AMENDED AND RESTATED AGREEMENT
OF
LIMITED PARTNERSHIP
OF
MEMPHIS 2004.0 LP
DATED AS OF AUGUST 30, 2005
TABLE OF CONTENTS
PAGE
Article I. DEFINITIONS.........................................................1
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.........................16
Section 6.1 Capital Contribution of General Partner........................16
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 and Special Limited
Partner........................................................18
Section 7.3 Repurchase of Limited Partner's and Special Limited Partner's
Interests......................................................22
Section 7.4 Adjustment of Capital Contributions............................23
Section 7.5 Return of Capital Contribution.................................25
Section 7.6 Liability of Limited Partner and Special Limited Partner.......25
Article VIII. WORKING CAPITAL AND RESERVES....................................26
Section 8.1 Replacement and Reserve Account................................26
Section 8.2 Intentionally omitted..........................................26
Section 8.3 Tax and Insurance Account......................................26
Article IX. MANAGEMENT AND CONTROL............................................26
Section 9.1 Power and Authority of General Partner.........................26
Section 9.2 Payments to the General Partners and Others....................27
Section 9.3 Specific Powers of the General Partner.........................28
Section 9.4 Authority Requirements.........................................29
Section 9.5 Limitations on General Partner's Power and Authority...........29
Section 9.6 Restrictions on Authority of General Partner...................31
Section 9.7 Duties of General Partner......................................33
Section 9.8 Obligations to Repair and Rebuild Project......................35
Section 9.9 Partnership Expenses...........................................35
Section 9.10 General Partner Expenses......................................36
Section 9.11 Other Business of Partners....................................36
Section 9.12 Covenants, Representations and Warranties.....................36
Section 9.13 Indemnification of the Partnership and the Limited Partners...40
Section 9.14 Option to Acquire.............................................40
Section 9.15 Right of First Refusal........................................42
Article X. ALLOCATIONS OF INCOME, LOSSES AND CREDITS..........................42
Section 10.1 General.......................................................42
Section 10.2 Allocations From Sale or Refinancing..........................43
Section 10.3 Special Allocations...........................................43
Section 10.4 Curative Allocations..........................................46
Section 10.5 Other Allocation Rules........................................46
Section 10.6 Tax Allocations: Code Section 704(c)..........................47
Section 10.7 Allocation Among Limited Partners.............................48
Section 10.8 Allocation Among General Partners.............................48
Section 10.9 Modification of Allocations...................................48
Article XI. DISTRIBUTION......................................................49
Section 11.1 Distribution of Net Operating Income..........................49
Section 11.2 Distribution of Sale or Refinancing Proceeds..................49
Article XII. TRANSFERS OF LIMITED PARTNER'S AND SPECIAL LIMITED PARTNER'S
INTERESTS IN THE PARTNERSHIP.....................................50
Section 12.1 Assignment of Interests.......................................50
Section 12.2 Effective Date of Transfer....................................51
Section 12.3 Invalid Assignment............................................51
Section 12.4 Assignee's Rights to Allocations and Distributions............51
Section 12.5 Substitution of Assignee as Limited Partner or Special Limited
Partner.......................................................51
Section 12.6 Death, Bankruptcy, Incompetency, etc., of a Limited Partner...52
Article XIII. WITHDRAWAL, REMOVAL AND REPLACEMENT OF GENERAL PARTNER..........52
Section 13.1 Withdrawal of General Partner.................................52
Section 13.2 Removal of General Partner....................................52
Section 13.3 Effects of a Withdrawal.......................................54
Section 13.4 Successor General Partner.....................................56
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Section 13.5 Admission of Additional or Successor General Partner..........57
Section 13.6 Transfer of Interest..........................................57
Section 13.7 No Goodwill Value.............................................57
Article XIV. BOOKS AND ACCOUNTS, REPORTS, TAX RETURNS, FISCAL YEAR AND
BANKING..........................................................58
Section 14.1 Books and Accounts............................................58
Section 14.2 Accounting Reports............................................58
Section 14.3 Other Reports.................................................59
Section 14.4 Late Reports..................................................62
Section 14.5 Site Visits...................................................62
Section 14.6 Tax Returns...................................................62
Section 14.7 Fiscal Year...................................................62
Section 14.8 Banking.......................................................62
Section 14.9 Certificates and Elections....................................62
Article XV. DISSOLUTION, WINDING UP, TERMINATION AND LIQUIDATION OF THE
PARTNERSHIP.......................................................63
Section 15.1 Dissolution of Partnership....................................63
Section 15.2 Return of Capital Contribution upon Dissolution...............63
Section 15.3 Distribution of Assets........................................63
Section 15.4 Deferral of Liquidation.......................................64
Section 15.5 Liquidation Statement.........................................65
Section 15.6 Certificates of Dissolution; Certificate of Cancellation of
Certificate of Limited Partnership............................65
Article XVI. AMENDMENTS.......................................................65
Article XVII. MISCELLANEOUS...................................................66
Section 17.1 Voting Rights.................................................66
Section 17.2 Meeting of Partnership........................................66
Section 17.3 Notices.......................................................67
Section 17.4 Successors and Assigns........................................67
Section 17.5 Recording of Certificate of Limited Partnership...............67
Section 17.6 Amendment of Certificate of Limited Partnership...............67
Section 17.7 Counterparts..................................................68
Section 17.8 Captions......................................................68
Section 17.9 Saving Clause.................................................68
Section 17.10 Certain Provisions...........................................69
Section 17.11 Tax Matters Partner..........................................69
Section 17.12 Expiration of Compliance Period..............................70
Section 17.13 Number and Gender............................................70
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Section 17.14 Entire Agreement.............................................71
Section 17.15 Section 17.15 Governing Law..................................71
Section 17.16 Attorney's Fees..............................................71
Section 17.17 Receipt of Correspondence....................................71
Section 17.18 Security Interest and Right of Set-Off.......................71
Number of Residential Buildings...............................................11
Number of Total Units.........................................................11
Number of Market Units........................................................11
Number of Exempt Employee Units...............................................11
EXHIBIT A Legal Description
EXHIBIT B Form of Legal Opinion
EXHIBIT C Certification and Agreement
EXHIBIT D Form of Completion Certificate
EXHIBIT E Accountant's Certificate
EXHIBIT F Contractor's Certificate
EXHIBIT G Depreciation Schedule
EXHIBIT H Report of Operations
EXHIBIT I Survey of Requirements
[List of Agreements Attached]
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AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP OF
MEMPHIS 2004.0 LP
This Amended and Restated Agreement of Limited Partnership is being
entered into effective as of the date written below by and between Memphis 2004
LLC, a Tennessee limited liability company, (the "General Partner"), United
Development Corporation, as the withdrawing limited partner (the "Original
Limited Partner"), WNC Housing Tax Credit Fund VI Series 12 L.P., a California
limited partnership, as the limited partner (the "Limited Partner"), and WNC
Housing, L.P., a California limited partnership, as the special limited partner
(the "Special Limited Partner.
RECITALS
WHEREAS, Memphis 2004.0 LP, a Tennessee limited partnership (the
"Partnership") recorded a certificate of limited partnership with the Tennessee
Secretary of State on November 16, 2004. A limited partnership agreement dated
November 16, 2002 was entered into by and between the General Partner and the
Original Limited Partner (the "Original Partnership Agreement").
WHEREAS, the Partners desire to enter into this Agreement to provide
for, among other things, (i) the continuation of the Partnership, (ii) to admit
the Limited Partner and the Special Limited Partner to the Partnership and allow
the Original Limited Partner to withdraw, (iii) a restatement of the respective
rights, obligations and interests of the Partners to each other and to the
Partnership, and (iv) certain other matters.
WHEREAS, the Partners desire hereby to amend and restate the Amended
and Restated Agreement.
NOW, THEREFORE, in consideration of their mutual agreements herein set
forth, the Partners hereby agree to amend and restate the Amended and Restated
Agreement in its entirety to provide as follows:
ARTICLE I.
DEFINITIONS
"Accountant" shall mean Novogradac & Co., LLP, or such other firm of
independent certified public accountants as may be engaged for the Partnership
by the General Partner with the Consent of the Special Limited Partner.
Notwithstanding any provision of this Agreement to the contrary, the Special
Limited Partner shall have the discretion to dismiss the Accountant for cause if
such Accountant fails to provide, or untimely provides, or inaccurately
provides, the information required in Section 14.2 or Section 14.3 of this
Agreement.
"Act" shall mean the laws of the State governing limited partnerships,
as now in effect and as the same may be amended from time to time.
"Actual Tax Credit" shall mean as of any point in time, the total
amount of the LIHTC actually allocated by the Partnership to the Limited Partner
and not subsequently recaptured or disallowed, representing 99.98% of the LIHTC
actually received by the Partnership, as shown on the applicable tax returns of
the Partnership.
"Adjusted Capital Account Deficit" shall mean with respect to any
Partner, the deficit balance, if any, in such Partner's Capital Account as of
the end of the relevant fiscal period, after giving effect to the following
adjustments:
(a) credit to such Capital Account any amounts which such Partner
is obligated to restore or is deemed to be obligated to restore pursuant to the
penultimate sentences of Treasury Regulations Sections 1.704-2(g)(1) and
1.704-2(i)(5); and
(b) debit to such Capital Account the items described in Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6) of
the Treasury Regulations.
The foregoing definition of Adjusted Capital Account Deficit is
intended to comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the
Treasury Regulations and shall be interpreted consistently therewith.
"Affiliate" shall mean (a) any Person directly or indirectly
controlling, controlled by, or under common control with another Person; (b) any
Person owning or controlling 10% or more of the outstanding voting securities of
such other Person; (c) any officer, director, trustee, or partner of such other
Person; and (d) if such Person is an officer, director, trustee or general
partner, any other Person for which such Person acts in any such capacity.
"Agreement" or "Partnership Agreement" shall mean this Amended and
Restated Agreement of Limited Partnership, as it may be amended from time to
time. Words such as "herein," "hereinafter," "hereof," "hereto," "hereby" and
"hereunder," when used with reference to this Agreement, refers to this
Agreement as a whole, unless the context otherwise requires,
"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.
"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.
"Assignee" shall mean a Person who has acquired all or a portion of the
Limited Partner's or the Special Limited Partner's beneficial interest in the
Partnership and who has not been substituted in the stead of the transferor as a
Partner.
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"Bankruptcy" or "Bankrupt" shall mean the making of an assignment for
the benefit of creditors, becoming a party to any liquidation or dissolution
action or proceeding other than as a creditor, the commencement of any
bankruptcy, reorganization, insolvency or other proceeding for the relief of
financially distressed debtors, the appointment of a receiver, liquidator,
custodian or trustee, or the discounted settlement of substantially all the
debts and obligations of a debtor; and, if any of the same occur involuntarily,
the same not being dismissed, stayed or discharged within 90 days; or the entry
of an order for relief under Title 11 of the United States Code. A Partner shall
be deemed Bankrupt if any of the above has occurred to that Partner.
"Breakeven Operations" shall mean at such time as the Partnership has
Cash Receipts in excess of Cash Expenses, as determined by the Accountant and
approved by the Special Limited Partner which approval shall not be unreasonably
withheld. For purposes of this definition; (a) any one-time up-front fee paid to
the Partnership from any source shall not be included in Cash Receipts to
calculate Breakeven Operations; (b) Cash Expenses shall include the amount of
any outstanding Partnership obligations and any management fee or portion
thereof which is currently deferred and not paid; and (c) Cash Expenses shall
include the amount of any reserve required to be funded in accordance with
Article VIII that is currently deferred and not paid. In addition, Breakeven
Operations shall not occur until the Partnership has: (a) sufficiently funded a
tax and insurance reserve in an amount equal to one year's property insurance
premium and the next full installment of real estate taxes based upon improved
land; and (b) deposited into the Operating Deficit Account an amount equal to
one month's mandatory debt service payment and one month's operating expenses.
"Budget" shall mean the annual operating budget of the Partnership as
more fully described in Section 14.3 of this Agreement
"Capital Account" shall mean, with respect to each Partner, the account
maintained for such Partner comprised of such Partner's Capital Contribution as
increased by allocations to such Partner of Partnership Income (or items
thereof) and any items in the nature of income or gain which are specially
allocated pursuant to Section 10.3 or Section 10.4 hereof, and decreased by the
amount of any Distributions made to such Partner, and allocations to such
Partner of Partnership Losses (or items thereof) and any items in the nature of
expenses or losses which are specially allocated pursuant to Section 10.3 or
Section 10.4 hereof. In the event of any transfer of an interest in the
Partnership in accordance with the terms of this Agreement, the transferee shall
succeed to the Capital Account of the transferor to the extent it relates to the
transferred interest. The foregoing definition and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are intended to comply
with Treasury Regulations Section 1.704-1(b), as amended or any successor
thereto, and shall be interpreted and applied in a manner consistent with such
Treasury Regulations.
"Capital Contribution" shall mean the total amount of money, or the
Gross Asset Value of property contributed to the Partnership, if any, by all the
Partners or any class of Partners or any one Partner as the case may be (or by a
predecessor-in-interest of such Partner or Partners), reduced by any such
capital which shall have been returned pursuant to Section 7.3, Section 7.4, or
Section 7.5 of this Agreement. A loan to the Partnership by a Partner shall not
be considered a Capital Contribution.
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"Cash Expenses" shall mean all operating obligations of the Partnership
(other than those covered by Insurance) including without limitation, the
payment of the monthly Mortgage payments, the Management Agent fees, the monthly
Asset Management Fee, 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, including, but not limited to,
Insurance, Real Estate Taxes and audit, tax or accounting expenses (excluding
deductions for cost recovery of buildings; improvements and personal property
and amortization of any financing fees) and any seasonal expenses (such as snow
removal, the use of air conditioners in the middle of the summer, or heaters in
the middle of the winter) which may reasonably be expected to be paid in a
subsequent period shall be allocated equally per month over the calendar year.
Cash Expenses payable to Partners or Affiliates of Partners shall be paid after
Cash Expenses payable to third parties. Construction Loan interest and
development costs of any nature whatsoever are not Cash Expenses and shall not
be paid from Cash Receipts. The provisions of Section 6.2 govern the payment of
development costs and construction interest.
"Cash Receipts" shall mean actual cash received on a cash basis by the
Partnership from operating revenues of the Partnership, including without
limitation rental income (but not any subsidy thereof from the General Partner
or an Affiliate thereof), tenant security deposits that have been forfeited by
tenants pursuant to the laws of the State, laundry income, paid to the
Partnership, telephone hook-up or service income, cable fees or hook-up costs,
telecommunications or satellite fees or hook-up costs, but excluding
prepayments, security deposits, Capital Contributions, borrowings, the
Construction Loan, the Mortgage Loan, lump-sum payments, 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.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, or any successor statute.
"Completion of Construction" shall mean the date the Partnership
receives the required certificate of occupancy (or the local equivalent) for all
144 single family homes, 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 units in the Project. Completion of Construction further means that
the construction shall be completed in good quality, and free and clear of all
mechanic, material and similar liens. In addition to the above, Completion of
Construction shall occur only when the statutory time period for the filing of
any liens by the Contractor, subcontractors, material suppliers or any one else
entitled to file a lien against the property has lapsed unless such filed liens,
other than the Construction Loan, or 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.
"Completion Date" shall mean November 29, 2006.
4
"Compliance Period" shall mean the period set forth in Section 42(i)(1)
of the Code, as amended, or any successor statute.
"Consent of the Special Limited Partner" shall mean the prior written
consent of the Special Limited Partner.
"Construction Completion, Operating Deficit and Tax Credit Guaranty
Agreement" shall mean that agreement entered into as of even date herewith, by
and between the Partnership, the Guarantor and the Limited Partner and
incorporated herein by this reference.
"Construction Contract" shall mean the construction contract dated May
15, 2005 in the amount of $9,241,209, entered into between the Partnership and
the Contractor pursuant to which the Improvements are being constructed in
accordance with the Plans and Specifications. The Construction Contract shall be
a fixed price agreement (includes materials and labor) at a cost consistent with
the Development Budget. Any modifications to the Construction Contract require
the Consent of the Special Limited Partner.
"Construction Draw Documents" shall mean those documents as set forth
in Section 14.3 (a) of this Agreement.
Construction Inspector" shall mean that person identified in the
Construction Monitoring Agreement entered as of even date herewith.
"Construction Lender" shall mean a lender approved by the Special
Limited Partner or any successor thereto.
"Construction Loan" shall mean the loan obtained from Construction
Lender in the principal amount of $6,000,000 at an interest rate equal to the
Construction Lender Base Rate plus 2% per annum with a maturity date of March 1,
2007 to provide funds for the acquisition, renovation and/or construction and
development of the Project. Where the context admits, the term "Construction
Loan" shall include any deed, deed of trust, note, security agreement,
assumption agreement or other instrument executed by, or on behalf of, the
Partnership or General Partner in connection with the Construction Loan as
required by the Construction Lender.
"Contractor" shall mean ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. dba ▇▇▇▇▇▇▇ Affordable
Homes. Any substitution of Contractor requires the Consent of the Special
Limited Partner.
"Debt Service Coverage" shall mean for the applicable period the ratio
between the Net Operating Income (excluding Mortgage payments and the Asset
Management Fee) and the debt service required to be paid on the Mortgage(s). As
example, a 1.15 Debt Service Coverage means that for every $1.00 of debt service
required to be paid there must be $1.15 of Net Operating Income available. A
worksheet for the calculation of Debt Service Coverage is found in the Report of
Operations attached hereto as Exhibit H and incorporated herein by this
reference. For purposes of this definition: (a) any one-time up-front fee paid
to the Partnership from any source shall not be included in Cash Receipts to
calculate Debt Service Coverage; (b) Cash Expenses shall include the amount of
5
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.
"Deferred Management Fee" shall have the meaning set forth in Section
9.2(c) hereof.
"Developer" shall mean United Development Corporation.
"Development Budget" shall mean the agreed upon cost of developing the
Project and Improvements, including all construction costs based on the
Construction Contract, the Plans and Specifications, land and soft costs (which
includes, but is not limited to, financing charges, market study, Development
Fee, architect fees, etc.) The final Development Budget is referenced in the
Development, Construction and Operating Budget Agreement entered into by and
between the Partners on even date herewith, and incorporated herein by this
reference.
"Development Fee" shall mean the fee payable to the Developer for
services incident to the development and construction of the Project in
accordance with the Development Fee Agreement between the Partnership and the
Developer dated the even date herewith and incorporated herein by this
reference. Development activities do not include services for the acquisition of
land or syndication activities, or negotiations for permanent financing.
"Distributions" shall mean the total amount of money, or the Gross
Asset Value of property (net of liabilities securing such distributed property
that such Partner is considered to assume or take subject to under Section 752
of the Code), distributed to Partners with respect to their Interests in the
Partnership, but shall not include any payments to the General Partner or its
Affiliates for fees or other compensation as provided in this Agreement or any
guaranteed payment within the meaning of Section 707(c) of the Code, as amended,
or any successor thereto.
"Fair Market Value" shall mean, with respect to any property, real or
personal, the price a ready, willing and able buyer would pay to a ready,
willing and able seller of the property, provided that such value is reasonably
agreed to between the parties in arm's-length negotiations and the parties have
sufficiently adverse interests.
"First Year Certificate" shall mean the certificate to be filed by the
General Partner with the Secretary of the Treasury as required by Code Section
42(1)(1), as amended, or any successor thereto.
"Force Majeure" shall mean any act of God, strike, lockout, or other
industrial disturbance, act of the public enemy, war, blockage, public riot,
fire, flood, explosion, governmental action, governmental delay or restraint.
"General Partner(s)" shall mean Memphis 2004 LLC, and such other
Persons as are admitted to the Partnership as additional or substitute General
Partners pursuant to this Agreement. If there is more than one General Partner
of the Partnership, the term "General Partner" shall be deemed to collectively
refer to such General Partners or individually may mean any General Partner as
the context dictates.
6
"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 definition to the extent the General Partner
determines that an adjustment pursuant to Section (b) hereof is necessary or
appropriate in connection with a transaction that would otherwise result in an
adjustment pursuant to Section (d) of this definition.
If the Gross Asset Value of an asset has been determined or adjusted
pursuant to this definition, such Gross Asset Value shall thereafter be adjusted
by the depreciation taken into account with respect to such asset for purposes
of computing Income and Losses.
"Guarantor" shall mean ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. and Jo ▇▇▇▇▇ ▇▇▇▇▇▇▇.
"Hazardous Substance" shall mean and include any substance, material or
waste, including, but not limited to, asbestos, petroleum and petroleum products
(including crude oil), that is or becomes designated, classified or regulated as
"toxic" or "hazardous" or a "pollutant" or that is or becomes similarly
designated, classified or regulated, under any federal, state or local law,
regulation or ordinance including, without limitation, Compensation and
7
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.
"Improvements" shall mean the new construction of 144 single family
homes and built in accordance with the Project Documents. It shall also include
all furnishings, equipment and personal property used in connection with the
operation thereof.
"In-Balance" shall mean, at any time when calculated, when the
cumulative amount of the undisbursed Construction Loan and the undisbursed
Capital Contributions of the Limited Partner and Special Limited Partner
required to be paid-in through and including the Completion of Construction are
sufficient in the Special Limited Partner's reasonable judgment to pay all of
the following sums: (a) all costs of construction to achieve Completion of
Construction; (b) all soft costs in the development of the Project and
Improvements, including but not limited to, architect fees, land acquisition,
impact fees and costs of marketing, maintenance and leasing of the Project
units; and (c) all interest and all other sums accruing or payable under the
Construction Loan documents. In making a determination that the financing is
In-Balance, the Special Limited Partner will also consider whether the
undisbursed Capital Contributions of the Limited Partner and Special Limited
Partner, the Mortgage and other sources of permanent financing (but not Cash
Receipts) are adequate to retire the Construction Loan at the earlier of the
time of Mortgage closing and funding, or maturity of the Construction Loan.
"Incentive Management Fee" shall have the meaning set forth in Section
9.2(e) hereof.
"Income and Loss(es)" shall mean, for each fiscal year or other period,
an amount equal to the Partnership's taxable income or loss for such year or
period, determined in accordance with Code Section 703(a) (for this purpose, all
items of income, gain, loss or deduction required to be stated separately
pursuant to Code Section 703(a)(1) shall be included in taxable income or loss),
with the following adjustments:
(a) any income of the Partnership that is exempt from federal
income tax and not otherwise taken into account in computing Income or Losses
shall be added to such taxable income or loss;
(b) any expenditures of the Partnership described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to
Treasury Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into
account in computing Income and Losses shall be subtracted from such taxable
income or loss;
(c) in the event the Gross Asset Value of any Partnership asset is
adjusted pursuant to the provisions of the definition thereof, the amount of
such adjustment shall be taken into account as gain or loss from the disposition
of such asset for purposes of computing Income and Losses;
(d) gain or loss resulting from any disposition of Partnership
assets with respect to which gain or loss is recognized for federal income tax
purposes shall be computed by reference to the Gross Asset Value of the property
8
disposed of, notwithstanding that the adjusted tax basis of such property
differs from its Gross Asset Value;
(e) in lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable income or loss,
there shall be taken into account depreciation for such fiscal year or other
period, computed as provided below; and
(f) notwithstanding any other provision of this definition, any
items which are specially allocated pursuant to Section 10.3 or Section 10.4
hereof shall not otherwise be taken into account in computing Income or Losses.
Depreciation for each fiscal year or other period shall be calculated
as follows: an amount equal to the depreciation, amortization, or other cost
recovery deduction allowable with respect to an asset for such year or other
period for federal income tax purposes, except that if the Gross Asset Value of
an asset differs from its adjusted basis for federal income tax purposes at the
beginning of such year or other period, depreciation shall be an amount which
bears the same ratio to such beginning Gross Asset Value as the federal income
tax depreciation, amortization, or other cost recovery deduction for such year
or other period bears to such beginning adjusted tax basis; provided, however,
if the federal income tax depreciation, amortization, or other cost recovery
deduction for such year is zero, depreciation shall be determined with reference
to such beginning Gross Asset Value using any reasonable method selected by the
General Partner.
For purposes of this Agreement, the term Income when used alone shall
include all items of income or revenue contemplated in this Section and the term
Losses when used alone shall include all items of loss or deductions
contemplated in this Section.
"Insurance" shall mean:
(a) during construction, the Partnership will provide and
maintain, or cause the Contractor to provide and maintain, builder's risk
insurance in an amount equal to 100% of the value of the Project at the date of
completion; property damage coverage of not less than $1,000,000 per occurrence
and comprehensive general liability insurance with limits against bodily injury
of not less than $1,000,000 per occurrence, both with aggregate coverage of
$2,000,000; and worker's compensation insurance, within the State statutory
guidelines;
(b) during operations the Partnership will provide and maintain
business interruption coverage covering actual sustained loss for 12 months;
worker's compensation; hazard coverage (including but not limited to fire, or
other casualty loss to any structure or building on the Project 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;
9
(d) all Insurance polices shall name the Partnership as the named
insured, the Limited Partner as an additional insured, and WNC & Associates,
Inc. as the certificate holder;
(e) all Insurance policies shall include a provision to notify the
insured, the Limited Partner and the certificate holder prior to cancellation;
(f) hazard coverage must include inflation and building or ordinance
endorsements;
(g) the Insurance Policy or Policies shall not have a deductible
provision in excess of $1,000; and
(h) the term "Insurance" specifically excludes co-insurance or
self-insurance.
"Insurance Company" shall mean any insurance company engaged by the
General Partner for the Partnership with the Consent of the Special Limited
Partner which Insurance Company shall have an A rating or better for financial
safety by A.M. Best or Standard & Poor's. Any substitution of Insurance Company
during the term of this Agreement requires the Consent of the Special Limited
Partner.
