AMENDED AND RESTATED AGREEMENT
OF
LIMITED PARTNERSHIP
OF
FDI-COUNTRY SQUARE, LTD.
DATED AS OF JUNE 14, 2006
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS..........................................................1
Section 1.1 "Accountant".............................................1
Section 1.2 "Act"....................................................2
Section 1.3 "Actual Tax Credit"......................................2
Section 1.4 "Adjusted Capital Account Deficit".......................2
Section 1.5 "Affiliate"..............................................2
Section 1.6 "Agreement" or "Partnership Agreement"...................2
Section 1.7 "Apartment Housing"......................................2
Section 1.8 "Architect of Record"....................................2
Section 1.9 "Asset Management Fee"...................................3
Section 1.10 "Assignee"...............................................3
Section 1.11 "Bankruptcy" or "Bankrupt"...............................3
Section 1.12 "Break-even Operations"..................................3
Section 1.13 "Budget".................................................3
Section 1.14 "Capital Account"........................................3
Section 1.15 "Capital Contribution"...................................3
Section 1.16 "Cash Expenses"..........................................4
Section 1.17 "Cash Receipts"..........................................4
Section 1.18 "Code"...................................................4
Section 1.19 "Completion of Construction".............................4
Section 1.20 "Compliance Period"......................................4
Section 1.21 "Consent of the Special Limited Partner".................5
Section 1.22 "Construction Budget"....................................5
Section 1.23 "Construction Contract"..................................5
Section 1.24 "Contractor".............................................5
Section 1.25 "Debt Service Coverage"..................................5
Section 1.26 "Deferred Management Fee"................................5
Section 1.27 "Developer"..............................................5
Section 1.28 "Development Fee"........................................5
Section 1.29 "Distributions"..........................................5
Section 1.30 "Fair Market Value"......................................5
Section 1.31 "Financial Interest".....................................6
Section 1.32 "First Year Certificate".................................6
Section 1.33 "Force Majeure"..........................................6
Section 1.34 "General Partner"........................................6
Section 1.35 "Gross Asset Value"......................................6
Section 1.36 "Hazardous Substance"....................................7
Section 1.37 "Improvements"...........................................7
Section 1.38 "In-Balance".............................................7
Section 1.39 "Incentive Management Fee"...............................7
Section 1.40 "Income and Losses"......................................7
Section 1.41 "Inspecting Architect"...................................8
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Section 1.42 "Insurance"..............................................9
Section 1.43 "Insurance Company"......................................9
Section 1.44 "Interest"...............................................9
Section 1.45 "Involuntary Withdrawal"................................10
Section 1.46 "Land Acquisition Fee"..................................10
Section 1.47 "LIHTC".................................................10
Section 1.48 "Limited Partner".......................................10
Section 1.49 "Management Agent"......................................10
Section 1.50 "Management Agreement"..................................10
Section 1.51 "Minimum Set-Aside Test"................................10
Section 1.52 "Mortgage" or "Mortgage Loan(s)"........................10
Section 1.53 "Net Operating Income"..................................11
Section 1.54 "Nonrecourse Deductions"................................11
Section 1.55 "Nonrecourse Liability".................................11
Section 1.56 "Operating Deficit".....................................11
Section 1.57 "Operating Deficit Guarantee Period"....................11
Section 1.58 "Operating Loans".......................................11
Section 1.59 "Original Limited Partner"..............................11
Section 1.60 "Partner(s)"............................................11
Section 1.61 "Partner Nonrecourse Debt"..............................11
Section 1.62 "Partner Nonrecourse Debt Minimum Gain".................12
Section 1.63 "Partner Nonrecourse Deductions"........................12
Section 1.64 "Partnership"...........................................12
Section 1.65 "Partnership Minimum Gain"..............................12
Section 1.66 "Permanent Mortgage Commencement".......................12
Section 1.67 "Person"................................................12
Section 1.68 "Plans and Specifications"..............................12
Section 1.69 "Project Documents".....................................12
Section 1.70 "Projected Annual Tax Credits"..........................12
Section 1.71 "Projected Tax Credits".................................12
Section 1.72 "Qualified Tenants".....................................12
Section 1.73 "RD"....................................................13
Section 1.74 "RD Loan Agreement".....................................13
Section 1.75 "Rent Restriction Test".................................13
Section 1.76 "Real Estate Taxes".....................................13
Section 1.77 "Revised Projected Tax Credits".........................13
Section 1.78 "Sale or Refinancing"...................................13
Section 1.79 "Sale or Refinancing Proceeds"..........................13
Section 1.80 "Special Limited Partner"...............................13
Section 1.81 "State".................................................13
Section 1.82 "State Tax Credit Agency"...............................13
Section 1.83 "Substitute Limited Partner"............................14
Section 1.84 "Syndication Fee".......................................14
Section 1.85 "Tax Credit"............................................14
Section 1.86 "Tax Credit Compliance Fee".............................14
Section 1.87 "Tax Credit Conditions".................................14
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Section 1.88 "Tax Credit Period".....................................14
Section 1.89 "Title Policy"..........................................14
Section 1.90 "TRA 1986"..............................................14
Section 1.91 "Treasury Regulations"..................................14
Section 1.92 "Withdrawing" or "Withdrawal"...........................14
ARTICLE II NAME...............................................................15
ARTICLE III PRINCIPAL EXECUTIVE OFFICE/AGENT FOR SERVICE......................15
Section 3.1 Principal Executive Office..............................15
Section 3.2 Agent for Service of Process............................15
ARTICLE IV PURPOSE............................................................15
Section 4.1 Purpose of the Partnership..............................15
Section 4.2 Authority of the Partnership............................15
ARTICLE V TERM................................................................16
ARTICLE VI GENERAL PARTNER'S CONTRIBUTIONS AND LOANS..........................16
Section 6.1 Capital Contribution of General Partner.................16
Section 6.2 Construction Obligations................................16
Section 6.3 Operating Obligations...................................17
Section 6.4 Other General Partner Loans.............................17
ARTICLE VII CAPITAL CONTRIBUTIONS OF LIMITED PARTNER AND SPECIAL LIMITED
PARTNER.......................................................................18
Section 7.1 Original Limited Partner................................18
Section 7.2 Capital Contribution of Limited Partner.................18
Section 7.3 Repurchase of Limited Partner's Interest................21
Section 7.4 Adjustment of Limited Partner's Capital Contribution....21
Section 7.5 Capital Contribution of Special Limited Partner.........23
Section 7.6 Return of Capital Contribution..........................23
Section 7.7 Liability of Limited Partner and Special Limited
Partner.................................................24
ARTICLE VIII WORKING CAPITAL AND RESERVES.....................................24
Section 8.1 Replacement and Reserve Account.........................24
Section 8.2 Operating and Maintenance Account.......................24
Section 8.3 Operating Deficit Account...............................24
Section 8.4 Tax and Insurance Account...............................25
Section 8.5 Other Reserves..........................................25
ARTICLE IX MANAGEMENT AND CONTROL.............................................25
Section 9.1 Power and Authority of General Partner..................25
Section 9.2 Payments to the General Partners and Others.............26
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Section 9.3 Specific Powers of the General Partner..................27
Section 9.4 Authority Requirements..................................28
Section 9.5 Limitations on General Partner's Power and Authority....28
Section 9.6 Restrictions on Authority of General Partner............29
Section 9.7 Duties of General Partner...............................30
Section 9.8 Obligations to Repair and Rebuild Apartment Housing.....32
Section 9.9 Partnership Expenses....................................32
Section 9.10 General Partner Expenses................................33
Section 9.11 Other Business of Partners..............................33
Section 9.12 Covenants, Representations and Warranties...............33
Section 9.13 Indemnification of the Partnership and the Limited
Partners................................................37
ARTICLE X ALLOCATIONS OF INCOME, LOSSES AND CREDITS...........................37
Section 10.1 General.................................................37
Section 10.2 Allocations From Sale or Refinancing....................37
Section 10.3 Special Allocations.....................................37
Section 10.4 Curative Allocations....................................37
Section 10.5 Other Allocation Rules..................................37
Section 10.6 Tax Allocations: Code Section 704(c)....................37
Section 10.7 Allocation Among Limited Partners.......................37
Section 10.8 Allocation Among General Partners.......................37
Section 10.9 Modification of Allocations.............................37
ARTICLE XI DISTRIBUTION.......................................................37
Section 11.1 Distribution of Net Operating Income....................37
Section 11.2 Distribution of Sale or Refinancing Proceeds............37
ARTICLE XII TRANSFERS OF LIMITED PARTNER'S INTEREST IN THE PARTNERSHIP........37
Section 12.1 Assignment of Limited Partner's Interest................37
Section 12.2 Effective Date of Transfer..............................37
Section 12.3 Invalid Assignment......................................37
Section 12.4 Assignee's Rights to Allocations and Distributions......37
Section 12.5 Substitution of Assignee as Limited Partner or Special
Limited Partner.........................................37
Section 12.6 Death, Bankruptcy, Incompetency, etc. of a Limited
Partner.................................................37
ARTICLE XIII WITHDRAWAL, REMOVAL AND REPLACEMENT OF GENERAL PARTNER...........37
Section 13.1 Withdrawal of General Partner...........................37
Section 13.2 Removal of General Partner..............................37
Section 13.3 Effects of a Withdrawal.................................37
Section 13.4 Successor General Partner...............................37
Section 13.5 Admission of Additional or Successor General Partner....37
Section 13.6 Transfer of Interest....................................37
Section 13.7 No Goodwill Value.......................................37
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ARTICLE XIV BOOKS AND ACCOUNTS, REPORTS, TAX RETURNS, FISCAL YEAR AND BANKING.37
Section 14.1 Books and Accounts......................................37
Section 14.2 Accounting Reports......................................37
Section 14.3 Other Reports...........................................37
Section 14.4 Late Reports............................................37
Section 14.5 Annual Site Visits......................................37
Section 14.6 Tax Returns.............................................37
Section 14.7 Fiscal Year.............................................37
Section 14.8 Banking.................................................37
Section 14.9 Certificates and Elections..............................37
ARTICLE XV DISSOLUTION, WINDING UP, TERMINATION AND LIQUIDATION OF THE
PARTNERSHIP...................................................................37
Section 15.1 Dissolution of Partnership..............................37
Section 15.2 Return of Capital Contribution upon Dissolution.........37
Section 15.3 Distribution of Assets..................................37
Section 15.4 Deferral of Liquidation.................................37
Section 15.5 Liquidation Statement...................................37
Section 15.6 Certificates of Dissolution; Certificate of Cancellation
of Certificate of Limited Partnership...................37
ARTICLE XVI AMENDMENTS........................................................37
ARTICLE XVII MISCELLANEOUS....................................................37
Section 17.1 Voting Rights...........................................37
Section 17.2 Meeting of Partnership..................................37
Section 17.3 Notices.................................................37
Section 17.4 Successors and Assigns..................................37
Section 17.5 Recording of Certificate of Limited Partnership.........37
Section 17.6 Amendment of Certificate of Limited Partnership.........37
Section 17.7 Counterparts............................................37
Section 17.8 Captions................................................37
Section 17.9 Saving Clause...........................................37
Section 17.10 Certain Provisions......................................37
Section 17.11 Tax Matters Partner.....................................37
Section 17.12 Expiration of Compliance Period.........................37
Section 17.13 Number and Gender.......................................37
Section 17.14 Entire Agreement........................................37
Section 17.15 Governing Law...........................................37
Section 17.16 Attorney's Fees.........................................37
Section 17.17 Receipt of Correspondence...............................37
Section 17.18 Security Interest and Right of Set-Off..................37
Section 17.19 RD Regulations..........................................37
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EXHIBIT A - Legal Description..........................................A-1
EXHIBIT B - Form of Legal Opinion................................B-1 - B-4
EXHIBIT C - Certification and Agreement..........................C-1 - C-4
EXHIBIT D - Form of Completion Certificate.............................D-1
EXHIBIT E - Accountant's Certificate...................................E-1
EXHIBIT F - Contractor's Letter........................................F-1
EXHIBIT G - Report on Operations..........................................
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AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP OF
FDI-COUNTRY SQUARE, LTD.
This Amended and Restated Agreement of Limited Partnership is being
entered into effective as of the date written below by and between Fieser
Holdings, Inc., a Texas corporation, as the general partner (the "General
Partner"), WNC Holding, LLC, a California limited liability company, as the
limited partner (the "Limited Partner"), WNC Housing, L.P., a California limited
partnership, as the special limited partner (the "Special Limited Partner") and
Xxxxxxxx X. Xxxxxx, an individual resident of the State of Texas, as the
withdrawing limited partner (the "Original Limited Partner").
RECITALS
WHEREAS, a partnership agreement dated August 8, 2005 was entered into
by and between the General Partner and the Original Limited Partner (the
"Original Partnership Agreement"). A Certificate of Limited Partnership was
filed with the Texas Secretary of State on August 8, 2005.
WHEREAS, the Partners desire to enter into this Agreement to provide
for, among other things, (i) the continuation of the Partnership, (ii) the
admission of the Limited Partner and the Special Limited Partner as partners of
the Partnership, (iii) the liquidation of the Original Limited Partner's
Interest in the Partnership, (iv) the payment of Capital Contributions by the
Limited Partner and the Special Limited Partner to the Partnership, (v) the
allocation of Income, Losses, Tax Credits and distributions of Net Operating
Income and other cash funds of the Partnership among the Partners (vi) the
determination of the respective rights, obligations and interests of the
Partners to each other and to the Partnership, and (vii) certain other matters.
WHEREAS, the Partners desire hereby to amend and restate the Amended
and Restated Partnership Agreement.
NOW, THEREFORE, in consideration of their mutual agreements herein set
forth, the Partners hereby agree to amend and restate the Amended and Restated
Partnership Agreement in its entirety to provide as follows:
ARTICLE I
DEFINITIONS
Section 1.1 "Accountant" shall mean Xxx X. Xxxxxx, P.C., or such other firm
of independent certified public accountants as may be engaged for the
Partnership by the General Partner with the Consent of the Special Limited
Partner. Notwithstanding any provision of this Agreement to the contrary, the
Special Limited Partner shall have the discretion to dismiss the Accountant for
cause if such Accountant fails to provide, or untimely provides, or inaccurately
provides, the information required in Sections 14.2 or 14.3 of this Agreement.
Section 1.2 "Act" shall mean the laws of the State governing limited
partnerships, as now in effect and as the same may be amended from time to time.
Section 1.3 "Actual Tax Credit" shall mean as of any point in time, the
total amount of the LIHTC actually allocated by the Partnership to the Limited
Partner and not subsequently recaptured or disallowed, representing 99.98% of
the LIHTC actually received by the Partnership, as shown on the applicable tax
returns of the Partnership.
Section 1.4 "Adjusted Capital Account Deficit" shall mean 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) credit to such Capital Account any amounts which such Partner is
obligated to restore or is deemed to be obligated to restore pursuant to
the penultimate sentences of Treasury Regulations Sections 1.704-2(g)(1)
and 1.704-2(i)(5); and
(b) debit to such Capital Account the items described in Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and
1.704-1(b)(2)(ii)(d)(6) of the Treasury 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 Treasury
Regulations and shall be interpreted consistently therewith.
Section 1.5 "Affiliate" shall mean (a) any Person directly or indirectly
controlling, controlled by, or under common control with another Person; (b) any
Person owning or controlling 10% or more of the outstanding voting securities of
such other Person; (c) any officer, director, trustee, or partner of such other
Person; and (d) if such Person is an officer, director, trustee or general
partner, any other Person for which such Person acts in any such capacity.
Section 1.6 "Agreement" or "Partnership Agreement" shall mean this Amended
and Restated Agreement of Limited Partnership, as it may be amended from time to
time. Words such as "herein," "hereinafter," "hereof," "hereto," "hereby" and
"hereunder," when used with reference to this Agreement, refer to this Agreement
as a whole, unless the context otherwise requires.
Section 1.7 "Apartment Housing" shall collectively mean the approximately
2.033 acres of land in Xxxxxx County, Texas, as more fully described in Exhibit
A attached hereto and incorporated herein by this reference, and the
Improvements.
Section 1.8 "Architect of Record" shall mean Xxxxx Xxxxxx. The General
Partner, on behalf of the Partnership, shall enter into a contract with the
Architect of Record to perform certain duties and responsibilities including,
but not limited to: designing the Improvements; preparing the construction
blueprints, preparing the property specifications manual; contracting for
administrative services; completing the close-out procedures; inspecting for and
overseeing resolution of the Contractor's final punch list; receiving and
approving operations and maintenance manuals; and collecting, reviewing,
approving and forwarding to the Partnership all product, material and
construction warranties.
2
Section 1.9 "Asset Management Fee" shall have the meaning set forth in
Section 9.2(d) hereof and the Minimum Amount (as defined in Section 9.2(d)),
shall be paid monthly to the Limited Partner.
Section 1.10 "Assignee" shall mean a Person who has acquired all or a
portion of the Limited Partner's or the Special Limited Partner's beneficial
interest in the Partnership and has not become a Substitute Limited Partner.
Section 1.11 "Bankruptcy" or "Bankrupt" shall mean the making of an
assignment for the benefit of creditors, becoming a party to any liquidation or
dissolution action or proceeding, the commencement of any bankruptcy,
reorganization, insolvency or other proceeding for the relief of financially
distressed debtors, or the appointment of a receiver, liquidator, custodian or
trustee and, if any of the same occur involuntarily, the same not being
dismissed, stayed or discharged within 90 days; or the entry of an order for
relief under Title 11 of the United States Code. A Partner shall be deemed
Bankrupt if the Bankruptcy of such Partner shall have occurred and be
continuing.
Section 1.12 "Break-even Operations" shall mean such time as the
Partnership has Cash Receipts equal to Cash Expenses, as determined by the
Accountant and approved by the Special Limited Partner. For purposes of this
definition, any one-time up-front fee paid to the Partnership from any source
shall not be included in Cash Receipts to calculate Break-even Operations.
Moreover, in the event any rent concession is granted for the rental of an
apartment unit, the value of the rental concession shall be amortized over the
term of the lease.
Section 1.13 "Budget" shall mean the annual operating budget of the
Partnership as more fully described in Section 14.3 of this Agreement.
Section 1.14 "Capital Account" shall mean, with respect to each Partner,
the account maintained for such Partner comprised of such Partner's Capital
Contribution as increased by allocations to such Partner of Partnership Income
(or items thereof) and any items in the nature of income or gain which are
specially allocated pursuant to Sections 10.3 or 10.4 hereof, and decreased by
the amount of any Distributions made to such Partner, and allocations to such
Partner of Partnership Losses (or items thereof) and any items in the nature of
expenses or losses which are specially allocated pursuant to Sections 10.3 or
10.4 hereof. In the event of any transfer of an interest in the Partnership in
accordance with the terms of this Agreement, the transferee shall succeed to the
Capital Account of the transferor to the extent it relates to the transferred
interest. The foregoing definition and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Treasury Regulation Section 1.704-1(b), as amended or any successor thereto, and
shall be interpreted and applied in a manner consistent with such Treasury
Regulation.
Section 1.15 "Capital Contribution" shall mean the total amount of money,
or the Gross Asset Value of property contributed to the Partnership, if any, by
all the Partners or any class of Partners or any one Partner as the case may be
(or by a predecessor in interest of such Partner or Partners), reduced by any
such capital which shall have been returned pursuant to Sections 7.3, 7.4 or 7.6
of this Agreement. A loan to the Partnership by a Partner shall not be
considered a Capital Contribution.
3
Section 1.16 "Cash Expenses" shall mean all cash operating obligations of
the Partnership (other than those covered by Insurance) in accordance with the
applicable Budget, including without limitation, the payment of the monthly
Mortgage payments, the Management Agent fees (which shall be deemed to include
that portion of such fees which is currently deferred and not paid), the funding
of reserves in accordance with Article VIII of this Agreement, advertising and
promotion, utilities, maintenance, repairs, Partner communications, legal,
telephone, any other expenses which may reasonably be expected to be paid in a
subsequent period but which on an accrual basis is allocable to the period in
question, such as Insurance, real estate taxes and audit, tax or accounting
expenses (excluding deductions for cost recovery of buildings; improvements and
personal property and amortization of any financing fees) and any seasonal
expenses (such as snow removal, the use of air conditioners in the middle of the
summer, or heaters in the middle of the winter) which may reasonably be expected
to be paid in a subsequent period shall be allocated equally per month over the
calendar year. Cash Expenses payable to Partners or Affiliates of Partners shall
be paid after Cash Expenses payable to third parties. Cash Expenses payable to
Partners or Affiliates of Partners shall be paid after Cash Expenses payable to
third parties.
Section 1.17 "Cash Receipts" shall mean actual cash received on a cash
basis by the Partnership from operating revenues of the Partnership, including
without limitation rental income (but not any subsidy thereof from the General
Partner or an Affiliate thereof), tenant security deposits that have been
forfeited by tenants pursuant to the laws of the State, laundry income, paid to
the Partnership, telephone hook-up or service income, cable fees or hook-up
costs, telecommunications or satellite fees or hook-up costs, but excluding
prepayments, security deposits, Capital Contributions, borrowings, the Mortgage
Loan, lump-sum payments, any extraordinary receipt of funds, and any income
earned on investment of its funds. Neither the General Partner nor its
Affiliates shall be entitled to payment of any Cash Receipts for any reason,
including but not limited to a separate contract, agreement, obligation or the
like.
Section 1.18 "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, or any successor statute.
Section 1.19 "Completion of Construction" shall mean the date the
Partnership receives the required certificate of occupancy (or the local
equivalent) for all 24 apartment units, and by the issuance of the Inspecting
Architect's certification, in a form substantially similar to the form attached
hereto as Exhibit D and incorporated herein by this reference, with respect to
completion of all the apartment units in the Apartment Housing. Completion of
Construction further means that the construction shall be completed in good
quality, and free and clear of all mechanic, material and similar liens. In
addition to the above, Completion of Construction shall occur only when the
statutory time period for the filing of any liens by the Contractor,
subcontractors, material suppliers or any one else entitled to file a lien
against the property has lapsed unless such filed liens, other than the Mortgage
Loans, have been bonded over and have been approved by the Special Limited
Partner; and the Special Limited Partner has approved the Completion of
Construction.
Section 1.20 "Compliance Period" shall mean the period set forth in Section
42 (i)(1) of the Code, as amended, or any successor statute.
4
Section 1.21 "Consent of the Special Limited Partner" shall mean the prior
written consent or approval of the Special Limited Partner.
Section 1.22 "Construction Budget" shall mean the agreed upon cost of
construction of the Improvements, including soft costs (which includes, but is
not limited to, financing charges, market study, Development Fee, architect
fees, etc.), based upon the Plans and Specifications. The final Construction
Budget is referenced in the Development, Construction and Operating Budget
Agreement entered into by and between the Partners the even date hereof. The
Development, Construction and Operating Budget Agreement shall: list all
subcontractors and material suppliers who will account for five percent or more
of the cost of construction of the Improvements; and show a trade payment
breakdown specifying the cost of each classification of construction
requirements pursuant to the Plans and Specifications.
Section 1.23 "Construction Contract" shall mean the construction contract
dated March 21, 2006 in the amount of $565,440, entered into between the
Partnership and the Contractor, pursuant to which the Improvements are being
constructed.
Section 1.24 "Contractor" shall mean LCJ Construction, Inc, which is the
general construction contractor for the Apartment Housing.
Section 1.25 "Debt Service Coverage" shall mean for the applicable period
the ratio between the Net Operating Income (excluding Mortgage Loan payments)
and the debt service required to be paid on the Mortgage Loans; as example, a
1.15 Debt Service Coverage means that for every $1.00 of debt service required
to be paid there must be $1.15 of Net Operating Income available. A worksheet
for the calculation of Debt Service Coverage is found in the Report of
Operations attached hereto as Exhibit G and incorporated herein by this
reference.
Section 1.26 "Deferred Management Fee" shall have the meaning set forth in
Section 9.2(c) hereof.
Section 1.27 "Developer" shall mean Fieser Development, Inc.
Section 1.28 "Development Fee" shall mean the fee payable to the Developer
for services incident to the development and construction of the Apartment
Housing in accordance with the Development Fee Agreement between the Partnership
and the Developer dated the even date herewith and incorporated herein by this
reference. Development activities do not include services for the acquisition of
the land or syndication activities.
Section 1.29 "Distributions" shall mean the total amount of money, or the
Gross Asset Value, of property (net of liabilities securing such distributed
property that such Partner is considered to assume or take subject to under
Section 752 of the Code), distributed to Partners with respect to their
Interests in the Partnership, but shall not include any payments to the General
Partner or its Affiliates for fees or other compensation as provided in this
Agreement or any guaranteed payment within the meaning of Section 707(c) of the
Code, as amended, or any successor thereto.
Section 1.30 "Fair Market Value" shall mean, with respect to any property,
real or personal, the price a ready, willing and able buyer would pay to a
5
ready, willing and able seller of the property, provided that such value is
reasonably agreed to between the parties in arm's length negotiations and the
parties have sufficiently adverse interests.
Section 1.31 "Financial Interest" shall mean the General Partner's minimum
5% financial interest in Sale or Refinancing Proceeds. Such Financial Interest
shall not affect the Partners' allocable share of the Income and Losses, Tax
Credits, or Net Operating Income as set forth in this Agreement.
Section 1.32 "First Year Certificate" shall mean the certificate to be
filed by the General Partner with the Secretary of the Treasury as required by
Code Section 42(l)(1), as amended, or any successor thereto.
Section 1.33 "Force Majeure" shall mean any act of God, strike, lockout, or
other industrial disturbance, act of the public enemy, war, blockage, public
riot, fire, flood, explosion, governmental action, governmental delay, restraint
or inaction and any other cause or event, whether of the kind enumerated
specifically herein, or otherwise, which is not reasonably within the control of
a Partner to this Agreement claiming such suspension.
Section 1.34 "General Partner" shall mean Fieser Holdings, Inc., a Texas
corporation, and such other Persons as are admitted to the Partnership as
additional or substitute General Partners pursuant to this Agreement. If there
is more than one General Partner of the Partnership, the term "General Partner"
shall be deemed to refer to such General Partners and vice versa.
Section 1.35 "Gross Asset Value" shall mean with respect to any asset, the
asset's adjusted basis for federal income tax purposes, except as follows:
(a) the initial Gross Asset Value of any asset contributed by a
Partner to the Partnership shall be the Fair Market Value of such asset, as
determined by the contributing Partner and the General Partner, provided
that, if the contributing Partner is a General Partner, the determination
of the Fair Market Value of a contributed asset shall be determined by
appraisal;
(b) the Gross Asset Values of all Partnership assets shall be adjusted
to equal their respective Fair Market Values, as determined by the General
Partner, as of the following times: (1) 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; (2) the distribution by the
Partnership to a Partner of more than a de minimis amount of Partnership
property as consideration for an Interest in the Partnership; and (3) the
liquidation of the Partnership within the meaning of Treasury Regulations
Section 1.704-1(b)(2)(ii)(g); provided, however, that the adjustments
pursuant to clauses (1) and (2) above shall be made only with the Consent
of the Special Limited Partner and only if the General Partner reasonably
determines that such adjustments are necessary or appropriate to reflect
the relative economic interests of the Partners in the Partnership;
(c) the Gross Asset Value of any Partnership asset distributed to any
Partner shall be adjusted to equal the Fair Market Value of such asset on
the date of distribution as determined by the distributee and the General
6
Partner, provided that, if the distributee is a General Partner, the
determination of the Fair Market Value of the distributed asset shall be
determined by appraisal; and
(d) the Gross Asset Value of Partnership assets shall be increased (or
decreased) to reflect any adjustments to the adjusted basis of such assets
pursuant to Code Section 734(b) or Code Section 743(b), but only to the
extent that such adjustments are taken into account in determining Capital
Accounts pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m) and
Section 10.3(g) hereof; provided however, that Gross Asset Values shall not
be adjusted pursuant to this Section 1.34(d) to the extent the General
Partner determines that an adjustment pursuant to Section 1.34(b) hereof is
necessary or appropriate in connection with a transaction that would
otherwise result in an adjustment pursuant to this Section 1.34(d).
If the Gross Asset Value of an asset has been determined or adjusted
pursuant to Section 1.34(a), Section 1.34(b), or Section 1.34(d) hereof, such
Gross Asset Value shall thereafter be adjusted by the depreciation taken into
account with respect to such asset for purposes of computing Income and Losses.
Section 1.36 ."Hazardous Substance" shall mean and include any substance,
material or waste, including asbestos, petroleum and petroleum products
(including crude oil), that is or becomes designated, classified or regulated as
"toxic" or "hazardous" or a "pollutant" or that is or becomes similarly
designated, classified or regulated, under any federal, state or local law,
regulation or ordinance including, without limitation, the Compensation and
Liability Act of 1980, as amended, the Hazardous Materials Transportation Act,
as amended, the Resource Conservation and Recovery Act, as amended, and the
regulations adopted and publications promulgated pursuant thereto.
Section 1.37 "Improvements" shall mean one building containing 24 apartment
units and ancillary and appurtenant facilities being renovated for family use in
accordance with the Project Documents. It shall also include all furnishings,
equipment and personal property used in connection with the operation thereof.
Section 1.38 "In-Balance" shall mean, on any occasion, that the amount of
the undisbursed Limited Partner's Capital Contribution is sufficient in the
Limited Partner's reasonable judgment to pay, through Completion of
Construction, where applicable, all of the following sums: (a) all costs of
construction, marketing, ownership, maintenance and leasing of the Apartment
Housing units; and (b) all interest and all other sums accruing or payable under
the construction documents.
Section 1.39 "Incentive Management Fee" shall have the meaning set forth in
Section 9.2(e) hereof.
