AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP OF
FDI-SHADY OAKS, LTD.
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS..........................................................1
Section 1.1 "Accountant".............................................1
Section 1.2 "Act"....................................................2
Section 1.3 "Actual Tax Credit"......................................2
Section 1.4 "Adjusted Capital Account Deficit".......................2
Section 1.5 "Affiliate"..............................................2
Section 1.6 "Agreement" or "Partnership Agreement"...................2
Section 1.7 "Apartment Housing"......................................2
Section 1.8 "Architect of Record"....................................2
Section 1.9 "Asset Management Fee"...................................3
Section 1.10 "Assignee"...............................................3
Section 1.11 "Bankruptcy" or "Bankrupt"...............................3
Section 1.12 "Break-even Operations"..................................3
Section 1.13 "Budget".................................................3
Section 1.14 "Capital Account"........................................3
Section 1.15 "Capital Contribution"...................................4
Section 1.16 "Cash Expenses"..........................................4
Section 1.17 "Cash Receipts"..........................................4
Section 1.18 "Code"...................................................4
Section 1.19 "Completion of Construction".............................4
Section 1.20 "Compliance Period"......................................5
Section 1.21 "Consent of the Special Limited Partner".................5
Section 1.22 "Construction Budget"....................................5
Section 1.23 "Construction Contract"..................................5
Section 1.24 "Contractor".............................................5
Section 1.25 "Debt Service Coverage"..................................5
Section 1.26 "Deferred Management Fee"................................5
Section 1.27 "Developer"..............................................6
Section 1.28 "Development Fee"........................................6
Section 1.29 "Distributions"..........................................6
Section 1.30 "Fair Market Value"......................................6
Section 1.31 "Financial Interest".....................................6
Section 1.32 "First Year Certificate".................................6
Section 1.33 "FmHA"...................................................6
Section 1.34 "FmHA Interest Credit Agreement".........................6
Section 1.35 "FmHA Loan Agreement"....................................6
Section 1.36 "Force Majeure"..........................................6
Section 1.37 "General Partner(s)".....................................7
Section 1.38 "Gross Asset Value"......................................7
Section 1.39 "Hazardous Substance"....................................8
Section 1.40 "Improvements"...........................................8
Section 1.41 "In-Balance".............................................8
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Section 1.42 "Incentive Management Fee"...............................8
Section 1.43 "Income and Losses"......................................8
Section 1.44 "Inspecting Architect"...................................9
Section 1.45 "Insurance"..............................................9
Section 1.46 "Insurance Company".....................................10
Section 1.47 "Interest"..............................................10
Section 1.48 "Involuntary Withdrawal"................................10
Section 1.49 "Land Acquisition Fee"..................................10
Section 1.50 "LIHTC".................................................10
Section 1.51 "Limited Partner".......................................11
Section 1.52 "Management Agent"......................................11
Section 1.53 "Management Agreement"..................................11
Section 1.54 "Minimum Set-Aside Test"................................11
Section 1.55 "Mortgage" or "Mortgage Loan"...........................11
Section 1.24 "Net Operating Income"..................................11
Section 1.57 "Nonrecourse Deductions"................................11
Section 1.58 "Nonrecourse Liability".................................12
Section 1.59 "Operating Deficit".....................................12
Section 1.60 "Operating Deficit Guarantee Period"....................12
Section 1.61 "Operating Loans".......................................12
Section 1.62 "Original Limited Partner"..............................12
Section 1.63 "Partner(s)"............................................12
Section 1.64 "Partner Nonrecourse Debt"..............................12
Section 1.65 "Partner Nonrecourse Debt Minimum Gain".................12
Section 1.66 "Partner Nonrecourse Deductions"........................12
Section 1.67 "Partnership"...........................................12
Section 1.68 "Partnership Minimum Gain"..............................12
Section 1.69 "Permanent Mortgage Commencement".......................12
Section 1.70 "Person"................................................13
Section 1.71 "Plans and Specifications"..............................13
Section 1.72 "Project Documents".....................................13
Section 1.73 "Projected Annual Tax Credits"..........................13
Section 1.74 "Projected Tax Credits".................................13
Section 1.75 "Qualified Tenants".....................................13
Section 1.76 "Rent Restriction Test".................................13
Section 1.77 "Rent-Up Reserve".......................................13
Section 1.78 "Revised Projected Tax Credits".........................13
Section 1.79 "Sale or Refinancing"...................................14
Section 1.80 "Sale or Refinancing Proceeds"..........................14
Section 1.81 "Special Limited Partner"...............................14
Section 1.82 "State".................................................14
Section 1.83 "State Tax Credit Agency"...............................14
Section 1.84 "Substitute Limited Partner"............................14
Section 1.85 "Syndication Fee".......................................14
Section 1.86 "Tax Credit"............................................14
Section 1.87 "Tax Credit Compliance Fee".............................14
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Section 1.88 "Tax Credit Conditions".................................14
Section 1.89 "Tax Credit Period".....................................15
Section 1.90 "Title Policy"..........................................15
Section 1.91 "TRA 1986"..............................................15
Section 1.92 "Treasury Regulations"..................................15
Section 1.93 "Withdrawing" or "Withdrawal"...........................15
ARTICLE II NAME...............................................................15
ARTICLE III PRINCIPAL EXECUTIVE OFFICE/AGENT FOR SERVICE......................15
Section 3.1 Principal Executive Office..............................15
Section 3.2 Agent for Service of Process............................15
ARTICLE IV PURPOSE............................................................16
Section 4.1 Purpose of the Partnership..............................16
Section 4.2 Authority of the Partnership............................16
ARTICLE V TERM................................................................16
ARTICLE VI GENERAL PARTNER'S CONTRIBUTIONS AND LOANS..........................17
Section 6.1 Capital Contribution of General Partner.................17
Section 6.2 Construction Obligations................................17
Section 6.3 Operating Obligations...................................17
Section 6.4 Other General Partner Loans.............................18
ARTICLE VII CAPITAL CONTRIBUTIONS OF LIMITED PARTNER AND SPECIAL LIMITED
PARTNER.......................................................................18
Section 7.1 Original Limited Partner................................18
Section 7.2 Capital Contribution of Limited Partner.................18
Section 7.3 Repurchase of Limited Partner's Interest................21
Section 7.4 Adjustment of Limited Partner's Capital Contribution....21
Section 7.5 Capital Contribution of Special Limited Partner.........23
Section 7.6 Return of Capital Contribution..........................24
Section 7.7 Liability of Limited Partner and Special Limited
Partner.................................................24
ARTICLE VIII WORKING CAPITAL AND RESERVES.....................................24
Section 8.1 Operating and Maintenance Account.......................24
Section 8.2 Reserve for Replacements................................24
Section 8.3 Tax and Insurance Account...............................24
Section 8.4 Other Reserves..........................................25
ARTICLE IX MANAGEMENT AND CONTROL.............................................25
Section 9.1 Power and Authority of General Partner..................25
Section 9.2 Payments to the General Partners and Others.............25
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Section 9.3 Specific Powers of the General Partner..................27
Section 9.4 Authority Requirements..................................27
Section 9.5 Limitations on General Partner's Power and Authority....28
Section 9.6 Restrictions on Authority of General Partner............29
Section 9.7 Duties of General Partner...............................31
Section 9.8 Obligations to Repair and Rebuild Apartment Housing.....32
Section 9.9 Partnership Expenses....................................33
Section 9.10 General Partner Expenses................................33
Section 9.11 Other Business of Partners..............................33
Section 9.12 Covenants, Representations and Warranties...............34
Section 9.13 Indemnification of the Partnership and the Limited
Partners................................................37
ARTICLE X ALLOCATIONS OF INCOME, LOSSES AND CREDITS...........................38
Section 10.1 General.................................................38
Section 10.2 Allocations From Sale or Refinancing....................38
Section 10.3 Special Allocations.....................................39
Section 10.4 Curative Allocations....................................41
Section 10.5 Other Allocation Rules..................................41
Section 10.6 Tax Allocations: Code Section 704(c)....................42
Section 10.7 Allocation Among Limited Partners.......................43
Section 10.8 Allocation Among General Partners.......................43
Section 10.9 Modification of Allocations.............................43
ARTICLE XI DISTRIBUTION.......................................................44
Section 11.1 Distribution of Net Operating Income....................44
Section 11.2 Distribution of Sale or Refinancing Proceeds............44
ARTICLE XII TRANSFERS OF LIMITED PARTNER'S INTEREST IN THE PARTNERSHIP........45
Section 12.1 Assignment of Limited Partner's Interest................45
Section 12.2 Effective Date of Transfer..............................45
Section 12.3 Invalid Assignment......................................45
Section 12.4 Assignee's Rights to Allocations and Distributions......46
Section 12.5 Substitution of Assignee as Limited Partner or Special
Limited Partner.........................................46
Section 12.6 Death, Bankruptcy, Incompetency, etc. of a Limited
Partner.................................................46
ARTICLE XIII WITHDRAWAL, REMOVAL AND REPLACEMENT OF GENERAL PARTNER...........47
Section 13.1 Withdrawal of General Partner...........................47
Section 13.2 Removal of General Partner..............................47
Section 13.3 Effects of a Withdrawal.................................49
Section 13.4 Successor General Partner...............................50
Section 13.5 Admission of Additional or Successor General Partner....51
Section 13.6 Transfer of Interest....................................51
Section 13.7 No Goodwill Value.......................................51
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ARTICLE XIV BOOKS AND ACCOUNTS, REPORTS, TAX RETURNS, FISCAL YEAR AND
BANKING.......................................................................52
Section 14.1 Books and Accounts......................................52
Section 14.2 Accounting Reports......................................52
Section 14.3 Other Reports...........................................53
Section 14.4 Late Reports............................................55
Section 14.5 Annual Site Visits......................................55
Section 14.6 Tax Returns.............................................56
Section 14.7 Fiscal Year.............................................56
Section 14.8 Banking.................................................56
Section 14.9 Certificates and Elections..............................56
ARTICLE XV DISSOLUTION, WINDING UP, TERMINATION AND LIQUIDATION OF THE
PARTNERSHIP...................................................................56
Section 15.1 Dissolution of Partnership..............................56
Section 15.2 Return of Capital Contribution upon Dissolution.........57
Section 15.3 Distribution of Assets..................................57
Section 15.4 Deferral of Liquidation.................................58
Section 15.5 Liquidation Statement...................................58
Section 15.6 Certificates of Dissolution; Certificate of Cancellation
of Certificate of Limited Partnership...................58
ARTICLE XVI AMENDMENTS........................................................59
ARTICLE XVII MISCELLANEOUS....................................................59
Section 17.1 Voting Rights...........................................59
Section 17.2 Meeting of Partnership..................................60
Section 17.3 Notices.................................................60
Section 17.4 Successors and Assigns..................................60
Section 17.5 FmHA Regulations........................................60
Section 17.6 Recording of Certificate of Limited Partnership.........61
Section 17.7 Amendment of Certificate of Limited Partnership.........61
Section 17.8 Counterparts............................................62
Section 17.9 Captions................................................62
Section 17.10 Saving Clause...........................................62
Section 17.11 Certain Provisions......................................62
Section 17.12 Tax Matters Partner.....................................62
Section 17.13 Expiration of Compliance Period.........................63
Section 17.14 Number and Gender.......................................64
Section 17.15 Entire Agreement........................................64
Section 17.16 Governing Law...........................................64
Section 17.17 Attorney's Fees.........................................64
Section 17.18 Receipt of Correspondence...............................64
Section 17.19 Security Interest and Right of Set-Off..................64
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EXHIBIT A - Legal Description..........................................A-1
EXHIBIT B - Form of Legal Opinion................................B-1 - B-4
EXHIBIT C - Certification and Agreement..........................C-1 - C-4
EXHIBIT D - Form of Completion Certificate.............................D-1
EXHIBIT E - Accountant's Certificate...................................E-1
EXHIBIT F - Contractor's Letter........................................F-1
EXHIBIT G - Operations..........................................G-1 - H-10
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AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP OF
FDI-SHADY OAKS, LTD.
This Amended and Restated Agreement Of Limited Partnership is being
entered into effective as of the date written below by and between Fieser
Holdings, Inc., as the general partner (the "General Partner"), WNC Holding,
LLC, a California limited liability company as the limited partner (the "Limited
Partner"), WNC Housing, L.P., as the special limited partner (the "Special
Limited Partner") and ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ as the withdrawing limited partner (the
"Original Limited Partner").
RECITALS
WHEREAS, a partnership agreement dated August 20, 2004 was entered into
by and between Fieser Holdings, Inc. as the general partner (the "Initial
General Partner), and ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ as the limited partner (the "Initial
Limited Partner") (the "Original Partnership Agreement"). A Certificate of
Limited Partnership was filed with the Texas Secretary of State on August 25,
2004.
WHEREAS, the Partners desire to enter into this Agreement to provide
for, among other things, (i) the continuation of the Partnership, (ii) the
admission of the Limited Partner and the Special Limited Partner as partners of
the Partnership, (iii) the liquidation of the Original Limited Partner's
Interest in the Partnership, (iv) the payment of Capital Contributions by the
Limited Partner and the Special Limited Partner to the Partnership, (v) the
allocation of Income, Losses, Tax Credits and distributions of Net Operating
Income and other cash funds of the Partnership among the Partners (vi) the
determination of the respective rights, obligations and interests of the
Partners to each other and to the Partnership, and (vii) certain other matters.
WHEREAS, the Partners desire hereby to amend and restate the 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:
ARTICLE I
DEFINITIONS
Section 1.1 "Accountant" shall mean ▇▇▇ ▇. ▇▇▇▇▇▇, P.C., or such other firm of
independent certified public accountants as may be engaged for the Partnership
by the General Partner with the Consent of the Special Limited Partner.
Notwithstanding any provision of this Agreement to the contrary, the Special
Limited Partner shall have the discretion to dismiss the Accountant for cause if
such Accountant fails to provide, or untimely provides, or inaccurately
provides, the information required in Section 14.2 or 14.3 of this Agreement.
Section 1.2 "Act" shall mean the laws of the State governing limited
partnerships, as now in effect and as the same may be amended from time to time.
Section 1.3 "Actual Tax Credit" shall mean as of any point in time, the
total amount of the LIHTC actually allocated by the Partnership to the Limited
Partner and not subsequently recaptured or disallowed, representing 99.98% of
the LIHTC actually received by the Partnership, as shown on the applicable tax
returns of the Partnership.
Section 1.4 "Adjusted Capital Account Deficit" shall mean with respect to
any Partner, the deficit balance, if any, in such Partner's Capital Account as
of the end of the relevant fiscal period, after giving effect to the following
adjustments:
(a) credit to such Capital Account any amounts which such Partner is
obligated to restore or is deemed to be obligated to restore pursuant to the
penultimate sentences of Treasury Regulations Sections 1.704-2(g)(1) and
1.704-2(i)(5); and
(b) debit to such Capital Account the items described in Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6) of
the Treasury Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Treasury
Regulations and shall be interpreted consistently therewith.
Section 1.5 "Affiliate" shall mean (a) any Person directly or indirectly
controlling, controlled by, or under common control with another Person; (b) any
Person owning or controlling 10% or more of the outstanding voting securities of
such other Person; (c) any officer, director, trustee, or partner of such other
Person; and (d) if such Person is an officer, director, trustee or general
partner, any other Person for which such Person acts in any such capacity.
Section 1.6 "Agreement" or "Partnership Agreement" shall mean this Amended
and Restated Agreement of Limited Partnership, as it may be amended from time to
time. Words such as "herein," "hereinafter," "hereof," "hereto," "hereby" and
"hereunder," when used with reference to this Agreement, refer to this Agreement
as a whole, unless the context otherwise requires.
Section 1.7 "Apartment Housing" shall collectively mean the approximately
3.224 acres of land in Prairie View, ▇▇▇▇▇▇ County, Texas, as more fully
described in Exhibit "A" attached hereto and incorporated herein by this
reference, and the Improvements.
Section 1.8 "Architect of Record" shall mean ▇▇▇▇▇ ▇▇▇▇▇▇▇▇. The General
Partner, on behalf of the Partnership, shall enter into a contract with the
Architect of Record to perform certain duties and responsibilities including,
but not limited to: designing the Improvements; preparing the construction
blueprints, preparing the property specifications manual; contracting for
administrative services; completing the close-out procedures; inspecting for and
overseeing resolution of the Contractor's final punch list; receiving and
approving operations and maintenance manuals; and collecting, reviewing,
approving and forwarding to the Partnership all product, material and
construction warranties.
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Section 1.9 "Asset Management Fee" shall have the meaning set forth in
Section 9.2(d) hereof and the Minimum Amount (as defined in Section 9.2(d)),
shall be paid monthly to the Limited Partner.
Section 1.10 "Assignee" shall mean a Person who has acquired all or a
portion of the Limited Partner's or the Special Limited Partner's beneficial
interest in the Partnership and has not become a Substitute Limited Partner.
Section 1.11 "Bankruptcy" or "Bankrupt" shall mean the making of an
assignment for the benefit of creditors, becoming a party to any liquidation or
dissolution action or proceeding, the commencement of any bankruptcy,
reorganization, insolvency or other proceeding for the relief of financially
distressed debtors, or the appointment of a receiver, liquidator, custodian or
trustee and, if any of the same occur involuntarily, the same not being
dismissed, stayed or discharged within 90 days; or the entry of an order for
relief under Title 11 of the United States Code. A Partner shall be deemed
Bankrupt if the Bankruptcy of such Partner shall have occurred and be
continuing.
Section 1.12 "Break-even Operations" shall mean at such time as the
Partnership has Cash Receipts equal to Cash Expenses, as determined by the
Accountant and approved by the Special Limited Partner. For purposes of this
definition: (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
(b) Cash Expenses shall include the amount of any outstanding Partnership
obligations and any management fee or portion thereof, which is currently
deferred and not paid; and (c) Cash Expenses shall include the amount of any
reserve required to be funded in accordance with Article VIII that is currently
deferred and not paid. In addition, Break-even Operations shall not occur until
the Partnership has: (a) sufficiently funded the tax and insurance reserve in an
amount equal to one year's property insurance premium and the next full
installment of real estate taxes based upon improved land; and (b) deposited
into the Operating Deficit Account an amount equal to one month's mandatory debt
service payment and one month's operating expenses. Moreover, in the event any
rent concession is granted for the rental of an apartment unit the value of the
rental concession shall be amortized over the term of the lease.
Section 1.13 "Budget" shall mean the annual operating Budget of the
Partnership as more fully described in Section 14.3 of this Agreement.
Section 1.14 "Capital Account" shall mean, with respect to each Partner,
the account maintained for such Partner comprised of such Partner's Capital
Contribution as increased by allocations to such Partner of Partnership Income
(or items thereof) and any items in the nature of income or gain which are
specially allocated pursuant to 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
3
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. Cash Expenses payable to Partners or Affiliates of Partners shall
be paid after Cash Expenses payable to third parties.
Section 1.17 "Cash Receipts" shall mean actual cash received on a cash
basis by the Partnership from operating revenues of the Partnership, including
without limitation rental income (but not any subsidy thereof from the General
Partner or an Affiliate thereof), tenant security deposits that have been
forfeited by tenants pursuant to the laws of the State, laundry income, paid to
the Partnership, telephone hook-up or service income, cable fees or hook-up
costs, telecommunications or satellite fees or hook-up costs, but excluding
prepayments, security deposits, Capital Contributions, borrowings, the Mortgage
Loan, lump-sum payments, any extraordinary receipt of funds, and any income
earned on investment of its funds. Neither the General Partner nor its
Affiliates shall be entitled to payment of any Cash Receipts for any reason,
including but not limited to a separate contract, agreement, obligation or the
like.
Section 1.18 "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, or any successor statute.
Section 1.19 "Completion of Construction" shall mean the date the
Partnership receives the required certificate of occupancy (or the local
equivalent) for all 40 apartment units, and by the issuance of the Construction
Inspector's certification, in a form substantially similar to the form attached
hereto as Exhibit D and incorporated herein by this reference, with respect to
completion of all the apartment units in the Apartment Housing. Completion of
Construction further means that the construction shall be completed in good
quality, and free and clear of all mechanic, material and similar liens. In
4
addition to the above, Completion of Construction shall occur only when the
statutory time period for the filing of any liens by the Contractor,
subcontractors, material suppliers or any one else entitled to file a lien
against the property has lapsed unless such filed liens, other than the Mortgage
Loan, have been bonded over and have been approved by the Special Limited
Partner; and the Special Limited Partner has approved the Completion of
Construction.
Section 1.20 "Compliance Period" shall mean the period set forth in Section
42 (i)(1) of the Code, as amended, or any successor statute.
Section 1.21 "Consent of the Special Limited Partner" shall mean the prior
written consent or approval of the Special Limited Partner.
Section 1.22 "Construction Budget" shall mean the agreed upon cost of
construction of the Improvements, including soft costs (which includes, but is
not limited to, financing charges, market study, Development Fee, architect
fees, etc.), based upon the Plans and Specifications. The final Construction
Budget is referenced in the Development, Construction and Operating Budget
Agreement entered into by and between the Partners the even date hereof. The
Development, Construction and Operating Budget Agreement shall: list all
subcontractors and material suppliers who will account for five percent or more
of the cost of construction of the Improvements; and show a trade payment
breakdown specifying the cost of each classification of construction
requirements pursuant to the Plans and Specifications.
