Amended And Restated Agreement
Of Limited Partnership Of
Calico Terrace Limited Partnership
DATED AS OF JULY 24, 2002
TABLE OF CONTENTS
Page
I. DEFINITIONS ............................................. 1
1.1 "Accountant" ................................... 2
1.2 "Act" .......................................... 2
1.3 "Actual Tax Credit"............................. 2
1.4 "Adjusted Capital Account Deficit" ............. 2
1.5 "Affiliate" .................................... 2
1.6 "Agreement" or "Partnership Agreement".......... 2
1.7 "Apartment Housing"............................. 3
1.8 "Assignee" ..................................... 3
1.9 "Bankruptcy" or "Bankrupt"...................... 3
1.10 "Break-even Operations"......................... 3
1.11 "Budget"........................................ 3
1.12 "Capital Account" .............................. 4
1.13 "Capital Contribution" ......................... 4
1.14 "Cash Expenses"................................. 4
1.15 "Cash Receipts"................................. 4
1.16 "Code" ......................................... 4
1.17 "Completion of Construction".................... 4
1.18 "Compliance Period"............................. 5
1.19 "Consent of the Special Limited Partner"........ 5
1.20 "Construction Budget"........................... 5
1.21 "Construction Contract"......................... 5
1.22 "Construction Lender"........................... 5
1.23 "Construction Loan" ............................ 5
1.24 "Contractor" ................................... 5
1.25 "Debt Service Coverage"......................... 5
1.26 "Deferred Management Fee"....................... 6
1.27 "Developer"..................................... 6
1.28 "Development Fee" .............................. 6
1.29 "Distributions" ................................ 6
1.30 "Fair Market Value" ............................ 6
1.31 "Financial Interest" ........................... 6
1.32 "First Year Certificate" ....................... 6
1.33 "FmHA" ......................................... 6
1.34 "FmHA Interest Credit Agreement" ............... 7
1.35 "FmHA Loan Agreement" .......................... 7
1.36 "Force Majeure"................................. 7
1.37 "General Partner" .............................. 7
1.38 "Gross Asset Value" ............................ 7
1.39 "Hazardous Substance"........................... 8
1.40 "Improvements".................................. 8
1.41 "In-Balance".................................... 8
1.42 "Incentive Management Fee"...................... 9
1.43 "Income and Losses"............................. 9
1.44 "Inspecting Architect".......................... 10
1.45 "Insurance" .................................... 10
1.46 "Insurance Company" ............................ 11
1.47 "Interest" ..................................... 11
1.48 "Involuntary Withdrawal"........................ 11
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1.49 "Land Acquisition Fee".......................... 11
1.50 "LIHTC"......................................... 11
1.51 "Limited Partner"............................... 11
1.52 "Management Agent".............................. 11
1.53 "Management Agreement".......................... 12
1.54 "Minimum Set-Aside Test"........................ 12
1.55 "Mortgage" or "Mortgage Loan"................... 12
1.56 "Net Operating Income".......................... 13
1.57 "Nonrecourse Deductions"........................ 13
1.58 "Nonrecourse Liability"......................... 13
1.59 "Operating Deficit" ............................ 13
1.60 "Operating Deficit Guarantee Period"............ 13
1.61 "Operating Loans"............................... 13
1.63 "Partner(s)" ................................... 13
1.64 "Partner Nonrecourse Debt" ..................... 13
1.65 "Partner Nonrecourse Debt Minimum Gain" ........ 13
1.66 "Partner Nonrecourse Deductions" ............... 13
1.67 "Partnership" .................................. 13
1.68 "Partnership Minimum Gain" ..................... 13
1.69 "Permanent Mortgage Commencement" .............. 14
1.70 "Person" ....................................... 14
1.71 "Plans and Specifications"...................... 14
1.72 "Project Documents" ............................ 14
1.73 "Projected Annual Tax Credits" ................. 14
1.74 "Projected Tax Credits" ........................ 14
1.75 "Qualified Tenants" ............................ 14
1.76 "Rent Restriction Test" ........................ 14
1.77 "Reporting Fee"................................. 15
1.78 "Revised Projected Tax Credits"................. 15
1.79 "Sale or Refinancing"........................... 15
1.80 "Sale or Refinancing Proceeds" ................. 15
1.81 "Special Limited Partner"....................... 15
1.82 "State" ........................................ 15
1.83 "State Tax Credit Agency" ...................... 15
1.84 "Substitute Limited Partner" ................... 15
1.85 "Syndication Fee"............................... 15
1.86 "Tax Credit" ................................... 15
1.87 "Tax Credit Compliance Fee"..................... 16
1.88 "Tax Credit Conditions"......................... 16
1.89 "Tax Credit Period"............................. 16
1.90 "Title Policy".................................. 16
1.91 "TRA 1986" ..................................... 16
1.92 "Treasury Regulations" ......................... 16
1.93 "Withdrawing" or "Withdrawal"................... 16
1.94 "Withdrawing Limited Partner"................... 16
II. NAME .................................................... 17
III. PRINCIPAL EXECUTIVE OFFICE/AGENT FOR SERVICE ............ 17
3.1 Principal Executive Office ..................... 17
3.2 Agent for Service of Process ................... 17
IV. PURPOSE ................................................. 17
4.1 Purpose of the Partnership..................... 17
4.2 Authority of the Partnership................... 17
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V. TERM .................................................... 18
VI. GENERAL PARTNER'S CONTRIBUTIONS AND LOANS................ 18
6.1 Capital Contribution of General Partner......... 18
6.2 Construction Obligations........................ 18
6.3 Operating Obligations........................... 19
6.4 Other General Partner Loans..................... 19
VII. CAPITAL CONTRIBUTIONS OF LIMITED PARTNER
AND SPECIAL LIMITED PARTNER.............................. 20
7.1 Withdrawing Limited Partner..................... 20
7.2 Capital Contribution of Limited Partner......... 20
7.3 Repurchase of Limited Partner's Interest........ 22
7.4 Adjustment of Limited Partner's
Capital Contribution............................ 22
7.5 Capital Contribution of Special Limited Partner. 25
7.6 Return of Capital Contribution.................. 25
7.7 Liability of Limited Partner and Special
Limited Partner................................. 25
VIII. WORKING CAPITAL AND RESERVES ............................... 26
8.1 Operating and Maintenance Account............... 26
8.2 Reserve for Replacements........................ 26
8.3 Tax and Insurance Account....................... 26
8.4 Other Reserves.................................. 26
IX. MANAGEMENT AND CONTROL .................................. 27
9.1 Power and Authority of General Partner ......... 27
9.2 Payments to the General Partners and Others .... 27
9.3 Specific Powers of the General Partner ......... 29
9.4 Authority Requirements.......................... 29
9.5 Limitations on General Partner's
Power and Authority ............................ 30
9.6 Restrictions on Authority of General Partner.... 31
9.7 Duties of General Partner ...................... 32
9.8 Obligations to Repair and Rebuild Apartment
Housing......................................... 34
9.9 Partnership Expenses ........................... 34
9.10 General Partner Expenses ....................... 35
9.11 Other Business of Partners ..................... 35
9.12 Covenants, Representations and Warranties....... 35
X. ALLOCATIONS OF INCOME, LOSSES AND CREDITS ............... 39
10.1 General ........................................ 39
10.2 Allocations From Sale or Refinancing............ 39
10.3 Special Allocations............................. 40
10.4 Curative Allocations............................ 43
10.5 Other Allocation Rules.......................... 43
10.6 Tax Allocations: Code Section 704(c)........... 44
10.7 Allocation Among Limited Partners............... 45
10.8 Allocation Among General Partners .............. 45
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10.9 Modification of Allocations .................... 45
XI. DISTRIBUTION ............................................ 46
11.1 Distribution of Net Operating Income ........... 46
11.2 Distribution of Sale or Refinancing Proceeds.... 46
XII. TRANSFERS OF LIMITED PARTNER'S INTEREST
IN THE PARTNERSHIP....................................... 47
12.1 Assignment of Limited Partner's Interest........ 47
12.2 Effective Date of Transfer ..................... 47
12.3 Invalid Assignment ............................. 47
12.4 Assignee's Rights to Allocations
and Distributions .............................. 48
12.5 Substitution of Assignee as Limited Partner
or Special Limited Partner...................... 48
12.6 Death, Bankruptcy, Incompetency, etc.
of a Limited Partner ........................... 48
XIII. WITHDRAWAL, REMOVAL AND REPLACEMENT OF GENERAL
PARTNER ................................................. 49
13.1 Withdrawal of General Partner .................. 49
13.2 Removal of General Partner ..................... 49
13.3 Effects of a Withdrawal......................... 51
13.4 Successor General Partner....................... 53
13.5 Admission of Additional or Successor
General Partner ................................ 53
13.6 Transfer of Interest ........................... 53
13.7 No Goodwill Value............................... 53
XIV. BOOKS AND ACCOUNTS, REPORTS, TAX RETURNS,
FISCAL YEAR AND BANKING ................................. 54
14.1 Books and Accounts ............................. 54
14.2 Accounting Reports ............................. 55
14.3 Other Reports .................................. 55
14.4 Late Reports ................................... 57
14.5 Annual Site Visits.............................. 58
14.6 Tax Returns..................................... 58
14.7 Fiscal Year .................................... 58
14.8 Banking ........................................ 58
14.9 Certificates and Elections ..................... 58
XV. DISSOLUTION, WINDING UP, TERMINATION AND
LIQUIDATION OF THE PARTNERSHIP .......................... 58
15.1 Dissolution of Partnership ..................... 58
15.2 Return of Capital Contribution upon
Dissolution .................................... 59
15.3 Distributions of Assets ........................ 59
15.4 Deferral of Liquidation......................... 60
15.5 Liquidation Statement .......................... 60
15.6 Certificates of Dissolution; Certificate of
Cancellation of Certificate of Limited
Partnership .................................... 61
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XVI. AMENDMENTS .............................................. 61
XVII. MISCELLANEOUS ........................................... 61
17.1 Voting Rights .................................. 61
17.2 Meeting of Partnership ......................... 62
17.3 Notices ........................................ 62
17.4 Successors and Assigns ......................... 63
17.5 FmHA Regulations................................ 63
17.6 Recording of Certificate of Limited
Partnership. ................................... 64
17.7 Amendment of Certificate of Limited
Partnership .................................... 64
17.8 Counterparts ................................... 65
17.9 Captions ....................................... 65
17.10 Saving Clause................................... 65
17.11 Certain Provisions.............................. 65
17.12 Tax Matters Partners............................ 65
17.13 Expiration of Compliance Period................. 66
17.14 Number and Gender .............................. 67
17.15 Entire Agreement ............................... 67
17.16 Governing Law .................................. 67
17.17 Attorney's Fees ................................ 67
17.18 Receipt of Correspondence ...................... 67
17.19 Security Interest and Right of Set-Off ......... 67
EXHIBIT A - Legal Description...................... A-1
EXHIBIT B - Form of Legal Opinion.................. B-1 - B-4
EXHIBIT C - Certification and Agreement............ C-1 - C-4
EXHIBIT D - Form of Completion Certificate......... D-1
EXHIBIT E - Accountant's Certificate............... E-1
EXHIBIT F - Contractor's Letter.....................F-1
EXHIBIT G - Accounting Form ........................G-1
EXHIBIT H - Report of Operations................... H-1 - H-10
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Amended And Restated Agreement
Of Limited Partnership Of
Calico Terrace Limited Partnership
This Amended And Restated Agreement Of Limited Partnership is being
entered into effective as of the date written below by and between River Valley
Planning & Development Corp., as the general partner (the "General Partner"),
WNC Holding, LLC, a California limited partnership as the limited partner (the
"Limited Partner"), WNC Housing, L.P., as the special limited partner (the
"Special Limited Partner") and River Valley Investments, Inc., as the
withdrawing limited partner (the "Withdrawing Limited Partner").
RECITALS
WHEREAS, Calico Terrace Limited Partnership, an Arkansas limited
partnership (the "Partnership") recorded a certificate of limited partnership
with the Arkansas Secretary of State on February 7, 2002. A partnership
agreement dated January 24, 2002 was entered into by and between the General
Partner and River Valley Holdings, Inc., the limited partner (the "First 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:
1
ARTICLE I
DEFINITIONS
Section 1.1 "Accountant" shall mean ▇▇▇▇▇ & ▇▇▇▇▇, CPA's, P.A., or such other
firm of independent certified public accountants as may be engaged for the
Partnership by the General Partner with the Consent of the Special Limited
Partner. Notwithstanding any provision of this Agreement to the contrary, the
Special Limited Partner shall have the discretion to dismiss the Accountant for
cause if such Accountant fails to provide, or untimely provides, or inaccurately
provides, the information required in Section 14.2 or 14.3 of this Agreement.
Section 1.2 "Act" shall mean the laws of the State governing limited
partnerships, as now in effect and as the same may be amended from time to time.
Section 1.3 "Actual Tax Credit" shall mean as of any point in time, the total
amount of the LIHTC actually allocated by the Partnership to the Limited Partner
and not subsequently recaptured or disallowed, representing 99.98% of the LIHTC
actually received by the Partnership, as shown on the applicable tax returns of
the Partnership.
Section 1.4 "Adjusted Capital Account Deficit" shall mean with respect to any
Partner, the deficit balance, if any, in such Partner's Capital Account as of
the end of the relevant fiscal period, after giving effect to the following
adjustments:
(a) credit to such Capital Account any amounts which such Partner is
obligated to restore or is deemed to be obligated to restore pursuant to the
penultimate sentences of Treasury Regulations Sections 1.704-2(g)(1) and
1.704-2(i)(5); and
(b) debit to such Capital Account the items described in Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6) of
the Treasury Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Treasury
Regulations and shall be interpreted consistently therewith.
Section 1.5 "Affiliate" shall mean (a) any Person directly or indirectly
controlling, controlled by, or under common control with another Person; (b) any
Person owning or controlling 10% or more of the outstanding voting securities of
such other Person; (c) any officer, director, trustee, or partner of such other
Person; and (d) if such Person is an officer, director, trustee or general
partner, any other Person for which such Person acts in any such capacity.
2
Section 1.6 "Agreement" or "Partnership Agreement" shall mean this Amended and
Restated Agreement of Limited Partnership, as it may be amended from time to
time. Words such as "herein," "hereinafter," "hereof," "hereto," "hereby" and
"hereunder," when used with reference to this Agreement, refers to this
Agreement as a whole, unless the context otherwise requires.
Section 1.7 "Apartment Housing" shall collectively mean the approximately 4.99
acres of land in Calico Rock, Izard County, Arkansas, as more fully described in
Exhibit "A" attached hereto and incorporated herein by this reference, and the
Improvements.
Section 1.8 "Architect of Record" shall mean ▇▇▇▇▇▇▇▇▇ Architects, P.A. The
General Partner, on behalf of the Partnership, shall enter into a contract with
the Architect of Record to perform certain duties and responsibilities
including, but are not limited to: designing the Improvements; preparing the
construction blueprints; preparing the property specifications manual; contract
administrative services; close-out procedures; inspecting for and overseeing
resolution of the Contractor's final punch list; receive and approve operations
and maintenance manuals; and collect, review, approve and forward to the
Partnership all product, material and construction warranties.
Section 1.9 "Asset Management Fee" shall have the meaning set forth in Section
9.2(d) hereof.
Section 1.10 "Assignee" shall mean a Person who has acquired all or a portion of
the Limited Partner's or Special Limited Partner's beneficial interest in the
Partnership and who has not been substituted in the stead of the transferor as a
Partner.
Section 1.11 "Bankruptcy" or "Bankrupt" shall mean the making of an assignment
for the benefit of creditors, becoming a party to any liquidation or dissolution
action or proceeding, the commencement of any bankruptcy, reorganization,
insolvency or other proceeding for the relief of financially distressed debtors,
or the appointment of a receiver, liquidator, custodian or trustee and, if any
of the same occur involuntarily, the same not being dismissed, stayed or
discharged within 90 days; or the entry of an order for relief under Title 11 of
the United States Code. A Partner shall be deemed Bankrupt if the Bankruptcy of
such Partner shall have occurred and be continuing.
Section 1.12 "Break-even Operations" shall mean 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 purpose 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 Break-even Operations; and, (b) Cash
Expenses shall include the amount of any Management Fee or portion thereof
currently deferred and not paid.
3
Section 1.13 "Budget" shall mean the annual operating Budget of the
Partnership as more fully described in Section 14.3 of this Agreement.
Section 1.14 "Capital Account" shall mean, with respect to each Partner, the
account maintained for such Partner comprised of such Partner's Capital
Contribution as increased by allocations to such Partner of Partnership Income
(or items thereof) and any items in the nature of income or gain which are
specially allocated pursuant to Section 10.3 or 10.4 hereof, and decreased by
the amount of any Distributions made to such Partner, and allocations to such
Partner of Partnership Losses (or items thereof) and any items in the nature of
expenses or losses which are specially allocated pursuant to Section 10.3 or
10.4 hereof. In the event of any transfer of an interest in the Partnership in
accordance with the terms of this Agreement, the transferee shall succeed to the
Capital Account of the transferor to the extent it relates to the transferred
interest. The foregoing definition and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Treasury Regulation Section 1.704-1(b), as amended or any successor thereto, and
shall be interpreted and applied in a manner consistent with such Treasury
Regulation.
Section 1.15 "Capital Contribution" shall mean the total amount of money, or the
Gross Asset Value of property contributed to the Partnership, if any, by all the
Partners or any class of Partners or any one Partner as the case may be (or by a
predecessor-in-interest of such Partner or Partners), reduced by any such
capital which shall have been returned pursuant to Section 7.3, 7.4 or 7.6 of
this Agreement. A loan to the Partnership by a Partner shall not be considered a
Capital Contribution.
Section 1.16 "Cash Expenses" shall mean all cash operating obligations of the
Partnership (other than those covered by Insurance) in accordance with the
applicable Budget, including without limitation, the payment of the monthly
Mortgage payments, the Management Agent fees (which shall be deemed to include
that portion of such fees which is currently deferred and not paid), the funding
of reserves in accordance with Article VIII of this Agreement, advertising and
promotion, utilities, maintenance, repairs, Partner communications, legal,
telephone, any other expenses which may reasonably be expected to be paid in a
subsequent period but which on an accrual basis is allocable to the period in
question, such as Insurance, real estate taxes and audit, tax or accounting
expenses (excluding deductions for cost recovery of buildings; improvements and
personal property and amortization of any financing fees) and any seasonal
expenses (such as snow removal, the use of air conditioners in the middle of the
summer, or heaters in the middle of the winter) which may reasonably be expected
to be paid in a subsequent period shall be allocated equally per month over the
calendar year. Cash Expenses payable to Partners or Affiliates of Partners shall
be paid after Cash Expenses payable to third parties. Construction Loan interest
and construction costs of any nature whatsoever are not Cash Expenses and shall
not be paid from Cash Receipts. The provisions of Section 6.2 govern the payment
of construction costs and construction interest.
4
Section 1.17 "Cash Receipts" shall mean actual cash received on a cash basis by
the Partnership from operating revenues of the Partnership, including without
limitation rental income (but not any subsidy thereof from the General Partner
or an Affiliate thereof), tenant security deposits that have been forfeited by
tenants pursuant to the laws of the State, laundry income, 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, any extraordinary receipt of funds, and any income earned on
investment of its funds. Neither the General Partner nor its Affiliates shall be
entitled to payment of any Cash Receipts by virtue of a separate contract,
agreement, obligation or the like, except as provided in this Agreement or with
the Consent of the Special Limited Partner unless disclosed to and approved by
the Special Limited Partner.
Section 1.18 "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, or any successor statute.
Section 1.19 "Completion of Construction" shall mean the date the Partnership
receives the required certificate of occupancy (or the local equivalent) for all
twenty-nine (29) apartment units, or by the issuance of the inspecting
architect's certification, in a form substantially similar to the form attached
hereto as Exhibit "D" and incorporated herein by this reference, with respect to
completion of all the apartment units in the Apartment Housing. Completion of
Construction further means that the construction shall be completed in good
quality, and free and clear of all mechanic, material and similar liens.
Notwithstanding, Completion of Construction shall occur when: the statutory time
period for the filing of any liens by the Contractor, subcontractors, material
suppliers or any one else entitled to file a construction lien has lapsed unless
such filed liens, date any liens or other encumbrances as to title to the
Apartment Housing exist, other than the Construction Loan, or the Mortgage Loan,
have been approved by the Acquisition Loan roll-over and HOME Funds Loan.
Section 1.20 "Compliance Period" shall mean the period set forth in Section
42 (i)(1) of the Code, as amended, or any successor statute.
Section 1.21 "Consent of the Special Limited Partner" shall mean the prior
written consent of the Special Limited Partner.
Section 1.22 "Construction Completion, Operating Deficit and Tax Credit
Guarantee Agreement" shall mean that agreement entered into the even date hereof
by and between the Partnership, the General Partner and the Limited Partner and
incorporated herein by this reference.
5
Section 1.23 "Construction Contract" shall mean the construction contract dated
June 24, 2002 in the amount of $693,084 entered into between the Partnership and
the Contractor pursuant to which the Improvements are being constructed in
accordance with the Plans and Specifications. The Construction Contract shall be
a fixed price agreement (includes materials and labor) at a cost consistent with
the Construction Budget.
Section 1.24 "Construction Lender" shall mean ▇▇▇▇▇▇ Bank & Trust or any
successor thereto.
Section 1.25 "Construction Loan" shall mean the loans obtained from ▇▇▇▇▇▇ Bank
& Trust in the principal amount of $515,000 at an interest rate equal to 6.25%
for a term of 12 months, to provide funds for the acquisition, renovation and/or
construction and development of the Apartment Housing. Where the context admits,
the term "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.
Section 1.26 "Contractor" shall mean The ▇▇▇▇▇▇▇ Group, which is the general
construction contractor for the Apartment Housing. At or before Completion of
Construction, the Contractor shall provide the Partnership with a closeout
binder, which shall include, but is not limited to, as-built drawings, all
operating manuals, and all manufacturing warranty agreements. In addition, the
Contractor shall provide the Partnership a one-year warranty on all parts,
materials and work-quality.
Section 1.27 "Debt Service Coverage" shall mean for the applicable period the
ratio between the Net Operating Income (excluding Mortgage payments) and the
debt service required to be paid on the Mortgage(s). As example, a 1.10 Debt
Service Coverage means that for every $1.00 of debt service required to be paid
there must be $1.10 of Net Operating Income available. A worksheet for the
calculation of Debt Service Coverage is found in the Report of Operations
attached hereto as Exhibit "H" and incorporated herein by this reference
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 to
be funded in accordance with Article VIII that is currently deferred and not
paid.
Section 1.28 "Deferred Management Fee" shall have the meaning set forth in
Section 9.2(c) hereof.
Section 1.29 "Developer" shall mean Seaside Development Corp.
6
Section 1.30 "Development Budget" shall mean the agreed upon cost of
construction of the Improvements, including soft costs (which includes, but is
not limited to, financing charges, market study, Development Fee, architect
fees, etc.), based upon the Plans and Specifications. The final Development
Budget is referenced in the Development, Construction and Operating Budget
Agreement entered into by and between the Partners the even date hereof, and
incorporated herein by this reference.
Section 1.31 "Development Fee" shall mean the fee payable to the Developer for
services incident to the development and construction of the Apartment Housing
in accordance with the Development Fee Agreement between the Partnership and the
Developer dated the even date herewith and incorporated herein by this
reference. Development activities do not include services for the acquisition of
land or syndication activities.
Section 1.32 "Distributions" shall mean the total amount of money, or the Gross
Asset Value of property (net of liabilities securing such distributed property
that such Partner is considered to assume or take subject to under Section 752
of the Code), distributed to Partners with respect to their Interests in the
Partnership, but shall not include any payments to the General Partner or its
Affiliates for fees or other compensation as provided in this Agreement or any
guaranteed payment within the meaning of Section 707(c) of the Code, as amended,
or any successor thereto.
