Exhibit 10.18
ALLOCATION AGREEMENT
NEW MARKETS TAX CREDIT PROGRAM
COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS FUND
ALLOCATEE: ROCKLAND TRUST COMMUNITY NMTC PROGRAM CONTROL NUMBER: 06NMA002322
DEVELOPMENT CORPORATION II
EMPLOYER IDENTIFICATION NUMBER: 841688578
ADDRESS:
288 Union Street
Rockland, MA 02370-1803
DATE OF APPLICABLE NOTICE OF ALLOCATION AUTHORITY: DATE OF NOTICE OF ALLOCATION:
July 15, 2005 and as amended March 10, 2006 April 28, 2006
ALLOCATEE'S FISCAL YEAR END: December 31
NMTC ALLOCATION AMOUNT: $45,000,000
By signing this Allocation Agreement and in consideration of the mutual
covenants, conditions and agreements hereinafter set forth, the parties hereto,
by their respective Authorized Representatives, agree that the NMTC Allocation
provided hereunder shall be administered pursuant to the Organization Specific
Terms and Conditions attached hereto as Schedule 1 and the General Allocation
Terms and Conditions, attached hereto as Schedule 2, and made a material part
hereof.
COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS FUND ROCKLAND TRUST COMMUNITY DEVELOPMENT CORPORATION II
By: By:
---------------------------------------------- -----------------------------------------------
Authorized Representative: Linda G. Davenport Authorized Representative: Edward Seksay
Title: Deputy Director for Policy and Programs Title: General Counsel
NMTC ALLOCATION EFFECTIVE DATE:
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THIS ALLOCATION AGREEMENT COMPRISES:
SCHEDULE 1 - ORGANIZATION SPECIFIC TERMS AND CONDITIONS
SCHEDULE 2 - GENERAL ALLOCATION TERMS AND CONDITIONS
SCHEDULE 3 - OPINION OF COUNSEL
SCHEDULE 1
ALLOCATEE: ROCKLAND TRUST COMMUNITY DEVELOPMENT CORPORATION II
CONTROL NO.: 06NMA002322
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NEW MARKETS TAX CREDIT PROGRAM
ORGANIZATION SPECIFIC TERMS AND CONDITIONS
----------
SCHEDULE 1
ALLOCATEE: ROCKLAND TRUST COMMUNITY DEVELOPMENT CORPORATION II
CONTROL NO.: 06NMA002322
THE PROVISIONS SET FORTH BELOW CORRESPOND TO THE SPECIFIED SECTIONS IN SCHEDULE
2 (GENERAL ALLOCATION TERMS AND CONDITIONS) OF THIS ALLOCATION AGREEMENT.
SECTION 3.2(A): ELIGIBLE ACTIVITIES
Investments in, or loans to, non-real estate QALICBs: X
Investments in, or loans to, QALICBs whose principal activities involve the
development or rehabilitation of real estate: X
Investments in, or loans to, other CDEs: X
Purchase of loans from other CDEs:
Financial Counseling and Other Services: X
SECTION 3.2(B): SERVICE AREA
STATE STATE FIPS COUNTY COUNTY FIPS
- ----- ---------- ----------------- -----------
MA 25 Barnstable County 25001
MA 25 Bristol County 25005
MA 25 Dukes County 25007
MA 25 Nantucket County 25019
MA 25 Norfolk County 25021
MA 25 Plymouth County 25023
RI 44 Entire State 44000
SECTION 3.2(C): SUBSIDIARY ALLOCATEES
Not Applicable
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SCHEDULE 1
ALLOCATEE: ROCKLAND TRUST COMMUNITY DEVELOPMENT CORPORATION II
CONTROL NO.: 06NMA002322
SECTION 3.2(D): UNRELATED ACTIVITIES
Unrelated Activities Clause: [X] Applicable [ ] Not Applicable
SECTION 3.2(F): FLEXIBLE PRODUCTS
Flexible Products Clause: [X] Applicable [ ] Not Applicable
SECTION 3.2(G): REQUIRED TRANSACTIONS
Not Applicable
SECTION 3.2(H): TARGETED DISTRESSED COMMUNITIES
Targeted Distressed Communities Clause: [X] Applicable [ ] Not Applicable
SECTION 3.2(I): LOAN PURCHASES INVESTMENT
Not Applicable
SECTION 3.2(J): QUALIFIED EQUITY INVESTMENT USAGE
Qualified Equity Investment Usage Percentage: 95%
SECTION 3.3(B): RESTRICTIONS
Restrictions Clause: [ ] Applicable [X] Not Applicable
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SCHEDULE 2
ALLOCATEE: ROCKLAND TRUST COMMUNITY DEVELOPMENT CORPORATION II
CONTROL NO.: 06NMA002322
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NEW MARKETS TAX CREDIT PROGRAM
GENERAL ALLOCATION TERMS AND CONDITIONS
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TABLE OF CONTENTS
Page
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I. Incorporation by Reference ........................................ 1
II. Definitions ....................................................... 1
2.1 Act .......................................................... 1
2.2 Affiliate .................................................... 1
2.3 Allocation Agreement ......................................... 1
2.4 Allocation Application ....................................... 1
2.5 Allocation Date .............................................. 1
2.6 Control ...................................................... 2
2.7 Equity Investment ............................................ 2
2.8 Financial Counseling and Other Services ...................... 2
2.9 Gulf Opportunity Zone ........................................ 2
2.10 Low-Income Community ......................................... 2
2.11 Metropolitan Area ............................................ 2
2.12 NMTC Allocation .............................................. 2
2.13 NMTC Program ................................................. 3
2.14 NMTC Program Income Tax Regulations .......................... 3
2.15 Notice of Allocation ......................................... 3
2.16 Qualified Active Low-Income Community Business ............... 3
2.17 Qualified Community Development Entity ....................... 3
2.18 Qualified Equity Investment .................................. 3
2.19 Qualified Low-Income Community Investment .................... 3
2.20 Reinvestment ................................................. 3
2.21 Repayment .................................................... 3
2.22 Service Area ................................................. 3
2.23 Subsidiary ................................................... 4
2.24 Subsidiary Allocatee ......................................... 4
2.25 Targeted Population .......................................... 4
2.26 Voting Securities ............................................ 4
III. The NMTC Allocation ............................................... 5
3.1 NMTC Allocation .............................................. 5
3.2 Authorized Uses of NMTC Allocation ........................... 5
3.3 Restrictions on the Use of NMTC Allocation ................... 9
3.4 Availability of NMTC Allocation .............................. 10
3.5 Notice to Taxpayers of Qualified Equity Investment ........... 10
IV. Representations and Warranties .................................... 11
4.1 Organization, Standing and Powers ............................ 11
4.2 Qualification ................................................ 11
4.3 Authorization; Consents ...................................... 11
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4.4 Execution and Delivery; Binding Agreement .................... 11
4.5 No Conflicts ................................................. 11
4.6 Litigation ................................................... 12
4.7 Compliance with Other Instruments ............................ 12
4.8 Disclosure ................................................... 12
4.9 Taxes; Debts; Bankruptcy ..................................... 12
4.10 Debarment, Suspension and Other Responsibility Matters ....... 12
4.11 Status as a CDE .............................................. 13
V. Conditions Precedent to NMTC Allocation ........................... 13
5.1 Performance .................................................. 13
5.2 Opinion of Allocatee Counsel ................................. 13
5.3 Representations and Warranties ............................... 13
5.4 Proceedings and Documents .................................... 13
VI. Covenants and Agreements of the Allocatee ......................... 13
6.1 Compliance with Government Requirements ...................... 13
6.2 Fraud, Waste, and Abuse ...................................... 14
6.3 Right to Inspect and Audit ................................... 14
6.4 Retention of Records ......................................... 14
6.5 Reports ...................................................... 15
6.6 Equal Credit Opportunity Act ................................. 16
6.7 Use of Allocation ............................................ 16
6.8 Maintain Existence as a CDE .................................. 16
6.9 Advise the Fund of Certain Material Events ................... 16
6.10 Disclosure to Potential Investors ............................ 17
6.11 Common Enterprises ........................................... 18
VII. Monitoring Fee .................................................... 18
7.1 Monitoring/Compliance Fee .................................... 18
VIII. Events of Default, Events of Recapture and Remedies ............... 18
8.1 Events of Default ............................................ 18
8.2 Events of Recapture .......................................... 19
8.3 Remedies ..................................................... 19
8.4 Referral to IRS .............................................. 20
8.5 No Waiver .................................................... 20
8.6 Prior Notice to Allocatee of Sanctions ....................... 20
8.7 Joint and Several Liability .................................. 21
IX. Miscellaneous ..................................................... 21
9.1 Notices ...................................................... 21
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9.2 Entire Agreement ............................................. 22
9.3 Assignment ................................................... 22
9.4 Successors ................................................... 22
9.5 Severability ................................................. 22
9.6 No Waiver .................................................... 22
9.7 Applicable Law ............................................... 22
9.8 Disclaimer of Relationships .................................. 22
9.9 Counterparts ................................................. 23
9.10 Headings ..................................................... 23
9.11 Amendments ................................................... 23
9.12 Survival of Representations and Warranties ................... 23
9.13 Termination .................................................. 23
9.14 Disclosure of Allocatee Reports by Fund ...................... 24
9.15 Compliance with Non-Discrimination Statutes .................. 24
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ARTICLE I
INCORPORATION BY REFERENCE
26 C.F.R. Part 1, section 1.45D-1, as from time to time amended, the Act
(as hereinafter defined), and any regulations for the NMTC Program which may be
later promulgated by the Fund, are incorporated by reference and given the same
force and effect as if set out in full text herein. In the event of any
inconsistency between 26 C.F.R. Part 1, section 1.45D-1, the Act, or any
applicable Fund regulations and the terms of this Allocation Agreement, and any
amendments thereto, the provisions of 26 C.F.R. Part 1, section 1.45D-1, the
Act, and the applicable Fund regulations shall govern.
