8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) December 30, 2011

NATIONAL TAX CREDIT INVESTORS II

(Exact name of Registrant as specified in its charter)

            California                0-20610                 93-1017959

      (State or other jurisdiction (Commission            (I.R.S. Employer

           of incorporation)        File Number)        Identification Number)

55 Beattie Place

Post Office Box 1089

Greenville, South Carolina 29602

(Address of principal executive offices)

(864) 239-1000

(Issuer's telephone number)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions:

[ ]   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ]   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ]   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ]   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.01   Completion of Acquisition or Disposition of Assets.

National Tax Credit Investors II, a California limited partnership (the “Registrant”), holds a 99% limited partnership interest in Countryside North American Partners L.P., a New Jersey limited partnership (“Countryside”).  Countryside owns a 180-unit apartment complex located in Howell, New Jersey.  As previously disclosed, on November 28, 2011, the Registrant entered into an Assignment and Assumption Agreement (the “Assignment Agreement”) with the operating general partner of Countryside and HCI Properties LLC, a New Jersey limited liability company (the “Assignee”), to assign its limited partnership interest in Countryside to the Assignee for $3,700,000. The Assignment Agreement became effective on December 30, 2011. Pursuant to the terms of the Assignment Agreement, the Registrant received proceeds of $150,000 in cash and a promissory note in the principal amount of $3,550,000. The promissory note in the amount of $3,550,000 has a maturity date of June 30, 2012 and will bear interest at the annual rate of two percent if paid on or before March 31, 2012 and seven percent if paid after March 31, 2012. The Registrant’s investment balance in Countryside was zero at September 30, 2011 and December 31, 2010.

In accordance with the terms of the Registrant’s partnership agreement, the Registrant’s general partner has evaluated the cash requirements of the Registrant and determined that the cash proceeds received will be held in the Registrant’s reserves. It is not anticipated that any distribution to the Registrant’s partners will be made at this time as a result of the sale of the Registrant’s limited partnership interest in Countryside.

Item 9.01   Financial Statements and Exhibits

(d)   Exhibits

10.16       First Amendment to Amended and Restated Certificate and Agreement of Limited Partnership of Countryside North American Partners, L.P., dated December 23, 2011.

10.17       Secured Promissory Note between Howell Countryside Inc., a New Jersey corporation, HCI Properties LLC, a New Jersey limited liability company, A.A.H. Management Company, Inc., a New Jersey corporation, National Tax Credit Investors II, a California limited partnership; and National Tax Credit, Inc. II, a California corporation, dated December 23, 2011.

10.18       Pledge and Security Agreement between Howell Countryside Inc., a New Jersey corporation, HCI Properties LLC, a New Jersey limited liability company, A.A.H. Management Company, Inc., a New Jersey corporation, National Tax Credit Investors II, a California limited partnership; and National Tax Credit, Inc. II, a California corporation, dated December 23, 2011.

These agreements included as exhibits to this Form 8-K contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and:

· should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;

• have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;

·  may apply standards of materiality in a way that is different from what may be viewed as material to an investor; and

·were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.

      Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. The Registrant acknowledges that, notwithstanding the inclusion of the foregoing cautionary statements, it is responsible for considering whether additional specific disclosures of material information regarding material contractual provisions are required to make the statements in this Form 8-K not misleading. Additional information about the Registrant may be found elsewhere in this Form 8-K and the Registrant’s other public filings, which are available without charge through the SEC’s website at http://www.sec.gov. 

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

NATIONAL TAX CREDIT INVESTORS II

By:  National Partnership Investments Corp.

General Partner

By:  /s/Stephen B. Waters

Stephen B. Waters

Senior Director of Partnership Accounting

  Date: January 5, 2012

EX-10.16

Exhibit 10.16

FIRST AMENDMENT TO AMENDED AND RESTATED
CERTIFICATE AND AGREEMENT OF LIMITED PARTNERSHIP
OF
COUNTRYSIDE NORTH AMERICAN PARTNERS, L.P.