Section 1.33 "Fair Market Value" shall mean, with respect to any property, real
or personal, the price a ready, willing and able buyer would pay to a ready,
willing and able seller of the property, provided that such value is reasonably
agreed to between the parties in arm's-length negotiations and the parties have
sufficiently adverse interests.
Section 1.34 "Financial Interest" shall mean the General Partner's capital
interest in the Partnership to be contributed and maintained pursuant to the
requirements of FmHA Instruction 1944-E, Section 1944.211(a)(13)(ii) or any
amendments thereto. Such Financial Interest shall not affect the Partners'
allocable share of the Profits, Losses, Tax Credits or Cash Flow From Operations
as set forth in this Agreement.
Section 1.35 "First Year Certificate" shall mean the certificate to be filed by
the General Partner with the Secretary of the Treasury as required by Code
Section 42(1)(1), as amended, or any successor thereto.
Section 1.36 "FmHA" shall mean the United States Department of Agriculture,
Rural Development-Arkansas (formerly Farmers Home Administration) or any
successor thereto.
Section 1.37 "FmHA Interest Credit Agreement" shall mean the Multiple Family
Housing Interest Credit and Rental Assistance Agreement (Form FmHA 1944-7 or any
successor thereof) between the FmHA and the Partnership whereby FmHA will
provide a monthly credit subsidy to the Partnership's Mortgage account when the
Partnership makes each monthly payment on the Mortgage.
7
Section 1.38 "FmHA Loan Agreement" shall mean the Loan Agreement for an RRH Loan
to a Limited Partnership Operating on a Limited Profit Basis (Form FmHA 1944-34
or any successor thereof) between the FmHA and the Partnership made in
consideration of the Mortgage Loan to the Partnership by the FmHA pursuant to
Section 515(b) of the Housing Act of 1949 to build a low to moderate income
apartment complex.
Section 1.39 "Force Majeure" shall mean any act of God, strike, lockout, or
other industrial disturbance, act of the public enemy, war, blockage, public
riot, fire, flood, explosion, governmental action, governmental delay, or
restraint.
Section 1.40 "General Partner(s)" shall mean River Valley Planning & Development
Corp. 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 and or individually may
mean any General Partner as the context dictates.
Section 1.41 "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;
8
(c) the Gross Asset Value of any Partnership asset distributed to any
Partner shall be adjusted to equal the Fair Market Value of such asset on the
date of distribution as determined by the distributee and the General Partner,
provided that, if the distributee is a General Partner, the determination of the
Fair Market Value of the distributed asset shall be determined by appraisal; and
(d) the Gross Asset Values of Partnership assets shall be increased (or
decreased) to reflect any adjustments to the adjusted basis of such assets
pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent
that such adjustments are taken into account in determining Capital Accounts
pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m) and Section
10.3(g) hereof; provided however, that Gross Asset Values shall not be adjusted
pursuant to this Section 1.38(d) to the extent the General Partner determines
that an adjustment pursuant to Section 1.38(b) hereof is necessary or
appropriate in connection with a transaction that would otherwise result in an
adjustment pursuant to this Section 1.38(d).
If the Gross Asset Value of an asset has been determined or adjusted
pursuant to Section 1.38(a), Section 1.38(b), or Section 1.38(d) hereof, such
Gross Asset Value shall thereafter be adjusted by the depreciation taken into
account with respect to such asset for purposes of computing Income and Losses.
Section 1.42 "Hazardous Substance" shall mean and include any substance,
material or waste, including asbestos, petroleum and petroleum products
(including crude oil), that is or becomes designated, classified or regulated as
"toxic" or "hazardous" or a "pollutant" or that is or becomes similarly
designated, classified or regulated, under any federal, state or local law,
regulation or ordinance including, without limitation, Compensation and
Liability Act of 1980, as amended, the Hazardous Materials Transportation Act,
as amended, the Resource Conservation and Recovery Act, as amended, and the
regulations adopted and publications promulgated pursuant thereto.
Section 1.43 "Improvements" shall mean the seven buildings containing
twenty-nine (29) apartment units and ancillary and appurtenant facilities
(including those intended for commercial use, if any,) being constructed for
families and built in accordance with the Project Documents. It shall also
include all furnishings, equipment and personal property used in connection with
the operation thereof.
Section 1.44 "In-Balance" shall mean, on any occasion, when the amount of the
undisbursed Construction Loan and the undisbursed Capital Contributions of the
Limited Partner and the Special Limited Partner required to be paid-in through
and including the issuance of a certificate of occupancy (or the local
equivalent) are sufficient in the Special Limited Partner's reasonable judgment
to pay all of the following sums: (a) all costs of construction to achieve
Completion of Construction; (b) all costs of marketing, ownership, 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 the 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.
9
Section 1.45 "Incentive Management Fee" shall have the meaning set forth in
Section 9.2(e) hereof.
Section 1.46 "Income and Loss(es)" shall mean, for each fiscal year or other
period, an amount equal to the Partnership's taxable income or loss for such
year or period, determined in accordance with Code Section 703(a) (for this
purpose, all items of income, gain, loss or deduction required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in taxable
income or loss), with the following adjustments:
(a) any income of the Partnership that is exempt from federal income tax
and not otherwise taken into account in computing Income or Losses pursuant to
this Section 1.40 shall be added to such taxable income or loss;
(b) any expenditures of the Partnership described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to
Regulation Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in
computing Income and Losses pursuant to this Section 1.40 shall be subtracted
from such taxable income or loss;
(c) in the event the Gross Asset Value of any Partnership asset is adjusted
pursuant to Section 1.36(a) or (b) hereof, the amount of such adjustment shall
be taken into account as gain or loss from the disposition of such asset for
purposes of computing Income and Losses;
(d) gain or loss resulting from any disposition of Partnership assets with
respect to which gain or loss is recognized for federal income tax purposes
shall be computed by reference to the Gross Asset Value of the property disposed
of, notwithstanding that the adjusted tax basis of such property differs from
its Gross Asset Value;
(e) in lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing such taxable income or loss, there
shall be taken into account depreciation for such fiscal year or other period,
computed as provided below; and
(f) notwithstanding any other provision of this definition, any items which
are specially allocated pursuant to Sections 10.3 or 10.4 hereof shall not
otherwise be taken into account in computing Income or Losses.
10
Depreciation for each fiscal year or other period shall be calculated as
follows: an amount equal to the depreciation, amortization, or other cost
recovery deduction allowable with respect to an asset for such year or other
period for federal income tax purposes, except that if the Gross Asset Value of
an asset differs from its adjusted basis for federal income tax purposes at the
beginning of such year or other period, depreciation shall be an amount which
bears the same ratio to such beginning Gross Asset Value as the federal income
tax depreciation, amortization, or other cost recovery deduction for such year
or other period bears to such beginning adjusted tax basis; provided, however,
if the federal income tax depreciation, amortization, or other cost recovery
deduction for such year is zero, depreciation shall be determined with reference
to such beginning Gross Asset Value using any reasonable method selected by the
General Partner.
For purposes of this Agreement, the term Income when used alone shall
include all items of income or revenue contemplated in this Section and the term
Losses when used alone shall include all items of loss or deductions
contemplated in this Section.
Section 1.47 "Inspecting Architect" shall mean , or any successor thereto with
the Consent of the Special Limited Partner. The Inspecting Architect shall make
regular inspections of the construction site, but in no event less than once a
month, to confirm that construction of the Improvements are in conformance with
the Plans and Specifications. The Inspecting Architect will sign-off on all the
draw requests made by the Contractor and provide the documents specified in
Section 14.3(a) of this Agreement. The Limited Partner shall budget for, and pay
the cost of, the Inspecting Architect. If there is, at any time, an identity of
interest between the Partnership and the Inspecting Architect, or between the
Contractor and the Inspecting Architect, then the General Partner will
immediately relieve the Inspecting Architect of any inspecting duties. The
General Partner shall dismiss the Inspecting Architect for cause if the
Inspecting Architect fails to detect, or fails to notify the General Partner and
Special Limited Partner within five business days of a draw request, that: (a)
the construction budget is not In-Balance; (b) a change order; (c) any
modification to the Plans and Specifications; or (d) any modification to a
construction line item from the approved construction budget as specified in the
Development, Construction and Operating Budget Agreement.
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Section 1.48 "Insurance" shall mean:
(a) during construction, the Partnership will provide and maintain, or
cause the Contractor to provide and maintain, builder's risk insurance in an
amount equal to 100% of the insurable value of the Apartment Housing at the date
of completion; comprehensive general liability insurance with limits against
bodily injury of not less than $1,000,000 per occurrence and an aggregate of
$2,000,000 and against property damage of not less than $1,000,000; and worker's
compensation insurance, with statutory guidelines;
(b) during operations the Partnership will provide and maintain business
interruption coverage covering actual sustained loss for 12 months; worker's
compensation; hazard coverage (including but not limited to fire, or other
casualty loss to any structure or building on the Apartment Housing in an amount
equal to the full replacement value of the damaged property without deducting
for depreciation); and comprehensive general liability coverage against
liability claims for bodily injury or property damage in the minimum amount of
$1,000,000 per occurrence and an aggregate of $2,000,000;
(c) all liability coverage shall include an umbrella liability coverage in
a minimum amount of $1,000,000 per occurrence and an aggregate of $1,000,000;
(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; and
(g) the Contractor must also provide evidence of liability coverage equal
to $1,000,000 per occurrence with an aggregate of $2,000,000 and shall name the
Partnership as an additional insured and WNC & Associates, Inc., as certificate
holder.
(h) the Insurance Policy or policies shall not have a deductible provision
in excess of $2,500; and
(i) the term "Insurance" specifically excludes co-insurance (property and
liability insurance) or self-insured.
Section 1.49 "Insurance Company" shall mean any insurance company engaged by the
General Partner for the Partnership with the Consent of the Special Limited
Partner which Insurance Company shall have an A rating or better for financial
safety by A.M. Best or Standard & Poor's.
12
Section 1.50 "Interest" shall mean the entire ownership interest of a Partner in
the Partnership at any particular time, including the right of such Partner to
any and all benefits to which a Partner may be entitled hereunder and the
obligation of such Partner to comply with the terms of this Agreement.
Section 1.51 "Involuntary Withdrawal" shall mean any Withdrawal of a General
Partner caused by death, adjudication of insanity or incompetence, Bankruptcy,
or the removal of a General Partner pursuant to Section 13.2 hereof.
Section 1.52 "Land Acquisition Fee" shall mean the fee payable to the General
Partner in an amount equal to $450 for the General Partner's services in
locating, negotiating and closing on the purchase of the real property upon
which the Improvements are, or will be, erected.
Section 1.53 "LIHTC" shall mean the low-income housing tax credit established by
TRA 1986 and which is provided for in Section 42 of the Code, as amended, or any
successor thereto.
Section 1.54 "Limited Partner" shall mean WNC Holding, LLC, a California limited
partnership, and such other Persons as are admitted to the Partnership as
additional or Substitute Limited Partners pursuant to this Agreement.
Section 1.55 "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
Tri-State Management Corp.
Section 1.56 "Management Agreement" shall mean the agreement between the
Partnership and the Management Agent for property management services. The
management fee shall be in an amount approved by FmHA. Neither the Management
Agreement nor ancillary agreement shall provide for an initial rent-up fee, a
set-up fee, nor any other similar pre-management fee payable to the Management
Agent. The Management Agreement shall provide that it will be terminable at will
by the Partnership at anytime following the Withdrawal or removal of the General
Partner and, in any event, on any anniversary of the date of execution of the
Management Agreement, without payment or penalty for failure to renew the same.
Section 1.57 "Minimum Set-Aside Test" shall mean the 40-60 set-aside test
pursuant to Section 42(g), as amended and any successor thereto, of the Code
with respect to the percentage of apartment units in the Apartment Housing to be
occupied by tenants whose incomes are equal to or less than the required
percentage of the area median gross income.
13
Section 1.58 "Mortgage" or "Mortgage Loan" shall mean the permanent nonrecourse
financing wherein the Partnership promises to pay: (a) USDA Rural Development,
or its successor or assignee, the principal sum of approximately $904,590, plus
interest on the principal 1% per annum over a term of 30 years and amortized
over 42 years; and, (b) USDA Rural Development, or its successor or assignee,
the principal sum of $530,000, plus interest on the principal at 1% per annum
over a term of 30 years and amortized over 42 years. Where the context admits,
the term "Mortgage" or "Mortgage Loan" shall include any mortgage, deed, deed of
trust, note, regulatory agreement, security agreement, assumption agreement or
other instrument executed in connection with the Mortgage which is binding on
the Partnership; and in case any Mortgage is replaced or supplemented by any
subsequent mortgage or mortgages, the Mortgage shall refer to any such
subsequent mortgage or mortgages. Prior to closing the Mortgage, the General
Partner shall provide to the Special Limited Partner a draft of the Mortgage
documents for review and approval. Based on the draft Mortgage documents, if the
terms of the Mortgage are not as specified above and the Special Limited Partner
determines that the Debt Service Coverage falls below 1.10 based on then current
Cash Expenses and Cash Receipts then the General Partner shall adjust the
principal loan amount and close on a Mortgage which will produce a 1.10 Debt
Service Coverage. The Mortgage funds shall be used to 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.
Section 1.59 "Net Operating Income" shall mean the cash available for
Distribution on an annual basis, when Cash Receipts exceed Cash Expenses.
Section 1.60 "Nonrecourse Deductions" shall have the meaning given it in
Treasury Regulations Section 1.704-2(b)(1).
Section 1.61 "Nonrecourse Liability" shall have the meaning given it in Treasury
Regulations Section 1.704-2(b)(3).
Section 1.62 "Operating Deficit" shall mean, for the applicable period,
insufficient funds to pay operating costs when Cash Expenses exceed Cash
Receipts, as determined by the Accountant and approved by the Special Limited
Partner.
Section 1.63 "Operating Deficit Guarantee Period" shall mean the period
commencing the date the first apartment unit in the Apartment Housing is
available for its intended use and ending fifteen years following three
consecutive months of break-even operations. The Operating Deficit Guarantee
Period will not expire unless the Partnership has achieved Completion of
Construction of the Apartment Housing.
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Section 1.64 "Operating Loans" shall mean loans made by the General Partner to
the Partnership pursuant to Article VI of this Agreement, which loans do not
bear interest and are repayable only as provided in Article XI of this
Agreement.
Section 1.65 "Partner(s)" shall collectively mean the General Partner, the
Limited Partner and the Special Limited Partner or individually may mean any
Partner as the context dictates.
Section 1.66 "Partner Nonrecourse Debt" shall have the meaning set forth in
Section 1.704-2(b)(4) of the Treasury Regulations.
Section 1.67 "Partner Nonrecourse Debt Minimum Gain" shall mean an amount, with
respect to each Partner Nonrecourse Debt, equal to the Partnership Minimum Gain
that would result if such Partner Nonrecourse Debt were treated as a Nonrecourse
Liability, determined in accordance with Section 1.704-2(i)(3) of the Treasury
Regulations.
Section 1.68 "Partner Nonrecourse Deductions" shall have the meaning set forth
in Sections 1.704-2 (i)(1) and 1.704-2(i)(2) of the Treasury Regulations.
Section 1.69 "Partnership" shall mean the limited partnership continued under
this Agreement.
Section 1.70 "Partnership Minimum Gain" shall mean the amount determined in
accordance with the principles of Treasury Regulation Sections 1.704-2(b)(2) and
1.704-2(d).
Section 1.71 "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; (b) the Mortgage shall have closed and funded; and (c)
amortization of the Mortgage shall have commenced.
Section 1.72 "Person" shall collectively mean an individual, proprietorship,
trust, estate, partnership, joint venture, association, company, corporation or
other entity.
Section 1.73 "Plans and Specifications" shall mean the plans and specifications
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. Any changes to the Plans and Specifications after
approval by the appropriate government building department shall require the
Consent of the Special Limited Partner.
Section 1.74 "Project Documents" shall mean all documents relating to the
Construction Loan, Mortgage Loan and Construction Contract. It shall also
include all documents required by any governmental agency having jurisdiction
over the Apartment Housing in connection with the development, construction and
financing of the Apartment Housing, including but not limited to, the approved
Plans and Specifications for the development and construction of the Apartment
Housing.
15
Section 1.75 "Projected Annual Tax Credits" shall mean LIHTC in the amount of
$21,515 for 2003, $64,546 per year for each of the years 2004 through 2012, and
$43,030 for 2013, 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 $645,520 to be available
to the Partnership.
Section 1.76 "Projected Tax Credits" shall mean LIHTC in the aggregate
amount of $645,520.
Section 1.77 "Qualified Tenants" shall mean any tenants who have incomes of 60%
(or such smaller percentage as the General Partner shall agree) or less of the
area median gross income, as adjusted for family size, so as to make the
Apartment Housing eligible for LIHC.
Section 1.78 "Rent Restriction Test" shall mean the test pursuant to Section 42
of the Code whereby the gross rent charged to tenants of the low-income
apartment units in the Apartment Housing cannot exceed 30% of the qualifying
income levels of those units under Section 42.
Section 1.79 "Reporting Fee" shall have the meaning set forth in Section
9.2(d) hereof.
Section 1.80 "Revised Projected Tax Credits" shall have the meaning set
forth in Section 7.4(a) hereof.
Section 1.81 "Sale or Refinancing" shall mean any of the following items or
transactions: a sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Partnership, a condemnation of or
casualty at the Apartment Housing or any part thereof, a claim against a title
insurance company, the refinancing or any Mortgage or other indebtedness of the
Partnership and any similar item or transaction; provided, however, that the
payment of Capital Contributions by the Partners shall not be included within
the meaning of the term "Sale or Refinancing."
Section 1.82 "Sale or Refinancing Proceeds" shall mean all cash receipts of the
Partnership arising from a Sale or Refinancing (including principal and interest
received on a debt obligation received as consideration in whole or in part, on
a Sale or Refinancing) less the amount paid or to be paid in connection with or
as an expense of such Sale or Refinancing, and with regard to damage recoveries
or insurance or condemnation proceeds, the amount paid or to be paid for
repairs, replacements or renewals resulting from damage to or partial
condemnation of the Apartment Housing.
16
Section 1.83 "Special Limited Partner" shall mean WNC Housing, L.P., a
California limited partnership, and such other Persons as are admitted to the
Partnership as additional or substitute Special Limited Partners pursuant to
this Agreement.
Section 1.84 "State" shall mean the State of Arkansas.
Section 1.85 "State Tax Credit Agency" shall mean the state agency of Arkansas,
which has the responsibility and authority to administer the LIHTC program in
Arkansas.
Section 1.86 "Substitute Limited Partner" shall mean any Person who is admitted
to the Partnership as a Limited Partner pursuant to Section 12.5 or acquires the
Interest of the Limited Partner pursuant to Section 7.3 of this Agreement.
Section 1.87 "Syndication Fee" shall mean the fee payable to the General Partner
in an amount equal to $10,000 for the General Partner's services in forming the
Partnership, locating and approving the Limited Partner and Special Limited
Partner as the investors in the Partnership, negotiating and finalizing this
Partnership Agreement and for such other services referenced in Treasury
Regulation Section 1.709-2(B).
Section 1.88 "Tax Credit" shall mean any credit permitted under the Code or the
law of any state against the federal or a state income tax liability of any
Partner as a result of activities or expenditures of the Partnership including,
without limitation, LIHTC.
Section 1.89 "Tax Credit Compliance Fee" shall mean the fee payable to the
General Partner in accordance with Section 9.2(f) of this Agreement.
Section 1.90 "Tax Credit Conditions" shall mean, for the duration of the
Compliance Period, any and all restrictions including, but not limited to,
applicable federal, state and local laws, rules and regulations, which must be
complied with in order to qualify for the LIHTC or to avoid an event of
recapture in respect of the LIHTC.
Section 1.91 "Tax Credit Period" shall mean the ten year time period referenced
in Code Section 42(f)(1) over which the Projected Tax Credits are allocated to
the Partners. It is the intent of the Partners that the Projected Tax Credits
will be allocated during the Tax Credit Period and not a longer term.
Section 1.92 "Title Policy" shall mean the policy of insurance covering the fee
simple title to the Apartment Housing from a company approved by the Special
Limited Partner. The Title Policy shall be an ALTA owners title policy naming
the Partnership as insured party, the Limited Partner and Special Limited
Partner as insured party and including the following endorsements:
non-imputation, fairway, access, contiguity, survey, owner's comprehensive,
zoning and subdivision, if applicable. The Title Policy shall also insure
against rights-of-way, easements, or claims of easements, not shown by public
records During construction of the Improvements, the Title Policy shall be in an
amount equal 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.
17
Section 1.93 "TRA 1986" shall mean the Tax Reform Act of 1986.
Section 1.94 "Treasury Regulations" shall mean the Income Tax Regulations
promulgated under the Code, as such regulations may be amended from time to time
(including corresponding provisions of succeeding regulations).
Section 1.95 "Withdrawing" or "Withdrawal" (including the verb form "Withdraw"
and the adjectival forms "Withdrawing" and "Withdrawn") shall mean, as to a
General Partner, the occurrence of the death, adjudication of insanity or
incompetence, Bankruptcy of such Partner, the withdrawal, removal or retirement
from the Partnership of such Partner for any reason, including any sale, pledge,
encumbering, assignment or other transfer of all or any part of its General
Partner Interest and those situations when a General Partner may no longer
continue as a General Partner by reason of any law or pursuant to any terms of
this Agreement.
Section 1.96 "Withdrawing Limited Partner" shall mean River Valley
Investments, Inc.
ARTICLE II
NAME
The name of the Partnership shall be "Calico Terrace 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 ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇, or at such other place or places within the State as the General Partner
may hereafter designate.
Section 3.2 Agent for Service of Process. The name of the agent for
service of process on the Partnership is ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, whose address is
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
18
ARTICLE IV
PURPOSE
Section 4.1 Purpose of the Partnership. The purpose of the Partnership
is to acquire, construct, own and operate the Apartment Housing in order to
provide, in part, Tax Credits to the Partners in accordance with the provisions
of the Code and the Treasury Regulations applicable to LIHTC and to sell the
Apartment Housing. The Partnership shall not engage in any business or activity
which is not incident to the attainment of such purpose.
Section 4.2 Authority of the Partnership. In order to carry out its
purpose, the Partnership is empowered and authorized to do any and all acts and
things necessary, appropriate, proper, advisable or incidental to the
furtherance and accomplishment of its purpose, and for protection and benefit of
the Partnership, including but not limited to the following:
(a) acquire ownership of the real property referred to in Exhibit "A"
attached hereto;
(b) construct, renovate, rehabilitate, own, maintain and operate the
Apartment Housing in accordance with the Project Documents;
(c) provide housing to Qualified Tenants, subject to the Minimum Set-Aside
Test and the Rent Restriction Test and consistent with the requirements of the
Project Documents so long as any Project Documents remain in force;
(d) maintain and operate the Apartment Housing, including hiring the
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 Arkansas, and shall continue until February 10, 2052
unless terminated earlier in accordance with the provisions of this Agreement or
as otherwise provided by law.
ARTICLE VI
GENERAL PARTNER'S CONTRIBUTIONS AND LOANS
Section 6.1 Capital Contribution of General Partner. The General Partner
shall make a Capital Contribution equal to $10.
Section 6.2 Construction Obligations.
(a) The General Partner hereby guarantees a lien free Completion of
Construction of the Apartment Housing on or before August 1, 2003 ("Completion
Date") at a total development cost of not more than $1,900,078 ("Development
Budget"), which includes all hard and soft costs incident to the acquisition,
development and construction of the Apartment Housing in accordance with the
Construction Budget, the Construction Contract, and the Project Documents. At
any time during construction and prior to Permanent Mortgage Commencement, if
the Special Limited Partner ascertains that the Development Budget exceeds the
sum of the Capital Contributions and the Mortgage amount then the General
Partner shall be responsible for and shall be obligated to pay the difference
thereof within thirty days of receiving written notice from the Special Limited
Partner except as otherwise provided for in this Agreement. Upon such notice
from the Special Limited Partner, the General Partner shall advance the
requested funds into the Construction Lender's construction account. Any
advances by the General Partner pursuant to the this section 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.
