AMENDED AND RESTATED AGREEMENT
OF
LIMITED PARTNERSHIP
OF
OTTAWA GRACEFIELD LIMITED PARTNERSHIP
Dated August 30, 2004
TABLE OF CONTENTS
Page
Article I. DEFINITIONS.........................................................2
Article II. NAME..............................................................16
Article III. PRINCIPAL EXECUTIVE OFFICE/AGENT FOR SERVICE.....................16
Section 3.1 Principal Executive Office.........................16
Section 3.2 Agent for Service of Process.......................16
Article IV. PURPOSE...........................................................16
Section 4.1 Purpose of the Partnership.........................16
Section 4.2 Authority of the Partnership.......................16
Article V. TERM...............................................................17
Article VI. GENERAL PARTNER'S CONTRIBUTIONS AND LOANS.........................17
Section 6.1 Capital Contribution of General Partner............17
Section 6.2 Rehabilitation Obligations.........................17
Section 6.3 Operating Obligations..............................18
Section 6.4 Other General Partner Loans........................18
Article VII. CAPITAL CONTRIBUTIONS OF LIMITED PARTNER AND SPECIAL LIMITED
PARTNER..............................................................18
Section 7.1 Original Limited Partners..........................18
Section 7.2 Capital Contribution of Limited Partner and Special
Limited Partner....................................18
Section 7.3 Repurchase of Limited Partner's Interest...........21
Section 7.4 Adjustment of Capital Contributions................22
Section 7.5 Return of Capital Contribution.....................25
Section 7.6 Liability of Limited Partner and Special
Limited Partner....................................25
Article VIII. WORKING CAPITAL AND RESERVES....................................25
Section 8.1 Operating and Maintenance Account..................25
Section 8.2 Intentionally Omitted..............................25
Section 8.3 Intentionally Omitted..............................25
Section 8.3 Intentionally Omitted..............................25
Section 8.4 Tax and Insurance Account..........................25
Section 8.5 Other Reserves.....................................26
Article IX. MANAGEMENT AND CONTROL............................................26
Section 9.1 Power and Authority of General Partner.............26
Section 9.2 Payments to the General Partners and Others........26
Section 9.3 Specific Powers of the General Partner.............28
Section 9.4 Authority Requirements.............................29
Section 9.5 Limitations on General Partner's Power and
Authority..........................................29
Section 9.6 Restrictions on Authority of General Partner.......30
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Section 9.7 Duties of General Partner..........................32
Section 9.8 Obligations to Repair and Rebuild Apartment
Housing............................................34
Section 9.9 Partnership Expenses...............................34
Section 9.10 General Partner Expenses...........................35
Section 9.11 Other Business of Partners.........................35
Section 9.12 Covenants, Representations and Warranties..........36
Article X. ALLOCATIONS OF INCOME, LOSSES AND CREDITS..........................40
Section 10.1 General............................................40
Section 10.2 Allocations From Sale or Refinancing...............40
Section 10.3 Special Allocations................................41
Section 10.4 Curative Allocations...............................43
Section 10.5 Other Allocation Rules.............................44
Section 10.6 Tax Allocations: Code Section 704(c)...............45
Section 10.7 Allocation Among Limited Partners..................45
Section 10.8 Allocation Among General Partners..................45
Section 10.9 Modification of Allocations........................45
Article XI. DISTRIBUTION......................................................46
Section 11.1 Distribution of Net Operating Income...............46
Section 11.2 Distribution of Sale or Refinancing Proceeds.......46
Article XII. TRANSFERS OF LIMITED PARTNER'S INTEREST IN THE PARTNERSHIP.......47
Section 12.1 Assignment of Interests............................47
Section 12.2 Effective Date of Transfer.........................48
Section 12.3 Invalid Assignment.................................48
Section 12.4 Assignee's Rights to Allocations and Distributions.48
Section 12.5 Substitution of Assignee as Limited Partner or
Special Limited Partner............................48
Section 12.6 Death, Bankruptcy, Incompetency, etc., of a
Limited Partner....................................48
Article XIII. WITHDRAWAL, REMOVAL AND REPLACEMENT OF GENERAL PARTNER..........49
Section 13.1 Withdrawal of General Partner......................49
Section 13.2 Removal of General Partner.........................49
Section 13.3 Effects of a Withdrawal............................51
Section 13.4 Successor General Partner..........................53
Section 13.5 Admission of Additional or Successor General
Partner............................................53
Section 13.6 Transfer of Interest...............................54
Section 13.7 No Goodwill Value..................................54
Article XIV. BOOKS AND ACCOUNTS, REPORTS, TAX RETURNS, FISCAL YEAR AND
BANKING..............................................................54
Section 14.1 Books and Accounts.................................54
Section 14.2 Accounting Reports.................................55
Section 14.3 Other Reports......................................56
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Section 14.4 Late Reports.......................................58
Section 14.5 Annual Site Visits.................................58
Section 14.6 Tax Returns........................................58
Section 14.7 Fiscal Year........................................58
Section 14.8 Banking............................................58
Section 14.9 Certificates and Elections.........................59
Article XV. DISSOLUTION, WINDING UP, TERMINATION AND LIQUIDATION OF THE
PARTNERSHIP..........................................................59
Section 15.1 Dissolution of Partnership.........................59
Section 15.2 Return of Capital Contribution upon Dissolution....59
Section 15.3 Distribution of Assets.............................59
Section 15.4 Deferral of Liquidation............................60
Section 15.5 Liquidation Statement..............................61
Section 15.6 Certificates of Dissolution; Certificate of
Cancellation of Certificate of Limited Partnership.61
Article XVI. AMENDMENTS.......................................................61
Article XVII. MISCELLANEOUS...................................................62
Section 17.1 Voting Rights......................................62
Section 17.2 Meeting of Partnership.............................62
Section 17.3 Notices............................................63
Section 17.4 Successors and Assigns.............................63
Section 17.5 Recording of Certificate of Limited Partnership....63
Section 17.6 Amendment of Certificate of Limited Partnership....63
Section 17.7 Counterparts.......................................64
Section 17.8 Captions...........................................64
Section 17.9 Saving Clause......................................64
Section 17.10 Certain Provisions.................................64
Section 17.11 Tax Matters Partner................................65
Section 17.12 Expiration of Compliance Period....................65
Section 17.13 Number and Gender..................................66
Section 17.14 Entire Agreement...................................66
Section 17.15 Governing Law......................................66
Section 17.16 Attorney's Fees....................................66
Section 17.17 Receipt of Correspondence..........................67
Section 17.18 Security Interest and Right of Set-Off.............67
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EXHIBIT A - Legal Description
EXHIBIT B - Certification and Agreement
EXHIBIT D - Form of Completion Certificate
EXHIBIT E - Accountant's Certificate
EXHIBIT F - Contractor's Certificate
EXHIBIT G - Depreciation
EXHIBIT H - Report of Operations
EXHIBIT I - Survey Requirements
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AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP OF
OTTAWA GRACEFIELD LIMITED PARTNERSHIP
This Amended and Restated Agreement of Limited Partnership is being
entered into effective as of the date written below by and between Ottawa
Gracefield G/P, L.L.C., a Illinois limited liability company, as the general
partner (the "General Partner"), WNC Housing Tax Credit Fund VI, L.P., Series
11, a California limited partnership, 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 Star-Equities L.L.C., a
Wisconsin limited liability company, as the withdrawing limited partner.
RECITALS
WHEREAS, Ottawa Gracefield Limited Partnership, an Illinois limited
partnership (the "Partnership"), recorded a certificate of limited partnership
with the Illinois Secretary of State on December 30, 2003. A limited partnership
agreement dated as of December 8, 2003 (the "Original Partnership Agreement")
was entered into by and between Ottawa Gracefield G/P, L.L.C., as a general
partner and a limited partner, and Star-Equities, L.L.C., as a limited partner.
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 withdrawal of the Original Limited Partner and
liquidation of the Original Limited Partner's Interest as limited partner 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 Original
Partnership Agreement.
NOW, THEREFORE, in consideration of their mutual agreements herein set
forth, the Partners hereby agree to amend and restate the Original Partnership
Agreement in its entirety to provide as follows:
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ARTICLE I.
DEFINITIONS
Section 1.1 "Accountant" shall mean Friduss, Lukee, Schiff & Co., 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 Section 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, refers to this
Agreement as a whole, unless the context otherwise requires.
Section 1.7 "Apartment Housing" shall collectively mean the approximately 2
acres of land in the City of Ottawa, LaSalle County, Illinois, as more fully
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described in Exhibit "A" attached hereto and incorporated herein by this
reference, and the Improvements, to be known as Gracefield Apartments.
Section 1.8 "Architect of Record" shall mean Xxxxxxx Xxxx & Xxxxxxx
Architects, Ltd. 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.
Section 1.9 "Asset Management Fee" shall have the meaning set forth in
Section 9.2(d) hereof.
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 who has not been substituted in the stead of the
transferor as a 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 other than as a creditor, 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, or the discounted settlement of substantially all the
debts and obligations of a debtor; 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 any of the above has occurred to that Partner.
Section 1.12 "Breakeven Operations" shall mean at such time as the
Partnership has Cash Receipts in excess of Cash Expenses, as determined by the
Accountant and approved by the Special Limited Partner. For purposes of this
definition; (a) any one-time up-front fee paid to the Partnership from any
source shall not be included in Cash Receipts to calculate Breakeven Operations;
(b) Cash Expenses shall include any management fee or portion thereof which is
currently deferred and not paid; and (c) Cash Expenses shall include the amount
of any reserve required to be funded in accordance with Article VIII that is
currently deferred and not paid.
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 Section 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 Section 10.3 or
10.4 hereof. In the event of any transfer of an interest in the Partnership in
3
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 Section 7.3, 7.4 or 7.5
of this Agreement. A loan to the Partnership by a Partner shall not be
considered a Capital Contribution.
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, specifically excluding depreciation and similar items for
which no cash outlay is required, including, without limitation, the payment of
the monthly Mortgage and Second Loan 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, General
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, including, but not limited to,
Insurance, real estate taxes and audit, tax return 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. Construction period interest and
development costs of any nature whatsoever except as defined in Section 11.1 are
not Cash Expenses and shall not be paid from Cash Receipts. The provisions of
Section 6.2 govern the payment of development costs and construction interest.
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 Second
Loan, the Mortgage Loan, lump-sum payments, any extraordinary receipt of funds,
and any income earned on investment of its funds. Except as otherwise provided
herein, 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
4
amended from time to time, or any successor statute.
Section 1.19 "Completion of Rehabilitation" shall mean the date the Partnership
receives the required certificate of occupancy (or the local equivalent) for all
apartment units (provided a building permit was issued for the rehabilitation of
the apartment units requiring a certificate of occupancy to be issued), or by
the issuance of the Completion Certificate, 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 Rehabilitation further means that the
rehabilitation shall be completed in good quality, and free and clear of all
mechanic, material and similar liens. Notwithstanding, Completion of
Rehabilitation shall not be deemed to have occurred: if the statutory time
period for the filing of any liens by the Contractor, subcontractors, material
suppliers or any one else entitled to file a construction lien has not lapsed,
unless final lien waivers from the Contractor and all subcontractors have been
provided; or if on such date any liens or other encumbrances as to title to the
Apartment Housing exist, other than the Mortgage and Second Loan.
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.
Section 1.21 "Consent of the Special Limited Partner" shall mean the prior
written consent of the Special Limited Partner.
Section 1.22 "Construction Contract" shall mean the construction contract
dated June 10, 2004 in the amount of $507,300 entered into between the
Partnership and the Contractor pursuant to which the Improvements are being
constructed in accordance with the Plans and Specifications. The Construction
Contract shall be a fixed price agreement (includes materials and labor) at a
cost consistent with the Development Budget. Any modifications to the
Construction Contract require the Consent of the Special Limited Partner.
Section 1.23 "Construction Inspector" shall mean WNC and Associates, Inc.
or it's appointed agent, or any successor thereto with the Consent of the
Special Limited Partner.
Section 1.24 "Contractor" shall mean Star General Contractors, L.L.C.,
which is the general construction contractor for the Apartment Housing. At or
before Completion of Rehabilitation, the Contractor shall provide the
Partnership with a closeout binder, which shall include, but is not limited to,
as-built drawings, all operating manuals, and all manufacturing warranty
agreements if requested by the Special Limited Partner. In addition, the
Contractor shall provide the Partnership a one-year warranty on all parts,
materials and work-quality.
Section 1.25 "Debt Service Coverage" shall mean for the applicable period
the ratio between the Net Operating Income (excluding Mortgage payments and
Asset Management Fees) and the debt service required to be paid on the
Mortgage(s). As example, a 1.10 Debt Service Coverage means that for every $1.00
of debt service required to be paid there must be $1.10 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 "H" and incorporated herein
by this reference. For purposes of this definition: (a) any one-time up-front
fee paid to the Partnership from any source shall not be included in Cash
Receipts to calculate Debt Service Coverage; (b) Cash Expenses shall include the
5
amount of any Management Fee, or portion thereof, which is currently deferred
and not paid; and (c) Cash Expenses shall include the amount of any required
monthly deposits in connection with the reserves established pursuant to
Sections 8.1 and 8.5 that are currently deferred and not paid.
Section 1.26 "Deferred Management Fee" shall have the meaning set forth in
Section 9.2(c) hereof.
Section 1.27 "Developer" shall mean Star Development, L.L.C., a Delaware
limited liability company.
Section 1.28 "Development Fee" shall mean the fee payable to the Developer
for services incident to the development and rehabilitation 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
land or syndication activities.
Section 1.29 "Development Budget" shall mean the agreed upon cost of
developing the Apartment Housing and Improvements, including all rehabilitation
costs based on the Construction Contract, the Plans and Specifications, land and
soft costs (which includes, but is not limited to, financing charges, market
study, Development Fee, architect fees, etc.) The final Development Budget is
referenced in the Development, Construction and Operating Budget Agreement
entered into by and between the Partners on even date herewith, and incorporated
herein by this reference.
