-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, QQGKv9HE3okScqspnfiqYISpJlLWz0J12mg/MMlgJdn5xe+OA2kDUggWdTks1wE2 Jr1Gl8lpn6bLcFpFbvj0kg== 0000041091-94-000019.txt : 19940921 0000041091-94-000019.hdr.sgml : 19940921 ACCESSION NUMBER: 0000041091-94-000019 CONFORMED SUBMISSION TYPE: U-1 PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 19940920 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GEORGIA POWER CO CENTRAL INDEX KEY: 0000041091 STANDARD INDUSTRIAL CLASSIFICATION: 4911 IRS NUMBER: 580257110 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: U-1 SEC ACT: 1935 Act SEC FILE NUMBER: 070-08467 FILM NUMBER: 94549639 BUSINESS ADDRESS: STREET 1: 333 PIEDMONT AVE NE CITY: ATLANTA STATE: GA ZIP: 30308 BUSINESS PHONE: 4045266526 U-1 1 FORM U-1 File No. 70-[ ] SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM U-1 APPLICATION OR DECLARATION under The Public Utility Holding Company Act of 1935 GEORGIA POWER COMPANY 333 Piedmont Avenue, N.E. Atlanta, Georgia 30308 (Name of company or companies filing this statement and addresses of principal executive offices) THE SOUTHERN COMPANY (Name of top registered holding company parent of each applicant or declarant) Judy M. Anderson, Vice President and Corporate Secretary Georgia Power Company 333 Piedmont Avenue, N.E. Atlanta, Georgia 30308 (Name and address of agent for service) The Commission is requested to mail signed copies of all orders, notices and communications to: W. L. Westbrook John F. Young Financial Vice President Vice President The Southern Company Southern Company Services, Inc. 64 Perimeter Center East One Wall Street, 42nd Floor Atlanta, Georgia 30346 New York, New York 10005 John D. McLanahan, Esq. Troutman Sanders 600 Peachtree Street, N.E. Suite 5200 Atlanta, Georgia 30308-2216 INFORMATION REQUIRED Item 1. Description of Proposed Transactions. 1.1 Background. Georgia Power Company ("Georgia Power") is an electric utility company and a wholly-owned subsidiary of The Southern Company, a registered holding company under the Public Utility Holding Company Act of 1935, as amended (the "Act"). Georgia Power provides retail and wholesale electric service throughout most of the State of Georgia. Georgia Power proposes herein to invest up to $10 million from time to time through December 31, 1997 to acquire limited partnership units in one or more limited partnerships (each a "Partnership") that will be organized for the purpose of investing in low income housing projects in Georgia that qualify for the low income housing tax credit ("LIHTC") provided under Section 42 of the Internal Revenue Code of 1986, as amended (the "Code"). It is contemplated that a separate Partnership would be organized for each qualifying housing project in order to facilitate compliance with the requirements of Section 42 and the financing of the project on a stand-alone basis, and to insulate each project from liabilities that may arise in connection with the operation of other projects. 1.2 The Low-Income Housing Tax Credit. The LIHTC was added to Section 42 of the Code as part of the Tax Reform Act of 1986, and extended as a part of the Revenue Reconciliation Act of 1993. In its current form, the LIHTC offers a substantial incentive to the private sector to supply affordable housing to people with lower incomes. The incentive is a stream of tax credits that directly reduce an investor's federal income taxes on a dollar- for-dollar basis. The credit is claimed pro-rata over ten years and can be used in connection with both new dwellings and rehabilitation of existing dwellings. The Section 42 tax credits are allocated to the States annually based on population, and reallocated in a competitive process within each State by an agency created for that purpose. In Georgia, that agency is the Georgia Housing and Finance Authority. The tax credit is available to assist with either 30% or 70% of the costs of the affordable housing units, depending upon the nature of the housing project. The 30% level is for new construction or rehabilitation of an existing building which is subsidized under other federal housing programs, such as the Department of Housing and Urban Development's "HOME PROGRAM". The 70% level is for new construction or rehabilitation which is not receiving any additional federal subsidies. The LIHTC was intended to enable a housing project owner to recapture approximately 90% of the property's original eligible basis, determined on a building-by-building basis, less the amount of any grants received. The amount is available in the form of equal annual tax credits over a ten year term payable over eleven years, with the first and last years pro-rated. In exchange for receiving this credit, the project owner must agree to rent the qualified dwelling units to individuals with lower incomes at Section 42 rates for a minimum of 15 years. -2- Theoretically, the credit is designed to provide the additional return that is necessary to compensate housing owners, allowing them to pass the savings in a project's capital costs along to residents in the project in the form of lower rents. To qualify for the Section 42 tax credits, the property must meet one of two minimum "set-aside" tests. The two minimum "set- aside" tests are known as the 20-50 test and the 40-60 test. The minimum "set-aside" test must be satisfied by the end of the first year of the credit period, and then must be complied with continuously thereafter. Under the 20-50 test, at least 20% of the residential units of a project must be rent-restricted and occupied by tenants whose gross income is 50% or less of the county median gross income. Likewise, the 40-60 test requires at least 40% of the residential units of the project be both rent- restricted and occupied by tenants whose gross income is 60% or less of the county median gross income. Widely held corporate investors which are not subject to the passive loss limitation rules under the Code are ideal equity investors in Section 42 housing tax credit properties. Corporations also do not have a limit on the amount of credits they can use except to the extent of their taxable income. 1.3 Demand for Affordable Housing in Georgia Power's Service Territory. There is a great demand for quality affordable housing across the United States, including Georgia. Millions of Americans can no longer afford a decent place to live, due to rising housing costs, shrinking real wages, and -3- destruction of many affordable apartment units. "Affordable" housing is described as being that which consumes no more than 30% of a household's income. Independent studies indicate that 39% of households in Georgia cannot afford fair market rents for one-bedroom units, and 45% cannot afford two-bedroom units based upon fair market rents. Georgia Power has identified seven target communities* spanning eight counties within its service territory with a chronic need for additional affordable housing. While some States have consistently utilized the Section 42 tax credits allocated to them, Georgia has not done so, thereby forfeiting this valuable form of federal assistance to other States to which they are reallocated. In 1992, for example, nearly half of the Section 42 tax credits allocated to Georgia were unused. Significantly, between 1992-1993, Georgia had a 37% decrease in multi-family housing starts, while States fully utilizing the tax credits had an increase. 1.4 Terms of Limited Partnership Agreement. Georgia Power proposes to acquire up to 20% of the aggregate interests of all partners in each Partnership, subject to an aggregate investment in all such Partnerships not to exceed $10 million. The sole general partner of each Partnership will be Heartland Properties, Inc., a subsidiary of WPL Holdings, Inc., an exempt holding company, or an affiliate of Heartland Properties (the "General Partner"). The remaining limited partnership interests of each * Atlanta, Macon, Rome, Augusta, Athens, Columbus, and Valdosta. -4- Partnership would be offered to one or more accredited investors, including but not limited to other large Georgia corporations. Attached hereto as Exhibit A is the form of partnership agreement (the "Partnership Agreement") that would be used in connection with each investment. Under the Partnership Agreement, the limited partners would be comprised of Class A Limited Partners and Class B Limited Partners (collectively, the "Limited Partners"). Georgia Power will only acquire Class B Limited Partner units. The term of each Partnership shall be for 50 years. (Section 1.10). Contributions to the capital of each Partnership by the Limited Partners, which will represent 99% of the aggregate of all contributions by all partners, will be made in accordance with a drawdown schedule that is appropriate for any particular housing project. By way of illustration only, a typical funding schedule might call for capital contributions to be made in three equal installments, one each at the time of execution of the Partnership Agreement, upon issuance of a certificate of occupancy for the housing project, and on the "breakeven date," which is the date on which the rental income of the Partnership has exceeded the sum of the Partnership's operational costs and required deposits to reserves. (Section 2.02). Generally, allocations of profits, losses and tax credits of each Partnership shall be allocated to the Partners in accordance with their respective partnership percentages (up to 20% in the case of Georgia Power). (Section 3.01 -.02). Similarly, cash -5- flow and the net proceeds from any sale or refinancing of a housing project will be distributed to the Partners in accordance with their respective partnership percentages. (Section 4.01 - .02). The General Partner shall have full and exclusive control over the affairs of each Partnership, subject to certain limited approval rights that limited partners may hold under Delaware law. (Section 5.01). As a Class B Limited Partner, however, Georgia Power will have fewer approval rights than the Class A Limited Partners. Specifically, without the consent of all Limited Partners, including Georgia Power as a Class B Limited Partner, the General Partner may not: (a) take any action in contravention of the Partnership Agreement; (b) take any action that would make it impossible to carry on the ordinary business of the Partnership; (c) possess Partnership property or assign its rights therein for other than a Partnership purpose; (d) make, amend or revoke tax elections; (e) materially change any accounting method or practice of the Partnership; (f) take any action that would cause a termination of the Partnership for tax purposes; (g) use Partnership property for any purpose other than as a low income housing development as contemplated in Section 42 of the Code; -6- (h) materially change the nature of the business or purpose of the Partnership; (i) take any action or fail to take any action that would cause or result in a breach of any representations or covenants of the General Partner; (j) except as otherwise specifically permitted, take any action that would cause a dissolution of the Partnership; and (k) perform any act that would subject any Limited Partner to liability as a general partner. In contrast, unlike a Class A Limited Partner, Georgia Power will have no consent or approval rights with respect to actions by the General Partner involving sales of Partnership property, incurrence of Partnership indebtedness, creation of mortgages and liens of Partnership property, or admission of additional general partners. (Section 5.02). In addition to the limited number of approval rights that Georgia Power would have, the Class A and Class B Limited Partners, voting together, may remove the General Partner for "cause." (Section 9.06). There shall be "cause" for removal of the General Partner only if the General Partner (a) intentionally and in bad faith violates the terms of the Partnership Agreement, or (b) materially breaches the Partnership Agreement, and such breach has an adverse effect on the tax benefits or cash flow available to the Limited Partners. -7- Finally, Limited Partners are entitled to examine and copy the books and records of the Partnership, to receive financial reports, and to receive a detailed annual operating and capital improvements budget. (Section 7.01 - .03). The General Partner, or a separate management company with which the Partnership may enter into a management agreement, would manage the day to day operations of each housing project, including leasing activities, rent collection, and property maintenance. It is contemplated that, in the typical case, a local real estate developer or property manager in the community in which the project is located would be engaged to provide some or all of these management services. 