"Interest" shall mean the entire ownership interest of a Partner in the
Partnership at any particular time, including the right of such Partner to any
and all benefits to which a Partner may be entitled hereunder and the obligation
of such Partner to comply with the terms of this Agreement.
"Involuntary Withdrawal" shall mean any Withdrawal of a General Partner
caused by death, adjudication of insanity or incompetence, Bankruptcy, or the
removal of a General Partner pursuant to Section 13.2 hereof.
"Land Acquisition Fee" shall mean the fee payable to the General
Partner in an amount equal to $8,640 for the General Partner's services in
locating, negotiating and closing on the purchase of the real property upon
which the Improvements are, or will be, erected or rehabilitated.
"LIHTC" shall mean the low income housing tax credit established by TRA
1986 and which is provided for in Section 42 of the Code, as amended, or any
successor thereto.
"Limited Partner" shall mean WNC Housing Tax Credit Fund VI Series 12,
L.P., a California limited partnership, and such other Persons as are admitted
to the Partnership as additional or Substitute Limited Partners pursuant to this
Agreement.
"Management Agent" shall mean the property management company which
oversees the property management functions for the Project and which is on-site
at the Project. The initial Management Agent shall be [▇▇▇▇▇▇▇ Enterprises,
Inc.] Any substitution of the Management Agent requires the Consent of the
Special Limited Partner.
"Management Agreement" shall mean the agreement between the Partnership
and the Management Agent for property management services. The management fee
shall equal ___% of gross revenues. The General Partner, on behalf of the
10
Partnership, shall insure that neither the Management Agreement nor any
ancillary agreement shall provide for an initial rent-up fee, a set-up fee, any
other similar pre-management fee or recurring fee for compliance monitoring or
the like payable to the Management Agent, General Partner, or Developer. The
Management Agreement shall provide that it will be terminable at will by the
Partnership at anytime following the Withdrawal or removal of the General
Partner and, in any event, on any anniversary of the date of execution of the
Management Agreement, without payment or penalty for failure to renew the same.
"Minimum Set-Aside Test" shall mean the 40-60 set-aside test pursuant
to Section 42(g), as amended and any successor thereto, of the Code with respect
to the percentage of units in the Project to be occupied by tenants whose
incomes are equal to or less than the required percentage of the area median
gross income. Notwithstanding the foregoing, the General Partner has agreed that
20% of the units will be rented to tenants with incomes of 50% or less of area
median income, adjusted for family size and 80% of the units will be rented to
tenants with incomes of 60% or less of area median income, adjusted for family
size.
"Mortgage" or "Mortgage Loan" shall mean the permanent nonrecourse
financing wherein the Partnership promises to pay a lender a principal sum plus
interest on the principal per annum. 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 provided the substitution or change has
received the Consent of the Special Limited Partner. Prior to closing the
Mortgage, the General Partner shall provide to the Special Limited Partner a
draft of the Mortgage documents for review and approval and the income and
expense statements for the Partnership showing Cash Receipts and Cash Expenses
for each and every month since issuance of the certificate of occupancy. Based
on the draft Mortgage documents and the income and expense statements, if the
Debt Service Coverage of those Mortgage Loans requiring an amortized monthly
principal and interest payment falls below 1.15 based on then current Cash
Expenses and Cash Receipts then the General Partner shall adjust the principal
loan amount and close on a Mortgage which will produce a 1.15 Debt Service
Coverage. The Mortgage funds shall be used to retire the Construction Loan and
if there are any funds remaining the Mortgage funds shall be used to retire any
outstanding hard construction costs including labor and materials.
Notwithstanding the foregoing, if the interest rate at the time of closing the
Mortgage is less than the amount stated, the General Partner shall not increase
the principal amount of the Mortgage even if the Debt Service Coverage remains
at or above 1.15.
"Net Operating Income" shall mean the cash available for Distribution
on an annual basis, when Cash Receipts exceed Cash Expenses.
"Nonrecourse Deductions" shall have the meaning given it in Treasury
Regulations Section 1.704-2(b)(1).
11
"Nonrecourse Liability" shall have the meaning given it in Treasury
Regulations Section 1.704-2(b)(3).
"Operating Deficit" shall mean, for the applicable period, insufficient
funds to pay Partnership operating costs when Cash Expenses exceed Cash
Receipts, as determined by the Accountant and approved by the Special Limited
Partner.
"Operating Deficit Guarantee Period" shall mean the period commencing
the date the first unit in the Project is available for its intended use and
ending three years following the achievement of three consecutive months of
Breakeven Operations. The Operating Deficit Guarantee Period will not expire
unless the Partnership has achieved Completion of Construction of the Project.
"Operating Loans" shall mean loans made by the General Partner to the
Partnership pursuant to Article VI of this Agreement, which loans are repayable
only as provided in Article XI of this Agreement.
"Original Limited Partner" shall mean United Development Corporation.
"Partner(s)" shall collectively mean the General Partner, the Limited
Partner and the Special Limited Partner or individually may mean any Partner as
the context dictates.
"Partner Nonrecourse Debt" shall have the meaning set forth in Section
1.704-2(b)(4) of the Treasury Regulations.
"Partner Nonrecourse Debt Minimum Gain" shall mean an amount, with
respect to each Partner Nonrecourse Debt, equal to the Partnership Minimum Gain
that would result if such Partner Nonrecourse Debt were treated as a Nonrecourse
Liability, determined in accordance with Section 1.704-2(i)(3) of the Treasury
Regulations.
"Partner Nonrecourse Deductions" shall have the meaning set forth in
Sections 1.704-2 (i)(1) and 1.704-2(i)(2) of the Treasury Regulations.
"Partnership" shall mean the limited partnership continued under this
Agreement.
"Partnership Minimum Gain" shall mean the amount determined in
accordance with the principles of Treasury Regulation Sections 1.704-2(b)(2) and
1.704-2(d).
"Permanent Mortgage Commencement" shall mean the first date on which
all of the following have occurred: (a) the Construction Loan shall have been
repaid in full; (b) the Mortgage shall have closed and funded; and (c)
amortization of the Mortgage shall have commenced.
"Person" shall mean an individual, proprietorship, trust, estate,
partnership, joint venture, association, company, corporation or other entity,
as the circumstances demonstrate.
12
"Plans and Specifications" shall mean the plans, blueprints and
specifications manual for the construction of the Improvements which are
approved by the local city/county building department with jurisdiction over the
construction of the Improvements and which Plans and Specifications are referred
to in the Construction Contract. The General Partner agrees to assure that the
Contractor completes construction in accordance with the Plans and
Specifications. Any changes to the Plans and Specifications after approval by
the appropriate government building department shall require the Consent of the
Special Limited Partner.
"Project" shall mean the 144 single family homes to be built on
scattered lots in qualified census tracts in Memphis, Shelby County, Tennessee,
as more fully described in Exhibit A attached hereto and incorporated herein by
this reference.
"Project Documents" shall mean all documents relating to the
Construction Loan, Mortgage Loan, Construction Contract, Title Policy and
Partnership Agreement. It shall also include all documents required by any
governmental agency having jurisdiction over the Project in connection with the
development, construction and financing of the Project, including but not
limited to, the approved Plans and Specifications for the development and
construction of the Project.
"Projected Annual Tax Credits" shall mean LIHTC in the amount of
$379,091 for 2007, $699,860 for 2008 through 2016, and $320,769 for 2017, which
the General Partner has projected to be the total amount of LIHTC which will be
allocated to the Limited Partner by the Partnership, constituting 99.98% of the
aggregate amount of LIHTC of $7,000,000 to be available to the Partnership.
"Projected Tax Credits" shall mean LIHTC in the aggregate amount of
$7,000,000.
"Qualified Tenants" shall mean any tenants who have incomes of 60% (or
such smaller percentage as the General Partner shall agree) or less of the area
median gross income, as adjusted for family size, so as to make the Project
eligible for LIHTC.
"Real Estate Taxes" shall mean the sum required to be paid annually by
the Partnership to the tax assessor, school district or similar representative,
of Memphis/Shelby County, Tennessee for real estate taxes assessed against the
Project. The Real Estate Taxes are payable as follows: City of Memphis real
property taxes due date is June 1 and Shelby County real property taxes due date
is October 1.
"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 units in
the Project cannot exceed 30% of the qualifying income levels of those units
under Section 42.
"Revised Projected Tax Credits" shall have the meaning set forth in
Section 7.4(a) hereof.
"Sale or Refinancing" shall mean any of the following items or
transactions: a sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Partnership, a condemnation of or
casualty at the Project or any part thereof, a claim against a title insurance
13
company, the refinancing of any Mortgage or other indebtedness of the
Partnership and any similar item or transaction; provided, however, that the
payment of Capital Contributions by the Partners shall not be included within
the meaning of the term "Sale or Refinancing."
"Sale or Refinancing Proceeds" shall mean all cash receipts of the
Partnership arising from a Sale or Refinancing (including principal and interest
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 Project.
"Special Limited Partner" shall mean WNC Housing, L.P., a California
limited partnership, and such other Persons as are admitted to the Partnership
as additional or substitute Special Limited Partners pursuant to this Agreement.
"State" shall mean the State of Tennessee.
"State Tax Credit Agency" shall mean the state agency of Tennessee
which has the responsibility and authority to administer the LIHTC program in
Tennessee.
"Substitute Limited Partner" shall mean any Person who is admitted to
the Partnership as a Limited Partner pursuant to Section 12.5 or acquires the
Interest of the Limited Partner pursuant to Section 7.3 of this Agreement.
"Tax Credit" shall mean any credit permitted under the Code or the law
of any state against the federal or a state income tax liability of any Partner
as a result of activities or expenditures of the Partnership including, without
limitation, LIHTC.
"Tax Credit Compliance Fee" shall mean the fee payable to the General
Partner in accordance with Section 9.2(f) of this Agreement.
"Tax Credit Conditions" shall mean, for the duration of the Compliance
Period, any and all restrictions including, but not limited to: (a) the land use
restriction agreement required by the State Tax Credit Agency to be recorded
against the Project; and (b) any applicable federal, state and local laws, rules
and regulations, which must be complied with in order to qualify for the LIHTC
or to avoid an event of recapture in respect of the LIHTC.
"Tax Credit Period" shall mean the 10-year time period referenced in
Code Section 42(f)(1) over which the Projected Tax Credits are allocated to the
Partners. It is the intent of the Partners that the Projected Tax Credits will
be allocated during the Tax Credit Period and not a longer term.
"Title Policy" shall mean the policy of insurance covering the fee
simple title to the Project from a company approved by the Special Limited
Partner. The Title Policy shall be an ALTA owners title policy including the
following endorsements: non-imputation, Fairways, access, contiguity, survey,
owner's comprehensive, zoning and subdivision, if available. The Title Policy
14
shall also insure against rights-of-way, easements, blanket easement or claims
of easements, not shown by public records. During construction of the
Improvements, the Title Policy shall be in an amount equal to the Construction
Loan amount and the Limited Partner's Capital Contribution. Upon Permanent
Mortgage Commencement, the Title Policy shall be in an amount equal to the
Mortgage amount and the Limited Partner's Capital Contribution. If allowed by
the title company, the Title Policy shall name the Limited Partner and the
Special Limited Partner as insured parties, or, if including the Limited Partner
and Special Limited Partner as insured parties is not allowed, the Title Policy
shall reference them "as their interests may appear in the partnership agreement
of the owner."
"TRA 1986" shall mean the Tax Reform Act of 1986.
"Treasury Regulations" shall mean the Income Tax Regulations
promulgated under the Code, as such regulations may be amended from time to time
(including corresponding provisions of succeeding regulations).
"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 "Memphis 2004.0 LP."
ARTICLE III.
PRINCIPAL EXECUTIVE OFFICE/AGENT FOR SERVICE
Section 3.1 Principal Executive Office.
The principal executive office of the Partnership is located at ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ or at such other place or places within the
State as the General Partner may hereafter designate.
Section 3.2 Agent for Service of Process.
The name of the agent for service of process on the Partnership is
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. , whose address is ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
15
ARTICLE IV.
PURPOSE
Section 4.1 Purpose of the Partnership.
The purpose of the Partnership is to acquire, construct, own and
operate the Project 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 Project at the conclusion of the Compliance
Period. The Partnership shall not engage in any business or activity that is not
incident to the attainment of such purpose.
Section 4.2 Authority of the Partnership.
In order to carry out its purpose, the Partnership is empowered and
authorized to do any and all acts and things necessary, appropriate, proper,
advisable or incidental to the furtherance and accomplishment of its purpose,
and for protection and benefit of the Partnership in accordance with the
Partnership Agreement, including but not limited to the following: acquire
ownership of the real property referred to in Exhibit A attached hereto;
construct, renovate, rehabilitate, and own the Project in accordance with the
Project Documents; provide housing to Qualified Tenants, subject to the Minimum
Set-Aside Test and the Rent Restriction Test and consistent with the
requirements of the Project Documents so long as any Project Documents remain in
force; maintain and operate the Project, 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 Project during its rent-up
and after its rent-up period in accordance with this Agreement; enter into the
Construction Loan and Mortgage; rent dwelling units in the Project from time to
time, in accordance with the provisions of the Code applicable to LIHTC; and do
any and all other acts and things necessary or proper in accordance with this
Agreement.
ARTICLE V.
TERM
The Partnership term commenced upon the filing of the Certificate of
Limited Partnership in the office of, and on the form prescribed by, the
Secretary of State of Tennessee, and shall continue until December 31, 2052
unless terminated earlier in accordance with the provisions of this Agreement or
as otherwise provided by law.
ARTICLE VI.
GENERAL PARTNER'S CONTRIBUTIONS AND LOANS
Section 6.1 Capital Contribution of General Partner.
The General Partner shall make a Capital Contribution equal to $100.
16
Section 6.2 Construction Obligations.
The General Partner hereby guarantees lien free Completion of
Construction of the Project on or before the Completion Date ("Completion
Date"). The General Partner further guarantees that the development of the
Project and Improvements will not exceed a total development cost of $11,281,560
("Development Budget"), which includes all hard and soft costs incident to the
acquisition, development and construction of the Project in accordance with the
Development Budget and the Project Documents. If the actual hard costs and soft
costs of developing and constructing the Project and Improvements exceed the
Development Budget then the General Partner shall advance the money to the
Partnership to pay the additional costs. Notwithstanding the foregoing, at any
time during construction and prior to Permanent Mortgage Commencement, if the
Special Limited Partner or the Construction Lender, in good faith, determines
that the actual construction and development costs exceed the line item costs
(excluding the Development Fee) referenced in the Development, Construction and
Operating Budget Agreement then the General Partner shall be responsible for and
shall be obligated to advance and deposit into the Construction Lender's
construction account, or similar disbursement agent's account, the difference
thereof for payment to the Contractor or other vendors, suppliers, or
subcontractors. In addition, at any time prior to Completion of Construction, if
the Special Limited Partner or Construction Lender, in good faith, determines
that there are insufficient funds to achieve Completion of Construction or the
funds are not available in accordance with the funding requirements of the
Construction Lender or this Agreement, the General Partner shall advance and
deposit into the Construction Lender's construction account, or similar
disbursement account, the amount requested by the Special Limited Partner or
Construction Lender to pay a current construction draw or an amount necessary to
achieve Completion of Construction. Said advance shall be made and documented
with an approved draw request within 30 days of receiving written notice from
the Special Limited Partner. Any advances by the General Partner pursuant to
this Section shall be repayable to the General Partner as an interest free loan.
Section 6.3 Operating Obligations.
From the date the first unit in the Project is available for its
intended use until 3 consecutive months of Breakeven Operations, the General
Partner will immediately provide to the Partnership the necessary funds to pay
Operating Deficits as an Operating Loan pursuant to this Section 6.3, which
funds shall be repayable, shall not change the Interest of any Partner and shall
not be considered a guaranteed payment to the Partnership for cost overruns. For
the balance of the Operating Deficit Guarantee Period the General Partner will
immediately provide Operating Loans to pay any Operating Deficits. The aggregate
maximum amount of the Operating Loan(s) the General Partner will be obligated to
lend will be $1,209,000, which is equal to one year's operating expenses
(including debt and reserves) as agreed to by the General Partner and the
Special Limited Partner. Each Operating Loan shall be nonrecourse to the
Partners, and shall be repayable out of the available Net Operating Income or
Sale or Refinancing Proceeds in accordance with Article XI of this Agreement.
17
Section 6.4 Other General Partner Loans.
Unless provided elsewhere, after expiration of the Operating Deficit
Guarantee Period, with the Consent of the Special Limited Partner, the General
Partner may loan to the Partnership any sums required by the Partnership and not
otherwise reasonably available to it. Any such loan shall bear simple interest
(not compounded) at the 10-year Treasury money market rate in effect as of the
day of the General Partner loan, or, if lesser, the maximum legal rate. The
maturity date and repayment schedule of any such loan shall be as agreed to by
the General Partner and the Special Limited Partner. The terms of any such loan
shall be evidenced by a written instrument. The General Partner shall not charge
a prepayment penalty on any such loan. Any loan in contravention of this Section
shall be deemed an invalid action taken by the General Partner and such advance
will be classified as a General Partner Capital Contribution. Notwithstanding
this provision, the General Partner remains obligated to the Partnership,
Limited Partner and Special Limited Partner as required in accordance with the
State limited partnership act, as amended from time to time.
ARTICLE VII.
CAPITAL CONTRIBUTIONS OF LIMITED PARTNER
AND SPECIAL LIMITED PARTNER
Section 7.1 Original Limited 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 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 and Special Limited Partner.
The Limited Partner and the Special Limited Partner shall make a
Capital Contribution in the aggregate amount of $5,249,475, as may be adjusted
in accordance with Section 7.4 of this Agreement, in cash on the later of the
Limited Partner's receipt and approval of the following documents.
(a) $150,000 (which includes the Special Limited Partner's Capital
Contribution of $525 and a pre-development loan in the amount of $135,000)
shall be payable upon the Limited Partner's receipt and approval of the
following documents:
(i) payment of $15,000 for costs and expenses incurred in connection
with the Limited Partner's or its Affiliate's underwriting of the Project
and Improvements.
(ii) an executed Development, Construction and Operating Budget
Agreement;
18
(iii) an executed Construction Completion, Operating Deficit and Tax
Credit Guaranty Agreement; and
(iv) an executed Development Fee Agreement and Development Fee
Guaranty Agreement.
(b) $1,950,105 shall be payable upon the Limited Partner's receipt and
approval of the following documents:
(i) a legal opinion in a form substantially similar to the form of
opinion attached hereto as Exhibit B and incorporated herein by this
reference;
(ii) a fully executed Certification and Agreement in the form attached
hereto as Exhibit C and incorporated herein by this reference;
(iii) a copy of the Title Policy;
(iv) Insurance required during construction;
(v) a copy of the recorded grant deed (warranty deed);
(vi) an executed commitment from the Mortgage lender to provide the
Mortgage;
(vii) a fully executed Construction Loan;
(viii) the construction draw disbursement procedure; and
(ix) an audited cost certification together with the Accountant's
workpapers verifying that the Partnership has expended the requisite 10% of
reasonably expected cost basis to meet the carryover test provisions of
Code Section 42.
Notwithstanding the foregoing, the second Capital Contribution payment
will be paid in installments based upon approved draw requests in
accordance with the Construction Monitoring Agreement.
(c) $2,624,475 shall be payable upon the Limited Partner's receipt and
approval of the following documents:
(i) the Construction Inspector's certification of 50% completion of
the total construction;
(ii) any documents previously not provided to the Limited Partner but
required pursuant to this Section 7.2 and Sections 14.3(a) and (b);
(iii) copies of all lien releases (partial or final, as applicable)
from the Contractor and subcontractors; and
19
(iv) a determination by the Special Limited Partner that the
construction and financing are In-Balance.
(v) evidence that the General Partner has purchased and implemented a
professional property management software system that will include, but not
be limited to, a rent roll, accounts payable, and general ledger system.
(d) $499,895 shall be payable upon the Limited Partner's receipt and
approval of the following documents:
(i) a certificate of occupancy (or equivalent evidence of local
occupancy approval if a permanent certificate is not available) on all the
units in the Project confirming the units are being placed in service for
their intended purpose;
(ii) 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;
(iii) 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;
(iv) Insurance required during operations;
(v) any documents previously not provided to the Limited Partner but
required pursuant to this Section 7.2 and Sections 14.3(a) and (b);
(vi) copies of all lien releases (partial or final, as applicable)
from the Contractor and subcontractors; and
(vii) a determination by the Special Limited Partner that the amount
of the remaining Capital Contributions and other financing funds are equal
to or exceed the difference between the Construction Loan and Mortgage in
order to retire the Construction Loan.
The Limited Partner and Special Limited Partner require receipt and
approval of 100% of the initial tenant files as specified in a subsequent
Capital Contribution payment. The time required to collect, review and
correct, if applicable, tenant files can be substantial. Therefore, to
expedite the process, the General Partner shall send tenant files to the
Special Limited Partner as soon as the file is complete instead of waiting
to send the files all at one time.
(viii) Mortgage Loan documents signed and the Mortgage funded;
(ix) an updated Title Policy dated no more than 10 days prior to the
scheduled Capital Contribution confirming that there are no liens, claims
or rights to a lien or judgments filed against the property or the Project
during the time period since the issuance of the Title Policy referenced
above in Section 7.2(a);
20
(x) an as-built survey adhering to the requirements referenced in
Exhibit I attached hereto and incorporated herein and a surveyor's
certification as referenced in Exhibit I;
(xi) the current rent roll evidencing a minimum 90% occupancy by
Qualified Tenants for 90 consecutive days immediately prior to funding and
100% LIHTC qualified units;
(xii) copies of all initial tenant files including executed lease
agreements, completed applications, completed questionnaires or checklist
of income and assets, documentation of third party verification of income
and assets, income certification forms (LIHTC specific) and any other form
or document collected by the Management Agent, or General Partner,
verifying each tenant's eligibility pursuant to the Minimum Set-Aside Test
and other applicable guidelines under Section 42 of the Code. For purposes
of this subsection only, the Limited Partner only requires receipt of all
the tenant documents, as described above, and approval of 10% of the
initial tenant files. Approval of the balance of the tenant files is
withheld for a subsequent Capital Contribution payment;
(xiii) Completion of Construction;
(xiv) a construction closeout binder, which shall include, but not be
limited to, as-built drawings, all operating manuals, and all manufacturing
warranty agreements. In addition, the Contractor shall provide the
Partnership a one-year warranty on all parts, materials and work-quality;
(xv) an audited construction cost certification that includes an
itemization of development, acquisition, and construction or rehabilitation
costs of the Project, the Land Acquisition Fee, the Syndication Fee and the
eligible basis and applicable percentage of each building of the Project;
and
(xvi) Debt Service Coverage of 1.15 for 90 consecutive days
immediately prior to funding.
(xvii) a copy of the recorded declaration of restrictive
covenants/extended use agreement entered into between the Partnership and
the State Tax Credit Agency;
(xviii) 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;
(xix) a fully signed Internal Revenue Code Form 8609, or any successor
form;
(xx) the first year tax return in which Tax Credits are taken by the
Partnership, unless the Tax Credits are deferred until the following year
and such deferral has been approved by the Special Limited Partner;
21
(xxi) the audited Partnership financial statements required by Section
14.2 for the year the Project is placed-in-service ; and
Notwithstanding the above conditions to this Capital Contribution
payment, the Limited Partner's payment will be held in escrow until copies
of all the signed Mortgage documents have been received by the Limited
Partner.
(e) $25,000 shall be payable upon the Special Limited Partner's approval of
the initial tenant files and any documents previously not provided to the
Limited Partner but required pursuant to this Section 7.2 and Sections
14.3(a) and (b). The initial tenant files will be reviewed at the Limited
Partner's expense by an independent third-party. In the event that the
independent third-party and the Special Limited Partner recommend
corrections to an initial tenant file, the General Partner will cause the
Management Agent to correct the tenant file and provide the corrected
tenant file to the Limited Partner. The Limited Partner may withhold all or
any portion of a Capital Contribution payment until it has received all the
initial tenant files and the same have been reviewed, corrected, and
approved.
Section 7.3 Repurchase of Limited Partner's and Special Limited Partner's
Interests.
Within 60 days after the General Partner receives written demand from
the Limited Partner and/or the Special Limited Partner, the Partnership shall
repurchase the Limited Partner's Interest and/or the Special Limited Partner's
Interest in the Partnership by refunding to it in cash the full amount of the
Capital Contribution which the Limited Partner and/or the Special Limited
Partner has theretofore made in the event that, for any reason, the Partnership
shall fail to:
(a) cause the Project to be placed in service within 6 months of the
Completion Date;
(b) achieve 100% occupancy of the Project by Qualified Tenants by January
1, 2008;
(c) obtain Permanent Mortgage Commencement by April 1, 2008;
(d) at any time before the Completion Date, prevent a foreclosure, or
abandonment of the Project or fail to lift any order restricting
construction of the Project;
(e) prior to completion of the Improvements, prevent the Construction
Lender from sending a notice of default under the Construction Loan;
(f) replace a withdrawn Mortgage Loan commitment with a comparable
commitment acceptable to the Special Limited Partner within a reasonable
period of time;
(g) meet both the Minimum Set-Aside Test and the Rent Restriction Test not
later than December 31 of the first year the Partnership elects the LIHTC
to commence in accordance with the Code; or
22
(h) obtain a carryover allocation, within the meaning of Section 42 of the
Code, from the State Tax Credit Agency on or before the due date.
Section 7.4 Adjustment of Capital Contributions.