Section 1.30 "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 1.31 "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
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 1.32 "Financial Interest" shall mean the General Partner's capital
interest in the Partnership to be contributed and maintained pursuant to the
requirements of RD Instruction 1944-E, Section 1944.211(a)(13)(ii) or any
amendments thereto. Such Financial Interest shall not affect the Partners'
allocable share of the Profits, Losses, Tax Credits or Net Operating Income as
set forth in this Agreement.
Section 1.33 "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(1)(1), as amended, or any successor thereto.
6
Section 1.34 "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 or
restraint.
Section 1.35 "General Partner" shall mean Ottawa Gracefield G/P, L.L.C. 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 collectively refer to such General Partners or individually may mean
any General Partner as the context dictates.
Section 1.36 "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 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 Values 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 1.37(d) to the extent the General Partner determines
that an adjustment pursuant to Section 1.37(b) hereof is necessary or
appropriate in connection with a transaction that would otherwise result in an
adjustment pursuant to this Section 1.37(d).
If the Gross Asset Value of an asset has been determined or adjusted
7
pursuant to Section 1.37(a), Section 1.37(b), or Section 1.37(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 1.37 "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, 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 1.38 "IHDA" shall mean the Illinois Housing Development Authority
or any successor thereto.
Section 1.39 "Improvements" shall mean the building containing 24 apartment
units (including one manager's unit) and ancillary and appurtenant facilities
being renovated for elderly and family use and built in accordance with the
Project Documents. It shall also include all furnishings, equipment and personal
property used in connection with the operation thereof.
Section 1.40 "In-Balance" shall mean, at any time when calculated, when the
undisbursed Capital Contributions of the Limited Partner and Special Limited
Partner required to be paid-in through and including the Completion of
Rehabilitation are sufficient in the Special Limited Partner's reasonable
judgment to pay all of the following sums: (a) all costs of construction to
achieve Completion of Rehabilitation; and (b) all soft costs in the development
of the Apartment Housing and Improvements, including but not limited to,
architect fees, land acquisition, impact fees and costs of marketing,
maintenance and leasing of the Apartment Housing units.
Section 1.41 "Incentive Management Fee" shall have the meaning set forth in
Section 9.2(e) hereof.
Section 1.42 "Income and Loss(es)" 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:
(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 1.37 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 shall be subtracted from
such taxable income or loss;
8
(c) in the event the Gross Asset Value of any Partnership asset is adjusted
pursuant to Section 1.37(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 1.43 "Insurance" shall mean:
(a) during rehabilitation, the Partnership will provide and maintain, or
cause the Contractor to provide and maintain, hazard insurance in an amount
equal to 100% of the insurable value of the Apartment Housing at the date of
acquisition; 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
9
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 building or ordinance endorsements;
(g) the Insurance Policy or Policies required by this Section shall not
have a deductible provision in excess of $5,000; 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 1.44 "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 1.45 "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.
Section 1.46 "Involuntary Withdrawal" shall mean any Withdrawal of a
General Partner caused by death, adjudication of insanity or incompetence,
Bankruptcy, or the removal of a General Partner pursuant to Section 13.2 hereof.
Section 1.47 "Land Acquisition Fee" shall mean the fee payable to the
General Partner in an amount equal to $2,098.00 for the General Partner's
services in locating, negotiating and closing on the purchase of the real
property upon which the Improvements are, or will be, erected.
Section 1.48 "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 1.49 "Limited Partner" shall mean WNC Housing Tax Credit Fund VI,
L.P., Series 11, a California limited partnership, and such other Persons as are
admitted to the Partnership as additional or Substitute Limited Partners
pursuant to this Agreement.
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Section 1.50 "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
Professional Property Management, L.L.C. Any substitution of the Management
Agent requires the Consent of the Special Limited Partner.
Section 1.51 "Management Agreement" shall mean the agreement between the
Partnership and the Management Agent for property management services. The
initial management fee shall equal $40.00 per unit per month. If approved by
Second Lender, the management fee may also include accounting fees authorized by
Second Lender. Neither the Management Agreement nor any ancillary agreement
shall provide for an initial rent-up fee, a set-up fee, any other similar
pre-management fee or recurring fee for compliance monitoring or the like
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 1.52 "Minimum Set-Aside Test" shall mean the 40-60 set-aside test
pursuant to Section 42(g) 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, and any additional set-aside requirements agreed to pursuant to the
Project Documents.
Section 1.53 "Mortgage" or "Mortgage Loan" shall mean the first priority
non-recourse permanent financing, wherein the Partnership promises to pay the
First National Bank of Ottawa the principal sum of $435,000 plus interest on the
principal at an annual rate of 7.893% amortized over 360 months, with a maturity
period of 20 years. 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 Special 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 of the Mortgage Loan and Second Loan requiring an
amortized monthly principal and interest payment falls below 1.10 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 1.10 Debt
Service Coverage. The Mortgage funds shall be used to provide permanent
financing in connection with the acquisition and development of the Apartment
Housing. Notwithstanding the foregoing, if the interest rate at the time of
closing the Mortgage is less than the amount stated, the General Partner shall
not increase the principal amount of the Mortgage even if the Debt Service
Coverage remains at or above 1.10.
Section 1.54 "Net Operating Income" shall mean the cash available for
Distribution on an annual basis, when Cash Receipts exceed Cash Expenses.
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Section 1.55 "Nonrecourse Deductions" shall have the meaning given it in
Treasury Regulations Section 1.704-2(b)(1).
Section 1.56 "Nonrecourse Liability" shall have the meaning given it in
Treasury Regulations Section 1.704-2(b)(3).
Section 1.57 "Operating Deficit" shall mean, for the applicable period,
insufficient funds to pay operating costs when Cash Expenses exceed Cash
Receipts, as determined by the Accountant and approved by the Special Limited
Partner.
Section 1.58 "Operating Deficit Guarantee Period" shall mean the period
commencing the date the first apartment unit in the Apartment Housing is
available for its intended use and ending three years following the achievement
of three consecutive months of Breakeven Operations. The Operating Deficit
Guarantee Period will not expire unless the Partnership has achieved Completion
of Rehabilitation of the Apartment Housing.
Section 1.59 "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 and are repayable only as provided in Article XI of this
Agreement.
Section 1.60 "Original Limited Partner" shall mean Star-Equities, L.L.C.
Section 1.61 "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 1.62 "Partner Nonrecourse Debt" shall have the meaning set forth in
Section 1.704-2(b)(4) of the Treasury Regulations.
Section 1.63 "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 1.64 "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 1.65 "Partnership" shall mean the limited partnership continued
under this Agreement.
Section 1.66 "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 1.67 "Permanent Mortgage Commencement" shall mean the first date on
which all of the following have occurred: (a) the Second Loan shall have closed
and funded; (b) the Mortgage shall have closed and funded; and (c) amortization
of the Mortgage and Second Loan shall have commenced.
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Section 1.68 "Person" shall collectively mean an individual,
proprietorship, trust, estate, partnership, joint venture, association, company,
corporation or other entity.
Section 1.69 "Plans and Specifications" shall mean the plans, blueprints
and specifications manual for the construction 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. The General Partner agrees to assure that the
Contractor completes rehabilitation in accordance with the Plans and
Specifications. Any changes to the Plans and Specifications (after approval by
the appropriate government building department) shall require the Consent of the
Special Limited Partner, provided, however, that changes to the Plans and
Specifications resulting in single line item changes of less than $2,500 in the
Construction Contract shall not require such Consent, provided further that such
changes shall not exceed an aggregate of $25,000.
Section 1.70 "Project Documents" shall mean all documents relating to the
Second Loan, the Mortgage Loan, and the Construction Contract. It shall also
include all documents required by any governmental agency having jurisdiction
over the Apartment Housing in connection with the development, rehabilitation
and financing of the Apartment Housing, including but not limited to, the
approved Plans and Specifications for the development and renovation of the
Apartment Housing.
Section 1.71 "Projected Annual Tax Credits" shall mean LIHTC in the amount
of $66,789 for 2005, $84,365 for each of the years 2006-2014, and $17,576 for
2015, 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 $843,820 to be available to the
Partnership.
Section 1.72 "Projected Tax Credits" shall mean LIHTC in the aggregate
amount of $843,820.
Section 1.73 "Qualified Tenants" shall mean any tenants who have incomes of
60% (or such smaller percentage as the General Partner shall agree) or less of
the area median gross income, as adjusted for family size, so as to make the
Apartment Housing eligible for LIHTC.
Section 1.74 "RD" shall mean United States Department of Agriculture, Rural
Development-Illinois (formerly Farmers Home Administration) or any successor
thereto.
Section 1.75 "RD Interest Credit Agreement" shall mean the Multiple Family
Housing Interest Credit and Rental Assistance Agreement (Form RD 1944-7 or any
successor thereof) between the RD and the Partnership in connection with the
Second Loan whereby RD will provide a monthly credit subsidy to the
Partnership's Second Loan account when the Partnership makes each monthly
payment on the Second Loan.
Section 1.76 "RD Loan Agreement" shall mean the Loan Agreement for an RRH
loan to the Partnership on a Limited Profit Basis (Form RD 1944-34 or any
successor thereof) between the RD and the Partnership made in consideration of
the Second Loan to the Partnership by RD pursuant to Section 515(b) of the
Housing Act of 1949 for the Apartment Housing.
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Section 1.77 "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 1.78 "Revised Projected Tax Credits" shall have the meaning set
forth in Section 7.4(a) hereof.
Section 1.79 "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 of 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 1.80 "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 1.81 "Second Lender" shall mean United States Department of
Agriculture or any successor thereto in its capacity as maker of the Second
Loan.
Section 1.82 "Second Loan" shall mean the permanent loan obtained from the
Second Lender for the Apartment Housing in the principal amount of $521,176 with
an effective interest rate of one percent (1%) per annum, amortized over 40
years with a 30 year maturity. Where the context admits, the term "Second Loan"
shall include any deed, deed of trust, note, security agreement, assumption
agreement or other instrument executed by, or on behalf of, the Partnership or
General Partner in connection with the Second Loan.
Section 1.83 "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 1.84 "State" shall mean the State of Illinois.
Section 1.85 "State Tax Credit Agency" shall mean the state agency of
Illinois which has the responsibility and authority to administer the LIHTC
program in Illinois.
Section 1.86 "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 1.87 "Syndication Fee" shall mean the fee payable to the General
14
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 the
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 1.88 "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 1.89 "Tax Credit Compliance Fee" shall mean the fee payable to the
General Partner in accordance with Section 9.2(f) of this Agreement.
Section 1.90 "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 1.91 "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 1.92 "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 ALTA owners title policy including
the following endorsements: non-imputation, Fairways, access, contiguity,
survey, owner's comprehensive, zoning and subdivision, if available. The Title
Policy shall also insure against rights-of-way, easements, blanket easement or
claims of easements, not shown by public records. At all times, the Title Policy
shall be in an amount equal to the sum of the Mortgage amount, the Second Loan
amount and the Limited Partner's Capital Contribution. If allowed by the title
company, the Title Policy shall name the Limited Partner and the Special Limited
Partner as insured parties, or, if including the Limited Partner and Special
Limited Partner as insured parties is not allowed, the Title Policy shall
reference them "as their interests may appear in the partnership agreement of
the owner."
Section 1.93 "TRA 1986" shall mean the Tax Reform Act of 1986.
Section 1.94 "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 1.95 "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, 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 "Ottawa Gracefield Limited
Partnership."
ARTICLE III.
PRINCIPAL EXECUTIVE OFFICE/AGENT FOR SERVICE
Section 3.1 Principal Executive Office.
The principal executive office of the Partnership is located at 0000
Xxxxxxxxxx Xxx, Xxxxx 000, Xxxxxxxx, Xxxxxxxx 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 Xxxxxxx
X. Xxxxx, whose address is 0000 Xxxxxxxxxx Xxx, Xxxxx 000, Xxxxxxxx, Xxxxxxxx
00000.
ARTICLE IV.
PURPOSE
Section 4.1 Purpose of the Partnership.
The purpose of the Partnership is to acquire, construct, 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 Project Documents;
(c) provide housing to Qualified Tenants, 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
16
Management Agent (which Management Agent may be any of the Partners or an
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 Second Loan and Mortgage;
(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 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 Illinois, and shall continue until December 31, 2065
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 $100.00.
Section 6.2 Rehabilitation Obligations.
The General Partner hereby guarantees lien free Completion of
Rehabilitation of the Apartment Housing on or before June 1, 2005 ("Completion
Date"). The General Partner further guarantees that the development of the
Apartment Housing and Improvements will not exceed a total development cost of
$1,586,006 ("Development Budget"), which includes all hard and soft costs
incident to the acquisition, development and rehabilitation of the Apartment
Housing in accordance with the Development Budget and the Project Documents. If
the hard costs and soft costs of developing and constructing the Apartment
Housing and Improvements exceed the Development Budget then the General Partner
shall advance the money to the Partnership to pay the additional costs.
Notwithstanding the foregoing, at any time during rehabilitation and prior to
Permanent Mortgage Commencement, if the Special Limited Partner, in good faith,
determines that the actual rehabilitation and development costs exceed the costs
(excluding the Development Fee) referenced in the Development, Construction and
Operating Budget Agreement then the General Partner shall be responsible for and
shall be obligated to advance and deposit into the Partnership's construction
account, or similar disbursement agent's account, the difference thereof for
payment to the Contractor or other vendors, suppliers, or subcontractors. Said
advance shall be made and documented with an approved draw request within 30
days of receiving written notice from the Special Limited Partner. Any advances
by the General Partner pursuant to this Section shall not be repayable, shall
not change the Interest of any Partner in the Partnership and shall be
17
considered a guaranteed payment to the Partnership for cost overruns.
Section 6.3 Operating Obligations.
From the date the first apartment unit in the Apartment Housing is
available for its intended use until three consecutive months of Breakeven
Operations, the General Partner will immediately provide to the Partnership 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 immediately 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. Notwithstanding this
provision, the General Partner remains obligated to the Partnership, the Limited
Partner and the Special Limited Partner as required in accordance with the State
limited partnership act, as amended from time to time.
