SECOND AMENDED AND RESTATED
MANAGEMENT INCENTIVE AGREEMENT
This Second Amended and Restated Management Incentive
Agreement (the "Agreement") has been made and entered into
effective as of the 1st day of January, 1998, by and between
Harrisonville Heights, L.P., a Missouri limited partnership (the
"Partnership") and Fairway Management, Inc., a Missouri
corporation (the "Management Agent"). This Agreement amends and
restates in its entirety the Amended and Restated Management
Incentive Agreement dated effective as of October 1, 1996
previously entered into between the Partnership and the
Management Agent.
For good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Partnership and
the Management Agent agree as follows:
(1) Definitions: As used in this Agreement, the following
terms shall have the following meanings:
"Annual Incentive Amount" means the amount of Eleven
Thousand Eight Hundred Forty-Six Dollars and Fifty Cents
($11,846.50) for each Measurement Year.
"Apartment Complex" means the multi-family housing project
owned by the Partnership which is located in Harrisonville, Cass
County, Missouri and which is known as "Harrisonville Heights
Apartments."
"Base Fee" means the fees and compensation payable to the
Management Agent pursuant to the Management Agreement on a
monthly basis.
"Class Limited Partner" means Boston Capital Corporate Tax
Credit Fund V, A Limited Partnership, a Massachusetts limited
partnership.
"Class B Limited Partner" means Boston Capital Tax Credit
Fund IV L.P., a Delaware limited partnership, specifically
Series 27 thereof.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time, and the regulations (permanent and temporary)
issued thereunder. References herein to any Code Section shall
include any successor provisions.
"Compliance Period" means the fifteen-year period defined in
Section 42(i) of the Code as in effect at the time the Apartment
Complex is placed in service.
"Credit Period" has the meaning given to it in Section
42(f)(1) of the Code.
"Escrow Agent" means Xxxxx County National Bank, a Missouri
banking corporation, whose address is 000 Xxxx Xxxxxxxx,
Xxxxxxxx, Xxxxxxxx 00000, and its duly appointed successors.
"Escrow Agreement" means the Second Amended and Restated
Escrow Agreement by and among the Partnership, the Management
Agent, the Class A Limited Partner and the Escrow Agent.
"Escrowed Funds" means the sum of One Hundred Eighteen
Thousand Four Hundred Sixty-Five Dollars ($118,465) which is to
be deposited by the Class A Limited Partner with the Escrow Agent
and which shall be disbursed in the manner specified in this
Agreement and in the Escrow Agreement.
"Fiscal Year" means the calendar year (January 1 through
December 31).
"General Partner" means Xxxxxxx X. Xxxxx Partnerships, L.C.,
a Missouri limited liability company.
"Investment Limited Partners" means the Class A Limited
Partner and the Class B Limited Partner.
"Management Agreement" means the agreement entered into or
to be entered into by and between the Management Agent and the
Partnership concerning the management of the Apartment Complex on
a day to day basis.
"Management Incentive Fee" means the Annual Incentive
Amount, plus interest accrued thereon (if any), conditionally
payable to the Management Agent for each of the Measurement Years
of the Compliance Period.
"Measurement Year" means the twelve-month period commencing
with the fifth anniversary of the date the Apartment Complex is
placed in service (or the sixth anniversary of the date the
Apartment Complex is placed in service in the event the first day
of the year of the Credit Period which is applicable to any
building in the Apartment Complex is deferred until the year
after the year in which such building is placed in service), and
each twelve-month period subsequent thereto with the first day of
each such twelve-month period being the anniversary of the date
the Apartment Complex is placed in service, through and including
the twelve-month period with or within which the Compliance
Period ends.
"Minimum Set-Aside Test" means the set aside test selected
by the Partnership pursuant to Section 42(g) of the Code whereby
at least 40% of the units in the Apartment Complex must be
occupied by individuals with incomes equal to 60% or less of area
median income, as adjusted for family size.
"Missouri Limited Partner" means Missouri Affordable Housing
Fund VI, L.P., a Missouri limited partnership.
"Non-Accrual Period" means the five-year period commencing
with the date the Apartment Complex is placed in service, or the
six-year period commencing with the date the Apartment Complex is
placed in service in the event the first day of the year of the
Credit Period which is applicable to any building in the
Apartment Complex is deferred until the year after the year in
which such building is placed in service, during which period the
Management Agent will not accrue any rights to payment of the
Management Incentive Fee other than accrued interest thereon.