This First Amendment to Amended and Restated Certificate and Agreement of Limited Partnership (the “Amendment”), effective as of December 23, 2011 (the “Effective Date”), is entered into by Howell Countryside, Inc., a New Jersey corporation (the “Operating General Partner”); National Tax Credit, Inc II, a California corporation (the “Administrative General Partner”); National Tax Credit Investors II a California limited partnership (the “Withdrawing Partner”); and HCI Properties LLC, a New Jersey limited liability company (the “Incoming Partner”) (each of the foregoing is hereinafter sometimes referred to as a “Party” and any two or more, as the context requires, are hereinafter sometimes referred to as the “Parties”), with reference to the following facts:

A.         Countryside North American Partners L.P., a New Jersey limited partnership (the “Partnership”), was formed as a limited partnership under the laws of the State New Jersey and is being governed pursuant to a Amended and Restated Agreement of Limited Partnership, dated as of January 7, 1992 (the “Partnership Agreement”).

B.         The Parties have entered into an Assignment and Assumption Agreement, dated as of November 28, 2011 (the “Assignment Agreement”), pursuant to which the Withdrawing Partner has agreed to assign its limited partnership interest in the Partnership to the Incoming Partner and the Incoming Partner agreed to acquire such interest and to pay the “Payment” (as that term is defined in the Assignment Agreement) to the Withdrawing Partner.

C.        The Parties desire to enter into this Amendment to provide for, among other things (i) the withdrawal of the Withdrawing Partner from the Partnership, (ii) the admission of the Incoming Partner into the Partnership and (iii) other amendments to the Amended Partnership Agreement, as set forth herein.

NOW, THEREFORE, in consideration of the covenants and agreements hereinafter set forth, and for such other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree that the Amended Partnership Agreement is hereby amended as follows:

1.Capitalized terms used herein have the same meanings as set forth in the Amended Partnership Agreement, unless specifically defined herein.

2.Effective as of the Effective Date:

2.1The Withdrawing Partner withdraws from the Partnership and acknowledges that it has no further interest therein and its Interest in the Partnership, including, but not limited to, their right to and/or interests in all Profits, Losses, Cash Flow, Sale or Refinancing Transaction Proceeds and other Partnership distributions, other Partnership funds and assets, and any reimbursements of expenses, repayments of any loans made by the Withdrawing Partner or any Affiliate to the Partnership (collectively, the “Interest”), is transferred to the Incoming Partner;

2.2The Incoming Partner is admitted into the Partnership as the Limited Partner and the entire Interest of the Limited Partner shall be allocated or distributed, as appropriate, to the Incoming Partner and the Incoming Partner agrees to assume and perform all of the obligations of the Limited Partner under the Amended Partnership Agreement, as hereby amended.

3.Notwithstanding the withdrawal of the Withdrawing Partner, each of the other Partners hereby elects to continue the business of the Partnership.

4.The defined term “Limited Partner” is deleted in its entirety and replaced with the following:

“Limited Partner” means, HCI Properties LLC, a New Jersey limited liability company, or its successors and assigns.

5.The defined term “Partner” or “Partners” is deleted in its entirety and replaced with the following:

“Partner” or “Partners” means any or all of the Operating General Partner, the Administrative General Partner and the Limited Partner.

6.Section 14.5B of the Partnership Agreement is deleted in its entirety and replaced with the following:

B.         If to the Administrative Limited Partner:

c/o National Partnership Investments Corp.

639 Granite Street

Suite 312

Braintree, MA 02184

Attention:  Jesse Curll

Facsimile: 781-849-7652

and:

AIMCO

4582 South Ulster Street Parkway

Suite 1100

Denver, CO  80237

Attention:  Trent Johnson, Esq.

Facsimile:  720-200-6882

with a copy to:

Law Offices of Peter H. Alpert, Inc.

601 S. Figueroa Street, Suite 2330

Los Angeles, California 90017

Attention: Peter H. Alpert, Esq.

Facsimile: (213) 687-1511

7.The following is added as Section 15C of the Partnership Agreement:

C.        If to the Limited Partner:

HCI Properties LLC

c/o AAH Management Co., Inc.

Laurelwood Corporate Center

1103 Laurel Oak Road, Suite 105B

Voorhees, NJ 08043

Attention: Barry Sharer

Facsimile: 856-435-4868

with a copy to:

Paul & Katz, P.C.

Laurelwood Corporate Center

1103 Laurel Oak Road, Suite 105C

Voorhees, NJ 08043

Attention: Edward L. Paul

Facsimile: 856-435-7064

8.Schedule A attached to the Amended Partnership Agreement is hereby deleted in its entirety and replaced with Schedule A attached hereto.