1.5 Tax Matters. The Section 42 tax credit will be allocated to Georgia Power in accordance with Rule 45(c) and the Southern System's currently authorized consolidated tax return allocation agreement. Item 2. Fees, Commissions and Expenses. Estimates as to fees and expenses will be furnished by amendment. Item 3. Applicable Statutory Provisions. Georgia Power believes that Section 9(c)(3) of the Act is applicable to the proposed transaction. In this connection, Georgia Power believes that the proposed investment in each Partnership is consistent with the general policy of Rule -8- 40(a)(5) under the Act and that such rule would exempt the proposed transaction from Section 9(a)(1) but for the fact that the amount of the investment proposed herein will exceed the dollar limitation therein contained. As a Class B Limited Partner, Georgia Power will not acquire any "voting securities," as that term is defined in Section 2(a)(17) of the Act. Thus, no Partnership will be an "affiliate" or "subsidiary company" of Georgia Power within the meaning of the Act. Specifically, Georgia Power will not be entitled to take part in the control, management or investment decisions of any Partnership or, through such Partnership, the control or management of any housing project in which such Partnership may invest. As a Class B Limited Partner, Georgia Power will only be entitled to receive notices and other information from the General Partner, to inspect the Partnership's books and records, and to vote on a limited number of actions that could fundamentally change the structure and purposes of the Partnership and its relationship with the General Partner. Finally, Georgia Power will have no power to remove the General Partner. Rule 54 is also applicable to the proposed transaction. Item 4. Regulatory Approval. The transaction proposed herein is not subject to the jurisdiction of any State commission or of any federal commission other than the Securities and Exchange Commission. -9- Item 5. Procedure. Georgia Power requests that the Commission's order be issued as soon as the rules allow, and that there be no thirty-day waiting period between the issuance of the Commission's order and the date on which it is to become effective. Georgia Power hereby waives a recommended decision by a hearing officer or other responsible officer of the Commission and hereby consents that the Division of Investment Management may assist in the preparation of the Commission's decision and/or order in this matter unless such Division opposes the matters covered hereby. Georgia Power proposes to file with the Commission as soon as practicable following each semi-annual period, commencing with the semi-annual period ending June 30, 1995, a report pursuant to Rule 24 which identifies each investment made by Georgia Power in any Partnership during such semi-annual period and a general description of the housing project owned by such Partnership; and the cumulative amounts invested by Georgia Power through the end of such semi-annual period in all such Partnerships. Item 6. Exhibits and Financial Statements. (a) Exhibits. A - Form of Limited Partnership Agreement. B - None. C - None. D - None. -10- E - None. F - Opinion of Troutman Sanders, counsel to Georgia Power. (To be filed by amendment). G - Form of Federal Register Notice. (b) Financial Statements. None. Item 7. Information as to Environmental Effects. (a) In light of the nature of the proposed transactions, as described in Item 1 hereof, the Commission's action in this matter will not constitute any major federal action significantly affecting the quality of the human environment. (b) No other federal agency has prepared or is preparing an environmental impact statement with regard to the proposed transactions. SIGNATURE Pursuant to the requirements of the Public Utility Holding Company Act of 1935, the undersigned company has duly caused this statement to be signed on its behalf by the undersigned thereunto duly authorized. Dated: September 20, 1994 GEORGIA POWER COMPANY By: Wayne Boston Wayne Boston, Assistant Secretary -11- EX-99 2 EXHIBIT A-FORM OF LIMITED PARTNERSHIP AGREEMENT Exhibit A ____________ APARTMENTS, LIMITED PARTNERSHIP (A Delaware Limited Partnership) LIMITED PARTNERSHIP AGREEMENT TABLE OF CONTENTS Page LIMITED PARTNERSHIP AGREEMENT . . . . . . . . . . . . . . . . 1 STATEMENT OF AGREEMENT . . . . . . . . . . . . . . . . . . . 1 ARTICLE 1: ORGANIZATION . . . . . . . . . . . . . . . . . . 1 Section 1.01 Formation . . . . . . . . . . . . . . . . 1 Section 1.02 Character and Purpose of Business . . . . 1 Section 1.03 Name of Partnership . . . . . . . . . . . 1 Section 1.04 Principal Place of Business . . . . . . . 1 Section 1.05 Principal Office . . . . . . . . . . . . 1 Section 1.06 Agent for Service of Process . . . . . . 1 Section 1.07 Name and Address of General Partner . . . 2 Section 1.08 Names and Addresses of Limited Partners . 2 Section 1.09 Governmental Filings . . . . . . . . . . 2 Section 1.10 Term of Partnership . . . . . . . . . . . 2 Section 1.11 Definitions . . . . . . . . . . . . . . . 2 ARTICLE 2: CAPITAL CONTRIBUTIONS . . . . . . . . . . . . . . 2 Section 2.01 General Partner's Capital Contributions . 2 Section 2.02 Limited Partner Capital Contributions . . 2 (a) Amount and Timing . . . . . . . . . . . . . . 2 (b) Additional Contributions . . . . . . . . . . . 3 Section 2.03 Interest on Capital Contributions . . . . 3 Section 2.04 Withdrawal and Return of Capital Contributions . . . . . . . . . . . . . . . . . . . 3 Section 2.05 Capital Accounts . . . . . . . . . . . . 3 ARTICLE 3: ALLOCATION OF PROFITS, LOSSES AND TAX CREDITS . . 4 Section 3.01 Profit and Loss Allocations . . . . . . . 4 Section 3.02 Special Allocations . . . . . . . . . . . 4 (a) Tax Credits . . . . . . . . . . . . . . . . . 4 (b) [RESERVED] . . . . . . . . . . . . . . . 4 (c) Partnership Minimum Gain Chargeback . . . . . 4 (d) Partner Minimum Gain Chargeback . . . . . . . 5 (e) Qualified Income Offset . . . . . . . . . . . 5 (f) Gross Income Allocation . . . . . . . . . . . 5 (g) Nonrecourse Deductions . . . . . . . . . . . . 6 (h) Partner Nonrecourse Deductions . . . . . . . . 6 (i) Section 754 Adjustment . . . . . . . . . . . . 6 (j) Curative Allocations . . . . . . . . . . . . . 6 (k) Matching Income Allocations for Sales and Refinancing Proceeds . . . . . . . . . . . . . 6 Section 3.03 Timing of Allocations . . . . . . . . . . 6 Section 3.04 Other Allocation Rules . . . . . . . . . 7 (a) Excess Nonrecourse Liabilities . . . . . . . . 7 (b) Effect of Cash Distributions . . . . . . . . . 7 (c) Recharacterization of Fee as Distribution . . 7 Section 3.05 Tax Effect of Allocations . . . . . . . . 7 i ARTICLE 4: DISTRIBUTIONS . . . . . . . . . . . . . . . . . . 8 Section 4.01 Distribution of Cash Flow . . . . . . . . 8 Section 4.02 Net Proceeds . . . . . . . . . . . . . . 8 Section 4.03 Treatment of Distributions . . . . . . . 8 ARTICLE 5: POWERS, RIGHTS AND DUTIES OF GENERAL PARTNER . . 8 Section 5.01 Management of Partnership . . . . . . . . 8 Section 5.02 Restrictions on General Partner's Authority . . . . . . . . . . . . . . . . . . . . . 8 Section 5.03 Representations, Warranties and Covenants of the General Partner . . . . . . . . . 10 Section 5.04 Specific Obligations of General Partner . 10 (a) Securities Law Matters . . . . . . . . . . . . 10 (b) Limited Partnership Status . . . . . . . . . . 10 (c) Tax Matters Partner . . . . . . . . . . . . . 10 (d) Governmental Filings . . . . . . . . . . . . . 11 (e) Bank Accounts . . . . . . . . . . . . . . . . 11 (f) Project Property Sale . . . . . . . . . . . . 11 Section 5.05 Fees for Services Rendered . . . . . . . 11 Section 5.06 Reimbursement of Expenses . . . . . . . . 12 Section 5.07 Outside Ventures of Partners . . . . . . 12 ARTICLE 6: POWERS, RIGHTS AND DUTIES OF LIMITED PARTNERS . . 12 Section 6.01 Limitation of Liability . . . . . . . . . 12 Section 6.02 No Participation in Management . . . . . 12 Section 6.03 Partnership Decisions . . . . . . . . . . 12 ARTICLE 7: ACCOUNTING AND FISCAL AFFAIRS . . . . . . . . . . 12 Section 7.01 Books of Account . . . . . . . . . . . . 12 Section 7.02 Financial Reports . . . . . . . . . . . . 13 Section 7.03 Budgets . . . . . . . . . . . . . . . . . 13 Section 7.04 Tax Information . . . . . . . . . . . . . 13 ARTICLE 8: TRANSFER OF LIMITED PARTNER'S PARTNERSHIP INTERESTS . . . . . . . . . . . . . . . . . . . . . . . 13 Section 8.01 Voluntary Transfers . . . . . . . . . . . 13 Section 8.02 General Partner's Consent to Substitution as a Limited Partner . . . . . . . . . 13 Section 8.03 Involuntary Transfers . . . . . . . . . . 14 Section 8.04 Distributions and Allocations with Respect to Transferred Partnership Interests . . . 14 Section 8.05 Voluntary Withdrawal . . . . . . . . . . 14 ARTICLE 9: TRANSFER OF GENERAL PARTNER'S PARTNERSHIP INTERESTS . . . . . . . . . . . . . . . . . . . . . . . 14 Section 9.01 Voluntary Transfers . . . . . . . . . . . 14 Section 9.02 Involuntary Transfers . . . . . . . . . . 15 Section 9.03 Continuation of Partnership After Involuntary Transfer of General Partner's Partnership Interests . . . . . . . . . . . . . . . 15 Section 9.04 Distributions and Allocations with Respect to Transferred Partnership Interests . . . 15 ii Section 9.05 Voluntary Withdrawal . . . . . . . . . . 16 Section 9.06 Removal of General Partner . . . . . . . 16 ARTICLE 10: DISSOLUTION, WINDING UP AND TERMINATION . . . . 16 Section 10.01 Dissolution . . . . . . . . . . . . . . . 16 Section 10.02 Winding Up and Termination . . . . . . . 17 Section 10.03 Compliance with Liquidation Requirements of Regulations . . . . . . . . . . . . . . . . . . 17 Section 10.04 Rights and Obligations of Limited Partners Upon Dissolution . . . . . . . . . . . . . 18 Section 10.05 Waiver of Partition . . . . . . . . . . . 19 Section 10.06 Final Accounting . . . . . . . . . . . . 19 ARTICLE 11: MISCELLANEOUS . . . . . . . . . . . . . . . . . 19 Section 11.01 Notices and Addresses . . . . . . . . . . 19 Section 11.02 Pronouns and Plurals . . . . . . . . . . 19 Section 11.03 Counterparts . . . . . . . . . . . . . . 19 Section 11.04 Applicable Law . . . . . . . . . . . . . 19 Section 11.05 Successors . . . . . . . . . . . . . . . 19 Section 11.06 Severability . . . . . . . . . . . . . . 19 Section 11.07 Exhibits . . . . . . . . . . . . . . . . 20 Section 11.08 Amendment of Partnership Agreement . . . 