Section 1.40 "Income and Losses" shall mean, for each fiscal year or other
period, an amount equal to the Partnership's taxable income or loss for such
year or period, determined in accordance with Code Section 703(a) (for this
purpose, all items of income, gain, loss or deduction required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in taxable
income or loss), with the following adjustments:
7
(a) any income of the Partnership that is exempt from federal income
tax and not otherwise taken into account in computing Income or Losses
pursuant to this Section 1.43 shall be added to such taxable income or
loss;
(b) any expenditures of the Partnership described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant
to Regulation Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into
account in computing Income and Losses pursuant to this Section 1.39 shall
be subtracted from such taxable income or loss;
(c) in the event the Gross Asset Value of any Partnership asset is
adjusted pursuant to Section 1.34(a) or (b) hereof, the amount of such
adjustment shall be taken into account as gain or loss from the disposition
of such asset for purposes of computing Income and Losses;
(d) gain or loss resulting from any disposition of Partnership assets
with respect to which gain or loss is recognized for federal income tax
purposes shall be computed by reference to the Gross Asset Value of the
property disposed of, notwithstanding that the adjusted tax basis of such
property differs from its Gross Asset Value;
(e) in lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing such taxable income or loss,
there shall be taken into account depreciation for such fiscal year or
other period, computed as provided below; and
(f) notwithstanding any other provision of this definition, any items
which are specially allocated pursuant to Sections 10.3 or 10.4 hereof
shall not otherwise be taken into account in computing Income or Losses.
Depreciation for each fiscal year or other period shall be calculated
as follows: an amount equal to the depreciation, amortization, or other cost
recovery deduction allowable with respect to an asset for such year or other
period for federal income tax purposes, except that if the Gross Asset Value of
an asset differs from its adjusted basis for federal income tax purposes at the
beginning of such year or other period, depreciation shall be an amount which
bears the same ratio to such beginning Gross Asset Value as the federal income
tax depreciation, amortization, or other cost recovery deduction for such year
or other period bears to such beginning adjusted tax basis; provided, however,
if the federal income tax depreciation, amortization, or other cost recovery
deduction for such year is zero, depreciation shall be determined with reference
to such beginning Gross Asset Value using any reasonable method selected by the
General Partner.
For purposes of this Agreement, the term Income when used alone shall
include all items of income or revenue contemplated in this Section and the term
Losses when used alone shall include all items of loss or deductions
contemplated in this Section.
Section 1.41 "Inspecting Architect" shall mean AECC, Inc. The Inspecting
Architect shall make regular inspections of the construction site, but in no
event less than once a month, to confirm that construction of the Improvements
is in conformance with the Plans and Specifications. The Inspecting Architect
will sign-off on all the draw requests made by the Contractor and provide the
documents specified in Section 14.3 of this Agreement. If there comes into being
any identity of interest between the Partnership and the Inspecting Architect,
8
or between the Contractor and the Inspecting Architect, then the General Partner
will immediately relieve the Inspecting Architect of any inspecting duties.
Section 1.42 "Insurance" shall mean:
(a) during construction, the Partnership will provide and maintain, or
cause the Contractor to provide and maintain, builder's risk insurance in
an amount equal to 100% of the insurable value of the Apartment Housing at
the date of completion; comprehensive general liability insurance with
limits against bodily injury of not less than $1,000,000 per occurrence and
an aggregate of $2,000,000 and against property damage of not less than
$1,000,000; and worker's compensation insurance, with statutory guidelines;
(b) during operations the Partnership will provide and maintain
business interruption coverage covering actual sustained loss for 12
months; worker's compensation; hazard coverage (including but not limited
to fire, or other casualty loss to any structure or building on the
Apartment Housing in an amount equal to the full replacement value of the
damaged property without deducting for depreciation); and comprehensive
general liability coverage against liability claims for bodily injury or
property damage in the minimum amount of $1,000,000 per occurrence and an
aggregate of $2,000,000;
(c) all liability coverage shall include an umbrella liability
coverage in a minimum amount of $4,000,000 per occurrence and an aggregate
of $4,000,000;
(d) all Insurance polices shall name the Partnership as the named
insured, the Limited Partner as an additional insured, and WNC &
Associates, Inc. as the certificate holder;
(e) all Insurance policies shall include a provision to notify the
insured, the Limited Partner and the certificate holder prior to
cancellation;
(f) hazard coverage must include inflation and building or ordinance
endorsements;
(g) the minimum builder's risk coverage shall be in an amount equal to
the construction contract amount; and
(h) the Contractor must also provide evidence of liability coverage
equal to $1,000,000 per occurrence with an aggregate of $2,000,000 and
shall name the Partnership as an additional insured and WNC & Associates,
Inc., as certificate holder.
Section 1.43 "Insurance Company" shall mean any insurance company engaged
by the General Partner for the Partnership with the Consent of the Special
Limited Partner which Insurance Company shall have an A rating or better for
financial safety by A.M. Best or Standard & Poor's.
Section 1.44 "Interest" shall mean the entire ownership interest of a
Partner in the Partnership at any particular time, including the right of such
Partner to any and all benefits to which a Partner may be entitled hereunder and
the obligation of such Partner to comply with the terms of this Agreement.
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Section 1.45 "Involuntary Withdrawal" shall mean any Withdrawal caused by
the death, adjudication of insanity or incompetence, Bankruptcy of a General
Partner, or the removal of a General Partner pursuant to Section 13.2 hereof.
Section 1.46 "Land Acquisition Fee" shall mean the fee payable to the
General Partner in an amount equal to $720 for the General Partner's services in
locating, negotiating and closing on the purchase of the real property upon
which the Improvements are located.
Section 1.47 "LIHTC" shall mean the low income housing tax credit
established by TRA 1986 and which is provided for in Section 42 of the Code, as
amended, or any successor thereto.
Section 1.48 "Limited Partner" shall mean WNC Holding, LLC, a California
limited liability company, and such other Persons as are admitted to the
Partnership as additional or Substitute Limited Partners pursuant to this
Agreement.
Section 1.49 "Management Agent" shall mean the property management company
which oversees the property management functions for the Apartment Housing and
which is on-site at the Apartment Housing. The initial Management Agent shall be
FDI Property Management Services, Inc.
Section 1.50 "Management Agreement" shall mean the agreement between the
Partnership and the Management Agent for property management services. The
management fee shall be equal to $35.00 per occupied unit per month. Neither the
Management Agreement nor ancillary agreement shall provide for an initial
rent-up fee, a set-up fee, nor any other similar pre-management fee payable to
the Management Agent. The Management Agreement shall provide that it will be
terminable at will by the Partnership at anytime following the Withdrawal or
removal of the General Partner and, in any event, on any anniversary of the date
of execution of the Management Agreement, without payment or penalty for failure
to renew the same.
Section 1.51 "Minimum Set-Aside Test" shall mean the 40-60 set aside test
pursuant to Section 42(g), as amended and any successor thereto, of the Code
with respect to the percentage of apartment units in the Apartment Housing to be
occupied by tenants whose incomes are equal to or less than the required
percentage of the area median gross income. The General Partner has further
agreed that all of the units will be two bedroom units occupied by tenants whose
incomes are equal to or less than 50% of area median income, as adjusted for
family size, that two units will designed and built to be accessible for persons
with mobility impairments, and that at least one unit will be designed and built
to be accessible for persons with hearing or vision impairments.
Section 1.52 "Mortgage" or "Mortgage Loan(s)" shall individually and
collectively mean the assumed permanent nonrecourse financing wherein the
Partnership promises to pay: (a) RD the principal sum of $306,980.91, plus
interest on the principal at 1% per annum pursuant to an Interest Credit
Agreement entered into between the Partnership and RD, with a term of 50 years
(commencing in 1981), and amortized over 600 months, and (b) the Texas
Department of Housing and Community Affairs, or its successor or assignee, the
principal sum of $385,000, plus interest on the principal at 1% per annum
commencing on January 1, 2008, with a maturity date of January 1, 2038 and
10
monthly payments of $1,238.31 commencing on February 1, 2008, financed by the
HOME Investment Partnerships Program. Where the context admits, the term
"Mortgage" or "Mortgage Loan" shall include any mortgage, deed, deed of trust,
note, regulatory agreement, security agreement, assumption agreement or other
instrument executed in connection with the Mortgage which is binding on the
Partnership; and in case any Mortgage is replaced or supplemented by any
subsequent mortgage or mortgages, the Mortgage shall refer to any such
subsequent mortgage or mortgages. Prior to closing the Mortgage, the General
Partner shall provide to the Limited Partner a draft of the Mortgage documents
for review and approval. Based on the draft Mortgage documents, if the terms of
the Mortgage are not as specified above and the Special Limited Partner
determines that the Debt Service Coverage falls below 1.15 based on then current
Cash Expenses and Cash Receipts then the General Partner shall adjust the
principal loan amount and close on a Mortgage which will produce a 1.15 Debt
Service Coverage. The Mortgage funds shall be used to retire any outstanding
hard construction costs including labor and materials.
Section 1.53 "Net Operating Income" shall mean the cash available for
Distribution on an annual basis, when Cash Receipts exceed Cash Expenses.
Section 1.54 "Nonrecourse Deductions" shall have the meaning given it in
Treasury Regulations Section 1.704-2(b)(1).
Section 1.55 "Nonrecourse Liability" shall have the meaning given it in
Treasury Regulations Section 1.704-2(b)(3).
Section 1.56 "Operating Deficit" shall mean, for the applicable period,
insufficient funds to pay operating costs when Cash Expenses exceed the sum of
Cash Receipts and any amount in the Rent-Up Reserve, as determined by the
Accountant and approved by the Special Limited Partner.
Section 1.57 "Operating Deficit Guarantee Period" shall mean the period
commencing with the date of this Agreement and ending 15 years following three
consecutive months of Break-even Operations, provided the Partnership has
achieved Completion of Construction of the Apartment Housing.
Section 1.58 "Operating Loans" shall mean loans made by the General Partner
to the Partnership pursuant to Article VI of this Agreement, which loans do not
bear interest (except as otherwise provided) and are repayable only as provided
in Article XI of this Agreement.
Section 1.59 ."Original Limited Partner" shall mean Xxxxxxxx X. Xxxxxx, an
individual resident of the State of Texas.
Section 1.60 "Partner(s)" shall collectively mean the General Partner, the
Limited Partner and the Special Limited Partner or individually may mean any
Partner as the context dictates.
Section 1.61 "Partner Nonrecourse Debt" shall have the meaning set forth in
Section 1.704-2(b)(4) of the Treasury Regulations.
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Section 1.62 "Partner Nonrecourse Debt Minimum Gain" shall mean 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)(3) of
the Treasury Regulations.
Section 1.63 "Partner Nonrecourse Deductions" shall have the meaning set
forth in Sections 1.704-2 (i)(1) and 1.704-2(i)(2) of the Treasury Regulations.
Section 1.64 "Partnership" shall mean the limited partnership continued
under this Agreement.
Section 1.65 "Partnership Minimum Gain" shall mean the amount determined in
accordance with the principles of Treasury Regulation Sections 1.704-2(b)(2) and
1.704-2(d).
Section 1.66 "Permanent Mortgage Commencement" shall mean the first date on
which both of the following have occurred: (a) the Mortgage Loans shall have
closed and funded; and (b) amortization of the Mortgage Loans shall have
commenced.
Section 1.67 "Person" shall collectively mean an individual,
proprietorship, trust, estate, partnership, joint venture, association, company,
corporation or other entity.
Section 1.68 "Plans and Specifications" shall mean the plans and
specifications for the rehabilitation of the Improvements which are approved by
the local city/county building department with jurisdiction over the
construction of the Improvements and which plans and specifications are referred
to in the Construction Contract. Any changes to the Plans and Specifications
after approval by the appropriate government building department, shall require
the Consent of the Special Limited Partner.
Section 1.69 "Project Documents" shall mean all documents relating to the
Mortgage Loans and Construction Contract. It shall also include all documents
required by any governmental agency having jurisdiction over the Apartment
Housing in connection with the development, construction and financing of the
Apartment Housing, including but not limited to, the approved Plans and
Specifications for the development and construction of the Apartment Housing.
Section 1.70 "Projected Annual Tax Credits" shall mean LIHTC in the amount
of $16,735 for 2006, $83,676 for 2007 through 2015, and $66,941 for 2016, which
the General Partner has projected to be the total amount of LIHTC which will be
allocated to the Limited Partner by the Partnership, constituting 99.98% of the
aggregate amount of LIHTC of $836,925 to be available to the Partnership.
Section 1.71 "Projected Tax Credits" shall mean LIHTC in the aggregate
amount of $836,925.
Section 1.72 ."Qualified Tenants" shall mean any tenants who have incomes
of 60% or less of the area median gross income, as adjusted for family size, so
as to make the Project eligible for LIHTC.
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Section 1.73 "RD" shall mean the United States Department of Agriculture,
Rural Development, or its successors or assigns.
Section 1.74 "RD Loan Agreement" shall mean the Loan Agreement for an RRH
Loan to a Limited Partnership Operating on a Limited Profit Basis (Form RD
1944-34 or any successor thereof) between RD and the Partnership made in
consideration of the Mortgage Loan to the Partnership by RD pursuant to Section
515(b) of the Housing Act of 1949 to build a low to moderate income apartment
complex.
Section 1.75 "Rent Restriction Test" shall mean the test pursuant to
Section 42 of the Code whereby the gross rent charged to tenants of the low
income apartment units in the Apartment Housing cannot exceed 30% of the
qualifying income levels of those units under Section 42.
Section 1.76 "Real Estate Taxes" shall mean the sum of $9659.75 required to
be paid annually by the Partnership to the tax assessor, school district or
similar representative, of the City of Lone Star, Xxxxxx County or other local
government authority for real estate taxes assessed against the Apartment
Housing. The Real Estate Taxes are payable by January 31 of each year.
Section 1.77 "Revised Projected Tax Credits" shall have the meaning set
forth in Section 7.4(a) hereof.
Section 1.78 "Sale or Refinancing" shall mean any of the following items or
transactions: a sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Partnership, a condemnation of or
casualty at the Apartment Housing or any part thereof, a claim against a title
insurance company, the refinancing or any Mortgage or other indebtedness of the
Partnership and any similar item or transaction; provided, however, that the
payment of Capital Contributions by the Partners shall not be included within
the meaning of the term "Sale or Refinancing."
Section 1.79 "Sale or Refinancing Proceeds" shall mean all cash receipts of
the Partnership arising from a Sale or Refinancing (including principal and
interest received on a debt obligation received as consideration in whole or in
part, on a Sale or Refinancing) less the amount paid or to be paid in connection
with or as an expense of such Sale or Refinancing, and with regard to damage
recoveries or insurance or condemnation proceeds, the amount paid or to be paid
for repairs, replacements or renewals resulting from damage to or partial
condemnation of the Apartment Housing.
Section 1.80 ."Special Limited Partner" shall mean WNC Housing, L.P., a
California limited partnership, and such other Persons as are admitted to the
Partnership as additional or substitute Special Limited Partners pursuant to
this Agreement.
Section 1.81 "State" shall mean the State of Texas.
Section 1.82 "State Tax Credit Agency" shall mean the state agency of Texas
which has the responsibility and authorization to administer the LIHTC program
in Texas.
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Section 1.83 "Substitute Limited Partner" shall mean any Person who is
admitted to the Partnership as a Limited Partner pursuant to Section 12.5 or
acquires the Interest of the Limited Partner pursuant to Section 7.3 of this
Agreement.
Section 1.84 "Syndication Fee" shall mean the fee payable to the General
Partner in an amount equal to $10,000 for the General Partner's services in
forming the Partnership, locating and approving the Limited Partner and Special
Limited Partner as the investors in the Partnership, negotiating and finalizing
this Partnership Agreement and for such other services referenced in Treasury
Regulation Section 1.709-2(B).
Section 1.85 ."Tax Credit" shall mean any credit permitted under the Code
or the law of any state against the federal or a state income tax liability of
any Partner as a result of activities or expenditures of the Partnership
including, without limitation, LIHTC.
Section 1.86 "Tax Credit Compliance Fee" shall mean the fee payable to the
General Partner in accordance with Section 9.2(f) of this Agreement.
Section 1.87 "Tax Credit Conditions" shall mean, for the duration of the
Compliance Period, any and all restrictions including, but not limited to,
applicable federal, state and local laws, rules and regulations, which must be
complied with in order to qualify for the LIHTC or to avoid an event of
recapture in respect of the LIHTC.
Section 1.88 "Tax Credit Period" shall mean the ten year time period
referenced in Code Section 42(f)(1) over which the Projected Tax Credits are
allocated to the Partners. It is the intent of the Partners that the Projected
Tax Credits will be allocated during the Tax Credit Period and not a longer
term.
Section 1.89 "Title Policy" shall mean the policy of insurance covering the
fee simple title to the Apartment Housing from a company approved by the Special
Limited Partner. The Title Policy shall be an owner's title policy naming the
Partnership as insured. The Title Policy shall also insure against
rights-of-way, easements, or claims of easements, not shown by public records.
The Title Policy shall be in an amount equal to the Mortgage Loan amount and the
Limited Partner's aggregate Capital Contribution.
Section 1.90 "TRA 1986" shall mean the Tax Reform Act of 1986.
Section 1.91 "Treasury Regulations" shall mean the Income Tax Regulations
promulgated under the Code, as such regulations may be amended from time to time
(including corresponding provisions of succeeding regulations).
Section 1.92 "Withdrawing" or "Withdrawal" (including the verb form
"Withdraw" and the adjectival forms "Withdrawing" and "Withdrawn") shall mean,
as to a General Partner, the occurrence of the death, adjudication of insanity
or incompetence, Bankruptcy of such Partner or any of its principals, the
withdrawal, removal or retirement from the Partnership of such Partner for any
reason, including any sale, pledge, encumbering, assignment or other transfer of
all or any part of its General Partner Interest and those situations when a
General Partner may no longer continue as a General Partner by reason of any law
or pursuant to any terms of this Agreement.
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ARTICLE II
NAME
The name of the Partnership shall be "FDI-Country Square, LTD."
ARTICLE III
PRINCIPAL EXECUTIVE OFFICE/AGENT FOR SERVICE
Section 3.1 Principal Executive Office. The principal executive office of
the Partnership is located at 00000 Xxxx Xxx Xxxx. Xxxxx 000 Xxxxxxx, Xxxxx
00000, or at such other place or places within the State as the General Partner
may hereafter designate.
Section 3.2 Agent for Service of Process. The name of the agent for service
of process on the Partnership is Xxxxx X. Xxxxxx, whose address is 00000
Xxxxxxxxx Xxxxxx Xxxx, Xxxx, Xxxxx 00000.
ARTICLE IV
PURPOSE
Section 4.1 Purpose of the Partnership. The purpose of the Partnership is
to acquire, renovate, own and operate the Apartment Housing in order to provide,
in part, Tax Credits to the Partners in accordance with the provisions of the
Code and the Treasury Regulations applicable to LIHTC and to sell the Apartment
Housing. The Partnership shall not engage in any business or activity which is
not incident to the attainment of such purpose.
Section 4.2 Authority of the Partnership. In order to carry out its
purpose, the Partnership is empowered and authorized to do any and all acts and
things necessary, appropriate, proper, advisable or incidental to the
furtherance and accomplishment of its purpose, and for protection and benefit of
the Partnership, including but not limited to the following:
(a) acquire ownership of the real property referred to in Exhibit A
attached hereto;
(b) construct, renovate, rehabilitate, own, maintain and operate the
Apartment Housing in accordance with the Plans and Specifications;
(c) provide housing, subject to the Minimum Set-Aside Test and the
Rent Restriction Test and consistent with the requirements of the Project
Documents, so long as any Project Documents remain in force;
(d) maintain and operate the Apartment Housing, including hiring the
Management Agent (which Management Agent may be any of the Partners or an
15
Affiliate thereof) and entering into any agreement for the management of
the Apartment Housing during its rent-up and after its rent-up period in
accordance with this Agreement;
(e) enter into the Mortgage Loans;
(f) rent dwelling units in the Apartment Housing from time to time, in
accordance with the provisions of the Code applicable to LIHTC; and
(g) do any and all other acts and things necessary or proper in
furtherance of the Partnership business and in accordance with this
Agreement.
ARTICLE V
TERM
The Partnership term commenced upon the filing of the Certificate of
Limited Partnership in the office of, and on the form prescribed by, the
Secretary of State of the State, and shall continue until December 31, 2055,
unless terminated earlier in accordance with the provisions of this Agreement or
as otherwise provided by law.
ARTICLE VI
GENERAL PARTNER'S CONTRIBUTIONS AND LOANS
Section 6.1 Capital Contribution of General Partner. The General Partner
has made a Capital Contribution of $200.
Section 6.2 Construction Obligations.
(a) The General Partner hereby guarantees lien free completion of
construction of the Apartment Housing on or before January 1, 2007
("Completion Date"), at a total development cost of not more than
$1,477,034 ("Development Budget"), which includes all hard and soft costs
incident to the acquisition, development and construction of the Apartment
Housing in accordance with the Construction Budget, the Construction
Contract, the other Project Documents and the Plans and Specifications. If
the Development Budget exceeds the sum of the Capital Contributions, the
Mortgage amount as specified herein and the Development Fee, then the
General Partner shall be responsible for and shall be obligated to pay the
difference thereof. Any advances by the General Partner pursuant to the
previous sentence shall not be repayable, shall not change the Interest of
any Partner in the Partnership and shall be considered a guaranteed payment
to the Partnership for cost overruns. If the Special Limited Partner, in
good faith, ascertains that the cost of completing the Improvements in
substantial accordance with the Plans and Specifications is greater than
the sum of (1) the then remaining undisbursed portion of the Capital
Contributions; (2) the then remaining undisbursed portion of the Mortgage
amount as specified herein; and (3) the then remaining undisbursed portion
16
of the Development Fee; then the Special Limited Partner may request the
General Partner to advance funds into a construction account in an amount
required to complete the Improvements.
(b) In addition, if (1) renovation of the Improvements is not
completed on or before the Completion Date (which date may be extended in
the event of Force Majeure, but in no event longer than three months from
the Completion Date); (2) prior to completing the Improvements, there is an
uncured default under or termination of the Mortgage Loan commitment, or
other material documents; or (3) a foreclosure action is commenced against
the Partnership, then at the Special Limited Partner's election, either the
General Partner will be removed from the Partnership and the Special
Limited Partner will be admitted as successor General Partner, all in
accordance with Article XIII hereof, or the General Partner will repurchase
the Interest of the Limited Partner and the Special Limited Partner for an
amount equal to the amounts theretofore paid by the Limited Partner and the
Special Limited Partner, and the Limited Partner and the Special Limited
Partner shall have no further Interest in the Partnership. If the Limited
Partner elects to have the General Partner repurchase the Interest of the
Limited Partner then the repurchase shall occur within 90 days after the
General Partner receives written demand from the Limited Partner.
Section 6.3 Operating Obligations. From the date of this Agreement until
three consecutive months of Break-even Operations, the General Partner will
provide the necessary funds to pay Operating Deficits, which funds shall not be
repayable, shall not change the Interest of any Partner and shall be considered
a guaranteed payment to the Partnership for cost overruns. For the balance of
the Operating Deficit Guarantee Period the General Partner will provide
Operating Loans to pay any Operating Deficits. The aggregate maximum amount of
the Operating Loan(s) the General Partner will be obligated to lend will be
equal to one year's operating expenses (including debt and reserves) approved by
the General Partner and the Special Limited Partner. Each Operating Loan shall
be nonrecourse to the Partners, and shall be repayable out of 50% of the
available Net Operating Income or Sale or Refinancing Proceeds in accordance
with Article XI of this Agreement.
Section 6.4 Other General Partner Loans. After expiration of the Operating
Deficit Guarantee Period, with the Consent of the Special Limited Partner, the
General Partner may loan to the Partnership any sums required by the Partnership
and not otherwise reasonably available to it. Any such loan shall bear simple
interest (not compounded) at the 10-year Treasury money market rate in effect as
of the day of the General Partner loan, or, if lesser, the maximum legal rate.
The maturity date and repayment schedule of any such loan shall be as agreed to
by the General Partner and the Special Limited Partner. The terms of any such
loan shall be evidenced by a written instrument. The General Partner shall not
charge a prepayment penalty on any such loan. Any loan in contravention of this
Section shall be deemed an invalid action taken by the General Partner and such
advance will be classified as a General Partner Capital Contribution.
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ARTICLE VII
CAPITAL CONTRIBUTIONS OF LIMITED PARTNER
AND SPECIAL LIMITED PARTNER
Section 7.1 Original Limited Partner. The Original Limited Partner made a
Capital Contribution of $800. Effective as of the date of this Agreement, the
Original Limited Partner's Interest has been liquidated and the Partnership has
reacquired the Original Limited Partner's Interest in the Partnership. The
Original Limited Partner acknowledges that she has no further interest in the
Partnership as a limited partner as of the date of this Agreement, and has
released all claims, if any, against the Partnership arising out of her
participation as a limited partner.
Section 7.2 Capital Contribution of Limited Partner. The Limited Partner
shall make a Capital Contribution in the amount of $627,508, as may be adjusted
in accordance with Section 7.4 of this Agreement, in cash on the dates and
subject to the conditions hereinafter set forth.
(a) $272,114 (which includes the Special Limited Partner's Capital
Contribution of $63) shall be payable upon the Limited Partner's receipt
and approval of the following documents:
(1) the execution of this Agreement;
(2) an ALTA survey;
(3) a legal opinion in a form substantially similar to the form
of opinion attached hereto as Exhibit B and incorporated herein by
this reference;
(4) a fully executed Certification and Agreement in the form
attached hereto as Exhibit C and incorporated herein by this
reference;
(5) a copy of the title commitment (in a form and substance
satisfactory to the Special Limited Partner) constituting an agreement
by a title company to issue the Title Policy within fifteen working
days. The title commitment will show the Apartment Housing to be free
from liens other than the Mortgage Loans and free from other
exceptions not previously approved by the Special Limited Partner;
(6) Insurance required during construction;
(7) a copy of the building permit;
(8) a copy of the recorded grant deed (warranty deed);
(9) a copy of the Limited Partner's independent engineer's
report;
(10) a copy of the Construction Contract;
(11) fully executed Mortgage Loan documents;
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(12) a full set of Plans and Specifications; and
(13) payment of $20,000 for costs and expenses incurred in
connection with the Limited Partner's or its Affiliate's underwriting
of the Apartment Housing and Improvements.
(b) $75,308 shall be payable upon the Limited Partner's receipt and
approval of the following documents:
(1) an audited cost certification together with the Accountant's
workpapers verifying that the Partnership has expended the requisite
10% of reasonably expected cost basis to meet the carryover test
provisions of Code Section 42;
(2) the Inspecting Architect's certification of 50% completion of
the total construction;
(3) a date down to the Title Policy dated no more than fifteen
days prior to this Capital Contribution payment evidencing no
construction or development related liens; and
(4) any documents previously not provided to the Limited Partner
but required pursuant to this Section 7.2 and Sections 14.3(a) and
(b).
(c) $125,514 shall be payable upon the Limited Partner's receipt and
approval of the following documents;
(1) certificate of occupancy (or equivalent evidence of local
occupancy approval if a permanent certificate is not available) on all
the apartment units in the Apartment Housing;
(2) a completion certification in a form substantially similar to
the form attached hereto as Exhibit D and incorporated herein by this
reference, indicating that the Improvements have been completed in
accordance with the Project Documents;
(3) a letter from the Contractor in a form substantially similar
to the form attached hereto as Exhibit F and incorporated herein by
this reference stating that all amounts payable to the Contractor have
been paid in full and that the Partnership is not in violation of the
Construction Contract;
(4) Insurance required during operations;
(5) a date down to the Title Policy dated no more than ten days
prior to this Capital Contribution payment providing an as-built
survey and confirming that here are no liens, claims or rights to a
lien or judgments filed against the property or the Apartment Housing
during the time period since the issuance of the Title Policy
referenced above in Section 7.2(a)evidencing no construction or
development related liens; and
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(6) any documents previously not provided to the Limited Partner
but required pursuant to this Section 7.2 and Sections 14.3(a) and (b)
(d) $94,135 shall be payable upon the Limited Partner's receipt and
approval of the following documents:
(1) endorsement to the Title Policy dated no more than ten days
prior to the scheduled Capital Contribution providing an as-built
survey and confirming that there are no liens, claims or rights to a
lien or judgments filed against the property or the Apartment Housing
during the time period since the issuance of the Title Policy
referenced above in Section 7.2(a).
(2) achievement by the Partnership of a Debt Service Coverage of
1.15 for 90 consecutive days;
(3) 90% tax credit qualified occupancy and 90% actual occupancy
for 90 consecutive days;
(4) an audited construction cost certification (which includes an
itemized cost breakdown);
(5) the Accountant's final Tax Credit certification in a form
substantially similar to the form attached hereto as Exhibit E and
incorporated herein by this reference; and
(6) any documents previously not provided to the Limited Partner
but required pursuant to this Section 7.2 or Sections 14.3(a) or (b).
(e) $35,560 shall be payable upon the Limited Partner's receipt and
approval of the following documents
(1) copies of all initial tenant files including completed
applications, completed questionnaires or checklist of income and
assets, documentation of third party verification of income and
assets, and income certification forms (LIHTC specific) collected by
the Management Agent, or General Partner, verifying each tenant's
eligibility pursuant to the Minimum Set-Aside Test;
(2) copies of the executed lease agreement with the tenants;
(3) the current rent roll;
(4) the construction documents required pursuant to Section
14.3(a) of this Agreement, if not previously provided to the Limited
Partner;
(5) first year tax return in which Tax Credits are taken;
(6) a copy of the declaration of restrictive covenants/extended
use agreement entered into between the Partnership and the State Tax
Credit Agency;
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(7) a copy of the Partnership's audited financial statement;
(8) Internal Revenue Code Form 8609, or any successor form; and
(9) any documents previously not provided to the Limited Partner
but required pursuant to this Section 7.2 and Sections 14.3(a) and
(b).
