AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
PLEASANT VILLAGE LIMITED PARTNERSHIP
DATED AS OF AUGUST 30, 2006
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.......................17
ARTICLE IV. PURPOSE...........................................................17
Section 4.1 Purpose of the Partnership.........................17
Section 4.2 Authority of the Partnership.......................17
ARTICLE V. TERM...............................................................18
ARTICLE VI. GENERAL PARTNER'S CONTRIBUTIONS AND LOANS.........................18
Section 6.1 General Partner's Initial Capital Account
and Limited Deficit Restoration Obligation.........18
Section 6.2 Construction Obligations...........................18
Section 6.3 Operating Obligations..............................19
Section 6.4 Other General Partner Loans........................20
ARTICLE VII. CAPITAL CONTRIBUTIONS OF LIMITED
LIMITED PARTNER PARTNER AND SPECIAL...........................................20
Section 7.1 Withdrawing Limited Partner........................20
Section 7.2 Capital Contribution of Limited
Partner and Special Limited Partner................21
Section 7.3 Repurchase of Limited Partner's Interest...........24
Section 7.4 Adjustment of Capital Contributions................25
Section 7.5 Return of Capital Contribution.....................28
Section 7.6 Liability of Limited Partner and
Special Limited Partner............................28
ARTICLE VIII. WORKING CAPITAL AND RESERVES....................................28
Section 8.1 Replacement and Reserve Account....................28
Section 8.2 [Reserved.]........................................28
Section 8.3 Tax and Insurance Account..........................28
Section 8.4 Construction Reserve Account.......................29
Section 8.5 Other Reserves.....................................29
ARTICLE IX. MANAGEMENT AND CONTROL............................................29
Section 9.1 Power and Authority of General Partner.............29
Section 9.2 Payments to the General Partners and Others........30
Section 9.3 Specific Powers of the General Partner.............32
Section 9.4 Authority Requirements.............................32
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Section 9.5 Limitations on General Partner's
Power and Authority................................33
Section 9.6 Restrictions on Authority of General Partner.......34
Section 9.7 Duties of General Partner..........................36
Section 9.8 Obligations to Repair and Rebuild
Apartment Housing..................................38
Section 9.9 Partnership Expenses...............................38
Section 9.10 General Partner Expenses...........................39
Section 9.11 Other Business of Partners.........................39
Section 9.12 Covenants, Representations and Warranties..........40
ARTICLE X. ALLOCATIONS OF INCOME, LOSSES AND CREDITS..........................44
Section 10.1 General............................................44
Section 10.2 Allocations From Sale or Refinancing...............44
Section 10.3 Special Allocations................................45
Section 10.4 Curative Allocations...............................47
Section 10.5 Other Allocation Rules.............................48
Section 10.6 Tax Allocations: Code Section 704(c)...............49
Section 10.7 Allocation Among Limited Partners..................49
Section 10.8 Allocation Among General Partners..................49
Section 10.9 Modification of Allocations........................50
ARTICLE XI. DISTRIBUTION......................................................50
Section 11.1 Distribution of Net Operating Income...............50
Section 11.2 Distribution of Sale or Refinancing Proceeds.......51
ARTICLE XII. TRANSFERS OF LIMITED PARTNER'S AND SPECIAL LIMITED
PARTNER'S INTERESTS IN THE PARTNERSHIP.......................................51
Section 12.1 Assignment of Interests............................51
Section 12.2 Effective Date of Transfer.........................52
Section 12.3 Invalid Assignment.................................52
Section 12.4 Assignee's Rights to Allocations
and Distributions..................................52
Section 12.5 Substitution of Assignee as Limited
Partner or Special Limited Partner.................52
Section 12.6 Death, Bankruptcy, Incompetency,
etc., of a Limited Partner.........................53
ARTICLE XIII. WITHDRAWAL, REMOVAL AND REPLACEMENT OF GENERAL PARTNER.........53
Section 13.1 Withdrawal of General Partner......................53
Section 13.2 Removal of General Partner.........................53
Section 13.3 Effects of a Withdrawal............................56
Section 13.4 Successor General Partner..........................57
Section 13.5 Admission of Additional or Successor
General Partner....................................58
Section 13.6 Transfer of Interest...............................58
Section 13.7 No Goodwill Value..................................58
ARTICLE XIV. BOOKS AND ACCOUNTS, REPORTS, TAX
RETURNS, FISCAL YEAR AND BANKING..............................................59
Section 14.1 Books and Accounts.................................59
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Section 14.2 Accounting Reports.................................59
Section 14.3 Other Reports......................................60
Section 14.4 Late Reports.......................................62
Section 14.5 Site Visits........................................63
Section 14.6 Tax Returns........................................63
Section 14.7 Fiscal Year........................................63
Section 14.8 Banking............................................63
Section 14.9 Certificates and Elections.........................63
ARTICLE XV. DISSOLUTION, WINDING UP, TERMINATION AND
LIQUIDATION OF THE PARTNERSHIP................................................63
Section 15.1 Dissolution of Partnership.........................63
Section 15.2 Return of Capital Contribution upon
Dissolution........................................64
Section 15.3 Distribution of Assets.............................64
Section 15.4 Deferral of Liquidation............................65
Section 15.5 Liquidation Statement..............................65
Section 15.6 Certificates of Dissolution; Certificate
of Cancellation of Certificate of
Limited Partnership................................65
ARTICLE XVI. AMENDMENTS.......................................................66
ARTICLE XVII. MISCELLANEOUS...................................................66
Section 17.1 Voting Rights......................................66
Section 17.2 Meeting of Partnership.............................67
Section 17.3 Notices............................................67
Section 17.4 Successors and Assigns.............................67
Section 17.5 [Reserved.]........................................68
Section 17.6 Amendment of Certificate of Limited Partnership....68
Section 17.7 Counterparts.......................................68
Section 17.8 Captions...........................................68
Section 17.9 Saving Clause......................................69
Section 17.10 Certain Provisions.................................69
Section 17.11 Tax Matters Partner................................69
Section 17.12 Expiration of Compliance Period; Option
to Acquire.........................................70
Section 17.13 Number and Gender..................................72
Section 17.14 Entire Agreement...................................72
Section 17.15 Governing Law......................................72
Section 17.16 Attorney's Fees....................................72
Section 17.17 Receipt of Correspondence..........................72
Section 17.18 Security Interest and Right of Set-Off.............72
Section 17.19 Signage and Public Relations.......................73
Section 17.20 Interim Closing of the Books.......................73
EXHIBIT A LEGAL DESCRIPTION
EXHIBIT B Form of Legal Opinion
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EXHIBIT C Certification and Agreement
EXHIBIT D Form of Completion Certificate
EXHIBIT E Accountant's Certificate
EXHIBIT F Contractor's Certificate
EXHIBIT G Depreciation Schedule
EXHIBIT H Report of Operations
EXHIBIT I Survey Requirements
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AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF PLEASANT VILLAGE LIMITED PARTNERSHIP
This Amended and Restated Agreement of Limited Partnership is being entered
into, effective as of the date written below, by and between ▇▇▇▇▇▇ Guardian
LLC, an Oregon limited liability company, as the general partner (the "General
Partner"), WNC Housing Tax Credit Fund VI Series 13, L.P., 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 ▇▇▇▇▇▇ Bridge, L.L.C., a Louisiana limited liability
company, as the withdrawing limited partner (the "Withdrawing Limited Partner").
RECITALS
WHEREAS, Pleasant Village Limited Partnership, an Oregon limited
partnership (the "Partnership") filed a Certificate of Limited Partnership with
the Oregon Secretary of State on August 30, 2004. A limited partnership
agreement dated August 30, 2004 was entered into by and between the General
Partner and the Withdrawing Limited Partner (the "Original Partnership
Agreement").
WHEREAS, the Partners desire to enter into this Agreement to provide for,
among other things, (i) the continuation of the Partnership, (ii) the admission
of the Limited Partner and the Special Limited Partner as partners of the
Partnership, (iii) the liquidation of the Withdrawing Limited Partner's Interest
in the Partnership, (iv) the payment of Capital Contributions by the Limited
Partner and the Special Limited Partner to the Partnership, (v) the allocation
of Income, Losses, Tax Credits and distributions of Net Operating Income and
other cash funds of the Partnership among the Partners, (vi) the determination
of the respective rights, obligations, and interests of the Partners to each
other and to the Partnership, and (vii) certain other matters.
WHEREAS, the Partners desire hereby to amend and restate the 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
"Accountant" shall mean ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & Company PLLC, 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 Section 14.3 of this
Agreement.
"Act" shall mean the laws of Oregon governing limited partnerships, as now
in effect and as the same may be amended from time to time.
"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.
"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.
"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.
"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.
"Apartment Housing" shall mean the Pleasant Village Apartments located on
approximately 16.86 acres of land at ▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇
▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, as more fully described in Exhibit A attached hereto and
incorporated herein by this reference, and the Improvements.
"Asset Management Fee" shall have the meaning set forth in Section 9.2(d)
hereof and shall be paid annually to the Limited Partner.
"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.
"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.
"Book-Up Amount" shall have the meaning set forth in Section 10.3(r)
hereof.
"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 the amount of any outstanding Partnership obligations and 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. In
addition, Breakeven Operations shall not occur until the Partnership has
sufficiently funded a tax and insurance reserve in an amount equal to one year's
property insurance premium and the next full installment of Real Estate Taxes
based upon improved land and all other reserves that may be required pursuant to
the terms of the documents governing the issuance of the Tax-Exempt Bonds.
"Budget" shall mean the annual operating budget of the Partnership as more
fully described in Section 14.3 of this Agreement.
"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 Section 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
Section 10.4 hereof. In the event of any transfer of an interest in the
Partnership in accordance with the terms of this Agreement, the transferee shall
succeed to the Capital Account of the transferor to the extent it relates to the
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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 Regulations Section 1.704-1(b), as amended or any successor
thereto, and shall be interpreted and applied in a manner consistent with such
Treasury Regulations.
"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, Section 7.4, or
Section 7.5 of this Agreement. A loan to the Partnership by a Partner shall not
be considered a Capital Contribution.
"Cash Expenses" shall mean all operating obligations of the Partnership
(other than those covered by Insurance) including without limitation, the
payment of the monthly Mortgage payments, the current Management Agent fees, the
funding of reserves in accordance with Article VIII of this Agreement,
advertising costs, utilities, maintenance, repairs, Partner communications,
legal, telephone, any other expenses which may reasonably be expected to be paid
in a subsequent period but which on an accrual basis shall be allocable equally
per month over the calendar year such as, but not limited to, Insurance, Real
Estate Taxes, Mortgage payments paid other than monthly, audit, tax or
accounting expenses (excluding deductions for cost recovery of buildings;
improvements and personal property and amortization of any financing fees) and
any seasonal expenses (such as snow removal, the use of air conditioners in the
middle of the summer, or heaters in the middle of the winter) which may
reasonably be expected to be paid in a subsequent period, excluding cash
payments that on an accrual basis of accounting represent prepaid assets and
whose expense is properly allocated to future accounting periods. Cash Expenses
payable to Partners or Affiliates of Partners shall be paid after Cash Expenses
payable to third parties. Construction Loan interest and development costs of
any nature whatsoever are not Cash Expenses and shall not be paid from Cash
Receipts, except as provided in Section 6.2(a). The provisions of Section 6.2
govern the payment of development costs and construction interest.
"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
Construction Loan, the Mortgage Loan, lump-sum payments, and any extraordinary
receipt of funds. Neither the General Partner nor its Affiliates shall be
entitled to payment of any Cash Receipts for any reason, including but not
limited to, by virtue of a separate contract, agreement, obligation, or the
like.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time, or any successor statute.
"Completion of Construction" shall mean the date the Partnership receives
the Construction Inspector's certification, in a form substantially similar to
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the form attached hereto as Exhibit D and incorporated herein by this reference,
with respect to rehabilitation of all the apartment units in the Apartment
Housing. Completion of Construction further means that the construction shall be
completed in good quality, and free and clear of all mechanic, material, and
similar liens. In addition to the above, Completion of Construction shall occur
only when the Special Limited Partner has approved the Completion of
Construction and (i) the statutory time period for the filing of any liens by
the Contractor, subcontractors, material suppliers or any one else entitled to
file a lien against the property has lapsed, (ii) such filed liens, other than
the Construction Loan, or Mortgage Loan, have been bonded over and have been
approved by the Special Limited Partner, or (iii) appropriate lien releases have
been obtained from the lien holders.
"Completion Date" shall mean June 1, 2007.
"Compliance Period" shall mean the period set forth in Section 42(i)(1) of
the Code, as amended, or any successor statute.
"Consent of the Special Limited Partner" shall mean the prior written
consent of the Special Limited Partner.
"Construction Completion, Operating Deficit and Tax Credit Guaranty
Agreement" shall mean that agreement entered into as of even date herewith, by
and between the Partnership, the Guarantor, and the Limited Partner, and
incorporated herein by this reference.
"Construction Contract" shall mean the construction contract dated August
29, 2006 in the amount of $3,648,962 entered into between the Partnership and
the Contractor pursuant to which the Improvements are being constructed in
accordance with the Plans and Specifications as amended. 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;
provided, however, that the Consent of the Special Limited Partner shall not be
required for change orders that do not cost more than $10,000 individually or
$25,000 in the aggregate.
"Construction Draw Documents" shall mean those documents as set forth in
Section 14.3(a) of this Agreement.
"Construction Inspector" shall mean AECC, Inc.
"Construction Lender" or "Lender" shall mean U.S. Bank National Association
or any successor thereto, in its capacity of the purchaser of the Tax-Exempt
Bonds.
"Construction Loan" shall mean the following financing obtained, directly
and indirectly, from the Lender the construction phase of the loan obtained from
the Issuer wherein the Partnership promises to pay the Lender, or its successor
or assignee, the principal sum outstanding on the loan of $6,000,000 plus
interest on the principal at a rate not to exceed 6.00% per annum, which shall
be financed with the proceeds of the Tax-Exempt Bonds. The Construction Loan
will have a maturity date 12 months from the initial closing. The Construction
Loan will provide funds for the acquisition, renovation and/or construction and
development of the Apartment Housing. Where the context admits, the term
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"Construction 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 Construction Loan
as required by the Construction Lender.
"Contractor" shall mean Penco Construction Company of Dallas, Inc. Any
substitution of Contractor requires the Consent of the Special Limited Partner.
"Debt Service Coverage" shall mean for the applicable period the ratio
between the Net Operating Income (excluding Mortgage payments and the Asset
Management Fee) and the debt service required to be paid on the Mortgage(s). As
example, a 1.15 Debt Service Coverage means that for every $1.00 of debt service
required to be paid there must be $1.15 of Net Operating Income available. A
worksheet for the calculation of Debt Service Coverage is found in the Report of
Operations attached hereto as Exhibit 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 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 reserve required or
portion thereof to be funded in accordance with Article VIII that is currently
deferred and not paid.
"Developer" shall mean Guardian Affordable Housing Development, LLC, an
Oregon limited liability company.
"Development Budget" shall mean the agreed upon cost of developing the
Apartment Housing and Improvements, including all construction 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.
"Development Fee" shall mean the fee payable to the Developer for services
incident to the development and construction of the Apartment Housing in
accordance with the Amended and Restated 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, or negotiations for permanent
financing.
"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.
"Eligible Basis" shall have the meaning set forth in Section 42(d) of the
Code.
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"Extended Use Period" shall have the meaning set forth in Section
42(h)(6)(D) of the Code.
"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.
"First Year Certificate" shall mean the certificate to be filed by the
General Partner with the Secretary of the Treasury as required by Code Section
42(l)(1), as amended, or any successor thereto.
"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.
"General Partner(s)" shall mean ▇▇▇▇▇▇ Guardian LLC 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.
"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
7
(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 definition to the extent the General Partner determines that an
adjustment pursuant to section (b) hereof is necessary or appropriate in
connection with a transaction that would otherwise result in an adjustment
pursuant to section (d) of this definition.
If the Gross Asset Value of an asset has been determined or adjusted
pursuant to this definition, 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.
"Guarantor" shall mean, collectively, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇, and
Guardian Management LLC, an Oregon limited liability company.
"Guardian Management Loan" shall mean the loan obtained from Guardian
Management LLC, wherein the Partnership promises to pay Guardian Management LLC,
or its successor or assignee, the principal sum outstanding on the loan of
$585,530 plus interest on the principal at a rate equal to 9.5% per annum over a
term of 40 years, which shall be payable solely from Net Operating Income and
Sale or Refinancing Proceeds.
"HAP Contract" shall mean the Housing Assistance Payments Contract, as
amended, Section 8 Contract Number TX16-M000-310 and Number TX16-L000-047
between the Partnership and HUD that relates to the Apartment Housing.
"Hazardous Substance" shall mean and include any substance, material or
waste, including, but not limited to, 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.
"HUD" shall mean the United States Department of Housing and Urban
Development.
"Improvements" shall mean the substantial rehabilitation of 12 buildings
containing 200 apartment units and ancillary and appurtenant facilities
(including those intended for commercial use, if any) for 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.
The total number of apartment units equals 200 low-income units.
"In-Balance" shall mean, at any time when calculated, when the cumulative
amount of the undisbursed Construction Loan and the undisbursed Capital
Contributions of the Limited Partner and Special Limited Partner required to be
paid-in through and including the Completion of Construction are sufficient in
the Special Limited Partner's reasonable judgment to pay all the following sums:
(a) all costs of construction to achieve Completion of Construction: (b) all
8
soft costs of 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; and
(c) all interest and all other sums accruing or payable under the Construction
Loan documents. In making a determination that the financing is In-Balance, the
Special Limited Partner will also consider whether the undisbursed Capital
Contributions of the Limited Partner and Special Limited Partner, the Mortgage
and other sources of permanent financing (but not Cash Receipts) are adequate to
retire the Construction Loan at the earlier of the time of Mortgage closing and
funding, or maturity of the Construction Loan.
"Incentive Management Fee" shall have the meaning set forth in Section
9.2(e) hereof.
"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 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
Treasury Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into
account in computing Income and Losses shall be subtracted from such taxable
income or loss;
(c) in the event the Gross Asset Value of any Partnership asset is adjusted
pursuant to the provisions of the definition thereof, 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 Section 10.3 or Section 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
9
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.
"Insurance" shall mean:
(a) during construction, the Partnership will provide and maintain, or
cause the Contractor to provide and maintain, builder's risk insurance in an
amount equal to 100% of the value of the Apartment Housing at the date of
completion; property damage coverage of not less than $1,000,000 per occurrence
and comprehensive general liability insurance with limits against bodily injury
of not less than $1,000,000 per occurrence, both with aggregate coverage of
$2,000,000; and worker's compensation insurance, within the State statutory
guidelines;
(b) during operations the Partnership will provide and maintain business
interruption coverage covering actual sustained loss for 12 months; worker's
compensation; hazard coverage (including but not limited to fire, or other
casualty loss to any structure or building on the Apartment Housing in an amount
equal to the full replacement value of the damaged property without deducting
for depreciation); and comprehensive general liability coverage against
liability claims for bodily injury or property damage in the minimum amount of
$1,000,000 per occurrence and an aggregate of $2,000,000;
(c) all liability coverage shall include an umbrella liability coverage in
a minimum amount of $4,000,000 per occurrence and an aggregate of $4,000,000;
(d) all Insurance polices shall name the Partnership as the named insured,
the Limited Partner as an additional insured, and WNC & Associates, Inc. as the
certificate holder;
(e) all Insurance policies shall include a provision to notify the insured,
the Limited Partner and the certificate holder prior to cancellation;
(f) hazard coverage must include inflation and building or ordinance
endorsements;
(g) the Insurance Policy or Policies shall not have a deductible provision
in excess of $1,000; and
(h) the term "Insurance" specifically excludes co-insurance or
self-insurance.