(a) The amounts of the Limited Partner's and the Special Limited Partner's
Capital Contributions were determined in part upon the amount of Tax
Credits that were expected to be available to the Partnership at a cost of
$0.75 for each dollar of Tax Credit received, and were based on the
assumption that the Partnership would be eligible to claim, in the
aggregate, the Projected Tax Credits. If the anticipated amount of
Projected Tax Credits to be allocated to the Limited Partner and Special
Limited Partner as evidenced by IRS Form 8609, Schedule A thereto, or by
the tax certification required in accordance with Section 7.2, provided to
the Limited Partner and Special Limited Partner are different than 99.99%
of $7,000,000 then the new Projected Tax Credit amount, if applicable,
shall be referred to as the "Revised Projected Tax Credits." The Limited
Partner's and Special Limited Partner's Capital Contribution provided for
in Section 7.2 shall be equal to 75% times the Projected Tax Credits or the
Revised Projected Tax Credits, if applicable, anticipated to be allocated
to the Limited Partner and Special Limited Partner. If any Capital
Contribution adjustment referenced in this Section 7.4(a) is a reduction
which is greater than the remaining Capital Contribution to be paid by the
Limited Partner, then the General Partner shall have 90 days from the date
the General Partner receives notice from either the Limited Partner or the
Special Limited Partner to pay the shortfall to the Partner whose Capital
Contribution is being adjusted. The amount paid by the General Partner
pursuant to this Section will be deemed to be a Capital Contribution by the
General Partner. Notwithstanding anything to the contrary in this
Agreement, the General Partner's Capital Contribution required to be paid
by this Section shall be disbursed to the Limited Partner as a return of
capital. If the Capital Contribution adjustment referenced in this Section
7.4(a) is an increase then the Partner whose Capital Contribution is being
adjusted shall have 90 days from the date the Limited Partner and Special
Limited Partner have received notice from the General Partner to pay the
increase.
(b) The General Partner is required to use its best efforts to rent 100% of
the Project's units to Qualified Tenants throughout the Compliance Period.
If, at the end of any calendar year following the year in which the Project
is placed in service, the Actual Tax Credit for the applicable fiscal year
or portion thereof is or will be less than the Projected Annual Tax Credit,
or the Projected Annual Tax Credit as modified by Section 7.4(a) of this
Agreement if applicable (the "Annual Credit Shortfall"), then the next
Capital Contribution owed by the Limited Partner shall be reduced by the
Annual Credit Shortfall amount, and any portion of such Annual Credit
Shortfall in excess of such Capital Contribution shall be applied to reduce
succeeding Capital Contributions of the Limited Partner. If the Annual
Credit Shortfall is greater than the Limited Partner's remaining Capital
Contributions, then the General Partner shall pay to the Limited Partner
the excess of the Annual Credit Shortfall over the remaining Capital
Contributions. The General Partner shall have 60 days to pay the Annual
Credit Shortfall from the date the General Partner receives notice from the
Special Limited Partner. The provisions of this Section 7.4(b) shall apply
equally to the Special Limited Partner in proportion to its Capital
Contribution and anticipated annual Tax Credit. The amount paid by the
General Partner pursuant to this Section will be deemed to be a Capital
23
Contribution by the General Partner. Notwithstanding anything to the
contrary in this Agreement, the General Partner's Capital Contribution
required by this Section shall be disbursed to the Limited Partner as a
return of capital.
(c) The General Partner has represented, in part, that the Limited Partner
will receive Projected Annual Tax Credits of $379,091 in 2007 and $699,860
in 2008. In the event the total of the 2007 and 2008 Actual Tax Credits are
less than the sum of such 2007 and 2008 Projected Annual Tax Credits then
the Limited Partner's Capital Contribution shall be reduced by an amount
equal to 75% times the difference between the sum of the Projected Annual
Tax Credits for 2007 and 2008 and the sum of the Actual Tax Credits for
2007 and 2008. If the sum of the 2007 and 2008 Actual Tax Credits are less
than the sum of the 2007 and 2008 Projected Annual Tax Credits projected
then the Special Limited Partner's Capital Contribution shall be reduced
following the same equation referenced in the preceding sentence. If, at
the time of determination thereof, the Capital Contribution adjustment
referenced in this Section 7.4(c) is greater than the balance of the
Limited Partner's or Special Limited Partner's Capital Contribution payment
which is then due, if any, then the excess amount shall be paid by the
General Partner to the Limited Partner and/or the Special Limited Partner
within 60 days of the General Partner receiving notice of the reduction
from the Limited Partner and/or the Special Limited Partner. The amount
paid by the General Partner pursuant to this Section will be deemed to be a
Capital Contribution by the General Partner. Notwithstanding anything to
the contrary in this Agreement, the General Partner's Capital Contribution
required by this Section shall be disbursed to the Limited Partner as a
return of capital.
(d) The Partners recognize and acknowledge that the Limited Partner and the
Special Limited Partner are making their Capital Contribution, in part, on
the expectation that the Projected Tax Credits are allocated to the
Partners over the Tax Credit Period. If the Projected Tax Credits are not
allocated to the Partners during the Tax Credit Period then the Limited
Partner's and Special Limited Partner's Capital Contribution shall be
reduced by an amount agreed upon by the Partners, in good faith, to provide
the Limited Partner and the Special Limited Partner with their anticipated
internal rate of return.
(e) In the event there is: (1) a filing of a tax return by the Partnership
evidencing a reduction in the qualified basis or eligible basis of the
Project causing a recapture of Tax Credits previously allocated to the
Limited Partner or an adjustment to Schedule K-1 or a loss of future Tax
Credits; (2) a filing of a tax return by the Partnership evidencing a
disposition of the Project prior to the expiration of the Compliance Period
causing a recapture of Tax Credits previously allocated to the Limited
Partner, or an adjustment to Schedule K-1, or a loss of future Tax Credits;
(3) a reduction in the qualified basis or eligible basis of the Project for
income tax purposes following an examination or review by the Internal
Revenue Service ("IRS") resulting in a recapture or reduction of Tax
Credits previously claimed or an adjustment to Schedule K-1; (4) a decision
by any court or administrative body upholding an assessment of deficiency
against the Partnership with respect to any Tax Credit previously claimed
or tax losses previously claimed, in connection with the Project, unless
the Partnership shall timely appeal such decision and the collection of
such assessment shall be stayed pending the disposition of such appeal; or
(5) a decision of a court affirming such decision upon such appeal then, in
addition to any other payments to which the Limited Partner and/or the
24
Special Limited Partner are entitled under the terms of this Section 7.4,
the General Partner shall pay to the Limited Partner and the Special
Limited Partner within 60 days of receiving notice from the Limited Partner
and/or the Special Limited Partner the sum of (A) the amount of the Tax
Credit recapture, (B) the cumulative tax effect of a decrease in loss
allocated to the Limited Partner and Special Limited Partner by the
Partnership; (C) any interest and penalties imposed on the Limited Partner
or Special Limited Partner with respect to such recapture; (D) the
cumulative increase of taxable income allocated to the Limited Partner and
Special Limited Partner by the Partnership; (E) an amount equal to the
product of the Tax Credit pricing percentage referenced in Section 7.4(a)
and future Tax Credits unable to be taken due to one of the above actions;
and (F) an amount sufficient to pay any tax liability owed by the Limited
Partner or Special Limited Partner resulting from the receipt of the
amounts specified in (A), (B), (C) and (D). The amount paid by the General
Partner pursuant to this Section will be deemed to be a Capital
Contribution by the General Partner. Notwithstanding anything to the
contrary in this Agreement, the General Partner's Capital Contribution
required by this Section shall be disbursed to the Limited Partner as a
return of Capital.
(f) The increase in the Capital Contribution of the Limited Partner and the
Special Limited Partner pursuant to Section 7.4(a) shall be subject to the
Limited Partner and Special Limited Partner having funds available to pay
any such increase at the time of its notification of such increase. For
these purposes, any funds theretofore previously earmarked by the Limited
Partner or Special Limited Partner to make other investments, or to be held
as required reserves, shall not be considered available for payment
hereunder.
Section 7.5 Return of Capital Contribution.
From time to time the Partnership may have cash in excess of the amount
required for the conduct of the affairs of the Partnership, and the General
Partner may, with the Consent of the Special Limited Partner, determine that
such cash should, in whole or in part, be returned to the Partners, pro rata, in
reduction of their Capital Contribution. No such return shall be made unless all
liabilities of the Partnership (except those to Partners on account of amounts
credited to them pursuant to this Agreement) have been paid or there remain
assets of the Partnership sufficient, in the sole discretion of the General
Partner, to pay such liabilities.
Section 7.6 Liability of Limited Partner and Special Limited Partner.
The Limited Partner and Special Limited Partner shall not be liable for
any of the debts, liabilities, contracts or other obligations of the
Partnership. The Limited Partner and Special Limited Partner shall be liable
only to make Capital Contributions in the amounts and on the dates specified in
this Agreement and, except as otherwise expressly required hereunder, shall not
be required to lend any funds to the Partnership or, after their respective
Capital Contributions have been paid, to make any further Capital Contribution
to the Partnership.
25
ARTICLE VIII.
WORKING CAPITAL AND RESERVES
Section 8.1 Replacement and Reserve Account.
The General Partner, on behalf of the Partnership, shall open a
Replacement and Reserve Account with a financial banking institution and shall
cause the Partnership to deposit thereinto an annual amount equal to $300 per
residential unit per year for the purpose of capital improvements. Said deposit
shall be made monthly in equal installments. The Replacement and Reserve Account
shall require the joint signature of the Special Limited Partner for any
withdrawals in excess of $5,000 per occurrence or $15,000 in aggregate per
calendar year. Except with respect to a sale of the Project to the General
Partner or its designee, any balance remaining in the account at the time of a
sale of the Project shall be allocated and distributed equally between the
General Partner and the Limited Partner. After the mandatory Compliance Period
and upon re-purchase of the Limited Partners' interests, the replacement reserve
shall be transferred to the General Partner or his designee with the Partnership
and shall not be included as part of equity for purposes of the calculation of
the re-purchase price.
Section 8.2 Intentionally omitted.
Section 8.3 Tax and Insurance Account.
The General Partner, on behalf of the Partnership, shall open a tax and
insurance account (the "T & I Account") for the purpose of making the requisite
Insurance premium payments and the real estate tax payments. The annual deposit
of the Partnership to the T & I Account shall equal the total annual Insurance
payment and the total annual real estate tax payment. Said amount shall be
deposited monthly in an amount equal to 1/12th of the annual required amount.
Notwithstanding the foregoing, as part of its obligation to achieve Breakeven
Operations, the General Partner shall cause the Partnership to prefund the T & I
Account in an amount equal to one year's property insurance premium and the next
full installment of real estate taxes based on improved land. Except with
respect to a sale of the Project to the General Partner or its designee, any
balance remaining in the account at the time of a sale of the Project shall be
allocated and distributed equally between the General Partner and the Limited
Partner. Any amount remaining after the mandatory Compliance Period and upon
repurchase of the Limited Partner Interests shall be transferred to the General
Partner or its designee with the Partnership and shall not be included as part
of equity. The Partnership is required to pay real estate taxes each year within
30 days after receipt of notice thereof from government entity assessing such
real estate taxes.
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
26
business and affairs, and shall have the right, power and authority, on behalf
of the Partnership, and in its name, to exercise all of the rights, powers and
authority of a partner of a partnership without limited partners. If there is
more than one General Partner, all acts, decisions or consents of the General
Partners shall require the concurrence of all of the General Partners. If a
General Partner takes action without the authorization of all the General
Partners then such act, decision, etc. shall not be deemed a valid action taken
by the General Partners pursuant to this Agreement. No 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 $975,000 in accordance with the Development Fee Agreement entered
into by and between the Developer and the Partnership on even date
herewith. The Development Fee Agreement provides, in part, that the
Development Fee shall first be paid from available proceeds in accordance
with Section 9.2(b) of this Agreement and if not paid in full then the
balance of the Development Fee will be paid in accordance with Section 11.1
of this Agreement.
(b) The Partnership shall utilize the proceeds from the Capital
Contributions paid pursuant to Section 7.2 of this Agreement for costs
associated with the development and construction of the Project including,
but not limited to, land costs, Land Acquisition Fee, architectural fees,
survey and engineering costs, financing costs, loan fees, Syndication Fee,
building materials and labor. If any Capital Contribution proceeds are
remaining after Completion of Construction and all acquisition, development
and construction costs, excluding the Development Fee, are paid in full and
the Construction Loan retired, then the remainder shall: first be paid to
the Developer in payment of the Development Fee; second be paid to the
General Partner as a reduction of the General Partner's Capital
Contribution; and any remaining Capital Contribution proceeds shall be paid
to the General Partner as a Partnership oversight fee.
(c) The Partnership shall pay to the Management Agent a property management
fee for the leasing and management of the Project in an amount in
accordance with the Management Agreement. The term of the Management
Agreement shall not exceed 1 year, and renewal of the Management Agreement
shall be automatic provided there is no material default by the General
Partner hereunder or by the Management Agent under the Management
Agreement. If the Management Agent is an Affiliate of the General Partner
and there is an Operating Deficit following the termination of the
Operating Deficit Guarantee Period or the depletion of the maximum
Operating Deficit amount pursuant to Section 6.3, whichever occurs first,
then 40% of the management fee will be deferred ("Deferred Management
Fees"). Deferred Management Fees, if any, shall be paid to the Management
Agent in accordance with Section 11.1 of this Agreement.
27
(i) The General Partner shall dismiss the Management Agent at the
request of the Special Limited Partner if the Management Agent fails to
provide or inaccurately provides the information requested in Sections 14.2
or 14.3 of this Agreement or for other cause.
(ii) The appointment of any successor Management Agent is subject to
the Consent of the Special Limited Partner which consent shall not be
unreasonably withheld, 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 annual Asset
Management Fee commencing in 2007 equal to $9,000, increasing by 3%
annually, for the Limited Partner's services in assisting with the
preparation of tax returns and the reports required in Section 14.2 and
Section 14.3 of this Agreement. The Asset Management Fee of $9,000 shall be
payable in monthly equal installments; provided, however, that if in any
year Net Operating Income is insufficient to pay the full $9,000, the
unpaid portion thereof shall accrue and be payable on a cumulative basis in
the first year in which there is sufficient Net Operating Income, as
provided in Section 11.1, or sufficient Sale or Refinancing Proceeds, as
provided in Section 11.2. The General Partner shall ensure that any accrued
Asset Management Fee will be reflected in the annual audited financial
statement.
(e) The Partnership shall pay to the General Partner through the Compliance
Period an annual Incentive Management Fee equal to 40% of Net Operating
Income commencing in 2007 for overseeing the marketing, lease-up and
continued occupancy of the Partnership's 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 Project 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. The Incentive Management
Fee shall be paid at the end of each calendar quarter payable from Net
Operating Income in the manner and priority set forth in Section 11.1 of
this Agreement. If the Incentive Management Fee is not paid in any year it
shall not accrue for payment in subsequent years.
(f) The Partnership shall pay to the General Partner through the Compliance
Period an annual Tax Credit Compliance Fee equal to 40% of Net Operating
Income commencing in 2007 for the services of the General Partner in
ensuring compliance by the Partnership and the Project with all Tax Credit
rules and regulations. The Tax Credit Compliance Fee shall be paid at the
end of each calendar quarter payable from Net Operating Income in the
manner and priority set forth in Section 11.1 of this Agreement. If the Tax
Credit Compliance Fee is not paid in any year it shall not accrue for
payment in subsequent years.
Section 9.3 Specific Powers of the General Partner.
Subject to the other provisions of this Agreement, the General Partner,
in the Partnership's name and on its behalf, may:
28
(a) employ, contract and otherwise deal with, from time to time, Persons
whose services are necessary or appropriate in connection with management
and operation of the Partnership business, including, without limitation,
contractors, agents, brokers, Accountants and Management Agents (provided
that the selection of any Accountant or Management Agent has received the
Consent of the Special Limited Partner) and attorneys, on such terms as the
General Partner shall determine within the scope of this Agreement;
(b) pay as a Partnership expense any and all costs and expenses associated
with the formation, development, organization and operation of the
Partnership, including the expense of annual audits, tax returns and LIHTC
compliance;
(c) deposit, withdraw, invest, pay, retain and distribute the Partnership's
funds in a manner consistent with the provisions of this Agreement;
(d) execute the Construction Loan and the Mortgage; and
(e) execute, acknowledge and deliver any and all instruments to effectuate
any of the foregoing.
Section 9.4 Authority Requirements.
During the Compliance Period, the following provisions shall apply.
(a) Each of the provisions of this Agreement shall be subject to, and the
General Partner covenants to act in accordance with, the Tax Credit
Conditions and all applicable federal, state and local laws and
regulations.
(b) The Tax Credit Conditions and all such laws and regulations, as amended
or supplemented, shall govern the rights and obligations of the Partners,
their 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 Project,
no title or right to the possession and control of the Project 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
Project 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:
29
(a) except as required by Section 9.4, act in contravention of this
Agreement;
(b) act in any manner which would make it impossible to carry on the
ordinary business of the Partnership;
(c) confess a judgment against the Partnership;
(d) possess Partnership property, or assign the Partner's right in specific
Partnership property, for other than the exclusive benefit of the
Partnership;
(e) admit a Person as a General Partner except as provided in this
Agreement;
(f) directly or indirectly transfer control of the General Partner;
(g) admit a Person as a Limited Partner or Special Limited Partner except
as provided in this Agreement;
(h) violate any provision of the Mortgage;
(i) cause the Project units to be rented to anyone other than Qualified
Tenants;
(j) violate the Minimum Set-Aside Test or the Rent Restriction Test for the
Project;
(k) allow the Insurance to expire;
(l) permit the Project to be without utility service except when caused by
failure of the utility company to provide such services to the Project;
(m) cause any recapture of the Tax Credits;
(n) permit any creditor who makes a nonrecourse loan to the Partnership to
have, or to acquire at any time as a result of making such loan, any direct
or indirect interest in the profits, income, capital or other property of
the Partnership, other than as a secured creditor;
(o) commingle funds of the Partnership with the funds of another Person;
(p) fail to cause the Partnership to make the Mortgage payment if the
Partnership fails to pay the same when due, subject to available funds,
including funds provided under Section 6.3 or Section 6.4;
(q) fail to cause the Accountant to issue the reports specified in Sections
14.2(a) and (b) of this Agreement;
(r) take any action which requires the Consent of the Special Limited
Partner or the consent of the Limited Partner unless the General Partner
has received said Consent;
30
(s) allow the Real Estate Taxes to be unpaid if the Partnership fails to
pay the same when due;
(t) pay any real estate commission for the sale or refinancing of the
Project;
(u) take any action that would cause a termination of the Partnership;
(v) encumber the Project, except as provided herein;
(w) execute an assignment for the benefit of creditors; or
(x) permit the Partnership to make loans 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 (except in the normal course of business to
Qualified Tenants) or otherwise dispose of the Project;
(b) incur indebtedness in the name of the Partnership other than the
Construction Loan and Mortgage, including, but not limited to, refinancing,
prepaying, or modifying the Construction Loan or Mortgage;
(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 Project to fail to qualify, or
which would cause a termination or discontinuance of the qualification of
the Project, as a "qualified low income housing project" under Section
42(g)(1) of the Code, as amended, or any successor thereto, or which would
cause the Limited Partner to fail to obtain the Projected Tax Credits or
which would cause the recapture of any LIHTC;
(g) make any expenditure of funds, or commit to make any such expenditure,
other than in response to an emergency, except as provided for in the
annual budget approved by the Special Limited Partner, as provided in
Section 14.3(i) hereof;
(h) cause the merger or other reorganization of the Partnership;
(i) dissolve the Partnership, or sell or dispose of all or substantially
all of the Partnership's assets;
31
(j) acquire any real or personal property (tangible or intangible) in
addition to the Project the aggregate value of which shall exceed $10,000
(other than easement or similar rights necessary or appropriate for the
operation of the Project);
(k) become personally liable on or in respect of, or guarantee, the
Mortgage or any other indebtedness of the Partnership or any Person;
(l) loan any money on behalf of the Partnership or pay any salary, fees or
other compensation to a General Partner or any Affiliate thereof, except as
authorized by Section 9.2 and Section 9.9 hereof or specifically provided
for in this Agreement;
(m) substitute the Accountant, Construction Inspector, Contractor or
Management Agent, as named herein, or terminate, amend or modify the
Construction Contract or any other Project Document, or grant any material
waiver or consent thereunder;
(n) change the nature of the business of the Partnership or cause the
Partnership to redeem or repurchase all or any portion of the Interest of a
Partner;
(o) cause the Partnership to convert the Project 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 in the normal day to day business of rent collections and evictions;
(r) reduce the amount of a construction budget line item (other than the
construction contingency) to provide funds for an overage in another
construction budget line item in amounts greater than $5,000, agree or
consent to any material changes in the Plans and Specifications, to any
change orders, or to any of the terms and provisions of the Construction
Contract;
(s) cause any funds to be paid to the General Partner or its Affiliates for
laundry service, cable hook-up, telephone connection, computer access,
satellite connection, compliance monitoring, initial rental set-up fee or
similar service or fee;
(t) on behalf of the Partnership, file or cause to be filed a voluntary
petition in bankruptcy under the Federal Bankruptcy Code, or file or cause
to be filed a petition or answer seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under
any statute, law or rule;
(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
32
(v) make any tax election not contemplated by this Agreement or 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;
(e) have a fiduciary responsibility to not use or permit another to use
Partnership funds or assets in any manner except for the benefit of the
Partnership;
(f) use its best efforts so that all requirements shall be met which are
reasonably necessary to obtain or achieve (1) compliance with the Minimum
Set-Aside Test, the Rent Restriction Test, and any other requirements
necessary for the Project 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 units in the Project; (3) compliance with all provisions of the Project
Documents and (4) a reservation and allocation of LIHTC from the State Tax
Credit Agency;
(g) make inspections of the Project and assure that the Project is in
decent, safe, sanitary and good condition, repair and working order,
ordinary use and obsolescence excepted, and make or cause to be made from
time to time all necessary repairs thereto (including external and
structural repairs) and renewals and replacements thereof;
(h) pay, before the same shall become delinquent and before penalties
accrue thereon all Partnership taxes, assessments and other governmental
charges against the Partnership or its properties, and all of its other
liabilities, except to the extent and so long as the same are being
contested in good faith by appropriate proceedings in such manners as not
to cause any material adverse effect on the Partnership's property,
financial condition or business operations, with adequate reserves provided
for such payments;
(i) pay, before the same becomes due or expires, the Insurance premium and
utilities for the Project;
(j) permit, and cause the Management Agent to permit, the Special Limited
Partner and its representatives: (1) to have access to the Project and
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personnel employed by the Partnership and by the Management Agent at all
times during normal business hours after reasonable notice; (2) to examine
all agreements, LIHTC compliance data and Plans and Specifications; and (3)
to make copies thereof;
(k) exercise good faith in all activities relating to the conduct of the
business of the Partnership, including the development, operation and
maintenance of the Project, and shall take no action with respect to the
business and property of the Partnership which is not reasonably related to
the achievement of the purpose of the Partnership;
(l) make any Capital Contributions, advances or loans required to be made
by the General Partner under the terms of this Agreement;
(m) establish and maintain all reserves required to be established and
maintained under the terms of this Agreement;
(n) cause the Partnership to pay, before the same becomes due, the Mortgage
payment, subject to available funds, including funds provided under Section
6.3 or Section 6.4;
(o) pay, before the same becomes due, the Real Estate Taxes;
(p) cause the Management Agent to manage the Project in such a manner that
the Project will be eligible to receive LIHTC with respect to 100% of the
units in the Project. 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
Project as required, for at least the duration of the Compliance Period;
(3) to operate the Project and cause the Management Agent to manage the
Project 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 Project
and cause the Management Agent to manage the Project so as to comply with
all other Tax Credit Conditions;
(q) cause the Accountant to issue the information required in accordance
with Sections 14.2(a) and (b);
(r) perform such other acts as may be expressly required of it under the
terms of this Agreement;
(s) maintain on its staff during construction and rent-up a trained and
experienced project manager who is responsible for the development and
construction of the Improvements, and responsible for obtaining Completion
of Construction.
(t) Intentionally omitted.
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Section 9.8 Obligations to Repair and Rebuild Project.
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 Project will be utilized to repair and rebuild the Project 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 to rebuild the
unit or units damaged by such fire or casualty.
Section 9.9 Partnership Expenses.
(a) All of the Partnership's expenses shall be billed directly to and paid
by the Partnership to the extent practicable. Reimbursements to the General
Partner, or any of its Affiliates, by the Partnership shall be allowed only
from the Partnership's Cash Expenses. The General Partner shall not be
reimbursed if the General Partner is obligated to pay the same as an
Operating Deficit during the Operating Deficit Guarantee Period, or by
operation of law in accordance with the State limited partnership act as
amended, or subject to the limitations on the reimbursement of such
expenses set forth herein in which case the General Partner shall be
responsible for payment of the expense. For purposes of this Section, Cash
Expenses shall include fees paid by the Partnership to the General Partner
or any Affiliate of the General Partner permitted by this Agreement and the
actual cost of goods, materials and administrative services used for or by
the Partnership, whether incurred by the General Partner, an Affiliate of
the General Partner or a nonaffiliated Person in performing the foregoing
functions. As used in the preceding sentence, "actual cost of goods and
materials" means the cost of the goods or services must be no greater and
preferably less than the cost of the same goods or services from
non-Affiliated vendors, contractors, or managers in the market area, and
actual cost of administrative services means the pro rata cost of personnel
(as if such persons were employees of the Partnership) associated
therewith, but in no event to exceed the amount which would be charged by
nonaffiliated Persons for comparable goods and services.
(b) Reimbursement to the General Partner or any of its Affiliates of
operating cash expenses pursuant to Subsection (a) hereof except for the
reimbursement of expenses expended by the General Partner prior to the date
hereof (which shall be repaid out of the initial capital contribution)
shall be subject to the following:
(i) 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
(ii) 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
35
operating division who reports directly to executive management; or (iv)
those holding 5% or more equity interest in such General Partner or any
such Affiliate of the General Partner or a person having the power to
direct or cause the direction of such General Partner or any such Affiliate
of the General Partner, whether through the ownership of voting securities,
by contract or otherwise.