ARTICLE II
DEFINITIONS
When used in this Allocation Agreement, the following terms shall have the
meanings specified below. Capitalized terms used but not defined herein shall
have the respective meanings assigned to them in the Act and/or the NMTC Program
Income Tax Regulations (as hereinafter defined).
2.1 Act. "Act" shall mean Section 121 of the Community Renewal Tax Relief Act of
2000, which includes Section 45D of the Internal Revenue Code (IRC) as enacted
by section 1 (a)(7) of the Consolidated Appropriations Act, 2001, Pub. L. No.
106-554 (December 21, 2000).
2.2 Affiliate. "Affiliate" shall mean any legal entity that Controls, is
Controlled by, or is under common Control with the Allocatee.
2.3 Allocation Agreement. "Allocation Agreement" or "Agreement" shall mean this
NMTC Program Allocation Agreement between the Fund and the Allocatee and
Subsidiary Allocatee, as the case may be, including the Organization Specific
Terms and Conditions (Schedule 1) and the General Allocation Terms and
Conditions (Schedule 2) and any attachments hereto, as such Agreement may, from
time to time, be amended in accordance with its terms.
2.4 Allocation Application. "Allocation Application" or "Application" shall mean
the NMTC Program Application Form, together with any permitted attachments
submitted (either in electronic or hard-copy format) by the Allocatee to the
Fund, in response to the Notice of Allocation Availability (NOAA) inviting
applications for the NMTC Program that was published in the Federal Register on
July 15, 2005 and as amended March 10, 2006.
2.5 Allocation Date. "Allocation Date" shall mean the date, as determined by the
Fund, that the Allocatee has returned to the Fund an executed copy of this
Allocation Agreement along with an acceptable opinion of counsel as set forth in
Attachment A attached hereto. Once the Fund has determined the Allocation Date,
the Fund will insert such date on the signature page of the
Allocation Agreement and provide the Allocatee with notification of the
Allocation Date and a copy of the signature page.
2.6 Control. "Control" shall mean:
(a) Ownership, control, or power to vote more than 50 percent of the
outstanding shares of any class of Voting Securities of any entity,
directly or indirectly or acting through one or more other persons;
(b) Control in any manner over the election of a majority of the directors,
trustees, general partners, managing members, managers (or individuals
exercising similar functions) of any other entity; or
(c) Power to exercise, directly or indirectly, a controlling influence over
the management policies or investment decisions of another entity, as
determined by the Fund.
For purposes of this Allocation Agreement, the term "Control" does not include
an investor's contractual right to remove a general partner, managing member, or
manager of an Allocatee for cause.
2.7 Equity Investment. "Equity Investment" shall mean pursuant to IRC Section
45D(b)(6) and 26 C.F.R. 1.45D-1(c)(2), any stock (other than nonqualified
preferred stock as defined in IRC Section 351(g)(2)) in an entity that is a
corporation and any capital interest in an entity that is a partnership for
federal tax purposes.
2.8 Financial Counseling and Other Services. "Financial Counseling and Other
Services" shall mean, pursuant to 26 C.F.R. 1.45D-1(d)(7), advice provided by a
Qualified Community Development Entity relating to the organization or
operation of a trade or business.
2.9 Gulf Opportunity Zone. "Gulf Opportunity Zone" or "GO Zone" shall mean that
portion of the Hurricane Katrina disaster area determined by the President to
warrant individual or individual and public assistance from the Federal
Government under the Robert T. Stafford Disaster Relief and Emergency Assistance
Act by reason of Hurricane Katrina. The Hurricane Katrina disaster area is an
area with respect to which a major disaster has been declared by the President
before September 14, 2005, under section 401 of the Gulf Opportunity Zone Act of
2005 (Pub. L. 109-135) by reason of Hurricane Katrina.
2.10 Low-Income Community. "Low-Income Community" shall mean any area as defined
in accordance with IRC Section 45D(e).
2.11 Metropolitan Area. "Metropolitan Area" shall mean an area designated as
such by the Office of Management and Budget pursuant to 44 U.S.C. 3504(e) and 31
U.S.C. 1104(d) and Executive Order 10253 (3 CFR 1949-1953 Comp., p.758), as
amended.
2.12 NMTC Allocation. "NMTC Allocation" shall mean an allocation of tax credit
authority pursuant to the NMTC Program.
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2.13 NMTC Program. "NMTC Program" shall mean the program authorized by the Act
and implemented pursuant to guidance published by the Fund at 66 Federal
Register 21846 and 66 Federal Register 65806, the NMTC Program Income Tax
Regulations (as hereinafter defined) promulgated by the Internal Revenue
Service, and applicable Notice of Allocation Availability.
2.14 NMTC Program Income Tax Regulations. "NMTC Program Income Tax Regulations"
shall mean the regulations promulgated by the Internal Revenue Service at 26
C.F.R. 1.45D-1, together with any amendment or interpretation of those
regulations as may be promulgated by the Internal Revenue Service through
guidance published in the Internal Revenue Bulletin or the Federal Register,
which provide guidance for taxpayers claiming the New Markets Tax Credit under
IRC Section 45D.
2.15 Notice of Allocation. "Notice of Allocation" shall mean a notification to
the Allocatee from the Fund that informs the Allocatee that it has been approved
by the Fund to receive a NMTC Allocation subject to the terms and conditions set
forth in the Notice of Allocation.
2.16 Qualified Active Low-Income Community Business. "Qualified Active
Low-Income Community Business" or "QALICB" shall mean any corporation (including
a nonprofit corporation), partnership or other business that meets the
requirements set forth in IRC Section 45D(d)(2) and 26 C.F.R. 1.45D-1(d)(4).
2.17 Qualified Community Development Entity. "Qualified Community Development
Entity" or "CDE" shall mean any domestic corporation or partnership, for Federal
tax purposes, certified as a CDE by the Fund pursuant to IRC Section 45D(c).
2.18 Qualified Equity Investment. "Qualified Equity Investment" shall mean an
Equity Investment in a CDE that meets the requirements of IRC Section 45D(b) and
26 C.F.R. 1.45D-1(c).
2.19 Qualified Low-Income Community Investment. "Qualified Low-Income Community
Investment" or "QLICI" shall have the same meaning as set forth in IRC Section
45D(d) and 26 C.F.R. 1.45D-1(d).
2.20 Reinvestment. "Reinvestment" shall mean investment of QLICI Repayment(s)
into QLICIs.
2.21 Repayment. "Repayment" shall mean any QLICI equity capital or loan
principal returned or repaid to the Allocatee by a QLICI recipient.
2.22 Service Area. "Service Area" shall mean, for the purposes of this
Allocation Agreement, the geographic area encompassing Low-Income Communities in
which the Allocatee is authorized to make Qualified Low-Income Community
Investments using the proceeds of Qualified Equity Investments. The Allocatee's
authorized Service Area is set forth in Section 3.2(b) of this Allocation
Agreement.
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2.23 Subsidiary. "Subsidiary" shall mean any legal entity that is owned or
Controlled directly or indirectly by the Allocatee. This term includes series
funds, which are separate investment funds Controlled by the Allocatee.
2.24 Subsidiary Allocatee. "Subsidiary Allocatee" shall mean a Subsidiary of the
Allocatee to which the Fund has authorized the Allocatee to transfer all or a
portion of its NMTC Allocation, pursuant to Section 3.2(c) of this Allocation
Agreement. A Subsidiary Allocatee must be a CDE and must agree to abide by all
of the terms and conditions contained in this Allocation Agreement as such terms
and conditions apply to the Allocatee. In addition, the Allocatee must, at a
minimum, at all times maintain a controlling influence over the investment
decisions of the Subsidiary Allocatee.