Upon such notice from the Special Limited Partner, the General Partner shall
advance the requested funds into the Construction Lender's construction account.
(b) In addition, if (1) the Improvements are not completed on or before
the Completion Date (which date may be extended in the events of Force Majeure,
but in no event longer than three months from the Completion Date); (2) prior to
completing the Improvements, the Construction Lender sends a notice of default
under the Construction Loan; or (3) a foreclosure action is commenced against
the Partnership, then at the Special Limited Partner's election, either the
General Partner will be removed from the Partnership and the Special Limited
Partner will be admitted as successor General Partner, all in accordance with
Article XIII hereof, or the General Partner will repurchase the Interest of the
Limited Partner and the Special Limited Partner for an amount equal to the
amounts theretofore paid by the Limited Partner and the Special Limited Partner,
and the Limited Partner and the Special Limited Partner shall have no further
Interest in the Partnership. If the Special Limited Partner elects to have the
General Partner repurchase such Interests then the repurchase shall occur within
60 days after the General Partner receives written demand from the Special
Limited Partner. If the Special Limited Partner elects to remove the General
Partner then the provisions of Article XIII apply.
20
Section 6.3 Operating Obligations. From the date the first apartment unit
in the Apartment Housing is available for its intended use until three
consecutive months of Break-even Operations, the General Partner will
immediately provide to the Partnership the necessary funds to pay Operating
Deficits, which funds shall not be repayable, shall not change the Interest of
any Partner and shall be considered a guaranteed payment to the Partnership for
cost overruns. For the balance of the Operating Deficit Guarantee Period the
General Partner will immediately provide Operating Loans to pay any Operating
Deficits. The aggregate maximum amount of the Operating Loan(s) the General
Partner will be obligated to lend will be equal to one year's operating expenses
(including debt and reserves) approved by the General Partner and the Special
Limited Partner. Each Operating Loan shall be nonrecourse to the Partners, and
shall be repayable out of 50% of the available Net Operating Income or Sale or
Refinancing Proceeds in accordance with Article XI of this Agreement.
Section 6.4 Other General Partner Loans. After expiration of the Operating
Deficit Guarantee Period, with the Consent of the Special Limited Partner, the
General Partner may loan to the Partnership any sums required by the Partnership
and not otherwise reasonably available to it. Any such loan shall bear simple
interest (not compounded) at the 10-year Treasury money market rate in effect as
of the day of the General Partner loan, or, if lesser, the maximum legal rate.
The maturity date and repayment schedule of any such loan shall be as agreed to
by the General Partner and the Special Limited Partner. The terms of any such
loan shall be evidenced by a written instrument. The General Partner shall not
charge a prepayment penalty on any such loan. Any loan in contravention of this
Section shall be deemed an invalid action taken by the General Partner and such
advance will be classified as a General Partner Capital Contribution.
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 $10. 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 limited 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 limited partner.
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Section 7.2 Capital Contribution of Limited Partner. The Limited Partner
shall make a Capital Contribution in the amount of $451,774, 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) $312,075 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 an ALTA title commitment, (in a form and substance
satisfactory to the Special Limited Partner) constituting an agreement by such
title company to issue the Title Policy within fifteen working days. The title
commitment will show the Apartment Housing to be free from liens except the
Construction Loan and free from other exceptions not previously approved by the
Special Limited Partner;
(4) Insurance required during construction;
(5) a copy of the recorded warranty deed;
(6) closing of the construction loan;
(7) construction-draw disbursement procedure; and
(8) the construction documents required pursuant to Section 14.3(a) of
this Agreement, if not previously provided to the Limited Partner and a
determination by the Special Limited Partner that construction financing is
In-Balance.
(b) $94,518 shall be payable upon the Limited Partner's receipt and
approval of the following documents:
(1) 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;
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(2) 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; construction financing is In-Balance; and
(3) permanent 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.
(c) $45,181 shall be payable upon the Limited Partner's receipt and
approval of the following documents:
(1) lien free Completion of Construction;
(2) Mortgage Loan documents signed and the Mortgage funded;
(3) Insurance required during operations;
(4) endorsement to the ALTA Title Policy dated no more than ten days
prior to the scheduled Capital Contribution providing an as-built survey and
confirming that there are no liens, claims or rights to a lien or judgments
filed against the property or the Apartment Housing during the time period since
the issuance of the Title Policy referenced above in Section 7.2(a);
(5) the current rent roll evidencing a minimum 90% occupancy by
Qualified Tenants immediately prior to funding;
(6) copies of all initial tenant files including completed
applications, completed questionnaires or checklist of income and assets,
documentation of third party verification of income and assets, and income
certification forms (LIHTC specific) collected by the Management Agent,
or General Partner, verifying each tenant's eligibility pursuant to the Minimum
Set-Aside Test;
(7) copies of the executed lease agreement with the tenants;
(8) a copy of the declaration of restrictive covenants/extended use
agreement entered into between the Partnership and the State Tax Credit Agency;
(9) an audited construction cost certification (which includes an
itemized cost breakdown);
(10) the final Tax Credit certification in a form substantially
similar to the form attached hereto as Exhibit "E" and incorporated herein by
this reference;
(11) Debt Service Coverage of 1.10 for 90 consecutive days exclusive
of the ADFA loan immediately prior to funding;
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(12) Internal Revenue Code Form 8609, or any successor form; and
(13) any documents previously not provided to the Limited Partner
but required pursuant to this Section 7.2 and Sections 14.3(a) and (b).
Section 7.3 Repurchase of Limited Partner's Interest. Within 60 days after
the General Partner receives written demand from the Limited Partner and/or the
Special Limited Partner, the Partnership shall repurchase the Limited Partner's
Interest and/or the Special Limited Partner's Interest in the Partnership by
refunding to it in cash the full amount of the Capital Contribution which the
Limited Partner and/or the Special Limited Partner has theretofore made in the
event that, for any reason, the Partnership shall fail to:
(a) cause the Apartment Housing to be placed in service by August 1, 2003;
(b) achieve 90% occupancy of the Apartment Housing by Qualified Tenants by
December 1, 2003;
(c) obtain Permanent Mortgage Commencement by December 1, 2003;
(d) meet both the Minimum Set-Aside Test and the Rent Restriction Test not
later than December 31 of the first year the Partnership elects the LIHTC to
commence in accordance with the Code; or
(e) obtain a carryover allocation, within the meaning of Section 42 of the
Code, from the State Tax Credit Agency on or before December 31, 2002.
Section 7.4 Adjustment of Capital Contributions.
(a) The amounts of the Limited Partner's and the Special Limited Partner's
Capital Contributions were determined in part upon the amount of Tax Credits
that were expected to be available to the Partnership, and 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, provided to the Limited Partner and Special
Limited Partner are less than $645,520 (the new Projected Tax Credit amount, if
applicable, shall be referred to as the "Revised Projected Tax Credits") then
the Limited Partner's and Special Limited Partner's Capital Contribution
provided for in Section 7.2 and Section 7.5 respectively shall be adjusted by
the amount which will make the total Capital Contribution to be paid by the
Limited Partner and Special Limited Partner to the Partnership equal to 70% of
the Revised Projected Tax Credits so anticipated to be allocated to the Limited
Partner and Special Limited Partner. If any Capital Contribution adjustment
referenced in this Section 7.4(a) is a reduction which is greater than the
remaining Capital Contribution to be paid by the Partner whose Capital
Contribution is being adjusted, then the General Partner shall have ninety days
from the date the General Partner receives notice from either the Limited
Partner or the Special Limited Partner to pay the shortfall to the Partner whose
Capital Contribution is being adjusted. The amount paid by the General Partner
pursuant to this Section will be deemed to be a Capital Contribution by the
General Partner. Notwithstanding anything to the contrary in this Agreement, the
General Partner's Capital Contribution required by this Section shall be
disbursed to the Limited Partner as a return of capital. If the Capital
Contribution adjustment referenced in this Section 7.4(a) is an increase then
the Partner whose Capital Contribution is being adjusted shall have ninety days
from the date the Limited Partner and Special Limited Partner have received
notice from the General Partner to pay the increase.
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(b) The General Partner is required to use its best efforts to rent 100% of
the Apartment Housing's apartment units to tenants who meet the Minimum
Set-Aside Test throughout the Compliance Period. If at the end of any calendar
year during the first four calendar years following the year in which the
Apartment Housing is placed in service, the Actual Tax Credit for any fiscal
year or portion thereof is or will be less than the Projected Annual Tax Credit,
or the Projected Annual Tax Credit as modified by Section 7.4(a) of this
Agreement if applicable (collectively the "Annual Tax Credit") (the "Annual
Credit Shortfall"), then the next Capital Contribution owed by the Limited
Partner shall be reduced by the Annual Credit Shortfall amount, and any portion
of such Annual Credit Shortfall in excess of such Capital Contribution shall be
applied to reduce succeeding Capital Contributions of the Limited Partner. If
the Annual Credit Shortfall is greater than the Limited Partner's remaining
Capital Contributions then the General Partner shall pay to the Limited Partner
the excess of the Annual Credit Shortfall over the remaining Capital
Contributions. The General Partner shall have sixty days to pay the Annual
Credit Shortfall from the date the General Partner receives notice from the
Special Limited Partner. The provisions of this Section 7.4(b) shall apply
equally to the Special Limited Partner in proportion to its Capital Contribution
and anticipated annual Tax Credit the amount paid by the General Partner
pursuant to this Section will be deemed to be a Capital Contribution by the
General Partner. Notwithstanding anything to the contrary in this Agreement, the
General Partner's Capital Contribution required by this Section shall be
disbursed to the Limited Partner as a return of capital.
(c) In the event that, for any reason, at any time after the first four
calendar years following the year in which the Apartment Housing is placed in
service, there is an Annual Credit Shortfall, then there shall be a reduction in
the General Partner's share of Net Operating Income in an amount equal to the
Annual Credit Shortfall and said amount shall be paid to the Limited Partner. In
the event there are not sufficient funds to pay the full Annual Credit Shortfall
to the Limited Partner at the time of the next Distribution of Net Operating
Income, then the unpaid Annual Credit Shortfall shall be repaid in the next year
in which sufficient monies are available from the General Partner's share of Net
Operating Income. In the event a Sale or Refinancing of the Apartment Housing
occurs prior to repayment in full of the Annual Credit Shortfall then the excess
will be paid in accordance with Section 11.2(b). The provisions of this Section
7.4(b) shall apply equally to the Special Limited Partner in proportion to its
Capital Contribution and anticipated annual Tax Credit.
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(d) The General Partner has represented, in part, that the Limited Partner
will receive Projected Annual Tax Credits of $21,513 in 2003 and $64,539 in
2004. In the event the 2003 or 2004 Actual Tax Credits are less than projected
then the Limited Partner's Capital Contribution shall be reduced by an amount
equal to 70% times the difference between the Projected Annual Tax Credits for
2003 or 2004 and the Actual Tax Credits for 2003 or 2004. If the 2003 or 2004
Actual Tax Credits are less than projected then the Special Limited Partner's
Capital Contribution shall be reduced following the same equation referenced in
the preceding sentence. If, at the time of determination thereof, the Capital
Contribution adjustment referenced in this Section 7.4(d) is greater than the
balance of the Limited Partner's or Special Limited Partner's Capital
Contribution payment which is then due, if any, then the excess amount shall be
paid by the General Partner to the Limited Partner and/or the Special Limited
Partner within sixty days of the General Partner receiving notice of the
reduction from the Limited Partner and/or the Special Limited Partner. The
amount paid by the General Partner pursuant to this Section will be deemed to be
a Capital Contribution by the General Partner. Notwithstanding anything to the
contrary in this Agreement, the General Partner's Capital Contribution required
by this Section shall be disbursed to the Limited Partner as a return of
capital.
(e) The Partners recognize and acknowledge that the Limited Partner and the
Special Limited Partner are making their Capital Contribution, in part, on the
expectation that the Projected Tax Credits are allocated to the Partners over
the Tax Credit Period. If the Projected Tax Credits are not allocated to the
Partners during the Tax Credit Period then the Limited Partner's and Special
Limited Partner's Capital Contribution shall be reduced by an amount agreed upon
by the Partners, in good faith, to provide the Limited Partner and the Special
Limited Partner with their anticipated internal rate of return.
(f) In the event there is: (1) a filing of a tax return by the Partnership
evidencing a reduction in the qualified basis or eligible basis of the Apartment
Housing causing a recapture of Tax Credits previously allocated to the Limited
Partner or adjusted to Schedule K-1; (2) a reduction in the qualified basis or
eligible basis of the Apartment Housing for income tax purposes following an
audit by the Internal Revenue Service (IRS) resulting in a recapture or
reduction of Tax Credits previously claimed or an adjusted to Schedule K-1; (3)
a decision by any court or administrative body upholding the United States Tax
Court upholding the assessment of such deficiency against the Partnership with
respect to any Tax Credit previously claimed in connection with the Apartment
Housing, unless the Partnership shall timely appeal such decision and the
collection of such assessment shall be stayed pending the disposition of such
appeal; or (4) a decision of a court affirming such decision upon such appeal
then, in addition to any other payments to which the Limited Partner and/or
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 sixty 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 increase of taxable income allocated to the
Limited Partner and Special Limited Partner by the Partnership and (E) 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. Notwithstanding the forgoing, this
guarantee will be in effect during the first seven years following completion of
construction and break-even operations for three consecutive months.
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(g) The increase in the Capital Contribution of the Limited Partner and the
Special Limited Partner pursuant to Section 7.4(a) shall be subject to the
Limited Partner and Special Limited Partner having funds available to pay any
such increase at the time of its notification of such increase. For these
purposes, any funds theretofore previously earmarked by the Limited Partner or
Special Limited Partner to make other investments, or to be held as required
reserves, shall not be considered available for payment hereunder.
Section 7.5 Capital Contribution of Special Limited Partner. The Special
Limited Partner shall make a Capital Contribution of $45 at the time of the
Limited Partner's Capital Contribution payment referenced in Section 7.2(a) upon
the same conditions. The Special Limited Partner shall be in a different class
from the Limited Partner and, except as otherwise expressly stated in this
Agreement, shall not participate in any rights allocable to or exercisable by
the Limited Partner under this Agreement.
Section 7.6 Return of Capital Contribution. From time to time the
Partnership may have cash in excess of the amount required for the conduct of
the affairs of the Partnership, and the General Partner may, with the Consent of
the Special Limited Partner, determine that such cash should, in whole or in
part, be returned to the Partners, pro rata, in reduction of their Capital
Contribution. No such return shall be made unless all liabilities of the
Partnership (except those to Partners on account of amounts credited to them
pursuant to this Agreement) have been paid or there remain assets of the
Partnership sufficient, in the sole discretion of the General Partner, to pay
such liabilities.
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Section 7.7 Liability of Limited Partner and Special Limited Partner. The
Limited Partner and Special Limited Partner shall not be liable for any of the
debts, liabilities, contracts or other obligations of the Partnership. The
Limited Partner and Special Limited Partner shall be liable only to make Capital
Contributions in the amounts and on the dates specified in this Agreement and,
except as otherwise expressly required hereunder, shall not be required to lend
any funds to the Partnership or, after their respective Capital Contributions
have been paid, to make any further Capital Contribution to the Partnership.
ARTICLE VIII
WORKING CAPITAL AND RESERVES
Section 8.1 Operating and Maintenance Account. The General Partner, on
behalf of the Partnership, shall establish an operating and maintenance account
and shall deposit thereinto, or provide a letter of credit, in an amount
required by the FmHA, to be used for initial operating capital as permitted or
required by applicable FmHA regulations. Said amount shall be reimbursed,
without interest, out of Apartment Housing funds as shall be authorized in
accordance with applicable FmHA regulations, and if not so reimbursed within
five years of the deposit, any amount remaining unreimbursed shall be forgiven
and shall constitute an ordinary and necessary business expense of the General
Partner as part consideration for the payment of the Development Fee.
Section 8.2 Reserve for Replacements. The Partnership shall fund, establish
and maintain a reserve account in an amount required by the FmHA Loan Agreement
which funds shall be used in accordance with FmHA Regulation 7 CFR Part 1930-C,
or any successor thereof, as evidenced by the FmHA Loan Agreement.
Section 8.3 Tax and Insurance Account. The General Partner, on behalf of
the Partnership, shall establish a tax and insurance account ("T & I Account")
for the purpose of making the requisite Insurance premium payments and the real
estate tax payments. The annual deposit to the T & I Account shall equal the
total annual Insurance payment and the total annual real estate tax payment.
Said amount shall be deposited monthly in equal installments. Withdrawals from
such account shall be made only for its intended purpose. Any balance remaining
in the account at the time of a sale of the Apartment Housing shall be allocated
and distributed equally between the General Partner and the Limited Partner.
Section 8.4 Other Reserves. The General Partner, shall 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
Code and applicable FmHA regulations; and (b) any real estate taxes, Insurance,
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.
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ARTICLE IX
MANAGEMENT AND CONTROL
Section 9.1 Power and Authority of General Partner. Subject to the Consent
of the Special Limited Partner or the consent of the Limited Partner where
required by this Agreement, and subject to the other limitations and
restrictions included in this Agreement, the General Partner shall have complete
and exclusive control over the management of the Partnership business and
affairs, and shall have the right, power and authority, on behalf of the
Partnership, and in its name, to exercise all of the rights, powers and
authority of a partner of a partnership without limited partners. If there is
more than one General Partner, all acts, decisions or consents of the General
Partners shall require the concurrence of all of the General Partners. No
actions taken without the authorization of all the General Partners shall be
deemed valid actions taken by the General Partners pursuant to this Agreement.
No Limited Partner or Special Limited Partner (except one who may also be a
General Partner, and then only in its capacity as General Partner within the
scope of its authority hereunder) shall have any right to be active in the
management of the Partnership's business or investments or to exercise any
control thereover, nor have the right to bind the Partnership in any contract,
agreement, promise or undertaking, or to act in any way whatsoever with respect
to the control or conduct of the business of the Partnership, except as
otherwise specifically provided in this Agreement.
Section 9.2 Payments to the General Partners and Others.
(a) The Partnership shall pay to the Developer a Development Fee in the
amount of $170,930 in accordance with the Development Fee Agreement entered into
by and between the Developer and the Partnership on the even date hereof. The
Development Fee Agreement provides, in part, that the Development Fee shall
first be paid from available proceeds in accordance with Section 9.2(b) of this
Agreement and if not paid in full then the balance of the Development Fee will
be paid in accordance with Section 11.1 of this Agreement.
(b) The Partnership shall utilize the proceeds from the Capital
Contributions paid pursuant to Section 7.2 and Section 7.5 of this Agreement for
development costs including, but not limited to, land costs, Land Acquisition
Fee, architectural fees, survey and engineering costs, financing costs, loan
fees, Syndication Fee, building materials and labor. If any Capital Contribution
proceeds are remaining after Completion of Construction and all acquisition,
development and construction costs, excluding the Development Fee, are paid in
full 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.
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(c) The Partnership shall pay to the Management Agent a property management
fee for the leasing and management of the Apartment Housing in an amount in
accordance with the Management Agreement. The term of the Management Agreement
shall not exceed one year, and the execution or renewal of any Management
Agreement shall be subject to the prior Consent of the Special Limited Partner
and shall not be unreasonably withheld. If the Management Agent is an Affiliate
of the General Partner then commencing with the termination of the Operating
Deficit Guarantee Period, in any year in which the Apartment Housing has an
Operating Deficit, 40% of the management fee may be deferred ("Deferred
Management Fee"). Deferred Management Fees, if any, shall be paid to the
Management Agent in accordance with Section 11.1 of this Agreement.
(1) The General Partner shall, upon receiving any request of the
Mortgage Lender requesting such action, dismiss the Management Agent as the
entity responsible for management of the Apartment Housing under the terms of
the Management Agreement and Mortgage documents; or, the General Partner shall
dismiss the Management Agent for cause at the request of the Special Limited
Partner. For purposes of this Section, for cause shall mean when Management
Agent:
(A) fails to provide, or untimely provides, or inaccurately
provides, the information required in Section 14.2 or 14.3 of this Agreement;
(B) declares Bankruptcy, is dissolved, or makes an assignment for
the benefit of its creditors;
(C) commits intentional misconduct; or
(D) commits negligence in the discharge of its duties and
obligations.
(2) The appointment of any successor Management Agent is subject to
the Consent of the Special Limited Partner, which may only be sought after the
General Partner has provided the Special Limited Partner with accurate and
complete disclosure respecting the proposed Management Agent.
(d) The Partnership shall pay to the Limited Partner a Reporting Fee
commencing in 2003 equal to the greater of $500 or 15% of the Net Operating
Income but in no event less than $500 for the Limited Partner's services in
assisting with the preparation of tax returns and the reports required in
Sections 14.2 and 14.3 of this Agreement. The Reporting Fee shall be payable
within seventy-five (75) days following each calendar year and shall be payable
from Net Operating Income in the manner and priority set forth in Section 11.1
of this Agreement; provided, however, that if in any year Net Operating Income
is insufficient to pay the full $500, 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.
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(e) The Partnership shall pay to the General Partner through the Compliance
Period an annual Incentive Management Fee equal to 35% of Net Operating Income
commencing in 2003 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) The Partnership shall pay to the General Partner through the Compliance
Period an annual Tax Credit Compliance Fee equal to 35% of Net Operating Income
commencing in 2003 for the services of the General Partner in ensuring
compliance by the Partnership and the Apartment Housing with all Tax Credit
rules and regulations. The Tax Credit Compliance Fee shall be payable from Net
Operating Income in the manner and priority set forth in Section 11.1 of this
Agreement upon completion and delivery of the annual audit pursuant to Section
14.2(a) of this Agreement. If the Tax Credit Compliance Fee is not paid in any
year it shall not accrue for payment in subsequent years.
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;
31
(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
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;
32
(e) admit a Person as a General Partner except as provided in this
Agreement;
(f) directly or indirectly transfer control of the General Partner, except
with the Consent of the Special Limited Partner, which will not be unreasonably
withheld;
(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;
(k) cause any recapture of the Tax Credits;
(l) 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;
(m) commingle funds of the Partnership with the funds of another Person; or
(n) 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.
(o) pay any real estate commission for the sale or refinancing of the
Apartment Complex.
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 in the name of the Partnership;
(c) use Partnership assets, property or Improvements to secure the debt of
any Partners, their Affiliates, or any third party;
33
(d) engage in any transaction not expressly contemplated by this Agreement
in which the General Partner has an actual or potential conflict of interest
with the Limited Partner or the Special Limited Partner;
(e) contract away the fiduciary duty owed to the Limited Partner and the
Special Limited Partner at common law;
(f) take any action which would cause the Apartment Housing to fail to
qualify, or which would cause a termination or discontinuance of the
qualification of the Apartment Housing, as a "qualified low income housing
project" under Section 42(g)(1) of the Code, as amended, or any successor
thereto, or which would cause the Limited Partner to fail to obtain the
Projected Tax Credits or which would cause the recapture of any LIHTC;
(g) make any expenditure of funds, or commit to make any such expenditure,
other than in response to an emergency, except as provided for in the annual
budget approved by the Special Limited Partner, as provided in Section 14.3(i)
hereof;
(h) cause the merger or other reorganization of the Partnership;
(i) dissolve the Partnership;
(j) acquire any real or personal property (tangible or intangible) in
addition to the Apartment Housing the aggregate value of which shall exceed
$10,000 (other than easement or similar rights necessary or appropriate for the
operation of the Apartment Housing);
(k) become personally liable on or in respect of, or guarantee, the
Mortgage or any other indebtedness of the Partnership;
(l) pay any salary, fees or other compensation to a General Partner or any
Affiliate thereof, except as authorized by Section 9.2 and Section 9.9 hereof or
specifically provided for in this Agreement;
(m) terminate the services of the Accountant, Inspecting Architect,
Contractor or Management Agent, or terminate, amend or modify the Construction
Contract or any other Project Document, or grant any material waiver or consent
thereunder;
(n) cause the Partnership to redeem or repurchase all or any portion of the
Interest of a Partner;
(o) cause the Partnership to convert the Apartment Housing to cooperative
or condominium ownership;
(p) cause or permit the Partnership to make loans to the General Partner or
any Affiliate;
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(q) bring or defend, pay, collect, compromise, arbitrate, resort to legal
action or otherwise adjust claims or demands of or against the Partnership;
(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;
(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; or
(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.