(e) $25,000 shall be payable upon the Special Limited Partner's
approval of the initial tenant files and any documents previously not
provided to the Limited Partner but required pursuant to this Section 7.2
and Sections 14.3(a) and (b). The initial tenant files will be reviewed at
the Limited Partner's expense by an independent third-party. In the event
that the independent third-party and the Special Limited Partner recommend
corrections to an initial tenant file, the General Partner will cause the
Management Agent to correct the tenant file and provide the corrected
tenant file to the Limited Partner. The Limited Partner may withhold all or
any portion of a Capital Contribution payment until it has received all the
initial tenant files and the same have been reviewed, corrected, and
approved.
(f) In the event the Limited Partner fails to pay a portion of any
Capital Contribution by its due date, and any such failure is not cured
within forty five (45) days after written request for the payment from the
General Partner (after all such prerequisites to receive such payment are
met), the Limited Partner shall be deemed to be in default of its
obligations under this Agreement and the General Partner shall be entitled
to institute a suit of law or in equity.
Section 7.3 Repurchase of Limited Partner's Interest. Within 90 days after
the General Partner receives written demand from the Limited Partner and/or the
Special Limited Partner, the Partnership shall repurchase the Limited Partner's
Interest and/or the Special Limited Partner's Interest in the Partnership by
refunding to it in cash the full amount of the Capital Contribution which the
Limited Partner and/or the Special Limited Partner has theretofore made in the
event that, for any reason, the Partnership shall fail to:
(a) cause the Apartment Housing to be placed in service by July 1,
2007;
(b) achieve 90% occupancy of the Apartment Housing by satisfying the
Minimum Set-Aside Test by September 1, 2007;
(c) obtain Permanent Mortgage Commencement by September 1, 2007; or
(d) meet both the Minimum Set-Aside Test and the Rent Restriction Test
not later than December 31 of the first year the Partnership elects the
LIHTC to commence in accordance with the Code.
Section 7.4 Adjustment of Limited Partner's Capital Contribution.
(a) The amount of the Limited Partner's and Special Limited Partner's
Capital Contribution was determined in part upon the amount of Tax Credits
that were expected to be available to the Partnership, and was based on the
assumption that the Partnership would be eligible to claim, in the
aggregate, the Projected Tax Credits. If the anticipated amount of
Projected Tax Credits to
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be allocated to the Limited Partner and Special Limited Partner as
evidenced by IRS Form 8609, Schedule A thereto, and the audited
construction cost certification provided to the Limited Partner and Special
Limited Partner is less than 99.99% of $836,925 (the new Tax Credit amount,
if applicable, shall be referred to as the "Revised Projected Tax Credits")
then the Limited Partner's and Special Limited Partner's Capital
Contribution provided for in Section 7.2 and Section 7.5 respectively shall
be adjusted by the amount which will make the total Capital Contribution to
be paid by the Limited Partner and Special Limited Partner to the
Partnership equal to 75% of the Revised Projected Tax Credits so
anticipated to be allocated to the Limited Partner and Special Limited
Partner. If the Capital Contribution adjustment referenced in this Section
7.4(a) is a reduction which is greater than the remaining Capital
Contribution to be paid by the Limited Partner and the Special Limited
Partner then the General Partner shall have ninety days from the date the
General Partner receives notice from either the Limited Partner or the
Special Limited Partner to pay the shortfall. If the Capital Contribution
adjustment referenced in this Section 7.4(a) is an increase then the
Limited Partner and Special Limited Partner shall have ninety days from the
date the Limited Partner and Special Limited Partner have received notice
from the General Partner to pay the increase.
(b) The General Partner is required to use its best efforts to rent
100% of the Apartment Housing's apartment units to tenants who meet the
Minimum Set-Aside Test throughout the Compliance Period. If at the end of
each calendar year following the year in which the Apartment Housing is
placed in service, the Actual Tax Credit for any fiscal year or portion
thereof is or will be less than the Projected Annual Tax Credit, or the
Projected Annual Tax Credit as modified by Section 7.4(a) of this Agreement
if applicable (collectively, the "Annual Tax Credit") (the "Annual Credit
Shortfall"), then the next Capital Contribution owed by the Limited Partner
shall be reduced by the Annual Credit Shortfall amount, and any portion of
such Annual Credit Shortfall in excess of such Capital Contribution shall
be applied to reduce succeeding Capital Contributions of the Limited
Partner. If the Annual Credit Shortfall is greater than the Limited
Partner's remaining Capital Contributions then the General Partner shall
pay to the Limited Partner the excess of the Annual Credit Shortfall over
the remaining Capital Contributions. The General Partner shall have ninety
days to pay the Annual Credit Shortfall from the date the General Partner
receives notice from the Limited Partner. The provisions of this Section
7.4(b) shall apply equally to the Special Limited Partner in proportion to
its Capital Contribution and anticipated annual Tax Credit.
(c) The General Partner has represented, in part, that the Limited
Partner will receive Projected Annual Tax Credits of $16,735 in 2006 and
$83,676 in 2007. In the event the 2006 or 2007 Actual Tax Credits are less
than projected then the Limited Partner's Capital Contribution shall be
reduced by an amount equal to 65% times the difference between the
Projected Annual Tax Credits for 2006 and 2007 and the Actual Tax Credits
for 2006 and 2007. If the 2006 and 2007 Actual Tax Credits are less than
projected then the Special Limited Partner's Capital Contribution shall be
reduced following the same equation referenced in the preceding sentence.
If, at the time of determination thereof, the Capital Contribution
adjustment referenced in this Section 7.4(d) is greater than the balance of
the Limited Partner's or Special Limited Partner's Capital Contribution
payment which is then due, if any, then the excess amount shall be paid by
the General Partner to the Limited Partner and/or the Special Limited
Partner within ninety days of the General Partner receiving notice of the
reduction from the Limited Partners and/or the Special Limited Partner.
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(d) The Partners recognize and acknowledge that the Limited Partner
and the Special Limited Partner are making their Capital Contribution, in
part, on the expectation that the Projected Tax Credits are allocated to
the Partners over the Tax Credit Period. If the Projected Tax Credits are
not allocated to the Partners during the Tax Credit Period then the Limited
Partner's and Special Limited Partner's Capital Contribution shall be
reduced by an amount agreed upon by the Partners, in good faith, to provide
the Limited Partner and the Special Limited Partner with their anticipated
internal rate of return.
(e) In the event there is: (1) a filing of a tax return by the
Partnership evidencing a reduction in the qualified basis of the Apartment
Housing causing a recapture of Tax Credits previously allocated to the
Limited Partner; (2) a reduction in the qualified basis of the Apartment
Housing for income tax purposes following an audit by the Internal Revenue
Service ("IRS") resulting in a recapture of Tax Credits previously claimed;
(3) a decision by the United States Tax Court upholding the assessment of
such deficiency against the Partnership with respect to any Tax Credit
previously claimed in connection with the Apartment Housing, unless the
Partnership shall timely appeal such decision and the collection of such
assessment shall be stayed pending the disposition of such appeal; or (4) a
decision of a court affirming such decision upon such appeal then, in
addition to any other payments to which the Limited Partner and Special
Limited Partner are entitled under the terms of this Section 7.4, the
General Partner shall pay to the Limited Partner and the Special Limited
Partner the sum of (A) the income tax deficiency assessed against the
Limited Partner or Special Limited Partner as a result of the Tax Credit
recapture, (B) any interest and penalties imposed on the Limited Partner or
Special Limited Partner with respect to such deficiency, and (C) an amount
sufficient to pay any tax liability owed by the Limited Partner or Special
Limited Partner resulting from the receipt of the amounts specified in (A)
and (B).
(f) The increase in the Capital Contribution of the Limited Partner
and the Special Limited Partner pursuant to Section 7.4(a) shall be subject
to the Limited Partner and Special Limited Partner having funds available
to pay any such increase at the time of its notification of such increase.
For these purposes, any funds theretofore previously earmarked by the
Limited Partner or Special Limited Partner to make other investments, or to
be held as required reserves, shall not be considered available for payment
hereunder.
Section 7.5 Capital Contribution of Special Limited Partner. The Special
Limited Partner shall make a Capital Contribution of $63 at the time of the
Limited Partner's Capital Contribution payment referenced in Section 7.2(a) upon
the same conditions. The Special Limited Partner shall be in a different class
from the Limited Partner and, except as otherwise expressly stated in this
Agreement, shall not participate in any rights allocable to or exercisable by
the Limited Partner under this Agreement.
Section 7.6 Return of Capital Contribution. From time to time the
Partnership may have cash in excess of the amount required for the conduct of
the affairs of the Partnership, and the General Partner may, with the Consent of
the Special Limited Partner, determine that such cash should, in whole or in
part, be returned to the Partners, pro rata, in reduction of their Capital
Contribution. No such return shall be made unless all liabilities of the
Partnership (except those to Partners on account of amounts credited to them
pursuant to this Agreement) have been paid or there remain assets of the
23
Partnership sufficient, in the sole discretion of the General Partner, to pay
such liabilities.
Section 7.7 Liability of Limited Partner and Special Limited Partner. The
Limited Partner and Special Limited Partner shall not be liable for any of the
debts, liabilities, contracts or other obligations of the Partnership. The
Limited Partner and Special Limited Partner shall be liable only to make Capital
Contributions in the amounts and on the dates specified in this Agreement and,
except as otherwise expressly required hereunder, shall not be required to lend
any funds to the Partnership or, after their respective Capital Contributions
have been paid, to make any further Capital Contribution to the Partnership.
ARTICLE VIII
WORKING CAPITAL AND RESERVES
Section 8.1 Replacement and Reserve Account. The Partnership shall fund,
establish and maintain a reserve account in the amount that is the greater of
$300 per unit or the amount required by the RD Loan Agreement, which funds shall
be maintained and used in accordance with the requirements of RD Regulation 7
CFR Part 1930-C, or any successor thereof, as evidenced by the RD Loan
Agreement.
Section 8.2 Operating and Maintenance Account The Co-General Partner, on
behalf of the Partnership, shall establish an operating and maintenance account
and shall deposit thereinto an amount required by the RD, to be used for initial
operating capital as permitted or required by applicable RD regulations. Said
amount shall be reimbursed, without interest, out of Apartment Housing funds as
shall be authorized in accordance with applicable RD regulations, and if not so
reimbursed within five years of the deposit, any amount remaining unreimbursed
shall be forgiven and shall constitute an ordinary and necessary business
expense of the General Partner as part consideration for the payment of the
Development Fee.
Section 8.3 Operating Deficit Account. At the time of the Capital
Contribution payment referenced in Section 7.2(d), the General Partner will
deposit $79,000 into an operating deficit reserve account (the "Operating
Deficit Account"). The Operating Deficit Account shall be an interest-bearing
account held by a federally insured financial institution mutually agreed upon
by the General Partner and the Special Limited Partner and requiring the
signatures of both the General Partner and the Special Limited Partner for any
withdrawals. The Operating Deficit Account may not be used to fund Operating
Deficits during the first full three years following the achievement of
Break-even Operations unless agreed to in writing by the General Partner and the
Special Limited Partner. Commencing in 2011 and continuing each year thereafter
until the balance of the Operating Deficit Account is zero, the General Partner
and the Special Limited Partner agree to distribute to the General Partner from
the Operating Deficit Account an amount based on a ten-year amortization,
provided that the Debt Service Coverage for the prior calendar year was at least
1.10, as evidenced by audited financial statements. Notwithstanding the above,
(a) there will be no distribution to the General Partner in any year in which
the prior year's Debt Service Coverage was not at least 1.10, and (b) funds
24
released from the Operating Deficit Account shall not be taken into
consideration in determining whether Debt Service Coverage of 1.10 was achieved.
Section 8.4 Tax and Insurance Account The General Partner, on behalf of the
Partnership, shall establish a tax and insurance account ("T & I Account") for
the purpose of making the requisite Insurance premium payments and the real
estate tax payments. The annual deposit to the T & I Account shall equal the
total annual Insurance payment and the total annual real estate tax payment.
Said amount shall be deposited monthly in equal installments. Withdrawals from
such account shall be made only for its intended purpose. Any balance remaining
in the account at the time of a sale of the Apartment Housing shall be allocated
and distributed equally between the General Partner and the Limited Partner.
Section 8.5 Other Reserves The Managing General Partner, on behalf of the
Partnership, may establish out of funds available to the Partnership a reserve
account sufficient in its sole discretion to pay any unforeseen contingencies
which might arise in connection with the furtherance of the Partnership business
including, but not limited to, (a) any rent subsidy required to maintain rent
levels in compliance with the Tax Credit Conditions and applicable RD
regulations; and (b) any debt service or other payments for which other funds
are not provided for hereunder or otherwise expected to be available to the
Partnership. The General Partner shall not be liable for any good-faith estimate
which it shall make in connection with establishing or maintaining any such
reserves nor shall the Managing General Partner be required to establish or
maintain any such reserves if, in its sole discretion, such reserves do not
appear to be necessary.
ARTICLE IX
MANAGEMENT AND CONTROL
Section 9.1 Power and Authority of General Partner. Subject to the Consent
of the Special Limited Partner or the consent of the Limited Partner where
required by this Agreement, and subject to the other limitations and
restrictions included in this Agreement, the General Partner shall have complete
and exclusive control over the management of the Partnership business and
affairs, and shall have the right, power and authority, on behalf of the
Partnership, and in its name, to exercise all of the rights, powers and
authority of a partner of a partnership without limited partners. If there is
more than one General Partner, all acts, decisions or consents of the General
Partners shall require the concurrence of all of the General Partners. No
actions taken without the authorization of all the General Partners shall be
deemed valid actions taken by the General Partners pursuant to this Agreement.
No Limited Partner or Special Limited Partner (except one who may also be a
General Partner, and then only in its capacity as General Partner within the
scope of its authority hereunder) shall have any right to be active in the
management of the Partnership's business or investments or to exercise any
control thereover, nor have the right to bind the Partnership in any contract,
agreement, promise or undertaking, or to act in any way whatsoever with respect
to the control or conduct of the business of the Partnership, except as
otherwise specifically provided in this Agreement.
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Section 9.2 Payments to the General Partners and Others.
(a) The Partnership shall pay to the Developer a Development Fee in
the amount of $172,195 in accordance with the Development Fee Agreement
entered by and between the Developer and the Partnership on the even date
hereof. The Development Fee Agreement provides, in part, that the
Development Fee shall first be paid from available proceeds in accordance
with Section 9.2(b) of this Agreement and if not paid in full then the
balance of the Development Fee will be paid in accordance with Section 11.1
of this Agreement.
(b) The Partnership shall utilize the proceeds from the Capital
Contributions paid pursuant to Section 7.2 and Section 7.5 of this
Agreement for development costs including, but not limited to, land and
building costs, Land Acquisition Fee, architectural fees, survey and
engineering costs, financing costs, loan fees, Syndication Fee, building
materials and labor. If any Capital Contribution proceeds are remaining
after Completion of Construction and all acquisition, development and
construction costs, excluding the Development Fee, are paid in full, then
the remainder shall: first be paid to the Developer in payment of the
Development Fee; second be paid to the General Partner as a reduction of
the General Partner's Capital Contribution; and any remaining Capital
Contribution proceeds shall be paid to the General Partner as a Partnership
oversight fee.
(c) The Partnership shall pay to the Management Agent a property
management fee for the leasing and management of the Apartment Housing in
an amount in accordance with the Management Agreement. The term of the
Management Agreement shall not exceed one year, and the execution or
renewal of any Management Agreement shall be subject to the prior Consent
of the Special Limited Partner. If the Management Agent is an Affiliate of
the General Partner then, commencing with the termination of the Operating
Deficit Guarantee Period, in any year in which the Apartment Housing has an
Operating Deficit, 40% of the management fee will be deferred ("Deferred
Management Fee"). Deferred Management Fees, if any, shall be paid to the
Management Agent in accordance with Section 11.1 of this Agreement.
(1) The General Partner shall, upon receiving any request of the
Mortgage Lender requesting such action, dismiss the Management Agent
as the entity responsible for management of the Apartment Housing
under the terms of the Management Agreement; or, the General Partner
shall dismiss the Management Agent at the request of the Special
Limited Partner for cause.
(2) The appointment of any successor Management Agent is subject
to the Consent of the Special Limited Partner, which may only be
sought after the General Partner has provided the Special Limited
Partner with accurate and complete disclosure respecting the proposed
Management Agent.
(d) The Partnership shall pay to the Limited Partner an Asset
Management Fee commencing in 2007 equal to 10% of Net Operating Income but
in no event less than $1,000, increasing by 3% per year (the "Minimum
Amount"), for the Limited Partner's services in monitoring the operations
of the Partnership and for services in connection with the Partnership's
accounting matters and assisting with the preparation of tax returns and
the reports required in Sections 14.2 and 14.3 of this Agreement. The Asset
26
Management Fee shall be payable within seventy-five (75) days following
each calendar year and shall be payable from Net Operating Income in the
manner and priority set forth in Section 11.1 of this Agreement; provided,
however, that if in any year Net Operating Income is insufficient to pay
the full Minimum Amount, the unpaid portion thereof shall accrue and be
payable on a cumulative basis in the first year in which there is
sufficient Net Operating Income, as provided in Section 11.1, or sufficient
Sale or Refinancing Proceeds, as provided in Section 11.2.
(e) The Partnership shall pay to the General Partner through the
Compliance Period an annual Incentive Management Fee equal to 35% of Net
Operating Income commencing in 2007 for overseeing the marketing, lease-up
and continued occupancy of the Partnership's apartment units, obtaining and
monitoring the Mortgage Loan, maintaining the books and records of the
Partnership, selecting and supervising the Partnership's Accountants,
bookkeepers and other Persons required to prepare and audit the
Partnership's financial statements and tax returns, and preparing and
disseminating reports on the status of the Apartment Housing and the
Partnership, all as required by Article XIV of this Agreement. The Partners
acknowledge that the Incentive Management Fee is being paid as an
inducement to the General Partner to operate the Partnership efficiently,
to maximize occupancy and to increase the Net Operating Income. The
Incentive Management Fee shall be payable from Net Operating Income in the
manner and priority set forth in Section 11.1 of this Agreement upon
completion and delivery of the annual audit pursuant to Section 14.2(a) of
this Agreement.
(f) The Partnership shall pay to the General Partner through the
Compliance Period an annual Tax Credit Compliance Fee equal to 35% of Net
Operating Income commencing in 2007 for the services of the General Partner
in ensuring compliance by the Partnership and the Apartment Housing with
all Tax Credit rules and regulations. The Tax Credit Compliance Fee shall
be payable from Net Operating Income in the manner and priority set forth
in Section 11.1 of this Agreement upon completion and delivery of the
annual audit pursuant to Section 14.2(a) of this Agreement.
Section 9.3 Specific Powers of the General Partner. Subject to the other
provisions of this Agreement, the General Partner, in the Partnership's name and
on its behalf, may:
(a) employ, contract and otherwise deal with, from time to time,
Persons whose services are necessary or appropriate in connection with
management and operation of the Partnership business, including, without
limitation, contractors, agents, brokers, Accountants and Management Agents
(provided that the selection of any Accountant or Management Agent has
received the Consent of the Special Limited Partner) and attorneys, on such
terms as the General Partner shall determine;
(b) pay as a Partnership expense any and all costs and expenses
associated with the formation, development, organization and operation of
the Partnership, including the expense of annual audits, tax returns and
LIHTC compliance;
(c) deposit, withdraw, invest, pay, retain and distribute the
Partnership's funds in a manner consistent with the provisions of this
Agreement;
(d) execute the Mortgage Loan documents; and
27
(e) execute, acknowledge and deliver any and all instruments to
effectuate any of the foregoing.
Section 9.4 Authority Requirements. During the Compliance Period, the
following provisions shall apply.
(a) Each of the provisions of this Agreement shall be subject to, and
the General Partner covenants to act in accordance with, the Tax Credit
Conditions and all applicable federal, state and local laws and
regulations.
(b) The Tax Credit Conditions and all such laws and regulations, as
amended or supplemented, shall govern the rights and obligations of the
Partners, their heirs, executors, administrators, successor and assigns,
and they shall control as to any terms in this Agreement which are
inconsistent therewith, and any such inconsistent terms of this Agreement
shall be unenforceable by or against any of the Partners.
(c) Upon any dissolution of the Partnership or any transfer of the
Apartment Housing, no title or right to the possession and control of the
Apartment Housing and no right to collect rent therefrom shall pass to any
Person who is not, or does not become, bound by the Tax Credit Conditions
in a manner that, in the opinion of counsel to the Partnership, would avoid
a recapture of Tax Credits thereof on the part of the former owners. (d)
Any conveyance or transfer of title to all or any portion of the Apartment
Housing required or permitted under this Agreement shall in all respects be
subject to the Tax Credit Conditions and all conditions, approvals or other
requirements of the rules and regulations of any authority applicable
thereto.
Section 9.5 Limitations on General Partner's Power and Authority.
Notwithstanding the provisions of this Article IX, the General Partner shall
not:
(a) except as required by Section 9.4, act in contravention of this
Agreement;
(b) act in any manner which would make it impossible to carry on the
ordinary business of the Partnership;
(c) confess a judgment against the Partnership in the aggregate of
$15,000 per calendar year without the prior Consent of the Special Limited
Partner;
(d) possess Partnership property, or assign the Partner's right in
specific Partnership property, for other than the exclusive benefit of the
Partnership;
(e) admit a Person as a General Partner except as provided in this
Agreement;
(f) admit a Person as a Limited Partner except as provided in this
Agreement;
(g) violate any provision of the Mortgage;
28
(h) cause the Apartment Housing apartment units to be rented to anyone
other than Qualified Tenants;
(i) violate the Minimum Set-Aside Test or the Rent Restriction Test
for the Apartment Housing;
(j) cause any recapture of the Tax Credits;
(k) permit any creditor who makes a nonrecourse loan to the
Partnership to have, or to acquire at any time as a result of making such
loan, any direct or indirect interest in the profits, income, capital or
other property of the Partnership, other than as a secured creditor;
(l) commingle funds of the Partnership with the funds of another
Person; or
(m) take any action which requires the Consent of the Special Limited
Partner or the consent of the Limited Partner unless the General Partner
has received said Consent.
Section 9.6 Restrictions on Authority of General Partner. Without the
Consent of the Special Limited Partner the General Partner shall not:
(a) sell, exchange, lease or otherwise dispose of the Apartment
Housing;
(b) incur indebtedness other than the Mortgage Loan in the name of the
Partnership;
(c) engage in any transaction not expressly contemplated by this
Agreement in which the General Partner has an actual or potential conflict
of interest with the Limited Partner or the Special Limited Partner;
(d) contract away the fiduciary duty owed to the Limited Partner and
the Special Limited Partner at common law;
(e) take any action which would cause the Apartment Housing to fail to
qualify, or which would cause a termination or discontinuance of the
qualification of the Apartment Housing, as a "qualified low income housing
project" under Section 42(g)(1) of the Code, as amended, or any successor
thereto, or which would cause the Limited Partner to fail to obtain the
Projected Tax Credits or which would cause the recapture of any LIHTC;
(f) make any expenditure of funds, or commit to make any such
expenditure, other than in response to an emergency, except as provided for
in the annual budget approved by the Special Limited Partner, as provided
in Section 14.3(i) hereof;
(g) cause the merger or other reorganization of the Partnership;
(h) dissolve the Partnership;
29
(i) acquire any real or personal property (tangible or intangible) in
addition to the Apartment Housing the aggregate value of which shall exceed
$10,000 (other than easement or similar rights necessary or appropriate for
the operation of the Apartment Housing);
(j) become personally liable on or in respect of, or guarantee, the
Mortgage or any other indebtedness of the Partnership;
(k) pay any salary, fees or other compensation to a General Partner or
any Affiliate thereof, except as authorized by Section 9.2 and Section 9.9
hereof or specifically provided for in this Agreement;
(l) terminate the services of the Accountant, Inspecting Architect,
Contractor or Management Agent, or terminate, amend or modify the
Construction Contract or any other Project Document, or grant any material
waiver or consent thereunder;
(m) cause the Partnership to redeem or repurchase all or any portion
of the Interest of a Partner;
(n) cause the Partnership to convert the Apartment Housing to
cooperative or condominium ownership;
(o) cause or permit the Partnership to make loans to the General
Partner or any Affiliate;
(p) bring or defend, pay, collect, compromise, arbitrate, resort to
legal action or otherwise adjust claims or demands of or against the
Partnership except as otherwise provided in this Agreement; or
(q) agree or consent to any changes in the Plans and Specifications,
to any change orders, or to any of the terms and provisions of the
Construction Contract.
Section 9.7 Duties of General Partner. The General Partner agrees that it
shall at all times:
(a) diligently and faithfully devote such of its time to the business
of the Partnership as may be necessary to properly conduct the affairs of
the Partnership;
(b) file and publish all certificates, statements or other instruments
required by law for the formation and operation of the Partnership as a
limited partnership in all appropriate jurisdictions;
(c) cause the Partnership to carry Insurance from an Insurance
Company;
(d) have a fiduciary responsibility for the safekeeping and use of all
funds and assets of the Partnership, whether or not in its immediate
possession or control and not employ or permit another to employ such funds
or assets in any manner except for the benefit of the Partnership;
30
(e) use its best efforts so that all requirements shall be met which
are reasonably necessary to obtain or achieve (1) compliance with the
Minimum Set-Aside Test, the Rent Restriction Test, and any other
requirements necessary for the Apartment Housing to initially qualify, and
to continue to qualify, for LIHTC; (2) issuance of all necessary
certificates of occupancy, including all governmental approvals required to
permit occupancy of all of the apartment units in the Apartment Housing;
(3) compliance with all provisions of the Project Documents and (4) a
reservation and allocation of LIHTC from the State Tax Credit Agency;
(f) make inspections of the Apartment Housing and assure that the
Apartment Housing is in decent, safe, sanitary and good condition, repair
and working order, ordinary use and obsolescence excepted, and make or
cause to be made from time to time all necessary repairs thereto (including
external and structural repairs) and renewals and replacements thereof;
(g) pay, before the same shall become delinquent and before penalties
accrue thereon all Partnership taxes, assessments and other governmental
charges against the Partnership or its properties, and all of its other
liabilities, except to the extent and so long as the same are being
contested in good faith by appropriate proceedings in such manners as not
to cause any material adverse effect on the Partnership's property,
financial condition or business operations, with adequate reserves provided
for such payments;
(h) permit, and cause the Management Agent to permit, the Special
Limited Partner and its representatives: (1) to have access to the
Apartment Housing and personnel employed by the Partnership and by the
Management Agent at all times during normal business hours after reasonable
notice; (2) to examine all agreements, LIHTC compliance data and Plans and
Specifications; and (3) to make copies thereof;
(i) exercise good faith in all activities relating to the conduct of
the business of the Partnership, including the development, operation and
maintenance of the Apartment Housing, and shall take no action with respect
to the business and property of the Partnership which is not reasonably
related to the achievement of the purpose of the Partnership;
(j) make any Capital Contributions, advances or loans required to be
made by the General Partner under the terms of this Agreement;
(k) establish and maintain all reserves required to be established and
maintained under the terms of this Agreement;
(l) cause the Management Agent to manage the Apartment Housing in such
a manner that the Apartment Housing will be eligible to receive LIHTC with
respect to 100% of the apartment units in the Apartment Housing. To that
end, the General Partner agrees, without limitation: (1) to make all
elections requested by the Special Limited Partner under Section 42 of the
Code to allow the Partnership or its Partners to claim the Tax Credit; (2)
to file Form 8609 with respect to the Apartment Housing as required, for at
least the duration of the Compliance Period; (3) to operate the Apartment
Housing and cause the Management Agent to manage the Apartment Housing so
as to comply with the requirements of Section 42 of the Code, as amended,
or any successor thereto, including, but not limited to, Section 42(g) and
Section 42(i)(3) of the Code, as amended, or any successors thereto; (4) to
31
make all certifications required by Section 42(l) of the Code, as amended,
or any successor thereto; and (5) to operate the Apartment Housing and
cause the Management Agent to manage the Apartment Housing so as to comply
with all other Tax Credit Conditions; and
(m) perform such other acts as may be expressly required of it under
the terms of this Agreement.
Section 9.8 Obligations to Repair and Rebuild Apartment Housing. With the
approval of any lender, if such approval is required, any Insurance proceeds
received by the Partnership due to fire or other casualty affecting the
Apartment Housing will be utilized to repair and rebuild the Apartment Housing
in satisfaction of the conditions contained in Section 42(j)(4) of the Code and
to the extent required by any lender. Any such proceeds received in respect of
such event occurring after the Compliance Period shall be so utilized or, if
permitted by the Project Documents and with the Consent of the Special Limited
Partner, shall be treated as Sale or Refinancing Proceeds.
Section 9.9 Partnership Expenses.
(a) All of the Partnership's expenses shall be billed directly to and
paid by the Partnership to the extent practicable. Reimbursements to the
General Partner, or any of its Affiliates, by the Partnership shall be
allowed only for the Partnership's Cash Expenses unless the General Partner
is obligated to pay the same as an Operating Deficit during the Operating
Deficit Guarantee Period, and subject to the limitations on the
reimbursement of such expenses set forth herein. For purposes of this
Section, Cash Expenses shall include fees paid by the Partnership to the
General Partner or any Affiliate of the General Partner permitted by this
Agreement and the actual cost of goods, materials and administrative
services used for or by the Partnership, whether incurred by the General
Partner, an Affiliate of the General Partner or a nonaffiliated Person in
performing the foregoing functions. As used in the preceding sentence,
"actual cost of goods and materials" means the actual cost of goods and
materials used for or by the Partnership and obtained from entities which
are not Affiliates of the General Partner, and actual cost of
administrative services means the pro rata cost of personnel (as if such
persons were employees of the Partnership) associated therewith, but in no
event to exceed the amount which would be charged by nonaffiliated Persons
for comparable goods and services.