Section 9.10 General Partner Expenses.
The General Partner or Affiliates of the General Partner shall pay all
Partnership expenses which are not permitted to be reimbursed pursuant to
Section 9.9 and all expenses which are unrelated to the business of the
Partnership.
Section 9.11 Other Business of Partners.
Any Partner may engage independently or with others in other business
ventures wholly unrelated to the Partnership business of every nature and
description, including, without limitation, the acquisition, development,
construction, operation and management of real estate projects and developments
of every type on their own behalf or on behalf of other partnerships, joint
ventures, corporations or other business ventures formed by them or in which
they may have an interest, including, without limitation, business ventures
similar to, related to or in direct or indirect competition with the Project.
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 worker-like manner in
accordance with all applicable requirements of all appropriate governmental
entities and the Plans and Specifications of the Project.
(d) The Project is being operated in accordance with standards and
procedures that are prudent and customary for the operation of properties
similar to the Project.
36
(e) All conditions to the funding of the Construction Loan have been met.
(f) No Partner has or will have any personal liability with respect to or
has or will have personally guaranteed the payment of the Mortgage.
(g) The Partnership is in compliance with all construction and use codes
applicable to the Project and is not in violation of any zoning,
environmental or similar regulations applicable to the Project.
(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 Project at the time of first occupancy and
throughout the term of the Partnership.
(i) All roads necessary for the full utilization of the Improvements have
either been completed or the necessary rights of way therefore have been
acquired by the appropriate governmental authority or have been dedicated
to public use and accepted by said governmental authority.
(j) The Partnership has Insurance written by an Insurance Company.
(k) The Partnership owns the fee simple interest in the Project.
(l) The Construction Contract has been entered into between the Partnership
and the Contractor; no other consideration or fee shall be paid to the
Contractor other than amounts set forth in the Construction Contract.
(m) The General Partner will require the Accountant to depreciate
Partnership items in accordance with Exhibit G attached hereto and
incorporated herein by this reference and provide the information required
by Sections 14.2(a) and (b) of this Agreement.
(n) To the best of the General Partner's knowledge: (1) no Hazardous
Substance has been disposed of, or released to or from, or otherwise now
exists in, on, under or around, the Project and (2) no aboveground or
underground storage tanks are now or have ever been located on or under the
Project. The General Partner will not install or allow to be installed any
aboveground or underground storage tanks on the Project. The General
Partner covenants that the Project shall be kept free of Hazardous
Substance and shall not be used to generate, manufacture, refine,
transport, treat, store, handle, dispose of, transfer, produce or process
Hazardous Substance, except in connection with the normal maintenance and
operation of any portion of the Project. The General Partner shall comply,
or cause there to be compliance, with all applicable Federal, state and
local laws, ordinances, rules and regulations with respect to Hazardous
Substance and shall keep, or cause to be kept, the Project 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
Project, any Improvements constructed on the Project, 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
37
any Hazardous Substance, and (5) of any claim made or threatened by any
Person, other than a governmental agency, against the Partnership or
General Partner arising out of or resulting from any Hazardous Substance
being present or released in, on or around any part of the Project.
(o) The General Partner has not executed and will not execute any
agreements with provisions contradictory to, or in opposition of the
provisions of this Agreement.
(p) The Partnership will allocate to the Limited Partner the Projected
Annual Tax Credits, or the Revised Projected Tax Credits, if applicable.
(q) No charges, liens or encumbrances exist with respect to the Project
other than those which are created or permitted by the Project Documents or
Mortgage or are noted or excepted in the Title Policy.
(r) The Partnership shall retain the Construction Inspector whose
responsibilities include, but are not limited to, preparing and overseeing
the construction close-out procedures upon completion; inspecting for and
overseeing resolution of the Contractor's final punch list items; receiving
and approving operation and maintenance manuals; collecting, reviewing,
approving and forwarding to the Partnership all warranties, check key count
and key schedules; and confirming turnover of spare parts and materials.
(s) The buildings on the Project 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
Project will satisfy the Minimum Set-Aside Test.
(t) All accounts of the Partnership required to be maintained under the
terms of the Project Documents, including, without limitation, any reserves
in accordance with Article VIII hereof, are currently funded to required
levels, including levels required by any governmental or lending authority.
(u) The General Partner has not lent or otherwise advanced any funds to the
Partnership other than its Capital Contribution, or Operating Deficit Loan,
if applicable, and the Partnership has no unsatisfied obligation to make
any payments of any kind to the General Partner or any Affiliate thereof.
(v) No event has occurred which constitutes a default under any of the
Project Documents.
(w) No event has occurred which has caused, and the General Partner has not
acted in any manner which will cause (1) the Partnership to be treated for
federal income tax purposes as an association taxable as a corporation, (2)
the Partnership to fail to qualify as a limited partnership under the Act,
or (3) the Limited Partner to be liable for Partnership obligations;
provided however, the General Partner shall not be in breach of this
representation if the action causing the Limited Partner to be liable for
the Partnership obligations is undertaken by the Limited Partner.
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(x) No event or proceeding, including, but not limited to, any legal
actions or proceedings before any court, commission, administrative body or
other governmental authority, and acts of any governmental authority having
jurisdiction over the zoning or land use laws applicable to the Project,
has occurred the continuing effect of which has: (1) materially or
adversely affected the operation of the Partnership or the Project; (2)
materially or adversely affected the ability of the General Partner to
perform its obligations hereunder or under any other agreement with respect
to the Project; 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
Project only insofar as they or any of them are part of the general public.
(y) Neither the Partnership nor the General Partner has any liabilities,
contingent or otherwise, which have not been disclosed in writing to the
Limited Partner and the Special Limited Partner and which in the aggregate
affect the ability of the Limited Partner to obtain the anticipated
benefits of its investment in the Partnership.
(z) Upon signing of the Construction Loan and receipt of the Construction
Lender's written start order, the General Partner will cause construction
of the Improvements to commence and thereafter will cause the Contractor to
diligently proceed with construction of the Improvements according to the
Plans and Specifications so that the Improvements can be completed by the
Completion Date.
(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 Project and increases caused
by reappraisal of all real estate within the same county. In the event the
actual real estate taxes, or property taxes, are greater than the Real
Estate Taxes specified in this Agreement and as a result of the higher real
estate tax, or property tax, the Debt Service Coverage falls below 1.15
then the General Partner will contribute additional capital to lower the
principal of the mortgage and reamortize the Mortgage so that the Debt
Service Coverage is at a sustainable 1.15, as approved by the Special
Limited Partner. If the Mortgage lender will not or cannot reamortize the
loan as specified in this Section, and the General Partner cannot obtain
another mortgage, then the General Partner will contribute additional
capital as determined by the Special Limited Partner to the T & I Account
in an amount equal to the annual difference between the actual real estate
tax, or property tax, over the Real Estate Taxes specified in this
Agreement times the number of years remaining on the 15-year LIHTC
compliance term. Any payment by the General Partner pursuant to this
section shall be in addition to the General Partner's obligation to fund
Operating Deficits.
39
(bb) The Partnership will maintain a Debt Service Coverage of not less than
1.15 and will not close on a permanent loan or refinance a Mortgage loan if
the Debt Service Coverage would fall below 1.15.
(cc) The General Partner will ensure that the Architect of Record will have
a policy of professional liability insurance in an amount not less than
$1,000,000, which policy should remain in force for a period of at least 2
years after the closing and funding of the Mortgage.
(dd) The General Partner and the Guarantor have and shall maintain an
aggregate net worth equal to at least $5,000,000 computed in accordance
with generally accepted accounting principles.
(ee) The Partnership is in compliance with and will maintain compliance
with the requirements of the federal Fair Housing Act of 1968 (42 U.S.C.
3600 et seq.) as amended, with respect to the Project.
(ff) Neither the General Partner nor its Affiliates will take any action or
agree to any terms or conditions that are contrary to, or in disagreement
with, the tax credit application used to secure the LIHTC, or the land use
restriction agreement required to be recorded against the Project.
The General Partner shall be liable to the Limited Partner for any
costs, damages, loss of profits, diminution in the value of its investment in
the Partnership, or other losses, of every nature and kind whatsoever, direct or
indirect, realized or incurred by the Limited Partner as a result of any
material breach of the representations and warranties set forth in this Section
9.12.
Section 9.13 Indemnification of the Partnership and the Limited Partners.
The General Partner will indemnify and hold the Partnership and the
Limited Partners harmless from and against any and all losses, damages and
liabilities (including reasonable attorney's fees) which the Partnership or any
Limited Partner may incur by reason of the past, present, or future actions or
omissions of the General Partner or any of its Affiliates that constitute gross
negligence or willful misconduct, fraud, malfeasance, breach of fiduciary duty,
or breach of any material provision of this Agreement that has a material
adverse effect on the Project, the Partnership or any Limited Partner.
Section 9.14 Option to Acquire.
At any time after expiration of the Compliance Period, the General
Partner may give notice (the "GP Notice") to the Limited Partner that it desires
to purchase the entire Interest of each of the Limited Partner and the Special
Limited Partner in the Partnership. Upon receipt by the Limited Partner and the
Special Limited Partner, the following events shall occur:
(a) The purchase price of the Interests shall be determined as of the date
of the GP Notice. The purchase price shall be the greater of (i) the
aggregate of the Fair Market Value of the Interest of the Limited Partner
and the Fair Market Value of the Interest of the Special Limited Partner or
40
(ii) the "Tax Amount" as hereinafter defined. The Fair Market Value of the
Interests shall be determined after taking into consideration any
outstanding loans and accrued fees due under this Agreement. The parties
hereto agree that the value of the Limited Partner's and Special Limited
Partner's Interests shall be calculated by determining the amount that the
Limited Partner and Special Limited Partner would receive upon the sale of
the Project (i.e., the Limited Partner would receive 9.99% and the Special
Limited Partner would receive 0.01% of the net amount equal to the
appraised value less the amount of any outstanding debts and accrued fees).
(b) The Limited Partner and the Special Limited Partner shall negotiate
with the General Partner for a period of 30 days after the GP Notice is
received to agree upon the Fair Market Value of their respective Interests.
In the event an agreement is not reached within such 30 day period, then
the General Partner or the Special Limited Partner may request that Fair
Market Value be determined in accordance with the process set forth below
by sending notice (the "Appraisal Notice") of same to the other party
within 15 days after the expiration of the 30 day period. If an Appraisal
Notice is not sent by either party within such 15 day period, then the
General Partner's option shall expire.
(c) If the respective Fair Market Value of the Interests of the Limited
Partner and the Special Limited Partner are not agreed upon as provided
above and either the General Partner or the Special Limited Partner issues
to the other Person an Appraisal Notice, then the Fair Market Value of such
Interests shall be determined by an appraisal. The appraisal shall be
conducted by an independent appraiser satisfactory to the General Partner
and the Special Limited Partner or, in the event that a single independent
appraiser cannot be agreed upon within 30 days following the date of the
Appraisal Notice, the General Partner and the Special Limited Partner shall
each select an independent appraiser and the appraisers so selected shall
select a third independent appraiser. All appraisers so designated shall be
experienced in accounting, business or real estate appraisal. The appraiser
or appraisers shall determine the Fair Market Value of the Interest of each
of the Limited Partner and the Special Limited Partner and the parties
hereto agree that the appraisal shall be based on the income valuation
approach. The decision of the appraisers (if more than one) shall be made
by the majority of such appraisers. The appraiser or appraisers shall
render a written report setting forth the Fair Market Value of such
Interests, which decision shall be rendered as expeditiously as possible by
the appraiser or appraisers and which decision shall be final and binding
upon the parties. The reasonable fees and expenses of the appraiser or
appraisers shall be paid one-half by the General Partner and one-half by
the Limited Partner. For purposes of this calculation, the amount of the
replacement reserve or any other reserves required hereunder shall not be
taken into account in determining Fair Market Value.
(d) The "Tax Amount" shall mean the dollar amount computed in the following
fashion:
(i) The Limited Partner and the Special Limited Partner shall be
deemed to have gain in an amount equal to the difference between their
respective basis in the Project and an amount equal to the total
forgiveness of debt which would be realized by the Limited Partner and the
Special Limited Partner computed as if the Limited Partner and the Special
41
Limited Partner abandoned their Interests in the Partnership on the date of
the GP Notice. The Tax Amount shall equal the deemed gain as computed above
by a tax rate(s) applied to such gain. The tax rate shall be the highest
individual rate stated in the Code applicable to the type of income (and if
there is more than one rate applicable because of more than one type of
income, the different rates shall be applied to the appropriate portions of
such income). The Limited Partner shall cooperate to expeditiously
determine the Tax Amount.
(e) Following determination of the purchase price, the General Partner
shall have 30 days thereafter to determine whether the General Partner will
purchase the Interests of the Limited Partner and the Special Limited
Partner at the purchase price so determined. The General Partner shall
exercise such right by written notice to the Limited Partner and the
Special Limited Partner within such 30 day period, and if such right is not
so exercised, the option shall lapse in its entirety.
(f) If the General Partner determines to proceed with the purchase, the
closing of the purchase shall occur within 120 days after the determination
of the purchase price and the purchase price shall be then paid all cash at
closing.
Section 9.15 Right of First Refusal.
If the Limited Partner and the Special Limited Partner are desirous of
selling their Interests in the Partnership then they must first offer their
Interests to the General Partner (the "Offer") on the terms and at the price
specified in Section 9.14 of this Agreement. For these purposes, the term "sell"
shall include any transfer, conveyance, assignment or pledge of all or any
portion of such Interests. The General Partner shall have 30 days from receipt
of the Offer (the "Offer Period") in which to accept or reject the Offer. If the
General Partner gives timely notice of acceptance of the Offer within the Offer
Period, the Limited Partner and the Special Limited Partner shall be obligated
to sell their Interests and the General Partner shall be obligated to purchase
the Interests. If the General Partner does not give timely notice of acceptance
of the Offer within the Offer Period, then the Limited Partner and the Special
Limited Partner may sell their Interests upon any terms and conditions. The
General Partner shall not be responsible for recapture or loss of tax credits
resulting from a sale by the Limited Partner or the Special Limited Partner
hereunder.
ARTICLE X.
ALLOCATIONS OF INCOME, LOSSES AND CREDITS
Section 10.1 General.
All items includable in the calculation of Income or Loss not arising
from a Sale or Refinancing, and all Tax Credits, shall be allocated 99.98% to
the Limited Partner, 0.01% to the Special Limited Partner and 0.01% to the
General Partner. In allocating Tax Credits, the special allocation provisions of
Section 10.3 shall not be taken into account.
42
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:
(i) 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
(ii) the balance, if any, of such Income shall be allocated to the
Partners in the proportion necessary so that the Partners will receive the
amount to which they are entitled pursuant to Section 11.2 hereof.
(b) Losses shall be allocated 99.98% to the Limited Partner, 0.01% to the
Special Limited Partner and 0.01% to the General Partner.
(c) Notwithstanding the foregoing provisions of Section 10.2(a) and (b), in
no event shall any Losses be allocated to the Limited Partner or the
Special Limited Partner if and to the extent that such allocation would
create or increase an Adjusted Capital Account Deficit for the Limited
Partner or the Special Limited Partner. In the event an allocation of
99.98% or 0.01% of each item includable in the calculation of Income or
Loss not arising from a Sale or Refinancing, would create or increase an
Adjusted Capital Account Deficit for the Limited Partner or the Special
Limited Partner, respectively, then so much of the items of deduction other
than projected depreciation shall be allocated to the General Partner
instead of the Limited Partner or the Special Limited Partner as is
necessary to allow the Limited Partner or the Special Limited Partner to be
allocated 99.98% and 0.01%, respectively, of the items of Income and
Project depreciation without creating or increasing an Adjusted Capital
Account Deficit for the Limited Partner or the Special Limited Partner, it
being the intent of the parties that the Limited Partner and the Special
Limited Partner always shall be allocated 99.98% and 0.01%, respectively,
of the items of Income not arising from a Sale or Refinancing and 99.98%
and 0.01%, respectively, of the Project 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
43
Partnership Minimum Gain, determined in accordance with Treasury
Regulations Section 1.704-2(g). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required to
be allocated to each Partner pursuant thereto. The items to be so allocated
shall be determined in accordance with Section 1.704-2(f)(6) and
1.704-2(j)(2) of the Treasury Regulations. This Section 10.3(a) is intended
to comply with the minimum gain chargeback requirement in Section
1.704-2(f) of the Treasury Regulations and shall be interpreted
consistently therewith.
(b) Except as otherwise provided in Section 1.704-2(i)(4) of the Treasury
Regulations, notwithstanding any other provision of this Article X, if
there is a net decrease in Partner Nonrecourse Debt Minimum Gain
attributable to a Partner Nonrecourse Debt during any Partnership fiscal
year, each Person who has a share of the Partner Nonrecourse Debt Minimum
Gain attributable to such Partner Nonrecourse Debt, determined in
accordance with Section 1.704-2(i)(5) of the Treasury Regulations, shall be
specially allocated items of Partnership income and gain for such fiscal
year (and, if necessary, subsequent fiscal years) in an amount equal to
such Person's share of the net decrease in Partner Nonrecourse Debt Minimum
Gain attributable to such Partner Nonrecourse Debt, determined in
accordance with Treasury Regulations Section 1.704-2(i)(4). Allocations
pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Partner pursuant
thereto. The items to be so allocated shall be determined in accordance
with Sections 1.704-2(i)(4) and 1.704-2(j)(2) of the Treasury Regulations.
This Section 10.3(b) is intended to comply with the minimum gain chargeback
requirement in Section 1.704-2(i)(4) of the Treasury Regulations and shall
be interpreted consistently therewith.
(c) In the event any Partner unexpectedly receives any adjustments,
allocations, or distributions described in Treasury Regulations Section
1.704-1(b)(2)(ii)(d)(4), Section 1.704-1(b)(2)(ii)(d)(5), or Section
1.704-1(b)(2)(ii)(d)(6), items of Partnership income and gain shall be
specially allocated to each such Partner in an amount and manner sufficient
to eliminate, to the extent required by the Treasury Regulations, the
Adjusted Capital Account Deficit of such Partner as quickly as possible,
provided that an allocation pursuant to this Section 10.3(c) shall be made
if and only to the extent that such Partner would have an Adjusted Capital
Account Deficit after all other allocations provided for in this Section
10.3 have been tentatively made as if this Section 10.3(c) were not in the
Agreement.
(d) In the event any Partner has a deficit Capital Account at the end of
any Partnership fiscal year which is in excess of the sum of (i) the amount
such Partner is obligated to restore, and (ii) the amount such Partner is
deemed to be obligated to restore pursuant to the penultimate sentences of
Treasury Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), each such
Partner shall be 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 Sections 10.3(d) and Section 10.3(c)
hereof were not in the Agreement.
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(e) Nonrecourse Deductions for any fiscal year shall be specially allocated
99.98% to the Limited Partner, 0.01% to the Special Limited Partner and
0.01% to the General Partner.
(f) Any Partner Nonrecourse Deductions for any fiscal year shall be
specially allocated to the Partner who bears the economic risk of loss with
respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse
Deductions are attributable in accordance with Treasury Regulations Section
1.704-2(i)(1).
(g) To the extent an adjustment to the adjusted tax basis of any
Partnership asset pursuant to Code Section 734(b) or Code Section 743(b) is
required, pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(2)
or Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining
Capital Accounts as the result of a distribution to a Partner in complete
liquidation of his interest in the Partnership, the amount of such
adjustment to the Capital Accounts shall be treated as an item of gain (if
the adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis) and such gain or loss shall be specially allocated to
the Partners in accordance with their interests in the Partnership in the
event that Treasury Regulations Section 1.704-1 (b)(2)(iv)(m)(2) applies,
or to the Partner to whom such distribution was made in the event that
Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.
(h) To the extent the Partnership has taxable interest income with respect
to any promissory note pursuant to Section 483 or Section 1271 through 1288
of the Code:
(i) such interest income shall be specially allocated to the Limited
Partner to whom such promissory note relates; and
(ii) the amount of such interest income shall be excluded from the
Capital Contributions credited to such Partner's Capital Account in
connection with payments of principal with respect to such promissory note.
(i) To the extent the Partnership has taxable interest income with respect
to deposits of Capital Contribution payments, such interest income shall be
specially allocated to the General Partner.
(j) In the event the adjusted tax basis of any investment tax credit
property that has been placed in service by the Partnership is increased
pursuant to Code Section 50(c), such increase shall be specially allocated
among the Partners (as an item in the nature of income or gain) in the same
proportions as the investment tax credit that is recaptured with respect to
such property is shared among the Partners.
(k) Any reduction in the adjusted tax basis (or cost) of Partnership
investment tax credit property pursuant to Code Section 50(c) shall be
specially allocated among the Partners (as an item in the nature of
expenses or losses) in the same proportions as the basis (or cost) of such
property is allocated pursuant to Treasury Regulations Section
1.46-3(f)(2)(i).
(l) Any income, gain, loss or deduction realized as a direct or indirect
result of the issuance of an interest in the Partnership by the Partnership
to a Partner (the "Issuance Items") shall be allocated among the Partners
45
so that, to the extent possible, the net amount of such Issuance Items,
together with all other allocations under this Agreement to each Partner,
shall be equal to the net amount that would have been allocated to each
such Partner if the Issuance Items had not been realized.
(m) If any Partnership expenditure treated as a deduction on its federal
income tax return is disallowed as a deduction and treated as a
distribution pursuant to Section 731(a) of the Code, there shall be a
special allocation of gross income to the Partner deemed to have received
such distribution equal to the amount of such distribution.
(n) Interest deduction on the Partnership indebtedness referred to in
Section 6.4 shall be allocated 100% to the General Partner.
(o) In the event all or part of the Incentive Management Fee or the Tax
Credit Compliance Fee is disallowed by the Internal Revenue Service, then
any interest or income chargeable to the Partnership for such disallowance
shall be allocated to the General Partner.
(p) If the General Partner provides an Operating Loan to pay an Operating
Deficit, then the Partnership shall allocate Operating Losses to the
General Partner in an amount not to exceed the Operating Loan.
Section 10.4 Curative Allocations.
The allocations set forth in Section 10.2(c), Section 10.3(a), Section
10.3(b), Section 10.3(c), Section 10.3(d), Section 10.3(e), Section 10.3(f), and
Section 10.3(g) hereof (the "Regulatory Allocations") are intended to comply
with certain requirements of the Treasury Regulations. It is the intent of the
Partners that, to the extent possible, all Regulatory Allocations shall be
offset either with other Regulatory Allocations or with special allocations of
other items of Partnership income, gain, loss, or deduction pursuant to this
Section 10.4. Therefore, notwithstanding any other provision of this Article X
(other than the Regulatory Allocations), with the Consent of the Special Limited
Partner, the General Partner shall make such offsetting special allocations of
Partnership income, gain, loss, or deduction in whatever manner the General
Partner, with the Consent of the Special Limited Partner, determines appropriate
so that, after such offsetting allocations are made, each Partner's Capital
Account balance is, to the extent possible, equal to the Capital Account balance
such Partner would have had if the Regulatory Allocations were not part of the
Agreement and all Partnership items were allocated pursuant to Section 10.1,
Section 10.2(a), Section 10.2(b), Section 10.3(h), Section 10.3(i), Section
10.3(j), Section 10.3(k), Section 10.3(l), Section 10.3(m) and Section 10.5. In
exercising its authority under this Section 10.4, the General Partner shall take
into account future Regulatory Allocations under Section 10.3(a) and Section
10.3(b) that, although not yet made, are likely to offset other Regulatory
Allocations previously made under Section 10.3(e) and Section 10.3(f).
Section 10.5 Other Allocation Rules.
(a) The basis (or cost) of any Partnership investment tax credit property
shall be allocated among the Partners in accordance with Treasury
Regulations Section 1.46-3(f)(2)(i). All Tax Credits (other than the
46
investment tax credit) shall be allocated among the Partners in accordance
with applicable law. Consistent with the foregoing, the Partners intend
that LIHTC will be allocated 99.98% to the Limited Partner, 0.01% to the
Special Limited Partner and 0.01% to the General Partner.
(b) In the event Partnership investment tax credit property is disposed of
during any taxable year, profits for such taxable year (and, to the extent
such profits are insufficient, profits for subsequent taxable years) in an
amount equal to the excess, if any, of (1) the reduction in the adjusted
tax basis (or cost) of such property pursuant to Code Section 50(c), over
(2) any increase in the adjusted tax basis of such property pursuant to
Code Section 50(c) caused by the disposition of such property, shall be
excluded from the profits allocated pursuant to Section 10.1 and Section
10.2(a) hereof and shall instead be allocated among the Partners in
proportion to their respective shares of such excess, determined pursuant
to Section 10.3(i) and Section 10.3(j) hereof. In the event more than one
item of such property is disposed of by the Partnership, the foregoing
sentence shall apply to such items in the order in which they are disposed
of by the Partnership, so the profits equal to the entire amount of such
excess with respect to the first such property disposed of shall be
allocated prior to any allocations with respect to the second such property
disposed of, and so forth.
(c) For purposes of determining the Income, Losses, or any other items
allocable to any period, Income, Losses, and any such other items shall be
determined on a daily, monthly, or other basis, as determined by the
General Partner with the Consent of the Special Limited Partner, using any
permissible method under Code Section 706 and the Treasury Regulations
thereunder.
(d) Solely for purposes of determining a Partner's proportionate share of
the "excess nonrecourse liabilities" of the Partnership within the meaning
of Treasury Regulations Section 1.752-3(a)(3), the Partners' interests in
Partnership profits are as follows: Limited Partner - 99.98%; Special
Limited Partner - 0.01%; General Partner - 0.01%.
