, if (i)
compensation paid or promised for such goods or services is reasonable (i.e.,
at fair market value) and is paid only for goods or services actually furnished
to the Partnership, (ii) the goods or services to be furnished shall be
reasonable for and necessary to the Partnership, (iii) the fees, terms and
conditions of such transaction are at least as favorable to the Partnership as
would be obtainable in an arm's-length transaction, and (iv) no agent,
attorney, accountant or other independent consultant or contractor who also is
employed on a full-time basis by the General Partner or any Affiliate shall be
compensated by the Partnership for his services. Any contract covering such
transactions shall be in writing and shall be terminable without penalty on
sixty (60) days written notice. Any payment made to the General Partner or any
Affiliate for such goods or services shall be fully disclosed to all Limited
Partners in the reports required under Article XII. Neither the General
Partner nor any Affiliate shall, by the making of lump-sum payments to any
other Person for disbursement by such other Person, circumvent the provisions
of this Section 6.15(b).
6.16 Tax Matters Partner
(a) The General Partner hereby is designated as Tax Matters Partner of
the Partnership, and shall engage in such undertakings as are required of the
Tax Matters Partner of the Partnership as provided in treasury regulations
pursuant to Section 6231 of the Code. Each Partner, by the execution of this
Agreement, consents to such designation of the Tax Matters Partner and agrees
to execute, certify, acknowledge, deliver, swear to, file and record at the
appropriate public offices such documents as may be necessary or appropriate to
evidence such consent.
(b) The Tax Matters Partner hereby is authorized, but not required:
(i) to enter into any settlement agreement with the Service with
respect to any tax audit or judicial review, in which agreement the Tax
Matters Partner may expressly state that such agreement shall bind the
other Partners, except that such settlement agreement shall not bind any
Partner who (within the time prescribed pursuant to the Code and treasury
regulations thereunder) files a statement with the Service providing that
the Tax Matters Partner shall not have the authority to enter into a
settlement agreement on the behalf of such Partner;
(ii) in the event that a notice of final administrative adjustment
at the Partnership level of any item required to be taken into account by
a Partner for tax purposes (a "Final Adjustment") is mailed to the Tax
Matters Partner, to seek judicial review of such Final Adjustment,
including the filing of a petition for readjustment with the Tax Court,
the District Court of the United States for the district in which the
Partnership's principal place of business is located, or the United
States Claims Court;
(iii) to intervene in any action brought by any other Partner for
judicial review of a Final Adjustment;
(iv) to file a request for an administrative adjustment with the
Service at any time and, if any part of such request is not allowed by
the Service, to file an appropriate pleading (petition or complaint) for
judicial review with respect to such request;
(v) to enter into an agreement with the Service to extend the
period for assessing any tax which is attributable to any item required
to be taken into account by a Partner for tax purposes, or an item
effected by such item; and
(vi) to take any other action on behalf of the Partners or the
Partnership in connection with any administrative or judicial tax
proceeding to the extent permitted by applicable law or Regulations.
(c) The Partnership shall indemnify and reimburse the Tax Matters
Partner for all expenses, including legal and accounting fees, claims,
liabilities, losses and damages incurred in connection with any administrative
or judicial proceeding with respect to the tax liability of the Partners. The
payment of all such expenses shall be made before any distributions are made
from Cash Flow or any discretionary reserves are set aside by the General
Partner. The General Partner shall have the obligation to provide Partnership
funds for such purpose, but only to the extent of available Partnership
resources. The taking of any action and the incurring of any expense by the
Tax Matters Partner in connection with any such proceeding, except to the
extent required by law, is a matter in the sole discretion of the Tax Matters
Partner and the provisions on limitations of liability of the General Partner
and indemnification set forth in Section 6.8 of this Agreement shall be fully
applicable to the Tax Matters Partner in its capacity as such.
ARTICLE VII
Withdrawal of a General Partner; New General Partners
7.1 Voluntary Withdrawal
(a) Except as set forth in Section 7.1(b) below, no General Partner
shall have the right to Withdraw voluntarily from the Partnership or to sell,
assign or encumber its Interest without the Consent of the Investment Limited
Partner and each of the other General Partners (if any) and, if required, any
Requisite Approvals.
(b) Notwithstanding the foregoing:
(i) A General Partner may at any time propose to the Investment
Limited Partner a Person to serve as such General Partner's successor or
if at such time there be more than one General Partner, to serve as a
successor to one or more of the General Partners ▇▇▇▇▇▇▇▇ to withdraw.
If the Investment Limited Partner has consented thereto or if, pursuant
to Section 7.5, such a consent is not required, and any Requisite
Approvals are obtained to such withdrawal and the admission of such
successor, all Partners hereby agree, subject to the provisions of
Section 7.5, that this Agreement and the Certificate shall be
appropriately amended to effect such withdrawal and admission.
(ii) If the Special Limited Partner or its designee becomes a
General Partner pursuant to the provisions of Section 4.5(b), Section
5.2(e), Section 6.2(b) or Section 6.10, it shall not require the consent
of any other General Partner to transfer all or any portion of its
Interest as a General Partner, other than as may be required under the
Act.
(iii) The General Partner may pledge or assign its Interest to the
Construction Lender as security for the Partnership's obligations under
the Construction Loan Documents, provided that the form and substance of
such pledge or assignment has been approved by the Special Limited
Partner.
7.2 Reconstitution
(a) In the event of the Withdrawal of a General Partner, the
Partnership shall not be dissolved or required to be wound up if (i) at the
time of such Withdrawal there is at least one remaining General Partner and
that General Partner carries on the business of the Partnership (any such
remaining General Partner being hereby authorized to carry on the business of
the Partnership), or (ii) within ninety (90) days after such Withdrawal all
remaining Partners agree in writing to continue the business of the Partnership
and to the appointment, effective as of the date of such Withdrawal, of one or
more additional General Partners.
(b) If it is determined, by a court of competent jurisdiction, that the
Partnership has dissolved prior to the occurrence of a Liquidating Event, or if
upon the Withdrawal of a General Partner, the Partners fail to appoint a
substitute General Partner effective as of such event and to agree to continue
the business of the Partnership as provided in this Section 7.2, then within an
additional ninety (90) days after such determination or the last day of such
ninety (90) day period, as the case may be (the "Reconstitution Period"), the
Investment Limited Partner may elect to reconstitute the Partnership and
continue its business on the same terms and conditions set forth in this
Agreement by forming a new limited partnership on terms identical to those set
forth in this Agreement and having as a General Partner a Person designated by
the Investment Limited Partners. Upon any such election by the Investment
Limited Partner, all Partners shall be bound thereby and shall be deemed to
have consented thereto. Unless such an election is made within the
Reconstitution Period, the Partnership shall wind up its affairs in accordance
with the provisions of Section 10.3 hereof. If such an election is made within
the Reconstitution Period, then:
(i) The reconstituted limited partnership shall continue
until the occurrence of a Liquidating Event as provided in Section
2.4;
(ii) If the successor General Partner is not a former
General Partner, then the provisions of Section 7.4(d) shall apply;
and
(iii) All necessary steps shall be taken to cancel this
Agreement and the Certificate and to enter into a new partnership
agreement and certificate of limited partnership, and the successor
General Partner shall be obligated to take such steps.
7.3 Successor General Partner
(a) Upon the occurrence of any Withdrawal, the remaining General
Partners may designate a Person to become a successor General Partner to the
Withdrawing General Partner. Except as provided in Section 7.5 and subject to
the provisions of Section 7.5, any Person so designated, subject to any
Requisite Approvals, the Consent of the Investment Limited Partner and, if
required by the Act or any other applicable law, the consent of any other
Partner so required, shall become a successor General Partner upon his written
agreement to be bound by the Project Documents and by the provisions of this
Agreement.
(b) If any Withdrawal shall occur at a time when there is no remaining
General Partner and the Partners do not unanimously elect to continue the
business of the Partnership in accordance with the provisions of clause (ii) of
Section 7.2(a) above, then the Investment Limited Partner shall have the right,
subject to any Requisite Approvals and the provisions of Section 7.5, to
designate a Person to become a successor General Partner upon his written
agreement to be bound by the Project Documents and by the provisions of this
Agreement.
(c) If the Investment Limited Partner elects to reconstitute the
Partnership and admit a successor General Partner pursuant to this Section 7.3,
the relationship of the Partners in the reconstituted Partnership shall be
governed by this Agreement.
7.4 Interest of Predecessor General Partner
(a) Except as provided in Section 7.3(a), no assignee or transferee of
all or any part of the Interest as a General Partner of a General Partner shall
have any automatic right to become a General Partner. Until the acquisition of
the Interest of a Withdrawing General Partner pursuant to Section 7.4(d) or
7.8, such Interest shall be deemed to be that of an assignee and the holder
thereof shall be entitled only to such rights as an assignee may have as such
under the laws of the State.
(b) Anything herein contained to the contrary notwithstanding, any Gen-
eral Partner who Withdraws voluntarily in violation of Section 7.1 shall remain
liable for all of its obligations under this Agreement, for all its other
obligations and liabilities hereunder incurred or accrued prior to the date of
its Withdrawal and for any loss or damage which the Partnership or any of its
Partners may incur as a result of such Withdrawal (except as provided in
Section 6.7), except for any loss or damage attributable to the default,
negligence or misconduct of a successor General Partner admitted in its place
under this Agreement.