ARTICLE VII.
CAPITAL CONTRIBUTIONS OF LIMITED PARTNER
AND SPECIAL LIMITED PARTNER
Section 7.1 Original Limited Partners.
The Original Limited Partner made an aggregate Capital Contribution of
$950.00. Effective as of the date of this Agreement, the Original Limited
Partner's Interest has been liquidated, the Original Limited Partner hereby
withdraws and the Partnership has reacquired the Original Limited Partners'
Interest in the Partnership. The Original Limited Partners acknowledges that
they has no further interest in the Partnership as a limited partner as of the
date of this Agreement, and have released all claims, if any, against the
Partnership arising out of their participation as a limited partner.
Section 7.2 Capital Contribution of Limited Partner and Special Limited
Partner.
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The Limited Partner and the Special Limited Partner shall make a Capital
Contribution in the aggregate amount of $607,490, 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) $400,964 (which includes the Special Limted Partner's Capital
Contribution of $150) shall be payable upon the Limited Partner's receipt and
approval of the following documents:
(1) a legal opinion in a form substantially similar to the form of opinion
attached hereto as Exhibit "B" and incorporated herein by this reference;
(2) a fully executed Certification and Agreement in the form attached
hereto as Exhibit "C" and incorporated herein by this reference;
(3) a copy of the Title Policy;
(4) Insurance required during rehabilitation;
(5) a copy of the executed grant deed (warranty deed or trustee deed);
(6) fully executed loan commitments in connection with the Mortgage Loan
and Second Loan;
(7) payment of $13,500 for costs and expenses incurred in connection with
the Limited Partner's or its Affiliate's underwriting of the Apartment Housing
and Improvements; and
(b) $176,154 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 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) a valid carryover allocation issued by the State Tax Credit Agency, if
available, and all documents and workpapers supporting the 10% carryover
determination; and
(3) Completion of Rehabilitation and 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;
(4) a rehabilitation closeout binder, which shall include, but is not
limited to, as-built drawings, all operating manuals, and all manufacturers'
warranty agreements. In addition, the Contractor shall provide the Partnership a
one-year warranty on all parts, materials and work-quality;
19
(5) 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;
(6) a 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 that required a building permit to perform work under
the Construction Contract;
(7) insurance required during operations;
(8) any documents previously not provided to the Limited Partner but
required pursuant to this Section 7.2 or Sections 14.3(a) and (b).
(c) $20,372 shall be payable upon the Limited Partner's receipt and
approval of the following documents:
(1) a valid carryover allocation issued by the State Tax Credit Agency if
not previously provided; and
(2) the current rent roll evidencing a minimum 90% occupancy by Qualified
Tenants for 90 consecutive days immediately prior to funding;
(3) Mortgage Loan documents signed and the Mortgage funded;
(4) Second Loan documents signed and the Second Loan funded;
(5) a copy of the declaration of restrictive covenants/extended use
agreement entered into between the Partnership and the State Tax Credit Agency;
(6) as as-built survey adhering to the requirements referenced in Exhibit I
attached hereto and incorporated herein and a surveyor's certification as
referenced in Exhibit I;
(7) tenant income verification data sufficient to establish that 100% of
the Low-Income Units qualify under Section 42 of the Code;
(8) copies of the executed lease agreement with the tenants;
(9) a rehabilitation cost certification (which includes an itemized cost
breakdown and sufficient information to determine compliance with applicable
Internal Revenue Service and Treasury Department guidance);
(10) 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,
20
verifying each tenant's eligibility pursuant to the Minimum Set-Aside Test; and
(11) endorsement to the Title Policy dated no more than ten days prior to
the scheduled Capital Contribution 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);
(12) Debt Service Coverage of 1.10 for 90 consecutive days immediately
prior to funding;
(13) 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;
(14) a fully signed Internal Revenue Code Form 8609, or any successor form;
(15) the first year tax return in which Tax Credits are taken by the
Partnership, unless the Tax Credits are deferred until the following year and
such deferral has been approved by the Special Limited Partner;
(16) the audited Partnership financial statements required by Section 14.3
for the year the Apartment Housing is placed-in-service;
(17) the Special Limited Partner's approval of the initial tenant file; and
(18) any documents previously not provided to the Limited Partner but
required pursuant to this Section 7.2 or Sections 14.3(a) and (b).
(d) $10,000 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.
Section 7.3 Repurchase of Limited Partner's Interest.
Within 60 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 December 31,
2005;
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(b) achieve 100% occupancy of the Apartment Housing by Qualified Tenants by
June 1, 2005;
(c) achieve Permanent Mortgage Commencement by September 1, 2005;
(d) at any time before the Completion Date, prevent a foreclosure, or
abandonment of the Apartment Housing or fail to lift any order restricting
rehabilitation of the Apartment Housing;
(e) intentionally omitted;
(f) replace a withdrawn Mortgage Loan or Second Loan commitment with a
comparable commitment acceptable to the Special Limited Partner within a
reasonable period of time;
(g) 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; or
(h) obtain a carryover allocation, within the meaning of Section 42 of the
Code, from the State Tax Credit Agency, on or before the due date.
If the Special Limited Partner elects to have the General Partner
repurchase such Interests then the repurchase shall occur within 30 days after
the General Partner receives written demand from the Special Limited Partner.
Section 7.4 Adjustment of Capital Contributions.
(a) The amounts of the Limited Partner's and the Special Limited Partner's
Capital Contributions were 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
be allocated to the Limited Partner and Special Limited Partner as evidenced by
IRS Form 8609, Schedule A thereto, provided to the Limited Partner and Special
Limited Partner is less than 99.99% of $843,820 (the new Projected 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
72% of the Revised Projected Tax Credits so anticipated to be allocated to the
Limited Partner and Special Limited Partner. If any 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 Partner whose Capital
Contribution is being adjusted, 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 to the Partner whose
Capital Contribution is being adjusted. The amount paid by the General Partner
pursuant to this Section will be deemed to be a Capital Contribution by the
General Partner. Notwithstanding anything to the contrary in this Agreement, the
General Partner's Capital Contribution required by this Section shall be
22
disbursed to the Limited Partner as a return of capital. If the Capital
Contribution adjustment referenced in this Section 7.4(a) is an increase then
the Partner whose Capital Contribution is being adjusted 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 units (with the exception of the manager's unit) to
tenants who meet the Minimum Set-Aside Test throughout the Compliance Period.
If, at the end of any calendar year during the first five calendar years
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 (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 sixty days to pay the Annual Credit Shortfall
from the date the General Partner receives notice from the Special 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. The amount paid by the General Partner pursuant
to this Section will be deemed to be a Capital Contribution by the General
Partner. Notwithstanding anything to the contrary in this Agreement, the General
Partner's Capital Contribution required by this Section shall be disbursed to
the Limited Partner as a return of capital.
(c) In the event that, for any reason, at any time after the Apartment
Housing is placed in service, there is an Annual Credit Shortfall, then there
shall be a reduction in the General Partner's share of Net Operating Income in
an amount equal to the Annual Credit Shortfall and said amount shall be paid to
the Limited Partner. In the event there are not sufficient funds to pay the full
Annual Credit Shortfall to the Limited Partner at the time of the next
Distribution of Net Operating Income, then the unpaid Annual Credit Shortfall
shall be repaid in the next year in which sufficient monies are available from
the General Partner's share of Net Operating Income. In the event a Sale or
Refinancing of the Apartment Housing occurs prior to repayment in full of the
Annual Credit Shortfall then the excess will be paid in accordance with Section
11.2(b). 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.
(d) The General Partner has represented, in part, that the Limited Partner
will receive Projected Annual Tax Credits of $66,789 for 2005 and $84,365 for
2006. In the event the 2005 or 2006 Actual Tax Credits are less than projected
then the Limited Partner's Capital Contribution shall be reduced by an amount
equal to 72% times the difference between the Projected Annual Tax Credits for
2005 or 2006 and the Actual Tax Credits for 2005 or 2006, provided that the
Projected Annual Tax Credits for 2006 are subject to adjustment pursuant to
Section 7.4(a) without any reduction in Capital Contribution under this section.
If the 2005 or 2006 Actual Tax Credits are less than projected, then the Special
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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 sixty days of the General Partner receiving
notice of the reduction from the Limited Partner and/or the Special Limited
Partner. The amount paid by the General Partner pursuant to this Section will be
deemed to be a Capital Contribution by the General Partner. Notwithstanding
anything to the contrary in this Agreement, the General Partner's Capital
Contribution required by this Section shall be disbursed to the Limited Partner
as a return of capital.
(e) 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.
(f) In the event there is: (1) a filing of a tax return by the Partnership
evidencing a reduction in the qualified basis or eligible basis of the Apartment
Housing causing a recapture of Tax Credits previously allocated to the Limited
Partner, an adjustment to Schedule K-1 resulting from a loss of Tax Credits, or
a loss of future Tax Credits; (2) a filing of a tax return by the Partnership
evidencing a disposition of the Apartment Housing prior to the expiration of the
Compliance Period causing a recapture of Tax Credits previously allocated to the
Limited Partner, or an adjustment to Schedule K-1 resulting from a loss of Tax
Credits, or a loss of future Tax Credits; (3) a reduction in the qualified basis
or eligible basis of the Apartment Housing for income tax purposes following an
examination or review by the Internal Revenue Service ("IRS") resulting in a
recapture or reduction of Tax Credits previously claimed or an adjustment to
Schedule K-1 resulting from a loss of Tax Credits; (4) a decision by any court
or administrative body upholding an assessment of 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 (5) a decision of a court affirming such decision
upon such appeal then; in addition to any other payments to which the Limited
Partner and/or the 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 within 60 days of receiving notice from the Limited
Partner and/or the Special Limited Partner the sum of (A) the amount of the Tax
Credit recapture, (B) any interest and penalties imposed on the Limited Partner
or Special Limited Partner with respect to such recapture; (C) an amount equal
to the product of the Tax Credit pricing percentage referenced in Section 7.4(a)
and future Tax Credits unable to be taken due to one of the above actions; and
(D) 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), provided that the General Partner shall have no liability under
this Section if the recapture or reduction of Tax Credits results from a
legislative amendment to the Code following the date of this Agreement. The
amount paid by the General Partner pursuant to this Section will be deemed to be
a Capital Contribution by the General Partner. Notwithstanding anything to the
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contrary in this Agreement, the General Partner's Capital Contribution required
by this Section shall be disbursed to the Limited Partner as a return of
Capital.
(g) 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 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 Partnership sufficient, in the sole discretion of the General
Partner, to pay such liabilities.
Section 7.6 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 Operating and Maintenance Account.
The General Partner, on behalf of the Partnership, shall establish an
operating and maintenance account and shall deposit thereinto an amount required
by RD, to be used for initial operating capital as permitted or required by
applicable RD regulations. To the extent the funds are not used, said amount
shall be allocated and disbursed to the General Partner, without interest, as
shall be authorized in accordance with applicable RD regulations.
Section 8.2 Intentionally Omitted.
Section 8.3 Reserve for Replacements.
The Partnership shall fund, establish and maintain a reserve account in an
amount required by the RD Loan Agreement which funds shall be used in accordance
with RD Regulation 7 CFR Part 1930-C or any successor thereof, as evidenced by
the RD Loan Agreement.
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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 General Partner, on behalf of the Partnership, may also 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 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.
Section 9.2 Payments to the General Partners and Others.
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(a) The Partnership shall pay to the Developer a Development Fee in the
amount of $161,040 in accordance with the Development Fee Agreement entered into
by and between the Developer and the Partnership on 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 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 Rehabilitation and all acquisition,
development and rehabilitation 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 management fee shall be at or
below the maximum approved by the government agency with oversight of approving
management fees. The term of the Management Contract shall be three years and
the General Partner may continue to renew the Management Contract for three year
terms so long as the property doesn't have Cash Expenses greater then Cash
Receipts for any fiscal year or it it does, so long as the General Partner
advances sufficient funds to balance Cash Expenses and Cash Receipts. 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.
(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.
(3) Notwithstanding anything to the contrary, the Special Limited Partner
shall not appoint a Management Agent that is (or that was previously) affiliated
with itself without the consent of the General Partner.
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(d) The Partnership shall pay to the Limited Partner an annual Asset
Management Fee commencing in 2005 equal to the greater of 10% of Net Operating
Income or $1,000 for services in assisting with the preparation of tax returns
and the reports required in Sections 14.2 and 14.3 of this Agreement. The annual
Asset Management Fee shall be payable in monthly equal installments if such
monthly payments are permitted by the lenders.
