DEVELOPMENT AGREEMENT
AGREEMENT made as of January 14, 1998 by and between XXXXXX
HOUSE LIMITED PARTNERSHIP, a Connecticut limited partnership (the
"Partnership") and HIGH NOON ASSOCIATES LLC, a Connecticut limited
liability company ("High Noon") and D & B VENTURES II, LLC, a
Connecticut limited liability company (collectively, the
"Developer") in their capacities as the Developer of the Apartment
Complex and not as General Partners of the Partnership.
Recitals
1. The Partnership was formed to acquire, rehabilitate,
develop, improve, maintain, own, operate, lease, dispose of and
otherwise deal with an apartment project located in Hartford,
Connecticut, known as the Xxxxxx House (the "Apartment Complex").
2. Capitalized terms used herein and not otherwise defined
shall have the meanings set forth in the Agreement of Limited
Partnership of the Partnership of even date herewith (the
"Partnership Agreement").
3. The Apartment Complex, following the completion of
rehabilitation, is expected to constitute a "qualified low-income
housing project" (as defined in Section 42(g)(1) of the Code).
4. The Developer has already provided and will continue to
provide certain services with respect to the Apartment Complex
during the acquisition, development, rehabilitation and initial
operating phases thereof.
5. In consideration for such services, past and future,
the Partnership has agreed to pay to the Developer certain fees
computed and paid in the manner stated herein.
NOW, THEREFORE, in consideration of the mutual covenants and
conditions set forth herein and other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
Section 1. Defined Terms.
"Development Advances" has the meaning set forth in Section
2.
"Development Costs" means any and all costs and expenses
necessary to (i) cause the rehabilitation of the Apartment Complex
to be completed, in a good and workmanlike manner, free and clear
of all mechanics', materialmen's or similar liens, in accordance
with the Plans and Specifications, (ii) equip the Apartment
Complex with all necessary and appropriate fixtures, equipment and
articles of personal property (including, without limitation,
refrigerators and ranges), (iii) obtain all required certificates
of occupancy for the apartment units and other space in the
Apartment Complex, (iv) pay the Development Fee, (v) finance the
rehabilitation of the Apartment Complex and achieve Rental
Achievement in accordance with the provisions of the Project
Documents, (vi) discharge all Partnership liabilities and
obligations arising out of any casualty generating insurance
proceeds for the Partnership, (vii) fund any Partnership reserves
required hereunder or under any of the Project Documents, (viii)
repay and discharge the Construction Loan, and (ix) pay any other
costs or expenses necessary to achieve the Completion Date and
Rental Achievement.
"Specified Proceeds" means (i) the proceeds of all Mortgage
Loans, (ii) the net rental income, if any, generated by the
Apartment Complex prior to Permanent Mortgage Commencement which
is permitted by the Lenders to be applied to the payment of
Development Costs, (iii) the Capital Contributions of the
Investment Limited Partner and the Special Limited Partner, (iv)
the Capital Contributions of the General Partners in the amounts
set forth in Schedule A of the Partnership Agreement as of the
Admission Date and (v) any insurance proceeds arising out of
casualties occurring prior to Permanent Mortgage Commencement.
Section 2. Obligation to Complete Rehabilitation and to Pay
Development Costs.
The Developer shall complete the rehabilitation of the
Apartment Complex or cause the same to be completed in a good and
workmanlike manner, free and clear of all mechanics',
materialmen's or similar liens and shall equip the Apartment
Complex or cause the same to be equipped with all necessary and
appropriate fixtures, equipment and articles of personal property,
including without limitation, refrigerators and ranges, provided
for in the Project Documents and the Plans and Specifications.
The Developer also shall cause the achievement of Permanent
Mortgage Commencement in accordance with the terms of the
Partnership Agreement. If the Specified Proceeds as available
from time to time are insufficient to pay all Development Costs
and achieve Permanent Mortgage Commencement, the Developer shall
advance or cause to be advanced to the Partnership from time to
time as needed all such funds as are required to pay such
deficiencies. Any such advances ("Development Advances") shall,
to the extent permitted under the Project Documents and any
applicable Regulations or requirements of any Lender or Agency (or
otherwise with any Requisite Approvals), be reimbursed at or prior
to Permanent Mortgage Commencement only out of Specified Proceeds
available from time to time after payment of all Development
Costs. Any balance of the amount of each Development Advance not
reimbursed through Permanent Mortgage Commencement shall not be
reimbursable, shall not be credited to the Capital Account of any
Partner, or otherwise change the interest of any Person in the
Partnership, but shall be borne by the Developer under the terms
of this Agreement.
Section 3. Development Services.