Section 9.7 Duties of General Partner. The General Partner agrees that it
shall at all times:
(a) diligently and faithfully devote such of its time to the business of
the Partnership as may be necessary to properly conduct the affairs of the
Partnership;
(b) file and publish all certificates, statements or other instruments
required by law for the formation and operation of the Partnership as a limited
partnership in all appropriate jurisdictions;
(c) cause the Partnership to carry Insurance from an Insurance Company;
(d) have a fiduciary responsibility for the safekeeping and use of all
funds and assets of the Partnership, whether or not in its immediate possession
or control and not employ or permit another to employ such funds or assets in
any manner except for the benefit of the Partnership;
(e) use its best efforts so that all requirements shall be met which are
reasonably necessary to obtain or achieve (1) compliance with the Minimum
Set-Aside Test, the Rent Restriction Test, and any other requirements necessary
for the Apartment Housing to initially qualify, and to continue to qualify, for
LIHTC; (2) issuance of all necessary certificates of occupancy, including all
governmental approvals required to permit occupancy of all of the apartment
units in the Apartment Housing; (3) compliance with all provisions of the
Project Documents and (4) a reservation and allocation of LIHTC from the State
Tax Credit Agency;
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(f) make inspections of the Apartment Housing and assure that the Apartment
Housing is in decent, safe, sanitary and good condition, repair and working
order, ordinary use and obsolescence excepted, and make or cause to be made from
time to time all necessary repairs thereto (including external and structural
repairs) and renewals and replacements thereof;
(g) pay, before the same shall become delinquent and before penalties
accrue thereon all Partnership taxes, assessments and other governmental charges
against the Partnership or its properties, and all of its other liabilities,
except to the extent and so long as the same are being contested in good faith
by appropriate proceedings in such manners as not to cause any material adverse
effect on the Partnership's property, financial condition or business
operations, with adequate reserves provided for such payments;
(h) permit, and cause the Management Agent to permit, the Special Limited
Partner and its representatives: (1) to have access to the Apartment Housing and
personnel employed by the Partnership and by the Management Agent at all times
during normal business hours after reasonable notice; (2) to examine all
agreements, LIHTC compliance data and Plans and Specifications; and (3) to make
copies thereof;
(i) exercise good faith in all activities relating to the conduct of the
business of the Partnership, including the development, operation and
maintenance of the Apartment Housing, and shall take no action with respect to
the business and property of the Partnership which is not reasonably related to
the achievement of the purpose of the Partnership;
(j) make any Capital Contributions, advances or loans required to be made
by the General Partner under the terms of this Agreement;
(k) establish and maintain all reserves required to be established and
maintained under the terms of this Agreement;
(l) cause the Management Agent to manage the Apartment Housing in such a
manner that the Apartment Housing will be eligible to receive LIHTC with respect
to 100% of the apartment units in the Apartment Housing. To that end, the
General Partner agrees, without limitation: (1) to make all elections requested
by the Special Limited Partner under Section 42 of the Code to allow the
Partnership or its Partners to claim the Tax Credit; (2) to file Form 8609 with
respect to the Apartment Housing as required, for at least the duration of the
Compliance Period; (3) to operate the Apartment Housing and cause the Management
Agent to manage the Apartment Housing so as to comply with the requirements of
Section 42 of the Code, as amended, or any successor thereto, including, but not
limited to, Section 42(g) and Section 42(i)(3) of the Code, as amended, or any
successors thereto; (4) to make all certifications required by Section 42(l) of
the Code, as amended, or any successor thereto; and (5) to operate the Apartment
Housing and cause the Management Agent to manage the Apartment Housing so as to
comply with all other Tax Credit Conditions; and
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(m) perform such other acts as may be expressly required of it under the
terms of this Agreement.
Section 9.8 Obligations to Repair and Rebuild Apartment Housing. With the
approval of any lender, if such approval is required, any Insurance proceeds
received by the Partnership due to fire or other casualty affecting the
Apartment Housing will be utilized to repair and rebuild the Apartment Housing
in satisfaction of the conditions contained in Section 42(j)(4) of the Code and
to the extent required by any lender. Any such proceeds received in respect of
such event occurring after the Compliance Period shall be so utilized or, if
permitted by the Project Documents and with the Consent of the Special Limited
Partner, shall be treated as Sale or Refinancing Proceeds.
Section 9.9 Partnership Expenses.
(a) All of the Partnership's expenses shall be billed directly to and paid
by the Partnership to the extent practicable. Reimbursements to the General
Partner, or any of its Affiliates, by the Partnership shall be allowed only for
the Partnership's Cash Expenses unless the General Partner is obligated to pay
the same as an Operating Deficit during the Operating Deficit Guarantee Period,
and subject to the limitations on the reimbursement of such expenses set forth
herein. For purposes of this Section, Cash Expenses shall include fees paid by
the Partnership to the General Partner or any Affiliate of the General Partner
permitted by this Agreement and the actual cost of goods, materials and
administrative services used for or by the Partnership, whether incurred by the
General Partner, an Affiliate of the General Partner or a nonaffiliated Person
in performing the foregoing functions. As used in the preceding sentence,
"actual cost of goods and materials" means the actual cost of goods and
materials used for or by the Partnership and obtained from entities which are
not Affiliates of the General Partner, and actual cost of administrative
services means the pro rata cost of personnel (as if such persons were employees
of the Partnership) associated therewith, but in no event to exceed the amount
which would be charged by nonaffiliated Persons for comparable goods and
services.
(b) Reimbursement to the General Partner or any of its Affiliates of
operating cash expenses pursuant to Subsection (a) hereof shall be subject to
the following:
(1) no such reimbursement shall be permitted for services for which
the General Partner or any of its Affiliates is entitled to compensation by way
of a separate fee; and
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(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, joint ventures, corporations or other business
ventures formed by them or in which they may have an interest, including,
without limitation, business ventures similar to, related to or in direct or
indirect competition with the Apartment Housing. Neither the Partnership nor any
Partner shall have any right by virtue of this Agreement or the partnership
relationship created hereby in or to such other ventures or activities or to the
income or proceeds derived therefrom. Conversely, no Person shall have any
rights to Partnership assets, incomes or proceeds by virtue of such other
ventures or activities of any Partner.
Section 9.12 Covenants, Representations and Warranties. The General Partner
covenants, represents and warrants that the following are presently true, will
be true at the time of each Capital Contribution payment made by the Limited
Partner and will be true during the term of this Agreement, to the extent then
applicable.
(a) The Partnership is a duly organized limited partnership validly
existing under the laws of the State and has complied with all filing
requirements necessary for the protection of the limited liability of the
Limited Partner and the Special Limited Partner.
(b) The Partnership Agreement and the Project Documents are in full force
and effect and neither the Partnership nor the General Partner are in breach or
violation of any provisions thereof.
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(c) Improvements will be completed in a timely and workerlike manner in
accordance with all applicable requirements of all appropriate governmental
entities and the Plans and Specifications of the Apartment Housing.
(d) All conditions to the funding of the Construction Loan have been met.
(e) The Apartment Housing is being operated in accordance with standards
and procedures which are prudent and customary for the operation of properties
similar to the Apartment Housing.
(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 obtained Insurance written by an Insurance Company.
(k) The Partnership owns the fee simple interest in the Apartment Housing.
(l) The Construction Contract has been entered into between the Partnership
and the Contractor; no other consideration or fee shall be paid to the
Contractor other than amounts set forth in the Construction Contract.
(m) The General Partner will require the Accountant to depreciate
Partnership items in accordance with Exhibit "G" attached hereto and
incorporated herein by this reference.
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(n) To the best of the General Partner's knowledge: (1) no Hazardous
Substance has been disposed of, or released to or from, or otherwise now exists
in, on, under or around, the Apartment Housing and (2) no aboveground or
underground storage tanks are now or have ever been located on or under the
Apartment Housing. The General Partner will not install or allow to be installed
any aboveground or underground storage tanks on the Apartment Housing. The
General Partner covenants that the Apartment Housing shall be kept free of
Hazardous Substance and shall not be used to generate, manufacture, refine,
transport, treat, store, handle, dispose of, transfer, produce or process
Hazardous Substance, except in connection with the normal maintenance and
operation of any portion of the Apartment Housing. The General Partner shall
comply, or cause there to be compliance, with all applicable Federal, state and
local laws, ordinances, rules and regulations with respect to Hazardous
Substance and shall keep, or cause to be kept, the Apartment Housing free and
clear of any liens imposed pursuant to such laws, ordinances, rules and
regulations. The General Partner must promptly notify the Limited Partner and
the Special Limited Partner in writing (3) if it knows, or suspects or believes
there may be any Hazardous Substance in or around any part of the Apartment
Housing, any Improvements constructed on the Apartment Housing, or the soil,
groundwater or soil vapor, (4) if the General Partner or the Partnership may be
subject to any threatened or pending investigation by any governmental agency
under any law, regulation or ordinance pertaining to any Hazardous Substance,
and (5) of any claim made or threatened by any Person, other than a governmental
agency, against the Partnership or General Partner arising out of or resulting
from any Hazardous Substance being present or released in, on or around any part
of the Apartment Housing.
(o) The General Partner has not executed and will not execute any
agreements with provisions contradictory to, or in opposition to, the provisions
of this Agreement.
(p) The Partnership will allocate to the Limited Partner the Projected
Annual Tax Credits, or the Revised Projected Tax Credits, if applicable.
(q) No charges, liens or encumbrances exist with respect to the Apartment
Housing other than those which are created or permitted by the Project Documents
or Mortgage or are noted or excepted in the Title Policy.
(r) The buildings on the Apartment Housing site constitute or shall
constitute a "qualified low-income housing project" as defined in Section 42(g)
of the Code, and as amplified by the Treasury Regulations thereunder. In this
connection, not later than December 31 of the first year in which the Partners
elect the LIHTC to commence in accordance with the Code, the Apartment Housing
will satisfy the Minimum Set-Aside Test.
(s) All accounts of the Partnership required to be maintained under the
terms of the Project Documents, including, without limitation, any reserves in
accordance with Article VIII hereof, are currently funded to required levels,
including levels required by any authority.
(t) The General Partner has not lent or otherwise advanced any funds to the
Partnership other than its Capital Contribution, or Operating Deficit Loan, if
applicable, and the Partnership has no unsatisfied obligation to make any
payments of any kind to the General Partner or any Affiliate thereof.
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(u) No event has occurred which constitutes a default under any of the
Project Documents.
(v) 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.
(w) No event or proceeding, including, but not limited to, any legal
actions or proceedings before any court, commission, administrative body or
other governmental authority, and acts of any governmental authority having
jurisdiction over the zoning or land use laws applicable to the Apartment
Housing, has occurred the continuing effect of which has: (1) materially or
adversely affected the operation of the Partnership or the Apartment Housing;
(2) materially or adversely affected the ability of the General Partner to
perform its obligations hereunder or under any other agreement with respect to
the Apartment Housing; or (3) prevented the completion of construction of the
Improvements in substantial conformity with the Project Documents, other than
legal proceedings which have been bonded against (or as to which other adequate
financial security has been issued) in a manner as to indemnify the Partnership
against loss; provided, however, the foregoing does not apply to matters of
general applicability which would adversely affect the Partnership, the General
Partner, Affiliates of the General Partner or the Apartment Housing only insofar
as they or any of them are part of the general public.
(x) 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.
(y) Upon signing of the Construction Loan and receipt of the Construction
Lender's written start order, the General Partner will cause construction of the
Improvements to commence and thereafter will cause the Contractor to diligently
proceed with construction of the Improvements according to the Plans and
Specifications so that the Improvements can be completed by the Completion Date.
(z) During the term of any guarantees made in conjunction with this
Agreement, the General Partner and the Guarantor has and shall maintain a net
worth of at least $750,000 computed in accordance with generally accepted
accounting principals.
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(aa) 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.
(bb) The Partnership's and General Partner's computer hardware and software
used to produce financial reports and tax return information are year 2000
compliant. To the best of the General Partner's knowledge after due inquiry: the
Partnership's and General Partner's office machinery and equipment are year 2000
compliant; and the Management Agent's financial reporting systems and office
machinery and equipment are year 2000 compliant.
The General Partner shall be liable to the Limited Partner for any
costs, damages, loss of profits, diminution in the value of its investment in
the Partnership, or other losses, of every nature and kind whatsoever, direct or
indirect, realized or incurred by the Limited Partner as a result of any
material breach of the representations and warranties set forth in this Section
9.12.
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.
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(c) Notwithstanding the foregoing provisions of Section 10.2(a) and (b), in
no event shall any Losses be allocated to the Limited Partner or the Special
Limited Partner if and to the extent that such allocation would create or
increase an Adjusted Capital Account Deficit for the Limited Partner or the
Special Limited Partner. In the event an allocation of 99.98% or 0.01% of each
item 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
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.
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(c) In the event any Partner unexpectedly receives any adjustments,
allocations, or distributions described in Treasury Regulations Section
1.704-1(b)(2)(ii)(d)(4), Section 1.704-1(b)(2)(ii)(d)(5), or Section
1.704-1(b)(2)(ii)(d)(6), items of Partnership income and gain shall be specially
allocated to each such Partner in an amount and manner sufficient to eliminate,
to the extent required by the Treasury Regulations, the Adjusted Capital Account
Deficit of such Partner as quickly as possible, provided that an allocation
pursuant to this Section 10.3(c) shall be made if and only to the extent that
such Partner would have an Adjusted Capital Account Deficit after all other
allocations provided for in this Section 10.3 have been tentatively made as if
this Section 10.3(c) were not in the Agreement.
(d) In the event any Partner has a deficit Capital Account at the end of
any Partnership fiscal year which is in excess of the sum of (i) the amount such
Partner is obligated to restore, and (ii) the amount such Partner is deemed to
be obligated to restore pursuant to the penultimate sentences of Treasury
Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), each such Partner shall be
specially allocated items of Partnership income and gain in the amount of such
excess as quickly as possible, provided that an allocation pursuant to this
Section 10.3(d) shall be made if and only to the extent that such Partner would
have a deficit Capital Account in excess of such sum after all other allocations
provided for in this Section 10.3 have been tentatively made as if this Section
10.3(d) and Section 10.3(c) hereof were not in the Agreement.
(e) Nonrecourse Deductions for any fiscal year shall be specially allocated
99.98% to the Limited Partner, 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.
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(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, such interest income shall be
specially allocated to the General Partner.
(j) In the event the adjusted tax basis of any investment tax credit
property that has been placed in service by the Partnership is increased
pursuant to Code Section 50(c), such increase shall be specially allocated among
the Partners (as an item in the nature of income or gain) in the same
proportions as the investment tax credit that is recaptured with respect to such
property is shared among the Partners.
(k) Any reduction in the adjusted tax basis (or cost) of Partnership
investment tax credit property pursuant to Code Section 50(c) shall be specially
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 6.3 shall be allocated 100% to the General Partner.
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(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.
Section 10.4 Curative Allocations. The allocations set forth in Sections
10.2(c), 10.3(a), 10.3(b), 10.3(c), 10.3(d), 10.3(e), 10.3(f), and 10.3(g)
hereof (the "Regulatory Allocations") are intended to comply with certain
requirements of the Treasury Regulations. It is the intent of the Partners that,
to the extent possible, all Regulatory Allocations shall be offset either with
other Regulatory Allocations or with special allocations of other items of
Partnership income, gain, loss, or deduction pursuant to this Section 10.4.
Therefore, notwithstanding any other provision of this Article X (other than the
Regulatory Allocations), with the Consent of the Special Limited Partner, the
General Partner shall make such offsetting special allocations of Partnership
income, gain, loss, or deduction in whatever manner the General Partner, with
the Consent of the Special Limited Partner, determines appropriate so that,
after such offsetting allocations are made, each Partner's Capital Account
balance is, to the extent possible, equal to the Capital Account balance such
Partner would have had if the Regulatory Allocations were not part of the
Agreement and all Partnership items were allocated pursuant to Sections 10.1,
10.2(a), 10.2(b), 10.3(h), 10.3(i), 10.3(j), 10.3(k), 10.3(l), 10.3(m) and 10.5.
In exercising its authority under this Section 10.4, the General Partner shall
take into account future Regulatory Allocations under Section 10.3(a) and
10.3(b) that, although not yet made, are likely to offset other Regulatory
Allocations previously made under Sections 10.3(e) and 10.3(f).
Section 10.5 Other Allocation Rules.
(a) The basis (or cost) of any Partnership investment tax credit property
shall be allocated among the Partners in accordance with Treasury Regulations
Section 1.46-3(f)(2)(i). All Tax Credits (other than the investment tax credit)
shall be allocated among the Partners in accordance with applicable law.
Consistent with the foregoing, the Partners intend that LIHTC will be allocated
99.98% to the Limited Partner, 0.01% to the Special Limited Partner and 0.01% to
the General Partner.
(b) In the event Partnership investment tax credit property is disposed of
during any taxable year, profits for such taxable year (and, to the extent such
profits are insufficient, profits for subsequent taxable years) in an amount
equal to the excess, if any, of (1) the reduction in the adjusted tax basis (or
cost) of such property pursuant to Code Section 50(c), over (2) any increase in
the adjusted tax basis of such property pursuant to Code Section 50(c) caused by
the disposition of such property, shall be excluded from the profits allocated
pursuant to Section 10.1 and Section 10.2(a) hereof and shall instead be
allocated among the Partners in proportion to their respective shares of such
excess, determined pursuant to Section 10.3(i) and 10.3(j) hereof. In the event
more than one item of such property is disposed of by the Partnership, the
foregoing sentence shall apply to such items in the order in which they are
disposed of by the Partnership, so the profits equal to the entire amount of
such excess with respect to the first such property disposed of shall be
allocated prior to any allocations with respect to the second such property
disposed of, and so forth.
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(c) For purposes of determining the Income, Losses, or any other items
allocable to any period, Income, Losses, and any such other items shall be
determined on a daily, monthly, or other basis, as determined by the General
Partner with the Consent of the Special Limited Partner, using any permissible
method under Code Section 706 and the Treasury Regulations thereunder.
(d) Solely for purposes of determining a Partner's proportionate share of
the "excess nonrecourse liabilities" of the Partnership within the meaning of
Treasury Regulations Section 1.752-3(a)(3), the Partners' interests in
Partnership profits are as follows: Limited Partner: 99.98%; Special Limited
Partner: 0.01%; General Partner: 0.01%.
(e) To the extent permitted by Section 1.704-2(h)(3) of the Treasury
Regulations, the General Partner shall endeavor to treat Distributions as having
been made from the proceeds of a Nonrecourse Liability or a Partner Nonrecourse
Debt only to the extent that such Distributions would cause or increase an
Adjusted Capital Account Deficit for any Partner who is not a General Partner.
(f) In the event that the deduction of all or a portion of any fee paid or
incurred out of Net Operating Income by the Partnership to a Partner or an
Affiliate of a Partner is disallowed for federal income tax purposes by the
Internal Revenue Service with respect to a taxable year of the Partnership, the
Partnership shall then allocate to such Partner an amount of gross income of the
Partnership for such year equal to the amount of such fee as to which the
deduction is disallowed.
Section 10.6 Tax Allocations: Code Section 704(c). In accordance with Code
Section 704(c) and the Treasury Regulations thereunder, income, gain, loss, and
deduction with respect to any property contributed to the capital of the
Partnership shall, solely for tax purposes, be allocated among the Partners so
as to take account of any variation between the adjusted basis of such property
to the Partnership for federal income tax purposes and its initial Gross Asset
Value (computed in accordance with Section 1.28(a) hereof).
In the event the Gross Asset Value of any Partnership asset is adjusted
pursuant to Section 1.30(b) hereof, subsequent allocations of income, gain,
loss, and deduction with respect to such asset shall take account of any
variation between the adjusted basis of such asset for federal income tax
purposes and its Gross Asset Value in the same manner as under Code Section
704(c) and the Treasury Regulations thereunder.
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Any elections or other decisions relating to such allocations shall be
made by the General Partner with the Consent of the Special Limited Partner in
any manner that reasonably reflects the purpose and intention of this Agreement.
Allocations pursuant to this Section 10.6 are solely for purposes of federal,
state, and local taxes and shall not affect, or in any way be taken into account
in computing, any Person's Capital Account or share of Income, Losses, other
items, or distributions pursuant to any provision of this Agreement.
Section 10.7 Allocation Among Limited Partners. In the event that the
Interest of the Limited Partner hereunder is at any time held by more than one
Limited Partner all items which are specifically allocated to the Limited
Partner for any month pursuant to this Article X shall be apportioned among such
Persons according to the ratio of their respective profit-sharing interests in
the Partnership at the last day of such month.
Section 10.8 Allocation Among General Partners. In the event that the
Interest of the General Partner hereunder is at any time held by more than one
General Partner all items which are specifically allocated to the General
Partner for any month pursuant to this Article X shall be apportioned among such
Persons in such percentages as may from time to time be determined by agreement
among them without amendment to this Agreement or consent of the Limited Partner
or Consent of the Special Limited Partner.
Section 10.9 Modification of Allocations. The provisions of Articles X and
XI and other provisions of this Agreement are intended to comply with Treasury
Regulations Section 1.704 and shall be interpreted and applied in a manner
consistent with such section of the Treasury Regulations. In the event that the
General Partner determines, in its sole discretion, that it is prudent to modify
the manner in which the Capital Accounts of the Partners, or any debit or credit
thereto, are computed in order to comply with such section of the Treasury
Regulations, the General Partner may make such modification, but only with the
Consent of the Special Limited Partner, to the minimum extent necessary, to
effect the plan of allocations and Distributions provided for elsewhere in this
Agreement. Further, the General Partner shall make any appropriate
modifications, but only with the Consent of the Special Limited Partner, in the
event it appears that unanticipated events (e.g., the existence of a Partnership
election pursuant to Code Section 754) might otherwise cause this Agreement not
to comply with Treasury Regulation Section 1.704.
ARTICLE XI
DISTRIBUTION
Section 11.1 Distribution of Net Operating Income. Except as otherwise
provided, Net Operating Income for each fiscal year shall be distributed within
seventy-five (75) days following each calendar year and shall be applied in the
following order of priority:
(a) to pay the Deferred Management Fee, if any;
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(b) to pay the current Reporting Fee and then to pay any accrued Reporting
Fees which have not been paid in full from previous years;
(c) to pay the Development Fee;
(d) to pay the Operating Loans, if any, 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 (c) of this
Section 11.1;
(e) to pay the Incentive Management Fee;
(f) to pay the Tax Credit Compliance Fee; and
(g) the balance, 30% to the Limited Partner and 70% to the General Partner.
Section 11.2 Distribution of Sale or Refinancing Proceeds. Sale or
Refinancing Proceeds shall be distributed in the following order:
(a) to the payment of the Mortgage and other matured debts and liabilities
of the Partnership, other than accrued payments, debts or other liabilities
owing to Partners or former Partners;
(b) to any accrued payments, debts or other liabilities owing to the
Partners or former Partners, including, but not limited to, accrued Reporting
Fees and Operating Loans, to be paid prorata if necessary;
(c) to the establishment of any reserves which the General Partner, with
the Consent of the Special Limited Partner, shall deem reasonably necessary for
contingent, unmatured or unforeseen liabilities or obligations of the
Partnership;
(d) to the Limited Partner in an amount equal to its Capital Contribution;
(e) to the Special Limited Partner in an amount equal to its Capital
Contribution;
(f) to the General Partner in an amount equal to its Capital Contribution;
and
(g) thereafter, 30% to the Limited Partner and 70% to the General Partner.