(e) To the extent permitted by Section 1.704-2(h)(3) of the Treasury
Regulations, the General Partner shall endeavor to treat Distributions as
having been made from the proceeds of a Nonrecourse Liability or a Partner
Nonrecourse Debt only to the extent that such Distributions would cause or
increase an Adjusted Capital Account Deficit for any Partner who is not a
General Partner.
(f) In the event that the deduction of all or a portion of any fee paid or
incurred out of Net Operating Income by the Partnership to a Partner or an
Affiliate of a Partner is disallowed for federal income tax purposes by the
Internal Revenue Service with respect to a taxable year of the Partnership,
the Partnership shall then allocate to such Partner an amount of gross
income of the Partnership for such year equal to the amount of such fee as
to which the deduction is disallowed.
Section 10.6 Tax Allocations: Code Section 704(c).
In accordance with Code Section 704(c) and the Treasury Regulations
thereunder, income, gain, loss, and deduction with respect to any property
47
contributed to the capital of the Partnership shall, solely for tax purposes, be
allocated among the Partners so as to take account of any variation between the
adjusted basis of such property to the Partnership for federal income tax
purposes and its initial Gross Asset Value.
In the event the Gross Asset Value of any Partnership asset is
adjusted, subsequent allocations of income, gain, loss, and deduction with
respect to such asset shall take account of any variation between the adjusted
basis of such asset for federal income tax purposes and its Gross Asset Value in
the same manner as under Code Section 704(c) and the Treasury Regulations
thereunder.
Any elections or other decisions relating to such allocations shall be
made by the General Partner with the Consent of the Special Limited Partner in
any manner that reasonably reflects the purpose and intention of this Agreement.
Allocations pursuant to this Section 10.6 are solely for purposes of federal,
state, and local taxes and shall not affect, or in any way be taken into account
in computing, any Person's Capital Account or share of Income, Losses, other
items, or distributions pursuant to any provision of this Agreement.
Section 10.7 Allocation Among Limited Partners.
In the event that the Interest of the Limited Partner hereunder is at
any time held by more than one Limited Partner all items which are specifically
allocated to the Limited Partner for any month pursuant to this Article X shall
be apportioned among such Persons according to the ratio of their respective
profit-sharing interests in the Partnership at the last day of such month.
Section 10.8 Allocation Among General Partners.
In the event that the Interest of the General Partner hereunder is at
any time held by more than one General Partner all items which are specifically
allocated to the General Partner for any month pursuant to this Article X shall
be apportioned among such Persons in such percentages as may from time to time
be determined by agreement among them without amendment to this Agreement or
consent of the Limited Partner or Consent of the Special Limited Partner.
Section 10.9 Modification of Allocations.
The provisions of Article X and Article XI and other provisions of this
Agreement are intended to comply with Treasury Regulations Section 1.704 and
shall be interpreted and applied in a manner consistent with such section of the
Treasury Regulations. In the event that the General Partner determines that it
is prudent to modify the manner in which the Capital Accounts of the Partners,
or any debit or credit thereto, are computed in order to comply with such
section of the Treasury Regulations, the General Partner may make such
modification, but only with the Consent of the Special Limited Partner, to the
minimum extent necessary, to effect the plan of allocations and Distributions
provided for elsewhere in this Agreement. Further, the General Partner shall
make any appropriate modifications, but only with the Consent of the Special
Limited Partner, in the event it appears that unanticipated events (e.g., the
existence of a Partnership election pursuant to Code Section 754) might
otherwise cause this Agreement not to comply with Treasury Regulation Section
1.704.
48
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 at each calendar quarter and shall be applied in the
following order of priority:
(a) to pay the Deferred Management Fee, if any;
(b) to pay the balance of the current Asset Management Fee that was not
paid monthly and then to pay any accrued Asset Management Fees which have
not been paid in full from previous years;
(c) to pay the principal and then interest on the Development Fee not to
exceed the amount set forth in Exhibit B to the Development Fee Agreement;
(d) to pay the Operating Loans, if any, as referenced in Section 6.3 of
this Agreement;
(e) to pay the Incentive Management Fee;
(f) to pay the Tax Credit Compliance Fee; and
(g) the balance, 9.99% to the Limited Partner, 0.01% to the Special Limited
Partner and 90% 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 Asset
Management Fees and Operating Loans, to be paid pro rata if necessary;
(c) to the establishment of any reserves which the General Partner, with
the Consent of the Special Limited Partner, shall deem reasonably necessary
for contingent, unmatured or unforeseen liabilities or obligations of the
Partnership; and
(d) thereafter, 9.99% to the Limited Partner, 0.01% to the Special Limited
Partner and 90% to the General Partner, provided that the amount
distributed to the Limited Partner pursuant to this sub paragraph (d) shall
not be less the aggregate federal and state income tax liability of the
Limited Partner with respect to this distribution, and the amount
49
distributable to the General Partner shall be reduced by the amount of any
distribution to the Limited Partner under this sub paragraph (d).
ARTICLE XII.
TRANSFERS OF LIMITED PARTNER'S AND SPECIAL
LIMITED PARTNER'S INTERESTS IN THE PARTNERSHIP
Section 12.1 Assignment of Interests.
The Limited Partner and the Special Limited Partner shall not have the
right to assign all or any part of their respective Interests to any other
Person, whether or not a Partner, except upon satisfaction of each 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; and
(b) upon receipt by the General Partner of the Assignee's written
representation that the Partnership Interest is to be acquired by the
Assignee for the Assignee's own account for long-term investment and not
with a view toward resale, fractionalization, division or distribution
thereof.
(c) Notwithstanding any provision to the contrary, the Limited Partner may
assign its Interest to an Affiliate or assign its Interest to U.S. Bank
National Association or its successors as collateral to secure a capital
contribution loan without satisfying the conditions of Section 12.1(a) and
(b) above.
THE LIMITED PARTNER INTEREST AND THE SPECIAL LIMITED PARTNER INTEREST DESCRIBED
HEREIN HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED OR
UNDER ANY STATE SECURITIES LAW. THESE INTERESTS MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED UNLESS REGISTERED UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS
OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
Notwithstanding anything to the contrary contained herein, the General
Partner shall not be responsible for recapture or loss of tax credits resulting
from a sale by the Limited Partner or the Special Limited Partner of their
Interest hereunder, unless there existed a recapture event prior to a sale.
50
Section 12.2 Effective Date of Transfer.
Any assignment of a Limited Partner's Interest or Special Limited
Partner's Interest pursuant to Section 12.1 shall become effective as of the
first day of the calendar month in which the last of the conditions to such
assignment are satisfied.
Section 12.3 Invalid Assignment.
Any purported assignment of an Interest of the Limited Partner or the
Special Limited Partner otherwise than in accordance with Section 12.1 or
Section 12.6 shall be of no effect as between the Partnership and the purported
assignee and shall be disregarded by the General Partner in making allocations
and Distributions hereunder.
Section 12.4 Assignee's Rights to Allocations and Distributions.
An Assignee shall be entitled to receive allocations and Distributions
from the Partnership attributable to the Interest acquired by reason of any
permitted assignment from the effective date of transfer as determined in
Section 12.2 above. The Partnership and the General Partner shall be entitled to
treat the assignor of such Partnership Interest as the absolute owner thereof in
all respects, and shall incur no liability for allocations and Distributions
made in good faith to such assignor, until such time as the written instrument
of assignment has been received by the Partnership.
Section 12.5 Substitution of Assignee as Limited Partner or Special Limited
Partner.
(a) An Assignee shall not have the right to become a Substitute Limited
Partner or Substitute Special Limited Partner in place of his assignor
unless the written consent of the General Partner to such substitution
shall have been obtained, which consent, in the General Partner's absolute
discretion, may be withheld; except that an Assignee which is an Affiliate
of the Limited Partner or Special Limited Partner, or U.S. Bank National
Association or its successors, may become a Substitute Limited Partner or
Substitute Special Limited Partner without the consent of the General
Partner.
(b) A nonadmitted transferee of the Limited Partner's Interest or the
Special Limited Partner's Interest in the Partnership shall only be
entitled to receive that share of allocations, Distributions and the return
of Capital Contribution to which its transferor would otherwise have been
e0ntitled 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.
51
Section 12.6 Death, Bankruptcy, Incompetency, etc., of a Limited Partner.
Upon the death, dissolution, adjudication of bankruptcy, or
adjudication of incompetency or insanity of the Limited Partner or Special
Limited Partner, such Partner's executors, administrators or legal
representatives shall have all the rights of its predecessor-in-interest for the
purpose of settling or managing such Partner's estate, including such power as
such Partner possessed to constitute a successor as a transferee of its Interest
in the Partnership and to join with such transferee in making the application to
substitute such transferee as a Partner. However, such executors, administrators
or legal representatives shall not have the right to become Substitute Limited
Partners or Substitute Special Limited Partners in the place of their respective
predecessor-in-interest unless the General Partner shall consent thereto which
consent, in the General Partner's absolute discretion, may be withheld, or
unless by operation of law.
ARTICLE XIII.
WITHDRAWAL, REMOVAL AND REPLACEMENT OF GENERAL PARTNER
Section 13.1 Withdrawal of General Partner.
(a) The General Partner may not Withdraw (other than as a result of an
Involuntary Withdrawal) without the Consent of the Special Limited Partner.
Withdrawal shall be conditioned upon the agreement of the Special Limited
Partner to be admitted as a successor General Partner, or if the Special
Limited Partner declines to be admitted as a successor General Partner then
on the agreement of one or more Persons who satisfy the requirements of
Section 13.5 of this Agreement to be admitted as successor General
Partner(s).
(b) Each General Partner shall indemnify and hold harmless the Partnership
and all Partners from its Withdrawal in violation of Section 13.1(a)
hereof. Each General Partner shall be liable for damages to the Partnership
resulting from its Withdrawal in violation of Section 13.1(a).
Section 13.2 Removal of General Partner.
(a) The Special Limited Partner or the Limited Partner, or both of them,
may remove one or all of the General Partners for cause if any General
Partner has, its officers, directors, members, or partners have, if
applicable, or the Partnership has:
(i) been subject to Bankruptcy;
(ii) committed any fraud, willful misconduct, breach of fiduciary duty
or other negligent conduct in the performance of its duties under this
Agreement;
(iii) been convicted of, or entered into a plea of guilty to, a
felony;
(iv) been barred from participating in any federal or state housing
program;
(v) made personal use of Partnership funds or properties;
52
(vi) violated the terms of the Mortgage and such violation prompts any
Mortgage lender to issue a letter regarding the violation;
(vii) failed to provide any loan, advance, Capital Contribution or any
other payment to the Partnership, the Limited Partner or the Special
Limited Partner as required under this Agreement;
(viii) breached any representation, warranty or covenant contained in
this Agreement;
(ix) 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 of this Agreement apply;
(x) failed to provide, or to cause to be provided, the construction
monitoring documents required in Section 14.3(a) of this Agreement;
(xi) violated any federal or state tax law which causes a recapture of
LIHTC;
(xii) violated the terms of the Construction Loan and such violation
prompts the Construction Lender to issue a letter regarding such violation;
(xiii) failed to ensure that the Development Budget is In-Balance;
(xiv) failed to obtain the consent of a Partner where such consent is
required pursuant to this Agreement;
(xv) failed to deliver the annual Partnership financial data as
required pursuant to Section 14.2(a) or (b).
(xvi) failed to maintain the reserve balances as required pursuant to
Article VIII;
(xvii) failed to place the Project in service within 6 months of the
Completion Date;
(xviii) failed to achieve 100% occupancy of the Project by January 1,
2008;
(xix) failed to obtain Permanent Mortgage Commencement by April 1,
2008;
(xx) failed to renew the Insurance on or before the due date;
(xxi) failed to pay the Real Estate Taxes on or before the due date;
53
(xxii) failed during any consecutive 6-month period during the
Compliance Period to rent 85% or more of the total units in the Project to
Qualified Tenants; notwithstanding the foregoing, if such failure is the
result of Force Majeure or if such failure is cured within 120 days after
the end of the 6-month period, then this removal provision shall not apply;
or
(xxiii) Intentionally omitted.
(b) Written notice of the removal for cause of the General Partner
("Removal Notice") shall set forth the reasons for removal and shall be
served by the Special Limited Partner or the Limited Partner, or both of
them, upon the General Partner in accordance with Section 17.3 of this
Agreement. If Section 13.2(a)(2), (6), (7), (8), (12), (13), (15), (16),
(20) or (21) is the basis for the removal for cause, then the General
Partner shall have 30 days from receipt of the Removal Notice in which to
cure the removal condition; except that in regard to the Mortgage or
Construction Loan the cure period shall be the sooner of 30 days or 10 days
prior to the expiration of the cure period referenced in the loan
documents, if any. If the condition for the removal for cause is not cured
within the 30-day cure period then the General Partner's removal shall
become effective upon approval of a majority of the Partner's Interest (as
specified in Section 10.1 of this Agreement) at a Partner's meeting held in
accordance with Section 17.2 of this Agreement. If the removal for cause is
for a condition referenced in Section 13.2(a)(1), (3), (4), (5), (9), (10),
(11), (14), (17), (18), (19), or (22) then the removal shall become
effective upon approval of a majority of the Partner's Interest (as
specified in Section 10.1 of this Agreement) at a Partner's meeting held in
accordance with Section 17.2 of this Agreement. Upon the General Partner's
removal, the General Partner shall deliver to the Special Limited Partner
within 5 business days of the Partner's meeting confirming the General
Partner's removal all Partnership books and records including all bank
signature cards and an authorization to change the signature on the
signature cards from the General Partner to the Special Limited Partner, or
a successor general partner so nominated by the Limited Partner and Special
Limited Partner. The Partner's recognize and acknowledge that if the
General Partner fails to provide the Partnership books and records upon the
General Partner's removal then the remaining Partners may suffer
irreparable injury. Therefore, in the event the General Partner does not
adhere to the provisions of this Section 13.2(b), and in addition to other
rights or remedies which may be provided by law and equity or this
Agreement, the Limited Partner and/or Special Limited Partner shall have
the right to specific performance to compel the General Partner to perform
its obligation under this Section and the Limited Partner and/or Special
Limited Partner may bring such action, and other actions to enforce the
removal, by way of temporary and/or permanent injunctive relief In the
event of removal of a General Partner for any reason, any earned but unpaid
portion of the Development Fee shall be due and payable upon the effective
date of such removal and shall be deemed paid by the removed General
Partner.
Section 13.3 Effects of a Withdrawal.
In the event of a Withdrawal, the entire Interest of the Withdrawing
General Partner shall immediately and automatically terminate on the effective
date of such Withdrawal, and such General Partner shall immediately cease to be
a General Partner, shall have no further right to participate in the management
54
or operation of the Partnership or the Project or to receive any allocations or
Distributions from the Partnership or any other funds or assets of the
Partnership, except as specifically set forth below. In the event of a
Withdrawal, any or all executory contracts, including but not limited to the
Management Agreement, between the Partnership and the Withdrawing General
Partner or its Affiliates may be terminated by the Partnership, with the Consent
of the Special Limited Partner, upon written notice to the party so terminated.
Furthermore, notwithstanding such Withdrawal, the Withdrawing General Partner
shall be and shall remain, liable as a General Partner for all liabilities and
obligations incurred by the Partnership or by the General Partner prior to the
effective date of the Withdrawal, or which may arise upon such Withdrawal. Any
remaining Partner shall have all other rights and remedies against the
Withdrawing General Partner as provided by law or under this Agreement. The
General Partner agrees that in the event of its Withdrawal it will indemnify and
hold the Limited Partner and the Special Limited Partner harmless from and
against all losses, costs and expenses incurred in connection with the
Withdrawal, including, without limitation, all legal fees and other expenses of
the Limited Partner and the Special Limited Partner in connection with the
transaction. The following additional provisions shall apply in the event of a
Withdrawal.
(a) In the event of a Withdrawal which is not an Involuntary Withdrawal, or
is not an Involuntary Withdrawal in accordance with Section 13.2(a), the
Withdrawing General Partner shall have no further right to receive any
future allocations or Distributions from the Partnership or any other funds
or assets of the Partnership, nor shall it be entitled to receive or to be
paid by the Partnership any further payments of fees (including fees which
have been earned but are unpaid) or to be repaid any outstanding advances
or loans made by it to the Partnership or to be paid any amount for its
former Interest. From and after the effective date of such Withdrawal, the
former rights of the Withdrawing General Partner to receive or to be paid
such allocations, Distributions, funds, assets, fees or repayments shall be
assigned to the other General Partner or General Partners (which may
include the Special Limited Partner), or if there is no other general
partner of the Partnership at that time, to the Special Limited Partner.
Furthermore, if the General Partner or an Affiliate is the guarantor of the
Development Fee, as provided pursuant to the Development Fee Guaranty
Agreement, then the General Partner shall pay any remaining unpaid
principal and interest of the Development Fee within 30 days of the General
Partner's removal.
(b) In the event of an Involuntary Withdrawal, except as provided in
Section 13.3(c) below, the Withdrawing General Partner shall have no
further right to receive any future allocations or Distributions from the
Partnership or any other funds or assets of the Partnership, provided that
accrued and payable fees (i.e., fees earned but unpaid as of the date of
Withdrawal) owed to the Withdrawing General Partner, and any outstanding
loans of the Withdrawing General Partner to the Partnership, shall be paid
to the Withdrawing General Partner in the manner and at the times such fees
and loans would have been paid had the Withdrawing General Partner not
Withdrawn. The Interest of the General Partner shall be purchased as
follows.
(i) 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
55
not obligated to, purchase the Interest of the Withdrawing General Partner.
The purchase price of such Interest shall be its Fair Market Value as
determined by agreement between the Withdrawing General Partner and the
Special Limited Partner, or, if they cannot agree, by arbitration in
accordance with the then current rules of the American Arbitration
Association. The cost of such arbitration shall be borne equally by the
Withdrawing General Partner and the Partnership. The purchase price shall
be paid by the Partnership by delivering to the General Partner or its
representative the Partnership's non-interest bearing unsecured promissory
note payable, if at all, upon liquidation of the Partnership in accordance
with Article XV. The note shall also provide that the Partnership may
prepay all or any part thereof without penalty.
(ii) If the Involuntary Withdrawal does not arise from removal for
cause under Section 13.2(a) hereof, and if the Partnership is to be
continued with one or more remaining or successor General Partner(s), and
if the Partnership does not purchase the Interest of the Withdrawing
General Partner in Partnership allocations, Distributions and capital, then
the Withdrawing General Partner shall retain its Interest in such items,
but such Interest shall be held as a special limited partner.
(c) Notwithstanding the provisions of Section 13.3(b), if the Involuntary
Withdrawal arises from removal for cause as set forth in Section 13.2(a)
hereof, the Withdrawn General Partner shall have no further right to
receive any future allocations or Distributions from the Partnership or any
other funds or assets of the Partnership, nor shall it be entitled to
receive any payment for its Interest, nor shall it be entitled to receive
or to be paid by the Partnership or any Partners or successor partners, any
further payments of fees (including fees which have been earned but remain
unpaid) or to be repaid any outstanding advances or loans made by it to the
Partnership. Furthermore, if the General Partner or an Affiliate is the
guarantor of the Development Fee, as provided in the Development Fee
Guaranty Agreement, then the General Partner shall pay any remaining unpaid
principal and interest of the Development Fee within 30 days of the General
Partner's removal.
(d) Notwithstanding anything to the contrary contained in this Agreement,
upon the death of the General Partner named in this Agreement, the
beneficiaries of such General Partner taking such General Partner's
Interest in the Partnership by the General Partner's will, testamentary
trust instrument or living trust instrument and who have been actively
involved in the management of Property or an entity controlled by such
beneficiary shall succeed to all General Partner Interests and shall
succeed to all of all of the General Partner's right, title and interest in
the Partnership with consent of the Special Limited Partner or the Limited
Partner, which consent shall not be unreasonably withheld.
Section 13.4 Successor General Partner.
Upon the occurrence of an event giving rise to a Withdrawal of a
General Partner, any remaining General Partner, or, if there be no remaining
General Partner, the Withdrawing General Partner or its legal representative,
shall promptly notify the Special Limited Partner of such Withdrawal (the
"Withdrawal Notice"). Whether or not the Withdrawal Notice shall have been sent
as provided herein the Special Limited Partner shall have the right to become a
successor General Partner (and to become the successor managing General Partner
56
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 shall have been granted, which
consent may be withheld in the discretion of the Special Limited Partner (unless
the successor is an heir to a deceased General Partner, then pursuant to Section
13.3 hereof, the consent shall not be unreasonably withheld by the Special
Limited Partner); and (c) such Person shall have executed and acknowledged any
other instruments which the Special Limited Partner shall reasonably deem
necessary or appropriate to effect the admission of such Person as a substitute
General Partner. If the foregoing conditions are satisfied, this Agreement shall
be amended in accordance with the provisions of the Act, and all other steps
shall be taken which are reasonably necessary to effect the Withdrawal of the
Withdrawing General Partner and the substitution of the successor General
Partner. Nothing contained herein shall reduce the Limited Partner's Interest or
the Special Limited Partner's Interest in the Partnership.
Section 13.6 Transfer of Interest.
Except as otherwise provided herein, the General Partner may not
Withdraw from the Partnership, or enter into any agreement as the result of
which any Person shall acquire an Interest in the Partnership, without the
Consent of the Special Limited Partner.
Section 13.7 No Goodwill Value.
At no time during continuation of the Partnership shall any value ever
be placed on the Partnership name, or the right to its use, or to the goodwill
appertaining to the Partnership or its business, either as among the Partners or
for the purpose of determining the value of any Interest, nor shall the legal
representatives of any Partner have any right to claim any such value. In the
event of a termination and dissolution of the Partnership as provided in this
Agreement, neither the Partnership name, nor the right to its use, nor the same
goodwill, if any, shall be considered as an asset of the Partnership, and no
valuation shall be put thereon for the purpose of liquidation or distribution,
or for any other purpose whatsoever.
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ARTICLE XIV.
BOOKS AND ACCOUNTS, REPORTS,
TAX RETURNS, FISCAL YEAR AND BANKING
Section 14.1 Books and Accounts.
(a) The General Partner shall cause the Partnership to keep and maintain at
its principal executive office full and complete books and records that
shall include each of the following:
(i) a current list of the full name and last known business or
residence address of each Partner set forth in alphabetical order together
with the Capital Contribution and the share in Income and Losses and Tax
Credits of each Partner;
(ii) 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;
(iii) copies of the Partnership's federal, state and local income tax
information returns and reports, if any, for the 6 most recent taxable
years;
(iv) copies of the original of this Agreement and all amendments
thereto;
(v) financial statements of the Partnership for the 6 most recent
fiscal years;
(vi) the Partnership's books and records for at least the current and
past 3 fiscal years; and
(vii) in regard to the first tenants to occupy the units in the
Project, 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).
(viii) 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 Project, at its own
expense.
Section 14.2 Accounting Reports.
(a) By February 20 of each calendar year the General Partner shall provide
to the Limited Partner and the Special Limited Partner the Partnership tax
return, Schedule K(1), and all tax information necessary for the
preparation of their federal and state income tax returns and other tax
returns with regard to the jurisdiction(s) in which the Partnership is
58
formed and in which the Project is located. Moreover, the General Partner
shall deliver to the Limited Partner and the Special Limited Partner a
draft copy of the information requested herein at least 10 days prior to
the above referenced due date.
(b) By March 1 of each calendar year, including the year(s) during
construction of the Project, the General Partner shall send to the Limited
Partner and the Special Limited Partner an audited financial statement for
the Partnership, which shall include, but not limited to: (1) a balance
sheet as of the end of such fiscal year and statements of income, Partners'
equity and changes in cash flow for such fiscal year prepared in accordance
with generally accepted accounting principles; (2) a report of any
Distributions made at any time during the fiscal year, separately
identifying Distributions from Net Operating Income for the fiscal year,
Net Operating Income for prior years, Sale or Refinancing Proceeds, and
reserves; (3) a report setting forth the amount of all fees and other
compensation and Distributions and reimbursed expenses paid by the
Partnership for the fiscal year to the General Partner or Affiliates of the
General Partner and the services performed in consideration therefor, which
report shall be verified by the Partnership's Accountants; and (4) the
Accountant's calculation of each pay-out of the Net Operating Income
pursuant to Section 11.1 of this Agreement. Moreover, the General Partner
shall deliver to the Limited Partner and the Special Limited Partner a
draft copy of the information requested herein at least 10 days prior to
the above referenced due date.
