DEVELOPMENT AGREEMENT
AGREEMENT made as of November 20, 1996 by and between ▇▇▇▇▇▇
PLACE APARTMENTS, L.P., an Indiana limited partnership (the
"Partnership") and HENDY ASSOCIATES LIMITED LIABILITY COMPANY, an Ohio
limited liability company (the "Developer"), in its capacity as the
Developer of the Apartment Complex and not as a General Partner of the
Partnership.
Recitals
1. The Partnership was formed to acquire, rehabilitate,
develop, improve, maintain, own, operate, lease, dispose of and
otherwise deal with an apartment project located in Indianapolis,
Indiana, known as the ▇▇▇▇▇▇ Place Apartments (the "Apartment
Complex").
2. Capitalized terms used herein and not otherwise defined
shall have the meanings set forth in the First Amended and Restated
Agreement of Limited Partnership of the Partnership of even date
herewith (the "Partnership Agreement").
3. The Apartment Complex, following the completion of
rehabilitation, is expected to constitute a "qualified low-income
housing project" (as defined in Section 42(g)(1) of the Code).
4. The Developer has already provided and will continue to
provide certain services with respect to the Apartment Complex during
the acquisition, development, rehabilitation and initial operating
phases thereof.
5. In consideration for such services, past and future, the
Partnership has agreed to pay to the Developer certain fees computed
and paid in the manner stated herein.
NOW, THEREFORE, in consideration of the mutual covenants and
conditions set forth herein and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:
Section 1. Defined Terms.
"Development Advances" has the meaning set forth in Section 2.
"Development Costs" means any and all costs and expenses
necessary to (i) cause the rehabilitation of the Apartment Complex to
be completed, in a good and workmanlike manner, free and clear of all
mechanics', materialmen's or similar liens, in accordance with the
Plans and Specifications, (ii) equip the Apartment Complex with all
necessary and appropriate fixtures, equipment and articles of personal
property (including, without limitation, refrigerators and ranges),
(iii) obtain all required certificates of occupancy for the apartment
units and other space in the Apartment Complex, (iv) pay the
Development Fee, (v) finance the rehabilitation of the Apartment
Complex and achieve Permanent Mortgage Commencement in accordance with
the provisions of the Project Documents, (vi) discharge all
Partnership liabilities and obligations arising out of any casualty
generating insurance proceeds for the Partnership, (vii) fund any
Partnership reserves required hereunder or under any of the Project
Documents and (viii) pay any other costs or expenses necessary to
achieve the Completion Date and Permanent Mortgage Commencement.
"Specified Proceeds" means (i) the proceeds of all Mortgage
Loans, (ii) the net rental income, if any, generated by the Apartment
Complex prior to Permanent Mortgage Commencement which is permitted by
the Lenders to be applied to the payment of Development Costs, (iii)
the Capital Contributions of the Investment Limited Partners and the
Special Limited Partner, (iv) the Capital Contributions of the General
Partner in the amounts set forth in Schedule A of the Partnership
Agreement as of the Admission Date and (v) any insurance proceeds
arising out of casualties occurring prior to Permanent Mortgage
Commencement.
Section 2. Obligation to Complete Rehabilitation and to Pay
Development Costs.
The Developer shall complete the rehabilitation of the Apartment
Complex or cause the same to be completed in a good and workmanlike
manner, free and clear of all mechanics', materialmen's or similar
liens and shall equip the Apartment Complex or cause the same to be
equipped with all necessary and appropriate fixtures, equipment and
articles of personal property, including without limitation,
refrigerators and ranges, provided for in the Project Documents and
the Plans and Specifications. The Developer also shall cause the
achievement of Permanent Mortgage Commencement in accordance with the
terms of the Partnership Agreement. If the Specified Proceeds as
available from time to time are insufficient to pay all Development
Costs and achieve Permanent Mortgage Commencement, the Developer shall
advance or cause to be advanced to the Partnership from time to time
as needed all such funds as are required to pay such deficiencies.
Any such advances ("Development Advances") shall, to the extent
permitted under the Project Documents and any applicable Regulations
or requirements of any Lender or Agency (or otherwise with any
Requisite Approvals), be reimbursed at or prior to Permanent Mortgage
Commencement only out of Specified Proceeds available from time to
time after payment of all Development Costs. Any balance of the
amount of each Development Advance not reimbursed through Permanent
Mortgage Commencement shall not be reimbursable, shall not be credited
to the Capital Account of any Partner, or otherwise change the
interest of any Person in the Partnership, but shall be borne by the
Developer under the terms of this Agreement.
Section 3. Development Services.