"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
10
A.M. Best or Standard & Poor's. Any substitution of Insurance Company during the
term of this Agreement requires the Consent of the Special Limited Partner.
"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.
"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.
"Issuer" shall mean the Texas Department of Housing and Community Affairs,
in its capacity as issuer of the Tax-Exempt Bonds.
"Land Acquisition Fee" shall mean the fee payable to the General Partner in
an amount equal to $22,050 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 or rehabilitated.
"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.
"Limited Partner" shall mean WNC Housing Tax Credit Fund VI Series 13,
L.P., a California limited partnership, and such other Persons as are admitted
to the Partnership as additional or Substitute Limited Partners pursuant to this
Agreement.
"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
Guardian Management LLC. Any substitution of the Management Agent requires the
Consent of the Special Limited Partner.
"Management Agreement" shall mean the agreement between the Partnership and
the Management Agent for property management services. The management fee shall
equal the greater of 6.34% of gross revenues or $34.95 per unit per month,
subject to any increases permitted by HUD. The General Partner, on behalf of the
Partnership, shall insure that 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, General Partner, or Developer.
Notwithstanding the foregoing, the Partnership may pay an affiliate of the
Management Agent a commercially reasonable tenant screening fee of $35 per unit,
subject to such adjustments as may be permitted 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.
"Minimum Set-Aside Test" shall mean the 40-60 set-aside test pursuant to
Section 42(g)(1)(B), as amended and any successor thereto, of the Code with
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respect to the percentage of apartment units in the Apartment Housing to be
occupied by tenants whose incomes are equal to or less than 60 percent of the
area median gross income. More specifically, the General Partner has agreed that
there will be 20 one bedroom units averaging 584 square feet, which shall be
leased to tenants whose incomes are 50% or less of the area median income, as
adjusted for family size, 20 one bedroom units averaging 584 square feet, which
shall be leased to tenants whose incomes are 60% or less of the area median
income, as adjusted for family size, 60 two bedroom units averaging 811 square
feet, which shall be leased to tenants whose incomes are 50% or less of the area
median income, as adjusted for family size, 60 two bedroom units averaging 811
square feet, which shall be leased to tenants whose incomes are 60% or less of
the area median income, as adjusted for family size, 20 three bedroom units
averaging 1,024 square feet, which shall be leased to tenants whose incomes are
50% or less of the area median income, as adjusted for family size, and 20 three
bedroom units averaging 1,024 square feet, which shall be leased to tenants
whose incomes are 60% or less of the area median income, as adjusted for family
size; provided however that, with the written consent of the State Tax Credit
Agency, one or more of the residential units may be an on-site manager's unit.
"Mortgage" or "Mortgage Loan" shall mean the permanent nonrecourse phase of
the loan obtained from the Lender wherein the Partnership promises to pay the
Lender, or its successor or assignee, the principal sum outstanding on the loan
of $6,000,000 plus interest on the principal at a rate equal to 6.00% per annum
over a term of 15 years and amortized over 360 months, which shall be financed
with the proceeds of the Tax-Exempt Bonds. 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 and the income and expense statements for the
Partnership showing Cash Receipts and Cash Expenses for each and every month
since issuance of the certificate of occupancy. Based on the draft Mortgage
documents, and the income and mortgage statements, if the terms of the Mortgage
are not as specified above or the Special Limited Partner determines that the
Debt Service Coverage of those Mortgage Loans requiring an amortized monthly
principal and interest payment falls below 1.15 based on then current Cash
Expenses and Cash Receipts then the General Partner shall adjust the principal
loan amount and close on a Mortgage which will produce a 1.15 Debt Service
Coverage. The Mortgage funds shall be used to retire the Construction Loan and
if there are any funds remaining the Mortgage funds shall be used to retire any
outstanding hard construction costs including labor and materials.
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 without the Consent of the Special Limited
Partner even if the Debt Service Coverage remains at or above 1.15.
"Net Operating Income" shall mean the cash available for Distribution on an
annual basis, when Cash Receipts exceed Cash Expenses. For purposes of this
definition, Cash Expenses shall be increased by the amount of cash used to
generate prepaid assets.
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"Nonrecourse Deductions" shall have the meaning given it in Treasury
Regulations Section 1.704-2(b)(1).
"Nonrecourse Liability" shall have the meaning given it in Treasury
Regulations Section 1.704-2(b)(3).
"Operating Deficit" shall mean, for the applicable period, insufficient
funds to pay Partnership operating costs when Cash Expenses exceed Cash
Receipts, as determined by the Accountant and approved by the Special Limited
Partner.
"Operating Deficit Guarantee Period" shall mean the period commencing on
the date of this Partnership Agreement and ending at the end of the Compliance
Period.
"Operating Loans" shall mean loans made by the General Partner to the
Partnership pursuant to Article VI of this Agreement, which loans are repayable
only as provided in Article XI of this Agreement.
"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.
"Partner Nonrecourse Debt" shall have the meaning set forth in Section
1.704-2(b)(4) of the Treasury Regulations.
"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.
"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.
"Partnership" shall mean the limited partnership continued under this
Agreement.
"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).
"Permanent Mortgage Commencement" shall mean the first date on which all of
the following have occurred: (a) the Construction Loan shall have been repaid in
full or converted to permanent financing; (b) the Mortgage shall have closed and
funded; and (c) amortization of the Mortgage shall have commenced.
"Person" shall mean an individual, proprietorship, trust, estate,
partnership, joint venture, association, company, corporation, or other entity,
as the circumstances demonstrate.
"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
13
Contractor completes construction 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.
"Project Documents" shall mean all documents relating to the Construction
Loan, Mortgage Loan, Construction Contract, Title Policy, and Partnership
Agreement and the Tax-Exempt Bonds. It shall also include all documents required
by any governmental agency having jurisdiction over the Apartment Housing in
connection with the development, construction and financing of the Apartment
Housing, including but not limited to, the approved Plans and Specifications for
the development and construction of the Apartment Housing.
"Projected Annual Tax Credits" shall mean LIHTC in the amount of $303,993
for the year 2007, $370,078 for each of the years 2008 through 2016, and $66,085
for the year 2017, 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 $3,701,520
to be available to the Partnership.
"Projected Tax Credits" shall mean LIHTC in the aggregate amount of
$3,701,520.
"Qualified Basis" shall have the meaning set forth in Section 42(c)(1) of
the Code.
"Qualified Tenants" shall mean any tenants described in Code Section
42(g)(1)(A) 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.
"Real Estate Taxes" shall mean the sum of $60,000 or such other amount
required to be paid annually by the Partnership to the tax assessor, school
district or similar representative for real estate taxes assessed against the
Apartment Housing. The Real Estate Taxes are payable as follows: either (i)
one-half due on November 30, and the second half due on June 30, or (ii) the
entire balance due on January 31.
"Rent Restriction Test" shall mean the test pursuant to Section 42(g)(2) 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 imputed income levels of
those units under Section 42.
"Revised Projected Tax Credits" shall have the meaning set forth in Section
7.4(a) hereof.
"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."
"Sale or Refinancing Proceeds" shall mean all cash receipts of the
Partnership arising from a Sale or Refinancing (including principal and interest
14
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.
"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.
"State" shall mean the State of Texas.
"State Tax Credit Agency" shall mean the state agency of the State of Texas
which has the responsibility and authority to administer the LIHTC program in
Texas.
"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.
"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.
"Tax Credit Compliance Fee" shall mean the fee payable to the General
Partner in accordance with Section 9.2(f) of this Agreement.
"Tax Credit Conditions" shall mean, for the duration of the Compliance
Period or, where applicable, the Extended Use Period, any and all restrictions
including, but not limited to: (a) the land use restriction agreement required
by the State Tax Credit Agency to be recorded against the Apartment Housing; and
(b) any 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.
"Tax Credit Period" shall mean the 10-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.
"Tax-Exempt Bonds" shall mean the Multifamily Housing Revenue Bonds
(Pleasant Village Apartments) Series 2006 issued by the Issuer, the proceeds of
which will be used to finance the Construction Loan and the Mortgage Loan made
by the Lender.
"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 TLTA owners title policy including the
following endorsements: non-imputation, Fairways, access, contiguity, survey,
owner's comprehensive, zoning and subdivision, if applicable and available. The
Title Policy shall also insure against rights-of-way, easements, blanket
easement, or claims of easements, not shown by public records. During
construction of the Improvements, the Title Policy shall be in an amount equal
15
to the Construction Loan amount and the Limited Partner's Capital Contribution.
Upon Permanent Mortgage Commencement, the Title Policy shall be in an amount
equal to the Mortgage amount and the Limited Partner's Capital Contribution. If
allowed by the title company, the Title Policy shall name the Limited Partner,
Special Limited Partner and General Partner as insured parties, or if not
allowed, the Title Policy shall reference them "as their interests may appear"
in the limited partnership agreement of the owner.
"TRA 1986" shall mean the Tax Reform Act of 1986.
"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).
"▇▇▇▇▇▇ Bridge Loan" shall mean the loan obtained from ▇▇▇▇▇▇ Bridge,
L.L.C., wherein the Partnership promises to pay ▇▇▇▇▇▇ Bridge, L.L.C., or its
successor or assignee, the principal sum outstanding on the loan of $613,590
plus interest on the principal at a rate equal to 9.5% per annum over a term of
40 years, which shall be payable solely from Net Operating Income and Sale or
Refinancing Proceeds.
"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 General Partner or any its principals, the withdrawal,
removal or retirement from the Partnership of such General Partner for any
reason, including any sale, pledge, encumbering, assignment or other transfer of
all or any part of its 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.
"Withdrawing Limited Partner" shall mean ▇▇▇▇▇▇ Bridge, L.L.C.
ARTICLE II.
NAME
The name of the Partnership shall be "Pleasant Village 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 ▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, and an office within the
State at the address of the agent for service of process set forth in Section
3.2, or at such other place or places within the State as the General Partner
may hereafter designate.
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Section 3.2. Agent for Service of Process.
The name of the agent for service of process on the Partnership is MN
Service Corporation (Oregon), whose address is ▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇.
ARTICLE IV.
PURPOSE
Section 4.1. Purpose of the Partnership.
The purpose of the Partnership is to acquire, rehabilitate, 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 or otherwise facilitate the disposition of the
Apartment Housing or otherwise provide for the termination or disposition of the
Interests of the Limited Partner and/or the Special Limited Partner at the
conclusion of the Compliance Period in a manner agreed upon by the Partners. The
Partnership shall not engage in any business or activity that 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 in accordance with the
Partnership Agreement, 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, and own 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
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 Construction 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.
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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 Oregon, and shall continue until January 1, 2050, unless
earlier terminated 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. General Partner's Initial Capital Account and Limited Deficit
Restoration Obligation.
General Partner has been a Partner of the Partnership since its formation
and consequently has a positive or negative Capital Account based its capital
contributions, distributions and allocations of Partnership income, loss,
deduction, expense and credits since the Partnership's formation. Simultaneously
with the admission of the Limited Partner and Special Limited Partner, the
parties to this Agreement desire to adjust the General Partner's Capital
Account, such that in the event the General Partner has a positive Capital
Account, to provide proportionate future allocations or alternatively, in the
event the General Partner has a negative Capital Account, to avoid a causing the
General Partner to realize taxable income upon the consummation of the Mortgage
Loan. In addition, in accordance with Section 10.3(r), the parties have agreed
to increase the Capital Account of the General Partner by the Book-Up Amount.
The parties agree as follows:
(a) to the extent that the General Partner's Capital Account, excluding the
Book-Up Amount, exceeds $150 on August 31, 2006 and only if such excess is
greater than $1,000, the Partnership will execute a promissory note payable to
the General Partner for the amount that the Capital Account exceeds $150 and
such note will be unsecured and payable solely from Sale or Refinancing Proceeds
pursuant to Section 11.2 of this Agreement; and
(b) to the extent that the General Partner's Capital Account is negative on
August 31, 2006, the General Partner may, at its sole discretion, agree to
restore the deficit in its Capital Account on August 31, 2006 (or agree to
restore any amount less than the deficit in the General Partner's Capital
Account) in order to avoid or minimize the allocation of taxable income upon the
consummation of the Mortgage Loan. Such deficit restoration obligation is due
upon liquidation of the Partnership or of the General Partner's entire Interest
in the Partnership, and after allocation of all items of profit, loss, expense,
deduction or credits realized through the liquidation event. The General Partner
will document such obligation by providing notice to the Special Limited Partner
and placing an appropriate notation in the Partnership's records no later than
the due date of the Partnership's 2006 IRS partnership tax return.
Section 6.2 Construction Obligations.
(a) The General Partner hereby guarantees lien free Completion of
Construction of the Apartment Housing on or before the Completion Date. At the
time of Permanent Mortgage Commencement, if the actual hard costs and soft costs
of developing and constructing the Apartment Housing and Improvements exceed the
18
Development Budget, then the General Partner shall: first, pay such excess with
Net Operating Income, if any, attributable to the period prior to the Completion
Date and, second, advance the money to the Partnership to pay the difference
between the aggregate of the actual hard and soft costs and the Development
Budget. At the time of Permanent Mortgage Commencement, if the remaining sources
of revenue from the Capital Contributions and the Mortgage are insufficient, as
determined by the Accountant and the Special Limited Partner, to pay in full the
Construction Loan and any outstanding hard and soft costs incident to the
acquisition, development and construction of the Apartment Housing (other than
Development Fee), then the General Partner prior to Permanent Mortgage
Commencement shall advance the money to the Partnership to pay the additional
costs.
(b) At any time during construction and prior to Permanent Mortgage
Commencement, if the Special Limited Partner or the Construction Lender, in good
faith, determines that the actual construction and development costs exceed the
Development Budget (excluding the Development Fee) then the General Partner
shall be responsible for and shall be obligated to advance and deposit into the
Construction Lender's construction account, or similar disbursement agent's
account, within ten days following notice by the Special Limited Partner or the
Construction Lender, the difference thereof for payment to the Contractor or
other vendors, suppliers, or subcontractors. In addition, at any time during
construction and prior to Completion of Construction, if the Special Limited
Partner or Construction Lender, in good faith, determines that there are
insufficient funds to achieve Completion of Construction or the funds are not
available in accordance with the funding requirements of the Construction Loan
or this Agreement, then the General Partner shall be responsible for and shall
be obligated to advance and deposit into the Construction Lender's construction
account, or similar disbursement account, within ten days following notice by
the Special Limited Partner or the Construction Lender, the amount requested by
the Special Limited Partner or Construction Lender to pay a current construction
draw or an amount necessary to achieve Completion of Construction.
(c) Any advances by the General Partner pursuant to this Section 6.2 shall
not be repayable, shall not change the Interest of any Partner in the
Partnership and shall be considered a guaranteed payment to the Partnership for
cost overruns.
Section 6.3 Operating Obligations.
(a) From the date the first apartment unit in the Apartment Housing is
available for its intended use until 3 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. Beginning in the sixth year of
the Operating Deficit Guarantee Period, provided the General Partner has
delivered to the Special Limited Partner audited financial statements evidencing
the Partnership's achievement of a Debt Service Coverage 1.15 for the preceding
three calendar years, the aggregate maximum amount of the Operating Loan(s) the
General Partner will be obligated to lend will be $1,905,800 (the "Operating
Deficit Cap"). The Operating Deficit Cap shall not apply to limit General
Partner's obligation to make Operating Loans: (i) during the first five years of
19
the Operating Deficit Guarantee Period, or (ii) in any subsequent year of the
Operating Deficit Guarantee Period, until the General Partner has delivered the
audited financial statements evidencing Debt Service Coverage of 1.15 for the
preceding three calendar years. The amount of any Operating Deficit that arises
prior to the year in which the Operating Deficit Cap becomes effective shall not
be counted toward the Operating Deficit Cap. Notwithstanding the foregoing, the
Operating Deficit Cap shall not apply to limit the General Partner's obligation
to make Operating Loans if the HAP Contract is terminated due to any action or
omission of the General Partner in violation of the HAP Contract or Section 8
program requirements, other than a termination due to reasons beyond the
reasonable control of the General Partner.
(b) 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.
(c) The Partnership shall pay the Development Fee in accordance with the
terms of the Amended and Restated Development Fee Agreement and Section 11.1 of
this Agreement.
Section 6.4 Other General Partner Loans.
Unless provided elsewhere, 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,
Limited Partner and Special Limited Partner as required in accordance with the
Act.
ARTICLE VII.
CAPITAL CONTRIBUTIONS OF LIMITED PARTNER
AND SPECIAL LIMITED PARTNER
Section 7.1 Withdrawing Limited Partner.
The Withdrawing Limited Partner made a Capital Contribution of $99.99.
Effective as of the date of this Agreement, the Withdrawing Limited Partner's
Interest has been liquidated and the Partnership has reacquired the Withdrawing
Limited Partner's Interest in the Partnership. The Withdrawing Limited Partner
acknowledges that it has no further interest in the Partnership as a partner as
of the date of this Agreement and has released all claims, if any, against the
Partnership arising out of its participation as a partner.
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Section 7.2 Capital Contribution of Limited Partner and Special Limited
Partner.
The Limited Partner and the Special Limited Partner shall make a Capital
Contribution in the aggregate amount of $2,849,885, 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) $1,995,005 (which includes the Special Limited Partner's Capital
Contribution of $285) 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) evidence of Insurance required during construction;
(5) a copy of the recorded grant deed (warranty deed);
(6) an executed commitment from the Lender to provide the Mortgage
Loan;
(7) fully executed Construction Loan documents;
(8) an executed Development, Construction and Operating Budget
Agreement;
(9) an executed Construction Completion, Operating Deficit and Tax
Credit Guaranty Agreement;
(10) an executed Amended and Restated Development Fee Agreement and
Development Fee Guaranty Agreement;
(11) the construction draw disbursement procedure;
(12) payment of $15,000 for costs and expenses in connection with the
Limited Partner's or its Affiliate's underwriting of the Apartment Housing
and Improvements;
(13) a determination by the Special Limited Partner that the amount of
the remaining Capital Contributions and other financing funds are equal to
or exceed the difference between the Construction Loan and Mortgage in
order to retire the Construction Loan; and
(14) a determination letter from the State Tax Credit Agency
satisfying the requirements of Section 42(m)(1)(D) and 42(m)(2)(D) of the
Code.
Upon satisfaction of the foregoing, $1,715,00 of the first Capital
Contribution payment shall be disbursed at closing to the Trustee of the
Tax-Exempt Bonds (the "Trustee") and will be held by the Trustee and disbursed
21
to the Partnership in installments based upon approved draw requests in
accordance with Section 6.02 of the Trust Indenture by and between the Issuer
and U.S. Bank National Association, as Trustee, dated as of August 1, 2006,
related to the Tax-Exempt Bonds. The amount of the first Capital Contribution
payment in excess of $1,715,000 will be held by the Limited Partner and the
Special Limited Partner and released to the Partnership in response to draw
requests submitted to and approved by the Special Limited Partner. The Partners
acknowledge that the amount of the first Capital Contribution held and disbursed
by the Limited Partner and the Special Limited Partner will be disbursed to the
Partnership prior to the Trustee's disbursement of the proceeds of the
Tax-Exempt Bonds.
