AMENDED AND RESTATED AGREEMENT
OF
LIMITED PARTNERSHIP
OF
▇▇▇▇▇▇▇ MEADOW ASSOCIATES, LTD.
Dated as of JULY 19, 2002
TABLE OF CONTENTS
Page
Article I. DEFINITIONS.........................................................2
Article II. NAME..............................................................16
Article III. PRINCIPAL EXECUTIVE OFFICE/AGENT FOR SERVICE.....................16
Section 3.1 Principal Executive Office.........................16
Section 3.2 Agent for Service of Process.......................16
Article IV. PURPOSE...........................................................16
Section 4.1 Purpose of the Partnership.........................16
Section 4.2 Authority of the Partnership.......................16
Article V. TERM...............................................................17
Article VI. GENERAL PARTNER'S CONTRIBUTIONS AND LOANS.........................17
Section 6.1 Capital Contribution of General Partner............17
Section 6.2 Construction Obligations...........................17
Section 6.3 Operating Obligations..............................18
Section 6.4 Other General Partner Loans........................18
Article VII. CAPITAL CONTRIBUTIONS OF LIMITED PARTNER AND SPECIAL LIMITED
PARTNER..........................................................19
Section 7.1 Original Limited Partner...........................19
Section 7.2 Capital Contribution of Limited Partner............19
Section 7.3 Repurchase of Limited Partner's Interest...........22
Section 7.4 Adjustment of Capital Contributions................22
Section 7.5 Capital Contribution of Special Limited Partner....25
Section 7.6 Return of Capital Contribution.....................25
Section 7.7 Liability of Limited Partner and Special Limited
Partner............................................25
Article VIII. WORKING CAPITAL AND RESERVES....................................25
Section 8.1 Replacement and Reserve Account....................25
Section 8.2 Operating and Maintenance Account..................26
Section 8.3 Tax and Insurance Account..........................26
Section 8.4 Operating Deficit Account..........................26
Section 8.5 Other Reserves.....................................26
Article IX. MANAGEMENT AND CONTROL............................................27
Section 9.1 Power and Authority of General Partner.............27
Section 9.2 Payments to the General Partners and Others........27
Section 9.3 Specific Powers of the General Partner.............29
Section 9.4 Authority Requirements.............................29
Section 9.5 Limitations on General Partner's Power and
Authority..........................................30
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Section 9.6 Restrictions on Authority of General Partner.......31
Section 9.7 Duties of General Partner..........................32
Section 9.8 Obligations to Repair and Rebuild Apartment
Housing............................................34
Section 9.9 Partnership Expenses...............................34
Section 9.10 General Partner Expenses...........................35
Section 9.11 Other Business of Partners.........................35
Section 9.12 Covenants, Representations and Warranties..........35
Article X. ALLOCATIONS OF INCOME, LOSSES AND CREDITS..........................40
Section 10.1 General............................................40
Section 10.2 Allocations From Sale or Refinancing...............40
Section 10.3 Special Allocations................................41
Section 10.4 Curative Allocations...............................43
Section 10.5 Other Allocation Rules.............................44
Section 10.6 Tax Allocations: Code Section 704(c)...............45
Section 10.7 Allocation Among Limited Partners..................45
Section 10.8 Allocation Among General Partners..................45
Section 10.9 Modification of Allocations........................45
Article XI. DISTRIBUTION......................................................46
Section 11.1 Distribution of Net Operating Income...............46
Section 11.2 Distribution of Sale or Refinancing Proceeds.......46
Article XII. TRANSFERS OF LIMITED PARTNER'S INTEREST IN THE PARTNERSHIP.......47
Section 12.1 Assignment of Interests............................47
Section 12.2 Effective Date of Transfer.........................48
Section 12.3 Invalid Assignment.................................48
Section 12.4 Assignee's Rights to Allocations and Distributions.48
Section 12.5 Substitution of Assignee as Limited Partner or
Special Limited Partner............................48
Section 12.6 Death, Bankruptcy, Incompetency, etc., of a
Limited Partner....................................48
Article XIII. WITHDRAWAL, REMOVAL AND REPLACEMENT OF GENERAL PARTNER..........49
Section 13.1 Withdrawal of General Partner......................49
Section 13.2 Removal of General Partner.........................49
Section 13.3 Effects of a Withdrawal............................51
Section 13.4 Successor General Partner..........................53
Section 13.5 Admission of Additional or Successor General
Partner............................................53
Section 13.6 Transfer of Interest...............................53
Section 13.7 No Goodwill Value..................................54
Article XIV. BOOKS AND ACCOUNTS, REPORTS, TAX RETURNS, FISCAL YEAR AND
BANKING..........................................................54
Section 14.1 Books and Accounts.................................54
Section 14.2 Accounting Reports.................................55
Section 14.3 Other Reports......................................55
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Section 14.4 Late Reports.......................................57
Section 14.5 Annual Site Visits.................................58
Section 14.6 Tax Returns........................................58
Section 14.7 Fiscal Year........................................58
Section 14.8 Banking............................................58
Section 14.9 Certificates and Elections.........................58
Article XV. DISSOLUTION, WINDING UP, TERMINATION AND LIQUIDATION OF THE
PARTNERSHIP.......................................................58
Section 15.1 Dissolution of Partnership.........................58
Section 15.2 Return of Capital Contribution upon Dissolution....59
Section 15.3 Distribution of Assets.............................59
Section 15.4 Deferral of Liquidation............................60
Section 15.5 Liquidation Statement..............................60
Section 15.6 Certificates of Dissolution; Certificate of
Cancellation of Certificate of Limited Partnership.61
Article XVI. AMENDMENTS.......................................................61
Article XVII. MISCELLANEOUS...................................................61
Section 17.1 Voting Rights......................................61
Section 17.2 Meeting of Partnership.............................62
Section 17.3 Notices............................................62
Section 17.4 Successors and Assigns.............................63
Section 17.5 Recording of Certificate of Limited Partnership....63
Section 17.6 Amendment of Certificate of Limited Partnership....63
Section 17.7 Counterparts.......................................64
Section 17.8 Captions...........................................64
Section 17.9 Saving Clause......................................64
Section 17.10 Certain Provisions.................................64
Section 17.11 Tax Matters Partner................................64
Section 17.12 Expiration of Compliance Period....................65
Section 17.13 Number and Gender..................................66
Section 17.14 Entire Agreement...................................66
Section 17.15 Governing Law......................................66
Section 17.16 Attorney's Fees....................................66
Section 17.17 Receipt of Correspondence..........................66
Section 17.18 Security Interest and Right of Set-Off.............67
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
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EXHIBIT F CONTRACTOR'S CERTIFICATE
EXHIBIT G DEPRECIATION SCHEDULE
EXHIBIT H REPORT OF OPERATIONS
EXHIBIT I SURVEY REQUIREMENTS
LIST OF AGREEMENTS ATTACHED
iv
AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP OF
▇▇▇▇▇▇▇ MEADOW ASSOCIATES, LTD.
This Amended And Restated Agreement of Limited Partnership is being
entered into effective as of the date written below by and between Eagle Creek
Partners Inc., an Alabama corporation, and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇, an individual,
as the general partner (the "General Partner"), WNC Holding, LLC, a California
limited liability company, as the limited partner (the "Limited Partner"), WNC
Housing, L.P., a California limited partnership, as the special limited partner
(the "Special Limited Partner"), and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇, an individual, as the
withdrawing limited partner (the "Original Limited Partner").
RECITALS
WHEREAS, ▇▇▇▇▇▇▇ Meadow Associates, Ltd., an Alabama limited
partnership (the "Partnership") recorded a certificate of limited partnership
with the Alabama Secretary of State on December 13, 2001. A partnership
agreement dated August 21, 2001 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) the
admission of the Limited Partner and the Special Limited Partner as partners of
the Partnership, (iii) the liquidation of the Original Limited Partner's
Interest in the Partnership, (iv) the payment of Capital Contributions by the
Limited Partner and the Special Limited Partner to the Partnership, (v) the
allocation of Income, Losses, Tax Credits and distributions of Net Operating
Income and other cash funds of the Partnership among the Partners, (vi) the
determination of the respective rights, obligations and interests of the
Partners to each other and to the Partnership, and (vii) certain other matters.
WHEREAS, the Partners desire hereby to amend and restate the Original
Partnership Agreement.
NOW, THEREFORE, in consideration of their mutual agreements herein set
forth, the Partners hereby agree to amend and restate the Original Partnership
Agreement in its entirety to provide as follows:
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Article I.
DEFINITIONS
"Accountant" shall mean Cone, ▇▇▇▇▇ & ▇▇▇▇▇, 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.
"Apartment Housing" shall collectively mean the approximately 5.77
acres of land in Glencoe, Etowah County, Alabama, as more fully described in
Exhibit A attached hereto and incorporated herein by this reference, and the
Improvements.
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"Architect of Record" shall mean ▇▇▇▇▇ and Associates. 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; 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.
"Assignee" shall mean a Person who has acquired all or a portion of the
Limited Partner's or the Special Limited Partner's beneficial interest in the
Partnership and who has not been substituted in the stead of the transferor as a
Partner.
"Bankruptcy" or "Bankrupt" shall mean the making of an assignment for
the benefit of creditors, becoming a party to any liquidation or dissolution
action or proceeding other than as a creditor, the commencement of any
bankruptcy, reorganization, insolvency or other proceeding for the relief of
financially distressed debtors, or the appointment of a receiver, liquidator,
custodian or trustee 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.
"Break-even Operations" shall mean at such time as the Partnership has
Cash Receipts in excess of Cash Expenses, as determined by the Accountant and
approved by the Special Limited Partner. For purposes of this definition; (a)
any one-time up-front fee paid to the Partnership from any source shall not be
included in Cash Receipts to calculate Break-even Operations; (b) Cash Expenses
shall include the amount of any management fee or portion thereof which is
currently deferred and not paid; and (c) Cash Expenses shall include the amount
of any reserve required to be funded in accordance with Article VIII that is
currently deferred and not paid. In addition, Break-even Operations shall not
occur until the Partnership has: (a) sufficiently funded the tax and insurance
reserve in an amount equal to one year's property insurance premium and the next
full installment of real estate taxes based upon improved land; and (b)
deposited into the Operating Deficit Account an amount equal to one month's
mandatory debt service payment and one month's operating expenses.
"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
3
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 7.6 of this Agreement. A loan to the Partnership by a Partner shall not
be considered a Capital Contribution.
"Cash Expenses" shall mean all cash 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, such as
Insurance, real estate taxes and audit, tax or accounting expenses (excluding
deductions for cost recovery of buildings; improvements and personal property
and amortization of any financing fees) and any seasonal expenses (such as snow
removal, the use of air conditioners in the middle of the summer, or heaters in
the middle of the winter) which may reasonably be expected to be paid in a
subsequent period shall be allocated equally per month over the calendar year.
Cash Expenses payable to Partners or Affiliates of Partners shall be paid after
Cash Expenses payable to third parties. Construction Loan interest and
construction costs of any nature whatsoever are not Cash Expenses and shall not
be paid from Cash Receipts. The provisions of Section 6.2 govern the payment of
construction costs and construction interest.
"Cash Receipts" shall mean actual cash received on a cash basis by the
Partnership from operating revenues of the Partnership, including without
limitation rental income (but not any subsidy thereof from the General Partner
or an Affiliate thereof), tenant security deposits that have been forfeited by
tenants pursuant to the laws of the State, laundry income, telephone hook-up or
service income, cable fees or hook-up costs, telecommunications or satellite
fees or hook-up costs, but excluding prepayments, security deposits, Capital
Contributions, borrowings, the Construction Loan, the Mortgage Loan, lump-sum
payments, any extraordinary receipt of funds, and any income earned on
investment of its funds. Neither the General Partner nor its Affiliates shall be
entitled to payment of any Cash Receipts by virtue of a separate contract,
agreement, obligation or the like.
"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
forty (40) apartment units, and by the issuance of the Construction Inspector's
4
certification, in a form substantially similar to the form attached hereto as
Exhibit D and incorporated herein by this reference, with respect to completion
of all the apartment units in the Apartment Housing. Completion of Construction
further means that the construction shall be completed in good quality, and free
and clear of all mechanic, material and similar liens. Completion of
Construction shall occur when the statutory time period for the filing of any
liens by the Contractor, subcontractors, material suppliers or any one else
entitled to file a construction lien has lapsed unless such filed liens, other
than the Construction Loan, or Mortgage Loan, have been approved by the Special
Limited Partner; and the Special Limited Partner has approved the Completion of
Construction.
"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 Guarantee
Agreement" shall mean that agreement entered into the even date hereof, by and
between the Partnership, the General Partner and the Limited Partner and
incorporated herein by this reference.
"Construction Contract" shall mean the construction contract dated
April 15, 2002 in the amount of $2,055,140, 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.
"Construction Inspector" shall mean that person identified in the
Construction Monitoring Agreement entered into the even date hereof.
"Construction Lender" shall mean Regions Bank or any successor thereto.
"Construction Loan" shall mean the loan obtained from Construction
Lender in the principal amount of $2,177,190 at an interest rate equal to the
Construction Lender's Base Rate plus one-half of one percent floating for a term
of 18 months to provide funds for the acquisition, renovation and/or
construction and development of the Apartment Housing. Where the context admits,
the term "Construction Loan" shall include any deed, deed of trust, note,
security agreement, assumption agreement or other instrument executed by, or on
behalf of, the Partnership or General Partner in connection with the
Construction Loan.
"Construction Monitoring Agreement" shall mean that agreement dated
even date herewith and incorporated herein by this reference for the oversight
and monitoring of the construction of the Improvements.
"Contractor" shall mean ▇▇▇▇▇ Construction Company Inc., which is the
general construction contractor for the Apartment Housing.
5
"Debt Service Coverage" shall mean for the applicable period the ratio
between the Net Operating Income (excluding Mortgage payments and the Asset
Management Fee) and the debt service required to be paid on the Mortgage(s). As
example, a 1.15 Debt Service Coverage means that for every $1.00 of debt service
required to be paid there must be $1.15 of Net Operating Income available. A
worksheet for the calculation of Debt Service Coverage is found in the Report of
Operations attached hereto as Exhibit H and incorporated herein by this
reference. For purposes of this definition: (a) any one-time up-front fee paid
to the Partnership from any source shall not be included in Cash Receipts to
calculate Debt Service Coverage; (b) Cash Expenses shall include the amount of
any Management Fee, or portion thereof, which is currently deferred and not
paid; and (c) Cash Expenses shall include the amount of any reserve required to
be funded in accordance with Article VIII that is current deferred and not paid.
"Deferred Management Fee" shall have the meaning set forth in Section
9.2(c) hereof.
"Developer" shall mean ▇▇▇▇▇▇ Development Inc.
"Development Budget" shall men the agreed upon cost of construction of
the Improvements, including soft costs (which includes, but is not limited to,
financing charges, market study, Development Fee, architect fees, etc.), based
upon the Plans and Specifications. The final Development Budget is referenced in
the Development, Construction and Operating Budget Agreement entered into by and
between the Partners on even date hereof, and incorporated herein by this
reference.
"Development Fee" shall mean the fee payable to the Developer for
services incident to the development and construction of the Apartment Housing
in accordance with the 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.
"DMH/MR" shall mean the Alabama Department of Mental Health and Mental
Retardation.
"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.
6
"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 Eagle Creek Partners Inc. and ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇ ▇▇ and such other Persons as are admitted to the Partnership as
additional or substitute General Partners pursuant to this Agreement. If there
is more than one General Partner of the Partnership, the term "General Partner"
shall be deemed to collectively refer to such General Partners or individually
may mean any General Partner as the context dictates.
"Gross Asset Value" shall mean with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
(a) the initial Gross Asset Value of any asset contributed by a Partner
to the Partnership shall be the Fair Market Value of such asset, as determined
by the contributing Partner and the General Partner, provided that, if the
contributing Partner is a General Partner, the determination of the Fair Market
Value of a contributed asset shall be determined by appraisal;
(b) the Gross Asset Values of all Partnership assets shall be adjusted
to equal their respective Fair Market Values, as determined by the General
Partner, as of the following times: (1) the acquisition of an additional
Interest in the Partnership by any new or existing Partner in exchange for more
than a de minimis Capital Contribution; (2) the distribution by the Partnership
to a Partner of more than a de minimis amount of Partnership property as
consideration for an Interest in the Partnership; and (3) the liquidation of the
Partnership within the meaning of Treasury Regulations Section
1.704-1(b)(2)(ii)(g); provided, however, that the adjustments pursuant to
clauses (1) and (2) above shall be made only with the Consent of the Special
Limited Partner and only if the General Partner reasonably determines that such
adjustments are necessary or appropriate to reflect the relative economic
interests of the Partners in the Partnership;
(c) the Gross Asset Value of any Partnership asset distributed to any
Partner shall be adjusted to equal the Fair Market Value of such asset on the
date of distribution as determined by the distributee and the General Partner,
provided that, if the distributee is a General Partner, the determination of the
Fair Market Value of the distributed asset shall be determined by appraisal; and
(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
7
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.
"Hazardous Substance" shall mean and include any substance, material or
waste, including, but not limited to, asbestos, petroleum and petroleum products
(including crude oil), that is or becomes designated, classified or regulated as
"toxic" or "hazardous" or a "pollutant" or that is or becomes similarly
designated, classified or regulated, under any federal, state or local law,
regulation or ordinance including, without limitation, Compensation and
Liability Act of 1980, as amended, the Hazardous Materials Transportation Act,
as amended, the Resource Conservation and Recovery Act, as amended, and the
regulations adopted and publications promulgated pursuant thereto.
"Improvements" shall mean the eleven (11) buildings containing forty
(40) apartment units and ancillary and appurtenant facilities (including those
intended for commercial use, if any) being constructed for the elderly use and
built in accordance with the Project Documents. It shall also include all
furnishings, equipment and personal property used in connection with the
operation thereof.
"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 issuance of a certificate of
occupancy (or the local equivalent) are sufficient in the Special Limited
Partner's reasonable judgment to pay all of the following sums: (a) all costs of
construction to achieve Completion of Construction; (b) all costs of marketing,
ownership, maintenance and leasing of the Apartment Housing units; and (c) all
interest and all other sums accruing or payable under the Construction Loan
documents. In making a determination that the financing is In-Balance, the
Special Limited Partner will also consider whether the undisbursed Capital
Contributions of the Limited Partner and 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 pursuant to
this Section 1.38 shall be added to such taxable income or loss;
8
(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 pursuant to this Section 1.38 shall be
subtracted from such taxable income or loss;
(c) in the event the Gross Asset Value of any Partnership asset is
adjusted pursuant to the provisions of the definition thereof, the amount of
such adjustment shall be taken into account as gain or loss from the disposition
of such asset for purposes of computing Income and Losses;
(d) gain or loss resulting from any disposition of Partnership assets
with respect to which gain or loss is recognized for federal income tax purposes
shall be computed by reference to the Gross Asset Value of the property disposed
of, notwithstanding that the adjusted tax basis of such property differs from
its Gross Asset Value;
(e) in lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing such taxable income or loss, there
shall be taken into account depreciation for such fiscal year or other period,
computed as provided below; and
(f) notwithstanding any other provision of this definition, any items
which are specially allocated pursuant to Section 10.3 or Section 10.4 hereof
shall not otherwise be taken into account in computing Income or Losses.
Depreciation for each fiscal year or other period shall be calculated
as follows: an amount equal to the depreciation, amortization, or other cost
recovery deduction allowable with respect to an asset for such year or other
period for federal income tax purposes, except that if the Gross Asset Value of
an asset differs from its adjusted basis for federal income tax purposes at the
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 insurable value of the Apartment Housing at the date
of completion; comprehensive general liability insurance with limits against
bodily injury of not less than $1,000,000 per occurrence and an aggregate of
$2,000,000 and against property damage of not less than $1,000,000; and worker's
compensation insurance, with statutory guidelines;
9
(b) during operations the Partnership will provide and maintain business
interruption coverage covering actual sustained loss for 12 months; worker's
compensation; hazard coverage (including but not limited to fire, or other
casualty loss to any structure or building on the Apartment Housing in an amount
equal to the full replacement value of the damaged property without deducting
for depreciation); and comprehensive general liability coverage against
liability claims for bodily injury or property damage in the minimum amount of
$1,000,000 per occurrence and an aggregate of $2,000,000;
(c) all liability coverage shall include an umbrella liability coverage
in a minimum amount of $4,000,000 per occurrence and an aggregate of $4,000,000;
(d) all Insurance polices shall name the Partnership as the named
insured, the Limited Partner as an additional insured, and WNC & Associates,
Inc. as the certificate holder;
(e) all Insurance policies shall include a provision to notify the
insured, the Limited Partner and the certificate holder prior to cancellation;
(f) hazard coverage must include inflation and building or ordinance
endorsements;
(g) the Contractor must also provide evidence of liability coverage
equal to $1,000,000 per occurrence with an aggregate of $2,000,000 and shall
name the Partnership as an additional insured and WNC & Associates, Inc., as
certificate holder.
(h) the Insurance Policy or Policies shall not have a deductible
provision in excess of $1,000; and
(i) the term "Insurance" specifically excludes co-insurance or
self-insured.
"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.
"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 Land Acquisition Fee 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.
"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.
10
"Limited Partner" shall mean WNC Holding, LLC, a California limited
liability company, and such other Persons as are admitted to the Partnership as
additional or Substitute Limited Partners pursuant to this Agreement.
"Management Agent" shall mean the property management company which
oversees the property management functions for the Apartment Housing and which
is on-site at the Apartment Housing. The initial Management Agent shall be
▇▇▇▇▇▇ Land Company Inc.
"Management Agreement" shall mean the agreement between the Partnership
and the Management Agent for property management services. The management fee
shall equal 9% of gross revenues. The General Partner, on behalf of the
Partnership, shall insure that neither the Management Agreement nor any
ancillary agreement shall provide for an initial rent-up fee, a set-up fee, any
other similar pre-management fee or recurring fee for compliance monitoring or
the like payable to the Management Agent. 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 pursuant to Section
42(g), as amended and any successor thereto, of the Code with respect to the
percentage of apartment units in the Apartment Housing to be occupied by tenants
whose incomes are equal to or less than the required percentage of the area
median gross income.
"Mortgage" or "Mortgage Loan" shall mean the permanent nonrecourse
financing wherein the Partnership promises to pay: (a) Regions Bank, or its
successor or assignee, the principal sum of $75,000, plus interest on the
principal at 9% per annum over a term of 20 years and amortized over 20 years;
(b) Alabama Housing Finance Authority - HOME Loan, or its successor or assignee,
the principal sum of $1,101,260, plus interest on the principal at 0.5% per
annum over a term of 20 years and amortized over 20 years; and (c) NEACCA, or
its successor or assignee, the principal sum of $50,000, plus interest on the
principal at 5% per annum over a term of 20 years and amortized over 20 years.
Where the context admits, the term "Mortgage" or "Mortgage Loan" shall include
any mortgage, deed, deed of trust, note, regulatory agreement, security
agreement, assumption agreement or other instrument executed in connection with
the Mortgage which is binding on the Partnership; and in case any Mortgage is
replaced or supplemented by any subsequent mortgage or mortgages, the Mortgage
shall refer to any such subsequent mortgage or mortgages. Prior to closing the
Mortgage, the General Partner shall provide to the Special Limited Partner a
draft of the Mortgage documents for review and approval. Based on the draft
Mortgage documents, if the terms of the Mortgage are not as specified above and
the Special Limited Partner determines that the Debt Service Coverage 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.
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"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).
"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 apartment unit in the Apartment Housing is available for its
intended use and ending three years following the achievement of three
consecutive years of Break-even Operations. The Operating Deficit Guarantee
Period will not expire unless the Partnership has achieved Completion of
Construction of the Apartment Housing.
"Operating Loans" shall mean loans made by the General Partner to the
Partnership pursuant to Article VI of this Agreement, which loans do not bear
interest and are repayable only as provided in Article IX of this Agreement.
"Original Limited Partner" shall mean ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇.
"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.
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"Person" shall mean an individual, proprietorship, trust, estate,
partnership, joint venture, association, company, corporation or other entity,
as the circumstances demonstrate.
"Plans and Specifications" shall mean the plans, blueprints and
specifications manual for the construction of the Improvements which are
approved by the local city/county building department with jurisdiction over the
construction of the Improvements and which Plans and Specifications are referred
to in the Construction Contract. Any changes to the Plans and Specifications
after approval by the appropriate government building department shall require
the Consent of the Special Limited Partner.
"Project Documents" shall mean all documents relating to the
Construction Loan, Mortgage Loan, Construction Contract, Title Policy and
Partnership Agreement. It shall also include all documents required by any
governmental agency having jurisdiction over the Apartment Housing in connection
with the development, construction and financing of the Apartment Housing,
including but not limited to, the approved Plans and Specifications for the
development and construction of the Apartment Housing.
"Projected Annual Tax Credits" shall mean LIHTC in the amount of
$120,785 for 2003, $222,988 for each of the years 2004 through 2012, and
$102,203 for 2013, which the General Partner has projected to be the total
amount of LIHTC which will be allocated to the Limited Partner by the
Partnership, constituting 99.98% of the aggregate amount of LIHTC of $2,230,330
to be available to the Partnership.
"Projected Tax Credits" shall mean LIHTC in the aggregate amount of the
$2,230,330.
"Qualified Tenants" shall mean any tenants who have incomes of 60% (or
such smaller percentage as the General Partner shall agree) or less of the area
median gross income, as adjusted for family size, so as to make the Apartment
Housing eligible for LIHTC.
"Real Estate Taxes" shall mean the sum of $17,600 required to be paid
by the Partnership to the tax assessor, or similar representative, of the County
of Etowah for real estate taxes assessed against the Apartment Housing.
"Rent Restriction Test" shall mean the test pursuant to Section 42 of
the Code whereby the gross rent charged to tenants of the low-income apartment
units in the Apartment Housing cannot exceed 30% of the qualifying income levels
of those units under Section 42.
