Negotiating the Partnership Agreement Ben Applegate Rachel Goetz Hilary Jaffe 2019 Applegate & Thorne-Thomsen, P.C. Investor & Syndicator Boot Camp, September 9, 2019

General Principles for Negotiation/Working With Your Lawyer: WORK AS A TEAM: KNOW WHAT IS “LEGAL” VS. “BUSINESS”? OR BOTH? KNOW WHY YOU ARE NEGOTIATING WHAT YOU ARE NEGOTIATING WHO IS THE INVESTOR? (WHERE WILL THIS DEAL END UP?) EXPERIENCE OF AND WITH THE DEVELOPER

What Does Your Lawyer Need to get Started? Letter of Intent (blackline to form is helpful) Projections (and do a tax tech review) Core Due Diligence Organizational documents Loan documents/commitment letters Tax Credit Application Reservation and Carryover Real Estate Due Diligence

Capital Contributions Timing for Payments Debt Service Coverage Breakeven Operations Construction Completion Lender Estoppels Opinion Updates Generic delivery requirements Cost Certifications and Initial Tenant Files Title date downs (state specific)

Guarantee Obligations Construction completion/stabilization Operating Deficits Tax Credit Compliance Environmental Termination/Burn off provisions

Reserves (Replacement, Operating and Other) Initial capitalization Ongoing funding and replenishment Conditions for use (interplay with guarantees, consents, etc.)

Distributions Order of the Waterfall Incentive and administrative fees (from distributions or reserves) 10% savings language/overall cap on General Partner fees “Soft” loan repayments Tax considerations Qualified allocations Acquisition credits/related parties Historic or other credits

Year 15 Related Provisions Purchase Option and ROFR “Forced Sale” Provisions Investor Puts

Repurchase Obligations Cliff issues Timeframes Developer argument: they create a “back door” guaranty?

Adjusters Timing (early and late) Basis (upward and downward) Other Credits (historic, energy or state) 15 year credits Change in law and LP actions

Defaults/Remedies Materiality standards Fraud, gross negligence and willful misconduct Notice and cure Power of Attorney Consider GP Loans and Developer Fee Related party lenders/ground lessors Removal Rights

Transfers General Partners Death or incapacity Bankruptcy Change in control

Transfers (continued) Limited Partners Status of Capital Contributions Related party transfers Lender requirements

Representations and Warranties Materiality and Reasonableness Knowledge vs. Strict Liability Regulatory and compliance with laws issues Environmental Projections/Financial

Nonprofit considerations Limitations on remedies Non-profit set aside Tax exemptions Tax-exempt use property Special allocation issues Material Participation Right of First Refusal Choi/Urban Memo

Reporting Requirements Check with Asset Management Penalties

Ancillary Documents Development Agreement Guaranty Incentive Management Fee Agreement General Partner/Manager Pledge Purchase Option and ROFR Agreement

Thank you!