2.25 Targeted Population. "Targeted Population," as defined in 12 U.S.C.
4702(20) and related CDFI Fund and IRS Guidance documents, shall mean
individuals, or an identifiable group of individuals, including an Indian tribe,
who (A) are low-income persons; or (B) otherwise lack adequate access to loans
or equity investments.
2.26 Voting Securities. "Voting Securities" shall mean (a) shares of common or
preferred stock, general or limited partnership shares or interests, or similar
interests if the shares or interest, by statute, charter, or in any manner,
entitle the holder:
(i) To vote for or select directors, trustees, or partners (or persons
exercising similar functions of the issuing company); or
(ii) To vote on or to direct the conduct of the operations or other
significant policies of the issuing company.
(b) Nonvoting shares. Preferred shares, limited partnership shares or
interests, or similar interests are not Voting Securities if:
(i) Any voting rights associated with the shares or interest are limited
solely to the type customarily provided by statute with regard to
matters that would significantly and adversely affect the rights or
preference of the security or other interest, such as the issuance of
additional amounts or classes of senior securities, the modification
of the terms of the security or interest, the dissolution of the
issuing company, or the payment of dividends by the issuing company
when preferred dividends are in arrears;
(ii) The shares or interest represent an essentially passive investment or
financing device and do not otherwise provide the holder with Control
over the issuing company; and
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(iii) The shares or interest do not entitle the holder, by statute,
charter, or in any manner, to select or to vote for the selection of
directors, trustees, or partners (or persons exercising similar
functions) of the issuing company.
ARTICLE III
THE NMTC ALLOCATION
3.1 NMTC Allocation. Subject to all of the terms and conditions hereof and in
reliance upon all representations, warranties, assurances, certifications and
agreements contained herein, the Fund hereby agrees to allocate to the Allocatee
and the Allocatee hereby agrees to accept from the Fund an NMTC Allocation. The
amount of the NMTC Allocation represents the amount of Qualified Equity
Investments which may be issued by the Allocatee, and as to which NMTCs may be
claimed. If any of the conditions specified herein or in any document connected
herewith, including the Notice of Allocation, have not been fulfilled to the
satisfaction of the Fund, the Fund will, in its sole discretion, elect not to
effectuate the NMTC Allocation until such time as said conditions shall be
fulfilled to the satisfaction of the Fund. Once the Fund has determined that the
conditions required herein, including the Notice of Allocation, have been met
and the Allocatee has returned to the Fund an executed copy of the Allocation
Agreement along with an acceptable opinion of counsel, the Fund will set the
Allocation Date. This Allocation Agreement will be effective as of the
Allocation Date.
3.2 Authorized Uses of NMTC Allocation. The Allocatee shall use the proceeds of
its NMTC Allocation to make investments or Reinvestments only as follows:
(a) At such time that the Allocatee has made 100 percent of its QLICIs or
September 30, 2009, whichever date is earlier, and until the Allocatee
redeems its first Qualified Equity Investment related to its NMTC
Allocation, the Allocatee shall make at least 85 percent of its QLICIs
(in terms of the aggregate dollar amount of the QLICIs) in the types
of activities listed in Schedule 1 of this Allocation Agreement.
(b) At such time that the Allocatee has made 100 percent of its QLICIs or
September 30, 2009, whichever date is earlier, and until the Allocatee
redeems its first Qualified Equity Investment related to its NMTC
Allocation, the Allocatee shall make at least 85 percent of its QLICIs
(in terms of the aggregate dollar amount of the QLICIs) in the
Service Area(s) listed in Schedule 1 of this Allocation Agreement.
(c) If applicable, the Allocatee may transfer all or part of its NMTC
Allocation to the Subsidiary Allocatees listed in Schedule 1 of this
Allocation Agreement.
(d) If applicable, as listed in Schedule 1 of this Allocation Agreement,
the Allocatee shall satisfy the requirements of IRC Section
45D(b)(1)(B) and 26 C.F.R. 1.45D- 1(c)(5) with respect to the
Qualified Equity Investments it receives by making
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QLICIs in businesses in which persons unrelated to the Allocatee hold
the majority equity interest (as defined in IRC Section 45D(f)(2)(B)),
and as determined subsequent to the Allocatee making the QLICI. The
requirement of this Section 3.2(d) does not apply if an Allocatee
becomes related to a business due to financial difficulties of the
business that were unforeseen at the time the Allocatee made a QLICI
in the business.
(e) By September 30, 2009, the Allocatee shall issue at least 60 percent
of its Qualified Equity Investments related to its NMTC Allocation.
(f) If applicable, at such time that the Allocatee has made 100 percent of
its QLICIs or September 30, 2009, whichever date is earlier, and until
the Allocatee redeems its first Qualified Equity Investment related to
its NMTC Allocation, the Allocatee shall demonstrate that QLICIs made
in the form of loans to or investments in CDEs or QALICBs (as opposed
to loan purchases or the provision of Financial Counseling and Other
Services) incorporated terms and conditions that, at the time the
QLICIs were made, were flexible, non-conventional, or non-conforming
with reference to either the Allocatee's underwriting guidelines or
standard practice in the marketplace as documented by the Allocatee.
Specifically, the Allocatee must have made QLICIs that (a) are equity
or equity-equivalent financing, (b) have interest rates that are at
least 25 percent lower than the prevailing market rates for the
particular product or at least 25 percent lower than the Applicant's
current offerings for the particular product, or (c) meet at least
three of the following criteria, provided nothing in this Allocation
Agreement shall be construed to require the Allocatee to engage in
unsafe or unsound underwriting practices:
(i) Debt with equity features (i.e., debt with royalties; debt
with warrants; convertible debt);
(ii) Subordinated debt;
(iii) Below market interest rates;
(iv) Lower than standard origination fees;
(v) A longer than standard period of interest only loan
payments;
(vi) Higher than standard loan to value ratio;
(vii) A longer than standard amortization period;
(viii) More flexible borrower credit standards;
(ix) Nontraditional forms of collateral;
(x) Lower than standard debt service coverage ratio; or
(xi) Loan loss reserve requirements that are less than standard.
Furthermore, to the extent that the Allocatee makes QLICIs in the form
of loans to or investments in CDEs ("Recipient CDEs"), the Allocatee
shall require that the Recipient CDE makes loans to or investments in
QALICBs that (a) are equity or equity-equivalent financing, (b) have
interest rates that are at least 25 percent
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lower than the prevailing market rates for the particular product or
at least 25 percent lower than the CDE's current offerings for the
particular product, or (c) meet at least three of criteria i-xi above.
(g) If applicable, the Allocatee shall use the proceeds of its Qualified
Equity Investments minimally or solely to make QLICIs in the
project(s) listed in Schedule 1 of this Allocation Agreement.
(h) If applicable, at such time that the Allocatee has made 100 percent of
its QLICIs or September 30, 2009, whichever date is earlier, and until
the Allocatee redeems its first Qualified Equity Investment related to
its NMTC Allocation, the Allocatee shall have made at least 75 percent
of the total dollar amount of its QLICIs in areas that are (1)
characterized by at least one of items (i) - (iii) on the list below
for each QLICI, (2) characterized by at least two of items (iv) -
(xiv) on the list below for each QLICI, or (3) characterized by item
(xv) on the list below as of the date the Allocatee closed the QLICI
transaction:
(i) Census tracts with poverty rates greater than 30 percent;
(ii) If located within a non-Metropolitan Area, median family
income does not exceed 60 percent of statewide median family
income or if located within a Metropolitan Area, median
family income does not exceed 60 percent of the greater of
statewide median family income or the Metropolitan Area
median family income;
(iii) Census tracts with unemployment rates at least 1.5 times
the national average;
(iv) Federally designated Empowerment Zones, Enterprise
Communities, or Renewal Communities;
(v) U.S. Small Business Administration (SBA) designated HUB
Zones, to the extent that the QLICIs will support businesses
that obtain HUB Zone certification from the SBA;
(vi) Brownfield sites as defined under 42 U.S.C. 9601(39)
(vii) Areas encompassed by a HOPE VI redevelopment plan;
(viii) Federally designated as Native American or Alaskan Native
areas, Hawaiian Homelands, or redevelopment areas by the
appropriate Tribal or other authority;
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(ix) Areas designated as distressed by the Appalachian Regional
Commission or Delta Regional Authority;
(x) Colonias areas as designated by the U.S. Department of
Housing and Urban Development;
(xi) Federally designated medically underserved areas, to the
extent that QLICI activities will support health related
services;
(xii) Located in a Hot Zone (defined as geographic areas
designated by the Fund as having greater levels of economic
distress);
(xiii) High Migration Rural County (defined as any county which,
during the 20 year period ending with the year in which the
most recent census was conducted, has a net out-migration of
inhabitants from the county of at least 10 percent of the
population of the county at the beginning of such period.