"Revised Projected Tax Credits" shall have the meaning set forth in
Section 7.4(a) hereof.
"Sale or Refinancing" shall mean any of the following items or
transactions: a sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Partnership, a condemnation of or
casualty at the Apartment Housing or any part thereof, a claim against a title
insurance company, the refinancing of any Mortgage or other indebtedness of the
Partnership and any similar item or transaction; provided, however, that the
payment of Capital Contributions by the Partners shall not be included within
the meaning of the term "Sale or Refinancing."
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"Sale or Refinancing Proceeds" shall mean all cash receipts of the
Partnership arising from a Sale or Refinancing (including principal and interest
received on a debt obligation received as consideration in whole or in part, on
a Sale or Refinancing) less the amount paid or to be paid in connection with or
as an expense of such Sale or Refinancing, and with regard to damage recoveries
or insurance or condemnation proceeds, the amount paid or to be paid for
repairs, replacements or renewals resulting from damage to or partial
condemnation of the Apartment Housing.
"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 Alabama.
"State Tax Credit Agency" shall mean the state agency of Alabama which
has the responsibility and authority to administer the LIHTC program in Alabama.
"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.
"Supportive Housing Tenant" shall mean a tenant identified by the State
or DMH/MR as being mentally ill or mentally retard.
"Supportive Housing Unit(s)" shall mean the 6 apartment units in the
Apartment Housing which have been set-aside to be occupied by Supportive Housing
Tenants.
"Syndication Fee" shall mean the fee payable to the General Partner in
an amount equal to $10,000 for the General Partner's services in forming the
Partnership, locating and approving the Limited Partner and the Special Limited
Partner as the investors in the Partnership, negotiating and finalizing this
Partnership Agreement and for such other services referenced in Treasury
Regulations Section 1.709-2(B).
"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 Apartment Housing; and (b) any applicable federal, state and local
laws, rules and regulations, which must be complied with in order to qualify for
the LIHTC or to avoid an event of recapture in respect of the LIHTC.
"Tax Credit Period" shall mean the 10-year time period referenced in
Code Section 42(f)(1) over which the Projected Tax Credits are allocated to the
14
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 Apartment Housing from a company approved by the Special
Limited Partner. The Title Policy shall be an ALTA owners title policy naming
the Partnership, the Limited Partner and the Special Limited Partner as insured
parties, and including the following endorsements: non-imputation, Fairways,
access, contiguity, survey, owner's comprehensive, zoning and subdivision, if
applicable. The Title Policy shall also insure against rights-of-way, easements,
blanket easement or claims of easements, not shown by public records. During
construction of the Improvements, the Title Policy shall be in an amount equal
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.
"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, 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.
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Article II.
NAME
The name of the Partnership shall be "▇▇▇▇▇▇▇ Meadow Associates, Ltd.".
Article III.
PRINCIPAL EXECUTIVE OFFICE/AGENT FOR SERVICE
Section 3.1 Principal Executive Office.
The principal executive office of the Partnership is located at ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other place or places within
the State as the General Partner may hereafter designate.
Section 3.2 Agent for Service of Process.
The name of the agent for service of process on the Partnership is
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇, whose address is ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇.
Article IV.
PURPOSE
Section 4.1 Purpose of the Partnership.
The purpose of the Partnership is to acquire, construct, own and
operate the Apartment Housing in order to provide, in part, Tax Credits to the
Partners in accordance with the provisions of the Code and the Treasury
Regulations applicable to LIHTC and to sell the Apartment Housing at the
conclusion of the Compliance Period. The Partnership shall not engage in any
business or activity which is not incident to the attainment of such purpose.
Section 4.2 Authority of the Partnership.
In order to carry out its purpose, the Partnership is empowered and
authorized to do any and all acts and things necessary, appropriate, proper,
advisable or incidental to the furtherance and accomplishment of its purpose,
and for protection and benefit of the Partnership in accordance with the
Partnership Agreement, including but not limited to the following:
(a) acquire ownership of the real property referred to in Exhibit A
attached hereto;
(b) construct, renovate, rehabilitate, own, maintain and operate the
Apartment Housing in accordance with the Project Documents;
(c) provide housing to Qualified Tenants, subject to the Minimum Set-Aside
Test and the Rent Restriction Test and consistent with the requirements of the
Project Documents so long as any Project Documents remain in force;
16
(d) maintain and operate the Apartment Housing, including hiring the
Management Agent (which Management Agent may be any of the Partners or an
Affiliate thereof) and entering into any agreement for the management of the
Apartment Housing during its rent-up and after its rent-up period in accordance
with this Agreement;
(e) enter into the Construction Loan and Mortgage;
(f) rent dwelling units in the Apartment Housing from time to time, in
accordance with the provisions of the Code applicable to LIHTC; and
(g) do any and all other acts and things necessary or proper in accordance
with this Agreement.
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 Alabama, and shall continue until December 13, 2053 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.
Section 6.2 Construction Obligations.
(a) The General Partner hereby guarantees lien free Completion of
Construction of the Apartment Housing on or before April 1, 2003 ("Completion
Date") at a total development cost of not more than $2,993,490 ("Development
Budget"), which includes all hard and soft costs incident to the acquisition,
development and construction of the Apartment Housing in accordance with the
Development Budget, the Construction Contract, and the Project Documents. At any
time during construction and prior to Permanent Mortgage Commencement, if the
Special Limited Partner ascertains that the Development Budget, less the
Development Fee, exceeds the sum of the Capital Contributions and the Mortgage
amount then the General Partner shall be responsible for and shall be obligated
to pay the difference thereof within 30 days of receiving written notice from
the Special Limited Partner. Upon such notice from the Special Limited Partner,
the General Partner shall advance the requested funds into the Construction
Lender's construction account. Any advances by the General Partner pursuant to
17
this Section shall not be repayable, shall not change the Interest of any
Partner in the Partnership and shall be considered a guaranteed payment to the
Partnership for cost overruns.
(b) In addition, if (1) the Improvements are not completed on or before the
Completion Date (which date may be extended in the events of Force Majeure, but
in no event longer than 3 months from the Completion Date); (2) prior to
completing the Improvements, the Construction Lender sends a notice of default
under the Construction Loan; or (3) a foreclosure action is commenced against
the Partnership, then at the Special Limited Partner's election, either the
General Partner will be removed from the Partnership and the Special Limited
Partner will be admitted as successor General Partner, all in accordance with
Article XIII hereof, or the General Partner will repurchase the Interest of the
Limited Partner and the Special Limited Partner for an amount equal to the
amounts theretofore paid by the Limited Partner and the Special Limited Partner,
and the Limited Partner and the Special Limited Partner shall have no further
Interest in the Partnership. If the Special Limited Partner elects to have the
General Partner repurchase such Interests then the repurchase shall occur within
30 days after the General Partner receives written demand from the Special
Limited Partner. If the Special Limited Partner elects to remove the General
Partner then the provisions of Article XIII apply.
Section 6.3 Operating Obligations.
From the date the first apartment unit in the Apartment Housing is
available for its intended use until 3 consecutive months of Break-even
Operations, the General Partner will immediately provide to the Partnership the
necessary funds to pay Operating Deficits, which funds shall not be repayable,
shall not change the Interest of any Partner and shall be considered a
guaranteed payment to the Partnership for cost overruns. For the balance of the
Operating Deficit Guarantee Period the General Partner will immediately provide
Operating Loans to pay any Operating Deficits. The aggregate maximum amount of
the Operating Loan(s) the General Partner will be obligated to lend will be
equal to one year's operating expenses (including debt and reserves) approved by
the General Partner and the Special Limited Partner. Each Operating Loan shall
be nonrecourse to the Partners, and shall be repayable out of 50% of the
available Net Operating Income or Sale or Refinancing Proceeds in accordance
with Article IX of this Agreement.
Section 6.4 Other General Partner Loans.
After expiration of the Operating Deficit Guarantee Period, with the
Consent of the Special Limited Partner, the General Partner may loan to the
Partnership any sums required by the Partnership and not otherwise reasonably
available to it. Any such loan shall bear simple interest (not compounded) at
the 10-year Treasury money market rate in effect as of the day of the General
Partner loan, or, if lesser, the maximum legal rate. The maturity date and
repayment schedule of any such loan shall be as agreed to by the General Partner
and the Special Limited Partner. The terms of any such loan shall be evidenced
by a written instrument. The General Partner shall not charge a prepayment
penalty on any such loan. Any loan in contravention of this Section shall be
deemed an invalid action taken by the General Partner and such advance will be
classified as a General Partner Capital Contribution.
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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 $0.
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.
The Limited Partner shall make a Capital Contribution in the amount of
$1,638,965, as may be adjusted in accordance with Section 7.4 of this Agreement,
in cash on the dates and subject to the conditions hereinafter set forth.
(a) $296,161 shall be payable upon the Limited Partner's receipt and
approval of the following documents:
(1) a legal opinion in a form substantially similar to the form of
opinion attached hereto as Exhibit B and incorporated herein by this reference;
(2) a fully executed Certification and Agreement in the form attached
hereto as Exhibit C and incorporated herein by this reference;
(3) a copy of the Title Policy;
(4) Insurance required during construction;
(5) a copy of the recorded grant deed (warranty deed);
(6) the Construction Monitoring Agreement;
(7) an executed commitment from the Mortgage lender to provide the
Mortgage;
(8) a fully executed Construction Loan;
(9) the construction draw disbursement procedure; and
(10) all documents and workpapers supporting the 10% carryover
determination.
Notwithstanding the foregoing, the first Capital Contribution payment
will be paid in installments based upon approved draw requests in accordance
with the Construction Monitoring Agreement.
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(b) $60,068 shall be payable upon the Limited Partner's receipt and
approval of the following documents:
(1) the Construction Inspector's certification of 80% completion of the
total construction;
(2) the construction documents required pursuant to Section 14.3(a) of
this Agreement, if not previously provided to the Limited Partner;
(3) any documents previously not provided to the Limited Partner but
required pursuant to this Section 7.2 and Section 14.3(a); and
(4) a determination by the Construction Inspector, pursuant to the
Construction Monitoring Agreement that construction financing is In-Balance.
(c) $1,118,757 shall be payable upon the Limited Partner's receipt and
approval of the following documents:
(1) a certificate of occupancy (or equivalent evidence of local
occupancy approval if a permanent certificate is not available) on all the
apartment units in the Apartment Housing;
(2) a completion certification in a form substantially similar to the
form attached hereto as Exhibit D and incorporated herein by this reference,
indicating that the Improvements have been completed in accordance with the
Project Documents;
(3) a letter from the Contractor in a form substantially similar to the
form attached hereto as Exhibit F and incorporated herein by this reference
stating that all amounts payable to the Contractor have been paid in full and
that the Partnership is not in violation of the Construction Contract;
(4) Insurance required during operations;
(5) the construction documents required pursuant to Section 14.3(a) of
this Agreement, if not previously provided to the Limited Partner;
(6) any documents previously not provided to the Limited Partner but
required pursuant to this Section 7.2 and Section 14.3(a); and
(7) a determination by the Construction Inspector, pursuant to the
Construction Monitoring Agreement that construction financing is In-Balance.
(d) $163,978 shall be payable upon the Limited Partner's receipt and
approval of the following documents:
(1) Mortgage Loan documents signed and the Mortgage funded;
(2) an updated Title Policy dated no more than 10 days prior to the
scheduled Capital Contribution confirming that there are no liens, claims or
20
rights to a lien or judgments filed against the property or the Apartment
Housing during the time period since the issuance of the Title Policy referenced
above in Section 7.2(a);
(3) 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;
(4) the current rent roll evidencing a minimum 90% occupancy by
Qualified Tenants for 90 consecutive days immediately prior to funding;
(5) copies of all initial tenant files including completed applications,
completed questionnaires or checklist of income and assets, documentation of
third party verification of income and assets, and income certification forms
(LIHTC specific) collected by the Management Agent, or General Partner,
verifying each tenant's eligibility pursuant to the Minimum Set-Aside Test;
(6) Completion of Construction;
(7) a construction closeout binder, which shall include, but is not
limited to, as-built drawings, all operating manuals, and all manufacturing
warranty agreements. In addition, the Contractor shall provide the Partnership a
one-year warranty on all parts, materials and work-quality;
(8) copies of the executed lease agreements with the tenants.
(9) a copy of the declaration of restrictive covenants/extended use
agreement entered into between the Partnership and the State Tax Credit Agency;
(10) an audited construction cost certification that includes an
itemization of development, acquisition, and construction or rehabilitation
costs of the Apartment Housing and the eligible basis and applicable percentage
of each building of the Apartment Housing;
(11) 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;
(12) Debt Service Coverage of 1.10 for 90 consecutive days immediately
prior to funding;
(13) Internal Revenue Code Form 8609, or any successor form;
(14) the audited Partnership financial statements required by Section
14.3 for the year the Apartment Housing is placed-in-service and the Partnership
has achieved Completion of Construction; and
(15) any documents previously not provided to the Limited Partner but
required pursuant to this Section 7.2 and Section 14.3(a).
21
Section 7.3 Repurchase of Limited Partner's Interest.
Within 60 days after the General Partner receives written demand from
the Limited Partner and/or the Special Limited Partner, the Partnership shall
repurchase the Limited Partner's Interest and/or the Special Limited Partner's
Interest in the Partnership by refunding to it in cash the full amount of the
Capital Contribution which the Limited Partner and/or the Special Limited
Partner has theretofore made in the event that, for any reason, the Partnership
shall fail to:
(a) cause the Apartment Housing to be placed in service by April 1, 2003;
(b) achieve 90% occupancy of the Apartment Housing by Qualified Tenants by
September 1, 2003;
(c) obtain Permanent Mortgage Commencement by September 1, 2003;
(d) at any time before the Completion Date, prevent a foreclosure, or
abandonment of the Apartment Housing or fail to lift any order restricting
construction of the Apartment Housing;
(e) replace a withdrawn Mortgage Loan commitment with a comparable
commitment acceptable to the Special Limited Partner within a reasonable period
of time;
(f) 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
(g) 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, and were based on the
assumption that the Partnership would be eligible to claim, in the aggregate,
the Projected Tax Credits. If the anticipated amount of Projected Tax Credits to
be allocated to the Limited Partner and Special Limited Partner as evidenced by
IRS Form 8609, Schedule A thereto, provided to the Limited Partner and Special
Limited Partner are less than 99.99% of $2,230,107 (the new Projected Tax Credit
amount, if applicable, shall be referred to as the "Revised Projected Tax
Credits") then the Limited Partner's and Special Limited Partner's Capital
Contribution provided for in Section 7.2 and Section 7.5 respectively shall be
adjusted by the amount which will make the total Capital Contribution to be paid
by the Limited Partner and Special Limited Partner to the Partnership equal to
73.50% of the Revised Projected Tax Credits so anticipated to be allocated to
the Limited Partner and Special Limited Partner. If any Capital Contribution
adjustment referenced in this Section 7.4(a) is a reduction which is greater
than the remaining Capital Contribution to be paid by the Partner whose Capital
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Contribution is being adjusted, 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 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 Apartment Housing's apartment units to Qualified Tenants throughout the
Compliance Period. If, at the end of any calendar year during the first 5
calendar years following the year in which the Apartment Housing is placed in
service, the Actual Tax Credit for the applicable fiscal year or portion thereof
is or will be less than the Projected Annual Tax Credit, or the Projected Annual
Tax Credit as modified by Section 7.4(a) of this Agreement if applicable (the
"Annual Credit Shortfall"), then the next Capital Contribution owed by the
Limited Partner shall be reduced by the Annual Credit Shortfall amount, and any
portion of such Annual Credit Shortfall in excess of such Capital Contribution
shall be applied to reduce succeeding Capital Contributions of the Limited
Partner. If the Annual Credit Shortfall is greater than the Limited Partner's
remaining Capital Contributions, then the General Partner shall pay to the
Limited Partner the excess of the Annual Credit Shortfall over the remaining
Capital Contributions. The General Partner shall have 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 Contribution by the
General Partner. Notwithstanding anything to the contrary in this Agreement, the
General Partner's Capital Contribution required by this Section shall be
disbursed to the Limited Partner as a return of capital.
(c) In the event that, for any reason, at any time after the first 5
calendar years following the year in which the Apartment Housing is placed in
service, there is an Annual Credit Shortfall, then there shall be a reduction in
the General Partner's share of Net Operating Income in an amount equal to the
Annual Credit Shortfall and said amount shall be paid to the Limited Partner. In
the event there are not sufficient funds to pay the full Annual Credit Shortfall
to the Limited Partner at the time of the next Distribution of Net Operating
Income, then the unpaid Annual Credit Shortfall shall be repaid in the next year
in which sufficient monies are available from the General Partner's share of Net
Operating Income. In the event a Sale or Refinancing of the Apartment Housing
occurs prior to repayment in full of the Annual Credit Shortfall then the excess
will be paid in accordance with Section 11.2(b). The provisions of this Section
7.4(b) shall apply equally to the Special Limited Partner in proportion to its
Capital Contribution and anticipated annual Tax Credit.
(d) The General Partner has represented, in part, that the Limited Partner
will receive Projected Annual Tax Credits of $120,785 in 2003 and $222,988. In
the event the 2003 or 2004 Actual Tax Credits are less than projected then the
Limited Partner's Capital Contribution shall be reduced by an amount equal to
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73.50% times the difference between the Projected Annual Tax Credits for 2003 or
2004 and the Actual Tax Credits for 2003 or 2004. If the 2003 or 2004 Actual Tax
Credits are less than projected then the Special Limited Partner's Capital
Contribution shall be reduced following the same equation referenced in the
preceding sentence. If, at the time of determination thereof, the Capital
Contribution adjustment referenced in this Section 7.4(d) is greater than the
balance of the Limited Partner's or Special Limited Partner's Capital
Contribution payment which is then due, if any, then the excess amount shall be
paid by the General Partner to the Limited Partner and/or the Special Limited
Partner within 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.
(e) The Partners recognize and acknowledge that the Limited Partner and the
Special Limited Partner are making their Capital Contribution, in part, on the
expectation that the Projected Tax Credits are allocated to the Partners over
the Tax Credit Period. If the Projected Tax Credits are not allocated to the
Partners during the Tax Credit Period then the Limited Partner's and Special
Limited Partner's Capital Contribution shall be reduced by an amount agreed upon
by the Partners, in good faith, to provide the Limited Partner and the Special
Limited Partner with their anticipated internal rate of return.
(f) In the event there is: (1) a filing of a tax return by the Partnership
evidencing a reduction in the qualified basis or eligible basis of the Apartment
Housing causing a recapture of Tax Credits previously allocated to the Limited
Partner or an adjustment to Schedule K-1; (2) a reduction in the qualified basis
or eligible basis of the Apartment Housing for income tax purposes following an
examination or review by the Internal Revenue Service ("IRS") resulting in a
recapture or reduction of Tax Credits previously claimed or an adjustment to
Schedule K-1; (3) 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
Apartment Housing, unless the Partnership shall timely appeal such decision and
the collection of such assessment shall be stayed pending the disposition of
such appeal; or (4) a decision of a court affirming such decision upon such
appeal then, in addition to any other payments to which the Limited Partner
and/or the Special Limited Partner are entitled under the terms of this Section
7.4, the General Partner shall pay to the Limited Partner and the Special
Limited Partner within 60 days of receiving notice from the Limited Partner
and/or the Special Limited Partner the sum of (A) the amount of the Tax Credit
recapture, (B) the cumulative tax effect of a decrease in loss allocated to the
Limited Partner and Special Limited Partner by the Partnership; (C) any interest
and penalties imposed on the Limited Partner or Special Limited Partner with
respect to such recapture; (D) the cumulative increase of taxable income
allocated to the Limited Partner and Special Limited Partner by the Partnership;
and (E) an amount sufficient to pay any tax liability owed by the Limited
Partner or Special Limited Partner resulting from the receipt of the amounts
specified in (A), (B), (C) and (D). The amount paid by the General Partner
pursuant to this Section will be deemed to be a Capital Contribution by the
General Partner. Notwithstanding anything to the contrary in this Agreement, the
General Partner's Capital Contribution required by this Section shall be
disbursed to the Limited Partner as a return of Capital.
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(g) The increase in the Capital Contribution of the Limited Partner and the
Special Limited Partner pursuant to Section 7.4(a) shall be subject to the
Limited Partner and Special Limited Partner having funds available to pay any
such increase at the time of its notification of such increase. For these
purposes, any funds theretofore previously earmarked by the Limited Partner or
Special Limited Partner to make other investments, or to be held as required
reserves, shall not be considered available for payment hereunder.
Section 7.5 Capital Contribution of Special Limited Partner.
The Special Limited Partner shall make a Capital Contribution of $164
at the time of the Limited Partner's Capital Contribution payment referenced in
Section 7.2(a) upon the same conditions.
Section 7.6 Return of Capital Contribution.
From time to time the Partnership may have cash in excess of the amount
required for the conduct of the affairs of the Partnership, and the General
Partner may, with the Consent of the Special Limited Partner, determine that
such cash should, in whole or in part, be returned to the Partners, pro rata, in
reduction of their Capital Contribution. No such return shall be made unless all
liabilities of the Partnership (except those to Partners on account of amounts
credited to them pursuant to this Agreement) have been paid or there remain
assets of the Partnership sufficient, in the sole discretion of the General
Partner, to pay such liabilities.
Section 7.7 Liability of Limited Partner and Special Limited Partner.
The Limited Partner and Special Limited Partner shall not be liable for
any of the debts, liabilities, contracts or other obligations of the
Partnership. The Limited Partner and Special Limited Partner shall be liable
only to make Capital Contributions in the amounts and on the dates specified in
this Agreement and, except as otherwise expressly required hereunder, shall not
be required to lend any funds to the Partnership or, after their respective
Capital Contributions have been paid, to make any further Capital Contribution
to the Partnership.
Article VIII.
WORKING CAPITAL AND RESERVES
Section 8.1 Replacement and Reserve Account.
The General Partner, on behalf of the Partnership, shall establish a
Replacement and Reserve Account and shall deposit thereinto the minimum amount
of $70,000, or make annual contributions equal to $10,000 per year until the
minimum amount is reached, at which point the annual contribution will be
reduced to equal $8,000 per year, for the purpose of capital improvements. Said
deposit shall be made with an initial lump sum contribution or in equal monthly
installments. Withdrawals from such account shall be made only with the Consent
of the Special Limited Partner and Alabama Housing Finance Authority. Any
balance remaining in the account at the time of a sale of the Apartment Housing
shall be allocated and distributed equally between the General Partner and the
Limited Partner.
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Section 8.2 General Partner Financed Rental Assistance Reserve Account.
The General Partner, on behalf of the Partnership, shall establish a
Rental Assistance Reserve Account and shall deposit thereinto a minimum amount
equal to $30,000, or shall deposit $250 per month until the minimum amount is
reached, for the purpose of rental assistance to the project. Said deposit shall
be made monthly in equal installments. Withdrawals from such account shall be
made only with the Consent of the Special Limited Partner.
Section 8.3 Tax and Insurance Account.
The General Partner, on behalf of the Partnership, shall establish a
tax and insurance account ("T & I Account") for the purpose of making the
requisite Insurance premium payments and the real estate tax payments. The
annual deposit to the T & I Account shall equal the total annual Insurance
payment and the total annual real estate tax payment. Said amount shall be
deposited monthly in an amount equal to 1/12th of the annual required amount.
Notwithstanding the foregoing, as part of its obligation to achieve Break-even
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. Withdrawals from
such account shall be made only for its intended purpose. Any balance remaining
in the account at the time of a sale of the Apartment Housing shall be allocated
and distributed equally between the General Partner and the Limited Partner.
Section 8.4 Operating Deficit Account.
The General Partner, on behalf of the Partnership, shall establish an
Operating Deficit Account at the time the Apartment Housing maintains Break-even
Operations for 3 consecutive months and shall deposit thereinto an amount equal
to one month's mandatory debt service payment and one month's operating
expenses. The funds in the Operating Deficit Account shall be used to pay
operating expenses excluding repair and maintenance items. Withdrawals from the
Operating Deficit Account shall be made only with the consent of the Special
Limited Partner and Alabama Housing Finance Authority. The Operating Deficit
Account shall terminate upon conclusion of the Operating Deficit Guarantee
Period. Upon termination of the Operating Deficit Account, any remaining funds
shall be distributed to the General Partner as a return of capital.
Section 8.5 Other Reserves.
The General Partner, on behalf of the Partnership, may establish out of
funds available to the Partnership a reserve account sufficient in its sole
discretion to pay any unforeseen contingencies which might arise in connection
with the furtherance of the Partnership business including, but not limited to,
(a) any rent subsidy required to maintain rent levels in compliance with the Tax
Credit Conditions; and (b) any debt service or other payments for which other
funds are not provided for hereunder or otherwise expected to be available to
the Partnership. The General Partner shall not be liable for any good-faith
estimate which it shall make in connection with establishing or maintaining any
such reserves nor shall the General Partner be required to establish or maintain
any such reserves if, in its sole discretion, such reserves do not appear to be
necessary.
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Article IX.
MANAGEMENT AND CONTROL
Section 9.1 Power and Authority of General Partner.
Subject to the Consent of the Special Limited Partner or the consent of
the Limited Partner where required by this Agreement, and subject to the other
limitations and restrictions included in this Agreement, the General Partner
shall have complete and exclusive control over the management of the Partnership
business and affairs, and shall have the right, power and authority, on behalf
of the Partnership, and in its name, to exercise all of the rights, powers and
authority of a partner of a partnership without limited partners. If there is
more than one General Partner, all acts, decisions or consents of the General
Partners shall require the concurrence of all of the General Partners. No
actions taken without the authorization of all the General Partners shall be
deemed valid actions taken by the General Partners pursuant to this Agreement.