(b) $427,440 shall be payable upon the Limited Partner's receipt and
approval of the following documents:
(1) any documents previously not provided to the Limited Partner but
required pursuant to this Section 7.2 and Section 14.3(a) and Section
14.3(b);
(2) a date down to the Title Policy dated no more than fifteen days
prior to this Capital Contribution payment evidencing no construction or
development related liens;
(3) evidence of Insurance required during operations;
(4) Completion of Construction;
(5) 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;
(6) (A) 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, or (B) evidence that the General Partner is adequately insured or
bonded against any potential disputes or amounts that may be in controversy
under the Construction Contract in such a manner as to preclude the
Contractor or surety or insurer from having any recourse to the Apartment
Housing or the Partnership or that the General Partner has established a
reserve account funded with amounts sufficient to pay any amount in
controversy under the Construction Contract, and provided, further, that
the Limited Partner may, in lieu of requiring such a reserve account, hold
in escrow an amount of this second installment of its Capital Contribution
equal to the total amount in controversy under the Construction Contract
pending the satisfactory resolution of such controversy;
(7) 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 confirming the apartment units are
being placed in service for their intended purpose; and
(8) evidence that the General Partner has satisfied the requirements
of Section 9.12(ff).
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The Limited Partner and Special Limited Partner require receipt and
approval of 100% of the tenant files as a condition to a subsequent installment
of the Limited Partner's Capital Contribution, as set forth in Section 7.2(d)(5)
below. However, the parties to this Agreement acknowledge that the time required
to collect, review, and correct, if applicable, tenant files can be substantial.
Therefore, to expedite the process, the General Partner shall send tenant files
to the Special Limited Partner as soon as the files are completed instead of
waiting until all of the tenant files are completed to send all the tenant files
at one time. Compliance with this paragraph shall not be a condition precedent
to the payment of the second installment of the Limited Partner's Capital
Contribution pursuant to this Section 7.2(b).
(c) $284,960 shall be payable upon the Limited Partner's receipt and
approval of the following documents:
(1) Debt Service Coverage of 1.15 for 90 consecutive days immediately
prior to funding;
(2) copy of the Conversion Notice (as that term is defined in the
Mortgage Loan documents) executed by Lender, or evidence satisfactory to
the Limited Partner that the Conversion Notice will issue upon the
Partnership's receipt of the third installment of the Limited Partner's
Capital Contribution to be made pursuant to this Section 7.2(c);
(3) the current rent roll evidencing a minimum 90% occupancy by
Qualified Tenants for 90 consecutive days immediately prior to funding and
100% LIHTC qualified units;
(4) an updated Title Policy dated no more than 10 days prior to the
scheduled Capital Contribution 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);
(5) an 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;
(6) an audited construction cost certification that includes an
itemization of development, acquisition, and construction or rehabilitation
costs of the Apartment Housing, the Land Acquisition Fee, and the Eligible
Basis and applicable percentage of each building of the Apartment Housing;
(7) a construction closeout binder, which shall include, but is not
limited to, as-built drawings, all operating manuals, and all manufacturing
warranty agreements. In addition, the Contractor shall provide the
Partnership a one-year warranty on all parts, materials and work-quality;
and
(8) any documents previously not provided to the Limited Partner but
required pursuant to this Section 7.2 and Section 14.3(a) and Section
14.3(b).
(d) $117,480 shall be payable upon the Limited Partner's receipt and
approval of the following documents:
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(1) a fully signed Internal Revenue Code Form 8609, or any successor
form;
(2) the audited Partnership financial statements required by Section
14.2 for the year the Apartment Housing is placed-in-service;
(3) a copy of the recorded declaration of restrictive
covenants/extended use agreement entered into between the Partnership and
the State Tax Credit Agency;
(4) 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;
(5) copies of all initial tenant files including executed lease
agreements, completed applications, completed questionnaires or checklist
of income and assets, documentation of third party verification of income
and assets, income certification forms (LIHTC specific), and any other form
or document collected by the Management Agent, or General Partner,
verifying each tenant's eligibility pursuant to the Minimum Set-Aside Test
and other applicable guidelines under Section 42 of the Code. For purposes
of this subsection only, the Limited Partner only requires receipt of all
the tenant documents, as described above, and approval of 10% of the
initial tenant files. Approval of the balance of the tenant files is
withheld for a subsequent Capital Contribution payment; and
(6) any documents previously not provided to the Limited Partner but
required pursuant to this Section 7.2 and Section 14.3(a) and Section
14.3(b).
(e) $25,000 shall be payable upon the Special Limited Partner's approval
of: (i) 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
the Partnership has obtained the Consent of the Special Limited Partner for such
deferral, (ii) the initial tenant files, and (iii) any documents previously not
provided to the Limited Partner but required pursuant to this Section 7.2 and
Section 14.3(a) and Section 14.3(b). The initial tenant files will be reviewed
at the Limited Partner's expense by an independent third-party. In the event
that the independent third-party and the Special Limited Partner recommend
corrections to an initial tenant file, the General Partner will cause the
Management Agent to correct the tenant file and provide the corrected tenant
file to the Limited Partner. The Limited Partner may withhold all or any portion
of a Capital Contribution payment until it has received all the initial tenant
files and the same have been reviewed, corrected, and approved.
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. This repurchase obligation shall arise if, for any
reason, the Partnership shall fail to:
(a) cause the Apartment Housing to be placed in service within 6 months of
the Completion Date;
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(b) achieve 100% occupancy of the Apartment Housing by Qualified Tenants by
April 1, 2008;
(c) obtain Permanent Mortgage Commencement by April 1, 2008;
(d) at any time before the Completion Date, prevent a foreclosure, or
abandonment of the Apartment Housing or fail to lift any order restricting
construction of the Apartment Housing (provided, however, that such event shall
not be grounds for repurchase of the Limited Partner and/or Special Limited
Partner's Interest(s) if such restriction either (a) is removed within 30 days,
or (b) has only a de minimis impact on the Partnership or the anticipated use of
the Apartment Housing and no impact on the Partnership's ability to obtain and
allocate Tax Credits to the Limited Partner and the Special Limited Partner);
(e) prior to completion of the Improvements, prevent the Construction
Lender from sending notice of default under the Construction Loan;
(f) replace a withdrawn Mortgage Loan commitment with a comparable
commitment acceptable to the Special Limited Partner within a reasonable period
of time; or
(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.
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 at a cost of $0.77 for
each dollar of Tax Credit received, and were 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, or by the tax certification required in accordance with
Section 7.2 provided to the Limited Partner and Special Limited Partner is
different than 99.99% of $3,701,520 then the new Projected Tax Credit amount, if
applicable, shall be referred to as the "Revised Projected Tax Credits." The
Limited Partner's and Special Limited Partner's Capital Contribution provided
for in Section 7.2 shall be equal to 77% times the Projected Tax Credits or the
Revised Projected Tax Credits, if applicable, 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 Limited Partner, then
the General Partner shall have 90 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 to be paid by this Section shall be 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
25
Contribution is being adjusted shall have 90 days from the date the Limited
Partner and Special Limited Partner have received notice from the General
Partner to pay the increase.
(b) The General Partner is required to use its best efforts to rent 100% of
the Apartment Housing's apartment units to Qualified Tenants throughout the
Compliance Period. If, at the end of any calendar year following the year in
which the Apartment Housing is placed in service, the Actual Tax Credit for the
applicable 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 90 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) The General Partner has represented, in part, that the Limited Partner
will receive Projected Annual Tax Credits of $303,993 in 2007 and $370,078 in
2008. In the event the 2007 or 2008 Actual Tax Credits are less than projected
then the Limited Partner's Capital Contribution shall be reduced by an amount
equal to 67% times the difference between the Projected Annual Tax Credits for
2007 or 2008 and the Actual Tax Credits for 2007 or 2008. If the 2007 or 2008
Actual Tax Credits are less than projected then the Special Limited Partner's
Capital Contribution shall be reduced following the same equation referenced in
the preceding sentence. If, at the time of determination thereof, the Capital
Contribution adjustment referenced in this Section 7.4(c) 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 60 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.
(d) The Partners recognize and acknowledge that the Limited Partner and the
Special Limited Partner are making their Capital Contribution, in part, on the
expectation that the Projected Tax Credits are allocated to the Partners over
the Tax Credit Period. If the Projected Tax Credits are not allocated to the
Partners during the Tax Credit Period then the Limited Partner's and Special
Limited Partner's Capital Contribution shall be reduced by an amount agreed upon
by the Partners, in good faith, to provide the Limited Partner and the Special
Limited Partner with their anticipated internal rate of return.
26
(e) 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 or an adjustment Schedule K-1 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, 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") whether by settlement, mutual agreement, or IRS decision, resulting in a
recapture or reduction of Tax Credits previously claimed or an adjustment to
Schedule K-1; (4) a decision by any court or administrative body upholding an
administrative adjustment against the Partnership with respect to any Tax Credit
previously claimed or tax losses previously claimed, in connection with the
Apartment Housing, unless the Partnership shall timely appeal such decision and
the collection of such adjustment 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) the cumulative tax effect of a decrease in loss allocated to the
Limited Partner and Special Limited Partner by the Partnership; (C) any interest
and penalties imposed on the Limited Partner or Special Limited Partner with
respect to such recapture; (D) the cumulative tax effect of an increase of
taxable income allocated to the Limited Partner and Special Limited Partner by
the Partnership; and (E) 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 (F) 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), (B), (C) and (D).
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.
(f) The increase in the Capital Contribution of the Limited Partner and the
Special Limited Partner pursuant to Section 7.4(a) shall be subject to the
Limited Partner and Special Limited Partner having funds available to pay any
such increase at the time of its notification of such increase. For these
purposes, any funds theretofore previously earmarked by the Limited Partner or
Special Limited Partner to make other investments, or to be held as required
reserves, shall not be considered available for payment hereunder. In the event
that the Limited Partner and Special Limited Partner do not have funds available
to pay an increase in the Capital Contribution of the Limited Partner and/or the
Special Limited Partner as required pursuant Section 7.4(a), the Limited Partner
and/or the Special Limited Partner shall endeavor to cause an Affiliate to
purchase an Interest in the Partnership (but shall have no liability if they
fail to do so) and, if no Affiliate of the Limited Partner or Special Limited
Partner purchases such an Interest, the General Partner shall be authorized to
admit one or more additional Partners to the Partnership who will be allocated a
percentage of all items includable in the calculation of Income or Loss not
arising from a Sale or Refinancing, and a percentage of all Tax Credits, equal
to the increase in the Capital Contribution required by Section 7.4(a) that has
27
not been paid by the Limited Partner or Special Limited Partner or an Affiliate
of either, divided by the total Capital Contribution required of the Limited
Partner and Special Limited Partner (including any increase required pursuant to
Section 7.4(a)); provided, however, that in no event shall the Limited Partner
be allocated less than 90% of all items includable in the calculation of Income
or Loss not arising from a Sale or Refinancing, and 90% of all Tax Credits. In
the event that one or more additional Partners are admitted to the Partnership,
the parties shall make appropriate modifications to this Agreement.
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 and subject to any
applicable restrictions imposed by HUD, 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 Replacement and Reserve Account.
The General Partner, on behalf of the Partnership, shall open a Replacement
and Reserve Account with a financial banking institution and shall deposit
thereinto an annual amount equal to $350 per residential unit per year for the
purpose of capital improvements. Said deposit shall be made monthly in equal
installments. The Replacement and Reserve Account shall require the joint
signatures of the Special Limited Partner and the Partnership for any
withdrawals. The Replacement and Reserve Account shall be held by and assigned
to the trustee of the Tax-Exempt Bonds, pursuant to the terms of the documents
governing issuance of the Tax-Exempt Bonds.
Section 8.2 [Reserved.]
Section 8.3 Tax and Insurance Account.
The General Partner, on behalf of the Partnership, shall open a tax and
insurance account (the "T & I Account") for the purpose of making the requisite
28
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
an amount equal to 1/12th of the annual required amount. Notwithstanding the
foregoing, as part of its obligation to achieve Breakeven Operations, the
General Partner shall cause the Partnership to prefund the T & I Account in an
amount equal to one year's property insurance premium and the next full
installment of real estate taxes based on improved land. The T & I Account shall
require the joint signature of the Special Limited Partner for any withdrawals.
The Partnership is required to pay Real Estate Taxes as follows: either (i)
one-half due on November 30, and the second half due on June 30, or (ii) the
entire balance due on January 31.
Section 8.4 Construction Reserve Account.
Within 30 days of the date of this Agreement, the General Partner, on
behalf of the Partnership, shall open a Construction Reserve Account with a
financial banking institution. Each month during construction and prior to
Permanent Mortgage Commencement, the Partnership shall deposit into the
Construction Reserve Account, the Partnership shall deposit into the
Construction Reserve Account all Cash Receipts remaining after the payment of
Cash Expenses. If, on March 1, 2007, the balance of the Construction Reserve
Account is less than $150,000, the General Partner shall be obligated to make
monthly deposits of $40,000 into the Construction Reserve Account until the
balance of the Construction Reserve Account is no less than $150,000. Funds held
in the Construction Reserve Account may be used only to pay construction related
expenses. Any withdrawals from the Construction Reserve Account shall require
the Consent of the Special Limited Partner. Any amounts remaining in the
Construction Reserve Account shall be released to the Partnership upon Permanent
Mortgage Commencement.
Section 8.5 Other Reserves.
The General Partner, on behalf of the Partnership, may establish out of
funds available to the Partnership a reserve account sufficient in its sole
discretion to pay any unforeseen contingencies which might arise in connection
with the furtherance of the Partnership business including, but not limited to,
(a) any rent subsidy required to maintain rent levels in compliance with the Tax
Credit Conditions; and (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
29
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. If a
General Partner takes action without the authorization of all the General
Partners then such act, decision, etc. shall not be deemed a valid action taken
by the General Partners pursuant to this Agreement. No intentional act by a
General Partner, or a principal of a General Partner, that violates State or
federal law will be deemed to be within the authority of this Agreement and,
therefore, the General Partner will be deemed to have acted in its individual
capacity and not as an agent of the Partnership. 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.
(a) The Partnership shall pay to the Developer a Development Fee in the
amount equal to the greater of (i) $1,104,320 or (ii) subject to the Special
Limited Partner's reasonable determination that such higher amount may be
included in the Eligible Basis of the Apartment Housing, 15% of the total
development costs as stated in the cost certification provided by the
Accountants and approved by the State Tax Credit Agency, pursuant to the Amended
and Restated Development Fee Agreement entered into by and between the Developer
and the Partnership on even date herewith; provided, however, that the
Development Fee shall be reduced prior to the end of the first year of the Tax
Credit Period, as necessary, to meet the 50% test for financing development
costs from tax-exempt bond proceeds as described in Code Section 42(h)(4)(B),
with the amount of such reduction to be determined by the Accountant and
approved by the Special Limited Partner. The Amended and Restated 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 of this Agreement for costs
associated with the development and construction of the Apartment Housing
including, but not limited to, land costs, Land Acquisition Fee, architectural
fees, survey and engineering costs, financing costs, loan fees, building
materials and labor. If any Capital Contribution proceeds are remaining after
Completion of Construction and all acquisition, development and construction
costs, excluding the Development Fee, are paid in full and the Construction Loan
retired, 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
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accordance with the Management Agreement. The term of the Management Agreement
shall not exceed 1 year, and the execution or renewal of any Management
Agreement shall be subject to veto by the Special Limited Partner.
(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.
(d) Subject to any applicable distribution restrictions imposed by HUD, the
Partnership shall pay to the Limited Partner an annual Asset Management Fee
commencing in 2008 in the amount of $7,500 and increasing by 3% annually for the
Limited Partner's services in assisting with the preparation of tax returns and
the reports required in Section 14.2 and Section 14.3 of this Agreement. If in
any year Net Operating Income is insufficient to pay the full Minimum Amount,
the unpaid portion thereof shall accrue and be payable on a cumulative basis in
the first year in which there is sufficient Net Operating Income, as provided in
Section 11.1, or sufficient Sale or Refinancing Proceeds, as provided in Section
11.2. The General Partner shall ensure that any accrued and unpaid Asset
Management Fee will be reflected in the annual audited financial statement.
(e) Subject to any applicable distribution restrictions imposed by HUD,
commencing in 2008, the Partnership shall pay to the General Partner through the
Compliance Period an annual Incentive Management Fee equal to 40% of Net
Operating Income remaining after payment of the obligations set forth in Section
11.1(a) through (e) 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. If
the Incentive Management Fee is not paid in any year it shall not accrue for
payment in subsequent years.
(f) Subject to any applicable distribution restrictions imposed by HUD,
commencing in 2006, the Partnership shall pay to the General Partner through the
Compliance Period an annual Tax Credit Compliance Fee equal to 40% of Net
Operating Income remaining after payment of the obligations set forth in Section
11.1(a) through (e) for the services of the General Partner in ensuring
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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. If the Tax Credit Compliance Fee is not paid in any
year it shall not accrue for payment in subsequent years.
(g) No separate consideration shall be paid to the General Partner for its
services in finding and acquiring the Property and in syndicating the
Partnership. The parties hereto acknowledge that a material part of the
consideration for the General Partner in providing acquisition and syndication
services is the distribution of Sale and Refinancing Proceeds provided for in
Section 11.2, which provides that 89.99% of such proceeds shall be allocated to
the General Partner.
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;
(c) deposit, withdraw, invest, pay, retain and distribute the Partnership's
funds in a manner consistent with the provisions of this Agreement;
(d) execute the Construction 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
32
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) directly or indirectly transfer control of the General Partner;
provided that if ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇ jointly retain control of the
General Partner, non-managing member interests in the General Partner may be
transferred for estate planning purposes to entities affiliated with ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇ and/or ▇▇▇ ▇▇▇▇▇▇ and beneficially owned by family members of ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇ and/or ▇▇▇ ▇▇▇▇▇▇;
(g) admit a Person as a Limited Partner or Special Limited Partner except
as provided in this Agreement;
(h) violate any provision of the Mortgage;
(i) cause the Apartment Housing apartment units to be rented to anyone
other than Qualified Tenants;
(j) violate the Minimum Set-Aside Test or the Rent Restriction Test for the
Apartment Housing;
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(k) allow the Insurance to expire;
(l) permit the Apartment Housing to be without utility service;
(m) cause any recapture of the Tax Credits;
(n) 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;
(o) commingle funds of the Partnership with the funds of another Person;
(p) fail to cause the Partnership to make the Mortgage 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;
(q) fail to cause the Accountant to issue the reports specified in Sections
14.2(a) and (b) of this Agreement;
(r) 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;
(s) allow the Real Estate Taxes to be unpaid;
(t) pay any real estate commission for the sale or refinancing of the
Apartment Housing;
(u) take any action that would cause a termination of the Partnership;
(v) encumber the Apartment Housing, except as provided herein;
(w) execute an assignment for the benefit of creditors;
(x) permit the Partnership to make loans to any Person; or
(y) violate any agreement between the Partnership and the State Tax Credit
Agency.
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) or otherwise dispose of the Apartment Housing;
(b) incur indebtedness in the name of the Partnership other than the
Construction Loan and Mortgage or other debt contemplated by this Agreement
(e.g., deferred Development Fee); including, but not limited to, refinancing,
prepaying, or modifying the Construction Loan or Mortgage;
34
(c) use Partnership assets, property or Improvements to secure the debt of
any Partners, their Affiliates, or any third party;
(d) engage in any transaction related to the Apartment Housing or the
Partnership and 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) operate the Apartment Housing in a manner that would cause the Limited
Partner to fail to obtain the Projected Tax Credits;
(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, or sell or dispose of all or substantially
all of the Partnership's assets;
(j) cause or permit the Partnership to 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 or any other indebtedness of the Partnership or any Person other than
loans made by the General Partner that are contemplated by this Agreement;
(l) loan any money on behalf of the Partnership or pay any salary, fees or
other compensation to a General Partner or any Affiliate thereof, except as
authorized by Section 9.2 and Section 9.9 hereof or specifically provided for in
this Agreement;
(m) substitute 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) change the nature of the business of the Partnership or 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;
35
(q) bring or defend, pay, collect, compromise, arbitrate, resort to legal
action or otherwise adjust claims or demands of or against the Partnership;
(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;
(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; provided, however, that commercially reasonable tenant screening fees
may be paid to an Affiliate of the Management Agent;
(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) 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; or
(v) make, amend or revoke any tax election.