(c) The estate (which term, for purposes of this Section 7.4(c), shall
include the heirs, distributees, estate, executors, administrators, guardian,
committee, trustee or other personal representative) of a Withdrawn General
Partner shall be liable for all his liabilities and obligations hereunder,
except as provided in this Section 7.4(c). In the event of the death, insanity
or incompetency of a General Partner, his estate shall remain liable for all of
his obligations and liabilities hereunder incurred or accrued prior to the date
of such event, and for any damages arising out of any breach of this Agreement
by him, but his estate shall not have any obligation or liability on account of
the business of the Partnership or the activities of the other General Partners
after his death, insanity or incompetency unless it becomes a General Partner
pursuant to Section 7.3(a).
(d) The Disposition of the General Partner Interest of a General
Partner who or which Withdraws voluntarily in compliance with this Agreement
shall be accomplished in such manner as shall be acceptable to the remaining
General Partners and shall be approved by Consent of the Investment Limited
Partner. Except as provided in the preceding sentence, upon the Withdrawal of
a General Partner (other than a General Partner who or which is removed as such
pursuant to Section 4.5), such Withdrawn General Partner shall be deemed to
have automatically transferred to the remaining General Partners, in proportion
to their respective General Partner Interests, or, if there shall be no
remaining General Partner, then to the Partnership for the benefit of the
remaining Partners, all or such portion of the General Partner Interest of such
Withdrawn General Partner which, when aggregated with the existing General
Partner Interests of all such remaining General Partners, will be sufficient to
assure such remaining General Partners a 1% interest in all Profits, Losses,
Tax Credits and distributions of the Partnership under Article X. No
documentation shall be necessary to effectuate such transfer, which shall be
automatic, and no consideration shall be payable therefor. For the purposes of
Article X, the effective date of the transfer pursuant to the provisions of
this Section 7.4(d) of the General Partner Interest of a Withdrawn General
Partner shall be deemed to be the date on which such Withdrawal occurs. That
portion of the General Partner Interest (the "Remaining Interest") of the
Withdrawing General Partner which shall not have been transferred pursuant to
this Section 7.4(d) shall be (i) purchased by the Partnership in accordance
with the provisions of Section 7.8 in the case of a General Partner who or
which Withdraws in violation of Section 7.1 hereof and (ii) in all other cases
(except a removed General Partner), shall be retained by such Withdrawing
General Partner (or pass to legal representatives thereof) who or which shall
have the status of a Special Limited Partner, but with the right to receive
only that share of the Profits, Losses, Tax Credits and distributions of the
Partnership to which the Withdrawing General Partner, as such, would have been
entitled had he or it remained, reduced to the extent of the General Partner
Interest transferred hereunder, but such Withdrawing Partner (or his or its
legal representatives, as the case may be) shall not be considered to be a
Special Limited Partner for the purpose of exercising any rights reserved to
the Special Limited Partner under this Agreement or sharing the benefits
allocated to the Special Limited Partner under Article X hereof and shall not
participate in the votes or consents of the Limited Partners hereunder;
provided, however, that in the case of a General Partner who or which Withdraws
involuntarily without violation of this Agreement, the Partnership shall have
the option (but not the obligation), exercisable by notice to the holder of
such Interest within six months following the date of such Withdrawal, to
acquire the Remaining Interest of such Withdrawing General Partner (or the
Special Limited Partner Interest deriving therefrom) in accordance with the
valuation and payment provisions of Section 7.8.
7.5 Event of Bankruptcy as to a General Partner; Removal of a General
Partner and Transfer of Its Interest
(a) If an Event of Bankruptcy shall have occurred as to a General Part-
ner, the Special Limited Partner may (i) replace such General Partner with a
successor general partner (the "Successor") willing to serve as a General
Partner and reallocate to the Successor (and the bankrupt General Partner
hereby assigns to the Successor in such event) the interest of the bankrupt
General Partner in Profits, Losses, Tax Credits, Cash Flow and Capital Proceeds
(provided, however, that in no event shall any fees which are earned be so
reallocated), or (ii) add an additional General Partner willing to serve as
such with such of the powers of the bankrupt General Partner hereunder as the
Special Limited Partner may designate and make a similar reallocation to that
contemplated by the foregoing clause (i), which the bankrupt General Partner
hereby ratifies in such event. Upon the selection of the Successor as
aforesaid and his admission as a General Partner, the bankrupt General Partner
shall not have any further rights, powers, liabilities or obligations under
this Agreement and/or in respect of the Apartment Complex, provided, however,
that the bankrupt General Partner shall continue to be responsible for (1) any
loss caused by the nonperformance of its obligations under this Agreement
and/or in respect of the Apartment Complex to be performed prior to the
Completion Date and (2) the furnishing of any funds required to be furnished by
it under Sections 6.10 and 6.11 (any such sums advanced by the bankrupt General
Partner pursuant to this clause (2) shall be deemed to be Capital Contributions
except to the extent treated as Subordinated Loans pursuant to Section 6.10).
If all or any part of the General Partner Interest of a General Partner is
reallocated pursuant to this Section 7.5, such General Partner shall be
entitled to receive the fair market value of the Interest (or portion thereof)
so reallocated; such fair market value shall be determined and paid in
accordance with Section 7.8. No exercise of rights pursuant to this
Section 7.5 need be delayed pending determination of such value.
(b) From and after the date of the occurrence of an Event of Bankruptcy
as to any General Partner, the obligation of the Investment Limited Partner to
pay the Installments shall be suspended, and such obligation shall be
reinstated only when such Event of Bankruptcy shall have been cured in a manner
approved in writing by the Special Limited Partner. Notwithstanding the
foregoing, if an Event of Bankruptcy occurs as to a General Partner when
another viable General Partner remains who is not in default with respect to
its obligations hereunder, the payment obligation of the Investment Limited
Partners shall be suspended only if such Event of Bankruptcy has a material
adverse impact on the Investment Limited Partner's tax benefits hereunder for
which the Investment Limited Partner has not been fully compensated under the
adjuster provisions set forth in Section 5.1.
(c) Each Partner (including any General Partner removed as aforesaid)
hereby irrevocably nominates and appoints the Special Limited Partner and each
of its officers, with full power of substitution, as the attorney-in-fact of
such Partner, in his name, place and ▇▇▇▇▇, to make, execute and deliver any
and all amendments to this Agreement, the Certificate, business certificates
and instruments of like tenor which may be necessary or appropriate to give
effect to the provisions of this Section 7.5.
(d) Inasmuch as the interests of the Partners under this Agreement
depend on the continuing existence of viable General Partners willing and able
to perform the functions of the General Partners under this Agreement, the
rights of, and payments to, the General Partners have been agreed on in con-
sideration, among other things, of the agreement and ability of the General
Partners to perform such functions, and the inclusion of this Section 7.5 in
this Agreement has been a material inducement to each of the Investment Limited
Partner and the Special Limited Partner to enter into this Agreement. Each
Partner hereby ratifies and confirms any action authorized by the provisions of
this Section 7.5.
7.6 Designation of New General Partners
(a) The General Partners may, with the written consent of all Partners,
at any time designate new General Partners, each with such Interest as a
General Partner in the Partnership as the General Partners may specify, subject
to any Requisite Approvals.
(b) Any new General Partner shall, as a condition of receiving any
interest in the Partnership property, agree to be bound by the Project
Documents and any other documents required in connection therewith and by the
provisions of this Agreement, to the same extent and on the same terms as any
other General Partner.
7.7 Amendment of Certificate; Approval of Certain Events
(a) Upon the admission of a new General Partner pursuant to the
preceding provisions of this Article VII, Schedule A shall be amended to
reflect such admission and an amendment to the Certificate, also reflecting
such admission, shall be filed as required by the Act.
(b) Each Partner hereby consents to and authorizes any admission or
substitution of a General Partner or any other transaction, including, without
limitation, the continuation of the Partnership business, which has been
authorized under the provisions of this Agreement, and hereby ratifies and
confirms each amendment of this Agreement necessary or appropriate to give
effect to any such transaction.
7.8 Valuation and Sale of Interest of Former General Partner
(a) Subject to the provisions of Section 7.4(d), if the business of the
Partnership is continued after the Withdrawal of a General Partner, or if,
following such event, the Partnership is reconstituted, in each case as
contemplated by this Agreement, the Partnership shall purchase such General
Partner's Interest (which term, and words of like import, as used in this
Section 7.8 shall refer only to the "Remaining Interest" of such Withdrawing
General Partner as defined in Section 7.4(d) in all cases where applicable) for
a price equal to the fair market value thereof. The fair market value shall be
based upon either the agreed value of such Interest or, if such value is not
agreed to, the fair market value of such Interest as determined by a qualified,
MAI-designated state-licensed real estate appraiser selected by the Withdrawing
General Partner. If the Partnership does not accept such value, it may select
a second similarly-qualified appraiser. If the values determined by both such
appraisers are within 10%, then the purchase price shall be the arithmetic mean
of the two. If the values differ by more than 10%, then the two appraisers
shall appoint a third similarly-qualified appraiser, who shall also determine a
value. The final purchase price shall be the arithmetic mean of the two values
closest in absolute dollars. Notwithstanding the foregoing, if a General
Partner is removed for cause, or if a General Partner has voluntarily Withdrawn
from the Partnership in contravention of the terms of this Agreement, the
purchase price paid to such General Partner for its Interest shall be reduced
by an amount determined by an arbitrator mutually agreeable to the Partnership
and the General Partner to adequately compensate the Partnership for the action
of such General Partner leading to its removal, or for the fact of its
violation of the terms of this Agreement.