See IRC Section 45D(e)(5));
(xiv) State or local tax-increment financing districts,
enterprise zone programs, or other similar state/local
programs targeted towards particularly economically
distressed communities; or
(xv) Counties for which the Federal Emergency Management Agency
(FEMA) has (a) issued a "major disaster declaration" since
July 15, 2005; and (b) made a determination that such County
is eligible for both "individual and public assistance;"
provided that, for areas not located within the GO Zone, the
initial project investment was made within 24 months of the
disaster declaration.
Furthermore, to the extent that the Allocatee makes QLICIs in the form of
loans to or investments in CDEs ("Recipient CDEs"), the Allocatee shall
require that the Recipient CDE makes loans to or investments in QALICBs in
areas that are (1) characterized by at least one of items (i) - (iii) on
the list above for each loan or investment, (2) characterized by at least
two of items (iv) - (xiv) on the list above for each loan or investment, or
(3) characterized by item (xv) on the list above for each loan or
investment.
(i) If applicable, the Allocatee shall require CDEs from which it purchases
loans to invest at least the designated percent of the proceeds of such
loan sales, as listed in Schedule 1 of this Allocation Agreement, in the
form of QLICIs.
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(j) If applicable, at such time that the Allocatee has issued 100 percent
of its Qualified Equity Investments or September 30, 2009, whichever
date is earlier, and until the Allocatee redeems its first Qualified
Equity Investment related to its NMTC Allocation, the Allocatee shall
use at least the designated percent of its Qualified Equity
Investments (in terms of the aggregate dollar amount of the Qualified
Equity Investments), as listed in Schedule 1 to this Allocation
Agreement, to make QLICIs.
To the extent that the Qualified Equity Investment finances loans to
or investments in CDEs ("Recipient CDEs") that are not Affiliates of
or Controlled by the Allocatee, the standard set forth above in this
section 3.2(j) shall be applied only to Allocatee - not to the
Recipient CDEs.
3.3 Restrictions on the Use of NMTC Allocation.
(a) The Allocatee shall not use its NMTC Allocation in a manner other than
as authorized herein, unless the Allocatee consults with and obtains
the prior written approval of the Fund, which approval shall not be
unreasonably withheld.
(b) If applicable, the Allocatee shall use the proceeds of its Qualified
Equity Investments as directed in Schedule 1 (with respect to this
Section 3.3(b)) of this Allocation Agreement.
(c) The Allocatee shall not transfer any portion of a NMTC Allocation to
any Subsidiary, except those Subsidiaries listed in Section 3.2(c) of
this Allocation Agreement, without the Fund's prior written approval.
(d) Pursuant to IRC Section 45D(b)(2) and 26 C.F.R. 1.45D-1(c)(4)(ii),
the Allocatee may not designate Equity Investments that it issues as
Qualified Equity Investments in an amount that exceeds the total
amount of its NMTC Allocation.
(e) Pursuant to IRC Section 45D(b)(1) and 26 C.F.R. 1.45D-1(c)(4)(i)(A),
the Allocatee may not designate any Equity Investment that it issues
as a Qualified Equity Investment if such investment is issued by the
Allocatee more than five (5) years after the Allocation Date.
(f) Pursuant to 26 C.F.R. 1.45D-1(c)(4)(i)(B), the Allocatee may not
designate an Equity Investment that it issues to another CDE as a
Qualified Equity Investment if the CDE making the investment has
received an NMTC Allocation.
(g) A taxpayer that makes a Qualified Equity Investment in the Allocatee
may not receive a Bank Enterprise Award Program award in addition to
NMTCs for making the same Equity Investment in the Allocatee.
9
(h) The Allocatee may not use the proceeds of its Qualified Equity
Investments to make loans to or investments in QALICBs whose principal
business activity is the rental to others of real property unless the
proceeds of the loan or investment are primarily used for: (1) costs
in connection with new construction located on such property; (2)
costs in connection with the substantial rehabilitation of such
property; (3) costs in connection with the acquisition and substantial
rehabilitation of such property; (4) acquisition costs in connection
with new construction; or (5) take-out financing for a loan, equity
investment, or other financing, the proceeds of which were used for
items (1), (2), (3), and/or (4) of this paragraph. Except as provided
in item (5) of this paragraph, the proceeds of such loans and
investments may not be used to re-finance or otherwise pay off an
existing loan on the property.
The restriction of this Section 3.3(h) does not apply to any loan to
or investment in a QALICB (the "first QALICB) that is controlled by
(within the meaning of 26 C.F.R. 1.45D-1(d)(6)(ii)(B)) or under common
control with another QALICB (the "second QALICB"), provided that: (1)
the principal business activity of the second QALICB is not the rental
to others of real property; and (2) the second QALICB will be the
primary user of all of the real property owned by the first QALICB.
(i) The Allocatee shall use the NMTC Allocation as authorized in Section
3.2 of this Allocation Agreement, but only to the extent that such
uses are generally consistent with the strategies (including, but not
limited to, the proposed product offerings and markets served) set
forth in the Allocation Application.
3.4 Availability of NMTC Allocation. On or after the Allocation Date, the
Allocatee may designate Qualified Equity Investments as to which NMTCs may be
claimed with respect to Equity Investments made on or after that date. An
Allocatee may also designate as a Qualified Equity Investment such Equity
Investments in the Allocatee made pursuant to the requirements set forth in 26
C.F.R. 1.45D-1(c)(3)(ii)(B).
3.5 Notice to Taxpayers of Qualified Equity Investment. In accordance with 26
C.F.R. 1.45D-1(g)(2), the Allocatee shall provide notice to any taxpayer who
makes a Qualified Equity Investment in the Allocatee at its original issue that
the Equity Investment is a Qualified Equity Investment entitling the taxpayer to
claim a NMTC. The Allocatee shall provide such notice to the taxpayer no later
than 60 days after the date the taxpayer makes the Qualified Equity Investment
in the Allocatee. The notice shall contain the amount paid to the Allocatee for
the Qualified Equity Investment at its original issue and the taxpayer
identification number of the Allocatee.
10
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
As of Allocation Date, the Allocatee hereby represents and warrants to the Fund
the following:
4.1 Organization, Standing and Powers. The Allocatee is a domestic corporation
or partnership for Federal tax purposes. In addition, the Allocatee validly
exists and is in good standing (if applicable) under the laws of the State of
its formation, and has all requisite organizational power and authority to own
and operate its assets and properties, to carry on its business as it is now
being conducted and to carry out the authorized use(s) of the NMTC Allocation
provided hereunder.
4.2 Qualification. The Allocatee is duly qualified, in good standing (if
applicable) and authorized to transact business in each jurisdiction where the
conduct of the Allocatee's business, the carrying out of the authorized use(s)
of the NMTC Allocation to be provided hereunder or the ownership of its assets
and properties requires such qualification, or, if not so qualified, the
Allocatee's failure so to qualify shall not reasonably be expected to: (i) have
a material adverse effect on the financial condition or business operations of
the Allocatee; (ii) impair the Allocatee's ability to carry out the authorized
use(s) of the NMTC Allocation to be provided hereunder; or (iii) impair the
Allocatee's right to enforce any material agreement to which it is a party.
4.3 Authorization; Consents. The execution, delivery and performance by the
Allocatee of the Allocation Agreement and the carrying out of the authorized
use(s) of the NMTC Allocation provided hereunder are within the Allocatee's
powers and have been duly authorized by all necessary corporate, partnership or
limited liability company action and no consent, approval, authorization or
order of, notice to and filing with, any third party including, without
limitation, any governmental entity which has not been previously obtained, is
required in connection with such execution, delivery and performance. The
Allocatee will make all such notices or filings that may be required after the
Allocation Date in accordance with the applicable time periods for such notices
or filings.
4.4 Execution and Delivery; Binding Agreement. This Allocation Agreement and all
documents connected herewith have been or will be, on or before the Allocation
Date, duly authorized, executed and delivered on behalf of the Allocatee and
constitute, on the Allocation Date, the legal, valid and binding obligations of
the Allocatee enforceable in accordance with their respective terms.
4.5 No Conflicts. The execution, delivery and performance by the Allocatee of
this Allocation Agreement and the carrying out of the authorized uses(s) of the
NMTC Allocation provided hereunder shall not result in any material violation of
and shall not materially conflict with, or result in a material breach of any of
the terms of, or constitute a material default under, any provision of Federal
or State law to which the Allocatee is subject, the Allocatee's incorporation,
charter, organization, formation or otherwise establishing documentation, bylaws
11
or any agreement, judgment, writ, injunction, decree, order, rule or regulation
to which the Allocatee is a party or by which it is bound.