No Limited Partner or Special Limited Partner (except one who may also be a
General Partner, and then only in its capacity as General Partner within the
scope of its authority hereunder) shall have any right to be active in the
management of the Partnership's business or investments or to exercise any
control thereover, nor have the right to bind the Partnership in any contract,
agreement, promise or undertaking, or to act in any way whatsoever with respect
to the control or conduct of the business of the Partnership, except as
otherwise specifically provided in this Agreement.
Section 9.2 Payments to the General Partners and Others.
(a) The Partnership shall pay to the Developer a Development Fee in the
amount of $390,000 in accordance with the Development Fee Agreement entered into
by and between the Developer and the Partnership on the even date hereof. The
Development Fee Agreement provides, in part, that the Development Fee shall
first be paid from available proceeds in accordance with Section 9.2(b) of this
Agreement and if not paid in full then the balance of the Development Fee will
be paid in accordance with Section 11.1 of this Agreement.
(b) The Partnership shall utilize the proceeds from the Capital
Contributions paid pursuant to Section 7.2 and Section 7.5 of this Agreement for
costs associated with the development and construction of the Apartment Housing
including, but not limited to, land costs, Land Acquisition Fee, architectural
fees, survey and engineering costs, financing costs, loan fees, 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 Apartment Housing in an amount in
accordance with the Management Agreement. The term of the Management Agreement
shall not exceed 1 year, and the execution or renewal of any Management
27
Agreement shall be subject to the prior Consent of the Special Limited Partner.
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.
(1) The General Partner shall, upon receiving any request of the
Mortgage lender requesting such action, dismiss the Management Agent as the
entity responsible for management of the Apartment Housing under the terms of
the Management Agreement; or, the General Partner shall dismiss the Management
Agent at the request of the Special Limited Partner.
(2) The appointment of any successor Management Agent is subject to the
Consent of the Special Limited Partner, which may only be sought after the
General Partner has provided the Special Limited Partner with accurate and
complete disclosure respecting the proposed Management Agent.
(d) The Partnership shall pay to the Limited Partner an Asset Management
Fee commencing in 2004 equal to $1,500 of the Net Operating Income 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
minimum annual Asset Management Fee of $1,500 shall be payable in monthly equal
installments; provided, however, that if in any year Net Operating Income is
insufficient to pay the full $1,500, the unpaid portion thereof shall accrue and
be payable on a cumulative basis in the first year in which there is sufficient
Net Operating Income, as provided in Section 11.1, or sufficient Sale or
Refinancing Proceeds, as provided in Section 11.2. 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 35% of Net Operating Income
commencing in 2004 for overseeing the marketing, lease-up and continued
occupancy of the Partnership's apartment units, obtaining and monitoring the
Mortgage Loan, maintaining the books and records of the Partnership, selecting
and supervising the Partnership's Accountants, bookkeepers and other Persons
required to prepare and audit the Partnership's financial statements and tax
returns, and preparing and disseminating reports on the status of the Apartment
Housing and the Partnership, all as required by Article XIV of this Agreement.
The Partners acknowledge that the Incentive Management Fee is being paid as an
inducement to the General Partner to operate the Partnership efficiently, to
maximize occupancy and to increase the Net Operating Income. The Incentive
Management Fee shall be payable from Net Operating Income in the manner and
priority set forth in Section 11.1 of this Agreement upon completion and
delivery of the annual audit pursuant to Section 14.2(a) of this Agreement. If
the Incentive Management Fee is not paid in any year it shall not accrue for
payment in subsequent years.
(f) The Partnership shall pay to the General Partner through the Compliance
Period an annual Tax Credit Compliance Fee equal to 35% of Net Operating Income
commencing in 2004 for the services of the General Partner in ensuring
28
compliance by the Partnership and the Apartment Housing with all Tax Credit
rules and regulations. The Tax Credit Compliance Fee shall be payable from Net
Operating Income in the manner and priority set forth in Section 11.1 of this
Agreement upon completion and delivery of the annual audit pursuant to Section
14.2(a) of this Agreement. If the Tax Credit Compliance Fee is not paid in any
year it shall not accrue for payment in subsequent years.
Section 9.3 Specific Powers of the General Partner.
Subject to the other provisions of this Agreement, the General Partner,
in the Partnership's name and on its behalf, may:
(a) employ, contract and otherwise deal with, from time to time, Persons
whose services are necessary or appropriate in connection with management and
operation of the Partnership business, including, without limitation,
contractors, agents, brokers, Accountants and Management Agents (provided that
the selection of any Accountant or Management Agent has received the Consent of
the Special Limited Partner) and attorneys, on such terms as the General Partner
shall determine within the scope of this Agreement;
(b) pay as a Partnership expense any and all costs and expenses associated
with the formation, development, organization and operation of the Partnership,
including the expense of annual audits, tax returns and LIHTC compliance;
(c) deposit, withdraw, invest, pay, retain and distribute the Partnership's
funds in a manner consistent with the provisions of this Agreement;
(d) execute the Construction Loan and the Mortgage; and
(e) execute, acknowledge and deliver any and all instruments to effectuate
any of the foregoing.
Section 9.4 Authority Requirements.
During the Compliance Period, the following provisions shall apply.
(a) Each of the provisions of this Agreement shall be subject to, and the
General Partner covenants to act in accordance with, the Tax Credit Conditions
and all applicable federal, state and local laws and regulations.
(b) The Tax Credit Conditions and all such laws and regulations, as amended
or supplemented, shall govern the rights and obligations of the Partners, their
heirs, executors, administrators, successor and assigns, and they shall control
as to any terms in this Agreement which are inconsistent therewith, and any such
inconsistent terms of this Agreement shall be unenforceable by or against any of
the Partners.
(c) Upon any dissolution of the Partnership or any transfer of the
Apartment Housing, no title or right to the possession and control of the
Apartment Housing and no right to collect rent therefrom shall pass to any
Person who is not, or does not become, bound by the Tax Credit Conditions in a
manner that, in the opinion of counsel to the Partnership, would avoid a
recapture of Tax Credits thereof on the part of the former owners.
29
(d) Any conveyance or transfer of title to all or any portion of the
Apartment Housing required or permitted under this Agreement shall in all
respects be subject to the Tax Credit Conditions and all conditions, approvals
or other requirements of the rules and regulations of any authority applicable
thereto.
Section 9.5 Limitations on General Partner's Power and Authority.
Notwithstanding the provisions of this Article IX, the General Partner
shall not:
(a) except as required by Section 9.4, act in contravention of this
Agreement;
(b) act in any manner which would make it impossible to carry on the
ordinary business of the Partnership;
(c) confess a judgment against the Partnership;
(d) possess Partnership property, or assign the Partner's right in specific
Partnership property, for other than the exclusive benefit of the Partnership;
(e) admit a Person as a General Partner except as provided in this
Agreement;
(f) directly or indirectly transfer control of the General Partner;
(g) admit a Person as a Limited Partner or Special Limited Partner except
as provided in this Agreement;
(h) violate any provision of the Mortgage;
(i) cause the Apartment Housing apartment units to be rented to anyone
other than Qualified Tenants;
(j) violate the Minimum Set-Aside Test or the Rent Restriction Test for the
Apartment Housing;
(k) cause any recapture of the Tax Credits;
(l) permit any creditor who makes a nonrecourse loan to the Partnership to
have, or to acquire at any time as a result of making such loan, any direct or
indirect interest in the profits, income, capital or other property of the
Partnership, other than as a secured creditor;
(m) commingle funds of the Partnership with the funds of another Person; or
(n) take any action which requires the Consent of the Special Limited
Partner or the consent of the Limited Partner unless the General Partner has
received said Consent; or
(o) pay any real estate commission for the sale or refinancing of the
Apartment Complex.
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Section 9.6 Restrictions on Authority of General Partner.
Without the Consent of the Special Limited Partner the General Partner
shall not:
(a) sell, exchange, lease (except in the normal course of business to
Qualified Tenants) or otherwise dispose of the Apartment Housing;
(b) incur indebtedness in the name of the Partnership other than the
Construction Loan and Mortgage;
(c) use Partnership assets, property or Improvements to secure the debt of
any Partners, their Affiliates, or any third party;
(d) engage in any transaction not expressly contemplated by this Agreement
in which the General Partner has an actual or potential conflict of interest
with the Limited Partner or the Special Limited Partner;
(e) contract away the fiduciary duty owed to the Limited Partner and the
Special Limited Partner at common law;
(f) take any action which would cause the Apartment Housing to fail to
qualify, or which would cause a termination or discontinuance of the
qualification of the Apartment Housing, as a "qualified low income housing
project" under Section 42(g)(1) of the Code, as amended, or any successor
thereto, or which would cause the Limited Partner to fail to obtain the
Projected Tax Credits or which would cause the recapture of any LIHTC;
(g) make any expenditure of funds, or commit to make any such expenditure,
other than in response to an emergency, except as provided for in the annual
budget approved by the Special Limited Partner, as provided in Section 14.3(i)
hereof;
(h) cause the merger or other reorganization of the Partnership;
(i) dissolve the Partnership;
(j) acquire any real or personal property (tangible or intangible) in
addition to the Apartment Housing the aggregate value of which shall exceed
$10,000 (other than easement or similar rights necessary or appropriate for the
operation of the Apartment Housing);
(k) become personally liable on or in respect of, or guarantee, the
Mortgage or any other indebtedness of the Partnership;
(l) pay any salary, fees or other compensation to a General Partner or any
Affiliate thereof, except as authorized by Section 9.2 and Section 9.9 hereof or
specifically provided for in this Agreement;
(m) terminate the services of the Accountant, Construction Inspector,
Contractor or Management Agent, or terminate, amend or modify the Construction
Contract or any other Project Document, or grant any material waiver or consent
thereunder;
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(n) cause the Partnership to redeem or repurchase all or any portion of the
Interest of a Partner;
(o) cause the Partnership to convert the Apartment Housing to cooperative
or condominium ownership;
(p) cause or permit the Partnership to make loans to the General Partner or
any Affiliate;
(q) bring or defend, pay, collect, compromise, arbitrate, resort to legal
action or otherwise adjust claims or demands of or against the Partnership;
(r) agree or consent to any changes in the Plans and Specifications, to any
change orders, or to any of the terms and provisions of the Construction
Contract;
(s) cause any funds to be paid to the General Partner or its Affiliates for
laundry service, cable hook-up, telephone connection, computer access, satellite
connection, compliance monitoring, initial rental set-up fee or similar service
or fee;
(t) on behalf of the Partnership, file or cause to be filed a voluntary
petition in bankruptcy under the Federal Bankruptcy Code, or file or cause to be
filed a petition or answer seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any statute, law
or rule; or
(u) settle any audit with the Internal Revenue Service concerning the
adjustment or readjustment of any Partnership tax item, extend any statute of
limitations, or initiate or settle any judicial review or action concerning the
amount or character of any Partnership tax item.
Section 9.7 Duties of General Partner.
The General Partner agrees that it shall at all times:
(a) diligently and faithfully devote such of its time to the business of
the Partnership as may be necessary to properly conduct the affairs of the
Partnership;
(b) file and publish all certificates, statements or other instruments
required by law for the formation and operation of the Partnership as a limited
partnership in all appropriate jurisdictions;
(c) cause the Partnership to carry Insurance from an Insurance Company;
(d) have a fiduciary responsibility for the safekeeping and use of all
funds and assets of the Partnership, whether or not in its immediate possession
or control;
(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;
32
(f) use its best efforts so that all requirements shall be met which are
reasonably necessary to obtain or achieve (1) compliance with the Minimum
Set-Aside Test, the Rent Restriction Test, and any other requirements necessary
for the Apartment Housing to initially qualify, and to continue to qualify, for
LIHTC; (2) issuance of all necessary certificates of occupancy, including all
governmental approvals required to permit occupancy of all of the apartment
units in the Apartment Housing; (3) compliance with all provisions of the
Project Documents and (4) a reservation and allocation of LIHTC from the State
Tax Credit Agency;
(g) make inspections of the Apartment Housing and assure that the Apartment
Housing is in decent, safe, sanitary and good condition, repair and working
order, ordinary use and obsolescence excepted, and make or cause to be made from
time to time all necessary repairs thereto (including external and structural
repairs) and renewals and replacements thereof;
(h) pay, before the same shall become delinquent and before penalties
accrue thereon all Partnership taxes, assessments and other governmental charges
against the Partnership or its properties, and all of its other liabilities,
except to the extent and so long as the same are being contested in good faith
by appropriate proceedings in such manners as not to cause any material adverse
effect on the Partnership's property, financial condition or business
operations, with adequate reserves provided for such payments;
(i) permit, and cause the Management Agent to permit, the Special Limited
Partner and its representatives: (1) to have access to the Apartment Housing and
personnel employed by the Partnership and by the Management Agent at all times
during normal business hours after reasonable notice; (2) to examine all
agreements, LIHTC compliance data and Plans and Specifications; and (3) to make
copies thereof;
(j) exercise good faith in all activities relating to the conduct of the
business of the Partnership, including the development, operation and
maintenance of the Apartment Housing, and shall take no action with respect to
the business and property of the Partnership which is not reasonably related to
the achievement of the purpose of the Partnership;
(k) make any Capital Contributions, advances or loans required to be made
by the General Partner under the terms of this Agreement;
(l) establish and maintain all reserves required to be established and
maintained under the terms of this Agreement;
(m) cause the Management Agent to manage the Apartment Housing in such a
manner that the Apartment Housing will be eligible to receive LIHTC with respect
to 100% of the apartment units in the Apartment Housing. To that end, the
General Partner agrees, without limitation: (1) to make all elections requested
by the Special Limited Partner under Section 42 of the Code to allow the
Partnership or its Partners to claim the Tax Credit; (2) to file Form 8609 with
respect to the Apartment Housing as required, for at least the duration of the
Compliance Period; (3) to operate the Apartment Housing and cause the Management
Agent to manage the Apartment Housing so as to comply with the requirements of
33
Section 42 of the Code, as amended, or any successor thereto, including, but not
limited to, Section 42(g) and Section 42(i)(3) of the Code, as amended, or any
successors thereto; (4) to make all certifications required by Section 42(l) of
the Code, as amended, or any successor thereto; and (5) to operate the Apartment
Housing and cause the Management Agent to manage the Apartment Housing so as to
comply with all other Tax Credit Conditions;
(n) perform such other acts as may be expressly required of it under the
terms of this Agreement; and
(o) 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. In lieu of this employee, or if the project manager position
remains vacant for 21 days, the General Partner shall retain the services of a
construction management firm, which firm shall be pre-approved by the Special
Limited Partner.
Section 9.8 Obligations to Repair and Rebuild Apartment Housing.
With the approval of any lender, if such approval is required, any
Insurance proceeds received by the Partnership due to fire or other casualty
affecting the Apartment Housing will be utilized to repair and rebuild the
Apartment Housing in satisfaction of the conditions contained in Section
42(j)(4) of the Code and to the extent required by any lender. Any such proceeds
received in respect of such event occurring after the Compliance Period shall be
so utilized or, if permitted by the Project Documents and with the Consent of
the Special Limited Partner, shall be treated as Sale or Refinancing Proceeds.
Section 9.9 Partnership Expenses.
(a) All of the Partnership's expenses shall be billed directly to and paid
by the Partnership to the extent practicable. Reimbursements to the General
Partner, or any of its Affiliates, by the Partnership shall be allowed only for
the Partnership's Cash Expenses unless the General Partner is obligated to pay
the same as an Operating Deficit during the Operating Deficit Guarantee Period,
and subject to the limitations on the reimbursement of such expenses set forth
herein. For purposes of this Section, Cash Expenses shall include fees paid by
the Partnership to the General Partner or any Affiliate of the General Partner
permitted by this Agreement and the actual cost of goods, materials and
administrative services used for or by the Partnership, whether incurred by the
General Partner, an Affiliate of the General Partner or a nonaffiliated Person
in performing the foregoing functions. As used in the preceding sentence,
"actual cost of goods and materials" means the actual cost of goods and
materials used for or by the Partnership and obtained from entities which are
not Affiliates of the General Partner, and actual cost of administrative
services means the pro rata cost of personnel (as if such persons were employees
of the Partnership) associated therewith, but in no event to exceed the amount
which would be charged by nonaffiliated Persons for comparable goods and
services.
(b) Reimbursement to the General Partner or any of its Affiliates of
operating cash expenses pursuant to Subsection (a) hereof shall be subject to
the following:
(1) no such reimbursement shall be permitted for services for which the
General Partner or any of its Affiliates is entitled to compensation by way of a
separate fee; and
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(2) no such reimbursement shall be made for (A) rent or depreciation,
utilities, capital equipment or other such administrative items, and
(B) salaries, fringe benefits, travel expenses and other administrative items
incurred or allocated to any "controlling person" of the General Partner or any
Affiliate of the General Partner. For the purposes of this Section 9.9(b)(2),
"controlling person" includes, but is not limited to, any Person, however
titled, who performs functions for the General Partner or any Affiliate of the
General Partner similar to those of: (i) chairman or member of the board of
directors; (ii) executive management, such as president, vice president or
senior vice president, corporate secretary or treasurer; (iii) senior
management, such as the vice president of an operating division who reports
directly to executive management; or (iv) those holding 5% or more equity
interest in such General Partner or any such Affiliate of the General Partner or
a person having the power to direct or cause the direction of such General
Partner or any such Affiliate of the General Partner, whether through the
ownership of voting securities, by contract or otherwise.
Section 9.10 General Partner Expenses.
The General Partner or Affiliates of the General Partner shall pay all
Partnership expenses which are not permitted to be reimbursed pursuant to
Section 9.9 and all expenses which are unrelated to the business of the
Partnership.
Section 9.11 Other Business of Partners.
Any Partner may engage independently or with others in other business
ventures wholly unrelated to the Partnership business of every nature and
description, including, without limitation, the acquisition, development,
construction, operation and management of real estate projects and developments
of every type on their own behalf or on behalf of other partnerships, joint
ventures, corporations or other business ventures formed by them or in which
they may have an interest, including, without limitation, business ventures
similar to, related to or in direct or indirect competition with the Apartment
Housing. Neither the Partnership nor any Partner shall have any right by virtue
of this Agreement or the partnership relationship created hereby in or to such
other ventures or activities or to the income or proceeds derived therefrom.
Conversely, no Person shall have any rights to Partnership assets, incomes or
proceeds by virtue of such other ventures or activities of any Partner.
Section 9.12 Covenants, Representations and Warranties.
The General Partner covenants, represents and warrants that the
following are presently true, will be true at the time of each Capital
Contribution payment made by the Limited Partner and will be true during the
term of this Agreement, to the extent then applicable.
(a) The Partnership is a duly organized limited partnership validly
existing under the laws of the State and has complied with all filing
requirements necessary for the protection of the limited liability of the
Limited Partner and the Special Limited Partner.
(b) The Partnership Agreement and the Project Documents are in full force
and effect and neither the Partnership nor the General Partner are in breach or
violation of any provisions thereof.
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(c) Improvements will be completed in a timely and worker-like manner in
accordance with all applicable requirements of all appropriate governmental
entities and the Plans and Specifications of the Apartment Housing.
(d) The Apartment Housing is being operated in accordance with standards
and procedures which are prudent and customary for the operation of properties
similar to the Apartment Housing.
(e) All conditions to the funding of the Construction Loan have been met.
(f) No Partner has or will have any personal liability with respect to or
has or will have personally guaranteed the payment of the Mortgage.
(g) The Partnership is in compliance with all construction and use codes
applicable to the Apartment Housing and is not in violation of any zoning,
environmental or similar regulations applicable to the Apartment Housing.
(h) All appropriate public utilities, including sanitary and storm sewers,
water, gas and electricity, are currently available and will be operating
properly for all units in the Apartment Housing at the time of first occupancy
and throughout the term of the Partnership.
(i) All roads necessary for the full utilization of the Improvements have
either been completed or the necessary rights of way therefore have been
acquired by the appropriate governmental authority or have been dedicated to
public use and accepted by said governmental authority.
(j) The Partnership has obtained Insurance written by an Insurance Company.
(k) The Partnership owns the fee simple interest in the Apartment Housing.
(l) The Construction Contract has been entered into between the Partnership
and the Contractor; no other consideration or fee shall be paid to the
Contractor other than amounts set forth in the Construction Contract.
(m) The General Partner will require the Accountant to depreciate
Partnership items in accordance with Exhibit G attached hereto and incorporated
herein by this reference.
(n) To the best of the General Partner's knowledge: (1) no Hazardous
Substance has been disposed of, or released to or from, or otherwise now exists
in, on, under or around, the Apartment Housing and (2) no aboveground or
underground storage tanks are now or have ever been located on or under the
Apartment Housing. The General Partner will not install or allow to be installed
any aboveground or underground storage tanks on the Apartment Housing. The
General Partner covenants that the Apartment Housing shall be kept free of
Hazardous Substance and shall not be used to generate, manufacture, refine,
transport, treat, store, handle, dispose of, transfer, produce or process
Hazardous Substance, except in connection with the normal maintenance and
operation of any portion of the Apartment Housing. The General Partner shall
36
comply, or cause there to be compliance, with all applicable Federal, state and
local laws, ordinances, rules and regulations with respect to Hazardous
Substance and shall keep, or cause to be kept, the Apartment Housing free and
clear of any liens imposed pursuant to such laws, ordinances, rules and
regulations. The General Partner must promptly notify the Limited Partner and
the Special Limited Partner in writing (3) if it knows, or suspects or believes
there may be any Hazardous Substance in or around any part of the Apartment
Housing, any Improvements constructed on the Apartment Housing, or the soil,
groundwater or soil vapor, (4) if the General Partner or the Partnership may be
subject to any threatened or pending investigation by any governmental agency
under any law, regulation or ordinance pertaining to any Hazardous Substance,
and (5) of any claim made or threatened by any Person, other than a governmental
agency, against the Partnership or General Partner arising out of or resulting
from any Hazardous Substance being present or released in, on or around any part
of the Apartment Housing.
(o) The General Partner has not executed and will not execute any
agreements with provisions contradictory to, or in opposition of the provisions
of this Agreement.
(p) The Partnership will allocate to the Limited Partner the Projected
Annual Tax Credits, or the Revised Projected Tax Credits, if applicable.
(q) No charges, liens or encumbrances exist with respect to the Apartment
Housing other than those which are created or permitted by the Project Documents
or Mortgage or are noted or excepted in the Title Policy.
(r) The Partnership shall retain the Architect of Record and ensure that
the Architect of Record's 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 Apartment Housing site constitute or shall
constitute a "qualified low-income housing project" as defined in Section 42(g)
of the Code, and as amplified by the Treasury Regulations thereunder. In this
connection, not later than December 31 of the first year in which the Partners
elect the LIHTC to commence in accordance with the Code, the Apartment Housing
will satisfy the Minimum Set-Aside Test.
(t) The Supportive Housing Units shall be leased to eligible Supportive
Housing Tenants until the required set-aside is met. The General Partner will
maintain a separate waiting list of eligible Supportive Housing Tenants and rent
to all eligible Supportive Housing Tenants on the waiting list until the
required set-aside is met. In the event there is no Supportive Housing Tenant on
the waiting list or a Supportive Housing Unit is not rented within 60 days of
the initial lease up, the General Partner must notify DMH/MR, then the unit(s)
may be rented to an otherwise income-eligible tenant.
(u) 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.
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(v) 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.
(w) No event has occurred which constitutes a default under any of the
Project Documents.
(x) 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.
(y) No event or proceeding, including, but not limited to, any legal
actions or proceedings before any court, commission, administrative body or
other governmental authority, and acts of any governmental authority having
jurisdiction over the zoning or land use laws applicable to the Apartment
Housing, has occurred the continuing effect of which has: (1) materially or
adversely affected the operation of the Partnership or the Apartment Housing;
(2) materially or adversely affected the ability of the General Partner to
perform its obligations hereunder or under any other agreement with respect to
the Apartment Housing; or (3) prevented the Completion of Construction of the
Improvements in substantial conformity with the Project Documents, other than
legal proceedings which have been bonded against (or as to which other adequate
financial security has been issued) in a manner as to indemnify the Partnership
against loss; provided, however, the foregoing does not apply to matters of
general applicability which would adversely affect the Partnership, the General
Partner, Affiliates of the General Partner or the Apartment Housing only insofar
as they or any of them are part of the general public.
(z) 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.
(aa) 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.
(bb) The General Partner has contacted the local tax assessor, or similar
representative, and has determined that the Real Estate Taxes are accurate and
correct, and that the Partnership will not be required to pay any more for real
estate taxes, or property taxes, than the amount of Real Estate Taxes,
referenced in this Agreement, except for annual increases imposed on all real
estate within the same county as the Apartment Housing. In the event the actual
38
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 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, then the General Partner will contribute
additional capital 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.
(cc) 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.
(dd) 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.
(ee) The General Partner and the Guarantor has and shall maintain an
aggregate net worth equal to at least $1,000,000 computed in accordance with
generally accepted accounting principles.
(ff) The Partnership is in compliance with and will maintain compliance
with the requirements of the federal Fair Housing Act of 1968 (42 U.S.C. 3600 et
seq.) as amended, with respect to the Apartment Housing.
(gg) The General Partner has verified and confirmed that the Real Estate
Taxes are accurate and correct. If the Real Estate Taxes are less than the
actual real estate taxes in the first fully-assessed tax year and the Mortgage
has not been reamortized as in (aa) above, then the General Partner will pay the
difference between the Real Estate Taxes and the actual and assessed real estate
taxes until such time as the General Partner has reduced or abated the actual
and assessed real estate taxes to an amount equal to or less than the Real
Estate Taxes. Any payment by the General Partner pursuant to this section shall
be in addition to the General Partner's obligation to fund Operating Deficits.
(hh) Neither the General Partner nor its Affiliates will take any action or
agree to any terms or conditions that are contrary to, or in disagreement with,
the tax credit application used to secure the LIHTC, or the land use restriction
agreement required to be recorded against the Apartment Housing.
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.
39
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.
Section 10.2 Allocations From Sale or Refinancing.