(b) Promptly after the determination of the purchase price of a former
General Partner's Interest pursuant to Section 7.8(a), the Partnership shall
deliver to such former General Partner a promissory note of the Partnership for
such purchase price, payable in five equal consecutive annual installments
commencing on the first anniversary of the date of such note. Such promissory
note shall bear simple interest at the rate per annum which is at all times
equal to the AFR then in effect for obligations of like term, payable on the
last day of each calendar quarter during which such note is outstanding;
provided, however, that if such note is delivered following a Withdrawal of a
General Partner which is voluntary on its part in violation of this Agreement
or a removal for cause, then (i) such note shall neither be secured nor bear
interest, and (ii) the principal payable to the withdrawing General Partner
shall be limited in amount and date of payment to distributions available from
the proceeds of a Capital Transaction as set forth in Section 10.2(b). Within
120 days after the determination of the purchase price of the former General
Partner's Interest, the Partnership may, with the consent of all remaining
General Partners and the Consent of the Investment Limited Partner, sell such
Interest to one or more Persons, who may be Affiliates of the remaining General
Partner or General Partners, and admit such Person or Persons to the
Partnership as substitute General Partners; provided, however, that the
purchase price to be paid to the Partnership for the Interest of the former
General Partner shall not be less than its purchase price as determined by the
appraisal and, if applicable, arbitration described above. Such substitute
General Partner or Partners may pay said purchase price in installments in the
manner set forth above in this Section 7.8(b).
ARTICLE VIII
Transferability of Limited Partner Interests
8.1 Assignments
(a) Except by operation of law (including the laws of descent and
distribution) or pursuant to the provisions of Section 8.1(b), no Limited
Partner may assign all or any part of its Interest without the written consent
of the General Partner, the giving or withholding of which is exclusively
within its discretion.
(b) A Limited Partner, without the consent of the General Partner, may
assign to any Person all or any portion of the economic benefits of the
ownership of such Limited Partner's Interest; provided, however, that such
assignment shall not be binding on the Partnership until there shall have been
filed with the Partnership by registered mail certified copies of an executed
and acknowledged assignment and the written acceptance by the assignee of all
the terms and provisions of this Agreement; if such assignment and acceptance
are not so filed, the Partnership need not recognize such assignment for any
purpose. An assignee of a Limited Partner who does not become a Substituted
Limited Partner shall have the right to receive the allocable share of any
Profits, Losses, Tax Credits or distributions of the Partnership to which the
assigning Limited Partner would have been entitled with respect to the Interest
(or portion thereof) so assigned if no such assignment had been made by such
Limited Partner. Any assigning Limited Partner whose permitted assignee
becomes a Substituted Limited Partner shall thereupon cease to be a Limited
Partner and shall no longer have any of the rights or privileges of a Limited
Partner. Where the assignee does not become a Substituted Limited Partner, the
Partnership shall recognize such assignment not later than the last day of the
calendar month following receipt of notice of assignment and all documentation
required in connection therewith.
(c) Each assignee of a Limited Partner Interest (or any portion
thereof) who desires to make a further assignment of its Interest shall be
subject to all the provisions of this Article VIII.
8.2 Substituted Limited Partner
(a) No Limited Partner shall have the right to substitute an assignee
as Limited Partner in its place. Subject to the provisions of Section 8.3, the
General Partner may, in its sole discretion, permit an assignee to become a
Substituted Limited Partner. The consent of the General Partner to an
assignment of a Limited Partner's Interest under Section 8.1 shall not, in and
of itself, constitute its consent to the admission of the assignee as a
Substituted Limited Partner under this Section 8.2.
(b) Any Substituted Limited Partner shall execute such instrument or
instruments as shall be required by the General Partner to signify the
agreement of such Substituted Limited Partner to be bound by all the provisions
of this Agreement and shall pay the Partnership's reasonable legal fees and
filing costs in connection with its substitution as a Limited Partner.
8.3 Restrictions
(a) No Disposition of a Limited Partner Interest may be made if such
Disposition would violate the provisions of Sections 8.1, 8.2 or 13.1.
(b) In no event shall all or any part of a Limited Partner Interest be
Disposed of to a minor (other than to a descendant by reason of death) or to an
incompetent.
(c) The General Partner may, in addition to any other requirement it
may impose, require as a condition of any Disposition of a Limited Partner
Interest that the transferor (i) assume all costs incurred by the Partnership
in connection therewith and (ii) furnish the Partnership and the other Partners
with an opinion of counsel satisfactory to counsel to the Partnership that such
Disposition complies with applicable federal and state securities laws.
(d) Any sale, exchange, transfer or other Disposition of a Limited
Partner Interest in contravention of any of the provisions of this Section 8.3
shall be void and ineffectual and shall not bind or be recognized by the
Partnership.
(e) Notwithstanding any other provision contained in this Article VIII,
if at any time there is more than one Investment Limited Partner, each
Investment Limited Partner shall have a right of first refusal to purchase the
Interest of any other Investment Limited Partner who wishes to sell or
otherwise transfer its Interest at a price equal to and on terms identical to
those of the prospective purchaser thereof, to the extent reasonably practical,
and shall have at least fifteen (15) business days in which to exercise such
right after receiving notice thereof. If there shall be more than two non-
selling or transferring Investment Limited Partners, each of which desires to
exercise such a right of first refusal, they may do so pro rata or, to the
extent one does not so desire to exercise such right, to the extent of the
entire Interest being so sold or transferred.
ARTICLE IX
Borrowings
All Partnership borrowings shall be subject to the terms of this
Agreement and may be made from any source, including Partners and their
Affiliates. Any Partnership borrowings from any Partner shall be subject to
any Requisite Approvals. If any Partner shall lend any monies to the
Partnership, the amount of any such loan shall not increase such Partner's
Capital Contribution. If any Partner shall so lend monies, each such loan (a
"Voluntary Loan") shall be an obligation of the Partnership and (except for
Subordinated Loans) shall be repayable to such Partner on the same basis and
with the same rate of interest as would be applicable to a comparable loan to
the Partnership from a third party. Funds advanced by the General Partner to
the Partnership pursuant to the provisions of Section 6.11 shall not constitute
borrowings for the purposes of this Article IX or for any other purposes.
ARTICLE X
Profits, Losses, Tax Credits, Distributions and Capital Accounts
10.1 Profits, Losses and Tax Credits
(a) Subject to the provisions of Section 10.1(b) and Section 10.4, for
each Partnership Fiscal Year or portion thereof, all Operating Profits and
Losses, tax-exempt income, losses, non-deductible non-capitalizable
expenditures and Tax Credits incurred or accrued on or after the Commencement
Date shall be allocated ninety-nine percent (99%) to the Investment Limited
Partner and one percent (1%) to the General Partner, provided, however, that in
any Fiscal Year in which Operating Profits are generated, such Operating
Profits shall be allocated to and among the Partners in the same percentages as
distributions of Cash Flow are made pursuant to Clause Sixth of
Section 10.2(a).
(b) Except as otherwise specifically provided in this Article, all
Profits and Losses arising from a Capital Transaction shall be allocated to the
Partners as follows:
As to Profits:
First, that portion of Profits (including any Profits treated
as ordinary income for federal income tax purposes) shall be
allocated to the Partners who have negative Capital Account
balances in proportion to the amounts of such balances, provided
that no Profits shall be allocated to a Partner under this Clause
First to increase any such Partner's Capital Account above zero;
and
Second, Profits in excess of the amounts allocated under
Clause First above shall be allocated to and among the Partners in
the same percentages as cash is distributed under Clauses Seventh,
Eighth and Ninth of Section 10.2(b);
As to Losses:
First, an amount of Losses shall be allocated to the Partners
to the extent and in such proportions as shall be necessary such
that, after giving effect thereto, the respective balances in all
Partners' Capital Accounts shall be in the ratio of 99% for the
Investment Limited Partner and 1% for the General Partner;
Second, an amount of Losses shall be allocated to the
Partners until the balance in each Partner Capital Account equals
the amount of such Partner's Capital Contribution (after the
allocation under Clause First above);
Third, an amount of Losses shall be allocated to the Partners
to the extent of and in proportion to such Partners' Capital
Account balances (after the allocations under Clauses First and
Second above); and
Fourth, any remaining amount of Losses after the allocation
under Clauses First, Second and Third above shall be allocated to
the Partners in accordance with the manner in which they bear the
Economic Risk of Loss associated with such Loss; provided, however,
that in the event that no Partner bears an Economic Risk of Loss
then any remaining Losses shall be allocated 99% to the Investment
Limited Partner and 1% to the General Partner.
10.2 Cash Distributions Prior to Dissolution
(a) Cash Flow
Subject to any Requisite Approvals, Cash Flow for each Fiscal Year
or portion thereof shall be applied as follows:
First, to the payment of the Asset Management Fee for such
Fiscal Year and for any previous Fiscal Year(s) as to which the
Asset Management Fee shall not yet have been paid in full;
Second, to the payment of any unpaid portion of the
Development Fee;
Third, to the repayment of any Subordinated Loans, with any
such payments to be applied first to accrued but unpaid interest
and then to principal;
Fourth, to the distribution to the General Partner (or its
designee) of any portion of the Operating Reserve which may be
released and disbursed in accordance with the provisions of Section
6.5(e)(ii);
Fifth, to the payment of the Partnership Management Fee in an
amount not to exceed the difference between $5,000 and the amount
of Cash Flow distributed pursuant to Clause Second of this
Section 10.2(a) for such Fiscal Year; and
Sixth, the balance thereof, if any, shall be distributed
annually, seventy-five (75) days after the end of the Fiscal Year,
20% to the Investment Limited Partner and 80% to the General
Partner.