(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 2005 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 2005 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 within the scope of this Agreement;
(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;
subject to the General Partner's obligations pursuant to Section 6.3 of this
Agreement;
(c) deposit, withdraw, invest, pay, retain and distribute the Partnership's
funds in a manner consistent with the provisions of this Agreement;
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(d) execute the Second Loan and the Mortgage; and
(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;
(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 or Special Limited Partner except
as provided in this Agreement;
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(g) violate any provision of the Mortgage;
(h) cause the Apartment Housing units (other than the manager's unit) 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) allow the Insurance to expire;
(k) permit the Apartment Housing to be without utility service;
(l) cause any recapture of the Tax Credits;
(m) 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;
(n) commingle funds of the Partnership with the funds of another Person;
(o) fail to cause the Partnership to make a Mortgage or Second Loan payment
if the Partnership fails to pay the same when due, subject to available funds,
including funds provided under Section 6.3 or Section 6.4;
(p) fail to cause the Accountant to issue the reports specified in Sections
14.2(a) and (b) of this Agreement;
(q) allow real estate taxes on the Apartment Housing to be upaid if the
Partnership fails to pay the same when due;
(r) pay any real estate commission for the sale or refinancing of the
Apartment Housing except for as otherwise provided for in this agreement; or
(s) 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 (except in the normal course of business to
Qualified Tenants and as provided in leases entered into prior to the date
hereof), modify the terms of any lease (whether existing as of the date hereof
or entered into after the date hereof), or otherwise dispose of the Apartment
Housing;
(b) incur indebtedness in the name of the Partnership other than the Second
Loan and Mortgage;
(c) use Partnership assets, property or Improvements to secure the debt of
30
any Partners, their Affiliates, or any third party;
(d) 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;
(e) contract away the fiduciary duty owed to the Limited Partner and the
Special Limited Partner at common law;
(f) 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;
(g) 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;
(h) cause the merger or other reorganization of the Partnership;
(i) dissolve the Partnership;
(j) 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);
(k) become personally liable on or in respect of, or guarantee, the
Mortgage, the Second Loan or any other indebtedness of the Partnership;
(l) 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,
for employees of the Management Agent which are part of the approved Operating
Budget, or specifically provided for in this Agreement;
(m) substitiute the Accountant, Construction Inspector, Contractor or
Management Agent, as named herein, or terminate, amend or modify the
Construction Contract or any other Project Document, or grant any material
waiver or consent thereunder;
(n) cause the Partnership to redeem or repurchase all or any portion of the
Interest of a Partner;
(o) cause the Partnership to convert the Apartment Housing to cooperative
or condominium ownership;
(p) cause or permit the Partnership to make loans to the General Partner or
any Affiliate;
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(q) bring or defend, pay, collect, compromise, arbitrate, resort to legal
action or otherwise adjust claims or demands of or against the Partnership,
provided that Consent shall not be required if such claim or demand relates to a
tenant dispute concerning a monetary amount less than $3,000;
(r) 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 provided that Consent shall not be required for a change to a single
line item in the Construction Contract of less than $1,500, provided further
that such changes shall not exceed an aggregate of $15,000, or if such change
does not reduce the scope of work or the total price contained in the
Construction Contract;
(s) cause any funds to be paid to the General Partner or its Affiliates for
laundry service, cable hook-up, telephone connection, computer access, satellite
connection, compliance monitoring, initial rental set-up fee or similar service
or fee;
(t) on behalf of the Partnership, file or cause to be filed a voluntary
petition in bankruptcy under the Federal Bankruptcy Code, or file or cause to be
filed a petition or answer seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any statute, law
or rule;
(u) directly or indirectly transfer control of the General Partner unless
said control is transferred to an Affiliate of Star-Holdings of Illinois, L.L.C.
and the replacement General Partner would not be in voliation of any other
provisions of the Agreement; or
(v) settle any audit with the Internal Revenue Service concerning the
adjustment or readjustment of any Partnership tax item, extend any statute of
limitations, or initiate or settle any judicial review or action concerning the
amount or character of any Partnership tax item.
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
(e) have a fiduciary responsibility to not use or permit another to use
Partnership funds or assets in any manner except for the benefit of the
Partnership;
32
(f) 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;
(g) 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;
(h) 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;
(i) pay, before the same become due or expire, the Insurance premium and
utilities for the Apartment Housing;
(j) 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;
(k) 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;
(l) make any Capital Contributions, advances or loans required to be made
by the General Partner under the terms of this Agreement;
(m) establish and maintain all reserves required to be established and
maintained under the terms of this Agreement;
(n) cause the Partnership to pay, before the same become due, the Mortgage
payment, subject to available funds, including funds provided under Section 6.3
or Section 6.4;
(o) pay, before the same become due, real estate taxes on the Apartment
Housing;
(p) 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 (with the exception of
33
the manager's unit). 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 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;
(q) cause the Accountant to issue the information required in accordance
with Sections 14.2(a) and (b);
(r) have the Architect of Record perform contract administrative services
during the course of rehabilitation, including but not limited to a monthly
review and certification of the Contractor's application for payment (form G702
and G703); to review and take action on requests for change orders; and oversee
all changes in the contract documents, addenda, shop drawings and supplements;
(s) perform such other acts as may be expressly required of it under the
terms of this Agreement; and
(t) maintain on its staff during rehabilitation and rent-up a trained and
experienced project manager who is responsible for the development and
rehabilitation of the Improvements, and responsible for achieving Completion of
Rehabilitation. In lieu of this employee, or if the project manager position
remains vacant for twenty-one days, the General Partner shall retain the
services of a construction management firm, which firm shall be pre-approved by
the Special Limited Partner.
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 from
the Partnership's Cash Expenses. The General Partner shall not be reimbursed if
the General Partner is obligated to pay the same as an Operating Deficit during
the Operating Deficit Guarantee Period, or by operation of law in accordance
34
with the State limited partnership act as amended, or subject to the limitations
on the reimbursement of such expenses set forth herein in which case the General
Partner shall be responsible for payment of the expense. 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 cost of the goods or services must be no greater and preferably less than
the cost of the same goods or services from non-Affiliated vendors, contractors,
or managers in the market area, 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 except as otherwise provided for herein; 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 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 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,
rehabilitation, operation and management of real estate projects and
developments of every type on their own behalf or on behalf of other
35
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 are 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) The Apartment Housing is being operated in accordance with standards
and procedures that are prudent and customary for the operation of properties
similar to the Apartment Housing.
(e) Intentionally omitted.
(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.
(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.
36
(j) The Partnership has Insurance written by an Insurance Company.
(k) The Partnership will own the fee simple interest in the Apartment
Housing as of the date hereof.
(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 General Partner will require the Accountant to depreciate
Partnership items in accordance with Exhibit "G" attached hereto and
incorporated herein by this reference and provide the information required by
Sections 14.2(a) and (b) of this Agreement.
(n) To the best of the General Partner's knowledge: (1) other than as
disclosed in the Phase 1 Environmental Assessment Report prepared by EMG with
regard to the Apartment Housing, dated July 16, 2004, 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
covenants that the Apartment Housing shall be kept free of Hazardous Substance
and shall not be used to generate, manufacture, refine, transport, treat, store,
handle, dispose of, transfer, produce or process Hazardous Substance, except in
connection with the normal maintenance and operation of any portion of the
Apartment Housing. The General Partner shall comply, or 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 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 Second Loan or are noted or excepted in the Title Policy.
(r) The Partnership shall retain the Architect of Record and ensure that
37
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 required to be funded as of the date hereof,
are currently funded to required levels, including levels required by any
governmental or lending 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 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 Rehabilitation 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.
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(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 the execution hereof, the General Partner will cause construction
of the Improvements to commence and thereafter will cause the Contractor to
diligently proceed with construction of the Improvements according to the Plans
and Specifications so that the Improvements can be completed by the Completion
Date.
(aa) During the Operating Deficit Guarantee Period, the Partnership will
maintain a Debt Service Coverage of not less than 1.10 and will close on a
permanent loan or refinance a Mortgage loan if the Debt Service Coverage would
fall below 1.10.
(bb) The General Partner will ensure that the Architect of Record will have
a policy of professional liability insurance in an amount not less than
$500,000, which policy should remain in force for a period of at least two years
after the closing and funding of the Mortgage.
(cc) The General Partner and the Guarantor have and shall maintain an
aggregate net worth equal to at least $1,000,000 computed in accordance with
generally accepted accounting principles.
(dd) 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.
(ee) (1) The Apartment Housing was acquired by purchase (as defined in Code
Section 179(d)(2); (2) a period of at least 10 years has elapsed between the
date on which the Partnership acquired the Apartment Housing and the date the
Apartment Housing was last placed in service; and (3) the Apartment Housing was
not previously placed in service by the Partnership, the General Partner, or any
other person who was a related person (as defined in Code Section
42(d)(2)(D)(iii)(II)) with respect to the Partnership as of the time the
Apartment Housing was previously placed in service.
(ff) Intentionally Omitted.
(gg)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.
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ARTICLE X.
ALLOCATIONS OF INCOME, LOSSES AND CREDITS
Section 10.1 General.
All items includible 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, 0.01% to the Special Limited Partner and 0.01% to the General
Partner, provided that all of the Partnership's taxable income for 2004 shall be
allocated to the General Partner. In allocating Tax Credits, the special
allocation provisions of Section 10.3 shall not be taken into account.
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 proportion necessary so that the Partners will receive the amount to
which they are entitled pursuant to Section 11.2 hereof.
(b) Losses shall be allocated 99.98% to the Limited Partner, 0.01% to the
Special Limited Partner and 0.01% 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 0.01% of each
item includible 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 0.01%, 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 0.01%, respectively, of the
items of Income not arising from a Sale or Refinancing and 99.98% and 0.01%,
respectively, of the Apartment Housing depreciation.
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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 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
41
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, 0.01% to the Special Limited Partner and 0.01% 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
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 1272 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) To the extent the Partnership has taxable interest income with respect
to deposits of Capital Contribution payments, such interest income shall be
specially allocated to the General Partner.
(j) 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.
(k) Any reduction in the adjusted tax basis (or cost) of Partnership
investment tax credit property pursuant to Code Section 50(c) shall be specially
42
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).
(l) 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.
(m) 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.
(n) Interest deduction on the Partnership indebtedness referred to in
Section 6.4 shall be allocated 100% to the General Partner.
(o) 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.
(p) If the General Partner provides an Operating Loan to pay an Operating
Deficit, then the Partnership shall allocate Operating Losses to the General
Partner in an amount not to exceed the Operating Loan.
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) and 10.5. In exercising its authority under
this Section 10.4, the General Partner shall take into account future Regulatory
Allocations under Section 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).
43
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, 0.01% to the Special Limited Partner and 0.01% 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.
(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: 0.01%; General Partner: 0.01%.
(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.
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(g)In the event that the General Partner contributes capital to the
Partnership pursuant to Section 6.3(b), operating deductions in an amount equal
to the amount contributed shall be specially allocated to the General Partner.
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
1.37(a) hereof).
In the event the Gross Asset Value of any Partnership asset is adjusted
pursuant to Section 1.37(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 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
45
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, Net Operating Income for each fiscal year
shall be distributed within seventy-five (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, in accordance with
Section 9.2(d), to pay any accrued Asset Management Fees which have not been
paid in full from previous years;
(c) to pay the interest and then principal on the deferred Development Fee;
(d) to pay the Operating Loans, if any, as referenced in Section 6.3 of
this Agreement; and
(e) to pay the Incentive Management Fee;
(f) to pay the Tax Credit Compliance Fee;
(g) the balance, 30% to the Limited Partner and 70% to the General Partner,
provided that the amount distributed to the Limited Partner pursuant to this
paragraph shall no be less than the aggregate federal and state income tax
liability of the Limited Partner with respect to this distribution, and the
amount distributable to the General Partner shall be reduced by the amount of
any distribution to the Limited Partner under this paragraph.
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, Second Loan 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 Asset
46
Management 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;
(d) to the Limited Partner in an amount equal to its Capital Contribution;
(e) to the Special Limited Partner in an amount equal to its Capital
Contribution;
(f) to the General Partner in an amount equal to its Capital Contribution;
and
(g) thereafter, 25% to the Limited Partner and 75% to the General Partner.
Article XII.
TRANSFERS OF LIMITED
PARTNER'S INTEREST IN THE PARTNERSHIP
Section 12.1 Assignment of Interests.
The Limited Partner and the 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 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; and
(b) 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.
(c) Notwithstanding any provision to the contrary, the Limited Partner may
assign its Interest to an Affiliate or assign its Interest to USbank or its
successors as collateral to secure a capital contribution loan without
satisfying the conditions of Sections 12.1(a) and (b) above.
THE LIMITED PARTNER INTEREST AND THE SPECIAL LIMITED PARTNER 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
47
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 first 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 the Limited Partner or the
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 the effective date of transfer as determined in Section 12.2
above. 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 National Association 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 the Limited Partner's Interest or the
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 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.
Section 12.6 Death, Bankruptcy, Incompetency, etc., of a Limited Partner.
48
Upon the death, dissolution, adjudication of bankruptcy, or adjudication of
incompetency or insanity of the Limited Partner or Special Limited Partner, such
Partner's executors, administrators or legal representatives shall have all the
rights of its predecessor-in-interest 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.
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.
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 or the Partnership has:
(1) been subject to Bankruptcy;
(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 any
lender to issue a letter regarding the violation;
(7) failed to provide any loan, advance, Capital Contribution or any other
payment to the Partnership, the Limited Partner or the Special Limited Partner
49
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;
(12) violated the terms of the Second Loan and such violation prompts the
Second Lender to issue a letter regarding the violation;
(13) failed to ensure that the Development Budget is In-Balance;
(14) failed to obtain the consent of a Partner where such consent is
required pursuant to this Agreement, provided, however, that failure to obtain
the consent of the Limited Partner or Special Limited Partner shall not be a
removal event pursuant to this Section if the failure to obtain such consent did
not, in the sole discretion of the Limited Partner or the Special Limited
Partner, cause material detriment to the Limited Partner, the Special Limited
Partner or the Partnership and if such consent was obtained within 30 days of
the action requiring consent;
(15) failed to deliver the annual Partnership financial data as required
pursuant to Section 14.2(a) or (b);
(16) failed to maintain the reserve balances as required pursuant to
Article VIII;
(17) failed to place the Apartment Housing in service by December 31, 2005;
(18) failed to achieve 90% occupancy of the Apartment Housing by June 1,
2005;
(19) failed to obtain Permanent Mortgage Commencement by September 1, 2005;
(20) failed to renew the Insurance on or before the due date;
(21) failed to pay the real estate taxes on the Apartment housing on or
before the due date; or
50
(22) failed during any consecutive six-month period during the Compliance
Period to rent 85% or more of the units in the Apartment Housing to Qualified
Tenants; notwithstanding, if such failure is the result of Force Majeure or if
such failure is cured within 120 days after the end of the six-month period,
then this removal provision shall not apply.
(b) Written notice of the removal for cause of the General Partner
("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 in accordance with Section 17.3 of this Agreement. If Section
13.2(a)(2), (6), (7), (8), (10), (12), (13), (15), (16), (20), or (21) 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 or Second Loan 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 upon approval of a majority of the Partner's
Interest (as specified in Section 10.1 of this Agreement) at a Partner's meeting
held in accordance with Section 17.2 of this Agreement. If the removal for cause
is for a condition referenced in Sections 13.2(a)(1), (3), (4), (5), (9), (11),
(14), or (17) then the removal shall become effective upon approval of a
majority of the Partner's Interest (as specified in Section 10.1 of this
Agreement) at a Partner's meeting held in accordance with Section 17.2 of this
Agreement. Upon the General Partner's removal, the General Partner shall deliver
to the Special Limited Partner within five business days of the Partner's
meeting confirming the General Partner's removal 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. In the event of removal of a General Partner for any reason, any earned
but unpaid portion of the Development Fee shall be due and payable upon the
effective date of such removal and shall be deemed paid by the removed General
Partner.