9.As a material inducement to the Withdrawing Partner’s entering into this Amendment, the Operating General Partner represents and warrants that the following are true and correct:

9.1The Partnership at all times has been and continues to be a limited partnership duly organized, validly existing and in good standing under the laws governing limited partnerships, as adopted in the state of its formation. The Partnership has taken all requisite action in order to conduct lawfully its business in the state in which the Apartment Complex is situated, and is not qualified or licensed to do business and is not required to be so qualified or licensed in any other jurisdiction. The Partnership has the full power and authority to carry on its business, including without limitation, to own, lease and operate the Apartment Complex.

9.2(i) The execution and delivery of this Amendment by the [perating General Partner and the performance of the transactions contemplated herein have been duly authorized by all requisite corporate and partnership proceedings, and (ii) assuming the due and proper execution and delivery by the Withdrawing Partner, this Amendment is binding upon and enforceable against the Operating General Partner in accordance with its terms.

9.3The Compliance Period ended on December 31, 2006.

9.4Neither the Operating General Partner nor the Partnership has received any notice nor has knowledge of either a compliance violation or other issue relating to any of the Housing Tax Credit rules or regulations or any fact or circumstance which could give rise to such violation.

10.As a material inducement to the Withdrawing Partner entering into this Amendment, the Incoming Partner hereby represents and warrants to the Withdrawing Partner that (i) the execution and delivery of this Amendment by the Incoming Partner and the performance of the transactions contemplated herein have been duly authorized by all requisite corporate and partnership proceedings and (ii) assuming the due and proper execution and delivery by the Withdrawing Partner, this Amendment is binding upon and enforceable against the Incoming Partner in accordance with its terms.

11.As a material inducement to the other Parties entering into this Amendment, the Withdrawing Partner hereby represents and warrants that (i) the execution and delivery of this Amendment by the Withdrawing Partner and the performance of the transactions contemplated herein have been duly authorized by all requisite corporate and partnership proceedings and (ii) assuming the due and proper execution and delivery by the other Parties, this Amendment is binding upon and enforceable against the Withdrawing Partner in accordance with its terms.

12.The representations and warranties set forth above in paragraphs 9, 10, and 11 shall be true and correct as of the Effective Date and shall survive the withdrawal of the Withdrawing Partner from and the admission of the Incoming Partner into the Partnership.

13.Notwithstanding the withdrawal of the Withdrawing Partner, the Operating General Partner acknowledges that from and after the Effective Date matters may arise that relate back to events that occurred prior to the Effective Date (for purposes of illustration and not limitation, audits by the IRS).  The Operating General Partner agrees that as to such matters (i) the Operating General Partner shall conduct itself in a manner which is consistent with the obligations it had as the Operating General Partner immediately prior to the Effective Date and, accordingly, recognize all of the corresponding rights of the Withdrawing Partner as if the Withdrawing Partner had not withdrawn from the Partnership as provided in this Amendment and (ii) that nothing herein shall relieve the Operating General Partner from such pre-existing obligations. Without limiting the generality of the foregoing, the Operating General Partner shall:

13.1file on behalf of the Partnership for the current Fiscal Year a United States Partnership Return of Income and such other tax returns and other documents from time to time as may be required by the federal government or by any state or any subdivision thereof within the time(s) prescribed by law for such filings;

13.2deliver to the Withdrawing Partner within ninety (90) days after the end of the current Fiscal Year such tax information, including, without limitation, a copy of Schedule K-1, as shall be reasonably necessary for inclusion by the Withdrawing Partner in its federal income tax returns and required state income tax and other tax returns;

13.3deliver to the Withdrawing Partner the current Fiscal Year audited financial statement of the Partnership as required pursuant to the terms of Section 7.3 of the Amended Partnership Agreement.

If the Operating General Partner shall fail, for any reason, to prepare and/or deliver to the Withdrawing Partner any of the returns or other information required by this paragraph 13, the Withdrawing Partner shall have the right to cause such returns and other information prepared at the sole cost and expense of the Operating General Partner, plus an administrative fee payable to the Withdrawing Partner in an amount equal to fifteen percent (15%) of the actual out-of-pocket costs incurred by the Withdrawing Partner to have such returns and information prepared. In furtherance of the foregoing, the Withdrawing Partner and its duly authorized representatives shall have the right to inspect and copy such portions of the Partnership’s books of account which are necessary or appropriate for the preparation of such returns and information; provided, however, it is expressly understood and agreed by the Withdrawing Partner that such access is solely for the purpose of preparing such returns or other information that the Operating General Partner failed to prepare and/or deliver as herein provided, and shall not be deemed to grant the Withdrawing Partner any other rights with respect to the Partnership and/or the operation of its business.