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ARTICLE XII
TRANSFERS OF LIMITED
PARTNER'S INTEREST IN THE PARTNERSHIP
Section 12.1 Assignment of Interests. The Limited Partner and the Special
Limited Partner shall have the right to assign all or any part of their
respective Interests to any other Person, whether or not a Partner, upon
satisfaction of the following:
(a) a written instrument setting forth the name and address of the proposed
transferee, the nature and extent of the Interest which is proposed to be
transferred and the terms and conditions upon which the transfer is proposed to
be made, stating that the Assignee accepts and agrees to be bound by all of the
terms and provisions of this Agreement, and providing for the payment of all
reasonable expenses incurred by the Partnership in connection with such
assignment, including but not limited to the cost of preparing any necessary
amendment to this Agreement; and
(b) upon receipt by the General Partner of the Assignee's written
representation that the Partnership Interest is to be acquired by the Assignee
for the Assignee's own account for long-term investment and not with a view
toward resale, fractionalization, division or distribution thereof.
(c) Notwithstanding any provision to the contrary, the Limited Partner may
assign its Interest to an Affiliate or assign its Interest to USbank or its
successors as collateral to secure a capital contribution loan without
satisfying the conditions of Sections 12.1(a) and (b) above.
THE LIMITED PARTNER INTEREST AND THE SPECIAL LIMITED PARTNER INTEREST
DESCRIBED HEREIN HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS
AMENDED OR UNDER ANY STATE SECURITIES LAW. THESE INTERESTS MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED UNLESS REGISTERED UNDER APPLICABLE FEDERAL AND STATE
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.
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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 USbank or its successors, may become a Substitute
Limited Partner or Substitute Special Limited Partner without the consent of the
General Partner.
(b) A nonadmitted transferee of the Limited Partner's Interest or the
Special Limited Partner's Interest in the Partnership shall only be entitled to
receive that share of allocations, Distributions and the return of Capital
Contribution to which its transferor would otherwise have been entitled with
respect to the Interest transferred, and shall have no right to obtain any
information on account of the Partnership's transactions, to inspect the
Partnership's books and records or have any other of the rights and privileges
of a Limited Partner or Special Limited Partner, provided, however, that the
Partnership shall, if a transferee and transferor jointly advise the General
Partner in writing of a transfer of an Interest in the Partnership, furnish the
transferee with pertinent tax information at the end of each fiscal year of the
Partnership.
Section 12.6 Death, Bankruptcy, Incompetency, etc. of a Limited Partner.
Upon the death, dissolution, adjudication of bankruptcy, or adjudication of
incompetency or insanity of the Limited Partner or Special Limited Partner, such
Partner's executors, administrators or legal representatives shall have all the
rights of its predecessor-in-interest for the purpose of settling or managing
such Partner's estate, including such power as such Partner possessed to
constitute a successor as a transferee of its Interest in the Partnership and to
join with such transferee in making the application to substitute such
transferee as a Partner.
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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
including but not limited to any Person who has by merger, consolidation or
otherwise, acquired substantially all of the General Partner's assets or stocks
and continued its business or terminate its business immediately after said
merger, consolidation or otherwise. Withdrawal shall be conditioned upon the
agreement of the Special Limited Partner to be admitted as a successor General
Partner, or if the Special Limited Partner declines to be admitted as a
successor General Partner then on the agreement of one or more Persons who
satisfy the requirements of Section 13.5 of this Agreement to be admitted as
successor General Partner(s).
(b) Each General Partner shall indemnify and hold harmless the Partnership
and all Partners from its Withdrawal in violation of Section 13.1(a) hereof.
Each General Partner shall be liable for damages to the Partnership resulting
from its Withdrawal in violation of Section 13.1(a).
Section 13.2 Removal of General Partner.
(a) The Special Limited Partner or the Limited Partner, or both of them,
may remove the General Partner for cause if such General Partner, its officers
or directors, if applicable, has:
(1) been subject to Bankruptcy;
(2) committed any fraud, willful misconduct, breach of fiduciary duty
or other negligent conduct in the performance of its duties under this
Agreement;
(3) been convicted of, or entered into a plea of guilty to, a felony;
(4) been disbarred from participating in any federal or state housing
program;
(5) made personal use of Partnership funds or properties;
(6) violated the terms of the Mortgage and such violation prompts
Union Bank and USDA RD to issue a default letter or acceleration notice to the
Partnership or General Partner;
(7) failed to provide any loan, advance, Capital Contribution or any
other payment to the Partnership, the Limited Partner or the Special Limited
Partner required under this Agreement;
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(8) breached any representation, warranty or covenant contained in
this Agreement;
(9) caused the Projected Tax Credits to be allocated to the Partners
for a term longer than the Tax Credit Period unless the provisions of Section
7.4(e) of this Agreement apply;
(10) failed to provide, or to cause to be provided, the construction
monitoring documents required in Section 14.3(a) of this Agreement;
(11) violated any federal or state tax law which causes a recapture
of LIHTC;
(12) violated the terms of the Construction Loan and such violation
prompts Union Bank to issue a default letter or acceleration notice to the
Partnership or General Partner;
(13) allowed the construction budget to be out-of-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 August 1,
2003;
(17) failed to achieve 90% occupancy of the Apartment Housing by
December 1, 2003;
(18) failed to obtain Permanent Mortgage Commencement by December 1,
2003; or
(19) failed during any consecutive six-month period during the
Compliance Period to cause at least 85% or more of the total apartment
units in the Apartment Housing to be Tax Credit Qualified; notwithstanding, if
such failure is the result of Force Majeure or if such failure is cured within
120 days after the end of the six-month period, then this removal provision
shall not apply.
53
(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), (12) or (13) is the basis for the removal for cause,
then the General Partner shall have thirty days from receipt of the Removal
Notice in which to cure the removal condition; except that in regard to the
Mortgage or Construcion Loan the cure period shall be the sooner of thirty days
or ten days prior to the expiration of the cure period referenced in the loan
documents, if any. If the condition for the removal for cause is not cured
within the thirty day cure period then the General Partner's removal shall
become effective upon approval of a majority of the Partner's Interest (as
specified in Section 10.1 of this Agreement) at a Partner's meeting held in
accordance with Section 17.2 of this Agreement. If the removal for cause is for
a condition referenced in Sections 13.2(a)(1), (3), (4), (5), (9), (10), (11),
(14), (15), (16), (17) or (18) then the removal shall become effective upon
approval of a majority of the Partner's Interest (as specified in Section 10.1
of this Agreement) at a Partner's meeting held in accordance with Section 17.2
of this Agreement. Upon the General Partner's removal, the General Partner shall
deliver to the Special Limited Partner within five business days of the
Partner's meeting confirming the General Partner's removal all Partnership books
and records including all bank signature cards and an authorization to change
the signature on the signature cards from the General Partner to the Special
Limited Partner, or a successor general partner so nominated by the Limited
Partner and Special Limited Partner. The Partner's recognize and acknowledge
that if the General Partner fails to provide the Partnership books and records
upon the General Partner's removal then the remaining Partners may suffer
irreparable injury. Therefore, in the event the General Partner does not adhere
to the provisions of this Section 13.2(b), and in addition to other rights or
remedies which may be provided by law and equity or this Agreement, the Limited
Partner and/or Special Limited Partner shall have the right to specific
performance to compel the General Partner to perform its obligation under this
Section and the Limited Partner and/or Special Limited Partner may bring such
action, and other actions to enforce the removal, by way of temporary and/or
permanent injunctive relief.
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.
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(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.
(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 Section 11.2(b). The note shall also provide that
the Partnership may prepay all or any part thereof without penalty.
(2) If the Involuntary Withdrawal does not arise from removal for
cause under Section 13.2(a) hereof, and if the Partnership is to be
continued with one or more remaining or successor General Partner(s), and if the
Partnership does not purchase the Interest of the Withdrawing General Partner in
Partnership allocations, Distributions and capital, then the Withdrawing General
Partner shall retain its Interest in such items, but such Interest shall be held
as a special limited partner.
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(c) Notwithstanding the provisions of Section 13.3(b), if the Involuntary
Withdrawal arises from removal for cause as set forth in Section 13.2(a) hereof,
the Withdrawn General Partner shall have no further right to receive any future
allocations or Distributions from the Partnership or any other funds or assets
of the Partnership, nor shall it be entitled to receive any payment for its
Interest, nor shall it be entitled to receive or to be paid by the Partnership
or any Partners or successor partners, any further payments of fees (including
fees which have been earned but remain unpaid) or to be repaid any outstanding
advances or loans made by it to the Partnership.
Section 13.4 Successor General Partner. Upon the occurrence of an event
giving rise to a Withdrawal of a General Partner, any remaining General Partner,
or, if there be no remaining General Partner, the Withdrawing General Partner or
its legal representative, shall promptly notify the Special Limited Partner of
such Withdrawal (the "Withdrawal Notice"). Whether or not the Withdrawal Notice
shall have been sent as provided herein, the Special Limited Partner shall have
the right to become a successor General Partner (and to become the successor
managing General Partner if the Withdrawing General Partner was previously the
managing General Partner). In order to effectuate the provisions of this Section
13.4 and the continuance of the Partnership, the Withdrawal of a General Partner
shall not be effective until the expiration of 120 days from the date on which
occurred the event giving rise to the Withdrawal, unless the Special Limited
Partner shall have elected to become a successor General Partner as provided
herein prior to expiration of such 120-day period, whereupon the Withdrawal of
the General Partner shall be deemed effective upon the notification of all the
other Partners by the Special Limited Partner of such election.
Section 13.5 Admission of Additional or Successor General Partner. No
Person shall be admitted as an additional or successor General Partner including
but not limited to a change in the General Partner organizational structure
because of merger, consolidation, asset sale, stock sale or swap, or otherwise
unless (a) such Person shall have agreed to become a General Partner by a
written instrument which shall include the acceptance and adoption of this
Agreement; (b) the Consent of the Special Limited Partner to the admission of
such Person as a substitute General Partner, which consent may be withheld in
the discretion of the Special Limited Partner, which will not be unreasonably
withheld; and (c) such Person shall have executed and acknowledged any other
instruments which the Special Limited Partner shall reasonably deem necessary or
appropriate to affect the admission of such Person as a substitute General
Partner. If the foregoing conditions are satisfied, this Agreement shall be
amended in accordance with the provisions of the Act, and all other steps shall
be taken which are reasonably necessary to effect the Withdrawal of the
Withdrawing General Partner and the substitution of the successor General
Partner. Nothing contained herein shall reduce the Limited Partner's Interest or
the Special Limited Partner's Interest in the Partnership.
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Section 13.6 Transfer of Interest. Except as otherwise provided herein, the
General Partner may not Withdraw from the Partnership, or enter into any
agreement as the result of which any Person shall acquire an Interest in the
Partnership, without the Consent of the Special Limited Partner.
Section 13.7 No Goodwill Value. At no time during continuation of the
Partnership shall any value ever be placed on the Partnership name, or the right
to its use, or to the goodwill appertaining to the Partnership or its business,
either as among the Partners or for the purpose of determining the value of any
Interest, nor shall the legal representatives of any Partner have any right to
claim any such value. In the event of a termination and dissolution of the
Partnership as provided in this Agreement, neither the Partnership name, nor the
right to its use, nor the same goodwill, if any, shall be considered as an asset
of the Partnership, and no valuation shall be put thereon for the purpose of
liquidation or distribution, or for any other purpose whatsoever. ARTICLE XIV
BOOKS AND ACCOUNTS, REPORTS,
TAX RETURNS, FISCAL YEAR AND BANKING
Section 14.1 Books and Accounts.
(a) The General Partner shall cause the Partnership to keep and maintain at
its principal executive office full and complete books and records which shall
include each of the following:
(1) a current list of the full name and last known business or
residence address of each Partner set forth in alphabetical order together with
the Capital Contribution and the share in Income and Losses and Tax Credits of
each Partner;
(2) a copy of the Certificate of Limited Partnership and all
certificates of amendment thereto, together with executed copies of any powers
of attorney pursuant to which any certificate has been executed;
(3) copies of the Partnership's federal, state and local income tax
information returns and reports, if any, for the six most recent taxable years;
(4) copies of the original of this Agreement and all amendments
thereto;
(5) financial statements of the Partnership for the six most recent
fiscal years;
(6) the Partnership's books and records for at least the current and
past three fiscal years; and
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(7) in regard to the first tenants to occupy the apartment units in
the Apartment Housing, the Partnership shall maintain, for the length of the
compliance period outlined under Section 42 of the Code, copies of all tenant
files including completed applications, completed questionnaires or checklist of
income and assets, documentation of third party verification of income and
assets, and income certification forms (LIHTC specific).
(b) Upon the request of the Limited Partner, the General Partner shall
promptly deliver to the Limited Partner, at the expense of the Partnership, a
copy of the information set forth in Section 14.1(a) above. The Limited Partner
shall have the right upon reasonable request and during normal business hours to
inspect and copy any of the foregoing, or any of the other books and records of
the Partnership or the Apartment Housing, at its own expense.
Section 14.2 Accounting Reports.
(a) By February 20 of each calendar year the General Partner shall provide
to the Limited Partner and the Special Limited Partner all tax information
necessary for the preparation of their federal and state income tax returns and
other tax returns with regard to the jurisdiction(s) in which the Partnership is
formed and in which the Apartment Housing is located. Notwithstanding, the
General Partner shall deliver to the Limited Partner and the Special Limited
Partner a draft copy of the information requested herein at least ten days prior
to the above referenced due date.
(b) By March 1 of each calendar year 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; and (3) a report setting forth the
amount of all fees and other compensation and Distributions and reimbursed
expenses paid by the Partnership for the fiscal year to the General Partner or
Affiliates of the General Partner and the services performed in consideration
therefor, which report shall be verified by the Partnership's Accountants; and
(4) the Accountant's calculation of each pay-out of the Net Operating Income
pursuant to Section 11.1 of this Agreement. Notwithstanding, the General Partner
shall deliver to the Limited Partner and the Special Limited Partner a draft
copy of the information requested herein at least ten days prior to the above
referenced due date.
(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.
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Section 14.3 Other Reports. The General Partner shall provide to the
Limited Partner and the Special Limited Partner the following reports:
(a) during construction, on a regular basis, but in no event less than once
a month, a copy of the Inspecting Architect's report and other construction
reports including, but not limited to, (1) the name of each person performing
work on the Improvements or providing materials for the Improvements, the work
performed or materials supplied by said person and the code number corresponding
to the line item in the Construction Budget which the person will be paid, (2)
an original AIA Document G702, or similar form acceptable to the Special Limited
Partner, (3) if not included in the Inspecting Architect's report or the AIA
Document G702, a line item break-down of the Construction Budget (which shall
include, description of work to be performed or materials to be supplied; total
dollar amount of the work or materials; dollar amount of work previously
completed and paid or materials supplied and paid; dollar amount of work or
materials to be paid per the current disbursement request; dollar amount of
materials stored; total dollar amount of work completed and stored as of the
current disbursement date; percentage of completion; dollar amount of work or
materials needed to complete the line item; and retainage), (4) a reconciliation
of the sources and uses to determine that the Construction Budget is in balance
and there are sufficient funds to complete the construction of the Improvements,
and (5) copies of lien releases, or waivers, from the Contractor and all
sub-contractors or material suppliers who were paid the previous month;
(b) during the rent-up phase, and continuing until the end of the first
six-month period during which the Apartment Housing has a sustained occupancy of
85% or better, by the twentieth day of each month within such period a copy of
the previous month's rent roll (through the last day of the month) and a tenant
LIHTC compliance worksheet similar to the monthly initial tenant certification
worksheet included in Exhibit "H" attached hereto and incorporated herein by
this reference;
(c) a quarterly tax credit compliance report similar to the worksheet
included in Exhibit "H" due on or before April 30 of each year for the first
quarter, July 31 of each year for the second quarter, October 31 of each year
for the third quarter and January 31 of each year for the fourth quarter. In
order to verify the reliability of the information being provided on the
compliance report the Special Limited Partner may request a sampling of tenant
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;
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(d) a quarterly report on operations, in the form attached hereto as
Exhibit "H", due on or before April 30 of each year for the first quarter of
operations, July 31 of each year for the second quarter of operations, October
31 of each year for the third quarter of operations and January 31 of each year
for the fourth quarter of operations which shall include, but is not limited to,
an unaudited income statement showing all activity in the reserve accounts
required to be maintained pursuant to Section VIII of this Agreement, statement
of income and expenses, balance sheet, rent roll as of the end of each calendar
quarter of each year, and third party verification of current utility allowance;
(e) by September 15 of each year, an estimate of LIHTC for that year;
(f) if the Apartment Housing receives a reservation of LIHTC in one year
but will not complete the construction and rent-up until a later year, an
audited cost certification together with the Accountant's work papers verifying
that the Partnership has expended the requisite 10% of the reasonably expected
cost basis to meet the carryover test provisions of Section 42 of the Code. Such
certification shall be provided to the Limited Partner and Special Limited
Partner by December 31 of the year during which the reservation was received.
Furthermore, if materials and supplies are purchased to meet the 10% requirement
then the General Partner shall provide to the Limited Partner an opinion of
counsel that title to the materials and supplies pass to the Partnership and
that the Partnership bears the risk of loss of the materials and supplies;
(g) during the Compliance Period, no later than the day any such
certification is filed, copies of any certifications which the Partnership must
furnish to federal or state governmental authorities administering the Tax
Credit program including, but not limited to, copies of all annual tenant
recertifications required under Section 42 of the Code;
(h) by the annual renewal date each and every year, an executed original or
certified copy of each and every Insurance policy or certificate required by the
terms of this Agreement;
(i) by the payment date of the real estate property taxes each and every
year verification that the same has been paid in full;
(j) on or before March 15th of each calendar year, a copy of the General
Partner's updated financial statement as of December 31 of the previous year;
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(k) on or before November 1 of each calendar year, a copy of the following
year's proposed operating budget. Each such Budget shall contain all the
anticipated Cash Expenses of the Partnership. Such Budget shall only be adopted
with the Consent of the Special Limited Partner; and
(l) notice of the occurrence, or of the likelihood of occurrence, of any
event which has had a material adverse effect upon the Apartment Housing or the
Partnership, including, but not limited to, any breach of any of the
representations and warranties set forth in Section 9.12 of this Agreement, and
any inability of the Partnership to meet its cash obligations as they become
payable, within ten days after the occurrence of such event.
Section 14.4 Late Reports. If the General Partner does not fulfill its
obligations under Section 14.2 within the time periods set forth therein, the
General Partner, using its own funds, shall pay as damages the sum of $50 per
day (plus interest at the rate established by Section 6.3 of this Agreement) to
the Limited Partner until such obligations shall have been fulfilled. If the
General Partner 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 $50.00 per week (plus interest at the rate established
by Section 6.3 of this Agreement) to the Limited Partner until such obligations
shall have been fulfilled. If the General Partner shall so fail to pay, the
General Partner and its Affiliates shall forthwith cease to be entitled to any
fees hereunder (other than the Development Fee) and/or to the payment of any Net
Operating Income or Sale or Refinancing Proceeds to which the General Partner
may otherwise be entitled hereunder. Payments of fees and Distributions shall be
restored only upon payment of such damages in full.
Section 14.5 Annual Site Visits. The Limited Partner, at the Limited
Partner's expense, has the right, upon reasonable notice to the General Partner,
to conduct a site visit which will include, in part, an inspection of the
property, a review of the office and tenant files and an interview with the
property manager.
Section 14.6 Tax Returns. The General Partner shall cause income tax
returns for the Partnership to be prepared and timely filed with the appropriate
federal, state and local taxing authorities.
Section 14.7 Fiscal Year. The fiscal year of the Partnership shall be the
calendar year or such other period as may be approved by the Internal Revenue
Service for federal income tax purposes.
Section 14.8 Banking. All funds of the Partnership shall be deposited in a
separate bank account or accounts as shall be determined by the General Partner
with the Consent of the Special Limited Partner. 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.
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Section 14.9 Certificates and Elections.
(a) The General Partner shall file the First Year Certificate within 90
days following the close of the taxable year during which Completion of
Construction occurs and thereafter shall timely file any certificates which the
Partnership must furnish to federal or state governmental authorities
administering the Tax Credit programs under Section 42 of the Code.
(b) The General Partner, with the Consent of the Special Limited Partner,
may, but is not required to, cause the Partnership to make or revoke the
election referred to in Section 754 of the Code, as amended, or any similar
provisions enacted in lieu thereof.
ARTICLE XV
DISSOLUTION, WINDING UP, TERMINATION
AND LIQUIDATION OF THE PARTNERSHIP
Section 15.1 Dissolution of Partnership. The Partnership shall be dissolved
upon the expiration of its term or the earlier occurrence of any of the
following events.
(a) The effective date of the Withdrawal or removal of the General Partner,
unless (1) at the time there is at least one other General Partner (which may be
the Special Limited Partner if it elects to serve as successor General Partner
under Section 13.4 hereof) who will continue as General Partner, or (2) within
120 days after the occurrence of any such event the Limited Partner elects to
continue the business of the Partnership.
(b) The sale of the Apartment Housing and the receipt in cash of the full
amount of the proceeds of such sale.
Notwithstanding the foregoing, however, in no event shall the
Partnership terminate prior to the expiration of its term if such termination
would result in a violation of the Mortgage or any other agreement with or rule
or regulation of any Mortgage lender to which the Partnership is subject.
Section 15.2 Return of Capital Contribution upon Dissolution. Except as
provided in Sections 7.3 and 7.4 of this Agreement, which provide for a
reduction or refund of the Limited Partner's Capital Contribution under certain
circumstances, and which shall represent the personal obligations of the General
Partner, as well as the obligations of the Partnership, each Partner shall look
solely to the assets of the Partnership for all Distributions with respect to
the Partnership (including the return of its Capital Contribution) and shall
have no recourse therefor (upon dissolution or otherwise) against any General
Partner. No Partner shall have any right to demand property other than money
upon dissolution and termination of the Partnership, and the Partnership is
prohibited from such a distribution of property absent the Consent of the
Special Limited Partner.
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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 11.2(c), the remaining assets of the Partnership
shall be distributed to the Partners in accordance with the positive balances in
their Capital Accounts, after taking into account all allocations under Article
X hereof.
(b) In the event that a General Partner has a deficit balance in its
Capital Account following the liquidation of the Partnership or its Interest, as
determined after taking into account all Capital Account adjustments for the
Partnership taxable year in which such liquidation occurs, such General Partner
shall pay to the Partnership the amount necessary to restore such deficit
balance to zero in compliance with Treasury Regulation Section
1.704-1(b)(2)(ii)(b)(3).
(1) The deficit reduction amount shall be paid by the General Partner
by the end of such taxable year (or, if later, within 90 days after the date of
Liquidation) and shall, upon liquidation of the Partnership, be paid to
creditors of the Partnership or distributed to other Partners in accordance with
their positive Capital Account balances.
(c) With respect to assets distributed in kind to the Partners in
liquidation or otherwise:
(1) unrealized appreciation or unrealized depreciation in the values
of such assets shall be deemed to be Income and Losses realized by the
Partnership immediately prior to the liquidation or other Distribution event;
and
(2) such Income and Losses shall be allocated to the Partners in
accordance with Section 10.2 hereof, and any property so distributed shall
be treated as a Distribution of an amount in cash equal to the excess of such
Fair Market Value over the outstanding principal balance of and accrued interest
on any debt by which the property is encumbered.
(d) For the purposes of Section 15.3(c), "unrealized appreciation" or
"unrealized depreciation" shall mean the difference between the Fair Market
Value of such assets, taking into account the Fair Market Value of the
associated financing but subject to Section 7701(g) of the Code, and the asset's
Gross Asset Value. Section 15.3(c) is merely intended to provide a rule for
allocating unrealized Income and Losses upon liquidation or other Distribution
event, and nothing contained in Section 15.3(c) or elsewhere in this Agreement
is intended to treat or cause such Distributions to be treated as sales for
value. The Fair Market Value of such assets shall be determined by an
independent appraiser to be selected by the General Partner.