(b) Reimbursement to the General Partner or any of its Affiliates of
operating cash expenses pursuant to Subsection (a) hereof shall be subject
to the following:
(1) no such reimbursement shall be permitted for services for
which the General Partner or any of its Affiliates is entitled to
compensation by way of a separate fee; and
(2) no such reimbursement shall be made for (A) rent or
depreciation, utilities, capital equipment or other such
administrative items, and (B) salaries, fringe benefits, travel
expenses and other administrative items incurred or allocated to any
"controlling person" of the General Partner or any Affiliate of the
General Partner. For the purposes of this Section 9.9(b)(2),
"controlling person" includes, but is not limited to, any Person,
however titled, who performs functions for the General Partner or any
32
Affiliate of the General Partner similar to those of: (i) chairman or
member of the board of directors; (ii) executive management, such as
president, vice president or senior vice president, corporate
secretary or treasurer; (iii) senior management, such as the vice
president of an operating division who reports directly to executive
management; or (iv) those holding 5% or more equity interest in such
General Partner or any such Affiliate of the General Partner or a
person having the power to direct or cause the direction of such
General Partner or any such Affiliate of the General Partner, whether
through the ownership of voting securities, by contract or otherwise.
Section 9.10 General Partner Expenses. The General Partner or Affiliates of
the General Partner shall pay all Partnership expenses which are not permitted
to be reimbursed pursuant to Section 9.9 and all expenses which are unrelated to
the business of the Partnership.
Section 9.11 Other Business of Partners. Any Partner may engage
independently or with others in other business ventures wholly unrelated to the
Partnership business of every nature and description, including, without
limitation, the acquisition, development, construction, operation and management
of real estate projects and developments of every type on their own behalf or on
behalf of other partnerships, joint ventures, corporations or other business
ventures formed by them or in which they may have an interest, including,
without limitation, business ventures similar to, related to or in direct or
indirect competition with the Apartment Housing. Neither the Partnership nor any
Partner shall have any right by virtue of this Agreement or the partnership
relationship created hereby in or to such other ventures or activities or to the
income or proceeds derived therefrom. Conversely, no Person shall have any
rights to Partnership assets, incomes or proceeds by virtue of such other
ventures or activities of any Partner.
Section 9.12 Covenants, Representations and Warranties. The General Partner
covenants, represents and warrants that the following are presently true, will
be true at the time of each Capital Contribution payment made by the Limited
Partner and will be true during the term of this Agreement, to the extent then
applicable.
(a) The Partnership is a duly organized limited partnership validly
existing under the laws of the State and has complied with all filing
requirements necessary for the protection of the limited liability of the
Limited Partner and the Special Limited Partner.
(b) The Partnership Agreement and the Project Documents are in full
force and effect and neither the Partnership nor the General Partner is in
breach or violation of any provisions thereof.
(c) Improvements will be completed in a timely and workerlike manner
in accordance with all applicable requirements of all appropriate
governmental entities and the Plans and Specifications of the Apartment
Housing.
(d) All conditions to the funding of the Mortgage Loans have been met.
(e) The Apartment Housing is being operated in accordance with
standards and procedures which are prudent and customary for the operation
of properties similar to the Apartment Housing.
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(f) No Partner has or will have any personal liability with respect to
or has or will have personally guaranteed the payment of the Mortgage
Loans.
(g) The Partnership is in compliance with all construction and use
codes applicable to the Apartment Housing and is not in violation of any
zoning, environmental or similar regulations applicable to the Apartment
Housing.
(h) All appropriate public utilities, including sanitary and storm
sewers, water, gas and electricity, are currently available and will be
operating properly for all units in the Apartment Housing at the time of
first occupancy and throughout the term of the Partnership.
(i) All roads necessary for the full utilization of the Improvements
have either been completed or the necessary rights of way therefore have
been acquired by the appropriate governmental authority or have been
dedicated to public use and accepted by said governmental authority.
(j) The Partnership has obtained Insurance written by an Insurance
Company.
(k) The Partnership owns the fee simple interest in the Apartment
Housing.
(l) The Construction Contract has been entered into between the
Partnership and the Contractor; no other consideration or fee shall be paid
to the Contractor other than amounts set forth in the Construction
Contract.
(m) The Partnership will require the Accountant to depreciate the
Improvements over a 27 1/2-year term. Site work shall be broken out
separately from Improvements and depreciated over 15 years using the cost
recovery system, mid-year 200% declining balance depreciation method.
Landscaping and personal property (cabinets, appliances, carpet and window
coverings) shall be depreciated over 5 years for regular tax or 9 years for
alternative minimum tax.
(n) To the best of the General Partner's knowledge: (1) no Hazardous
Substance has been disposed of, or released to or from, or otherwise now
exists in, on, under or around, the Apartment Housing and (2) no
aboveground or underground storage tanks are now or have ever been located
on or under the Apartment Housing. The General Partner will not install or
allow to be installed any aboveground or underground storage tanks on the
Apartment Housing. The General Partner will use its best efforts to keep
the Apartment Housing free of Hazardous Substances and shall not use or
generate, manufacture, refine, transport, treat, store, handle, dispose of,
transfer, produce or process Hazardous Substance, and shall immediately
take all remedial action as required by any governmental agency or as
required by law which is necessary to remove such Hazardous Substance,
except in connection with the normal maintenance and operation of any
portion of the Apartment Housing. The General Partner shall comply, and use
its best efforts to cause there to be compliance, with all applicable
Federal, state and local laws, ordinances, rules and regulations with
respect to Hazardous Substance and shall keep, or cause to be kept, the
Apartment Housing free and clear of any liens imposed pursuant to such
laws, ordinances, rules and regulations. The General Partner must promptly
notify the Limited Partner and the Special Limited Partner in writing (3)
if it knows, or suspects or believes there may be any Hazardous Substance
in or around any part of the Apartment Housing, any Improvements
34
constructed on the Apartment Housing, or the soil, groundwater or soil
vapor, (4) if the General Partner or the Partnership may be subject to any
threatened or pending investigation by any governmental agency under any
law, regulation or ordinance pertaining to any Hazardous Substance, and (5)
of any claim made or threatened by any Person, other than a governmental
agency, against the Partnership or General Partner arising out of or
resulting from any Hazardous Substance being present or released in, on or
around any part of the Apartment Housing.
(o) The General Partner has not executed and will not execute any
agreements with provisions contradictory to, or in opposition to, the
provisions of this Agreement.
(p) The Partnership will allocate to the Limited Partner the Projected
Annual Tax Credits, or the Revised Projected Tax Credits, if applicable.
(q) No charges, liens or encumbrances exist with respect to the
Apartment Housing other than those which are created or permitted by the
Project Documents or Mortgage or are noted or excepted in the Title Policy.
(r) The Partnership shall retain the Inspecting Architect and ensure
that the Architect of Record's responsibilities include, but are not
limited to, preparing and overseeing the construction close-out procedures
upon completion; inspecting for and overseeing resolution of the
Contractor's final punch list items; receiving and approving operation and
maintenance manuals; collecting, reviewing, approving and forwarding to the
Partnership all warranties, check key count and key schedules; and
confirming turnover of spare parts and materials.
(s) The buildings on the Apartment Housing site constitute or shall
constitute a "qualified low-income housing project" as defined in Section
42(g) of the Code, and as amplified by the Treasury Regulations thereunder.
In this connection, not later than December 31 of the first year in which
the Partners elect the LIHTC to commence in accordance with the Code, the
Apartment Housing will satisfy the Minimum Set-Aside Test.
(t) All accounts of the Partnership required to be maintained under
the terms of the Project Documents, including, without limitation, any
reserves in accordance with Article VIII hereof, are currently funded to
required levels, including levels required by any authority.
(u) The General Partner has not lent or otherwise advanced any funds
to the Partnership other than its Capital Contribution, or Operating
Deficit Loan, if applicable, and the Partnership has no unsatisfied
obligation to make any payments of any kind to the General Partner or any
Affiliate thereof.
(v) No event has occurred which constitutes a default under any of the
Project Documents.
(w) No event has occurred which has caused, and the General Partner
has not acted in any manner which will cause (1) the Partnership to be
treated for federal income tax purposes as an association taxable as a
corporation, (2) the Partnership to fail to qualify as a limited
partnership under the Act, or (3) the Limited Partner to be liable for
Partnership obligations; provided however, the General Partner shall not be
35
in breach of this representation if all or a portion of a Limited Partner's
agreed upon Capital Contributions are used to satisfy the Partnership's
obligations to creditors of the Partnership and such action by the General
Partner is otherwise authorized under this Agreement and; provided further,
however, the General Partner shall not be in breach of this representation
if the action causing the Limited Partner to be liable for the Partnership
obligations is undertaken by the Limited Partner.
(x) No event or proceeding, including, but not limited to, any legal
actions or proceedings before any court, commission, administrative body or
other governmental authority, and acts of any governmental authority having
jurisdiction over the zoning or land use laws applicable to the Apartment
Housing, has occurred the continuing effect of which has: (1) materially or
adversely affected the operation of the Partnership or the Apartment
Housing; (2) materially or adversely affected the ability of the General
Partner to perform its obligations hereunder or under any other agreement
with respect to the Apartment Housing; or (3) prevented the completion of
construction of the Improvements in substantial conformity with the Project
Documents, other than legal proceedings which have been bonded against (or
as to which other adequate financial security has been issued) in a manner
as to indemnify the Partnership against loss; provided, however, the
foregoing does not apply to matters of general applicability which would
adversely affect the Partnership, the General Partner, Affiliates of the
General Partner or the Apartment Housing only insofar as they or any of
them are part of the general public.
(y) Neither the Partnership nor the General Partner has any
liabilities, contingent or otherwise, which have not been disclosed in
writing to the Limited Partner and the Special Limited Partner and which in
the aggregate affect the ability of the Limited Partner to obtain the
anticipated benefits of its investment in the Partnership.
(z) Upon signing of the Mortgage Loan documents and receipt of the
written start order, the General Partner will cause renovation of the
Improvements to commence and thereafter will cause the Contractor to
diligently proceed with renovation of the Improvements according to the
Plans and Specifications so that renovation of the Improvements can be
completed by the Completion Date.
(aa) The General Partner has contacted the local tax assessor, or
similar representative, and has determined that the Real Estate Taxes are
accurate and correct, and that the Partnership will not be required to pay
any more for real estate taxes, or property taxes, than the amount of Real
Estate Taxes, referenced in this Agreement, except for annual increases
imposed on all real estate within the same county as the Apartment Housing.
In the event the actual real estate taxes, or property taxes, are greater
than the Real Estate Taxes specified in this Agreement and as a result of
the higher real estate tax, or property tax, the Debt Service Coverage
falls below 1.15 then the General Partner will contribute additional
capital to lower the principal of the mortgage and reamortize the Mortgage
so that the Debt Service Coverage is at a sustainable 1.15, as approved by
the Special Limited Partner. If the Mortgage lender will not or cannot
reamortize the loan as specified in this Section, and the General Partner
cannot obtain another mortgage, then the General Partner will contribute
additional capital as determined by the Special Limited Partner to the T &
I Account in an amount equal to the annual difference between the actual
real estate tax, or property tax, over the Real Estate Taxes specified in
this Agreement times the number of years remaining on the 15-year LIHTC
36
compliance term. Any payment by the General Partner pursuant to this
section shall be in addition to the General Partner's obligation to fund
Operating Deficits.
(bb) The Partnership will maintain a Debt Service Coverage of not less
than 1.15 and will not close on a permanent loan or refinance a Mortgage
loan if the Debt Service Coverage would fall below 1.15.
(cc) The General Partner will use its best efforts to ensure that any
architect retained by the Partnership or General Partner will have a policy
of professional liability insurance in an amount not less than $1,000,000,
which policy should remain in force for a period of at least two years
after the closing and funding of the Mortgage.
(dd) The General Partner has and shall maintain a net worth equal to
at least $1,000,000 computed in accordance with generally accepted
accounting principles.
(ee) The Partnership is in compliance with and will maintain
compliance with the requirements of the federal Fair Housing Act of 1968
(42 U.S.C. 3600 et seq.) as amended, with respect to the Apartment Housing.
(ff) Neither the General Partner nor its Affiliates will take any
action or agree to any terms or conditions that are contrary to, or in
disagreement with, the tax credit application used to secure the LIHTC, or
the land use restriction agreement required to be recorded against the
Apartment Housing.
The General Partner shall be liable to the Limited Partner for any
costs, damages, loss of profits, diminution in the value of its investment in
the Partnership, or other losses, of every nature and kind whatsoever, direct or
indirect, realized or incurred by the Limited Partner as a result of any
material breach of the representations and warranties set forth in this Section
9.12.
Section 9.13 Indemnification of the Partnership and the Limited Partners
The General Partner will indemnify and hold the Partnership and the
Limited Partners harmless from and against any and all losses, damages and
liabilities (including reasonable attorney's fees) which the Partnership or any
Limited Partner may incur by reason of the past, present, or future actions or
omissions of the General Partner or any of its Affiliates that constitute gross
negligence or willful misconduct, fraud, malfeasance, breach of fiduciary duty
or breach of any material provision of this Agreement that has a material
adverse effect on the Apartment Housing, the Partnership, or any Limited
Partner.
ARTICLE X
ALLOCATIONS OF INCOME, LOSSES AND CREDITS
Section 10.1 General. All items includable in the calculation of Income or
Loss not arising from a Sale or Refinancing, and all Tax Credits, shall be
allocated 99.98% to the Limited Partner, .01% to the Special Limited Partner and
..01% to the General Partner.
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Section 10.2 Allocations From Sale or Refinancing. All Income and Losses
arising from a Sale or Refinancing shall be allocated between the Partners as
follows:
(a) As to Income:
(1) first, an amount of Income equal to the aggregate negative
balances (if any) in the Capital Accounts of all Partners having
negative Capital Accounts (prior to taking into account the Sale or
Refinancing and the Distribution of the related Sale or Refinancing
Proceeds, but after giving effect to Distributions of Net Operating
Income and allocations of other Income and Losses pursuant to this
Article X up to the date of the Sale or Refinancing) shall be
allocated to such Partners in proportion to their negative Capital
Account balances until all such Capital Accounts shall have zero
balances; and
(2) the balance, if any, of such Income shall be allocated to the
Partners in the proportions necessary so that the Partners will
receive the amounts to which they are entitled pursuant to Section
11.2 hereof.
(b) Losses shall be allocated 99.98% to the Limited Partner, .01% to
the Special Limited Partner and .01% to the General Partner.
(c) Notwithstanding the foregoing provisions of Section 10.2(a) and
(b), in no event shall any Losses be allocated to the Limited Partner or
the Special Limited Partner if and to the extent that such allocation would
create or increase an Adjusted Capital Account Deficit for the Limited
Partner or the Special Limited Partner. In the event an allocation of
99.98% or .01% of each item includable in the calculation of Income or Loss
not arising from a Sale or Refinancing, would create or increase an
Adjusted Capital Account Deficit for the Limited Partner or the Special
Limited Partner, respectively, then so much of the items of deduction other
than projected depreciation shall be allocated to the General Partner
instead of the Limited Partner or the Special Limited Partner as is
necessary to allow the Limited Partner or the Special Limited Partner to be
allocated 99.98% and .01%, respectively, of the items of Income and
Apartment Housing depreciation without creating or increasing an Adjusted
Capital Account Deficit for the Limited Partner or the Special Limited
Partner, it being the intent of the parties that the Limited Partner and
the Special Limited Partner always shall be allocated 99.98% and .01%,
respectively, of the items of Income not arising from a Sale or Refinancing
and 99.98% and .01%, respectively, of the Apartment Housing depreciation.
Section 10.3 Special Allocations. The following special allocations shall
be made in the following order.
(a) Except as otherwise provided in Section 1.704-2(f) of the Treasury
Regulations, notwithstanding any other provisions of this Article X, if
there is a net decrease in Partnership Minimum Gain during any Partnership
fiscal year, each Partner 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 such Person's share of the net decrease in
Partnership Minimum Gain, determined in accordance with Treasury
Regulations Section 1.704-2(g). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required to
be allocated to each Partner pursuant thereto. The items to be so allocated
38
shall be determined in accordance with Section 1.704-2(f)(6) and
1.704-2(j)(2) of the Treasury Regulations. This Section 10.3(a) is intended
to comply with the minimum gain chargeback requirement in Section
1.704-2(f) of the Treasury Regulations and shall be interpreted
consistently therewith.
(b) Except as otherwise provided in Section 1.704-2(i)(4) of the
Treasury Regulations, notwithstanding any other provision of this Article
X, if there is a net decrease in Partner Nonrecourse Debt Minimum Gain
attributable to a Partner Nonrecourse Debt during any Partnership fiscal
year, each Person who has a share of the Partner Nonrecourse Debt Minimum
Gain attributable to such Partner Nonrecourse Debt, determined in
accordance with Section 1.704-2(i)(5) of the Treasury 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
such Person's share of the net decrease in Partner Nonrecourse Debt Minimum
Gain attributable to such Partner Nonrecourse Debt, determined in
accordance with Treasury Regulations Section 1.704-2(i)(4). Allocations
pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Partner pursuant
thereto. The items to be so allocated shall be determined in accordance
with Sections 1.704-2(i)(4) and 1.704-2(j)(2) of the Treasury Regulations.
This Section 10.3(b) is intended to comply with the minimum gain chargeback
requirement in Section 1.704-2(i)(4) of the Treasury Regulations and shall
be interpreted consistently therewith.
(c) In the event any Partner unexpectedly receives any adjustments,
allocations, or distributions described in Treasury Regulations Section
1.704-1(b)(2)(ii)(d)(4), Section 1.704-1(b)(2)(ii)(d)(5), or Section
1.704-1(b)(2)(ii)(d)(6), items of Partnership income and gain shall be
specially allocated to each such Partner in an amount and manner sufficient
to eliminate, to the extent required by the Treasury Regulations, the
Adjusted Capital Account Deficit of such Partner as quickly as possible,
provided that an allocation pursuant to this Section 10.3(c) shall be made
if and only to the extent that such Partner would have an Adjusted Capital
Account Deficit after all other allocations provided for in this Section
10.3 have been tentatively made as if this Section 10.3(c) were not in the
Agreement.
(d) In the event any Partner has a deficit Capital Account at the end
of any Partnership fiscal year which is in excess of the sum of (i) the
amount such Partner is obligated to restore, and (ii) the amount such
Partner is deemed to be obligated to restore pursuant to the penultimate
sentences of Treasury Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5),
each such Partner shall be specially allocated items of Partnership income
and gain in the amount of such excess as quickly as possible, provided that
an allocation pursuant to this Section 10.3(d) shall be made if and only to
the extent that such Partner would have a deficit Capital Account in excess
of such sum after all other allocations provided for in this Section 10.3
have been tentatively made as if this Section 10.3(d) and Section 10.3(c)
hereof were not in the Agreement.
(e) Nonrecourse Deductions for any fiscal year shall be specially
allocated 99.98% to the Limited Partner, .01% to the Special Limited
Partner and .01% to the General Partner.
(f) Any Partner Nonrecourse Deductions for any fiscal year shall be
specially allocated to the Partner who bears the economic risk of loss with
respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse
39
Deductions are attributable in accordance with Treasury Regulations Section
1.704-2(i)(1).
(g) To the extent an adjustment to the adjusted tax basis of any
Partnership asset pursuant to Code Section 734(b) or Code Section 743(b) is
required, pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(2)
or Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining
Capital Accounts as the result of a distribution to a Partner in complete
liquidation of his interest in the Partnership, 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 accordance with their interests in the Partnership in the
event that Treasury Regulations Section 1.704-1 (b)(2)(iv)(m)(2) applies,
or to the Partner to whom such distribution was made in the event that
Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.
(h) To the extent the Partnership has taxable interest income with
respect to any promissory note pursuant to Section 483 or Section 1271
through 1288 of the Code:
(1) such interest income shall be specially allocated to the
Limited Partner to whom such promissory note relates; and
(2) the amount of such interest income shall be excluded from the
Capital Contributions credited to such Partner's Capital Account in
connection with payments of principal with respect to such promissory
note.
(i) In the event the adjusted tax basis of any investment tax credit
property that has been placed in service by the Partnership is increased
pursuant to Code Section 50(c), such increase shall be specially allocated
among the Partners (as an item in the nature of income or gain) in the same
proportions as the investment tax credit that is recaptured with respect to
such property is shared among the Partners.
(j) Any reduction in the adjusted tax basis (or cost) of Partnership
investment tax credit property pursuant to Code Section 50(c) shall be
specially allocated among the Partners (as an item in the nature of
expenses or losses) in the same proportions as the basis (or cost) of such
property is allocated pursuant to Treasury Regulations Section
1.46-3(f)(2)(i).
(k) Any income, gain, loss or deduction realized as a direct or
indirect result of the issuance of an interest in the Partnership by the
Partnership to a Partner (the "Issuance Items") shall be allocated among
the Partners so that, to the extent possible, the net amount of such
Issuance Items, together with all other allocations under this Agreement to
each Partner, shall be equal to the net amount that would have been
allocated to each such Partner if the Issuance Items had not been realized.
(l) If any Partnership expenditure treated as a deduction on its
federal income tax return is disallowed as a deduction and treated as a
distribution pursuant to Section 731(a) of the Code, there shall be a
special allocation of gross income to the Partner deemed to have received
such distribution equal to the amount of such distribution.
40
(m) Interest deduction on the Partnership indebtedness referred to in
Section 6.4 shall be allocated 100% to the General Partner.
(n) In the event all or part of the Incentive Management Fee or the
Tax Credit Compliance Fee is disallowed by the Internal Revenue Service,
then any interest or income chargeable to the Partnership for such
disallowance shall be allocated to the General Partner.
Section 10.4 Curative Allocations. The allocations set forth in Sections
10.2(c), 10.3(a), 10.3(b), 10.3(c), 10.3(d), 10.3(e), 10.3(f), and 10.3(g)
hereof (the "Regulatory Allocations") are intended to comply with certain
requirements of the Treasury Regulations. It is the intent of the Partners that,
to the extent possible, all Regulatory Allocations shall be offset either with
other Regulatory Allocations or with special allocations of other items of
Partnership income, gain, loss, or deduction pursuant to this Section 10.4.
Therefore, notwithstanding any other provision of this Article X (other than the
Regulatory Allocations), with the Consent of the Special Limited Partner, the
General Partner shall make such offsetting special allocations of Partnership
income, gain, loss, or deduction in whatever manner the General Partner, with
the Consent of the Special Limited Partner, determines appropriate so that,
after such offsetting allocations are made, each Partner's Capital Account
balance is, to the extent possible, equal to the Capital Account balance such
Partner would have had if the Regulatory Allocations were not part of the
Agreement and all Partnership items were allocated pursuant to Sections 10.1,
10.2(a), 10.2(b), 10.3(h), 10.3(i), 10.3(j), 10.3(k), 10.3(l), 10.3(m), 10.3(n)
and 10.5. In exercising its authority under this Section 10.4, the General
Partner shall take into account future Regulatory Allocations under Sections
10.3(a) and 10.3(b) that, although not yet made, are likely to offset other
Regulatory Allocations previously made under Sections 10.3(e) and 10.3(f).
Section 10.5 Other Allocation Rules.
(a) The basis (or cost) of any Partnership investment tax credit
property shall be allocated among the Partners in accordance with Treasury
Regulations Section 1.46-3(f)(2)(i). All Tax Credits (other than the
investment tax credit) shall be allocated among the Partners in accordance
with applicable law. Consistent with the foregoing, the Partners intend
that LIHTC will be allocated 99.98% to the Limited Partner, .01% to the
Special Limited Partner and .01% to the General Partner.
(b) In the event Partnership investment tax credit property is
disposed of during any taxable year, profits for such taxable year (and, to
the extent such profits are insufficient, profits for subsequent taxable
years) in an amount equal to the excess, if any, of (1) the reduction in
the adjusted tax basis (or cost) of such property pursuant to Code Section
50(c), over (2) any increase in the adjusted tax basis of such property
pursuant to Code Section 50(c) caused by the disposition of such property,
shall be excluded from the profits allocated pursuant to Section 10.1 and
Section 10.2(a) hereof and shall instead be allocated among the Partners in
proportion to their respective shares of such excess, determined pursuant
to Section 10.3(i) and 10.3(j) hereof. In the event more than one item of
such property is disposed of by the Partnership, the foregoing sentence
shall apply to such items in the order in which they are disposed of by the
Partnership, so the profits equal to the entire amount of such excess with
respect to the first such property disposed of shall be allocated prior to
any allocations with respect to the second such property disposed of, and
so forth.
41
(c) For purposes of determining the Income, Losses, or any other items
allocable to any period, Income, Losses, and any such other items shall be
determined on a daily, monthly, or other basis, as determined by the
General Partner with the Consent of the Special Limited Partner, using any
permissible method under Code Section 706 and the Treasury Regulations
thereunder.
(d) Solely for purposes of determining a Partner's proportionate share
of the "excess nonrecourse liabilities" of the Partnership within the
meaning of Treasury Regulations Section 1.752-3(a)(3), the Partners'
interests in Partnership profits are as follows: Limited Partner: 99.98%;
Special Limited Partner: .01%; General Partner: .01%.
(e) To the extent permitted by Section 1.704-2(h)(3) of the Treasury
Regulations, the General Partner shall endeavor to treat Distributions 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 any Partner who is not a
General Partner.
(f) In the event that the deduction of all or a portion of any fee
paid or incurred out of Net Operating Income by the Partnership to a
Partner or an Affiliate of a Partner is disallowed for federal income tax
purposes by the Internal Revenue Service with respect to a taxable year of
the Partnership, the Partnership shall then allocate to such Partner an
amount of gross income of the Partnership for such year equal to the amount
of such fee as to which the deduction is disallowed.
Section 10.6 Tax Allocations: Code Section 704(c). In accordance with Code
Section 704(c) and the Treasury Regulations thereunder, income, gain, loss, and
deduction with respect to any property contributed to the capital of the
Partnership shall, solely for tax purposes, be allocated among the Partners so
as to take account of any variation between the adjusted basis of such property
to the Partnership for federal income tax purposes and its initial Gross Asset
Value (computed in accordance with Section 1.34(a) hereof).
In the event the Gross Asset Value of any Partnership asset is adjusted
pursuant to Section 1.34(b) hereof, subsequent allocations of income, gain,
loss, and deduction with respect to such asset shall take account of any
variation between the adjusted basis of such asset for federal income tax
purposes and its Gross Asset Value in the same manner as under Code Section
704(c) and the Treasury Regulations thereunder.
Any elections or other decisions relating to such allocations shall be
made by the General Partner with the Consent of the Special Limited Partner in
any manner that reasonably reflects the purpose and intention of this Agreement.
Allocations pursuant to this Section 10.6 are solely for purposes of federal,
state, and local taxes and shall not affect, or in any way be taken into account
in computing, any Person's Capital Account or share of Income, Losses, other
items, or distributions pursuant to any provision of this Agreement.
Section 10.7 Allocation Among Limited Partners. In the event that the
Interest of the Limited Partner hereunder is at any time held by more than one
Limited Partner all items which are specifically allocated to the Limited
42
Partner for any month pursuant to this Article X shall be apportioned among such
Persons according to the ratio of their respective profit-sharing interests in
the Partnership at the last day of such month.
Section 10.8 Allocation Among General Partners. In the event that the
Interest of the General Partner hereunder is at any time held by more than one
General Partner all items which are specifically allocated to the General
Partner for any month pursuant to this Article X shall be apportioned among such
Persons in such percentages as may from time to time be determined by agreement
among them without amendment to this Agreement or consent of the Limited Partner
or Consent of the Special Limited Partner.
Section 10.9 Modification of Allocations. The provisions of Articles X and
XI and other provisions of this Agreement are intended to comply with Treasury
Regulations Section 1.704 and shall be interpreted and applied in a manner
consistent with such section of the Treasury Regulations. In the event that the
General Partner determines, in its sole discretion, that it is prudent to modify
the manner in which the Capital Accounts of the Partners, or any debit or credit
thereto, are computed in order to comply with such section of the Treasury
Regulations, the General Partner may make such modification, but only with the
Consent of the Special Limited Partner, to the minimum extent necessary, to
effect the plan of allocations and Distributions provided for elsewhere in this
Agreement. Further, the General Partner shall make any appropriate
modifications, but only with the Consent of the Special Limited Partner, in the
event it appears that unanticipated events (e.g., the existence of a Partnership
election pursuant to Code Section 754) might otherwise cause this Agreement not
to comply with Treasury Regulation Section 1.704.
ARTICLE XI
DISTRIBUTION
Section 11.1 Distribution of Net Operating Income. Except as otherwise
provided and subject to the requirements of RD regarding Partnership
distributions, Net Operating Income for each fiscal year shall be distributed
within 75 days following each calendar year and shall be applied in the
following order of priority:
(a) to pay the Deferred Management Fee, if any;
(b) to pay the current Asset Management Fee and then to pay any
accrued Asset Management Fees which have not been paid in full from
previous years;
(c) to pay the Development Fee;
(d) to pay the Operating Loans, if any, limited to 50% of the Net
Operating Income remaining after reduction for the payments made pursuant
to subsections (a) through (c) of this Section 11.1;
(e) to pay the Incentive Management Fee;
(f) to pay the Tax Credit Compliance Fee; and
43
(g) the balance, 29.99% to the Limited Partner, 0.01% to the Special
Limited Partner, and 70% to the General Partner.
Section 11.2 Distribution of Sale or Refinancing Proceeds. Sale or
Refinancing Proceeds shall be distributed in the following order:
(a) to the payment of the Mortgage and other matured debts and
liabilities of the Partnership, other than accrued payments, debts or other
liabilities owing to Partners or former Partners;
(b) to any accrued payments, debts or other liabilities owing to the
Partners or former Partners, including, but not limited to, accrued
Reporting Fees and Operating Loans, to be paid prorata if necessary;
(c) to the establishment of any reserves which the General Partner,
with the Consent of the Special Limited Partner, shall deem reasonably
necessary for contingent, unmatured or unforeseen liabilities or
obligations of the Partnership; and
(d) thereafter, 29.99% to the Limited Partner, 0.01% to the Special
Limited Partner, and 70% to the General Partner.
