AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF FDI-SHADY OAKS, LTD.

Limited Partnership Agreement

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Title: AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF FDI-SHADY OAKS, LTD.
Governing Law: Texas Date: 7/5/2005

AMENDED AND RESTATED AGREEMENT

OF LIMITED PARTNERSHIP OF

FDI-SHADY OAKS, LTD.

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TABLE OF CONTENTS

Page

ARTICLE I DEFINITIONS..........................................................1

Section 1.1 "Accountant".............................................1

Section 1.2 "Act"....................................................2

Section 1.3 "Actual Tax Credit"......................................2

Section 1.4 "Adjusted Capital Account Deficit".......................2

Section 1.5 "Affiliate"..............................................2

Section 1.6 "Agreement" or "Partnership Agreement"...................2

Section 1.7 "Apartment Housing"......................................2

Section 1.8 "Architect of Record"....................................2

Section 1.9 "Asset Management Fee"...................................3

Section 1.10 "Assignee"...............................................3

Section 1.11 "Bankruptcy" or "Bankrupt"...............................3

Section 1.12 "Break-even Operations"..................................3

Section 1.13 "Budget".................................................3

Section 1.14 "Capital Account"........................................3

Section 1.15 "Capital Contribution"...................................4

Section 1.16 "Cash Expenses"..........................................4

Section 1.17 "Cash Receipts"..........................................4

Section 1.18 "Code"...................................................4

Section 1.19 "Completion of Construction".............................4

Section 1.20 "Compliance Period"......................................5

Section 1.21 "Consent of the Special Limited Partner".................5

Section 1.22 "Construction Budget"....................................5

Section 1.23 "Construction Contract"..................................5

Section 1.24 "Contractor".............................................5

Section 1.25 "Debt Service Coverage"..................................5

Section 1.26 "Deferred Management Fee"................................5

Section 1.27 "Developer"..............................................6

Section 1.28 "Development Fee"........................................6

Section 1.29 "Distributions"..........................................6

Section 1.30 "Fair Market Value"......................................6

Section 1.31 "Financial Interest".....................................6

Section 1.32 "First Year Certificate".................................6

Section 1.33 "FmHA"...................................................6

Section 1.34 "FmHA Interest Credit Agreement".........................6

Section 1.35 "FmHA Loan Agreement"....................................6

Section 1.36 "Force Majeure"..........................................6

Section 1.37 "General Partner(s)".....................................7

Section 1.38 "Gross Asset Value"......................................7

Section 1.39 "Hazardous Substance"....................................8

Section 1.40 "Improvements"...........................................8

Section 1.41 "In-Balance".............................................8

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Section 1.42 "Incentive Management Fee"...............................8