All Income and Losses arising from a Sale or Refinancing shall be
allocated between the Partners as follows:
(a) As to Income:
(1) first, an amount of Income equal to the aggregate negative balances
(if any) in the Capital Accounts of all Partners having negative Capital
Accounts (prior to taking into account the Sale or Refinancing and the
Distribution of the related Sale or Refinancing Proceeds, but after giving
effect to Distributions of Net Operating Income and allocations of other Income
and Losses pursuant to this Article X up to the date of the Sale or Refinancing)
shall be allocated to such Partners in proportion to their negative Capital
Account balances until all such Capital Accounts shall have zero balances; and
(2) the balance, if any, of such Income shall be allocated to the
Partners in the proportion necessary so that the Partners will receive the
amount to which they are entitled pursuant to Section 11.2 hereof.
(b) Losses shall be allocated 99.98% to the Limited Partner, 0.01% to the
Special Limited Partner and 0.01% to the General Partner.
(c) Notwithstanding the foregoing provisions of Section 10.2(a) and (b), in
no event shall any Losses be allocated to the Limited Partner or the Special
Limited Partner if and to the extent that such allocation would create or
increase an Adjusted Capital Account Deficit for the Limited Partner or the
Special Limited Partner. In the event an allocation of 99.98% or 0.01% of each
item includable in the calculation of Income or Loss not arising from a Sale or
Refinancing, would create or increase an Adjusted Capital Account Deficit for
the Limited Partner or the Special Limited Partner, respectively, then so much
of the items of deduction other than projected depreciation shall be allocated
to the General Partner instead of the Limited Partner or the Special Limited
Partner as is necessary to allow the Limited Partner or the Special Limited
Partner to be allocated 99.98% and 0.01%, respectively, of the items of Income
and Apartment Housing depreciation without creating or increasing an Adjusted
Capital Account Deficit for the Limited Partner or the Special Limited Partner,
it being the intent of the parties that the Limited Partner and the Special
Limited Partner always shall be allocated 99.98% and 0.01%, respectively, of the
items of Income not arising from a Sale or Refinancing and 99.98% and 0.01%,
respectively, of the Apartment Housing depreciation.
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Section 10.3 Special Allocations.
The following special allocations shall be made in the following order.
(a) Except as otherwise provided in Section 1.704-2(f) of the Treasury
Regulations, notwithstanding any other provisions of this Article X, if there is
a net decrease in Partnership Minimum Gain during any Partnership fiscal year,
each Partner shall be specially allocated items of Partnership income and gain
for such fiscal year (and, if necessary, subsequent fiscal years) in an amount
equal to such Person's share of the net decrease in Partnership Minimum Gain,
determined in accordance with Treasury Regulations Section 1.704-2(g).
Allocations pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Partner pursuant thereto.
The items to be so allocated shall be determined in accordance with Section
1.704-2(f)(6) and 1.704-2(j)(2) of the Treasury Regulations. This Section
10.3(a) is intended to comply with the minimum gain chargeback requirement in
Section 1.704-2(f) of the Treasury Regulations and shall be interpreted
consistently therewith.
(b) Except as otherwise provided in Section 1.704-2(i)(4) of the Treasury
Regulations, notwithstanding any other provision of this Article X, if there is
a net decrease in Partner Nonrecourse Debt Minimum Gain attributable to a
Partner Nonrecourse Debt during any Partnership fiscal year, each Person who has
a share of the Partner Nonrecourse Debt Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with Section 1.704-2(i)(5) of
the Treasury Regulations, shall be specially allocated items of Partnership
income and gain for such fiscal year (and, if necessary, subsequent fiscal
years) in an amount equal to such Person's share of the net decrease in Partner
Nonrecourse Debt Minimum Gain attributable to such Partner Nonrecourse Debt,
determined in accordance with Treasury Regulations Section 1.704-2(i)(4).
Allocations pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Partner pursuant thereto.
The items to be so allocated shall be determined in accordance with Sections
1.704-2(i)(4) and 1.704-2(j)(2) of the Treasury Regulations. This Section
10.3(b) is intended to comply with the minimum gain chargeback requirement in
Section 1.704-2(i)(4) of the Treasury Regulations and shall be interpreted
consistently therewith.
(c) In the event any Partner unexpectedly receives any adjustments,
allocations, or distributions described in Treasury Regulations Section
1.704-1(b)(2)(ii)(d)(4), Section 1.704-1(b)(2)(ii)(d)(5), or Section
1.704-1(b)(2)(ii)(d)(6), items of Partnership income and gain shall be specially
allocated to each such Partner in an amount and manner sufficient to eliminate,
to the extent required by the Treasury Regulations, the Adjusted Capital Account
Deficit of such Partner as quickly as possible, provided that an allocation
pursuant to this Section 10.3(c) shall be made if and only to the extent that
such Partner would have an Adjusted Capital Account Deficit after all other
allocations provided for in this Section 10.3 have been tentatively made as if
this Section 10.3(c) were not in the Agreement.
(d) In the event any Partner has a deficit Capital Account at the end of
any Partnership fiscal year which is in excess of the sum of (i) the amount such
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
41
Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), each such Partner shall be
specially allocated items of Partnership income and gain in the amount of such
excess as quickly as possible, provided that an allocation pursuant to this
Section 10.3(d) shall be made if and only to the extent that such Partner would
have a deficit Capital Account in excess of such sum after all other allocations
provided for in this Section 10.3 have been tentatively made as if this Section
10.3(d) and Section 10.3(c) hereof were not in the Agreement.
(e) Nonrecourse Deductions for any fiscal year shall be specially allocated
99.98% to the Limited Partner, 0.01% to the Special Limited Partner and 0.01% to
the General Partner.
(f) Any Partner Nonrecourse Deductions for any fiscal year shall be
specially allocated to the Partner who bears the economic risk of loss with
respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse
Deductions are attributable in accordance with Treasury Regulations Section
1.704-2(i)(1).
(g) To the extent an adjustment to the adjusted tax basis of any
Partnership asset pursuant to Code Section 734(b) or Code Section 743(b) is
required, pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(2) or
Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital
Accounts as the result of a distribution to a Partner in complete liquidation of
his interest in the Partnership, the amount of such adjustment to the Capital
Accounts shall be treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases such basis) and such
gain or loss shall be specially allocated to the Partners in accordance with
their interests in the Partnership in the event that Treasury Regulations
Section 1.704-1 (b)(2)(iv)(m)(2) applies, or to the Partner to whom such
distribution was made in the event that Treasury Regulations Section
1.704-1(b)(2)(iv)(m)(4) applies.
(h) To the extent the Partnership has taxable interest income with respect
to any promissory note pursuant to Section 483 or Section 1271 through 1288 of
the Code:
(1) such interest income shall be specially allocated to the Limited
Partner to whom such promissory note relates; and
(2) the amount of such interest income shall be excluded from the
Capital Contributions credited to such Partner's Capital Account in connection
with payments of principal with respect to such promissory note.
(i) To the extent the Partnership has taxable interest income with respect
to deposits of Capital Contribution payments, 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
42
allocated among the Partners (as an item in the nature of expenses or losses) in
the same proportions as the basis (or cost) of such property is allocated
pursuant to Treasury Regulations Section 1.46-3(f)(2)(i).
(l) Any income, gain, loss or deduction realized as a direct or indirect
result of the issuance of an interest in the Partnership by the Partnership to a
Partner (the "Issuance Items") shall be allocated among the Partners so that, to
the extent possible, the net amount of such Issuance Items, together with all
other allocations under this Agreement to each Partner, shall be equal to the
net amount that would have been allocated to each such Partner if the Issuance
Items had not been realized.
(m) If any Partnership expenditure treated as a deduction on its federal
income tax return is disallowed as a deduction and treated as a distribution
pursuant to Section 731(a) of the Code, there shall be a special allocation of
gross income to the Partner deemed to have received such distribution equal to
the amount of such distribution.
(n) Interest deduction on the Partnership indebtedness referred to in
Section 6.3 shall be allocated 100% to the General Partner.
(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 (b) that,
although not yet made, are likely to offset other Regulatory Allocations
previously made under Section 10.3(e) and (f).
43
Section 10.5 Other Allocation Rules.
(a) The basis (or cost) of any Partnership investment tax credit property
shall be allocated among the Partners in accordance with Treasury Regulations
Section 1.46-3(f)(2)(i). All Tax Credits (other than the investment tax credit)
shall be allocated among the Partners in accordance with applicable law.
Consistent with the foregoing, the Partners intend that LIHTC will be allocated
99.98% to the Limited Partner, 0.01% to the Special Limited Partner and 0.01% to
the General Partner.
(b) In the event Partnership investment tax credit property is disposed of
during any taxable year, profits for such taxable year (and, to the extent such
profits are insufficient, profits for subsequent taxable years) in an amount
equal to the excess, if any, of (1) the reduction in the adjusted tax basis (or
cost) of such property pursuant to Code Section 50(c), over (2) any increase in
the adjusted tax basis of such property pursuant to Code Section 50(c) caused by
the disposition of such property, shall be excluded from the profits allocated
pursuant to Section 10.1 and Section 10.2(a) hereof and shall instead be
allocated among the Partners in proportion to their respective shares of such
excess, determined pursuant to Section 10.3(i) and Section 10.3(j) hereof. In
the event more than one item of such property is disposed of by the Partnership,
the foregoing sentence shall apply to such items in the order in which they are
disposed of by the Partnership, so the profits equal to the entire amount of
such excess with respect to the first such property disposed of shall be
allocated prior to any allocations with respect to the second such property
disposed of, and so forth.
(c) For purposes of determining the Income, Losses, or any other items
allocable to any period, Income, Losses, and any such other items shall be
determined on a daily, monthly, or other basis, as determined by the General
Partner with the Consent of the Special Limited Partner, using any permissible
method under Code Section 706 and the Treasury Regulations thereunder.
(d) Solely for purposes of determining a Partner's proportionate share of
the "excess nonrecourse liabilities" of the Partnership within the meaning of
Treasury Regulations Section 1.752-3(a)(3), the Partners' interests in
Partnership profits are as follows: Limited Partner - 99.98%; Special Limited
Partner - 0.01%; General Partner - 0.01%.
(e) To the extent permitted by Section 1.704-2(h)(3) of the Treasury
Regulations, the General Partner shall endeavor to treat Distributions as having
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.
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Section 10.6 Tax Allocations: Code Section 704(c).
In accordance with Code Section 704(c) and the Treasury Regulations
thereunder, income, gain, loss, and deduction with respect to any property
contributed to the capital of the Partnership shall, solely for tax purposes, be
allocated among the Partners so as to take account of any variation between the
adjusted basis of such property to the Partnership for federal income tax
purposes and its initial Gross Asset Value (computed in accordance with Section
1.37(a) hereof).
In the event the Gross Asset Value of any Partnership asset is adjusted
pursuant to Section 1.37(b) hereof, subsequent allocations of income, gain,
loss, and deduction with respect to such asset shall take account of any
variation between the adjusted basis of such asset for federal income tax
purposes and its Gross Asset Value in the same manner as under Code Section
704(c) and the Treasury Regulations thereunder.
Any elections or other decisions relating to such allocations shall be
made by the General Partner with the Consent of the Special Limited Partner in
any manner that reasonably reflects the purpose and intention of this Agreement.
Allocations pursuant to this Section 10.6 are solely for purposes of federal,
state, and local taxes and shall not affect, or in any way be taken into account
in computing, any Person's Capital Account or share of Income, Losses, other
items, or distributions pursuant to any provision of this Agreement.
Section 10.7 Allocation Among Limited Partners.
In the event that the Interest of the Limited Partner hereunder is at
any time held by more than one Limited Partner all items which are specifically
allocated to the Limited Partner for any month pursuant to this Article X shall
be apportioned among such Persons according to the ratio of their respective
profit-sharing interests in the Partnership at the last day of such month.
Section 10.8 Allocation Among General Partners.
In the event that the Interest of the General Partner hereunder is at
any time held by more than one General Partner all items which are specifically
allocated to the General Partner for any month pursuant to this Article X shall
be apportioned among such Persons in such percentages as may from time to time
be determined by agreement among them without amendment to this Agreement or
consent of the Limited Partner or Consent of the Special Limited Partner.
Section 10.9 Modification of Allocations.
The provisions of 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
45
make any appropriate modifications, but only with the Consent of the Special
Limited Partner, in the event it appears that unanticipated events (e.g., the
existence of a Partnership election pursuant to Code Section 754) might
otherwise cause this Agreement not to comply with Treasury Regulation Section
1.704.
Article XI.
DISTRIBUTION
Section 11.1 Distribution of Net Operating Income.
Except as otherwise provided, Net Operating Income for each fiscal year
shall be distributed within 75 days following each calendar year and shall be
applied in the following order of priority:
(a) to pay the Deferred Management Fee, if any;
(b) to pay the 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;
(d) to pay the Operating Loans, if any, as referenced in Section 6.3 of
this Agreement, limited to 50% of the Net Operating Income remaining after
reduction for the payments made pursuant to subsections (a) through (c) of this
Section 11.1;
(e) to pay the Incentive Management Fee;
(f) to pay the Tax Credit Compliance Fee; and
(g) the balance, 29.99% to the Limited Partner, 0.01% to the Special
Limited Partner and 70% to the General Partner.
Section 11.2 Distribution of Sale or Refinancing Proceeds.
Sale or Refinancing Proceeds shall be distributed in the following
order:
(a) to the payment of the Mortgage and other matured debts and liabilities
of the Partnership, other than accrued payments, debts or other liabilities
owing to Partners or former Partners;
(b) to any accrued payments, debts or other liabilities owing to the
Partners or former Partners, including, but not limited to, accrued Asset
Management Fees and Operating Loans, to be paid prorata if necessary;
(c) to the establishment of any reserves which the General Partner, with
the Consent of the Special Limited Partner, shall deem reasonably necessary for
contingent, unmatured or unforeseen liabilities or obligations of the
Partnership; and
46
(d) thereafter, 29.99% to the Limited Partner, 0.01% to the Special Limited
Partner and 70% to the General Partner, provided that the amount distributed to
the Limited Partner pursuant to this paragraph shall not be less than the
aggregate federal and state income tax liability of the Limited Partner with
respect to this distribution, and the amount distributable to the General
Partner shall be reduced by the amount of any distribution to the Limited
Partner under this paragraph.
Article XII.
TRANSFERS OF LIMITED
PARTNER'S INTEREST IN THE PARTNERSHIP
Section 12.1 Assignment of Interests.
The Limited Partner and the Special Limited Partner shall have the
right to assign all or any part of their respective Interests to any other
Person, whether or not a Partner, upon satisfaction of the following:
(a) a written instrument setting forth the name and address of the proposed
transferee, the nature and extent of the Interest which is proposed to be
transferred and the terms and conditions upon which the transfer is proposed to
be made, stating that the Assignee accepts and agrees to be bound by all of the
terms and provisions of this Agreement, and providing for the payment of all
reasonable expenses incurred by the Partnership in connection with such
assignment, including but not limited to the cost of preparing any necessary
amendment to this Agreement; and
(b) upon receipt by the General Partner of the Assignee's written
representation that the Partnership Interest is to be acquired by the Assignee
for the Assignee's own account for long-term investment and not with a view
toward resale, fractionalization, division or distribution thereof.
(c) Notwithstanding any provision to the contrary, the Limited Partner may
assign its Interest to an Affiliate or assign its Interest to USbank or its
successors as collateral to secure a capital contribution loan without
satisfying the conditions of 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.
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.
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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 USbank or its successors, may become a Substitute
Limited Partner or Substitute Special Limited Partner without the consent of the
General Partner.
(b) A nonadmitted transferee of the Limited Partner's Interest or the
Special Limited Partner's Interest in the Partnership shall only be entitled to
receive that share of allocations, Distributions and the return of Capital
Contribution to which its transferor would otherwise have been entitled with
respect to the Interest transferred, and shall have no right to obtain any
information on account of the Partnership's transactions, to inspect the
Partnership's books and records or have any other of the rights and privileges
of a Limited Partner or Special Limited Partner, provided, however, that the
Partnership shall, if a transferee and transferor jointly advise the General
Partner in writing of a transfer of an Interest in the Partnership, furnish the
transferee with pertinent tax information at the end of each fiscal year of the
Partnership.
Section 12.6 Death, Bankruptcy, Incompetency, etc., of a Limited Partner.
Upon the death, dissolution, adjudication of bankruptcy, or
adjudication of incompetency or insanity of the Limited Partner or Special
Limited Partner, such Partner's executors, administrators or legal
representatives shall have all the rights of its predecessor-in-interest for the
purpose of settling or managing such Partner's estate, including such power as
such Partner possessed to constitute a successor as a transferee of its Interest
in the Partnership and to join with such transferee in making the application to
substitute such transferee as a Partner.
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Article XIII.
WITHDRAWAL, REMOVAL AND REPLACEMENT OF
GENERAL PARTNER
Section 13.1 Withdrawal of General Partner.
(a) The General Partner may not Withdraw (other than as a result of an
Involuntary Withdrawal) without the Consent of the Special Limited Partner.
Withdrawal shall be conditioned upon the agreement of the Special Limited
Partner to be admitted as a successor General Partner, or if the Special Limited
Partner declines to be admitted as a successor General Partner then on the
agreement of one or more Persons who satisfy the requirements of Section 13.5 of
this Agreement to be admitted as successor General Partner(s).
(b) Each General Partner shall indemnify and hold harmless the Partnership
and all Partners from its Withdrawal in violation of Section 13.1(a) hereof.
Each General Partner shall be liable for damages to the Partnership resulting
from its Withdrawal in violation of Section 13.1(a).
Section 13.2 Removal of General Partner.
(a) The Special Limited Partner or the Limited Partner, or both of them,
may remove the General Partner for cause if such General Partner, its officers
or directors, if applicable, has:
(1) been subject to Bankruptcy;
(2) committed any fraud, willful misconduct, breach of fiduciary duty or
other negligent conduct in the performance of its duties under this Agreement;
(3) been convicted of, or entered into a plea of guilty to, a felony
related to the activities as a General Partner or any actions that impact the
Partnership;
(4) been disbarred from participating in any federal or state housing
program;
(5) made personal use of Partnership funds or properties;
(6) violated the terms of the Mortgage and such violation prompts
Regions Bank, Alabama Housing Finance Authority - HOME Loan or NEACAA to issue a
letter regarding the violation;
(7) failed to provide any loan, advance, Capital Contribution or any
other payment to the Partnership, the Limited Partner or the Special Limited
Partner required under this Agreement;
(8) breached any representation, warranty or covenant contained in this
Agreement;
49
(9) caused the Projected Tax Credits to be allocated to the Partners for
a term longer than the Tax Credit Period unless the provisions of Section 7.4(e)
of this Agreement apply;
(10) failed to provide, or to cause to be provided, the construction
monitoring documents required in Section 14.3(a) of this Agreement;
(11) violated any federal or state tax law which causes a recapture of
LIHTC;
(12) violated the terms of the Construction Loan and such violation
prompts Regions Bank to issue a letter regarding such violation;
(13) failed to ensure that the Development Budget is In-Balance;
(14) failed to obtain the consent of a Partner where such consent is
required pursuant to this Agreement;
(15) failed to deliver the annual Partnership financial data as required
pursuant to Section 14.2(a) or (b).
(16) failed to maintain the reserve balances as required pursuant to
Article VIII;
(17) failed to place the Apartment Housing in service by April 1, 2003;
(18) failed to achieve 90% occupancy of the Apartment Housing by
September 1, 2003;
(19) failed to obtain Permanent Mortgage Commencement by September 1,
2003; or
(20) failed during any consecutive 6-month period during the Compliance
Period to rent 85% or more of the total apartment units in the Apartment Housing
to Qualified Tenants; notwithstanding, 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.
(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) or (16) 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
50
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), (18),
(19), or (20)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 f 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
or operation of the Partnership or the Apartment Housing or to receive any
allocations or Distributions from the Partnership or any other funds or assets
of the Partnership, except as specifically set forth below. In the event of a
Withdrawal, any or all executory contracts, including but not limited to the
Management Agreement, between the Partnership and the Withdrawing General
Partner or its Affiliates may be terminated by the Partnership, with the Consent
of the Special Limited Partner, upon written notice to the party so terminated.
Furthermore, notwithstanding such Withdrawal, the Withdrawing General Partner
shall be and shall remain, liable as a General Partner for all liabilities and
obligations incurred by the Partnership or by the General Partner prior to the
effective date of the Withdrawal, or which may arise upon such Withdrawal. Any
remaining Partner shall have all other rights and remedies against the
Withdrawing General Partner as provided by law or under this Agreement. The
General Partner agrees that in the event of its Withdrawal it will indemnify and
hold the Limited Partner and the Special Limited Partner harmless from and
against all losses, costs and expenses incurred in connection with the
Withdrawal, including, without limitation, all legal fees and other expenses of
the Limited Partner and the Special Limited Partner in connection with the
transaction. The following additional provisions shall apply in the event of a
Withdrawal.
(a) In the event of a Withdrawal which is not an Involuntary Withdrawal, or
is not an Involuntary Withdrawal in accordance with Section 13.2(a), the
Withdrawing General Partner shall have no further right to receive any future
51
allocations or Distributions from the Partnership or any other funds or assets
of the Partnership, nor shall it be entitled to receive or to be paid by the
Partnership any further payments of fees (including fees which have been earned
but are unpaid) or to be repaid any outstanding advances or loans made by it to
the Partnership or to be paid any amount for its former Interest. From and after
the effective date of such Withdrawal, the former rights of the Withdrawing
General Partner to receive or to be paid such allocations, Distributions, funds,
assets, fees or repayments shall be assigned to the other General Partner or
General Partners (which may include the Special Limited Partner), or if there is
no other general partner of the Partnership at that time, to the Special Limited
Partner.
(b) In the event of an Involuntary Withdrawal, except as provided in
Section 13.3(c) below, the Withdrawing General Partner shall have no further
right to receive any future allocations or Distributions from the Partnership or
any other funds or assets of the Partnership, provided that accrued and payable
fees (i.e., fees earned but unpaid as of the date of Withdrawal) owed to the
Withdrawing General Partner, and any outstanding loans of the Withdrawing
General Partner to the Partnership, shall be paid to the Withdrawing General
Partner in the manner and at the times such fees and loans would have been paid
had the Withdrawing General Partner not Withdrawn. The Interest of the General
Partner shall be purchased as follows.
(1) If the Involuntary Withdrawal does not arise from removal for cause
under Section 13.2(a) hereof, and if the Partnership is to be continued with one
or more remaining or successor General Partner(s), the Partnership, with the
Consent of the Special Limited Partner, may, but is not obligated to, purchase
the Interest of the Withdrawing General Partner. The purchase price of such
Interest shall be its Fair Market Value as determined by agreement between the
Withdrawing General Partner and the Special Limited Partner, or, if they cannot
agree, by arbitration in accordance with the then current rules of the American
Arbitration Association. The cost of such arbitration shall be borne equally by
the Withdrawing General Partner and the Partnership. The purchase price shall be
paid by the Partnership by delivering to the General Partner or its
representative the Partnership's non-interest bearing unsecured promissory note
payable, if at all, upon liquidation of the Partnership in accordance with
Section 11.2(b). The note shall also provide that the Partnership may prepay all
or any part thereof without penalty.
(2) If the Involuntary Withdrawal does not arise from removal for cause
under Section 13.2(a) hereof, and if the Partnership is to be continued with one
or more remaining or successor General Partner(s), and if the Partnership does
not purchase the Interest of the Withdrawing General Partner in Partnership
allocations, Distributions and capital, then the Withdrawing General Partner
shall retain its Interest in such items, but such Interest shall be held as a
special limited partner.
(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
52
Partner or an Affiliate is the guarantor of the Development Fee, as provided in
the Development Fee Agreement and its 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.
Section 13.4 Successor General Partner.
Upon the occurrence of an event giving rise to a Withdrawal of a
General Partner, any remaining General Partner, or, if there be no remaining
General Partner, the Withdrawing General Partner or its legal representative,
shall promptly notify the Special Limited Partner of such Withdrawal (the
"Withdrawal Notice"). Whether or not the Withdrawal Notice shall have been sent
as provided herein, the Special Limited Partner shall have the right to become a
successor General Partner (and to become the successor managing General Partner
if the Withdrawing General Partner was previously the managing General Partner).
In order to effectuate the provisions of this Section 13.4 and the continuance
of the Partnership, the Withdrawal of a General Partner shall not be effective
until the expiration of 120 days from the date on which occurred the event
giving rise to the Withdrawal, unless the Special Limited Partner shall have
elected to become a successor General Partner as provided herein prior to
expiration of such 120-day period, whereupon the Withdrawal of the General
Partner shall be deemed effective upon the notification of all the other
Partners by the Special Limited Partner of such election.
Section 13.5 Admission of Additional or Successor General Partner.
No Person shall be admitted as an additional or successor General
Partner unless (a) such Person shall have agreed to become a General Partner by
a written instrument which shall include the acceptance and adoption of this
Agreement; (b) the Consent of the Special Limited Partner to the admission of
such Person as a substitute General Partner, which consent may be withheld in
the discretion of the Special Limited Partner; and (c) such Person shall have
executed and acknowledged any other instruments which the Special Limited
Partner shall reasonably deem necessary or appropriate to affect the admission
of such Person as a substitute General Partner. If the foregoing conditions are
satisfied, this Agreement shall be amended in accordance with the provisions of
the Act, and all other steps shall be taken which are reasonably necessary to
effect the Withdrawal of the Withdrawing General Partner and the substitution of
the successor General Partner. Nothing contained herein shall reduce the Limited
Partner's Interest or the Special Limited Partner's Interest in the Partnership.
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 ▇▇▇▇▇▇▇ Meadow Associates, Ltd., 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
53
value. In the event of a termination and dissolution of the Partnership as
provided in this Agreement, neither the ▇▇▇▇▇▇▇ Meadow Associates, Ltd., nor the
right to its use, nor the same goodwill, if any, shall be considered as an asset
of the Partnership, and no valuation shall be put thereon for the purpose of
liquidation or distribution, or for any other purpose whatsoever.