20 iii ____________ APARTMENTS, LIMITED PARTNERSHIP (A Delaware Limited Partnership) LIMITED PARTNERSHIP AGREEMENT This Limited Partnership Agreement (referred to herein as the "Partnership Agreement") is entered into as of _______________, 1994, by and among Heartland ___________, Inc., a Wisconsin corporation, as the General Partner, _________________________, as the Class A Limited Partners, and Georgia Power Company, a Georgia corporation, as the Class B Limited Partner. STATEMENT OF AGREEMENT The parties to this Partnership Agreement, each in consideration of the acts, capital contributions and promises of the other, agree as follows: ARTICLE 1: ORGANIZATION Section 1.01 Formation. The Partnership was formed by the filing of a Certificate of Limited Partnership on ____________, 1994. Section 1.02 Character and Purpose of Business. The sole purpose of the business of the Partnership shall be: (a) to acquire, construct, own, finance, lease and operate the Project as a qualified low income housing project within the meaning of Section 42 of the Code; (b) to eventually sell or otherwise dispose of the Project in a manner consistent with the provisions of this Partnership Agreement; and (c) to engage in all other activities incidental or related thereto. Section 1.03 Name of Partnership. The name of the Partnership is __________ Apartments, Limited Partnership." The Partnership may conduct its business under such other fictitious names as the General Partner selects and the law permits. Section 1.04 Principal Place of Business. The address of the principal place of business of the Partnership shall be ________________________________________________________, or such other address as may from time to time be selected by the Partners. Section 1.05 Principal Office. The address of the principal office of the Partnership shall be its principal place of business or such other address as may from time to time be selected by the Partners. 1 Section 1.06 Agent for Service of Process. The initial address of the Partnership's registered office in Delaware is 1209 Orange Street, Wilmington, Delaware, and its initial registered agent at such address for service of process is the Corporation Trust Company. Section 1.07 Name and Address of General Partner. The name and address of the General Partner is as follows: Heartland _____________, Inc. 309 West Washington Avenue Madison, Wisconsin 53703 Section 1.08 Names and Addresses of Limited Partners. The names and addresses of the Limited Partners are as follows: Class A Limited Partners Class B Limited Partner Georgia Power Company _____________________________ 333 Piedmont Avenue, N.E. Atlanta, GA 30308 _____________________________ _____________________________ Section 1.09 Governmental Filings. The General Partner shall make all governmental filings as are necessary or appropriate to qualify the Partnership to do business in any jurisdiction or to otherwise carry out the purposes and intent of this Partnership Agreement. Section 1.10 Term of Partnership. The term of the Partnership began on the date its Certificate of Limited Partnership was filed, and the Partnership shall continue in existence until December 31, 2043, or such later date as is agreed to by all the Partners, unless it is earlier dissolved and terminated pursuant to the provisions of this Partnership Agreement. Section 1.11 Definitions. All capitalized words and phrases used in this Partnership Agreement (other than the full names and addresses of the Partners and governmental subdivisions and agencies) shall have the meanings set forth in Exhibit A. ARTICLE 2: CAPITAL CONTRIBUTIONS Section 2.01 General Partner's Capital Contributions. The General Partner has made an initial cash Capital Contribution to the Partnership in the amount of $1,000, and shall make such additional Capital Contributions as may be necessary to cause the General Partner's total Capital Contributions to equal 1% of the 2 total Capital Contributions to the Partnership. The General Partner's Capital Contributions shall be made on the dates the Limited Partners make their Capital Contributions under Section 2.02. Section 2.02 Limited Partner Capital Contributions. (a) Amount and Timing. The Class A Limited Partners shall contribute an aggregate of $___________ to the Partnership, representing 79% of the Partners' total Capital Contributions. The Class B Limited Partner shall contribute $__________ to the Partnership, representing 20% of the Partners' total Capital Contributions. Subject to the terms and conditions of the Subscription Agreement, the Capital Contributions of the Class A Limited Partners and the Class B Limited Partner shall be made in three installments, as follows: (i) One-third upon execution of this Agreement; (ii) One-third upon the issuance of a certificate of occupancy for the Project; and (iii) One-third on the Breakeven Date. (b) Additional Contributions. No Limited Partner shall be required to make additional Capital Contributions to the Partnership, except as provided in Section 10.04. Section 2.03 Interest on Capital Contributions. No Partner shall be paid interest on its Capital Contribution. Section 2.04 Withdrawal and Return of Capital Contributions. No Partner shall have the right: (a) to withdraw any part of its Capital Contribution from the Partnership; (b) to demand a return of its Capital Contribution; or (c) to receive property other than cash in return for its Capital Contribution. Section 2.05 Capital Accounts. The Partnership shall maintain for each Partner a separate Capital Account in accordance with Section 1.704-1(b) of the Regulations. The Capital Account of each Partner shall consist of the amount of its Capital Contribution, increased by (a) the fair market value of any property contributed by it to the Partnership, (b) the amount of any Partnership liability assumed by such Partner or which is secured by any Partnership Property distributed to such Partner, and (c) its allocable share of Profits and any items of income or gain specially allocated to it pursuant to Sections 3.02 (d) through (k), and shall be decreased by (w) the amount of any cash distributed to it, (x) the fair market value of any Partnership Property distributed to it, (y) the amount of any liability of such Partner assumed by the Partnership or which is secured by any property contributed by such Partner to the Partnership, and (z) its allocable share of Losses and any items of loss or deduction specially allocated to it pursuant to Sections 3.02 (d) through (k). 3 If any Partnership Interests are transferred in accordance with the terms of this Partnership Agreement, then the transferee shall succeed to the Capital Account of the transferor to the extent it relates to the transferred Partnership Interests; provided, however, that if any such transfer causes a termination of the Partnership for federal income tax purposes pursuant to Section 708(b) of the Code, then the Capital Account of the transferee (as well as those of the remaining Partners) shall be adjusted to take into consideration the revaluation of the Partnership Property mandated pursuant to Sections 1.704- 1(b)(2)(iv)(e), (f) and (l) of the Regulations. Upon the occurrence of any of the following events, the Partnership Property shall be revalued and the Partners' Capital Accounts adjusted to reflect the gain (or loss) that would have been allocated to each Partner if all the Partnership Property had been sold at its fair market value immediately prior to the occurrence of such event: (i) 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; (ii) The distribution by the Partnership to a Partner of more than a de minimis amount of property or money in consideration for an interest in the Partnership; or (iii) The "liquidation" of the Partnership within the meaning of Section 1.704-1(b)(2)(ii)(g) of the Regulations. The revaluation of the Partnership Property referred to in the immediately preceding sentence shall be made in accordance with Section 1.704-1(b)(2)(iv)(f) of the Regulation. The foregoing provisions and all other provisions of this Partnership Agreement relating to the maintenance of Capital Accounts are intended to comply with Section 1.704-1(b) of the Regulations and shall be interpreted and applied in a manner consistent with such Regulations. ARTICLE 3: ALLOCATION OF PROFITS, LOSSES AND TAX CREDITS Section 3.01 Profit and Loss Allocations. Except as otherwise provided in Section 3.02, Profits and Losses for any fiscal year of the Partnership shall be allocated between the Partners in accordance with their respective Partnership Percentages. Unless and until adjusted by agreement among the Partners, the Partnership Percentages shall be as follows: General Partner 1% Class A Limited Partners (as a group) 79% 4 Class B Limited Partner 20% 100% Section 3.02 Special Allocations. Notwithstanding anything to the contrary contained in Section 3.01, the following special allocations shall in all events apply in determining the allocation of Profits and Losses between the Partners and shall be made prior to the allocations required under Section 3.01. (a) Tax Credits. Tax Credits shall be allocated between the Partners in accordance with the same percentages set forth in Section 3.01 with respect to Profits and Losses. (b) [RESERVED] (c) Partnership Minimum Gain Chargeback. Notwithstanding any other provision of this Article 3, if there is a net decrease in Partnership Minimum Gain during any Partnership fiscal year, then each Partner shall be specially allocated items of Partnership income or gain for such fiscal year (and, if necessary, subsequent fiscal years) in an amount equal to the portion of such Partner's share of the net decrease in the Partnership Minimum Gain (determined in accordance with Section 1.704-2(g) of the Regulations). Any allocations made pursuant to this subparagraph (c) shall be made in proportion to the respective amounts required to be allocated to each of the Partners. The items of Partnership income or gain to be specially allocated under this subparagraph (c) shall be determined in accordance with Section 1.704-2(f) of the Regulations. This subparagraph (c) is intended to comply with the minimum gain chargeback requirements of Section 1.704-2(f) of the Regulations and shall be interpreted consistently therewith. (d) Partner Minimum Gain Chargeback. Notwithstanding any other provision of this Article 3 (except subparagraph (c) of this Section 3.02), if there is a net decrease in Partner Minimum Gain attributable to a Partner Nonrecourse Debt during any Partnership fiscal year, then each Partner who has a share of the Partner Minimum Gain attributable to such Partner Nonrecourse Debt (as determined in accordance with Section 1.704-2(i)(5) of the Regulations) shall be specially allocated items of Partnership income and gain for such fiscal year (and if necessary, subsequent fiscal years) in an amount equal to the portion of such Partner's share of the net decrease in Partner Minimum Gain attributable to such Partner Nonrecourse Debt (as determined in accordance with Section 1.704-2(i)(4) of the Regulations). Any allocations made pursuant to this subparagraph (d) shall be made in proportion to the respective amounts required to be allocated to each Partner. The items of Partnership income or gain to be specially allocated under this subparagraph (d) shall be determined in accordance with Section 1.704-2(i)(4) of the Regulations. This subparagraph (d) is 5 intended to comply with the minimum gain chargeback requirements of Section 1.704-2(i)(4) of the Regulations and shall be interpreted consistently therewith. (e) Qualified Income Offset. If a 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 Regulations, then items of Partnership income or gain shall be specially allocated to such Limited Partner in an