4.6 Litigation. The Allocatee has neither actual nor constructive knowledge of
any suit, action, proceeding or investigation pending or threatened that
questions the validity of this Allocation Agreement or any action taken or to be
taken pursuant hereto or contemplated hereby including, but not limited to, the
carrying out of the authorized use(s) of the NMTC Allocation to be provided
hereunder.
4.7 Compliance with Other Instruments. The Allocatee is not in material
violation of any provision of its incorporation, charter, organization,
formation or otherwise establishing documents, or in material violation of any
loan agreement or other material agreement to which it is a party. The Allocatee
is not in material violation of any instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to it, the violation of
which might have a material adverse effect on the business, affairs, operations,
or condition of the Allocatee.
4.8 Disclosure. Neither this Allocation Agreement, the Allocation Application
nor any attachment hereto, nor any certification or other document referenced or
incorporated herein or therein and furnished to the Fund by the Allocatee
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained herein or therein, in
light of the circumstances under which they were made, not misleading. The
Allocatee has disclosed, in writing, to the Fund all facts that might reasonably
be expected to result in a material adverse effect upon the Allocatee's ability
either to conduct its principal business or to carry out its proposed and herein
authorized uses of the NMTC Allocation to be provided hereunder. The Allocatee
has not knowingly and willfully made or used a document or writing containing
any false, fictitious or fraudulent statement or entry as part of its
correspondence or communication with the Fund. The Allocatee acknowledges, under
18 U.S.C. Section 1001, that if it knowingly and willfully makes or uses such
document or writing, it or its employee(s) or agents may be fined or imprisoned
for not more than five years, or both.
4.9 Taxes; Debts; Bankruptcy. The Allocatee is not delinquent on any debts owed
to Federal, State or local governments including, but not limited to, amounts
due under the Internal Revenue Code. The Allocatee has never filed for
bankruptcy and has neither actual nor constructive knowledge of any pending or
anticipated bankruptcy filings on its behalf.
4.10 Debarment, Suspension and Other Responsibility Matters. Pursuant to 31
C.F.R. 19.335, neither the Allocatee nor any of its principals (as defined by 31
C.F.R. 19.995): (a) are presently excluded or disqualified from covered
transactions by any Federal department or agency; (b) within the three-year
period preceding the Allocation Date, have been convicted of or had a civil
judgment rendered against them for any of the offenses listed in 31 C.F.R.
19.800(a); (c) are presently indicted for or otherwise criminally or civilly
charged by a governmental entity (Federal, State or local) with commission of
any of the offenses listed in 31 C.F.R. 19.800(a); or (d) within the three-year
period preceding the Allocation Date, have had one or more public transactions
(Federal, State, or local) terminated for cause or default.
12
4.11 Status as a CDE. Since its certification as a CDE by the Fund, the
Allocatee has neither actual nor constructive knowledge of any changes that may
adversely affect its (or any of its Subsidiary Allocatees') status as a
certified CDE.
ARTICLE V
CONDITIONS PRECEDENT TO NMTC ALLOCATION
The obligation of the Fund to provide a NMTC Allocation to the Allocatee is
subject to the fulfillment, as determined by the Fund, in its sole discretion,
of the following conditions precedent, each of which shall be fulfilled prior to
or as of the Allocation Date.
5.1 Performance. The Allocatee shall have performed and complied with all
applicable agreements and conditions contained herein required to be performed
or complied with by it before or on the Allocation Date.
5.2 Opinion of Allocatee Counsel. Unless otherwise determined by mutual
agreement of the Fund and the Allocatee, the Fund shall have received from the
counsel for the Allocatee, an acceptable opinion or acceptable opinions, as
determined by the Fund, substantially in the form set forth in Attachment A
attached hereto.
5.3 Representations and Warranties. The representations and warranties set forth
in this Agreement, the Allocation Application and the Assurances and
Certifications contained in the Allocation Application are true and correct in
all material respects as of the Allocation Date.
5.4 Proceedings and Documents. All corporate and other proceedings in connection
with the transactions contemplated by this Allocation Agreement and all
documents and instruments incident to such transactions which are necessary for
the Allocatee's execution and delivery of the Allocation Agreement shall be
satisfactory in substance and form to the Fund, and the Fund shall have received
from the Allocatee all such counterpart originals or certified or other
documents as the Fund may reasonably request.
ARTICLE VI
COVENANTS AND AGREEMENTS OF THE ALLOCATEE
The Allocatee shall duly perform and observe each and all of the following
covenants and agreements:
6.1 Compliance with Government Requirements. In carrying out its
responsibilities pursuant to this Allocation Agreement, the Allocatee shall
comply with all applicable Federal, State and local laws, regulations,
ordinances, Office of Management and Budget (OMB) Circulars, and Executive
Orders.
13
6.2 Fraud, Waste and Abuse.
(a) If the Allocatee becomes aware at any time of the existence of fraud,
waste or abuse of the NMTC Allocation allocated pursuant to this
Allocation Agreement, the Allocatee shall promptly report such
incidence(s) to the Office of Inspector General of the U.S. Department
of the Treasury.
(b) If a principal purpose of a transaction or a series of transactions is
to achieve a result that is inconsistent with the purposes of the Act,
the NMTC Program Income Tax Regulations, the Notice of Allocation
Availability (70 FR 41075 and as amended 71 FR 12423), or this
Allocation Agreement, the Fund, in its sole discretion, may treat the
transaction or series of transactions as causing an event of default
subject to the remedies available under Section 8.3 of this Agreement.
6.3 Right to Inspect and Audit. The Allocatee shall submit such financial and
activity reports, records, statements, documents, and other information as may
be requested by the Fund and the U.S. Department of the Treasury to ensure
compliance with this Allocation Agreement, the provisions of the Internal
Revenue Code and the NMTC Program Income Tax Regulations. The United States
Government including, but not limited to, the U.S. Department of the Treasury,
the Internal Revenue Service and the Comptroller General, and their duly
authorized representatives, shall have full and free access during reasonable
business hours to the Allocatee's offices and facilities and all books,
documents, records and financial statements relevant to the NMTC Allocation
provided hereunder. The Allocatee shall permit any of these authorities to copy
such documents as they deem appropriate. The purposes of such inspections and/or
audits will include, but not be limited to, ensuring that representations,
warranties, covenants, and/or certifications provided by the Allocatee are
accurate. Such inspections and/or audits may also be conducted to investigate a
taxpayer's claim for a New Markets Tax Credit, including a potential event of
recapture pursuant to IRC Section 45D(g) and 26 C.F.R. 1.45D-1(e)(2). The Fund
will, consistent with applicable law, including the Freedom of Information Act
(5 U.S.C. Section 552) and the Privacy Act (5 U.S.C. Section 552a), maintain the
confidentiality of all financial and other proprietary information disclosed to
the Fund pursuant to this section. Furthermore, the Fund will, consistent with
IRC Section 6103, maintain the confidentiality of, and adequately safeguard,
return information as provided to the Fund pursuant to this section.
6.4 Retention of Records. The Allocatee shall retain all financial records,
supporting documents, and any other records pertinent to the NMTC Allocation
(including the Allocatee's designation of Qualified Equity Investments and
making of QLICIs) as may be reasonably necessary to demonstrate, among other
things, the following:
(a) the manner in which the NMTC Allocation provided hereunder is used;
(b) compliance with the requirements of IRC Section 45D, the NMTC Program
Income Tax Regulations and this Allocation Agreement; and
(c) information to evaluate the results of the NMTC Program.
14
6.5 Reports. The Allocatee will be required to report on its compliance with the
requirements of the NMTC Program and this Allocation Agreement and to assist the
Fund in evaluating the results of the NMTC Program. Unless otherwise instructed
by the Fund, the Allocatee will submit its reports, except for audited financial
statements, to the Fund electronically using the Fund's Community Investment
Impact System (CIIS) and Allocation Tracking System. The reports are as follows:
(a) Notice of Receipt of Qualified Equity Investment. Within 60 days after
the date that a taxpayer makes an Equity Investment in the Allocatee and
provided that the Allocatee designates such investment as a Qualified
Equity Investment, the Allocatee shall notify the Fund using the Fund's
electronic Allocation Tracking System. Such notice shall contain, but not
be limited to, the following:
(i) The identification of each taxpayer (including, but not limited
to, the name, taxpayer identification number, and address of the
investment entity and any partners, members, or other legal
entities comprising such investment entity) entitled to claim a
NMTC as the result of a Qualified Equity Investment designated by
the Allocatee; and
(ii) The form, date and dollar amount of Qualified Equity Investments
issued by the Allocatee.