Article XIV.
BOOKS AND ACCOUNTS, REPORTS,
TAX RETURNS, FISCAL YEAR AND BANKING
Section 14.1 Books and Accounts.
(a) The General Partner shall cause the Partnership to keep and maintain at
its principal executive office full and complete books and records which shall
include each of the following:
(1) a current list of the full name and last known business or residence
address of each Partner set forth in alphabetical order together with the
Capital Contribution and the share in Income and Losses and Tax Credits of each
Partner;
(2) a copy of the Certificate of Limited Partnership and all
certificates of amendment thereto, together with executed copies of any powers
of attorney pursuant to which any certificate has been executed;
(3) copies of the Partnership's federal, state and local income tax
information returns and reports, if any, for the 6 most recent taxable years;
(4) copies of the original of this Agreement and all amendments thereto;
(5) financial statements of the Partnership for the 6 most recent fiscal
years;
(6) the Partnership's books and records for at least the current and
past 3 fiscal years; and
(7) in regard to the first tenants to occupy the apartment units in the
Apartment Housing, copies of all tenant files including completed applications,
completed questionnaires or checklist of income and assets, documentation of
third party verification of income and assets, and income certification forms
(LIHTC specific).
(b) Upon the request of the Limited Partner, the General Partner shall
promptly deliver to the Limited Partner, at the expense of the Partnership, a
copy of the information set forth in Section 14.1(a) above. The Limited Partner
shall have the right upon reasonable request and during normal business hours to
inspect and copy any of the foregoing, or any of the other books and records of
the Partnership or the Apartment Housing, at its own expense.
54
Section 14.2 Accounting Reports.
(a) By February 20 of each calendar year the General Partner shall provide
to the Limited Partner and the Special Limited Partner all tax information
necessary for the preparation of their federal and state income tax returns and
other tax returns with regard to the jurisdiction(s) in which the Partnership is
formed and in which the Apartment Housing is located. 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 Apartment Housing, the General Partner shall send to the
Limited Partner and the Special Limited Partner an audited financial statement
for the Partnership, which shall include, but is not limited to: (1) a balance
sheet as of the end of such fiscal year and statements of income, Partners'
equity and changes in cash flow for such fiscal year prepared in accordance with
generally accepted accounting principles; (2) a report of any Distributions made
at any time during the fiscal year, separately identifying Distributions from
Net Operating Income for the fiscal year, Net Operating Income for prior years,
Sale or Refinancing Proceeds, and reserves; (3) a report setting forth the
amount of all fees and other compensation and Distributions and reimbursed
expenses paid by the Partnership for the fiscal year to the General Partner or
Affiliates of the General Partner and the services performed in consideration
therefor, which report shall be verified by the Partnership's Accountants; and
(4) the Accountant's calculation of each pay-out of the Net Operating Income
pursuant to Section 11.1 of this Agreement. Moreover, the General Partner shall
deliver to the Limited Partner and the Special Limited Partner a draft copy of
the information requested herein at least 10 days prior to the above referenced
due date.
(c) Within 60 days after the end of each fiscal quarter in which a Sale or
Refinancing of the Apartment Housing occurs, the General Partner shall send to
the Limited Partner and the Special Limited Partner a report as to the nature of
the Sale or Refinancing and as to the Income and Losses for tax purposes and
proceeds arising from the Sale or Refinancing.
Section 14.3 Other Reports.
The General Partner shall provide to the Limited Partner and the
Special Limited Partner the following reports:
(a) during construction, on a regular basis, but in no event less than once
a month, a copy of the Construction Inspector's report and other construction
reports including, but not limited to, (1) the name of each person performing
work on the Improvements or providing materials for the Improvements, if the
work performed or materials supplied by a person accounts for 5% or more of the
construction of the Improvements, the work performed or materials supplied by
said person and the code number corresponding to the line item in the
Development Budget which the person will be paid, (2) an original AIA Document
G702, or similar form acceptable to the Special Limited Partner, (3) if not
included in the Construction Inspector's report or the AIA Document G702, a line
55
item break-down of the Development Budget (which shall include, description of
work to be performed or materials to be supplied; total dollar amount of the
work or materials; dollar amount of work previously completed and paid or
materials supplied and paid; dollar amount of work or materials to be paid per
the current disbursement request; dollar amount of materials stored; total
dollar amount of work completed and stored as of the current disbursement date;
percentage of completion; dollar amount of work or materials needed to complete
the line item; and retainage), (4) a reconciliation of the sources and uses to
determine that the Development Budget is In-Balance and there are sufficient
funds to complete the construction of the Improvements, and (5) copies of lien
releases, or waivers, from the Contractor and all sub-contractors or material
suppliers who were paid the previous month;
(b) during the rent-up phase, and continuing until the end of the first
6-month period during which the Apartment Housing has a sustained occupancy of
95% or better, 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) and a tenant
LIHTC compliance worksheet similar to the monthly initial tenant certification
worksheet included in Exhibit H attached hereto and incorporated herein by this
reference;
(c) a quarterly tax credit compliance report similar to the worksheet
included in Exhibit H due on or before April 30 of each year for the first
quarter, July 31 of each year for the second quarter, October 31 of each year
for the third quarter and January 31 of each year for the fourth quarter. In
order to verify the reliability of the information being provided on the
compliance report the Special Limited Partner may request a sampling of tenant
files to be provided. The sampling will include, but not be limited to, copies
of tenant applications, certifications and third party verifications used to
qualify tenants. If any inaccuracies are found to exist on the tax credit
compliance report or any items of noncompliance are discovered then the sampling
will be expanded as determined by the Special Limited Partner;
(d) a quarterly report on operations, in the form attached hereto as
Exhibit H, due on or before April 30 of each year for the first quarter of
operations, July 31 of each year for the second quarter of operations, October
31 of each year for the third quarter of operations and January 31 of each year
for the fourth quarter of operations which shall include, but is not limited to,
an unaudited income statement showing all activity in the reserve accounts
required to be maintained pursuant to 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 for that year;
(f) if the Apartment Housing 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
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
56
the Limited Partner an opinion of counsel that title to the materials and
supplies pass to the Partnership and that the Partnership bears the risk of loss
of the materials and supplies;
(g) during the Compliance Period, no later than the day any such
certification is filed, copies of any certifications which the Partnership must
furnish to federal or state governmental authorities administering the Tax
Credit program including, but not limited to, copies of all annual tenant
recertifications required under Section 42 of the Code;
(h) by the annual renewal date each and every year, an executed original or
certified copy of each and every Insurance policy or certificate required by the
terms of this Agreement;
(i) by the payment date of the real estate property taxes each and every
year verification that the same has been paid in full;
(j) on or before March 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. Such Budget shall only be adopted
with the Consent of the Special Limited Partner; and
(l) notice of the occurrence, or of the likelihood of occurrence, of any
event which has had a material adverse effect upon the Apartment Housing or the
Partnership, including, but not limited to, any breach of any of the
representations and warranties set forth in Section 9.12 of this Agreement, and
any inability of the Partnership to meet its cash obligations as they become
payable, within 10 days after the occurrence of such event.
Section 14.4 Late Reports.
If the General Partner does not fulfill its obligations under Section
14.2 within the time periods set forth therein, the General Partner, using its
own funds, shall pay as damages the sum of $100 per 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 Annual Site Visits.
The Limited Partner, at the Limited Partner's expense, has the right,
upon reasonable notice to the General Partner, to conduct a site visit which
57
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.
(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.
58
(b) The sale of the Apartment Housing and the receipt in cash of the full
amount of the proceeds of such sale.
Notwithstanding the foregoing, in no event shall the Partnership
terminate 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.
(a) Upon dissolution and termination, after payment of, or adequate
provision for, the debts and obligations of the Partnership pursuant to Section
11.2(a) through and including Section 11.2(c), the remaining assets of the
Partnership shall be distributed to the Partners in accordance with the positive
balances in their Capital Accounts, after taking into account all allocations
under Article X hereof.
(b) 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).
(1) The deficit reduction amount shall be paid by the General Partner by
the end of such taxable year (or, if later, within 90 days after the date of
Liquidation) and shall, upon liquidation of the Partnership, be paid to
creditors of the Partnership or distributed to other Partners in accordance with
their positive Capital Account balances.
(c) With respect to assets distributed in kind to the Partners in
liquidation or otherwise:
59
(1) unrealized appreciation or unrealized depreciation in the values of
such assets shall be deemed to be Income and Losses realized by the Partnership
immediately prior to the liquidation or other Distribution event; and
(2) such Income and Losses shall be allocated to the Partners in
accordance with Section 10.2 hereof, and any property so distributed shall be
treated as a Distribution of an amount in cash equal to the excess of such Fair
Market Value over the outstanding principal balance of and accrued interest on
any debt by which the property is encumbered.
(d) For the purposes of Section 15.3(c), "unrealized appreciation" or
"unrealized depreciation" shall mean the difference between the Fair Market
Value of such assets, taking into account the Fair Market Value of the
associated financing but subject to Section 7701(g) of the Code, and the asset's
Gross Asset Value. Section 15.3(c) is merely intended to provide a rule for
allocating unrealized Income and Losses upon liquidation or other Distribution
event, and nothing contained in Section 15.3(c) or elsewhere in this Agreement
is intended to treat or cause such Distributions to be treated as sales for
value. The Fair Market Value of such assets shall be determined by an
independent appraiser to be selected by the General Partner.
Section 15.4 Deferral of Liquidation.
If at the time of liquidation the General Partner or other liquidator
shall determine that an immediate sale of part or all of the Partnership assets
could cause undue loss to the Partners, the liquidator may, in order to avoid
loss, but only with the Consent of the Special Limited Partner, either defer
liquidation and retain all or a portion of the assets or distribute all or a
portion of the assets to the Partners in kind. In the event that the liquidator
elects to distribute such assets in kind, the assets shall first be assigned a
value (by appraisal by an independent appraiser) and the unrealized appreciation
or depreciation in value of the assets shall be allocated to the Partners'
Capital Accounts, as if such assets had been sold, in the manner described in
Section 10.2, and such assets shall then be distributed to the Partners as
provided herein. In applying the preceding sentence, the Apartment Housing shall
not be assigned a value less than the unamortized principal balance of any loan
secured thereby.
Section 15.5 Liquidation Statement.
Each of the Partners shall be furnished with a statement prepared or
caused to be prepared by the General Partner or other liquidator, which shall
set forth the assets and liabilities of the Partnership as of the date of
complete liquidation. Upon compliance with the distribution plan as outlined in
Section 15.3 and Section 15.4, the Limited Partner and Special Limited Partner
shall cease to be such and the General Partner shall execute, acknowledge and
cause to be filed those certificates referenced in Section 15.6.
Section 15.6 Certificates of Dissolution; Certificate of Cancellation of
Certificate of Limited Partnership.
(a) Upon the dissolution of the Partnership, the General Partner shall
cause to be filed in the office of the Secretary of State, and on a form
prescribed by the Secretary of State of Alabama, a certificate of dissolution.
60
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 Alabama a certificate of cancellation
of the Certificate of Limited Partnership. The certificate of cancellation of
the Certificate of Limited Partnership shall set forth the Partnership's name,
the Secretary of State's file number for the Partnership, and any other
information which the General Partner determines to include therein.
Article XVI.
AMENDMENTS
This Agreement may be amended by a majority consent of the Interests of
the Partners after a meeting of the Partners pursuant to Section 17.2, which
meeting shall be held after proper notice as provided in Section 17.3 of this
Agreement. For purposes of this Article XVI, a Partner shall grant its consent
to a proposed amendment unless such Partner reasonably determines that the
proposed amendment is adverse to the Partner's Interest.
Article XVII.
MISCELLANEOUS
Section 17.1 Voting Rights.
(a) The Limited Partner shall have no right to vote upon any matters
affecting the Partnership, except as provided in this Agreement.
Notwithstanding, at a meeting of the Partnership, the Limited Partner may vote:
(1) to approve or disapprove the Sale or Refinancing of the Apartment
Housing prior to such Sale or Refinancing;
(2) to remove the General Partner and elect a substitute General Partner
as provided in this Agreement;
(3) to elect a successor General Partner upon the Withdrawal of the
General Partner;
(4) to approve or disapprove the dissolution of the Partnership;
(5) subject to the provisions of Article XVI hereof, to amend this
Agreement;
(6) to approve or disapprove the refinancing of the Mortgage prior to
such refinancing; or
61
(7) on any other matter permitted in this Agreement.
(b) On any matter where the Limited Partner has the right to vote, votes
may only be cast at a duly called meeting of the Partnership or through written
action without a meeting.
(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 Limited Partner shall be governed
in all respects, including matters relating to proxies, record dates and actions
without a meeting, by the applicable provisions of the Act, as it shall be
amended from time to time.
Section 17.3 Notices.
Any notice given pursuant to this Agreement may be served personally on
the Partner to be notified, or may be sent by overnight courier, or may be
mailed, first class postage prepaid, 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: Eagle Creek Partners Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
To the Limited Partner: WNC Holding, LLC
c/o WNC & Associates, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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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
Alabama.
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:
(1) a change in the name of the Partnership;
(2) a change in the street address of the Partnership's principal
executive office;
(3) a change in the address, or the Withdrawal, of a General Partner, or
a change in the address of the agent for service of process, or appointment of a
new agent for service of process;
(4) the admission of a General Partner and that Partner's address; or
(5) the discovery by the General Partner of any false or erroneous
material statement contained in the Certificate of Limited Partnership or any
amendment thereto.
(b) The Certificate of Limited Partnership may also be amended in
conformity with this Agreement at any time in any other respect that the General
Partner determines.
(c) The General Partner shall cause the Certificate of Limited Partnership
to be amended, when required or permitted as aforesaid, by filing a certificate
of amendment thereto in the office of, and on a form prescribed by, the
Secretary of State of Alabama. 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.
63
(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.
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.
64
(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.
Section 17.12 Expiration of Compliance Period.
(a) Notwithstanding any provision hereof to the contrary (other than this
Section 17.12), the Special Limited Partner shall have the right at any time
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
Apartment Housing who will continue to operate the Apartment Housing as a
qualified low-income property, at a purchase price that is not less than the
minimum amount set forth in Section 42(h)(6) of the Code (or any successor
provision). In the event that the State Tax Credit Agency obtains an offer
satisfying the conditions of the preceding sentence, the General Partner shall
promptly notify the Special Limited Partner in writing with respect to the terms
and conditions of such offer, and, if the Special Limited Partner notifies the
General Partner that such offer should be accepted, the General Partner shall
cause the Partnership promptly to accept such offer and to proceed to sell the
Apartment Housing pursuant to such offer.
(b) Notwithstanding any other provision of this Agreement to the contrary,
the Special Limited Partner shall have the right at any time after the end of
the Compliance Period to require, by written notice to the General Partner (the
"Required Sale Notice"), that the General Partner promptly use its best efforts
to obtain a buyer for the Apartment Housing on the most favorable terms then
available. The General Partner shall submit the terms of any proposed sale to
the Special Limited Partner for its approval in the manner set forth in Section
17.2(a) hereof. If the General Partner shall fail to so obtain a buyer for the
Apartment Housing within 6 months of receipt of the Required Sale Notice or if
the Consent of the Special Limited Partner in its sole discretion shall be
withheld to any proposed sale, then the Special Limited Partner shall have the
65
right at any time thereafter to obtain a buyer for the Apartment Housing on
terms acceptable to the Special Limited Partner (but not less favorable to the
Partnership than any proposed sale previously rejected by the Special Limited
Partner). In the event that the Special Limited Partner so obtains a buyer, it
shall notify the General Partner in writing with respect to the terms and
conditions of the proposed sale and the General Partner shall cause the
Partnership promptly to sell the Apartment Housing to such buyer.
(c) A sale of the Apartment Housing prior to the end of the Compliance
Period may only take place if the conditions of Section 42(j)(6) of the Code (or
any successor provision) will be satisfied upon such sale by having the
purchaser of the Apartment Housing post the required bond on behalf of the
Partnership.
Section 17.13 Number and Gender.
All pronouns and any variations thereof shall be deemed to refer to the
masculine, feminine, neuter, singular or plural as the identity of the Person or
Persons may require.
Section 17.14 Entire Agreement.
This Agreement constitutes the entire understanding between the parties
with respect to the subject matter hereof and all prior understandings and
agreements between the parties, written or oral, respecting this transaction are
merged in this Agreement.
Section 17.15 Governing Law.
This Agreement and its application shall be governed by the laws of the
State.
Section 17.16 Attorney's Fees.
If a suit or action is instituted in connection with an alleged breach
of any provision of this Agreement, the prevailing party shall be entitled to
recover, in addition to costs, such sums as the court may adjudge reasonable as
attorney's fees, including fees on any appeal.
Section 17.17 Receipt of Correspondence.
The Partners agree that the General Partner shall send to the Limited
Partner and the Special Limited Partner within 5 days of receipt a copy of any
correspondence relative to the Apartment Housing's noncompliance with the
Mortgage, relative to the Apartment Housing's noncompliance with the Tax Credit
rules or regulations, relative to any correspondence from the Mortgage lender
and/or relative to the disposition of the Apartment Housing.
Section 17.18 Security Interest and Right of Set-Off.
As security for the performance of the respective obligations to which
any Partner may be subject under this Agreement, the Partnership shall have (and
each Partner hereby grants to the Partnership) a security interest in their
respective Interests of such Partner and in all funds distributable to said
Partner to the extent of the amount of such obligation.
66
IN WITNESS WHEREOF, this Amended and Restated Agreement of Limited
Partnership of ▇▇▇▇▇▇▇ Meadow Associates, Ltd., an Alabama limited partnership,
is made and entered into as of the 19th day of July, 2002.
GENERAL PARTNER:
Eagle Creek Partners Inc.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇,
President
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇
WITHDRAWING ORIGINAL LIMITED
PARTNER:
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇
LIMITED PARTNER:
WNC Holding, LLC
By: WNC & ASSOCIATES, INC.,
Managing Member
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Executive Vice President
SPECIAL LIMITED PARTNER:
WNC Housing, L.P.
By: WNC & Associates, Inc.,
General Partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Executive Vice President
67
EXHIBIT A
LEGAL DESCRIPTION
PARCEL ONE:
COMMENCE AT THE NORTHEAST CORNER OF THE NORTHWEST 1/4 OF THE SOUTHEAST 1/4, IN
THE ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇ ▇▇▇▇; THENCE RUN SOUTH 02 DEGREES, 40
MINUTES EAST, ALONG THE EAST LINE THEREOF, 18.00 FEET TO A POINT IN THE SOUTH
LINE OF MARKER ROAD (30 FT. RW), WHICH IS THE POINT OF BEGINNING OF THE PARCEL
OF LAND HEREIN DESCRIBED; THENCE FROM SAID POINT OF BEGINNING, CONTINUE SOUTH 02
DEGREES 40 MINUTS EAST, ALONG SAID EAST LINE OF NORTHWEST 1/4 OF SOUTHEAST 1/4
41.36 FEET TO A POINT IN CONTOUR ELEVATION 517 FT. MSL; THENCE RUN THE FOLLOWING
BEARINGS AND DISTANCES ALONG SAID CONTOUR 517; SOUTH 79 DEGREES 32 MINUTES WEST,
24.58 FEET; SOUTH 21 DEGREES 45 MINUTES WEST, 54.56 FEET; SOUTH 48 DEGREES 49
MINUTES EAST, 57.29 FEET; SOUTH 33 DEGREES 13 MINUTES WEST, 105.72 FEET; SOUTH
59 DEGREES 47 MINUTES WEST 43.11 FEET; SOUTH 08 DEGREES 31 MINUTES WEST, 92.86
FEET AND SOUTH 60 DEGREES 02 MINUTES WEST, 41.16 FEET TO A POINT; THENCE RUN
SOUTH 87 DEGREES 28 MINUTES WEST, 589.63 FEET TO A POINT; THENCE RUN NORTH 02
DEGREES 40 MINUTES WEST, 350.00 FEET TO A POINT IN AFORESAID SOUTH LINE OF
MARKER ROAD; THENCE RUN NORTH87 DEGREES 28 MINUTES EAST ALONG SAID SOUTH LINE,
750.00 FEET TO THE POINT OF BEGINNING, CONTAINING 5.55 ACRES, AND EMBRACING
PROTIONS OF AFORESAID NORTHWEST 1/4 OF SOUTHEAST 1/4, IN SECTION 24, TOWNSHIP 12
SOUTH, RANGE ▇ ▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇.
PARCEL TWO:
A PARCEL OF LAND DESCRIBED AS BEGINNING AT THE SOUTHWEST ▇▇▇▇▇▇ ▇▇ ▇▇▇ #▇, ▇▇
▇▇▇▇▇ "▇", ▇▇ ▇▇▇▇▇▇▇▇▇ SUBDIVISION; THENCE FROM SAID BEGINNING ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇ ▇▇ DEGREES 28 MINUTES EAST, ALONG THE SOUTH LINE THEREOF, 50.00 FEET
TO THE SOUTHEAST CORNER OF SAID LOT #7; THENCE RUN NORTH 02 DEGREES 11 MINUTES
WEST, ALONG THE EAST LINE THEREOF, 191.71 FEET TO A POINT IN THE SOUTH LINE OF
COLLEGE PARKWAY; THENCE RUN SOUTH 80 DEGREES 15 MINUTES WEST, ALONG SAID SOUTH
LINE OF COLLEGE PARKWAY, 50.44 FEET TO A POINT IN THE WEST LINE OF SAID LOT #7;
THENCE RUN SOUTH 02 DEGREES 11 MINUTES EAST, ALONG SAID WEST LINE, 185.37 FEET
TO THE POINT OF BEGINNING, CONTAINNING 0.22 ACRES, MORE OR LESS, AND EMBRACING
PORTIONS OF SAID LOT #7, IN BLOCK "C" OF GRAYFIELD SUBDIVISION, AS RECORDED IN
PLAT BOOT "C", PAGE 221, PROBATE OFFICE, ETOWAH COUNTY, ALABAMA, AND LYING IN
GLENCOE, ETOWAH COUNTY, ALABAMA.
EXHIBIT B
FORM OF LEGAL OPINION
WNC Holding, LLC
c/o WNC & Associates, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Re: ▇▇▇▇▇▇▇ Meadow Associates, Ltd.
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in
connection with the investment by WNC Holding, LLC, a California limited
liability company (the "Limited Partner") in ▇▇▇▇▇▇▇ Meadow Associates, Ltd.
(the "Partnership"), an Alabama limited partnership formed to own, develop,
construct, finance and operate an apartment complex for low-income persons (the
"Apartment Complex") in Glencoe, Etowah County, Alabama. The general partners of
the Partnership are Eagle Creek Partners Inc. and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇ (the
"General Partners").
In rendering the opinions stated below, we have examined and relied
upon the following:
(i) [Certificate of Limited Partnership];
(ii) [Agreement of Limited Partnership] (the "Partnership
Agreement");
(iii) The Title Policy as defined in the Partnership
Agreement;
(iv) The Certificate and Agreement attached as Exhibit C to
the Partnership Agreement;
(v) The Development Fee Agreement and accompanying Guaranty
Agreement, dated _________, 2002;
(vi) The Development, Construction and Operating Budget
Agreement, dated _________, 2002;
(vii) The Construction Completion, Operating Deficit and Tax
Credit Guaranty Agreement, dated _________, 2002;
(viii) The Construction Monitoring Agreement, dated _________,
2002;
(ix) A preliminary reservation letter from _________________
(the "State Agency") dated _________, 200___ conditionally awarding $___________
in Federal tax credits annually for each of 10 years and $_____________ in
California tax credits annually for each of 4 years for the Apartment Complex;
and
(x) Such other documents, records and instruments as we
have deemed necessary in order to enable us to render the opinions referred to
in this letter.
For purposes of rendering the opinions stated below we have assumed
that, in those cases in which we have not been involved directly in the
preparation, execution or the filing of a document, that (a) the document
reviewed by us is an original document, or a true and accurate copy of the
original document, and has not been subsequently amended, (b) the signatures on
each original document are genuine, and (c) each party who executed the document
had proper authority and capacity.
Based on the foregoing we are of the opinion that:
(a) __________________, one of the General Partners, is a
[corporation/partnership] duly formed and validly existing under the laws of the
State of _____________________ and has full power and authority to enter into
and perform its obligations under the Partnership Agreement. _______________,
one of the other General Partners, is a [corporation/partnership] duly formed
and validly existing under the laws of the State of __________________ and has
full power and authority to enter into and perform its obligations under the
Partnership Agreement.
(b) The Partnership is a limited partnership duly formed and validly
existing under the laws of the State of Alabama.
(c) The Partnership is validly existing under and subject to the laws
of Alabama with full power and authority to own, develop, construct, finance and
operate the Apartment Complex and to otherwise conduct business under the
Partnership Agreement.
(d) Execution of the Partnership Agreement by the General Partner(s)
has been duly and validly authorized by or on behalf of the General Partner(s)
and, having been executed and delivered in accordance with its terms, the
Partnership Agreement constitutes the valid and binding agreement of the General
Partner(s), enforceable in accordance with its terms.
(e) The execution and delivery of the Partnership Agreement by the
General Partner(s) does not conflict with and will not result in a breach of any
of the terms, provisions or conditions of any agreement or instrument known to
counsel to which any of the General Partner(s) or the Partnership, or any
guarantor is a party or by which any of them may be bound, or any order, rule,
or regulation to be applicable to any of such parties of any court or
governmental body or administrative agency having jurisdiction over any of such
parties or over the property.
(f) To the best of counsel's knowledge, after due inquiry, there is no
litigation or governmental proceeding pending or threatened against, or
involving the Apartment Complex, the Partnership or any General Partner or any
guarantor, which would materially adversely affect the condition (financial or
otherwise) or business of the Apartment Complex, the Partnership or any of the
Partners of the Partnership.