amount and manner sufficient to eliminate, to the extent required by the Regulations, the Adjusted Capital Account Deficit of the Limited Partner as quickly as possible. The special allocations required pursuant to this subparagraph (e) shall be made only if and to the extent that a Limited Partner would have an Adjusted Capital Account Deficit after all other allocations provided for in this Article 3 have been tentatively made as if this subparagraph (e) were not in the Partnership Agreement. This subparagraph (e) is intended to comply with the qualified income offset requirements of Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted consistently therewith. (f) Gross Income Allocation. If a Limited Partner has a deficit balance in its Capital Account at the end of any Partnership fiscal year which exceeds the sum of (i) the amount the Limited Partner is obligated to restore pursuant to any provision of this Partnership Agreement and (ii) the amount the Limited Partner is deemed to be obligated to restore pursuant to the penultimate sentences of Section 1.704-2(g)(1) and 1.704- 2(i)(5) of the Regulations, then the Limited Partner shall be specially allocated items of Partnership income or gain in the amount of such excess as quickly as possible. The special allocations required pursuant to this subparagraph (f) shall be made only if and to the extent that a Limited Partner would have a deficit Capital Account in excess of the aforementioned sum after all of the allocations provided for in this Article 3 have been tentatively made as if subparagraph (e) and this subparagraph (f) were not in the Partnership Agreement. (g) Nonrecourse Deductions. Nonrecourse Deductions shall be specially allocated between the Partners in accordance with the same percentages set forth in Section 3.01 with respect to Profits and Losses. (h) Partner Nonrecourse Deductions. Partner Nonrecourse Deductions shall be specially allocated to the Partner which bears the economic risk of loss with respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable in accordance with Section 1.704-2(i) of the Regulations. (i) Section 754 Adjustment. To the extent an adjustment to the adjusted tax basis of any Partnership Property 6 undertaken pursuant to Section 734(b) or 743(b) of the Code is required to be taken into account in determining the Capital Accounts of the Partners under Section 1.704-1(b)(2)(iv)(m) of the Regulations, then the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) and such gain or loss shall be specially allocated to the Partners in a manner consistent with the manner in which their Capital Accounts are required to be adjusted pursuant to the aforementioned section of the Regulations. (j) Curative Allocations. The special allocations set forth in subparagraphs (c) through (h) of this Section 3.02 are intended to comply with the requirements of Section 1.704-1(b) of the Regulations. These special allocations may lead to results which are inconsistent with the Partners' intentions concerning their sharing in Partnership distributions. Accordingly, the General Partner is hereby authorized and directed to specially allocate other items of Partnership income, gain, loss and deduction between the Partners so as to prevent the special allocations required under subparagraphs (c) through (h) of this Section 3.02 from distorting the Partners' understanding of the manner in which Partnership distributions are to be made to the Partners upon the dissolution and termination of the Partnership. In general, it is anticipated that the special allocations, if any, which will be made under this subparagraph (j) will be made by specially allocating other items of Partnership income, gain, loss and deduction between the Partners so that the sum of the special allocations made to each Partner pursuant to subparagraphs (c) through (h) of this Section 3.02 equals the sum of the special allocations made under this subparagraph (j). (k) Matching Income Allocations for Sales and Refinancing Proceeds. All or a portion of the remaining items of Partnership income or gain for the year, if any, shall be specially allocated to the Partners in proportion to the cumulative distributions each has received pursuant to Section 4.02(b) and Section 10.02(d) hereof from the commencement of the Partnership to a date thirty (30) days after the end of such fiscal year until the aggregate amounts allocated to each Partner pursuant to this Section 3.02(k) for such fiscal years and all previous fiscal years is equal to the cumulative amount of such distributions to such Partner. Section 3.03 Timing of Allocations. Except as otherwise expressly provided herein, all allocations of Profits, Losses and Tax Credits shall be made as of the last day of each fiscal year of the Partnership. Section 3.04 Other Allocation Rules. The following rules shall apply for the purpose of interpreting and applying the 7 provisions of this Article 3 relating to the allocation of Profits, Losses and Tax Credits between the Partners: (a) Excess Nonrecourse Liabilities. Solely for purposes of determining a Partner's proportionate share of the "excess nonrecourse liabilities" of the Partnership within the meaning of Section 1.752-3(a)(3) of the Regulations, the Partners' respective interests in Partnership Profits shall be those percentage interests set forth in Section 3.01 (determined without regard to Section 3.02). (b) Effect of Cash Distributions. To the extent permitted by Section 1.704-2(h) and Section 1.704-2(i)(6) of the Regulations, the General Partner shall endeavor to treat distributions of Cash Flow as having been made from the proceeds of a Nonrecourse Liability or a Partner Nonrecourse Debt only to the extent that such distributions would cause or increase an Adjusted Capital Account Deficit for a Limited Partner. (c) Recharacterization of Fee as Distribution. If any fee payable to any Partner or any Affiliate thereof is determined to be a nondeductible distribution from the Partnership to a Partner for federal income tax purposes, there shall be allocated to such Partner an amount of gross income equal to such distribution. Section 3.05 Tax Effect of Allocations. Except as otherwise provided herein, the allocation of Profits, Losses and Tax Credits to any Partner under this Article 3 shall be deemed an allocation to that Partner of the same proportionate part of each separate item of Partnership taxable income, gain, loss, deduction or credit which comprise such Profits, Losses and Tax Credits, including, without limitation, any "unrealized receivable" or "substantially appreciated inventory item" under Section 751 of the Code. The Partners are aware of the income tax consequences of the allocations made pursuant to this Article 3 and hereby agree to be bound by the provisions of this Article 3 in reporting their respective shares of Partnership income, gain, loss, deduction and credit for income tax purposes. Notwithstanding anything to the contrary contained in this Article 3, income, gain, loss, deduction and credit with respect to any Partnership Property contributed to the capital of the Partnership by any Partner shall, solely for tax purposes, be allocated between the Partners so as to take into account any variation between the adjusted tax basis of such Partnership Property to the Partnership for federal income tax purposes and the value assigned to such Partnership Property for the purposes of the computation of the Partners' Capital Accounts. If any revaluation of the Partnership Property is made by the General Partner with the consent of the Limited Partners, then any subsequent allocations of income, gain, loss, deduction and 8 credit with respect to such Partnership Property shall take into account any variation between the adjusted tax basis of such Partnership Property for federal income tax purposes and the value assigned to such Partnership Property as a result of such revaluation. All allocations required under this paragraph of Section 3.05 are solely for purposes of federal, state and local income taxes and shall not affect or in any way be taken into account in computing any Partner's Capital Account or any Partner's share of Profits, Losses, Tax Credits or other items or distributions required or permitted to be made pursuant to any provision of this Partnership Agreement. ARTICLE 4: DISTRIBUTIONS Section 4.01 Distribution of Cash Flow. Cash Flow shall be distributed among the Partners based on their Partnership Percentages. Section 4.02 Net Proceeds. Except as otherwise provided in Article 10 hereof (pertaining to the liquidation and dissolution of the Partnership), Net Proceeds shall be distributed among the Partners based on their Partnership Percentages. Section 4.03 Treatment of Distributions. Distributions to a Partner of Cash Flow shall be considered draws against such Partner's allocable share of the Partnership's Profits and Losses. ARTICLE 5: POWERS, RIGHTS AND DUTIES OF GENERAL PARTNER Section 5.01 Management of Partnership. The Partnership shall be managed by the General Partner, who shall exercise full and exclusive control over the affairs of the Partnership, subject, however, to the limitations on its authority set forth in this Partnership Agreement (including, without limitation, Sections 5.02 and 5.03). The General Partner shall be under a fiduciary duty to conduct and manage the affairs of the Partnership in a prudent, businesslike and lawful manner and shall devote such part of its time to the affairs of the Partnership as shall be deemed necessary and appropriate to pursue the business and carry out the purposes of the Partnership as contemplated in this Partnership Agreement. The General Partner shall use its best efforts and exercise good faith in all activities related to the business of the Partnership. Section 5.02 Restrictions on General Partner's Authority. The General Partner shall not have the authority to take any of those actions specifically set forth below unless the prior consent of all Limited Partners is obtained in the case of those 9 actions set forth in subparagraphs (a) through (c), (h) through (k), (n), (o), (q) and (r); and otherwise unless the prior consent of the Class A Limited Partners is obtained: (a) Do any act which is in contravention of or inconsistent with this Partnership Agreement or any other agreement to which the Partnership is a party; (b) Do any act which would make it impossible to carry on the ordinary business of the Partnership; (c) Possess Partnership Property or assign its rights in specific Partnership Property for other than a Partnership purpose; (d) Sell or otherwise transfer any interest in the Project Property or any interest therein (other than leases of residential units in the ordinary course of the Partnership's business); (e) Incur any liability on behalf of the Partnership in the ordinary course of the Partnership's business in excess of $50,000, other than those liabilities (or agreements relating thereto) which have theretofore been disclosed to and approved in writing by the Class A Limited Partners; (f) Acquire any interest in real property or acquire any item of personal property having a purchase price of more than $50,000; (g) Refinance or prepay any mortgage or long-term liability of the Partnership; (h) Make, amend or revoke any tax election required of or permitted to be made by the Partnership under the Code or the Regulations, including, without limitation, any election under Section 42 or Section 754 of the Code; (i) Materially change any accounting method or practice of the Partnership; (j) Take any action which would cause the termination of the Partnership for federal income tax