Section 1.23 "Construction Contract" shall mean the construction contract
March 22, 2005 in the amount of $674,560 per year entered into between the
Partnership and the Contractor pursuant to which the Improvements are being
constructed in accordance with the Plans and Specifications. The Construction
Contract shall be a fixed price agreement (includes materials and labor) at a
cost consistent with the Development Budget. Any modifications to the
Construction Contract requires the Consent of the Special Limited Partner.
Section 1.24 "Contractor" shall mean LCJ Management, Inc. dba LCJ
Construction, which is the general construction contractor for the Apartment
Housing.
Section 1.25 "Debt Service Coverage" shall mean for the applicable period
the ratio between the Net Operating Income (excluding Mortgage payments) and the
debt service required to be paid on the Mortgage(s); as example, a 1.15 Debt
Service Coverage means that for every $1.00 of debt service required to be paid
there must be $1.15 of Net Operating Income available. A worksheet for the
calculation of Debt Service Coverage is found in the Report of Operations
attached hereto as Exhibit "G" and incorporated herein by this reference. For
purposes of this definition: (a) any one-time up-front fee paid to the
Partnership from any source shall not be included in Cash Receipts to calculate
Debt Service Coverage; (b) Cash Expenses shall include the amount of any
Management Fee, or portion thereof, which is currently deferred and not paid;
and (c) Cash Expenses shall include the amount of any reserve required to be
funded in accordance with Article VIII that is currently deferred and not paid.
Section 1.26 "Deferred Management Fee" shall have the meaning set forth in
Section 9.2(c) hereof.
5
Section 1.27 "Developer" shall mean Fieser Development, Inc.
Section 1.28 "Development Fee" shall mean the fee payable to the Developer
for services incident to the development and construction of the Apartment
Housing in accordance with the Development Fee Agreement between the Partnership
and the Developer dated the even date herewith and incorporated herein by this
reference. Development activities do not include services for the acquisition of
the land or syndication activities.
Section 1.29 "Distributions" shall mean the total amount of money, or the
Gross Asset Value of property (net of liabilities securing such distributed
property that such Partner is considered to assume or take subject to under
Section 752 of the Code), distributed to Partners with respect to their
Interests in the Partnership, but shall not include any payments to the General
Partner or its Affiliates for fees or other compensation as provided in this
Agreement or any guaranteed payment within the meaning of Section 707(c) of the
Code, as amended, or any successor thereto.
Section 1.30 "Fair Market Value" shall mean, with respect to any property,
real or personal, the price a ready, willing and able buyer would pay to a
ready, willing and able seller of the property, provided that such value is
reasonably agreed to between the parties in arm's length negotiations and the
parties have sufficiently adverse interests.
Section 1.31 "Financial Interest" shall mean the General Partner's 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 1.32 "First Year Certificate" shall mean the certificate to be
filed by the General Partner with the Secretary of the Treasury as required by
Code Section 42(1)(1), as amended, or any successor thereto. Section 1.33 "FmHA"
shall mean the United States Department of Agriculture, Rural Development
(formerly Farmers Home Administration) or any successor thereto.
Section 1.34 "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.
Section 1.35 "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 1.36 "Force Majeure" shall mean any act of God, strike, lockout, or
other industrial disturbance, act of the public enemy, war, blockage, public
6
riot, fire, flood, explosion, governmental action, governmental delay, restraint
or inaction and any other cause or event, whether of the kind enumerated
specifically herein, or otherwise, which is not reasonably within the control of
a Partner to this Agreement claiming such suspension.
Section 1.37 "General Partner(s)" shall mean Fieser Holdings, Inc., and
such other Persons as are admitted to the Partnership as additional or
substitute General Partners pursuant to this Agreement. If there is more than
one General Partner of the Partnership, the term "General Partner" shall be
deemed to refer to such General Partners and vice versa.
Section 1.38 "Gross Asset Value" shall mean with respect to any asset, the
asset's adjusted basis for federal income tax purposes, except as follows:
(a) the initial Gross Asset Value of any asset contributed by a Partner to
the Partnership shall be the Fair Market Value of such asset, as determined by
the contributing Partner and the General Partner, provided that, if the
contributing Partner is a General Partner, the determination of the Fair Market
Value of a contributed asset shall be determined by appraisal;
(b) the Gross Asset Values of all Partnership assets shall be adjusted to
equal their respective Fair Market Values, as determined by the General Partner,
as of the following times: (1) the acquisition of an additional Interest in the
Partnership by any new or existing Partner in exchange for more than a de
minimis Capital Contribution; (2) the distribution by the Partnership to a
Partner of more than a de minimis amount of Partnership property as
consideration for an Interest in the Partnership; and (3) the liquidation of the
Partnership within the meaning of Treasury Regulations Section
1.704-1(b)(2)(ii)(g); provided, however, that the adjustments pursuant to
clauses (1) and (2) above shall be made only with the Consent of the Special
Limited Partner and only if the General Partner reasonably determines that such
adjustments are necessary or appropriate to reflect the relative economic
interests of the Partners in the Partnership;
(c) the Gross Asset Value of any Partnership asset distributed to any
Partner shall be adjusted to equal the Fair Market Value of such asset on the
date of distribution as determined by the distributee and the General Partner,
provided that, if the distributee is a General Partner, the determination of the
Fair Market Value of the distributed asset shall be determined by appraisal; and
(d) the Gross Asset Values of Partnership assets shall be increased (or
decreased) to reflect any adjustments to the adjusted basis of such assets
pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent
that such adjustments are taken into account in determining Capital Accounts
pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m) and Section
10.3(g) hereof; provided however, that Gross Asset Values shall not be adjusted
pursuant to this Section 1.38(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
7
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 1.39 "Hazardous Substance" shall mean and include any substance,
material or waste, including asbestos, petroleum and petroleum products
(including crude oil), that is or becomes designated, classified or regulated as
"toxic" or "hazardous" or a "pollutant" or that is or becomes similarly
designated, classified or regulated, under any federal, state or local law,
regulation or ordinance including, without limitation, the Compensation and
Liability Act of 1980, as amended, the Hazardous Materials Transportation Act,
as amended, the Resource Conservation and Recovery Act, as amended, and the
regulations adopted and publications promulgated pursuant thereto.
Section 1.40 "Improvements" shall mean the seven (7) buildings containing
Forty (40) apartment units and ancillary and appurtenant facilities (including
those intended for commercial use, if any,) being constructed for families 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 1.41 "In-Balance" shall mean, on any occasion, that the amount of
the undisbursed Limited Partner's Capital Contribution are sufficient in the
Limited Partner's reasonable judgment to pay, through Completion of
Construction, all of the following sums: (a) all costs of construction,
marketing, ownership, maintenance and leasing of the Apartment Housing units;
and (b) all sums payable under the Construction documents.
Section 1.42 "Incentive Management Fee" shall have the meaning set forth in
Section 9.2(e) hereof.
Section 1.43 "Income and Losses" shall mean, for each fiscal year or other
period, an amount equal to the Partnership's taxable income or loss for such
year or period, determined in accordance with Code Section 703(a) (for this
purpose, all items of income, gain, loss or deduction required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in taxable
income or loss), with the following adjustments:
(a) any income of the Partnership that is exempt from federal income tax
and not otherwise taken into account in computing Income or Losses pursuant to
this Section 1.43 shall be added to such taxable income or loss;
(b) any expenditures of the Partnership described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to
Regulation Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in
computing Income and Losses pursuant to this Section 1.43 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 1.38(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;
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(d) gain or loss resulting from any disposition of Partnership assets with
respect to which gain or loss is recognized for federal income tax purposes
shall be computed by reference to the Gross Asset Value of the property disposed
of, notwithstanding that the adjusted tax basis of such property differs from
its Gross Asset Value;
(e) in lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing such taxable income or loss, there
shall be taken into account depreciation for such fiscal year or other period,
computed as provided below; and
(f) notwithstanding any other provision of this definition, any items which
are specially allocated pursuant to Sections 10.3 or 10.4 hereof shall not
otherwise be taken into account in computing Income or Losses.
Depreciation for each fiscal year or other period shall be calculated
as follows: an amount equal to the depreciation, amortization, or other cost
recovery deduction allowable with respect to an asset for such year or other
period for federal income tax purposes, except that if the Gross Asset Value of
an asset differs from its adjusted basis for federal income tax purposes at the
beginning of such year or other period, depreciation shall be an amount which
bears the same ratio to such beginning Gross Asset Value as the federal income
tax depreciation, amortization, or other cost recovery deduction for such year
or other period bears to such beginning adjusted tax basis; provided, however,
if the federal income tax depreciation, amortization, or other cost recovery
deduction for such year is zero, depreciation shall be determined with reference
to such beginning Gross Asset Value using any reasonable method selected by the
General Partner.
For purposes of this Agreement, the term Income when used alone shall
include all items of income or revenue contemplated in this Section and the term
Losses when used alone shall include all items of loss or deductions
contemplated in this Section.
Section 1.44 "Inspecting Architect" shall mean
AECC, Inc. The Inspecting Architect shall make regular inspections of the
construction site, but in no event less than once a month, to confirm that
construction of the Improvements is in conformance with the Plans and
Specifications. The Inspecting Architect will sign-off on all the draw requests
made by the Contractor and provide the documents specified in Section 14.3 of
this Agreement. If there comes into being any identity of interest between the
Partnership and the Inspecting Architect, or between the Contractor and the
Inspecting Architect, then the General Partner will immediately relieve the
Inspecting Architect of any inspecting duties.
Section 1.45 "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
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compensation; hazard coverage (including but not limited to fire, or other
casualty loss to any structure or building on the Apartment Housing in an amount
equal to the full replacement value of the damaged property without deducting
for depreciation); and comprehensive general liability coverage against
liability claims for bodily injury or property damage in the minimum amount of
$1,000,000 per occurrence and an aggregate of $2,000,000;
(c) all liability coverage shall include an umbrella liability coverage in
a minimum amount of $4,000,000 per occurrence and an aggregate of $4,000,000;
(d) all Insurance polices shall name the Partnership as the named insured,
the Limited Partner as an additional insured, and WNC & Associates, Inc. as the
certificate holder;
(e) all Insurance policies shall include a provision to notify the insured,
the Limited Partner and the certificate holder prior to cancellation;
(f) hazard coverage must include inflation and building or ordinance
endorsements;
(g) the minimum builder's risk coverage shall be in an amount equal to the
construction contract amount; and
(h) the Contractor must also provide evidence of liability coverage equal
to $1,000,000 per occurrence with an aggregate of $2,000,000 and shall name the
Partnership as an additional insured and WNC & Associates, Inc., as certificate
holder.
Section 1.46 "Insurance Company" shall mean any insurance company engaged
by the General Partner for the Partnership with the Consent of the Special
Limited Partner which Insurance Company shall have an A rating or better for
financial safety by A.M. Best or Standard & Poor's.
Section 1.47 "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 1.48 "Involuntary Withdrawal" shall mean any Withdrawal caused by
the death, adjudication of insanity or incompetence, Bankruptcy of a General
Partner, or the removal of a General Partner pursuant to Section 13.2 hereof.
Section 1.49 "Land Acquisition Fee" shall mean the fee payable to the
General Partner in an amount equal to $1,920 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 1.50 "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.
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Section 1.51 "Limited Partner" shall mean WNC Holding, LLC, a California
limited liability company, and such other Persons as are admitted to the
Partnership as additional or Substitute Limited Partners pursuant to this
Agreement.
Section 1.52 "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
▇▇▇▇▇▇▇▇ Valley Management, Inc.
Section 1.53 "Management Agreement" shall mean the agreement between the
Partnership and the Management Agent for property management services. The
management fee shall equal to $30 per occupied unit per month. Neither the
Management Agreement nor ancillary agreement shall provide for an initial
rent-up fee, a set-up fee, nor any other similar pre-management fee payable to
the Management Agent. The Management Agreement shall provide that it will be
terminable at will by the Partnership at anytime following the Withdrawal or
removal of the General Partner and, in any event, on any anniversary of the date
of execution of the Management Agreement, without payment or penalty for failure
to renew the same.
Section 1.54 "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.
Section 1.55 "Mortgage" or "Mortgage Loan" shall mean the following
permanent nonrecourse financing: a loan from Rural Development, or its successor
or assignee, in the principal amount of $1,015,804, plus interest on the
principal at 1.0% per annum over a term of 50 years and amortized over 50 years
and a HOME loan in the principal amount of $465,000, plus interest on the
principal at 1.0% per annum over a term of 30 years and amortized over 30 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 Limited Partner a draft of
the Mortgage documents for review and approval. Based on the draft Mortgage
documents, if the terms of the Mortgage are not as specified above and the
Special Limited Partner determines that the Debt Service Coverage falls below
1.15 based on then current Cash Expenses and Cash Receipts then the General
Partner shall adjust the principal loan amount and close on a Mortgage which
will produce a 1.15 Debt Service Coverage. The Mortgage funds shall be used to
retire any outstanding hard construction costs including labor and materials.
Section 1.56 "Net Operating Income" shall mean the cash available for
Distribution on an annual basis, when Cash Receipts exceed Cash Expenses.
Section 1.57 "Nonrecourse Deductions" shall have the meaning given it in
Treasury Regulations Section 1.704-2(b)(1).
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Section 1.58 "Nonrecourse Liability" shall have the meaning given it in
Treasury Regulations Section 1.704-2(b)(3).
Section 1.59 "Operating Deficit" shall mean, for the applicable period,
insufficient funds to pay operating costs when Cash Expenses exceed the sum of
Cash Receipts and any amount in the Rent-Up Reserve, as determined by the
Accountant and approved by the Special Limited Partner.
Section 1.60 "Operating Deficit Guarantee Period" shall mean the period
commencing with the date the first apartment unit in the Apartment Housing is
available for its intended use (for properties being rehabilitated with tenants
in residence, the period commences with the signing of this Agreement). The
period ending three years following the achievement of three consecutive months
of Break-even Operations (for properties being rehabilitated with tenants in
residence, the Operating Deficit Guarantee Period ends following three
consecutive months of Breakeven Operations after completion of all the
rehabilitation as approved in the Plans and Specifications or scope of work).
The Operating Deficit Guarantee Period will not expire unless the Partnership
has achieved Completion of Construction of the Apartment Housing.
"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 1.61 "Original Limited Partner" shall mean ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇.
Section 1.62 "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 1.63 "Partner Nonrecourse Debt" shall have the meaning set forth in
Section 1.704-2(b)(4) of the Treasury Regulations.
Section 1.64 "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 1.65 "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 1.66 "Partnership" shall mean the limited partnership continued
under this Agreement.
Section 1.67 "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 1.68 "Permanent Mortgage Commencement" shall mean the first date on
which all of the following have occurred: (a) the Mortgage shall have closed and
funded; and (b) amortization of the Mortgage shall have commenced.
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Section 1.69 "Person" shall collectively mean an individual,
proprietorship, trust, estate, partnership, joint venture, association, company,
corporation or other entity.
Section 1.70 "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. For rehabilitated properties without
Plans and Specifications, this definition shall include any specifications
manual and the unit by unit scope of work approved by the local city or county
building department, if applicable, and the Special Limited Partner.
Section 1.71 "Project Documents" shall mean all documents relating to the
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.
Section 1.72 "Projected Annual Tax Credits" shall mean LIHTC in the amount
of $63,699 for 2005, $122,303 per year for each of the years 2006 through 2014,
and $50,959 for 2015, which the General Partner has projected to be the total
amount of LIHTC which will be allocated to the Limited Partner by the
Partnership, constituting 99.98% of the aggregate amount of LIHTC of $1,223,025
to be available to the Partnership.
Section 1.73 "Projected Tax Credits" shall mean LIHTC in the aggregate
amount of $1,223, 025.
Section 1.74 "Qualified Tenants" shall mean any tenants who have incomes of
60% or less of the area median gross income, as adjusted for family size, so as
to make the Project eligible for LIHTC.
Section 1.75 "Real Estate Taxes" shall mean the sum of $10,000 required to
be paid annually by the Partnership to the tax assessor, school district or
similar representative, of the Katy, ▇▇▇▇▇▇ County, for real estate taxes
assessed against the Apartment Housing. The Real Estate Taxes are payable as
follows: Paid on January 1 of each year in the amount of $10,000.
Section 1.76 "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.
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Section 1.77 "Rent-Up Reserve" means the Partnership reserve in the initial
amount of $0 established to fund the rent-up of the Apartment Complex.
Section 1.78 "Revised Projected Tax Credits" shall have the meaning set
forth in Section 7.4(a) hereof.
Section 1.79 "Sale or Refinancing" shall mean any of the following items or
transactions: a sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Partnership, a condemnation of or
casualty at the Apartment Housing or any part thereof, a claim against a title
insurance company, the refinancing 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 1.80 "Sale or Refinancing Proceeds" shall mean all cash receipts of
the Partnership arising from a Sale or Refinancing (including principal and
interest received on a debt obligation received as consideration in whole or in
part, on a Sale or Refinancing) less the amount paid or to be paid in connection
with or as an expense of such Sale or Refinancing, and with regard to damage
recoveries or insurance or condemnation proceeds, the amount paid or to be paid
for repairs, replacements or renewals resulting from damage to or partial
condemnation of the Apartment Housing.
Section 1.81 "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 1.82 "State" shall mean the State of Texas.
Section 1.83 "State Tax Credit Agency" shall mean the state agency of Texas
which has the responsibility and authorization to administer the LIHTC program
in Texas.
Section 1.84 "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 1.85 "Syndication Fee" shall mean the fee payable to the General
Partner in an amount equal to $20,000 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 1.86 "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 1.87 "Tax Credit Compliance Fee" shall mean the fee payable to the
General Partner in accordance with Section 9.2(f) of this Agreement.
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Section 1.88 "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 1.89 "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 1.90 "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 a TLTA Owners title policy naming the
Partnership as insured. The Title Policy shall also insure against
rights-of-way, easements, or claims of easements, not shown by public records.
The Title Policy shall be in an amount equal to the Mortgage Loan amount and the
Limited Partner's Capital Contribution.
Section 1.91 "TRA 1986" shall mean the Tax Reform Act of 1986.
Section 1.92 "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 1.93 "Withdrawing" or "Withdrawal" (including the verb form
"Withdraw" and the adjectival forms "Withdrawing" and "Withdrawn") shall mean,
as to a General Partner, the occurrence of the death, adjudication of insanity
or incompetence, Bankruptcy of such Partner or any of its principals, the
withdrawal, removal or retirement from the Partnership of such Partner for any
reason, including any sale, pledge, encumbering, assignment or other transfer of
all or any part of its General Partner Interest and those situations when a
General Partner may no longer continue as a General Partner by reason of any law
or pursuant to any terms of this Agreement.
ARTICLE II
NAME
The name of the Partnership shall be "FDI-SHADY OAKS, LTD."
ARTICLE III
PRINCIPAL EXECUTIVE OFFICE/AGENT FOR SERVICE
Section 3.1 Principal Executive Office. The principal executive office of
the Partnership is located at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ or
at such other place or places within the State as the General Partner may
hereafter designate.
15
Section 3.2 Agent for Service of Process. The name of the agent for service
of process on the Partnership is ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, whose address is ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇.
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 Plans and Specifications;
(c) provide housing, subject to the Minimum Set-Aside Test and the Rent
Restriction Test and consistent with the requirements of the Project Documents
so long as any Project Documents remain in force;
(d) maintain and operate the Apartment Housing, including hiring the
Management Agent (which Management Agent may be any of the Partners or an
Affiliate thereof) and entering into any agreement for the management of the
Apartment Housing during its rent-up and after its rent-up period in accordance
with this Agreement;
(e) enter into the Mortgage;
(f) rent dwelling units in the Apartment Housing from time to time, in
accordance with the provisions of the Code applicable to LIHTC; and
(g) do any and all other acts and things necessary or proper in furtherance
of the Partnership business and in accordance with this Agreement.
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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 the State, and shall continue until August 20, 2059,
unless terminated earlier in accordance with the provisions of this Agreement or
as otherwise provided by law.
ARTICLE VI
GENERAL PARTNER'S CONTRIBUTIONS AND LOANS
Section 6.1 Capital Contribution of General Partner. The General Partner
has made a Capital Contribution equal to $300.
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, 2005 ("Completion
Date"), at a total development cost of not more than $2,398,257 ("Development
Budget"), which includes all hard and soft costs incident to the acquisition,
development and construction of the Apartment Housing in accordance with the
Construction Budget, the Construction Contract, the other Project Documents and
the Plans and Specifications. If the Development Budget exceeds the sum of the
Capital Contributions, the Mortgage amount as specified herein and the
Development Fee then the General Partner shall be responsible for and shall be
obligated to pay the difference thereof. Any advances by the General Partner
pursuant to the previous sentence shall not be repayable, shall not change the
Interest of any Partner in the Partnership and shall be considered a guaranteed
payment to the Partnership for cost overruns. If the Special Limited Partner, in
good faith, ascertains that the cost of completing the Improvements in
substantial accordance with the Plans and Specifications is greater than the sum
of (1) the then remaining undisbursed portion of the Capital Contributions; (2)
the then remaining undisbursed portion of the Mortgage amount as specified
herein; and (3) the then remaining undisbursed portion of the Development Fee;
then the Special Limited Partner may request the General Partner to advance
funds into a construction account in an amount required to complete the
Improvements.