(a) The Developer has heretofore performed certain services
relating to the development of the Apartment Complex and shall
continue to oversee the rehabilitation and development of the
Apartment Complex, and shall perform the services and carry out
the responsibilities with respect to the Apartment Complex as are
set forth herein, and such additional duties and responsibilities
as are reasonably within the general scope of such services and
responsibilities and are designated from time to time by the
General Partners.
(b) The Developer's services shall be performed in the name
and on behalf of the Partnership and shall consist of the duties
set forth in subparagraphs (i)-(xv) below of this Section 3(b) and
as provided elsewhere in this Agreement; provided, however, that
if the performance of any duty of the Developer set forth in this
Agreement is beyond the reasonable control of the Developer, the
Developer shall nonetheless be obligated to (i) use its best
efforts to perform such duty and (ii) promptly notify the General
Partners that the performance of such duty is beyond its
reasonable control. The Developer has performed or shall perform
the following:
(i) Negotiate and cause to be executed in the
name and on behalf of the Partnership any agreements
for architectural, engineering, testing or consulting
services for the Apartment Complex, and any agreements
for the rehabilitation of any improvements or tenant
improvements to be constructed or installed by the
Partnership or the furnishing of any supplies,
materials, machinery or equipment therefor, or any
amendments thereof, provided that no agreement shall be
executed nor binding commitment made until the terms
and conditions thereof and the party with whom the
agreement is to be made have been approved by the
General Partners unless the terms, conditions, and
parties comply with guidelines issued by the General
Partners concerning such agreements;
(ii) Advise the Partnership as to the steps
necessary to qualify the Apartment Complex during the
compliance period defined in Section 42(i)(1) of the
Code as a "qualified low-income housing project" under
Section 42(g)(1) of the Code;
(iii) Assist the Partnership in preparing and
processing an application for a low-income housing tax
credit allocation for the Apartment Complex under
Section 42 of the Code;
(iv) Advise the Partnership as to federal, state
and local subsidy programs available for the Apartment
Complex;
(v) Establish and implement appropriate
administrative and financial controls for the design
and rehabilitation of the Apartment Complex, including
but not limited to:
(A) coordination and administration of the
Apartment Complex architect, the general contractor,
and other contractors, professionals and consultants
employed in connection with the design or
rehabilitation of the Apartment Complex;
(B) administration of any construction contracts
on behalf of the Partnership;
(C) participation in conferences and the
rendering of such advice and assistance as will aid in
developing economical, efficient and desirable design
and rehabilitation procedures;
(D) the rendering of advice and recommendations
as to the selection of subcontractors and suppliers;
(E) the review and submission to the General
Partners for approval of all requests for payments
under any architectural agreement, general contractor's
agreement, or any loan agreements with any lending
institutions providing funds for the benefit of the
Partnership for the design or rehabilitation of any
improvements;
(F) the submission of any suggestions or requests
for changes which could in any reasonable manner
improve the design, efficiency or cost of the Apartment
Complex;
(G) applying for and maintaining in full force
and effect any and all governmental permits and
approvals required for the lawful rehabilitation of the
Apartment Complex;
(H) compliance with all terms and conditions
applicable to the Partnership or the Apartment Complex
contained in any governmental permit or approval
required or obtained for the lawful rehabilitation of
the Apartment Complex, or in any insurance policy
affecting or covering the Apartment Complex, or in any
surety bond obtained in connection with the Apartment
Complex;
(I) furnishing such consultation and advice
relating to the Apartment Complex as may be reasonably
requested from time to time by the General Partners;
(J) keeping the General Partners fully informed
on a regular basis of the progress of the design and
rehabilitation of the Apartment Complex, including the
preparation of such reports as are provided for herein
or as may reasonably be requested by the General
Partners and which are of a nature generally requested
or expected of construction managers or similar owner's
representatives on similar projects;
(K) giving or making the Partnership's
instructions, requirements, approvals and payments
provided for in the agreements with the Apartment
Complex architect, general contractor, and other
contractors, professionals and consultants retained for
the Apartment Complex; and
(L) at the Partnership's expense, filing on
behalf of and as the attorney-in-fact for the
Partnership any notices of completion required or
permitted to be filed upon the completion of any
improvement(s) and taking such actions as may be
required to obtain any certificates of occupancy or
equivalent documents required to permit the occupancy
of the Apartment Complex.