purposes; (k) Use or cause the Project Property to be used for any purpose other than as a low income housing development as contemplated under Section 42 of the Code; (l) Mortgage, pledge or encumber any interest in any Partnership Property, including, without limitation, the Project Property; 10 (m) Enter into any agreement which contemplates or requires the General Partner to take any action on behalf of the Partnership with respect to any matter for which the prior written consent of the Class A Limited Partners is a prerequisite to action under this Section 5.2; (n) Materially change the nature of the business or purpose of the Partnership; (o) Take any action (or fail to take any action) which would cause or result in a breach of any of the representations, warranties or covenants of the General Partner set forth in this Partnership Agreement, including, without limitation, those set forth in Section 5.03; (p) Admit any other person or entity as a General Partner; (q) Except as permitted by Section 10.01 (pertaining to dissolution of the Partnership), take any action that will cause the dissolution of the Partnership; or (r) Perform any act that would subject any Limited Partner to liability as a general partner in any jurisdiction. Section 5.03 Representations, Warranties and Covenants of the General Partner. The General Partner makes no representation, covenants or warranties with respect to the Partnership other than those set forth in the Subscription Agreement. Section 5.04 Specific Obligations of General Partner. The General Partner shall, on behalf of and in the name of the Partnership and in addition to any obligations placed upon them elsewhere in this Partnership Agreement, have the following specific obligations. (a) Securities Law Matters. The General Partner shall prepare and file all appropriate reports for the Partnership with the Securities and Exchange Commission and state securities administrators. (b) Limited Partnership Status. The General Partner shall (i) file such certificates and do such other acts as may be required to qualify and maintain the Partnership as a limited partnership under the Act and to qualify the Partnership to transact business in all such jurisdictions as may be required under applicable provisions of law and (ii) take or cause the Partnership to take all reasonable steps deemed necessary by counsel to the Partnership to assure that the Partnership is at all times classified as a partnership for federal income tax purposes. 11 (c) Tax Matters Partner. For the purposes of Subchapter C of Chapter 63 of the Code, the General Partner shall serve as the "Tax Matters Partner" of the Partnership and, as such, shall have all of the rights and obligations given to a Tax Matters Partner under said Subchapter. Notwithstanding anything to the contrary contained herein, the General Partner, in its capacity as the Tax Matters Partner, shall not take any of the following actions, without first obtaining the prior written consent of all Limited Partners. (i) Extend the statute of limitations for assessing or computing any tax liability against the Partnership (or the amount or character of any Partnership tax item); (ii) Settle any audit with the IRS concerning the adjustment or readjustment of any Partnership tax item; (iii) File a request for an administrative adjustment with the IRS at any time or file a petition for judicial review with respect to any IRS adjustment; (iv) Initiate or settle any judicial review or action concerning the amount or character of any Partnership tax item; (v) Intervene in any action brought by any other Partner for judicial review of a final adjustment of any Partnership tax item; or (vi) Take any other action which would have the affect of finally resolving a tax matter affecting the rights of the Partnership and its Partners. The General Partner shall keep the Limited Partners advised of any dispute the Partnership may have with any federal, state or local taxing authority and shall afford the Limited Partners the right to participate directly in negotiations with any such taxing authority in an effort to resolve any such dispute. (d) Governmental Filings. The General Partner shall prepare and submit to the Secretary of the Treasury, the applicable state housing agency and any other governmental authority having jurisdiction over the Project Property, on a timely basis, any and all annual reports, information returns and other certifications and information required by any such governmental agency. The General Partner shall comply with all other applicable requirements of any federal, state or local agency having jurisdiction over the Project Property, including, without limitation, any requirements of any such governmental agency with respect to the funding and maintenance of any operating or capital improvement reserves for the Project Property. 12 (e) Bank Accounts. The General Partner shall establish in the name and on behalf of the Partnership such bank accounts as shall be required to facilitate the operation of the Partnership's business. The Partnership's funds shall not be commingled with any other funds of the General Partner or any of its Affiliates. Promptly upon the request of a Limited Partner, the General Partner shall obtain and deliver to such Limited Partner full, complete and accurate statements of the amount and status of all Partnership bank accounts and all withdrawals therefrom and deposits thereto. (f) Project Property Sale. The General Partner shall investigate and report to the Limited Partners with respect to the sale of the Project Property at such time as it is in the best interests of the Limited Partners to consider any offer to purchase or resyndicate the Project Property. Section (5.05) Fees for Services Rendered. The Partnership shall pay the following described fees to the Persons indicated below: (a) The Management Fee shall be paid to _______________________ as provided in the Management Agreement; (b) The General Partner shall be paid the fees provided in the Subscription Agreement as provided therein. None of the payments or reimbursements to any of the Persons indicated above shall be considered a distribution of Cash Flow to any Partner. Section (5.06) Reimbursement of Expenses. The Partnership shall reimburse each Partner for all out-of-pocket costs and expenses incurred by it or its Affiliates in connection with the formation of the Partnership. In addition, the Partnership shall reimburse each Partner for all reasonable out-of-pocket costs and expenses incurred by it or its Affiliates in connection with the operation of the Partnership's business. Section 5.07 Outside Ventures of Partners. Any Partner may engage in or possess an interest in any other business venture of any type or description, independently or with others (including, without limitation, any venture which may be competitive with the business being conducted by the Partnership) and neither the Partnership, nor any Partner will, by virtue of this Partnership Agreement, have any right, title or interest in or to such outside ventures or the income or other benefits derived therefrom. ARTICLE 6: POWERS, RIGHTS AND DUTIES OF LIMITED PARTNERS 13 Section 6.01 Limitation of Liability. Except as otherwise required under Sections 17-607(b) and 17-607(c) of the Act (relating to a limited partner's liability under certain circumstances to refund to the Partnership distributions of cash previously made to it), the Limited Partners shall not be personally liable for any loss or liability of the Partnership beyond the amount of the Limited Partners' agreed-upon Capital Contributions. Section 6.02 No Participation in Management. Except as otherwise expressly provided in this Partnership Agreement, no Limited Partner shall participate in the operation, management or control of the Partnership's business, transact any business in the Partnership's name or have any power to sign documents for or otherwise bind the Partnership. Section 6.03 Partnership Decisions. Decisions to be made by all Limited Partners hereunder shall be made by Limited Partners with an aggregate Partnership Percentage in excess of 49.5%. Decisions to be made by the Class A Limited Partners shall be made by Class A Limited Partners with an aggregate Partnership Percentage in excess of 39.5%. Decisions to be made by the Partners under this Agreement shall be made by Partners owning an aggregate Partnership Percentage in excess of 50%. ARTICLE 7: ACCOUNTING AND FISCAL AFFAIRS Section 7.01 Books of Account. The General Partner shall keep proper books of account for the Partnership. Such books of account shall be kept at the principal office of the Partnership and shall be open at all times for examination and copying by the Limited Partner or its authorized representatives. The Partnership shall utilize a calendar year and the accrual method for tax and accounting purposes. Section 7.02 Financial Reports. No later than February 28 following the close of each calendar year, the General Partner shall provide the Limited Partners with financial statements for the Partnership consisting of (a) a balance sheet and income statement prepared in accordance with generally accepted accounting principles; (b) a cash flow statement; (c) a statement and reconciliation of the Partners' Capital Accounts in the Partnership; and (d) a summary and computation of all fees paid or payable to the General Partner and its Affiliates with respect to the calendar year. The General Partner shall also provide quarterly reports reflecting the operating results of the Partnership within thirty (30) days following the close of each calendar quarter. Such reports shall contain such information as the Limited Partners shall reasonably require. 14 Section 7.03 Budgets. The General Partner shall provide the Limited Partners, at least thirty (30) days prior to the close of each calendar year, with a reasonably detailed annual operating and capital improvements budget for the Partnership for the following calendar year. Section 7.04 Tax Information. The General Partner shall prepare the annual partnership information return for each taxable year of the Partnership, including Schedule K-1, no later than March 1 of the following calendar year. ARTICLE 8: TRANSFER OF LIMITED PARTNER'S PARTNERSHIP INTERESTS Section 8.01 Voluntary Transfers. A Limited Partner may at any time make a Voluntary Transfer of all or any part of its Partnership Interests, so long as such Voluntary Transfer complies with the following conditions: (a) the General Partner has received a written instrument of transfer of all such Partnership Interests, which instrument shall be signed by the transferor Limited Partner and the transferee and shall contain the name and address of the transferee and the transferee's express acceptance of and agreement to be bound by all of the terms and conditions of this Partnership Agreement; (b) all requirements of applicable state and federal securities laws have been complied with; (c) such Voluntary Transfer will not result in the Partnership's loss of any exemption (federal or state) from the registration of the sale of securities relied upon in its offering of the Partnership Interests; and (d) such Voluntary Transfer will not result in the Partnership being classified as an "association" which is taxable as a corporation for federal income tax purposes. Upon compliance with all of the conditions of this Section 8.01, such Voluntary Transfer of a Limited Partner's Partnership Interests shall bind the Partnership and the General Partner, no such transfer shall cause the dissolution and termination of the Partnership and the transferee shall automatically