(g) The Limited Partner and the Special Limited Partner have been
admitted to the Partnership as limited partners of the Partnership under Alabama
law and are entitled to all of the rights of limited partners under the
Partnership Agreement. Except as described in the Partnership Agreement, no
person is a partner of or has any legal or equitable interest in the
Partnership, and all former partners of record or known to counsel have validly
withdrawn from the Partnership and have released any claims against the
Partnership arising out of their participation as partners therein.
(h) Liability of the Limited Partner for obligations of the Partnership
is limited to the amount of the Limited Partner's capital contributions required
by the Partnership Agreement.
(i) Neither the General Partner(s) of the Partnership nor the Limited
Partner nor the Special Limited Partner will have any liability for the Mortgage
represented thereby (as those terms are defined in the Partnership Agreement),
and the lender of the Mortgage Loan will look only to its security in the
Apartment Complex for repayment of the Mortgage Loan.
(j) The Partnership owns a fee simple interest in the Apartment
Complex.
(k) To the best of our actual knowledge and belief, after due inquiry,
the Partnership, the General Partner(s) and any guarantor has obtained all
consents, permissions, licenses, approvals, or orders required by all applicable
governmental or regulatory agencies for the development, construction and
operation of the Apartment Complex, and the Apartment Complex conforms to all
applicable Federal, state and local land use, zoning, health, building and
safety laws, ordinances, rules and regulations.
(l) The Apartment Complex has obtained a preliminary reservation of low
income housing tax credits ("LIHTC") from the State Agency. The final allocation
of the LIHTC and ultimate eligibility of the Apartment Complex for such final
allocation are subject to a series of requirements which must be met, performed
or achieved at various times prior to and after such final allocation. Assuming
all such requirements are met, performed or achieved at the time or times
provided by applicable laws and regulations, the Apartment Complex will qualify
for LIHTC.
(m) Each guarantor of the Partnership, if not an individual, was
incorporated, duly organized, and is validly existing and in good standing the
laws of the State of Alabama, 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 of the Partnership (i) has full power and authority
to execute, deliver and perform, and (ii) has duly authorized the execution,
delivery and performance of the applicable guaranty. The applicable guaranty has
been duly executed and delivered by the guarantor and constitutes the legal,
valid and binding obligation of the guarantor enforceable in accordance with its
terms except as the enforceability thereof may be limited by applicable
bankruptcy, reorganization, insolvency, moratorium or other similar laws
affecting the enforcement of creditor's rights generally and general principles
of equity (regardless of whether enforceability is considered a proceeding at
law or equity).
All of the opinions set forth above are qualified to the extent that
the validity of any provision of any agreement may be subject to or affected by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the rights of creditors generally. We do not express any opinion as to
the availability of any equitable or specific remedy upon any breach of any of
the covenants, warranties or other provisions contained in any agreement. We
have not examined, and we express no opinion with respect to, the applicability
of, or liability under, any Federal, state or local law, ordinance or regulation
governing or pertaining to environmental matters, hazardous wastes, toxic
substances or the like.
We express no opinion as to any matter except those set forth above.
These opinions are rendered for use by the Limited Partner and its legal counsel
which will rely on this opinion in connection with federal income tax opinions
to be rendered by that firm. This opinion may not be delivered to or relied upon
by any other person or entity without our express written consent.
Sincerely,
_________________________
[Name]
EXHIBIT C
CERTIFICATION AND AGREEMENT
CERTIFICATION AND AGREEMENT made as of the date written below by
▇▇▇▇▇▇▇ Meadow Associates, Ltd., an Alabama limited partnership (the
"Partnership"); Eagle Creek Partners Inc. and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇ (collectively
referred to as the "General Partner"); and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇ (collectively
referred to as the "Original Limited Partner") for the benefit of WNC Holding,
LLC, a California limited liability company (the "Investment Partnership"), and
WNC & Associates, Inc. ("WNC").
WHEREAS, the Partnership proposes to admit the Investment Partnership
as a limited partner thereof pursuant to an Amended and Restated Agreement of
Limited Partnership of the Partnership (the "Partnership Agreement"), in
accordance with which the Investment Partnership will make substantial capital
contributions to the Partnership; and
WHEREAS, the Investment Partnership and WNC have relied upon certain
information and representations described herein in evaluating the merits of
investment by the Investment Partnership in the Partnership;
NOW, THEREFORE, to induce the Investment Partnership to enter into the
Partnership Agreement and become a limited partner of the Partnership, and for
$1.00 and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the Partnership, the General Partner and the
Original Limited Partner hereby agree as follows for the benefit of the
Investment Partnership and WNC.
1. Representations, Warranties and Covenants of the Partnership, the General
Partner and the Original Limited Partner.
The Partnership, the General Partner and the Original Limited Partner
jointly and severally represent, warrant and certify to the Investment
Partnership and WNC that, with respect to the Partnership, as of the date
hereof:
1.1 The Partnership is duly organized and in good standing as a limited
partnership pursuant to the laws of the state of its formation with full power
and authority to own its apartment complex (the "Apartment Complex") and conduct
its business; the Partnership, the General Partner and the Original Limited
Partner have the power and authority to enter into and perform this
Certification and Agreement; the execution and delivery of this Certification
and Agreement by the Partnership, the General Partner and the Original Limited
Partner have been duly and validly authorized by all necessary action; the
execution and delivery of this Certification and Agreement, the fulfillment of
its terms and consummation of the transactions contemplated hereunder do not and
will not conflict with or result in a violation, breach or termination of or
constitute a default under (or would not result in such a conflict, violation,
breach, termination or default with the giving of notice or passage of time or
both) any other agreement, indenture or instrument by which the Partnership or
any General Partner or Original Limited Partner is bound or any law, regulation,
judgment, decree or order applicable to the Partnership or any General Partner
or Original Limited Partner or any of their respective properties; this
Certification and Agreement constitutes the valid and binding agreement of the
Partnership, the General Partner and the Original Limited Partner, enforceable
against each of them in accordance with its terms.
1.2 The General Partner has delivered to the Investment Partnership,
WNC or their affiliates all documents and information which would be material to
a prudent investor in deciding whether to invest in the Partnership. All factual
information provided to the Investment Partnership, WNC or their affiliates
either in writing or orally, did not, at the time given, and does not, on the
date hereof, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances under which they are made.
1.3 Each of the representations and warranties contained in the
Partnership Agreement is true and correct as of the date hereof.
1.4 Each of the covenants and agreements of the Partnership and the
General Partner contained in the Partnership Agreement has been duly performed
to the extent that performance of any covenant or agreement is required on or
prior to the date hereof.
1.5 All conditions to admission of the Investment Partnership as the
investment limited partner of the Partnership contained in the Partnership
Agreement have been satisfied.
1.6 No default has occurred and is continuing under the Partnership
Agreement or any of the Project Documents (as such term is defined in the
Partnership Agreement) for the Partnership.
1.7 The Partnership will allocate to the Limited Partner the Projected
Annual Tax Credits, or the Revised Projected Tax Credits, if applicable.
1.8 The General Partner agrees to take all actions necessary to claim
the Projected Tax Credit, including, without limitation, the filing of Form(s)
8609 with the Internal Revenue Service.
1.9 No person or entity other than the Partnership holds any equity
interest in the Apartment Complex.
1.10 The Partnership has the sole responsibility to pay all maintenance
and operating costs, including all taxes levied and all insurance costs,
attributable to the Apartment Complex.
1.11 The Partnership, except to the extent it is protected by insurance
and excluding any risk borne by lenders, bears the sole risk of loss if the
Apartment Complex is destroyed or condemned or there is a diminution in the
value of the Apartment Complex.
1.12 No person or entity except the Partnership has the right to any
proceeds, after payment of all indebtedness, from the sale, refinancing, or
leasing of the Apartment Complex.
1.13 No General Partner is related in any manner to the Investment
Partnership, nor is any General Partner acting as an agent of the Investment
Partnership.
1.14 No event has occurred which would have a material adverse change
to the Limited Partner's investment.
2. Miscellaneous.
2.1 This Certification and Agreement is made solely for the benefit of
the Investment Partnership and WNC, and their respective successors and
assignees, and no other person shall acquire or have any right under or by
virtue of this Agreement.
2.2 This Certification and Agreement may be executed in several
counterparts, each of which shall be deemed to be an original, all of which
together shall constitute one and the same instrument.
2.3 Capitalized terms used but not defined in this Certification
Agreement shall have the meanings given to them in the Partnership Agreement.
[Signatures begin on the following page]
IN WITNESS WHEREOF, this Certificate and Agreement is made and entered into
as of the _____ day of ____________, 2002.
PARTNERSHIP:
▇▇▇▇▇▇▇ Meadow Associates, Ltd.
By: Eagle Creek Partners Inc.,
General Partner
By: ____________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇,
President
____________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇,
General Partner
GENERAL PARTNER:
Eagle Creek Partners Inc.
By: ____________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇,
President
____________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇
ORIGINAL LIMITED PARTNER:
____________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇
EXHIBIT D
FORM OF COMPLETION CERTIFICATE
(to be used when [construction/rehabilitation] completed)
COMPLETION CERTIFICATE
The undersigned, an architect duly licensed and registered in the State
of Alabama, has reviewed the final working plans and detailed specifications for
▇▇▇▇▇▇▇ Meadow Associates, Ltd., an Alabama limited partnership (the
"Partnership") in connection with the construction of improvements on certain
real property located in Glenco, Etowah County, Alabama (the "Improvements").
The undersigned hereby certifies (i) that the Improvements have been
completed in accordance with the aforesaid plans and specifications, (ii) that a
permanent certificate of occupancy and all other permits required for the
continued use and occupancy of the Improvements have been issued with respect
thereto by the governmental agencies having jurisdiction thereof, (iii) that the
Improvements are in compliance with all requirements and restrictions of all
governmental authorities having jurisdiction over the Improvements, including,
without limitation, all applicable zoning, building, environmental, fire, and
health ordinances, rules and regulations and (iv) that all contractors,
subcontractors and workmen who worked on the Improvements have issued lien
releases and have been paid in full except for normal retainages and amounts in
dispute.
____________________________
APARTMENT HOUSING ARCHITECT
Date: ____________________________
Confirmed by:
____________________________
GENERAL PARTNER
Date: ____________________________
EXHIBIT E
ACCOUNTANT'S CERTIFICATE
[Accountant's Letterhead]
_______________, 200__
WNC Holding, LLC
c/o WNC & Associates, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Re: ▇▇▇▇▇▇▇ Meadow Associates, Ltd.
Certification as to Amount of Eligible Tax Credit Base
Ladies and Gentlemen:
In connection with the acquisition by WNC Holding, LLC (the "Limited
Partner") of a limited partnership interest in ▇▇▇▇▇▇▇ Meadow Associates, Ltd.,
an Alabama limited partnership (the "Partnership"), which owns a certain parcel
of land located in Glencoe, Etowah County, Alabama and improvements thereon (the
"Apartment Housing"), the Limited Partner has requested our certification as to
certain issues including the amount of low-income housing tax credits ("Tax
Credits") available with respect to the Apartment Housing under Section 42 of
the Internal Revenue Code of 1986, as amended (the "Code"). Based upon our
review of [the financial information provided by the Partnership] of the
Partnership, and the five technical advice memoranda issued by the Internal
Revenue Service in October and November of 2000, we are prepared to file the
Federal information tax return of the Partnership claiming annual Tax Credits in
the amount of $[amount], which amount is based on an eligible basis (as defined
in Section 42(d) of the Code) of the Apartment Housing of $[amount], a qualified
basis (as defined in Section 42(c) of the Code) of the Apartment Housing of
$[amount] and an applicable percentage (as defined in Section 42(b) of the Code)
of [percent]%.
Sincerely,
-------------------------
EXHIBIT F
CONTRACTOR'S CERTIFICATE
[Contractor's Letterhead]
_______________, 200____
WNC Holding, LLC
c/o WNC & Associates, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Re: ▇▇▇▇▇▇▇ Meadow Associates, Ltd.
Ladies and Gentlemen:
The undersigned ▇▇▇▇▇ Construction Company Inc., (hereinafter referred
to as "Contractor"), has furnished or has contracted to furnish labor, services
and/or materials (hereinafter collectively referred to as the "Work") in
connection with the improvement of certain real property known as
__________________ located in Glencoe, Etowah County, Alabama (hereinafter known
as the "Apartment Housing").
Contractor makes the following representations and warranties regarding
Work at the Apartment Housing:
o Work on said Apartment Housing has been performed and completed in
accordance with the plans and specifications for the Apartment
Housing.
o Contractor acknowledges that upon the Partnership's receipt of the
Limited Partner's completion of construction Capital Contribution
payment all amounts owed to contractor pursuant to the contract
for Work performed for ▇▇▇▇▇▇▇ Meadow Associates, Ltd. will be
paid in full. If not paid in full, then Contractor will defer any
amounts owed to it until receipt of the next Capital Contribution
payment.
o Contractor acknowledges ▇▇▇▇▇▇▇ Meadow Associates, Ltd. is not in
violation with terms and conditions of the contractual documents
related to the Apartment Housing.
o Contractor warrants that all other parties who have supplied Work
for improvement of the Apartment Housing have been paid in full.
o Contractor acknowledges that the contract has been paid in full
and releases any lien or right to lien against the above property.
The undersigned has personal knowledge of the matters stated herein and
is authorized and fully qualified to execute this document on behalf of the
Contractor.
[COMPANY NAME]
By: _____________________________
Name: ____________________
Title: ____________________
EXHIBIT G
DEPRECIATION SCHEDULE
Real Property: Use Modified Accelerated Cost Recovery System ("MACRS") 27.5
year straight-line depreciation using the mid-month. Real property includes
buildings and building improvements.
Personal Property: Use 5-year recovery period using mid-year 200% declining
balance, if it relates to residential real estate. Personal property related to
commercial space must use a 7-year recovery period using mid-year 200% declining
balance.
The following costs have a 5-year recovery period:
o Removable appliances (not central climate control system equipment or
water heaters)
o Draperies, blinds and shades, if they would be reusable if removed
o Carpeting, if its removal would not destroy the underlying floor
o Vinyl flooring, if its removal would be easy and not destroy the
underlying floor
o Common area furnishings
o Photocopy equipment
o Calculators, adding machines
o Typewriters
o Computers
o Wall coverings, if their removal would not destroy the underlying wall
o Exit signs
o Security systems (not fire protection system, sprinkler system, smoke
detectors, or fire escapes)
o Outdoor security lighting (not parking lot lighting)
o Fire extinguishers
o Decorative lighting and sconces (not light fixtures for central
lighting)
o Outdoor decorative lighting, such as that lighting signs
o Telephone systems
o Corridor handrails (not bathroom or stairway)
o Raised floors to accommodate wiring in computer rooms
The following costs have a 7-year recovery period with a mid-year 200% declining
balance:
o Office furnishings
o Cabinets and shelving
o Bulletin boards
o Conference or meeting room movable partitions
A percentage of the development fee is also allowed in personal property. The
percentage is calculated by taking the ratio of personal property cost,
excluding development fee, to total development costs and multiplying the
development fee by the calculated ratio.
Land improvements Cost Recovery: Use 15-year recovery period using mid-year 150%
declining balance. The following costs have a 15-year recovery period. Items
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 prorata portion of the general contractor/construction company
profit, overhead, and general requirements and conditions allocable to
items with a 15-year cost recovery period
o The prorata portion of the developer fee, profit and overhead allocable
to items with a 15-year cost recovery period
Recovery of costs of sanitary sewer system and water utility/distribution
system, including the sewer system outside the buildings: the following costs
have a 20-year recovery period - 150% declining balance mid-year convention.
o Fire hydrants
o Manhole rings and covers
o Watermeter
o Gate valves
o Flushing hydrants
o Cast iron fittings
o Valve boxes
o Air release valves
o Tapping sleeves
o PVC water pipe (outside)
o PVC sewer pipe (outside)
o PVC sewer fittings
EXHIBIT H TO THE PARTNERSHIP AGREEMENT
REPORT OF OPERATIONS
QUARTER ENDED: ____________________, 200__
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LOCAL PARTNERSHIP:
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GENERAL PARTNER:
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FIRM NAME:
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ADDRESS:
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CITY, STATE, ZIP:
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PHONE:
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PROPERTY NAME:
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ADDRESS:
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CITY, STATE, ZIP:
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RESIDENT MANAGER:
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PHONE:
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ACCOUNTANT:
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FIRM:
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ADDRESS:
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CITY, STATE, ZIP:
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PHONE:
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MANAGEMENT COMPANY
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ADDRESS:
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CITY, STATE, ZIP:
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PHONE:
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CONTACT:
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(6) OCCUPANCY INFORMATION
A. Number of Apartment Units_____ Number of RA Units_____
Number of Section 8 Tenants ____
B. Occupancy for the Quarter has: Increased ____ Decreased_____
Remained the Same _____
C. Number of: Move-Ins ______ Move-Outs __________ % of Occupancy ______
D. Average length of tenant residency: 1-6 months ______ 6-12 months ______
1-3 years ______ Over 4 years_____
E. Number of Basic rent qualified applicants on waiting list: ________
F. If the apartments are less than 90% occupied, please explain why and
describe what efforts are being made to lease-up remaining units.
___________________________________________________________________________
G. On site manager: Full Time__________ Part Time____________.
If part-time, the number of hours per week_____________.
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
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Interior Painting
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Exterior Painting
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Siding
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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
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Common Areas
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Carpet
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Appliances
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Lighting
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Other
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Please describe in detail any major repairs:
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Exhibit H
CONDITION OF PROPERTY
THE OVERALL APPEARANCE OF THE BUILDING(S) IS:
Excellent Good Fair Bad
THE OVERALL APPEARANCE OF THE GROUNDS IS:
Excellent Good Fair Bad
EXTERIOR CONDITION (Please Check Appropriate Box)
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Type of Condition Excellent Good Fair Problems/Comments
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Signage
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Parking Lots
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Office/Storage
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Equipment
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Community Building
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Laundry Room
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Benches/Playground
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Lawns, Plantings
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Drainage, Erosion
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Carports
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Fences
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Walks/Steps/Guardrails
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Lighting
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Painting
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Walls/Foundation
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Roof/Flashing/Vents
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Gutters/Splashblocks
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Balconies/Patios
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Doors Windows/Screens
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Elevators
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INTERIOR CONDITION
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Stairs
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Flooring
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Doors/Cabinets/Hardware
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Drapes/Blinds
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Interior Painting
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Refrig/Stoves/Sinks
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Bathroom/Tubs/Showers
Toilets
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Exhibit H
FINANCIAL STATUS
A. Replacement Reserve is: Fully-funded Under-funded Amount
(complete attached schedule)
Tax/Insurance Escrow is: Fully-funded Under-funded Amount
(complete attached schedule)
Property is operating at a: Surplus Deficit Amount
If deficit, General Partner funding? Yes No Amount
Mortgage Payments are: On Schedule Delinquent Amount
Are the taxes current? Yes No
(please provide copy of paid tax ▇▇▇▇)
Is the insurance current? Yes No Renewal Date
(please provide copy of yearly renewal)
B. Please note and explain any significant changes in the following:
Administrative Expense Increase Decrease Amount
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------------------------------------------------------------------------
Repairs/Maintenance Expense Increase Decrease Amount
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Utility Expense Increase Decrease Amount
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Taxes/Insurance Expense Increase Decrease Amount
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C. Do you anticipate making a return to owner distribution? Yes No
Explanation:
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D. Please explain in detail any change in the financial condition:
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E. Any insurance claims files? Yes______ No______
If yes, please explain:
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Exhibit H
SCHEDULE OF RESERVES
Replacement Tax & Insurance Other Total
Beginning Balance: ----------- ---------- ------- -------
Deposits:
---------- ----------- ---------- ------- -------
---------- ----------- ---------- ------- -------
---------- ----------- ---------- ------- -------
Total Deposits ----------- ---------- ------- -------
Authorized Disbursements: ----------- ---------- ------- -------
Description:
--------- ----------- ---------- ------- -------
--------- ----------- ---------- ------- -------
--------- ----------- ---------- ------- -------
--------- ----------- ---------- ------- -------
--------- ----------- ---------- ------- -------
--------- ----------- ---------- ------- -------
Total Disbursements: ----------- ---------- -------- ------
Ending Balance: (1) ----------- ---------- -------- ------
Required Balance: ----------- ---------- -------- ------
Over/under funding: ----------- ---------- -------- ------
Prepared By: Date:
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Firm: Telephone:
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Reminder: Please include the following documents:
1. Completed Report of Operations
2. Balance Sheet
3. Statement of Income & Expenses
4. Rent roll for quarter ending
5. Tax Credit Compliance Report
Exhibit H
INITIAL TENANT CERTIFICATIONS
Partnership Name:-------------------
Fund: ------------------- Tax Credit Set-Asides Information: Loan/Regulatory
Property Name: ---------- [ ] 20/50 or [ ] 40/60 Election Set-Asides:
Address: ---------------- Does the 51% average apply?
---------------- [ ] Y [ ] N
---------------- Deeper Set-Aside __% @ 50% AMI
County: ----------------
[ ] Multi-Family [ ] Elderly Management Company:--------------------
[24]Number of Apartment Units Contact Person:------------------------
----Number of Exempt Units Phone #:-------------------------------
----LIHTC Apartment Housing #
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Gross
Unit First Time Move-in # of # in Income Move-In
# Tenant Name Date Bdrms Sq.Ft. Set-Aside Unit Move-In Limits
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BIN # Certificate of Occupancy Date:
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BIN # Certificate of Occupancy Date:
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BIN # Certificate of Occupancy Date:
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INITIAL TENANT CERTIFICATIONS
Partnership Name:-------------------
(CONTINUED)
Tenant Tenant
Income Income Asset Unit Less Rent Tenant Utility
Qualified Verification Verification Rent Subsidy Payment Allowance
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YES
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YES
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YES
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YES
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YES
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YES
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YES
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YES
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YES
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YES
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YES
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YES
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YES
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YES
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YES
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INITIAL TENANT CERTIFICATIONS
Partnership Name:-------------------
(CONTINUED)
Tenant Tenant Overall
Gross Maximum Rent Tenant
Rent Rent Qualified Eligible
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YES YES
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YES YES
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YES YES
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YES YES
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YES YES
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YES YES
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YES YES
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YES YES
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YES YES
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YES YES
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YES YES
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YES YES
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YES YES
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YES YES
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Exhibit H
QUARTERLY TAX CREDIT COMPLIANCE REPORT
Property Name:----------------------
Quarter Ending: --------- Tax Credit Set-Asides Information: Loan/Regulatory
[ ] 20/50 or [ ] 40/60 Election Set-Asides:
Address: ---------------- Does the 51% average apply?
---------------- [ ] Y [ ] N
---------------- Deeper Set-Aside __(List Details)
County: ----------------
Allocation: Management Company:-------------
Pre-1990 (Rent based on -------------
number of persons) Contact Person: -------------
[ ] Multi-Family Elected to change
[ ] Elderly # Bedrooms Phone #: -------------
---Number of Post-1989 (Based on
Apartment Units number of Bedroom) Fax #: -------------
---Number of Prepared by: -------------
Exempt Units
---LIHTC Apartment Housing #
-----------------------------------------------------------------------------
Gross Annual
Unit Tenant Move-in # Of Inc. Set- # in Annual Income
# Name Date Bdrms % Aside Unit Income Limits
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QUARTERLY TAX CREDIT COMPLIANCE REPORT
Property Name:----------------------
(CONTINUED)
Annual Tenant Less
Recert. Income Income Assets Unit Rent Tenant
Date Qualified Verified Verified Rent Subsidy Payment
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QUARTERLY TAX CREDIT COMPLIANCE REPORT
Property Name:----------------------
(CONTINUED)
Tenant Tenant Overall
Utility Gross Maximum Rent Tenat
Allow. Rent Rent Qualified Eligible
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Exhibit H
TENANT TAX CREDIT COMPLIANCE AUDIT
Document Transmittal Checklist
Unit Number Property Name Date
Tenant Name Completed By:
Initial [ ] Annual [ ]
Check Box for Type of Certification Management Company
This Section For WNC Use Only
Check Documents Being Sent
Received. Reviewed
___Internal Checklist or worksheet [ ] [ ] ----------
___Initial - Rental Application/Rental Agreement [ ] [ ] ----------
___Initial - Questionnaire of Income/Assets [ ] [ ] ----------
___Recertification - Questionnaire of Income/Assets [ ] [ ] ----------
___Recertification - Addendum to Lease [ ] [ ] ----------
___Employment Verification [ ] [ ] ----------
___Employment Termination Verification [ ] [ ] ----------
___Military Verification [ ] [ ] ----------
___Verification of Welfare Benefits [ ] [ ] ----------
___Verification of Social Security Benefits [ ] [ ] ----------
___Verification of Disability Benefits [ ] [ ] ----------
___Unemployment Verification [ ] [ ] ----------
___Verification of Unemployment Compensation [ ] [ ] ----------
___Verification Worksmen Compensation [ ] [ ] ----------
___Retirement/Annuities Verification [ ] [ ] ----------
___Verification of Veterans Pension [ ] [ ] ----------
___Verification of Child Support [ ] [ ] ----------
___Verification of Alimony Support [ ] [ ] ----------
___Disposed of Assets Last 2 years [ ] [ ] ----------
___Real Estate [ ] [ ] ----------
___Investment [ ] [ ] ----------
___Assets Verifications (savings, stocks etc.) [ ] [ ] ----------
___Trusts/with Current Tax Return [ ] [ ] ----------
___Lump Sum Settlements [ ] [ ] ----------
___Notarized Affidavit of Support [ ] [ ] ----------
___Certification of Handicap [ ] [ ] ----------
___Notarized Self-Employed-Tax Return [ ] [ ] ----------
___Notarized statement of no income [ ] [ ] ----------
___Tenant Certification [ ] [ ] ----------
Exhibit H
This Section For WNC Use Only
YES NO
[ ] [ ] Are all required forms completed?
[ ] [ ] Are all required forms dated?
[ ] [ ] Did the Manager and Tenant sign all documents?
[ ] [ ] Third party verification of income completed?