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Section 15.4 Deferral of Liquidation. If at the time of liquidation the
General Partner or other liquidator shall determine that an immediate sale of
part or all of the Partnership assets could cause undue loss to the Partners,
the liquidator may, in order to avoid loss, but only with the Consent of the
Special Limited Partner, either defer liquidation and retain all or a portion of
the assets or distribute all or a portion of the assets to the Partners in kind.
In the event that the liquidator elects to distribute such assets in kind, the
assets shall first be assigned a value (by appraisal by an independent
appraiser) and the unrealized appreciation or depreciation in value of the
assets shall be allocated to the Partners' Capital Accounts, as if such assets
had been sold, in the manner described in Section 10.2, and such assets shall
then be distributed to the Partners as provided herein. In applying the
preceding sentence, the Apartment Housing shall not be assigned a value less
than the unamortized principal balance of any loan secured thereby.
Section 15.5 Liquidation Statement. Each of the Partners shall be furnished
with a statement prepared or caused to be prepared by the General Partner or
other liquidator, which shall set forth the assets and liabilities of the
Partnership as of the date of complete liquidation. Upon compliance with the
distribution plan as outlined in Sections 15.3 and 15.4, the Limited Partner and
Special Limited Partner shall cease to be such and the General Partner shall
execute, acknowledge and cause to be filed those certificates referenced in
Section 15.6.
Section 15.6 Certificates of Dissolution; Certificate of Cancellation of
Certificate of Limited Partnership.
(a) Upon the dissolution of the Partnership, the General Partner shall
cause to be filed in the office of the Secretary of State, and on a form
prescribed by the Secretary of State of Arkansas, a certificate of dissolution.
The certificate of dissolution shall set forth the Partnership's name, the
Secretary of State's file number for the Partnership, the event causing the
Partnership's dissolution and the date of the dissolution.
(b) Upon the completion of the winding up of the Partnership's affairs, the
General Partner shall cause to be filed in the office of, and on a form
prescribed by, the Secretary of State of Arkansas, 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.
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ARTICLE XVI
AMENDMENTS
This Agreement may be amended by a majority consent of the Partners
after a meeting of the Partners, which meeting shall be held after proper notice
as provided in Section 17.2 of this Agreement. For purposes of this Article XVI,
a Partner shall grant its consent to a proposed amendment unless such Partner
reasonably determines that the proposed amendment is adverse to the Partner's
Interest.
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, at a meeting of the Partnership, the Limited Partner may vote:
(1) to approve or disapprove the Sale or Refinancing of the Apartment
Housing prior to such Sale or Refinancing;
(2) to remove the General Partner and elect a substitute General
Partner as provided in this Agreement;
(3) to elect a successor General Partner upon the Withdrawal of the
General Partner;
(4) to approve or disapprove the dissolution of the Partnership;
(5) subject to the provisions of Article XVI hereof, to amend this
Agreement;
(6) to approve or disapprove the refinancing of the Mortgage prior to
such refinancing; or
(7) on any other matters permitted in this Agreement.
(b) On any matter where the Limited Partner has the right to vote, votes
may only be cast at a duly called meeting of the Partnership or through written
action without a meeting.
(c) The Special Limited Partner shall have the right to consent to those
actions or inactions of the Partnership and/or General Partner as otherwise set
forth in this Agreement, and the General Partner is prohibited from any action
or inaction requiring such consent unless such consent has been obtained.
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Section 17.2 Meeting of Partnership. Meetings of the Partnership may be
noticed either (a) at any time by the General Partner; or (b) by the Limited
Partner or the Special Limited Partner. The notice for a meeting shall specify
the purpose of such meeting, and the time and the place of such meeting (which
shall be by telephone conference or at the principal place of business of the
Partnership). Any Partner calling a Partners meeting shall provide written
notice to all Partners. The meeting shall not be held less than 15 days nor more
than 30 days from the Partners' receipt of the notice. All meetings and actions
of the Limited Partner 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, to the following
address, or to such other address as a party may from time to time designate in
writing:
To the General Partner: River Valley Planning &
Development Corp.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
To the Limited Partner: WNC Holding, LLC
c/o WNC & Associates, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
To the Special
Limited Partner: WNC Housing, L.P.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Section 17.4 Successors and Assigns. All the terms and conditions of this
Agreement shall be binding upon and inure to the benefit of the successors and
assigns of the Partners.
Section 17.5 FmHA Regulations. Notwithstanding any other provisions of this
Agreement, the following will take precedence:
(a) The Partnership is authorized to execute any documents required by FmHA
in connection with the FmHA Loan Agreement. The General Partner hereby covenants
to act in accordance with the Project Documents. Any incoming General Partner
shall, as a condition of receiving a Partnership interest, agree to be bound by
the Project Documents, and all other documents executed in connection with the
FmHA Loan Agreement to the same extent and on the same terms as any other
General Partner. Upon any dissolution, no title or right to possession and
control of the Project, and no right to collect the rents therefrom, shall pass
to any Person who is not bound in a manner consistent with Section 515 of the
Housing Act and the rules and regulations thereunder.
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(b) In the event that any provision of this Agreement in any way tends to
contradict, modify or in any way change the terms of the Project Documents or
any other agreement related to the Project entered into, or to be entered into,
by or on behalf of the Partnership with FmHA, the terms of the Project Documents
or such other agreements with FmHA shall prevail and govern.
(c) Any amendment or revision of this Agreement, transfer of a Partnership
interest or other action requiring approval shall be subject to the written
approval of FmHA, if such approval is required, and any amendment without the
prior written approval of FmHA shall be subject to later amendment to comply
with the requirements of FmHA; provided, however, that no such approval of FmHA
shall be required for any amendment of this Agreement the sole purpose of which
is to provide for the admission of additional or substituted limited partners so
long as any such additional or substituted limited partner so admitted shall own
in the aggregate less than a 10% limited partner interest in the Partnership.
(d) Any conveyance or transfer of title to all or any portion of the
Project required or permitted under this Agreement shall in all respects be
subject to all conditions, approvals and other requirements of FmHA rules and
regulations applicable thereto.
(e) The General Partner will at all times maintain the FmHA required
Financial Interest in the Partnership.
The foregoing paragraphs (a), (b), (c), (d), and (e) will automatically
become void and of no further force and effect with respect to FmHA at such time
as the Mortgage is no longer being provided by FmHA.
Section 17.6 Recording of Certificate of Limited Partnership. If the
General Partner should deem it advisable to do so, the Partnership shall record
in the office of the County Recorder of the county in which the principal place
of business of the Partnership is located a certified copy of the Certificate of
Limited Partnership, or any amendment thereto, after such Certificate or
amendment has been filed with the Secretary of State of Arkansas.
Section 17.7 Amendment of Certificate of Limited Partnership.
(a) The General Partner, or any successor general partner shall cause to be
filed, within 30 days after the happening of any of the following events, an
amendment to the Certificate of Limited Partnership reflecting the occurrence of
any of the following:
(1) a change in the name of the Partnership;
(2) a change in the street address of the Partnership's principal
executive office;
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(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 Arkansas. 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 17.8 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 17.9 Captions. Captions to and headings of the Articles, Sections
and subsections of this Agreement are solely for the conveniences of the
Partners, are not a part of this Agreement, and shall not be used for the
interpretation or determination of the validity of this Agreement or any
provision hereof.
Section 17.10 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 17.11 Certain Provisions. If the operation of any provision of
this Agreement would contravene the provisions of applicable law, or would
result in the imposition of general liability on any Limited Partner or Special
Limited Partner, such provisions shall be void and ineffectual.
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Section 17.12 Tax Matters Partner. All the Partners hereby agree that the
General Partner shall be the "Tax Matters Partner" pursuant to the Code and in
connection with any audit of the federal income tax returns of the Partnership.
At the time of a review, examination, or otherwise, the Tax Matters Partner
shall inform the IRS that a copy of all correspondence shall be provided to the
Limited Partner.
(a) The Tax Matters Partner shall furnish to each Partner notice and
information with respect to the following: closing conference with an examining
agent; proposed adjustments, rights of appeal, and requirements for filing a
protest; time and place of any appeals conference; acceptance by the Internal
Revenue Service of any settlement offer; consent to the extension of the period
of limitation with respect to all Partners; filing of a request for
administrative adjustment on behalf of the Partnership; filing by the Tax
Matters Partner or any other Partner of any petition for judicial review; filing
of any appeal with respect to any judicial determination; and a final judicial
redetermination.
(b) If the Tax Matters Partner shall determine to litigate any
administrative determination relating to federal income tax matters, then the
Tax Matters Partner shall litigate such matter in such court as the Tax Matters
Partner shall decide in its sole discretion.
(c) In discharging its duties and responsibilities, the Tax Matters Partner
shall act as a fiduciary (1) to the Limited Partner (to the exclusion of the
other Partners) insofar as tax matters related to the Tax Credits are concerned,
and (2) to all of the Partners in other respects.
(d) The Partners consent and agree that in connection with any audit of the
Partnership, or if the Tax Matters Partner withdraws from the Partnership or the
Tax Matters Partner becomes Bankrupt, then the Special Limited Partner may
become, in its sole discretion, a special general partner, and become the Tax
Matters Partner. The Limited Partner will make no claim against the Partnership
in respect of any action or omission by the Tax Matters Partner during such time
as the Special Limited Partner acts as the Tax Matters Partner.
(e) Nothing herein shall be construed as a waiver by the Limited Partner of
any of its rights under Chapter 631 of the Code. The General Partner shall not
enter into any settlement agreement purporting to bind the Limited Partner
without the Limited Partner's consent.
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Section 17.13 Expiration of Compliance Period.
(a) Notwithstanding any provision hereof to the contrary (other than this
Section 17.13), the Special Limited Partner shall have the right at any time
after the beginning of the last year of the Compliance Period to require, by
written notice to the General Partner, that the General Partner promptly submit
a written request to the applicable State Tax Credit Agency pursuant to Section
42(h) of the Code (or any successor provision) that such agency endeavor to
locate within one year from the date of such written request a purchaser for the
Apartment Housing who will continue to operate the Apartment Housing as a
qualified low income property, at a purchase price that is not less than the
minimum amount set forth in Section 42(h)(6) of the Code (or any successor
provision). In the event that the State Tax Credit Agency obtains an offer
satisfying the conditions of the preceding sentence, the General Partner shall
promptly notify the Special Limited Partner in writing with respect to the terms
and conditions of such offer, and, if the Special Limited Partner notifies the
General Partner that such offer should be accepted, the General Partner shall
cause the Partnership promptly to accept such offer and to proceed to sell the
Apartment Housing pursuant to such offer.
(b) Notwithstanding any other provision of this Agreement to the contrary,
the Special Limited Partner shall have the right at any time after the end of
the Compliance Period to require, by written notice to the General Partner (the
"Required Sale Notice"), that the General Partner promptly use its best efforts
to obtain a buyer for the Apartment Housing on the most favorable terms then
available. The General Partner shall submit the terms of any proposed sale to
the Special Limited Partner for its approval in the manner set forth in Section
17.13(a) hereof. If the General Partner shall fail to so obtain a buyer for the
Apartment Housing within six months of receipt of the Required Sale Notice or if
the Consent of the Special Limited Partner in its sole discretion shall be
withheld to any proposed sale, then the Special Limited Partner shall have the
right at any time thereafter to obtain a buyer for the Apartment Housing on
terms acceptable to the Special Limited Partner (but not less favorable to the
Partnership than any proposed sale previously rejected by the Special Limited
Partner). In the event that the Special Limited Partner so obtains a buyer, it
shall notify the General Partner in writing with respect to the terms and
conditions of the proposed sale and the General Partner shall cause the
Partnership promptly to sell the Apartment Housing to such buyer.
(c) A sale of the Apartment Housing prior to the end of the Compliance
Period may only take place if the conditions of Section 42(j)(6) of the Code (or
any successor provision) will be satisfied upon such sale by having the
purchaser of the Apartment Housing post the required bond on behalf of the
Partnership.
Section 17.14 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 17.15 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 17.16 Governing Law. This Agreement and its application shall be
governed by the laws of the State.
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Section 17.17 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 17.18 Receipt of Correspondence. The Partners agree that the
General Partner shall send to the Limited Partner and the Special Limited
Partner within five days of receipt a copy of any correspondence relative to the
Apartment Housing's noncompliance with the Mortgage, relative to the Apartment
Housing's noncompliance with the Tax Credit rules or regulations, relative to
the acceleration of the Mortgage and/or relative to the disposition of the
Apartment Housing.
Section 17.19 Security Interest and Right of Set-Off. As security for the
performance of the respective obligations to which any Partner may be subject
under this Agreement, the Partnership shall have (and each Partner hereby grants
to the Partnership) a security interest in their respective Interests of such
Partner in all funds distributable to said Partner to the extent of the amount
of such obligation.
[Remainder of page intentionally left blank.]
71
IN WITNESS WHEREOF, this Amended and Restated Agreement of Limited
Partnership of Calico Terrace Limited Partnership, an Arkansas limited
partnership, is made and entered into as of July 24, 2002.
GENERAL PARTNER
River Valley Planning & Development Corp.
By:
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
President
WITHDRAWING LIMITED PARTNER
River Valley Investments, Inc.
By:
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
President
LIMITED PARTNER
WNC Holding, LLC
By: WNC & Associates, Inc.
General Partner
By:
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Executive Vice President
SPECIAL LIMITED PARTNER
WNC Housing, L.P.
By: WNC & Associates, Inc.,
General Partner
By:
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Executive Vice President
72
EXHIBIT A TO PARTNERSHIP AGREEMENT
LEGAL DESCRIPTION
A parcel of land situated in the ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (▇▇▇/▇
of SW1/4) of section 20, Township 7 North, Range 18 west, Izard County,
Arkansas, bounded by a line the point of beginning of which is found by
commencing at the Southeast corner of said NE1/4 of SW1/4, thence running West a
distance of 530.00 feet, thence running North 02 deg 57' 37" East a distance of
447.31 feet, thence running North 00 deg 20' 24" West a distance of 211.46 feet
to the point of beginning for the parcel of land herein described; THENCE FROM
SAID BEGINNING POINT, continue running North 00 deg 20' 24" West a distance of
374.75 feet to a point on the South side of Fourth Street in the City of Calico
Rock, thence running South 85 deg 26' 28" East along the South side of Fourth
Street a distance of 231.60 feet, thence running South 07 deg 08' 12" West a
distance of 125.00 feet, thence running South 85 deg 20' 26" East a distance of
148.28 feet, thence running South 06 deg 54' 52" West a distance of 250.11 feet,
and thence running North 85 deg 20' 21" West a distance of 338.91 feet to the
point of beginning.
A-1
EXHIBIT B TO PARTNERSHIP AGREEMENT
FORM OF LEGAL OPINION
WNC Holding, LLC
c/o WNC & Associates, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
RE: Calico Terrace Limited Partnership
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in
connection with the investment by WNC Holding, LLC, a California limited
partnership (the "Limited Partner") in Calico Terrace Limited Partnership (the
"Partnership"), an Arkansas limited partnership formed to own, develop,
(construct/-rehabilitate) finance and operate an apartment complex for
low-income persons (the "Apartment Complex") in Calico Rock, Izard County,
Arkansas. The general partner(s) of the Partnership (is/are) River Valley
Planning & Development Corp. (the "General Partner(s)").
In rendering the opinions stated below, we have examined and relied
upon the following:
(i) [Certificate of Limited Partnership];
(ii) [Agreement of Limited Partnership] (the "Partnership
Agreement");
(iii) A preliminary reservation letter from [State
Allocating Agency] (the "State Agency") dated
_________, 200___ conditionally awarding
$_______________ in Federal tax credits annually for
each of ten years and $_______________ in California
tax credits annually for each of four years for the
Apartment Complex; and
(iv) Such other documents, records and instruments as we
have deemed necessary in order to enable us to render
the opinions referred to in this letter.
For purposes of rendering the opinions stated below we have assumed
that, in those cases in which we have not been involved directly in the
preparation, execution or the filing of a document, that (a) the document
reviewed by us is an original document, or a true and accurate copy of the
original document, and has not been subsequently amended, (b) the signatures on
each original document are genuine, and (c) each party who executed the document
had proper authority and capacity.
B1
WNC Holding, LLC
c/o WNC & Associates, Inc.
200
---------------------, --
Page 2
Based on the foregoing we are of the opinion that:
(a) ________________________, one of the General Partners, is a
[corporation/partnership] duly formed and validly existing under the laws of the
State of _____________________ and has full power and authority to enter into
and perform its obligations under the Partnership Agreement. __________________,
one of the other General Partners, is a [corporation/partnership] duly formed
and validly existing under the laws of the State of __________________ and has
full power and authority to enter into and perform its obligations under the
Partnership Agreement.
(b) The Partnership is a limited partnership duly formed and validly
existing under the laws of the State of Arkansas.
(c) The Partnership is validly existing under and subject to the laws
of Arkansas with full power and authority to own, develop,
[construct/rehabilitate], finance and operate the Apartment Complex and to
otherwise conduct business under the Partnership Agreement.
(d) Execution of the Partnership Agreement by the General Partner(s)
has been duly and validly authorized by or on behalf of the General Partner(s)
and, having been executed and delivered in accordance with its terms, the
Partnership Agreement constitutes the valid and binding agreement of the General
Partner(s), enforceable in accordance with its terms.
(e) The execution and delivery of the Partnership Agreement by the
General Partner(s) does not conflict with and will not result in a breach of any
of the terms, provisions or conditions of any agreement or instrument known to
counsel to which any of the General Partner(s) or the Partnership is a party or
by which any of them may be bound, or any order, rule, or regulation to be
applicable to any of such parties of any court or governmental body or
administrative agency having jurisdiction over any of such parties or over the
property.
(f) To the best of counsel's knowledge, after due inquiry, there is no
litigation or governmental proceeding pending or threatened against, or
involving the Apartment Complex, the Partnership or any General Partner which
would materially adversely affect the condition (financial or otherwise) or
business of the Apartment Complex, the Partnership or any of the Partners of the
Partnership.
(g) The Limited Partner and the Special Limited Partner have been
admitted to the Partnership as limited partners of the Partnership under
__________ law and are entitled to all of the rights of limited partners under
the Partnership Agreement. Except as described in the Partnership Agreement, no
person is a partner of or has any legal or equitable interest in the
Partnership, and all former partners of record or known to counsel have validly
withdrawn from the Partnership and have released any claims against the
Partnership arising out of their participation as partners therein.
B-2
WNC Holding, LLC
c/o WNC & Associates, Inc.
200
---------------------, --
Page 3
(h) Liability of the Limited Partner for obligations of the Partnership
is limited to the amount of the Limited Partner's capital contributions required
by the Partnership Agreement.
(i) Neither the General Partner(s) of the Partnership nor the Limited
Partner nor the Special Limited Partner will have any liability for the Mortgage
represented thereby (as those terms are defined in the Partnership Agreement,
and the lender of the Mortgage Loan will look only to its security in the
Apartment Complex for repayment of the Mortgage Loan.
(j) The Partnership owns a fee simple interest in the Apartment
Complex.
(k) To the best of our actual knowledge and belief, after due inquiry,
the Partnership has obtained all consents, permissions, licenses, approvals, or
orders required by all applicable governmental or regulatory agencies for the
development, [construction/rehabilitation] and operation of the Apartment
Complex, and the Apartment Complex conforms to all applicable Federal, state and
local land use, zoning, health, building and safety laws, ordinances, rules and
regulations.
(l) The Apartment Complex has obtained a preliminary reservation of low
income housing tax credits ("LIHTC") from the State Agency. The final allocation
of the LIHTC and ultimately eligibility of the Apartment Complex for such final
allocation are subject to a series of requirements which must be met, performed
or achieved at various times prior to and after such final allocation. Assuming
all such requirements are met, performed or achieved at the time or times
provided by applicable laws and regulations, the Apartment Complex will qualify
for LIHTC.
(m) Each guarantor of the Partnership, if not an individual, was
incorporated, duly organized, and is validly existing and in good standing under
the laws of the State of _________________, is qualified to do business in every
jurisdiction in which because of the nature of its activities or properties
qualification is appropriate, and has all requisite power and authority to own
and operate its properties and to carry on its business as now conducted.
B-3
WNC Holding, LLC
c/o WNC & Associates, Inc.
200
---------------------, --
Page 4
(n) Each guarantor of the Partnership (i) has full power and authority
to execute, deliver and perform and (ii) has duly authorized the execution,
delivery and performance of the applicable guaranty. The applicable 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 creditors' rights generally and general principles
of equity (regardless of whether enforceability is considered a proceeding at
law or equity).
All of the opinions set forth above are qualified to the extent that
the validity of any provision of any agreement may be subject to or affected by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the rights of creditors generally. We do not express any opinion as to
the availability of any equitable or specific remedy upon any breach of any of
the covenants, warranties or other provisions contained in any agreement. We
have not examined, and we express no opinion with respect to, the applicability
of, or liability under, any Federal, state or local law, ordinance or regulation
governing or pertaining to environmental matters, hazardous wastes, toxic
substances or the like.
We express no opinion as to any matter except those set forth above.
These opinions are rendered for use by the Limited Partner and its legal counsel
which will rely on this opinion in connection with federal income tax opinions
to be rendered by that firm. This opinion may not be delivered to or relied upon
by any other person or entity without our express written consent.
Sincerely,
--------------------
B-4
EXHIBIT C TO PARTNERSHIP AGREEMENT
CERTIFICATION AND AGREEMENT
CERTIFICATION AND AGREEMENT made as of the date written below by Calico
Terrace Limited Partnership, an Arkansas limited partnership (the
"Partnership"); River Valley Planning & Development Corp. (collectively referred
to as the "General Partner"); and River Valley Investment Corp. (collectively
referred to as the " Withdrawing Limited Partner") for the benefit of WNC
Holding, LLC, a California limited partnership (the "Investment Partnership"),
and WNC & Associates, Inc. ("WNC").
WHEREAS, the Partnership proposes to admit the Investment Partnership
as a limited partner thereof pursuant to an Amended and Restated Agreement of
Limited Partnership of the Partnership (the "Partnership Agreement"), in
accordance with which the Investment Partnership will make substantial capital
contributions to the Partnership; and
WHEREAS, the Investment Partnership and WNC have relied upon certain
information and representations described herein in evaluating the merits of
investment by the Investment Partnership in the Partnership;
NOW, THEREFORE, to induce the Investment Partnership to enter into the
Partnership Agreement and become a limited partner of the Partnership, and for
$1.00 and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the Partnership, the General Partner and the
Withdrawing Limited Partner hereby agree as follows for the benefit of the
Investment Partnership and WNC.
1. Representations, Warranties and Covenants of the Partnership,
the General Partner and the Withdrawing Limited Partner
The Partnership, the General Partner and the Withdrawing Limited
Partner jointly and severally represent, warrant and certify to the Investment
Partnership and WNC that, with respect to the Partnership, as of the date
hereof:
1.1 The Partnership is duly organized and in good standing as
a limited partnership pursuant to the laws of the state of its formation with
full power and authority to own its apartment complex (the "Apartment Complex")
and conduct its business; the Partnership, the General Partner and the
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 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.
C-1
1.2 The General Partner has delivered to the Investment
Partnership, WNC or their affiliates all documents and information which would
be material to a prudent investor in deciding whether to invest in the
Partnership. All factual information provided to the Investment Partnership, WNC
or their affiliates either in writing or orally, did not, at the time given, and
does not, on the date hereof, contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading in light of the circumstances under which
they are made.
1.3 Each of the representations and warranties contained in
the Partnership Agreement is true and correct as of the date hereof.
1.4 Each of the covenants and agreements of the Partnership
and the General Partner contained in the Partnership Agreement has been duly
performed to the extent that performance of any covenant or agreement is
required on or prior to the date hereof.