be deemed to be an Assignee with respect to such Partnership Interests. Section 8.02 General Partner's Consent to Substitution as a Limited Partner. Notwithstanding anything to the contrary contained in Section 8.01, an Assignee of a Limited Partner's Partnership Interests shall not become a Substituted Limited Partner unless and until the General Partner consents in writing to such substitution, which consent may be arbitrarily withheld. The effective date of the substitution of the Assignee as a Substituted Limited Partner shall be the date on which the General Partner gives its written consent to the assignment. If the General Partner does not consent to the substitution of an Assignee of a Limited Partner's Partnership Interests, then the transferor Limited Partner shall retain all the rights of a transferor of a limited partnership interest under the Act and, 15 except as otherwise provided in Section 8.04, the Assignee shall not be treated as owning any interest in the Partnership. In particular, an Assignee of a Limited Partner's Partnership Interests who is not admitted as a Substituted Limited Partner under this Section 8.02 shall not be entitled to: (a) require any accounting of the Partnership's transactions; (b) inspect the Partnership's books and records; (c) require any information from the Partnership; or (d) exercise any privilege or right of a Limited Partner which is not specifically granted to a nonsubstituted transferee of a limited partnership interest under the Act. Section 8.03 Involuntary Transfers. The Involuntary Transfer of all or any part of any Limited Partner's Partnership Interests shall not cause the dissolution and termination of the Partnership, but rather the business of the Partnership shall be continued without interruption in accordance with the provisions of this Section 8.03. Upon an Involuntary Transfer of all or any part of any Limited Partner's Partnership Interests, such Limited Partner's successor or legal representative shall automatically be deemed to be a Substituted Limited Partner. Section 8.04 Distributions and Allocations with Respect to Transferred Partnership Interests. If any transfer (whether a Voluntary or Involuntary Transfer) of Partnership Interests is recognized by the Partnership under this Article 8, then all allocations of Profits and Losses attributable to the transferred Partnership Interests shall be divided and allocated between the transferor and the transferee by taking into account their varying interests during such fiscal period, using any convention or method of allocation selected by the General Partner which is then permitted under Section 706 of the Code and the Regulations promulgated thereunder. All distributions of Cash Flow made prior to the effective date of any such transfer shall be made to the transferor and any such distributions made after the effective date of such transfer shall be made to the transferee. Section 8.05 Voluntary Withdrawal. A Limited Partner shall not be permitted to voluntarily withdraw from the Partnership. ARTICLE 9: TRANSFER OF GENERAL PARTNER'S PARTNERSHIP INTERESTS Section 9.01 Voluntary Transfers. The Partnership shall not recognize any Voluntary Transfer of a General Partner's Partnership Interests unless all Limited Partners have consented in writing to such Voluntary Transfer, which consent may be arbitrarily withheld. An authorized transfer of a General Partner's Partnership Interests shall bind the Partnership and all the Limited Partners and no such Voluntary Transfer shall cause the termination of the Partnership. In addition, effective 16 as of the date of full compliance with the requirements of this Section 9.01, the transferee of a General Partner's Partnership Interests shall be admitted as a new General Partner of the Partnership and shall be vested with all the powers and obligations with respect to the management of the Partnership as are granted to and placed upon the transferor General Partner under this Partnership Agreement. Section 9.02 Involuntary Transfers. An Involuntary Transfer of a General Partner's Partnership Interests at such time as there is more than one General Partner shall not dissolve the Partnership, but rather the business of the Partnership shall be continued without interruption and all of the management powers and authority granted herein to the General Partner making such Involuntary Transfer shall automatically be placed upon the remaining General Partner(s), unless the Limited Partner otherwise elects within ten days after the occurrence of such Involuntary Transfer to dissolve the Partnership and have the Partnership's affairs and business wound up and terminated pursuant to Article 10. An Involuntary Transfer of a General Partner's Partnership Interests when there is no other General Partner in existence shall dissolve the Partnership and the Partnership's affairs and business shall be wound up and terminated under Article 10, unless the Limited Partners agree in writing to the continuation of the business of the Partnership and the appointment of a new General Partner pursuant to the provisions of Section 9.03. Section 9.03 Continuation of Partnership After Involuntary Transfer of General Partner's Partnership Interests. Upon an Involuntary Transfer of the last remaining General Partner's Partnership Interests, the Partnership shall be dissolved and the affairs and business of the Partnership shall be wound up and terminated under Article 10, unless within 90 days after the occurrence of such Involuntary Transfer, the Limited Partners agree in writing to the continuation of the business of the Partnership and the appointment of a new General Partner. Unless such an election is made within such 90-day period, the Partnership shall conduct only those activities which are necessary to wind up and terminate its affairs and business. If such an election is made within such 90-day period, then: (a) the reconstituted partnership shall continue until the end of the term of the Partnership's existence set forth in this Partnership Agreement; and (b) immediately upon its receipt of cash in an amount equal to the greater of (i) $100 or (ii) the then positive balance in its Capital Account, the former General Partner shall automatically (and without the need for the execution of any further documentation) be deemed to have assigned its entire Partnership Interest to the new General Partner. 17 Section 9.04 Distributions and Allocations with Respect to Transferred Partnership Interests. If any transfer (whether a Voluntary or Involuntary Transfer) of a General Partner's Partnership Interests is recognized by the Partnership under this Article 9, then all allocations of Profits and Losses attributable to the transferred Partnership Interests shall be divided and allocated between the transferor and the transferee by taking into account their varying interests during such fiscal period, using any convention or method of allocation selected by the Limited Partner which is then permitted under Section 706 of the Code and the Regulations promulgated thereunder. Any distributions of Cash Flow made prior to the effective date of any such transfer shall be made to the transferor and any such distributions made after the effective date of such transfer shall be made to the transferee. Neither the Partnership nor any Limited Partner shall incur any liability for making allocations and distributions in accordance with the provisions of this Section 9.04. Section 9.05 Voluntary Withdrawal. The General Partner shall not be permitted to voluntarily withdraw from the Partnership. Section 9.06 Removal of General Partner. Except in the case of an Involuntary Transfer, the General Partner shall not be removed as General Partner unless the Limited Partners determine that there is cause for removal of the General Partner. There shall be cause for removal of the General Partner only if (a) the General Partner intentionally and in bad faith violates the terms of this Agreement or the Subscription Agreement; or (b) there is a material breach of this Agreement or the Subscription Agreement, and such breach has an adverse effect the tax benefits or cash flow available to the Limited Partners. The removal of the General Partner shall be effective five (5) business days following receipt of a written removal notice by the General Partner. Upon the effective date of removal, the General Partner's interest in the Partnership shall be converted to a limited partnership interest representing an identical share of Partnership Cash Flow, Net Proceeds and tax items as the surrendered general partnership interest. For the purposes of determining the effect of the removal of the General Partner upon the Partnership, such removal shall be treated as an Involuntary Transfer of the General Partner's Partnership Interests pursuant to Sections 9.02 and 9.03 hereof; provided, however, that notwithstanding such removal, the General Partner shall remain liable to the Partnership and the Limited Partners for (i) all obligations and liabilities incurred by it as a General Partner before the effective date of such removal but shall be free of any obligations and liabilities incurred on account of Partnership activities from and after the time of such removal and (ii) all damages and other amounts recoverable or payable hereunder or under applicable law by or to the Partnership or the 18 Limited Partners as a result of the occurrence of the event giving rise to such removal. ARTICLE 10: DISSOLUTION, WINDING UP AND TERMINATION Section 10.01 Dissolution. The Partnership shall dissolve upon the occurrence of any of the following events: (a) The expiration of the term of the Partnership's existence; (b) The sale or other disposition of all or substantially all of the Partnership Property and the Partnership's receipt of all or substantially all of the proceeds therefrom; (c) The Partners' mutual election to dissolve the Partnership; (d) The failure of the Limited Partners to agree in writing at the time and in the manner provided in Section 9.03 to the continuation of the business of the Partnership and the appointment of a new General Partner upon the occurrence of an Involuntary Transfer of the last remaining General Partner's Partnership Interests or the removal of the General Partner; and (e) The Limited Partners' election pursuant to Section 9.02 to dissolve the Partnership upon the occurrence of an Involuntary Transfer of a General Partner's Partnership Interests, notwithstanding the fact that one or more other General Partners are in existence at such time. Section 10.02 Winding Up and Termination. Upon the dissolution of the Partnership, the affairs and business of the Partnership shall be wound up and terminated, the Partnership's liabilities shall be discharged and the Partnership Property shall be liquidated and distributed in the manner hereinafter described. A reasonable time shall be allowed for the orderly winding up of the affairs and business of the Partnership so as to enable the Partnership to minimize the normal losses attendant to the winding up and termination period. The winding up and termination of the affairs and business of the Partnership shall be supervised and conducted by the Liquidation Manager. The Liquidation Manager shall have the exclusive power and authority to act on behalf of the Partnership to wind up and terminate the affairs and business of the Partnership, to sell and convey the Partnership Property to such Persons (including, without limitation, any Partner or any Affiliate thereof) for such consideration and upon such terms and conditions as it deems necessary or appropriate, to discharge the