(c) Within 60 days after the end of each fiscal quarter in which a Sale or
Refinancing of the Project 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 within 30 days after request by
the Limited Partner or Special Limited Partner:
(a) during construction, on a regular basis, but in no event less than once
a month, a copy of the Construction Inspector's report and other
construction reports including, but not limited to, (1) the name of each
person performing work on the Improvements or providing materials for the
Improvements, if the work performed or materials supplied by a person
accounts for 5% or more of the construction of the Improvements, the work
performed or materials supplied by said person and the code number
corresponding to the line item in the Development Budget which the person
will be paid, (2) an original AIA Document G702, or similar form acceptable
to the Special Limited Partner, (3) if not included in the Construction
Inspector's report or the AIA Document G702, a line item break-down of the
Development Budget (which shall include, description of work to be
performed or materials to be supplied; total dollar amount of the work or
materials; dollar amount of work previously completed and paid or materials
supplied and paid; dollar amount of work or materials to be paid per the
current disbursement request; dollar amount of materials stored; total
dollar amount of work completed and stored as of the current disbursement
date; percentage of completion; dollar amount of work or materials needed
59
to complete the line item; and retainage), (4) a reconciliation of the
sources and uses to determine that the Development Budget is In-Balance and
there are sufficient funds to complete the construction of the
Improvements, and (5) if not provided for in the above referenced
documents, a line item break down of all soft development costs not
included in the Construction Contract but part of the Development Budget;
(6) copies of lien releases, or waivers, from the Contractor and all
sub-contractors or material suppliers who were paid the previous month; and
(7) any other document requested by the Special Limited Partner as the
circumstances warrant (collectively the "Construction Draw Documents");
(b) during the rent-up phase, and continuing until the later of the end of
the first 6-month period during which the Project has a sustained occupancy
of 95% or better or the Special Limited Partner's approval of the initial
tenant files, including any recommended corrections, by the 20th day of
each month within such period a copy of the previous month's rent roll
(through the last day of the month), a tenant LIHTC compliance worksheet
similar to the monthly initial tenant certification worksheet included in
Exhibit H attached hereto and incorporated herein by this reference; an up
to date income statement, an up to date balance sheet and a copy of the
Partnership's bank statement reflecting all operating accounts and reserve
accounts;
(c) a quarterly tax credit compliance report similar to the worksheet
included in Exhibit H due on or before April 30 of each year for the first
quarter, July 31 of each year for the second quarter, October 31 of each
year for the third quarter and January 31 of each year for the fourth
quarter. In order to verify the reliability of the information being
provided on the compliance report the Special Limited Partner may request a
sampling of tenant files to be provided. The sampling will include, but not
be limited to, copies of tenant applications, certifications and third
party verifications used to qualify tenants. If any inaccuracies are found
to exist on the tax credit compliance report or any items of noncompliance
are discovered then the sampling will be expanded as determined by the
Special Limited Partner;
(d) a quarterly report on operations, in the form attached hereto as
Exhibit H, due on or before April 25 of each year for the first quarter of
operations, July 25 of each year for the second quarter of operations,
October 25 of each year for the third quarter of operations and January 25
of each year for the fourth quarter of operations that shall include, but
not be limited to, a copy of the Partnership's bank statement showing all
operating accounts and reserve accounts required to be maintained pursuant
to Article VIII of this Agreement, statement of income and expenses,
balance sheet, rent roll as of the end of each calendar quarter of each
year, and third party verification of current utility allowance;
(e) by September 15 of each year, an estimate of LIHTC and taxable income
or loss to be allocated to the Limited Partner for that year;
(f) if the Project receives a reservation of LIHTC in 1 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
60
Partner by the later of December 31 of the year during which the
reservation was received or 6 months after the date of the carryover
allocation if permitted by the State Tax Credit Agency. Furthermore, if
materials and supplies are purchased to meet the 10% requirement then the
General Partner shall provide to the Limited Partner an opinion of counsel
that title to the materials and supplies pass to the Partnership and that
the Partnership bears the risk of loss of the materials and supplies;
(g) during the Compliance Period, no later than the day any such
certification is filed, copies of any certifications which the Partnership
must furnish to federal, state, or local authorities including, but not
limited to, copies of all annual tenant recertifications required under
Section 42 of the Code, the annual owner's sworn statement, and the State
Tax Credit Agency Compliance (or annual) report;
(h) by the annual renewal date each and every year, an executed original or
certified copy of each and every Insurance policy or certificate required
by the terms of this Agreement;
(i) by the payment date of the real estate property taxes each and every
year verification that the same has been paid in full;
(j) on or before March 15 of each calendar year, a copy of the General
Partner's updated financial statement as of December 31 of the previous
year;
(k) on or before November 1 of each calendar year, a copy of the following
year's proposed operating budget. Each such Budget shall contain all the
anticipated Cash Expenses of the Partnership. Neither the General Partner,
the Management Agent nor their employees, agents or representatives shall
adopt the Budget until the Consent of the Special Limited Partner has been
obtained;
(l) in the event the Project and/or the Partnership is experiencing
financial or operational concerns or maintenance issues and is placed on
the Limited Partner's watch list, 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
update reports, providing an up-to-date income statement, up-to-date
balance sheet, copy of previous month's rent roll, and a copy of the
Partnership's monthly bank statement; and (4) providing any other documents
deemed relevant by the Special Limited Partner; and
(m) notice of the occurrence, or of the likelihood of occurrence, of any
event which has had a material adverse effect upon the Project or the
Partnership, including, but not limited to, any breach of any of the
representations and warranties set forth in Section 9.12 of this Agreement,
and any inability of the Partnership to meet its cash obligations as they
become payable, within 10 days after the occurrence of such event.
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Section 14.4 Late Reports.
If the General Partner does not fulfill its obligations under Section
14.2 within the time periods set forth therein, the General Partner, using its
own funds, shall pay as damages the sum of $100 per day (plus interest at the
rate established by Section 6.4 of this Agreement) to the Limited Partner until
such obligations shall have been fulfilled. If the General Partner does not
fulfill its obligations under Section 14.3 within the time periods set forth
therein, the General Partner, using its own funds, shall pay as damages the sum
of $100 per week (plus interest at the rate established by Section 6.4 of this
Agreement) to the Limited Partner until such obligations shall have been
fulfilled. If the General Partner shall so fail to pay, the General Partner and
its Affiliates shall forthwith cease to be entitled to any fees hereunder (other
than the Development Fee) and/or to the payment of any Net Operating Income or
Sale or Refinancing Proceeds to which the General Partner may otherwise be
entitled hereunder. Payments of fees and Distributions shall be restored only
upon payment of such damages in full.
Section 14.5 Site Visits.
The Limited Partner, at the Limited Partner's expense, has the right,
upon reasonable advance notice to the General Partner, to conduct a reasonable
number of site visits which will include, in part, an inspection of the
property, a review of the office and tenant files and an interview with the
property manager.
Section 14.6 Tax Returns.
The General Partner shall cause income tax returns for the Partnership
to be prepared and timely filed with the appropriate federal, state and local
taxing authorities.
Section 14.7 Fiscal Year.
The fiscal year of the Partnership shall be the calendar year or such
other period as may be approved by the Internal Revenue Service for federal
income tax purposes.
Section 14.8 Banking.
All funds of the Partnership shall be deposited in a separate bank
account or accounts as shall be determined by the General Partner with the
Consent of the Special Limited Partner. All withdrawals therefrom shall be made
upon checks signed by the General Partner or by any person authorized to do so
by the General Partner. The General Partner shall provide to any Partner who
requests same the name and address of the financial institution, the account
number and other relevant information regarding any Partnership bank account.
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.
62
(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 Project and the receipt in cash of the full amount of
the proceeds of such sale.
Notwithstanding the foregoing, in no event shall the Partnership
terminate prior to the expiration of its term if such termination would result
in a violation of the Mortgage or any other agreement with or rule or regulation
of any Mortgage lender to which the Partnership is subject.
Section 15.2 Return of Capital Contribution upon Dissolution.
Except as provided in Section 7.3 and Section 7.4 of this Agreement,
which provide for a reduction or refund of the Limited Partner's Capital
Contribution under certain circumstances, and which shall represent the personal
obligations of the General Partner, as well as the obligations of the
Partnership, each Partner shall look solely to the assets of the Partnership for
all Distributions with respect to the Partnership (including the return of its
Capital Contribution) and shall have no recourse therefor (upon dissolution or
otherwise) against any 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 Special Limited Partner or by the court
in a judicial dissolution) shall take full account of the Partnership assets and
liabilities and shall liquidate the assets as promptly as is consistent with
obtaining the fair value thereof.
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(a) Upon dissolution and termination, after payment of, or adequate
provision for, the debts and obligations of the Partnership pursuant to
Sections 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 Regulations Section 1.704-1(b)(2)(ii)(b)(3).
(i) 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:
(i) 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
(ii) such Income and Losses shall be allocated to the Partners in
accordance with Section 10.2 hereof, and any property so distributed shall
be treated as a Distribution of an amount in cash equal to the excess of
such Fair Market Value over the outstanding principal balance of and
accrued interest on any debt by which the property is encumbered.
(d) For the purposes of Section 15.3(c), "unrealized appreciation" or
"unrealized depreciation" shall mean the difference between the Fair Market
Value of such assets, taking into account the Fair Market Value of the
associated financing but subject to Section 7701(g) of the Code, and the
asset's Gross Asset Value. Section 15.3(c) is merely intended to provide a
rule for allocating unrealized Income and Losses upon liquidation or other
Distribution event, and nothing contained in Section 15.3(c) or elsewhere
in this Agreement is intended to treat or cause such Distributions to be
treated as sales for value. The Fair Market Value of such assets shall be
determined by an independent appraiser to be selected by the General
Partner.
Section 15.4 Deferral of Liquidation.
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
64
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 Project 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 Section 15.4, the Limited Partner and Special Limited Partner
shall cease to be such and the General Partner shall execute, acknowledge and
cause to be filed those certificates referenced in Section 15.6.
Section 15.6 Certificates of Dissolution; Certificate of Cancellation of
Certificate of Limited Partnership.
(a) Upon the dissolution of the Partnership, the General Partner shall
cause to be filed in the office of the Secretary of State, and on a form
prescribed by the Secretary of State of Tennessee, 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 Tennessee a certificate of
cancellation of the Certificate of Limited Partnership. The certificate of
cancellation of the Certificate of Limited Partnership shall set forth the
Partnership's name, the Secretary of State's file number for the
Partnership, and any other information which the General Partner determines
to include therein.
ARTICLE XVI.
AMENDMENTS
This Agreement may be amended by a majority consent of the Interests of
the Partners after a meeting of the Partners pursuant to Section 17.2, which
meeting shall be held after proper notice as provided in Section 17.3 of this
Agreement. Notwithstanding the foregoing, no amendment shall be valid unless it
is in writing and no amendment shall change the Partnership to a general
partnership; extend the term of the Partnership beyond the date provided for in
this Agreement; modify the limited liability of the Limited Partner and the
Special Limited Partner; allow the Limited Partner to take control of the
Partnership's business within the meaning of the Act; reduce or defer the
realization of any Partner's interest in allocations, Distributions, capital or
compensation hereunder, or increase any Partner's obligations hereunder, without
the consent of the partner so affected; or change the provisions of this Article
XVI.
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ARTICLE XVII.
MISCELLANEOUS
Section 17.1 Voting Rights.
(a) The Limited Partner shall have no right to vote upon any matters
affecting the Partnership, except as provided in this Agreement.
Notwithstanding the foregoing, the Limited Partner's and Special Limited
Partner's vote is required:
(i) to approve or disapprove the Sale or Refinancing of the Project
prior to such Sale or Refinancing;
(ii) to remove the General Partner and elect a substitute General
Partner as provided in this Agreement;
(iii) to elect a successor General Partner upon the Withdrawal of the
General Partner;
(iv) to approve or disapprove the dissolution of the Partnership;
(v) subject to the provisions of Article XVI hereof, to amend this
Agreement;
(vi) to approve or disapprove the refinancing of the Mortgage prior to
such refinancing; or
(vii) on any other matter permitted in this Agreement.
(b) On any matter where the Limited Partner has the right to vote, votes
may only be cast at a duly called meeting of the Partnership or through
written action without a meeting.
(c) The Special Limited Partner shall have the right to consent to those
actions or inactions of the Partnership and/or General Partner as otherwise
set forth in this Agreement, and the General Partner is prohibited from any
action or inaction requiring such consent unless such consent has been
obtained.
Section 17.2 Meeting of Partnership.
Meetings of the Partnership may be noticed either (a) at any time by
the General Partner; or (b) by the Limited Partner or the Special Limited
Partner. The notice for a meeting shall specify the purpose of such meeting, and
the time and the place of such meeting (which shall be by telephone conference
or at the principal place of business of the Partnership). Any Partner calling a
Partners meeting shall provide written notice to all Partners. The meeting shall
not be held less than 15 days nor more than 30 days from the Partners' receipt
of the notice. All meetings and actions of the Partnership shall be governed in
66
all respects, including matters relating to proxies, record dates and actions
without a meeting, by the applicable provisions of the Act, as it shall be
amended from time to time.
Section 17.3 Notices.
Any notice given pursuant to this Agreement may be served personally on
the Partner to be notified, or may be sent by overnight courier, or may be
mailed, first class postage prepaid, or by certified mail, to the following
address, or to such other address as a party may from time to time designate in
writing:
To the General Partner: Memphis 2004 LLC
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
To the Limited Partner: WNC Housing Tax Credit Fund VI
Series 12, L.P.
c/o WNC & Associates, Inc.
▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
To the Special Limited Partner: WNC Housing, L.P.
▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Section 17.4 Successors and Assigns.
All the terms and conditions of this Agreement shall be binding upon
and inure to the benefit of the successors and assigns of the Partners.
Section 17.5 Recording of Certificate of Limited Partnership.
If the General Partner should deem it advisable to do so, the
Partnership shall record in the office of the County Recorder of the county in
which the principal place of business of the Partnership is located a certified
copy of the Certificate of Limited Partnership, or any amendment thereto, after
such Certificate or amendment has been filed with the Secretary of State of
Tennessee.
Section 17.6 Amendment of Certificate of Limited Partnership.
(a)The General Partner, or any successor general partner, shall cause to be
filed, within 30 days after the happening of any of the following events,
an amendment to the Certificate of Limited Partnership reflecting the
occurrence of any of the following:
(i) a change in the name of the Partnership;
67
(ii) a change in the street address of the Partnership's principal
executive office;
(iii) 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;
(iv) the admission of a General Partner and that Partner's address; or
(v) 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 Tennessee. The certificate of amendment shall
set forth the Partnership's name, the Secretary of State's file number for
the Partnership and the text of the amendment.
(d) In the event of a Withdrawal or Involuntary Withdrawal of the General
Partner, and if such General Partner does not file an amendment to the
Certificate of Limited Partnership as specified in this Section 17.6, then
the Special Limited Partner is hereby granted the specific authority to
sign and file such amendment.
Section 17.7 Counterparts.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, and said counterparts shall constitute but
one and the same instrument which may sufficiently be evidenced by one
counterpart.
Section 17.8 Captions.
Captions to and headings of the Articles, sections and subsections of
this Agreement are solely for the conveniences of the Partners, are not a part
of this Agreement, and shall not be used for the interpretation or determination
of the validity of this Agreement or any provision hereof.
Section 17.9 Saving Clause.
If any provision of this Agreement, or the application of such
provision to any Person or circumstance, shall be held invalid, the remainder of
this Agreement, or the application of such provision to Persons or circumstances
other than those as to which it is held invalid, shall not be affected thereby.
68
Section 17.10 Certain Provisions.
If the operation of any provision of this Agreement would contravene
the provisions of applicable law, or would result in the imposition of general
liability on any Limited Partner or Special Limited Partner, such provisions
shall be void and ineffectual.
Section 17.11 Tax Matters Partner.
All the Partners hereby agree that the General Partner shall be the
"Tax Matters Partner" pursuant to the Code and in connection with any review or
examination of the federal income tax returns of the Partnership. At the time of
a review, examination, or otherwise, the Tax Matters Partner shall inform the
IRS that a copy of all correspondence shall be provided to the Limited Partner.
(a) The Tax Matters Partner shall furnish or cause to be furnished to each
Partner notice and information with respect to the following: closing
conference with an examining agent; proposed adjustments, rights of appeal,
and requirements for filing a protest; time and place of any appeals
conference; acceptance by the Internal Revenue Service of any settlement
offer; consent to the extension of the period of limitation with respect to
all Partners; filing of a request for administrative adjustment on behalf
of the Partnership; filing by the Tax Matters Partner or any other Partner
of any petition for judicial review; filing of any appeal with respect to
any judicial determination; and a final judicial redetermination.
(b) If the Tax Matters Partner shall determine to litigate any
administrative determination relating to federal income tax matters, then
the Tax Matters Partner shall obtain the Consent of the Special Limited
Partner to litigate such matter in such court.
(c) In discharging its duties and responsibilities, the Tax Matters Partner
shall act as a fiduciary (1) to the Limited Partner (to the exclusion of
the other Partners) insofar as tax matters related to the Tax Credits are
concerned, and (2) to all of the Partners in other respects.
(d) The Partners consent and agree that in connection with any audit,
review, examination, or otherwise of the Partnership, or if the Tax Matters
Partner withdraws from the Partnership or the Tax Matters Partner becomes
Bankrupt, then the Special Limited Partner may become, in its sole
discretion, a special general partner, and become the Tax Matters Partner.
The Limited Partner will make no claim against the Partnership in respect
of any action or omission by the Tax Matters Partner during such time as
the Special Limited Partner acts as the Tax Matters Partner.
(e) Nothing herein shall be construed as a waiver by the Limited Partner of
any of its rights under Chapter 631 of the Code. The General Partner shall
not enter into any settlement agreement purporting to bind the Limited
Partner without the Limited Partner's consent.
69
Section 17.12 Expiration of Compliance Period.
(a) Notwithstanding any provision hereof to the contrary (other than this
Section 17.12), subject to the General Partner's rights under Section 9.14
hereof, 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 1 year from the date of such written request a
purchaser for the Project who will continue to operate the Project 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 Project 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 Project 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 17.2(a) hereof. If the General Partner shall fail to
so obtain a buyer for the Project within 6 months of receipt of the
Required Sale Notice or if the Consent of the Special Limited Partner in
its sole discretion shall be withheld to any proposed sale, then the
Special Limited Partner shall have the right at any time thereafter to
obtain a buyer for the Project 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 Project to such buyer.
(c) A sale of the Project 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 Project post the required bond on behalf of the
Partnership.
Section 17.13 Number and Gender.
All pronouns and any variations thereof shall be deemed to refer to the
masculine, feminine, neuter, singular or plural as the identity of the Person or
Persons may require.
70
Section 17.14 Entire Agreement.
This Agreement constitutes the entire understanding between the parties
with respect to the subject matter hereof and all prior understandings and
agreements between the parties, written or oral, respecting this transaction are
merged in this Agreement.
Section 17.15 Governing Law.
This Agreement and its application shall be governed by the laws of the
State.
Section 17.16 Attorney's Fees.
If a suit or action is instituted in connection with an alleged breach
of any provision of this Agreement, the prevailing party shall be entitled to
recover, in addition to costs, such sums as the court may adjudge reasonable as
attorney's fees, including fees on any appeal.
Section 17.17 Receipt of Correspondence.
The Partners agree that the General Partner shall send to the Limited
Partner and the Special Limited Partner within 5 days of receipt a copy of any
correspondence relative to the Project's noncompliance with the Mortgage,
relative to the Project's noncompliance with the Tax Credit rules or
regulations, relative to any correspondence from the Mortgage lender and/or
relative to the disposition of the Project.
Section 17.18 Security Interest and Right of Set-Off.
As security for the performance of the respective obligations to which
any General Partner may be subject under this Agreement, the Partnership shall
have (and each General Partner hereby grants to the Partnership) a security
interest in their respective Interests of such General Partner and in all funds
distributable to said General Partner to the extent of the amount of such
obligation.
[Signatures begin on the following page]
71
IN WITNESS WHEREOF, this Second Amended and Restated Agreement of Limited
Partnership of Memphis 2004.0 LP, a Tennessee limited partnership, is made and
entered into as of the 30th day of August, 2005.
GENERAL PARTNER:
Memphis 2004 LLC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Managing Member
LIMITED PARTNER:
WNC Housing Tax Credit Fund VI Series 12, L.P.
By: WNC & Associates, Inc.,
General Partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Executive Vice President
SPECIAL LIMITED PARTNER:
WNC Housing, L.P.
By: WNC & Associates, Inc.,
General Partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Executive Vice President
WITHDRAWING ORIGINAL LIMITED
PARTNER:
United Development Corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
President
72
EXHIBIT A
LEGAL DESCRIPTION
[TO BE ATTACHED BY WNC]
Exhibit A
EXHIBIT B
FORM OF LEGAL OPINION
_____________, 200_
WNC Housing Tax Credit Fund VI Series 12, L.P.
WNC Housing, L.P.
c/o WNC & Associates, Inc.
▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Re: Memphis 2004.0 LP
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in
connection with the investment by WNC Housing Tax Credit Fund VI Series 12, L.P.
a California limited partnership (the "Limited Partner"), and WNC Housing, L.P.,
a California limited partnership (the "Special Limited Partner"), in Memphis
2004.0 LP (the "Partnership"), a Tennessee limited partnership formed to own,
develop, construct, finance and operate an complex for low-income persons (the
"Project") in Memphis, Shelby County, Tennessee. The original limited partner of
the Partnership is United Development Corp (the "Original Limited Partner"). The
general partner of the Partnership is Memphis 2004 LLC (the "General Partner").
The developer of the Project is United Development Corporation (the
"Developer"). The guarantor of certain obligations of the General Partner is
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. and Jo ▇▇▇▇▇ ▇▇▇▇▇▇▇ (the "Guarantor").
In rendering the opinions stated below, we have examined and relied
upon the following:
(i) [Partnership Organizational Documents];
(ii) [Amended and Restated Agreement of Limited Partnership] (the
"Partnership Agreement");
(iii) [Second Amended & Restated Agreement of Limited Partnership]
(iv) [GP Organizational Documents];
(v) [Developer Organizational Documents];
(vi) [Guarantor Organizational Documents];
(vii) the Title Policy, as defined in the Partnership Agreement;
Exhibit B
(viii) the Certification and Agreement entered into by the
Partnership, the General Partner, the Original Limited Partner, the
Limited Partner, and WNC & Associates, Inc., attached as Exhibit C to
the Partnership Agreement and dated ______________;
(ix) the Development Fee Agreement entered into by the Developer and
the Partnership and dated ______________, (the "Development
Agreement");
(x) the Development Fee Guaranty Agreement, entered into by the
Guarantor and the Partnership and dated ______________;
(xi) the Development, Construction, and Operating Budget Agreement,
entered into by the General Partner, the Limited Partner, and the
Special Limited Partner and dated ______________;
(xii) the Construction Completion, Operating Deficit, and Tax Credit
Guaranty Agreement, entered into by the Guarantor, the Partnership,
and the Limited Partner and dated ______________;
(xiii) the Construction Monitoring Agreement, entered into by the
Partnership, the General Partner, ______________, and ______________
and dated ______________ ______________;
(xiv) the [reservation letter/carryover allocation] from the Tennessee
Housing Development Agency(the "State Agency") dated December 22, 2004
awarding $7,000,000 in federal tax credits annually for each of 10
years; and
(xv) such other documents, records and instruments as we have deemed
necessary in order to enable us to render the opinions referred to in
this letter.
For purposes of rendering the opinions stated below we have assumed
that, in those cases in which we have not been involved directly in the
preparation, execution or the filing of a document, (a) the document reviewed by
us is an original document, or a true and accurate copy of the original
document, and has not been subsequently amended, (b) the signatures on each
original document are genuine, and (c) each party, other than the Partnership,
the General Partner, the Developer and the Guarantor, who executed the document
had proper authority and capacity to do so.
Based on the foregoing, we are of the opinion that:
(a) The General Partner is a limited liability company duly formed and
validly existing under the laws of the State of Tennessee.
(b) The Partnership is a limited partnership duly formed and validly
existing under the laws of the State of Tennessee.
Exhibit B-2
(c) The Partnership has full power and authority to own, develop,
construct, finance and operate the Project and to otherwise conduct business
under the Partnership Agreement and the Related Agreements.
(d) Execution of the Partnership Agreement and the Related Agreements by
the General Partner and the Partnership, as applicable, has been duly and
validly authorized by or on behalf of the General Partner and the Partnership,
as applicable, and, having been executed and delivered in accordance with its
terms, each of the Partnership Agreement and the Related Agreements constitutes
the valid and binding agreement of the General Partners and the Partnership, as
applicable, enforceable in accordance with its terms.
(e) The execution and delivery of the Partnership Agreement and the Related
Agreements by the General Partner do not conflict with and will not result in a
breach of any of the terms, provisions or conditions of any agreement or
instrument known to counsel to which any of the General Partner, the
Partnership, the Developer or the Guarantor is a party or by which any of them
may be bound, or any order, rule, or regulation applicable to any of such
parties of any court or governmental body or administrative agency having
jurisdiction over any of such parties or over the property.
(f) To the best of counsel's knowledge, after due inquiry, there is no
litigation or governmental proceeding pending or threatened against, or
involving the Project, the Partnership, or any General Partner, the Guarantor,
or the Developer which would materially adversely affect the condition
(financial or otherwise) or business of the Project, 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 Tennessee law
and are entitled to all of the rights of limited partners under the Partnership
Agreement. Except as described in the Partnership Agreement, no person is a
partner of or has any legal or equitable interest in the Partnership, and all
former partners of record or known to counsel have validly withdrawn from the
Partnership and have released any claims against the Partnership arising out of
their participation as partners therein.
(h) Liability of the Limited Partner and the Special Limited Partner for
obligations of the Partnership is limited to the amount of their capital
contributions required by the Partnership Agreement.
(i) Neither the General Partner of the Partnership nor the Limited Partner
nor the Special Limited Partner will have any liability for the Mortgage (as
such term is defined in the Partnership Agreement), and the lender of the
Mortgage Loan will look only to its security in the Project for repayment of the
Mortgage Loan.
(j) The Partnership owns a fee simple interest in the Project.
(k) To the best of our actual knowledge and belief, after due inquiry, the
Partnership, the General Partner, the Developer and the Guarantor have obtained
all consents, permissions, licenses, approvals, or orders required by all
Exhibit B-3
applicable governmental or regulatory agencies for the development, construction
and operation of the Project, and the Project conforms to all applicable
Federal, state and local land use, zoning, health, building and safety laws,
ordinances, rules and regulations.
(l) The Project has obtained a carryover allocation of low housing tax
credits ("LIHTC") from the State Agency. The final allocation of LIHTC and
ultimate eligibility of the Project for such final allocation are subject to a
series of requirements which must be met, performed or achieved at various times
prior to and after such final allocation. Assuming all such requirements are
met, performed or achieved at the time or times provided by applicable laws and
regulations, the Project will qualify for LIHTC.