1.5 All conditions to admission of the Investment Partnership
as the investment limited partner of the Partnership contained in the
Partnership Agreement have been satisfied.
1.6 No default has occurred and is continuing under the
Partnership Agreement or any of the Project Documents (as such term is defined
in the Partnership Agreement) for the Partnership.
1.7 The Partnership will allocate to the Limited Partner the
Projected Annual Tax Credits, or the Revised Projected Tax Credits, if
applicable.
1.8 The General Partner agrees to take all actions necessary
to claim the Projected Tax Credit, including, without limitation, the filing of
Form(s) 8609 with the Internal Revenue Service.
1.9 No person or entity other than the Partnership holds any
equity interest in the Apartment Complex.
1.10 The Partnership has the sole responsibility to pay all
maintenance and operating costs, including all taxes levied and all insurance
costs, attributable to the Apartment Complex.
C-2
1.11 The Partnership, except to the extent it is protected by
insurance and excluding any risk borne by lenders, bears the sole risk of loss
if the Apartment Complex is destroyed or condemned or there is a diminution in
the value of the Apartment Complex.
1.12 No person or entity except the Partnership has the right
to any proceeds, after payment of all indebtedness, from the sale, refinancing,
or leasing of the Apartment Complex.
1.13 No General Partner is related in any manner to the
Investment Partnership, nor is any General Partner acting as an agent of the
Investment Partnership.
1.14 No event has occurred which would have a material adverse
change to the Limited Partner's investment.
2. Miscellaneous
2.1 This Certification and Agreement is made solely for the
benefit of the Investment Partnership and WNC, and their respective successors
and assignees, and no other person shall acquire or have any right under or by
virtue of this Agreement.
2.2 This Certification and Agreement may be executed in
several counterparts, each of which shall be deemed to be an original, all of
which together shall constitute one and the same instrument.
2.3 Capitalized terms used but not defined in this
Certification Agreement shall have the meanings given to them in the Partnership
Agreement.
[Remainder of page intentionally left blank.]
C-3
IN WITNESS WHEREOF, this Certificate and Agreement is made and entered
into as of _________________, 2002.
PARTNERSHIP
Calico Terrace Limited Partnership
By: River Valley Planning & Development Corp.,
General Partner
By:
----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
President
GENERAL PARTNER
River Valley Planning & Development Corp.
By:
----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
President
WITHDRAWING LIMITED PARTNER
River Valley Investments, Inc.
By:
----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
President
C-4
EXHIBIT D TO PARTNERSHIP AGREEMENT
FORM OF COMPLETION CERTIFICATE
(to be used when construction [rehabilitation] completed)
COMPLETION CERTIFICATE
The undersigned, an architect duly licensed and registered in the State of
Arkansas, has reviewed the final working plans and detailed specifications for
Calico Terrace Limited Partnership, an Arkansas limited partnership (the
"Partnership") in connection with the construction [rehabilitation] of
improvements on certain real property located in Calico Rock, Izard County,
Arkansas (the "Improvements").
The undersigned hereby certifies (i) that the Improvements have been completed
in accordance with the aforesaid plans and specifications, (ii) that a permanent
certificate of occupancy and all other permits required for the continued use
and occupancy of the Improvements have been issued with respect thereto by the
governmental agencies having jurisdiction thereof, (iii) that the Improvements
are in compliance with all requirements and restrictions of all governmental
authorities having jurisdiction over the Improvements, including, without
limitation, all applicable zoning, building, environmental, fire, and health
ordinances, rules and regulations and (iv) that all contractors, subcontractors
and workmen who worked on the Improvements have been paid in full except for
normal retainages and amounts in dispute.
-----------------------------------
Apartment Housing Architect
Date: ----------------------------
Confirmed by:
-----------------------------------
General Partner
Date: ----------------------------
D-1
EXHIBIT E TO THE PARTNERSHIP
[CERTIFICATE]
[Letterhead]
_______________, 200____
WNC Holding, LLC
c/o WNC & Associates, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
RE: Partnership
Certification as to Amount
of Eligible Tax Credit Base
Gentlemen:
In connection with the acquisition by WNC Holding, LLC (the "Limited Partner")
of a limited partnership interest in Calico Terrace Limited Partnership, an
Arkansas limited partnership (the "Partnership") which owns a certain parcel of
land located in Calico Rock, Izard County, Arkansas and improvements thereon
(the "Apartment Housing"), the Limited Partner has requested our certification
as to the amount of low-income housing tax credits ("Tax Credits") available
with respect to the Apartment Housing under Section 42 of the Internal Revenue
Code of 1986, as amended (the "Code"). Based upon our review of [the financial
information provided by the Partnership] of the Partnership, we are prepared to
file the Federal information tax return of the Partnership claiming annual Tax
Credits in the amount of $_______________, which amount is based on an eligible
basis (as defined in Section 42(d) of the Code) of the Apartment Housing of
$________________, a qualified basis (as defined in Section 42(c) of the Code)
of the Apartment Housing of $_________________ and an applicable percentage (as
defined in Section 42(b) of the Code) of _____%.
Sincerely,
-------------------------
E-1
EXHIBIT F TO THE PARTNERSHIP AGREEMENT
[CONTRACTOR'S CERTIFICATE]
[Contractor's Letterhead]
_______________, 200____
WNC Holding, LLC
c/o WNC & Associates, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Re: Calico Terrace Limited Partnership
Dear Ladies and Gentlemen:
The undersigned The ▇▇▇▇▇▇▇ Group, (hereinafter referred to as "Contractor"),
has furnished or has contracted to furnish labor, services and/or materials
(hereinafter collectively referred to as the "Work") in connection with the
improvement of certain real property known as __________________ located in
Calico Rock, Izard County, Arkansas (hereinafter known as the "Apartment
Housing").
Contractor makes the following representations and warranties regarding Work at
the Apartment Housing.
o Work on said Apartment Housing has been performed and completed in
accordance with the plans and specifications for the Apartment Housing.
o Contractor acknowledges that all amounts owed pursuant to the contract for
Work performed for Calico Terrace Limited Partnership is paid in full.
o Contractor acknowledges that Calico Terrace Limited Partnership is not in
violation with terms and conditions of the contractual documents related to
the Apartment Housing.
o Contractor warrants that all parties who have supplied Work for improvement
of the Apartment Housing have been paid in full.
o Contractor acknowledges the contract to be paid in full and releases any
lien or right to lien against the above property.
The undersigned has personal knowledge of the matters stated herein and is
authorized and fully qualified to execute this document on behalf of the
Contractor.
(NAME OF COMPANY)
By:_________________________________________
Title:______________________________________
F-1
EXHIBIT G TO THE PARTNERSHIP
Real Property: Use Modified Accelerated Cost Recovery System ("MACRS") 27.5 year
straight-line depreciation using the mid month convention or use MACRS
Alternative Depreciation System ("ADS") 40 year straight-line depreciation if
required pursuant to the Agreement. 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 or use MACRS Alternative
Depreciation System ("ADS") 12 year straight-line depreciation if required
pursuant to the Agreement. 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 wirings 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 or use MACRS Alternative Depreciation System ("ADS") 20
year straight-line depreciation if required pursuant to the Agreement. The
following costs have a 15-year recovery period. Items allowed in this section
are costs attributable to excavation, grading, and removing soil necessary to
the proper setting of buildings. Other costs allowable in this section are as
follows:
o Roads and sidewalks
o Concrete work (curb and gutter)
o Fencing
G-1
o Landscaping (including, but not limited to, trees and shrubs) around the
building which would be destroyed if the building were replaced
o Decorative walls which are part of the landscaping
o Parking lot (resurfacing it later is deducted as an expense)
o Initial parking lot striping (restriping it later is deducted as an
expense)
o Street lights and signs
o Signs which identify the property or provide directions
o Parking lot lighting (not outdoor security lighting)
o Playground equipment
o Basketball court and backboard
o Tennis courts
o Swimming pools
o Jogging trails
o Flag pole
o Wastewater treatment plant and lift station to handle raw sewage
o Interest expense capitalized and related to any of the above costs
o The prorata portion of the general contractor/construction company profit,
overhead, and general requirements and conditions allocable to items with a
15-year cost recovery period
o The prorata portion of the developer fee, profit and overhead allocable to
items with a 15-year cost recovery period
Recovery of costs of sanitary sewer system and water utility/distribution
system, including the sewer system outside the buildings - the following costs
have a 20-year recovery period - 150% declining balance mid-year convention.
o Fire hydrants
o Manhole rings and covers
o 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
G-2
EXHIBIT H TO THE PARTNERSHIP AGREEMENT
REPORT OF OPERATIONS
QUARTER ENDED: ____________________, 200X
------------------------------------- -----------------------------------
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:
------------------------------------- -----------------------------------
-------------------------------------------------------------------------------
(6) OCCUPANCY INFORMATION
A. Number of Apartment Units_____ Number of RA Units_____
Number of Section 8 Tenants ____
B. Occupancy for the Quarter has: Increased ____ Decreased_____
Remained the Same _____
C. Number of: Move-Ins ______ Move-Outs __________ % of Occupancy ______
D. Average length of tenant residency: 1-6 months ______ 6-12 months ______
1-3 years ______ Over 4 years_____
E. Number of Basic rent qualified applicants on waiting list: ________
F. If the apartments are less than 90% occupied, please explain why and
describe what efforts are being made to lease-up remaining units.
___________________________________________________________________________
G. On site manager: Full Time__________ Part Time____________.
If part-time, the number of hours per week_____________.
H-1
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
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Lighting
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Other
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Please describe in detail any major repairs:
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H-2
CONDITION OF PROPERTY
THE OVERALL APPEARANCE OF THE BUILDING(S) IS:
Excellent Good Fair Bad
THE OVERALL APPEARANCE OF THE GROUNDS IS:
Excellent Good Fair Bad
EXTERIOR CONDITION (Please Check Appropriate Box)
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Type of Condition Excellent Good Fair Problems/Comments
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Signage
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Parking Lots
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Office/Storage
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Equipment
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Community Building
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Laundry Room
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Benches/Playground
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Lawns, Plantings
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Drainage, Erosion
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Carports
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Fences
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Walks/Steps/Guardrails
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Lighting
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Painting
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Walls/Foundation
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Roof/Flashing/Vents
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Gutters/Splashblocks
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Balconies/Patios
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Doors Windows/Screens
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Elevators
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INTERIOR CONDITION
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Stairs
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Flooring
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Doors/Cabinets/Hardware
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Drapes/Blinds
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Interior Painting
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Refrig/Stoves/Sinks
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Bathroom/Tubs/Showers
Toilets
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H-3
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
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Repairs/Maintenance Expense Increase Decrease Amount
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Utility Expense Increase Decrease Amount
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Taxes/Insurance Expense Increase Decrease Amount
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C. Do you anticipate making a return to owner distribution? Yes No
Explanation:
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D. Please explain in detail any change in the financial condition:
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E. Any insurance claims files? Yes______ No______
If yes, please explain:
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H-4
SCHEDULE OF RESERVES
Replacement Tax & Insurance Other Total
Beginning Balance: ----------- ---------- ------- -------
Deposits:
---------- ----------- ---------- ------- -------
---------- ----------- ---------- ------- -------
---------- ----------- ---------- ------- -------
Total Deposits ----------- ---------- ------- -------
Authorized Disbursements: ----------- ---------- ------- -------
Description:
--------- ----------- ---------- ------- -------
--------- ----------- ---------- ------- -------
--------- ----------- ---------- ------- -------
--------- ----------- ---------- ------- -------
--------- ----------- ---------- ------- -------
--------- ----------- ---------- ------- -------
Total Disbursements: ----------- ---------- -------- ------
Ending Balance: (1) ----------- ---------- -------- ------
Required Balance: ----------- ---------- -------- ------
Over/under funding: ----------- ---------- -------- ------
Prepared By: Date:
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Firm: Telephone:
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Reminder: Please include the following documents:
1. Completed Report of Operations
2. Balance Sheet
3. Statement of Income & Expenses
4. Rent roll for quarter ending
5. Tax Credit Compliance Report
H-5
INITIAL TENANT CERTIFICATIONS
Partnership Name:-------------------
Fund: ------------------- Tax Credit Set-Asides Information: Loan/Regulatory
Property Name: ---------- [ ] 20/50 or [ ] 40/60 Election Set-Asides:
Address: ---------------- Does the 51% average apply?
---------------- [ ] Y [ ] N
---------------- Deeper Set-Aside __% @ 50% AMI
County: ----------------
[ ] Multi-Family [ ] Elderly Management Company:--------------------
----Number of Apartment Units Contact Person:------------------------
----Number of Exempt Units Phone #:-------------------------------
----LIHTC Apartment Housing #
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Gross
Unit First Time Move-in # of # in Income Move-In
# Tenant Name Date Bdrms Sq.Ft. Set-Aside Unit Move-In Limits
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BIN # Certificate of Occupancy Date:
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BIN # Certificate of Occupancy Date:
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BIN # Certificate of Occupancy Date:
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INITIAL TENANT CERTIFICATIONS
Partnership Name:-------------------
(CONTINUED)
Tenant Tenant
Income Income Asset Unit Less Rent Tenant Utility
Qualified Verification Verification Rent Subsidy Payment Allowance
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YES
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YES
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YES
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YES
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YES
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YES
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YES
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YES
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YES
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YES
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YES
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YES
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YES
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YES
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YES
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INITIAL TENANT CERTIFICATIONS
Partnership Name:-------------------
(CONTINUED)
Tenant Tenant Overall
Gross Maximum Rent Tenant
Rent Rent Qualified Eligible
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YES YES
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YES YES
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YES YES
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YES YES
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YES YES
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YES YES
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YES YES
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YES YES
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YES YES
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YES YES
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YES YES
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YES YES
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YES YES
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YES YES
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H-6
QUARTERLY TAX CREDIT COMPLIANCE REPORT
Property Name:----------------------
Quarter Ending: --------- Tax Credit Set-Asides Information: Loan/Regulatory
[ ] 20/50 or [ ] 40/60 Election Set-Asides:
Address: ---------------- Does the 51% average apply?
---------------- [ ] Y [ ] N
---------------- Deeper Set-Aside __(List Details)
County: ----------------
Allocation: Management Company:-------------
Pre-1990 (Rent based on -------------
number of persons) Contact Person: -------------
[ ] Multi-Family Elected to change
[ ] Elderly # Bedrooms Phone #: -------------
---Number of Post-1989 (Based on
Apartment Units number of Bedroom) Fax #: -------------
---Number of Prepared by: -------------
Exempt Units
---LIHTC Apartment Housing #
-----------------------------------------------------------------------------
Gross Annual
Unit Tenant Move-in # Of Inc. Set- # in Annual Income
# Name Date Bdrms % Aside Unit Income Limits
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QUARTERLY TAX CREDIT COMPLIANCE REPORT
Property Name:----------------------
(CONTINUED)
Annual Tenant Less
Recert. Income Income Assets Unit Rent Tenant
Date Qualified Verified Verified Rent Subsidy Payment
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QUARTERLY TAX CREDIT COMPLIANCE REPORT
Property Name:----------------------
(CONTINUED)
Tenant Tenant Overall
Utility Gross Maximum Rent Tenat
Allow. Rent Rent Qualified Eligible
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H-7
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
This Section For WNC Use Only
Check Documents Being Sent
Received. Reviewed
___Internal Checklist or worksheet [ ] [ ] ----------
___Initial - Rental Application/Rental Agreement [ ] [ ] ----------
___Initial - Questionnaire of Income/Assets [ ] [ ] ----------
___Recertification - Questionnaire of Income/Assets [ ] [ ] ----------
___Recertification - Addendum to Lease [ ] [ ] ----------
___Employment Verification [ ] [ ] ----------
___Employment Termination Verification [ ] [ ] ----------
___Military Verification [ ] [ ] ----------
___Verification of Welfare Benefits [ ] [ ] ----------
___Verification of Social Security Benefits [ ] [ ] ----------
___Verification of Disability Benefits [ ] [ ] ----------
___Unemployment Verification [ ] [ ] ----------
___Verification of Unemployment Compensation [ ] [ ] ----------
___Verification Worksmen Compensation [ ] [ ] ----------
___Retirement/Annuities Verification [ ] [ ] ----------
___Verification of Veterans Pension [ ] [ ] ----------
___Verification of Child Support [ ] [ ] ----------
___Verification of Alimony Support [ ] [ ] ----------
___Disposed of Assets Last 2 years [ ] [ ] ----------
___Real Estate [ ] [ ] ----------
___Investment [ ] [ ] ----------
___Assets Verifications (savings, stocks etc.) [ ] [ ] ----------
___Trusts/with Current Tax Return [ ] [ ] ----------
___Lump Sum Settlements [ ] [ ] ----------
___Notarized Affidavit of Support [ ] [ ] ----------
___Certification of Handicap [ ] [ ] ----------
___Notarized Self-Employed-Tax Return [ ] [ ] ----------
___Notarized statement of no income [ ] [ ] ----------
___Tenant Certification [ ] [ ] ----------
This Section For WNC Use Only
YES NO
[ ] [ ] Are all required forms completed?
[ ] [ ] Are all required forms dated?
[ ] [ ] Did the Manager and Tenant sign all documents?
[ ] [ ] Third party verification of income completed?
[ ] [ ] Third party verification of assets completed?
[ ] [ ] Are verifications completed for all members 18 years and
over?
[ ] [ ] Did all the members of the household 18 yrs. and
[ ] [ ] over sign all documents?
[ ] [ ] Is lease completed with a minimum of six months/ SRO
monthly?
[ ] [ ] Addendum completed?
[ ] [ ] Tenant Certification completed?
[ ] [ ] Are all members of the household full-time students?
[ ] [ ] Is utility allowance correct?
[ ] [ ] Is correct income limit being used?
[ ] [ ] Is correct rent limit being used?
For tenants with no income
[ ] [ ] Was notarized statement of no income obtained with tax
return?
[ ] [ ] or Were all sources verified (AFDC, Unemployment,
Soc. Sec., Disability)?
H-8
TAX CREDIT COMPLIANCE MONITORING:
ANNUAL CERTIFICATION
As General Partner of Calico Terrace Limited Partnership, I hereby
certify as to the following:
1. Calico Terrace Limited Partnership owns a twenty-nine (29) unit project
("Apartment Housing") in Calico Rock, Izard County, Arkansas.
2. An annual income certification (including supporting documentation) has
been received from each tenant. The income certification reflects that the
tenant's income meets the income limitation applicable to the Apartment Housing
pursuant to Section 42(g)(1) of the Internal Revenue Code ("Code").
3. The Apartment Housing satisfies the requirements of the applicable
minimum set aside test as defined in Section 42(g)(1) of the Code.
4. Each unit within the Apartment Housing is rent restricted as defined in
Section 42(g)(2)of the Code.
5. Each unit in the Apartment Housing is available for use by the general
public and not for use on a transient basis.
6. Each building in the Apartment Housing is suitable for occupancy in
accordance with local health, safety, and building codes.
7. During the preceding calendar year, there had been no change in the
eligible basis, as defined in Section 42(d)of the Code, of any building within
the Apartment Housing.
8. All common area facilities included in the eligible basis of the
Apartment Complex are provided to the tenants on a comparable basis without a
separate fee to any tenant in the Apartment Housing.
9. During the preceding calendar year when a unit in the Apartment Housing
became vacant reasonable attempts were made to rent that unit to tenants whose
incomes met the income limitation applicable to the Apartment Housing pursuant
to Section 42(g)(1) of the Code and while that unit was vacant no units of
comparable or smaller size were rented to tenants whose income did not meet the
income limitation applicable to the Apartment Housing pursuant to Section
42(g)(1) of the Code.
10. If the income of a tenant in a unit increased above the limit allowed
in Section 42 (g)(2)(D)(ii), then the next available unit of comparable or
smaller size was rented to tenants whose incomes met the income limitation
applicable to the Apartment Housing pursuant to Section 42(g)(1) of the Code.
IN VERIFICATION OF THE FOREGOING ENCLOSED HEREWITH IS A COPY OF THE ANNUAL
INCOME CERTIFICATION RECEIVED FROM EACH TENANT IN THE PROJECT. UPON REQUEST I
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
Arkansas that the foregoing is true and correct.
Executed this day of at , .
--- ---------- ------------- ----------------
------------------------------------
H-9
Calculation of Debt Service Coverage
Month 1 Month 2 Month 3
------------ ------------ ------------
INCOME
Gross Potential Rent
Other Income
Vacancy Loss ------------ ------------ ------------
Adjusted Gross Income ------------ ------------ ------------
OPERATING EXPENSES
Utilities
Maintenance
Management Fee
Administration
Insurance
Real Estate Taxes
Other Expenses ------------ ------------ ------------
Total Operating Expenses ------------ ------------ ------------
Net Operating Income (1)
Accrual adjustments for:
R/E Taxes
Insurance
Tax/ Accounting
Other
Replacement Reserves
------------ ------------ ------------
Income for DSC Calculation ============ ============ ============
Stabilized Debt Service
------------ ------------ ------------
Debt Service Coverage (2)
------------ ------------ ------------
Please submit this form along with the following supporting documentation:
Monthly Financial Reports (income statement, balance sheet, general ledger and
rent rolls)
Operating Budget
Copies of bank statements.
(1) This number should reconcile easily with the monthly financial statements.
(2) The ratio between the Income for DSC calculation and Stabilized Debt
Service. As example, a 1.10 DSC means that for every $1.00 of Stabilized Debt
Service required to be paid there must be $1.10 of Net operating Income
available.
H-10
EXHIBIT I TO THE PARTNERSHIP AGREEMENT
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 ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇) 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.
I-1
(k) The location and recording data for all easements (both those burdening
and benefiting the Apartment Housing), encroachments, set back and building
restriction lines, conflicts or protrusions from or onto adjoining property,
streets or alleys. (Fully depict any appurtenant easements, showing all courses
and distances.) Note any easements which cannot be located, and note easements
which appear on the Apartment Housing but which are not subject to any recorded
instrument.
(l) The character and location of all walls, buildings, fences and other
visible improvements within five 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;
I-2
(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.
I-3
SURVEYOR'S CERTIFICATE
I hereby certify to Calico Terrace Limited Partnership, their 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 rights 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 "Minimum Angle, Distance and Closure Requirements for Survey Measurements
Which Control Land Boundaries for ALTA/ACSM Land Title Surveys," established by
ALTA, ACSM and NSPS in October 1999.
--------------------- ------------------------------------------
Date Surveyor
[SEAL]
License/Registration No.
-----------------------
Job No.
------------------------------
I-4
DEVELOPMENT FEE AGREEMENT
This Development Fee Agreement ("Agreement"), is entered into as of the
date written below by and between Seaside Development Corp. ("Developer") and
Calico Terrace Limited Partnership, an Arkansas 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 Calico Rock, Izard
County, Arkansas, as more particularly described in Exhibit A attached hereto
and incorporated herein (the "Real Property").
B. Owner intends to develop on the Real Property a twenty-nine (29)
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 development of the Apartment Housing until all construction work is
completed and to provide certain services relating thereto. The Parties
recognize and acknowledge that the Developer is, and has been, an independent
contractor in all services rendered to, and to be rendered to, the Owner
pursuant to this Development Fee Agreement.
D. Owner desires to commit its existing development agreement with
Developer into writing through this Development Fee Agreement for Developer's
services to manage, oversee, and complete development of the Apartment Housing.
Developer desires to commit its existing development agreement with Owner into
writing through this Development Fee Agreement and Developer is willing to
assign all development rights to the Apartment Housing to Owner, to undertake
performance of such development services, and to fulfill all obligations of the
Developer set forth in this Agreement, in consideration of Owner's restated
promise to pay to Developer the fee specified in this Agreement.
NOW THEREFORE, in consideration of the foregoing recitals and the
mutual promises and undertakings in this Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Owner and Developer agree as follows.
1
SECTION I
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall, when capitalized,
have the following meanings:
"Code" means the Internal Revenue Code of 1986, as amended.