Partnership's liabilities, to establish any reserves that it deems necessary or 19 appropriate for any contingent or unforeseen liabilities or obligations of the Partnership, and to distribute the liquidation proceeds in the manner hereinafter described. Upon completion of the winding up of the affairs and business of the Partnership, the liquidation proceeds shall be distributed by the Liquidation Manager in the following manner and order of priority: (a) First, such liquidation proceeds shall be applied to the payment of debts and liabilities of the Partnership (including any loans from any Partner to the Partnership) and the payment of expenses of the winding up of the affairs and business of the Partnership; (b) Second, such liquidation proceeds shall be applied to the setting up of any reserves (to be held by the Liquidation Manager in an interest-bearing account) which the Liquidation Manager may deem necessary or appropriate for any contingent or unforeseen liabilities or obligations of the Partnership; provided, however, that at the expiration of such time as the Liquidation Manager deems necessary or appropriate, the balance of such reserves remaining after payment of such liabilities or obligations shall be distributed by the Liquidation Manager in the manner hereinafter set forth in this Section 10.02; (c) Third, such liquidation proceeds shall be distributed to the Partners in accordance with the positive balances in their respective Capital Accounts following the allocation of Partnership Profits and Losses. Such distributions shall be made not later than the last to occur of (i) the end of the year in which the liquidation occurs, or (ii) 90 days after the liquidation. Section 10.03 Compliance with Liquidation Requirements of Regulations. If the Partnership is "liquidated" within the meaning of Section 1.704-1(b)(2)(ii)(g) of the Regulations, then: (a) Distributions shall be made pursuant to Section 10.2 (if such "liquidation" constitutes a dissolution and termination of the Partnership) to the Partners who have positive balances in their Capital Accounts in compliance with Section 1.704-1(b)(2)(ii)(b)(2) of the Regulations; (b) If the General Partner has a deficit balance in its Capital Account (after giving effect to all contributions, distributions and allocations for all taxable years, including, without limitation, the taxable year in which such liquidation occurs), then the General Partner shall contribute to the capital of the Partnership the amount necessary to restore the balance in its Capital Account to zero in compliance with Section 1.704- 1(b)(2)(ii)(b)(3) of the Regulations; and 20 (c) If a Limited Partner has a deficit balance in its Capital Account (after giving effect to all contributions, distributions and allocations for all taxable years, including, without limitation, the taxable year in which such liquidation occurs), then the Limited Partner shall pay to the Partnership the limited dollar amount, if any, of its Capital Account deficit which the Limited Partner has expressly agreed in writing to restore to the capital of the Partnership pursuant to Section 10.04; and (d) Any such contribution by a Partner shall be made on or before the later of (i) the end of the taxable year of the "liquidation" or (ii) 90 days after the date of the "liquidation." Notwithstanding anything to the contrary contained in this Section 10.03, in the event the Partnership is "liquidated" within the meaning of Section 1.704-1(b)(2)(ii)(g) of the Regulations, but such "liquidation" does not constitute a dissolution and termination of the Partnership pursuant to this Partnership Agreement, then no distributions shall be made pursuant to Section 10.02. Instead, the Partnership shall be deemed to have distributed the Partnership Property in kind to the Partners, who shall be deemed to have assumed and taken subject to all Partnership liabilities, all in accordance with their respective Capital Accounts. Immediately thereafter, the Partners shall be deemed to have recontributed the Partnership Property in kind to the Partnership, which shall be deemed to have assumed and taken subject to all such liabilities. Section 10.04 Rights and Obligations of Limited Partners Upon Dissolution. Except as otherwise expressly provided in Section 10.03(b), the Limited Partners shall look solely to the assets of the Partnership for the return of their Capital Contributions. Except as otherwise elected by a Limited Partner pursuant to this Section 10.04, a Limited Partner shall not have any obligation to restore any deficit in its Capital Account upon the liquidation of the Partnership. Notwithstanding anything to the contrary contained in this Partnership Agreement, the Limited Partner may from time to time elect to be obligated to restore a deficit in its Capital Account up to a limited dollar amount. Such election shall be made by the Limited Partner's delivery of a written notice of election to the General Partner no later than April 15 following the taxable year for which such election is to be effective and shall specify the dollar amount of the deficit in its Capital Account that the Limited Partner agrees to restore. Such election shall be irrevocable and shall be binding on subsequent transferees of the Limited Partner's Partnership Interests. 21 Section 10.05 Waiver of Partition. Each Partner hereby waives any right to partition or cause a partition of the Partnership Property. Section 10.06 Final Accounting. The Liquidation Manager shall furnish each of the Partners with a statement setting forth the assets and liabilities of the Partnership as of the date of the completion of the winding up and termination of the affairs and business of the Partnership. Upon completion of the distribution plan set forth in this Article 10, the Liquidation Manager shall cause to be executed by the appropriate parties all documents which the Liquidation Manager deems necessary or appropriate to effect the dissolution and termination of the Partnership. ARTICLE 11: MISCELLANEOUS Section 11.01 Notices and Addresses. All notices, consents, demands, requests, or other communications which may or are required to be given hereunder shall be in writing and shall be sent by telefax, overnight courier or United States mail, registered or certified, return receipt requested, postage prepaid to the Partnership at the address of the Partnership's principal office and to the Partners at the addresses set forth after their respective names in Article 1. The Partnership and any Partner may change it or his address for the giving of notices, consents, demands, requests, or other communications by delivering written notice to the Partnership and to all the Partners of it or his new address for such purpose. Notices, consents, demands, requests, or other communications shall be deemed given or served on the day when sent by telefax, one business day after deposit with an overnight courier or two (2) business days after deposit in the United States mail. Section 11.02 Pronouns and Plurals. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural, as the identity of the person or persons may require. Section 11.03 Counterparts. This Partnership Agreement may be executed in several counterparts all of which shall constitute one agreement, binding on all parties hereto, notwithstanding that all the parties are not signatories to the same counterpart. Section 11.04 Applicable Law. This Partnership Agreement and the rights of the Partners hereunder shall be interpreted in accordance with the laws of the State of Delaware. Section 11.05 Successors. This Partnership Agreement shall inure to the benefit of, be binding upon, and be enforceable by 22 and against the parties hereto, their heirs, executors, administrators, successors, and assigns. Section 11.06 Severability. The invalidity or unenforceability of any provision of this Partnership Agreement in a particular respect shall not affect the validity and enforceability of any other provisions of this Partnership Agreement or of the same provision in any other respect. Section 11.07 Exhibits. All exhibits attached hereto or referred to herein are incorporated herein by this reference. Section 11.08 Amendment of Partnership Agreement. This Partnership Agreement may not be amended in whole or in part except by a written instrument signed by the General Partner and Limited Partners. The Partners have executed this Partnership Agreement as of the date first set forth at the beginning hereof. GENERAL PARTNER: HEARTLAND ________________, INC. By: Thomas A. Landgraf, President CLASS A LIMITED PARTNERS: CLASS B LIMITED PARTNER: GEORGIA POWER COMPANY By: 23 EXHIBIT A DEFINITIONS The capitalized words and phrases used in the Limited Partnership Agreement for ____________________________ Apartments, Limited Partnership, shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of such words and phrases): "Act" means the Delaware Revised Uniform Limited Partnership Act, as the same may be amended from time to time (or any corresponding provisions of any successor law). "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 the relevant fiscal period after giving effect to the following adjustments: (a) the credit to such Capital Account of any amounts which such Partner is obligated to restore under this Partnership Agreement or is deemed to be obligated to restore pursuant to the penultimate sentences of Section 1.704-2(g)(1) and Section 1.704-2(i)(5) of the Regulations; and (b) the debit to such Capital Account of the amounts described in Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Regulations. The foregoing definition of Adjusted Capital Account Deficit is intended to comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted consistently therewith. "Affiliate" means, with respect to any Person: (a) any Person directly or indirectly controlling, controlled by or under common control with such Person; (b) any Person owning or controlling 10% or more of the outstanding voting securities of such Person; (c) any officer, director or general partner of such Person; or (d) any Person who is an officer, director, general partner, trustee or holder of 10% or more of the voting securities of any Person described in clauses (a) through (c) of this subparagraph. "Assignee" means a Person to whom all or any part of a Limited Partner's Partnership Interest has been transferred in a manner permitted under this Partnership Agreement, but who has not been admitted to the Partnership as a Substituted Limited Partner with respect to the transferred Partnership. "Breakeven Date" means the first day of the calendar month following the first full calendar month in which the rental income of the Partnership (including rent subsidies) actually received has exceeded the sum of (i) the Partnership's operational costs and expenses (including ratable accruals of expenses which are reasonably expected to be incurred on other A-1 than a monthly basis); and (ii) required deposits to reserves under the Subscription Agreement. "Capital Account" means, with respect to any Partner, the capital account maintained for such Partner pursuant to Section 2.05. "Capital Contribution" means, with respect to any Partner, the amount of money and the fair market value of property contributed to the Partnership by such Partner. "Cash Flow" means the gross cash receipts received by the Partnership from any source, excluding Net Proceeds and Capital Contributions, reduced by (a) payments with respect to Partnership indebtedness; (b) ordinary operating expenses, including but not limited to, maintenance expenses, utilities, trash removal and groundskeeping expenses; (c) deposits to