(b) Distributions of Capital Proceeds
Prior to dissolution and subject to the provisions of
Section 4.2(c), if Capital Proceeds are available for distribution from a
Capital Transaction, such Capital Proceeds shall be applied or distributed as
follows:
First, to the payment of all matured debts and liabilities of
the Partnership (including, but not limited to, all expenses of the
Partnership incident to such Capital Transaction, excluding
(i) debts and liabilities of the Partnership to Partners or their
Affiliates, (ii) all unpaid fees owing to the General Partner or
its Affiliates and (iii) notes delivered and payable pursuant to
Section 7.8(b)(i) and (ii); and to the establishment of any
reserves which the General Partner and the Auditors shall deem
reasonably necessary for contingent, unmatured or unforeseen
liabilities or obligations of the Partnership;
Second, to the payment of any accrued and unpaid Asset
Management Fees;
Third, to the payment to the Investment Limited Partner of
the full amount (including interest) of any Credit Recovery Loans;
Fourth, to the repayment of any Subordinated Loans, with any
such payments to be applied first to accrued but unpaid interest
and then to principal;
Fifth, to the repayment of any remaining unpaid debts and
liabilities owed to Partners or Affiliates thereof by the
Partnership for Partnership obligations (exclusive of Credit
Recovery Loans and Subordinated Loans) to any of them, including,
but not limited to, accrued and unpaid amounts due in respect of
any and all fees (including but not limited to the Development Fee)
due and payable to the General Partner or its Affiliates as set
forth in Section 6.12; provided, however, that any debts or
obligations to be repaid to any Limited Partner or Affiliate
thereof pursuant to this Clause Fifth shall be repaid prior to the
repayment of any such debts or obligations to any General Partner
or Affiliate thereof;
Sixth, to the payment to each Limited Partner of an amount
equal to its Invested Amount, in each case minus any prior
distributions made to such Partner under this Clause Sixth, but
never an amount less than zero;
Seventh, to the payment to each General Partner of an amount
equal to its Invested Amount in each case minus any prior
distributions made to such Partner under this Clause Seventh, but
never an amount less than zero;
Eighth, subject to the provisions of Section 10.3(a), any
balance 19.999% to the Investment Limited Partner, .001% to the
Special Limited Partner and 80% to the General Partner.
10.3 Distributions Upon Dissolution
(a) Upon dissolution and termination, after payment of, or adequate
provision for, the debts and obligations of the Partnership, the remaining
assets of the Partnership shall be distributed to the Partners in accordance
with the positive balances in their Capital Accounts after taking into account
all Capital Account adjustments for the Partnership Fiscal Year, including
adjustments to Capital Accounts pursuant to Sections 10.1(b) and 10.3(b). In
the event that a General Partner or Additional Limited Partner has a negative
balance in its Capital Account following the liquidation of the Partnership or
such Partner's Interest, after taking into account all Capital Account
adjustments for the Partnership Fiscal Year in which such liquidation occurs,
such Partner shall pay to the Partnership in cash an amount equal to the
negative balance in such Partner's Capital Account. Such payment shall be made
by the end of such Fiscal Year (or, if later, within ninety (90) days after the
date of such liquidation) and shall, upon liquidation of the Partnership, be
paid to recourse creditors of the Partnership or distributed to other Partners
in accordance with the positive balances in their Capital Accounts.
(b) With respect to assets distributed in kind to the Partners in
liquidation or otherwise, (i) any unrealized appreciation or unrealized
depreciation in the values of such assets shall be deemed to be Profits and
Losses realized by the Partnership immediately prior to the liquidation or
other distribution event; and (ii) such Profits and Losses shall be allocated
to the Partners in accordance with the provisions of Section 10.1(b), and any
property so distributed shall be treated as a distribution of an amount in cash
equal to the excess of such fair market value over the outstanding principal
balance of and accrued interest on any debt by which the property is
encumbered. For the purposes of this Section 10.3(b), the terms "unrealized
appreciation" or "unrealized depreciation" shall mean the difference between
the fair market value of such assets, taking into account the fair market value
of the associated financing (but subject to the provisions of Section 7701(g)
of the Code), and the Partnership's adjusted basis for such assets as
determined under the applicable provisions of the Allocation Regulations. This
Section 10.3(b) is merely intended to provide a rule for allocating unrealized
gains and losses upon liquidation or other distribution event, and nothing
contained in this Section 10.3(b) or elsewhere herein is intended to treat or
cause such distributions to be treated as sales for value. The fair market
value of such assets shall be determined by an appraiser to be selected by the
General Partner with the Consent of the Special Limited Partner.
10.4 Special Provisions
(a) Except as otherwise provided in this Agreement, all Profits, tax-
exempt income, Losses, non-deductible non-capitalizable expenditures, Tax
Credits and cash distributions shared by a class of Partners shall be shared by
each Partner in such class in the ratio of such Partner's paid-in Capital
Contribution to the paid-in Class Contribution of the class of Partners of
which such Partner is a member.
(b) Notwithstanding the foregoing provisions of this Article X:
(i) If (a) the Partnership incurs recourse obligations or Partner
Nonrecourse Debt (including, without limitation, Voluntary Loans or
Subordinated Loans) or (b) the Partnership incurs Losses from
extraordinary events which are not recovered from insurance or otherwise
(collectively "Recourse Obligations") in respect of any Partnership
Fiscal Year, then the calculation and allocation of Profits and Losses
shall be adjusted as follows: first, an amount of deductions
attributable to the Recourse Obligations shall be allocated to the
General Partner; and second, the balance of such deductions shall be
allocated as provided in Section 10.1(a).
(ii) If any Profits arise from the sale or other disposition of
any Partnership asset which shall be treated as ordinary income under the
depreciation recapture provisions of the Code, then the full amount of
such ordinary income shall be allocated among the Partners in the
proportions that the Partnership deductions from the depreciation giving
rise to such recapture were actually allocated. In the event that
subsequently-enacted provisions of the Code result in other recapture
income, no allocation of such recapture income shall be made to any
Partner who has not received the benefit of those items giving rise to
such other recapture income.
(iii) If the Partnership shall receive any purchase money
indebtedness in partial payment of the purchase price of the Apartment
Complex and such indebtedness is distributed to the Partners pursuant to
the provisions of Section 10.2(b) or Section 10.3, the distributions of
the cash portion of such purchase price and the principal amount of such
purchase money indebtedness hereunder shall be allocated among the
Partners in the following manner: On the basis of the sum of the
principal amount of the purchase money indebtedness and cash payments
received on the sale (net of amounts required to pay Partnership
obligations and fund reasonable reserves), there shall be calculated the
percentage of the total net proceeds distributable to each class of
Partners based on Section 10.2(b) or Section 10.3, as applicable,
treating cash payments and purchase money indebtedness principal
interchangeably for this purpose, and the respective classes shall
receive such respective percentages of the net cash purchase price and
purchase money principal. Payments on such purchase money indebtedness
retained by the Partnership shall be distributed in accordance with the
respective portions of principal allocated to the respective classes of
Partners in accordance with the preceding sentence, and if any such
purchase money indebtedness shall be sold, the sale proceeds shall be
allocated in the same proportion.
(iv) Income, gain, loss and deduction with respect to any asset
which has a variation between its basis computed in accordance with the
applicable provisions of the Allocation Regulations and its basis
computed for federal income tax purposes shall be shared among the
Partners so as to take account of such variation in a manner consistent
with the principles of Section 704(c) of the Code and Section 1.704-
1(b)(2)(iv)(g) of the Allocation Regulations.
(v) The terms "Profits" and "Losses" used in this Agreement shall
mean income and losses, and each item of income, gain, loss, deduction or
credit entering into the computation thereof, as determined in accordance
with the accounting methods followed by the Partnership and computed in
accordance with Treasury Regulation Section 1.704-1(b)(2)(iv). Profits
and Losses for federal income tax purposes shall be allocated in the same
manner as set forth in this Article X, except as provided in Section
10.4(b)(iv).
(vi) Nonrecourse Deductions shall be allocated 1% to the General
Partner and 99% to the Investment Limited Partner.
(vii) Partner Nonrecourse Deductions shall be allocated to and
among the Partners in the manner provided in the Allocation Regulations.
(viii) Subject to the provisions of Section 10.4(b)(xix), if there
is a net decrease in Partnership Minimum Gain for a Partnership Fiscal
Year, the Partners shall be allocated items of Partnership income and
gain in accordance with the provisions of Section 1.704-(2)(f) of the
Allocation Regulations.
(ix) Subject to the provisions of Section 10.4(b)(xix), if there
is a net decrease in Partner Nonrecourse Debt Minimum Gain for a
Partnership Fiscal Year then any Partner with a Share of such Partner
Nonrecourse Debt Minimum Gain shall be allocated items of Partnership
income and gain in accordance with the provisions of Section 1.704-
2(i)(4) of the Allocation Regulations.
(x) Subject to the provisions of 10.4(b)(vi) through 10.4(b)(ix)
above, in the event that any Limited Partner unexpectedly receives any
adjustments, allocations or distributions described in Section 1.704-
1(b)(2)(ii)(d)(4), (5) or (6) of the Allocation Regulations, items of
Partnership income and gain shall be specially allocated to each such
Partner in an amount and manner sufficient to eliminate, to the extent
required by the Allocation Regulations, the Adjusted Capital Account
Deficit of such Limited Partner as quickly as possible. This Section
10.4(b)(x) is intended to constitute a "qualified income offset"
provision within the meaning of the Allocation Regulations and shall be
interpreted consistently therewith.