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
51
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
is not 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 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. Furthermore, if the General Partner or an Affiliate is the guarantor of
the Development Fee, as provided pursuant to the Development Fee Guaranty
Agreement, then the General Partner shall pay any remaining unpaid principal and
interest of the Development Fee within 30 days of the General Partner's removal.
(b) In the event of an Involuntary Withdrawal, except as provided in
Section 13.3(c) 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. 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
52
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
Article XV. 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 any payment for its
Interest, 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. Furthermore, if the General
Partner or an Affiliate is the guarantor of the Development Fee, as provided
pursuant to the Development Fee Guaranty Agreement, then the General Partner
shall pay any remaining unpaid principal and interest of the Development Fee
within 30 days of the General Partner's removal.
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 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
53
such Person as a substitute General Partner, which consent may be withheld in
the discretion of the Special Limited Partner; and (c) such Person shall have
executed and acknowledged any other instruments which the Special Limited
Partner shall reasonably deem necessary or appropriate to affect 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.
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 and Tax Credits 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;
54
(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 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 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. Notwithstanding, the
General Partner shall deliver to the Limited Partner and the Special Limited
Partner a draft copy of the information requested herein at least ten days prior
to the above referenced due date.
(b) By March 1 of each calendar year, including the year(s) during
rehabilitation of the Apartment Housing, the General Partner shall send to the
Limited Partner and the Special Limited Partner an audited financial statement
for the Partnership for the preceding year, which 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; (2) a
report 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;
(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; and (4) the Accountant's calculation of each
pay-out of Net Operating Income pursuant to Section 11.1 of this Agreement.
Moreover, the General Partner shall deliver to the Limited Partner and the
Special Limited Partner a draft copy of the information requested herein at
least ten days prior to the above referenced due date.
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(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 rehabilitation, on a regular basis, but in no event less than
once a month, construction reports including, but not limited to, (1) the name
of each person performing work on the Improvements or providing materials for
the Improvements, if the work performed or materials supplied by a person
accounts for 5% or more of the construction of the Improvements, the work
performed or materials supplied by said person and the code number corresponding
to the line item in the Development 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 AIA Document G702, a line item break-down of
the Development 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 Development Budget is In-Balance and there are sufficient funds to complete
the construction of the Improvements, (5) if not provided for in the
above-referenced documents, a line item breakdown of all soft development costs
not included in the Construction Contract but part of the Development Budget;
(6) copies of lien releases, or waivers, from the Contractor and all
sub-contractors or material suppliers who were paid the previous month; and (7)
any other document requested by the Special Limited Partner as the circumstances
warrant (collectively the "Construction Draw Documents");
(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 or the Special Limited Partner's approval of the initial tenant
files, including any recommended corrections, 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 "H" attached hereto
and incorporated herein by this reference; an up to date income statemen, an up
to date balance sheet and a copy of the Partnership's bank statement reflecting
all operating accounts and reserve accounts;
(c) a quarterly tax credit compliance report similar to the worksheet
included in Exhibit "H" 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 Special Limited Partner may request a sampling of tenant
56
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 Special Limited Partner;
(d) a quarterly report on operations, in the form attached hereto as
Exhibit "H," 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 1 year but
will not complete the rehabilitation 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 the later of December 31 of the year during which the reservation was
received or 6 months after the date of the carryover allocation if permitted by
the State Tax Credit Agency. 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;
(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. Neither the General Partner, the
Management Agent, nor their employees, agents, or representatives shall adopt
the Budget until the Consent of the Special Limited Partner has been obtained;
provided that such Consent shall be deemed given if no objections are raised by
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the Special Limited Partner within 30 days of its receipt of such Budget; 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 14.2
or 14.3 within the time periods set forth therein, the General Partner, using
its own funds, shall pay as damages, 30 days after notice from the Limited
Partner, the sum of $100 per week, plus interest at the rate established by
Section 6.4 of this Agreement, to the Limited Partner until such obligations
shall have been fulfilled. If the General Partner shall so fail to 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.
The Limited Partner, at the Limited Partner's expense, has the right, upon
reasonable notice to the General Partner, to 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.
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 Internal Revenue Service 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, provided that it is hereby agreed that the funds of
the Partnership may be held in accounts of Amcore and or First National Bank of
Ottawa. 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 who requests the same the name and
address of the financial institution, the account number and other relevant
information regarding any Partnership bank account.
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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
Rehabilitation 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 obligations of the
General Partner, as well as the obligations 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.
Section 15.3 Distribution of Assets.
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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 Special 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.
Section 15.4 Deferral of Liquidation.
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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 the Secretary of State, and on a form
prescribed by the Secretary of State of Illinois, 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 Illinois 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 majority consent of the Partners after a
meeting of the Partners pursuant to Section 17.2, which meeting shall be held
after proper notice as provided in Section 17.3 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.
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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. Notwithstanding
the foregoing, at a meeting of the Partnership, the Limited Partner and the
Special Limited Partner may vote:
(1) to approve or disapprove the Sale or Refinancing of the Apartment
Housing prior to such Sale or Refinancing;
(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;
(5) subject to the provisions of Article XVI hereof, to amend this
Agreement;
(6) to approve or disapprove the refinancing of the Mortgage or Second Loan
prior to such refinancing; or
(7) on any other matter permitted in this Agreement.
(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 the Limited Partner or the Special Limited Partner.
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 Partnership shall be governed in all
respects, including matters relating to proxies, record dates and actions
without a meeting, by the applicable provisions of the Act, as it shall be
amended from time to time.
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Section 17.3 Notices.
Any notice given pursuant to this Agreement may be served personally on the
Partner to be notified, or may be sent by overnight courier, or may be mailed,
first class postage prepaid, or by certified mail, to the following address, or
to such other address as a party may from time to time designate in writing:
To the General Partner: Ottawa Gracefield G/P, L.L.C.
0000 Xxxxxxxxxx Xxx
Xxxxx 000
Xxxxxxxx, XX 00000
To the Limited Partner: WNC Housing Tax Credit Fund VI,
L.P., Series 11
c/o WNC & Associates, Inc.
00000 Xxx Xxxx Xxxxxx
Xxxxxx, XX 00000-0000
Attn: Xxxxx X. Xxxxxx
To the Special Limited Partner: WNC Housing, L.P.
00000 Xxx Xxxx Xxxxxx
Xxxxxx, XX 00000-0000
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 Illinois.
Section 17.6 Amendment of Certificate of Limited Partnership.
(a) The General Partner, or any successor 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
63
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; or
(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.
(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 Illinois. 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.
(d) In the event of a Withdrawal or Involuntary Withdrawal of the General
Partner, and if such General Partner does not file an amendment to the
Certificate of Limited Partnership as specified in this Section 17.6, then the
Special Limited Partner is hereby granted the specific authority to sign and
file such 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.
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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 review or
examination of the federal income tax returns of the Partnership. At the time of
a review, examination, or otherwise, the Tax Matters Partner shall inform the
IRS that a copy of all correspondence shall be provided to the Limited Partner.
(a) The Tax Matters Partner shall furnish or cause to be furnished 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 obtain the Consent of the Special Limited Partner to
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.
(d) The Partners consent and agree that in connection with any audit,
review, examination, or otherwise 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.
(e) Nothing herein shall be construed as a waiver by the Limited Partner of
any of its rights under Chapter 631 of the Code. The General Partner shall not
enter into any settlement agreement purporting to bind the Limited Partner
without the Limited Partner's consent.
Section 17.12 Expiration of Compliance Period.
(a) Notwithstanding any provision hereof to the contrary (other than this
Section 17.12), 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
65
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
17.12(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.
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
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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, relative to the Apartment Housing's noncompliance with the Tax Credit
rules or regulations, relative to any correspondence from the Mortgage lender
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
Partner may be subject under this Agreement, the Partnership shall have (and
each Partner hereby grants to the Partnership) a security interest in their
respective Interests of such Partner and in all funds distributable to said
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 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.
67
(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 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.
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 Second Loan is no longer being provided by RD.
[Signatures begin on the following page]
68
Amended and Restated Agreement of Limited Partnership IN WITNESS WHEREOF,
this Amended and Restated Agreement of Limited Partnership of Ottawa Gracefield
Limited Partnership, an Illinois limited partnership, is made and entered into
as of the 30 day of August, 2004.
GENERAL PARTNER:
OTTAWA GRACEFIELD G/P, L.L.C., a
Illinois limited liability company
By: /s/ XXXXXXX X. XXXXX
Xxxxxxx X. Xxxxx
Manager
WITHDRAWING ORIGINAL LIMITED PARTNERs:
Star-Equities, L.L.C., a Wisconsin limited
liability company
By: /s/ XXXXXXX X. XXXXX
Xxxxxxx X. Xxxxx
Manager
LIMITED PARTNER:
WNC HOUSING TAX CREDIT FUND VI, L.P.,
Series 11, a California limited partnership
By: WNC & Associates, Inc., a California
corporation, its general partner
By: /s/ XXXXX X. XXXXXX
Xxxxx X. Xxxxxx,
Executive Vice President
SPECIAL LIMITED PARTNER:
WNC Housing, L.P., a California limited
partnership
By: WNC & Associates, Inc., a California
limited partnership, its general partner
By: /s/ XXXXX X. XXXXXX
Xxxxx X. Xxxxxx,
Executive Vice President
EXHIBIT A
LEGAL DESCRIPTION
The South 2.00 acres of Parcel A of Gracefield Subdivision, being a part of the
East Half of the Southwest Quarter of Section Thirty Six (36), Township Thirty
Four (34) North, Range Three (3) East of the Third Principal Meridian, according
to the Plat thereof recorded April 24, 1974 in Plat Book 1, Pages 85 and 86 as
Document #602462, bounded and described as follows, to wit: Beginning at the
Southwest corner of said Parcel A, thence Easterly along the Southerly line of
said Parcel A, a distance of 302.14 feet to the West right of way of Xxxxxx
Xxxx, thence Northeasterly along said West right of way line at an angle of
120 deg. 27' 20" as measured clockwise from the last described course, a
distance of 151.61 feet, thence Northeasterly along said West right of way, as
said line is curved concave from Northwesterly having a radius of 365.00 feet,
at an angle to the chord of 170 deg. 52' 47", an arc distance of 116.20 feet,
thence Westerly parallel to the South line of said Parcel A, at an angle of
68 deg. 39' 53" as measured clockwise from the land described chord, a
distance of 413.38 feet to the West line of said Parcel A, then Southerly along
said West line at an angle of 91 deg. 43' 46" as measured clockwise from the
last described course, a distance of 238.58 feet to the point of beginning, in
LaSalle County, Illinois.
ADDRESS: 0000 Xxxxxx Xxxx
Xxxxxx, Xxxxxxxx
Exhibit A
EXHIBIT B
FORM OF LEGAL OPINION
WNC Housing Tax Credit Fund VI, L.P., Series 11
c/o WNC & Associates, Inc.
00000 Xxx Xxxx Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Re: Ottawa Gracefield Limited Partnership
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in
connection with the investment by WNC Housing Tax Credit Fund VI, L.P., Series
11, a California limited partnership (the "Limited Partner") in Ottawa
Gracefield Limited Partnership (the "Partnership"), an Illinois limited
partnership formed to own, develop, renovate, finance and operate an apartment
complex for families and elderly low-income persons (the "Apartment Complex") in
the City of Ottawa, LaSalle County, Illinois. The general partner of the
Partnership is Ottawa Gracefield G/P, L.L.C. (the "General Partner"). The
original limited partner of the Partnership is Star-Equities, L.L.C. (the
"Original Limited Partner"). The developer of the Apartment Housing is Star
Development, L.L.C. (the "Developer"). The guarantors of certain obligations of
the General Partner are Xxxxxxx X. Xxxxx and Star-Holdings of Illinois, L.L.C.
(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[s], 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
(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 Construction Monitoring Agreement, entered into by the
Partnership, the General Partner, _______________, and ____________________ and
dated _________;
(xiv) the reservation letter/carryover allocation] from __________________
(the "State Agency") dated _________, 200___ awarding $_____________ in federal
tax credits annually for each of 10 years; and
(xv) 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, that (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 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 limited liability company duly formed and
validly existing under the laws of the State of _________ and has full power and
authority to enter into and perform its obligations under the Partnership
Agreement.
(b) The Partnership is a limited partnership duly formed and validly
existing under the laws of Illinois.
(c) The Partnership has full power and authority to own, develop,
construct, finance and operate the Apartment Complex and to otherwise conduct
business under the Partnership Agreement.
(d) Execution of the Partnership Agreement by the General Partner(s) has
been duly and validly authorized by or on behalf of the General Partner(s) and,
Exhibit B
having been executed and delivered in accordance with its terms, the Partnership
Agreement constitutes the valid and binding agreement of the General Partner(s),
enforceable in accordance with its terms.
(e) The execution and delivery of the Partnership Agreement by the General
Partner(s) does 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(s),the Partnership, the Developer or any
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 Complex, the Partnership, General Partner, any Guarantor
or the Developer which would materially adversely affect the condition
(financial or otherwise) or business of the Apartment Complex, 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 Illinois 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
represented thereby (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
Complex for repayment of the Mortgage Loan.
(j) The Partnership owns a fee simple interest in the Apartment Complex.
(k) To the best of our actual knowledge and belief, after due inquiry, the
Partnership has 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 Complex, and the
Apartment Complex conforms to all applicable Federal, state and local land use,
zoning, health, building and safety laws, ordinances, rules and regulations.