(b) In addition, if (1) the Improvements are not completed on or before the
Completion Date (which date may be extended in the event of Force Majeure, but
in no event longer than three months from the Completion Date); (2) prior to
completing the Improvements, there is an uncured default under or termination of
the Mortgage Loan commitment, or other material documents; or (3) a foreclosure
action is commenced against the Partnership, then at the Special Limited
Partner's election, either the General Partner will be removed from the
Partnership and the Special Limited Partner will be admitted as successor
General Partner, all in accordance with Article XIII hereof, or the General
Partner will repurchase the Interest of the Limited Partner and the Special
Limited Partner for an amount equal to the amounts theretofore paid by the
Limited Partner and the Special Limited Partner, and the Limited Partner and the
17
Special Limited Partner shall have no further Interest in the Partnership. If
the Limited Partner elects to have the General Partner repurchase the Interest
of the Limited Partner then the repurchase shall occur within 90 days after the
General Partner receives written demand from the Limited Partner.
Section 6.3 Operating Obligations. From the date of this Agreement until
three consecutive months of Break-even Operations (for properties being
rehabilitated, the Operating Deficit Guarantee Period ends following three
consecutive months of Breakeven Operations after completion of all
rehabilitation as approved in the Plans and Specifications or scope of work),
the General Partner will provide the necessary funds to pay Operating Deficits,
which funds shall not be repayable, shall not change the Interest of any Partner
and shall be considered a guaranteed payment to the Partnership for cost
overruns. For the balance of the Operating Deficit Guarantee Period the General
Partner will provide Operating Loans to pay any Operating Deficits. The
aggregate maximum amount of the Operating Loan(s) the General Partner will be
$135,693 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 Original Limited Partner. The Original Limited Partner made a
Capital Contribution of $100. Effective as of the date of this Agreement, the
Original Limited Partner's Interest has been liquidated and the Partnership has
reacquired the Original Limited Partner's Interest in the Partnership. The
Original Limited Partner acknowledges that 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.
Section 7.2 Capital Contribution of Limited Partner. The Limited Partner
shall make a Capital Contribution in the amount of $917,269, 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.
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(a) $687,952 (which includes the Special Limited Partner's Capital
Contribution of $92) shall be payable upon the Limited Partner's receipt and
approval of the following documents:
(1) the execution of this Agreement;
(2) an ALTA survey;
(3) a legal opinion in a form substantially similar to the form of opinion
attached hereto as Exhibit "B" and incorporated herein by this reference;
(4) a fully executed Certification and Agreement in the form attached
hereto as Exhibit "C" and incorporated herein by this reference;
(5) a copy of the title commitment, (in a form and substance satisfactory
to the Special Limited Partner) constituting an agreement by 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 and free from other exceptions
not previously approved by the Special Limited Partner;
(6) Insurance required during construction;
(7) copy of building permit;
(8) a copy of the recorded grant deed (warranty deed);
(9) copy of Limited Partner's independent engineer's report;
(10) copy of Construction Contract;
(11) copy of firm commitment from Mortgage Lender; and
(12) full set of Plans and Specifications.
(13) payment of $15,000 to the Limited Partner for costs and expenses
incurred by the Limited Partner in connection with the Limited Partner's
underwriting of the Apartment Housing and Improvements.
(b) $91,727 shall e payable upon the Limited partner's receipt and approval
of documents substantiating 50% construction completion, with all accompanying
documents including lien releases and date downs;
(c) $45,863 shall be payable upon the Limited Partner's receipt and
approval of the following documents:
(1) a certificate of occupancy (or equivalent evidence of local occupancy
approval if a permanent certificate is not available) on all the apartment units
in the Apartment Housing;
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(2) a completion certification in a form substantially similar to the form
attached hereto as Exhibit "D" and incorporated herein by this reference,
indicating that the Improvements have been completed in accordance with the
Project Documents;
(3) a letter from the Contractor in a form substantially similar to the
form attached hereto as Exhibit "F" and incorporated herein by this reference
stating that all amounts payable to the Contractor have been paid in full and
that the Partnership is not in violation of the Construction Contract;
(4) insurance required during operations;
(5) endorsement to the Title Policy dated no more than ten days prior to
the scheduled Capital Contribution providing an as-built survey and confirming
that there are no liens, claims or rights to a lien or judgments filed against
the property or the Apartment Housing during the time period since the issuance
of the Title Policy referenced above in Section 7.2(a).
(d) $45,863 shall be payable upon the Limited Partner's receipt and
approval of the following documents;
(1) Mortgage Loan Documents signed and the Mortgage funded;
(2) achievement by the Partnership of a Debt Service Coverage of 1.15 for
90 consecutive days;
(3) 90% tax credit qualified occupancy and 90% actual occupancy for 90
consecutive days;
(4) an audited construction cost certification (which includes an itemized
cost breakdown);
(5) an updated Title Policy;
(6) the Accountant's final Tax Credit certification in a form substantially
similar to the form attached hereto as Exhibit "E" and incorporated herein by
this reference; and
(7) an as-built survey.
(e) $45,863 shall be payable upon the Limited Partner's receipt and
approval of the following documents;
(1) copies of all initial tenant files including completed applications,
completed questionnaires or checklist of income and assets, documentation of
third party verification of income and assets, and income certification forms
(LIHTC specific) collected by the Management Agent, or General Partner,
verifying each tenant's eligibility pursuant to the Minimum Set-Aside Test;
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(2) copies of the executed lease agreement with the tenants;
(3) the current rent roll;
(4) the construction documents required pursuant to Section 14.3(a) of this
Agreement, if not previously provided to the Limited Partner;
(5) first year tax return in which Tax Credits are taken;
(6) a copy of the declaration of restrictive covenants/extended use
agreement entered into between the Partnership and the State Tax Credit Agency;
(7) a copy of the Partnership's audited financial statement;
(8) Internal Revenue Code Form 8609, or any successor form; and
(9) any documents previous not provided to the Limited Partner but required
pursuant to this Section 7.2 and Sections 14.3(a) and (b).
(f) In the event the Limited Partner fails to pay a portion of any Capital
Contribution by its due date, and any such failure is not cured within forty
five (45) days after written request for the payment from the General Partner
(after all such prerequisites to receive such payment are met), the Limited
Partner shall be deemed to be in default of its obligations under this Agreement
and the General Partner shall be entitled to institute a suit of law or in
equity.
Section 7.3 Repurchase of Limited Partner's Interest. Within 90 days after
the General Partner receives written demand from the Limited Partner and/or the
Special Limited Partner, the Partnership shall repurchase the Limited Partner's
Interest and/or the Special Limited Partner's Interest in the Partnership by
refunding to it in cash the full amount of the Capital Contribution which the
Limited Partner and/or the Special Limited Partner has theretofore made in the
event that, for any reason, the Partnership shall fail to:
(a) cause the Apartment Housing to be placed in service by February 1,
2006;
(b) achieve 90% occupancy of the Apartment Housing by satisfying the
Minimum Set-Aside Test by February 1, 2006;
(c) obtain Permanent Mortgage Commencement by July 1, 2006; or
(d) meet both the Minimum Set-Aside Test and the Rent Restriction Test not
later than December 31 of the first year the Partnership elects the LIHTC to
commence in accordance with the Code.
Section 7.4 Adjustment of Limited Partner's Capital Contribution.
(a) The amount of the Limited Partner's and Special Limited Partner's
Capital Contribution was determined in part upon the amount of Tax Credits that
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were expected to be available to the Partnership, at a cost of 75.00% and was
based on the assumption that the Partnership would be eligible to claim, in the
aggregate, the Projected Tax Credits. If the anticipated amount of Projected Tax
Credits to be allocated to the Limited Partner and Special Limited Partner as
evidenced by IRS Form 8609, Schedule A thereto, and the audited construction
cost certification provided to the Limited Partner and Special Limited Partner
are less than $1,223,025 (the new Tax Credit amount, if applicable, shall be
referred to as the "Revised Projected Tax Credits") then the Limited Partner's
and Special Limited Partner's Capital Contribution provided for in Section 7.2
and Section 7.5 respectively shall be adjusted by the amount which will make the
total Capital Contribution to be paid by the Limited Partner and Special Limited
Partner to the Partnership equal to 75.00% of the Revised Projected Tax Credits
so anticipated to be allocated to the Limited Partner and Special Limited
Partner. If the Capital Contribution adjustment referenced in this Section
7.4(a) is a reduction which is greater than the remaining Capital Contribution
to be paid by the Limited Partner and the Special Limited Partner then the
General Partner shall have ninety days from the date the General Partner
receives notice from either the Limited Partner or the Special Limited Partner
to pay the shortfall. If the Capital Contribution adjustment referenced in this
Section 7.4(a) is an increase then the Limited Partner and Special Limited
Partner shall have ninety days from the date the Limited Partner and Special
Limited Partner have received notice from the General Partner to pay the
increase.
(b) The General Partner is required to use its best efforts to rent 100% of
the Apartment Housing's apartment units to tenants who meet the Minimum
Set-Aside Test throughout the Compliance Period. If at the end of each calendar
year during the first five calendar years following the year in which the
Apartment Housing is placed in service, the Actual Tax Credit for any fiscal
year or portion thereof is or will be less than the Projected Annual Tax Credit,
or the Projected Annual Tax Credit as modified by Section 7.4(a) of this
Agreement if applicable (collectively the "Annual Tax Credit") (the "Annual
Credit Shortfall"), then the next Capital Contribution owed by the Limited
Partner shall be reduced by the Annual Credit Shortfall amount, and any portion
of such Annual Credit Shortfall in excess of such Capital Contribution shall be
applied to reduce succeeding Capital Contributions of the Limited Partner. If
the Annual Credit Shortfall is greater than the Limited Partner's remaining
Capital Contributions then the General Partner shall pay to the Limited Partner
the excess of the Annual Credit Shortfall over the remaining Capital
Contributions. The General Partner shall have ninety days to pay the Annual
Credit Shortfall from the date the General Partner receives notice from the
Limited Partner. The provisions of this Section 7.4(b) shall apply equally to
the Special Limited Partner in proportion to its Capital Contribution and
anticipated annual Tax Credit.
(c) In the event that, for any reason, at any time after the first five
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 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
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7.4(b) shall apply equally to the Special Limited Partner in proportion to its
Capital Contribution and anticipated annual Tax Credit.
(d) The General Partner has represented, in part, that the Limited Partner
will receive Projected Annual Tax Credits of $63,699 in 2005 and $122,303 in
2006. In the event the 2005 and 2006 Actual Tax Credits are less than projected
then the Limited Partner's Capital Contribution shall be reduced by an amount
equal to 75% times the difference between the Projected Annual Tax Credits for
2005 and 2006 and the Actual Tax Credits for 2005 and 2006. If the 2005 and 2006
Actual Tax Credits are less than projected then the Special Limited Partner's
Capital Contribution shall be reduced following the same equation referenced in
the preceding sentence. If, at the time of determination thereof, the Capital
Contribution adjustment referenced in this Section 7.4(d) is greater than the
balance of the Limited Partner's or Special Limited Partner's Capital
Contribution payment which is then due, if any, then the excess amount shall be
paid by the General Partner to the Limited Partner and/or the Special Limited
Partner within ninety days of the General Partner receiving notice of the
reduction from the Limited Partners and/or the Special Limited Partner.
(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 of the Apartment Housing causing a
recapture of Tax Credits previously allocated to the Limited Partner; (2) a
reduction in the qualified basis of the Apartment Housing for income tax
purposes following an audit by the Internal Revenue Service (IRS) resulting in a
recapture of Tax Credits previously claimed; (3) a decision by the United States
Tax Court upholding the assessment of such deficiency against the Partnership
with respect to any Tax Credit previously claimed in connection with the
Apartment Housing, unless the Partnership shall timely appeal such decision and
the collection of such assessment shall be stayed pending the disposition of
such appeal; or (4) a decision of a court affirming such decision upon such
appeal then, in addition to any other payments to which the Limited Partner and
Special Limited Partner are entitled under the terms of this Section 7.4, the
General Partner shall pay to the Limited Partner and the Special Limited Partner
the sum of (A) the income tax deficiency assessed against the Limited Partner or
Special Limited Partner as a result of the Tax Credit recapture, (B) any
interest and penalties imposed on the Limited Partner or Special Limited Partner
with respect to such deficiency, and (C) an amount sufficient to pay any tax
liability owed by the Limited Partner or Special Limited Partner resulting from
the receipt of the amounts specified in (A) and (B).
(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
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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 $92 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.
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.
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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.
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 $299,695 in accordance with the Development Fee Agreement entered into
by and between the Developer and the Partnership on the even date hereof. The
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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, then the remainder shall: first be paid to the Developer in payment of the
Development Fee; second be paid to the General Partner as a reduction of the
General Partner's Capital Contribution; and any remaining Capital Contribution
proceeds shall be paid to the General Partner as a Partnership oversight fee.
(c) The Partnership shall pay to the Management Agent a property management
fee for the leasing and management of the Apartment Housing in an amount in
accordance with the Management Agreement. The term of the Management Agreement
shall not exceed one year, and the execution or renewal of any Management
Agreement shall be subject to the prior Consent of the Special Limited Partner.
If the Management Agent is an Affiliate of the General Partner then commencing
with the termination of the Operating Deficit Guarantee Period, in any year in
which the Apartment Housing has an Operating Deficit, 40% of the management fee
will be deferred ("Deferred Management Fee"). Deferred Management Fees, if any,
shall be paid to the Management Agent in accordance with Section 11.1 of this
Agreement.
(1) The General Partner shall, upon receiving any request of the Mortgage
Lender requesting such action, dismiss the Management Agent as the entity
responsible for management of the Apartment Housing under the terms of the
Management Agreement; or, the General Partner shall dismiss the Management Agent
at the request of the Special Limited Partner for cause.
(2) The appointment of any successor Management Agent is subject to the
Consent of the Special Limited Partner, which may only be sought after the
General Partner has provided the Special Limited Partner with accurate and
complete disclosure respecting the proposed Management Agent.
(d) The Partnership shall pay to the Limited Partner an Asset Management
Fee commencing in 2006 equal to 15% of the Net Operating Income but in no event
less than $1,323 for the Limited Partner's services in monitoring the operations
of the Partnership and for services in connection with the Partnership's
accounting matters and assisting with the preparation of tax returns and the
reports required in Sections 14.2 and 14.3 of this Agreement. The Asset
Management Fee of $1,323 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 $1,323, the unpaid portion thereof shall accrue and be payable on a
cumulative basis in the first year in which there is sufficient Net Operating
26
Income, as provided in Section 11.1, or sufficient Sale or Refinancing Proceeds,
as provided in Section 11.2.
(e) The Partnership shall pay to the General Partner through the Compliance
Period an annual Incentive Management Fee equal to 15% of Net Operating Income
commencing in 2006 for overseeing the marketing, lease-up and continued
occupancy of the Partnership's apartment units, obtaining and monitoring the
Mortgage Loan, maintaining the books and records of the Partnership, selecting
and supervising the Partnership's Accountants, bookkeepers and other Persons
required to prepare and audit the Partnership's financial statements and tax
returns, and preparing and disseminating reports on the status of the Apartment
Housing and the Partnership, all as required by Article XIV of this Agreement.
The Partners acknowledge that the Incentive Management Fee is being paid as an
inducement to the General Partner to operate the Partnership efficiently, to
maximize occupancy and to increase the Net Operating Income. The Incentive
Management Fee shall be payable from Net Operating Income in the manner and
priority set forth in Section 11.1 of this Agreement upon completion and
delivery of the annual audit pursuant to Section 14.2(a) of this Agreement.
(f) The Partnership shall pay to the General Partner through the Compliance
Period an annual Tax Credit Compliance Fee equal to 15% of Net Operating Income
commencing in 2004 for the services of the General Partner in ensuring
compliance by the Partnership and the Apartment Housing with all Tax Credit
rules and regulations. The Tax Credit Compliance Fee shall be payable from Net
Operating Income in the manner and priority set forth in Section 11.1 of this
Agreement upon completion and delivery of the annual audit pursuant to Section
14.2(a) of this Agreement.
Section 9.3 Specific Powers of the General Partner. Subject to the other
provisions of this Agreement, the General Partner, in the Partnership's name and
on its behalf, may:
(a) employ, contract and otherwise deal with, from time to time, Persons
whose services are necessary or appropriate in connection with management and
operation of the Partnership business, including, without limitation,
contractors, agents, brokers, Accountants and Management Agents (provided that
the selection of any Accountant or Management Agent has received the Consent of
the Special Limited Partner) and attorneys, on such terms as the General Partner
shall determine;
(b) pay as a Partnership expense any and all costs and expenses associated
with the formation, development, organization and operation of the Partnership,
including the expense of annual audits, tax returns and LIHTC compliance;
(c) deposit, withdraw, invest, pay, retain and distribute the Partnership's
funds in a manner consistent with the provisions of this Agreement;
(d) execute the Mortgage; and
(e) execute, acknowledge and deliver any and all instruments to effectuate
any of the foregoing.
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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 without the prior consent of
the Special Limited Partner;
(d) possess Partnership property, or assign the Partner's right in specific
Partnership property, for other than the exclusive benefit of the Partnership;
(e) admit a Person as a General Partner except as provided in this
Agreement;
(f) admit a Person as a Limited Partner except as provided in this
Agreement;
(g) violate any provision of the Mortgage;
(h) cause the Apartment Housing apartment units to be rented to anyone
other than Qualified Tenants;
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(i) violate the Minimum Set-Aside Test or the Rent Restriction Test for the
Apartment Housing;
(j) allow the Insurance to expire;
(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;
(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) allow the Real Estate Taxes to be unpaid if the Partnership fails to
pay the same when due;
(p) take any action that would cause termination of the Partnership;
(q) encumber the Apartment Housing, except as provided herein;
(r) execute an assignment for the benefit of creditors; or
(s) permit the Partnership to make any loan to any Person.
Section 9.6 Restrictions on Authority of General Partner. Without the
Consent of the Special Limited Partner the General Partner shall not:
(a) sell, exchange, lease or otherwise dispose of the Apartment Housing;
(b) incur indebtedness other than the Mortgage Loan in the name of the
Partnership;
(c) use Partnership assets, property or Improvements to secure the debt of
any Partners, their Affiliates, or any third party;
(d) engage in any transaction not expressly contemplated by this Agreement
in which the General Partner has an actual or potential conflict of interest
with the Limited Partner or the Special Limited Partner;
(e) contract away the fiduciary duty owed to the Limited Partner and the
Special Limited Partner at common law;
(f) take any action which would cause the Apartment Housing to fail to
qualify, or which would cause a termination or discontinuance of the
qualification of the Apartment Housing, as a "qualified low income housing
project" under Section 42(g)(1) of the Code, as amended, or any successor
29
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;
(q) bring or defend, pay, collect, compromise, arbitrate, resort to legal
action or otherwise adjust claims or demands of or against the Partnership
except as otherwise provided in this Agreement;
(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
30
filed a petition or answer seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any statute, law
or rule;
(u) settle any audit with the Internal Revenue Service concerning the
adjustment or readjustment of any Partnership tax item, extend any statute of
limitations, or initiate or settle any judicial review or action concerning the
amount or character of any Partnership tax item; or
(v) make, amend or revoke any tax election.
Section 9.7 Duties of General Partner. The General Partner agrees that it
shall at all times:
(a) diligently and faithfully devote such of its time to the business of
the Partnership as may be necessary to properly conduct the affairs of the
Partnership;
(b) file and publish all 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;
(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;
31
(h) pay, before the same becomes due or expires, the Insurance premium and
utilities to the Apartment Housing;
(i) 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;
(j) 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;
(k) make any Capital Contributions, advances or loans required to be made
by the General Partner under the terms of this Agreement;
(l) establish and maintain all reserves required to be established and
maintained under the terms of this Agreement;
(m) cause the Partnership to pay, before the same becomes due, the Mortgage
payment, subject to available funds, including funds provided under Section 6.3
or Section 6.4;
(n) 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;
(o) pay, before the same becomes due the Real Estate Taxes;
(p) maintain the initial tenant files, as may be corrected by the
Management Agent following the third party review, in a clean, dry, fireproof
location for a minimum period of twenty-one years; and
(q) abide by State law governing the operations of partnerships.
(r) perform such other acts as may be expressly required of it under the
terms of this Agreement.
32
Section 9.8 Obligations to Repair and Rebuild
Apartment Housing. With the approval of any lender, if such approval is
required, any Insurance proceeds received by the Partnership due to fire or
other casualty affecting the Apartment Housing will be utilized to repair and
rebuild the Apartment Housing in satisfaction of the conditions contained in
Section 42(j)(4) of the Code and to the extent required by any lender. Any such
proceeds received in respect of such event occurring after the Compliance Period
shall be so utilized or, if permitted by the Project Documents and with the
Consent of the Special Limited Partner, shall be treated as Sale or Refinancing
Proceeds.
Section 9.9 Partnership Expenses.
(a) All of the Partnership's expenses shall be billed directly to and paid
by the Partnership to the extent practicable. Reimbursements to the General
Partner, or any of its Affiliates, by the Partnership shall be allowed only for
the Partnership's Cash Expenses unless the General Partner is obligated to pay
the same as an Operating Deficit during the Operating Deficit Guarantee Period,
and subject to the limitations on the reimbursement of such expenses set forth
herein. For purposes of this Section, Cash Expenses shall include fees paid by
the Partnership to the General Partner or any Affiliate of the General Partner
permitted by this Agreement and the actual cost of goods, materials and
administrative services used for or by the Partnership, whether incurred by the
General Partner, an Affiliate of the General Partner or a nonaffiliated Person
in performing the foregoing functions. As used in the preceding sentence,
"actual cost of goods and materials" means the actual cost of goods and
materials used for or by the Partnership and obtained from entities which are
not Affiliates of the General Partner, and actual cost of administrative
services means the pro rata cost of personnel (as if such persons were employees
of the Partnership) associated therewith, but in no event to exceed the amount
which would be charged by nonaffiliated Persons for comparable goods and
services.