ARTICLE XII
TRANSFERS OF LIMITED PARTNER'S INTEREST IN THE PARTNERSHIP
Section 12.1 Assignment of Limited Partner's Interest. The Limited Partner
and Special Limited Partner shall have the right to assign all or any part of
their respective Interests to any other Person, whether or not a Partner, upon
satisfaction of the following:
(a) a written instrument in form and substance satisfactory to the
General Partner and its counsel, setting forth the name and address of the
proposed transferee, the nature and extent of the Interest which is
proposed to be transferred and the terms and conditions upon which the
transfer is proposed to be made, stating that the Assignee accepts and
agrees to be bound by all of the terms and provisions of this Agreement,
and providing for the payment of all reasonable expenses incurred by the
Partnership in connection with such assignment, including but not limited
to the cost of preparing any necessary amendment to this Agreement;
(b) upon consent of the General Partner to such assignment, which
consent shall not be unreasonably withheld; and
(c) upon receipt by the General Partner of the Assignee's written
representation that the Partnership Interest is to be acquired by the
Assignee for the Assignee's own account for long-term investment and not
with a view toward resale, fractionalization, division or distribution
thereof.
Notwithstanding any provision to the contrary, the Limited Partner may
assign its Interest to an Affiliate or assign its Interest to U.S. Bank National
44
Association or its successors as collateral to secure a capital contribution
loan without satisfying the conditions of Sections 12.1(a) through (c) above.
THE LIMITED PARTNERSHIP INTEREST AND THE SPECIAL LIMITED PARTNERSHIP
INTEREST DESCRIBED HEREIN HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 AS AMENDED OR UNDER ANY STATE SECURITIES LAW. THESE INTERESTS MAY NOT BE
SOLD OR OTHERWISE TRANSFERRED UNLESS REGISTERED UNDER APPLICABLE FEDERAL AND
STATE SECURITIES LAWS OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
Section 12.2 Effective Date of Transfer. Any assignment of a Limited
Partner's Interest or Special Limited Partner's Interest pursuant to Section
12.1 shall become effective as of the last day of the calendar month in which
the last of the conditions to such assignment are satisfied.
Section 12.3 Invalid Assignment. Any purported assignment of an Interest of
a Limited Partner or Special Limited Partner otherwise than in accordance with
Section 12.1 or Section 12.6 shall be of no effect as between the Partnership
and the purported assignee and shall be disregarded by the General Partner in
making allocations and Distributions hereunder.
Section 12.4 Assignee's Rights to Allocations and Distributions. An
Assignee shall be entitled to receive allocations and Distributions from the
Partnership attributable to the Interest acquired by reason of any permitted
assignment from and after the first day of the calendar month of the transfer of
such Interest as provided in Section 12.2. The Partnership and the General
Partner shall be entitled to treat the assignor of such Partnership Interest as
the absolute owner thereof in all respects, and shall incur no liability for
allocations and Distributions made in good faith to such assignor, until such
time as the written instrument of assignment has been received by the
Partnership.
Section 12.5 Substitution of Assignee as Limited Partner or Special Limited
Partner.
(a) An Assignee shall not have the right to become a Substitute
Limited Partner or Substitute Special Limited Partner in place of his
assignor unless the written consent of the General Partner to such
substitution shall have been obtained, which consent, in the General
Partner's absolute discretion, may be withheld; except that an Assignee
which is an Affiliate of the Limited Partner or Special Limited Partner, or
U.S. Bank or its successors, may become a Substitute Limited Partner or
Substitute Special Limited Partner without the consent of the General
Partner.
(b) A nonadmitted transferee of a Limited Partner's Interest or
Special Limited Partner's Interest in the Partnership shall only be
entitled to receive that share of allocations, Distributions and the return
of Capital Contribution to which its transferor would otherwise have been
entitled with respect to the Interest transferred, and shall have no right
to obtain any information on account of the Partnership's transactions, to
inspect the Partnership's books and records or have any other of the rights
and privileges of a Limited Partner or Special Limited Partner, provided,
however, that the Partnership shall, if a transferee and transferor jointly
45
advise the General Partner in writing of a transfer of an Interest in the
Partnership, furnish the transferee with pertinent tax information at the
end of each fiscal year of the Partnership.
(c) The General Partner may elect to treat a transferee of a
Partnership Interest who has not become a Substitute Limited Partner or
substitute Special Limited Partner as a Substitute Limited Partner or
substitute Special Limited Partner, as the case may be, in the place of its
transferor should the General Partner determine in its absolute discretion
that such treatment is in the best interest of the Partnership.
Section 12.6 Death, Bankruptcy, Incompetency, etc. of a Limited Partner.
Upon the death, dissolution, adjudication of bankruptcy, or adjudication of
incompetency or insanity of a Limited Partner or Special Limited Partner, such
Partner's executors, administrators or legal representatives shall have all the
rights of a Limited Partner or Special Limited Partner, as the case may be, for
the purpose of settling or managing such Partner's estate, including such power
as such Partner possessed to constitute a successor as a transferee of its
Interest in the Partnership and to join with such transferee in making the
application to substitute such transferee as a Partner. However, such executors,
administrators or legal representatives will not have the right to become
Substitute Limited Partners or substitute Special Limited Partners in the place
of their respective predecessors-in-interest unless the General Partner shall so
consent.
ARTICLE XIII
WITHDRAWAL, REMOVAL AND REPLACEMENT OF GENERAL PARTNER
Section 13.1 Withdrawal of General Partner.
(a) The General Partner may not Withdraw (other than as a result of an
Involuntary Withdrawal) without the Consent of the Special Limited Partner,
and, to the extent required, of Rural Development. Withdrawal shall be
conditioned upon the agreement of the Special Limited Partner to be
admitted as a successor General Partner, or if the Special Limited Partner
declines to be admitted as a successor General Partner then on the
agreement of one or more Persons who satisfy the requirements of Section
13.5 of this Agreement to be admitted as successor General Partner(s).
(b) Each General Partner shall indemnify and hold harmless the
Partnership and all Partners from its Withdrawal in violation of Section
13.1(a) hereof. Each General Partner shall be liable for damages to the
Partnership resulting from its Withdrawal in violation of Section 13.1(a).
Section 13.2 Removal of General Partner.
(a) The Special Limited Partner or the Limited Partner, or both of
them, may remove the General Partner for cause if such General Partner, its
officers or directors, if applicable, has:
(1) been subject to Bankruptcy;
46
(2) committed any fraud, willful misconduct, breach of fiduciary
duty or other negligent conduct in the performance of its duties under
this Agreement;
(3) been convicted of, or entered into a plea of guilty to, a
felony;
(4) been disbarred from participating in any federal or state
housing program;
(5) made personal use of Partnership funds or properties;
(6) violated the terms of the Mortgage and such violation prompts
Rural Development to issue a default letter or acceleration notice to
the Partnership or General Partner;
(7) failed to provide any loan, advance, Capital Contribution or
any other payment to the Partnership, the Limited Partner or the
Special Limited Partner required under this Agreement;
(8) breached any representation, warranty or covenant contained
in this Agreement;
(9) caused the Projected Tax Credits to be allocated to the
Partners for a term longer than the Tax Credit Period unless the
provisions of Section 7.4(e) of this Agreement apply;
(10) failed to provide, or to cause to be provided, the
construction monitoring documents required in Section 14.3(a) of this
Agreement;
(11) violated any federal or state tax law which causes a
recapture of LIHTC; or
(12) failed during any six-month period during the Compliance
Period to cause at least 85% of the total apartment units in the
Apartment Housing to qualify for LIHTC, unless such failure is the
result of Force Majeure or unless such failure is cured within 120
days after the end of the six-month period.
(b) Written notice of the removal for cause of the General Partner
(the "Removal Notice") shall set forth the reasons for removal and shall be
served by the Special Limited Partner or the Limited Partner, or both of
them, upon the General Partner either by certified or by registered mail,
return receipt requested, or by personal service. If Section 13.2(a)(2),
(6), (7) or (8) is the basis for the removal for cause, then the General
Partner shall have thirty days from receipt of the Removal Notice in which
to cure the removal condition; except that in regard to the Mortgage the
cure period shall be the sooner of thirty days or ten days prior to the
expiration of the cure period referenced in the loan documents, if any. If
the condition for the removal for cause is not cured within the thirty day
cure period then the General Partner's removal shall become effective on
the first day following the expiration of the cure period, or, thirty-one
days from the General Partner's receipt of the Removal Notice. If the
removal for cause is for a condition referenced in Sections 13.2(a)(1),
(3), (4), (5), (9), (10), (11) or (12) then the removal shall become
47
effective upon the General Partner's receipt of the Removal Notice. Upon
the General Partner's removal, the General Partner shall deliver to the
Special Limited Partner within five business days of the termination of the
cure period, or five business days of the Removal Notice all Partnership
books and records including all bank signature cards and an authorization
to change the signature on the signature cards from the General Partner to
the Special Limited Partner, or a successor general partner so nominated by
the Limited Partner and Special Limited Partner. The Partner's recognize
and acknowledge that if the General Partner fails to provide the
Partnership books and records upon the General Partner's removal then the
remaining Partners may suffer irreparable injury. Therefore, in the event
the General Partner does not adhere to the provisions of this Section
13.2(b), and in addition to other rights or remedies which may be provided
by law and equity or this Agreement, the Limited Partner and/or Special
Limited Partner shall have the right to specific performance to compel the
General Partner to perform its obligation under this Section and the
Limited Partner and/or Special Limited Partner may bring such action, and
other actions to enforce the removal, by way of temporary and/or permanent
injunctive relief.
Section 13.3 Effects of a Withdrawal. In the event of a Withdrawal, the
entire Interest of the Withdrawing General Partner shall immediately and
automatically terminate on the effective date of such Withdrawal, and such
General Partner shall immediately cease to be a General Partner, shall have no
further right to participate in the management or operation of the Partnership
or the Apartment Housing or to receive any allocations or Distributions from the
Partnership or any other funds or assets of the Partnership, except as
specifically set forth below. In the event of a Withdrawal, any or all executory
contracts, including but not limited to the Management Agreement, between the
Partnership and the Withdrawing General Partner or its Affiliates may be
terminated by the Partnership, with the Consent of the Special Limited Partner,
upon written notice to the party so terminated. Furthermore, notwithstanding
such Withdrawal, the Withdrawing General Partner shall be and shall remain,
liable as a General Partner for all liabilities and obligations incurred by the
Partnership or by the General Partner prior to the effective date of the
Withdrawal, or which may arise upon such Withdrawal. Any remaining Partner shall
have all other rights and remedies against the Withdrawing General Partner as
provided by law or under this Agreement. The General Partner agrees that in the
event of its Withdrawal it will indemnify and hold the Limited Partner and the
Special Limited Partner harmless from and against all losses, costs and expenses
incurred in connection with the Withdrawal, including, without limitation, all
legal fees and other expenses of the Limited Partner and the Special Limited
Partner in connection with the transaction. The following additional provisions
shall apply in the event of a Withdrawal.
(a) In the event of a Withdrawal which is not an Involuntary
Withdrawal, or an Involuntary Withdrawal in accordance with Section
13.2(a), the Withdrawing General Partner shall have no further right to
receive any future allocations or Distributions from the Partnership or any
other funds or assets of the Partnership, nor shall it be entitled to
receive or to be paid by the Partnership any further payments of fees
(including fees which have been earned but are unpaid) or to be repaid any
outstanding advances or loans made by it to the Partnership or to be paid
any amount for its former Interest. From and after the effective date of
such Withdrawal, the former rights of the Withdrawing General Partner to
receive or to be paid such allocations, Distributions, funds, assets, fees
or repayments shall be assigned to the other General Partner or General
48
Partners (which may include the Special Limited Partner), or if there is no
other general partner of the Partnership at that time, to the Special
Limited Partner.
(b) In the event of an Involuntary Withdrawal, except as provided in
the preceding paragraph or in Section 13.3(b)(2) below, the Withdrawing
General Partner shall have no further right to receive any future
allocations or Distributions from the Partnership or any other funds or
assets of the Partnership, provided that accrued and payable fees (i.e.,
fees earned but unpaid as of the date of Withdrawal) owed to the
Withdrawing General Partner, and any outstanding loans of the Withdrawing
General Partner to the Partnership, shall be paid to the Withdrawing
General Partner in the manner and at the times such fees and loans would
have been paid had the Withdrawing General Partner not Withdrawn. The
Interest of the General Partner shall be purchased as follows.
(1) If the Involuntary Withdrawal does not arise from removal for
cause under Section 13.2(a) hereof, and if the Partnership is to be
continued with one or more remaining or successor General Partner(s),
the Partnership, with the Consent of the Special Limited Partner, may,
but is not obligated to, purchase the Interest of the Withdrawing
General Partner in Partnership allocations, Distributions and capital.
The purchase price of such Interest shall be its Fair Market Value as
determined by agreement between the Withdrawing General Partner and
the Special Limited Partner, or, if they cannot agree, by arbitration
in accordance with the then current rules of the American Arbitration
Association. The cost of such arbitration shall be borne equally by
the Withdrawing General Partner and the Partnership. The purchase
price shall be paid by the Partnership by delivering to the General
Partner or its representative the Partnership's non-interest bearing
unsecured promissory note payable, if at all, upon liquidation of the
Partnership in accordance with Section 11.2(b). The note shall also
provide that the Partnership may prepay all or any part thereof
without penalty.
(2) If the Involuntary Withdrawal does not arise from removal for
cause under Section 13.2(a) hereof, and if the Partnership is to be
continued with one or more remaining or successor General Partner(s),
and if the Partnership does not purchase the Interest of the
Withdrawing General Partner in Partnership allocations, Distributions
and capital, then the Withdrawing General Partner shall retain its
Interest in such items, but such Interest shall be held as a special
limited partner.
(c) Notwithstanding the provisions of Section 13.3(b), if the
Involuntary Withdrawal arises from removal for cause as set forth in
Section 13.2(a) hereof, the Withdrawn General Partner shall have no further
right to receive any future allocations or Distributions from the
Partnership or any other funds or assets of the Partnership, nor shall it
be entitled to receive or to be paid by the Partnership or any Partners or
successor partners, any further payments of fees (including fees which have
been earned but remain unpaid) or to be repaid any outstanding advances or
loans made by it to the Partnership.
Section 13.4 Successor General Partner. Upon the occurrence of an event
giving rise to a Withdrawal of a General Partner, any remaining General Partner,
or, if there be no remaining General Partner, the Withdrawing General Partner or
its legal representative, shall promptly notify the Special Limited Partner of
such Withdrawal (the "Withdrawal Notice"). Whether or not the Withdrawal Notice
shall have been sent as provided herein, the Special Limited Partner shall have
49
the right to become a successor General Partner (and to become the successor
managing General Partner if the Withdrawing General Partner was previously the
managing General Partner). In order to effectuate the provisions of this Section
13.4 and the continuance of the Partnership, the Withdrawal of a General Partner
shall not be effective until the expiration of 120 days from the date on which
occurred the event giving rise to the Withdrawal, unless the Special Limited
Partner shall have elected to become a successor General Partner as provided
herein prior to expiration of such 120-day period, whereupon the Withdrawal of
the General Partner shall be deemed effective upon the notification of all the
other Partners by the Special Limited Partner of such election.
Section 13.5 Admission of Additional or Successor General Partner. No
Person shall be admitted as an additional or successor General Partner unless
(a) such Person shall have agreed to become a General Partner by a written
instrument which shall include the acceptance and adoption of this Agreement;
(b) the Consent of the Special Limited Partner to the admission of such Person
as a substitute General Partner, which consent may be withheld in the discretion
of the Special Limited Partner, shall have been given; and (c) such Person shall
have executed and acknowledged any other instruments which the Special Limited
Partner shall reasonably deem necessary or appropriate to effect the admission
of such Person as a substitute General Partner. If the foregoing conditions are
satisfied, this Agreement shall be amended in accordance with the provisions of
the Act, and all other steps shall be taken which are reasonably necessary to
effect the Withdrawal of the Withdrawing General Partner and the substitution of
the successor General Partner. Nothing contained herein shall reduce the Limited
Partner's Interest or the Special Limited Partner's Interest in the Partnership.
Section 13.6 Transfer of Interest. Except as otherwise provided herein, the
General Partner may not Withdraw from the Partnership, or enter into any
agreement as the result of which any Person shall acquire an Interest in the
Partnership, without the Consent of the Special Limited Partner.
Section 13.7 No Goodwill Value. At no time during continuation of the
Partnership shall any value ever be placed on the Partnership name, or the right
to its use, or to the goodwill appertaining to the Partnership or its business,
either as among the Partners or for the purpose of determining the value of any
Interest, nor shall the legal representatives of any Partner have any right to
claim any such value. In the event of a termination and dissolution of the
Partnership as provided in this Agreement, neither the Partnership name, nor the
right to its use, nor the same goodwill, if any, shall be considered as an asset
of the Partnership, and no valuation shall be put thereon for the purpose of
liquidation or distribution, or for any other purpose whatsoever.
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ARTICLE XIV
BOOKS AND ACCOUNTS, REPORTS, TAX RETURNS, FISCAL YEAR AND BANKING
Section 14.1 Books and Accounts.
(a) The General Partner shall cause the Partnership to keep and
maintain at its principal executive office full and complete books and
records which shall include each of the following:
(1) a current list of the full name and last known business or
residence address of each Partner set forth in alphabetical order
together with the Capital Contribution and the share in Income and
Losses of each Partner;
(2) a copy of the Certificate of Limited Partnership and all
certificates of amendment thereto, together with executed copies of
any powers of attorney pursuant to which any certificate has been
executed;
(3) copies of the Partnership's federal, state and local income
tax information returns and reports, if any, for the six most recent
taxable years;
(4) copies of the original of this Agreement and all amendments
thereto;
(5) financial statements of the Partnership for the six most
recent fiscal years;
(6) the Partnership's books and records for at least the current
and past three fiscal years; and
(7) in regard to the first tenants to occupy the apartment units
in the Apartment Housing, copies of all tenant files including
completed applications, completed questionnaires or checklist of
income and assets, documentation of third party verification of income
and assets, and income certification forms (LIHTC specific).
(b) Upon the request of the Limited Partner, the General Partner shall
promptly deliver to the Limited Partner, at the expense of the Partnership,
a copy of the information set forth in Section 14.1(a) above. The Limited
Partner shall have the right upon reasonable request and during normal
business hours to inspect and copy any of the foregoing, or any of the
other books and records of the Partnership or the Apartment Housing, at its
own expense.
Section 14.2 Accounting Reports.
(a) By February 20 of each calendar year, the General Partner shall
provide to the Limited Partner and the Special Limited Partner all tax
information necessary for the preparation of their federal and state income
51
tax returns and other tax returns with regard to the jurisdiction(s) in
which the Partnership is formed and in which the Apartment Housing is
located.
(b) By March 1 of each calendar year, the General Partner shall send
to the Limited Partner and the Special Limited Partner financial statements
for the Partnership. If requested by the Limited Partner, such financial
statements shall be performed in accordance with the audit standards of the
Public Companies Accounting Oversight Board and the audit opinion shall
refer to such standards. The audited financial statements of the
Partnership shall include, but not be limited to: (1) a balance sheet as of
the end of such fiscal year and statements of income, Partners' equity and
changes in cash flow for such fiscal year prepared in accordance with
generally accepted accounting principles and accompanied by an auditor's
report containing an opinion of the Partnership's Accountants; (2) a report
(which need not be audited) of any Distributions made at any time during
the fiscal year, separately identifying Distributions from Net Operating
Income for the fiscal year, Net Operating Income for prior years, Sale or
Refinancing Proceeds, and reserves; and (3) a report setting forth the
amount of all fees and other compensation and Distributions and reimbursed
expenses paid by the Partnership for the fiscal year to the General Partner
or Affiliates of the General Partner and the services performed in
consideration therefor, which report shall be verified by the Partnership's
Accountants, with the method of verification to include, at a minimum, a
review of the time records of individual employees, the costs of whose
services were reimbursed, and a review of the specific nature of the work
performed by each such employee, all in accordance with generally accepted
auditing standards and, accordingly, including such tests of the accounting
records and such other auditing procedures as the Accountants consider
appropriate in the circumstances.
(c) Within 60 days after the end of each fiscal quarter in which a
Sale or Refinancing of the Apartment Housing occurs, the General Partner
shall send to the Limited Partner and the Special Limited Partner a report
as to the nature of the Sale or Refinancing and as to the Income and Losses
for tax purposes and proceeds arising from the Sale or Refinancing.
Section 14.3 Other Reports. The General Partner shall provide to the
Limited Partner and the Special Limited Partner the following reports:
(a) during construction, on a regular basis, but in no event less than
once a month, a copy of the Inspecting Architect's report and other
construction reports including, but not limited to, (1) the name of each
person performing work on the Improvements or providing materials for the
Improvements, the work performed or materials supplied by said person and
the code number corresponding to the line item in the Construction Budget
which the person will be paid, (2) an original AIA Document G702, or
similar form acceptable to the Special Limited Partner, (3) if not included
in the Inspecting Architect's report or the AIA Document G702, a line item
break-down of the Construction Budget (which shall include, description of
work to be performed or materials to be supplied; total dollar amount of
the work or materials; dollar amount of work previously completed and paid
or materials supplied and paid; dollar amount of work or materials to be
paid per the current disbursement request; dollar amount of materials
stored; total dollar amount of work completed and stored as of the current
disbursement date; percentage of completion; dollar amount of work or
materials needed to complete the line item; and retainage), (4) a
reconciliation of the sources and uses to determine that the Construction
52
Budget is in balance and there are sufficient funds to complete the
construction of the Improvements, and (5) copies of lien releases, or
waivers, from the Contractor and all sub-contractors or material suppliers
who were paid the previous month;
(b) during the rent-up phase, and continuing until the end of the
first six-month period during which the Apartment Housing has a sustained
occupancy of 95% or better, by the twentieth day of each month within such
period a copy of the previous month's rent roll (through the last day of
the month) and a tenant LIHTC compliance worksheet similar to the monthly
initial tenant certification worksheet included in Exhibit G attached
hereto and incorporated herein by this reference;
(c) a quarterly tax credit compliance report similar to the worksheet
included in Exhibit G due on or before April 30 of each year for the first
quarter, July 31 of each year for the second quarter, October 31 of each
year for the third quarter and January 31 of each year for the fourth
quarter. In order to verify the reliability of the information being
provided on the compliance report the Limited Partner may request a small
sampling of tenant files to be provided. The sampling will include, but not
be limited to, copies of tenant applications, certifications and third
party verifications used to qualify tenants. If any inaccuracies are found
to exist on the tax credit compliance report or any items of noncompliance
are discovered then the sampling will be expanded as determined by the
Limited Partner;
(d) a quarterly report on operations, in the form attached hereto as
Exhibit G due on or before April 30 of each year for the first quarter of
operations, July 31 of each year for the second quarter of operations,
October 31 of each year for the third quarter of operations and January 31
of each year for the fourth quarter of operations which shall include, but
is not limited to, an unaudited income statement showing all activity in
the reserve accounts required to be maintained pursuant to Section VIII of
this Agreement, statement of income and expenses, balance sheet, rent roll
as of the end of each calendar quarter of each year, and third party
verification of current utility allowance;
(e) by September 15 of each year, an estimate of LIHTC for that year;
(f) if the Apartment Housing receives a reservation of LIHTC in one
year but will not complete the construction and rent-up until a later year,
an audited cost certification together with the Accountant's work papers
verifying that the Partnership has expended the requisite 10% of the
reasonably expected cost basis to meet the carryover test provisions of
Section 42 of the Code. Such certification shall be provided to the Limited
Partner and Special Limited Partner by December 31 of the year during which
the reservation was received or within six months of the date of the LIHTC
allocation. Furthermore, if materials and supplies are purchased to meet
the 10% requirement then the General Partner shall provide to the Limited
Partner an opinion of counsel that title to the materials and supplies pass
to the Partnership and that the Partnership bears the risk of loss of the
materials and supplies;
(g) during the Compliance Period, no later than the day any such
certification is filed, copies of any certifications which the Partnership
must furnish to federal or state governmental authorities administering the
Tax Credit program including, but not limited to, copies of all annual
tenant recertifications required under Section 42 of the Code;
53
(h) by the annual renewal date each and every year, an executed
original or certified copy of each and every Insurance policy or
certificate required by the terms of this Agreement;
(i) by the payment date of the real estate property taxes each and
every year verification that the same has been paid in full;
(j) on or before March 15th of each calendar year, a copy of the
General Partner's updated financial statement as of December 31 of the
previous year;
(k) on or before November 1 of each calendar year, a copy of the
following year's proposed operating budget. Each such Budget shall contain
all the anticipated Cash Expenses of the Partnership. Such Budget shall
only be adopted with the Consent of the Special Limited Partner; and
(l) notice of the occurrence, or of the likelihood of occurrence, of
any event which has had a material adverse effect upon the Apartment
Housing or the Partnership, including, but not limited to, any breach of
any of the representations and warranties set forth in Section 9.12 of this
Agreement, and any inability of the Partnership to meet its cash
obligations as they become payable, within ten days after the occurrence of
such event.
Section 14.4 Late Reports. If the General Partner does not fulfill its
obligations under Section 14.3 within the time periods set forth therein, the
General Partner, using its own funds, shall pay as damages the sum of $100.00
per week (plus interest at the rate established by Section 6.3 of this
Agreement) to the Limited Partner until such obligations shall have been
fulfilled. If the General Partner shall fail to so pay, the General Partner and
its Affiliates shall forthwith cease to be entitled to any fees hereunder (other
than the Development Fee) and/or to the payment of any Net Operating Income or
Sale or Refinancing Proceeds to which the General Partner may otherwise be
entitled hereunder. Payments of fees and Distributions shall be restored only
upon payment of such damages in full.
Section 14.5 Annual Site Visits. On an annual basis a representative of the
Limited Partner, at the Limited Partner's expense, will conduct a site visit
which will include, in part, an inspection of the property, a review of the
office and tenant files and an interview with the property manager. The Limited
Partner may, in its sole discretion, cancel all or any part of the annual site
visit.
Section 14.6 Tax Returns. The General Partner shall cause income tax
returns for the Partnership to be prepared and timely filed with the appropriate
federal, state and local taxing authorities.
Section 14.7 Fiscal Year. The fiscal year of the Partnership shall be the
calendar year or such other period as may be approved by the IRS for federal
income tax purposes.
Section 14.8 Banking. All funds of the Partnership shall be deposited in a
separate bank account or accounts as shall be determined by the General Partner
with the Consent of the Special Limited Partner. All withdrawals therefrom shall
be made upon checks signed by the General Partner or by any person authorized to
do so by the General Partner. The General Partner shall provide to any Partner
54
who requests same the name and address of the financial institution, the account
number and other relevant information regarding any Partnership bank account.
Section 14.9 Certificates and Elections.
(a) The General Partner shall file the First Year Certificate within
90 days following the close of the taxable year during which Completion of
Construction occurs and thereafter shall timely file any certificates which
the Partnership must furnish to federal or state governmental authorities
administering the Tax Credit programs under Section 42 of the Code.
(b) The General Partner, with the Consent of the Special Limited
Partner, may, but is not required to, cause the Partnership to make or
revoke the election referred to in Section 754 of the Code, as amended, or
any similar provisions enacted in lieu thereof.
ARTICLE XV
DISSOLUTION, WINDING UP, TERMINATION AND LIQUIDATION OF THE PARTNERSHIP
Section 15.1 Dissolution of Partnership. The Partnership shall be dissolved
upon the expiration of its term or the earlier occurrence of any of the
following events.
(a) The effective date of the Withdrawal or removal of the General
Partner, unless (1) at the time there is at least one other General Partner
(which may be the Special Limited Partner if it elects to serve as
successor General Partner under Section 13.4 hereof) who will continue as
General Partner, or (2) within 120 days after the occurrence of any such
event the Limited Partner elects to continue the business of the
Partnership.
(b) The sale of the Apartment Housing and the receipt in cash of the
full amount of the proceeds of such sale.
Notwithstanding the foregoing, however, in no event shall the
Partnership terminate prior to the expiration of its term if such termination
would result in a violation of the Mortgage or any other agreement with or rule
or regulation of any Mortgage Lender to which the Partnership is subject.
Section 15.2 Return of Capital Contribution upon Dissolution. Except as
provided in Sections 7.3 and 7.4 of this Agreement, which provide for a
reduction or refund of the Limited Partner's Capital Contribution under certain
circumstances, and which shall represent the personal obligation of the General
Partner, as well as the obligation of the Partnership, each Partner shall look
solely to the assets of the Partnership for all Distributions with respect to
the Partnership (including the return of its Capital Contribution) and shall
have no recourse therefor (upon dissolution or otherwise) against any General
Partner. No Partner shall have any right to demand property other than money
upon dissolution and termination of the Partnership, and the Partnership is
prohibited from such a distribution of property absent the Consent of the
Special Limited Partner.
55
Section 15.3 Distribution of Assets. Upon a dissolution
of the Partnership, the General Partner (or, if there is no General Partner then
remaining, such other Person(s) designated as the liquidator of the Partnership
by the Limited Partner or by the court in a judicial dissolution) shall take
full account of the Partnership assets and liabilities and shall liquidate the
assets as promptly as is consistent with obtaining the fair value thereof.
(a) Upon dissolution and termination, after payment of, or adequate
provision for, the debts and obligations of the Partnership pursuant to
Section 11.2(a) through and including 11.2(c), the remaining assets of the
Partnership shall be distributed to the Partners in accordance with the
positive balances in their Capital Accounts, after taking into account all
allocations under Article X hereof.
(b) In the event that a General Partner has a deficit balance in its
Capital Account following the Liquidation of the Partnership or its
interest, as determined after taking into account all Capital Account
adjustments for the Partnership taxable year in which such Liquidation
occurs, such General Partner shall pay to the Partnership the amount
necessary to restore such deficit balance to zero in compliance with
Treasury Regulation Section 1.704-1(b)(2)(ii)(b)(3).