(xi) Subject to the provisions of Sections 10.4(b)(vi) through
10.4(b)(x) above, in no event shall any Limited Partner be allocated
Losses which would cause it to have an Adjusted Capital Account Deficit
as of the end of any Partnership Fiscal Year. Any Losses which are not
allocated to a Limited Partner by reason of the application of the
provisions of this Section 10.4(b)(xi) shall be allocated to the General
Partner.
(xii) Subject to the provisions of Sections 10.4(b)(vi) through
10.4(b)(xi) above, in the event that any Limited Partner has an Adjusted
Capital Account Deficit at the end of any Partnership Fiscal Year, items
of Partnership income and gain shall be specially allocated to each such
Limited Partner in the amount of such Adjusted Capital Account Deficit as
quickly as possible.
(xiii) Syndication Expenses for any Fiscal Year or other period
shall be specially allocated to the Investment Limited Partner.
(xiv) For purposes of determining the Profits, Losses, Tax Credits
or any other items allocable to any period, Profits, Losses, Tax Credits
and any such other items shall be determined on a daily, monthly, or
other basis, as determined by the General Partner using any permissible
method under Code Section 706 and the Treasury Regulations thereunder.
(xv) To the extent that interest on loans (or other advances which
are deemed to be loans) made by a General Partner to the Partnership is
determined to be deductible by the Partnership in excess of the amount of
interest actually paid by the Partnership, such additional interest
deduction(s) shall be allocated solely to such General Partner.
(xvi) Notwithstanding anything to the contrary contained herein,
the General Partner (or, if there is more than one General Partner, all
of the General Partners as a group) shall be allocated not less than 1%
of each material item of Partnership income, gain, loss, deduction and
credit ("Partnership Items") at all times during the existence of the
Partnership, provided, however, that temporary nonconformance with the
provisions of this Section 10.4(b)(xvi) shall be permitted to the extent
permitted by Revenue Procedure 89-12 or any successor provisions.
Subject to the foregoing, in the event that there is no allocation of a
material Partnership Item to the General Partner(s) hereunder or if the
amount of any material Partnership Item allocable to the General
Partner(s) hereunder shall not equal 1% of the aggregate amount allocable
to all the Partners without giving effect to this provision, then the
amount of such Partnership Item(s) otherwise allocable to the Limited
Partners hereunder shall be correspondingly reduced in order to assure
the General Partner(s) of its or their 1% share. Any such reduction
shall be applied to reduce the share of all classes of Limited Partners
in proportion to their respective Interests.
(xvii) For purposes of determining each Partner's proportionate
share of the excess Nonrecourse Liabilities of the Partnership pursuant
to Section 1.752-3(a)(3) of the Allocation Regulations, the Investment
Limited Partner shall be deemed to have a 99% interest in Profits and the
General Partner shall be deemed to have a 1% interest in Profits.
(xviii) Any recapture of any Tax Credit shall be allocated to
and among the Partners in the same manner in which the Partners share the
expenditures giving rise to such Tax Credit.
(xix) If for any Fiscal Year the application of the minimum gain
chargeback provisions of Section 10.4(b)(viii) or Section 10.4(b)(ix) of
this Agreement would cause distortion in the economic arrangement among
the Partners and it is not expected that the Partnership will have
sufficient other income to correct that distortion, the General Partner
may request a waiver from the Commissioner of the Service of the
application in whole or in part of Section 10.4(b)(viii) or Section
10.4(b)(ix) in accordance with Section 1.704-2(f)(4) of the Allocation
Regulations. Furthermore, if additional exceptions to the minimum gain
chargeback requirements of the Allocation Regulations have been provided
through revenue rulings or other Service pronouncements, the General
Partner is authorized to cause the Partnership to take advantage of such
exceptions if to do so would be in the best interest of a majority in
interest of the Partners.
(xx) In the event that any fee payable to any General Partner or
any Affiliate thereof shall instead be determined to be a non-deductible,
non-capitalizable distribution from the Partnership to a Partner for
federal income tax purposes, then there shall be allocated to such
General Partner an amount of gross income equal to the amount of such
distribution.
(xxi) In applying the provisions of Article X with respect to
distributions and allocations, the following ordering of priorities shall
apply:
(1) Capital Accounts shall be deemed to be reduced by
Qualified Income Offset Items.
(2) Capital Accounts shall be reduced by distributions of
Cash Flow under Clause Sixth of Section 10.2(a).
(3) Capital Accounts shall be reduced by distributions of
Capital Proceeds under Clauses Sixth, Seventh, or
Eighth of Section 10.2(b).
(4) Capital Accounts shall be increased by any minimum gain
chargeback under Section 10.4(b)(viii) or Section
10.4(b)(ix).
(5) Capital Accounts shall be increased by any qualified
income offset required under Section 10.4(b)(x).
(6) Capital Accounts shall be increased by allocations of
Operating Profits under Section 10.1(a).
(7) Capital Accounts shall be reduced by allocations of
Operating Losses under Section 10.1(a).
(8) Capital Accounts shall be reduced by allocations of
Losses under Section 10.1(b).
(9) Capital Accounts shall be increased by allocations of
Profits under Section 10.1(b).
(xxii) To the maximum extent permitted under the Code, allocations
of Profits and Losses shall be modified so that the Partners' Capital
Accounts reflect the amount they would have reflected if adjustments
required by Sections 10.4(b)(x), 10.4(b)(xi) and 10.4(b)(xii) had not
occurred.
10.5 Authority of the General Partner to Vary Allocations to Preserve
and Protect the Partners' Intent
(a) It is the intent of the Partners that each Partner's distributive
share of Profits, tax-exempt income, Losses, non-deductible non-capitalizable
expenditures and Tax Credits (and items thereof) shall be determined and
allocated in accordance with this Agreement to the fullest extent permitted by
Section 704(b) of the Code and the Allocation Regulations. In order to
preserve and protect the determinations and allocations provided for in this
Agreement, the General Partner is hereby authorized and directed to allocate
Profits, tax-exempt income, Losses, non-deductible non-capitalizable
expenditures and credits (and items thereof) arising in any Fiscal Year
differently than otherwise provided for in this Agreement to the extent that
allocating Profits, tax-exempt income, Losses, non-deductible non-capitalizable
expenditures or credits (or any item thereof) in the manner provided for herein
would cause the determinations and allocations of each Partner's distributive
share of Profits, tax-exempt income, Losses, non-deductible non-capitalizable
expenditures or credits (or any item thereof) not to be permitted by Section
704(b) of the Code. Any allocation made pursuant to this Section 10.5 shall be
deemed to be a complete substitute for any allocation otherwise provided for in
this Agreement, and no amendment of this Agreement or approval of any Partner
shall be required.
(b) In making any allocation (the "New Allocation") under Section
10.5(a), the General Partner is authorized to act only after having been
advised in writing by the Tax Accountants that, under Section 704(b) of the
Code and/or the Allocation Regulations, (i) the New Allocation is necessary,
and (ii) the New Allocation is the minimum modification of the allocations
otherwise provided for in this Agreement necessary in order to assure that,
either in the then-current Fiscal Year or in any preceding Fiscal Year, each
Partner's distributive share of Profits, tax-exempt income, Losses, non-
deductible non-capitalizable expenditures and Tax Credits (or any item thereof)
is determined and allocated in accordance with this Agreement to the fullest
extent permitted by Section 704(b) of the Code and the Allocation Regulations.
(c) If the General Partner is required by Section 10.5(a) to make any
New Allocation in a manner less favorable to the Limited Partners than is
otherwise provided for herein, then the General Partner is authorized and
directed, only after having been advised in writing by the Tax Accountants that
such an allocation is permitted by Section 704(b) of the Code and the
Allocation Regulations, to allocate Profits, tax-exempt income, Losses, non-
deductible non-capitalizable expenditures and credits (and any item thereof)
arising in later years in such manner so as to bring the allocations of
Profits, tax-exempt income, Losses, non-deductible non-capitalizable
expenditures and credits (and each item thereof) to the Limited Partners as
nearly as possible to the allocations thereof otherwise contemplated by this
Agreement.
(d) New Allocations made by the General Partner under Section 10.5(a)
and Section 10.5(c) in reliance upon the advice of the Tax Accountants shall be
deemed to be made pursuant to the fiduciary obligation of the General Partner
to the Partnership and the Limited Partners, and no such allocation shall give
rise to any claim or cause of action by any Limited Partner.
ARTICLE XI
Management Agent
11.1 General
The General Partner shall engage the Management Agent to manage the
Apartment Complex pursuant to the Management Agreement. The Management Agent
shall receive a Management Fee of those amounts payable from time to time by
the Partnership to the Management Agent for management services in accordance
with a management contract approved by any Agency or Lender with the right to
approve the same, or, when any such management contract is not subject to the
approval of any Agency or Lender, in accordance with a reasonable and
competitive fee arrangement. The initial Management Agent shall be Mondel
Enterprises. From and after the Admission Date, the Partnership shall not
enter into any Management Agreement or modify or extend any Management
Agreement unless (i) the General Partner shall have obtained the prior Consent
of the Special Limited Partner to the identity of the Management Agent and the
terms of the Management Agreement or the modification or extension thereof and
(ii) such new Management Agreement or modified or extended Management Agreement
provides that it is terminable by the Partnership on thirty (30) days' notice
by the Partnership in the event of any change in the identity of the General
Partner.