(b) Reimbursement to the General Partner or any of its Affiliates of
operating cash expenses pursuant to Subsection (a) hereof shall be subject to
the following:
(1) no such reimbursement shall be permitted for services for which the
General Partner or any of its Affiliates is entitled to compensation by way of a
separate fee; and
(2) no such reimbursement shall be made for (A) rent or depreciation,
utilities, capital equipment or other such administrative items, and (B)
salaries, fringe benefits, travel expenses and other administrative items
incurred or allocated to any "controlling person" of the General Partner or any
Affiliate of the General Partner. For the purposes of this Section 9.9(b)(2),
"controlling person" includes, but is not limited to, any Person, however
titled, who performs functions for the General Partner or any 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.
33
Section 9.10 General Partner Expenses. The General Partner or Affiliates of
the General Partner shall pay all Partnership expenses which are not permitted
to be reimbursed pursuant to Section 9.9 and all expenses which are unrelated to
the business of the Partnership.
Section 9.11 Other Business of Partners. Any Partner may engage
independently or with others in other business ventures wholly unrelated to the
Partnership business of every nature and description, including, without
limitation, the acquisition, development, construction, operation and management
of real estate projects and developments of every type on their own behalf or on
behalf of other partnerships, joint ventures, corporations or other business
ventures formed by them or in which they may have an interest, including,
without limitation, business ventures similar to, related to or in direct or
indirect competition with the Apartment Housing. Neither the Partnership nor any
Partner shall have any right by virtue of this Agreement or the partnership
relationship created hereby in or to such other ventures or activities or to the
income or proceeds derived therefrom. Conversely, no Person shall have any
rights to Partnership assets, incomes or proceeds by virtue of such other
ventures or activities of any Partner.
Section 9.12 Covenants, Representations and Warranties. The General Partner
covenants, represents and warrants that the following are presently true, will
be true at the time of each Capital Contribution payment made by the Limited
Partner and will be true during the term of this Agreement, to the extent then
applicable.
(a) The Partnership is a duly organized limited partnership validly
existing under the laws of the State and has complied with all filing
requirements necessary for the protection of the limited liability of the
Limited Partner and the Special Limited Partner.
(b) The Partnership Agreement and the Project Documents are in full force
and effect and neither the Partnership nor the General Partner is in breach or
violation of any provisions thereof.
(c) Improvements will be completed in a timely and workerlike manner in
accordance with all applicable requirements of all appropriate governmental
entities and the Plans and Specifications of the Apartment Housing.
(d) All conditions to the funding of the Mortgage 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) Except as to any non-recourse carveouts which maybe contained in the
Mortgage Loan, the General Partner does not have any personal liability with
respect to and has not personally guaranteed the payment of the Mortgage.
(g) The Partnership is or will be after completion of rehabilitation 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.
34
(h) All appropriate public utilities, including sanitary and storm sewers,
water, gas and electricity, are currently available and will be operating
properly for all units in the Apartment Housing at the time of first occupancy
and throughout the term of the Partnership.
(i) All roads necessary for the full utilization of the Improvements have
either been completed or the necessary rights of way therefore have been
acquired by the appropriate governmental authority or have been dedicated to
public use and accepted by said governmental authority.
(j) The Partnership has obtained Insurance written by an Insurance Company.
(k) The Partnership owns the fee simple interest in the Apartment Housing.
(l) The Construction Contract has been entered into between the Partnership
and the Contractor; no other consideration or fee shall be paid to the
Contractor other than amounts set forth in the Construction Contract.
(m) The Partnership will require the Accountant to depreciate the
Improvements over a 27 1/2-year term. Site work shall be broken out separately
from Improvements and depreciated over 15 years using the cost recovery system,
mid-year 200% declining balance depreciation method. Landscaping and personal
property (cabinets, appliances, carpet and window coverings) shall be
depreciated over 5 years for regular tax or 9 years for alternative minimum tax.
(n) To the best of the General Partner's knowledge: (1) no Hazardous
Substance has been disposed of, or released to or from, or otherwise now exists
in, on, under or around, the Apartment Housing and (2) no aboveground or
underground storage tanks are now or have ever been located on or under the
Apartment Housing. The General Partner will not install or allow to be installed
any aboveground or underground storage tanks on the Apartment Housing. The
General Partner will use its best efforts to keep the Apartment Housing free of
Hazardous Substances and shall not use or generate, manufacture, refine,
transport, treat, store, handle, dispose of, transfer, produce or process
Hazardous Substance, and shall immediately take all remedial action as required
by any governmental agency or as required by law which is necessary to remove
such Hazardous Substance, except in connection with the normal maintenance and
operation of any portion of the Apartment Housing. The General Partner shall
comply, and use its best efforts to cause there to be compliance, with all
applicable Federal, state and local laws, ordinances, rules and regulations with
respect to Hazardous Substance and shall keep, or cause to be kept, the
Apartment Housing free and clear of any liens imposed pursuant to such laws,
ordinances, rules and regulations. The General Partner must promptly notify the
Limited Partner and the Special Limited Partner in writing (3) if it knows, or
suspects or believes there may be any Hazardous Substance in or around any part
of the Apartment Housing, any Improvements 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
35
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.
(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 all or a
portion of a Limited Partner's agreed upon Capital Contributions are used to
satisfy the Partnership's obligations to creditors of the Partnership and such
action by the General Partner is otherwise authorized under this Agreement and;
provided further, however, the General Partner shall not be in breach of this
representation if the action causing the Limited Partner to be liable for the
Partnership obligations is undertaken by the Limited Partner.
(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
36
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 Mortgage Loan and receipt of the 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) The General Partner will ensure that the Architect of Record will have
a policy of professional liability insurance in an amount not less than five
hundred thousand dollars, which policy should remain in force for a period of at
least two years after the closing and funding of the Mortgage.
(aa) The General Partner has contacted the local tax assessor, or similar
representative, and has determined that the Real Estate Taxes are accurate and
correct, and that the Partnership will not be required to pay any more for real
estate taxes, or property taxes, than the amount of Real Estate Taxes,
referenced in this Agreement, except for annual increases imposed on all real
estate within the same county as the Apartment Housing. In the event the real
estate taxes, or property taxes, are actually greater than the Real Estate Taxes
specified in this Agreement and as a result of the higher real estate tax, or
property tax, the Debt Service Coverage falls below 1.15 then the General
Partner will contribute additional capital to lower the principal of the
mortgage and reamortize the Mortgage so that the Debt Service Coverage is at a
sustainable 1.15 as approved by the Special Limited Partner. If the Mortgage
lender will not, or cannot, reamortize the loan as specified in this Section,
and the General Partner cannot obtain another mortgage, then the General Partner
will contribute additional capital as determined by the Special Limited Partner
to the T & I Account in an amount equal to the annual difference between the
actual real estate tax, or property tax, over the Real Estate Taxes specified in
this Agreement times the number of years remaining on the 15-year LIHTC
compliance term. Any payment by the General Partner pursuant to this section
shall be in addition to the General Partner's obligation to fund Operating
Deficits.
(bb) The General Partner has and shall maintain a net worth equal to at
least $1,000,000 computed in accordance with generally accepted accounting
principles.
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
37
indirect, realized or incurred by the Limited Partner as a result of any
material breach of the representations and warranties set forth in this Section
9.12. Section 9.13 Indemnification of the Partnership and the Limited Partners
The General Partner will indemnify and hold the Partnership and the
Limited Partners harmless from and against any and all losses, damages and
liabilities (including reasonable attorney's fees) which the Partnership or any
Limited Partner may incur by reason of the past, present, or future actions or
omissions of the General Partner or any of its Affiliates that constitute gross
negligence or willful misconduct, fraud, malfeasance, breach of fiduciary duty
or breach of any material provision of this Agreement that has a material
adverse effect on the Apartment Housing, the Partnership, or any Limited
Partner.
ARTICLE X
ALLOCATIONS OF INCOME, LOSSES AND CREDITS
Section 10.1 General. All items includable in the calculation of Income or
Loss not arising from a Sale or Refinancing, and all Tax Credits, shall be
allocated 99.98% to the Limited Partner, .01% to the Special Limited Partner and
..01% to the General Partner. Section 10.2 Allocations From Sale or Refinancing.
All Income and Losses arising from a Sale or Refinancing shall be allocated
between the Partners as follows:
(a) As to Income:
(1) first, an amount of Income equal to the aggregate negative balances (if
any) in the Capital Accounts of all Partners having negative Capital Accounts
(prior to taking into account the Sale or Refinancing and the Distribution of
the related Sale or Refinancing Proceeds, but after giving effect to
Distributions of Net Operating Income and allocations of other Income and Losses
pursuant to this Article X up to the date of the Sale or Refinancing) shall be
allocated to such Partners in proportion to their negative Capital Account
balances until all such Capital Accounts shall have zero balances; and
(2) the balance, if any, of such Income shall be allocated to the Partners
in the proportions necessary so that the Partners will receive the amounts to
which they are entitled pursuant to Section 11.2 hereof.
(b) Losses shall be allocated 99.98% to the Limited Partner, .01% to the
Special Limited Partner and .01% to the General Partner.
(c) Notwithstanding the foregoing provisions of Section 10.2(a) and (b), in
no event shall any Losses be allocated to the Limited Partner or the Special
Limited Partner if and to the extent that such allocation would create or
increase an Adjusted Capital Account Deficit for the Limited Partner or the
Special Limited Partner. In the event an allocation of 99.98% or .01% of each
item includable in the calculation of Income or Loss not arising from a Sale or
Refinancing, would create or increase an Adjusted Capital Account Deficit for
38
the Limited Partner or the Special Limited Partner, respectively, then so much
of the items of deduction other than projected depreciation shall be allocated
to the General Partner instead of the Limited Partner or the Special Limited
Partner as is necessary to allow the Limited Partner or the Special Limited
Partner to be allocated 99.98% and .01%, respectively, of the items of Income
and Apartment Housing depreciation without creating or increasing an Adjusted
Capital Account Deficit for the Limited Partner or the Special Limited Partner,
it being the intent of the parties that the Limited Partner and the Special
Limited Partner always shall be allocated 99.98% and .01%, respectively, of the
items of Income not arising from a Sale or Refinancing and 99.98% and .01%,
respectively, of the Apartment Housing depreciation.
Section 10.3 Special Allocations. The following special allocations shall
be made in the following order.
(a) Except as otherwise provided in Section 1.704-2(f) of the Treasury
Regulations, notwithstanding any other provisions of this Article X, if there is
a net decrease in Partnership Minimum Gain during any Partnership fiscal year,
each Partner shall be specially allocated items of Partnership income and gain
for such fiscal year (and, if necessary, subsequent fiscal years) in an amount
equal to such Person's share of the net decrease in Partnership Minimum Gain,
determined in accordance with Treasury Regulations Section 1.704-2(g).
Allocations pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Partner pursuant thereto.
The items to be so allocated shall be determined in accordance with Section
1.704-2(f)(6) and 1.704-2(j)(2) of the Treasury Regulations. This Section
10.3(a) is intended to comply with the minimum gain chargeback requirement in
Section 1.704-2(f) of the Treasury Regulations and shall be interpreted
consistently therewith.
(b) Except as otherwise provided in Section 1.704-2(i)(4) of the Treasury
Regulations, notwithstanding any other provision of this Article X, if there is
a net decrease in Partner Nonrecourse Debt Minimum Gain attributable to a
Partner Nonrecourse Debt during any Partnership fiscal year, each Person who has
a share of the Partner Nonrecourse Debt Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with Section 1.704-2(i)(5) of
the Treasury Regulations, shall be specially allocated items of Partnership
income and gain for such fiscal year (and, if necessary, subsequent fiscal
years) in an amount equal to such Person's share of the net decrease in Partner
Nonrecourse Debt Minimum Gain attributable to such Partner Nonrecourse Debt,
determined in accordance with Treasury Regulations Section 1.704-2(i)(4).
Allocations pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Partner pursuant thereto.
The items to be so allocated shall be determined in accordance with Sections
1.704-2(i)(4) and 1.704-2(j)(2) of the Treasury Regulations. This Section
10.3(b) is intended to comply with the minimum gain chargeback requirement in
Section 1.704-2(i)(4) of the Treasury Regulations and shall be interpreted
consistently therewith.
(c) In the event any Partner unexpectedly receives any adjustments,
allocations, or distributions described in Treasury Regulations Section
1.704-1(b)(2)(ii)(d)(4), Section 1.704-1(b)(2)(ii)(d)(5), or Section
1.704-1(b)(2)(ii)(d)(6), items of Partnership income and gain shall be specially
allocated to each such Partner in an amount and manner sufficient to eliminate,
to the extent required by the Treasury Regulations, the Adjusted Capital Account
39
Deficit of such Partner as quickly as possible, provided that an allocation
pursuant to this Section 10.3(c) shall be made if and only to the extent that
such Partner would have an Adjusted Capital Account Deficit after all other
allocations provided for in this Section 10.3 have been tentatively made as if
this Section 10.3(c) were not in the Agreement.
(d) In the event any Partner has a deficit Capital Account at the end of
any Partnership fiscal year which is in excess of the sum of (i) the amount such
Partner is obligated to restore, and (ii) the amount such Partner is deemed to
be obligated to restore pursuant to the penultimate sentences of Treasury
Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), each such Partner shall be
specially allocated items of Partnership income and gain in the amount of such
excess as quickly as possible, provided that an allocation pursuant to this
Section 10.3(d) shall be made if and only to the extent that such Partner would
have a deficit Capital Account in excess of such sum after all other allocations
provided for in this Section 10.3 have been tentatively made as if this Section
10.3(d) and Section 10.3(c) hereof were not in the Agreement.
(e) Nonrecourse Deductions for any fiscal year shall be specially allocated
99.98% to the Limited Partner, .01% to the Special Limited Partner and .01% to
the General Partner.
(f) Any Partner Nonrecourse Deductions for any fiscal year shall be
specially allocated to the Partner who bears the economic risk of loss with
respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse
Deductions are attributable in accordance with Treasury Regulations Section
1.704-2(i)(1).
(g) To the extent an adjustment to the adjusted tax basis of any
Partnership asset pursuant to Code Section 734(b) or Code Section 743(b) is
required, pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(2) or
Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital
Accounts as the result of a distribution to a Partner in complete liquidation of
his interest in the Partnership, the amount of such adjustment to the Capital
Accounts shall be treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases such basis) and such
gain or loss shall be specially allocated to the Partners in accordance with
their interests in the Partnership in the event that Treasury Regulations
Section 1.704-1 (b)(2)(iv)(m)(2) applies, or to the Partner to whom such
distribution was made in the event that Treasury Regulations Section
1.704-1(b)(2)(iv)(m)(4) applies.
(h) To the extent the Partnership has taxable interest income with respect
to any promissory note pursuant to Section 483 or Section 1271 through 1288 of
the Code:
(1) such interest income shall be specially allocated to the Limited
Partner to whom such promissory note relates; and
(2) the amount of such interest income shall be excluded from the Capital
Contributions credited to such Partner's Capital Account in connection with
payments of principal with respect to such promissory note.
(i) In the event the adjusted tax basis of any investment tax credit
property that has been placed in service by the Partnership is increased
pursuant to Code Section 50(c), such increase shall be specially allocated among
the Partners (as an item in the nature of income or gain) in the same
40
proportions as the investment tax credit that is recaptured with respect to such
property is shared among the Partners.
(j) Any reduction in the adjusted tax basis (or cost) of Partnership
investment tax credit property pursuant to Code Section 50(c) shall be specially
allocated among the Partners (as an item in the nature of expenses or losses) in
the same proportions as the basis (or cost) of such property is allocated
pursuant to Treasury Regulations Section 1.46-3(f)(2)(i).
(k) Any income, gain, loss or deduction realized as a direct or indirect
result of the issuance of an interest in the Partnership by the Partnership to a
Partner (the "Issuance Items") shall be allocated among the Partners so that, to
the extent possible, the net amount of such Issuance Items, together with all
other allocations under this Agreement to each Partner, shall be equal to the
net amount that would have been allocated to each such Partner if the Issuance
Items had not been realized.
(l) If any Partnership expenditure treated as a deduction on its federal
income tax return is disallowed as a deduction and treated as a distribution
pursuant to Section 731(a) of the Code, there shall be a special allocation of
gross income to the Partner deemed to have received such distribution equal to
the amount of such distribution.
(m) Interest deduction on the Partnership indebtedness referred to in
Section 6.3 shall be allocated 100% to the General Partner.
(n) In the event all or part of the Incentive Management Fee or the Tax
Credit Compliance Fee is disallowed by the Internal Revenue Service, then any
interest or income chargeable to the Partnership for such disallowance shall be
allocated to the General Partner.
(o) If the General Partner provides an Operating Loan to pay an Operating
Deficit, then the Partnership shall allocate Operating Losses to the General
Partner in an amount not to exceed the Operating Loan.
Section 10.4 Curative Allocations. The allocations set forth in Sections
10.2(c), 10.3(a), 10.3(b), 10.3(c), 10.3(d), 10.3(e), 10.3(f), and 10.3(g)
hereof (the "Regulatory Allocations") are intended to comply with certain
requirements of the Treasury Regulations. It is the intent of the Partners that,
to the extent possible, all Regulatory Allocations shall be offset either with
other Regulatory Allocations or with special allocations of other items of
Partnership income, gain, loss, or deduction pursuant to this Section 10.4.
Therefore, notwithstanding any other provision of this Article X (other than the
Regulatory Allocations), with the Consent of the Special Limited Partner, the
General Partner shall make such offsetting special allocations of Partnership
income, gain, loss, or deduction in whatever manner the General Partner, with
the Consent of the Special Limited Partner, determines appropriate so that,
after such offsetting allocations are made, each Partner's Capital Account
balance is, to the extent possible, equal to the Capital Account balance such
Partner would have had if the Regulatory Allocations were not part of the
Agreement and all Partnership items were allocated pursuant to Sections 10.1,
10.2(a), 10.2(b), 10.3(h), 10.3(i), 10.3(j), 10.3(k), 10.3(l), 10.3(m), 10.3(n)
and 10.5. In exercising its authority under this Section 10.4, the General
41
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, .01% to the Special Limited Partner and .01% to
the General Partner.
(b) In the event Partnership investment tax credit property is disposed of
during any taxable year, profits for such taxable year (and, to the extent such
profits are insufficient, profits for subsequent taxable years) in an amount
equal to the excess, if any, of (1) the reduction in the adjusted tax basis (or
cost) of such property pursuant to Code Section 50(c), over (2) any increase in
the adjusted tax basis of such property pursuant to Code Section 50(c) caused by
the disposition of such property, shall be excluded from the profits allocated
pursuant to Section 10.1 and Section 10.2(a) hereof and shall instead be
allocated among the Partners in proportion to their respective shares of such
excess, determined pursuant to Section 10.3(i) and 10.3(j) hereof. In the event
more than one item of such property is disposed of by the Partnership, the
foregoing sentence shall apply to such items in the order in which they are
disposed of by the Partnership, so the profits equal to the entire amount of
such excess with respect to the first such property disposed of shall be
allocated prior to any allocations with respect to the second such property
disposed of, and so forth.
(c) For purposes of determining the Income, Losses, or any other items
allocable to any period, Income, Losses, and any such other items shall be
determined on a daily, monthly, or other basis, as determined by the General
Partner with the Consent of the Special Limited Partner, using any permissible
method under Code Section 706 and the Treasury Regulations thereunder.
(d) Solely for purposes of determining a Partner's proportionate share of
the "excess nonrecourse liabilities" of the Partnership within the meaning of
Treasury Regulations Section 1.752-3(a)(3), the Partners' interests in
Partnership profits are as follows: Limited Partner: 99.98%; Special Limited
Partner: .01%; General Partner: .01%.
(e) To the extent permitted by Section 1.704-2(h)(3) of the Treasury
Regulations, the General Partner shall endeavor to treat Distributions as having
been made from the proceeds of a Nonrecourse Liability or a Partner Nonrecourse
Debt only to the extent that such Distributions would cause or increase an
Adjusted Capital Account Deficit for any Partner who is not a General Partner.
(f) In the event that the deduction of all or a portion of any fee paid or
incurred out of Net Operating Income by the Partnership to a Partner or an
Affiliate of a Partner is disallowed for federal income tax purposes by the
Internal Revenue Service with respect to a taxable year of the Partnership, the
Partnership shall then allocate to such Partner an amount of gross income of the
42
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 1.38(a) hereof).
In the event the Gross Asset Value of any Partnership asset is adjusted
pursuant to Section 1.38(b) hereof, subsequent allocations of income, gain,
loss, and deduction with respect to such asset shall take account of any
variation between the adjusted basis of such asset for federal income tax
purposes and its Gross Asset Value in the same manner as under Code Section
704(c) and the Treasury Regulations thereunder.
Any elections or other decisions relating to such allocations shall be made
by the General Partner with the Consent of the Special Limited Partner in any
manner that reasonably reflects the purpose and intention of this Agreement.
Allocations pursuant to this Section 10.6 are solely for purposes of federal,
state, and local taxes and shall not affect, or in any way be taken into account
in computing, any Person's Capital Account or share of Income, Losses, other
items, or distributions pursuant to any provision of this Agreement.
Section 10.7 Allocation Among Limited Partners. In the event that the
Interest of the Limited Partner hereunder is at any time held by more than one
Limited Partner all items which are specifically allocated to the Limited
Partner for any month pursuant to this Article X shall be apportioned among such
Persons according to the ratio of their respective profit-sharing interests in
the Partnership at the last day of such month.