(vi) Inspect the progress of the course of the
rehabilitation of the Apartment Complex, including
verification of the materials and labor being furnished
to and on such rehabilitation so as to be fully
competent to approve or disapprove requests for payment
made by the Apartment Complex architect and the
general contractor, or by any other parties with
respect to the design or rehabilitation of the
Apartment Complex, and in addition to verify that the
rehabilitation is being carried out substantially in
accordance with the Plans and Specifications approved
by the General Partners or, in the event that the
rehabilitation is not being so carried out, to promptly
notify the General Partners;
(vii) If requested to do so by the General
Partners, perform on behalf of the Partnership all
obligations of the Partnership with respect to the
design or rehabilitation of the Apartment Complex
contained in any loan agreement or security agreement
entered into in connection with any construction or
long-term financing for the Apartment Complex, or in
any lease or rental agreement relating to space in the
Apartment Complex, or in any agreement entered into
with any governmental body or agency relating to the
terms and conditions of such rehabilitation, provided
that copies of such agreements have been provided by
the Partnership to the Developer or the Partnership has
otherwise notified the Developer in writing of such
obligations;
(viii) To the extent requested to do so by the
General Partners, prepare and distribute to the General
Partners a critical path schedule, and periodic updates
thereto as necessary to reflect any material changes,
but in any event not less frequently than quarterly,
other design or rehabilitation cost estimates as
required by the General Partners, and financial
accounting reports, including monthly progress reports
on the quality, progress and cost of the rehabilitation
and recommendations as to the drawing of funds from any
loans arranged by the Partnership to cover the cost of
design and rehabilitation of the Apartment Complex, or
as to the providing of additional capital contributions
should such loan funds for any reason be unavailable or
inadequate;
(ix) At the Partnership's expense, obtain and
maintain insurance coverage for the Apartment Complex,
the Partnership, and the Developer and its employees,
at all times until final completion of the
rehabilitation of the Apartment Complex, in accordance
with an insurance schedule approved by the General
Partners, which insurance shall include general public
liability insurance covering claims for personal
injury, including but not limited to bodily injury, or
property damage, occurring in or upon the Property or
the streets, passageways, curbs and vaults adjoining
the Property. Such insurance shall be in a liability
amount approved by the General Partners;
(x) Comply with all applicable present and future
laws, ordinances, orders, rules, regulations and
requirements (hereinafter in this subparagraph (x)
called "laws") of all federal, state and municipal
governments, courts, departments, commissions, boards
and offices, any national or local Board of Fire
Underwriters or Insurance Services Offices having
jurisdiction in the county in which the Apartment
Complex is located or any other body exercising
functions similar to those of any of the foregoing, or
any insurance carriers providing any insurance coverage
for the Partnership or the Apartment Complex, which may
be applicable to the Apartment Complex or any part
thereof. Any such compliance undertaken by the
Developer on behalf of and in the name of the
Partnership, in accordance with the provisions of this
Agreement, shall be at the Partnership's expense. The
Developer shall likewise ensure that all agreements
between the Partnership and independent contractors
performing work in connection with the Apartment
Complex shall include the agreement of said independent
contractors to comply with all such applicable laws;
(xi) Assemble and retain all contracts, agreements
and other records and data as may be necessary to carry
out the Developer's functions hereunder. Without
limiting the foregoing, the Developer will prepare,
accumulate and furnish to the General Partners and the
appropriate governmental authorities, as necessary,
data and information sufficient to identify the market
value of improvements in place as of each real property
tax lien date, and will make application for
appropriate exclusions from the capital costs of the
Apartment Complex for purposes of real property ad
valorem taxes;
(xii) Coordinate and administer the design and
rehabilitation of all interior tenant improvements to
the extent required under any leases or other occupancy
agreements to be constructed or furnished by the
Partnership with respect to the initial leasing of
space in the Apartment Complex, whether involving
building standard or non-building standard work;
(xiii) Use its best efforts to accomplish the
timely completion of the Apartment Complex in
accordance with the approved Plans and Specifications
and the time schedules for such completion approved by
the General Partners;
(xiv) At the direction of the General Partners,
implement any decisions of the General Partners made in
connection with the design, rehabilitation and
development of the Apartment Complex or any policies
and procedures relating thereto, exclusive of leasing
activities; and
(xv) Perform and administer any and all other
services and responsibilities of the Developer which
are set forth in any other provisions of this
Agreement, or which are requested to be performed by
the General Partners and are within the general scope
of the services described herein.
Section 4. Limitations and Restrictions.
Notwithstanding any provisions of this Agreement, the
Developer shall not take any action, expend any sum, make any
decision, give any consent, approval or authorization, or incur
any obligation with respect to any of the following matters unless
and until the same has been approved by the General Partners:
(a) Approval of all construction and architectural
contracts and all architectural plans, specifications and drawings
prior to the rehabilitation and/or alteration of any improvements
contemplated thereby, except for such matters as may be expressly
delegated in writing to the Developer by the General Partners;
(b) Any proposed change in the work of the rehabilitation
of the Apartment Complex, or in the Plans and Specifications
therefor as previously approved by the General Partners, or in the
cost thereof, or any other change which would affect the design,
cost, value or quality of the Apartment Complex, except for such
matters as may be expressly delegated in writing to the Developer
by the General Partners;
(c) Making any expenditure or incurring any obligation by
or on behalf of the Partnership or the Apartment Complex involving
a sum in excess of $25,000 or involving a sum of more than $5,000
where the same relates to a component part of any work, the
combined cost of which exceeds $25,000, except for expenditures
made and obligations incurred pursuant to and specifically set
forth in a construction budget approved by the General Partners
(the "Construction Budget") or for such matters as may be
otherwise expressly delegated to the Developer by the General
Partners;
(d) Making any expenditure or incurring any obligation
which, when added to any other expenditure, exceeds the
Construction Budget or any line item specified in the Construction
Budget, except for such matters as may be otherwise expressly
delegated in writing to the Developer by the General Partners; or
(e) Expending more than what the Developer in good faith
believes to be the fair and reasonable market value at the time
and place of contracting for any goods purchased or leased or
services engaged on behalf of the Partnership or otherwise in
connection with the Apartment Complex.