11.2 Fees
Notwithstanding the provisions of Section 11.1, however, should the
Investment General Partner or an Affiliate thereof perform property management
services for the Partnership, property management, rent-up or leasing fees
shall be paid to the Investment General Partner or such Affiliate only for
services actually rendered and shall be in an amount equal to the lesser of (i)
fees competitive in price and terms with those of non-affiliated Persons
rendering comparable services in the locality where the Apartment Complex is
located and which could reasonably be available to the Partnership, or (ii)
five percent (5%) of the gross revenues of the Apartment Complex. No duplicate
property manager fees shall be paid to any Person.
11.3 Removal and Replacement
If (i) the Apartment Complex shall be subject to a substantial building
code violation which shall not have been cured within six months after notice
from a Governmental Authority or (ii) the Partnership shall not have achieved
a 1.15 to 1.00 Debt Service Coverage Ratio during any Fiscal Year commencing on
January 1, 1997, or (iii) an Event of Bankruptcy shall occur with respect to
the Management Agent, or (iv) the Management Agent shall commit willful
misconduct or gross negligence in its conduct of its duties and obligations
under the Management Agreement or (v) there is any change in the Persons acting
as General Partners (to which the Special Limited Partner has not consented),
or (vi) the Management Agent is cited by the Credit Agency or any other Tax
Credit monitoring or compliance agency of the State or any other Governmental
Authority for a violation or alleged violation of any applicable rules,
regulations or requirements, including, without limitation, non-compliance with
the Minimum Set-Aside Test, the Rent Restriction Test or any other Tax
Credit-related provision, then, upon request by the Special Limited Partner and
subject to Agency and Lender approval, if required, the General Partner shall
cause the Partnership to promptly terminate the Management Agreement with the
Management Agent and appoint a new Management Agent selected by the Special
Limited Partner, which new Management Agent shall not be an Affiliate of a
General Partner. Each General Partner hereby grants to the Special Limited
Partner an irrevocable (to the extent permitted by applicable law) power of
attorney coupled with an interest to take any action and to execute and deliver
any and all documents and instruments on behalf of such General Partner and the
Partnership as the Special Limited Partner may deem to be necessary or
appropriate in order to effectuate the provisions of this Article XI. Subject
to any Requisite Approvals, the Partnership shall not enter into any future
management arrangement or renew or extend any existing management arrangement
unless such arrangement is terminable without penalty upon the occurrence of
the events described in this Article XI.
11.4 Lack of Management Agent
The General Partner shall have the duty to manage the Apartment Complex
during any period when there is no Management Agent.
ARTICLE XII
Books and Records, Accounting, Tax Elections, Etc.
12.1 Books and Records
The Partnership shall maintain all books and records which are required
under the Act or by any Governmental Authority and may maintain such other
books and records as the General Partner in its discretion deems advisable.
Each Limited Partner, or its duly authorized representatives, shall have access
to the records of the Partnership at the principal office of the Partnership at
any and all reasonable times, and may inspect and copy any of such records. A
list of the name and addresses of all of the Limited Partners shall be
maintained as part of the books and records of the Partnership and shall be
mailed to any Limited Partner upon request. The Partnership may require
reimbursement for any out of pocket expenses which it incurs as a result of the
exercise by any Limited Partner of its rights under this Section 12.1,
including, without limitation, photocopying expenses.
12.2 Bank Accounts
The bank accounts of the Partnership shall be maintained in the
Partnership's name with such financial institutions as the General Partner
shall determine. Withdrawals shall be made only in the regular course of
Partnership business on such signature or signatures as the General Partner may
determine. All deposits (including security deposits and other funds required
to be escrowed by any Lender or Agency) and other funds not needed in the
operation of the business shall be deposited, if required by applicable law and
to the extent permitted by applicable Agency or Lender requirements, in
interest bearing accounts or invested in United States Government obligations
maturing within one year.
12.3 Auditors
(a) The Auditors shall prepare, for execution by the General Partner,
all tax returns of the Partnership. Prior to the filing of the Partnership tax
returns, and in no event later than February 1 of each Fiscal Year, the
Auditors shall deliver the tax returns for the prior Fiscal Year to the Tax
Accountants for their review and comment. If a dispute arises between the
Auditors and the Tax Accountants over the proper preparation of the tax returns
and such dispute cannot be resolved by the Auditors and the Tax Accountants by
March 1 of such Fiscal Year, then the Tax Accountants shall make the final
decision with respect to whether any changes are necessary. The Partnership
shall reimburse the Investment Limited Partner and its Affiliates for all costs
and expenses paid to the Tax Accountants for the aforementioned services.
(b) The Auditors shall certify all annual financial reports to the
Partners in accordance with generally accepted auditing standards.
(c) If the Partnership fails to fulfill any of its obligations under
Section 12.7(a)(i) and/or Section 12.7(a)(ii) within the time periods set forth
therein, at any time thereafter upon written notice from the Special Limited
Partner, the General Partner shall appoint replacement Auditors. If no such
notice from the Special Limited Partner is delivered, the Consent of the
Special Limited Partner must be received to the appointment of replacement
Auditors. If the General Partner fails to appoint replacement Auditors within
thirty (30) days of the notice from the Special Limited Partner to replace the
Auditors, then the Special Limited Partner shall appoint replacement Auditors
of its own choosing, the cost of which shall be borne by the Partnership as a
Partnership expense. All of the Partners hereby grant to the Special Limited
Partner a special power of attorney, irrevocable to the extent permitted by
law, coupled with an interest, to so appoint replacement Auditors and to
anything else which in the judgment of the Special Limited Partner may be
necessary or appropriate to accomplish the purposes of this Section 12.3(c).
(d) On or prior to the date which is thirty (30) days after the
Admission Date, the General Partner shall cause the Partnership (i) in writing,
to engage the Auditors to perform the services required herein and (ii) to
deliver to the Investment Limited Partner copies of all such engagement letters
and agreements.
12.4 Cost Recovery and Elections
(a) With respect to all depreciable assets for which cost recovery
deductions are permitted, the Partnership shall elect to use, so far as
permitted by the provisions of the Code, accelerated cost recovery methods.
However, the Partnership may change to another method of cost recovery if such
other method is, in the opinion of the Auditors, more advantageous to the
Investment Limited Partner (and the limited partners and/or holders of
beneficial assignee certificates thereof).
(b) Subject to the provisions of Section 12.5, all other elections
required or permitted to be made by the Partnership under the Code shall be
made by the General Partner in such manner as will, in the opinion of the
Auditors, be most advantageous to the Investment Limited Partner and the
limited partners and/or holders of beneficial assignee certificates thereof.
12.5 Special Basis Adjustments
In the event of a transfer of all or any part of the Interest of the
Investment Limited Partner or a transfer of all or any part of an interest of a
partner and/or a holder of a beneficial assignee certificate of the Investment
Limited Partner, the Partnership shall elect, upon the request of the
Investment Limited Partner, pursuant to Section 754 of the Code, to adjust the
basis of the Partnership property. Any adjustments made pursuant to said
Section 754 shall affect only the successor in interest to the transferring
Partner or partner or holder of a beneficial assignee certificate thereof.
Each Partner will furnish the Partnership all information necessary to give
effect to any such election.
12.6 Fiscal Year
Unless otherwise required by law, the Fiscal Year and tax year of the
Partnership shall be the calendar year. The books of the Partnership shall be
maintained on an accrual basis.
12.7 Information to Partners
(a) The General Partner shall cause to be prepared and distributed to
all Persons who were Partners at any time during a Fiscal Year of the
Partnership:
(i) Within forty-five (45) days after the end of each Fiscal Year
of the Partnership, (A) a balance sheet as of the end of such Fiscal
Year, a statement of income, a statement of partners' equity, and a
statement of cash flows, each for the Fiscal Year then ended, all of
which, except the statement of cash flows, shall be prepared in
accordance with generally accepted accounting principles and accompanied
by a report of the Auditors containing an opinion of the Auditors, and
(B) a report of the activities of the Partnership during the period
covered by the report. With respect to any distribution to the
Investment Limited Partner, the report called for shall separately
identify distributions from (1) Cash Flow from operations during the
period, (2) Cash Flow from operations during a prior period which had
been held as reserves, (3) proceeds from disposition of property and
investments, (4) lease payments on net leases with builders and sellers,
(5) reserves from the gross proceeds of the Capital Contributions of the
Investment Limited Partner, (6) borrowed monies, and (7) transactions
outside of the ordinary course of business with a description thereof.
(ii) Within thirty (30) days after the end of each Fiscal Year of
the Partnership, all information relating to the Partnership and/or the
Apartment Complex which is necessary, in the view of the Tax Accountants,
for the preparation of the Limited Partners' federal income tax returns
for the prior Fiscal Year.
(iii) Within thirty (30) days after the end of each quarter of a
Fiscal Year of the Partnership, a report containing:
(A) a balance sheet, which may be unaudited;
(B) a statement of income for the quarter then ended, which
may be unaudited;
(C) a statement of cash flows for the quarter then ended,
which may be unaudited;
(D) a certification of the General Partner that the
Apartment Complex and its tenants are in compliance with all
applicable federal, state and local requirements and regulations;
(E) a Tax Credit monitoring form, a copy of the rent roll
for the Apartment Complex for each month during such quarter, a
statement of income and expenses, an operating statement and an
Occupancy/Rental Report, all in a form specified by the Special
Limited Partner;
(F) all other information which would be pertinent to a
reasonable investor regarding the Partnership and its activities
during the quarter covered by the report; and
(b) Within sixty (60) days after the end of each Fiscal Year of the
Partnership a copy of the annual report to be filed with the United States
Treasury concerning the status of the Apartment Complex as low-income housing
and, if required, a certificate to the appropriate state agency concerning the
same.