Section 10.8 Allocation Among General Partners. In the event that the
Interest of the General Partner hereunder is at any time held by more than one
General Partner all items which are specifically allocated to the General
Partner for any month pursuant to this Article X shall be apportioned among such
Persons in such percentages as may from time to time be determined by agreement
among them without amendment to this Agreement or consent of the Limited Partner
or Consent of the Special Limited Partner.
Section 10.9 Modification of Allocations. The provisions of Articles X and
XI and other provisions of this Agreement are intended to comply with Treasury
Regulations Section 1.704 and shall be interpreted and applied in a manner
consistent with such section of the Treasury Regulations. In the event that the
General Partner determines, in its sole discretion, that it is prudent to modify
the manner in which the Capital Accounts of the Partners, or any debit or credit
thereto, are computed in order 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
43
election pursuant to Code Section 754) might otherwise cause this Agreement not
to comply with Treasury Regulation Section 1.704.
ARTICLE XI
DISTRIBUTION
Section 11.1 Distribution of Net Operating Income. Except as otherwise
provided, Net Operating Income for each fiscal year shall be distributed within
seventy-five (75) days following each calendar year and shall be applied in the
following order of priority:
(a) to pay the Deferred Management Fee, if any;
(b) to pay the current Asset Management Fee and then to pay any accrued
Asset Management Fees which have not been paid in full from previous years;
(c) to pay the Development Fee; (d) to pay the Operating Loans, if any, 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, 20% to the Limited Partner and 80% 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) thereafter, 20% to the Limited Partner and 80% to the General Partner.
44
ARTICLE XII
TRANSFERS OF LIMITED PARTNER'S INTEREST IN THE PARTNERSHIP
Section 12.1 Assignment of Limited Partner's Interest. The Limited Partner
and Special Limited Partner shall have the right to assign all or any part of
their respective Interests to any other Person, whether or not a Partner, upon
satisfaction of the following:
(a) a written instrument in form and substance satisfactory to the General
Partner and its counsel, setting forth the name and address of the proposed
transferee, the nature and extent of the Interest which is proposed to be
transferred and the terms and conditions upon which the transfer is proposed to
be made, stating that the Assignee accepts and agrees to be bound by all of the
terms and provisions of this Agreement, and providing for the payment of all
reasonable expenses incurred by the Partnership in connection with such
assignment, including but not limited to the cost of preparing any necessary
amendment to this Agreement;
(b) upon consent of the General Partner to such assignment, which consent
shall not be unreasonably withheld; and
(c) upon receipt by the General Partner of the Assignee's written
representation that the Partnership Interest is to be acquired by the Assignee
for the Assignee's own account for long-term investment and not with a view
toward resale, fractionalization, division or distribution thereof.
(d) Notwithstanding any provision to the contrary, the Limited Partner may
assign its Interest to an Affiliate or assign its Interest to U.S. Bank or its
successors as collateral to secure a capital contribution loan without
satisfying the conditions of Sections 12.1(a) through (c) above.
THE LIMITED PARTNERSHIP INTEREST AND THE SPECIAL LIMITED PARTNERSHIP
INTEREST DESCRIBED HEREIN HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 AS AMENDED OR UNDER ANY STATE SECURITIES LAW. THESE INTERESTS MAY NOT BE
SOLD OR OTHERWISE TRANSFERRED UNLESS REGISTERED UNDER APPLICABLE FEDERAL AND
STATE SECURITIES LAWS OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
Section 12.2 Effective Date of Transfer. Any assignment of a Limited
Partner's Interest or Special Limited Partner's Interest pursuant to Section
12.1 shall become effective as of the last day of the calendar month in which
the last of the conditions to such assignment are satisfied.
Section 12.3 Invalid Assignment. Any purported assignment of an Interest of
a Limited Partner or Special Limited Partner otherwise than in accordance with
Section 12.1 or Section 12.6 shall be of no effect as between the Partnership
and the purported assignee and shall be disregarded by the General Partner in
making allocations and Distributions hereunder.
45
Section 12.4 Assignee's Rights to Allocations and Distributions. An
Assignee shall be entitled to receive allocations and Distributions from the
Partnership attributable to the Interest acquired by reason of any permitted
assignment from and after the first day of the calendar month of the transfer of
such Interest as provided in Section 12.2. The Partnership and the General
Partner shall be entitled to treat the assignor of such Partnership Interest as
the absolute owner thereof in all respects, and shall incur no liability for
allocations and Distributions made in good faith to such assignor, until such
time as the written instrument of assignment has been received by the
Partnership.
Section 12.5 Substitution of Assignee as Limited Partner or Special Limited
Partner.
(a) An Assignee shall not have the right to become a Substitute Limited
Partner or Substitute Special Limited Partner in place of his assignor unless
the written consent of the General Partner to such substitution shall have been
obtained, which consent, in the General Partner's absolute discretion, may be
withheld; except that an Assignee which is an Affiliate of the Limited Partner
or Special Limited Partner, or U.S. Bank or its successors, may become a
Substitute Limited Partner or Substitute Special Limited Partner without the
consent of the General Partner.
(b) A nonadmitted transferee of a Limited Partner's Interest or Special
Limited Partner's Interest in the Partnership shall only be entitled to receive
that share of allocations, Distributions and the return of Capital Contribution
to which its transferor would otherwise have been entitled with respect to the
Interest transferred, and shall have no right to obtain any information on
account of the Partnership's transactions, to inspect the Partnership's books
and records or have any other of the rights and privileges of a Limited Partner
or Special Limited Partner, provided, however, that the Partnership shall, if a
transferee and transferor jointly advise the General Partner in writing of a
transfer of an Interest in the Partnership, furnish the transferee with
pertinent tax information at the end of each fiscal year of the Partnership.
(c) The General Partner may elect to treat a transferee of a Partnership
Interest who has not become a Substitute Limited Partner or substitute Special
Limited Partner as a Substitute Limited Partner or substitute Special Limited
Partner, as the case may be, in the place of its transferor should the General
Partner determine in its absolute discretion that such treatment is in the best
interest of the Partnership.
Section 12.6 Death, Bankruptcy, Incompetency, etc. of a Limited Partner.
Upon the death, dissolution, adjudication of bankruptcy, or adjudication of
incompetency or insanity of a Limited Partner or Special Limited Partner, such
Partner's executors, administrators or legal representatives shall have all the
rights of a Limited Partner or Special Limited Partner, as the case may be, for
the purpose of settling or managing such Partner's estate, including such power
as such Partner possessed to constitute a successor as a transferee of its
Interest in the Partnership and to join with such transferee in making the
application to substitute such transferee as a Partner. However, such executors,
administrators or legal representatives will not have the right to become
Substitute Limited Partners or substitute Special Limited Partners in the place
of their respective predecessors-in-interest unless the General Partner shall so
consent.
46
ARTICLE XIII
WITHDRAWAL, REMOVAL AND REPLACEMENT OF GENERAL PARTNER
Section 13.1 Withdrawal of General Partner.
(a) The General Partner may not Withdraw (other than as a result of an
Involuntary Withdrawal) without the Consent of the Special Limited Partner, and,
to the extent required, of Rural Development. Withdrawal shall be conditioned
upon the agreement of the Special Limited Partner to be admitted as a successor
General Partner, or if the Special Limited Partner declines to be admitted as a
successor General Partner then on the agreement of one or more Persons who
satisfy the requirements of Section 13.5 of this Agreement to be admitted as
successor General Partner(s).
(b) Each General Partner shall indemnify and hold harmless the Partnership
and
all Partners from its Withdrawal in violation of Section 13.1(a) hereof. Each
General Partner shall be liable for damages to the Partnership resulting from
its Withdrawal in violation of Section 13.1(a).
Section 13.2 Removal of General Partner.
(a) The Special Limited Partner or the Limited Partner, or both of them,
may remove the General Partner for cause if such General Partner, its officers
or directors, if applicable, has:
(1) been subject to Bankruptcy;
(2) committed any fraud, willful misconduct, breach of fiduciary duty or
other negligent conduct in the performance of its duties under this Agreement;
(3) been convicted of, or entered into a plea of guilty to, a felony;
(4) been disbarred from participating in any federal or state housing
program;
(5) made personal use of Partnership funds or properties;
(6) violated the terms of the Mortgage and such violation prompts Rural
Development to issue a default letter or acceleration notice to the Partnership
or General Partner;
(7) failed to provide any loan, advance, Capital Contribution or any other
payment to the Partnership, the Limited Partner or the Special Limited Partner
required under this Agreement;
(8) breached any representation, warranty or covenant contained in this
Agreement;
47
(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) failed to obtain the consent of a Partner where such consent is
required pursuant to this Agreement;
(13) failed to deliver the annual Partnership financial data as required
pursuant to Section 14.2(a) or (b);
(14) failed to maintain the reserve balances as required pursuant to
Article VIII;
(15) failed to renew the Insurance on or before the due date;
(16) failed to pay the Real Estate Taxes on or before the due date; and
(17) failed during any six-month period during the Compliance Period to
cause at least 85% of the total apartment units in the Apartment Housing to
qualify for LIHTC, unless such failure is the result of Force Majeure or unless
such failure is cured within 120 days after the end of the six-month period.
(b) Written notice of the removal for cause of the General Partner
("Removal Notice") shall set forth the reasons for removal and shall be served
by the Special Limited Partner or the Limited Partner, or both of them, upon the
General Partner either by certified or by registered mail, return receipt
requested, or by personal service. If Section 13.2(a) (2), (6), (7), (8), (13),
(14), (15), or (17) 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 violations of the Mortgage
or Construction 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 (Interest
percentage for voting is in accordance with the percentages shown in Section
10.1 of this Agreement) at a Partner's meeting held in accordance with Section
17.2 of this Agreement on the first day following the expiration of the cure
period, or, thirty-one days from the General Partner's receipt of the Removal
Notice. If the removal for cause is for a condition referenced in Sections
13.2(a)(1), (3), (4), (5), (9), (10), (11) or (12) then the removal shall become
effective upon the General Partner's receipt of the Removal Notice. Upon the
General Partner's removal, the General Partner shall deliver to the Special
Limited Partner within five business days of the termination of the cure period,
or five business days of the Removal Notice all Partnership books and records
including all bank signature cards and an authorization to change the signature
on the signature cards from the General Partner to the Special Limited Partner,
48
or a successor general partner so nominated by the Limited Partner and Special
Limited Partner. The Partner's recognize and acknowledge that if the General
Partner fails to provide the Partnership books and records upon the General
Partner's removal then the remaining Partners may suffer irreparable injury.
Therefore, in the event the General Partner does not adhere to the provisions of
this Section 13.2(b), and in addition to other rights or remedies which may be
provided by law and equity or this Agreement, the Limited Partner and/or Special
Limited Partner shall have the right to specific performance to compel the
General Partner to perform its obligation under this Section and the Limited
Partner and/or Special Limited Partner may bring such action, and other actions
to enforce the removal, by way of temporary and/or permanent injunctive relief.
Section 13.3 Effects of a Withdrawal. In the event of a Withdrawal, the
entire Interest of the Withdrawing General Partner shall immediately and
automatically terminate on the effective date of such Withdrawal, and such
General Partner shall immediately cease to be a General Partner, shall have no
further right to participate in the management or operation of the Partnership
or the Apartment Housing or to receive any allocations or Distributions from the
Partnership or any other funds or assets of the Partnership, except as
specifically set forth below. In the event of a Withdrawal, any or all executory
contracts, including but not limited to the Management Agreement, between the
Partnership and the Withdrawing General Partner or its Affiliates may be
terminated by the Partnership, with the Consent of the Special Limited Partner,
upon written notice to the party so terminated. Furthermore, notwithstanding
such Withdrawal, the Withdrawing General Partner shall be and shall remain,
liable as a General Partner for all liabilities and obligations incurred by the
Partnership or by the General Partner prior to the effective date of the
Withdrawal, or which may arise upon such Withdrawal. Any remaining Partner shall
have all other rights and remedies against the Withdrawing General Partner as
provided by law or under this Agreement. The General Partner agrees that in the
event of its Withdrawal it will indemnify and hold the Limited Partner and the
Special Limited Partner harmless from and against all losses, costs and expenses
incurred in connection with the Withdrawal, including, without limitation, all
legal fees and other expenses of the Limited Partner and the Special Limited
Partner in connection with the transaction. The following additional provisions
shall apply in the event of a Withdrawal.
(a) In the event of a Withdrawal which is not an Involuntary Withdrawal, or
an Involuntary Withdrawal in accordance with Section 13.2(a), the Withdrawing
General Partner shall have no further right to receive any future allocations or
Distributions from the Partnership or any other funds or assets of the
Partnership, nor shall it be entitled to receive or to be paid by the
Partnership any further payments of fees (including fees which have been earned
but are unpaid) or to be repaid any outstanding advances or loans made by it to
the Partnership or to be paid any amount for its former Interest. From and after
the effective date of such Withdrawal, the former rights of the Withdrawing
General Partner to receive or to be paid such allocations, Distributions, funds,
assets, fees or repayments shall be assigned to the other General Partner or
General Partners (which may include the Special Limited Partner), or if there is
no other general partner of the Partnership at that time, to the Special Limited
Partner.
(b) In the event of an Involuntary Withdrawal, except as provided in the
preceding paragraph or in Section 13.3(b)(2) below, the Withdrawing General
Partner shall have no further right to receive any future allocations or
Distributions from the Partnership or any other funds or assets of the
49
Partnership, provided that accrued and payable fees (i.e., fees earned but
unpaid as of the date of Withdrawal) owed to the Withdrawing General Partner,
and any outstanding loans of the Withdrawing General Partner to the Partnership,
shall be paid to the Withdrawing General Partner in the manner and at the times
such fees and loans would have been paid had the Withdrawing General Partner not
Withdrawn. The Interest of the General Partner shall be purchased as follows.
(1) If the Involuntary Withdrawal does not arise from removal for cause
under Section 13.2(a) hereof, and if the Partnership is to be continued with one
or more remaining or successor General Partner(s), the Partnership, with the
Consent of the Special Limited Partner, may, but is not obligated to, purchase
the Interest of the Withdrawing General Partner in Partnership allocations,
Distributions and capital. The purchase price of such Interest shall be its Fair
Market Value as determined by agreement between the Withdrawing General Partner
and the Special Limited Partner, or, if they cannot agree, by arbitration in
accordance with the then current rules of the American Arbitration Association.
The cost of such arbitration shall be borne equally by the Withdrawing General
Partner and the Partnership. The purchase price shall be paid by the Partnership
by delivering to the General Partner or its representative the Partnership's
non-interest bearing unsecured promissory note payable, if at all, upon
liquidation of the Partnership in accordance with Section 11.2(b). The note
shall also provide that the Partnership may prepay all or any part thereof
without penalty.
(2) If the Involuntary Withdrawal does not arise from removal for cause
under Section 13.2(a) hereof, and if the Partnership is to be continued with one
or more remaining or successor General Partner(s), and if the Partnership does
not purchase the Interest of the Withdrawing General Partner in Partnership
allocations, Distributions and capital, then the Withdrawing General Partner
shall retain its Interest in such items, but such Interest shall be held as a
special limited partner. For this sub-section only, the Withdrawing General
Partner's Interest will be the same percentage as shown in Section 10.1 of this
Agreement prior to the Withdrawing event. In order to provide a successor
general partner with an Interest, the Special Limited Partner will assign
one-half of its Interest (as shown in Section 10.1 of this Agreement) to the
successor general partner.
(c) Notwithstanding the provisions of Section 13.3(b), if the Involuntary
Withdrawal arises from removal for cause as set forth in Section 13.2(a) hereof,
the Withdrawn General Partner shall have no further right to receive any future
allocations or Distributions from the Partnership or any other funds or assets
of the Partnership, nor shall it be entitled to receive or to be paid by the
Partnership or any Partners or successor partners, any further payments of fees
(including fees which have been earned but remain unpaid) or to be repaid any
outstanding advances or loans made by it to the Partnership. Furthermore, if the
General Partner or an Affiliate is the guarantor of the Development Fee, as
provided in the Development Fee Guaranty Agreement, then any earned but unpaid
Development Fee shall be due and payable upon the effective date of such removal
and shall be deemed paid by the General Partner.
Section 13.4 Successor General Partner. Upon the occurrence of an event
giving rise to a Withdrawal of a General Partner, any remaining General Partner,
or, if there be no remaining General Partner, the Withdrawing General Partner or
its legal representative, shall promptly notify the Special Limited Partner of
such Withdrawal (the "Withdrawal Notice"). Whether or not the Withdrawal Notice
50
shall have been sent as provided herein, the Special Limited Partner shall have
the right to become a successor General Partner (and to become the successor
managing General Partner if the Withdrawing General Partner was previously the
managing General Partner). In order to effectuate the provisions of this Section
13.4 and the continuance of the Partnership, the Withdrawal of a General Partner
shall not be effective until the expiration of 120 days from the date on which
occurred the event giving rise to the Withdrawal, unless the Special Limited
Partner shall have elected to become a successor General Partner as provided
herein prior to expiration of such 120-day period, whereupon the Withdrawal of
the General Partner shall be deemed effective upon the notification of all the
other Partners by the Special Limited Partner of such election.
Section 13.5 Admission of Additional or Successor General Partner. No
Person shall be admitted as an additional or successor General Partner unless
(a) such Person shall have agreed to become a General Partner by a written
instrument which shall include the acceptance and adoption of this Agreement;
(b) the Consent of the Special Limited Partner to the admission of such Person
as a substitute General Partner, which consent may be withheld in the discretion
of the Special Limited Partner, shall have been given; and (c) such Person shall
have executed and acknowledged any other instruments which the Special Limited
Partner shall reasonably deem necessary or appropriate to effect the admission
of such Person as a substitute General Partner. If the foregoing conditions are
satisfied, this Agreement shall be amended in accordance with the provisions of
the Act, and all other steps shall be taken which are reasonably necessary to
effect the Withdrawal of the Withdrawing General Partner and the substitution of
the successor General Partner. Nothing contained herein shall reduce the Limited
Partner's Interest or the Special Limited Partner's Interest in the Partnership.
Section 13.6 Transfer of Interest. Except as otherwise provided herein, the
General Partner may not Withdraw from the Partnership, or enter into any
agreement as the result of which any Person shall acquire an Interest in the
Partnership, without the Consent of the Special Limited Partner.
Section 13.7 No Goodwill Value. At no time during continuation of the
Partnership shall any value ever be placed on the Partnership name, or the right
to its use, or to the goodwill appertaining to the Partnership or its business,
either as among the Partners or for the purpose of determining the value of any
Interest, nor shall the legal representatives of any Partner have any right to
claim any such value. In the event of a termination and dissolution of the
Partnership as provided in this Agreement, neither the Partnership name, nor the
right to its use, nor the same goodwill, if any, shall be considered as an asset
of the Partnership, and no valuation shall be put thereon for the purpose of
liquidation or distribution, or for any other purpose whatsoever.
51
ARTICLE XIV
BOOKS AND ACCOUNTS, REPORTS, TAX RETURNS, FISCAL YEAR AND BANKING
Section 14.1 Books and Accounts.
(a) The General Partner shall cause the Partnership to keep and maintain at
its principal executive office full and complete books and records which shall
include each of the following:
(1) a current list of the full name and last known business or residence
address of each Partner set forth in alphabetical order together with the
Capital Contribution and the share in Income and Losses of each Partner;
(2) a copy of the Certificate of Limited Partnership and all certificates
of amendment thereto, together with executed copies of any powers of attorney
pursuant to which any certificate has been executed;
(3) copies of the Partnership's federal, state and local income tax
information returns and reports, if any, for the six most recent taxable years;
(4) copies of the original of this Agreement and all amendments thereto;
(5) financial statements of the Partnership for the six most recent fiscal
years;
(6) the Partnership's books and records for at least the current and past
three fiscal years; and
(7) in regard to the first tenants to occupy the apartment units in the
Apartment Housing, copies of all tenant files including completed applications,
completed questionnaires or checklist of income and assets, documentation of
third party verification of income and assets, and income certification forms
(LIHTC specific).
(b) Upon the request of the Limited Partner, the General Partner shall
promptly deliver to the Limited Partner, at the expense of the Partnership, a
copy of the information set forth in Section 14.1(a) above. The Limited Partner
shall have the right upon reasonable request and during normal business hours to
inspect and copy any of the foregoing, or any of the other books and records of
the Partnership or the Apartment Housing, at its own expense.
Section 14.2 Accounting Reports.
(a) By February 20 of each calendar year the General Partner shall provide
to the Limited Partner and the Special Limited Partner all tax information
necessary for the preparation of their federal and state income tax returns and
52
other tax returns with regard to the jurisdiction(s) in which the Partnership is
formed and in which the Apartment Housing is located.
(b) By March 1 of each calendar year the General Partner shall send to the
Limited Partner and the Special Limited Partner: (1) a balance sheet as of the
end of such fiscal year and statements of income, Partners' equity and changes
in cash flow for such fiscal year prepared in accordance with generally accepted
accounting principles and accompanied by an auditor's report containing an
opinion of the Partnership's Accountants; (2) a report (which need not be
audited) of any Distributions made at any time during the fiscal year,
separately identifying Distributions from Net Operating Income for the fiscal
year, Net Operating Income for prior years, Sale or Refinancing Proceeds, and
reserves; and (3) a report setting forth the amount of all fees and other
compensation and Distributions and reimbursed expenses paid by the Partnership
for the fiscal year to the General Partner or Affiliates of the General Partner
and the services performed in consideration therefor, which report shall be
verified by the Partnership's Accountants, with the method of verification to
include, at a minimum, a review of the time records of individual employees, the
costs of whose services were reimbursed, and a review of the specific nature of
the work performed by each such employee, all in accordance with generally
accepted auditing standards and, accordingly, including such tests of the
accounting records and such other auditing procedures as the Accountants
consider appropriate in the circumstances.