(l) The Apartment Housing has obtained a reservation of low housing tax
credits ("LIHTC") from the State Agency. Final allocation of LIHTC and ultimate
eligibility of the Apartment Housing for such final allocation are subject to a
Exhibit B
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) Each Guarantor, if not an individual, was incorporated, duly organized,
and is validly existing and in good standing under the laws of the State of
Delaware, 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 Illinois, 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).
I am a member of the Bar of the State of Illinois and express no opinion as
the laws applicable in any other jurisdiction. 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 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.
Exhibit B
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, the Special
Limited Partner and their legal counsel which may rely on this opinion. This
opinion may not be delivered to or relied upon by any other person or entity
without our express written consent.
Sincerely,
--------------------
[Name]
Exhibit B
EXHIBIT C
CERTIFICATION AND AGREEMENT
CERTIFICATION AND AGREEMENT made as of the date written below by Ottawa
Gracefield Limited Partnership, an Illinois limited partnership (the
"Partnership"); Ottawa Gracefield G/P, L.L.C. (the "General Partner"); and
Star-Equities, L.L.C. (the "Original Limited Partner") for the benefit of WNC
Housing Tax Credit Fund VI, L.P., Series 11, a California limited partnership
(the "Investment Partnership") and WNC & Associates, Inc., a California
corporation ("WNC"), the managing member of the Investment Partnership.
WHEREAS, the Partnership proposes to admit the Investment Partnership
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 Partnership will make substantial capital
contributions to the Partnership; and
WHEREAS, the Investment Partnership and WNC have relied upon certain
information and representations described herein in evaluating the merits of
investment by the Investment Partnership in the Partnership;
NOW, THEREFORE, to induce the Investment Partnership 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 Partnership 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
Partnership 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 Partnership,
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 Partnership, 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 Partnership 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 Investment Partnership 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
1.13 No General Partner is related in any manner to the Investment
Partnership, nor is any General Partner acting as an agent of the Investment
Partnership.
1.14 No event has occurred which would have a material adverse change
to the Investment Partnership's investment.
2. Miscellaneous.
2.1 This Certification and Agreement is made solely for the benefit of
the Investment Partnership 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.
IN WITNESS WHEREOF, this Certificate and Agreement is made and entered
into as of the ____ day of ______, 2004.
PARTNERSHIP:
OTTAWA GRACEFIELD LIMITED
PARTNERSHIP, an Illinois limited partnership
By: Ottawa Gracefield G/P, L.L.C., a _______
limited liability company, its general partner
By: ____________________________
Xxxxxxx X. Xxxxx
Manager
GENERAL PARTNER:
OTTAWA GRACEFIELD G/P, L.L.C., a ___________
limited liability company
By: ____________________________
Xxxxxxx X. Xxxxx
Manager
Exhibit C
ORIGINAL LIMITED PARTNER:
STAR-EQUITIES, L.L.C., a Wisconsin limited
liability company
By: ____________________________
Xxxxxxx X. Xxxxx
Manager
Exhibit C
EXHIBIT D
FORM OF COMPLETION CERTIFICATE
(to be used when rehabilitation completed)
COMPLETION CERTIFICATE
The undersigned, an architect duly licensed and registered in the State
of Illinois, has reviewed the final working plans and detailed specifications
for Ottawa Gracefield Limited Partnership, an Illinois limited partnership (the
"Partnership") in connection with the construction of improvements on certain
real property located in the City of Ottawa, LaSalle County, Illinois (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 construction-related 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,
to the best knowledge of the undersigned, all contractors, subcontractors and
workmen who worked on the Improvements have issued lien releases and 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
ACCOUNTANT'S CERTIFICATE
[Accountant's Letterhead]
_______________, 200__
WNC Housing Tax Credit Fund VI, L.P., Series 11
c/o WNC & Associates, Inc.
00000 Xxx Xxxx Xxxxxx
Xxxxxx, XX 00000
Re: Ottawa Gracefield Limited Partnership
Certification as to Amount of Eligible Tax Credit Base
Ladies and Gentlemen:
In connection with the acquisition by WNC Housing Tax Credit Fund VI, L.P.,
Series 11 (the "Limited Partner") or its affiliate of a limited partnership
interest in Ottawa Gracefield Limited Partnership, an Illinois limited
partnership (the "Partnership"), which owns a certain parcel of land located in
the City of Ottawa, LaSalle County, Illinois 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, and the five
technical advice memoranda issued by the Internal Revenue Service in October and
November of 2000, 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
CONTRACTOR'S CERTIFICATE
[Contractor's Letterhead]
_______________, 200____
WNC Housing Tax Credit Fund VI, L.P., Series 11
00000 Xxx Xxxx Xxxxxx
Xxxxxx, XX 00000
Re: Ottawa Gracefield Limited Partnership
Ladies and Gentlemen:
The undersigned Star General Contractors, L.L.C. (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 Ottawa
Gracefield Apartments located in the City of Ottawa, LaSalle County, Illinois
(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 upon the Partnership's receipt of the
Limited Partner's completion of rehabilitation Capital Contribution
payment, all amounts owed to Contractor pursuant to the contract for
Work performed for Partnership will be paid in full. If not paid in
full, then Contractor will defer any amounts owned to it until receipt
of the next Capital Contribution payment.
o Contractor acknowledges Partnership is not in violation with terms and
conditions of the contractual documents related to the Apartment
Housing.
o Contractor warrants that all others parties who have supplied Work for
improvement of the Apartment Housing have been paid in full.
o Contractor acknowledges the contract has been paid in full and releases
any lien or right to lien against the above property.
Exhibit F
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.
STAR GENERAL CONTRACTORS, L.L.C.
By:_____________________________
Name: ____________________
Title: ____________________
Exhibit F
EXHIBIT G
DEPRECIATION
Real Property: Use Modified Accelerated Cost Recovery System ("MACRS") 27.5 year
straight-line depreciation using the mid month convention. Real property
includes buildings and building improvements.
Personal Property: Use 5-year recovery period using mid-year 200% declining
balance, if it relates to residential real estate. Personal property related to
commercial space must use a 7-year recovery period using mid year 200% declining
balance.
The following costs have a 5-year recovery period:
o Removable appliances (not central climate control system equipment or
water heaters)
o Draperies, blinds and shades, if they would be reusable if removed
o Carpeting, if its removal would not destroy the underlying floor
o Vinyl flooring, if its removal would be easy and not destroy the
underlying floor
o Common area furnishings
o Photocopy equipment
o Calculators, adding machines
o Typewriters
o Computers
o Wall coverings, if their removal would not destroy the underlying wall
o Exit signs
o Security systems (not fire protection system, sprinkler system, smoke
detectors, or fire escapes)
o Outdoor security lighting (not parking lot lighting)
o Fire extinguishers
o Decorative lighting and sconces (not light fixtures for central
lighting)
o Outdoor decorative lighting, such as that lighting signs
o Telephone systems
o Corridor handrails (not bathroom or stairway)
o Raised floors to accommodate wiring in computer rooms
The following costs have a 7-year recovery period with a mid year 200% declining
balance:
o Office furnishings
o Cabinets and shelving
o Bulletin boards
o Conference or meeting room movable partitions
Exhibit G
A percentage of the development fee is also allowed in personal property. The
percentage is calculated by taking the ratio of personal property cost,
excluding development fee, to total development costs and multiplying the
development fee by the calculated ratio.
Land improvements Cost Recovery: Use 15-year recovery period using mid-year 150%
declining balance. The following costs have a 15-year recovery period. Items
allowed in this section are costs attributable to excavation, grading, and
removing soil necessary to the proper setting of buildings. Other costs
allowable in this section are as follows:
o Roads and sidewalks
o Concrete work (curb and gutter)
o Fencing
o Landscaping (including, but not limited to, trees and shrubs) around
the building which would be destroyed if the building were replaced
o Decorative walls which are part of the landscaping
o Parking lot (resurfacing it later is deducted as an expense)
o Initial parking lot striping (restriping it later is deducted as an
expense)
o Street lights and signs
o Signs which identify the property or provide directions
o Parking lot lighting (not outdoor security lighting)
o Playground equipment
o Basketball court and backboard
o Tennis courts
o Swimming pools
o Jogging trails
o Flag pole
o Wastewater treatment plant and lift station to handle raw sewage
o Interest expense capitalized and related to any of the above costs
o The prorata portion of the general contractor/construction company
profit, overhead, and general requirements and conditions allocable to
items with a 15-year cost recovery period
o The prorata portion of the developer fee, profit and overhead allocable
to items with a 15-year cost recovery period
Recovery of costs of sanitary sewer system and water utility/distribution
system, including the sewer system outside the buildings: the following costs
have a 20-year recovery period - 150% declining balance mid-year convention.
o Fire hydrants
o Manhole rings and covers
o Water meter
o Gate valves
o Flushing hydrants
o Cast iron fittings
o Valve boxes
Exhibit G
o Air release valves
o Tapping sleeves
o PVC water pipe (outside)
o PVC sewer pipe (outside)
o PVC sewer fittings
Exhibit G
EXHIBIT H TO THE PARTNERSHIP AGREEMENT
REPORT OF OPERATIONS
QUARTER ENDED: ____________________, 200__
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LOCAL PARTNERSHIP:
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GENERAL PARTNER:
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Firm Name:
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Address:
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City, State, Zip:
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Phone:
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PROPERTY NAME:
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Address:
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City, State, Zip:
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Resident Manager:
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Phone:
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ACCOUNTANT:
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Firm:
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Address:
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City, State, Zip:
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Phone:
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MANAGEMENT COMPANY
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Address:
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City, State, Zip:
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Phone:
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Contact:
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(6) 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 H
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
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Interior Painting
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Exterior Painting
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Siding
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Roofing
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Drainage
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Paving
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Landscaping
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Playground
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Community Room
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Laundry Room
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Common Areas
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Carpet
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Appliances
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Lighting
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Other
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Please describe in detail any major repairs:
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Exhibit H
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)
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Type of Condition Excellent Good Fair Problems/Comments
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Signage
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Parking Lots
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Office/Storage
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Equipment
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Community Building
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Laundry Room
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Benches/Playground
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Lawns, Plantings
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Drainage, Erosion
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Carports
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Fences
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Walks/Steps/Guardrails
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Lighting
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Painting
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Walls/Foundation
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Roof/Flashing/Vents
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Gutters/Splashblocks
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Balconies/Patios
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Doors Windows/Screens
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Elevators
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INTERIOR CONDITION
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Stairs
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Flooring
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Doors/Cabinets/Hardware
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Drapes/Blinds
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Interior Painting
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Refrig/Stoves/Sinks
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Bathroom/Tubs/Showers
Toilets
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Exhibit H
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
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Repairs/Maintenance Expense Increase Decrease Amount
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Utility Expense Increase Decrease Amount
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Taxes/Insurance Expense Increase Decrease Amount
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C. Do you anticipate making a return to owner distribution? Yes No
Explanation:
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D. Please explain in detail any change in the financial condition:
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E. Any insurance claims files? Yes______ No______
If yes, please explain:
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Exhibit H
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: ----------- ---------- -------- ------
Prepared By: Date:
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Firm: Telephone:
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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 H
INITIAL TENANT CERTIFICATIONS
Partnership Name:-------------------
Fund: ------------------- Tax Credit Set-Asides Information: Loan/Regulatory
Property Name: ---------- [ ] 20/50 or [ ] 40/60 Election Set-Asides:
Address: ---------------- Does the 51% average apply?
---------------- [ ] Y [ ] N
---------------- Deeper Set-Aside __% @ 50% AMI
County: ----------------
[ ] Multi-Family [ ] Elderly Management Company:--------------------
[ ] Number of Apartment Units Contact Person:------------------------
[ ] Number of Exempt Units Phone #:-------------------------------
[ ] LIHTC Apartment Housing #
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Gross
Unit First Time Move-in # of # in Income Move-In
# Tenant Name Date Bdrms Sq.Ft. Set-Aside Unit Move-In Limits
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BIN # Certificate of Occupancy Date:
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BIN # Certificate of Occupancy Date:
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BIN # Certificate of Occupancy Date:
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INITIAL TENANT CERTIFICATIONS
Partnership Name:-------------------
(CONTINUED)
Tenant Tenant
Income Income Asset Unit Less Rent Tenant Utility
Qualified Verification Verification Rent Subsidy Payment Allowance
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YES
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YES
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YES
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YES
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YES
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YES
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YES
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YES
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YES
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YES
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YES
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YES
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YES
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YES
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YES
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INITIAL TENANT CERTIFICATIONS
Partnership Name:-------------------
(CONTINUED)
Tenant Tenant Overall
Gross Maximum Rent Tenant
Rent Rent Qualified Eligible
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YES YES
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YES YES
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YES YES
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YES YES
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YES YES
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YES YES
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YES YES
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YES YES
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YES YES
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YES YES
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YES YES
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YES YES
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YES YES
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YES YES
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Exhibit H
QUARTERLY TAX CREDIT COMPLIANCE REPORT
Property Name:----------------------
Quarter Ending: --------- Tax Credit Set-Asides Information: Loan/Regulatory
[ ] 20/50 or [ ] 40/60 Election Set-Asides:
Address: ---------------- Does the 51% average apply?
---------------- [ ] Y [ ] N
---------------- Deeper Set-Aside __(List Details)
County: ----------------
Allocation: Management Company:-------------
Pre-1990 (Rent based on -------------
number of persons) Contact Person: -------------
[ ] Multi-Family Elected to change
[ ] Elderly # Bedrooms Phone #: -------------
---Number of Post-1989 (Based on
Apartment Units number of Bedroom) Fax #: -------------
---Number of Prepared by: -------------
Exempt Units
---LIHTC Apartment Housing #
-----------------------------------------------------------------------------
Gross Annual
Unit Tenant Move-in # Of Inc. Set- # in Annual Income
# Name Date Bdrms % Aside Unit Income Limits
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QUARTERLY TAX CREDIT COMPLIANCE REPORT
Property Name:----------------------
(CONTINUED)
Annual Tenant Less
Recert. Income Income Assets Unit Rent Tenant
Date Qualified Verified Verified Rent Subsidy Payment
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QUARTERLY TAX CREDIT COMPLIANCE REPORT
Property Name:----------------------
(CONTINUED)
Tenant Tenant Overall
Utility Gross Maximum Rent Tenat
Allow. Rent Rent Qualified Eligible
-------------------------------------------------------------------------------
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Exhibit H
EXHIBIT I
SURVEY REQUIREMENTS
The Survey shall satisfy the minimum standard detail requirements for
an ALTA/ACSM Land Title Survey, as established by ALTA, ACSM and NSPS in October
of 1999, including optional items 1 through 11 and 13, and shall show the items
listed below:
(a) A scale of measurement.