14.This Amendment may be signed in any number of counterparts, each of which shall be an original for all purposes, but all of which taken together shall constitute only one agreement.

15.The Parties shall execute and deliver such further instruments and do such further acts and things as may be reasonably required to carry out the intent and purposes of this Amendment.

Except as set forth above, all of the terms and provisions of the Amended Partnership Amendment remain unmodified and in full force and effect.

[Signatures on following page(s)]

IN WITNESS WHEREOF, this Amendment has been duly executed as of the Effective Date.

OPERATING GENERAL PARTNER:                    HOWELL COUNTRYSIDE, INC.,

a New Jersey corporation

By  /s/Barry Sharer

Name: Barry Sharer

Title: President

INCOMING LIMITED PARTNER:                           HCI PROPERTIES LLC[,

a New Jersey limited liability company

By  /s/Barry Sharer

Name: Barry Sharer

Title: Managing Member

ADMINISTRATIVE GENERAL PARTNER:            NATIONAL TAX CREDIT, INC. II,

a California corporation

By  /s/Jesse Curll

Name:  Jesse Curll

Title:  Vice President

WITHDRAWING PARTNER:                                 NATIONAL TAX CREDIT INVESTORS II,

a California limited partnership

By  National Partnership Investments Corp.,

a California corporation,

General Partner

By  /s/Jesse Curll

Name:  Jesse Curll

Title:  Vice President

AMENDED SCHEDULE A
TO THE AMENDED AND RESTATED
CERTIFICATE AND AGREEMENT OF LIMITED PARTNERSHIP
OF
COUNTRYSIDE NORTH AMERICAN PARTNERS, L.P.

Name and Address                                                                     Capital Contribution

Operating General Partner:

Howell Countryside, Inc.                                                        $                         100.00

1103 Laurel Oak Road, Suite 105B

Voorhees, NJ 08043

Administrative General Partner:

National Tax Credit, Inc. II                                                      $                         100.00

639 Granite Street, Suite 312

Braintree, MA 02184

Limited Partner:

HCI Properties LLC                                                                $                         100.00

Laurelwood Corporate Center

1103 Laurel Oak Road, Suite 105B

Voorhees, NJ 08043

EX-10.17

Exhibit 10.17

SECURED PROMISSORY NOTE

US $3,550,000.00                                                                                             December 23, 2011

FOR VALUE RECEIVED, Howell Countryside, Inc., a New Jersey corporation, a HCI Properties, LLC, a New Jersey limited liability company, and A.A.H. Management Company, Inc., a New Jersey corporation (individually and collectively, and together with such parties’ respective successors and assigns, “Borrower”) promise to pay to the order of National Tax Credit Investors II, a California limited partnership (together with its successors and assigns, “Lender”), the principal sum of THREE MILLION FIVE HUNDRED FIFTY THOUSAND AND 00/100 Dollars (US $3,550,000.00), with interest on the unpaid principal balance, as hereinafter provided.

1.Defined Terms.

1.1As used in herein the following terms shall have the meanings ascribed to them below:

“Attorneys’ Fees and Costs” means (i) fees and out-of-pocket costs of Lender’s attorneys, as applicable, including, without limitation, costs of Lender’s in-house counsel, support staff costs, costs of preparing for litigation, computerized research, telephone and facsimile transmission expenses, mileage, deposition costs, postage, duplicating, process service, videotaping and similar costs and expenses; (ii) costs and fees of any expert witnesses; and (iii) all investigatory fees.

“Bankruptcy or Insolvency Event” means:  (i) the making of a general assignment for the benefit of creditors by Borrower or any guarantor of the Indebtedness; (ii) the voluntary appointment (at the request of any such party or with the consent of any such party) of a receiver, custodian, liquidator or trustee in bankruptcy of the property of Borrower or any guarantor of the Indebtedness; (iii) the filing by Borrower or any guarantor of the Indebtedness of a petition in bankruptcy or an adjudication of Borrower or any guarantor of the Indebtedness as bankrupt or insolvent; (iv) the filing by Borrower or any guarantor of the Indebtedness of any petition or answer seeking or acquiescing in any relief under any present or future federal, state or other law or regulation relating to bankruptcy, insolvency or other relief for debtors; (v) Borrower or any guarantor of the Indebtedness admitting in writing its insolvency or inability to pay its debts generally as they become due; or (vi) the filing against Borrower or any guarantor of the Indebtedness of a petition seeking any relief under any present or future federal, state or other law or regulation relating to bankruptcy, insolvency or other similar relief for debtors, or the involuntary appointment of a receiver, custodian, liquidator or trustee in bankruptcy of the property of Borrower or any guarantor of the Indebtedness, if such petition or appointment is not vacated or discharged within thirty (30) days after the filing or making thereof.