"Construction Documents" means the contract documents between the Owner
and the Construction Lender pertaining to construction of the Apartment Housing.
"Construction Lender" means Union Bank, 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 The ▇▇▇▇▇▇▇ Group
"Department" means the Arkansas 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 Calico Terrace Limited Partnership, an Arkansas
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, 2012.
2.2 Development Fee. In consideration of Developer's prior activities and
Developer's agreement to provide development services during the term of this
Agreement, Owner agrees to pay the Developer a Development Fee in the amount of
$150,000 ("Development Fee"). The Development Fee shall be payable in accordance
with Section 3 of this Agreement.
2
2.3 Development Services.
(a) Prior Services. Owner acknowledges that Developer has, prior to the
date hereof, performed substantial development services relating to the
Apartment Housing. Such services (the "Prior Services") have included the
following.
(1) Services Rendered Prior to December 31, 2004.
(A) Developer has negotiated and conferred with the Contractor
and recommended to the Owner to enter into a construction contract with the
Contractor for the building of the Apartment Housing.
(B) Developer has: estimated the cost of construction; determined
the construction period; prepared a monthly-estimated construction chart
reflecting the construction services required each month; and prepared a
preliminary construction budget.
(C) Developer has reviewed the plans and specifications for
compliance with design criteria and construction contracts.
(D) Developer has negotiated and conferred with public
authorities relating to traffic control, flood control and other matters
affecting the development of the Apartment Housing.
(E) Developer has negotiated and conferred with an architect and
recommended to the Owner to execute an architectural contract for the planning
and design of the Apartment Housing.
(F) Developer has placed its own capital at risk in anticipation
of the Apartment Housing being constructed, leased and Tax Credits awarded.
(2) Other Prior Services.
(A) Developer has created, refined and analyzed the financial
projections for the Apartment Housing.
(B) Developer has negotiated, conferred, and worked with the
Apartment Housing architects, engineers and Contractor with regard to
preparation, refinement, and finalization of the plans and specifications for
the Apartment Housing, and projected construction schedules and costs.
(C) Developer has negotiated and conferred with the Construction
Lender to obtain the Construction Loan.
(D) Developer has negotiated and conferred with an insurance
carrier to provide a builder's risk policy during construction.
3
(b) Future Services. Developer shall oversee construction of the Apartment
Housing on Owner's behalf, as provided in this Section 2.3(b)(1). Owner shall
allow Developer full access to the Apartment Housing during the construction
period. Developer and Developer's agents shall perform their work in a manner
that minimizes interference with the management and operation of the Apartment
Housing.
(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 participate in and provide assistance with regard
to pre-construction conferences and pre-construction documents, including
drawings, specifications, contracts, and schedules.
(3) Developer shall review all Construction Documents, identify
construction issues and participate in the resolution of such issues.
(4) Developer shall review and approve subcontract bids received by
the Contractor.
(5) Developer shall establish and administer field order and change
order procedures.
(6) Developer shall coordinate performance of Owner's obligations
under the construction phase for the Apartment Housing, including the
preparation of draw requests.
(7) Developer shall attend construction progress meetings at the
Apartment Housing site to monitor construction progress and advise Owner and the
Contractor with respect to the resolution of construction issues.
(8) Developer shall review the Contractor's monthly pay applications.
(9) Developer shall monitor the Contractor's progress with respect to
the approved Apartment Housing schedule and keep the Owner informed of all
pertinent Apartment Housing issues and construction progress.
(10) Developer shall advise Owner with respect to relations with
engineers, architects, and other construction professionals.
(11) Developer shall be available for immediate response in critical
situations arising during the construction of the Apartment Housing.
(12) Developer shall coordinate relations with the City of Calico Rock
and other governmenta authorities having jurisdiction over development of the
Apartment Housing.
4
(c) Assignment of Development Rights. Developer hereby assigns to Owner all
rights to the development of the Apartment Housing, including but not limited
to, all tangible and intangible rights arising with respect to the name Calico
Terrace Limited Partnership, 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 Services Rendered Prior to December 31, 2002. The Parties acknowledge
and agree that Developer has earned the sum of $ for services rendered prior to
December 31, 2002, that said amount is reasonable in relation to the work
performed, is fully earned as of that date and said amount shall be paid in any
event notwithstanding the termination of this Agreement. The Parties further
acknowledge and agree that the Owner has accrued the Development Fee of
$150,000, under its method of accounting, and has reported the Development Fee
expense on its 2002 income tax return.
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 21, 2012. Also, if the
Development Fee is not paid in full in accordance with Section 9.2(b) of the
Partnership Agreement then the unpaid portion shall accrue interest at a rate
equal to the 5-year Treasury money market rate in effect as of the date of the
last capital contribution payment referenced in Section 7.2(b) of the
Partnership Agreement.
SECTION 4
TERMINATION
Neither Party to this Agreement shall have the right to terminate this
Agreement prior to the expiration of the term without cause. Owner may terminate
this Agreement without further liability, for cause, which shall mean any one of
the following:
5
(a) a material breach by Developer of its obligations under this Agreement
that is not cured within thirty (30) days after notice thereof (or, as to any
non-monetary obligations that is not reasonably capable of cure within 30 days,
and provided that cure is commenced within 10 days of notice and diligently
pursued thereafter to completion, within such time as may reasonably be
necessary to complete such cure);
(b) a fraudulent or intentionally incorrect report by Developer to Owner
with respect to the Apartment Housing; or
(c) any intentional misconduct or gross negligence by Developer with
respect to its duties under this Contract.
Upon proper termination of this Agreement by Owner pursuant to this
Section 4, all rights of Developer to receive unearned Development Fees pursuant
to this Agreement with respect to services not yet performed shall terminate.
Developer shall receive the full Development Fee for Prior Services and shall
receive a portion of the Development Fee for Future Services based on the
percentage of completion of construction of the Apartment Housing at the time of
termination. Nothing in this Section 4 shall be deemed to prevent Owner from
bringing an action against Developer to recover fully all damages resulting from
any of the causes set forth in paragraphs (a), (b) or (c) above, or to prevent
Owner from contending in any action or proceeding that the Future Services were
not earned by Developer.
SECTION 5
GENERAL PROVISIONS
5.1 Notices. Notices required or permitted to be given under this Agreement
shall be in writing sent by registered or certified mail, postage prepaid,
return receipt requested, to the Parties at the following addresses, or such
other address as is designated in writing by the Party, the date of registry
thereof, or the date of certification receipt therefor being deemed the date of
such notice; provided, however, that any written communication containing such
information sent to a Party actually received by a Party shall constitute notice
for all purposes of this Agreement.
If to Developer: Seaside Development Corp.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
If to Owner: Calico Terrace Limited Partnership
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
6
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 Arkansas
applicable to contracts made and wholly performed within Arkansas by persons
domiciled in Arkansas.
(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 Attorney' Fees. If any suit or action arising out of or related to this
Agreement is brought by any Party to any such document, the prevailing Party
shall be entitled to recover the costs and fees (including without limitation
reasonable attorneys' fees and costs of experts and consultants, copying,
courier and telecommunication costs, and deposition costs and all other costs of
discovery) incurred by such Party in such suit or action, including without
limitation to any post-trial or appellate proceeding.
5.5 Binding Effect. This Agreement shall bind and inure to the benefit of,
and be enforceable by, the Parties hereto and their respective successors,
heirs, and permitted assigns.
5.6 Assignment. Neither Party may assign this Agreement without the consent
of the other Party. No assignment shall relieve any Party of liability under
this Agreement unless agreed in writing to the contrary.
7
5.7 Third-Party Beneficiary Rights. No person not a Party to this Agreement
is an intended beneficiary of this Agreement, and no person not a Party to this
Agreement shall have any right to enforce any term of this Agreement.
Notwithstanding the Parties acknowledge that WNC Holding, LLC shall have the
right to enforce any term of this Agreement.
5.8 Related Parties. The Parties acknowledge that the Owner and Developer
are related parties under Code Section 267 and that Owner is an accrual basis
taxpayer. As such, the Parties agree and consent that each and every year during
the term of this Agreement that Owner accrues any or all of the principal and/or
interest of the Development Fee that the Developer (whether or not an accrual
basis taxpayer) will include an equal amount in Developer's income tax return
for that year.
5.9 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one agreement binding
on all the Parties, notwithstanding that all Parties are not signatories to the
same counterpart.
5.10 Further Assurances. Each Party agrees, at the request of the other
Party, at any time and from time to time after the date hereof, to execute and
deliver all such further documents, and to take and forbear from all such
action, as may be reasonably necessary or appropriate in order more effectively
to perfect the transfers or rights contemplated herein or otherwise to confirm
or carry out the provisions of this Agreement.
5.11 Mandatory Arbitration. Any person enforcing this Agreement may require
that all disputes, claims, counterclaims, and defenses ("Claims") relating in
any way to this Agreement or any transaction of which this Agreement is a part
(the "Transaction"), be settled by binding arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association and Title 9
of the U.S. Code. All claims will be subject to the statutes of limitation
applicable if they were litigated.
If arbitration occurs, one neutral arbitrator will decide all issues
unless either Party's Claim is $100,000.00 or more, in which case three neutral
arbitrators will decide all issues. All arbitrators will be active Arkansas
State Bar members in good standing. In addition to all other powers, the
arbitrator(s) shall have the exclusive right to determine all issues of
arbitrability. Judgment on any arbitration award may be entered in any court
with jurisdiction.
8
If either Party institutes any judicial proceeding relating to the
Transaction, such action shall not be a waiver of the right to submit any Claim
to arbitration. In addition, both Parties have the right before, during, and
after any arbitration to exercise any of the following remedies, in any order or
concurrently: (i) setoff, (ii) self-help repossession, (iii) judicial or
non-judicial foreclosure against real or personal property collateral, (iv)
provisional remedies, including injunction, appointment of receiver, attachment,
claim and delivery, and replevin.
This arbitration clause cannot be modified or waived by either Party
except in a writing that refers to this arbitration clause and is signed by both
Parties.
[Remainder of page intentionally left blank.]
9
IN WITNESS WHEREOF, the Parties have caused this Development Fee
Agreement to be executed as of ____________________, 2002.
DEVELOPER: Seaside Development Corp.
By:
--------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
Title _________________
OWNER: Calico Terrace Limited Partnership
By: River Valley Planning & Development Corp.,
General Partner
By:
--------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
President
10
EXHIBIT A
LEGAL DESCRIPTION
A parcel of land situated in the ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (▇▇▇/▇
of SW1/4) of section 20, Township 7 North, Range 18 west, Izard County,
Arkansas, bounded by a line the point of beginning of which is found by
commencing at the Southeast corner of said NE1/4 of SW1/4, thence running West a
distance of 530.00 feet, thence running North 02 deg 57' 37" East a distance of
447.31 feet, thence running North 00 deg 20' 24" West a distance of 211.46 feet
to the point of beginning for the parcel of land herein described; THENCE FROM
SAID BEGINNING POINT, continue running North 00 deg 20' 24" West a distance of
374.75 feet to a point on the South side of Fourth Street in the City of Calico
Rock, thence running South 85 deg 26' 28" East along the South side of Fourth
Street a distance of 231.60 feet, thence running South 07 deg 08' 12" West a
distance of 125.00 feet, thence running South 85 deg 20' 26" East a distance of
148.28 feet, thence running South 06 deg 54' 52" West a distance of 250.11 feet,
and thence running North 85 deg 20' 21" West a distance of 338.91 feet to the
point of beginning.
1
GUARANTY AGREEMENT
FOR VALUE RECEIVED, the receipt and sufficiency of which is hereby
acknowledged, and in consideration of the agreement of Seaside Development
Corp., (the "Developer") to permit deferral of the $150,000 due from Calico
Terrace Limited Partnership, an Arkansas 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 Developer Fee from Debtor to the Developer, evidenced by the Development
Fee Agreement dated the even date herewith, and incorporated herein by this
reference. The foregoing described debt is referred to hereinafter as the
"Liabilities" or "Liability."
The undersigned further agree to pay all expenses paid or incurred by
the Debtor or Developer in endeavoring to collect the Liabilities, or any part
thereof, and in enforcing the Liabilities or this Guaranty Agreement (including
reasonable attorneys' fees if collected or enforced by law or through an
attorney-at-law). The undersigned hereby represents and warrants that the
extension of credit or other financial accommodations by the Developer to Debtor
will be to the interest and advantage of the undersigned, and acknowledges that
this Guaranty Agreement is a substantial inducement to the Developer to extend
credit to Debtor and that the Developer would not otherwise extend credit to
Debtor.
Debtor or Developer may, from time to time, without notice to or
consent of the undersigned, (a) retain or obtain a security interest in any
property to secure any of the Liabilities or any obligation hereunder, (b)
retain or obtain the primary or secondary liability of any party or parties, in
addition to the undersigned, with respect to any of the Liabilities and (c)
resort to the undersigned for payment of any of the Liabilities, whether or not
the Debtor or Developer shall have resorted to any property securing any of the
Liabilities or any obligation hereunder or shall have preceded against any other
party primarily or secondarily liable on any of the Liabilities.
Debtor and Developer must mutually agree to (a) extend or renew for any
period this Agreement (whether or not longer than the original period) or alter
any of the Liabilities, (b) release or compromise any Liability of the
undersigned hereunder or any Liability of any other party or parties primarily
or secondarily liable on any of the Liabilities, or (c) release, compromise or
subordinate its title or security interest, or any part thereof, if any, in all
or any property now or hereafter securing any of the Liabilities or any
obligation hereunder, and permit any substitution or exchange for any such
property,
1
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 Guaranty
Agreement. For the purpose of this Guaranty Agreement, the Liabilities of Debtor
to the Developer are guaranteed notwithstanding any right or power of Debtor or
anyone else to assert any claim or defense as to the invalidity or
unenforceability of any such obligation, and no such claim or defense shall
impair or affect the obligations of the undersigned hereunder.
Any payment from Guarantor directly to Developer in accordance with
this Agreement shall be classified and booked as a non-refundable cost overrun
payment from Guarantor to Debtor in consideration of this Guaranty Agreement and
then a payment by Debtor to Developer in consideration of the Development Fee
Agreement.
This Guaranty Agreement shall be binding upon the undersigned, and upon
the legal representatives, heirs, successors and assigns of the undersigned, and
may be enforced against them by the Debtor or Developer or their legal
representatives, heirs, successors and assigns.
This Guaranty Agreement has been made and delivered in the state of
Arkansas and shall be construed and governed under Arkansas law.
2
Whenever possible, each provision of the Guaranty Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Guaranty Agreement shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition of invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Guaranty Agreement.
Whenever the singular or plural number, masculine or feminine or neuter
is used herein, it shall equally include the other where applicable. In the
event this Guaranty Agreement is executed by more than one guarantor, this
Guaranty Agreement and the obligations hereunder are the joint and several
obligation of all the undersigned.
Guarantor consents to the jurisdiction of the courts in the State of
Arkansas and/or to the jurisdiction and venue of any United States District
Court in the State of Arkansas 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 Arkansas, even if it was, in fact,
executed and delivered elsewhere.
[Remainder of page intentionally left blank.]
3
IN WITNESS WHEREOF, the undersigned have hereunto caused this Guaranty
Agreement to be executed as of , --------------------- 2002.
Signed, sealed and delivered GUARANTOR:
in the presence of:
----------------------------
Witness
--------------------------
____________________________ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Notary Public
My Commission Expires:
Address for Guarantor:
____________________________ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
(▇▇▇▇▇▇ ▇▇▇▇) ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
4
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 Calico
Terrace Limited Partnership, an Arkansas limited Partnership ("Owner"), River
Valley Planning & Development Corp. ("General Partner"), WNC Holding, LLC, a
California limited partnership ("Limited Partner") and WNC Housing, L.P., a
California limited Partnership ("Special Limited Partner"). Owner, General
Partner, Limited Partner and Special Limited Partner collectively may be
referred to as the "Parties" or individually may be referred to as a "Party".
RECITALS
A. Owner has acquired 4.99 acres of land in Calico Rock, Izard County,
Arkansas (the "Real Property").
B. Owner intends to develop on the Real Property a twenty-nine (29)
unit low-income rental housing complex and other related improvements for
families, which is intended to qualify for federal low-income housing tax
credits (the "Apartment Housing").
C. On the even date herewith a Partnership agreement for Calico Terrace
Limited Partnership ("Partnership Agreement") was entered into by and between
River Valley Planning & Development Corp. as the general partner ("General
Partner"), WNC Holding, LLC as the limited partner and WNC Housing, L.P. 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).
D. The Parties recognize and acknowledge that the final construction
cost determination involves substantial negotiations with lenders, contractors
and governmental authorities.
E. The Parties recognize and acknowledge that a final operating budget
involves substantial negotiations with lenders and governmental authorities.
F. Limited Partner's and Special Limited Partner's decision to execute
the Partnership Agreement is based, in part, on their acceptance of the sources
of funds available to develop the Apartment Housing, the cost of construction to
build the Apartment Housing and the operating budget necessary to provide a
positive Debt Service Coverage.
Now Therefore, in consideration of the foregoing recitals which are a
part of this Agreement, the mutual promises and undertakings in this Agreement,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Parties agree as follows.
1. Source of Funds. Attached hereto as Exhibit "A" and incorporated
herein by this reference is the Apartment Housing Source of Funds. The Source of
Funds have been specified in the Partnership Agreement as the 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
$1,880,232. Owner acknowledges and represents that the attached Development
Budget includes the total costs and expenses to acquire, develop and construct
the Real Property and the Apartment Housing.
3. Construction Proforma. Attached hereto as Exhibit "C" and
incorporated herein by this reference is the Construction Proforma. Owner
acknowledges and represents that the attached Construction Proforma has been
reviewed by and approved by the Construction Lender, Mortgage lender if
applicable and any governmental authorities if applicable. The Construction
Proforma contains a list, by name, of all subcontractors and material suppliers
who will account for five percent or more of the cost of construction of the
Apartment Housing. Also included is a trade payment breakdown specifying the
cost of each classification of construction requirements pursuant to Plans and
Specifications and the other Project Documents. In accordance with the
Partnership Agreement, if the construction costs exceed the sum of the Capital
Contributions, the proceeds of the Mortgage and the Development Fee then the
General Partner shall be responsible for and shall be obligated to pay such
deficiencies.
4. 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 "D" and incorporated
herein by this reference is the Operating Proforma. Owner acknowledges and
represents that the attached Operating Proforma has been reviewed by and
approved by the 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: River Valley Planning &
Development Corp.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
To the Limited Partner: WNC Holding, LLC
c/o WNC & Associates, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
To the Special
Limited Partner: WNC Housing, L.P.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
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 Arkansas.
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.
[Remainder of page intentionally left blank.]
In Witness Whereof, this Development, Construction and Operating Budget
Agreement is made and entered into as of _______________, 2002.
GENERAL PARTNER
River Valley Planning & Development Corp.
By:
---------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
President
LIMITED PARTNER
WNC Holding, LLC
By: WNC & Associates, Inc.,
General Partner
By: ---------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Executive Vice President
SPECIAL LIMITED PARTNER
WNC Housing, L.P.
By: WNC & Associates, Inc.,
General Partner
By: ---------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Executive Vice President
EXHIBIT A
TO DEVELOPMENT, CONSTRUCTION AND OPERATING BUDGET AGREEMENT
SOURCE OF FUNDS
EXHIBIT B
TO DEVELOPMENT, CONSTRUCTION AND OPERATING BUDGET AGREEMENT
DEVELOPMENT BUDGET
EXHIBIT C
TO DEVELOPMENT, CONSTRUCTION AND OPERATING BUDGET AGREEMENT
CONSTRUCTION PROFORMA
EXHIBIT D
TO DEVELOPMENT, CONSTRUCTION AND OPERATING BUDGET AGREEMENT
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 24th day of July, 2002 by and
between ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ("Guarantor"), Calico Terrace Limited Partnership
("Calico Terrace") and WNC Holding, LLC ("Limited Partner"). Guarantor, Calico
Terrace and Limited Partner collectively may be referred to as the "Parties" or
individually may be referred to as a "Party".
RECITALS
WHEREAS, on July 24, 2002 a partnership agreement for Calico Terrace
Limited Partnership ("Partnership Agreement") was entered into by and between
River Valley Planning & Development Corp. as the general partner ("General
Partner") and WNC Holding, LLC as the limited partner (the Partnership Agreement
is incorporated herein by this reference as if the same were reproduced in full
and any capitalized terms not defined in this Agreement shall have the meaning
as defined in the Partnership Agreement).
WHEREAS, pursuant to the terms of the Partnership Agreement the General
Partner: (1) is required to guarantee the completion of construction of a (n)
28-unit low to moderate income housing complex located in Calico Rock, Izard
County, Arkansas, 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 Calico Terrace as a
result of the operations of the Apartment Housing; and (3) is required to
guarantee the annual allocation of tax credits to the Limited Partner.
WHEREAS, the Limited Partner would not have entered into the
Partnership Agreement as a Limited Partner but for the agreement of Guarantor to
provide the financial funds necessary to obtain Completion of Construction, to
pay Operating Deficits and to pay Tax Credit deficits. Guarantor is an affiliate
of the General Partner and will therefore benefit from the acquisition by the
Limited Partner of a limited partnership interest in Calico Terrace.
NOW THEREFORE, in consideration of the foregoing and the promises,
covenants and undertakings herein contained and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties hereto agree as follows:
SECTION 1. Guarantor hereby jointly and severally guarantees to Calico
Terrace and the Limited Partner, as applicable, the prompt payment and full
performance of the provisions, but limited by the time limits contained therein,
under Section 6.2, Section 6.3, Section 7.4(a), Section 7.4(b), Section 7.4(d)
and Section 7.4(f) of the Partnership Agreement, including all modifications
thereof, pursuant to and in accordance with the terms and conditions set forth
in the Partnership Agreement and in this Agreement.
SECTION 2. Guarantor further agrees to pay all expenses paid or
incurred by Calico Terrace 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 Calico Terrace or Limited
Partner in the exercise of any right or remedy shall operate as a waiver
thereof, and no single or partial exercise by Calico Terrace of any right or
remedy shall preclude other or future exercise thereof or the exercise of any
other right or remedy. No action of Calico Terrace permitted hereunder shall in
any way impair or affect this Agreement. For the purpose of this Agreement,
Guarantor's obligations are guaranteed notwithstanding any right or power of
anyone else to assert any claim or defense as to the invalidity or
unenforceability of any such obligation, and no such third party claim or
defense shall impair or affect the obligations of Guarantors hereunder.
SECTION 4. This Agreement shall be binding upon the Parties, and upon
their legal representatives, heirs, successors and assigns.
SECTION 5. This Agreement has been made and delivered in the state of
Arkansas and shall be construed and governed under Arkansas 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 Calico Terrace does not take legal action to enforce this
Agreement, if and when by the terms of this Agreement it is enforceable, then
the Limited Partner, may on its own behalf and in its own name commence legal
proceedings to enforce the terms of this Agreement.
SECTION 8. Whenever the singular or plural number, masculine or
feminine or neuter is used herein, it shall equally include the other where
applicable.
SECTION 9. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, and said counterparts shall
constitute but one and the same instrument which may sufficiently be evidenced
by one counterpart.
SECTION 10. The Parties consent to the jurisdiction and venue of the
courts of Pulski County in the State of Arkansas and/or to the jurisdiction and
venue of any United States District Court in the State of Arkansas having
jurisdiction over Pulski 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 Arkansas, even if it was, in fact, executed and delivered elsewhere.
[Remainder of page intentionally left blank.]
IN WITNESS WHEREOF, this Construction Completion, Operating Deficit and
Tax Credit Guaranty Agreement is made and entered into as of _______________,
2002.
GUARANTOR
By:
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
OWNER
Calico Terrace Limited Partnership
By: River Valley Planning & Development Corp.,
General Partner
By: ______________________
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President
LIMITED PARTNER
WNC Holding, LLC
By: WNC & Associates, Inc.
General Partner
By: _________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Executive Vice President