(b) A North arrow shall be shown.
(c) A legend to explain any symbols or abbreviations appearing on the
survey, and supplementary or exaggerated diagrams shall be provided as
necessary, for clarity.
(d) A point of beginning to form the basis for, or as used in, the
legal description of record of the property unless a lot and block legal
description is utilized. Measured and recorded distances from corners of parcels
to the nearest right of way lines of streets.
(e) The distances to the nearest intersecting street shall be
indicated. Names and widths of streets and highways abutting the property
surveyed and widths of rights of way shall be given. Indicate whether roads and
streets are publicly dedicated; note if not physically open.
(f) Notations of the names of adjoining owners whenever possible.
(g) The boundaries of the Apartment Housing and monuments placed (or
references to monuments found) at all major corners of the boundary of the
premises.
(h) The character of any and all evidence of possession shall be stated
and the location of such evidence shall carefully given in relation to both the
measured boundary lines and those established by the record.
(i) Location and dimensions (including height and gross floor area)of
all buildings, structures and other improvements situated on the Apartment
Housing (such as signs, parking areas, structures, swimming pools, etc.) the
number of square feet contained within the footprint of each building on the
Apartment Housing, and their locations defined by measurements perpendicular to
the Apartment Housing boundaries.
(j) Show the street address(es) of the improvements.
(k) The location and recording data for all easements (both those
burdening and benefiting the Apartment Housing), encroachments, set back and
building restriction lines, conflicts or protrusions from or onto adjoining
property, streets or alleys. (Fully depict any appurtenant easements, showing
all courses and distances.) Note any easements which cannot be located, and note
easements which appear on the Apartment Housing but which are not subject to any
recorded instrument.
(l) The character and location of all walls, buildings, fences and
other visible improvements within 5 feet of each side of the boundary lines
shall be noted.
Exhibit I
(m) The location of driveways, alleys, access roads, sidewalks, curbs,
railroad tracks and railroad rights-of-way on or crossing the Apartment Housing.
(n) Observable evidence of cemeteries.
(o) The location of creeks, streams, rivers, lakes, ponds (retention or
otherwise) or other waterways that cross or form a boundary line of the
property, including the location of high and low water marks established by the
U.S. Army Corps of Engineers, where applicable.
(p) Vicinity map showing the Apartment Housing surveyed in reference to
nearby highway(s)or major street intersections(s).
(q) Flood zone designation.
(r) Land area by acreage and square feet.
(s) Identify and show, if possible, setback, height and floor space
area restrictions.
(t) Parking areas and, if striped, the striping and the number of
parking spaces (by category - full size, compact size, handicap reserved).
(u) Indication of access to a public way such as curb cuts, driveways
marked.
(v) Location of all utilities serving the Premises, including without
limitation:
(i) All manholes, catch basins, valve vaults, storm drains or
other surface indications of subterranean uses;
(ii) All wires and cables (including their function)
crossing the surveyed premises, all poles on or within ten feet of the surveyed
premises, and the dimensions of all cross wires or overhangs affecting the
surveyed premises; and
(iii) All utility installations on the surveyed premises
based upon information obtained from independent sources such as utility
companies or utility locating services.
(w) Any wetlands area(s), if known.
(x) The political subdivision, county, state and such other notations
as will accurately locate the property surveyed.
(y) Significant observations not otherwise disclosed.
Exhibit I
TENANT TAX CREDIT COMPLIANCE AUDIT
Document Transmittal Checklist
Unit Number Property Name Date
Tenant Name Completed By:
Check Box for Type of Certification: Management Company:
Initial [ ] Annual [ ]
This Section For WNC Use Only
Check Documents Being Sent
Received. Reviewed
___Internal Checklist or worksheet [ ] [ ] ----------
___Initial - Rental Application/Rental Agreement [ ] [ ] ----------
___Initial - Questionnaire of Income/Assets [ ] [ ] ----------
___Recertification - Questionnaire of Income/Assets [ ] [ ] ----------
___Recertification - Addendum to Lease [ ] [ ] ----------
___Employment Verification [ ] [ ] ----------
___Employment Termination Verification [ ] [ ] ----------
___Military Verification [ ] [ ] ----------
___Verification of Welfare Benefits [ ] [ ] ----------
___Verification of Social Security Benefits [ ] [ ] ----------
___Verification of Disability Benefits [ ] [ ] ----------
___Unemployment Verification [ ] [ ] ----------
___Verification of Unemployment Compensation [ ] [ ] ----------
___Verification Workmen'S Compensation [ ] [ ] ----------
___Retirement/Annuities Verification [ ] [ ] ----------
___Verification of Veterans Pension [ ] [ ] ----------
___Verification of Child Support [ ] [ ] ----------
___Verification of Alimony Support [ ] [ ] ----------
___Disposed of Assets Last 2 years [ ] [ ] ----------
___Real Estate [ ] [ ] ----------
___Investment [ ] [ ] ----------
___Assets Verifications (savings, stocks etc.) [ ] [ ] ----------
___Trusts/with Current Tax Return [ ] [ ] ----------
___Lump Sum Settlements [ ] [ ] ----------
___Notarized Affidavit of Support [ ] [ ] ----------
___Certification of Handicap [ ] [ ] ----------
___Notarized Self-Employed-Tax Return [ ] [ ] ----------
___Notarized statement of no income [ ] [ ] ----------
___Tenant Certification [ ] [ ] ----------
This Section For WNC Use Only
YES NO
[ ] [ ] Are all required forms completed?
[ ] [ ] Are all required forms dated?
[ ] [ ] Did the Manager and Tenant sign all documents?
[ ] [ ] Third party verification of income completed?
[ ] [ ] Third party verification of assets completed?
[ ] [ ] Are verifications completed for all members 18 years and
over?
[ ] [ ] Did all the members of the household 18 yrs. and
[ ] [ ] over sign all documents?
[ ] [ ] Is lease completed with a minimum of six months/ SRO
monthly?
[ ] [ ] Addendum completed?
[ ] [ ] Tenant Certification completed?
[ ] [ ] Are all members of the household full-time students?
[ ] [ ] Is utility allowance correct?
[ ] [ ] Is correct income limit being used?
[ ] [ ] Is correct rent limit being used?
For tenants with no income
[ ] [ ] Was notarized statement of no income obtained with tax
return?
[ ] [ ] Or Were all sources verified (AFDC, Unemployment,
Soc. Sec., Disability)?
TAX CREDIT COMPLIANCE MONITORING:
ANNUAL CERTIFICATION
As General Partner of Ottawa Gracefield Limited Partnership, I hereby
certify as to the following:
1. Ottawa Gracefield Limited Partnership owns a 24 unit project
("Apartment Housing") in the City of Ottawa, LaSalle County, Illinois.
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 low income 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 low income 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 APARTMENT HOUSING. UPON
REQUEST I 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
Illinois that the foregoing is true and correct.
Executed this ____ day of ____________ at _____________, _____________.
__________________________
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 1.15 DSC means that for every $1.00 of Stabilized Debt
Service required to be paid there must be $1.15 of Net Operating Income
available.
DEVELOPMENT FEE AGREEMENT
This Development Fee Agreement ("Agreement") is entered into as of the date
written below by and between Star Development, L.L.C., a Delaware limited
liability company ("Developer") and Ottawa Gracefield Limited Partnership, an
Illinois 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 the real property located in the City of Ottawa,
LaSalle County, Illinois, 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 rental housing
complex and other related improvements, which is 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
rehabilitation of the Apartment Housing until all rehabilitation 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 desires to commit its existing development agreement with Owner into
writing through this Development Fee Agreement and 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.
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 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.
"Contractor" means Star General Contractors, L.L.C.
1
"Department" means the Illinois 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 Ottawa Gracefield Limited Partnership, an Illinois
limited partnership.
"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, 2015.
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
$161,040 ("Development Fee"). 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 performed
substantial development services relating to the Apartment Housing. Such
services (the "Prior Services") included the following.
(1) Developer has identified a Contractor and recommended to the Owner to
enter into a construction contract with the Contractor for the building of the
Apartment Housing.
(2) Developer has: estimated the cost of rehabilitation; determined the
rehabilitation period; prepared a monthly-estimated construction chart
reflecting the construction services required each month; and prepared a
preliminary Development Budget.
(3) Developer has reviewed the plans and specifications for compliance with
design criteria and construction contracts.
(4) Developer has identified an architect and recommended to the Owner to
execute an architectural contract for the planning and design of the Apartment
Housing.
2
(5) Developer has placed its own capital at risk in anticipation of the
Apartment Housing being constructed, leased and Tax Credits awarded.
(6) Intentionally omitted.
(7) Developer has negotiated and conferred with an insurance carrier to
provide a builder's risk policy during rehabilitation.
(b) Future Services. Developer shall monitor renovation of the Apartment
Housing for Owner and shall provide Owner with information requiring
intervention to resolve construction issues. Owner shall allow Developer full
access to the Apartment Housing during the renovation 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.
(1) Developer shall exert its best efforts to ensure that the Contractor
performs its obligations under the construction contract in a diligent and
timely manner.
(2) Developer shall monitor pre-construction conferences and review
pre-construction documents, including drawings, specifications, contracts, and
schedules.
(3) Developer shall identify construction issues and inform Owner of the
same.
(4) Developer shall review subcontract bids received by the Contractor.
(5) Developer shall monitor field order and change order procedures and
inform the Owner.
(7) Developer shall attend construction progress meetings at the Apartment
Housing site to monitor construction progress and report to the Owner the
outcome of meetings.
(8) Developer shall review the Contractor's monthly pay applications.
(9) 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.
(10) Developer shall advise Owner with respect to relations with engineers,
architects, and other construction professionals.
(11) Developer shall maintain relations with the City of Ottawa and other
governmental authorities having jurisdiction over development of the Apartment
Housing and inform the Owner of any construction or building issues.
(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
3
Partnership Name, 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 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, 2015. Also, if the
Development Fee is not paid in full in accordance with Section 9.2(b) of the
Partnership Agreement then Owner shall provide Developer with a note payable to
Developer ("Development Fee Note") in a principal amount equal to the unpaid
balance of the Development Fee. The Development Fee Note shall accrue interest
at a rate equal to the applicable federal rate in effect as of the date of the
last capital contribution payment referenced in Section 7.2 of the Partnership
Agreement. The Development Fee Note shall be paid out of Net Operating Income
pursuant to Section 11.1 of the Partnership Agreement, but the Owner shall pay
to the Developer any unpaid principal and accrued interest on the eleventh
anniversary of the Completion Date.
3.2 Accrual of Development Fee. The Development Fee shall be earned no
later than the end of the first year of the tax credit period referenced in
Section 42(f)(1) of the Code. Once any portion of the Development Fee has been
earned, it shall be payable by the Partnership in all events.
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.
4
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 Rehabilitation 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 overnight courier or 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; 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: Star Development, L.L.C.
0000 Xxxxxxxxxx Xxx
Xxxxx 000
Xxxxxxxx, XX 00000
If to Owner: Ottawa Gracefield Limited Partnership
0000 Xxxxxxxxxx Xxx
Xxxxx 000
Xxxxxxxx, XX 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 Illinois applicable
to contracts made and wholly performed within Illinois by persons domiciled in
Illinois.
(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.
5
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 Attorney' 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 Limited Partner's Name 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.
6
If arbitration occurs, one neutral arbitrator will decide all issues unless
either Party's Claim is $100,000 or more, in which case three neutral
arbitrators will decide all issues. All arbitrators will be active Illinois
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 begin on the following page]
7
IN WITNESS WHEREOF, the Parties have caused this Development Fee Agreement
to be executed as of __________, 2004.
DEVELOPER:
STAR DEVELOPMENT, L.L.C.
By: Star-Holdings of Illinois, L.L.C.,
its sole member
By: ______________________
Xxxxxxx X. Xxxxx
Managing Member
OWNER:
OTTAWA GRACEFIELD LIMITED PARTNERSHIP
By: Ottawa Gracefield G/P, L.L.C, its
general partner
By: ____________________________
Xxxxxxx X. Xxxxx
Manager
8
EXHIBIT A
LEGAL DESCRIPTION
The South 2.00 acres of Parcel A of Gracefield Subdivision, being a part of the
East Half of the Southwest Quarter of Section Thirty Six (36), Township Thirty
Four (34) North, Range Three (3) East of the Third Principal Meridian, according
to the Plat thereof recorded April 24, 1974 in Plat Book 1, Pages 85 and 86 as
Document #602462, bounded and described as follows, to wit: Beginning at the
Southwest corner of said Parcel A, thence Easterly along the Southerly line of
said Parcel A, a distance of 302.14 feet to the West right of way of Xxxxxx
Xxxx, thence Northeasterly along said West right of way line at an angle of 120
27' 20" as measured clockwise from the last described course, a distance of
151.61 feet, thence Northeasterly along said West right of way, as said line is
curved concave from Northwesterly having a radius of 365.00 feet, at an angle to
the chord of 170 52' 47", an arc distance of 116.20 feet, thence Westerly
parallel to the South line of said Parcel A, at an angle of 68 39' 53" as
measured clockwise from the land described chord, a distance of 413.38 feet to
the West line of said Parcel A, then Southerly along said West line at an angle
of 91 43' 46" as measured clockwise from the last described course, a distance
of 238.58 feet to the point of beginning, in LaSalle County, Illinois.