“Borrower” is defined in the preamble hereto.

“Business Day” means any day other than a Saturday, a Sunday or any other day on which the national banking associations are not open for business.

“Default Rate” means an annual interest rate equal to nine percent (9%) computed, notwithstanding anything contained in this Note to the contrary, from the Effective Date ; provided, however, at no time will the Default Rate exceed the Maximum Interest Rate.

“Effective Date” means the date of this Note, first above written.

“Indebtedness” means the outstanding principal balance of this Note, together with all interest accrued thereon, and all other amounts due at any time under this Note or any other Loan Document, including late charges and default interest.

“Lender” is defined in the preamble hereto.

“Loan” means the loan evidenced by this Note.

“Loan Documents” means, collectively, the Note, the Security Instrument and any other documents now or in the future executed by Borrower or any guarantor or any other Person in connection with the Loan, as such documents may be amended from time to time.

“Maturity Date” means the earlier of (i) June 30, 2012, and (ii) the date on which the unpaid principal balance of this Note becomes due and payable by acceleration or otherwise pursuant to the Loan Documents or the exercise by Lender of any right or remedy under any Loan Document.

“Maximum Interest Rate” means the highest rate of interest permitted to be charged at any time by applicable law.

“Note” means this Secured Promissory Note as the same may be amended, restated or otherwise modified from time to time.

“Partnership” means Countryside North American Partners L.P., a New Jersey limited partnership.

“Person” means any individual, corporation, general or limited partnership, limited liability company, limited liability partnership, joint venture, estate, trust, joint stock company, unincorporated association, any other entity, any governmental authority and any fiduciary acting in such capacity on behalf of any of the foregoing.

“Property” means that certain multi-family housing development commonly known as Countryside Apartments, North American Drive, Howell, New Jersey.

“Security Instrument” means that certain Pledge and Security Agreement, effective as of the date of this Note, from Borrower to and for the benefit of Lender and securing this Note.

“Stated Rate” means a per annum interest rate of two percent (2%); provided, however, if the entire amount of the Indebtedness is not paid on or before March 31, 2012, the Stated Rate shall be seven percent (7%), effective as of the Effective Date.

1.2Other capitalized terms used but not defined in this Note shall have the meanings given to such terms in the Security Instrument.

2.Representation and Warranties of Borrower.

2.1This Note and the Security Instrument have each been duly executed and delivered to Lender by Borrower and/or each guarantor of the Indebtedness (as applicable) and each such document constitutes the legal, valid and binding obligation of each party thereto enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency or other laws affecting creditors’ rights generally and the exercise of judicial discretion in accordance with general equitable principles.

2.2The execution, delivery and performance of this Note and the Security Instrument by Borrower and/or each guarantor of the Indebtedness (as applicable) and the compliance with the terms and conditions hereof and thereof by each such party does not, with or without the giving of notice or the lapse of time or both, conflict with, constitute a default under, or violate (i) any material agreement to which Borrower and/or any guarantor of the Indebtedness is a party, or (ii) any judgment, decree, order, law, rule or regulation applicable to Borrower and/or any guarantor of the Indebtedness.

2.3There is no unsatisfied judgment, award, order, writ, injunction, arbitration, decision or decree outstanding or any litigation, proceeding, claim or investigation pending or, to the best knowledge of Borrower, threatened against Borrower and/or any guarantor of the Indebtedness which may adversely affect the ability of Borrower and/or any guarantor of the Indebtedness to enter into and perform its obligations under this Note and the Security Instrument (as applicable).

3.Payments; Address for Payment.

3.1Interest will accrue on the outstanding principal balance of this Note at the Stated Rate, as provided in Section 3(d) and subject to the provisions of Section 8 of this Note. 

3.2Interest under this Note shall be computed, payable and allocated on the basis of a 365-day year.

3.3[Intentionally Omitted]

3.4[Intentionally Omitted]

3.5All of the Indebtedness, including all accrued and unpaid principal, interest and other charges, shall be due and payable by Borrower on the Maturity Date.