(c) Within 60 days after the end of each fiscal quarter in which a Sale or
Refinancing of the Apartment Housing occurs, the General Partner shall send to
the Limited Partner and the Special Limited Partner a report as to the nature of
the Sale or Refinancing and as to the Income and Losses for tax purposes and
proceeds arising from the Sale or Refinancing.
Section 14.3 Other Reports. The General Partner shall provide to the
Limited Partner and the Special Limited Partner the following reports:
(a) during construction, on a regular basis, but in no event less than once
a month, a copy of the Inspecting Architect's report and other construction
reports including, but not limited to, (1) the name of each person performing
work on the Improvements or providing materials for the Improvements, the work
performed or materials supplied by said person and the code number corresponding
to the line item in the Construction Budget which the person will be paid, (2)
an original AIA Document G702, or similar form acceptable to the Special Limited
Partner, (3) if not included in the Inspecting Architect's report or the AIA
Document G702, a line item break-down of the Construction Budget (which shall
include, description of work to be performed or materials to be supplied; total
dollar amount of the work or materials; dollar amount of work previously
completed and paid or materials supplied and paid; dollar amount of work or
materials to be paid per the current disbursement request; dollar amount of
materials stored; total dollar amount of work completed and stored as of the
current disbursement date; percentage of completion; dollar amount of work or
materials needed to complete the line item; and retainage), (4) a reconciliation
of the sources and uses to determine that the Construction 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;
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(b) during the rent-up phase, and continuing until the end of the first
six-month period during which the Apartment Housing has a sustained occupancy of
95% or better, by the twentieth day of each month within such period a copy of
the previous month's rent roll (through the last day of the month) and a tenant
LIHTC compliance worksheet similar to the monthly initial tenant certification
worksheet included in Exhibit "G" attached hereto and incorporated herein by
this reference;
(c) a quarterly tax credit compliance report similar to the worksheet
included in Exhibit "G" due on or before April 30 of each year for the first
quarter, July 31 of each year for the second quarter, October 31 of each year
for the third quarter and January 31 of each year for the fourth quarter. In
order to verify the reliability of the information being provided on the
compliance report the Limited Partner may request a small sampling of tenant
files to be provided. The sampling will include, but not be limited to, copies
of tenant applications, certifications and third party verifications used to
qualify tenants. If any inaccuracies are found to exist on the tax credit
compliance report or any items of noncompliance are discovered then the sampling
will be expanded as determined by the Limited Partner;
(d) a quarterly report on operations, in the form attached hereto as
Exhibit "G," due on or before April 30 of each year for the first quarter of
operations, July 31 of each year for the second quarter of operations, October
31 of each year for the third quarter of operations and January 31 of each year
for the fourth quarter of operations which shall include, but is not limited to,
an unaudited income statement showing all activity in the reserve accounts
required to be maintained pursuant to Section VIII of this Agreement, statement
of income and expenses, balance sheet, rent roll as of the end of each calendar
quarter of each year, and third party verification of current utility allowance;
(e) by September 15 of each year, an estimate of LIHTC for that year;
(f) if the Apartment Housing receives a reservation of LIHTC in one year
but will not complete the construction and rent-up until a later year, an
audited cost certification together with the Accountant's work papers verifying
that the Partnership has expended the requisite 10% of the reasonably expected
cost basis to meet the carryover test provisions of Section 42 of the Code. Such
certification shall be provided to the Limited Partner and Special Limited
Partner by December 31 of the year during which the reservation was received.
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;
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(i) by the payment date of the real estate property taxes each and every
year verification that the same has been paid in full;
(j) on or before March 15th of each calendar year, a copy of the General
Partner's updated financial statement as of December 31 of the previous year;
(k) on or before November 1 of each calendar year, a copy of the following
year's proposed operating budget. Each such Budget shall contain all the
anticipated Cash Expenses of the Partnership. Such Budget shall only be adopted
with the Consent of the Special Limited Partner;
(l) in the event the Apartment Housing and/or the Partnership are
experiencing financial concerns or operational concerns or maintenance issues
and the Partnership is placed on the Limited Partner's watch list, then the
Special Limited Partner requires the Management Agent to cooperate with the
Special Limited Partner's staff as requested including, but not limited to the
following: (1) being available and responsive for site visits, telephone calls
and correspondence (whether by e-mail, fax, mail or overnight delivery); (2)
providing weekly tenant traffic reports; (3) providing weekly unit or building
or grounds repair reports; (4) providing an up-to-date income statement,
up-to-date balance sheet, copy of previous month's rent roll, and a copy of
Partnership's monthly bank statement; and (5) providing any other documents
deemed relevant by the Special Limited Partner. In addition, the Limited
Partner's investors have the right to ask questions of the Management Agent in
accordance with this Section if the Partnership is placed on the Limited
Partner's watch list; and
(m) notice of the occurrence, or of the likelihood of occurrence, of any
event which has had a material adverse effect upon the Apartment Housing or the
Partnership, including, but not limited to, any breach of any of the
representations and warranties set forth in Section 9.12 of this Agreement, and
any inability of the Partnership to meet its cash obligations as they become
payable, within ten days after the occurrence of such event.
Section 14.4 Late Reports. If the General Partner does not fulfill its
obligations under Section 14.3 within the time periods set forth therein, the
General Partner, using its own funds, shall pay as damages the sum of $100.00
per week (plus interest at the rate established by Section 6.3 of this
Agreement) to the Limited Partner until such obligations shall have been
fulfilled. If the General Partner shall fail to so pay, the General Partner and
its Affiliates shall forthwith cease to be entitled to any fees hereunder (other
than the Development Fee) and/or to the payment of any Net Operating Income or
Sale or Refinancing Proceeds to which the General Partner may otherwise be
entitled hereunder. Payments of fees and Distributions shall be restored only
upon payment of such damages in full.
Section 14.5 Annual Site Visits. On an annual basis a representative of the
Limited Partner, at the Limited Partner's expense, will conduct a site visit
which will include, in part, an inspection of the property, a review of the
office and tenant files and an interview with the property manager. The Limited
Partner may, in its sole discretion, cancel all or any part of the annual site
visit.
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Section 14.6 Tax Returns. The General Partner shall cause income tax
returns for the Partnership to be prepared and timely filed with the appropriate
federal, state and local taxing authorities.
Section 14.7 Fiscal Year. The fiscal year of the Partnership shall be the
calendar year or such other period as may be approved by the Internal Revenue
Service for federal income tax purposes.
Section 14.8 Banking. All funds of the Partnership shall be deposited in a
separate bank account or accounts as shall be determined by the General Partner
with the Consent of the Special Limited Partner. All withdrawals therefrom shall
be made upon checks signed by the General Partner or by any person authorized to
do so by the General Partner. The General Partner shall provide to any Partner
who requests same the name and address of the financial institution, the account
number and other relevant information regarding any Partnership bank account.
Section 14.9 Certificates and Elections.
(a) The General Partner shall file the First Year Certificate within 90
days following the close of the taxable year during which Completion of
Construction occurs and thereafter shall timely file any certificates which the
Partnership must furnish to federal or state governmental authorities
administering the Tax Credit programs under Section 42 of the Code.
(b) The General Partner, with the Consent of the Special Limited Partner,
may, but is not required to, cause the Partnership to make or revoke the
election referred to in Section 754 of the Code, as amended, or any similar
provisions enacted in lieu thereof.
ARTICLE XV
DISSOLUTION, WINDING UP, TERMINATION AND LIQUIDATION OF THE PARTNERSHIP
Section 15.1 Dissolution of Partnership. The Partnership shall be dissolved
upon the expiration of its term or the earlier occurrence of any of the
following events.
(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
56
in a violation of the Mortgage or any other agreement with or rule or regulation
of any Mortgage Lender to which the Partnership is subject.
Section 15.2 Return of Capital Contribution upon Dissolution. Except as
provided in Sections 7.3 and 7.4 of this Agreement, which provide for a
reduction or refund of the Limited Partner's Capital Contribution under certain
circumstances, and which shall represent the personal obligation of the General
Partner, as well as the obligation of the Partnership, each Partner shall look
solely to the assets of the Partnership for all Distributions with respect to
the Partnership (including the return of its Capital Contribution) and shall
have no recourse therefor (upon dissolution or otherwise) against any General
Partner. No Partner shall have any right to demand property other than money
upon dissolution and termination of the Partnership, and the Partnership is
prohibited from such a distribution of property absent the Consent of the
Special Limited Partner.
Section 15.3 Distribution of Assets. Upon a dissolution of the Partnership,
the General Partner (or, if there is no General Partner then remaining, such
other Person(s) designated as the liquidator of the Partnership by the Limited
Partner or by the court in a judicial dissolution) shall take full account of
the Partnership assets and liabilities and shall liquidate the assets as
promptly as is consistent with obtaining the fair value thereof.
(a) Upon dissolution and termination, after payment of, or adequate
provision for, the debts and obligations of the Partnership pursuant to Section
11.2(a) through and including 11.2(c), the remaining assets of the Partnership
shall be distributed to the Partners in accordance with the positive balances in
their Capital Accounts, after taking into account all allocations under Article
X hereof.
(b) In the event that a General Partner has a deficit balance in its
Capital Account following the Liquidation of the Partnership or its interest, as
determined after taking into account all Capital Account adjustments for the
Partnership taxable year in which such Liquidation occurs, such General Partner
shall pay to the Partnership the amount necessary to restore such deficit
balance to zero in compliance with Treasury Regulation Section
1.704-1(b)(2)(ii)(b)(3).
(1) The deficit reduction amount shall be paid by the General Partner by
the end of such taxable year (or, if later, within 90 days after the date of
Liquidation) and shall, upon Liquidation of the Partnership, be paid to
creditors of the Partnership or distributed to other Partners in accordance with
their positive Capital Account balances.
(c) With respect to assets distributed in kind to the Partners in
Liquidation or otherwise:
(1) unrealized appreciation or unrealized depreciation in the values of
such assets shall be deemed to be Income and Losses realized by the Partnership
immediately prior to the Liquidation or other Distribution event; and
(2) such Income and Losses shall be allocated to the Partners in accordance
with Section 10.2 hereof, and any property so distributed shall be treated as a
Distribution of an amount in cash equal to the excess of such Fair Market Value
57
over the outstanding principal balance of and accrued interest on any debt by
which the property is encumbered.
(d) For the purposes of Section 15.3(c), "unrealized appreciation" or
"unrealized depreciation" shall mean the difference between the Fair Market
Value of such assets, taking into account the Fair Market Value of the
associated financing but subject to Section 7701(g) of the Code, and the asset's
Gross Asset Value. Section 15.3(c) is merely intended to provide a rule for
allocating unrealized Income and Losses upon Liquidation or other Distribution
event, and nothing contained in Section 15.3(c) or elsewhere in this Agreement
is intended to treat or cause such Distributions to be treated as sales for
value. The Fair Market Value of such assets shall be determined by an
independent appraiser to be selected by the General Partner.
Section 15.4 Deferral of Liquidation. If at the time of liquidation the
General Partner or other liquidator shall determine that an immediate sale of
part or all of the Partnership assets could cause undue loss to the Partners,
the liquidator may, in order to avoid loss, but only with the Consent of the
Special Limited Partner, either defer liquidation and retain all or a portion of
the assets or distribute all or a portion of the assets to the Partners in kind.
In the event that the liquidator elects to distribute such assets in kind, the
assets shall first be assigned a value (by appraisal by an independent
appraiser) and the unrealized appreciation or depreciation in value of the
assets shall be allocated to the Partners' Capital Accounts, as if such assets
had been sold, in the manner described in Section 10.2, and such assets shall
then be distributed to the Partners as provided herein. In applying the
preceding sentence, the Apartment Housing shall not be assigned a value less
than the unamortized principal balance of any loan secured thereby.
Section 15.5 Liquidation Statement. Each of the Partners shall be furnished
with a statement prepared or caused to be prepared by the General Partner or
other liquidator, which shall set forth the assets and liabilities of the
Partnership as of the date of complete liquidation. Upon compliance with the
distribution plan as outlined in Sections 15.3 and 15.4, the Limited Partner and
Special Limited Partner shall cease to be such and the General Partner shall
execute, acknowledge and cause to be filed those certificates referenced in
Section 15.6.
Section 15.6 Certificates of Dissolution; Certificate of Cancellation of
Certificate of Limited Partnership.
(a) Upon the dissolution of the Partnership, the General Partner shall
cause to be filed in the office of, and on a form prescribed by the Secretary of
State of the State, a certificate of dissolution. The certificate of dissolution
shall set forth the Partnership's name, the Secretary of State's file number for
the Partnership, the event causing the Partnership's dissolution and the date of
the dissolution.
(b) Upon the completion of the winding up of the Partnership's affairs, the
General Partner shall cause to be filed in the office of, and on a form
prescribed by, the Secretary of State of the State, a certificate of
cancellation of the Certificate of Limited Partnership. The certificate of
cancellation of the Certificate of Limited Partnership shall set forth the
58
Partnership's name, the Secretary of State's file number for the Partnership,
and any other information which the General Partner determines to include
therein.
ARTICLE XVI
AMENDMENTS
This Agreement may be amended by a unanimous consent of the Partners after
a meeting of the Partners, which meeting shall be held after proper notice as
provided in Section 17.2 of this Agreement. For purposes of this Article XVI, a
Partner shall grant its consent to a proposed amendment unless such Partner
reasonably determines that the proposed amendment is adverse to the Partner's
Interest.
ARTICLE XVII
MISCELLANEOUS
Section 17.1 Voting Rights.
(a) The Limited Partner shall have no right to vote upon any matters
affecting the Partnership, except as provided in this Agreement. At a meeting of
the Partnership, the Limited Partner may vote:
(1) to approve or disapprove the Sale or Refinancing of the Apartment
Housing 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; or
(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
Sale or Refinancing; or
(7) on any other matter permitted in this Agreement.
(b) On any matter where the Limited Partner has the right to vote, votes
may only be cast at a duly called meeting of the Partnership or through written
action without a meeting.
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(c) The Special Limited Partner shall have the right to consent to those
actions or inactions of the Partnership and/or General Partner as otherwise set
forth in this Agreement, and the General Partner is prohibited from any action
or inaction requiring such consent unless such consent has been obtained.
Section 17.2 Meeting of Partnership. Meetings of the Partnership may be
noticed either (a) at any time by the General Partner; or (b) by any Partner
with an Interest greater than 20% of the Income and Losses. The notice for a
meeting shall specify the purpose of such meeting, and the time and the place of
such meeting (which shall be by telephone conference or at the principal place
of business of the Partnership). Any Partner calling a Partners meeting shall
provide written notice to all Partners. The meeting shall not be held less than
15 days nor more than 30 days from the Partners' receipt of the notice. All
meetings and actions of the Limited Partner shall be governed in all respects,
including matters relating to notice, quorum, adjournment, proxies, record dates
and actions without a meeting, by the applicable provisions of the Act, as it
shall be amended from time to time.
Section 17.3 Notices. Any notice given pursuant to this Agreement may be
served personally on the Partner to be notified, or may be mailed, first class
postage prepaid, to the following address, or to such other address as a party
may from time to time designate in writing:
To the General Partner: Fieser Holdings, Inc.
c/o ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
To the Limited Partner: WNC Holding, LLC,
c/o WNC & Associates, Inc.
▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
To the Special
Limited Partner: WNC Housing, L.P.
▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Section 17.4 Successors and Assigns. All the terms and conditions of this
Agreement shall be binding upon and inure to the benefit of the successors and
assigns of the Partners.
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
60
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.
(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 the State.
Section 17.7 Amendment of Certificate of Limited Partnership.
(a) The General Partner shall cause to be filed, within 30 days after the
happening of any of the following events, an amendment to the Certificate of
Limited Partnership reflecting the occurrence of any of the following.
(1) A change in the name of the Partnership.
(2) A change in the street address of the Partnership's principal executive
office.
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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.
(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 the State. The certificate of amendment shall set forth
the Partnership's name, the Secretary of State's file number for the Partnership
and the text of the amendment.
(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.
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.
(a) The Tax Matters Partner shall furnish to each Partner notice and
information with respect to the following: closing conference with an examining
62
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.
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
63
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.
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 General Partner may be
subject under this Agreement, the Partnership shall have (and each General
Partner hereby grants to the Partnership) a security interest in their
respective Interests of such General Partner in all funds distributable to said
General Partner to the extent of the amount of such obligation.
[Signatures begin on following page]
64
IN WITNESS WHEREOF, this Amended and Restated Agreement of Limited
Partnership of FDI-SHADY OAKS, LTD., a Texas limited partnership, is made and
entered into as of the 3 day of June, 2005.
GENERAL PARTNER:
FIESER HOLDINGS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President
WITHDRAWING ORIGINAL LIMITED PARTNER:
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
LIMITED PARTNER:
WNC HOLDING, LLC,
By: WNC & Associates, Inc.
Managing Member
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Executive Vice President
SPECIAL LIMITED PARTNER:
WNC HOUSING, L.P.
By: WNC & Associates, Inc.,
General Partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Executive Vice President
65
EXHIBIT A TO PARTNERSHIP AGREEMENT
LEGAL DESCRIPTION
[GRAPHIC OMITTED]
EXHIBIT B TO PARTNERSHIP AGREEMENT
FORM OF LEGAL OPINION
WNC Holding, LLC,
c/o WNC & Associates, Inc.
▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
RE: FDI-SHADY OAKS, LTD.
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in
connection with the investment by WNC Holding, LLC, a California limited
liability company (the "Limited Partner"), and WNC Housing, L.P., a California
limited partnership (the "Special Limited Partner") in FDI-SHADY OAKS, LTD. (the
"Partnership"), a Texas limited partnership formed to own, develop, rehabilitate
finance and operate an apartment complex for low-income persons (the "Apartment
Complex") in Prairie View, ▇▇▇▇▇▇ County, Texas. The general partner(s) of the
Partnership (is/are) Fieser Holdings, Inc. (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 _________, 199___
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.
Exhibit B
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 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 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 Texas.
(c) The Partnership is validly existing under and subject to the laws of
Texas with full power and authority to own, develop 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 Texas law and
are entitled to all of the rights of limited partners under the Partnership
Agreement. Except as described in the Partnership Agreement, no person is a
partner of or has any legal or equitable interest in the Partnership, and all
former partners of record or known to counsel have validly withdrawn from the
Partnership and have released any claims against the Partnership arising out of
their participation as partners therein.
(h) Liability of the Limited Partner for obligations of the Partnership is
limited to the amount of the Limited Partner's capital contributions required by
the Partnership Agreement.
Exhibit B
WNC Holding, LLC
c/o WNC & Associates, Inc.
_______________, 200_
Page 3
(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, 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 carryover allocation of low income
housing tax credits ("LIHTC") from the State Agency, and the Apartment Complex
will qualify for LIHTC.
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,
--------------------
Exhibit B
EXHIBIT C TO PARTNERSHIP AGREEMENT
CERTIFICATION AND AGREEMENT
CERTIFICATION AND AGREEMENT made as of the date written below by FDI-SHADY
OAKS, LTD., a Texas limited partnership (the "Partnership"); Fieser Holdings,
Inc. (the "General Partner"); and ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (the "Original Limited
Partner") for the benefit of WNC Holding, LLC, a California limited liability
company(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
Original Limited Partner hereby agree as follows for the benefit of the
Investment Partnership and WNC.
1. Representations, Warranties and Covenants of the Partnership, the
General Partner and the Original Limited Partner
The Partnership, the General Partner and the Original Limited Partner
jointly and severally represent, warrant and certify to the Investment
Partnership and WNC that, with respect to the Partnership, as of the date
hereof:
1.1 The Partnership is duly organized and in good standing as
a limited partnership pursuant to the laws of the state of its formation with
full power and authority to own its apartment complex (the "Apartment Complex")
and conduct its business; the Partnership, the General Partner and the Original
Limited Partner have the power and authority to enter into and perform this
Certification and Agreement; the execution and delivery of this Certification
and Agreement by the Partnership, the General Partner and the Original Limited
Partner have been duly and validly authorized by all necessary action; the
execution and delivery of this Certification and Agreement, the fulfillment of
its terms and consummation of the transactions contemplated hereunder do not and
will not conflict with or result in a violation, breach or termination of or
constitute a default under (or would not result in such a conflict, violation,
breach, termination or default with the giving of notice or passage of time or
both) any other agreement, indenture or instrument by which the Partnership or
any General Partner or Original Limited Partner is bound or any law, regulation,
judgment, decree or order applicable to the Partnership or any General Partner
Exhibit C
or Original Limited Partner or any of their respective properties; this
Certification and Agreement constitutes the valid and binding agreement of the
Partnership, the General Partner and the Original Limited Partner, enforceable
against each of them in accordance with its terms.
1.2 The General Partner has delivered to the Investment
Partnership, WNC or their affiliates all documents and information which would
be material to a prudent investor in deciding whether to invest in the
Partnership. All factual information provided to the Investment Partnership, WNC
or their affiliates either in writing or orally, did not, at the time given, and
does not, on the date hereof, contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading in light of the circumstances under which
they are made.
1.3 Each of the representations and warranties contained in
the Partnership Agreement is true and correct as of the date hereof.