(a) The Developer has heretofore performed certain services
relating to the development of the Apartment Complex and shall
continue to oversee the rehabilitation and development of the
Apartment Complex, and shall perform the services and carry out the
responsibilities with respect to the Apartment Complex as are set
forth herein, and such additional duties and responsibilities as are
reasonably within the general scope of such services and
responsibilities and are designated from time to time by the General
Partner.
(b) The Developer's services shall be performed in the name
and on behalf of the Partnership and shall consist of the duties set
forth in subparagraphs (i)-(xv) below of this Section 3(b) and as
provided elsewhere in this Agreement; provided, however, that if the
performance of any duty of the Developer set forth in this Agreement
is beyond the reasonable control of the Developer, the Developer shall
nonetheless be obligated to (i) use its best efforts to perform such
duty and (ii) promptly notify the General Partner that the performance
of such duty is beyond its reasonable control. The Developer has
performed or shall perform the following:
(i) Negotiate and cause to be executed in the name
and on behalf of the Partnership any agreements for
architectural, engineering, testing or consulting services
for the Apartment Complex, and any agreements for the
rehabilitation of any improvements or tenant improvements
to be constructed or installed by the Partnership or the
furnishing of any supplies, materials, machinery or
equipment therefor, or any amendments thereof, provided
that no agreement shall be executed nor binding commitment
made until the terms and conditions thereof and the party
with whom the agreement is to be made have been approved
by the General Partner unless the terms, conditions, and
parties comply with guidelines issued by the General
Partner concerning such agreements;
(ii) Advise the Partnership as to the steps
necessary to qualify the Apartment Complex during the
compliance period defined in Section 42(i)(1) of the Code
as a "qualified low-income housing project" under Section
42(g)(1) of the Code;
(iii) Advise the Partnership and act as liaison in
connection with the Credit Agency relative to a low-income
housing tax credit available for the Apartment Complex
under Section 42 of the Code;
(iv) Advise the Partnership as to federal, state
and local subsidy programs available for the Apartment
Complex;
(v) Establish and implement appropriate
administrative and financial controls for the design and
rehabilitation of the Apartment Complex, including but not
limited to:
(A) coordination and administration of the
Apartment Complex architect, the general contractor, and
other contractors, professionals and consultants employed
in connection with the design or rehabilitation of the
Apartment Complex;
(B) administration of any construction contracts
on behalf of the Partnership;
(C) participation in conferences and
the rendering of such advice and assistance as will aid in
developing economical, efficient and desirable design and
rehabilitation procedures;
(D) the rendering of advice and
recommendations as to the selection of subcontractors and
suppliers;
(E) the review and submission to the
General Partner for approval of all requests for payments
under any architectural agreement, general contractor's
agreement, or any loan agreements with any lending
institutions providing funds for the benefit of the
Partnership for the design or rehabilitation of any
improvements;
(F) the submission of any suggestions
or requests for changes which could in any reasonable
manner improve the design, efficiency or cost of the
Apartment Complex;
(G) applying for the maintaining in
full force and effect any and all governmental permits and
approvals required for the lawful rehabilitation of the
Apartment Complex;
(H) compliance with all terms and
conditions applicable to the Partnership or the Apartment
Complex contained in any governmental permit or approval
required or obtained for the lawful rehabilitation of the
Apartment Complex, or in any insurance policy affecting or
covering the Apartment Complex, or in any surety bond
obtained in connection with the Apartment Complex;
(I) furnishing such consultation and
advice relating to the Apartment Complex as may be
reasonably requested from time to time by the General
Partner;
(J) keeping the General Partner fully
informed on a regular basis of the progress of the design
and rehabilitation of the Apartment Complex, including the
preparation of such reports as are provided for herein or
as may reasonably be requested by the General Partner and
which are of a nature generally requested or expected of
construction managers or similar owner's representatives
on similar projects;
(K) giving or making the Partnership's
instructions, requirements, approvals and payments
provided for in the agreements with the Apartment Complex
architect, general contractor, and other contractors,
professionals and consultants retained for the Apartment
Complex; and
(L) at the Partnership's expense,
filing on behalf of and as the attorney-in-fact for the
Partnership any notices of completion required or
permitted to be filed upon the completion of any
improvement(s) and taking such actions as may be required
to obtain any certificates of occupancy or equivalent
documents required to permit the occupancy of the
Apartment Complex.