Section 1.43 "Income and Losses"......................................8

Section 1.44 "Inspecting Architect"...................................9

Section 1.45 "Insurance"..............................................9

Section 1.46 "Insurance Company".....................................10

Section 1.47 "Interest"..............................................10

Section 1.48 "Involuntary Withdrawal"................................10

Section 1.49 "Land Acquisition Fee"..................................10

Section 1.50 "LIHTC".................................................10

Section 1.51 "Limited Partner".......................................11

Section 1.52 "Management Agent"......................................11

Section 1.53 "Management Agreement"..................................11

Section 1.54 "Minimum Set-Aside Test"................................11

Section 1.55 "Mortgage" or "Mortgage Loan"...........................11

Section 1.24 "Net Operating Income"..................................11

Section 1.57 "Nonrecourse Deductions"................................11

Section 1.58 "Nonrecourse Liability".................................12

Section 1.59 "Operating Deficit".....................................12

Section 1.60 "Operating Deficit Guarantee Period"....................12

Section 1.61 "Operating Loans".......................................12

Section 1.62 "Original Limited Partner"..............................12

Section 1.63 "Partner(s)"............................................12

Section 1.64 "Partner Nonrecourse Debt"..............................12

Section 1.65 "Partner Nonrecourse Debt Minimum Gain".................12

Section 1.66 "Partner Nonrecourse Deductions"........................12

Section 1.67 "Partnership"...........................................12

Section 1.68 "Partnership Minimum Gain"..............................12

Section 1.69 "Permanent Mortgage Commencement".......................12

Section 1.70 "Person"................................................13

Section 1.71 "Plans and Specifications"..............................13

Section 1.72 "Project Documents".....................................13

Section 1.73 "Projected Annual Tax Credits"..........................13

Section 1.74 "Projected Tax Credits".................................13

Section 1.75 "Qualified Tenants".....................................13

Section 1.76 "Rent Restriction Test".................................13

Section 1.77 "Rent-Up Reserve".......................................13

Section 1.78 "Revised Projected Tax Credits".........................13

Section 1.79 "Sale or Refinancing"...................................14

Section 1.80 "Sale or Refinancing Proceeds"..........................14

Section 1.81 "Special Limited Partner"...............................14

Section 1.82 "State".................................................14

Section 1.83 "State Tax Credit Agency"...............................14

Section 1.84 "Substitute Limited Partner"............................14

Section 1.85 "Syndication Fee".......................................14

Section 1.86 "Tax Credit"............................................14

Section 1.87 "Tax Credit Compliance Fee".............................14

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Section 1.88 "Tax Credit Conditions".................................14

Section 1.89 "Tax Credit Period".....................................15

Section 1.90 "Title Policy"..........................................15

Section 1.91 "TRA 1986"..............................................15

Section 1.92 "Treasury Regulations"..................................15

Section 1.93 "Withdrawing" or "Withdrawal"...........................15

ARTICLE II NAME...............................................................15

ARTICLE III PRINCIPAL EXECUTIVE OFFICE/AGENT FOR SERVICE......................15

Section 3.1 Principal Executive Office..............................15

Section 3.2 Agent for Service of Process............................15

ARTICLE IV PURPOSE............................................................16

Section 4.1 Purpose of the Partnership..............................16

Section 4.2 Authority of the Partnership............................16

ARTICLE V TERM................................................................16

ARTICLE VI GENERAL PARTNER'S CONTRIBUTIONS AND LOANS..........................17

Section 6.1 Capital Contribution of General Partner.................17

Section 6.2 Construction Obligations................................17

Section 6.3 Operating Obligations...................................17

Section 6.4 Other General Partner Loans.............................18

ARTICLE VII CAPITAL CONTRIBUTIONS OF LIMITED PARTNER AND SPECIAL LIMITED

PARTNER.......................................................................18

Section 7.1 Original Limited Partner................................18

Section 7.2 Capital Contribution of Limited Partner.................18

Section 7.3 Repurchase of Limited Partner's Interest................21

Section 7.4 Adjustment of Limited Partner's Capital Contribution....21

Section 7.5 Capital Contribution of Special Limited Partner.........23

Section 7.6 Return of Capital Contribution..........................24

Section 7.7 Liability of Limited Partner and Special Limited

Partner.................................................24

ARTICLE VIII WORKING CAPITAL AND RESERVES.....................................24

Section 8.1 Operating and Maintenance Account.......................24

Section 8.2 Reserve for Replacements................................24

Section 8.3 Tax and Insurance Account...............................24

Section 8.4 Other Reserves..........................................25

ARTICLE IX MANAGEMENT AND CONTROL.............................................25

Section 9.1 Power and Authority of General Partner..................25

Section 9.2 Payments to the General Partners and Others.............25

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Section 9.3 Specific Powers of the General Partner..................27