(1) The deficit reduction amount shall be paid by the General
Partner by the end of such taxable year (or, if later, within 90 days
after the date of Liquidation) and shall, upon Liquidation of the
Partnership, be paid to creditors of the Partnership or distributed to
other Partners in accordance with their positive Capital Account
balances.
(c) With respect to assets distributed in kind to the Partners in
Liquidation or otherwise:
(1) unrealized appreciation or unrealized depreciation in the
values of such assets shall be deemed to be Income and Losses realized
by the Partnership immediately prior to the Liquidation or other
Distribution event; and
(2) such Income and Losses shall be allocated to the Partners in
accordance with Section 10.2 hereof, and any property so distributed
shall be treated as a Distribution of an amount in cash equal to the
excess of such Fair Market Value over the outstanding principal
balance of and accrued interest on any debt by which the property is
encumbered.
(d) For the purposes of Section 15.3(c), "unrealized appreciation" or
"unrealized depreciation" shall mean the difference between the Fair Market
Value of such assets, taking into account the Fair Market Value of the
associated financing but subject to Section 7701(g) of the Code, and the
asset's Gross Asset Value. Section 15.3(c) is merely intended to provide a
rule for allocating unrealized Income and Losses upon Liquidation or other
Distribution event, and nothing contained in Section 15.3(c) or elsewhere
in this Agreement is intended to treat or cause such Distributions to be
treated as sales for value. The Fair Market Value of such assets shall be
determined by an independent appraiser to be selected by the General
Partner.
56
Section 15.4 Deferral of Liquidation. If at the time of liquidation the
General Partner or other liquidator shall determine that an immediate sale of
part or all of the Partnership assets could cause undue loss to the Partners,
the liquidator may, in order to avoid loss, but only with the Consent of the
Special Limited Partner, either defer liquidation and retain all or a portion of
the assets or distribute all or a portion of the assets to the Partners in kind.
In the event that the liquidator elects to distribute such assets in kind, the
assets shall first be assigned a value (by appraisal by an independent
appraiser) and the unrealized appreciation or depreciation in value of the
assets shall be allocated to the Partners' Capital Accounts, as if such assets
had been sold, in the manner described in Section 10.2, and such assets shall
then be distributed to the Partners as provided herein. In applying the
preceding sentence, the Apartment Housing shall not be assigned a value less
than the unamortized principal balance of any loan secured thereby.
Section 15.5 Liquidation Statement. Each of the Partners shall be furnished
with a statement prepared or caused to be prepared by the General Partner or
other liquidator, which shall set forth the assets and liabilities of the
Partnership as of the date of complete liquidation. Upon compliance with the
distribution plan as outlined in Sections 15.3 and 15.4, the Limited Partner and
Special Limited Partner shall cease to be such and the General Partner shall
execute, acknowledge and cause to be filed those certificates referenced in
Section 15.6.
Section 15.6 Certificates of Dissolution; Certificate of Cancellation of
Certificate of Limited Partnership.
(a) Upon the dissolution of the Partnership, the General Partner shall
cause to be filed in the office of, and on a form prescribed by the
Secretary of State of the State, a certificate of dissolution. The
certificate of dissolution shall set forth the Partnership's name, the
Secretary of State's file number for the Partnership, the event causing the
Partnership's dissolution and the date of the dissolution.
(b) Upon the completion of the winding up of the Partnership's
affairs, the General Partner shall cause to be filed in the office of, and
on a form prescribed by, the Secretary of State of the State, a certificate
of cancellation of the Certificate of Limited Partnership. The certificate
of cancellation of the Certificate of Limited Partnership shall set forth
the Partnership's name, the Secretary of State's file number for the
Partnership, and any other information which the General Partner determines
to include therein.
ARTICLE XVI
AMENDMENTS
This Agreement may be amended by a unanimous consent of the Partners
after a meeting of the Partners, which meeting shall be held after proper notice
as provided in Section 17.2 of this Agreement. For purposes of this Article XVI,
a Partner shall grant its consent to a proposed amendment unless such Partner
reasonably determines that the proposed amendment is adverse to the Partner's
Interest.
57
ARTICLE XVII
MISCELLANEOUS
Section 17.1 Voting Rights.
(a) The Limited Partner shall have no right to vote upon any matters
affecting the Partnership, except as provided in this Agreement. At a
meeting of the Partnership, the Limited Partner may vote:
(1) to approve or disapprove the Sale or Refinancing of the
Apartment Housing;
(2) to remove the General Partner and elect a substitute General
Partner as provided in this Agreement;
(3) to elect a successor General Partner upon the Withdrawal of
the General Partner;
(4) to approve or disapprove the dissolution of the Partnership;
or
(5) subject to the provisions of Article XVI hereof, to amend
this Agreement; or
(6) to approve or disapprove the refinancing of the Mortgage.
(b) On any matter where the Limited Partner has the right to vote,
votes may only be cast at a duly called meeting of the Partnership or
through written action without a meeting.
(c) The Special Limited Partner shall have the right to consent to
those actions or inactions of the Partnership and/or General Partner as
otherwise set forth in this Agreement, and the General Partner is
prohibited from any action or inaction requiring such consent unless such
consent has been obtained.
Section 17.2 Meeting of Partnership. Meetings of the Partnership may be
noticed either (a) at any time by the General Partner; or (b) by any Partner
with an Interest greater than 20% of the Income and Losses. The notice for a
meeting shall specify the purpose of such meeting, and the time and the place of
such meeting (which shall be by telephone conference or at the principal place
of business of the Partnership). Any Partner calling a Partners meeting shall
provide written notice to all Partners. The meeting shall not be held less than
15 days nor more than 30 days from the Partners' receipt of the notice. All
meetings and actions of the Limited Partner shall be governed in all respects,
including matters relating to notice, quorum, adjournment, proxies, record dates
and actions without a meeting, by the applicable provisions of the Act, as it
shall be amended from time to time.
58
Section 17.3 Notices. Any notice given pursuant to this Agreement may be
served personally on the Partner to be notified, or may be mailed, first class
postage prepaid, to the following address, or to such other address as a party
may from time to time designate in writing:
To the General Partner: Fieser Holdings, Inc.
00000 Xxxx Xxx Xxxx.
Xxxxx 000
Xxxxxxx, Xxxxx 00000
To the Limited Partner: WNC Holding, LLC
c/o WNC & Associates, Inc.
00000 Xxx Xxxx Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxx
To the Special
Limited Partner: WNC Housing, L.P.
00000 Xxx Xxxx Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxx
Section 17.4 Successors and Assigns. All the terms and conditions of this
Agreement shall be binding upon and inure to the benefit of the successors and
assigns of the Partners.
Section 17.5 Recording of Certificate of Limited Partnership. If the
General Partner should deem it advisable to do so, the Partnership shall record
in the office of the County Recorder of the county in which the principal place
of business of the Partnership is located a certified copy of the Certificate of
Limited Partnership, or any amendment thereto, after such Certificate or
amendment has been filed with the Secretary of State of the State.
Section 17.6 Amendment of Certificate of Limited Partnership.
(a) The General Partner shall cause to be filed, within 30 days after
the happening of any of the following events, an amendment to the
Certificate of Limited Partnership reflecting the occurrence of any of the
following.
(1) A change in the name of the Partnership.
(2) A change in the street address of the Partnership's principal
executive office.
(3) A change in the address, or the Withdrawal, of a General
Partner, or a change in the address of the agent for service of
process, or appointment of a new agent for service of process.
(4) The admission of a General Partner and that Partner's
address.
(5) The discovery by the General Partner of any false or
erroneous material statement contained in the Certificate of Limited
Partnership or any amendment thereto.
59
(b) The Certificate of Limited Partnership may also be amended in
conformity with this Agreement at any time in any other respect that the
General Partner determines.
(c) The General Partner shall cause the Certificate of Limited
Partnership to be amended, when required or permitted as aforesaid, by
filing a certificate of amendment thereto in the office of, and on a form
prescribed by, the Secretary of State of the State. The certificate of
amendment shall set forth the Partnership's name, the Secretary of State's
file number for the Partnership and the text of the amendment.
Section 17.7 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and said counterparts
shall constitute but one and the same instrument which may sufficiently be
evidenced by one counterpart.
Section 17.8 Captions. Captions to and headings of the Articles, Sections
and subsections of this Agreement are solely for the conveniences of the
Partners, are not a part of this Agreement, and shall not be used for the
interpretation or determination of the validity of this Agreement or any
provision hereof.
Section 17.9 Saving Clause. If any provision of this Agreement, or the
application of such provision to any Person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to Persons or circumstances other than those as to which it is held invalid,
shall not be affected thereby.
Section 17.10 Certain Provisions. If the operation of any provision of this
Agreement would contravene the provisions of applicable law, or would result in
the imposition of general liability on any Limited Partner or Special Limited
Partner, such provisions shall be void and ineffectual.
Section 17.11 Tax Matters Partner. All the Partners hereby agree that the
General Partner shall be the "Tax Matters Partner" pursuant to the Code and in
connection with any audit of the federal income tax returns of the Partnership.
(a) The Tax Matters Partner shall furnish to each Partner notice and
information with respect to the following: closing conference with an
examining agent; proposed adjustments, rights of appeal, and requirements
for filing a protest; time and place of any appeals conference; acceptance
by the Internal Revenue Service of any settlement offer; consent to the
extension of the period of limitation with respect to all Partners; filing
of a request for administrative adjustment on behalf of the Partnership;
filing by the Tax Matters Partner or any other Partner of any petition for
judicial review; filing of any appeal with respect to any judicial
determination; and a final judicial redetermination.
(b) If the Tax Matters Partner shall determine to litigate any
administrative determination relating to federal income tax matters, then
the Tax Matters Partner shall litigate such matter in such court as the Tax
Matters Partner shall decide in its sole discretion.
(c) In discharging its duties and responsibilities, the Tax Matters
Partner shall act as a fiduciary (1) to the Limited Partner (to the
exclusion of the other Partners) insofar as tax matters related to the Tax
Credits are concerned, and (2) to all of the Partners in other respects.
60
(d) The Partners consent and agree that in connection with any audit
of the Partnership, or if the Tax Matters Partner withdraws from the
Partnership or the Tax Matters Partner becomes Bankrupt, then the Special
Limited Partner may become, in its sole discretion, a special general
partner, and become the Tax Matters Partner. The Limited Partner will make
no claim against the Partnership in respect of any action or omission by
the Tax Matters Partner during such time as the Special Limited Partner
acts as the Tax Matters Partner.
Section 17.12 Expiration of Compliance Period.
(a) Notwithstanding any provision hereof to the contrary (other than
this Section 17.13), the Special Limited Partner shall have the right at
any time after the beginning of the last year of the Compliance Period to
require, by written notice to the General Partner, that the General Partner
promptly submit a written request to the applicable State Tax Credit Agency
pursuant to Section 42(h) of the Code (or any successor provision) that
such agency endeavor to locate within one year from the date of such
written request a purchaser for the Apartment Housing who will continue to
operate the Apartment Housing as a qualified low income property, at a
purchase price that is not less than the minimum amount set forth in
Section 42(h)(6) of the Code (or any successor provision). In the event
that the State Tax Credit Agency obtains an offer satisfying the conditions
of the preceding sentence, the General Partner shall promptly notify the
Special Limited Partner in writing with respect to the terms and conditions
of such offer, and, if the Special Limited Partner notifies the General
Partner that such offer should be accepted, the General Partner shall cause
the Partnership promptly to accept such offer and to proceed to sell the
Apartment Housing pursuant to such offer.
(b) Notwithstanding any other provision of this Agreement to the
contrary, the Special Limited Partner shall have the right at any time
after the end of the Compliance Period to require, by written notice to the
General Partner (the "Required Sale Notice"), that the General Partner
promptly use its best efforts to obtain a buyer for the Apartment Housing
on the most favorable terms then available. The General Partner shall
submit the terms of any proposed sale to the Special Limited Partner for
its approval in the manner set forth in Section 17.13(a) hereof. If the
General Partner shall fail to so obtain a buyer for the Apartment Housing
within six months of receipt of the Required Sale Notice or if the Consent
of the Special Limited Partner in its sole discretion shall be withheld to
any proposed sale, then the Special Limited Partner shall have the right at
any time thereafter to obtain a buyer for the Apartment Housing on terms
acceptable to the Special Limited Partner (but not less favorable to the
Partnership than any proposed sale previously rejected by the Special
Limited Partner). In the event that the Special Limited Partner so obtains
a buyer, it shall notify the General Partner in writing with respect to the
terms and conditions of the proposed sale and the General Partner shall
cause the Partnership promptly to sell the Apartment Housing to such buyer.
(c) A sale of the Apartment Housing prior to the end of the Compliance
Period may only take place if the conditions of Section 42(j)(6) of the
Code (or any successor provision) will be satisfied upon such sale by
having the purchaser of the Apartment Housing post the required bond on
behalf of the Partnership.
61
Section 17.13 Number and Gender. 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 17.14 Entire Agreement. This Agreement constitutes the entire
understanding between the parties with respect to the subject matter hereof and
all prior understandings and agreements between the parties, written or oral,
respecting this transaction are merged in this Agreement.
Section 17.15 Governing Law. This Agreement and its application shall be
governed by the laws of the State.
Section 17.16 Attorney's Fees. If a suit or action is instituted in
connection with an alleged breach of any provision of this Agreement, the
prevailing party shall be entitled to recover, in addition to costs, such sums
as the court may adjudge reasonable as attorney's fees, including fees on any
appeal.
Section 17.17 Receipt of Correspondence. The Partners agree that the
General Partner shall send to the Limited Partner and the Special Limited
Partner within five days of receipt a copy of any correspondence relative to the
Apartment Housing's noncompliance with the Mortgage Loans, relative to the
Apartment Housing's noncompliance with the Tax Credit rules or regulations,
relative to the acceleration of the Mortgage Loans and/or relative to the
disposition of the Apartment Housing.
Section 17.18 Security Interest and Right of Set-Off. As security for the
performance of the respective obligations to which any General Partner may be
subject under this Agreement, the General Partnership shall have (and each
General Partner hereby grants to the Partnership) a security interest in their
respective Interests of such General Partner in all funds distributable to said
General Partner to the extent of the amount of such obligation.
Section 17.19 RD Regulations.
Notwithstanding any other provisions of this Agreement, the following
will take precedence:
(a) The Partnership is authorized to execute any documents required by
RD in connection with the RD Loan Agreement. The General Partner hereby
covenants to act in accordance with the Project Documents. Any incoming
General Partner shall, as a condition of receiving a Partnership interest,
agree to be bound by the Project Documents, and all other documents
executed in connection with the RD Loan Agreement to the same extent and on
the same terms as any other General Partner. Upon any dissolution, no title
or right to possession and control of the Project, and no right to collect
the rents therefrom, shall pass to any Person who is not bound in a manner
consistent with Section 515 of the Housing Act and the rules and
regulations thereunder.
(b) In the event that any provision of this Agreement in any way tends
to contradict, modify or in any way change the terms of the Project
Documents or any other agreement related to the Project entered into, or to
62
be entered into, by or on behalf of the Partnership with RD, the terms of
the Project Documents or such other agreements with RD shall prevail and
govern.
(c) Any amendment or revision of this Agreement, transfer of a
Partnership interest or other action requiring approval shall be subject to
the written approval of RD, if such approval is required, and any amendment
without the prior written approval of RD shall be subject to later
amendment to comply with the requirements of RD; provided, however, that no
such approval of RD shall be required for any amendment of this Agreement
the sole purpose of which is to provide for the admission of additional or
substituted limited partners so long as any such additional or substituted
limited partner so admitted shall own in the aggregate less than a 10%
limited partner interest in the Partnership.
(d) Any conveyance or transfer of title to all or any portion of the
Project required or permitted under this Agreement shall in all respects be
subject to all conditions, approvals and other requirements of RD rules and
regulations applicable thereto.
(e) The General Partner will at all times maintain the RD required
Financial Interest in the Partnership.
(f) The foregoing paragraphs (a), (b), (c), (d), and (e) will
automatically become void and of no further force and effect with respect
to RD at such time as the Mortgage is no longer being provided by RD.
[signatures appear on following page]
63
IN WITNESS WHEREOF, this Amended and Restated Agreement of Limited
Partnership of FDI-Country Square, LTD., a Texas limited partnership, is made
and entered into as of the _____ day of June, 2006.
GENERAL PARTNER:
Fieser Holdings, Inc.
By: /s/ XXXXX X. XXXXXX
------------------------------
Xxxxx X. Xxxxxx
President
WITHDRAWING ORIGINAL LIMITED PARTNER:
Xxxxxxxx X. Xxxxxx
/s/ XXXXXXXX X. XXXXXX
------------------------------
LIMITED PARTNER:
WNC Holding, LLC
By: WNC and Associates, Inc., its managing
member
By: /s/ XXXXX X. XXXXXX
-----------------------------
Xxxxx X. Xxxxxx
Executive Vice President
SPECIAL LIMITED PARTNER:
WNC Housing, L.P.
By: WNC & Associates, Inc., its
general partner
By: /s/ XXXXX X. XXXXXX
------------------------------
Xxxxx X. Xxxxxx
Executive Vice President
64
EXHIBIT A TO PARTNERSHIP AGREEMENT
Legal Description
A 2.033 acre tract of land in the Xxxxxxx Xxxx Survey, Abstract 170 Xxxxxx
County, Texas, being all of lots one (1), two (2), three (3), four (4), five
(5), sixteen (16), seventeen (17), eighteen (18) and nineteen (19) in Block "E",
Lone Star Heights Subdivision, City of Lone Star, according to the plat thereof
recorded in Volume 1, Page 33, Plat Records, Xxxxxx County, Texas.
Exhibit A
EXHIBIT B TO PARTNERSHIP AGREEMENT
FORM OF LEGAL OPINION
WNC Holding, LLC
c/o WNC & Associates, Inc.
00000 Xxx Xxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxx
RE: FDI-Country Square, LTD.
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in
connection with the investment by WNC Holding, LLC, a California limited
liability company, (the "Limited Partner") in FDI-Country Square, LTD. (the
"Partnership"), a Texas limited partnership formed to own, develop,
rehabilitate, finance and operate an apartment complex for low-income persons
(the "Apartment Housing") in Xxxxxx County, Texas. The general partner of the
Partnership is Fieser Holdings, Inc., a Texas corporation (the "General
Partner"). The developer of the Apartment Housing is Fieser Development, Inc., a
Texas corporation (the "Developer"). The guarantor of certain obligations of the
General Partner is Xxxxx X. Xxxxxx, an individual resident of the State of Texas
(the "Guarantor").
In rendering the opinions stated below, we have examined and relied
upon the following:
(i) [Partnership Organizational Documents];
(ii) [Amended and Restated Agreement of Limited Partnership]
(the "Partnership Agreement");
(iii) [GP Organizational Documents];
(iv) [Developer Organizational Documents];
(v) [Guarantor Organizational Documents];
(vi) the Title Policy, as defined in the Partnership
Agreement;
(vii) the Certification and Agreement entered into by the
Partnership, the General Partner, the Original Limited Partner, the Limited
Partner, and WNC & Associates, Inc., attached as Exhibit C to the Partnership
Agreement and dated ____;
(viii) the Development Fee Agreement entered into by the
Developer and the Partnership and dated _____, (the "Development Agreement");
Exhibit B
WNC Holding, LLC
c/o WNC & Associates, Inc.
June ___, 2006
Page 2
(ix) the Development Fee Guaranty Agreement, entered into by
the Guarantor and the Partnership and dated _________;
(x) the Development, Construction, and Operating Budget
Agreement, entered into by the General Partner, the Limited Partner, and the
Special Limited Partner and dated _________;
(xi) the Construction Completion, Operating Deficit, and Tax
Credit Guaranty Agreement, entered into by the Guarantor, the Partnership, and
the Limited Partner and dated _________;
(xii) the [reservation letter/carryover allocation] from
__________________ (the "State Agency") dated _________, 200_ awarding
$_____________ in federal tax credits annually for each of 10 years; and
(xiii) such other documents, records and instruments as we
have deemed necessary in order to enable us to render the opinions referred to
in this letter.
For purposes of rendering the opinions stated below we have assumed
that, in those cases in which we have not been involved directly in the
preparation, execution or the filing of a document, (a) the document reviewed by
us is an original document, or a true and accurate copy of the original
document, and has not been subsequently amended, (b) the signatures on each
original document are genuine, and (c) each party, other than the Partnership,
the General Partner, the Developer and the Guarantor, who executed the document
had proper authority and capacity to do so.
Based on the foregoing, we are of the opinion that:
(a) The General Partner is a corporation duly formed and validly
existing under the laws of the State of Texas and has full power and authority
to enter into and perform its obligations under the Partnership Agreement and
the other agreements referenced above to which it or the Partnership is a party
(the "Related Agreements").
(b) The Partnership is a limited partnership duly formed and validly
existing under the laws of the State of Texas and the provisions of the
Partnership Agreement and the Related Agreements conform with Texas law.
(c) The Partnership has full power and authority to own, develop,
rehabilitate, finance and operate the Apartment Housing and to otherwise conduct
business under the Partnership Agreement and the Related Agreements.
(d) Execution of the Partnership Agreement and the Related Agreements
by the General Partner and the Partnership, as applicable, has been duly and
validly authorized by or on behalf of the General Partner and the Partnership,
as applicable, and, having been executed and delivered in accordance with its
Exhibit B-2
WNC Holding, LLC
c/o WNC & Associates, Inc.
June ___, 2006
Page 3
terms, each of the Partnership Agreement and the Related Agreements constitutes
the valid and binding agreement of the General Partner and the Partnership, as
applicable, enforceable in accordance with its terms.
(e) The execution and delivery of the Partnership Agreement and the
Related Agreements by the General Partner do not conflict with and will not
result in a breach of any of the terms, provisions or conditions of any
agreement or instrument known to counsel to which any of the General Partner,
the Partnership, the Developer or the Guarantor is a party or by which any of
them may be bound, or any order, rule, or regulation applicable to any of such
parties of any court or governmental body or administrative agency having
jurisdiction over any of such parties or over the property.
(f) To the best of counsel's knowledge, after due inquiry, there is no
litigation or governmental proceeding pending or threatened against, or
involving the Apartment Housing, the Partnership, or any General Partner, the
Guarantor, or the Developer which would materially adversely affect the
condition (financial or otherwise) or business of the Apartment Housing, the
Partnership or any of the partners of the Partnership.
(g) The Limited Partner and the Special Limited Partner have been
admitted to the Partnership as limited partners of the Partnership under Texas
law and are entitled to all of the rights of limited partners under the
Partnership Agreement. Except as described in the Partnership Agreement, no
person is a partner of or has any legal or equitable interest in the
Partnership, and all former partners of record or known to counsel have validly
withdrawn from the Partnership and have released any claims against the
Partnership arising out of their participation as partners therein.
(h) Liability of the Limited Partner and the Special Limited Partner
for obligations of the Partnership is limited to the amount of their capital
contributions required by the Partnership Agreement.
(i) Neither the General Partner of the Partnership nor the Limited
Partner nor the Special Limited Partner will have any liability for the Mortgage
(as such term is defined in the Partnership Agreement), and the lender of the
Mortgage Loan will look only to its security in the Apartment Housing for
repayment of the Mortgage Loan.
(j) The Partnership owns a fee simple interest in the Apartment
Housing.
(k) To the best of our actual knowledge and belief, after due inquiry,
the Partnership, the General Partner, the Developer and the Guarantor have
obtained all consents, permissions, licenses, approvals, or orders required by
all applicable governmental or regulatory agencies for the development,
rehabilitation, and operation of the Apartment Housing, and the Apartment
Housing conforms to all applicable Federal, state and local land use, zoning,
health, building and safety laws, ordinances, rules and regulations.
Exhibit B-3
WNC Holding, LLC
c/o WNC & Associates, Inc.
June ___, 2006
Page 4
(l) The Apartment Housing has obtained a [reservation/carryover
allocation] of low income housing tax credits ("LIHTC") from the State Agency.
The final allocation of LIHTC and ultimate eligibility of the Apartment Housing
for such final allocation are subject to a series of requirements which must be
met, performed or achieved at various times prior to and after such final
allocation. Assuming all such requirements are met, performed or achieved at the
time or times provided by applicable laws and regulations, the Apartment Housing
will qualify for LIHTC.
(m) The Guarantor, if not an individual, was incorporated, duly
organized, and is validly existing and in good standing under the laws of the
State of Texas, is qualified to do business in every jurisdiction in which
because of the nature of its activities or properties qualification is
appropriate, and has all requisite power and authority to own and operate its
properties and to carry on its business as now conducted.
(n) Each Guarantor (i) has full power and authority to execute, deliver
and perform its obligations under and (ii) has duly authorized the execution,
delivery and performance of the Development Fee Guaranty Agreement and the
Construction Completion, Operating Deficit and Tax Credit Guaranty Agreement
(collectively, the "Guaranty"). The Guaranty has been duly executed and
delivered by the Guarantor and constitutes the legal, valid and binding
obligation of the Guarantor enforceable in accordance with its terms except as
the enforceability thereof may be limited by applicable bankruptcy,
reorganization, insolvency, moratorium or other similar laws affecting the
enforcement of creditor's rights generally and general principles of equity
(regardless of whether enforceability is considered a proceeding at law or
equity).
(o) The Developer was incorporated, duly organized, and is validly
existing and in good standing the laws of the State of Texas, is qualified to do
business in every jurisdiction in which because of the nature of its activities
or properties qualification is appropriate, and has all requisite power and
authority to own and operate its properties and to carry on its business as now
conducted.
(p) The Developer (i) has full power and authority to execute, deliver
and perform its obligations under, and (ii) has duly authorized the execution,
delivery and performance of the Development Agreement. The Development Agreement
has been duly executed and delivered by the Developer and constitutes the legal,
valid and binding obligation of the Developer enforceable in accordance with its
terms except as the enforceability thereof may be limited by applicable
bankruptcy, reorganization, insolvency, moratorium or other similar laws
affecting the enforcement of creditor's rights generally and general principles
of equity (regardless of whether enforceability is considered a proceeding at
law or equity).
All of the opinions set forth above are qualified to the extent that
the validity of any provision of any agreement may be subject to or affected by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the rights of creditors generally. We do not express any opinion as to
the availability of any equitable or specific remedy upon any breach of any of
the covenants, warranties or other provisions contained in any agreement. We
Exhibit B-4
WNC Holding, LLC
c/o WNC & Associates, Inc.
June ___, 2006
Page 5
have not examined, and we express no opinion with respect to, the applicability
of, or liability under, any Federal, state or local law, ordinance or regulation
governing or pertaining to environmental matters, hazardous wastes, toxic
substances or the like.
We are members of the bar of the State of Texas. We express no opinion
as to any matter except those set forth above. These opinions are rendered for
use by the Limited Partner, its assignees, and its legal counsel which will rely
on this opinion in connection with federal income tax opinions to be rendered by
that firm. This opinion may not be delivered to or relied upon by any other
person or entity without our express written consent.
Sincerely,
--------------------
Exhibit B-5
EXHIBIT C TO PARTNERSHIP AGREEMENT
CERTIFICATION AND AGREEMENT
CERTIFICATION AND AGREEMENT made as of the date written below by
FDI-Country Square, LTD., a Texas limited partnership (the "Partnership");
Fieser Holdings, Inc., a Texas corporation (the "General Partner"); and Xxxxxxxx
X. Xxxxxx (the "Original Limited Partner") for the benefit of WNC Holding, LLC,
a California limited liability company (the "Investment Partner"), and WNC &
Associates, Inc., a California corporation ("WNC").
WHEREAS, the Partnership proposes to admit the Investment Partner as a
limited partner thereof pursuant to an Amended and Restated Agreement of Limited
Partnership of the Partnership (the "Partnership Agreement"), in accordance with
which the Investment Partner will make substantial capital contributions to the
Partnership; and
WHEREAS, the Investment Partner and WNC have relied upon certain
information and representations described herein in evaluating the merits of
investment by the Investment Partner in the Partnership;
NOW, THEREFORE, to induce the Investment Partner to enter into the
Partnership Agreement and become a limited partner of the Partnership, and for
$1.00 and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the Partnership, the General Partner and the
Original Limited Partner hereby agree as follows for the benefit of the
Investment Partner and WNC.
1. Representations, Warranties and Covenants of the Partnership,
the General Partner and the Original Limited Partner
The Partnership, the General Partner and the Original Limited Partner
jointly and severally represent, warrant and certify to the Investment Partner
and WNC that, with respect to the Partnership, as of the date hereof:
1.1 The Partnership is duly organized and in good standing as
a limited partnership pursuant to the laws of the state of its formation with
full power and authority to own its apartment complex (the "Apartment Complex")
and conduct its business; the Partnership, the General Partner and the Original
Limited Partner have the power and authority to enter into and perform this
Certification and Agreement; the execution and delivery of this Certification
and Agreement by the Partnership, the General Partner and the Original Limited
Partner have been duly and validly authorized by all necessary action; the
execution and delivery of this Certification and Agreement, the fulfillment of
its terms and consummation of the transactions contemplated hereunder do not and
will not conflict with or result in a violation, breach or termination of or
constitute a default under (or would not result in such a conflict, violation,
breach, termination or default with the giving of notice or passage of time or
both) any other agreement, indenture or instrument by which the Partnership or
any General Partner or Original Limited Partner is bound or any law, regulation,
judgment, decree or order applicable to the Partnership or any General Partner
Exhibit C
or Original Limited Partner or any of their respective properties; this
Certification and Agreement constitutes the valid and binding agreement of the
Partnership, the General Partner and the Original Limited Partner, enforceable
against each of them in accordance with its terms.
1.2 The General Partner has delivered to the Investment
Partner, WNC or their affiliates all documents and information which would be
material to a prudent investor in deciding whether to invest in the Partnership.