(m) The Guarantor, if not an individual, was incorporated, duly organized,
and is validly existing and in good standing under the laws of the State of
Tennessee, is qualified to do business in every jurisdiction in which because of
the nature of its activities or properties qualification is appropriate, and has
all requisite power and authority to own and operate its properties and to carry
on its business as now conducted.
(n) Each Guarantor (i) has full power and authority to execute, deliver and
perform its obligations under and (ii) has duly authorized the execution,
delivery and performance of the Development Fee Guaranty Agreement and the
Construction Completion, Operating Deficit and Tax Credit Guaranty Agreement
(collectively, the "Guaranty"). The Guaranty has been duly executed and
delivered by the Guarantor and constitutes the legal, valid and binding
obligation of the Guarantor enforceable in accordance with its terms except as
the enforceability thereof may be limited by applicable bankruptcy,
reorganization, insolvency, moratorium or other similar laws affecting the
enforcement of creditor's rights generally and general principles of equity
(regardless of whether enforceability is considered a proceeding at law or
equity).
(o) The Developer was incorporated, duly organized, and is validly existing
and in good standing the laws of the State of Tennessee, is qualified to do
business in every jurisdiction in which because of the nature of its activities
or properties qualification is appropriate, and has all requisite power and
authority to own and operate its properties and to carry on its business as now
conducted.
(p) The Developer (i) has full power and authority to execute, deliver and
perform its obligations under, and (ii) has duly authorized the execution,
delivery and performance of the Development Agreement. The Development Agreement
has been duly executed and delivered by the Developer and constitutes the legal,
valid and binding obligation of the Developer enforceable in accordance with its
terms except as the enforceability thereof may be limited by applicable
bankruptcy, reorganization, insolvency, moratorium or other similar laws
affecting the enforcement of creditor's rights generally and general principles
of equity (regardless of whether enforceability is considered a proceeding at
law or equity).
I am a member of the Bar of the State of Tennessee and express no
opinion as to the laws applicable in any other jurisdiction. All of the opinions
set forth above are qualified to the extent that the validity of any provision
of any agreement may be subject to or affected by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the rights of
Exhibit B-4
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, its Assignees, the
Special Limited Partner and their legal counsel which may rely on this opinion.
This opinion may not be delivered to or relied upon by any other person or
entity without our express written consent.
Sincerely,
----------------------------
Exhibit B-5
EXHIBIT C
CERTIFICATION AND AGREEMENT
CERTIFICATION AND AGREEMENT made as of the date written below by
Memphis 2004.0 LP, a Tennessee limited partnership (the "Partnership"); Memphis
2004 LLC (the "General Partner"); and United Development Corporation (the
"Original Limited Partner") for the benefit of WNC Housing Tax Credit Fund VI
Series 12, L.P., a California limited partnership (the "Investment
Partnership"), and WNC & Associates, Inc. ("WNC").
WHEREAS, the Partnership proposes to admit the Investment Partnership
as a limited partner thereof pursuant to an Amended and Restated Agreement of
Limited Partnership of the Partnership (the "Partnership Agreement"), in
accordance with which the Investment Partnership will make substantial capital
contributions to the Partnership; and
WHEREAS, the Investment Partnership and WNC have relied upon certain
information and representations described herein in evaluating the merits of
investment by the Investment Partnership in the Partnership;
NOW, THEREFORE, to induce the Investment Partnership to enter into the
Partnership Agreement and become a limited partner of the Partnership, and for
$1.00 and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the Partnership, the General Partner and the
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 Project (the "Project") 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 or Original
Limited Partner or any of their respective properties; this Certification and
Exhibit C
Agreement constitutes the valid and binding agreement of the Partnership, the
General Partner and the Original Limited Partner, enforceable against each of
them in accordance with its terms.
1.2 The General Partner has delivered to the Investment Partnership,
WNC or their affiliates all documents and information which would be material to
a prudent investor in deciding whether to invest in the Partnership. All factual
information provided to the Investment Partnership, WNC or their affiliates
either in writing or orally, did not, at the time given, and does not, on the
date hereof, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances under which they are made.
1.3 Each of the representations and warranties contained in the
Partnership Agreement is true and correct as of the date hereof.
1.4 Each of the covenants and agreements of the Partnership and the
General Partner contained in the Partnership Agreement has been duly performed
to the extent that performance of any covenant or agreement is required on or
prior to the date hereof.
1.5 All conditions to admission of the Investment Partnership as the
investment limited partner of the Partnership contained in the Partnership
Agreement have been satisfied.
1.6 No default has occurred and is continuing under the Partnership
Agreement or any of the Project Documents (as such term is defined in the
Partnership Agreement) for the Partnership.
1.7 The Partnership will allocate to the Investment Partnership the
Projected Annual Tax Credits, or the Revised Projected Tax Credits, if
applicable.
1.8 The General Partner agrees to take all actions necessary to claim
the Projected Tax Credit, including, without limitation, the filing of Form(s)
8609 with the Internal Revenue Service.
1.9 No person or entity other than the Partnership holds any equity
interest in the Project.
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 Project.
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
Project is destroyed or condemned or there is a diminution in the value of the
Project.
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 Project.
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.
Exhibit C-2
1.14 No event has occurred which would have a material adverse change
on the Investment Partnership's investment.
2. Miscellaneous.
2.1 This Certification and Agreement is made solely for the benefit of
the Investment Partnership and WNC, and their respective successors and
assignees, and no other person shall acquire or have any right under or by
virtue of this Agreement.
2.2 This Certification and Agreement may be executed in several
counterparts, each of which shall be deemed to be an original, all of which
together shall constitute one and the same instrument.
2.3 Capitalized terms used but not defined in this Certification and
Agreement shall have the meanings given to them in the Partnership Agreement.
Exhibit C-3
IN WITNESS WHEREOF, this Certification and Agreement is made and entered
into as of the 30 day of August, 2005.
PARTNERSHIP:
Memphis 2004.0 LP
By: Memphis 2004 LLC, its general partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
-------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Managing Member
GENERAL PARTNER:
Memphis 2004 LLC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
-------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Managing Member
ORIGINAL LIMITED PARTNER:
United Development Corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
-------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
President
EXHIBIT C-4
EXHIBIT D
FORM OF COMPLETION CERTIFICATE
(to be used when construction completed)
COMPLETION CERTIFICATE
The undersigned, an architect duly licensed and registered in the State
of Tennessee, has reviewed the final working plans and detailed specifications
for Memphis 2004.0 LP, a Tennessee limited partnership (the "Partnership") in
connection with the construction of improvements on certain real property
located in Memphis, Shelby, Tennessee County, Tennessee (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, suppliers and workmen who worked on the Improvements have issued
lien releases and have been paid in full except for normal retainages and
amounts in dispute.
-----------------------------------
PROJECT ARCHITECT
Date: ____________________________
Confirmed by:
----------------------------------
GENERAL PARTNER
Date: ____________________________
EXHIBIT D
EXHIBIT E
ACCOUNTANT'S CERTIFICATE
[Accountant's Letterhead]
_______________, 200__
WNC Housing Tax Credit Fund VI Series 12, L.P.
c/o WNC & Associates, Inc.
▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Re: Memphis 2004.0 LP
Certification as to Amount of Eligible Tax Credit Base
Ladies and Gentlemen:
In connection with the acquisition by WNC Housing Tax Credit Fund VI
Series, L.P. (the "Limited Partner") of a limited partnership interest in
Memphis 2004.0 LP, a Tennessee limited partnership (the "Partnership"), which
owns a certain parcel of land located in Memphis, Shelby County, Tennessee and
improvements thereon (the "Project"), the Limited Partner has requested our
certification as to certain issues including the amount of low-income housing
tax credits ("Tax Credits") available with respect to the Project under Section
42 of the Internal Revenue Code of 1986, as amended (the "Code"). Based upon our
review of [the financial information provided by the Partnership] of the
Partnership, we are prepared to file the Federal information tax return of the
Partnership claiming annual Tax Credits in the amount of $[amount], which amount
is based on an eligible basis (as defined in Section 42(d) of the Code) of the
Project of $[amount], a qualified basis (as defined in Section 42(c) of the
Code) of the Project of $[amount] and an applicable percentage (as defined in
Section 42(b) of the Code) of [percent]%.
Sincerely,
-------------------------
EXHIBIT E
EXHIBIT F
CONTRACTOR'S CERTIFICATE
[Contractor's Letterhead]
_______________, 200_
WNC Housing Tax Credit Fund VI Series 12, L.P.
c/o WNC & Associates, Inc.
▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Re: Memphis 2004.0 LP
Ladies and Gentlemen:
The undersigned [▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. dba ▇▇▇▇▇▇▇ Affordable Homes]
(hereinafter referred to as "Contractor"), has furnished or through various
contractors, sub-contractors, or material suppliers has contracted to furnish
labor, services and/or materials to satisfy the Construction Contract
(hereinafter collectively referred to as the "Work") in connection with the
improvement of certain real property known as __________________ located in
Memphis, Shelby County, Tennessee (hereinafter known as the "Project"). Any
terms not defined herein shall have the meaning ascribed in the Amended and
Restated Agreement of Limited Partnership of Memphis 2004.0 LP.
Contractor makes the following representations, warranties and
covenants regarding the Work at the Project with full knowledge that the Limited
Partner will rely on these representations, warranties and covenants as a
condition to making its Capital Contribution payment to Memphis 2004.0 LP:
o Work on said Project has been performed and completed in accordance
with the Plans and Specifications for the Project.
o Contractor acknowledges that upon the Partnership's receipt of the
Limited Partner's placed in service Capital Contribution payment all
amounts owed to Contractor, sub-contractor or material suppliers to
complete the Work will be paid in full.
o Contractor acknowledges Memphis 2004.0 LP is not in violation of any
terms and conditions of the Construction Contract.
o Contractor acknowledges that the Construction Contract has been paid
in full and all liens for the Work have been released.
EXHIBIT F
The undersigned has personal knowledge of the matters stated herein and
is authorized and fully qualified to execute this document on behalf of the
Contractor.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. DBA ▇▇▇▇▇▇▇
AFFORDABLE HOMES
By: ___________________________
Name: ____________________
Title: ____________________
EXHIBIT F-2
EXHIBIT G
DEPRECIATION SCHEDULE
Real Property: Use Modified Accelerated Cost Recovery System ("MACRS") 27.5 year
straight-line depreciation using the mid-month. Real property includes buildings
and building improvements.
Personal Property: Use 5-year recovery period using mid-year 200% declining
balance, if it relates to residential real estate. Personal property related to
commercial space must use a 7-year recovery period using mid-year 200% declining
balance.
The following costs have a 5-year recovery period:
o Removable appliances (not central climate control system equipment
or water heaters)
o Draperies, blinds and shades, if they would be reusable if removed
o Carpeting, if its removal would not destroy the underlying floor
o Vinyl flooring, if its removal would be easy and not destroy the
underlying floor
o Common area furnishings
o Photocopy equipment
o Calculators, adding machines
o Typewriters
o Computers
o Wall coverings, if their removal would not destroy the underlying
wall
o Exit signs
o Security systems (not fire protection system, sprinkler system,
smoke detectors, or fire escapes)
o Outdoor security lighting (not parking lot lighting)
o Fire extinguishers
o Decorative lighting and sconces (not light fixtures for central
lighting)
o Outdoor decorative lighting, such as that lighting signs
o Telephone systems
o Corridor handrails (not bathroom or stairway)
o Raised floors to accommodate wiring in computer rooms
The following costs have a 7-year recovery period with a mid-year 200% declining
balance:
o Office furnishings
o Cabinets and shelving
o Bulletin boards
o Conference or meeting room movable partitions
A percentage of the development fee is also allowed in personal property. The
percentage is calculated by taking the ratio of personal property cost,
excluding development fee, to total development costs and multiplying the
development fee by the calculated ratio.
EXHIBIT G
Land improvements Cost Recovery: Use 15-year recovery period using mid-year 150%
declining balance. The following costs have a 15-year recovery period. Items
allowed in this section are costs attributable to excavation, grading, and
removing soil necessary to the proper setting of buildings. Other costs
allowable in this section are as follows:
o Roads and sidewalks
o Concrete work (curb and gutter)
o Fencing
o Landscaping (including, but not limited to, trees and shrubs)
around the building which would be destroyed if the building were
replaced
o Decorative walls which are part of the landscaping
o Parking lot (resurfacing it later is deducted as an expense)
o Initial parking lot striping (restriping it later is deducted as
an expense)
o Street lights and signs
o Signs which identify the property or provide directions
o Parking lot lighting (not outdoor security lighting)
o Playground equipment
o Basketball court and backboard
o Tennis courts
o Swimming pools
o Jogging trails
o Flag pole
o Wastewater treatment plant and lift station to handle raw sewage
o Interest expense capitalized and related to any of the above costs
o The pro rata portion of the general contractor/construction
company profit, overhead, and general requirements and conditions
allocable to items with a 15-year cost recovery period
o The pro rata portion of the development fee, profit and overhead
allocable to items with a 15-year cost recovery period
Recovery of costs of sanitary sewer system and water utility/distribution
system, including the sewer system outside the buildings: the following costs
have a 20-year recovery period - 150% declining balance mid-year convention.
o Fire hydrants
o Manhole rings and covers
o Watermeter
o Gate valves
o Flushing hydrants
o Cast iron fittings
o Valve boxes
o Air release valves
o Tapping sleeves
o PVC water pipe (outside)
o PVC sewer pipe (outside)
o PVC sewer fittings
EXHIBIT G-2
EXHIBIT H
REPORT OF OPERATIONS
QUARTER ENDED: ____________________, 200__
------------------------------------- -----------------------------------
LOCAL PARTNERSHIP:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
GENERAL PARTNER:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Firm Name:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Address:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
City, State, Zip:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Phone:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
PROPERTY NAME:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Address:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
City, State, Zip:
-----------------------------------
------------------------------------- -----------------------------------
Resident Manager:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Phone:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
ACCOUNTANT:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Firm:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Address:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
City, State, Zip:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Phone:
------------------------------------- -----------------------------------
------------------------------------ -----------------------------------
MANAGEMENT COMPANY
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Address:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
City, State, Zip:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Phone:
------------------------------------- -----------------------------------
------------------------------------- -----------------------------------
Contact:
------------------------------------- -----------------------------------
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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 H
OPERATIONAL INFORMATION
Rent Schedule and Increases from Previous Quarter
Number Monthly Rent Rent Increases Effective
of Units Basic / Market Amount Percent Date
1 Bedroom ________ ______________ _______ _______ ________
2 Bedroom ________ ______________ _______ _______ ________
3 Bedroom ________ ______________ _______ _______ ________
PROPOSED MAINTENANCE
Completed Funded by
Type Description or Operations or Amount
Planned Reserves
------------------------------------------------------------------------------
Interior Painting
------------------------------------------------------------------------------
Exterior Painting
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Siding
------------------------------------------------------------------------------
Roofing
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Drainage
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Paving
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Landscaping
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Playground
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Community Room
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Laundry Room
------------------------------------------------------------------------------
Common Areas
------------------------------------------------------------------------------
Carpet
------------------------------------------------------------------------------
Appliances
------------------------------------------------------------------------------
Lighting
------------------------------------------------------------------------------
Other
------------------------------------------------------------------------------
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Please describe in detail any major repairs:
------------------------------------------------------------------------------
------------------------------------------------------------------------------
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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
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Signage
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Parking Lots
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Office/Storage
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Equipment
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Community Building
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Laundry Room
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Benches/Playground
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Lawns, Plantings
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Drainage, Erosion
-------------------------------------------------------------------------------
Carports
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Fences
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Walks/Steps/Guardrails
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Lighting
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Painting
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Walls/Foundation
-------------------------------------------------------------------------------
Roof/Flashing/Vents
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Gutters/Splashblocks
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Balconies/Patios
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Doors Windows/Screens
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Elevators
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INTERIOR CONDITION
-------------------------------------------------------------------------------
Stairs
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Flooring
-------------------------------------------------------------------------------
Doors/Cabinets/Hardware
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Drapes/Blinds
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Interior Painting
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Refrig/Stoves/Sinks
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Bathroom/Tubs/Showers
Toilets
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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:
------------------------------------------------------------------------
------------------------------------------------------------------------
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
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#:
-------------------------------------------------------------------------------
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
-------------------------------------------------------------------------------
BIN # Certificate of Occupancy Date (New Construction)/
Place In Service Date - Acq-Rehab / Rehab):
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
BIN # Certificate of Occupancy Date (New Construction)/
Place In Service Date - Acq-Rehab / Rehab):
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
BIN # Certificate of Occupancy Date (New Construction)/
Place In Service Date - Acq-Rehab / Rehab):
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
INITIAL TENANT CERTIFICATIONS
Partnership Name:-------------------
(CONTINUED)
Tenant Tenant
Income Income Asset Unit Rent Tenant Utility
Qualified Vrfcn Vrfcn Rent Subsidy Payment Allowance
-------------------------------------------------------------------------------
YES
-------------------------------------------------------------------------------
YES
-------------------------------------------------------------------------------
YES
-------------------------------------------------------------------------------
YES
-------------------------------------------------------------------------------
YES
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
YES
-------------------------------------------------------------------------------
YES
-------------------------------------------------------------------------------
YES
-------------------------------------------------------------------------------
YES
-------------------------------------------------------------------------------
YES
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
YES
-------------------------------------------------------------------------------
YES
-------------------------------------------------------------------------------
YES
-------------------------------------------------------------------------------
YES
-------------------------------------------------------------------------------
YES
-------------------------------------------------------------------------------
INITIAL TENANT CERTIFICATIONS
Partnership Name:-------------------
(CONTINUED)
Tenant Tenant Overall
Gross Maximum Rent Tenant
Rent Rent Qualified Eligible
-------------------------------------------------------------------------------
NO NO
-------------------------------------------------------------------------------
NO NO
-------------------------------------------------------------------------------
NO NO
-------------------------------------------------------------------------------
NO NO
-------------------------------------------------------------------------------
NO NO
-------------------------------------------------------------------------------
NO NO
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NO NO
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NO NO
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NO NO
-------------------------------------------------------------------------------
NO NO
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NO NO
-------------------------------------------------------------------------------
NO NO
-------------------------------------------------------------------------------
NO NO
-------------------------------------------------------------------------------
NO NO
-------------------------------------------------------------------------------
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
___ Number of Residential
Buildings
___ Number of Total Units
___ Number of Market Are You Performing Annual
Units Re-Certs? ___
___ 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
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
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
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
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 [Partnership Name], I hereby certify as to the
following:
1. [Partnership Name] owns a [Number of Units] unit project ("Apartment
Housing") in [Apartment City], [Apartment County] County, [Apartment
State].
2. An annual income certification (including supporting documentation)
has been received from each tenant. 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
[Apartment State] 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.
EXHIBIT I
SURVEY REQUIREMENTS
The Survey shall satisfy the minimum standard detail requirements for
an ALTA/ACSM Land Title Survey, as established by ALTA, ACSM and NSPS in October
of 1999, including optional items 1 through 11 and 13, and shall show the items
listed below:
(a) A scale of measurement.
(b) A North arrow shall be shown.
(c) A legend to explain any symbols or abbreviations appearing on the
survey, and supplementary or exaggerated diagrams shall be provided as
necessary, for clarity.
(d) A point of beginning to form the basis for, or as used in, the legal
description of record of the property unless a lot and block legal
description is utilized. Measured and recorded distances from corners
of parcels to the nearest right of way lines of streets.
(e) The distances to the nearest intersecting street shall be indicated.
Names and widths of streets and highways abutting the property
surveyed and widths of rights of way shall be given. Indicate whether
roads and streets are publicly dedicated; note if not physically open.
(f) Notations of the names of adjoining owners whenever possible.
(g) The boundaries of the Project and monuments placed (or references to
monuments found) at all major corners of the boundary of the premises.
(h) The character of any and all evidence of possession shall be stated
and the location of such evidence shall carefully given in relation to
both the measured boundary lines and those established by the record.
(i) Location and dimensions (including height and gross floor area)of all
buildings, structures and other improvements situated on the Project
(such as signs, parking areas, structures, swimming pools, etc.) the
number of square feet contained within the footprint of each building
on the Project, and their locations defined by measurements
perpendicular to the Project boundaries.
(j) Show the street address(es) of the improvements.
(k) The location and recording data for all easements (both those
burdening and benefiting the Project), encroachments, set back and
building restriction lines, conflicts or protrusions from or onto
adjoining property, streets or alleys. (Fully depict any appurtenant
easements, showing all courses and distances.) Note any easements
which cannot be located, and note easements which appear on the
Project but which are not subject to any recorded instrument.
(l) The character and location of all walls, buildings, fences and other
visible improvements within 5 feet of each side of the boundary lines
shall be noted.
(m) The location of driveways, alleys, access roads, sidewalks, curbs,
railroad tracks and railroad rights-of-way on or crossing the Project.
(n) Observable evidence of cemeteries.
(o) The location of creeks, streams, rivers, lakes, ponds (retention or
otherwise) or other waterways that cross or form a boundary line of
the property, including the location of high and low water marks
established by the U.S. Army Corps of Engineers, where applicable.
(p) Vicinity map showing the Project surveyed in reference to nearby
highway(s)or major street intersections(s).
(q) Flood zone designation.
(r) Land area by acreage and square feet.
(s) Identify and show, if possible, setback, height and floor space area
restrictions.
(t) Parking areas and, if striped, the striping and the number of parking
spaces (by category - full size, compact size, handicap reserved).
(u) Indication of access to a public way such as curb cuts, driveways
marked.
(v) Location of all utilities serving the Premises, including without
limitation:
(i) All manholes, catch basins, valve vaults, storm drains or other
surface indications of subterranean uses;
(ii) All wires and cables (including their function) crossing the
surveyed premises, all poles on or within ten feet of the
surveyed premises, and the dimensions of all cross wires or
overhangs affecting the surveyed premises; and
(iii) All utility installations on the surveyed premises based upon
information obtained from independent sources such as utility
companies or utility locating services.
(w) Any wetlands area(s), if known.
(x) The political subdivision, county, state and such other notations as
will accurately locate the property surveyed.
(y) Significant observations not otherwise disclosed.
EXHIBIT I-2
SURVEYOR'S CERTIFICATE
I hereby certify to Memphis 2004.0 LP, its respective successors and/or assigns
that the survey for this plat was made on the ground under my supervision from a
recorded description in deed of record in Book ___, Page ___, Records of
___________ County, ___________, and that the angular and linear measurements
and all other matters shown hereon are correct. I further certify that this
survey made under my supervision on ___________ 200__, correctly shows the total
area of the property in acres and in square feet; the exact dimensions and
location of improvements, walkways, paved areas and parking areas; all other
matters on the ground which may adversely affect title to the subject property;
the exact relation of buildings and other structures to the property lines of
the land indicated hereon; the exact location of visible and recorded easements
and other manners of record affecting the subject property. I further certify
that there are no encroachments of adjoining buildings or structures onto said
land nor overlap of buildings or structures from said land other than as shown;
that adequate ingress and egress to the subject property are provided by
___________ and ___________, as shown on the survey, the same being paved,
dedicated public right; of way; that the location of all improvements on the
subject property is in accord with all applicable zoning laws regulating the use
of the subject property and with all applicable laws containing minimum set back
provisions and covenants and restriction of record; that the subject property
does not serve any adjoining property for drainage ingress and egress or for any
other purpose; and that the property is not in flood plain (as shown by Map No.
____ of ____, as dated ___________); this survey is made in accordance with
'Minimum Angle, Distance and Closure Requirements for Survey Measurements Which
Control Land Boundaries for ALTA/ACSM Land Title Surveys," established by ALTA,
ACSM and NSPS in October 1999.
-------------------- -----------------------------------------
Date Surveyor
[SEAL]
License/Registration No.: ____________________
Job No.: __________________________________
LIST OF AGREEMENTS ATTACHED
Development Fee Agreement
Development Fee Guaranty Agreement
Development, Construction, and Operating Budget Agreement
Construction Completion, Operating Deficit, and Tax Credit Guaranty Agreement
Construction Monitoring Agreement
DEVELOPMENT FEE AGREEMENT
This Development Fee Agreement ("Agreement"), is entered into as of the date
written below by and between United Development Corporation ("Developer") and
Memphis 2004.0 LP, a Tennessee 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 Memphis, Shelby
County, Tennessee, 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 total of 144 single
family homes to be built on scattered lots in qualified census tracts in
Memphis, Shelby County, Tennessee, and other related improvements, which is
intended to qualify for federal low-income housing tax credits (the "Project").
C. Prior to the date of this Agreement, Developer has performed
substantial development services with respect to the Project as specified in
Section 2.3 of this Agreement. Developer has also agreed to oversee the
construction of the Project 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 Project. 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 Project to Owner, to undertake performance of such
development services, and to fulfill all obligations of the Developer set forth
in this Agreement, in consideration of Owner's restated promise to pay to
Developer the fee specified in this Agreement.
NOW THEREFORE, in consideration of the foregoing recitals and the
mutual promises and undertakings in this Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Owner and Developer agree as follows.
SECTION 1
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall, when capitalized, have the
following meanings:
"Code" means the Internal Revenue Code of 1986, as amended.
"Construction Documents" means the contract documents between the Owner
and the Construction Lender pertaining to the construction loan for the
construction of the Project.
"Construction Lender" means ______________, which has committed to make
a loan to finance construction of the Project.
"Construction Loan" means the loan to finance construction of the
Project, made to Owner by the Construction Lender.
"Contractor" means [▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. dba ▇▇▇▇▇▇▇ Affordable
Homes].
"Department" means the Tennessee 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 Memphis 2004.0 LP, a Tennessee limited partnership.
"Tax Credits" means the low-income housing tax credits found in Section
42 of the Code, and all rules, regulations, rulings, notices and other
promulgations thereunder.