(b) Institution-Level Report: The institution-level report shall be
submitted annually through CIIS and may include, but not be limited to,
organizational, financial, portfolio and impact information, as well as:
(i) Certifications and business activity data related to the
Allocatee's (and any of its Subsidiary Allocatees') maintenance
of its status as a CDE;
(ii) With respect to each Equity Investment that the Allocatee
designates as a Qualified Equity Investment, a certification that
the requirements of IRC Section 45D(b)(1)(B) and 26 C.F.R. 1.45D-
1(c)(5) are met and that no recapture event within the meaning of
IRC Section 45D(g) and 26 C.F.R. 1.45D-1(e)(2) has occurred; and
(iii) Any other information that the Fund deems appropriate to ensure
compliance with this Allocation Agreement and to evaluate the
results of the NMTC Program.
Unless otherwise provided in guidance issued by the Fund, no later than 180 days
after the end of the Allocatee's fiscal year in which the Allocatee or its
Subsidiary Allocatee(s) issues its first Qualified Equity Investment and each
fiscal year of the Allocatee thereafter, the Allocatee shall deliver to the Fund
the Allocatee's institution-level report.
15
(c) Audited Financial Statements. No later than 180 days after the end of
the Allocatee's first fiscal year ending after the Allocation Date and each
fiscal year of the Allocatee thereafter, the Allocatee shall deliver to the
Fund copies of the Allocatee's most recent statements of financial
condition audited by an independent certified public accountant covering
the Allocatee's fiscal year end.
(d) Transaction-Level Report: The transaction-level report shall include:
(i) specific data elements on each of the Allocatee's QLICIs,
including, but not limited to, the location, type and amount of
the QLICIs, and information on the use of the proceeds of QLICIs
by CDEs receiving Equity Investments or loans from the Allocatee
or CDEs selling loans to the Allocatee; and
(ii) any other information required to confirm the Allocatee's
compliance with the terms of this Allocation Agreement, IRC
Section 45D and the NMTC Program Income Tax Regulations.
Unless otherwise provided in guidance issued by the Fund, the Allocatee shall be
required to submit this report at least annually through CIIS, due no later than
180 days after the end of the Allocatee's fiscal year in which the Allocatee or
its Subsidiary Allocatee(s) makes its first QLICI and each fiscal year
thereafter. In addition, the Fund reserves the right to require additional
submissions of information related to this report, but not more frequently than
quarterly. If additional submissions are required, the Allocatee will be
notified of the specific due date for each additional submission of information
related to the transaction-level report at least 60 days prior to the respective
due date.
After the Institution-Level Reports and the Transaction-Level Reports are
submitted to the Fund, the Fund's CIIS Help Desk will review the report and send
any questions to the Allocatee. If the Allocatee fails to respond to such
questions within the Fund's required timeframe, the report will be considered
not submitted.
6.6 Equal Credit Opportunity Act. The Allocatee shall provide its products and
services in a manner that is consistent with the Equal Credit Opportunity Act
(15 U.S.C. Section 1691), to the extent that the Allocatee is subject to the
requirements of such Act.
6.7 Use of Allocation. The Allocatee shall use its NMTC Allocation provided
hereunder only as permitted hereby.
6.8 Maintain Existence as a CDE. The Allocatee shall do all things reasonably
necessary to preserve, renew and keep in full force and effect its existence as
a CDE.
6.9 Advise the Fund of Certain Material Events. The Allocatee shall advise the
Fund in writing in reasonable detail of any of the following events, within 20
calendar days of the occurrence of such events:
16
(a) any proceeding instituted against the Allocatee or its Affiliates in,
by or before any court, governmental or administrative body or agency,
which proceeding or its outcome could reasonably be expected to have a
material adverse effect upon the financial condition or business
operations, of the Allocatee;
(b) any material adverse change in the condition, financial or otherwise,
or operations of the Allocatee which would impair the Allocatee's
ability to carry out the authorized uses of the NMTC Allocation to be
provided hereunder;
(c) the occurrence of any Event of Default, as that term is defined in
Section 8.1 hereof, or any event which upon notice or lapse of time,
or both, would constitute an Event of Default;
(d) the occurrence of any event that may be a recapture event pursuant to
IRC Section 45D(g) and 26 C.F.R. 1.45D-1(e)(2);
(e) the merger or acquisition of the Allocatee by or with another entity;
(f) the Allocatee's Controlling Entity (as identified in the Allocation
Application) shall no longer have any ownership or management interest
in the Allocatee; provided that the foregoing shall not be deemed to
prohibit mergers, asset transfers, stock transfers, or similar
transactions with respect to the Controlling Entity that pertain to
the business operations of the Controlling Entity and are not
primarily undertaken for the purpose of transferring Control of the
Allocatee or the NMTC Allocation.;
(g) the replacement of any key management officials (e.g., the Executive
Director, the Chief Financial Officer, the Board Chairperson or their
equivalents) that had been named in the Allocation Application;
(h) the occurrence of any event described in 31 C.F.R. 19.350; or
(i) such other events that may be determined by the Fund, in its sole
discretion, to be material events, and for which the Fund issues
related guidance.
6.10 Disclosure to Potential Investors. The Allocatee will make all disclosures
required by Federal or State law, including applicable securities laws, to
taxpayers to whom the Allocatee issues Qualified Equity Investments and will
advise all such taxpayers to perform all necessary due diligence prior to making
an Equity Investment in the Allocatee. The Allocatee will also inform all such
taxpayers that the receipt of a NMTC Allocation from the Fund shall not be
deemed to be an assurance of any kind by the Fund regarding the taxpayer's
Equity Investment in the Allocatee.
17
6.11 Common Enterprises. The Allocatee (or its Subsidiary Allocatees) shall not
become an Affiliate of or member of a common enterprise (as defined in the NOAA
and related Fund guidance) with another entity that received a NMTC Allocation
in the CY 2006 round of the NMTC Program (or its Subsidiary transferee), at any
time after the submission of the Allocation Application. This prohibition,
however, generally does not apply to entities that are commonly Controlled
solely because of common ownership by Qualified Equity Investment investors,
including investors that have received an NMTC Allocation.
ARTICLE VII
MONITORING FEE
7.1 Monitoring/Compliance Fee. The Allocatee agrees to pay to the Fund an annual
fee as may be assessed by the Fund, to cover the full cost (as defined in OMB
Circular A-25) to the Fund associated with monitoring the Allocatee's compliance
with the requirements of the NMTC Program. The Fund will provide the Allocatee
with due dates and instructions for payment of such fee at a later date.
ARTICLE VIII
EVENTS OF DEFAULT, EVENTS OF RECAPTURE AND REMEDIES
8.1 Events of Default. If any one or more of the following events occurs, the
Fund, in its sole discretion, may find the Allocatee to be in default
(a) any representation, warranty, certification, assurance or any other
statement of fact set forth in the Allocation Application of the
Allocatee including, but not limited to, the Assurances and
Certifications contained in the Application, is found by the Fund to
be inaccurate, false, or incomplete when made, in any material
respect;
(b) any representation, warranty, certification, assurance or any other
statement of fact set forth in this Allocation Agreement as of the
Allocation Date or any representation or warranty set forth in any
document, report, certificate, financial statement or instrument now
or hereafter furnished in connection with this Allocation Agreement as
of the Allocation Date or thereafter, is found by the Fund to be
inaccurate, false, or incomplete when made, in any material respect;
(c) the failure of the Allocatee to observe, comply with or perform any
term, covenant, agreement or other provision contained in IRC Section
45D, the NMTC Program Income Tax Regulations, the Allocation Agreement
or any instrument,
18
note or any other document delivered to the Fund in connection with or
pursuant to this Allocation Agreement;
(d) the failure of the Allocatee to conduct its business in the usual and
ordinary course or to maintain its existence and right to carry on its
business and duly obtain all necessary renewals and extensions thereof
and to maintain, preserve and renew all such rights, powers,
privileges and franchises to the extent that such failure has a
material adverse effect on the Allocatee, its financial condition or
business operations and impairs the Allocatee's ability to carry out
the authorized use(s) of the NMTC Allocation to be provided hereunder;
provided, however, that no default will be deemed to occur in the
event that the Allocatee ceases or omits to exercise any rights,
powers, privileges, or franchises that in the judgment of its board of
directors may no longer be exercised in the best interests of the
Allocatee; or
(e) the occurrence of a material event (as defined in Section 6.9 of this
Allocation Agreement and with the exception of Section 6.9(c)) to the
extent that such event has a material adverse effect on the Allocatee,
its financial condition or business operations and impairs the
Allocatee's ability to carry out the authorized uses of the NMTC
Allocation to be provided hereunder.