3.6All payments under this Note shall be made in immediately available U.S. funds.

3.7[Intentionally Omitted]

3.8Any accrued interest remaining past due for ten (10) days or more, shall be added to and become part of the unpaid principal balance of this Note and any reference to “accrued interest” shall refer to only accrued interest which has not then become part of the unpaid principal balance.  Any amount added to principal pursuant to the Loan Documents shall bear interest at the Stated Rate or the Default Rate (as applicable) in accordance with the terms of this Note and shall be payable with such interest upon demand by Lender and absent such demand, as provided in this Note for the payment of principal and interest.

3.9All payments made by Borrower hereunder shall be made irrespective of, and without any deduction for, any set-offs or counterclaims.

3.10All payments due under this Note shall be payable at 4582 South Ulster Street Parkway, Suite 1100, Denver, Colorado 80237, or such other place as may be designated by notice to Borrower from or on behalf of Lender.

4.Application of Payments.  If at any time Lender receives, from Borrower or otherwise, any amount applicable to the Indebtedness which is less than all amounts due and payable at such time, Lender may apply the amount received to amounts then due and payable in any manner and in any order determined by Lender, in Lender’s sole discretion.  Borrower agrees that neither Lender’s acceptance of a payment from Borrower in an amount that is less than all amounts then due and payable nor Lender’s application of such payment shall constitute or be deemed to constitute either a waiver of the unpaid amounts or an accord and satisfaction.

5.Security.  The Indebtedness is secured by, among other things, the Security Instrument, and reference is made to the Security Instrument for other rights of Lender as to collateral for the Indebtedness.

6.Acceleration.  If an Event of Default has occurred and is continuing, the entire unpaid principal balance, any accrued interest, and all other amounts payable under this Note and any other Loan Document, shall at once become due and payable, at the option of Lender, without any prior notice to Borrower (except if notice is required by applicable law, then after such notice).  Lender may exercise this option to accelerate regardless of any prior forbearance.  Notwithstanding the foregoing, the entire unpaid principal balance, any accrued interest, and all other amounts payable under this Note and the other Loan Document, shall without notice or demand and without the need for any action or election by Lender automatically become due and payable upon the occurrence of any Bankruptcy or Insolvency Event.  For the purposes of this Note, the occurrence of any one or more of the following shall constitute an event of default (each an, “Event of Default”) under this Note:

6.1any failure by Borrower to pay or deposit when due any amount required by the Note;

6.2any fraud or material misrepresentation or material omission by Borrower or any guarantor in connection with (i) the application for or creation of the Indebtedness, (ii) any financial statement, rent schedule, or other report or information provided to Lender during the term of the Indebtedness, or (iii) any request for Lender’s consent to any proposed action;

6.3any failure by Borrower or any guarantor of the Indebtedness to perform any of their respective obligations as and when required under any Loan Document;

6.4any exercise by the holder of any other debt instrument secured by a mortgage, deed of trust or deed to secure debt on the Property of a right to declare all amounts due under that debt instrument immediately due and payable;

6.5the occurrence of any Bankruptcy or Insolvency Event; and

6.6if Borrower’s representations and warranties in this Note or any other Loan Document is false or misleading in any material respect.

7.Late Charge.

7.1If any Monthly Installment or any other amount payable under this Note or under the Security Instrument or any other Loan Document is not received in full by Lender within three (3) Business Days after the Monthly Installment or other amount is due, counting from and including the date such Monthly Installment or other amount is due (unless applicable law requires a longer period of time before a late charge may be imposed, in which event such longer period shall be substituted), Borrower shall pay to Lender, immediately and without demand by Lender, a late charge equal to five percent (5%) of such Monthly Installment or other amount due (unless applicable law requires a lesser amount be charged, in which event such lesser amount shall be substituted).

7.2Borrower acknowledges that its failure to make timely payments will cause Lender to incur additional expenses in servicing and processing the Loan and that it is extremely difficult and impractical to determine those additional expenses.  Borrower agrees that the late charge payable pursuant to this Section 7 represents a fair and reasonable estimate, taking into account all circumstances existing on the date of this Note, of the additional expenses Lender will incur by reason of such late payment and that such charge does not constitute a penalty.  The late charge is payable in addition to, and not in lieu of, any interest payable at the Default Rate pursuant to Section 8.