"Occupancy Ratio" means the percentage of occupancy of the
apartment units in the Apartment Complex as compared to the
maximum theoretically possible occupancy, determined annually.
The maximum theoretical occupancy shall be 100%, and the
occupancy of the Apartment Complex at any point in time shall be
determined by dividing the total number of apartment units in the
Apartment Complex available for rental by the number of apartment
units then occupied by tenants obligated to pay rent under
arrangements which meet the Minimum Set-Aside Test and the Rent
Restriction Test and are consistent with the duties and
obligations of the General Partner set forth in Section 6.5(b) of
the Partnership Agreement. Apartment units in the Apartment
Complex available for rental at any given time shall not include
(i) any apartment units damaged or destroyed by fire, flood or
other casualty or natural disaster if such apartment units are
being expeditiously restored within a reasonable time period, or
(ii) any apartment units unavailable due to governmental agency
action outside of the control of the Management Agent if such
apartment units are being expeditiously made to conform to the
requirements of the applicable government agency so as to permit
occupancy within a reasonable time period.
"Parties" means the Partnership and the Management Agent
"Partnership Agreement" means the Second Amended and
Restated Agreement of Limited Partnership of the Partnership
dated effective as of January 1, 1998, by and among the General
Partner, the Missouri Limited Partner, the Special Limited
Partner and the Investment Limited Partners.
"Rent Restriction Test" means the test pursuant to Section
42 of the Code whereby the gross rents charged to tenants of the
low-income units in the Apartment Complex may not exceed 30% of
the qualifying income levels.
"Special Limited Partner" means BCCC, Inc., a Massachusetts
corporation.
(2) Recitals of Pertinent Facts: This Agreement has been
entered into in view of the following facts which the Parties
believe are true, to wit:
(a) The Partnership was formed to own the Apartment
Complex. The Partnership is governed by the Partnership
Agreement, the General Partner is the general partner of the
Partnership, and the current limited partners of the Partnership
are the Missouri Limited Partner, the Special Limited Partner and
the Investment Limited Partners.
(b) The Apartment Complex is low-income multi-family
housing project located in Harrisonville, Cass County, Missouri.
The Apartment Complex has been developed and will be operated in
such a manner as to make it eligible for certain favorable tax
treatment, including state and federal income tax credits
pursuant to the Code and the Revenue Laws of the State of
Missouri. However, the Apartment Complex must be managed and
operated in a manner so as to continually qualify as a "low-
income housing project" under the Code and under said revenue
laws during the Compliance Period. The Partnership desires to
assure the compliance of the Apartment Complex with all pertinent
laws governing said income tax credits during the Compliance
Period.
(c) The Management Agent is experienced in providing
management services to low-income housing projects similar to the
Apartment Complex. The Management Agent is willing to provide
management services to the Apartment Complex, but desires to
receive compensation for extraordinary services rendered with
respect to the Apartment Complex which are above and beyond those
for which provisions are made in the Management Agreement.
(d) The fees payable pursuant to this Agreement will be in
addition to the Base Fee. However, the fees payable pursuant to
this Agreement will be payable by the Partnership from the
Escrowed Funds (and interest accrued thereon), and shall not be
paid out of operating revenues of the Apartment Complex.
(3) Payment of the Annual Incentive Amount: At anytime
after the close of a Measurement Year, the Management Agent may
certify to the Partnership, the Class A Limited Partner and the
Escrow Agent, in the form of a written payment certification (the
"Annual Payment Certification"), that the Management Agent has
earned the Annual Incentive Amount for a Measurement Year. Both
the Partnership and the Class A Limited Partner (or either of
them) shall have the right to dispute such Annual Payment
Certification and to notify the Escrow Agent in writing that the
Class A Limited Partner and/or the Partnership does not believe
that the Management Agent has earned the Annual Incentive Amount
for said Measurement Year. However, in the event that both the
Class A Limited Partner and/or the Partnership fail to dispute or
otherwise protest the certifications in the Annual Payment
Certification within ten (10) business days of the date of
receipt of said Annual Payment Certification from the Management
Agent, then as soon as possible after the expiration of said ten
(10) business day period, the Partnership and the Class A Limited
Partner shall be deemed to have instructed the Escrow Agent to
distribute to the Management Agent from the Escrowed Funds an
amount equal to the Annual Incentive Amount, plus all accrued
interest on the Escrowed Funds at the time of each such
disbursement. If the Annual Incentive Amount has not been
determined to have been earned by the Management Agent pursuant
to the terms of this Agreement for that Measurement Year in the
opinion of either the Partnership or the Class A Limited Partner,
then the Escrow Agent shall not disburse any Escrowed Funds until
receiving written instructions from both the Class A Limited
Partner and the Partnership to do so. The Class A Limited
Partner agrees to deposit in a separate escrow account funds
sufficient to fund the Annual Incentive Amount for each of the
ten Measurement Years pursuant to paragraph 5 of this Agreement.