SECTION 2
ENGAGEMENT OF DEVELOPER; FEE; SERVICES
2.1 Engagement; Term. Owner hereby confirms the engagement of Developer
to act as developer of the Project, and to perform the various covenants and
obligations of the Developer under this Agreement. Developer hereby confirms and
accepts such engagement and agrees to perform fully and timely each and every
one of its obligations under this Agreement. The term of such engagement shall
commence on the date hereof and subject to the pre-payment provisions of Section
3 shall expire on December 31, 2017.
2.2 Development Fee. In consideration of Developer's prior activities
and Developer's agreement to provide development services during the term of
this Agreement, Owner agrees to pay the Developer a Development Fee in the
amount of $975,000 ("Development Fee"). The Development Fee shall be payable in
accordance with Section 3 of this Agreement.
2.3 Development Services.
(a) Prior Services. Owner acknowledges that Developer
has, prior to the date hereof, performed substantial development services
relating to the Project. Such services (the "Prior Services") have included the
following.
(1) Services Rendered Prior to April 29, 2005.
2
(A) Developer has identified a Contractor and
recommended to the Owner to enter into a construction contract with the
Contractor for the building of the Project.
(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 Development Budget.
(C) Developer has reviewed the plans and
specifications for compliance with design criteria and construction contracts.
(D) Developer has identified an architect and
recommended to the Owner to execute an architectural contract for the planning
and design of the Project.
(E) Developer has placed its own capital at risk
in anticipation of the Project being constructed.
(2) Other Prior Services.
(A) Developer has identified and recommended to
Owner a Construction Lender to obtain the Construction Loan.
(B) Developer has negotiated and conferred with an
insurance carrier to provide a builder's risk policy during construction.
(b) Future Services. Developer shall monitor construction
of the Project for Owner and shall provide Owner with information requiring
Owner's intervention to resolve construction issues. Owner shall allow Developer
full access to the Project 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 Project.
(1) Developer shall exert its best efforts to ensure
that the Contractor performs its obligations under the Construction Documents in
a diligent and timely manner.
(2) Developer shall monitor pre-construction
conferences and review pre-construction documents, including drawings,
specifications, contracts, and schedules.
(3) Developer shall identify construction issues and
inform Owner of the same.
(4) Developer shall review subcontract bids received by
the Contractor and make a recommendation to the Owner.
(5) Developer shall monitor field order and change order
procedures and inform the Owner.
3
(6) Developer shall attend construction progress
meetings at the Project site to monitor construction progress and report to the
Owner the outcome of those meetings.
(7) Developer shall review the Contractor's monthly pay
applications.
(8) Developer shall monitor the Contractor's progress
with respect to the approved Project schedule and keep the Owner informed of all
pertinent Project issues and construction progress.
(9) Developer shall advise Owner with respect to
relations with engineers, architects, and other construction professionals.
(10) Developer shall maintain relations with the City
of Memphis and other governmental authorities having jurisdiction over
development of the Project and inform the Owner of any construction or building
issues.
(c) Assignment of Development Rights. Developer hereby
assigns to Owner all rights to the development of the Project, including but not
limited to, all tangible and intangible rights arising with respect to the name
"Memphis 2004.0 LP", the design of the Project, the plans and specifications for
the Project and all rights arising under the agreements with Project architects,
engineers and other Project design and construction professionals.
SECTION 3
DEVELOPMENT FEE PAYMENTS
3.1 Prior Services Rendered. The Parties acknowledge and agree that
Developer has earned the sum of $195,000 for services rendered prior to April
29, 2005, that said amount is reasonable in relation to the work performed, is
fully earned as of that date and said amount shall be paid in any event
notwithstanding the termination of this Agreement. The Parties further
acknowledge and agree that the Owner has accrued the Development Fee of
$195,000, under its method of accounting.
3.2 Payment of Development Fee. The Development Fee shall be paid to
the Developer from capital contribution payments received by the Owner in
accordance with Section 9.2(b) of the Partnership Agreement. If the Development
Fee is not paid in full in accordance with Section 9.2(b) of the Partnership
Agreement then the balance of the Development Fee shall be paid from available
net operating income in accordance with the terms of Section 11.1 of the
Partnership Agreement, but in no event later than December 31, 2017. Also, if
the Development Fee is not paid in full in accordance with Section 9.2(b) of the
Partnership Agreement then Owner shall provide Developer with a note payable to
Developer ("Development Fee Note") in a principal amount equal to the unpaid
balance of the Development Fee. The Development Fee Note shall accrue interest
at a rate equal to the applicable federal rate in effect as of the date of the
last capital contribution payment referenced in Section 7.2 of the Partnership
Agreement. The Development Fee Note shall be paid out of Net Operating Income
pursuant to Section 11.1 of the Partnership Agreement, but the Owner shall pay
4
to the Developer any unpaid principal and accrued interest on the eleventh
anniversary of the Completion Date. Amounts due under this Development Fee
Agreement, or a Development Fee Note, may not be prepaid.
3.3 Accrual of Development Fee. The Development Fee shall be earned no
later than the end of the first year of the tax credit period referenced in
Section 42(f)(1) of the Code. Once any portion of the Development Fee has been
earned, it shall be payable by the Partnership in all events.
SECTION 4
TERMINATION
Neither Party to this Agreement shall have the right to terminate this
Agreement prior to the expiration of the term without cause. Owner may terminate
this Agreement without further liability, for cause, which shall mean any one of
the following:
(a) a material breach by Developer of its obligations
under this Agreement that is not cured within 30 days after notice thereof (or,
as to any non-monetary obligations that is not reasonably capable of cure within
30 days, and provided that cure is commenced within 10 days of notice and
diligently pursued thereafter to completion, within such time as may reasonably
be necessary to complete such cure);
(b) a fraudulent or intentionally incorrect report by
Developer to Owner with respect to the Project; 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 Project at the time of
termination. Nothing in this Section 4 shall be deemed to prevent Owner from
bringing an action against Developer to recover fully all damages resulting from
any of the causes set forth in paragraphs (a), (b) or (c) above, or to prevent
Owner from contending in any action or proceeding that the Future Services were
not earned by Developer.
SECTION 5
GENERAL PROVISIONS
5.1 Notices. Notices required or permitted to be given under this
Agreement shall be in writing sent by overnight courier or mail, postage
prepaid, to the Parties at the following addresses, or such other address as is
designated in writing by the Party, provided, however, that any written
communication containing such information sent to a Party actually received by a
Party shall constitute notice for all purposes of this Agreement.
5
If to Developer: United Development Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
If to Owner: Memphis 2004.0 LP
▇▇▇▇ ▇▇▇▇▇ ▇▇▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
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
Tennessee applicable to contracts made and wholly performed within Tennessee by
persons domiciled in Tennessee.
(d) Severability. Any provision of this Agreement that is
deemed invalid or unenforceable shall be ineffective to the extent of such
invalidity or unenforceability, without rendering invalid or unenforceable the
remaining provisions of this Agreement.
5.3 Integration; Amendment. This Agreement constitutes the entire
agreement of the Parties relating to the subject matter hereof. There are no
promises, terms, conditions, obligations, or warranties other than those
contained herein. This Agreement supersedes all prior communications,
representations, or agreements, verbal or written, among the Parties relating to
the subject matter hereof. This Agreement may not be amended except in writing.
5.4 Attorneys' Fees. If any suit or action arising out of or related to
this Agreement is brought by any Party to any such document, the prevailing
Party shall be entitled to recover the costs and fees (including without
limitation reasonable attorneys' fees and costs of experts and consultants,
copying, courier and telecommunication costs, and deposition costs and all other
costs of discovery) incurred by such Party in such suit or action, including
without limitation to any post-trial or appellate proceeding.
5.5 Binding Effect. This Agreement shall bind and inure to the benefit
of, and be enforceable by, the Parties hereto and their respective successors,
heirs, and permitted assigns.
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.
6
5.7 Third-Party Beneficiary Rights. No person not a Party to this
Agreement is an intended beneficiary of this Agreement, and no person not a
Party to this Agreement shall have any right to enforce any term of this
Agreement. Notwithstanding the foregoing, the Parties acknowledge that WNC
Housing Tax Credit Fund VI Series 12, L.P. and its assignees shall have the
right to enforce any term of this Agreement.
5.8 Related Parties. The Parties acknowledge that the Owner and
Developer are related parties under Code Section 267 and that Owner is an
accrual basis taxpayer. As such, the Parties agree and consent that each and
every year during the term of this Agreement that Owner accrues any or all of
the principal and/or interest of the Development Fee that the Developer (whether
or not an accrual basis taxpayer) will include an equal amount in Developer's
income tax return for that year.
5.9 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one agreement binding
on all the Parties, notwithstanding that all Parties are not signatories to the
same counterpart.
5.10 Further Assurances. Each Party agrees, at the request of the other
Party, at any time and from time to time after the date hereof, to execute and
deliver all such further documents, and to take and forbear from all such
action, as may be reasonably necessary or appropriate in order more effectively
to perfect the transfers or rights contemplated herein or otherwise to confirm
or carry out the provisions of this Agreement.
5.11 Mandatory Arbitration. Any person enforcing this Agreement may
require that all disputes, claims, counterclaims, and defenses ("Claims")
relating in any way to this Agreement or any transaction of which this Agreement
is a part (the "Transaction"), be settled by binding arbitration in accordance
with the Commercial Arbitration Rules of the American Arbitration Association
and Title 9 of the U.S. Code. All claims will be subject to the statutes of
limitation applicable if they were litigated.
If arbitration occurs, one neutral arbitrator will decide all issues
unless either Party's Claim is $100,000 or more, in which case three neutral
arbitrators will decide all issues. All arbitrators will be active Tennessee
State Bar members in good standing. In addition to all other powers, the
arbitrator(s) shall have the exclusive right to determine all issues of
arbitrability. Judgment on any arbitration award may be entered in any court
with jurisdiction.
If either Party institutes any judicial proceeding relating to the
Transaction, such action shall not be a waiver of the right to submit any Claim
to arbitration. In addition, both Parties have the right before, during, and
after any arbitration to exercise any of the following remedies, in any order or
concurrently: (i) setoff, (ii) self-help repossession, (iii) judicial or
non-judicial foreclosure against real or personal property collateral, (iv)
provisional remedies, including injunction, appointment of receiver, attachment,
claim and delivery, and replevin.
This arbitration clause cannot be modified or waived by either Party
except in a writing that refers to this arbitration clause and is signed by both
Parties.
[Signatures begin on the following page]
7
IN WITNESS WHEREOF, the Parties have caused this Development Fee Agreement
to be executed as of Aug 30, 2005.
DEVELOPER:
United Development Corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
President
OWNER:
Memphis 2004.0 LP
By: Memphis 2004 LLC, its general partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Managing Member
8
[Development Fee Agreement]
Exhibit A
Legal Description
[TO BE ATTACHED BY WNC]
DEVELOPMENT FEE GUARANTY AGREEMENT
FOR VALUE RECEIVED, the receipt and sufficiency of which are hereby
acknowledged, and in consideration of the agreement of United Development
Corporation (the "Developer") to permit deferral of the $ ______________ due
from Memphis 2004.0 LP, a Tennessee limited partnership ("Debtor") to the
Developer, the undersigned Guarantor(s), hereby unconditionally guarantees the
full and prompt payment when due, whether by acceleration or otherwise of that
certain Developer Fee from Debtor to the Developer, evidenced by the Development
Fee Agreement dated the even date herewith, and incorporated herein by this
reference. The foregoing described debt is referred to hereinafter as the
"Liabilities" or "Liability."
The undersigned further agree to pay all expenses paid or incurred by
the Debtor or Developer in endeavoring to collect the Liabilities, or any part
thereof, and in enforcing the Liabilities or this Agreement (including
reasonable attorneys' fees if collected or enforced by law or through an
attorney-at-law). The undersigned hereby represent and warrant 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 acknowledge that
this 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 Agreement.
For the purpose of this Agreement, the Liabilities of Debtor to the Developer
are guaranteed notwithstanding any right or power of Debtor or anyone else to
assert any claim or defense as to the invalidity or unenforceability of any such
obligation, and no such claim or defense shall impair or affect the obligations
of the undersigned hereunder.
Any payment from Guarantor directly to Developer or the Debtor in
accordance with this Agreement shall be classified and booked as a
non-refundable cost overrun payment from Guarantor to Debtor in consideration of
this Agreement and then a payment by Debtor to Developer in consideration of the
Development Fee Agreement, provided that any payments made to the Partnership
under the guarantee of Development Fee payment pursuant to Section 6.3(b) of the
Partnership Agreement shall be included in the Capital Account of the General
Partner.
This Agreement shall be binding upon the undersigned, and upon the
legal representatives, heirs, successors and assigns of the undersigned, and may
be enforced against them by the Debtor or Developer or their legal
representatives, heirs, successors and assigns.
This Agreement has been made and delivered in the State of Tennessee
and shall be construed and governed under Tennessee law.
Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
such law, such provision shall be ineffective to the extent of such prohibition
of invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
Whenever the singular or plural number, masculine or feminine or neuter
is used herein, it shall equally include the other where applicable. In the
event this Agreement is executed by more than one guarantor, this Agreement and
the obligations hereunder are the joint and several obligation of all the
undersigned.
Guarantor consents to the jurisdiction of the courts in the State of
Tennessee and/or to the jurisdiction and venue of any United States District
Court in the State of Tennessee 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
2
considered for all purposes to have been executed and delivered within the
geographical boundaries of the State of Tennessee, even if it was, in fact,
executed and delivered elsewhere.
3
IN WITNESS WHEREOF, the undersigned have hereunto caused this Development
Fee Guaranty Agreement to be executed as of Aug 30, 2005.
WITNESS: GUARANTOR:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
------------------ /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
------------------------------
Address for Guarantor:
▇▇▇▇ ▇▇▇▇▇ ▇▇▇.
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
----------------------------
Notary Public
My Commission Expires: ____________________
----------------------------
(NOTARY SEAL)
WITNESS: GUARANTOR:
Jo ▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------ /s/ JO ▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------
Address for Guarantor:
▇▇▇▇ ▇▇▇▇▇ ▇▇▇.
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
----------------------------
Notary Public
My Commission Expi_________________
----------------------------
(NOTARY SEAL)
4
DEVELOPMENT, CONSTRUCTION, AND
OPERATING BUDGET AGREEMENT
This Development, Construction, and Operating Budget Agreement
("Agreement") is entered into as of the date written below by and between
Memphis 2004.0 LP, a Tennessee limited partnership ("Owner"), Memphis 2004 LLC,
a Tennessee limited liability company (the "General Partner"), WNC Housing Tax
Credit Fund VI Series 12, L.P., a California limited partnership (the "Limited
Partner"), and WNC Housing, L.P., a California limited partnership (the "Special
Limited Partner"). Owner, General Partner, Limited Partner, and Special Limited
Partner collectively may be referred to as the "Parties" or individually may be
referred to as a "Party."
RECITALS
A. Owner has acquired ______ acres of land in Memphis, Shelby County,
Tennessee (the "Real Property").
B. Owner intends to develop on the Real Property a total of 144 single
family homes to be built on scattered lots in qualified census tracts in
Memphis, Shelby County, Tennessee, and other related improvements for family
use, which is intended to qualify for federal low-income housing tax credits
(the "Project").
C. On even date herewith, an amended and restated partnership agreement
for Memphis 2004.0 LP ("Partnership Agreement") was entered into by and between
the General Partner, the Limited Partner, and the Special Limited Partner (the
Partnership Agreement is incorporated herein by this reference as if the same
were reproduced in full and any capitalized terms not defined in this Agreement
shall have the meaning as defined in the Partnership Agreement).
D. The Parties recognize and acknowledge that the final construction
cost determination involves substantial negotiations with lenders, contractors
and governmental authorities.
E. The Parties recognize and acknowledge that a final operating budget
involves substantial negotiations with lenders and governmental authorities.
F. Limited Partner's and Special Limited Partner's decision to execute
the Partnership Agreement is based, in part, on their acceptance of the sources
of funds available to develop the Project, the cost of construction to build the
Project 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 Project Source of Funds. The Source of Funds has
been specified in the Partnership Agreement as the Construction Loan, the
Mortgage, the Capital Contribution of the General Partner, the Capital
Contribution of the Limited Partner and the Capital Contribution of the Special
Limited Partner. Unless expressly permitted in the Partnership Agreement,
Consent of the Special Limited Partner is required for any change to the Source
of Funds.
2. Development Budget. Attached hereto as Exhibit B and incorporated
herein by this reference is the Development Budget in an amount equal to
$11,281,560. 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 Project.
3. Construction Proforma. Attached hereto as Exhibit C and incorporated
herein by this reference is the Construction Proforma. Owner acknowledges and
represents that the attached Construction Proforma has been reviewed by and
approved by the Construction Lender, Mortgage lender if applicable and any
governmental authorities if applicable. In accordance with the Partnership
Agreement, if the development costs, less the Development Fee, exceed the sum of
the Capital Contributions and the proceeds of the Mortgage, then the General
Partner shall be responsible for and shall be obligated to pay such
deficiencies.
4. Time Line. Attached hereto as Exhibit D and incorporated herein by
this reference is a construction time line, ▇▇▇▇ chart or similar graph approved
by the Special Limited Partner. The time line will include, at a minimum, a
month-to-month, building-by-building analysis as to when each trade will start
and complete the work for which they have been retained. If at any time during
construction there is, or anticipated to be, a change in the construction
schedule as displayed in the time line then the General Partner shall update the
time line and provide the same to the Limited Partner and Special Limited
Partner.
5. Operating Proforma. Attached hereto as Exhibit E and incorporated
herein by this reference is the Operating Proforma. Owner acknowledges and
represents that the attached Operating Proforma has been reviewed by and
approved by the Construction Lender, the Mortgage lender and any governmental
authorities if applicable.
6. Notices. Any notice given pursuant to this Agreement may be served
personally on the Party to be notified, or may be mailed, first class postage
prepaid, to the following address, or to such other address as a Party may from
time to time designate in writing:
To the General Partner: Memphis 2004 LLC
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
To the Limited Partner: WNC Housing Tax Credit Fund VI Series 12, L.P.
c/o WNC & Associates, Inc.
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▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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To the Special Limited Partner: WNC Housing, L.P.
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Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
7. 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.
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.
9. 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.
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.
11. Governing Law. This Agreement and its application shall be governed
by the laws of Tennessee.
12. Attorney's Fees. If a suit or action is instituted in connection
with an alleged breach of any provision of this Agreement, the prevailing Party
shall be entitled to recover, in addition to costs, such sums as the court may
adjudge reasonable as attorney's fees, including fees on any appeal.
[Signatures begin on the following page]
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IN WITNESS WHEREOF, this Development, Construction, and Operating Budget
Agreement is made and entered into as of Aug 30, 2005.
PARTNERSHIP:
Memphis 2004.0 LP
By: Memphis 2004 LLC, its general partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Managing Member
GENERAL PARTNER:
Memphis 2004 LLC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Managing Member
LIMITED PARTNER:
WNC Housing Tax Credit Fund VI Series 12, L.P.
By: WNC & Associates, Inc.,
Managing Member
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Executive Vice President
SPECIAL LIMITED PARTNER:
WNC Housing, L.P.
By: WNC & Associates, Inc.,
General Partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Executive Vice President
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[Development, Construction, and Operating Budget Agreement]
Exhibit A
Source of Funds
[TO BE ATTACHED BY WNC]
[Development, Construction, and Operating Budget Agreement]
Exhibit B
Development Budget
[TO BE ATTACHED BY WNC]
[Development, Construction, and Operating Budget Agreement]
Exhibit C
Construction Proforma
[TO BE ATTACHED BY WNC]
[Development, Construction, and Operating Budget Agreement]
Exhibit D
Construction Time Line
[TO BE ATTACHED BY WNC]
[Development, Construction, and Operating Budget Agreement]
Exhibit E
Operating Proforma
[TO BE ATTACHED BY WNC]
CONSTRUCTION COMPLETION, OPERATING DEFICIT, AND
TAX CREDIT GUARANTY AGREEMENT
This Construction Completion, Operating Deficit, and Tax Credit
Guaranty Agreement ("Agreement") is entered into this ______ day of August,
2005, by and among Memphis 2004 LLC, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. and Jo ▇▇▇▇▇ ▇▇▇▇▇▇▇
(collectively, "Guarantor"), Memphis 2004.0 LP (the "Partnership") and WNC
Housing Tax Credit Fund VI Series 12, L.P. ("Limited Partner"). Guarantor, the
Partnership and Limited Partner collectively may be referred to as the "Parties"
or individually may be referred to as a "Party."
RECITALS
WHEREAS, on even date herewith, a partnership agreement for the
Partnership (the "Partnership Agreement") was entered into by and between
Memphis 2004 LLC as the general partner (collectively, "General Partner") and
the Limited Partner (the Partnership Agreement is incorporated herein by this
reference as if the same were reproduced in full and any capitalized terms not
defined in this Agreement shall have the meaning as defined in the Partnership
Agreement).
WHEREAS, pursuant to the terms of the Partnership Agreement, the
General Partner: (1) is required to guarantee the completion of construction of
144 single family homes to be built on scattered lots in qualified census tracts
in Memphis, Shelby County, Tennessee , intended to qualify for federal
low-income housing tax credits, as more fully described in Exhibit A attached
hereto and incorporated herein by this reference, and any and all improvements
now or hereafter to be constructed thereon ("Project"); (2) is required to
guarantee the payment of all Operating Deficits incurred by the Partnership as a
result of the operations of the Project; and (3) is required to guarantee the
annual allocation of tax credits to the Limited Partner.
WHEREAS, the Limited Partner would not have entered into the
Partnership Agreement as a limited partner but for the agreement of Guarantor to
provide the financial funds necessary to obtain Completion of Construction, to
pay Operating Deficits and to pay Tax Credit deficits. Guarantor is an affiliate
of the General Partner and will therefore benefit from the acquisition by the
Limited Partner of a limited partnership interest in the Partnership.
NOW THEREFORE, in consideration of the foregoing and the promises,
covenants and undertakings herein contained and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties hereto agree as follows:
SECTION 1. Guarantor hereby individually, jointly and severally
guarantees to the Partnership and the Limited Partner, as applicable, the prompt
payment and full performance of the provisions under Section 6.2, Section 6.3,
Section 7.4(a), Section 7.4(b), Section 7.4(c), Section 7.4(e), and Section 9.12
of the Partnership Agreement, including all modifications thereof, pursuant to
and in accordance with the terms and conditions set forth in the Partnership
Agreement and in this Agreement.
SECTION 2. Guarantor further agrees to pay all expenses paid or
incurred by the Partnership and/or Limited Partner in endeavoring to collect
Guarantor's obligations, or any part thereof, and in enforcing the provisions of
this Agreement, including reasonable attorneys' fees if collected or enforced by
law or through an attorney-at-law.
SECTION 3. No delay or failure on the part of the Partnership or
Limited Partner in the exercise of any right or remedy shall operate as a waiver
thereof, and no single or partial exercise by the Partnership of any right or
remedy shall preclude other or future exercise thereof or the exercise of any
other right or remedy. No action of the Partnership permitted hereunder shall in
any way impair or affect this Agreement. For the purpose of this Agreement,
Guarantor's obligations are guaranteed notwithstanding any right or power of
anyone else to assert any claim or defense as to the invalidity or
unenforceability of any such obligation, and no such third party claim or
defense shall impair or affect the obligations of Guarantors hereunder.
SECTION 4. This Agreement shall be binding upon the Parties, and upon
their legal representatives, heirs, successors and assigns.
SECTION 5. This Agreement has been made and delivered in the State of
Tennessee and shall be construed and governed under Tennessee law.
SECTION 6. Whenever possible, each provision of the Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
such law, such provision shall be ineffective to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
SECTION 7. The Parties recognize and acknowledge, and Guarantor agrees
and consents, that if the Partnership does not take legal action to enforce this
Agreement, if and when by the terms of this Agreement it is enforceable, then
the Limited Partner, may on its own behalf and in its own name commence legal
proceedings to enforce the terms of this Agreement.
SECTION 8. Whenever the singular or plural number, masculine or
feminine or neuter is used herein, it shall equally include the other where
applicable.
SECTION 9. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, and said counterparts shall
constitute but one and the same instrument which may sufficiently be evidenced
by one counterpart.
SECTION 10. The Parties consent to the jurisdiction and venue of the
courts of Shelby County in the State of Tennessee and/or to the jurisdiction and
venue of any United States District Court in the State of Tennessee having
jurisdiction over Shelby County in any action or judicial proceeding brought to
enforce, construe or interpret this Agreement. The Parties agree to stipulate in
any such proceeding that this Agreement is to be considered for all purposes to
have been executed and delivered within the geographical boundaries of the State
of Tennessee, even if it was, in fact, executed and delivered elsewhere.
IN WITNESS WHEREOF, this Construction, Operating Deficit, and Tax
Credit Guaranty Agreement is made and entered into as of this 30th day of
August, 2005.
GUARANTOR:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Notary Public:
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
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My Commission Expires: ____________________
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(NOTARY SEAL)
GUARANTOR:
Jo ▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ JO ▇▇▇▇▇ ▇▇▇▇▇▇▇
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Notary Public:
----------------------
My Commission Expires: ____________________
----------------------------
(NOTARY SEAL)
GUARANTOR:
Memphis 2004 LLC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Managing Member
Notary Public:
----------------------
My Commission Expires: ____________________
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(NOTARY SEAL)
PARTNERSHIP:
Memphis 2004.0 LP
By: Memphis 2004 LLC, its general partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Managing Member
LIMITED PARTNER:
WNC Housing Tax Credit Fund VI
Series 12, L.P.
By: WNC & Associates, Inc.,
General Partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Executive Vice President
[Construction Completion, Operating Deficit, and Tax Credit Guaranty Agreement]
EXHIBIT A
LEGAL DESCRIPTION
[TO BE ATTACHED BY WNC]