8.Default Rate.  For so long as any Event of Default (including, without limitation, the failure to pay the Indebtedness in full on the Maturity Date) has occurred and is continuing, then notwithstanding anything in Section 3 of this Note to the contrary, interest under this Note shall accrue on the unpaid principal balance and (to the extent permitted by applicable law) all unpaid interest and other Indebtedness then due, from the date on which any such Event of Default occurs at the Default Rate until (i) such Event of Default is cured in accordance with the Loan Documents or (ii) the entire Indebtedness is paid in full.

9.Full Recourse Loan.  Borrower accepts and agrees that the Loan evidenced by this Note is a full recourse Loan and that Lender may exercise any and all remedies available to it at law or in equity against Borrower in order to collect the entire amount of the Indebtedness in accordance with the Loan Documents as and when due.

10.Voluntary and Involuntary Prepayments.

10.1Any receipt by Lender of principal due under this Note prior to the Maturity Date constitutes a prepayment of principal under this Note.  Without limiting the foregoing, any application by Lender, prior to the Maturity Date, of any proceeds of collateral or other security to the repayment of any portion of the unpaid principal balance of this Note constitutes a prepayment under this Note.

10.2Borrower may voluntarily prepay all or any part of the unpaid principal balance of this Note at any time.

11.Costs and Expenses.  To the fullest extent allowed by applicable law, Borrower shall pay all expenses and costs, including Attorneys’ Fees and Costs incurred by Lender as a result of any default under this Note or in connection with efforts to collect any amount due under this Note, or to enforce the provisions of any of the other Loan Documents, including those incurred in post-judgment collection efforts and in any bankruptcy proceeding (including any action for relief from the automatic stay of any bankruptcy proceeding) or judicial or non-judicial foreclosure proceeding.

12.Forbearance; Not Waiver.  Any forbearance by Lender in exercising any right or remedy under this Note, the Security Instrument, or any other Loan Document or otherwise afforded by applicable law, shall not be a waiver of or preclude the exercise of that or any other right or remedy.  The acceptance by Lender of any payment after the due date of such payment, or in an amount which is less than the required payment, shall not be a waiver of Lender’s right to require prompt payment when due of all other payments or to exercise any right or remedy with respect to any failure to make prompt payment.  Enforcement by Lender of any security for Borrower’s obligations under this Note shall not constitute an election by Lender of remedies so as to preclude the exercise of any other right or remedy available to Lender.

13.Waivers.  Borrower and all endorsers and guarantors of this Note and all other third party obligors waive presentment, demand, notice of dishonor, protest, notice of acceleration, notice of intent to demand or accelerate payment or maturity, presentment for payment, notice of nonpayment, grace, and diligence in collecting the Indebtedness.

14.Loan Charges.  Neither this Note nor any of the other Loan Documents shall be construed to create a contract for the use, forbearance or detention of money requiring payment of interest at a rate greater than the Maximum Interest Rate.  If any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower in connection with the Loan is interpreted so that any interest or other charge provided for in any Loan Document, whether considered separately or together with other charges provided for in any other Loan Document, violates that law, and Borrower is entitled to the benefit of that law, that interest or charge is hereby reduced to the extent necessary to eliminate that violation.  The amounts, if any, previously paid to Lender in excess of the permitted amounts shall be applied by Lender to reduce the unpaid principal balance of this Note. For the purpose of determining whether any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower has been violated, all Indebtedness that constitutes interest, as well as all other charges made in connection with the Indebtedness that constitute interest, shall be deemed to be allocated and spread ratably over the stated term of this Note.  Unless otherwise required by applicable law, such allocation and spreading shall be effected in such a manner that the rate of interest so computed is uniform throughout the stated term of this Note.

15.Commercial Purpose.  Borrower represents that Borrower is incurring the Indebtedness solely for the purpose of carrying on a business or commercial enterprise, and not for personal, family, household, or agricultural purposes.

16.Counting of Days.  Except where otherwise specifically provided, any reference in this Note to a period of “days” means calendar days, not Business Days.

17.GOVERNING LAW. 

(1) THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW JERSEY, WITHOUT REFERENCE TO CHOICE OF LAW DOCTRINE.