All factual information provided to the Investment Partner, WNC or their
affiliates either in writing or orally, did not, at the time given, and does
not, on the date hereof, contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances under which they
are made.
1.3 Each of the representations and warranties contained in
the Partnership Agreement is true and correct as of the date hereof.
1.4 Each of the covenants and agreements of the Partnership
and the General Partner contained in the Partnership Agreement has been duly
performed to the extent that performance of any covenant or agreement is
required on or prior to the date hereof.
1.5 All conditions to admission of the Investment Partner as
the investment limited partner of the Partnership contained in the Partnership
Agreement have been satisfied.
1.6 No default has occurred and is continuing under the
Partnership Agreement or any of the Project Documents (as such term is defined
in the Partnership Agreement) for the Partnership.
1.7 The Partnership will allocate to the Limited Partner the
Projected Annual Tax Credits, or the Revised Projected Tax Credits, if
applicable.
1.8 The General Partner agrees to take all actions necessary
to claim the Projected Tax Credit, including, without limitation, the filing of
Form(s) 8609 with the Internal Revenue Service.
1.9 No person or entity other than the Partnership holds any
equity interest in the Apartment Complex.
1.10 The Partnership has the sole responsibility to pay all
maintenance and operating costs, including all taxes levied and all insurance
costs, attributable to the Apartment Complex.
1.11 The Partnership, except to the extent it is protected by
Insurance and excluding any risk borne by lenders, bears the sole risk of loss
if the Apartment Complex is destroyed or condemned or there is a diminution in
the value of the Apartment Complex.
1.12 No person or entity except the Partnership has the right
to any proceeds, after payment of all indebtedness, from the sale, refinancing,
or leasing of the Apartment Complex.
Exhibit C-2
1.13 No General Partner is related in any manner to the
Investment Partner, nor is any General Partner acting as an agent of the
Investment Partner.
2. Miscellaneous
2.1 This Certification and Agreement is made solely for the
benefit of the Investment Partner and WNC, and their respective successors and
assignees, and no other person shall acquire or have any right under or by
virtue of this Agreement.
2.2 This Certification and Agreement may be executed in
several counterparts, each of which shall be deemed to be an original, all of
which together shall constitute one and the same instrument.
2.3 Capitalized terms used but not defined in this
Certification Agreement shall have the meanings given to them in the Partnership
Agreement.
[signatures appear on following page]
Exhibit C-3
IN WITNESS WHEREOF, this Certificate and Agreement is made and entered into
as of the __ day of June, 2006.
PARTNERSHIP:
FDI-Country Square, LTD.
By: Fieser Holdings, Inc., its general
partner
By: /s/ XXXXX X. XXXXXX
------------------------------------
Xxxxx X. Xxxxxx
President
GENERAL PARTNER:
Fieser Holdings, Inc.
By: /s/ XXXXX X. XXXXXX
------------------------------------
Xxxxx X. Xxxxxx
President
ORIGINAL LIMITED PARTNER:
Xxxxxxxx X. Xxxxxx
/s/ XXXXXXXX X. XXXXXX
-----------------------------
EXHIBIT D TO PARTNERSHIP AGREEMENT
FORM OF COMPLETION CERTIFICATE
(TO BE USED WHEN REHABILITATION COMPLETED)
COMPLETION CERTIFICATE
The undersigned, an architect duly licensed and registered in the State of
Texas, has reviewed the final working plans and detailed specifications for
FDI-Country Square, LTD., a Texas limited partnership (the "Partnership"), in
connection with the rehabilitation of improvements on certain real property
located in Xxxxxx County, Texas (the "Improvements").
The undersigned hereby certifies (i) that the Improvements have been completed
in accordance with the aforesaid plans and specifications, (ii) that a permanent
certificate of occupancy and all other permits required for the continued use
and occupancy of the Improvements have been issued with respect thereto by the
governmental agencies having jurisdiction thereof, (iii) that the Improvements
are in compliance with all requirements and restrictions of all governmental
authorities having jurisdiction over the Improvements, including, without
limitation, all applicable zoning, building, environmental, fire, and health
ordinances, rules and regulations and (iv) that all contractors, subcontractors
and workmen who worked on the Improvements have been paid in full except for
normal retainages and amounts in dispute.
-----------------------------------------
Apartment Housing Architect
Date:
----------------------------------
Confirmed by:
---------------------------
-----------------------------------------
General Partner
Date:
----------------------------------
Exhibit D
EXHIBIT E TO THE PARTNERSHIP
[ACCOUNTANT'S CERTIFICATE]
[ACCOUNTANT'S LETTERHEAD]
__________, 200_
WNC Holding, LLC
WNC Housing, L.P.
c/o WNC & Associates, Inc.
00000 Xxx Xxxx Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxx
RE: PartnershipCertification as to Amount
of Eligible Tax Credit Base
Ladies and Gentlemen:
In connection with the acquisition by WNC Holding, LLC, a California limited
liability company (the "Limited Partner"), of a limited partnership interest in
FDI-Country Square, LTD., a Texas limited partnership (the "Partnership") which
owns a certain parcel of land located in Xxxxxx County, Texas and improvements
thereon (the "Apartment Housing"), the Limited Partner has requested our
certification as to the amount of low-income housing tax credits ("Tax Credits")
available with respect to the Apartment Housing under Section 42 of the Internal
Revenue Code of 1986, as amended (the "Code"). Based upon our review of [the
financial information provided by the Partnership] of the Partnership, we are
prepared to file the Federal information tax return of the Partnership claiming
annual Tax Credits in the amount of $_______________, which amount is based on
an eligible basis (as defined in Section 42(d) of the Code) of the Apartment
Housing of $________________, a qualified basis (as defined in Section 42(c) of
the Code) of the Apartment Housing of $_________________ and an applicable
percentage (as defined in Section 42(b) of the Code) of _____%.
Sincerely,
-------------------------
Exhibit E
EXHIBIT F TO THE PARTNERSHIP AGREEMENT
[CONTRACTOR'S CERTIFICATE]
[CONTRACTOR'S LETTERHEAD]
_______________, 200_
WNC Holding, LLC
c/o WNC & Associates, Inc.
00000 Xxx Xxxx Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxx
Re: FDI-Country Square, LTD.
Dear Ladies and Gentlemen:
The undersigned LCJ Management, Inc. (hereinafter referred to as "Contractor"),
has furnished or has contracted to furnish labor, services and/or materials
(hereinafter collectively referred to as the "Work") in connection with the
improvement of certain real property known as Country Square Apartments located
in Xxxxxx County, Texas (hereinafter known as the "Apartment Housing").
Contractor makes the following representations and warranties regarding Work at
the Apartment Housing.
o Work on said Apartment Housing has been performed and completed in
accordance with the plans and specifications for the Apartment
Housing.
o Contractor acknowledges that all amounts owed pursuant to the contract
for Work performed for FDI-Country Square, LTD. is paid in full.
o Contractor acknowledges that FDI-Country Square, LTD. is not in
violation of the terms and conditions of the contractual documents
related to the Apartment Housing.
o Contractor warrants that all parties who have supplied Work for
improvement of the Apartment Housing have been paid in full.
o Contractor acknowledges the contract to be paid in full and releases
any lien or right to lien against the above property.
The undersigned has personal knowledge of the matters stated herein and is
authorized and fully qualified to execute this document on behalf of the
Contractor.
LCJ Management, Inc.
By:
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
Exhibit F
EXHIBIT G
REPORT OF OPERATIONS
QUARTER ENDED: ____________________, 200_
------------------------------------- -----------------------------------
LOCAL PARTNERSHIP:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
GENERAL PARTNER:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Firm Name:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Address:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
City, State, Zip:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Phone:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
PROPERTY NAME:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Address:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
City, State, Zip:
-----------------------------------
------------------------------------- -----------------------------------
Resident Manager:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Phone:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
ACCOUNTANT:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Firm:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Address:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
City, State, Zip:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Phone:
------------------------------------- -----------------------------------
------------------------------------ -----------------------------------
MANAGEMENT COMPANY
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Address:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
City, State, Zip:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Phone:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Contact:
------------------------------------- -----------------------------------
-------------------------------------------------------------------------------
OCCUPANCY INFORMATION
A. Number of Apartment Units_____ Number of RA Units_____
Number of Section 8 Tenants ____
B. Occupancy for the Quarter has: Increased ____ Decreased_____
Remained the Same _____
C. Number of: Move-Ins ______ Move-Outs __________ % of Occupancy ______
D. Average length of tenant residency: 1-6 months ______ 6-12 months ______
1-3 years ______ Over 4 years_____
E. Number of Basic rent qualified applicants on waiting list: ________
F. If the apartments are less than 90% occupied, please explain why and
describe what efforts are being made to lease-up remaining units.
___________________________________________________________________________
G. On site manager: Full Time__________ Part Time____________.
If part-time, the number of hours per week_____________.
Exhibit G
OPERATIONAL INFORMATION
Rent Schedule and Increases from Previous Quarter
Number Monthly Rent Rent Increases Effective
of Units Basic / Market Amount Percent Date
1 Bedroom ________ ______________ _______ _______ ________
2 Bedroom ________ ______________ _______ _______ ________
3 Bedroom ________ ______________ _______ _______ ________
PROPOSED MAINTENANCE
Completed Funded by
Type Description or Operations or Amount
Planned Reserves
------------------------------------------------------------------------------
Interior Painting
------------------------------------------------------------------------------
Exterior Painting
------------------------------------------------------------------------------
Siding
------------------------------------------------------------------------------
Roofing
------------------------------------------------------------------------------
Drainage
------------------------------------------------------------------------------
Paving
------------------------------------------------------------------------------
Landscaping
------------------------------------------------------------------------------
Playground
------------------------------------------------------------------------------
Community Room
------------------------------------------------------------------------------
Laundry Room
------------------------------------------------------------------------------
Common Areas
------------------------------------------------------------------------------
Carpet
------------------------------------------------------------------------------
Appliances
------------------------------------------------------------------------------
Lighting
------------------------------------------------------------------------------
Other
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Please describe in detail any major repairs:
------------------------------------------------------------------------------
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Exhibit G
CONDITION OF PROPERTY
The overall appearance of the building(s) is:
Excellent Good Fair Bad
The overall appearance of the grounds is:
Excellent Good Fair Bad
EXTERIOR CONDITION (Please Check Appropriate Box)
------------------------------------------------------------------------------
Type of Condition Excellent Good Fair Problems/Comments
------------------------------------------------------------------------------
Signage
-------------------------------------------------------------------------------
Parking Lots
-------------------------------------------------------------------------------
Office/Storage
-------------------------------------------------------------------------------
Equipment
-------------------------------------------------------------------------------
Community Building
-------------------------------------------------------------------------------
Laundry Room
-------------------------------------------------------------------------------
Benches/Playground
-------------------------------------------------------------------------------
Lawns, Plantings
-------------------------------------------------------------------------------
Drainage, Erosion
-------------------------------------------------------------------------------
Carports
-------------------------------------------------------------------------------
Fences
-------------------------------------------------------------------------------
Walks/Steps/Guardrails
-------------------------------------------------------------------------------
Lighting
-------------------------------------------------------------------------------
Painting
-------------------------------------------------------------------------------
Walls/Foundation
-------------------------------------------------------------------------------
Roof/Flashing/Vents
-------------------------------------------------------------------------------
Gutters/Splashblocks
-------------------------------------------------------------------------------
Balconies/Patios
-------------------------------------------------------------------------------
Doors Windows/Screens
-------------------------------------------------------------------------------
Elevators
-------------------------------------------------------------------------------
INTERIOR CONDITION
-------------------------------------------------------------------------------
Stairs
-------------------------------------------------------------------------------
Flooring
-------------------------------------------------------------------------------
Doors/Cabinets/Hardware
-------------------------------------------------------------------------------
Drapes/Blinds
-------------------------------------------------------------------------------
Interior Painting
-------------------------------------------------------------------------------
Refrig/Stoves/Sinks
-------------------------------------------------------------------------------
Bathroom/Tubs/Showers
Toilets
-------------------------------------------------------------------------------
Exhibit G
FINANCIAL STATUS
A. Replacement Reserve is: Fully-funded Under-funded Amount
(complete attached schedule)
Tax/Insurance Escrow is: Fully-funded Under-funded Amount
(complete attached schedule)
Property is operating at a: Surplus Deficit Amount
If deficit, General Partner funding? Yes No Amount
Mortgage Payments are: On Schedule Delinquent Amount
Are the taxes current? Yes No
(please provide copy of paid tax xxxx)
Is the insurance current? Yes No Renewal Date
(please provide copy of yearly renewal)
B. Please note and explain any significant changes in the following:
Administrative Expense Increase Decrease Amount
------------------------------------------------------------------------
------------------------------------------------------------------------
Repairs/Maintenance Expense Increase Decrease Amount
------------------------------------------------------------------------
------------------------------------------------------------------------
Utility Expense Increase Decrease Amount
------------------------------------------------------------------------
------------------------------------------------------------------------
Taxes/Insurance Expense Increase Decrease Amount
------------------------------------------------------------------------
------------------------------------------------------------------------
C. Do you anticipate making a return to owner distribution? Yes No
Explanation:
------------------------------------------------------------------------
------------------------------------------------------------------------
D. Please explain in detail any change in the financial condition:
------------------------------------------------------------------------
------------------------------------------------------------------------
E. Any insurance claims files? Yes______ No______
If yes, please explain:
------------------------------------------------------------------------
Exhibit G
SCHEDULE OF RESERVES
Replacement Tax & Insurance Other Total
Beginning Balance: ----------- ---------- ------- -------
Deposits:
---------- ----------- ---------- ------- -------
---------- ----------- ---------- ------- -------
---------- ----------- ---------- ------- -------
Total Deposits ----------- ---------- ------- -------
Authorized Disbursements: ----------- ---------- ------- -------
Description:
--------- ----------- ---------- ------- -------
--------- ----------- ---------- ------- -------
--------- ----------- ---------- ------- -------
--------- ----------- ---------- ------- -------
--------- ----------- ---------- ------- -------
--------- ----------- ---------- ------- -------
Total Disbursements: ----------- ---------- -------- ------
Ending Balance: (1) ----------- ---------- -------- ------
Required Balance: ----------- ---------- -------- ------
Over/under funding: ----------- ---------- -------- ------
(1) Must agree with amount shown on the balance sheet.
Prepared By: Date:
-------------------------------------------------------------------------------
Firm: Telephone:
-------------------------------------------------------------------------------
Reminder: Please include the following documents:
1. Completed Report of Operations
2. Balance Sheet
3. Statement of Income & Expenses
4. Rent roll for quarter ending
5. Tax Credit Compliance Report
Exhibit G
INITIAL TENANT CERTIFICATIONS
PARTNERSHIP NAME
Fund:
Property Name:
Address:
Tax Credit Set-Asides Information: Loan/Regulatory Set-Asides:
[ ] 20/50 [ ] 40/60 Election
[ ] Does the 51% average apply [ ] Y [ ] N
Deeper Set-Aside ______% @ 50% AMI
County:
Management
Company
Contact Person:
Phone #
[ ] Multi-Family
[ ] Elderly
[38] Number of Units
Number of Exempt Units
LIHTC Apartment
Housing#:
-------------------------------------------------------------------------------
Gross Move-In
Unit First Time Move-In # Of # In Income Income
# Tenant Name Date Bdrms Sq.Ft. Set-Aside Unit Move-In Limits
-------------------------------------------------------------------------------
BIN # Certificate of Occupancy
Date:
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
BIN # Certificate of Occupancy
Date:
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
BIN # Certificate of Occupancy
Date:
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Exhibit G
(CONTINUED)
Tenant Income Asset Less Tenant
Income Verifica Verifica Unit Rent Tenant Utility
Qualified tion tion Rent Subsidy Payment Allowance
-------------------------------------------------------------------------------
YES
-------------------------------------------------------------------------------
YES
-------------------------------------------------------------------------------
YES
-------------------------------------------------------------------------------
YES
-------------------------------------------------------------------------------
YES
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
YES
-------------------------------------------------------------------------------
YES
-------------------------------------------------------------------------------
YES
-------------------------------------------------------------------------------
YES
-------------------------------------------------------------------------------
YES
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
YES
-------------------------------------------------------------------------------
YES
-------------------------------------------------------------------------------
YES
-------------------------------------------------------------------------------
YES
-------------------------------------------------------------------------------
YES
-------------------------------------------------------------------------------
(CONTINUED)
Tenant Tenant Overall
Gross Maximum Rent Tenant
Rent Rent Qualified Eligible
-------------------------------------------------------------------------------
YES YES
-------------------------------------------------------------------------------
YES YES
-------------------------------------------------------------------------------
YES YES
-------------------------------------------------------------------------------
YES YES
-------------------------------------------------------------------------------
YES YES
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Exhibit G
QUARTERLY TAX CREDIT COMPLIANCE REPORT
PROPERTY NAME
Quarter Ending:
Tax Credit Set-Asides Information: Loan/Regulatory Set-Asides:
[ ] 20/50 [ ] 40/60 Election
[ ] Does the 51% average apply [ ] Y [ ] N
Deeper Set-Aside: List Details
Property Address:
County:
Allocation: Management Company:
[ ] Pre-1990 (Rent based on
number of persons) Contact Person:
[ ] Multi-Family [ ] Elected to change
[ ] Elderly # Bdrm Phone #
[ ] Number of Units [ ] Post-1989 (Based on Fax #
[ ] Number of # of Bedroom) Prepared by:
Exempt Units
LIHTC
Apartment
Housing #
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Gross Annual
Unit Tenant Move-In # Of Inc. Set- # In Annual Income
# Name Date Bdrms % Aside Unit Income Limits
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(CONTINUED)
Annual Tenant Less
Recert. Income Income Assets Unit Rent Tenant
Date Qualified Verified Verified Rent Subsidy Payment
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(CONTINUED)
Tenant Tenant Overall
Utility Gross Maximum Rent Tenat
Allow. Rent Rent Qualified Eligible
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Exhibit G
Tenant Tax Credit Compliance Audit
Document Transmittal Checklist
Unit Number Property Name Date
Tenant Name Completed By:
Initial /____/ Annual /____/
Check Box for Type of Certification Management Company
Check Documents This Section For WNC Use Only
Being Sent
Received Review
___ Internal Checklist or ____ ___________________
___ Initial - Rental Application/ ____ ___________________
___ Initial - Questionnaire of ____ ___________________
___ Recertification - Questionnaire of ____ ___________________
___ Recertification - ____ ___________________
___ Income/Assets ____ ___________________
___ Employment Verification ____ ___________________
___ Employment Termination ____ ___________________
___ Military Verification ____ ___________________
___ Verification of Welfare ____ ___________________
___ Verification of Social Security ____ ___________________
___ Verification of Disability ____ ___________________
___ Unemployment Verification ____ ___________________
___ Verification of Unemployment ____ ___________________
___ Verification Workmen's ____ ___________________
___ Retirement/Annuities ____ ___________________
___ Verification of Veterans ____ ___________________
___ Verification of Child Support ____ ___________________
___ Verification of Alimony ____ ___________________
___ Disposed of Assets Last 2 yrs ____ ___________________
___ Real ____ ___________________
___ Investm ____ ___________________
___ Assets Verifications/savings ____ ___________________
___ Trusts/with Current Tax ____ ___________________
___ Lump Sum Settlements ____ ___________________
___ Notarized Affidavit of Support ____ ___________________
___ Certification of Handicap ____ ___________________
___ Notarized Self- ____ ___________________
___ Notarized Statement of no ____ ___________________
___ Tenant Certification ____ ___________________
This Section For WNC Use Only
Yes No
___ ___ Are all required forms
___ ___ Are all required
___ ___ Did the Manager and Tenant sign
___ ___ Third party verification of
___ ___ Third party verification of
___ ___ Are verifications completed for all
___ ___ Did all the members of the household 18 yrs. and over sign all
documents?
___ ___ Is lease completed with a minimum of six
Exhibit G
___ ___ Addendum
___ ___ Tenant Certification
___ ___ Are all members of the household
___ ___ Is utility
___ ___ Is correct income limit
___ ___ Is correct rent limit
For tenants with no
___ ___ Was notarized statement of no income
___ ___ or Were all sources verified (AFDC Unemployment Soc Sec Disability)?
Exhibit G
TAX CREDIT COMPLIANCE MONITORING:
ANNUAL CERTIFICATION
As General Partner of FDI-Country Square, LTD., I hereby certify as to
the following:
1. FDI-Country Square, LTD. owns a 24 unit project ("Apartment
Housing") in Xxxxxx County, Texas.
2. An annual income certification (including supporting documentation)
has been received from each tenant. The income certification reflects that the
tenant's income meets the income limitation applicable to the Apartment Housing
pursuant to Section 42(g)(1) of the Internal Revenue Code ("Code").
3. The Apartment Housing satisfies the requirements of the applicable
minimum set aside test as defined in Section 42(g)(1) of the Code.
4. Each unit within the Apartment Housing is rent restricted as defined
in Section 42(g)(2)of the Code.
5. Each unit in the Apartment Housing is available for use by the
general public and not for use on a transient basis.
6. Each building in the Apartment Housing is suitable for occupancy in
accordance with local health, safety, and building codes.
7. During the preceding calendar year, there had been no change in the
eligible basis, as defined in Section 42(d) of the Code, of any building within
the Apartment Housing.
8. All common area facilities included in the eligible basis of the
Apartment Complex are provided to the tenants on a comparable basis without a
separate fee to any tenant in the Apartment Housing.
9. During the preceding calendar year when a unit in the Apartment
Housing became vacant reasonable attempts were made to rent that unit to tenants
whose incomes met the income limitation applicable to the Apartment Housing
pursuant to Section 42(g)(1) of the Code and while that unit was vacant no units
of comparable or smaller size were rented to tenants whose income did not meet
the income limitation applicable to the Apartment Housing pursuant to Section
42(g)(1) of the Code.
10. If the income of a tenant in a unit increased above the limit
allowed in Section 42 (g)(2)(D)(ii), then the next available unit of comparable
or smaller size was rented to tenants whose incomes met the income limitation
applicable to the Apartment Housing pursuant to Section 42(g)(1) of the Code.
IN VERIFICATION OF THE FOREGOING ENCLOSED HEREWITH IS A COPY OF THE ANNUAL
INCOME CERTIFICATION RECEIVED FROM EACH TENANT IN THE PROJECT. UPON REQUEST I
Exhibit G
WILL PROVIDE COPIES OF ALL DOCUMENTATION RECEIVED FROM THE TENANT TO SUPPORT
THAT CERTIFICATION.
I declare under penalty of perjury under the law of the State of Texas
that the foregoing is true and correct.
Executed this ____ day of ____________ at _____________, ____________.
----------------------------
Exhibit G
Calculation of Debt Service Coverage
Month 1 Month 2 Month 3
------------ ------------ ------------
INCOME
Gross Potential Rent
Other Income
Vacancy Loss ------------ ------------ ------------
Adjusted Gross Income ------------ ------------ ------------
OPERATING EXPENSES
Utilities
Maintenance
Management Fee
Administration
Insurance
Real Estate Taxes
Other Expenses ------------ ------------ ------------
Total Operating Expenses ------------ ------------ ------------
Net Operating Income (1)
Accrual adjustments for:
R/E Taxes
Insurance
Tax/ Accounting
Other
Replacement Reserves ------------ ------------ ------------
Income for DSC Calculation ============ ============ ============
Stabilized Debt Service ------------ ------------ ------------
Debt Service Coverage (2) ------------ ------------ ------------
Please submit this form along with the following supporting documentation:
Monthly Financial Reports (income statement, balance sheet, general ledger, and
rent rolls)
Operating Budget
Copies of bank statements
(1) This number should reconcile easily with the monthly financial
statements.
(2) The ratio between the Income for DSC calculation and Stabilized Debt
Service. As example, a 1.10 DSC means that for every $1.00 of Stabilized Debt
Service required to be paid there must be $1.10 of Net Operating Income
available.
Exhibit G
DEVELOPMENT FEE AGREEMENT
This Development Fee Agreement ("Agreement") is entered into as of the
date written below by and between Fieser Development, Inc., a Texas corporation
("Developer"), and FDI-Country Square, LTD., a Texas limited partnership
("Owner"). Developer and Owner collectively may be referred to as the "Parties"
or individually may be referred to as a "Party."
RECITALS
A. Owner has acquired real property located in Xxxxxx County, Texas, as
more particularly described in Exhibit A attached hereto and incorporated herein
(the "Real Property").
B. Owner intends to develop on the Real Property a 24 unit low-income
rental housing complex and other related improvements, which are intended to
qualify for federal low-income housing tax credits (the "Apartment Housing").
C. Prior to the date of this Agreement Developer has performed
substantial development services with respect to the Apartment Housing as
specified in Section 2.3 of this Agreement. Developer has also agreed to oversee
the development of the Apartment Housing until all construction work is
completed and to provide certain services relating thereto. The Parties
recognize and acknowledge that the Developer is, and has been, an independent
contractor in all services rendered to, and to be rendered to, the Owner
pursuant to this Development Fee Agreement.
D. Owner desires to commit its existing development agreement with
Developer into writing through this Development Fee Agreement for Developer's
services to manage, oversee, and complete development of the Apartment Housing.
Developer is willing to assign all development rights to the Apartment Housing
to Owner, to undertake performance of such development services, and to fulfill
all obligations of the Developer set forth in this Agreement, in consideration
of Owner's restated promise to pay to Developer the fee specified in this
Agreement. The parties agree that this Agreement supercedes all prior agreements
with respect to the subject matter hereof, whether oral or written.
NOW THEREFORE, in consideration of the foregoing recitals and the
mutual promises and undertakings in this Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Owner and Developer agree enter into this Development Fee
Agreement as follows:
SECTION 1
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall, when capitalized,
have the following meanings:
"Code" means the Internal Revenue Code of 1986, as amended.
"Construction Documents" means the contract documents between the Owner
and the Contractor pertaining to construction of the Apartment Housing.
"Contractor" means LCJ Management, Inc.
"Department" means the Texas agency responsible for the reservation and
allocation of Tax Credits.
"Development Fee" means the fee for development services described in
Section 2 of this Agreement.
"Partnership Agreement" shall mean the Amended and Restated Agreement
of Limited Partnership of FDI-Country Square, LTD., a Texas limited partnership,
which Partnership Agreement is incorporated herein by this reference. Any terms
capitalized but not defined herein shall have the meaning ascribed in the
Partnership Agreement.
"Tax Credits" means the low-income housing tax credits found in Section
42 of the Code, and all rules, regulations, rulings, notices and other
promulgations thereunder.
SECTION 2
ENGAGEMENT OF DEVELOPER; FEE; SERVICES
2.1 Engagement; Term. Owner hereby confirms the engagement of Developer to
act as developer of the Apartment Housing, and to perform the various covenants
and obligations of the Developer under this Agreement. Developer hereby confirms
and accepts such engagement and agrees to perform fully and timely each and
every one of its obligations under this Agreement. The term of such engagement
shall commence on the date hereof and subject to the pre-payment provisions of
Section 3 shall expire on December 31, 2017.
2.2 Development Fee. In consideration of Developer's prior activities and
Developer's agreement to provide development services during the term of this
Agreement, Owner agrees to pay the Developer a Development Fee in the amount of
$172,195. The Development Fee shall be payable in accordance with Section 3 of
this Agreement.
2.3 Development Services.
(a) Prior Services. Owner acknowledges that Developer has, prior to
the date hereof, performed substantial development services relating to the
Apartment Housing. Such services (the "Prior Services") have included the
following.
(1) Services Rendered Prior to Date Hereof.
(A) Developer has negotiated and conferred with the
Contractor and recommended to the Owner to enter into a
construction contract with the Contractor for the building of the
Apartment Housing.
2
(B) Developer has: estimated the cost of construction;
determined the construction period; prepared a monthly-estimated
construction chart reflecting the construction services required
each month; and prepared a preliminary construction budget.
(C) Developer has reviewed the plans and specifications for
compliance with design criteria and construction contracts.
(D) Developer has established a central control file of all
design, engineering and development documents, including
contracts, plans and specifications.
(E) Developer has negotiated and conferred with public
authorities relating to traffic control, flood control and other
matters affecting the development of the Apartment Housing.
(F) Developer has negotiated and conferred with an architect
and recommended to the Owner to execute an architectural contract
for the planning and design of the Apartment Housing.
(2) Other Prior Services.
(A) Developer has created, refined and analyzed the
financial projections for the Apartment Housing.
(B) Developer has negotiated, conferred, and worked with the
Apartment Housing architects, engineers and Contractor with
regard to preparation, refinement, and finalization of the plans
and specifications for the Apartment Housing, and projected
construction schedules and costs.
(C) Developer has negotiated and conferred with an Insurance
Company to provide a builder's risk policy during construction.
(b) Future Services. Developer hereby agrees to perform the following
development services for and as an agent of Owner.
(1) Construction and Development Matters. Developer shall oversee
construction of the Apartment Housing on Owner's behalf, as provided
in this Section 2.3(b)(1). Owner shall allow Developer full access to
the Apartment Housing during the construction period. Developer and
Developer's agents shall perform their work in a manner that minimizes
interference with the management and operation of the Apartment
Housing.
(A) Developer shall exert its best efforts to ensure that
the Contractor performs its obligations under the Construction
Documents in a diligent and timely manner.
(B) Developer shall participate in and provide assistance
with regard to pre-construction conferences and pre-construction
documents, including drawings, specifications, contracts, and
schedules.
3
(C) Developer shall review all Construction Documents,
identify construction issues and participate in the resolution of
such issues.
(D) Developer shall review and approve subcontract bids
received by the Contractor.
(E) Developer shall establish and administer field order and
change order procedures.
(F) Developer shall coordinate performance of Owner's
obligations under the construction phase for the Apartment
Housing, including the preparation of draw requests.
(G) Developer shall attend construction progress meetings at
the Apartment Housing site to monitor construction progress and
advise Owner and the Contractor with respect to the resolution of
construction issues.
(H) Developer shall review the Contractor's monthly pay
applications.