1.4 Each of the covenants and agreements of the Partnership
and the General Partner contained in the Partnership Agreement has been duly
performed to the extent that performance of any covenant or agreement is
required on or prior to the date hereof.
1.5 All conditions to admission of the Investment Partnership
as the investment limited partner of the Partnership contained in the
Partnership Agreement have been satisfied.
1.6 No default has occurred and is continuing under the
Partnership Agreement or any of the Project Documents (as such term is defined
in the Partnership Agreement) for the Partnership.
1.7 The Partnership will allocate to the Limited Partner the
Projected Annual Tax Credits, or the Revised Projected Tax Credits, if
applicable.
1.8 The General Partner agrees to take all actions necessary
to claim the Projected Tax Credit, including, without limitation, the filing of
Form(s) 8609 with the Internal Revenue Service.
1.9 No person or entity other than the Partnership holds any
equity interest in the Apartment Complex.
1.10 The Partnership has the sole responsibility to pay all
maintenance and operating costs, including all taxes levied and all insurance
costs, attributable to the Apartment Complex.
1.11 The Partnership, except to the extent it is protected by
insurance and excluding any risk borne by lenders, bears the sole risk of loss
if the Apartment Complex is destroyed or condemned or there is a diminution in
the value of the Apartment Complex.
1.12 No person or entity except the Partnership has the right
to any proceeds, after payment of all indebtedness, from the sale, refinancing,
or leasing of the Apartment Complex.
Exhibit C
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.
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.
[Signatures begin on following page]
Exhibit C
IN WITNESS WHEREOF, this Certificate and Agreement is made and entered into
as of the 3 day of June, 2005.
PARTNERSHIP
FDI-SHADY OAKS, LTD.
Fieser Holdings, Inc.,
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President
GENERAL PARTNER
FIESER HOLDINGS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President
ORIGINAL LIMITED PARTNER
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Exhibit C
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
Texas, has reviewed the final working plans and detailed specifications for
FDI-SHADY OAKS, LTD., a Texas limited partnership (the "Partnership") in
connection with the rehabilitation of improvements on certain real property
located in Prairie View, ▇▇▇▇▇▇ County, Texas (the "Improvements").
The undersigned hereby certifies (i) that the Improvements have been completed
in accordance with the aforesaid plans and specifications, (ii) that a permanent
certificate of occupancy and all other permits required for the continued use
and occupancy of the Improvements have been issued with respect thereto by the
governmental agencies having jurisdiction thereof, (iii) that the Improvements
are in compliance with all requirements and restrictions of all governmental
authorities having jurisdiction over the Improvements, including, without
limitation, all applicable zoning, building, environmental, fire, and health
ordinances, rules and regulations and (iv) that all contractors, subcontractors
and workmen who worked on the Improvements have been paid in full except for
normal retainages and amounts in dispute.
Apartment Housing Architect
Date:
--------------------
Confirmed by:
General Partner
Date:
---------------------
Exhibit D
EXHIBIT E TO THE PARTNERSHIP
[ACCOUNTANT'S CERTIFICATE]
[ACCOUNTANT'S LETTERHEAD]
_______________, 200____
WNC Holding, LLC,
c/o WNC & Associates, Inc.
▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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 FDI-SHADY OAKS, LTD., a Texas limited
partnership (the "Partnership") which owns a certain parcel of land located in
Prairie View, ▇▇▇▇▇▇ County, Texas and improvements thereon (the "Apartment
Housing"), the Limited Partner has requested our certification as to the amount
of low-income housing tax credits ("Tax Credits") available with respect to the
Apartment Housing under Section 42 of the Internal Revenue Code of 1986, as
amended (the "Code"). Based upon our review of [the financial information
provided by the Partnership] of the Partnership, we are prepared to file the
Federal information tax return of the Partnership claiming annual Tax Credits in
the amount of $_______________, which amount is based on an eligible basis (as
defined in Section 42(d) of the Code) of the Apartment Housing of
$________________, a qualified basis (as defined in Section 42(c) of the Code)
of the Apartment Housing of $_________________ and an applicable percentage (as
defined in Section 42(b) of the Code) of _____%.
Sincerely,
-------------------------
Exhibit E
EXHIBIT F TO THE PARTNERSHIP AGREEMENT
[CONTRACTOR'S CERTIFICATE]
[CONTRACTOR'S LETTERHEAD]
_______________, 200____
WNC Holding, LLC,
c/o WNC & Associates, Inc.
▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Re: FDI-SHADY OAKS, LTD.
Dear Ladies and Gentlemen:
The undersigned LCJ Management, Inc. d.b.a. LCJ Construction (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 Ole Town
Apartments located in Prairie View, ▇▇▇▇▇▇ County, Texas (hereinafter known as
the "Apartment Housing").
Contractor makes the following representations and warranties regarding Work at
the Apartment Housing.
o Work on said Apartment Housing has been performed and completed in
accordance with the plans and specifications for the Apartment Housing.
o Contractor acknowledges that all amounts owed pursuant to the contract
for Work performed for FDI-SHADY OAKS, LTD. is paid in full.
o Contractor acknowledges that FDI-SHADY OAKS, LTD. 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:
------------------------------
Exhibit F
REPORT OF OPERATIONS
QUARTER ENDED: ____________________, 200__
------------------------------------- -----------------------------------
LOCAL PARTNERSHIP:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
GENERAL PARTNER:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Firm Name:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Address:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
City, State, Zip:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Phone:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
PROPERTY NAME:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Address:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
City, State, Zip:
-----------------------------------
------------------------------------- -----------------------------------
Resident Manager:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Phone:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
ACCOUNTANT:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Firm:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Address:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
City, State, Zip:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Phone:
------------------------------------- -----------------------------------
------------------------------------ -----------------------------------
MANAGEMENT COMPANY
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Address:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
City, State, Zip:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Phone:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Contact:
------------------------------------- -----------------------------------
-------------------------------------------------------------------------------
OCCUPANCY INFORMATION
A. Number of Apartment Units_____ Number of RA Units_____
Number of Section 8 Tenants ____
B. Occupancy for the Quarter has: Increased ____ Decreased_____
Remained the Same _____
C. Number of: Move-Ins ______ Move-Outs __________ % of Occupancy ______
D. Average length of tenant residency: 1-6 months ______ 6-12 months ______
1-3 years ______ Over 4 years_____
E. Number of Basic rent qualified applicants on waiting list: ________
F. If the apartments are less than 90% occupied, please explain why and
describe what efforts are being made to lease-up remaining units.
___________________________________________________________________________
G. On site manager: Full Time__________ Part Time____________.
If part-time, the number of hours per week_____________.
H. Number of Buildings _____
Exhibit G
OPERATIONAL INFORMATION
Rent Schedule and Increases from Previous Quarter
Number Monthly Rent Rent Increases Effective
of Units Basic / Market Amount Percent Date
1 Bedroom ________ ______________ _______ _______ ________
2 Bedroom ________ ______________ _______ _______ ________
3 Bedroom ________ ______________ _______ _______ ________
PROPOSED MAINTENANCE
Completed Funded by
Type Description or Operations or Amount
Planned Reserves
------------------------------------------------------------------------------
Interior Painting
------------------------------------------------------------------------------
Exterior Painting
------------------------------------------------------------------------------
Siding
------------------------------------------------------------------------------
Roofing
------------------------------------------------------------------------------
Drainage
------------------------------------------------------------------------------
Paving
------------------------------------------------------------------------------
Landscaping
------------------------------------------------------------------------------
Playground
------------------------------------------------------------------------------
Community Room
------------------------------------------------------------------------------
Laundry Room
------------------------------------------------------------------------------
Common Areas
------------------------------------------------------------------------------
Carpet
------------------------------------------------------------------------------
Appliances
------------------------------------------------------------------------------
Lighting
------------------------------------------------------------------------------
Other
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Please describe in detail any major repairs:
------------------------------------------------------------------------------
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Exhibit G
CONDITION OF PROPERTY
The overall appearance of the building(s) is:
Excellent Good Fair Bad
The overall appearance of the grounds is:
Excellent Good Fair Bad
EXTERIOR CONDITION
(Please Check Appropriate Box)
------------------------------------------------------------------------------
Type of Condition Excellent Good Fair Problems/Comments
------------------------------------------------------------------------------
Signage
-------------------------------------------------------------------------------
Parking Lots
-------------------------------------------------------------------------------
Office/Storage
-------------------------------------------------------------------------------
Equipment
-------------------------------------------------------------------------------
Community Building
-------------------------------------------------------------------------------
Laundry Room
-------------------------------------------------------------------------------
Benches/Playground
-------------------------------------------------------------------------------
Lawns, Plantings
-------------------------------------------------------------------------------
Drainage, Erosion
-------------------------------------------------------------------------------
Carports
-------------------------------------------------------------------------------
Fences
-------------------------------------------------------------------------------
Walks/Steps/Guardrails
-------------------------------------------------------------------------------
Lighting
-------------------------------------------------------------------------------
Painting
-------------------------------------------------------------------------------
Walls/Foundation
-------------------------------------------------------------------------------
Roof/Flashing/Vents
-------------------------------------------------------------------------------
Gutters/Splashblocks
-------------------------------------------------------------------------------
Balconies/Patios
-------------------------------------------------------------------------------
Doors Windows/Screens
-------------------------------------------------------------------------------
Elevators
-------------------------------------------------------------------------------
INTERIOR CONDITION
-------------------------------------------------------------------------------
Stairs
-------------------------------------------------------------------------------
Flooring
-------------------------------------------------------------------------------
Doors/Cabinets/Hardware
-------------------------------------------------------------------------------
Drapes/Blinds
-------------------------------------------------------------------------------
Interior Painting
-------------------------------------------------------------------------------
Refrig/Stoves/Sinks
-------------------------------------------------------------------------------
Bathroom/Tubs/Showers
Toilets
-------------------------------------------------------------------------------
Exhibit G
FINANCIAL STATUS
A. Replacement Reserve is: Fully-funded Under-funded Amount
(complete attached schedule)
Tax/Insurance Escrow is: Fully-funded Under-funded Amount
(complete attached schedule)
Property is operating at a: Surplus Deficit Amount
If deficit, General Partner funding? Yes No Amount
Mortgage Payments are: On Schedule Delinquent Amount
Are the taxes current? Yes No
(please provide copy of paid tax ▇▇▇▇)
Is the insurance current? Yes No Renewal Date
(please provide copy of yearly renewal)
B. Please note and explain any significant changes in the following:
Administrative Expense Increase Decrease Amount
------------------------------------------------------------------------
------------------------------------------------------------------------
Repairs/Maintenance Expense Increase Decrease Amount
------------------------------------------------------------------------
------------------------------------------------------------------------
Utility Expense Increase Decrease Amount
------------------------------------------------------------------------
------------------------------------------------------------------------
Taxes/Insurance Expense Increase Decrease Amount
------------------------------------------------------------------------
------------------------------------------------------------------------
C. Do you anticipate making a return to owner distribution? Yes No
Explanation:
------------------------------------------------------------------------
------------------------------------------------------------------------
D. Please explain in detail any change in the financial condition:
------------------------------------------------------------------------
------------------------------------------------------------------------
E. Any insurance claims files? Yes______ No______
If yes, please explain:
------------------------------------------------------------------------
------------------------------------------------------------------------
Exhibit G
SCHEDULE OF RESERVES
Replacement Tax & Insurance Other Total
Beginning Balance: ----------- ---------- ------- -------
Deposits:
---------- ----------- ---------- ------- -------
---------- ----------- ---------- ------- -------
---------- ----------- ---------- ------- -------
Total Deposits ----------- ---------- ------- -------
Authorized Disbursements: ----------- ---------- ------- -------
Description:
--------- ----------- ---------- ------- -------
--------- ----------- ---------- ------- -------
--------- ----------- ---------- ------- -------
--------- ----------- ---------- ------- -------
--------- ----------- ---------- ------- -------
--------- ----------- ---------- ------- -------
Total Disbursements: ----------- ---------- -------- ------
Ending Balance: (1) ----------- ---------- -------- ------
Required Balance: ----------- ---------- -------- ------
Over/under funding: ----------- ---------- -------- ------
Prepared By: Date:
-------------------------------------------------------------------------------
Firm: Telephone:
-------------------------------------------------------------------------------
Reminder: Please include the following documents:
1. Completed Report of Operations
2. Balance Sheet
3. Statement of Income & Expenses
4. Rent roll for quarter ending
5. Tax Credit Compliance Report
Exhibit G
MONTHLY INITIAL TENANT CERTIFICATION REPORT
Property Name:
Address:
County: Tax Credit Set-Asides Information:
[ ] 20/50 [ ] 40/60 Election [ ] 25/60 - NY City
[ ] Deep Rent Skewing ______% @ ______%
Additional Targeting: ______% @ ______% AMI
Additional Financing / Subsidy Programs Layered:
(I.e. RD, HUD, HOME, Bond, CDBG, HODAG)
[ ] Multi-Family [ ] Elderly - Age Restriction ____ Management Company:
[ ] Special Needs [ ] Mixed Income
[ ] New Construction [ ] Acquisition-Rehab - Contact Person:
Acquisition Place in Service
[ ] Rehab only Date: _____ Phone #
[ ] Number of Residential Building Fax #
[ ] Number of Total Units
[ ] Number of Market Units
[ ] Number of Exempt Employee Units
LIHTC Project#:
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Cert. Gross Move-In
Unit First Time Move-in Effect # of Unit # In Income@ Income
# Tenant Name Date Date Bdrms Sq.Ft. Set-Aside Unit Move-In Limits
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BIN # Certificate of Occupancy Date (New Construction)/
Place In Service Date - Acq-Rehab / Rehab):
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BIN # Certificate of Occupancy Date (New Construction)/
Place In Service Date - Acq-Rehab / Rehab):
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BIN # Certificate of Occupancy Date (New Construction)/
Place In Service Date - Acq-Rehab / Rehab):
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INITIAL TENANT CERTIFICATIONS
Partnership Name:-------------------
(CONTINUED)
Tenant Tenant
Income Income Asset Unit Rent Tenant Utility
Qualified Vrfcn Vrfcn 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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NO NO
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NO NO
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NO NO
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NO NO
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NO NO
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NO NO
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NO NO
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NO NO
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NO NO
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NO NO
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NO NO
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NO NO
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NO NO
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NO NO
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Exhibit G
QUARTERLY TAX CREDIT COMPLIANCE REPORT
PROPERTY NAME
Quarter Ending: Tax Credit Set-Asides Information:
[ ] 20/50 [ ] 40/60 Election [ ] 25/60 - NY City
Property Address: [ ] Deep Rent Skewing ______% @ ______%
Additional Targeting: ______% @ ______% AMI
Additional Financing / Subsidy Programs Layered:
(I.e. RD, HUD, HOME, Bond, CDBG, HODAG)
County:
Allocation: Management Company:
Pre-1990 (Rent based on -------------
number of persons) Contact Person:
[ ] Multi-Family Elected to change
[ ] Elderly # Bdrm Phone #:
[ ] Special Needs Post-1989 (Based on
[ ] Mixed Income # of Bedroom) Fax #:
[ ] New Construction Prepared by:
[ ] Rehab
___ ARTICLE II. Number of Residential
Buildings
___ ARTICLE III. Number of Total Units
___ ARTICLE IV. Number of Market Are You Performing Annual
Units Re-Certs? ___
___ ARTICLE V. Number of Exempt Are Any Delinquent? ___
Employee Units
LIHTC Project #
BIN #
-----------------------------------------------------------------------------
Move-In Move-In Current
Unit Tenant Move-in # Of Set- # In Gross Income Gross
# Name Date Bdrms Aside Unit Income Limits Income
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QUARTERLY TAX CREDIT COMPLIANCE REPORT
PROPERTY NAME
(CONTINUED)
Current Annual Tenant Less
Income Recert. Income Income Assets Unit Rent Tenant
Limits Date Qualified Verified Verified Rent Subsidy Payment
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QUARTERLY TAX CREDIT COMPLIANCE REPORT
PROPERTY NAME
(CONTINUED)
Tenant Tenant Overall
Utility Gross Maximum Rent Tenat
Allow. Rent Rent Qualified Eligible
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Exhibit G
Tenant Certification Compliance File Audit/Review
Tenant File Transmittal Checklist
Unit Number Property Name Date
Tenant Name Completed By:
Initial /____/ Annual /____/
Check Box for Type of Certification Management Company
Check Documents This Section For WNC Use Only
Being Sent
Received Returned Comments
___ Initial - Rental Application ____ ____ __________
___ Initial - Lease Agreement ____ ____ __________
___ Initial - Addendum to Lease ____ ____ __________
___ Initial - Questionnaire of Income/Assets ____ ____ __________
___ Recertification - Questionnaire of ____ ____ __________
___ Income/Assets ____ ____ __________
___ Recertification - Addendum to Lease ____ ____ __________
___ Addendum - Full Student Addendum ____ ____ __________
___ Tenant Income Certification - Tax Credit ____ ____ __________
___ Tenant Income Certification
- HUD 50059/RD 1944-8 ____ ____ __________
___ Calculation Worksheet ____ ____ __________
___ Tenant Information Release /Authorization ____ ____ __________
___ Verification Tracking Sheet ____ ____ __________
___ Verification - Employment ____ ____ __________
___ Verification - Termination of Employment ____ ____ __________
___ Verification - Bank Verification ____ ____ __________
___ Verification - Child Support ____ ____ __________
___ Verification - Public Assistance/Welfare ____ ____ __________
___ Benefits ____ ____ __________
___ Verification - Social Security Benefits ____ ____ __________
___ Verification - Pension/Retirement/Annuities ____ ____ __________
___ Verification - Disability Benefits ____ ____ __________
___ Verification - Unemployment ____ ____ __________
___ Verification - Alimony ____ ____ __________
___ Verification - Worker's Compensation ____ ____ __________
___ Verification - Life Insurance ____ ____ __________
___ Verification - Real Estate ____ ____ __________
___ Verification - Veterans Pension ____ ____ __________
___ Verification - Military ____ ____ __________
___ Verification - Student Status ____ ____ __________
___ Verification - Lump Sum Settlements ____ ____ __________
___ Verification - Telephone ____ ____ __________
___ Notarized Affidavit of Support
- Monetary Contribution ____ ____ __________
___ Copy -Tax Return ____ ____ __________
___ Copy - Divorce/Separation Agreement ____ ____ __________
___ Copy - Bank/Dividend/Asset Statements ____ ____ __________
___ Copy - W-2 ____ ____ __________
___ Certification - Self-Employment ____ ____ __________
___ Certification - Zero Income ____ ____ __________
___ Certification - Assets Under $5,000 ____ ____ __________
___ Certification - assets disposed last 2 years ____ ____ __________
___ Certification - Affidavit of Child Support ____ ____ __________
___ Certification - Non Working ____ ____ __________
___ Clarification - Telephone Conversation Report ____ ____ __________
___ Clarification Record/Report ____ ____ __________
___ Other: ____ ____ __________
TAX CREDIT COMPLIANCE MONITORING:
ANNUAL CERTIFICATION
As General Partner of FDI-SHADY OAKS, LTD., I hereby certify as to the
following:
1. FDI-SHADY OAKS, LTD. owns a 40 unit project ("Apartment Housing") in
Prairie View, ▇▇▇▇▇▇ County, Texas.
2. An annual income certification (including supporting documentation)
has been received from each tenant. The income certification reflects that the
tenant's income meets the income limitation applicable to the Apartment Housing
pursuant to Section 42(g)(1) of the Internal Revenue Code ("Code").
3. The Apartment Housing satisfies the requirements of the applicable
minimum set aside test as defined in Section 42(g)(1) of the Code.
4. Each unit within the Apartment Housing is rent restricted as defined
in Section 42(g)(2)of the Code.
5. Each unit in the Apartment Housing is available for use by the
general public and not for use on a transient basis.
6. Each building in the Apartment Housing is suitable for occupancy in
accordance with local health, safety, and building codes.
7. During the preceding calendar year, there had been no change in the
eligible basis, as defined in Section 42(d) of the Code, of any building within
the Apartment Housing.
8. All common area facilities included in the eligible basis of the
Apartment Complex are provided to the tenants on a comparable basis without a
separate fee to any tenant in the Apartment Housing.
9. During the preceding calendar year when a unit in the Apartment
Housing became vacant reasonable attempts were made to rent that unit to tenants
whose incomes met the income limitation applicable to the Apartment Housing
pursuant to Section 42(g)(1) of the Code and while that unit was vacant no units
of comparable or smaller size were rented to tenants whose income did not meet
the income limitation applicable to the Apartment Housing pursuant to Section
42(g)(1) of the Code. 10. If the income of a tenant in a unit increased above
the limit allowed in Section 42 (g)(2)(D)(ii), then the next available unit of
comparable or smaller size was rented to tenants whose incomes met the income
limitation applicable to the Apartment Housing pursuant to Section 42(g)(1) of
the Code.
IN VERIFICATION OF THE FOREGOING ENCLOSED HEREWITH IS A COPY OF THE
ANNUAL INCOME CERTIFICATION RECEIVED FROM EACH TENANT IN THE PROJECT.
UPON REQUEST I WILL PROVIDE COPIES OF ALL DOCUMENTATION RECEIVED FROM
THE TENANT TO SUPPORT THAT CERTIFICATION.
I declare under penalty of perjury under the law of the State of Texas
that the foregoing is true and correct.