ADDRESS: 0000 Xxxxxx Xxxx
Xxxxxx, Xxxxxxxx
1
DEVELOPMENT FEE
GUARANTY AGREEMENT
FOR VALUE RECEIVED, the receipt and sufficiency of which are hereby
acknowledged, and in consideration of the agreement of Star Development, L.L.C.,
a Delaware limited liability company (the "Developer") to permit deferral of the
$161,040 development fee due from Ottawa Gracefield Limited Partnership, an
Illinois limited partnership ("Debtor"), to the Developer, the undersigned
guarantors (jointly and severally, the "Guarantor"), hereby unconditionally
guarantee 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 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.
1
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 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, provided that any payments made to the
Partnership under the guarantee of Development Fee payment pursuant to Section
6.3(b) of the Partnership Agreement shall be included in the Capital Account of
the General Partner.
The Guarantor further agrees to maintain a minimum aggregate net worth
of $1,000,000 during the term of this Development Fee Guaranty Agreement,
provided that this amount may be reduced by the net worth of the Debtor. Failure
to maintain such net worth shall be deemed a default by the Guarantor of its
obligations hereunder.
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 Illinois and shall be construed and governed under Illinois 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
2
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
Illinois and/or to the jurisdiction and venue of any United States District
Court in the State of Illinois 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 Illinois, even if it was, in fact,
executed and delivered elsewhere.
IN WITNESS WHEREOF, the undersigned have hereunto caused this
Development Fee Guaranty Agreement to be executed as of _________, 2004.
GUARANTOR:
STAR-HOLDINGS OF ILLINOIS, L.L.C.
Witness:
_____________________ By: ________________________
Xxxxxxx X. Xxxxx
Managing Member
_____________________
Notary Public
My Commission Expires: ____________
(NOTARY SEAL)
Address for Guarantor:
0000 Xxxxxxxxxx Xxx
Xxxxx 000
Xxxxxxxx, XX 00000
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 Ottawa
Gracefield Limited Partnership, an Illinois limited partnership ("Owner"),
Ottawa Gracefield G/P, L.L.C. ("General Partner"), WNC Housing Tax Credit Fund
VI, L.P., Series 11, a California limited partnership (the "Limited Partner"),
and WNC Housing, L.P., a California limited partnership (the "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 acres of land in the City of
Ottawa, LaSalle County, Illinois (the "Real Property").
B. Owner intends to develop on the Real Property a 24 unit rental
housing complex and other related improvements for elderly use intended to
qualify for federal low-income housing tax credits (collectively, the "Apartment
Housing").
C. On even date herewith, an amended and restated partnership agreement
for Owner (the "Partnership Agreement") was entered into by and between the
General Partner, the Limited Partner and the Special 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).
D. The Parties recognize and acknowledge that the final construction
cost determination involves substantial negotiations with lenders, contractors
and governmental authorities.
E. The Parties recognize and acknowledge that a final operating budget
involves substantial negotiations with lenders and governmental authorities.
F. 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
renovate 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 has been specified in the Partnership Agreement as the Second Loan, the
Mortgage, 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,
1
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
$1,586,006. 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 Second Lender if applicable, Mortgage lender if
applicable and any governmental authorities if applicable. In accordance with
the Partnership Agreement, if the development costs, less the Development Fee,
exceed the sum of the Capital Contributions and the proceeds of the Mortgage and
the Second Loan then the General Partner shall be responsible for and shall be
obligated to pay such deficiencies.
4. Operating Proforma. Attached hereto as Exhibit "E" 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 Second Lender, the Mortgage lender 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: Ottawa Gracefield G/P, L.L.C.
0000 Xxxxxxxxxx Xxx
Xxxxx 000
Xxxxxxxx, XX 00000
To the Limited Partner: WNC Housing Tax Credit Fund VI, L.P.,
Series 11
c/o WNC & Associates, Inc.
00000 Xxx Xxxx Xxxxxx
Xxxxxx, XX 00000-0000
To the Special Limited Partner: WNC Housing, L.P.
00000 Xxx Xxxx Xxxxxx
Xxxxxx, XX 00000-0000
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
2
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 Illinois.
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 begin on the following page]
3
In Witness Whereof, this Development, Construction and Operating Budget
Agreement is made and entered into as of ________, 2004.
GENERAL PARTNER:
OTTAWA GRACEFIELD G/P, L.L.C., a
_________ limited liability company
By: ________________________
Xxxxxxx X. Xxxxx
Manager
LIMITED PARTNER:
WNC HOUSING TAX CREDIT FUND VI, L.P.,
Series 11, a California limited partnership
By: WNC & Associates, Inc., a California
corporation, its general partner
By: ________________________
Xxxxx X. Xxxxxx,
Executive Vice President
SPECIAL LIMITED PARTNER:
WNC Housing, L.P., a California limited
partnership
By: WNC & Associates, Inc., a California
limited partnership, its general partner
By: ________________________
Xxxxx X. Xxxxxx,
Executive Vice President
4
EXHIBIT A TO DEVELOPMENT, CONSTRUCTION, AND
OPERATING BUDGET AGREEMENT
SOURCE OF FUNDS
1
EXHIBIT B TO DEVELOPMENT, CONSTRUCTION, AND
OPERATING BUDGET AGREEMENT
DEVELOPMENT BUDGET
1
EXHIBIT C TO DEVELOPMENT, CONSTRUCTION, AND
OPERATING BUDGET AGREEMENT
CONSTRUCTION PROFORMA
1
EXHIBIT D TO DEVELOPMENT, CONSTRUCTION, AND
OPERATING BUDGET AGREEMENT
OPERATING PRO FORMA
1
CONSTRUCTION COMPLETION GUARANTY AGREEMENT
This Construction Completion Guaranty Agreement ("Agreement") is
entered into this ___ day of ________, 2004 by Star-Holdings of Illinois, L.L.C
("Guarantor"); Ottawa Gracefield Limited Partnership (the "Partnership"); and
WNC Housing Tax Credit Fund VI, L.P., Series 11 ("Limited Partner"). Guarantor,
the Partnership and 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 Ottawa Gracefield G/P, L.L.C. as the general partner (the "General
Partner") and WNC Housing Tax Credit Fund VI, L.P., Series 11 as the limited
partner (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: is required to guarantee, inter alia, the completion of
renovation of a 24 unit housing complex for families and elderly low-income
tenants located in the City of Ottawa, LaSalle County, Illinois, located on land
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").
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.
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 jointly and severally, along with the
General Partner (or any successors) guarantees to Ottawa Gracefield Limited
Partnership and the Limited Partner, as applicable, the prompt payment and full
performance of the provisions under Section 6.2 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. Guarantor further agrees to maintain a minimum aggregate net worth of
$1,000,000 during the term of this Agreement, provided that this amount may be
reduced by the net worth of the Partnership. Failure to maintain such net worth
shall be deemed a default by Guarantor of its obligations hereunder.
SECTION 2. Guarantor further agrees to pay all expenses paid or
incurred by Ottawa Gracefield Limited Partnership and/or Limited Partner in
endeavoring to collect Guarantor's obligations, or any part thereof, and in
1
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 heirs, successors and assigns.
SECTION 5. This Agreement has been made and delivered in the state of
Illinois and shall be construed and governed under Illinois 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 Ottawa Gracefield Limited 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 Parties consent to the jurisdiction and venue of the
courts of the State of Illinois having jurisdiction over LaSalle 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 Illinois, even if
it was, in fact, executed and delivered elsewhere.
2
IN WITNESS WHEREOF, the Parties hereto have set their hands and seals this
____ day of _________, 2004.
GUARANTOR:
STAR-HOLDINGS OF ILLINOIS, L.L.C.
By: _______________________
Xxxxxxx X. Xxxxx
Managing Member
OWNER:
OTTAWA GRACEFIELD LIMITED PARTNERSHIP
By: Ottawa Gracefield G/P, L.L.C., its
general partner
By: _________________________
Xxxxxxx X. Xxxxx
Manager
LIMITED PARTNER:
WNC HOUSING TAX CREDIT FUND VI, L.P.,
SERIES 11
By: WNC & Associates, Inc., its general
partner
By: ____________________
Xxxxx X. Xxxxxx,
Executive Vice President
3
EXHIBIT A
LEGAL DESCRIPTION
The South 2.00 acres of Parcel A of Gracefield Subdivision, being a part of the
East Half of the Southwest Quarter of Section Thirty Six (36), Township Thirty
Four (34) North, Range Three (3) East of the Third Principal Meridian, according
to the Plat thereof recorded April 24, 1974 in Plat Book 1, Pages 85 and 86 as
Document #602462, bounded and described as follows, to wit: Beginning at the
Southwest corner of said Parcel A, thence Easterly along the Southerly line of
said Parcel A, a distance of 302.14 feet to the West right of way of Xxxxxx
Xxxx, thence Northeasterly along said West right of way line at an angle of
120 deg. 27' 20" as measured clockwise from the last described course, a
distance of 151.61 feet, thence Northeasterly along said West right of way, as
said line is curved concave from Northwesterly having a radius of 365.00 feet,
at an angle to the chord of 170 deg. 52' 47", an arc distance of 116.20 feet,
thence Westerly parallel to the South line of said Parcel A, at an angle of
68 deg. 39' 53" as measured clockwise from the land described chord, a
distance of 413.38 feet to the West line of said Parcel A, then Southerly along
said West line at an angle of 91 deg. 43' 46" as measured clockwise from the
last described course, a distance of 238.58 feet to the point of beginning, in
LaSalle County, Illinois.
ADDRESS: 0000 Xxxxxx Xxxx
Xxxxxx, Xxxxxxxx
1
OPERATING DEFICIT and TAX CREDIT GUARANTY AGREEMENT
This Operating Deficit and Tax Credit Guaranty Agreement ("Agreement")
is entered into this ___ day of ______, 2004 by Star-Holdings of Illinois,
L.L.C. (the "Guarantor"); Ottawa Gracefield Limited Partnership (the
"Partnership"); and WNC Housing Tax Credit Fund VI, L.P., Series 11 ("Limited
Partner"). Guarantor, the Partnership and 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 Ottawa Gracefield G/P, L.L.C. as the general partner (the "General
Partner") and WNC Housing Tax Credit Fund VI, L.P., Series 11 as the limited
partner (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 renovation of a
24 unit housing complex for families and elderly low-income tenants located in
the City of Ottawa, LaSalle County, Illinois, located on land 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 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 jointly and severally, along with the
General Partner (or any successors) guarantees to Ottawa Gracefield Limited
Partnership and the Limited Partner, as applicable, the prompt payment and full
performance of the provisions under Section 6.3, Section 7.4(a), Section 7.4(b),
Section 7.4(d), and Section 7.4(f) 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.
Notwithstanding anything to the contrary contained herein, the amount to be paid
by the Guarantor pursuant to Sections 7.4(a), 7.4(b), 7.4(d), 7.4(f)(1),
7.4(f)(2), 7.4(f)(3), 7.4(f)(4), 7.4(f)(5)(A), and 7.4(f)(5)(C) shall be limited
to an amount equaling 843,735 less the total amount of tax credits previously
received by the Limited Partner and the Special Limited Partner under the
Agreement; provided, however, the such Guaranty limit shall be increased by the
1
amount of tax credits that are recaptured for previous events. Guarantor further
agrees to maintain a minimum net worth of $1,000,000 during the term of this
Agreement, provided that this amount may be reduced by the net worth of the
Partnership. Failure to maintain such net worth shall be deemed a default by
Guarantor of its obligations hereunder.
SECTION 2. Guarantor further agrees to pay all expenses paid or
incurred by Ottawa Gracefield Limited 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 heirs, successors and assigns.
SECTION 5. This Agreement has been made and delivered in the state of
Illinois and shall be construed and governed under Illinois 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 Ottawa Gracefield Limited 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 Parties consent to the jurisdiction and venue of the
courts of the State of Illinois having jurisdiction over LaSalle 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
2
Agreement is to be considered for all purposes to have been executed and
delivered within the geographical boundaries of the State of Illinois, even if
it was, in fact, executed and delivered elsewhere.
3
IN WITNESS WHEREOF, the Parties hereto have set their hands and seals this
____ day of _______, 2004.
GUARANTOR:
STAR-HOLDINGS OF ILLINOIS, L.L.C.
By: _______________________
Xxxxxxx X. Xxxxx
Managing Member
OWNER:
OTTAWA GRACEFIELD LIMITED PARTNERSHIP
By: Ottawa Gracefield G/P, L.L.C., its
general partner
By: _________________________
Xxxxxxx X. Xxxxx
Manager
LIMITED PARTNER:
WNC HOUSING TAX CREDIT FUND VI, L.P.,
SERIES 11
By: WNC & Associates, Inc., its general
partner
By: ____________________
Xxxxx X. Xxxxxx,
Executive Vice President
4
SCHEDULE A
LEGAL DESCRIPTION
The South 2.00 acres of Parcel A of Gracefield Subdivision, being a part of the
East Half of the Southwest Quarter of Section Thirty Six (36), Township Thirty
Four (34) North, Range Three (3) East of the Third Principal Meridian, according
to the Plat thereof recorded April 24, 1974 in Plat Book 1, Pages 85 and 86 as
Document #602462, bounded and described as follows, to wit: Beginning at the
Southwest corner of said Parcel A, thence Easterly along the Southerly line of
said Parcel A, a distance of 302.14 feet to the West right of way of Xxxxxx
Xxxx, thence Northeasterly along said West right of way line at an angle of
120 deg. 27' 20" as measured clockwise from the last described course, a
distance of 151.61 feet, thence Northeasterly along said West right of way, as
said line is curved concave from Northwesterly having a radius of 365.00 feet,
at an angle to the chord of 170 deg. 52' 47", an arc distance of 116.20 feet,
thence Westerly parallel to the South line of said Parcel A, at an angle of
68 deg. 39' 53" as measured clockwise from the land described chord, a
distance of 413.38 feet to the West line of said Parcel A, then Southerly along
said West line at an angle of 91 deg. 43' 46" as measured clockwise from the
last described course, a distance of 238.58 feet to the point of beginning, in
LaSalle County, Illinois.
ADDRESS: 0000 Xxxxxx Xxxx
Xxxxxx, Xxxxxxxx