(c) upon the written request of the Investment Limited Partner for
further information with respect to any matter covered in item (a) or item (b)
above, the General Partner shall furnish such information within thirty (30)
days of receipt of such request.
(d) Prior to October 15 of each Fiscal Year, the Partnership shall send
to the Investment Limited Partner an estimate of the Investment Limited
Partner's share of the Tax Credits, Profits and Losses of the Partnership for
federal income tax purposes for the current Fiscal Year. Such estimate shall be
prepared by the General Partner and the Auditors and shall be in the form
specified by the Special Limited Partner.
(e) Within fifteen (15) days after the end of any calendar quarter
during which:
(i) there is a material default by the Partnership under any
Project Document or in the payment of any mortgage, taxes, interest or
other obligation on secured or unsecured debt,
(ii) any reserve has been reduced or terminated by application of
funds therein for purposes materially different from those for which such
reserve was established,
(iii) any General Partner has received any notice of a material
fact which may substantially affect further distributions or Tax Credit
allocations to any Limited Partner, or
(iv) any Partner has pledged or collateralized its Interest in the
Partnership, the General Partner shall send the Investment Limited
Partner a detailed report of such event.
(f) After the Admission Date, the Partnership shall send to the
Investment Limited Partner copies of all applicable periodic reports covering
the status of project operations and any matters relating to the Tax Credit as
are required by any Lender or Agency.
(g) On or before May 1 of each Fiscal Year, the Partnership shall send
to the Investment Limited Partner a report on operations, in the form supplied
by the Special Limited Partner.
(h) The General Partner hereby consents to each Lender or Agency
providing the Special Limited Partner with copies of all material
communications between any such Lender or Agency and the General Partner and/or
the Partnership, including, but not limited to, any notices of default.
(i) If the earlier of (A) the Completion Date or (B) the date upon
which tenants first occupied apartment units in the Apartment Complex after the
construction of such units, shall have occurred six (6) months or more prior to
the date on which the Investment Limited Partner acquired its Interest in the
Partnership, then the General Partner shall cause to be prepared and delivered
to the Investment Limited Partner within sixty (60) days of the Admission Date
the following items:
(i) An unaudited statement of income of the Partnership for the
year (or such shorter period as there may be from the date of the most
recent audited statement of income of the Partnership) ended on the date
upon which the Investment Limited Partner acquired its Interest in the
Partnership; and
(ii) An audited statement of income of the Partnership for any
fiscal year of the Partnership ending between (A) the earlier of (1) the
Completion Date or (2) the date upon which tenants first occupied
apartment units in the Apartment Complex after the rehabilitation of such
units and (B) the date upon which the Investment Limited Partner acquired
its Interest in the Partnership.
(j) Within thirty (30) days following the Completion Date, the General
Partner shall prepare, or cause the Auditors to prepare, and deliver to each
Limited Partner a Tax Credit basis worksheet for each building in the Apartment
Complex, all in a form specified by the Special Limited Partner.
(k) Promptly after Permanent Mortgage Commencement, the General Partner
shall send to the Special Limited Partner a closing binder containing
photocopies of the fully executed versions of all documents signed in
connection with the Permanent Mortgage. From and after any date upon which the
General Partner receives notice from the Special Limited Partner that the
Special Limited Partner would like copies of the monthly rent rolls for the
Apartment Complex to be sent to the Special Limited Partner, the General
Partner shall send copies of the rent rolls to the Special Limited Partner no
later than ten (10) days after the expiration of each month.
(l) If the General Partner does not cause the Partnership to fulfill
its obligations under Section 12.7(a)(i) and/or Section 12.7(a)(ii) within the
time periods set forth therein, the General Partner shall pay as damages the
sum of $500 per day (plus interest at a rate equal to the Prime Rate plus three
percent (3%)) to the Investment Limited Partner until such obligations shall
have been fulfilled. Such damages shall be paid forthwith by the General
Partner, and the failure to pay any such damages shall constitute a material
default by the General Partner hereunder. In addition, if the General Partner
shall fail to pay any such damages, the General Partner and its Affiliates
shall forthwith cease to be entitled to the distribution of any Cash Flow or
Capital Proceeds to which they may otherwise be entitled hereunder. Such
distributions of Cash Flow and Capital Proceeds shall be restored only upon the
payment of such damages in full, and any amount of such damages not so paid
shall be deducted against distributions of Cash Flow and Capital Proceeds
otherwise due to the General Partner or its Affiliates.
12.8 Expenses of the Partnership
(a) All expenses of the Partnership shall be billed directly to and
paid by the Partnership.
(b) Except in extraordinary circumstances, neither the Investment
General Partner nor any Affiliate thereof shall be permitted to contract or
otherwise deal with the Partnership for the sale of goods or services or the
lending of money to the Partnership or the General Partners, except for (i)
management services, subject to the restrictions set forth in Article XI, (ii)
loans made by, or guaranteed by, the Investment General Partner or any of its
Affiliates and (iii) those dealings, contracts or provision of services
described in the Investment Partnership Agreement. Extraordinary circumstances
shall only be presumed to exist where there is an emergency situation requiring
immediate action and the services required are not immediately available from
unaffiliated parties. All services rendered under such circumstances must be
rendered pursuant to a written contract which must contain a clause allowing
termination without penalty on sixty (60) days' notice. Goods and services
provided under such circumstances must be provided at the lesser of actual cost
or the price charged for such goods or services by independent parties.
(c) In the event that extraordinary circumstances arise, the Investment
General Partner and its Affiliates may provide construction services in
connection with the Apartment Complex. Neither the Investment General Partner
nor any of its Affiliates shall provide such services unless it believes it has
an adequate staff to do so and unless such provision of goods and construction
services is part of its ordinary and ongoing business in which it has
previously engaged, independent of the activities of the Investment Limited
Partner. Any such services must be reasonable for and necessary to the
Partnership, actually furnished to the Partnership, and provided at the lower
of one hundred percent (100%) of the construction contract rate with respect to
the Apartment Complex or ninety percent (90%) of the competitive price charged
for such services by independent parties for comparable goods and services in
the same geographic location (except that in the case of transfer agent,
custodial and similar banking-type fees, and insurance fees, the compensation,
price or fee shall be at the lesser of costs or the compensation, price or fee
of any other Person rendering comparable services as aforesaid). Cost of
services as used herein means the pro rata cost of personnel, including an
allocation of overhead directly attributable to such personnel, based on the
amount of time such personnel spend on such services or other method of
allocation acceptable to the accountants for the Investment Limited Partner.
(d) All services provided by the Investment General Partner or any
Affiliate thereof pursuant to Section 12.8(c) must be rendered pursuant to the
Investment Partnership Agreement or a written contract which precisely
describes the services to be rendered and all compensation to be paid and shall
contain a clause allowing termination without penalty upon sixty (60) days'
notice to the Investment General Partner by a vote of a majority in interest of
the limited partners and assignees of beneficial interests in the Investment
Limited Partner.
(e) No compensation or fees may be paid by the Partnership to the
Investment General Partner or its Affiliates except as described in the
Investment Partnership Agreement.
ARTICLE XIII
General Provisions
13.1 Restrictions by Reason of Section 708 of the Code
No Disposition of an Interest may be made if the Interest sought to be
Disposed of, when added to the total of all other Interests Disposed of within
the period of twelve consecutive months prior to the proposed date of the
Disposition, would, in the opinion of the Tax Accountants or tax counsel to the
Partnership, result in the termination of the Partnership under Section 708 of
the Code. This Section 13.1 shall have no application to any required
repurchase of the Investment Limited Partner's Interest. Any Disposition in
contravention of any of the provisions of this Section 13.1 shall be void ab
initio and ineffectual and shall not bind or be recognized by the Partnership.
Notwithstanding the foregoing provisions of this Section 13.1, however, the
Investment Limited Partner may waive the provisions of this Section 13.1 at any
time as to a Disposition or series of Dispositions, and in the event of such a
waiver, this Section 13.1 shall have no force or effect upon such Disposition
or series of Dispositions.
13.2 Amendments to Certificates
Within one hundred twenty (120) days after the end of the Partnership
Fiscal Year in which the Investment Limited Partner shall have received any
distributions under Article X, the General Partner shall file an amendment to
the Certificate reducing the amount of its allocable share of such distribution
the amount of Capital Contribution of the Investment Limited Partner as stated
in the last previous amendment to the Certificate. However, Schedule A shall
not be amended on account of any such distribution.
The Partnership shall amend the Certificate at least once each calendar
quarter to effect the substitution of Substitute Limited Partners, although the
General Partner may elect to do so more frequently. In the case of
assignments, where the assignee does not become a Substitute Limited Partner,
the Partnership shall recognize the assignment not later than the last day of
the calendar month following receipt of notice of assignment and all
documentation required in connection therewith hereunder.
Notwithstanding the foregoing provisions of this Section 13.2, no such
amendments to the Certificate need be filed by the General Partner if the
Certificate is not required to and does not identify the Limited Partners or
their Capital Contributions in such capacity.