Said funds (and the interest accrued thereon) shall be held
subject to the Escrow Agreement for the purposes set forth in the
Partnership Agreement and this Agreement, including the payment
by the Partnership to the Management Agent of that portion of the
Management Incentive Fee earned by the Management Agent during
that period of time during which the Management Agent manages the
day-to-day operations of the Apartment Complex.
(4) Supplemental Agreement: This Agreement is supplemental
to the Management Agreement and it will not amend, modify or
replace in any manner the terms and conditions of the Management
Agreement. Instead, the purpose of this Agreement is to set
forth such additional parameters, duties, and obligations of the
Management Agent and to provide for a method of compensating the
Management Agent from the Partnership's capital for extraordinary
services in managing the Apartment Complex during the Compliance
Period.
(5) Escrow Agreement: The Class A Limited Partner shall
deposit the Escrowed Funds with the Escrow Agent at the time set
forth in the Escrow Agreement. The Escrow Agent named in the
Escrow Agreement shall hold and disburse the Escrowed Funds
pursuant to the terms of the Escrow Agreement, the Partnership
Agreement and this Agreement. The Escrow Agent has agreed to
invest the Escrowed Funds in an interest-bearing account and to
hold and disburse the Escrowed Funds pursuant to the terms of the
Escrow Agreement, the Partnership Agreement and this Agreement.
The terms and conditions of the Escrow Agreement are incorporated
herein by reference.
(6) Accrual of Rights to Management Incentive Fee: The
Partnership and the Management Agent agree that the Management
Agent must provide the additional management services described
in paragraph 7 of this Agreement, in addition to fulfilling those
terms and obligations set forth in the Management Agreement, in
order to be entitled to receive the Management Incentive Fee.
The Management Agent shall not accrue any rights to a Management
Incentive Fee during the Non-Accrual Period. If for any reason
the Management Agent ceases to manage the day-to-day operations
of the Apartment Complex during the term of this Agreement and
before all Annual Incentive Amounts have been paid to the
Management Agent, then the Management Agent shall forfeit all
rights to receive any unpaid portions of the Management Incentive
Fee referred to in this Agreement, and in this regard, each
year's Annual Incentive Amount shall not be deemed earned until
the last day of the Measurement Year to which said payment
relates. Furthermore:
(a) Notwithstanding the fact that the Annual Incentive
Amount payments which are payable to the Management Agent
pursuant to this Agreement will not commence until after the Non-
Accrual Period, all accrued interest on the Escrowed Funds held
during the Non-Accrual Period shall be paid at the end of each
Fiscal Year of the Non-Accrual Period to the Management Agent,
and such interest shall be reported for federal and state income
tax purposes as income to the Management Agent at the end of each
such Fiscal Year for so long as the Management Agent manages the
Apartment Complex pursuant to the Management Agreement. The
Management Agent's right to receive such interest shall terminate
contemporaneously with the termination of this Agreement.
(b) If the Management Agent continues to manage the
Apartment Complex and in addition thereto complies with and
performs the additional services specified in paragraph 7 of this
Agreement throughout a Measurement Year, then the Management
Agent shall be entitled to accrue and be paid an amount not to
exceed the Annual Incentive Amount, plus all then accrued
interest on the Escrowed Funds, as of the last day of such
Measurement Year.
(c) If for any reason the Management Agent ceases to manage
the day-to-day operations of the Apartment Complex prior to the
end of the Compliance Period, then only that portion of the
Management Incentive Fee which shall have been earned by the
Management Agent at the time the Management Agent ceases to
manage the day-to-day operations of the Apartment Complex shall
be payable to the Management Agent. Furthermore, if in any
Measurement Year during which the Management Agent is managing
the day-to-day operations of the Apartment Complex the Management
Agent does not fulfill each of the criteria set forth in
paragraph 7 below, then the Management Agent shall not receive
the Management Incentive Fee amount for that Measurement Year and
the Annual Incentive Amount which would have been applied to fund
the Management Incentive Fee for such Measurement Year shall not
be paid to the Management Agent, but, instead, shall be disbursed
to the Class A Limited Partner by the Escrow Agent, together with
the accrued but unpaid interest on the Escrowed Funds, from the
Escrowed Funds of the Class A Limited Partner held pursuant to
the terms of the Escrow Agreement.