8.2 Events of Recapture. If any one of the following events occurs, a Qualified
Equity Investment issued by the Allocatee is subject to a recapture event as
further defined in IRC Section 45D(g) and 26 C.F.R. 1.45D-1(e):
(a) the Allocatee ceases to be a certified CDE;
(b) the proceeds of a Qualified Equity Investment issued by the Allocatee
ceases to be used as required by IRC Section 45D(b)(1)(B); or
(c) a Qualified Equity Investment issued by the Allocatee is redeemed by
the Allocatee before the end of the 7-year credit period (as defined
in 26 C.F.R. 1.45D-1(c)(5)(i)).
The Internal Revenue Service will determine all such events of recapture.
8.3 Remedies. If the Fund finds the Allocatee to be in default under Section 8.1
of this Allocation Agreement, the Fund may, in its sole discretion, take any one
or more of the following actions, subject to Section 8.6 of this Agreement:
(a) revoke approval of any other applications submitted to and declare as
ineligible any other applications pending before the Fund by the
Allocatee or any of its Affiliates under any of the Fund's programs;
19
(b) terminate or reallocate any unused portion of the NMTC Allocation
authorized hereunder;
(c) bar the Allocatee or any of its Affiliates from applying for a NMTC
Allocation from the Fund or to any of the Fund's programs;
(d) require the Allocatee to convene a meeting(s) of its board of
directors or other governing body at which meeting(s) the Fund will be
given the opportunity to address the attendees with respect to the
Fund's evaluations and concerns regarding the performance of the
Allocatee under this Allocation Agreement;
(e) notify taxpayers (as identified in Section 6.5 of this Allocation
Agreement) of the Allocatee's default under this Allocation Agreement;
and
(f) take any other action permitted by the terms of this Allocation
Agreement or available at law or in equity (except for recapture
events as set forth in Section 8.2 of this Allocation Agreement).
8.4 Referral to IRS. The Fund may provide reports to the Internal Revenue
Service on the activities of each Allocatee based on the Allocatee's reports to
the Fund. The Internal Revenue Service may use such reports to, among other
things, aid in its determination of whether: (i) a Qualified Equity Investment
issued by the Allocatee is subject to a recapture event as defined in IRC
Section 45D(g) and 26 C.F.R. 1.45D-1(e)(2); (ii) a QLICI made by an Allocatee
meets the requirements of IRC Section 45D and 26 C.F.R 1.45D-1; and (iii) an
Allocatee continues otherwise to meet the requirements of IRC Section 45D and 26
C.F.R. 1.45D-1. The Fund may share with the IRS any other information that it
obtains, in such manner and at such times, as it deems appropriate, consistent
with IRC Section 6103.
8.5 No Waiver. No course of dealing on the part of the Fund or any delay or
failure on the part of the Fund to exercise any right herein will operate as a
waiver of the right or otherwise prejudice the Fund's rights, powers and
remedies under this Allocation Agreement, the Notice of Allocation, the NOAA,
any guidance documents published by the Fund, the Act, the NMTC Program Income
Tax Regulations or any other applicable law or regulation.
8.6 Prior Notice to Allocatee of Sanctions. Prior to exercising or imposing any
remedy contained herein, the Fund will provide the Allocatee with written notice
of the incident(s) giving rise to the default and the proposed remedy (or
remedies). The Fund's written notice will give the Allocatee up to 90 calendar
days from the date of the notice to respond to and to cure the incident(s)
giving rise to the default. If the Allocatee fails to respond and correct the
incident(s) giving rise to the default within the time period provided in the
written notice, the Fund may, in its sole discretion, impose or exercise the
remedy (or remedies) set forth in its written notice. Nothing in this Allocation
Agreement, however, will provide the Allocatee with any right to any formal or
informal hearing or comparable proceeding not otherwise required by law. In the
event of a recapture event under IRC Section 45D(g) and 26 C.F.R. 1.45D-1(e)(2),
this section does not apply.
20
8.7 Joint and Several Liability. The Allocatee and each of its Subsidiary
Allocatees are hereby jointly and severally liable for any event of default
under Section 8.1 of this Allocation Agreement whether the Allocatee or any of
its Subsidiary Allocatees incurs such default. If such an event of default
occurs, the Fund may, in its sole discretion, subject to Section 8.6 of this
Allocation Agreement, impose any of the remedies listed in Section 8.3 of this
Allocation Agreement jointly or severally upon the Allocatee and its Subsidiary
Allocatees, except that Section 8.3(b) of this Allocation Agreement shall not be
imposed with respect to any investment commitments related to a NMTC Allocation
made to a non-defaulting Allocatee or Subsidiary Allocatee, as determined by the
Fund. For purposes of this section, an investment commitment must be evidenced
by a written, signed document in which: (i) an investor commits to make an
investment in the Allocatee or Subsidiary Allocatee in a specified amount and on
specified terms; (ii) an investor has made an initial disbursement of investment
proceeds related to such investment commitment to the Allocatee or Subsidiary
Allocatee; and (iii) the investor commits to disburse the remaining investment
proceeds based on specified amounts and payment dates.
ARTICLE IX
MISCELLANEOUS
9.1 Notices. All notices, requests, demands, consents, waivers and other
communications given under any provision of this Allocation Agreement shall be
in writing and shall be delivered by electronic mail, CIIS or the Allocation
Tracking System, by hand, mailed by postage-prepaid first-class mail or
delivered by overnight courier service, to the addresses and individuals
indicated below, or to such different address or addresses as the addressee may
have specified in a notice duly given to the sender:
if to the Fund:
Community Development Financial Institutions Fund
Department of the Treasury
Attention: Grants Manager
601 13th Street, NW, Suite 200 South
Washington, DC 20005
grantsmanagement@cdfi.treas.gov
if to the Allocatee:
Allocatee's physical or electronic mailing address as listed in the
Fund's electronic database.
Attention: Authorized Representative
All such notices shall be deemed as received on the date of actual receipt by
the Fund or the Allocatee.
21
9.2 Entire Agreement. This Allocation Agreement, the Schedules, the material
provisions of the Allocation Application and the attachments, exhibits,
appendices and supplements to the Application, and the Notice of Allocation
between the Allocatee and the Fund with respect to the NMTC Allocation contain
the entire agreement of the parties with respect to the subject matter hereof
and supersede all prior agreements or understandings, written or oral, in
respect thereof, and no change, modification or waiver of any provision hereof
shall be valid unless in writing and signed by the party to be bound. The
Allocation Application, including any attachments, exhibits, appendices and
supplements thereto, any Schedules, attachments, exhibits, appendices and
supplements to this Allocation Agreement, and said Notice of Allocation are
incorporated in and made a part of this Allocation Agreement.
9.3 Assignment. The Allocatee may not assign, pledge or otherwise transfer any
rights, benefits or responsibilities of the Allocatee under this Allocation
Agreement except as set forth in Section 3.2(c) of this Allocation Agreement,
without the prior written consent of the Fund.
9.4 Successors. The rights, benefits and responsibilities of each of the parties
hereto shall inure to their respective successors, subject to this Section 9.4.
If the Allocatee merges with or is acquired by another entity, the Fund reserves
the right to examine the new entity, which acquired or merged with the
Allocatee, to determine its acceptability as an Allocatee. If the Fund
determines that the new entity is not eligible or acceptable as an Allocatee, or
if the new entity does not agree to abide by all the provisions of this
Allocation Agreement and shall continue operations and performance as if there
were no interruption in the parties to this Agreement, the Fund may terminate
the continued provision of the NMTC Allocation under this Allocation Agreement
and take any or all remedies it deems appropriate in accordance with Sections
8.3 and 8.6 herein.
9.5 Severability. If any provision of this Allocation Agreement shall for any
reason be held to be illegal, invalid or unenforceable, such illegality,
invalidity or unenforceability shall not affect any other provision of this
Allocation Agreement, and this Allocation Agreement shall be construed as if
such illegal, invalid or unenforceable provision had never been contained
herein.
9.6 No Waiver. No delay or failure on the part of either party in exercising any
rights hereunder, and no partial or single exercise thereof, shall constitute a
waiver of such rights or of any other rights hereunder.
9.7 Applicable Law. This Allocation Agreement shall be governed by and construed
in accordance with Federal law to the extent such Federal law is applicable, and
to the extent Federal law is not applicable, this Allocation Agreement shall be
governed by and construed in accordance with the law of the State of formation
of the Allocatee or its Subsidiary Allocatees, as the case may be.
9.8 Disclaimer of Relationships.
(a) The Allocatee shall not be deemed to be an agency, department or
instrumentality of the United States merely by virtue of it being an
Allocatee.