13.3 Notices
Except as otherwise specifically provided herein, all notices, demands or
other communications hereunder shall be in writing and shall be deemed to have
been given when the same are (i) deposited in the United States mail and sent
by certified or registered mail, postage prepaid, (ii) delivered to a
nationally recognized overnight delivery service, (iii) sent by telecopier or
other facsimile transmission, answerback requested, or (iv) delivered
personally, in each case, to the parties at the addresses set forth below or at
such other addresses as such parties may designate by notice to the
Partnership:
(a) If to the Partnership, at the office of the Partnership set forth
in Section 2.2.
(b) If to a Partner, at its address set forth in the Schedule, with
copies to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq., ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, P.C., ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇, ▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq., P.O.
Box 352, Albuquerque, NM, 87103-0352.
13.4 Word Meanings
The words such as "herein," "hereinafter," "hereof" and "hereunder" refer
to this Agreement as a whole and not merely to a subdivision in which such
words appear unless the context otherwise requires. The singular shall include
the plural, and vice versa, and each gender (masculine, feminine and neuter)
shall include the other genders, unless the context requires otherwise. Each
reference to a "Section" or an "Article" refers to the corresponding Section or
Article of this Agreement, unless specified otherwise. References to Treasury
Regulations (permanent or temporary) or Revenue Procedures shall include any
successor provisions.
13.5 Binding Effect
The covenants and agreements contained herein shall be binding upon and
inure to the benefit of the heirs, executors, administrators, successors and
assigns of the respective parties hereto.
13.6 Applicable Law
This Agreement shall be construed and enforced in accordance with the
laws of the State.
13.7 Counterparts
This Agreement may be executed in several counterparts and all so
executed shall constitute one agreement binding on all parties hereto,
notwithstanding that all the parties have not signed the original or the same
counterpart.
13.8 Financing Regulations
(a) So long as any of the Project Documents are in effect, (i) each of
the provisions of this Agreement shall be subject to, and the General Partner
covenants to act in accordance with, the Project Documents; (ii) the Project
Documents shall govern the rights and obligations of the Partners, their heirs,
executors, administrators, successors and assigns to the extent expressly
provided therein; (iii) upon any dissolution of the Partnership or any transfer
of the Apartment Complex, no title or right to the possession and control of
the Apartment Complex and no right to collect the rent therefrom shall pass to
any Person who is not, or does not become, bound by the Project Documents in a
manner satisfactory to the Lenders and any Agency (to the extent that its
approval is required); (iv) no amendment to any provision of the Project
Documents shall become effective without the prior written consent of any
Lender and/or Agency (to the extent that its approval is required); and (v) the
affairs of the Partnership shall be subject to the Regulations, and no action
shall be taken which would require the consent or approval of any Lender and/or
Agency unless the prior consent or approval of such Lender and/or Agency, as
the case may be, shall have been obtained. No new Partner shall be admitted to
the Partnership, and no Partner shall withdraw from the Partnership or be
substituted for without the consent of any Lender and/or Agency (if such
consent is then required). No amendment to this Agreement relating to matters
governed by the Regulations or requirements shall become effective until any
Requisite Approvals to such amendment shall have been obtained.
(b) Any conveyance or transfer of title to all or any portion of the
Apartment Complex required or permitted under this Agreement shall in all
respects be subject to all conditions, approvals and other requirements of any
Regulations applicable thereto.
13.9 Separability of Provisions
Each provision of this Agreement shall be considered separable and (a) if
for any reason any provision is determined to be invalid, such invalidity shall
not impair the operation of or affect those portions of this Agreement which
are valid, and (b) if for any reason any provision would cause the Investment
Limited Partner or the Special Limited Partner (in its capacity as a Limited
Partner) to be bound by the obligations of the Partnership (other than the
Regulations and the other requirements of any Agency or Lender), such
provision or provisions shall be deemed void and of no effect.
13.10 Paragraph Titles
All article and section headings in this Agreement are for convenience of
reference only and are not intended to qualify the meaning of any article or
section.
13.11 Amendment Procedure
This Agreement may be amended by the General Partner only with the
Consent of the Investment Limited Partner and the Consent of the Special
Limited Partner.
13.12 Extraordinary Limited Partner Expenses
(a) Any and all costs and expenses incurred by the Investment Limited
Partner and/or the Special Limited Partner in connection with exercising rights
and remedies against the General Partner with respect to this Agreement,
including, without limitation, reasonable attorneys' fees, shall be paid by the
General Partner on demand. All amounts due to the Investment Limited Partner
and/or the Special Limited Partner pursuant to this provision shall bear
interest from demand at a rate of nine percent (9%) per annum.
(b) If any General Partner breaches any provision of this Agreement,
the Investment Limited Partner and/or the Special Limited Partner may employ
an attorney or attorneys to protect its rights hereunder, and the General
Partner shall pay on demand the reasonable attorneys' fees and expenses
incurred by the Investment Limited Partner and/or the Special Limited Partner,
whether or not a legal action is actually commenced against any General Partner
by reason of such breach. All amounts due to the Investment Limited Partner
and/or the Special Limited Partner pursuant to this provision shall bear
interest from demand at a rate equal to nine percent (9%) per annum.
13.13 Time of Admission
The Investment Limited Partner shall be deemed to have been admitted to
the Partnership as of the Commencement Date for all purposes of this Agreement,
including Article X, provided, however, that if treasury regulations are issued
under the Code or an amendment to the Code is adopted which would require, in
the opinion of the Auditors, that the Investment Limited Partner be deemed
admitted on a date other than as of the Commencement Date, then the General
Partner shall select a permitted admission date which is most favorable to the
Investment Limited Partner.
13.14 HUD Provisions
(a) The Partnership is authorized to execute the Permanent Loan
Documents and to execute the Regulatory Agreement and other documents required
by HUD and the Permanent Lender in connection with the Permanent Loan.
(b) If any of the provisions of this Agreement, as amended from time to
time, conflict with the terms of the Permanent Loan Documents, the terms of the
Permanent Loan Documents will control, provided that the Permanent Loan
Documents comply with the terms of the Permanent Loan Commitment.
(c) No part of this Section 13.14 may be amended without the prior
approval of HUD, so long as HUD is the insurer or holder of the Permanent Note.
(d) Any party acquiring 25% or greater Interest in the Partnership must
meet the applicable requirements for HUD previous participation clearance.
(e) So long as HUD, or HUD's successors or assigns, is the insurer or
holder of the Permanent Note, without the prior written approval of HUD: (i)
the Partnership may not be voluntarily dissolved or changed to another type of
entity, (ii) the General Partner may not be a Limited Liability Company, (iii)
no amendment which modifies the term of the Partnership, or that activates the
requirements that a HUD previous participation certification be obtained from
any additional Partner be made.
(f) The Partnership hereby designates the General Partner, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, as the official representative for all matters concerning the
Apartment Complex which require HUD consent or approval, and the signature of
such person shall bind the Partnership in such matters. If the Partnership
designates a new representative to perform such functions, within three
business days of doing so, the Partnership shall provide HUD with written
notification of the name, address and telephone number of such new
representative.
WITNESS the execution hereof under seal as of the 1st day of
August, 1996.
ORIGINAL (WITHDRAWING)
LIMITED PARTNERS:
/S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
/s/ ▇. ▇▇▇▇ ▇▇▇▇▇
▇. ▇▇▇▇ ▇▇▇▇▇
GENERAL PARTNER:
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
SPECIAL LIMITED PARTNER:
BCTC 94, INC., a Delaware corporation
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, as
Attorney-in-Fact for ▇▇▇▇ ▇.
▇▇▇▇▇▇▇, President
INVESTMENT LIMITED PARTNER:
BOSTON CAPITAL TAX CREDIT FUND IV
L.P., a Delaware limited partnership,
by its general partner, Boston
Capital Associates IV L.P., a
Delaware limited partnership, by its
general partner, C&M Associates d/b/a
Boston Capital Associates, a
Massachusetts general partnership
By: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, as Attorney-in-
Fact for ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, a
Partner
CONSENTS AND AGREEMENTS
The undersigned hereby executes this Agreement for the sole purpose of
agreeing to the provisions of Article XI of the foregoing First Amended and
Restated Agreement of Limited Partnership notwithstanding any provision of the
Management Agreement to the contrary.
MANAGEMENT AGENT:
MONDEL ENTERPRISES
By: ___________________________________
The undersigned hereby executes this Agreement for the sole purpose of
agreeing to the provisions of Sections 6.11 and 6.12(a) of the foregoing First
Amended and Restated Agreement of Limited Partnership.
/s/ ▇. ▇▇▇▇ ▇▇▇▇▇
▇. ▇▇▇▇ ▇▇▇▇▇
LOS LUNAS APARTMENTS LIMITED PARTNERSHIP
SCHEDULE A
As of August 1, 1996
General Partner Capital Contribution Percentage Interests
of Operating Profits
and Losses and Tax
Credits
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ $100 1%
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇, ▇▇▇▇▇ ▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Special Limited Partner Capital Contribution Percentage Interests
of Operating Profits
and Losses and Tax
Credits
BCTC 94, Inc. $10 0%
c/o Boston Capital
Partners, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇
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Investment
Limited Partner Total Agreed-to Paid-In Capital Percentage
Capital Contribution Contribution* Interests of
Operating
Profits and
Losses and Tax
Credits
Boston Capital Tax Credit $1,086,935 $706,007 99%
Fund IV L.P.
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*Paid-in Capital Contribution as of the date of this Schedule A. Future
Installments of Capital Contribution are subject to adjustment and are due at
the times and subject to the conditions set forth in the Agreement to which
this Schedule is attached.
EXHIBIT A
LEGAL DESCRIPTION
EXHIBIT B
PROJECTED RENTS