(d) Interest which accrues on the Escrowed Funds during all
periods of time in which this Agreement is in effect shall be
reported to the Internal Revenue Service by the Escrow Agent
under the federal taxpayer identification number of the
Management Agent. However, in the event that in any year such
accrued interest is actually paid to the Class A Limited Partner,
then the Escrow Agent shall report to the Internal Revenue
Service the amount of any such interest actually paid to the
Class A Limited Partner from the Escrowed Funds as interest
income earned by the Class A Limited Partner and not the
Management Agent. Until the termination of the Management
Agent's management of the Apartment Complex, interest which
accrues on the Escrowed Funds during the Non-Accrual Period shall
be paid at the end of each Fiscal Year pursuant to the provisions
of subparagraph (a) above, and interest which accrues on the
Escrowed Funds during each Measurement Year shall be paid on the
last day of such Measurement Year pursuant to the provisions of
subparagraph (b) above.
(7) Management Criteria: The Management Incentive Fee
payable pursuant to this Agreement shall not be paid to the
Management Agent as to any Measurement Year unless the Management
Agent, in such Measurement Year, satisfies each of the following,
to wit:
(a) The Partnership must have paid during such Measurement
Year the guaranteed portion of the "Asset Management Fee" (as
such term is defined in the Partnership Agreement) for each
Fiscal Year all or part of which is included in such Measurement
Year, and such fee shall have been paid for each Fiscal Year all
or part of which is included in such Measurement Year.
(b) Operating revenues of the Partnership for such
Measurement Year shall have been applied to fund any required
annual payments to reserve accounts specified under the
Management Agreement, the Partnership Agreement or any other
"Project Document" (as such term is defined in the Partnership
Agreement).
(c) There shall have been (i) successful completion of all
Apartment Complex maintenance inspections required by any Lender
or government agency, and (ii) completion of all required
Apartment Complex maintenance.
(d) There must be timely filing of all compliance reports
required by any state or federal government agencies having
jurisdiction over the Apartment Complex; provided, however, that
in the event that any such report is not timely filed as a result
of the failure of such agency to effectively provide notice of
the nature, form, content or timing of a required report, the
Management Agent shall have a reasonable time following any
notice to the Partnership by such agency to cure such failure,
provided that such a cure is permitted by such agency without
penalty upon the Apartment Complex or the Partnership.
(e) The average Occupancy Ratio for the Apartment Complex
during the Measurement Year must equal or exceed 85%, or if such
occupancy is less than 85%, then the average Occupancy Ratio must
equal or exceed the average Occupancy Ratio for similar apartment
developments in the same geographical area as the Apartment
Complex during said Measurement Year.
For purposes of this paragraph 7, operating revenues shall
be deemed to include rents, interest and other amounts actually
received by the Partnership in the ordinary course of business,
and insurance, casualty or other payments actually received by
the Partnership as a result of casualty, natural disaster,
condemnation or other business interruption. Also, for purposes
of this paragraph 7, subordinated loans may be applied to fund
items otherwise required to be funded by operating revenues
pursuant to paragraph (a) through (c) above.
(8) Effect: This Agreement shall be effective as of the
date first written above, and shall remain in effect so long as
the Management Agreement, or any extension, renewal or substitute
thereof shall be in effect during the Compliance Period;
provided, however, that in no event shall this Agreement be
interpreted to provide for more than ten (10) Measurement Years.
The Management Incentive Fee shall be payable to the Management
Agent or any successor or assign of the Management Agent;
provided, the Management Incentive Fee shall only be paid to that
person or entity responsible for the management of the day-to-day
operations of the Apartment Complex, and then only if the
criteria for such payment as set forth in paragraph 7. above is
met.
(9) Governing Law: This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of
the State of Missouri.
(10) Counterparts: This Agreement may be executed in
multiple counterparts, each of which shall be considered an
original and all of which taken together shall constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties have set their hands
effective as of the date first above written.
PARTNERSHIP: MANAGEMENT AGENT:
HARRISONVILLE HEIGHTS, L.P. FAIRWAY MANAGEMENT, INC.
By: Xxxxxxx X. Xxxxx Partnerships, /s/Xxxx Xxxx
L.C., its General Partner Xxx Xxxx, Vice President
By: /s/Xxxx Xxxx
Xxx Xxxx, Vice President