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 articles, 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;
(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
36
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 becomes due or expires, the Insurance premium and
utilities for the Apartment Housing (other than utilities for which the tenants
are responsible);
(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 becomes due, the Mortgage
payment subject to available funds, including funds provided under Section 6.3
or Section 6.4;
(o) pay, before the same becomes due, the Real Estate Taxes;
(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. 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
37
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) perform such other acts as may be expressly required of it under the
terms of this Agreement;
(s) from the date of this Agreement through Completion of Construction, the
General Partner shall retain the services of Guardian Affordable Housing
Management LLC, which shall be responsible for overseeing the development and
construction of the Improvements and for obtaining Completion of Construction;
(t) maintain the initial tenant files, as may be corrected by the
Management Agent following the third party review, in a clean, dry, fireproof
location for a minimum period of 21 years;
(u) abide by State law governing the operations of limited liability
companies; and
(v) cause at least 50% of the aggregate basis of the land and buildings
comprising the Apartment Housing for purposes of Code Section 42(h)(4) to be
financed with the proceeds of the Tax-Exempt Bonds.
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 unless otherwise provided in this Agreement. Reimbursements
to the General Partner, or any of its Affiliates, by the Partnership shall be
allowed as provided herein. 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 with
the Act, or in accordance with this Agreement, 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, Partnership expenses shall include fees paid by the Partnership to the
38
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 reasonable and
comparable to 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, provided that such cost
must be reasonable and comparable to the amount which would be charged by
nonaffiliated Persons for comparable goods and services.
(b) Reimbursement to the General Partner or any of its Affiliates of
operating cash expenses pursuant to Subsection (a) hereof shall be subject to
the following:
(1) no such reimbursement shall be permitted for services for which
the General Partner or any of its Affiliates is entitled to compensation by
way of a separate fee; and
(2) no such reimbursement shall be made for (A) rent or depreciation,
utilities, capital equipment or other such administrative items, and (B)
salaries, fringe benefits, travel expenses and other administrative items
incurred or allocated to any "controlling person" of the General Partner or
any Affiliate of the General Partner. For the purposes of this Section
9.9(b)(2), "controlling person" includes, but is not limited to, any
Person, however titled, who performs functions for the General Partner or
any Affiliate of the General Partner similar to those of: (i) chairman or
member of the board of directors; (ii) executive management, such as
president, vice president or senior vice president, corporate secretary or
treasurer; (iii) senior management, such as the vice president of an
operating division who reports directly to executive management; or (iv)
those holding 5% or more equity interest in such General Partner or any
such Affiliate of the General Partner or a person having the power to
direct or cause the direction of such General Partner or any such Affiliate
of the General Partner, whether through the ownership of voting securities,
by contract or otherwise.
Section 9.10 General Partner Expenses.
The General Partner or Affiliates of the General Partner shall pay all
Partnership expenses which are not permitted to be reimbursed pursuant to
Section 9.9 and all expenses which are unrelated to the business of the
Partnership.
Section 9.11 Other Business of Partners.
Any Partner may engage independently or with others in other business
ventures wholly unrelated to the Partnership business of every nature and
description, including, without limitation, the acquisition, development,
construction, operation, and management of real estate projects and developments
of every type on their own behalf or on behalf of other partnerships, companies,
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
39
therefrom. Conversely, no Person shall have any rights to Partnership assets,
incomes or proceeds by virtue of such other ventures or activities of any
Partner.
Section 9.12 Covenants, Representations and Warranties.
The General Partner covenants, represents and warrants that the following
are presently true, will be true at the time of each Capital Contribution
payment made by the Limited Partner and will be true during the term of this
Agreement, to the extent then applicable.
(a) The Partnership is a duly organized limited partnership validly
existing under the laws of the State and has complied with all filing
requirements necessary for the protection of the limited liability of the
Limited Partner and the Special Limited Partner.
(b) The Partnership Agreement and the Project Documents are in full force
and effect and neither the Partnership nor the General Partner is in breach or
violation of any provisions thereof.
(c) Improvements will be completed in a timely and worker-like 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) All conditions to the funding of the Construction Loan have been met.
(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.
(j) The Partnership has Insurance written by an Insurance Company.
(k) The Partnership owns the fee simple interest in the Apartment Housing.
40
(l) The Construction Contract has been entered into between the Partnership
and the Contractor; no other consideration or fee shall be paid to the
Contractor other than amounts set forth in the Construction Contract.
(m) The Partnership will require the Accountant to depreciate 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) 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. Except
for routine cleaning and maintenance supplies, 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 will 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 of the provisions
of this Agreement.
(p) The Partnership will allocate to the Limited Partner the Projected
Annual Tax Credits, or the Revised Projected Tax Credits, if applicable.
(q) No charges, liens or encumbrances exist with respect to the Apartment
Housing other than those which are created or permitted by the Project Documents
or Mortgage or are noted or excepted in the Title Policy.
(r) The Partnership shall retain the Construction Inspector and ensure that
its 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.
41
(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 31st of the first year in which the Partners
elect the LIHTC to commence in accordance with the Code, the Apartment Housing
will satisfy the Minimum Set-Aside Test.
(t) All accounts of the Partnership required to be maintained under the
terms of the Project Documents, including, without limitation, any reserves in
accordance with Article VIII hereof, are currently funded to required levels,
including levels required by any 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 or
other loans made by the General Partner that are contemplated by this Agreement,
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 Construction of the
Improvements in substantial conformity with the Project Documents, other than
legal proceedings which have been bonded against (or as to which other adequate
financial security has been issued) in a manner as to indemnify the Partnership
against loss.
(y) Neither the Partnership nor the General Partner has any liabilities,
contingent or otherwise, which have not been disclosed in writing to the Limited
Partner and the Special Limited Partner and which in the aggregate affect the
ability of the Limited Partner to obtain the anticipated benefits of its
investment in the Partnership.
(z) Upon signing of the Construction Loan and receipt of the Construction
Lender's written start order, the Partnership will cause construction of the
42
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) The General Partner has contacted the local tax assessor, or similar
representative, and has determined that the Real Estate Taxes are accurate and
correct, and that the Partnership will not be required to pay any more for real
estate taxes, or property taxes, than the amount of Real Estate Taxes,
referenced in this Agreement, except for annual increases imposed on all real
estate within the same county as the Apartment Housing. In the event the actual
real estate taxes, or property taxes, are greater than the Real Estate Taxes
specified in this Agreement and as a result of the higher real estate tax, or
property tax, the Debt Service Coverage falls below 1.15 then the General
Partner will contribute additional capital to lower the principal of the
mortgage and reamortize the Mortgage so that the Debt Service Coverage is at a
sustainable 1.15, as approved by the Special Limited Partner. If the Mortgage
lender will not or cannot reamortize the loan as specified in this Section, and
the General Partner cannot obtain another mortgage, then the General Partner
will contribute additional capital as determined by the Special Limited Partner
to the T & I Account in an amount equal to the annual difference between the
actual real estate tax, or property tax, over the Real Estate Taxes specified in
this Agreement times the number of years remaining on the 15-year LIHTC
compliance term. Any payment by the General Partner pursuant to this section
shall be in addition to the General Partner's obligation to fund Operating
Deficits.
(bb) The Partnership will maintain a Debt Service Coverage of not less than
1.15 and will not close on a permanent loan or refinance a Mortgage loan if the
Debt Service Coverage would fall below 1.15.
(cc) The General Partner and the Guarantor have and shall maintain an
aggregate net worth equal to at least $20,000,000.
(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) 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.
(ff) The General Partner covenants that, within 30 days of the date of this
Agreement, it shall deliver to the Special Limited Partner: (i) evidence
satisfactory to the Special Limited Partner that the Developer is qualified to
do business in the State; and (ii) a survey meeting the requirements of Exhibit
I to this Agreement and dated not more than 30 days prior to the date of this
Agreement, in form and substance satisfactory to the Special Limited Partner in
its reasonable discretion.
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
43
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.
ARTICLE X.
ALLOCATIONS OF INCOME, LOSSES AND CREDITS
Section 10.1 General.
All items includable in the calculation of Income or Loss not arising from
a Sale or Refinancing, and all Tax Credits, shall be allocated 99.98% to the
Limited Partner, 0.01% to the Special Limited Partner and 0.01% to the General
Partner.
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 Section
10.2(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 includable in the calculation of Income or Loss not arising from a Sale or
Refinancing, would create or increase an Adjusted Capital Account Deficit for
the Limited Partner or the Special Limited Partner, respectively, then so much
of the items of deduction other than projected depreciation shall be allocated
to the General Partner instead of the Limited Partner or the Special Limited
Partner as is necessary to allow the Limited Partner or the Special Limited
Partner to be allocated 99.98% and 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
44
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.
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
45
Partner is obligated to restore, and (ii) the amount such Partner is deemed to
be obligated to restore pursuant to the penultimate sentences of Treasury
Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), each such Partner shall be
specially allocated items of Partnership income and gain in the amount of such
excess as quickly as possible, provided that an allocation pursuant to this
Section 10.3(d) shall be made if and only to the extent that such Partner would
have a deficit Capital Account in excess of such sum after all other allocations
provided for in this Section 10.3 have been tentatively made as if this Section
10.3(d) and Section 10.3(c) hereof were not in the Agreement.
(e) Nonrecourse Deductions for any fiscal year shall be specially allocated
99.98% to the Limited Partner, 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 1271 through 1288 of
the Code:
(1) such interest income shall be specially allocated to the Limited
Partner to whom such promissory note relates; and
(2) the amount of such interest income shall be excluded from the
Capital Contributions credited to such Partner's Capital Account in
connection with payments of principal with respect to such promissory note.
(i) To the extent the Partnership has taxable interest income with respect
to deposits of Capital Contribution payments or proceeds of the bonds financing
the Construction Loan, 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.
46
(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
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.
(q) In the event that the Partnership reports taxable income attributable
to any period prior to the Completion Date, there shall be a special allocation
of gross income to the General Partner in an amount equal to the amount of such
taxable income.
(r) The Partners agree that the Capital Account of the General Partner
shall be increased by $983,400 (the "Book-Up Amount") to take into account the
difference between the basis of the Apartment Housing for federal income tax
purposes and the Fair Market Value of the Apartment Housing pursuant to Section
704(c) of the Code.
Section 10.4 Curative Allocations.
The allocations set forth in Section 10.2(c), Section 10.3(a), Section
10.3(b), Section 10.3(c), Section 10.3(d), Section 10.3(e), Section 10.3(f), and
Section 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
47
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 Section 10.1 and
Section 10.2(a), Section 10.2(b), Section 10.3(h), Section 10.3(i), Section
10.3(j), Section 10.3(k), Section 10.3(l), Section 10.3(m) and Section 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 Section
10.3(b) that, although not yet made, are likely to offset other Regulatory
Allocations previously made under Section 10.3(e) and Section 10.3(f).
Section 10.5 Other Allocation Rules.
(a) The basis (or cost) of any Partnership investment tax credit property
shall be allocated among the Partners in accordance with Treasury Regulations
Section 1.46-3(f)(2)(i). All Tax Credits (other than the investment tax credit)
shall be allocated among the Partners in accordance with applicable law.
Consistent with the foregoing, the Partners intend that LIHTC will be allocated
99.98% to the Limited Partner, 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 Section 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
48
been made from the proceeds of a Nonrecourse Liability or a Partner Nonrecourse
Debt only to the extent that such Distributions would cause or increase an
Adjusted Capital Account Deficit for any Partner who is not a General Partner.
(f) In the event that the deduction of all or a portion of any fee paid or
incurred out of Net Operating Income by the Partnership to a Partner or an
Affiliate of a Partner is disallowed for federal income tax purposes by the
Internal Revenue Service with respect to a taxable year of the Partnership, the
Partnership shall then allocate to such Partner an amount of gross income of the
Partnership for such year equal to the amount of such fee as to which the
deduction is disallowed.
Section 10.6 Tax Allocations: Code Section 704(c).
In accordance with Code Section 704(c) and the Treasury Regulations
thereunder, income, gain, loss, and deduction with respect to any property
contributed to the capital of the Partnership shall, solely for tax purposes, be
allocated among the Partners so as to take account of any variation between the
adjusted basis of such property to the Partnership for federal income tax
purposes and its initial Gross Asset Value.
In the event the Gross Asset Value of any Partnership asset is adjusted,
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.
49
Section 10.9 Modification of Allocations.
The provisions of Article X and Article 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 that it
is prudent to modify the manner in which the Capital Accounts of the Partners,
or any debit or credit thereto, are computed in order to comply with such
section of the Treasury Regulations, the General Partner may make such
modification, but only with the Consent of the Special Limited Partner, to the
minimum extent necessary, to effect the plan of allocations and Distributions
provided for elsewhere in this Agreement. Further, the General Partner shall
make any appropriate modifications, but only with the Consent of the Special
Limited Partner, in the event it appears that unanticipated events (e.g., the
existence of a Partnership election pursuant to Code Section 754) might
otherwise cause this Agreement not to comply with Treasury Regulation Section
1.704.
ARTICLE XI.
DISTRIBUTION
Section 11.1 Distribution of Net Operating Income.
Except as otherwise provided in this Agreement, and subject to any
applicable restrictions on distributions imposed by HUD, Net Operating Income
for each fiscal year shall be distributed within 75 days following each calendar
year and shall be applied in the following order of priority:
(a) to pay the current Asset Management Fee and then to pay any accrued
Asset Management Fees which have not been paid in full from previous years;
(b) to pay the principal and then interest on the Development Fee, not to
exceed the amount set forth in the Amended and Restated Development Fee
Agreement;
(c) to pay amounts due and owing on the ▇▇▇▇▇▇ Bridge Loan, and the
Guardian Management Loan, limited to 50% of the Net Operating Income remaining
after reduction for the payments made pursuant to subsections (a) and (b) of
this Section 11.1;
(d) to pay the General Partner a return of the General Partner's Capital
Account, until the General Partner has received an amount that is, in the
aggregate, equal to the Book-Up Amount;
(e) to pay the Operating Loans, if any, as referenced in Section 6.3 of
this Agreement, limited to 50% of the Net Operating Income remaining after
reduction for the payments made pursuant to subsections (a) through (d) of this
Section 11.1;
(f) to pay the Incentive Management Fee;
(g) to pay the Tax Credit Compliance Fee;
50
(h) of the balance, 50% shall be paid to the Limited Partner, 0.01% shall
be paid to the Special Limited Partner, and 49.99% shall be paid to the General
Partner.
Section 11.2 Distribution of Sale or Refinancing Proceeds.
Sale or Refinancing Proceeds shall be distributed in the following order:
(a) to the payment of the Mortgage and other matured debts and liabilities
of the Partnership, other than accrued payments, debts or other liabilities
owing to Partners or former Partners;
(b) to any accrued payments, debts or other liabilities owing to the
Partners, former Partners, or their Affiliates, including, but not limited to,
accrued Asset Management Fees, the ▇▇▇▇▇▇ Bridge Loan, the Guardian Management
Loan, and Operating Loans, to be paid pro rata (based on outstanding principal
and accrued and unpaid interest) 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 payment of any unreturned portion of the Book-Up Amount; and
(e) thereafter, 10.00% to the Limited Partner, 0.01% to the Special Limited
Partner and 89.99% to the General Partner, provided that the amount distributed
to the Limited Partner pursuant to this paragraph shall not 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.
ARTICLE XII.
TRANSFERS OF LIMITED PARTNER'S AND SPECIAL LIMITED PARTNER'S
INTERESTS 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
51
(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 U. S. Bank
National Association or its successors as collateral to secure a capital
contribution loan without satisfying the conditions of Section 12.1(a) and
Section 12.1(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 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
52
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.
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
designate 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 one or all of the General Partners for cause if any General Partner
has, or a member of such General Partner has, if applicable, or the Partnership
has:
(1) been subject to Bankruptcy;
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(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 barred 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
Mortgage Lender to issue a letter regarding the violation;
(7) failed to provide any loan, advance, Capital Contribution or any
other payment as 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(d) 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 Construction Loan and such violation
prompts the Construction Lender to issue a letter regarding such violation;
(13) failed to keep the Development Budget In-Balance;
(14) failed to obtain the consent of a Partner where such consent is
required pursuant to this Agreement;
(15) failed to deliver the annual Partnership financial data as
required pursuant to Section 14.2(a) or Section 14.2(b).
(16) failed to maintain the reserve balances as required pursuant to
Article VIII;
(17) failed to place the Apartment Housing in service by within 6
months of the Completion Date;
(18) failed to achieve 100% occupancy of the Apartment Housing by
November 1, 2006;
(19) failed to obtain Permanent Mortgage Commencement by November 1,
2006;
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(20) failed to renew the Insurance on or before the due date;
(21) failed to pay the Real Estate Taxes on or before the due date;
(22) failed during any consecutive 6-month period during the
Compliance Period to rent 85% or more of the total apartment units in the
Apartment Housing to Qualified Tenants; notwithstanding the foregoing, if
such failure is the result of Force Majeure or if such failure is cured
within 120 days after the end of the 6-month period, then this removal
provision shall not apply;
(23) failed to finance at least 50% of the aggregate basis of the land
and buildings comprising the Apartment Housing with the Tax-Exempt Bonds,
as provided in Code Section 42(h)(6);
(24) defaulted under the Construction Completion, Operating Deficit,
and Tax Credit Guaranty Agreement or the Development Fee Guaranty
Agreement; or
(25) failed to obtain the cooperation of the Management Agent pursuant
to Section 14.3(k).
(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 30 days
from receipt of the Removal Notice in which to cure the removal condition;
except that in regard to violations of the Mortgage or Construction Loan the
cure period shall be the sooner of 30 days or 10 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 30-day cure period then the
General Partner's removal shall become effective upon approval of a majority of
the Partners' Interests (Interest percentage for voting is in accordance with
the percentages shown in Section 10.1 of this Agreement) at a Partners' meeting
held in accordance with Section 17.2 of this Agreement. If the removal for cause
is for a condition referenced in Section 13.2(a)(1), (3), (4), (5), (9), (11),
(14), (17), (18), (19), (20) or (23) then the removal shall become effective
upon approval of a majority of the Partners' Interests (Interest percentage for
voting is in accordance with the percentages shown in Section 10.1 of this
Agreement) at a Partners' 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 5 business days of the Partners' 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 Partners 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
55
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, if the removed
General Partner or its Affiliate is the guarantor of the Development Fee, as
provided in the Development Fee Guaranty Agreement, any earned but unpaid
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
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 in 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 withdrawal.
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(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 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 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 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 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 in the Development Fee Guaranty Agreement, then any earned but unpaid
Development Fee shall be due and payable upon the effective date of such removal
and shall be deemed paid by the General Partner.
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
57
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 General Partner if the Withdrawing
General Partner was previously the General Partner). In order to effectuate the
provisions of this Section 13.4 and the continuance of the Partnership, the
Withdrawal of a General Partner shall not be effective until the expiration of
120 days from the date on which occurred the event giving rise to the
Withdrawal, unless the Special Limited Partner shall have elected to become a
successor General Partner as provided herein prior to expiration of such 120-day
period, whereupon the Withdrawal of the General Partner shall be deemed
effective upon the notification of all the other Partners by the Special Limited
Partner of such election.
Section 13.5 Admission of Additional or Successor General Partner.