Executed this ____ day of ______________ at _______________,
______________.
Calculation of Debt Service Coverage
Month 1 Month 2 Month 3
------------ ------------ ------------
INCOME
Gross Potential Rent
Other Income
Vacancy Loss ------------ ------------ ------------
Adjusted Gross Income ------------ ------------ ------------
OPERATING EXPENSES
Utilities
Maintenance
Management Fee
Administration
Insurance
Real Estate Taxes
Other Expenses ------------ ------------ ------------
Total Operating Expenses ------------ ------------ ------------
Net Operating Income (1)
Accrual adjustments for:
R/E Taxes
Insurance
Tax/ Accounting
Other
Replacement Reserves ------------ ------------ ------------
Income for DSC Calculation ============ ============ ============
Stabilized Debt Service ------------ ------------ ------------
Debt Service Coverage (2) ------------ ------------ ------------
Please submit this form along with the following supporting documentation:
Monthly Financial Reports (income statement, balance sheet, general ledger, and
rent rolls)
Operating Budget
Copies of bank statements
(1) This number should reconcile easily with the monthly financial
statements.
(2) The ratio between the Income for DSC calculation and Stabilized Debt
Service. As example, a 1.15 DSC means that for every $1.00 of Stabilized Debt
Service required to be paid there must be $1.15 of Net Operating Income
available.
TAX CREDIT COMPLIANCE MONITORING:
ANNUAL CERTIFICATION
As General Partner of FDI-SHADY OAKS, LTD., I hereby certify as to the
following:
1. FDI-SHADY OAKS, LTD. owns a 40-unit project ("Apartment Housing") in
Prairie View, ▇▇▇▇▇▇ County, Texas.
2. An annual income certification (including supporting documentation) has
been received from each tenant. The income certification reflects that the
tenant's income meets the income limitation applicable to the Apartment Housing
pursuant to Section 42(g)(1) of the Internal Revenue Code ("Code").
3. The Apartment Housing satisfies the requirements of the applicable
minimum set aside test as defined in Section 42(g)(1) of the Code.
4. Each unit within the Apartment Housing is rent restricted as defined in
Section 42(g)(2) of the code.
5. Each unit in the Apartment Housing is available for use by the general
public and not for use on a transient basis.
6. Each building in the Apartment Housing is suitable for occupancy in
accordance with local health, safety, and building codes.
7. During the preceding calendar year, there had been no change in the
eligible basis, as defined in Section 42(d) of the Code, of any building within
the Apartment Housing.
8. All common area facilities included in the eligible basis of the
apartment Complex are provided to the tenants on a comparable basis without a
separate fee to any tenant in the Apartment Housing.
9. During the preceding calendar year when a unit in the Apartment Housing
became vacant reasonable attempts were made to rent that unit to tenants whose
incomes met the income limitation applicable to the Apartment Housing pursuant
to Section 42(g)(1) of the code and while that unit was vacant no units of
comparable size or smaller 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 Texas
that the foregoing is true and correct.
Executed this ___ day of __________ at ____________, _____________.
DEVELOPMENT FEE AGREEMENT
This Development Fee Agreement ("Agreement") is entered into as of the date
written below by and between Fieser Development, Inc. a Texas Corporation
("Developer") and FDI-SHADY OAKS, LTD., a Texas limited partnership ("Owner").
Developer and Owner collectively may be referred to as the "Parties" or
individually may be referred to as a "Party."
RECITALS
A. Owner has acquired the real property located in Prairie View, ▇▇▇▇▇▇
County, Texas, as more particularly described in Exhibit A attached hereto and
incorporated herein (the "Real Property").
B. Owner intends to develop on the Real Property a 40-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 enter into this Development Fee Agreement as follows:
SECTION 1
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall, when capitalized,
have the following meanings:
"Code" means the Internal Revenue Code of 1986, as amended.
"Construction Documents" means the contract documents between the Owner and
the Contractor pertaining to construction of the Apartment Housing.
"Contractor" means LCJ Management, Inc. dba LCJ Construction.
"Department" means the Texas agency responsible for the reservation and
allocation of Tax Credits.
"Development Fee" means the fee for development services described in
Section 2 of this Agreement.
"Partnership Agreement" shall mean the Amended and Restated Agreement of
Limited Partnership of FDI-SHADY OAKS, LTD., a Texas limited partnership, which
Partnership Agreement is incorporated herein by this reference. Any terms
capitalized but not defined herein shall have the meaning ascribed in the
Partnership Agreement.
"Tax Credits" means the low-income housing tax credits found in Section 42
of the Code, and all rules, regulations, rulings, notices and other
promulgations thereunder.
SECTION 2
ENGAGEMENT OF DEVELOPER; FEE; SERVICES
2.1 Engagement; Term. Owner hereby confirms the engagement of Developer to
act as developer of the Apartment Housing, and to perform the various covenants
and obligations of the Developer under this Agreement. Developer hereby confirms
and accepts such engagement and agrees to perform fully and timely each and
every one of its obligations under this Agreement. The term of such engagement
shall commence on the date hereof and subject to the pre-payment provisions of
Section 3 shall expire on October 1, 2016.
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
$300,210. The Development Fee shall be payable in accordance with Section 3 of
this Agreement.
2.3 Development Services.
(a) Prior Services. Owner acknowledges that Developer has, prior to the
date hereof, performed substantial development services relating to the
Apartment Housing. Such services (the "Prior Services") have included the
following.
(1) Services Rendered Prior to 10% Carryover.
(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 established a central control file of all design,
engineering and development documents, including contracts, plans and
specifications.
(E) Developer has negotiated and conferred with public authorities relating
to traffic control, flood control and other matters affecting the development of
the Apartment Housing.
(F) Developer has negotiated and conferred with an architect and
recommended to the Owner to execute an architectural contract for the planning
and design of the Apartment Housing.
(2) Other Prior Services.
(A) Developer has created, refined and analyzed the financial projections
for the Apartment Housing.
(B) Developer has negotiated, conferred, and worked with the Apartment
Housing architects, engineers and Contractor with regard to preparation,
refinement, and finalization of the plans and specifications for the Apartment
Housing, and projected construction schedules and costs.
(C) [Intentionally omitted].
(D) Developer has negotiated and conferred with an insurance carrier to
provide a builder's risk policy during construction.
(b) Future Services. Developer hereby agrees to perform the following
development services for and as an agent of Owner.
(1) Construction and Development Matters. Developer shall oversee
construction of the Apartment Housing on Owner's behalf, as provided in this
Section 2.3(b)(1). Owner shall allow Developer full access to the Apartment
Housing during the construction period. Developer and Developer's agents shall
perform their work in a manner that minimizes interference with the management
and operation of the Apartment Housing.
(A) Developer shall exert its best efforts to ensure that the Contractor
performs its obligations under the Construction Documents in a diligent and
timely manner.
(B) Developer shall participate in and provide assistance with regard to
pre-construction conferences and pre-construction documents, including drawings,
specifications, contracts, and schedules.
(C) Developer shall review all Construction Documents, identify
construction issues and participate in the resolution of such issues.
(D) Developer shall review and approve subcontract bids received by the
Contractor.
(E) Developer shall establish and administer field order and change order
procedures.
(F) Developer shall coordinate performance of Owner's obligations under the
construction phase for the Apartment Housing, including the preparation of draw
requests.
(G) Developer shall attend construction progress meetings at the Apartment
Housing site to monitor construction progress and advise Owner and the
Contractor with respect to the resolution of construction issues.
(H) Developer shall review the Contractor's monthly pay applications.
(I) Developer shall monitor the Contractor's progress with respect to the
approved Apartment Housing schedule and keep the Owner informed of all pertinent
Apartment Housing issues and construction progress.
(J) Developer shall advise Owner with respect to relations with engineers,
architects, and other construction professionals.
(K) Developer shall be available for immediate response in critical
situations arising during the construction of the Apartment Housing.
(L) Developer shall coordinate relations with the City of Prairie View and
other governmental authorities having jurisdiction over development of the
Apartment Housing.
(2) Tax Credit Matters. From the date hereof through the completion of
construction of the Apartment Housing, the Developer shall provide the following
services to Owner with regard to the Tax Credits which services do not
constitute the rendering of legal or tax advice:
(A) Developer shall consult with and advise Owner concerning construction
issues that could affect the amount of Tax Credits for which the Apartment
Housing is eligible.
(B) Developer shall consult with and advise Owner with respect to the
requirements of the Department as they relate to the construction and
development of the Apartment Housing.
(C) Developer shall monitor construction progress with respect to the
Apartment Housing schedule agreed to with the Department, if any.
(c) Assignment of Development Rights. Developer hereby assigns to Owner all
rights to the development of the Apartment Housing, including but not limited
to, all tangible and intangible rights arising with respect to the name
FDI-SHADY OAKS, LTD., the design of the Apartment Housing, the plans and
specifications for the Apartment Housing and all rights arising under the
agreements with Apartment Housing architects, engineers and other Apartment
Housing design and construction professionals.
SECTION 3
DEVELOPMENT FEE PAYMENTS
3.1 [Intentionally omitted].
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 October 1, 2016. Also, if the Development
Fee is not paid in full in accordance with Section 9.2(b) of the Partnership
Agreement then the unpaid portion shall accrue interest at a rate equal to the
applicable federal rate (as defined in Code Section 1274(d)) for long-term debt
in effect as of the date of the last Capital Contribution payment referenced in
Section 7.2(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:
(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: Fieser Development, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇.
▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
If to Owner: FDI-SHADY OAKS, LTD.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇.
▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
5.2 Interpretation.
(a) Headings. The section headings in this Agreement are included for
convenience only; they do not give full notice of the terms of any portion of
this Agreement and are not relevant to the interpretation of any provision of
this Agreement.
(b) Relationship of the Parties. Neither Party hereto shall be deemed an
agent, partner, joint venturer, or related entity of the other by reason of this
Agreement and as such neither Party may enter into contracts or agreements which
bind the other Party.
(c) Governing Law. The Parties intend that this Agreement shall be governed
by and construed in accordance with the laws of the state of Texas applicable to
contracts made and wholly performed within Texas by persons domiciled in Texas.
(d) Severability. Any provision of this Agreement that is deemed invalid or
unenforceable shall be ineffective to the extent of such invalidity or
unenforceability, without rendering invalid or unenforceable the remaining
provisions of this Agreement.
5.3 Integration; Amendment. This Agreement constitutes the entire agreement
of the Parties relating to the subject matter hereof. There are no promises,
terms, conditions, obligations, or warranties other than those contained herein.
This Agreement supersedes all prior communications, representations, or
agreements, verbal or written, among the Parties relating to the subject matter
hereof. This Agreement may not be amended except in writing.
5.4 Attorney' Fees. If any suit or action arising out of or related to this
Agreement is brought by any Party to any such document, the prevailing Party
shall be entitled to recover the costs and fees (including without limitation
reasonable attorneys' fees and costs of experts and consultants, copying,
courier and telecommunication costs, and deposition costs and all other costs of
discovery) incurred by such Party in such suit or action, including without
limitation to any post-trial or appellate proceeding.
5.5 Binding Effect. This Agreement shall bind and inure to the benefit of,
and be enforceable by, the Parties hereto and their respective successors,
heirs, and permitted assigns.
5.6 Assignment. Neither Party may assign this Agreement without the consent
of the other Party. No assignment shall relieve any Party of liability under
this Agreement unless agreed in writing to the contrary.
5.7 Third-Party Beneficiary Rights. No person not a Party to this Agreement
is an intended beneficiary of this Agreement, and no person not a Party to this
Agreement shall have any right to enforce any term of this Agreement.
Notwithstanding the Parties acknowledge that 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 Texas State
Bar members in good standing. In addition to all other powers, the arbitrator(s)
shall have the exclusive right to determine all issues of arbitrability.
Judgment on any arbitration award may be entered in any court with jurisdiction.
If either Party institutes any judicial proceeding relating to the
Transaction, such action shall not be a waiver of the right to submit any Claim
to arbitration. In addition, both Parties have the right before, during, and
after any arbitration to exercise any of the following remedies, in any order or
concurrently: (i) setoff, (ii) self-help repossession, (iii) judicial or
non-judicial foreclosure against real or personal property collateral, (iv)
provisional remedies, including injunction, appointment of receiver, attachment,
claim and delivery, and replevin.
This arbitration clause cannot be modified or waived by either Party except
in a writing that refers to this arbitration clause and is signed by both
Parties.
[Signatures begin on following page]
IN WITNESS WHEREOF, the Parties have caused this Development Fee Agreement
to be executed as of June 3, 2005.
DEVELOPER: FIESER DEVELOPMENT, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President
OWNER: FDI-SHADY OAKS, LTD.
By: Fieser Holdings, Inc.
General Partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President
EXHIBIT A
LEGAL DESCRIPTION
GUARANTY AGREEMENT
FOR VALUE RECEIVED, the receipt and sufficiency of which is hereby
acknowledged, and in consideration of the agreement of Fieser Development, Inc.
(the "Developer") to permit deferral of the $299,695 due from FDI-SHADY OAKS,
LTD., a Texas limited partnership (the "Debtor") to the Developer, the
undersigned Guarantor, hereby unconditionally guarantees the full and prompt
payment when due, whether by acceleration or otherwise of that certain Developer
Fee from Debtor to the Developer, evidenced by the Development Fee Agreement
dated the even date herewith, and incorporated herein by this reference. The
foregoing described debt is referred to hereinafter as the "Liabilities" or
"Liability."
The undersigned further agree to pay all expenses paid or incurred by
the Debtor or Developer in endeavoring to collect the Liabilities, or any part
thereof, and in enforcing the Liabilities or this Guaranty Agreement (including
reasonable attorneys' fees if collected or enforced by law or through an
attorney-at-law). The undersigned hereby represents and warrants that the
extension of credit or other financial accommodations by the Developer to Debtor
will be to the interest and advantage of the undersigned, and acknowledges that
this Guaranty Agreement is a substantial inducement to the Developer to extend
credit to Debtor and that the Developer would not otherwise extend credit to
Debtor.
Debtor or Developer may, from time to time, without notice to or
consent of the undersigned, (a) retain or obtain a security interest in any
property to secure any of the Liabilities or any obligation hereunder, (b)
retain or obtain the primary or secondary liability of any party or parties, in
addition to the undersigned, with respect to any of the Liabilities and (c)
resort to the undersigned for payment of any of the Liabilities, whether or not
the Debtor or Developer shall have resorted to any property securing any of the
Liabilities or any obligation hereunder or shall have preceded against any other
party primarily or secondarily liable on any of the Liabilities.
Debtor and Developer must mutually agree to (a) extend or renew for any
period this Agreement (whether or not longer than the original period) or alter
any of the Liabilities, (b) release or compromise any Liability of the
undersigned hereunder or any Liability of any other party or parties primarily
or secondarily liable on any of the Liabilities, or (c) release, compromise or
subordinate its title or security interest, or any part thereof, if any, in all
or any property now or hereafter securing any of the Liabilities or any
obligation hereunder, and permit any substitution or exchange for any such
property,
The undersigned hereby expressly waives: (a) notice of the existence or
creation of all or any of the Liabilities, (b) notice of any amendment or
modification of any of the instruments or documents evidencing or securing the
Liabilities, (c) presentment, demand, notice of dishonor and protest, (d) all
diligence in collection or protection of or realization upon the Liabilities or
any thereof, any obligation hereunder, or any security for any of the foregoing,
and (e) the right to require the Developer to proceed against Debtor on any of
the Liabilities, though nothing herein shall prevent the Developer from
proceeding against Debtor on any of the Liabilities.
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
Texas and shall be construed and governed under Texas law.
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
Texas and/or to the jurisdiction and venue of any United States District Court
in the State of Texas having jurisdiction over any action or judicial proceeding
brought to enforce, construe or interpret this Guaranty. Guarantor agrees to
stipulate in any such proceeding that this Guaranty is to be considered for all
purposes to have been executed and delivered within the geographical boundaries
of the State of Texas, even if it was, in fact, executed and delivered
elsewhere.
IN WITNESS WHEREOF, the undersigned have hereunto caused this Guaranty
Agreement to be executed as of June 3, 2005.
Signed, sealed and delivered in the
presence of: GUARANTOR:
----------
/s/ ▇▇▇ ▇▇▇▇▇▇ /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------- ------------------------
Witness ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------
Notary Public
My Commission Expires: Address for Guarantor:
---------------------
--------------------- 26735 Stockdick School Road
(NOTARY SEAL) ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
DEVELOPMENT, CONSTRUCTION AND OPERATING
BUDGET AGREEMENT
This Development, Construction and Operating Budget Agreement ("Agreement")
is entered into as of the date written below by and between FDI-SHADY OAKS,
LTD., a Texas limited Partnership ("Owner"), Fieser Holdings, Inc. ("General
Partner"), WNC Holding, LLC, a California limited liability company ("Limited
Partner") and WNC Housing, L.P., a California limited Partnership ("Special
Limited Partner"). Owner, General Partner, Limited Partner and Special Limited
Partner collectively may be referred to as the "Parties" or individually may be
referred to as a "Party."
RECITALS
A. Owner has acquired 3.2242 acres of land in Prairie View, ▇▇▇▇▇▇ County,
Texas (the "Real Property").
B. Owner intends to develop on the Real Property a Forty (40) unit
low-income rental housing complex and other related improvements for family,
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 FDI-SHADY OAKS,
LTD. ("Partnership Agreement") was entered into by and between Fieser Holdings,
Inc. 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. In determining whether to be admitted into FDI-SHADY OAKS, LTD. and
contribute funds to the development of the Apartment Housing, the Limited
Partner and Special Limited Partner performed a due diligence review. Part of
the due diligence review included an analysis of the available sources of funds
to develop the Apartment Housing, the cost of construction, the anticipated
revenues associated with the rental of the Apartment Housing units and the
expenses required to operate the Apartment Housing.
E. The Parties recognize and acknowledge that the final construction cost
determination involves substantial negotiations with lenders, contractors and
governmental authorities.
F. The Parties recognize and acknowledge that a final operating budget
involves substantial negotiations with lenders and governmental authorities.
G. Limited Partner's and Special Limited Partner's decision to execute the
Partnership Agreement is based, in part, on their acceptance of the sources of
funds available to develop the Apartment Housing, the cost of construction to
build the Apartment Housing and the operating budget necessary to provide a
positive Debt Service Coverage.
Now Therefore, in consideration of the foregoing recitals which are a part
of this Agreement, the mutual promises and undertakings in this Agreement, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Parties agree as follows.
1. Source of Funds. Attached hereto as Exhibit "A" and incorporated herein
by this reference is the Apartment Housing Source of Funds. The Source of Funds
have been specified in the Partnership Agreement as the Mortgage, 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
$1,600,969. Owner acknowledges and represents that the attached Development
Budget includes the total costs and expenses to acquire, develop and construct
the Real Property and the Apartment Housing.
3. Construction Proforma. Attached hereto as Exhibit "C" and incorporated
herein by this reference is the Construction Proforma. Owner acknowledges and
represents that the attached Construction Proforma has been reviewed by and
approved by the, Mortgage lender if applicable and any governmental authorities
if applicable. The Construction Proforma contains a list, by name, of all
subcontractors and material suppliers who will account for five percent or more
of the cost of construction of the Apartment Housing. Also included is a trade
payment breakdown specifying the cost of each classification of construction
requirements pursuant to Plans and Specifications and the other Project
Documents. In accordance with the Partnership Agreement, if the construction
costs exceed the sum of the Capital Contributions, the proceeds of the Mortgage
and the Development Fee then the General Partner shall be responsible for and
shall be obligated to pay such deficiencies.
4. Operating Proforma. Attached hereto as Exhibit "D" and incorporated
herein by this reference is the Operating Proforma. Owner acknowledges and
represents that the attached Operating Proforma has been reviewed by and
approved by the, the Mortgage lender and any governmental authorities if
applicable.
5. Notices. Any notice given pursuant to this Agreement may be served
personally on the Party to be notified, or may be mailed, first class postage
prepaid, to the following address, or to such other address as a Party may from
time to time designate in writing:
To the General Partner: Fieser Holdings, Inc.
c/o ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
To the Limited Partner: WNC Holding, LLC,
c/o WNC & Associates, Inc.
▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
To the Special
Limited Partner: WNC Housing, L.P.
▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
6. Successors and Assigns. All the terms and conditions of this Agreement
shall be binding upon and inure to the benefit of the successors and assigns of
the Parties.
7. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and said counterparts
shall constitute but one and the same instrument which may sufficiently be
evidenced by one counterpart.
8. Captions. Captions to and headings of the Sections of this Agreement are
solely for the conveniences of the Parties, are not a part of this Agreement,
and shall not be used for the interpretation or determination of the validity of
this Agreement or any provision hereof.
9. Saving Clause. If any provision of this Agreement, or the application of
such provision to any Person or circumstance, shall be held invalid, the
remainder of this Agreement, or the application of such provision to Persons or
circumstances other than those as to which it is held invalid, shall not be
affected thereby.
10. Governing Law. This Agreement and its application shall be governed by
the laws of Texas.
11. Attorney's Fees. If a suit or action is instituted in connection with
an alleged breach of any provision of this Agreement, the prevailing Party shall
be entitled to recover, in addition to costs, such sums as the court may adjudge
reasonable as attorney's fees, including fees on any appeal.
[Signatures begin on following page]
IN WITNESS WHEREOF, this Development, Construction and Operating Budget
Agreement is made and entered into as of June 3, 2005.
GENERAL PARTNER
FIESER HOLDINGS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President
LIMITED PARTNER
WNC HOLDING, LLC,
By: WNC & Associates, Inc.
Managing Member
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Executive Vice President
SPECIAL LIMITED PARTNER
WNC HOUSING, L.P.
By: WNC & Associates, Inc.,
General Partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
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