(vi) Inspect the progress of the course of the
rehabilitation of the Apartment Complex, including
verification of the materials and labor being furnished to
and on such rehabilitation so as to be fully competent to
approve or disapprove requests for payment made by the
Apartment Complex architect and the general contractor,
or by any other parties with respect to the design or
rehabilitation of the Apartment Complex, and in addition
to verify that the rehabilitation is being carried out
substantially in accordance with the Plans and
Specifications approved by the General Partner or, in the
event that the rehabilitation] is not being so carried
out, to promptly notify the General Partner;
(vii) If requested to do so by the General Partner,
perform on behalf of the Partnership all obligations of
the Partnership with respect to the design or
rehabilitation of the Apartment Complex contained in any
loan agreement or security agreement entered into in
connection with any construction or long-term financing
for the Apartment Complex, or in any lease or rental
agreement relating to space in the Apartment Complex, or
in any agreement entered into with any governmental body
or agency relating to the terms and conditions of such
rehabilitation, provided that copies of such agreements
have been provided by the Partnership to the Developer or
the Partnership has otherwise notified the Developer in
writing of such obligations;
(viii) To the extent requested to do so by the
General Partner, prepare and distribute to the General
Partner a critical path schedule, and periodic updates
thereto as necessary to reflect any material changes, but
in any event not less frequently than quarterly, other
design or rehabilitation cost estimates as required by the
General Partner, and financial accounting reports,
including monthly progress reports on the quality,
progress and cost of the rehabilitation and
recommendations as to the drawing of funds from any loans
arranged by the Partnership to cover the cost of design
and rehabilitation of the Apartment Complex, or as to the
providing of additional capital contributions should such
loan funds for any reason be unavailable or inadequate;
(ix) At the Partnership's expense, obtain and
maintain insurance coverage for the Apartment Complex, the
Partnership, and the Developer and its employees, at all
times until final completion of the rehabilitation of the
Apartment Complex, in accordance with an insurance
schedule approved by the General Partner, which insurance
shall include general public liability insurance covering
claims for personal injury, including but not limited to
bodily injury, or property damage, occurring in or upon
the Property or the streets, passageways, curbs and vaults
adjoining the Property. Such insurance shall be in a
liability amount approved by the General Partner;
(x) Comply with all applicable present and future
laws, ordinances, orders, rules, regulations and
requirements (hereinafter in this subparagraph (x) called
"laws") of all federal, state and municipal governments,
courts, departments, commissions, boards and offices, any
national or local Board of Fire Underwriters or Insurance
Services Offices having jurisdiction in the county in
which the Apartment Complex is located or any other body
exercising functions similar to those of any of the
foregoing, or any insurance carriers providing any
insurance coverage for the Partnership or the Apartment
Complex, which may be applicable to the Apartment Complex
or any part thereof. Any such compliance undertaken by
the Developer on behalf of and in the name of the
Partnership, in accordance with the provisions of this
Agreement, shall be at the Partnership's expense. The
Developer shall likewise ensure that all agreements
between the Partnership and independent contractors
performing work in connection with the Apartment Complex
shall include the agreement of said independent
contractors to comply with all such applicable laws;
(xi) Assemble and retain all contracts, agreements
and other records and data as may be necessary to carry
out the Developer's functions hereunder. Without limiting
the foregoing, the Developer will prepare, accumulate and
furnish to the General Partner and the appropriate
governmental authorities, as necessary, data and
information sufficient to identify the market value of
improvements in place as of each real property tax lien
date, and will make application for appropriate exclusions
from the capital costs of the Apartment Complex for
purposes of real property ad valorem taxes;
(xii) Coordinate and administer the design and
rehabilitation of all interior tenant improvements to the
extent required under any leases or other occupancy
agreements to be constructed or furnished by the
Partnership with respect to the initial leasing of space
in the Apartment Complex, whether involving building
standard or non-building standard work;
(xiii) Use its best efforts to accomplish the
timely completion of the Apartment Complex in accordance
with the approved Plans and Specifications and the time
schedules for such completion approved by the General
Partner;
(xiv) At the direction of the General Partner,
implement any decisions of the General Partner made in
connection with the design, rehabilitation and development
of the Apartment Complex or any policies and procedures
relating thereto, exclusive of leasing activities; and
(xv) Perform and administer any and all other
services and responsibilities of the Developer which are
set forth in any other provisions of this Agreement, or
which are requested to be performed by the General Partner
and are within the general scope of the services described
herein.
Section 4. Limitations and Restrictions.