No Person shall be admitted as an additional or successor General Partner
unless (a) such Person shall have agreed to become a General Partner by a
written instrument which shall include the acceptance and adoption of this
Agreement; (b) the Consent of the Special Limited Partner to the admission of
such Person as a substitute General Partner shall have been granted, 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
effect the admission of such Person as a substitute General Partner. If the
foregoing conditions are satisfied, this Agreement shall be amended in
accordance with the provisions of the Act, and all other steps shall be taken
which are reasonably necessary to effect the Withdrawal of the Withdrawing
General Partner and the substitution of the successor General Partner. Nothing
contained herein shall reduce the Limited Partner's Interest or the Special
Limited Partner's Interest in the Partnership.
Section 13.6 Transfer of Interest.
Except as otherwise provided herein, the General Partner may not Withdraw
from the Partnership, or enter into any agreement as the result of which any
Person shall acquire an Interest in the Partnership, without the Consent of the
Special Limited Partner.
Section 13.7 No Goodwill Value.
At no time during continuation of the Partnership shall any value ever be
placed on the Partnership name, or the right to its use, or to the goodwill
appertaining to the Partnership or its business, either as among the Partners or
for the purpose of determining the value of any Interest, nor shall the legal
representatives of any Partner have any right to claim any such value. In the
event of a termination and dissolution of the Partnership as provided in this
Agreement, neither the Partnership name, nor the right to its use, nor the same
goodwill, if any, shall be considered as an asset of the Partnership, and no
valuation shall be put thereon for the purpose of liquidation or distribution,
or for any other purpose whatsoever.
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ARTICLE XIV.
BOOKS AND ACCOUNTS, REPORTS,
TAX RETURNS, FISCAL YEAR AND BANKING
Section 14.1 Books and Accounts.
(a) The General Partner shall cause the Partnership to keep and maintain at
its principal executive office full and complete books and records that 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
amendments 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 6 most recent taxable
years;
(4) copies of the original of this Agreement and all amendments
thereto;
(5) financial statements of the Partnership for the 6 most recent
fiscal years;
(6) the Partnership's books and records for at least the current and
past 3 fiscal years; and
(7) in regard to the first tenants to occupy the apartment units in
the Apartment Housing, copies of all tenant files including completed
applications, completed questionnaires or checklist of income and assets,
documentation of third party verification of income and assets, and income
certification forms (LIHTC specific).
(b) Upon the request of the Limited Partner, the General Partner shall
promptly deliver to the Limited Partner, at the expense of the Partnership, a
copy of the information set forth in Section 14.1(a) above. The Limited Partner
shall have the right upon reasonable request and during normal business hours to
inspect and copy any of the foregoing, or any of the other books and records of
the Partnership or the Apartment Housing, at its own expense.
Section 14.2 Accounting Reports.
(a) By February 20 of each calendar year the General Partner shall provide
to the Limited Partner and the Special Limited Partner the Partnership tax
return, Schedule K-1, and 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. 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 10 days prior to the above referenced due date.
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(b) By March 1 of each calendar year, including the year(s) during
construction 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, which shall include, but is not 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 the 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 10 days prior to the above referenced
due date.
(c) Within 60 days after the end of each fiscal quarter in which a Sale or
Refinancing of the Apartment Housing occurs, the General Partner shall send to
the Limited Partner and the Special Limited Partner a report as to the nature of
the Sale or Refinancing and as to the Income and Losses for tax purposes and
proceeds arising from the Sale or Refinancing.
Section 14.3 Other Reports.
The General Partner shall provide to the Limited Partner and the Special
Limited Partner the following reports:
(a) during construction, on a regular basis, but in no event less than once
a month, a copy of the Construction Inspector's report and other construction
reports including, but not limited to, (1) the name of each person performing
work on the Improvements or providing materials for the Improvements, 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 Construction Inspector's report or 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 break down 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;
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and (7) any other document reasonably 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 later of the end of
the first 6-month period during which the Apartment Housing has a sustained
occupancy of 95% or better, and the Special Limited Partner's approval of the
initial tenant files, including any recommended corrections, by the 20th day of
each month within such period a copy of the previous month's rent roll (through
the last day of the month), 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
statement, 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 25th of each year for the first
quarter, July 25th of each year for the second quarter, October 25th of each
year for the third quarter and January 25th 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
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 25th of each year for the first quarter of
operations, July 25th of each year for the second quarter of operations, October
25th of each year for the third quarter of operations and January 25th of each
year for the fourth quarter of operations that shall include, but not be limited
to, a copy of the Partnership's bank statement showing all operating accounts
and reserve accounts required to be maintained pursuant to Article 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 15th of each year, an estimate of LIHTC and taxable income
and loss to be allocated to the Limited Partner for that year;
(f) 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, state or local authorities including, but not limited to,
copies of all annual tenant recertifications required under Section 42 of the
Code, the annual owner's sworn statement, and the State Tax Credit Agency
Compliance (or annual) report;
(g) 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;
(h) by the payment date of the Real Estate Taxes each and every year
verification that the same has been paid in full;
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(i) on or before March 15th of each calendar year, a copy of the General
Partner's updated financial statement as of December 31st of the previous year;
(j) on or before November 1st of each calendar year, a copy of the
following year's proposed operating budget. Each such Budget shall contain all
the anticipated Cash Receipts and 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; and
(k) in the event the Apartment Housing and/or the Partnership is
experiencing financial concerns or operational concerns or maintenance issues
and the Partnership is placed on the Limited Partner's watch list, then the
General Partner shall cause the Management Agent to cooperate with the Special
Limited Partner's staff as requested including, but not limited to, the
following: (1) being available and responsive for site visits, telephone calls
and correspondence (whether by e-mail, fax, mail, or overnight delivery); (2)
providing weekly tenant traffic reports; (3) providing weekly unit or building
or grounds repair reports, (4) providing an up-to-date income statement,
up-to-date balance sheet, copy of previous month's rent roll, and a copy of the
Partnership's monthly bank statement; and (5) providing any other documents
deemed relevant by the Special Limited Partner. In addition, the Limited
Partner's investors have the right to ask questions of the Management Agent in
accordance with this Section if the Partnership is placed on the Limited
Partner's watch list;
(l) copies of any notice of default received by the General Partner
regarding any Project Document; and
(m) 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 10 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 within the time periods set forth therein, the General Partner, using its
own funds, shall pay as damages 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 does not
fulfill its obligations under Section 14.3 within the time periods set forth
therein, the General Partner, using its own funds, shall pay as damages the sum
of $100 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.
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Section 14.5 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. In addition, the
Limited Partner's investors have the right, at the Limited Partner's expense,
and upon reasonable notice, to conduce a site visit in accordance with this
Section.
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. 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
same the name and address of the financial institution, the account number and
other relevant information regarding any Partnership bank account.
Section 14.9 Certificates and Elections.
(a) The General Partner shall file the First Year Certificate within 90
days following the close of the taxable year during which Completion of
Construction occurs and thereafter shall timely file any certificates which the
Partnership must furnish to federal or state governmental authorities
administering the Tax Credit programs under Section 42 of the Code.
(b) The General Partner, with the Consent of the Special Limited Partner,
may, but is not required to, cause the Partnership to make or revoke the
election referred to in Section 754 of the Code, as amended, or any similar
provisions enacted in lieu thereof.
ARTICLE XV.
DISSOLUTION, WINDING UP, TERMINATION
AND LIQUIDATION OF THE PARTNERSHIP
Section 15.1 Dissolution of Partnership.
The Partnership shall be dissolved upon the expiration of its term or the
earlier occurrence of any of the following events.
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(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, in no event shall the Partnership terminate
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 Section 7.3 and Section 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 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.
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 Section 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) [Reserved.]
(c) With respect to assets distributed in kind to the Partners in
liquidation or otherwise:
(1) unrealized appreciation or unrealized loss in value 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
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(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 loss in value" 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.
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 Section
15.3 and Section 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 Oregon, 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
65
prescribed by, the Secretary of State of Oregon a certificate of cancellation of
the Certificate of Limited Partnership. The certificate of cancellation of the
Certificate of Limited Partnership shall set forth the Partnership's name, the
Secretary of State's file number for the Partnership, and any other information
which the General Partner determines to include therein.
ARTICLE XVI.
AMENDMENTS
This Agreement may be amended by a majority consent of the Interests 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. Any Amendment to this Agreement
that would decrease the rights or increase the obligations of the General
Partner hereunder requires the unanimous consent of the Partners.
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, the Limited Partner's and the Special Limited Partner's vote is
required:
(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 prior to
such refinancing; or
(7) on any other matter requiring the consent or vote of the Limited
Partner or the Special Limited Partner in this Agreement.
(b) On any matter where the Limited Partner has the right to vote, votes
may be cast at a duly called meeting of the Partnership or through written
action without a meeting.
66
(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) by the General
Partner; (b) by the Limited Partner, or (c) by 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.
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: ▇▇▇▇▇▇ Guardian LLC
▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇▇▇▇
To the Limited Partner: WNC Housing Tax Credit Fund VI
Series 13, L.P.
c/o WNC & Associates, Inc.
▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
To the Special Limited Partner: WNC Housing, L.P.
▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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.
67
Section 17.5 [Reserved.]
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, if necessary:
(1) a change in the name of the Partnership;
(2) a change in the street address of the Partnership's principal
executive office;
(3) a change in the address, or the Withdrawal, of a General Partner,
or a change in the address of the agent for service of process, or
appointment of a new agent for service of process;
(4) the admission of a General Partner and that Partner's address; 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 Oregon. 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.
68
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 Partner, such provisions shall be void and ineffectual.
Section 17.11 Tax Matters Partner.
All the Partners hereby agree that the General Partner shall be the "Tax
Matters Partner" pursuant to the Code and in connection with any 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.
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.
(a) 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.
(b) 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.
(c) 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.
69
(d) Nothing herein shall be construed as a waiver by the Limited Partner of
any of its rights under Chapter 63 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; Option to Acquire.
(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
beginning 24 months after the end 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 1 year from the date of such written request a purchaser for the
Apartment Housing who will continue to operate the Apartment Housing as a
qualified low-income property, at a purchase price that is not less than the
minimum amount set forth in Section 42(h)(6) of the Code (or any successor
provision). In the event that the State Tax Credit Agency obtains an offer
satisfying the conditions of the preceding sentence, the General Partner shall
promptly notify the Special Limited Partner in writing with respect to the terms
and conditions of such offer, and, if the Special Limited Partner notifies the
General Partner that such offer should be accepted, the General Partner shall
cause the Partnership promptly to accept such offer and to proceed to sell the
Apartment Housing pursuant to such offer.
(b) Notwithstanding any other provision of this Agreement to the contrary,
the Special Limited Partner shall have the right at any time beginning 24 months
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 6 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, for 6 months 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.
(d) Option to Acquire. Notwithstanding the provisions of Sections 17.12(a)
and (b) above, after the conclusion of the initial term of the Mortgage Loan,
the General Partner may give notice (the "General Partner Notice") to the
Special Limited Partner and the Limited Partner that it desires to purchase the
70
entire Interests of each of the Special Limited Partner and the Limited Partner
in the Partnership. Upon the Special Limited Partner's and the Limited Partner's
receipt of the General Partner Notice, the following events shall occur:
(1) The purchase price of the Interests shall be the greater of (i)
the aggregate of the Fair Market Value of the Interest of the Limited
Partner and the Fair Market Value of the Interest of the Special Limited
Partner or (ii) the "Tax Amount" as hereinafter defined.
(2) The Limited Partner and the Special Limited Partner shall
negotiate with the General Partner for a period of 30 days after the
General Partner Notice is received to agree upon the Fair Market Value of
their respective Interests. In the event an agreement is not reached within
such 30-day period, then the General Partner or the Special Limited Partner
may request that the Fair Market Value be determined in accordance with the
process set forth below by sending notice (the "Appraisal Notice") of same
to the other party within 15 days of the expiration of the 30-day period.
If an Appraisal Notice is not sent by either party within such 15-day
period, then the General Partner's option shall expire.
(3) If the respective Fair Market Value of the Interests of the
Special Limited Partner and the Limited Partner are not agreed upon as
provided above and either the General Partner or the Special Limited
Partner issues to the other Person an Appraisal Notice, then the Fair
Market Value of such Interests shall be determined by an appraisal. The
appraisal shall be conducted by an independent appraiser satisfactory to
the General Partner and the Special Limited Partner or, in the event that a
single independent appraiser cannot be agreed upon within 30 days following
the date of the Appraisal Notice, the General Partner and the Special
Limited Partner shall each select an independent appraiser and the
appraisers so selected shall select a third independent appraiser. All
appraisers so designated shall be experienced in accounting, business or
real estate appraisal. The appraiser or appraisers shall determine the Fair
Market Value of the Interest of each of the Special Limited Partner and the
Limited Partner. The decision of the appraisers (if more than one) shall be
made by the majority of such appraisers. The appraiser or appraisers shall
render a written report setting forth the Fair Market Value of such
Interests, which decision shall be rendered as expeditiously as possible by
the appraiser or appraisers and which decision shall be final and binding
upon the parties. The reasonable fees and expenses of the appraiser or
appraisers shall be paid one-half by the General Partner and one-half by
the Limited Partner.
(4) The "Tax Amount" shall mean the dollar amount computed in the
following fashion: The Special Limited Partner and the Limited Partner
shall be deemed to have gain in an amount equal to the sum of (i) the
amount of cash to be paid pursuant to Section 17.12(d)(1)(i), and (ii) the
difference between their respective basis in the Apartment Housing and an
amount equal to the total forgiveness of debt which would be realized by
the Special Limited Partner and the Limited Partner computed as if the
Special Limited Partner and the Limited Partner abandoned their Interests
in the Partnership on the date of the General Partner Notice. The Tax
Amount shall equal the deemed gain as computed above multiplied by a tax
rate(s) applied to such gain. The tax rate shall be the highest corporate
rate stated in the Code applicable to the type of income (and if there is
more than one rate applicable because of more than one type of income, the
different rates shall be applied to the appropriate portions of such
income). The Limited Partner shall cooperate to expeditiously determine the
Tax Amount.
71
(5) Following determination of the purchase price, the General Partner
shall have 30 days thereafter to determine whether the General Partner will
purchase the Interests of the Special Limited Partner and the Limited
Partner at the purchase price so determined. The General Partner shall
exercise such right by written notice to the Special Limited Partner and
the Limited Partner within such 30-day period, and if such right is not so
exercised, the option shall lapse in its entirety.
(e) If the General Partner determines to proceed with the purchase, the
purchase price shall be paid in cash, within 60 days following the giving of the
notice required by Section 17.12(d)(5).
Section 17.13 Number and Gender.
All pronouns and any variations thereof shall be deemed to refer to the
masculine, feminine, neuter, singular or plural as the identity of the Person or
Persons may require.
Section 17.14 Entire Agreement.
This Agreement constitutes the entire understanding between the parties
with respect to the subject matter hereof and all prior understandings and
agreements between the parties, written or oral, respecting this transaction are
merged in this Agreement.
Section 17.15 Governing Law.
This Agreement and its application shall be governed by the laws of the
State.
Section 17.16 Attorney's Fees.
If a suit or action is instituted in connection with an alleged breach of
any provision of this Agreement, the prevailing party shall be entitled to
recover, in addition to costs, such sums as the court may adjudge reasonable as
attorney's fees, including fees on any appeal.
Section 17.17 Receipt of Correspondence.
The Partners agree that the General Partner shall send to the Limited
Partner and the Special Limited Partner within 5 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
General Partner may be subject under this Agreement, the Partnership shall have
(and each General Partner hereby grants to the Partnership) a security interest
in their respective Interests and in all funds distributable to said General
Partner to the extent of the amount of such obligation.
72
Section 17.19 Signage and Public Relations.
The General Partner shall allow the Special Limited Partner to place a
sign at the Apartment Housing during rehabilitation, which sign shall
include the following language: "Financing provided in part by WNC &
Associates, Inc." The cost of the sign shall be borne by the Limited
Partner. In any Apartment Housing-related web and print media, and in any
verbal remarks made in public about the Apartment Housing, the General
Partner shall acknowledge the contributions of the Limited Partner. The
General Partner shall invite representatives of the Limited Partner to
participate in public relations opportunities including, but not limited
to, speaking at ground-breaking and ribbon-cutting events. The General
Partner will provide the Limited Partner access to the Apartment Housing
for the purpose of preparing photographic and/or schematic images of the
Apartment Housing and access to such images prepared by the General Partner
and will allow the Limited Partner to use any such images for the Limited
Partner's or its Affiliates' marketing, including use on websites and in
brochures and other printed advertisements.
Section 17.20 Interim Closing of the Books.
For tax purposes, the Limited Partner and Special Limited Partner will
be treated as having acquired their Interest in the Partnership on August
1, 2006. Furthermore, the Partners agree that the change in ownership
pursuant to the admission of the Limited Partner and Special Limited
Partner will be accounted for pursuant to Code Section 706(d)(1) and the
Company will use the "interim-closing-of-the-books method" to allocate
income, loss, deduction, expenses and credits in 2006.
[Signatures begin on the following page.]
73
IN WITNESS WHEREOF, this Amended and Restated Agreement of Limited
Partnership of Pleasant Village Limited Partnership, an Oregon limited
partnership, is made and entered into as of the 30th day of August 2006.
GENERAL PARTNER:
▇▇▇▇▇▇ Guardian LLC
By: GM Low Income Housing Management, LLC, Manager
By: Guardian Management, LLC, Manager
By: Guardian Holding, Inc., Manager
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
President
WITHDRAWING LIMITED PARTNER:
▇▇▇▇▇▇ Bridge, L.L.C.
By: /s/ ▇▇▇ ▇▇▇▇▇▇
-------------------
▇▇▇ ▇▇▇▇▇▇
Manager
LIMITED PARTNER:
WNC Housing Tax Credit Fund VI Series 13, L.P.
By: WNC National Partners, LLC, general partner
By: WNC & Associates, Inc., managing member
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Executive Vice President
[Signatures continue on the next page.]
SPECIAL LIMITED PARTNER:
WNC Housing, L.P.
By: WNC & Associates, Inc., general partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Executive Vice President
EXHIBIT A
LEGAL DESCRIPTION
BEING all of ▇▇▇ ▇, ▇▇▇▇▇ ▇/▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Apartments, an addition to
the City of Dallas, Dallas County, Texas, according to the plat thereof recorded
in Volume 67131, Page 1115, Map Records, Dallas County, Texas, and being more
particularly described as follows:
BEGINNING at a found "X" cut in paving 30.00 feet East of the original center
line of ▇▇▇ ▇▇▇▇▇▇ Road (100 foot R.O.W.);
THENCE, North 01 degrees 28 minutes 00 seconds West a distance of 606.81 feet
parallel with and 30.00 feet East of the original center line of ▇▇▇ ▇▇▇▇▇▇ Road
(100 foot R.O.W.) to a found "X" cut in paving for corner;
THENCE North 89 degrees 55 minutes 00 seconds East a distance of 1256.88 feet
departing said ▇▇▇ ▇▇▇▇▇▇ Road (100 foot R.O.W.) to a point for corner in a
flowing creek;
THENCE South 18 degrees 35 minutes 00 seconds West a distance of 131.95 feet to
a point for corner in a flowing creek;
THENCE South 00 degrees 05 minutes 00 seconds East a distance of 481.00 feet to
a found iron pin for corner;
THENCE South 89 degrees 55 minutes 00 seconds West a distance of 1200.00 feet
along back to the PLACE OF BEGINNING and CONTAINING 16.86 acres (734,293 square
feet) of land, more or less.
Exhibit A
EXHIBIT B
FORM OF LEGAL OPINION
August __, 2006
WNC Housing Tax Credit Fund VI Series 13, L.P.
WNC Housing, L.P.
c/o WNC & Associates, Inc.
▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Re: Pleasant Village 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 Series 13,
L.P., a California limited partnership (the "Limited Partner"), and WNC Housing,
L.P., a California limited partnership (the "Special Limited Partner"), in
Pleasant Village Limited Partnership, an Oregon limited partnership (the
"Operating Partnership"), formed to own, develop, rehabilitate, finance and
operate an apartment complex for low-income persons (the "Apartment Housing") in
Dallas, Dallas County, Texas. The withdrawing limited partner of the Operating
Partnership is ▇▇▇▇▇▇ Bridge, L.L.C., a Louisiana limited liability company (the
"Withdrawing Limited Partner"). The general partner of the Operating Partnership
is ▇▇▇▇▇▇ Guardian LLC, an Oregon limited liability company (the "General
Partner"). The developer of the Apartment Housing is Guardian Affordable Housing
Development LLC (the "Developer"). The guarantor of certain obligations of the
General Partner are ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ and Guardian Management LLC
(the "Guarantor"). With respect to this opinion, we represent the Operating
Partnership, the General Partner, the Developer, Guardian Management, LLC, and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇.
In rendering the opinions stated below, we have examined and relied
upon the following:
(i) Certificate in Support of Legal Opinion re Guardian
Management LLC;
(ii) Certificate in Support of Legal Opinion re ▇▇▇▇▇▇
Guardian LLC;
(iii) Certificate in Support of Legal Opinion re Guardian
Holding, Inc.;
(iv) Certificate in Support of Legal Opinion re Guardian
Affordable Housing Development LLC;
(v) Amended and Restated Agreement of Limited Partnership for
the Operating Partnership (the "Partnership Agreement");
(vi) the Certification and Agreement entered into by the
Operating Partnership, the General Partner, the Withdrawing Limited Partner, the
Special Limited Partner, and WNC & Associates, Inc., attached as Exhibit C to
the Partnership Agreement and dated ____;
Exhibit B
(vii) the Amended and Restated Development Fee Agreement
entered into by the Developer and the Operating Partnership and dated _____,
(the "Development Agreement");
(viii) the Development Fee Guaranty Agreement, entered into by
the Guarantor and the Operating Partnership and dated _________;
(ix) the Development, Construction, and Operating Budget
Agreement, entered into by the General Partner, the Limited Partner, and the
Special Limited Partner and dated _________;
(x) the Construction Completion, Operating Deficit, and Tax
Credit Guaranty Agreement, entered into by the Guarantor, the Operating
Partnership, and the Limited Partner and dated _________;
(xi) the Construction Monitoring Agreement, entered into by
the Operating Partnership, the General Partner, U.S. Bank National Association,
and [Disbursement Agent Name] and dated _________;
(xii) the allocation letter from the Texas Department of
Housing and Community Affairs (the "State Housing Finance Agency") dated
_________, 200_;
(xiii) Memorandum re Litigation Search, prepared by ▇▇▇▇▇▇
▇▇▇▇ dated ___________; and
(xiv) such other documents, records and instruments as we have
deemed necessary in order to enable us to render the opinions referred to in
this letter.
For purposes of rendering the opinions stated below we have assumed
that, in those cases in which we have not been involved directly in the
preparation, execution or the filing of a document, (a) the document reviewed by
us is an original document, or a true and accurate copy of the original
document, and has not been subsequently amended, (b) the signatures on each
original document are genuine, and (c) each party, other than the Operating
Partnership, the General Partner, the Developer, Guardian Management, LLC, and
▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, who executed the document had proper authority and
capacity to do so.
Based on the foregoing, we are of the opinion that:
(a) ▇▇▇▇▇▇ Guardian LLC, the General Partner, is a limited liability
company duly formed and validly existing under the laws of the State of Oregon
and has full power and authority to enter into and perform its obligations under
the Partnership Agreement and the other agreements referenced above to which it
or the Operating Partnership is a party (the "Related Agreements").
(b) The Operating Partnership is a limited partnership duly formed and
validly existing under the laws of the State of Oregon and the Partnership
Agreement and the Related Agreements conform with Oregon law.
Exhibit B
(c) The Operating Partnership has full power and authority to own,
develop, rehabilitate, finance, and operate the Apartment Housing and to
otherwise conduct business under the Partnership Agreement and the Related
Agreements.
(d) Execution of the Partnership Agreement and the Related Agreements
by the General Partner and the Operating Partnership, as applicable, has been
duly and validly authorized by or on behalf of the General Partner and the
Partnership, as applicable, having been executed and delivered in accordance
with its terms, each of the Partnership Agreement and the Related Agreements
constitutes the valid and binding agreement of the General Partner and the
Operating Partnership, as applicable, enforceable in accordance with its terms.
(e) Based solely on the Certificate in Support of Legal Opinions re
referred to in (i) to (iv) above and our actual knowledge after due inquiry, the
execution and delivery of the Partnership Agreement and the Related Agreements
by the General Partner do not conflict with and will not result in a breach of
any of the terms, provisions or conditions of any agreement or instrument to
which any of the General Partner, the Operating Partnership, the Developer or
the Guarantor is a party or by which any of them may be bound, or any order,
rule, or regulation applicable to any of such parties of any court or
governmental body or administrative agency having jurisdiction over any of such
parties or over the property.
(f) Based solely on our actual knowledge and the Certificate in Support
of Legal Opinions re referred to in (i) to (iv) above, there is no litigation or
governmental proceeding pending or threatened against, or involving the
Apartment Housing, the Operating Partnership, or any General Partner, the
Guarantor, or the Developer except as disclosed in the Memorandum re Litigation
Search referred to in (xiii) above.
(g) The Limited Partner and the Special Limited Partner have been
admitted to the Operating Partnership as partners of the Operating Partnership
under Oregon law and are entitled to all of the rights of 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 Operating
Partnership, and all former partners of record or to which counsel has actual
knowledge have validly withdrawn from the Operating Partnership and have
released any claims against the Operating Partnership arising out of their
participation as partners therein.
(h) Liability of the Limited Partner and the Special Limited Partner
for obligations of the Operating Partnership is limited to the amount of their
capital contributions required by the Partnership Agreement.
(i) Except for the carve-out provisions included in the Mortgage for
certain acts, neither the General Partner of the Operating Partnership nor the
Limited Partner nor the Special Limited Partner has any liability for the
Mortgage (as such term is defined in the Partnership Agreement), and the lender
of the Mortgage Loan will look only to its security in the Apartment Housing for
repayment of the Mortgage Loan.
(j) Based solely on the title report, the Operating Partnership owns a
fee simple interest in the Apartment Housing.
Exhibit B
(k) Based solely on the Certificate in Support of Legal Opinions re
referred to in (i) to (iv) above and our actual knowledge, the Operating
Partnership, the General Partner, the Developer and the Guarantor have obtained
all consents, permissions, licenses, approvals, or orders required by all
applicable governmental or regulatory agencies for the development,
rehabilitation and operation of the Apartment Housing.
(l) [Intentionally Omitted]
(m) Guarantor Guardian Management LLC is duly organized and is validly
existing under the laws of the State of Oregon, is qualified to do business in
Texas, 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 under the laws of the State of Oregon, is qualified to do business in
Texas, 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).
Whenever the phrase "our actual knowledge" or any variation thereof is
used in this opinion, the subject modified by such phrase is limited to matters
within the present actual knowledge of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇▇, and ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇, the lawyers in this firm actively engaged in
the representation of the General Partner, Developer and Guarantor, and, solely
for purposes of paragraph (f) above, the person performing the searches used to
prepare the Memorandum re Litigation Search, shall mean only the conscious
awareness of facts or other information by such lawyers, and shall not include
any knowledge that may be imputed to such individuals by constructive notice or
other means or imply that any inquiry has been undertaken by such individuals
with respect to any of such matters except to the extent that facts and
circumstances presented to such individuals would compel a prudent lawyer to
make further inquiry when presented with the same facts and circumstances.
Exhibit B
The lawyer executing this opinion is a member of the Bar of the State
of Oregon and expresses no opinion as to 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.
For purposes of paragraph (e) above, the term "due inquiry" shall be
limited to discussions concerning the subject matter of paragraph (e) between
the lawyers executing this opinion and the principal(s) of the persons providing
the Certificates in Support of Legal Opinions referenced therein.
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.
Very truly yours,
▇▇▇▇▇▇ ▇▇▇▇ LLP
Exhibit B
EXHIBIT C
CERTIFICATION AND AGREEMENT
CERTIFICATION AND AGREEMENT made as of the date written below by
Pleasant Village Limited Partnership, an Oregon limited partnership (the
"Partnership"); ▇▇▇▇▇▇ Guardian LLC, an Oregon limited liability company (the
"General Partner"); and ▇▇▇▇▇▇ Bridge, L.L.C., a Louisiana limited liability
company (the "Withdrawing Limited Partner") for the benefit of WNC Housing Tax
Credit Fund VI Series 13, L.P., a California limited partnership (the "Limited
Partner"), and WNC & Associates, Inc., a California corporation ("WNC").
WHEREAS, the Partnership proposes to admit the Limited Partner as a
partner thereof pursuant to an Amended and Restated Agreement of Limited
Partnership of the Partnership (the "Partnership Agreement"), in accordance with
which the Limited Partner will make substantial capital contributions to the
Partnership; and
WHEREAS, the Limited Partner and WNC have relied upon certain
information and representations described herein in evaluating the merits of
investment by the Limited Partner in the Partnership;
NOW, THEREFORE, to induce the Limited Partner to enter into the
Partnership Agreement and become a Limited Partner of the Partnership, and for
$1.00 and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the Partnership, the General Partner and the
Withdrawing Limited Partner hereby agree as follows for the benefit of the
Limited Partner and WNC.
1. Representations, Warranties, and Covenants of the Partnership, the General
Partner, and the Withdrawing Limited Partner.
The Partnership, the General Partner, and the Withdrawing Limited
Partner jointly and severally represent, warrant, and certify to the Limited
Partner and WNC that, with respect to the Partnership, as of the date hereof:
1.1 The Partnership is duly organized and validly existing as a limited
partnership pursuant to the laws of the state of its formation with full power
and authority to own its apartment housing (the "Apartment Housing") and conduct
its business; the Partnership, the General Partner and the Withdrawing 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 Withdrawing
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 Withdrawing Limited Partner is bound or any law,
regulation, judgment, decree or order applicable to the Partnership or any
General Partner or Withdrawing Limited Partner or any of their respective
Exhibit C
properties; this Certification and Agreement constitutes the valid and binding
agreement of the Partnership, the General Partner and the Withdrawing Limited
Partner, enforceable against each of them in accordance with its terms.
1.2 The General Partner has delivered to the Limited Partner, WNC or
their affiliates all documents and information which would be material to a
prudent investor in deciding whether to invest in the Partnership. All factual
information provided to the Limited Partner, WNC or their affiliates either in
writing or orally, did not, at the time given, and does not, on the date hereof,
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances under which they are made.
1.3 Each of the representations and warranties contained in the
Partnership Agreement is true and correct as of the date hereof.
1.4 Each of the covenants and agreements of the Partnership and the
General Partner contained in the Partnership Agreement has been duly performed
to the extent that performance of any covenant or agreement is required on or
prior to the date hereof.
1.5 All conditions to admission of the Limited Partner as the Limited
Partner of the Partnership contained in the Partnership Agreement have been
satisfied.
1.6 No default has occurred and is continuing under the Partnership
Agreement or any of the Project Documents (as such term is defined in the
Partnership Agreement) for the Partnership.
1.7 The Partnership will allocate to the Limited Partner the Projected
Annual Tax Credits, or the Revised Projected Tax Credits, if applicable.
1.8 The General Partner agrees to take all actions necessary to claim
the Projected Tax Credit, including, without limitation, the filing of Form(s)
8609 with the Internal Revenue Service.
1.9 No person or entity other than the Partnership or leasehold tenants
holds any equity interest in the Apartment Housing.
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 Housing.
1.11 The Partnership, except to the extent it is protected by insurance
and excluding any risk borne by lenders and the Guarantor, bears the sole risk
of loss if the Apartment Housing is destroyed or condemned or there is a
diminution in the value of the Apartment Housing.
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 Housing.
Exhibit C
1.13 To the best knowledge of the General Partner, no General Partner
is related in any manner to the Limited Partner, nor is any General Partner
acting as an agent of the Limited Partner.
1.14 To the best knowledge of the General Partner, no event has
occurred which would have a material adverse change on the Limited Partner's
investment.
1.15 Except as described in the Partnership Agreement, no person is a
partner of or has any legal or equitable interest in the Operating Partnership,
and all former partners of record or known to counsel have validly withdrawn
from the Operating Partnership and have released any claims against the
Partnership arising out of their participation as partners therein.
1.16 There is no litigation or governmental proceeding pending or
threatened against, or involving the Apartment Housing, the Partnership, or any
General Partner, the Guarantor, or the Developer which would materially
adversely affect the condition (financial or otherwise) or business of the
Apartment Housing, the Partnership or any of the partners of the Partnership.
2. Miscellaneous.
2.1 This Certification and Agreement is made solely for the benefit of
the Limited Partner and WNC, and their respective successors and assignees, and
no other person shall acquire or have any right under or by virtue of this
Agreement.
2.2 This Certification and Agreement may be executed in several
counterparts, each of which shall be deemed to be an original, all of which
together shall constitute one and the same instrument.
2.3 Capitalized terms used but not defined in this Certification and
Agreement shall have the meanings given to them in the Partnership Agreement.
[Signatures begin on the following page.]
Exhibit C
IN WITNESS WHEREOF, this Certification and Agreement is made and
entered into as of the 30th day of August 2006.
PARTNERSHIP:
Pleasant Village Limited Partnership
By: ▇▇▇▇▇▇ Guardian LLC, General Partner
By: GM Low Income Housing Management, LLC, Manager
By: Guardian Management LLC, Manager
By: Guardian Holding, Inc., Manager
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
President
GENERAL PARTNER:
▇▇▇▇▇▇ Guardian LLC
By: GM Low Income Housing Management, LLC, Manager
By: Guardian Management LLC, Manager
By: Guardian Holding, Inc., Manager
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
President
[Signatures continued on the next page.]
Exhibit C
WITHDRAWING LIMITED PARTNER:
▇▇▇▇▇▇ Bridge, L.L.C.
By: /s/ ▇▇▇ ▇▇▇▇▇▇
--------------------------
▇▇▇ ▇▇▇▇▇▇
Manager
Exhibit C
EXHIBIT D
FORM OF COMPLETION CERTIFICATE
(to be used when rehabilitation completed)
COMPLETION CERTIFICATE
The undersigned, an construction inspector duly licensed and registered
in the State of Texas, has reviewed the Construction Contract, final working
plans and detailed specifications for Pleasant Village Limited Partnership, an
Oregon limited partnership (the "Partnership") in connection with the
rehabilitation of improvements on certain real property located in Dallas,
Dallas County, Texas (the "Improvements").
The undersigned hereby certifies (i) that the Improvements have been
"substantially completed" in accordance with the Construction Contract, (ii)
that all permits required for the continued use and occupancy of the
Improvements have been issued with respect thereto by the governmental agencies
having jurisdiction thereof, (iii) that the Improvements are in compliance with
all requirements and restrictions of all governmental authorities having
jurisdiction over the Improvements, including, without limitation, all
applicable zoning, building, environmental, fire, and health ordinances, rules
and regulations and (iv) that all contractors, subcontractors, suppliers 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.
CONSTRUCTION INSPECTOR:
-----------------------------
By: ___________________________
[Name]
[Title]
Date: ____________________________
[Signatures continue on the next page.]
Exhibit D
Confirmed by:
GENERAL PARTNER:
▇▇▇▇▇▇ Guardian LLC, an Oregon limited liability
company
By: GM Low Income Housing Management, LLC, Manager
By: Guardian Management, LLC, Manager
By: Guardian Holding, Inc., Manager
By: ________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
President
Date: ____________________________
Exhibit D
EXHIBIT E
ACCOUNTANT'S CERTIFICATE
[Accountant's Letterhead]
_______________, 200_
WNC Housing Tax Credit Fund VI Series 13, L.P.
c/o WNC & Associates, Inc.
▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Re: Pleasant Village 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
Series 13, L.P. (the "Limited Partner") of a partnership interest in Pleasant
Village Limited Partnership, an Oregon limited partnership (the "Partnership"),
which owns a certain parcel of land located in Dallas, Dallas County, Texas and
improvements thereon (the "Apartment Housing"), the Limited Partner has
requested our certification as to certain issues including the amount of
low-income housing tax credits ("Tax Credits") available with respect to the
Apartment Housing under Section 42 of the Internal Revenue Code of 1986, as
amended (the "Code"). Based upon our review of [the financial information
provided by the Partnership] of the Partnership, we are prepared to file the
Federal information tax return of the Partnership claiming annual Tax Credits in
the amount of $[amount], which amount is based on an eligible basis (as defined
in Section 42(d) of the Code) of the Apartment Housing of $[amount], a qualified
basis (as defined in Section 42(c) of the Code) of the Apartment Housing of
$[amount] and an applicable percentage (as defined in Section 42(b) of the Code)
of [percent]%.
Sincerely,
-------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & Company PLLC
Exhibit E
EXHIBIT F
CONTRACTOR'S CERTIFICATE
[Contractor's Letterhead]
_______________, 200_
WNC Housing Tax Credit Fund VI Series 13, L.P.
c/o WNC & Associates, Inc.
▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Re: Pleasant Village Limited Partnership
Ladies and Gentlemen:
The undersigned, Penco Construction Company of Dallas, Inc.
(hereinafter referred to as "Contractor"), has furnished or through various
contractors, sub-contractors, or material suppliers has contracted to furnish
labor, services or materials to satisfy the Construction Contract (hereinafter
collectively referred to as the "Work") in connection with the improvement of
certain real property known as Pleasant Village Apartments located in Dallas,
Dallas County, Texas (hereinafter known as the "Apartment Housing"). Any terms
not defined herein shall have the meaning ascribed in the Amended and Restated
Agreement of Limited Partnership of Pleasant Village Limited Partnership.
Contractor makes the following representations, warranties and
covenants regarding the Work at the Apartment Housing with full knowledge that
the Limited Partner will rely on these representations, warranties and covenants
as a condition to making its Capital Contribution payment to Pleasant Village
Limited Partnership:
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 Pleasant Village Limited Partnership is
not in violation of any terms and conditions of the Construction
Contract.
o Contractor acknowledges that the Construction Contract has been
paid in full and all liens for the Work have been released.
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.
Exhibit F
Penco Construction Company of Dallas, Inc.
By: ___________________________
Name: ____________________
Title: ____________________
Exhibit F
EXHIBIT G
DEPRECIATION SCHEDULE
Real Property: Use Modified Accelerated Cost Recovery System ("MACRS") 27.5 year
straight-line depreciation using the mid-month. 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
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
Exhibit G
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 pro rata 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 pro rata portion of the development 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 Watermeter
o Gate valves
o Flushing hydrants
o Cast iron fittings
o Valve boxes
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
REPORT OF OPERATIONS
QUARTER ENDED: ____________________, 200_
------------------------------------- -----------------------------------
LOCAL PARTNERSHIP:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
GENERAL PARTNER:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Firm Name:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Address:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
City, State, Zip:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Phone:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
PROPERTY NAME:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Address:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
City, State, Zip:
-----------------------------------
------------------------------------- -----------------------------------
Resident Manager:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Phone:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
ACCOUNTANT:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Firm:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Address:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
City, State, Zip:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Phone:
------------------------------------- -----------------------------------
------------------------------------ -----------------------------------
MANAGEMENT COMPANY
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Address:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
City, State, Zip:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Phone:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Contact:
------------------------------------- -----------------------------------
-------------------------------------------------------------------------------
OCCUPANCY INFORMATION
A. Number of Apartment Units_____ Number of RA Units_____
Number of Section 8 Tenants ____
B. Occupancy for the Quarter has: Increased ____ Decreased_____
Remained the Same _____
C. Number of: Move-Ins ______ Move-Outs __________ % of Occupancy ______
D. Average length of tenant residency: 1-6 months ______ 6-12 months ______
1-3 years ______ Over 4 years_____
E. Number of Basic rent qualified applicants on waiting list: ________
F. If the apartments are less than 90% occupied, please explain why and
describe what efforts are being made to lease-up remaining units.