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(b) Nothing in this Allocation Agreement, nor any act of the Fund or the
Allocatee, shall be construed by either of them, or by a third party,
to create any relationship of third-party beneficiary, principal and
agent, limited or general partner or joint venture, or of any
association or relationship whatsoever involving the Fund and the
Allocatee.
(c) Notwithstanding any other provision of law, the Fund shall not be
deemed to control the Allocatee by reason of any NMTC Allocation
provided hereunder for the purpose of any other applicable law.
(d) The Allocatee's receipt of a NMTC Allocation from the Fund shall not
be deemed to be an assurance of any kind by the Fund regarding a
taxpayer's Equity Investment in the Allocatee.
9.9 Counterparts. This Allocation Agreement may be executed in counterparts,
each of which shall constitute an original but all of which together shall
constitute one and the same instrument.
9.10 Headings. The headings contained in this Allocation Agreement are for
convenience only and shall not affect the meaning or interpretation of this
Allocation Agreement.
9.11 Amendments. The terms of this Allocation Agreement may be amended,
modified, or supplemented by the mutual written consent of the parties hereto.
All amendment requests must be directed to the Grants Manager at
grantsmanagement@cdfi.treas.gov.
Notwithstanding the above, the Fund may, upon reasonable notice to the Awardee,
unilaterally amend the Allocation Agreement for the sole purpose of making
ministerial or administrative changes or correcting scrivener's errors.
9.12 Survival of Representations and Warranties. All representations,
warranties, covenants, and agreements made by the Allocatee in this Allocation
Agreement or the Application, including, without limitation, all Assurances and
Certifications contained in the Application, or in any document, report,
certificate, financial statement, note or instrument now or hereafter furnished
in connection with this Allocation Agreement shall survive the execution and
delivery of this Allocation Agreement and the provision of any NMTC Allocation
pursuant hereto, except as otherwise agreed to by the Fund.
9.13 Termination. Unless otherwise mutually agreed upon in writing by the
parties hereto, this Allocation Agreement shall terminate at such time that:
(a) the Fund determines that the Allocatee has submitted to the Fund all
reports required by this Allocation Agreement covering the 7-year
credit period (as defined in 26 C.F.R. 1.45D-1(c)(5)(i)) after the
Allocatee issues its last Qualified Equity Investment related to its
NMTC Allocation; and
23
(b) the Fund determines that the NMTC Allocation has been used as
permitted hereby or two years after the 7-year credit period (as
defined in 26 C.F.R. 1.45D- 1(c)(5)(i)) after the Allocatee issues its
last Qualified Equity Investment related to its NMTC Allocation,
whichever date is earlier.
This Section 9.13 shall not, in any manner, waive or supersede any rights,
powers, or remedies available to the Department of the Treasury or the Internal
Revenue Service pursuant to the Act, the Internal Revenue Code or any other
applicable law or regulation.
9.14 Disclosure of Allocatee Reports by Fund. The Fund will, consistent with
applicable law (including IRC Section 6103), make reports described in Article
VI hereof available for public inspection after deleting any materials necessary
to protect privacy or proprietary interests. The Fund will also make reports
described in Article VI hereof available to the Internal Revenue Service for the
purpose of determining the Allocatee's and its investors' compliance with the
requirements of IRC Section 45D and the NMTC Program Income Tax Regulations.
9.15 Compliance with Non-Discrimination Statutes. The Allocatee shall comply, to
the extent applicable, with all Federal statutes relating to non-discrimination,
including, but not limited to: Title VI of the Civil Rights Act of 1964; Title
IX of the Education Amendments of 1972; Section 504 of the Rehabilitation Act of
1973; the Age Discrimination Act of 1975; the Drug Abuse Office and Treatment
Act of 1972; the Comprehensive Alcohol Abuse and Alcoholism Prevention,
Treatment and Rehabilitation Act of 1970; Sections 523 and 527 of the Public
Health Service Act of 1912; and Title VIII of the Civil Rights Act of 1968.
24
SCHEDULE 3
ALLOCATEE: ROCKLAND TRUST COMMUNITY DEVELOPMENT CORPORATION II
CONTROL NO.: 06NMA002322
FORM OF OPINION OF COUNSEL
[THIS FORM MUST BE SUBMITTED ON THE COUNSEL'S LETTERHEAD]
[Date]
TO: Community Development Financial Institutions Fund
601 13th Street, N.W., Suite 200 South
Washington, D.C. 20005
Attention: Grants Manager
RE: New Markets Tax Credit Program Allocation
[Name of Allocatee] [Control No. 05NMA00]
[If applicable][Name of Each Subsidiary Allocatee and the respective CDE
No.]
Dear Ladies and Gentlemen:
The undersigned counsel represents the above-referenced [Allocatee] and
[Subsidiary Allocatees] as counsel in connection with an allocation of New
Markets Tax Credits (NMTC) to [Allocatee] from the Community Development
Financial Institutions (CDFI) Fund in the third round of the NMTC Program. We
have reviewed the General Guidance (66 FR 21846); the CDE Certification Guidance
(66 FR 65806); the Notice of Allocation Availability for the NMTC Program (70 FR
41075 and as amended 71 FR 12423); Section 45D of the Internal Revenue Code and
the regulations issued pursuant thereto; and made such other investigations of
law, as we have deemed appropriate. We have also reviewed the Allocation
Agreement and such other documents and records as we have deemed necessary to
render this opinion. Capitalized terms contained herein shall have the same
meaning assigned to them in the Allocation Agreement.
Based upon the foregoing, the undersigned is of the opinion that:
a. The Allocatee is a domestic [corporation] [partnership] for
Federal tax purposes. [The Subsidiary Allocatee is a domestic
corporation/ partnership for Federal tax purposes]. The
Allocatee is a [insert corporate form] and is validly existing
and in good standing (if applicable) under the laws of the State
of ___________ and it is
legally authorized to transact business in each jurisdiction in
which it is authorized to use its NMTC Allocation to the extent
such authorization is required to undertake the activities
related to its NMTC Allocation. The Allocatee is currently
transacting business in the State(s) of ___________. [The
Subsidiary Allocatee is a [insert corporate form] and is validly
existing and in good standing (if applicable) under the laws of
the State of ___________ and it is legally authorized to transact
business in each jurisdiction in which it is authorized to use
the NMTC Allocation to the extent such authorization is required
to undertake the activities related to the NMTC Allocation. The
Subsidiary Allocatee is currently transacting business in the
State(s) of ________________.]
b. The execution, delivery and performance by the Allocatee [and the
Subsidiary Allocatees] of the Allocation Agreement are within the
Allocatee's [and Subsidiary Allocatees'] corporate [partnership]
powers and have been duly authorized by all requisite corporate
[partnership] action and no additional authorizations are
required which have not been previously obtained.
c. The execution, delivery and performance by the Allocatee [and the
Subsidiary Allocatees] of the Allocation Agreement shall not
result in any violation of and shall not conflict with, or
result in a breach of any of the terms of, or constitute a
default under any provision of the Allocatee's [and the
Subsidiary Allocatees'] incorporation, charter, organization,
bylaws or other establishing documents or to our knowledge any
provision of Federal or State law to which the Allocatee [or the
Subsidiary Allocatees] is subject, or any agreement, judgment,
writ, injunction, decree, order, rule or regulation to which the
Allocatee [or the Subsidiary Allocatees] is a party or by which
it is bound. The Subsidiary Allocatee(s) listed in Section 3.2(c)
of the Allocation Agreement are Subsidiaries of the Allocatee and
the Allocatee has a controlling influence over the investment
decisions of each Subsidiary Allocatee.
d. The Allocation Agreement and all documents related thereto to
which the Allocatee or the Subsidiary Allocatee is a party and
executed and delivered by the Allocatee or Subsidiary Allocatee
as of the date hereof constitute the legal, valid and binding
obligations of the Allocatee [and the Subsidiary Allocatees]
enforceable in accordance with their respective terms.
e. To our knowledge, there is no suit, action, proceeding, or
investigation, pending or threatened against the Allocatee [or
the Subsidiary Allocatees] that questions the validity of the
Allocation Agreement or any actions taken or to be taken pursuant
thereto.
2
This opinion is based upon the laws of the State(s) of _______ [this list must
include the incorporation laws of the Allocatee and Subsidiary Allocatee(s)
State(s) of formation and the laws of all States listed in opinion a. as States
where the Allocatee and/or Subsidiary Allocatee(s) are currently transacting
business] and the Federal laws of the United States. This opinion is rendered
solely in connection with the CDFI Fund's provision of the NMTC Allocation to
the Allocatee [and the Subsidiary Allocatees]. Accordingly, it may be relied
upon only by the CDFI Fund and may not be relied upon by any other party for
any other purpose.
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Name of Counsel
By:
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3