Notwithstanding any provisions of this Agreement, the Developer
shall not take any action, expend any sum, make any decision, give any
consent, approval or authorization, or incur any obligation with
respect to any of the following matters unless and until the same has
been approved by the General Partner:
(a) Approval of all construction and architectural contracts
and all architectural plans, specifications and drawings prior to the
rehabilitation and/or alteration of any improvements contemplated
thereby, except for such matters as may be expressly delegated in
writing to the Developer by the General Partner;
(b) Any proposed change in the work of the rehabilitation of
the Apartment Complex, or in the Plans and Specifications therefor as
previously approved by the General Partner, or in the cost thereof, or
any other change which would affect the design, cost, value or quality
of the Apartment Complex, except for such matters as may be expressly
delegated in writing to the Developer by the General Partner;
(c) Making any expenditure or incurring any obligation by or
on behalf of the Partnership or the Apartment Complex involving a sum
in excess of $25,000 or involving a sum of more than $5,000 where the
same relates to a component part of any work, the combined cost of
which exceeds $25,000, except for expenditures made and obligations
incurred pursuant to and specifically set forth in a construction
budget approved by the General Partner (the "Construction Budget") or
for such matters as may be otherwise expressly delegated to the
Developer by the General Partner;
(d) Making any expenditure or incurring any obligation which,
when added to any other expenditure, exceeds the Construction Budget
or any line item specified in the Construction Budget, except for such
matters as may be otherwise expressly delegated in writing to the
Developer by the General Partner; or
(e) Expending more than what the Developer in good faith
believes to be the fair and reasonable market value at the time and
place of contracting for any goods purchased or leased or services
engaged on behalf of the Partnership or otherwise in connection with
the Apartment Complex.
Section 5. Accounts and Records.
(a) The Developer on behalf of the Partnership, shall keep
such books of account and other records as may be required and
approved by the General Partner, including, but not limited to,
records relating to the costs of rehabilitation and rehabilitation
advances. The Developer shall keep vouchers, statements, receipted
bills and invoices and all other records, in the form approved by the
General Partner, covering all collections, if any, disbursements and
other data in connection with the Apartment Complex prior to the
Completion Date. All accounts and records relating to the Apartment
Complex, including all correspondence, shall be surrendered to the
Partnership, upon demand without charge therefor.
(b) The Developer shall cooperate with the Management Agent to
facilitate the timely preparation by the Management Agent of such
reports and financial statements as the Management Agent is required
to furnish pursuant to the Management Agreement.
(c) All books and records prepared or maintained by the
Developer shall be kept and maintained at all times at the place or
places approved by the General Partner, and shall be available for and
subject to audit, inspection and copying by the Management Agent, the
General Partner or any representative or auditor thereof or
supervisory or regulatory authority, at the times and in the manner
set forth in the Partnership Agreement.
Section 6. Development Fees.
For its services in connection with the development of the
Apartment Complex and the supervision of the rehabilitation of the
Apartment Complex, and as reimbursement for Development Advances, the
Developer shall receive a fee (the "Development Fee") in the amount of
$592,858. The Development Fee shall be deemed to have been earned as
and when the Developer's services are rendered and such Development
Fee shall be paid out of Specified Proceeds. If Specified Proceeds
are insufficient to pay the Development Fee, such unpaid amounts shall
be paid out of Cash Flow distributable pursuant to Section 10.2(a),
Clause Second of the Partnership Agreement. In any event, the General
Partner shall cause the Partnership to pay such Development Fee only
after the payment of all Development Costs (other than the Development
Fee). If the Development Fee has not been fully paid by the tenth
anniversary of the Completion Date, the General Partner shall make a
Capital Contribution to the Partnership in an amount sufficient to
enable the Partnership to pay any unpaid portion of the Development
Fee.
Section 7. Applicable Law.
This Agreement, and the application or interpretation hereof,
shall be governed by and construed in accordance with the laws of the
State of Indiana.
Section 8. Binding Agreement.
This Agreement shall be binding on the parties hereto, their
heirs, executors, personal representatives, successors and assigns.
As long as the Developer is not in default under this Agreement, the
obligation of the Partnership to pay the Development Fee shall not be
affected by any change in the identity of the General Partner of the
Partnership.
Section 9. Headings.
All section headings in this Agreement are for convenience of
reference only and are not intended to qualify the meaning of any
section.
Section 10. Terminology.
All personal pronouns used in this Agreement, whether used in
the masculine, feminine or neuter gender, shall include all other
genders, the singular shall include the plural, and vice versa as the
context may require.
Section 11. Benefit of Agreement.
The obligations and undertakings of the Developer set forth in
this Agreement are made for the benefit of the Partnership and its
Partners and shall not inure to the benefit of any creditor of the
Partnership other than a Partner, notwithstanding any pledge or
assignment by the Partnership of this Agreement or any rights
hereunder.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed as of the date first written above.
PARTNERSHIP: ▇▇▇▇▇▇ PLACE APARTMENTS, L.P., an
Indiana limited partnership, by
its general partner, Hendy
Associates Limited Liability
Company, an Ohio limited liability
company
By: /s/▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇, Manager
DEVELOPER: HENDY ASSOCIATES LIMITED LIABILITY
COMPANY, an Ohio limited liability
company
By: /s/▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇, Manager