(2)ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR BORROWER ARISING OUT OF OR RELATING TO THIS NOTE MAY AT LENDER’S OPTION BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN THE CITY CAMDEN, COUNTY OF CAMDEN, AND BORROWER WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE BASED ON VENUE AND/OR FORUM NON CONVENIENS OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING.  HOWEVER, NOTHING IN THIS NOTE IS INTENDED TO LIMIT ANY RIGHT THAT LENDER MAY HAVE TO BRING ANY SUIT, ACTION OR PROCEEDING RELATING TO MATTERS ARISING UNDER THIS NOTE IN ANY COURT OF ANY OTHER JURISDICTION.

18.WAIVER OF TRIAL BY JURY.  TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND LENDER EACH (A) AGREES NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS NOTE OR THE RELATIONSHIP BETWEEN THE PARTIES AS LENDER AND BORROWER THAT IS TRIABLE OF RIGHT BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE.  THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL.

19.Joint and Several. Each obligation expressly identified as an obligation of Borrower under this Note shall be the joint and several obligation of each person and entity comprising Borrower.

20.Captions.  The captions of the Sections of this Note are for convenience only and shall be disregarded in construing this Note.

21.Notices; Written Modifications.

21.1All notices, demands, requests and other communications required or permitted hereunder shall be in writing, and shall be (a) personally delivered with a written receipt of delivery; (b) sent by a nationally-recognized overnight delivery service requiring a written acknowledgement of receipt or providing a certification of delivery or attempted delivery; (c) sent by certified or registered mail, return receipt requested; or (d) sent by confirmed facsimile transmission or electronic delivery with an original copy thereof transmitted to the recipient by one of the means described in subsections (a) through (c) no later than 3 business days thereafter.  All notices shall be deemed effective when actually delivered as documented in a delivery receipt; provided, however, that if the notice was sent by overnight courier or mail as aforesaid and is affirmatively refused or cannot be delivered during customary business hours by reason of the absence of a signatory to acknowledge receipt, or by reason of a change of address with respect to which the addressor did not have either knowledge or written notice delivered in accordance with this paragraph, then the first attempted delivery shall be deemed to constitute delivery.  Each party shall be entitled to change its address for notices from time to time by delivering to the other party notice thereof in the manner herein provided for the delivery of notices.  All notices shall be sent to the addressee at its address set forth following its name below:

(a)If to Lender:

c/o AIMCO

4582 South Ulster Street Parkway

Suite 1100

Denver, CO  80237

Attention:  Trent Johnson, Esq.

Facsimile:  720-200-6882

with a copy to:

Law Offices of Peter H. Alpert, Inc.

601 S. Figueroa Street, Suite 2330

Los Angeles, CA 90017

Attention: Peter H. Alpert, Esq.

Facsimile: 213-687-1511

(b)If to Borrower:

c/o AAH Management Co., Inc.

Laurelwood Corporate Center

1103 Laurel Oak Road, Suite 105B

Voorhees, NJ 08043

Attention: Barry Sharer

Facsimile: 856-435-4868

with a copy to:

Paul & Katz, P.C.

Laurelwood Corporate Center

1103 Laurel Oak Road, Suite 105C

Voorhees, NJ 08043

Attention: Edward L. Paul, Esq.

Facsimile: 856-435-7064

21.2Any modification or amendment to this Note shall be ineffective unless in writing signed by the party sought to be charged with such modification or amendment.

21.       Sales/Re-financings.              If, at any time after the date hereof, the Partnership, at the direction of Borrower or otherwise, (x) refinances any one or more of the mortgage loans encumbering the Property, (y) borrows any money secured by a mortgage encumbering the Property (or by a pledge of any direct or indirect ownership interests in the Borrower), or (z) sells the Property or any portion thereof (excluding the sale of less than all of the direct or indirect interest in the Borrower to one or more third party investors), then Borrower shall cause all net proceeds realized by Partnership from any of the foregoing transactions to be applied to the payment of the Indebtedness, which net proceeds shall be applied first to all interest and other sums due hereunder which have accrued and remain unpaid, and then to the principal balance of the Loan.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed and delivered as of the date first above written.

BORROWER:                                                       HCI PROPERTIES LLC,

a New Jersey limited liability company

By  /s/Barry Sharer

Name: Barry Sharer

Title: Managing Member

HOWELL COUNTRYSIDE, INC.,

a New Jersey corporation

By  /s/Barry Sharer

Name: Barry Sharer

Title: President

A.A.H. MANAGEMENT COMPANY, INC.,

a New Jersey corporation

By  /s/Barry Sharer

Name: Name: Barry Sharer

Title: President

EX-10.18

Exhibit 10