[ ] [ ] Third party verification of assets completed?
[ ] [ ] Are verifications completed for all members 18 years and
over?
[ ] [ ] Did all the members of the household 18 yrs. and
[ ] [ ] over sign all documents?
[ ] [ ] Is lease completed with a minimum of six months/ SRO
monthly?
[ ] [ ] Addendum completed?
[ ] [ ] Tenant Certification completed?
[ ] [ ] Are all members of the household full-time students?
[ ] [ ] Is utility allowance correct?
[ ] [ ] Is correct income limit being used?
[ ] [ ] Is correct rent limit being used?
For tenants with no income
[ ] [ ] Was notarized statement of no income obtained with tax
return?
[ ] [ ] or Were all sources verified (AFDC, Unemployment,
Soc. Sec., Disability)?
Exhibit H
TAX CREDIT COMPLIANCE MONITORING:
ANNUAL CERTIFICATION
As General Partner of ▇▇▇▇▇▇▇ Meadow Associates, Ltd., I hereby certify
as to the following:
1. ▇▇▇▇▇▇▇ Meadow Associates, Ltd. owns a forty (40) unit project
("Apartment Housing") in Glenco, Etowah County, Alabama.
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
Alabama that the foregoing is true and correct.
Executed this ____ day of ___________ at _____________, ______________.
----------------------------
Exhibit H
Calculation of Debt Service Coverage
Month 1 Month 2 Month 3
------------ ------------ ------------
INCOME
Gross Potential Rent
Other Income
Vacancy Loss ------------ ------------ ------------
Adjusted Gross Income ------------ ------------ ------------
OPERATING EXPENSES
Utilities
Maintenance
Management Fee
Administration
Insurance
Real Estate Taxes
Other Expenses ------------ ------------ ------------
Total Operating Expenses ------------ ------------ ------------
Net Operating Income (1)
Accrual adjustments for:
R/E Taxes
Insurance
Tax/ Accounting
Other
Replacement Reserves
------------ ------------ ------------
Income for DSC Calculation ============ ============ ============
Stabilized Debt Service
------------ ------------ ------------
Debt Service Coverage (2)
------------ ------------ ------------
Please submit this form along with the following supporting documentation:
Monthly Financial Reports (income statement, balance sheet, general ledger and
rent rolls)
Operating Budget Copies of bank statements.
(1) This number should reconcile easily with the monthly financial statements.
(2) The ratio between the Income for DSC calculation and Stabilized Debt
Service. As example, a 1.15 DSC means that for every $1.00 of Stabilized Debt
Service required to be paid there must be $1.15 of Net Operating Income
available.
Exhibit H
EXHIBIT I
SURVEY REQUIREMENTS
The Survey shall satisfy the minimum standard detail requirements for
an ALTA/ACSM Land Title Survey, as established by ALTA, ACSM and NSPS in October
of 1999, including optional items 1 through 11 and 13, and shall show the items
listed below:
(a) A scale of measurement.
(b) A North arrow shall be shown.
(c) A legend to explain any symbols or abbreviations appearing on the
survey, and supplementary or exaggerated diagrams shall be provided as
necessary, for clarity.
(d) A point of beginning to form the basis for, or as used in, the
legal description of record of the property unless a lot and block legal
description is utilized. Measured and recorded distances from corners of parcels
to the nearest right of way lines of streets.
(e) The distances to the nearest intersecting street shall be
indicated. Names and widths of streets and highways abutting the property
surveyed and widths of rights of way shall be given. Indicate whether roads and
streets are publicly dedicated; note if not physically open.
(f) Notations of the names of adjoining owners whenever possible.
(g) The boundaries of the Apartment Housing and monuments placed (or
references to monuments found) at all major corners of the boundary of the
premises.
(h) The character of any and all evidence of possession shall be stated
and the location of such evidence shall carefully given in relation to both the
measured boundary lines and those established by the record.
(i) Location and dimensions (including height and gross floor area)of
all buildings, structures and other improvements situated on the Apartment
Housing (such as signs, parking areas, structures, swimming pools, etc.) the
number of square feet contained within the footprint of each building on the
Apartment Housing, and their locations defined by measurements perpendicular to
the Apartment Housing boundaries.
(j) Show the street address(es) of the improvements.
(k) The location and recording data for all easements (both those
burdening and benefiting the Apartment Housing), encroachments, set back and
building restriction lines, conflicts or protrusions from or onto adjoining
property, streets or alleys. (Fully depict any appurtenant easements, showing
all courses and distances.) Note any easements which cannot be located, and note
easements which appear on the Apartment Housing but which are not subject to any
recorded instrument.
(l) The character and location of all walls, buildings, fences and
other visible improvements within 5 feet of each side of the boundary lines
shall be noted.
(m) The location of driveways, alleys, access roads, sidewalks, curbs,
railroad tracks and railroad rights-of-way on or crossing the Apartment Housing.
(n) Observable evidence of cemeteries.
(o) The location of creeks, streams, rivers, lakes, ponds (retention or
otherwise) or other waterways that cross or form a boundary line of the
property, including the location of high and low water marks established by the
U.S. Army Corps of Engineers, where applicable.
(p) Vicinity map showing the Apartment Housing surveyed in reference to
nearby highway(s)or major street intersections(s).
(q) Flood zone designation.
(r) Land area by acreage and square feet.
(s) Identify and show, if possible, setback, height and floor space
area restrictions.
(t) Parking areas and, if striped, the striping and the number of
parking spaces (by category - full size, compact size, handicap reserved).
(u) Indication of access to a public way such as curb cuts, driveways
marked.
(v) Location of all utilities serving the Premises, including without
limitation:
(i) All manholes, catch basins, valve vaults, storm drains
or other surface indications of subterranean uses;
(ii) All wires and cables (including their function)
crossing the surveyed premises, all poles on or within ten feet of the surveyed
premises, and the dimensions of all cross wires or overhangs affecting the
surveyed premises; and
(iii) All utility installations on the surveyed premises
based upon information obtained from independent sources such as utility
companies or utility locating services.
(w) Any wetlands area(s), if known.
(x) The political subdivision, county, state and such other notations
as will accurately locate the property surveyed.
(y) Significant observations not otherwise disclosed.
SURVEYOR'S CERTIFICATE
I hereby certify to ▇▇▇▇▇▇▇ Meadow Associates, Ltd., 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 ▇▇▇▇▇▇ Development, Inc.("Developer") and
▇▇▇▇▇▇▇ Meadow Associates, Ltd., an Alabama 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 Glencoe, Etowah
County, Alabama, 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 forty (40) unit
low-income rental housing complex and other related improvements, which is
intended to qualify for federal low-income housing tax credits (the "Apartment
Housing").
C. Prior to the date of this Agreement Developer has performed
substantial development services with respect to the Apartment Housing as
specified in Section 2.3 of this Agreement. Developer has also agreed to oversee
the construction of the Apartment Housing until all construction work is
completed and to provide certain services relating thereto. The Parties
recognize and acknowledge that the Developer is, and has been, an independent
contractor in all services rendered to, and to be rendered to, the Owner
pursuant to this Development Fee Agreement.
D. Owner desires to commit its existing development agreement with
Developer into writing through this Development Fee Agreement for Developer's
services to manage, oversee, and complete development of the Apartment Housing.
Developer desires to commit its existing development agreement with Owner into
writing through this Development Fee Agreement and Developer is willing to
assign all development rights to the Apartment Housing to Owner, to undertake
performance of such development services, and to fulfill all obligations of the
Developer set forth in this Agreement, in consideration of Owner's restated
promise to pay to Developer the fee specified in this Agreement.
NOW THEREFORE, in consideration of the foregoing recitals and the
mutual promises and undertakings in this Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Owner and Developer agree as follows.
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 Apartment Housing.
"Construction Lender" means Regions Bank, which has committed to make a
loan to finance construction of the Apartment Housing.
"Construction Loan" means the loan to finance construction of the
Apartment Housing, made to Owner by the Construction Lender.
"Contractor" means Fyffe Construction Company Inc..
"Department" means the Alabama 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 ▇▇▇▇▇▇▇ Meadow Associates, Ltd., an Alabama limited
partnership.
"Tax Credits" means the low-income housing tax credits found in Section
42 of the Code, and all rules, regulations, rulings, notices and other
promulgations thereunder.
SECTION 2
ENGAGEMENT OF DEVELOPER; FEE; SERVICES
2.1 Engagement; Term. Owner hereby confirms the engagement of Developer
to act as developer of the Apartment Housing, and to perform the various
covenants and obligations of the Developer under this Agreement. Developer
hereby confirms and accepts such engagement and agrees to perform fully and
timely each and every one of its obligations under this Agreement. The term of
such engagement shall commence on the date hereof and subject to the pre-payment
provisions of Section 3 shall expire on December 31, 2012.
2.2 Development Fee. In consideration of Developer's prior activities
and Developer's agreement to provide development services during the term of
this Agreement, Owner agrees to pay the Developer a Development Fee in the
amount of $390,000 ("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 Apartment Housing. Such services (the "Prior Services") have included the
following.
(1) Services Rendered Prior to June 3, 2002.
(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 Apartment Housing.
(B) Developer has estimated the cost of
construction; determined the construction period; prepared a monthly-estimated
construction chart reflecting the construction services required each month;
and prepared a preliminary 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 Apartment Housing.
(E) Developer has placed its own capital at
risk in anticipation of the Apartment Housing
being constructed, leased and Tax Credits awarded.
(2) Other Prior Services.
(A) Developer has 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 Apartment Housing for Owner and shall provide Owner with information
requiring Owner's intervention to resolve construction issues. Owner shall allow
Developer full access to the Apartment Housing during the construction period.
Developer and Developer's agents shall perform their work in a manner that
minimizes interference with the management and operation of the Apartment
Housing.
(1) Developer shall exert its best efforts to ensure
that the Contractor performs its obligations
under the Construction Documents in a diligent and timely manner.
(2) Developer shall 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.
(6) Developer shall attend construction progress
meetings at the Apartment Housing site to monitor
construction progress and report to the Owner the outcome of those meetings.
(7) Developer shall review the Contractor's monthly
pay applications.
(8) Developer shall monitor the Contractor's progress
with respect to the approved Apartment Housing
schedule and keep the Owner informed of all pertinent Apartment Housing issues
and construction progress.
(9) Developer shall advise Owner with respect to
relations with engineers, architects, and other
construction professionals.
(10) Developer shall maintain relations with the City
of Alabama and other governmental authorities
having jurisdiction over development of the Apartment Housing 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 Apartment Housing, including but
not limited to, all tangible and intangible rights arising with respect to the
name ▇▇▇▇▇▇▇ Meadow Associates, Ltd., the design of the Apartment Housing, the
plans and specifications for the Apartment Housing and all rights arising under
the agreements with Apartment Housing architects, engineers and other Apartment
Housing design and construction professionals.
SECTION 3
DEVELOPMENT FEE PAYMENTS
3.1 Prior Services Rendered. The Parties acknowledge and agree that
Developer has earned the sum of $78,000 for services rendered prior to the June
3, 2002, that said amount is reasonable in relation to the work performed, is
fully earned as of that date and said amount shall be paid in any event
notwithstanding the termination of this Agreement. The Parties further
acknowledge and agree that the Owner has accrued the Development Fee of $78,000,
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, 2013. 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 5-year Treasury money market 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 to the Developer any unpaid principal and accrued interest on
the eleventh anniversary of the Completion Date.
3.3 Accrual of Development Fee. The Development Fee shall be earned no
later than the end of the first year of the tax credit period referenced in
Section 42(f)(1) of the Code. Once any portion of the Development Fee has been
earned, it shall be payable by the Partnership in all events.
SECTION 4
TERMINATION
Neither Party to this Agreement shall have the right to terminate this
Agreement prior to the expiration of the term without cause. Owner may terminate
this Agreement without further liability, for cause, which shall mean any one of
the following:
(a) a material breach by Developer of its obligations under
this Agreement that is not cured within 30 days after notice thereof (or, as to
any non-monetary obligations that is not reasonably capable of cure within 30
days, and provided that cure is commenced within 10 days of notice and
diligently pursued thereafter to completion, within such time as may reasonably
be necessary to complete such cure);
(b) a fraudulent or intentionally incorrect report by
Developer to Owner with respect to the Apartment Housing; or
(c) any intentional misconduct or gross negligence by
Developer with respect to its duties under this Contract.
Upon proper termination of this Agreement by Owner pursuant to this
Section 4, all rights of Developer to receive unearned Development Fees pursuant
to this Agreement with respect to services not yet performed shall terminate.
Developer shall receive the full Development Fee for Prior Services and shall
receive a portion of the Development Fee for Future Services based on the
percentage of Completion of Construction of the Apartment Housing at the time of
termination. Nothing in this Section 4 shall be deemed to prevent Owner from
bringing an action against Developer to recover fully all damages resulting from
any of the causes set forth in paragraphs (a), (b) or (c) above, or to prevent
Owner from contending in any action or proceeding that the Future Services were
not earned by Developer.
SECTION 5
GENERAL PROVISIONS
5.1 Notices. Notices required or permitted to be given under this
Agreement shall be in writing sent by overnight courier or mail, postage
prepaid, to the Parties at the following addresses, or such other address as is
designated in writing by the Party, provided, however, that any written
communication containing such information sent to a Party actually received by a
Party shall constitute notice for all purposes of this Agreement.
If to Developer: ▇▇▇▇▇▇ Development, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
If to Owner: ▇▇▇▇▇▇▇ Meadow Associates, Ltd.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
5.2 Interpretation.
(a) Headings. The section headings in this Agreement are
included for convenience only; they do not give full notice of the terms of any
portion of this Agreement and are not relevant to the interpretation of any
provision of this Agreement.
(b) Relationship of the Parties. Neither Party hereto shall be
deemed an agent, partner, joint venturer, or related entity of the other by
reason of this Agreement and as such neither Party may enter into contracts or
agreements which bind the other Party.
(c) Governing Law. The Parties intend that this Agreement
shall be governed by and construed in accordance with the laws of the state of
Alabama applicable to contracts made and wholly performed within Alabama by
persons domiciled in Alabama.
(d) Severability. Any provision of this Agreement that is
deemed invalid or unenforceable shall be ineffective to the extent of such
invalidity or unenforceability, without rendering invalid or unenforceable the
remaining provisions of this Agreement.
5.3 Integration; Amendment. This Agreement constitutes the entire
agreement of the Parties relating to the subject matter hereof. There are no
promises, terms, conditions, obligations, or warranties other than those
contained herein. This Agreement supersedes all prior communications,
representations, or agreements, verbal or written, among the Parties relating to
the subject matter hereof. This Agreement may not be amended except in writing.
5.4 Attorney' Fees. If any suit or action arising out of or related to
this Agreement is brought by any Party to any such document, the prevailing
Party shall be entitled to recover the costs and fees (including without
limitation reasonable attorneys' fees and costs of experts and consultants,
copying, courier and telecommunication costs, and deposition costs and all other
costs of discovery) incurred by such Party in such suit or action, including
without limitation to any post-trial or appellate proceeding.
5.5 Binding Effect. This Agreement shall bind and inure to the benefit
of, and be enforceable by, the Parties hereto and their respective successors,
heirs, and permitted assigns.
5.6 Assignment. Neither Party may assign this Agreement without the
consent of the other Party. No assignment shall relieve any Party of liability
under this Agreement unless agreed in writing to the contrary.
5.7 Third-Party Beneficiary Rights. No person not a Party to this
Agreement is an intended beneficiary of this Agreement, and no person not a
Party to this Agreement shall have any right to enforce any term of this
Agreement. Notwithstanding the Parties acknowledge that WNC Holding, LLC, shall
have the right to enforce any term of this Agreement.
5.8 Related Parties. The Parties acknowledge that the Owner and
Developer are related parties under Code Section 267 and that Owner is an
accrual basis taxpayer. As such, the Parties agree and consent that each and
every year during the term of this Agreement that Owner accrues any or all of
the principal and/or interest of the Development Fee that the Developer (whether
or not an accrual basis taxpayer) will include an equal amount in Developer's
income tax return for that year.
5.9 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one agreement binding
on all the Parties, notwithstanding that all Parties are not signatories to the
same counterpart.
5.10 Further Assurances. Each Party agrees, at the request of the other
Party, at any time and from time to time after the date hereof, to execute and
deliver all such further documents, and to take and forbear from all such
action, as may be reasonably necessary or appropriate in order more effectively
to perfect the transfers or rights contemplated herein or otherwise to confirm
or carry out the provisions of this Agreement.
5.11 Mandatory Arbitration. Any person enforcing this Agreement may
require that all disputes, claims, counterclaims, and defenses ("Claims")
relating in any way to this Agreement or any transaction of which this Agreement
is a part (the "Transaction"), be settled by binding arbitration in accordance
with the Commercial Arbitration Rules of the American Arbitration Association
and Title 9 of the U.S. Code. All claims will be subject to the statutes of
limitation applicable if they were litigated.
If arbitration occurs, one neutral arbitrator will decide all issues
unless either Party's Claim is $100,000 or more, in which case three neutral
arbitrators will decide all issues. All arbitrators will be active Alabama 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]
IN WITNESS WHEREOF, the Parties have caused this Development Fee Agreement
to be executed as of ___________________, 2002.
DEVELOPER:
▇▇▇▇▇▇ Development Inc.
By: ______________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇,
Title:
OWNER:
▇▇▇▇▇▇▇ Meadow Associates, Ltd.
By: Eagle Creek Partners Inc.,
General Partner
By: ______________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇,
President
______________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇,
General Partner
[Development Fee Agreement]
Exhibit A
Legal Description
PARCEL ONE:
COMMENCE AT THE NORTHEAST CORNER OF THE NORTHWEST 1/4 OF THE SOUTHEAST 1/4, IN
THE ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇ ▇▇▇▇; THENCE RUN SOUTH 02 DEGREES, 40
MINUTES EAST, ALONG THE EAST LINE THEREOF, 18.00 FEET TO A POINT IN THE SOUTH
LINE OF MARKER ROAD (30 FT. RW), WHICH IS THE POINT OF BEGINNING OF THE PARCEL
OF LAND HEREIN DESCRIBED; THENCE FROM SAID POINT OF BEGINNING, CONTINUE SOUTH 02
DEGREES 40 MINUTS EAST, ALONG SAID EAST LINE OF NORTHWEST 1/4 OF SOUTHEAST 1/4
41.36 FEET TO A POINT IN CONTOUR ELEVATION 517 FT. MSL; THENCE RUN THE FOLLOWING
BEARINGS AND DISTANCES ALONG SAID CONTOUR 517; SOUTH 79 DEGREES 32 MINUTES WEST,
24.58 FEET; SOUTH 21 DEGREES 45 MINUTES WEST, 54.56 FEET; SOUTH 48 DEGREES 49
MINUTES EAST, 57.29 FEET; SOUTH 33 DEGREES 13 MINUTES WEST, 105.72 FEET; SOUTH
59 DEGREES 47 MINUTES WEST 43.11 FEET; SOUTH 08 DEGREES 31 MINUTES WEST, 92.86
FEET AND SOUTH 60 DEGREES 02 MINUTES WEST, 41.16 FEET TO A POINT; THENCE RUN
SOUTH 87 DEGREES 28 MINUTES WEST, 589.63 FEET TO A POINT; THENCE RUN NORTH 02
DEGREES 40 MINUTES WEST, 350.00 FEET TO A POINT IN AFORESAID SOUTH LINE OF
MARKER ROAD; THENCE RUN NORTH87 DEGREES 28 MINUTES EAST ALONG SAID SOUTH LINE,
750.00 FEET TO THE POINT OF BEGINNING, CONTAINING 5.55 ACRES, AND EMBRACING
PROTIONS OF AFORESAID NORTHWEST 1/4 OF SOUTHEAST 1/4, IN SECTION 24, TOWNSHIP 12
SOUTH, RANGE ▇ ▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇.
PARCEL TWO:
A PARCEL OF LAND DESCRIBED AS BEGINNING AT THE SOUTHWEST ▇▇▇▇▇▇ ▇▇ ▇▇▇ #▇, ▇▇
▇▇▇▇▇ "▇", ▇▇ ▇▇▇▇▇▇▇▇▇ SUBDIVISION; THENCE FROM SAID BEGINNING ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇ ▇▇ DEGREES 28 MINUTES EAST, ALONG THE SOUTH LINE THEREOF, 50.00 FEET
TO THE SOUTHEAST CORNER OF SAID LOT #7; THENCE RUN NORTH 02 DEGREES 11 MINUTES
WEST, ALONG THE EAST LINE THEREOF, 191.71 FEET TO A POINT IN THE SOUTH LINE OF
COLLEGE PARKWAY; THENCE RUN SOUTH 80 DEGREES 15 MINUTES WEST, ALONG SAID SOUTH
LINE OF COLLEGE PARKWAY, 50.44 FEET TO A POINT IN THE WEST LINE OF SAID LOT #7;
THENCE RUN SOUTH 02 DEGREES 11 MINUTES EAST, ALONG SAID WEST LINE, 185.37 FEET
TO THE POINT OF BEGINNING, CONTAINNING 0.22 ACRES, MORE OR LESS, AND EMBRACING
PORTIONS OF SAID LOT #7, IN BLOCK "C" OF GRAYFIELD SUBDIVISION, AS RECORDED IN
PLAT BOOT "C", PAGE 221, PROBATE OFFICE, ETOWAH COUNTY, ALABAMA, AND LYING IN
GLENCOE, ETOWAH COUNTY, ALABAMA.
DEVELOPMENT FEE GUARANTY AGREEMENT
FOR VALUE RECEIVED, the receipt and sufficiency of which are hereby
acknowledged, and in consideration of the agreement of ▇▇▇▇▇▇ Development, Inc.
(the "Developer") to permit deferral of the $390,000 due from ▇▇▇▇▇▇▇ Meadow
Associates, Ltd., an Alabama 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 represents and warrants that the
extension of credit or other financial accommodations by the Developer to Debtor
will be to the interest and advantage of the undersigned, and acknowledges that
this 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.
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 Alabama and
shall be construed and governed under Alabama 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
Alabama and/or to the jurisdiction and venue of any United States District Court
in the State of Alabama having jurisdiction over any action or judicial
proceeding brought to enforce, construe or interpret this Guaranty. Guarantor
agrees to stipulate in any such proceeding that this Guaranty is to be
considered for all purposes to have been executed and delivered within the
geographical boundaries of the State of Alabama, even if it was, in fact,
executed and delivered elsewhere.
[Signatures begin on the following page]
IN WITNESS WHEREOF, the undersigned have hereunto caused this Development
Fee Guaranty Agreement to be executed as of ______________________, 2002.
WITNESS: GUARANTOR:
______________________ ______________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇
Address for Guarantor:
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
______________________
Notary Public
My Commission Expires: ____________________
______________________
(NOTARY SEAL)
DEVELOPMENT, CONSTRUCTION, AND
OPERATING BUDGET AGREEMENT
This Development, Construction and Operating Budget Agreement
("Agreement") is entered into as of the date written below by and between
▇▇▇▇▇▇▇ Meadow Associates, Ltd., an Alabama limited partnership ("Owner"), Eagle
Creek Partners Inc., a corporation, and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇, an individual
("General Partner"), WNC Holding, LLC, a California limited liability company
(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 5.77 acres of land in Glencoe, Etowah County,
Alabama (the "Real Property").
B. Owner intends to develop on the Real Property a forty (40) unit
low-income rental housing complex and other related improvements for the
elderly, which is intended to qualify for federal low-income housing tax credits
(the "Apartment Housing").
C. On the even date herewith a partnership agreement for ▇▇▇▇▇▇▇ Meadow
Associates, Ltd. ("Partnership Agreement") was entered into by and Eagle Creek
Partners Inc. and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇ as the general partner ("General
Partner"), WNC Holding, LLC, as the limited partner, and WNC Housing, L.P. as
the special limited partner (the Partnership Agreement is incorporated herein by
this reference as if the same were reproduced in full and any capitalized terms
not defined in this Agreement shall have the meaning as defined in the
Partnership Agreement).
D. The Parties recognize and acknowledge that the final construction
cost determination involves substantial negotiations with lenders, contractors
and governmental authorities.
E. The Parties recognize and acknowledge that a final operating budget
involves substantial negotiations with lenders and governmental authorities.
F. Limited Partner's and Special Limited Partner's decision to execute
the Partnership Agreement is based, in part, on their acceptance of the sources
of funds available to develop the Apartment Housing, the cost of construction to
build the Apartment Housing and the operating budget necessary to provide a
positive Debt Service Coverage.
Now Therefore, in consideration of the foregoing recitals which are a
part of this Agreement, the mutual promises and undertakings in this Agreement,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Parties agree as follows.
1. Source of Funds. Attached hereto as Exhibit A and incorporated
herein by this reference is the Apartment Housing Source of Funds. The Source of
Funds have been specified in the Partnership Agreement as the Construction Loan,
the Mortgage, the Capital Contribution of the General Partner, the Capital
Contribution of the Limited Partner and the Capital Contribution of the Special
Limited Partner. Unless expressly permitted in the Partnership Agreement,
Consent of the Special Limited Partner is required for any change to the Source
of Funds.
2. Development Budget. Attached hereto as Exhibit B and incorporated
herein by this reference is the Development Budget in an amount equal to
$2,993,490. Owner acknowledges and represents that the attached Development
Budget includes the total costs and expenses to acquire, develop and construct
the Real Property and the Apartment Housing.
3. Construction Proforma. Attached hereto as Exhibit C and incorporated
herein by this reference is the Construction Proforma. Owner acknowledges and
represents that the attached Construction Proforma has been reviewed by and
approved by the Construction Lender, Mortgage lender if applicable and any
governmental authorities if applicable. 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: Eagle Creek Partners Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
To the General Partner: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
To the Limited Partner: WNC Holding, LLC
c/o WNC & Associates, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
To the Special Limited Partner: WNC Housing, L.P.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
6. Successors and Assigns. All the terms and conditions of this
Agreement shall be binding upon and inure to the benefit of the successors and
assigns of the Parties.
7. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and said counterparts
shall constitute but one and the same instrument which may sufficiently be
evidenced by one counterpart.
8. Captions. Captions to and headings of the sections of this Agreement
are solely for the conveniences of the Parties, are not a part of this
Agreement, and shall not be used for the interpretation or determination of the
validity of this Agreement or any provision hereof.
9. Saving Clause. If any provision of this Agreement, or the
application of such provision to any Person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to Persons or circumstances other than those as to which it is held invalid,
shall not be affected thereby.
10. Governing Law. This Agreement and its application shall be governed
by the laws of Alabama.
11. Attorney's Fees. If a suit or action is instituted in connection
with an alleged breach of any provision of this Agreement, the prevailing Party
shall be entitled to recover, in addition to costs, such sums as the court may
adjudge reasonable as attorney's fees, including fees on any appeal.
[Signatures begin on the following page]
In Witness Whereof, this Development, Construction and Operating Budget
Agreement is made and entered into as of _______________, 2002.
GENERAL PARTNER:
Eagle Creek Partners Inc.
By: _________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇,
President
______________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇
LIMITED PARTNER:
WNC Holding, LLC
By: WNC & Associates, Inc.,
Managing Member
By: _________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Executive Vice President
SPECIAL LIMITED PARTNER:
WNC Housing, L.P.
By: WNC & Associates, Inc.,
General Partner
By: ______________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Executive Vice President
[Development, Construction, and Operating Budget Agreement]
Exhibit A
Source of Funds
[Development, Construction, and Operating Budget Agreement]
Exhibit B
Development Budget
[Development, Construction, and Operating Budget Agreement]
Exhibit C
Construction Proforma
[Development, Construction, and Operating Budget Agreement]
Exhibit D
Construction Time Line
[Development, Construction, and Operating Budget Agreement]
Exhibit E
Operating Proforma
CONSTRUCTION COMPLETION, OPERATING DEFICIT, AND
TAX CREDIT GUARANTY AGREEMENT
This Construction Completion, Operating Deficit and Tax Credit Guaranty
Agreement ("Agreement") is entered into this 19th day of July, 2002, by and
between ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇ ("Guarantor"), ▇▇▇▇▇▇▇ Meadow Associates, Ltd. (the
"Partnership") and WNC Holding, LLC ("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 July 19, 2002 a partnership agreement for the Partnership
(the "Partnership Agreement") was entered into by and between Eagle Creek
Partners Inc. and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇, as the general partner ("General Partner")
and WNC Holding, LLC, as the limited partner (the Partnership Agreement is
incorporated herein by this reference as if the same were reproduced in full and
any capitalized terms not defined in this Agreement shall have the meaning as
defined in the Partnership Agreement).
WHEREAS, pursuant to the terms of the Partnership Agreement the General
Partner: (1) is required to guarantee the completion of construction of a forty
(40) unit low to moderate income housing complex located in Glencoe, Etowah
County, Alabama, as more fully described in Exhibit A attached hereto and
incorporated herein by this reference, and any and all improvements now or
hereafter to be constructed thereon ("Apartment Housing"); (2) is required to
guarantee the payment of all Operating Deficits incurred by the Partnership as a
result of the operations of the Apartment Housing; 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 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(d) and 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
Alabama and shall be construed and governed under Alabama 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 Etowah County in the State of Alabama and/or to the jurisdiction and
venue of any United States District Court in the State of Alabama having
jurisdiction over Etowah 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 Alabama, even if it was, in fact, executed and delivered elsewhere.
[Signatures begin on the following page]
IN WITNESS WHEREOF, this Construction, Operating Deficit and Tax Credit
Guaranty Agreement is made and entered into as of this __________ day of
____________________, 2002.
GUARANTOR:
______________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇
PARTNERSHIP:
▇▇▇▇▇▇▇ Meadow Associates, Inc.
By: Eagle Creek Partners Inc.,
General Partner
By: ____________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇,
President
______________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇,
General Partner
LIMITED PARTNER:
WNC Holding, LLC
By: WNC & Associates, Inc.,
Managing Member
By: ____________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Executive Vice President
[Construction Completion, Operating Deficit, and Tax Credit Guaranty Agreement]
Exhibit A
Legal Description
PARCEL ONE:
COMMENCE AT THE NORTHEAST CORNER OF THE NORTHWEST 1/4 OF THE SOUTHEAST 1/4, IN
THE ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇ ▇▇▇▇; THENCE RUN SOUTH 02 DEGREES, 40
MINUTES EAST, ALONG THE EAST LINE THEREOF, 18.00 FEET TO A POINT IN THE SOUTH
LINE OF MARKER ROAD (30 FT. RW), WHICH IS THE POINT OF BEGINNING OF THE PARCEL
OF LAND HEREIN DESCRIBED; THENCE FROM SAID POINT OF BEGINNING, CONTINUE SOUTH 02
DEGREES 40 MINUTS EAST, ALONG SAID EAST LINE OF NORTHWEST 1/4 OF SOUTHEAST 1/4
41.36 FEET TO A POINT IN CONTOUR ELEVATION 517 FT. MSL; THENCE RUN THE FOLLOWING
BEARINGS AND DISTANCES ALONG SAID CONTOUR 517; SOUTH 79 DEGREES 32 MINUTES WEST,
24.58 FEET; SOUTH 21 DEGREES 45 MINUTES WEST, 54.56 FEET; SOUTH 48 DEGREES 49
MINUTES EAST, 57.29 FEET; SOUTH 33 DEGREES 13 MINUTES WEST, 105.72 FEET; SOUTH
59 DEGREES 47 MINUTES WEST 43.11 FEET; SOUTH 08 DEGREES 31 MINUTES WEST, 92.86
FEET AND SOUTH 60 DEGREES 02 MINUTES WEST, 41.16 FEET TO A POINT; THENCE RUN
SOUTH 87 DEGREES 28 MINUTES WEST, 589.63 FEET TO A POINT; THENCE RUN NORTH 02
DEGREES 40 MINUTES WEST, 350.00 FEET TO A POINT IN AFORESAID SOUTH LINE OF
MARKER ROAD; THENCE RUN NORTH87 DEGREES 28 MINUTES EAST ALONG SAID SOUTH LINE,
750.00 FEET TO THE POINT OF BEGINNING, CONTAINING 5.55 ACRES, AND EMBRACING
PROTIONS OF AFORESAID NORTHWEST 1/4 OF SOUTHEAST 1/4, IN SECTION 24, TOWNSHIP 12
SOUTH, RANGE ▇ ▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇.
PARCEL TWO:
A PARCEL OF LAND DESCRIBED AS BEGINNING AT THE SOUTHWEST ▇▇▇▇▇▇ ▇▇ ▇▇▇ #▇, ▇▇
▇▇▇▇▇ "▇", ▇▇ ▇▇▇▇▇▇▇▇▇ SUBDIVISION; THENCE FROM SAID BEGINNING ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇ ▇▇ DEGREES 28 MINUTES EAST, ALONG THE SOUTH LINE THEREOF, 50.00 FEET
TO THE SOUTHEAST CORNER OF SAID LOT #7; THENCE RUN NORTH 02 DEGREES 11 MINUTES
WEST, ALONG THE EAST LINE THEREOF, 191.71 FEET TO A POINT IN THE SOUTH LINE OF
COLLEGE PARKWAY; THENCE RUN SOUTH 80 DEGREES 15 MINUTES WEST, ALONG SAID SOUTH
LINE OF COLLEGE PARKWAY, 50.44 FEET TO A POINT IN THE WEST LINE OF SAID LOT #7;
THENCE RUN SOUTH 02 DEGREES 11 MINUTES EAST, ALONG SAID WEST LINE, 185.37 FEET
TO THE POINT OF BEGINNING, CONTAINNING 0.22 ACRES, MORE OR LESS, AND EMBRACING
PORTIONS OF SAID LOT #7, IN BLOCK "C" OF GRAYFIELD SUBDIVISION, AS RECORDED IN
PLAT BOOT "C", PAGE 221, PROBATE OFFICE, ETOWAH COUNTY, ALABAMA, AND LYING IN
GLENCOE, ETOWAH COUNTY, ALABAMA.
CONSTRUCTION MONITORING AGREEMENT
This Construction Monitoring Agreement ("Agreement")is entered into as
of the date written below by and between ▇▇▇▇▇▇▇ Meadow Associates, Ltd., an
Alabama limited partnership ("Borrower"), Eagle Creek Partners Inc. and ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇ ▇▇, the general partner of Borrower ("General Partner"), Regions Bank
("Lender"), WNC Housing, L. P., a California limited partnership ("WNC") and
Regions Bank, the disbursement agent (the "Disbursement Agent"). Borrower,
General Partner, Lender, WNC and the Disbursement Agent may individually be
referred to as a "Party" and may collectively be referred to as the "Parties".
RECITALS
A. Borrower has acquired, or will acquire, the real property located in
Glencoe, Alabama ("Real Property") and intends to develop a forty (40) unit
apartment complex ("Improvements") which will qualify for federal low-income
housing tax credits.
B. Lender has agreed to provide construction financing to Borrower in
the amount of $2,177,190 for the acquisition of the Real Property and
construction of the Improvements (the "Construction Loan").
C. On July 19, 2002, WNC Holding, LLC, a California limited liability
company, was admitted as a limited partner of Borrower and WNC was admitted as
the special limited partner in accordance with the amended and restated
agreement of limited partnership of the Borrower (the "Partnership Agreement").
The Partnership Agreement provides, in part, for WNC Holding, LLC and WNC to
make capital contribution payments to the Borrower during the construction of
the Improvements in the aggregate amount of $296,286 (the "Equity Financing")
which will be deposited with the Disbursement Agent to be disbursed in
accordance with this Agreement. The Construction Loan and the Equity Financing
collectively shall be referred to as "Construction Funds".
D. The Parties have agreed upon a construction budget which specifies,
per line item, the work to be performed, the subcontractor performing the work
and the contract amount for the line-item work (the "Construction Budget") in
accordance with the approved plans and specifications (the "Plans and
Specifications"). The Construction Budget is attached hereto as Exhibit A and
incorporated herein by this reference.
E. Borrower entered into a construction contract with Fyffe
Construction Company Inc. ("Contractor") in the amount of $2,055,140 for the
construction of the Improvements in accordance with the Plans and
Specifications.
F. The Borrower and General Partner represent that the Construction
Funds are sufficient to acquire the Real Property and build the Improvements in
accordance with the Plans and Specifications and within the Construction Budget.
G. The Parties acknowledge that it is in their best interest to provide
for a process and procedure for the disbursement of the Construction Funds to
Borrower for the construction of the Improvements.
H. The Parties have agreed that the Disbursement Agent will serve as
the disbursement agent for the construction of the Improvements. As such, the
Disbursement Agent will establish a construction account in Borrower's name
("Construction Account") in which to hold, administer and disburse the
Construction Funds.
NOW THEREFORE, in consideration of the foregoing Recitals which are
made a part of this Agreement, 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.
ARTICLE I
DISBURSEMENT PROCEDURE
Section 1.1 Construction Reports. Prior to any disbursement of
Construction Funds the Borrower must submit to Disbursement Agent the following
information for review and approval:
(a) an original AIA Document G702 and G703 signed by the inspecting
architect and accompanied by a form of disbursement request;
(b) the name of each person to be paid, the amount to be paid to such
person and the work performed, or materials supplied, by that person for the
Improvements;
(c) documentation supporting the amount to be paid, including but not
limited to, original invoices, statements, receipts, delivery tickets, and the
like evidencing that the disbursement is for Improvement expenses;
(d) reconciliation of the items referenced in subsection (c) to the
line item in the Construction Budget;
(e) reconciliation of the sources and uses to determine that the
Construction Budget is in balance with the Construction Funds;
(f) lien releases, or waivers, from the Contractor and all
subcontractors which lien waivers shall cover all work since the date of the
last Contractor's requisition;
(g) certification by each contractor, subcontractor or vendor receiving
Construction Funds that there have been no changes to their scope of work and/or
increases in their contract or invoice amount; and
(h) a title insurance update (the documents referenced in this Section
1.1 shall collectively be referred to as the "Construction Reports").
Section 1.2 Inspector's Review. The Parties agree that Lender and WNC
will retain the services of an independent inspector to monitor the construction
of the Improvements. For purposes of this Agreement, independent inspector shall
mean a qualified architect, engineer or construction supervisor knowledgeable in
the construction and pricing of multifamily apartment complexes who may be an
employee of, or affiliated with, any of the Parties except the Borrower, and who
is not the design or inspecting architect of record for Borrower ("Inspector").
The initial Inspector shall be Clearwater Construction Consultants, Inc.
(a) The Inspector shall make regular visits to the job site, but in no
event less than once a month, to inspect the quality of the construction of the
Improvements, to determine the percentage of work completed as of the inspection
date, to determine the percentage of Construction Funds spent on the
Improvements as of the inspection date, to confirm that construction is
proceeding in accordance with the Plans and Specifications, and to perform any
other construction monitoring related tasks request by the Lender or WNC.
(b) Prior to the Inspector's visit to the job site, Borrower shall send
a copy of the monthly Construction Report to the Inspector.
(c) The Inspector will place Inspector's findings into a report. The
report, in part, will include the Inspector's observations on the job site, the
Inspector's review and approval or disapproval of the monthly Construction
Report and the Inspector's recommendation for disbursement or non-disbursement
of Construction Funds (the "Inspector's Report").
(d) Upon completion of the Inspector's Report, the Inspector will send
the report to the Disbursement Agent.
Section 1.3 Monitoring. Upon receipt of the Inspector's Report, the
Disbursement Agent will provide the Construction Reports and Inspector's Report
to Lender and WNC.
(a) Prior to the disbursement of funds from the Construction Account
for payment of the Improvements, Lender and WNC shall have 3 business days from
receipt of the Construction Report and Inspector's Report to approve or deny the
draw request.
(b) If approved, Lender and WNC shall send written confirmation of
their approval of the draw request to the Disbursement Agent within the
specified time period. Failure to respond within the time period shall be deemed
to be an approval of the draw request.
(c) The draw request may be denied by either Lender or WNC if there is
any material modifications to the Plans and Specifications, or the quality of
the work is called into question, or either Lender or WNC reasonably determines
that the Construction Funds are "out of balance" ("Construction Concern").
(d) If either Lender or WNC halts the disbursement of funds in
accordance with the previous paragraph, then said Party shall promptly call a
meeting to discuss the Construction Concern. Since time is of the essence, all
Parties, or their respective representatives or agents, will make themselves
available to discuss and resolve the Construction Concern at the earliest
opportunity, but in no event later than three working days from the notice to
call a meeting. Said meeting may be by telephone conference or face-to-face
meeting or a combination thereof. The Parties further agree that if the
particular Construction Concern is addressed in either the Construction Loan
documents or the Partnership Agreement then the resolution of the Construction
Concern as addressed therein shall prevail. The Parties further agree that if
there is a conflict between the Construction Loan documents and the Partnership
Agreement, then the Construction Loan documents shall prevail.
Section 1.4 Payment of Draw Request. Upon the Disbursement's Agent
receipt of the approval of the draw request in accordance with the preceding
section, the Disbursement Agent will pay the Contractor and subcontractors the
amount approved in the draw from the Construction Funds.
ARTICLE II
LOAN IN BALANCE
Section 2.1 Construction Financing In Balance. At the time of each
draw, construction of the Improvements and the financing thereof are "in
balance" whenever the amount of the undisbursed Construction Funds are
sufficient in WNC's reasonable judgment to pay all of the following sums: all
costs of construction to achieve a lien free completion of construction; all
costs of marketing, ownership, maintenance and leasing of the apartment units;
and all interest and all other sums accruing or payable under the Construction
Loan.
(a) Borrower acknowledges that the Construction Financing may become
"out of balance" in numerous ways, not all of which can be stated herein.
Borrower further acknowledges that the Construction Funds may become "out of
balance" from a shortage of funds in any single line item or category of the
cost breakdown, even if there are undisbursed Construction Funds in other line
items or categories. Undisbursed Construction Funds in one category or line item
may not be applied to another category or line item unless either the cost
breakdown allows such use (and only to the extent specifically allowed) or WNC
consents in writing to such use in each instance. Undisbursed Construction Funds
in the category of contractor's contingency/construction cost contingency may be
used to balance any "out of balance" line item which has been completed or may
be used to balance another "out of balance" line item with the approval of
Borrower, Lender and WNC. In addition, a surplus in any line item which has been
completed may be used to balance another "out of balance" line item with the
approval of Borrower, Lender and WNC.
(b) Whenever the Construction Funds are "out of balance," WNC and/or
Lender may make written demand on the General Partner to deposit the General
Partner's own funds into the Construction Account in an amount sufficient in
WNC's reasonable judgment to cause the Construction Funds to be `in balance."
General Partner must deposit immediately all funds required by Lender and/or
WNC. Also, if required by Lender and/or WNC, Borrower must submit, for Lender
and/or WNC's approval, a revised cost breakdown within 15 days after any such
demand.
(c) At any time, WNC or Lender may evaluate the sufficiency of
undisbursed Construction Funds allocated for payment of future interest,
exercising its reasonable judgment in light of: cost overruns or change orders;
and failure of the Improvements to be completed or leased as projected by
Borrower. Based on Lender's and/or WNC's evaluation of these data and
projections, the Construction Funds may be "out of balance." If this happens, at
its sole election and discretion, Lender and/or WNC may exercise their rights
under paragraph 2.1(b) above.
ARTICLE III
RETAINAGE
Disbursement Agent shall disburse the aggregate amount approved on each
draw request, less a 5% holdback, until such time as substantial completion of
the Improvements shall be achieved as evidenced by an AIA Certificate of
Substantial Completion duly executed by the inspecting architect and approved by
the Inspector. The retainage shall not be due and owing to the Contractor until
such time as:
(a) the terms and conditions of the construction contract between
Borrower and Contractor have been satisfied;
(b) the Borrower has submitted the draw forms and certificates of
substantial completion on AIA Document G702 and G703 properly executed by all
appropriate parties;
(c) Inspector, Lender and WNC have approved such draw request; and
(d) the title insurance company is willing to issue its endorsements of
title insurance as required by Lender and WNC showing a construction lien-free
title.
ARTICLE IV
DISBURSEMENT AGENT
Section 4.1 Authority to Act. During construction, the Disbursement
Agent shall act as the disbursement agent for Borrower, Lender and WNC in
connection with the receipt and disbursement of all Construction Funds for
construction and development cost referenced in the Construction Budget.
Section 4.2 Liens. Upon receiving specific written request from WNC,
Disbursement Agent shall, within ten (10) days after receiving such request,
notify Lender and WNC of any mechanics' or materialmens' liens of which it is
aware, provided however, that Disbursement Agent shall have no obligation
whatsoever to search the public records for any such liens or otherwise
determine whether any such liens exist or have been threatened. Any written
request by WNC pursuant to this Section 4.2 shall be ineffective unless and
until a copy of such request is also delivered to: ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ & White
LLP, Attn: ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇.
ARTICLE V
MISCELLANEOUS
Section 5.1 Modification to Plans and Specifications and Construction
Loan. Neither Borrower, Lender nor WNC can approve a change order to the Plans
and Specifications without the other's prior written consent, which consent
shall not be unreasonably withheld or delayed. For purposes of this Agreement, a
change order is an actual change in the Plans and Specifications which increases
or decreases the scope of work to be completed; e.g., the addition of a
previously unplanned laundry room. A change order is not an increase in the cost
of materials and should not be submitted for such purpose. Any increase in the
cost of labor or materials may cause the Construction Funds to be out of balance
thereby requiring the General Partner to pay for the increases in accordance
with Section 2.1 of this Agreement. Neither Borrower, Lender nor WNC can approve
an increase or decrease in the Construction Loan without the other's prior
written approval, which approval shall not be unreasonably withheld or delayed.
Section 5.2 Amendments. This Agreement may be amended only by written
consent of each of the Parties.
Section 5.3 Notices. Any and all notices, demands, requests, or other
communications required or permitted by this Agreement or by law to be served
on, given to, or delivered to any Party hereto by any other Party to this
Agreement shall be in writing and shall be deemed duly served, given, or
delivered when personally delivered to the Party or to an officer of the Party,
or in lieu of such personal delivery, when deposited in the United States mail,
first-class postage prepaid, certified, return receipt requested, delivered to
the following address:
WNC: WNC Housing, L.P
c/o WNC &Associates, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Lender: Regions Bank
▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Borrower: ▇▇▇▇▇▇▇ Meadow Associates, Ltd.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Disbursement Agent: Regions Bank
▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Section 5.4 Attorney's Fees. Should any litigation be commenced between
the Parties to this Agreement, the Party prevailing in such litigation shall be
entitled, in addition to such award, as a court may grant, a sum as a reasonable
attorneys fee.
Section 5.5 Governing Law. This Agreement shall be construed and
governed by the laws of the State of Alabama.
Section 5.6 Sole and Only Agreement. This Agreement constitutes the
sole and only agreement of the Parties relative to the subject matter herein and
correctly sets forth the rights, duties, and obligations of each to the other in
relation thereto as of its date.
Section 5.7 Necessary Acts. The Parties agree to perform all acts and
execute and deliver any documents that may be reasonably necessary to carry out
the provisions of this Agreement.
Section 5.8 Invalid Provisions. In the event that any provision of this
Agreement is found to be invalid or otherwise unenforceable under any applicable
law, such invalidity or unenforceability shall not render any other provision
contained herein invalid or unenforceable, and all such other provisions shall
be given full force and effect to the same extent as though the invalid and
unenforceable provision was not contained herein.
Section 5.9 Captions and Interpretation. Captions of this Agreement are
for convenience and reference only, and the words contained therein shall in no
way be held to explain, modify, amplify, or aid in the interpretation,
construction, or meaning of the provisions of this Agreement. The language and
all parts of this Agreement, in all cases, shall be construed in accordance with
their fair meaning as if prepared by all Parties to this Agreement and not
strictly for or against any Party to this Agreement.
Section 5.10 Governmental Rules and Regulations. The provisions of this
Agreement are subject to any and all present and future orders, rules and
regulations of any duly constituted authority having jurisdiction of the
transaction contemplated by the provisions of this Agreement.
Section 5.11 Further Assurances. Each Party to this Agreement hereby
agrees to take any and all action necessary, appropriate or advisable to execute
and discharge such Party's responsibilities and obligations created by the
provisions of this Agreement and to further effectuate and carry out the intents
and purposes of this Agreement and the transaction contemplated hereby.
Section 5.12 Number and Gender. Whenever the singular number is used in
this Agreement and, when required by the context, the same shall include the
plural, and vice versa; the masculine gender shall include the feminine and the
neuter genders, and vice versa; and the word "person" shall include corporation,
firm, partnership, or other form of association.
Section 5.13 Successors and Assigns. This Agreement and each of its
provisions shall be binding on the heirs, executors, administrators, successors,
and assigns of each of the Parties hereto. However, nothing contained in this
section shall be a consent to the assignment or delegation by any Party to this
Agreement of such Party's respective rights and obligations created by the
provisions of this Agreement.
Section 5.14 Reservation of Rights. The failure of any Party to this
Agreement at any time or times hereafter to require strict performance by the
other Party to this Agreement of any of the warranties, representations,
covenants, terms, conditions and provisions set forth in this Agreement shall
not waive, affect or diminish any right of such Party failing to require strict
performance to demand strict compliance and performance therewith and with
respect to any other provisions, warranties, terms, and conditions contained in
this Agreement, and any waiver of any default shall not waive or affect any
other default, whether prior or subsequent thereto, and whether the same or of a
different type. None of the representations, warranties, covenants, conditions,
provisions, and terms contained in this Agreement shall be deemed to have been
waived by any act or knowledge of either Party to this Agreement, such Party's
agents, officers, or employees and any such waiver shall be made only by an
instrument in writing, signed by the waiving Party and directed to the
non-waiving Party specifying such waiver, and each Party hereto reserves such
Party's rights to insist upon strict compliance herewith at all times.
Section 5.15 Concurrent Remedies. No right or remedy set forth in this
Agreement conferred on or reserved to the Parties to this Agreement is exclusive
of any other right or remedy set forth in this Agreement or by law or equity
provided or permitted; but each such right and remedy shall be cumulative of,
and in addition to, every other right and remedy set forth in this Agreement or
now or hereafter existing at law or in equity or by statute or otherwise, and
may be enforced concurrently therewith or from time to time. The termination of
this Agreement for any reason whatsoever shall not prejudice any right or remedy
which either Party to this Agreement may have, either at law, in equity, or
pursuant to the provisions of this Agreement.
Section 5.16 Consent to Jurisdiction. Any and all actions or
proceedings, at law or in equity, to enforce or interpret the provisions of this
Agreement may be litigated in courts having sites within the State of Alabama
and each Party to this Agreement hereby consents expressly to the jurisdiction
of any local, state or federal court located within the State of Alabama; and
consents that any service of process in such action or proceeding may be made by
personal service upon such Party wherever such Party may be then located, or by
certified or registered mail directed to such Party at such Party's last known
address.
Section 5.17 Consent to Agreement. By executing this Agreement the
Parties to this Agreement represent that such Parties have read or caused to be
read this Agreement in all particulars, and consent to the rights, conditions,
duties and responsibilities imposed upon such Parties as set forth in this
Agreement.
[Signatures begin on the following page]
WHEREFORE, the Parties hereto have executed this Construction Monitoring
Agreement on ____________________, 2002.
▇▇▇▇▇▇▇ Meadow Associates, Ltd.
By: Eagle Creek Partners Inc., its
General Partner
By: ____________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇,
President
____________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇,
General Partner
WNC Housing, L.P.
By: WNC &Associates, Inc.
General Partner
By: ____________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Executive Vice President
Regions Bank
By: ____________________
Name: ____________________
Title: ____________________
Regions Bank
By: ____________________
Name: ____________________
Title: ____________________
[Construction Monitoring Agreement]
Exhibit A
Construction Budget