Section 5. Accounts and Records.
(a) The Developer on behalf of the Partnership, shall keep
such books of account and other records as may be required and
approved by the General Partners, including, but not limited to,
records relating to the costs of rehabilitation and rehabilitation
advances. The Developer shall keep vouchers, statements,
receipted bills and invoices and all other records, in the form
approved by the General Partners, covering all collections, if
any, disbursements and other data in connection with the Apartment
Complex prior to the Completion Date. All accounts and records
relating to the Apartment Complex, including all correspondence,
shall be surrendered to the Partnership, upon demand without
charge therefor.
(b) The Developer shall cooperate with the Management Agent
to facilitate the timely preparation by the Management Agent of
such reports and financial statements as the Management Agent is
required to furnish pursuant to the Management Agreement.
(c) All books and records prepared or maintained by the
Developer shall be kept and maintained at all times at the place
or places approved by the General Partners, and shall be available
for and subject to audit, inspection and copying by the Management
Agent, the General Partners or any representative or auditor
thereof or supervisory or regulatory authority, at the times and
in the manner set forth in the Partnership Agreement.
Section 6. Development Fees.
For its services in connection with the development of the
Apartment Complex and the supervision of the rehabilitation of the
Apartment Complex, and as reimbursement for Development Advances,
the Developer shall receive a fee (the "Development Fee") in the
amount of $232,000. $46,400 of such fee will be earned by the
Developer as of December 31, 1997 and will be accrued as of
December 31, 1997. The remainder of the Development Fee shall be
deemed to have been earned as and when the Developer's services
are rendered and such Development Fee shall be paid out of
Specified Proceeds. If Specified Proceeds are insufficient to pay
the Development Fee, such unpaid amounts shall be paid out of Cash
Flow as set forth in Section 10.2(a) of the Partnership Agreement.
In any event, the General Partners shall cause the Partnership to
pay such Development Fee only after the payment of all Development
Costs (other than the Development Fee). If the Development Fee
has not been fully paid by the tenth anniversary of the Completion
Date, the General Partners shall make a Capital Contribution to
the Partnership in an amount sufficient to enable the Partnership
to pay any unpaid portion of the Development Fee.
Section 7. Applicable Law.
This Agreement, and the application or interpretation hereof,
shall be governed by and construed in accordance with the laws of
the State of Connecticut.
Section 8. Binding Agreement.
This Agreement shall be binding on the parties hereto, their
heirs, executors, personal representatives, successors and
assigns. As long as the Developer is not in default under this
Agreement, the obligation of the Partnership to pay the
Development Fee shall not be affected by any change in the
identity of the General Partners of the Partnership.
Section 9. Headings.
All section headings in this Agreement are for convenience of
reference only and are not intended to qualify the meaning of any
section.
Section 10. Terminology.
All personal pronouns used in this Agreement, whether used in
the masculine, feminine or neuter gender, shall include all other
genders, the singular shall include the plural, and vice versa as
the context may require.
Section 11. Benefit of Agreement.
The obligations and undertakings of the Developer set forth
in this Agreement are made for the benefit of the Partnership and
its Partners and shall not inure to the benefit of any creditor of
the Partnership other than a Partner, notwithstanding any pledge
or assignment by the Partnership of this Agreement or any rights
hereunder.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed as of the date first written above.
PARTNERSHIP: XXXXXX HOUSE LIMITED PARTNERSHIP, a
Connecticut limited partnership, by
its general partners
D & B Ventures II, LLC, a
Connecticut limited liability
company
By: /s/Xxxxxx X. Xxxxx
Xxxxxx X. Xxxxx, Member
High Noon Associates LLC, a
Connecticut limited liability
company
By: /s/Xxxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxxx, Member
DEVELOPER: D & B VENTURES II, LLC, a Connecticut
limited liability company
By: /s/Xxxxxx X.Xxxxx
Xxxxxx X. Xxxxx, Member
HIGH NOON ASSOCIATES LLC, a
Connecticut limited liability company
By: /s/Xxxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxxx, Member