___________________________________________________________________________
G. On site manager: Full Time__________ Part Time____________.
If part-time, the number of hours per week_____________.
Exhibit 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
------------------------------------------------------------------------------
Interior Painting
------------------------------------------------------------------------------
Exterior Painting
------------------------------------------------------------------------------
Siding
------------------------------------------------------------------------------
Roofing
------------------------------------------------------------------------------
Drainage
------------------------------------------------------------------------------
Paving
------------------------------------------------------------------------------
Landscaping
------------------------------------------------------------------------------
Playground
------------------------------------------------------------------------------
Community Room
------------------------------------------------------------------------------
Laundry Room
------------------------------------------------------------------------------
Common Areas
------------------------------------------------------------------------------
Carpet
------------------------------------------------------------------------------
Appliances
------------------------------------------------------------------------------
Lighting
------------------------------------------------------------------------------
Other
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Please describe in detail any major repairs:
------------------------------------------------------------------------------
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Exhibit 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)
------------------------------------------------------------------------------
Type of Condition Excellent Good Fair Problems/Comments
------------------------------------------------------------------------------
Signage
-------------------------------------------------------------------------------
Parking Lots
-------------------------------------------------------------------------------
Office/Storage
-------------------------------------------------------------------------------
Equipment
-------------------------------------------------------------------------------
Community Building
-------------------------------------------------------------------------------
Laundry Room
-------------------------------------------------------------------------------
Benches/Playground
-------------------------------------------------------------------------------
Lawns, Plantings
-------------------------------------------------------------------------------
Drainage, Erosion
-------------------------------------------------------------------------------
Carports
-------------------------------------------------------------------------------
Fences
-------------------------------------------------------------------------------
Walks/Steps/Guardrails
-------------------------------------------------------------------------------
Lighting
-------------------------------------------------------------------------------
Painting
-------------------------------------------------------------------------------
Walls/Foundation
-------------------------------------------------------------------------------
Roof/Flashing/Vents
-------------------------------------------------------------------------------
Gutters/Splashblocks
-------------------------------------------------------------------------------
Balconies/Patios
-------------------------------------------------------------------------------
Doors Windows/Screens
-------------------------------------------------------------------------------
Elevators
-------------------------------------------------------------------------------
INTERIOR CONDITION
-------------------------------------------------------------------------------
Stairs
-------------------------------------------------------------------------------
Flooring
-------------------------------------------------------------------------------
Doors/Cabinets/Hardware
-------------------------------------------------------------------------------
Drapes/Blinds
-------------------------------------------------------------------------------
Interior Painting
-------------------------------------------------------------------------------
Refrig/Stoves/Sinks
-------------------------------------------------------------------------------
Bathroom/Tubs/Showers
Toilets
-------------------------------------------------------------------------------
Exhibit 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 ▇▇▇▇)
Is the insurance current? Yes No Renewal Date
(please provide copy of yearly renewal)
B. Please note and explain any significant changes in the following:
Administrative Expense Increase Decrease Amount
------------------------------------------------------------------------
------------------------------------------------------------------------
Repairs/Maintenance Expense Increase Decrease Amount
------------------------------------------------------------------------
------------------------------------------------------------------------
Utility Expense Increase Decrease Amount
------------------------------------------------------------------------
------------------------------------------------------------------------
Taxes/Insurance Expense Increase Decrease Amount
------------------------------------------------------------------------
------------------------------------------------------------------------
C. Do you anticipate making a return to owner distribution? Yes No
Explanation:
------------------------------------------------------------------------
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D. Please explain in detail any change in the financial condition:
------------------------------------------------------------------------
------------------------------------------------------------------------
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: ----------- ---------- -------- ------
(1) Must agree with amount shown on the balance sheet.
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:
Property Name:
Address:
Tax Credit Set-Asides Information: Loan/Regulatory Set-Asides:
[ ] 20/50 [ ] 40/60 Election
[ ] Does the 51% average apply [ ] Y [ ] N
Deeper Set-Aside ______% @ 50% AMI
County:
Management
Company
Contact Person:
Phone #
[ ] Multi-Family [ ] Elderly
[ ] Number of Units
Number of Exempt Units
LIHTC Apartment Housing#:
-------------------------------------------------------------------------------
Gross Move-In
Unit First Time Move-In # Of # In Income Income
# Tenant Name Date Bdrms Sq.Ft. Set-Aside Unit Move-In Limits
-------------------------------------------------------------------------------
BIN # Certificate of Occupancy
Date:
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BIN # Certificate of Occupancy
Date:
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BIN # Certificate of Occupancy
Date:
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Exhibit H
(CONTINUED)
Tenant Income Asset Less Tenant
Income Verifica Verifica Unit Rent Tenant Utility
Qualified tion tion Rent Subsidy Payment Allowance
-------------------------------------------------------------------------------
YES
-------------------------------------------------------------------------------
YES
-------------------------------------------------------------------------------
YES
-------------------------------------------------------------------------------
YES
-------------------------------------------------------------------------------
YES
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
YES
-------------------------------------------------------------------------------
YES
-------------------------------------------------------------------------------
YES
-------------------------------------------------------------------------------
YES
-------------------------------------------------------------------------------
YES
-------------------------------------------------------------------------------
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YES
-------------------------------------------------------------------------------
YES
-------------------------------------------------------------------------------
YES
-------------------------------------------------------------------------------
YES
-------------------------------------------------------------------------------
YES
-------------------------------------------------------------------------------
(CONTINUED)
Tenant Tenant Overall
Gross Maximum Rent Tenant
Rent Rent Qualified Eligible
-------------------------------------------------------------------------------
YES YES
-------------------------------------------------------------------------------
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
-------------------------------------------------------------------------------
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 Set-Asides:
[ ] 20/50 [ ] 40/60 Election
[ ] Does the 51% average apply [ ] Y [ ] N
Deeper Set-Aside: List Details
Property Address: _______________________
County: _______________________
Allocation: Management Company: ______
[ ] Pre-1990 (Rent based on __________________________
number of persons) Contact Person: __________
[ ] Multi-Family [ ] Elected to change
[ ] Elderly # Bedrooms Phone #: _________________
[ ] Number of Units [ ] Post-1989 (Based on Fax #: ___________________
[ ] Number of # of Bedroom) 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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-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
(CONTINUED)
Annual Tenant Less
Recert. Income Income Assets Unit Rent Tenant
Date Qualified Verified Verified Rent Subsidy Payment
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
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-------------------------------------------------------------------------------
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-------------------------------------------------------------------------------
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-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
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-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
(CONTINUED)
Tenant Tenant Overall
Utility Gross Maximum Rent Tenat
Allow. Rent Rent Qualified Eligible
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
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Exhibit H
TENANT TAX CREDIT COMPLIANCE AUDIT
Document Transmittal Checklist
Unit Number Property Name Date
Tenant Name Completed By:
Initial /____/ Annual /____/
Check Box for Type of Certification Management Company
Check Documents This Section For WNC Use Only
Being Sent
Received Review
___ Internal Checklist or 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 yrs ____ ___________________
___ 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 ____ ___________________
Exhibit H
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 years and over sign all
documents?
___ ___ Is lease completed with a minimum of 6 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 income obtained with tax return?
___ ___ Or Were all sources verified (AFDC, Unemployment, Soc. Sec.,
Disability)?
Exhibit H
TAX CREDIT COMPLIANCE MONITORING:
ANNUAL CERTIFICATION
As General Partner of [Partnership Name], I hereby certify as to the
following:
1. [Partnership Name] owns a [Number of Units] unit project ("Apartment
Housing") in [Apartment City], [Apartment County] County, [Apartment State].
2. An annual income certification (including supporting documentation)
has been received from each tenant. Subject to paragraph 9 (below), the income
certification reflects that the tenant's income meets the income limitation
applicable to the Apartment Housing pursuant to Section 42(g)(1) of the Internal
Revenue Code ("Code").
3. The Apartment Housing satisfies the requirements of the applicable
minimum set aside test as defined in Section 42(g)(1) of the Code.
4. Each unit within the Apartment Housing is rent restricted as defined
in Section 42(g)(2)of the Code.
5. Each unit in the Apartment Housing is available for use by the
general public and not for use on a transient basis.
6. Each building in the Apartment Housing is suitable for occupancy in
accordance with local health, safety, and building codes.
7. During the preceding calendar year, there had been no change in the
eligible basis, as defined in Section 42(d) of the Code, of any building within
the Apartment Housing.
8. All common area facilities included in the eligible basis of the
Apartment Complex are provided to the tenants on a comparable basis without a
separate fee to any tenant in the Apartment Housing.
9. During the preceding calendar year when a unit in the Apartment
Housing became vacant reasonable attempts were made to rent that unit to tenants
whose incomes met the income limitation applicable to the Apartment Housing
pursuant to Section 42(g)(1) of the Code and while that unit was vacant no units
of comparable or smaller size were rented to tenants whose income did not meet
the income limitation applicable to the Apartment Housing pursuant to Section
42(g)(1) of the Code.
10. If the income of a tenant in a unit increased above the limit
allowed in Section 42 (g)(2)(D)(ii), then the next available unit of comparable
or smaller size was rented to tenants whose incomes met the income limitation
applicable to the Apartment Housing pursuant to Section 42(g)(1) of the Code.
IN VERIFICATION OF THE FOREGOING ENCLOSED HEREWITH IS A COPY OF THE ANNUAL
INCOME CERTIFICATION RECEIVED FROM EACH TENANT IN THE PROJECT. UPON REQUEST I
Exhibit H
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
[Apartment State] that the foregoing is true and correct.
Executed this ____ day of ___________ at _______________, ____________.
----------------------------
Exhibit H
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.
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.
Exhibit I
(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.
(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
SURVEYOR'S CERTIFICATE
I hereby certify to Pleasant Village Limited Partnership, its
respective successors and/or assigns that the survey for this plat was made on
the ground under my supervision from a recorded description in deed of record in
Book ___, Page ___, Records of ___________ County, ___________, and that the
angular and linear measurements and all other matters shown hereon are correct.
I further certify that this survey made under my supervision on ___________
200_, correctly shows the total area of the property in acres and in square
feet; the exact dimensions and location of improvements, walkways, paved areas
and parking areas; all other matters on the ground which may adversely affect
title to the subject property; the exact relation of buildings and other
structures to the property lines of the land indicated hereon; the exact
location of visible and recorded easements and other manners of record affecting
the subject property. I further certify that there are no encroachments of
adjoining buildings or structures onto said land nor overlap of buildings or
structures from said land other than as shown; that adequate ingress and egress
to the subject property are provided by ___________ and ___________, as shown on
the survey, the same being paved, dedicated public right; of way; that the
location of all improvements on the subject property is in accord with all
applicable zoning laws regulating the use of the subject property and with all
applicable laws containing minimum set back provisions and covenants and
restriction of record; that the subject property does not serve any adjoining
property for drainage ingress and egress or for any other purpose; and that the
property is not in flood plain (as shown by Map No. ____ of ____, as dated
_______________); this survey is made in accordance with the "Minimum Standard
Detail Requirements for ALTA/ACSM Land Title Surveys" jointly established and
adopted by ALTA and NSPS in October 2005, and includes Items __ on Table A
thereof. Pursuant to the Accuracy Standards as adopted by ALTA and NSPS and in
effect on the date of this certification, the undersigned further certifies that
in my professional opinion as a land surveyor registered in the State of
__________, the Relative Positional Accuracy of this survey does not exceed that
which is specified therein.
-------------------- -----------------------------------------
Date Surveyor
[SEAL]
License/Registration No.: _________________
Job No.: __________________________________
Exhibit I
LIST OF AGREEMENTS ATTACHED
Amended and Restated Development Fee Agreement
Development Fee Guaranty Agreement
Development, Construction, and Operating Budget Agreement
Construction Completion, Operating Deficit, and Tax Credit Guaranty
Agreement
AMENDED AND RESTATED DEVELOPMENT FEE AGREEMENT
This Amended and Restated Development Fee Agreement ("Agreement"), is
entered into as of the date written below by and between Guardian Affordable
Housing Development, LLC ("Developer") and Pleasant Village Limited Partnership,
an Oregon 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 Dallas, Dallas
County, Texas, as more particularly described in Exhibit A attached hereto and
incorporated herein (the "Real Property").
B. Owner intends to renovate on the Real Property a 200-unit low-income
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 construction work is
completed and to provide certain services relating thereto. The Parties
recognize and acknowledge that the Developer is, and has been, an independent
contractor in all services rendered to, and to be rendered to, the Owner
pursuant to this Amended and Restated Development Fee Agreement.
D. Owner desires to commit its existing development agreement with
Developer into writing through this Amended and Restated 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 Amended and Restated 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
Any terms not defined herein shall have the meaning ascribed in the
Partnership Agreement. As used in this Agreement, the following terms shall,
when capitalized, have the following meanings:
"Code" means the Internal Revenue Code of 1986, as amended.
"Construction Documents" means the contract documents between the Owner
and the Construction Lender pertaining to the construction loan for the
construction of the Apartment Housing.
"Construction Lender" means U.S. Bank National Association, which has
committed to make a loan to finance construction of the Apartment Housing.
"Construction Loan" means the loan to finance construction of the
Apartment Housing, made to Owner by the Construction Lender.
"Contractor" means Penco Construction Company of Dallas, Inc.
"Department" means the Texas agency responsible for the reservation and
allocation of Tax Credits.
"Development Fee" means the fee for development services described in
Section 2 of this Agreement.
"Partnership Agreement" shall mean the Amended and Restated Agreement
of Limited Partnership of Pleasant Village Limited Partnership, an Oregon
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, 2019.
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 equal to the greater of (i) $1,104,320 or (ii) subject to the Special
Limited Partner's reasonable determination that such higher amount may be
included in the Eligible Basis of the Apartment Housing, 15% of the total
development costs as stated in the cost certification provided by the
Accountants and approved by the State Tax Credit Agency ("Development Fee");
provided, however, that the Development Fee shall be reduced as needed to ensure
that at least 50% of the aggregate basis of the land and buildings comprising
the Apartment Housing for purposes of Code Section 42(h)(4) shall be financed
with the proceeds of the Tax-Exempt Bonds. The Development Fee shall be
determined as of the Completion Date and shall be subject to the review and
2
approval of accountants designated by WNC. The Development Fee shall be payable
in accordance with Section 3 of this Agreement.
2.3 Development Services.
(a) Prior Services. Owner acknowledges that Developer has, prior to the
date hereof, performed substantial development services relating to the
Apartment Housing. Such services (the "Prior Services") have included the
following.
(1) Developer has identified a Contractor and recommended to
the Owner to enter into a construction contract with the Contractor for the
rehabilitation of the Apartment Housing.
(2) Developer has estimated the cost of rehabilitation;
determined the rehabilitation period; prepared a monthly-estimated
rehabilitation chart reflecting the rehabilitation 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) If applicable, Developer has identified an architect and
recommended to the Owner to execute an architectural contract for the planning
and design of the Apartment Housing.
(5) Developer has placed its own capital at risk in
anticipation of the Apartment Housing being rehabilitated, leased and Tax
Credits and bond financing awarded.
(6) Developer has identified and recommended to Owner a
Construction Lender to obtain the Construction Loan.
(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 construction of the
Apartment Housing for Owner and shall provide Owner with information requiring
Owner's intervention to resolve rehabilitation issues. Owner shall allow
Developer full access to the Apartment Housing during the rehabilitation 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 Documents in a
diligent and timely manner.
(2) Developer shall monitor pre-rehabilitation conferences and
review pre-rehabilitation documents, including drawings, specifications,
contracts, and schedules.
(3) Developer shall identify rehabilitation issues and inform
Owner of the same.
3
(4) Developer shall review subcontract bids received by the
Contractor and make a recommendation to the Owner.
(5) Developer shall monitor field order and change order
procedures and inform the Owner.
(6) Developer shall attend rehabilitation progress meetings at
the Apartment Housing site to monitor construction progress and report to the
Owner the outcome of those meetings.
(7) Developer shall review the Contractor's monthly pay
applications.
(8) 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.
(9) Developer shall advise Owner with respect to relations
with engineers, architects, and other rehabilitation professionals.
(10) Developer shall maintain relations with the City of
Dallas and other governmental authorities having jurisdiction over development
of the Apartment Housing and inform the Owner of any rehabilitation 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
Pleasant Village Apartments, the design of the Apartment Housing, the plans and
specifications for the Apartment Housing and all rights arising under the
agreements with Apartment Housing architects, engineers and other Apartment
Housing design and construction professionals.
SECTION 3
DEVELOPMENT FEE PAYMENTS
3.1 Prior Services Rendered. The Parties acknowledge and agree that
Developer has earned 75% of the Development Fee for services rendered prior to
the date hereof, that said amount is reasonable in relation to the work
performed, is fully earned as of that date and said amount shall be paid in any
event notwithstanding the termination of this Agreement. The Parties further
acknowledge and agree that, for accounting purposes, the Owner has accrued an
amount of the Development Fee equal to $828,240.
3.2 Payment of Development Fee. The Development Fee shall be paid to
the Developer from capital contribution payments received by the Owner in
accordance with Section 9.2(b) of the Partnership Agreement. If the Development
Fee is not paid in full in accordance with Section 9.2(b) of the Partnership
Agreement then the balance of the Development Fee shall be paid from available
net operating income in accordance with the terms of Section 11.1 of the
Partnership Agreement, but in no event later than December 31, 2019. Also, if
the Development Fee is not paid in full in accordance with Section 9.2(b) of the
Partnership Agreement then Owner shall be indebted to the Developer for the
unpaid balance of the Development Fee ("Deferred Development Fee"). The Deferred
4
Development Fee 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 Deferred Development
Fee 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 thirteenth anniversary of the Completion
Date. Amounts due under this Amended and Restated Development Fee Agreement may
not be prepaid.
3.3 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 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.
Upon proper termination of this Agreement by Owner pursuant to this
Section 4, all rights of Developer to receive unearned Development Fees pursuant
to this Agreement with respect to services not yet performed shall terminate.
Developer shall receive the full Development Fee for Prior Services and shall
receive a portion of the Development Fee for Future Services based on the
percentage of Completion of Construction of the Apartment Housing at the time of
termination. Nothing in this Section 4 shall be deemed to prevent Owner from
bringing an action against Developer to recover fully all damages resulting from
any of the causes set forth in paragraphs (a), (b) or (c) above, or to prevent
Owner from contending in any action or proceeding that the Future Services were
not earned by Developer.
SECTION 5
GENERAL PROVISIONS
5.1 Notices. Notices required or permitted to be given under this
Agreement shall be in writing sent by overnight courier or mail, postage
prepaid, to the Parties at the following addresses, or such other address as is
5
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: Guardian Affordable Housing Development, LLC
▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇▇▇▇
If to Owner: Pleasant Village Limited Partnership
▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇▇▇▇
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 Oregon
applicable to contracts made and wholly performed within Oregon by persons
domiciled in Oregon.
(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.