reserves for payment of insurance or real estate taxes, or any other reserves required by lenders or the Subscription Agreement; and (d) the Management Fees. "Class A Limited Partners" means __________________________. "Class B Limited Partner" means Georgia Power Company. "Code" means the Internal Revenue Code of 1986, as the same may be amended from time to time (or any corresponding provisions of any successor law). "Compliance Period" means, with respect to the Project Property, the 15-year compliance period specified in Section 42(i)(1) of the Code. "General Partner" means Heartland ________________, Inc., or any other Person who becomes a successor general partner pursuant to Section 9.01 or Section 9.03. "Involuntary Event" means, with respect to any Partner any one of the following events: (i) the making of an assignment for the benefit of creditors by the Partner; (ii) the filing of a voluntary petition in bankruptcy by the Partner; (iii) the adjudication of the Partner as a bankrupt or insolvent; (iv) the filing of a petition or answer by the Partner seeking a reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any statute, law or rule; (v) the seeking, consenting to or acquiescence of the Partner in the appointment of a trustee, receiver, or liquidator of the Partner or of all or any substantial part of the Partner's properties; (vi) the death of any Partner who is a natural person; or (vii) the termination of the legal existence of any Partner who is other than a natural person. A-2 "Involuntary Transfer" means any transfer of any Partner's Partnership Interests effected by operation of law as a result of the occurrence of an Involuntary Event. "Limited Partners" means the Class A Limited Partners and the Class B Limited Partner, as well as any Person who becomes a Substituted Limited Partner for any such Person pursuant to Section 8.01 or Section 8.02. "Liquidation Manager" means any Person selected by the Limited Partner. "Management Agreement" means the agreement between the Partnership and ___________________________. "Net Proceeds" means, with respect to any fiscal year of the Partnership, the cash proceeds from Partnership sales or refinancings reduced by (a) all reasonable costs and expenses incurred by the Partnership in connection with such sale or refinancing, and (b) all principal and interest payments and other sums paid on or with respect to any indebtedness of the Partnership. Net Proceeds shall include all principal and interest payments with respect to any note or other obligation received by the Partnership in connection with the sale or other disposition of Project Property. "Nonrecourse Deduction" has the meaning set forth in Section 1.704-2(b)(1) of the Regulations. The amount of Nonrecourse Deductions for any fiscal year of the Partnership equals the excess, if any, of the net increase, if any, in the amount of Partnership Minimum Gain during that fiscal year reduced (but not below zero) by the aggregate amount of any distributions during that fiscal year of proceeds of a Nonrecourse Liability that are allocable to an increase in Partnership Minimum Gain, determined in accordance with Section 1.704-2(c) of the Regulations. "Nonrecourse Liability" has the meaning set forth in Section 1.704-2(b)(3) of the Regulations. "Partner" means the General Partner or the Limited Partners. "Partner Minimum Gain" means an amount, with respect to each Partner Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if such Partner Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with Section 1.704-2(i) of the Regulations. "Partner Nonrecourse Debt" has the meaning set forth in Section 1.704-2(b)(4) of the Regulations. A-3 "Partner Nonrecourse Deductions" has the meaning set forth in Section 1.704-2(i)(2) of the Regulations. The amount of Partner Nonrecourse Deductions with respect to a Partner Nonrecourse Debt for a Partnership fiscal year equals the net increase during that fiscal year in Partner Nonrecourse Debt reduced (but not below zero) by the proceeds of the Partner Nonrecourse Debt distributed during that fiscal year to the Partner bearing the economic risk of loss for the Partner Nonrecourse Debt that are both attributable to the Partner Nonrecourse Debt and allocable to an increase in Partner Minimum Gain, as determined in accordance with Section 1.704-2(i)(2) of the Regulations. "Partnership" means ________________ Apartments Limited Partnership. "Partnership Agreement" means the Limited Partnership Agreement, as the same may be amended from time to time. Words such as "herein," "hereinafter," "hereof," "hereto" and "hereunder" refer to this Partnership Agreement as a whole, unless the context otherwise requires. "Partnership Interest" means the entire ownership interest of a Partner, including, without limitation, the rights and obligations of such Partner under this Partnership Agreement and the Act. "Partnership Minimum Gain" has the meaning set forth in Section 1.704-2(d) of the Regulations. "Partnership Percentage" shall mean the percentage that a Partner's Capital Contributions bears to the aggregate Capital Contributions of all Partners. "Partnership Property" means all real and personal property acquired by the Partnership and any improvements thereto, and shall include both tangible and intangible property. "Person" means any individual, partnership, corporation, trust or other entity. "Profits" and "Losses" mean, for each fiscal year of the Partnership, an amount equal to the Partnership's taxable income or loss for such period from all sources, determined in accordance with Section 703(a) of the Code, adjusted in the following manner: (a) the income of the Partnership that is exempt from federal income tax shall be added to such taxable income or loss; (b) any expenditures of the Partnership which are not deductible in computing its taxable income and not properly chargeable to capital account under either Section 705(a)(2)(B) of the Code or the Regulations promulgated under Section 704(b) of the Code shall be subtracted from such taxable income or loss; A-4 (c) in the event any Partnership Property is revalued in accordance with Section 1.704-1(b)(2)(iv)(f) of the Regulations, then the amount of any adjustment to the value of such Partnership Property shall be taken into account as gain or loss from the disposition of such Partnership Property for purposes of computing Profits or Losses; (d) gain or loss resulting from any disposition of Partnership Property which has been revalued pursuant to Section 1.704-1(b)(2)(iv)(f) of the Regulations and with respect to which gain or loss is recognized for Federal income tax purposes shall be computed by reference to the adjusted value of such Partnership Property, notwithstanding that the adjusted tax basis of such Partnership Property differs from the adjusted value; (e) any depreciation, amortization or other cost recovery deductions taken into account in computing such taxable income or loss shall be recomputed based upon the adjusted value of any Partnership Property which has been revalued in accordance with Section 1.704-1(b)(2)(iv)(f) of the Regulations; and (f) any items of income, gain, loss, deduction or credit which are specially allocated pursuant to Sections 3.2 (d) through (k) shall not be taken into account in computing Profits or Losses. "Project Property" or "Project" means the ___________ Apartments located in __________, Georgia. "Regulations" means the Federal Income Tax Regulations (including without limitation, Temporary Regulations) promulgated under the Code, as the same may be amended from time to time (including corresponding provisions of successor regulations). "Subscription Agreement" means the Subscription Agreement dated _______________, by and among the Class A Limited Partners, the Class B Limited Partner, the General Partner and the Partnership, setting forth the terms and conditions of the Limited Partners' Capital Contributions to the Partnership and the General Partner's representations and warranties in connection therewith. "Substituted Limited Partner" means a Person who is admitted as a Limited Partner to the Partnership pursuant to Section 8.01 or Section 8.02 in place of and with all the rights of a limited partner under the Partnership Agreement and the Act. "Tax Credit" means the low income housing tax credit under Section 42 of the Code. "Tax Matters Partner" means the General Partner acting in the capacity described in Section 5.05(c). A-5 "Voluntary Transfer" means any sale, assignment, transfer, pledge, or hypothecation of any Partnership Interests by a Partner, except for an Involuntary Transfer. A-6 EX-99 3 EXHIBIT G EXHIBIT G FORM OF NOTICE Georgia Power Company ("Georgia Power"), 333 Piedmont Avenue, N.E., Atlanta, Georgia 30308, a wholly-owned subsidiary of The Southern Company, a registered holding company under the Public Utility Holding Company Act of 1935 (the "Act"), has filed an application-declaration under Section 9(c)(3) of the Act. Georgia requests authority to invest up to $10 million from time to time through December 31, 1997 in the Class B Limited Partnership units of one or more Delaware limited partnerships (each a "Partnership") to be formed for the purpose of developing, constructing, financing, managing and operating low- income housing projects located in Georgia Power's retail and wholesale electric service territory in Georgia. The general partner of each Partnership will be Heartland Properties Inc., a subsidiary of WPL Holdings, Inc., an exempt holding company under the Act, or an affiliate thereof. Georgia Power will commit to provide no more than 20% of the contributed capital of all partners in any one Partnership. Commitments to purchase the remaining limited partnership interests of each Partnership will be obtained from other qualified investors, including other large Georgia companies. Each Partnership will invest in qualifying low income housing properties within the meaning of Section 42 of the Internal Revenue Code of 1986, as amended. Under Section 42, the owners of a qualifying housing property are entitled to income tax credits, provided that various restrictions and limitations on the income level of tenants and on the rents charged by the owners are satisfied. As a Class B Limited Partner in each Partnership, Georgia Power will have access to the books and records of the Partnership and will be entitled to receive copies of all notices and reports sent to partners. In addition, Georgia Power will have the right to vote with all other limited partners to remove the general partner for "cause," and to approve certain limited actions by the general partner that would fundamentally change the business purpose of the Partnership or its relationship to the general partner. Broader approval rights over other actions of the general partner will be given to Class A Limited Partners. In all other respects, e.g., for purposes of allocations of profit, loss, and tax credits, and distributions of cash flow and net proceeds, Class A and Class B Limited Partners will be treated equally. Georgia Power is proposing to invest indirectly through each Partnership in qualifying low-income housing properties in order to support the construction or rehabilitation of housing units in communities in Georgia in which there currently exists a demonstrated shortage. The Section 42 tax credit provides a substantial incentive to companies such as Georgia Power to make such an investment. In its application, Georgia Power states that, unlike other States, Georgia has not utilized the full amount of Section 42 tax credits allocated to Georgia for this purpose. -----END PRIVACY-ENHANCED MESSAGE-----