(I) Developer shall monitor the Contractor's progress with
respect to the approved Apartment Housing schedule and keep the
Owner informed of all pertinent Apartment Housing issues and
construction progress.
(J) Developer shall advise Owner with respect to relations
with engineers, architects, and other construction professionals.
(K) Developer shall be available for immediate response in
critical situations arising during the construction of the
Apartment Housing.
(L) Developer shall coordinate relations with the Xxxxxx
County and other governmental authorities having jurisdiction
over development of the Apartment Housing.
(2) Tax Credit Matters. From the date hereof through the
completion of construction of the Apartment Housing, the Developer
shall provide the following services to Owner with regard to the Tax
Credits which services do not constitute the rendering of legal or tax
advice:
(A) Developer shall consult with and advise Owner concerning
construction issues that could affect the amount of Tax Credits
for which the Apartment Housing is eligible.
(B) Developer shall consult with and advise Owner with
respect to the requirements of the Department as they relate to
the construction and development of the Apartment Housing.
(C) Developer shall monitor construction progress with
respect to the Apartment Housing schedule agreed to with the
Department, if any.
4
(c) Assignment of Development Rights. Developer hereby assigns to
Owner all rights to the development of the Apartment Housing, including but
not limited to, all tangible and intangible rights arising with respect to
the name FDI-Country Square, LTD., the design of the Apartment Housing, the
plans and specifications for the Apartment Housing and all rights arising
under the agreements with Apartment Housing architects, engineers and other
Apartment Housing design and construction professionals.
SECTION 3
DEVELOPMENT FEE PAYMENTS
3.1 Prior Services Rendered. The Parties acknowledge and agree that
Developer has earned the sum of $34,439 for services rendered prior to the date
hereof, that said amount is reasonable in relation to the work performed, is
fully earned as of that date and said amount shall be paid in any event
notwithstanding the termination of this Agreement. The Parties further
acknowledge and agree that the Owner has accrued the Development Fee of $34,439,
under its method of accounting.
3.2 Payment of Development Fee. The Development Fee shall be paid to the
Developer from Capital Contribution payments received by the Owner in accordance
with Section 9.2(b) of the Partnership Agreement. If the Development Fee is not
paid in full in accordance with Section 9.2(b) of the Partnership Agreement then
the balance of the Development Fee shall be paid from available Net Operating
Income in accordance with the terms of Section 11.1 of the Partnership
Agreement, but in no event later than December 31, 2017. Also, if the
Development Fee is not paid in full in accordance with Section 9.2(b) of the
Partnership Agreement then the unpaid portion shall accrue interest at a rate
equal to the applicable federal rate (as defined in Code Section 1274(d)) for
long-term debt in effect as of the date of the last Capital Contribution payment
referenced in Section 7.2 of the Partnership Agreement.
SECTION 4
TERMINATION
Neither Party to this Agreement shall have the right to terminate this
Agreement prior to the expiration of the term without cause. Owner may terminate
this Agreement without further liability, for cause, which shall mean any one of
the following:
(a) a material breach by Developer of its obligations under this
Agreement that is not cured within thirty (30) days after notice thereof
(or, as to any non-monetary obligations that is not reasonably capable of
cure within 30 days, and provided that cure is commenced within 10 days of
notice and diligently pursued thereafter to completion, within such time as
may reasonably be necessary to complete such cure);
(b) a fraudulent or intentionally incorrect report by Developer to
Owner with respect to the Apartment Housing; or
(c) any intentional misconduct or gross negligence by Developer with
respect to its duties under this Contract.
5
Upon proper termination of this Agreement by Owner pursuant to this
Section 4, all rights of Developer to receive unearned Development Fees pursuant
to this Agreement with respect to services not yet performed shall terminate.
Developer shall receive the full Development Fee for Prior Services and shall
receive a portion of the Development Fee for Future Services based on the
percentage of completion of construction of the Apartment Housing at the time of
termination. Nothing in this Section 4 shall be deemed to prevent Owner from
bringing an action against Developer to recover fully all damages resulting from
any of the causes set forth in paragraphs (a), (b) or (c) above, or to prevent
Owner from contending in any action or proceeding that the Future Services were
not earned by Developer.
SECTION 5
GENERAL PROVISIONS
5.1 Notices. Notices required or permitted to be given under this Agreement
shall be in writing sent by registered or certified mail, postage prepaid,
return receipt requested, to the Parties at the following addresses, or such
other address as is designated in writing by the Party, the date of registry
thereof, or the date of certification receipt therefor being deemed the date of
such notice; provided, however, that any written communication containing such
information sent to a Party actually received by a Party shall constitute notice
for all purposes of this Agreement.
If to Developer: Fieser Development, Inc.
00000 Xxxx Xxx Xxxx.
Xxxxx 000
Xxxxxxx, Xxxxx 00000
If to Owner: FDI-Country Square, LTD.
00000 Xxxx Xxx Xxxx.
Xxxxx 000
Xxxxxxx, Xxxxx 00000
5.2 Interpretation.
(a) Headings. The section headings in this Agreement are included for
convenience only; they do not give full notice of the terms of any portion
of this Agreement and are not relevant to the interpretation of any
provision of this Agreement.
(b) Relationship of the Parties. Neither Party hereto shall be deemed
an agent, partner, joint venturer, or related entity of the other by reason
of this Agreement and as such neither Party may enter into contracts or
agreements which bind the other Party.
(c) Governing Law. The Parties intend that this Agreement shall be
governed by and construed in accordance with the laws of the state of Texas
applicable to contracts made and wholly performed within Texas by persons
domiciled in Texas.
(d) Severability. Any provision of this Agreement that is deemed
invalid or unenforceable shall be ineffective to the extent of such
invalidity or unenforceability, without rendering invalid or unenforceable
the remaining provisions of this Agreement.
6
5.3 Integration; Amendment. This Agreement constitutes the entire agreement
of the Parties relating to the subject matter hereof. There are no promises,
terms, conditions, obligations, or warranties other than those contained herein.
This Agreement supersedes all prior communications, representations, or
agreements, verbal or written, among the Parties relating to the subject matter
hereof. This Agreement may not be amended except in writing.
5.4 Attorneys' Fees. If any suit or action arising out of or related to
this Agreement is brought by any Party to any such document, the prevailing
Party shall be entitled to recover the costs and fees (including without
limitation reasonable attorneys' fees and costs of experts and consultants,
copying, courier and telecommunication costs, and deposition costs and all other
costs of discovery) incurred by such Party in such suit or action, including
without limitation to any post-trial or appellate proceeding.
5.5 Binding Effect. This Agreement shall bind and inure to the benefit of,
and be enforceable by, the Parties hereto and their respective successors,
heirs, and permitted assigns.
5.6 Assignment. Neither Party may assign this Agreement without the consent
of the other Party. No assignment shall relieve any Party of liability under
this Agreement unless agreed in writing to the contrary.
5.7 Third-Party Beneficiary Rights. No person not a Party to this Agreement
is an intended beneficiary of this Agreement, and no person not a Party to this
Agreement shall have any right to enforce any term of this Agreement.
Notwithstanding the Parties acknowledge that WNC Holding, LLC and its assignees
shall have the right to enforce any term of this Agreement.
5.8 Related Parties. The Parties acknowledge that the Owner and Developer
are related parties under Code Section 267 and that Owner is an accrual basis
taxpayer. As such, the Parties agree and consent that each and every year during
the term of this Agreement that Owner accrues any or all of the principal and/or
interest of the Development Fee that the Developer (whether or not an accrual
basis taxpayer) will include an equal amount in Developer's income tax return
for that year.
5.9 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one agreement binding
on all the Parties, notwithstanding that all Parties are not signatories to the
same counterpart.
5.10 Further Assurances. Each Party agrees, at the request of the other
Party, at any time and from time to time after the date hereof, to execute and
deliver all such further documents, and to take and forbear from all such
action, as may be reasonably necessary or appropriate in order more effectively
to perfect the transfers or rights contemplated herein or otherwise to confirm
or carry out the provisions of this Agreement.
5.11 Mandatory Arbitration. Any person enforcing this Agreement may require
that all disputes, claims, counterclaims, and defenses ("Claims") relating in
any way to this Agreement or any transaction of which this Agreement is a part
(the "Transaction"), be settled by binding arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association and Title 9
of the U.S. Code. All claims will be subject to the statutes of limitation
applicable if they were litigated.
7
If arbitration occurs, one neutral arbitrator will decide all issues
unless either Party's Claim is $100,000.00 or more, in which case three neutral
arbitrators will decide all issues. All arbitrators will be active Texas State
Bar members in good standing. In addition to all other powers, the arbitrator(s)
shall have the exclusive right to determine all issues of arbitrability.
Judgment on any arbitration award may be entered in any court with jurisdiction.
If either Party institutes any judicial proceeding relating to the
Transaction, such action shall not be a waiver of the right to submit any Claim
to arbitration. In addition, both Parties have the right before, during, and
after any arbitration to exercise any of the following remedies, in any order or
concurrently: (i) setoff, (ii) self-help repossession, (iii) judicial or
non-judicial foreclosure against real or personal property collateral, (iv)
provisional remedies, including injunction, appointment of receiver, attachment,
claim and delivery, and replevin.
This arbitration clause cannot be modified or waived by either Party
except in a writing that refers to this arbitration clause and is signed by both
Parties.
[signatures appear on following page]
8
IN WITNESS WHEREOF, the Parties have caused this Development Fee Agreement
to be executed as of June ______, 2006.
DEVELOPER: Fieser Development, Inc.
By: /s/ XXXXX X. XXXXXX
-----------------------------
Xxxxx X. Xxxxxx
President
OWNER: FDI-Country Square, LTD.
By: Fieser Holdings, Inc., its general
partner
By: /s/ XXXXX X. XXXXXX
-----------------------------
Xxxxx X. Xxxxxx
President
9
EXHIBIT A
Legal Description
A 2.033 acre tract of land in the Xxxxxxx Xxxx Survey, Abstract 170 Xxxxxx
County, Texas, being all of lots one (1), two (2), three (3), four (4), five
(5), sixteen (16), seventeen (17), eighteen (18) and nineteen (19) in Block "E",
Lone Star Heights Subdivision, City of Lone Star, according to the plat thereof
recorded in Volume 1, Page 33, Plat Records, Xxxxxx County, Texas.
Exhibit A
DEVELOPMENT FEE GUARANTY AGREEMENT
FOR VALUE RECEIVED, the receipt and sufficiency of which is hereby
acknowledged, and in consideration of the agreement of Fieser Development, Inc.
(the "Developer") to permit deferral of the $172,195 due from FDI-Country
Square, LTD., a Texas limited partnership (the "Debtor"), to the Developer, the
undersigned Guarantor hereby unconditionally guarantees the full and prompt
payment when due, whether by acceleration or otherwise of that certain Developer
Fee from Debtor to the Developer, evidenced by the Development Fee Agreement
dated the even date herewith, and incorporated herein by this reference. The
foregoing described debt is referred to hereinafter as the "Liabilities" or
"Liability."
The undersigned further agree to pay all expenses paid or incurred by
the Debtor or Developer in endeavoring to collect the Liabilities, or any part
thereof, and in enforcing the Liabilities or this Development Fee Guaranty
Agreement (including reasonable attorneys' fees if collected or enforced by law
or through an attorney-at-law). The undersigned hereby represents and warrants
that the extension of credit or other financial accommodations by the Developer
to Debtor will be to the interest and advantage of the undersigned, and
acknowledges that this Development Fee Guaranty Agreement is a substantial
inducement to the Developer to extend credit to Debtor and that the Developer
would not otherwise extend credit to Debtor.
Debtor or Developer may, from time to time, without notice to or
consent of the undersigned, (a) retain or obtain a security interest in any
property to secure any of the Liabilities or any obligation hereunder, (b)
retain or obtain the primary or secondary liability of any party or parties, in
addition to the undersigned, with respect to any of the Liabilities and (c)
resort to the undersigned for payment of any of the Liabilities, whether or not
the Debtor or Developer shall have resorted to any property securing any of the
Liabilities or any obligation hereunder or shall have preceded against any other
party primarily or secondarily liable on any of the Liabilities.
Debtor and Developer must mutually agree to (a) extend or renew for any
period this Agreement (whether or not longer than the original period) or alter
any of the Liabilities, (b) release or compromise any Liability of the
undersigned hereunder or any Liability of any other party or parties primarily
or secondarily liable on any of the Liabilities, or (c) release, compromise or
subordinate its title or security interest, or any part thereof, if any, in all
or any property now or hereafter securing any of the Liabilities or any
obligation hereunder, and permit any substitution or exchange for any such
property,
The undersigned hereby expressly waives: (a) notice of the existence or
creation of all or any of the Liabilities, (b) notice of any amendment or
modification of any of the instruments or documents evidencing or securing the
Liabilities, (c) presentment, demand, notice of dishonor and protest, (d) all
diligence in collection or protection of or realization upon the Liabilities or
any thereof, any obligation hereunder, or any security for any of the foregoing,
and (e) the right to require the Developer to proceed against Debtor on any of
the Liabilities, though nothing herein shall prevent the Developer from
proceeding against Debtor on any of the Liabilities.
In the event any payment of Debtor to the Developer is held to
constitute a preference under the bankruptcy laws, or if for any other reason
the Developer is required to refund such payment or pay the amount thereof to
any other party, such payment by Debtor to the Developer shall not constitute a
release of Guarantor from any Liability hereunder, but Guarantor agrees to pay
such amount to the Developer upon demand and this Guaranty shall continue to be
effective or shall be reinstated, as the case may be, to the extent of any such
payment or payments.
No delay or failure on the part of the Developer in the exercise of any
right or remedy shall operate as a waiver thereof, and no single or partial
exercise by the Developer of any right or remedy shall preclude other or future
exercise thereof or the exercise of any other right or remedy. No action of the
Developer permitted hereunder shall in any way impair or affect this Development
Fee Guaranty Agreement. For the purpose of this Development Fee Guaranty
Agreement, the Liabilities of Debtor to the Developer are guaranteed
notwithstanding any right or power of Debtor or anyone else to assert any claim
or defense as to the invalidity or unenforceability of any such obligation, and
no such claim or defense shall impair or affect the obligations of the
undersigned hereunder.
Any payment from Guarantor directly to Developer in accordance with
this Agreement shall be classified and booked as a non-refundable cost overrun
payment from Guarantor to Debtor in consideration of this Development Fee
Guaranty Agreement and then a payment by Debtor to Developer in consideration of
the Development Fee Agreement.
This Development Fee Guaranty Agreement shall be binding upon the
undersigned, and upon the legal representatives, heirs, successors and assigns
of the undersigned, and may be enforced against them by the Debtor or Developer
or their legal representatives, heirs, successors and assigns.
This Development Fee Guaranty Agreement has been made and delivered in
the state of Texas and shall be construed and governed under Texas law.
Whenever possible, each provision of the Development Fee Guaranty
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Development Fee Guaranty Agreement
shall be prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition of invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Development Fee Guaranty Agreement.
Whenever the singular or plural number, masculine or feminine or neuter
is used herein, it shall equally include the other where applicable. In the
event this Development Fee Guaranty Agreement is executed by more than one
guarantor, this Development Fee Guaranty Agreement and the obligations hereunder
are the joint and several obligation of all the undersigned.
Guarantor consents to the jurisdiction of the courts in the State of
Texas and/or to the jurisdiction and venue of any United States District Court
in the State of Texas having jurisdiction over any action or judicial proceeding
brought to enforce, construe or interpret this Guaranty. Guarantor agrees to
stipulate in any such proceeding that this Guaranty is to be considered for all
purposes to have been executed and delivered within the geographical boundaries
of the State of Texas, even if it was, in fact, executed and delivered
elsewhere.
[signatures appear on following page]
2
IN WITNESS WHEREOF, the undersigned have hereunto caused this
Development Fee Guaranty Agreement to be executed as of June ___, 2006.
Signed, sealed and delivered
in the presence of: GUARANTOR:
/s/ XXXXX X. XXXXXX
---------------------------- --------------------------
Witness Xxxxx X. Xxxxxx
Notary Public
My Commission Expires: Address for Guarantor:
---------------------
00000 Xxx Xxxxxx Xxxx,
---------------------------- Xxxx, Xxxxx 00000
(NOTARY SEAL)
3
DEVELOPMENT, CONSTRUCTION AND OPERATING
BUDGET AGREEMENT
This Development, Construction and Operating Budget Agreement
("Agreement") is entered into as of the date written below by and between
FDI-Country Square, LTD., a Texas limited partnership ("Owner"), Fieser
Holdings, Inc., a Texas corporation ("General Partner"), WNC Holding, LLC, a
California limited liability company ("Limited Partner") and WNC Housing, L.P.,
a California limited partnership ("Special Limited Partner"). Owner, General
Partner, Limited Partner and Special Limited Partner collectively may be
referred to as the "Parties" or individually may be referred to as a "Party."
RECITALS
A. Owner has acquired approximately 2.033 acres of land in Xxxxxx
County, Texas (the "Real Property").
B. Owner intends to renovate and develop on the Real Property a 24-unit
low-income rental housing complex and other related improvements for family use,
which are intended to qualify for federal low-income housing tax credits (the
"Apartment Housing").
C. On even date herewith, an amended and restated partnership agreement
for FDI-Country Square, LTD. ("Partnership Agreement") was entered into by and
between the Parties (the Partnership Agreement is incorporated herein by this
reference as if the same were reproduced in full and any capitalized terms not
defined in this Agreement shall have the meaning as defined in the Partnership
Agreement).
D. In determining whether to be admitted into FDI-Country Square, LTD.
and contribute funds to the development of the Apartment Housing, the Limited
Partner and Special Limited Partner performed a due diligence review. Part of
the due diligence review included an analysis of the available sources of funds
to develop the Apartment Housing, the cost of construction, the anticipated
revenues associated with the rental of the Apartment Housing units and the
expenses required to operate the Apartment Housing.
E. The Parties recognize and acknowledge that the final construction
cost determination involves substantial negotiations with lenders, contractors
and governmental authorities.
F. The Parties recognize and acknowledge that a final operating budget
involves substantial negotiations with lenders and governmental authorities.
G. Limited Partner's and Special Limited Partner's decision to execute
the Partnership Agreement is based, in part, on their acceptance of the sources
of funds available to develop the Apartment Housing, the cost of construction to
build the Apartment Housing and the operating budget necessary to provide a
positive Debt Service Coverage.
Now Therefore, in consideration of the foregoing recitals which are a
part of this Agreement, the mutual promises and undertakings in this Agreement,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Parties agree as follows.
1. Source of Funds. Attached hereto as Exhibit A and incorporated
herein by this reference is the Apartment Housing Source of Funds. The Source of
Funds have been specified in the Partnership Agreement as the Mortgage Loan, the
Capital Contribution of the General Partner, the Capital Contribution of the
Limited Partner and the Capital Contribution of the Special Limited Partner.
Unless expressly permitted in the Partnership Agreement, Consent of the Special
Limited Partner is required for any change to the Source of Funds.
2. Development Budget. Attached hereto as Exhibit B and incorporated
herein by this reference is the Development Budget in an amount equal to
$1,477,034. Owner acknowledges and represents that the attached Development
Budget includes the total costs and expenses to acquire, develop and construct
the Real Property and the Apartment Housing.
3. Construction Proforma. Attached hereto as Exhibit C and incorporated
herein by this reference is the Construction Proforma. Owner acknowledges and
represents that the attached Construction Proforma has been reviewed by and
approved by the Mortgage lender, if applicable, and any governmental
authorities, if applicable. The Construction Proforma contains a list, by name,
of all subcontractors and material suppliers who will account for five percent
or more of the cost of construction of the Apartment Housing. Also included is a
trade payment breakdown specifying the cost of each classification of
construction requirements pursuant to Plans and Specifications and the other
Project Documents. In accordance with the Partnership Agreement, if the
construction costs exceed the sum of the Capital Contributions, the proceeds of
the Mortgage and the Development Fee then the General Partner shall be
responsible for and shall be obligated to pay such deficiencies.
4. Operating Proforma. Attached hereto as Exhibit D and incorporated
herein by this reference is the Operating Proforma. Owner acknowledges and
represents that the attached Operating Proforma has been reviewed by and
approved by the Mortgage lender, if applicable, and any governmental authorities
if applicable.
5. Notices. Any notice given pursuant to this Agreement may be served
personally on the Party to be notified, or may be mailed, first class postage
prepaid, to the following address, or to such other address as a Party may from
time to time designate in writing:
To the General Partner: Fieser Holdings, Inc.
00000 Xxxx Xxx Xxxx.
Xxxxx 000
Xxxxxxx, Xxxxx 00000
To the Limited Partner: WNC Holding, LLC
c/o WNC & Associates, Inc.
00000 Xxx Xxxx Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxx
2
To the Special
Limited Partner: WNC Housing, L.P.
00000 Xxx Xxxx Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxx
6. Successors and Assigns. All the terms and conditions of this
Agreement shall be binding upon and inure to the benefit of the successors and
assigns of the Parties.
7. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and said counterparts
shall constitute but one and the same instrument which may sufficiently be
evidenced by one counterpart.
8. Captions. Captions to and headings of the Sections of this Agreement
are solely for the conveniences of the Parties, are not a part of this
Agreement, and shall not be used for the interpretation or determination of the
validity of this Agreement or any provision hereof.
9. Saving Clause. If any provision of this Agreement, or the
application of such provision to any Person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to Persons or circumstances other than those as to which it is held invalid,
shall not be affected thereby.
10. Governing Law. This Agreement and its application shall be governed
by the laws of Texas.
11. Attorney's Fees. If a suit or action is instituted in connection
with an alleged breach of any provision of this Agreement, the prevailing Party
shall be entitled to recover, in addition to costs, such sums as the court may
adjudge reasonable as attorney's fees, including fees on any appeal.
[signatures appear on following page]
3
IN WITNESS WHEREOF, this Development, Construction and Operating Budget
Agreement is made and entered into as of June _____, 2006.
GENERAL PARTNER
Fieser Holdings, Inc.
By: /s/ XXXXX X. XXXXXX
---------------------------------
Xxxxx X. Xxxxxx
President
LIMITED PARTNER
WNC Holding, LLC
By: WNC & Associates, Inc., its managing
member
By: /s/ XXXXX X. XXXXXX
---------------------------------
Xxxxx X. Xxxxxx
Executive Vice President
SPECIAL LIMITED PARTNER
WNC Housing, L.P.
By: WNC & Associates, Inc., its general
partner
By: /s/ XXXXX X. XXXXXX
--------------------------------
Xxxxx X. Xxxxxx
Executive Vice President
EXHIBIT A
TO DEVELOPMENT, CONSTRUCTION AND OPERATING BUDGET AGREEMENT
SOURCE OF FUNDS
Exhibit A
EXHIBIT B
TO DEVELOPMENT, CONSTRUCTION AND OPERATING BUDGET AGREEMENT
DEVELOPMENT BUDGET
Exhibit B
EXHIBIT C
TO DEVELOPMENT, CONSTRUCTION AND OPERATING BUDGET AGREEMENT
CONSTRUCTION PROFORMA
Exhibit C
EXHIBIT D
TO DEVELOPMENT, CONSTRUCTION AND OPERATING BUDGET AGREEMENT
OPERATING PROFORMA
Exhibit D
CONSTRUCTION COMPLETION, OPERATING DEFICIT, AND TAX CREDIT GUARANTY AGREEMENT
This Construction Completion, Operating Deficit, and Tax Credit
Guaranty Agreement ("Agreement") is entered into as of this __ day of June,
2006, by and between Xxxxx X. Xxxxxx, an individual resident of the State of
Texas, and Fieser Holdings, Inc., a Texas corporation (individually and
collectively, the "Guarantor"), FDI-Country Square, LTD., a Texas limited
partnership (the "Partnership"), and WNC Holding, LLC, a California limited
liability company (the "Limited Partner"). The Guarantor, the Partnership and
the Limited Partner collectively may be referred to as the "Parties" or
individually may be referred to as a "Party."
RECITALS
WHEREAS, on even date herewith, an amended and restated partnership
agreement for the Partnership (the "Partnership Agreement") was entered into by
and between the General Partner and the Limited Partner (the Partnership
Agreement is incorporated herein by this reference as if the same were
reproduced in full and any capitalized terms not defined in this Agreement shall
have the meaning as defined in the Partnership Agreement).
WHEREAS, pursuant to the terms of the Partnership Agreement, the
General Partner: (1) is required to guarantee the completion of rehabilitation
of a 24 unit low income housing complex located in Xxxxxx County, Texas, as more
fully described in Exhibit A attached hereto and incorporated herein by this
reference, and any and all improvements now or hereafter to be constructed
thereon ("Apartment Housing"); (2) is required to guarantee the payment of all
Operating Deficits incurred by the Partnership as a result of the operations of
the Apartment Housing and (3) is required to guarantee the annual allocation of
tax credits to the Limited Partner.
WHEREAS, the Limited Partner would not have entered into the
Partnership Agreement as a limited partner but for the agreement of Guarantor to
provide the financial funds necessary to obtain Completion of Construction, to
pay Operating Deficits and to pay Tax Credit deficits. Guarantor is an affiliate
of the General Partner and will therefore benefit from the acquisition by the
Limited Partner of a limited partnership interest in the Partnership.
NOW THEREFORE, in consideration of the foregoing and the promises,
covenants and undertakings herein contained and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties hereto agree as follows:
SECTION 1. Guarantor hereby individually, jointly and severally
guarantees to the Partnership and the Limited Partner, as applicable, the prompt
payment and full performance of the provisions under Section 6.2, Section 6.3,
Section 7.4(a), Section 7.4(b), Section 7.4(c), and Section 7.4(e) of the
Partnership Agreement, including all modifications thereof, pursuant to and in
accordance with the terms and conditions set forth in the Partnership Agreement
and in this Agreement.
SECTION 2. Guarantor further agrees to pay all expenses paid or
incurred by the Partnership and/or Limited Partner in endeavoring to collect
Guarantor's obligations, or any part thereof, and in enforcing the provisions of
this Agreement, including reasonable attorneys' fees if collected or enforced by
law or through an attorney-at-law.
SECTION 3. No delay or failure on the part of the Partnership or
Limited Partner in the exercise of any right or remedy shall operate as a waiver
thereof, and no single or partial exercise by the Partnership of any right or
remedy shall preclude other or future exercise thereof or the exercise of any
other right or remedy. No action of the Partnership permitted hereunder shall in
any way impair or affect this Agreement. For the purpose of this Agreement,
Guarantor's obligations are guaranteed notwithstanding any right or power of
anyone else to assert any claim or defense as to the invalidity or
unenforceability of any such obligation, and no such third party claim or
defense shall impair or affect the obligations of Guarantors hereunder.
SECTION 4. This Agreement shall be binding upon the Parties, and upon
their legal representatives, heirs, successors and assigns.
SECTION 5. This Agreement has been made and delivered in the State of
Texas and shall be construed and governed under Texas law.
SECTION 6. Whenever possible, each provision of the Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
such law, such provision shall be ineffective to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
SECTION 7. The Parties recognize and acknowledge, and Guarantor agrees
and consents, that if the Partnership does not take legal action to enforce this
Agreement, if and when by the terms of this Agreement it is enforceable, then
the Limited Partner, may on its own behalf and in its own name commence legal
proceedings to enforce the terms of this Agreement.
SECTION 8. Whenever the singular or plural number, masculine or
feminine or neuter is used herein, it shall equally include the other where
applicable.
SECTION 9. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, and said counterparts shall
constitute but one and the same instrument which may sufficiently be evidenced
by one counterpart.
SECTION 10. The Guarantor shall maintain a net worth equal to at least
$1,000,000 computed in accordance with generally accepted accounting principles
and shall provide annual financial statements to Limited Partner as evidence of
such net worth, which financial statements shall be audited in the case of
Fieser Holdings, Inc.
SECTION 11. The Parties consent to the jurisdiction and venue of the
courts of Xxxxxx County in the State of Texas and/or to the jurisdiction and
venue of any United States District Court in the State of Texas having
jurisdiction over Xxxxxx County in any action or judicial proceeding brought to
enforce, construe or interpret this Agreement. The Parties agree to stipulate in
any such proceeding that this Agreement is to be considered for all purposes to
have been executed and delivered within the geographical boundaries of the State
of Texas, even if it was, in fact, executed and delivered elsewhere.
2
IN WITNESS WHEREOF, this Construction Completion, Operating Deficit,
and Tax Credit Guaranty Agreement is made and entered into as of this _______
day of June, 2006.
[signatures appear on following page]
3
GUARANTORS:
Fieser Holdings, Inc.
By: /s/ XXXXX X. XXXXXX
--------------------------------
Xxxxx X. Xxxxxx
President
Xxxxx X. Xxxxxx
/s/ XXXXX X. XXXXXX
------------------------------
Notary Public:
My Commission Expires:
-----------------------------
-----------------------------
(NOTARY SEAL)
PARTNERSHIP:
FDI-Country Square, LTD.
By: Fieser Holdings, Inc., its general
partner
By: /s/ XXXXX X. XXXXXX
----------------------------------
Xxxxx X. Xxxxxx
President
LIMITED PARTNER:
WNC Holding, LLC
By: WNC & Associates, Inc., its managing
member
By: /s/ XXXXX X. XXXXXX
--------------------------
Xxxxx X. Xxxxxx
Executive Vice President
[CONSTRUCTION COMPLETION, OPERATING DEFICIT, AND TAX CREDIT GUARANTY AGREEMENT]
Exhibit A
Legal Description
A 2.033 acre tract of land in the Xxxxxxx Xxxx Survey, Abstract 170 Xxxxxx
County, Texas, being all of lots one (1), two (2), three (3), four (4), five
(5), sixteen (16), seventeen (17), eighteen (18) and nineteen (19) in Block "E",
Lone Star Heights Subdivision, City of Lone Star, according to the plat thereof
recorded in Volume 1, Page 33, Plat Records, Xxxxxx County, Texas.
Exhibit A