5.3 Integration; Amendment. This Agreement constitutes the entire
agreement of the Parties relating to the subject matter hereof. There are no
promises, terms, conditions, obligations, or warranties other than those
contained herein. This Agreement supersedes all prior communications,
representations, or agreements, verbal or written, among the Parties relating to
the subject matter hereof. This Agreement may not be amended except in writing.
5.4 Attorneys' Fees. If any suit or action arising out of or related to
this Agreement is brought by any Party to any such document, the prevailing
Party shall be entitled to recover the costs and fees (including without
limitation reasonable attorneys' fees and costs of experts and consultants,
copying, courier and telecommunication costs, and deposition costs and all other
costs of discovery) incurred by such Party in such suit or action, including
without limitation to any post-trial or appellate proceeding.
5.5 Binding Effect. This Agreement shall bind and inure to the benefit
of, and be enforceable by, the Parties hereto and their respective successors,
heirs, and permitted assigns.
6
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 foregoing, the Parties acknowledge that WNC
Housing Tax Credit Fund VI Series 13, L.P. and its assignees shall have the
right to enforce any term of this Agreement.
5.8 [Reserved.]
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 Mediation. 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 mediation. All claims will be subject to the
statutes of limitation applicable if they were litigated.
If mediation occurs, one neutral mediator will decide all issues unless
either Party's Claim is $100,000 or more, in which case three neutral mediators
will decide all issues. All mediator will be active Oregon State Bar members in
good standing. Judgment on any mediation 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 mediation. In addition, both Parties have the right before, during, and after
any mediation 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 mediation clause cannot be modified or waived by either Party
except in a writing that refers to this mediation clause and is signed by both
Parties.
[Signatures begin on the following page.]
7
IN WITNESS WHEREOF, the Parties have caused this Amended and Restated
Development Fee Agreement to be executed as of August 30, 2006.
DEVELOPER:
Guardian Affordable Housing Development, LLC
By: Guardian Management, LLC, manager
By: Guardian Holding, Inc., manager
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
President
OWNER:
Pleasant Village Limited Partnership
By: ▇▇▇▇▇▇ Guardian LLC, General Partner
By: GM Low Income Housing Management,
LLC, Manager
By: Guardian Management LLC,
General Partner
By: Guardian Holding, Inc.,
Manager
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
President
Exhibit A
Legal Description
BEING all of ▇▇▇ ▇, ▇▇▇▇▇ ▇/▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Apartments, an addition to
the City of Dallas, Dallas County, Texas, according to the plat thereof recorded
in Volume 67131, Page 1115, Map Records, Dallas County, Texas, and being more
particularly described as follows:
BEGINNING at a found "X" cut in paving 30.00 feet East of the original center
line of ▇▇▇ ▇▇▇▇▇▇ Road (100 foot R.O.W.);
THENCE, North 01 degrees 28 minutes 00 seconds West a distance of 606.81 feet
parallel with and 30.00 feet East of the original center line of ▇▇▇ ▇▇▇▇▇▇ Road
(100 foot R.O.W.) to a found "X" cut in paving for corner;
THENCE North 89 degrees 55 minutes 00 seconds East a distance of 1256.88 feet
departing said ▇▇▇ ▇▇▇▇▇▇ Road (100 foot R.O.W.) to a point for corner in a
flowing creek;
THENCE South 18 degrees 35 minutes 00 seconds West a distance of 131.95 feet to
a point for corner in a flowing creek;
THENCE South 00 degrees 05 minutes 00 seconds East a distance of 481.00 feet to
a found iron pin for corner;
THENCE South 89 degrees 55 minutes 00 seconds West a distance of 1200.00 feet
along back to the PLACE OF BEGINNING and CONTAINING 16.86 acres (734,293 square
feet) of land, more or less.
DEVELOPMENT FEE GUARANTY AGREEMENT
FOR VALUE RECEIVED, the receipt and sufficiency of which are hereby
acknowledged, and in consideration of the agreement of Guardian Affordable
Housing Development, LLC (the "Developer") to permit deferral of a portion of
the development fee due from Pleasant Village Limited Partnership, an Oregon
limited partnership ("Debtor") to the Developer, the undersigned Guarantor(s),
hereby unconditionally guarantees the full and prompt payment when due, whether
by acceleration or otherwise of that certain Development Fee from Debtor to the
Developer, evidenced by the Amended and Restated 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 Agreement (including
reasonable attorneys' fees if collected or enforced by law or through an
attorney-at-law).
Debtor or Developer may, from time to time, without notice to or
consent of the undersigned, (a) retain or obtain a security interest in any
property to secure any of the Liabilities or any obligation hereunder, (b)
retain or obtain the primary or secondary liability of any party or parties, in
addition to the undersigned, with respect to any of the Liabilities and (c)
resort to the undersigned for payment of any of the Liabilities, whether or not
the Debtor or Developer shall have resorted to any property securing any of the
Liabilities or any obligation hereunder or shall have preceded against any other
party primarily or secondarily liable on any of the Liabilities.
Debtor and Developer must mutually agree to (a) extend or renew for any
period this Agreement (whether or not longer than the original period) or alter
any of the Liabilities, (b) release or compromise any Liability of the
undersigned hereunder or any Liability of any other party or parties primarily
or secondarily liable on any of the Liabilities, or (c) release, compromise or
subordinate its title or security interest, or any part thereof, if any, in all
or any property now or hereafter securing any of the Liabilities or any
obligation hereunder, and permit any substitution or exchange for any such
property,
The undersigned hereby expressly waives: (a) notice of the existence or
creation of all or any of the Liabilities, (b) notice of any amendment or
modification of any of the instruments or documents evidencing or securing the
Liabilities, (c) presentment, demand, notice of dishonor and protest, (d) all
diligence in collection or protection of or realization upon the Liabilities or
any thereof, any obligation hereunder, or any security for any of the foregoing,
and (e) the right to require the Developer to proceed against Debtor on any of
the Liabilities, though nothing herein shall prevent the Developer from
proceeding against Debtor on any of the Liabilities.
In the event any payment of Debtor to the Developer is held to
constitute a preference under the bankruptcy laws, or if for any other reason
the Developer is required to refund such payment or pay the amount thereof to
any other party, such payment by Debtor to the Developer shall not constitute a
release of Guarantor from any Liability hereunder, but Guarantor agrees to pay
such amount to the Developer upon demand and this Guaranty shall continue to be
effective or shall be reinstated, as the case may be, to the extent of any such
payment or payments.
No delay or failure on the part of the Developer in the exercise of any
right or remedy shall operate as a waiver thereof, and no single or partial
exercise by the Developer of any right or remedy shall preclude other or future
exercise thereof or the exercise of any other right or remedy. No action of the
Developer permitted hereunder shall in any way impair or affect this Agreement.
For the purpose of this 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 or the Debtor 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 Agreement and then a payment by Debtor to Developer in consideration of the
Amended and Restated 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.
This 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 Agreement has been made and delivered in the State of Oregon and
shall be construed and governed under Oregon law.
Whenever possible, each provision of this 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
of invalidity, without invalidating the remainder of such provision or the
remaining provisions of this 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 Agreement is executed by more than one guarantor, this Agreement and
the obligations hereunder are the joint and several obligation of all the
undersigned.
Guarantor consents to the jurisdiction of the courts in the State of
Texas and/or to the jurisdiction and venue of any United States District Court
in the State of Texas having jurisdiction over any action or judicial proceeding
brought to enforce, construe or interpret this Guaranty. Guarantor agrees to
stipulate in any such proceeding that this Guaranty is to be considered for all
purposes to have been executed and delivered within the geographical boundaries
of the State of Texas, even if it was, in fact, executed and delivered
elsewhere.
[Signatures begin on the following page.]
2
IN WITNESS WHEREOF, the undersigned have hereunto caused this
Development Fee Guaranty Agreement to be executed as of August 30, 2006.
WITNESS: GUARANTOR:
Guardian Management, LLC
_____________________________ By: Guardian Holding, Inc., manager
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
President
Address for Guarantor:
▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
----------------------------
Notary Public
My Commission Expires: 5/14/07
-------
(NOTARY SEAL)
GUARANTOR:
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Address for Guarantor:
▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
----------------------------
Notary Public
My Commission Expires: 5/14/07
-------
------------------------
(NOTARY SEAL)
GUARANTOR:
/s/ ▇▇▇ ▇▇▇▇▇▇
------------------------------
▇▇▇ ▇▇▇▇▇▇
Address for Guarantor:
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------
Notary Public
My Commission Expires: __________________
▇▇▇▇▇▇ ▇▇▇▇▇▇
Notary Public Hall County, Georgia
My Commission Expires May 30, 2009
------------------------
(NOTARY SEAL)
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
Pleasant Village Limited Partnership, an Oregon limited partnership ("Owner"),
▇▇▇▇▇▇ Guardian LLC, an Oregon limited liability company ("General Partner"),
WNC Housing Tax Credit Fund VI Series 13, L.P., 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 17.458 acres of land in Dallas, Dallas County,
Texas (the "Real Property").
B. Owner intends to rehabilitate the improvements located on the Real
Property, including a 232-unit low-income rental housing complex and other
related improvements for family use, which is intended to qualify for federal
low-income housing tax credits (the "Apartment Housing").
C. On even date herewith, an Amended and Restated Agreement of Limited
Partnership for the Partnership ("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 rehabilitation
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 rehabilitation
to build the Apartment Housing and the operating budget necessary to provide a
positive Debt Service Coverage.
Now therefore, in consideration of the foregoing recitals which are a
part of this Agreement, the mutual promises and undertakings in this Agreement,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Parties agree as follows.
1. Source of Funds. Attached hereto as Exhibit A and incorporated
herein by this reference is the Apartment Housing Source of Funds. The Source of
Funds has been specified in the Partnership Agreement as the Construction 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,
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
$11,908,907. Owner acknowledges and represents that the attached Development
Budget includes the total anticipated costs and expenses to acquire, develop and
rehabilitate 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 Construction Lender, 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, then the General
Partner shall be responsible for and shall be obligated to pay such
deficiencies.
4. Time Line. Attached hereto as Exhibit D and incorporated herein by
this reference is a construction time line, ▇▇▇▇ chart or similar graph approved
by the Special Limited Partner. The time line will include, at a minimum, a
month-to-month, building-by-building analysis as to when each trade will start
and complete the work for which they have been retained. If at any time during
construction there is, or anticipated to be, a change in the construction
schedule as displayed in the time line then the General Partner shall update the
time line and provide the same to the Limited Partner and Special Limited
Partner.
5. 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 Construction Lender, the Mortgage lender and any governmental
authorities if applicable.
6. 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: ▇▇▇▇▇▇ Guardian LLC
▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇▇▇▇
To the Limited Partner: WNC Housing Tax Credit Fund VI
Series 13, L.P.
c/o WNC & Associates, Inc.
▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
To the Special Limited Partner: WNC Housing, L.P.
▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
6. Successors and Assigns. All the terms and conditions of this
Agreement shall be binding upon and inure to the benefit of the successors and
assigns of the Parties.
7. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and said counterparts
shall constitute but one and the same instrument which may sufficiently be
evidenced by one counterpart.
8. Captions. Captions to and headings of the sections of this Agreement
are solely for the conveniences of the Parties, are not a part of this
Agreement, and shall not be used for the interpretation or determination of the
validity of this Agreement or any provision hereof.
9. Saving Clause. If any provision of this Agreement, or the
application of such provision to any Person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to Persons or circumstances other than those as to which it is held invalid,
shall not be affected thereby.
10. Governing Law. This Agreement and its application shall be governed
by the laws of Texas.
11. Attorney's Fees. If a suit or action is instituted in connection
with an alleged breach of any provision of this Agreement, the prevailing Party
shall be entitled to recover, in addition to costs, such sums as the court may
adjudge reasonable as attorney's fees, including fees on any appeal.
[Signatures begin on the following page.]
3
In witness whereof, this Development, Construction, and Operating
Budget Agreement is made and entered into as of August 30, 2006.
PARTNERSHIP:
Pleasant Village Limited Partnership
By: ▇▇▇▇▇▇ Guardian LLC, General Partner
By: GM Low Income Housing Management LLC,
Manager
By: Guardian Management LLC, Manager
By: Guardian Holding, Inc., Manager
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
President
LIMITED PARTNER:
WNC Housing Tax Credit Fund VI Series 13, L.P.
By: WNC National Partners, LLC, general partner
By: WNC & Associates, Inc., managing member
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Executive Vice President
[Signatures continue on the next page.]
SPECIAL LIMITED PARTNER:
WNC Housing, L.P.
By: WNC & Associates, Inc., its general partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Executive Vice President
Exhibit A
Source of Funds
Exhibit B
Development Budget
Exhibit C
Construction Proforma
Exhibit D
Construction Time Line
Exhibit E
Operating Proforma
CONSTRUCTION COMPLETION, OPERATING DEFICIT, AND
TAX CREDIT GUARANTY AGREEMENT
This Construction Completion, Operating Deficit, and Tax Credit
Guaranty Agreement ("Agreement") is entered into this 30th day of August 2006,
by and among Guardian Management LLC, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇
(individually and collectively, the "Guarantor"), Pleasant Village Limited
Partnership (the "Partnership"), and WNC Housing Tax Credit Fund VI Series 13,
L.P. ("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 limited
partnership agreement for the Partnership (the "Partnership Agreement") was
entered into by and between ▇▇▇▇▇▇ Guardian LLC as the general partner ("General
Partner") and the Limited Partner as the Limited Partner and the Special Limited
Partner as 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).
WHEREAS, pursuant to the terms of the Partnership Agreement the General
Partner: (1) is required to guarantee the completion of rehabilitation of a
200-unit low to moderate income housing complex located in the City of Dallas,
Dallas County, Texas, as more fully described in Exhibit A attached hereto and
incorporated herein by this reference, and any and all improvements now or
hereafter to be constructed thereon ("Apartment Housing"); (2) is required to
guarantee the payment of all Operating Deficits incurred by the Partnership as a
result of the operations of the Apartment Housing, including but not limited to
Real Estate Taxes; 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 member but for the agreement of Guarantor to provide
the financial funds necessary to obtain Completion of Construction, to pay
Operating Deficits and to pay Tax Credit deficits. Guarantor is an affiliate of
the General Partner and will therefore benefit from the acquisition by the
Limited Partner of a membership interest in the Partnership.
NOW THEREFORE, in consideration of the foregoing and the promises,
covenants and undertakings herein contained and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties hereto agree as follows:
SECTION 1. Guarantor hereby individually, jointly and severally
guarantees to the Partnership and the Limited Partner, as applicable, the prompt
payment and full performance of the provisions under Section 6.2, Section 6.3,
Section 7.4(a), Section 7.4(b), Section 7.4(c), Section 7.4(e) and Section
9.12(aa) of the Partnership Agreement, including all modifications thereof,
pursuant to and in accordance with the terms and conditions set forth in the
Partnership Agreement and in this Agreement.
SECTION 2. Guarantor further agrees to pay all expenses paid or
incurred by the Partnership and/or Limited Partner in endeavoring to collect
Guarantor's obligations, or any part thereof, and in enforcing the provisions of
this Agreement, including reasonable attorneys' fees if collected or enforced by
law or through an attorney-at-law.
SECTION 3. No delay or failure on the part of the Partnership or
Limited Partner in the exercise of any right or remedy shall operate as a waiver
thereof, and no single or partial exercise by the Partnership of any right or
remedy shall preclude other or future exercise thereof or the exercise of any
other right or remedy. No action of the Partnership permitted hereunder shall in
any way impair or affect this Agreement. For the purpose of this Agreement,
Guarantor's obligations are guaranteed notwithstanding any right or power of
anyone else to assert any claim or defense as to the invalidity or
unenforceability of any such obligation, and no such third party claim or
defense shall impair or affect the obligations of Guarantors hereunder.
SECTION 4. This Agreement shall be binding upon the Parties, and upon
their legal representatives, heirs, successors and assigns.
SECTION 5. This Agreement shall be construed and governed under Texas
law.
SECTION 6. Whenever possible, each provision of the Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
such law, such provision shall be ineffective to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
SECTION 7. The Parties recognize and acknowledge, and Guarantor agrees
and consents, that if the Partnership does not take legal action to enforce this
Agreement, if and when by the terms of this Agreement it is enforceable, then
the Limited Partner, may on its own behalf and in its own name commence legal
proceedings to enforce the terms of this Agreement.
SECTION 8. Whenever the singular or plural number, masculine or
feminine or neuter is used herein, it shall equally include the other where
applicable.
SECTION 9. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, and said counterparts shall
constitute but one and the same instrument which may sufficiently be evidenced
by one counterpart.
SECTION 10. The Guarantor shall maintain a net worth equal to at least
$20,000,000 and shall provide annual financial statements to Limited Partner as
evidence of such net worth.
SECTION 11. The Parties consent to the jurisdiction and venue of the
courts of Dallas County in the State of Texas and/or to the jurisdiction and
venue of any United States District Court in the State of Texas having
jurisdiction over Dallas County in any action or judicial proceeding brought to
enforce, construe or interpret this Agreement. The Parties agree to stipulate in
any such proceeding that this Agreement is to be considered for all purposes to
have been executed and delivered within the geographical boundaries of the State
of Texas, even if it was, in fact, executed and delivered elsewhere.
2
IN WITNESS WHEREOF, this Construction Completion, Operating Deficit,
and Tax Credit Guaranty Agreement is made and entered into as of this 30th day
of August 2006.
GUARANTOR:
Guardian Management LLC
By: Guardian Holding, Inc., manager
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
President
Notary Public:
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------------
My Commission Expires: 5/14/07
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-----------------------------
(NOTARY SEAL)
GUARANTOR:
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Notary Public:
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
My Commission Expires: 5/14/07
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-----------------------------
(NOTARY SEAL)
[Signatures continue on the next page.]
GUARANTOR:
/s/ ▇▇▇ ▇▇▇▇▇▇
---------------------------------
▇▇▇ ▇▇▇▇▇▇
Notary Public:
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------
My Commission Expires: __________________
▇▇▇▇▇▇ ▇▇▇▇▇▇
Notary Public Hall County, Georgia
My Commission Expires May 30, 2009
------------------------
(NOTARY SEAL)
LIMITED PARTNER:
WNC Housing Tax Credit Fund VI Series 13, L.P.
By: WNC National Partners, LLC, general partner
By: WNC & Associates, Inc., managing
member
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Executive Vice President
EXHIBIT A
LEGAL DESCRIPTION
BEING all of ▇▇▇ ▇, ▇▇▇▇▇ ▇/▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Apartments, an addition to
the City of Dallas, Dallas County, Texas, according to the plat thereof recorded
in Volume 67131, Page 1115, Map Records, Dallas County, Texas, and being more
particularly described as follows:
BEGINNING at a found "X" cut in paving 30.00 feet East of the original center
line of ▇▇▇ ▇▇▇▇▇▇ Road (100 foot R.O.W.);
THENCE, North 01 degrees 28 minutes 00 seconds West a distance of 606.81 feet
parallel with and 30.00 feet East of the original center line of ▇▇▇ ▇▇▇▇▇▇ Road
(100 foot R.O.W.) to a found "X" cut in paving for corner;
THENCE North 89 degrees 55 minutes 00 seconds East a distance of 1256.88 feet
departing said ▇▇▇ ▇▇▇▇▇▇ Road (100 foot R.O.W.) to a point for corner in a
flowing creek;
THENCE South 18 degrees 35 minutes 00 seconds West a distance of 131.95 feet to
a point for corner in a flowing creek;
THENCE South 00 degrees 05 minutes 00 seconds East a distance of 481.00 feet to
a found iron pin for corner;
THENCE South 89 degrees 55 minutes 00 seconds West a distance of 1200.00 feet
along back to the PLACE OF BEGINNING and CONTAINING 16.86 acres (734,293 square
feet) of land, more or less.