Section 9.4 Authority Requirements..................................27

Section 9.5 Limitations on General Partner's Power and Authority....28

Section 9.6 Restrictions on Authority of General Partner............29

Section 9.7 Duties of General Partner...............................31

Section 9.8 Obligations to Repair and Rebuild Apartment Housing.....32

Section 9.9 Partnership Expenses....................................33

Section 9.10 General Partner Expenses................................33

Section 9.11 Other Business of Partners..............................33

Section 9.12 Covenants, Representations and Warranties...............34

Section 9.13 Indemnification of the Partnership and the Limited

Partners................................................37

ARTICLE X ALLOCATIONS OF INCOME, LOSSES AND CREDITS...........................38

Section 10.1 General.................................................38

Section 10.2 Allocations From Sale or Refinancing....................38

Section 10.3 Special Allocations.....................................39

Section 10.4 Curative Allocations....................................41

Section 10.5 Other Allocation Rules..................................41

Section 10.6 Tax Allocations: Code Section 704(c)....................42

Section 10.7 Allocation Among Limited Partners.......................43

Section 10.8 Allocation Among General Partners.......................43

Section 10.9 Modification of Allocations.............................43

ARTICLE XI DISTRIBUTION.......................................................44

Section 11.1 Distribution of Net Operating Income....................44

Section 11.2 Distribution of Sale or Refinancing Proceeds............44

ARTICLE XII TRANSFERS OF LIMITED PARTNER'S INTEREST IN THE PARTNERSHIP........45

Section 12.1 Assignment of Limited Partner's Interest................45

Section 12.2 Effective Date of Transfer..............................45

Section 12.3 Invalid Assignment......................................45

Section 12.4 Assignee's Rights to Allocations and Distributions......46

Section 12.5 Substitution of Assignee as Limited Partner or Special

Limited Partner.........................................46

Section 12.6 Death, Bankruptcy, Incompetency, etc. of a Limited

Partner.................................................46

ARTICLE XIII WITHDRAWAL, REMOVAL AND REPLACEMENT OF GENERAL PARTNER...........47

Section 13.1 Withdrawal of General Partner...........................47

Section 13.2 Removal of General Partner..............................47

Section 13.3 Effects of a Withdrawal.................................49

Section 13.4 Successor General Partner...............................50

Section 13.5 Admission of Additional or Successor General Partner....51

Section 13.6 Transfer of Interest....................................51

Section 13.7 No Goodwill Value.......................................51

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ARTICLE XIV BOOKS AND ACCOUNTS, REPORTS, TAX RETURNS, FISCAL YEAR AND

BANKING.......................................................................52

Section 14.1 Books and Accounts......................................52

Section 14.2 Accounting Reports......................................52

Section 14.3 Other Reports...........................................53

Section 14.4 Late Reports............................................55

Section 14.5 Annual Site Visits......................................55

Section 14.6 Tax Returns.............................................56

Section 14.7 Fiscal Year.............................................56

Section 14.8 Banking.................................................56

Section 14.9 Certificates and Elections..............................56

ARTICLE XV DISSOLUTION, WINDING UP, TERMINATION AND LIQUIDATION OF THE

PARTNERSHIP...................................................................56

Section 15.1 Dissolution of Partnership..............................56

Section 15.2 Return of Capital Contribution upon Dissolution.........57

Section 15.3 Distribution of Assets..................................57

Section 15.4 Deferral of Liquidation.................................58

Section 15.5 Liquidation Statement...................................58

Section 15.6 Certificates of Dissolution; Certificate of Cancellation

of Certificate of Limited Partnership...................58

ARTICLE XVI AMENDMENTS........................................................59

ARTICLE XVII MISCELLANEOUS....................................................59

Section 17.1 Voting Rights...........................................59

Section 17.2 Meeting of Partnership..................................60

Section 17.3 Notices.................................................60

Section 17.4 Successors and Assigns..................................60

Section 17.5 FmHA Regulations........................................60

Section 17.6 Recording of Certificate of Limited Partnership.........61

Section 17.7 Amendment of Certificate of Limited Partnership.........61

Section 17.8 Counterparts............................................62

Section 17.9 Captions................................................62

Section 17.10 Saving Clause...........................................62

Section 17.11 Certain Provisions......................................62

Section 17.12 Tax Matters Partner.....................................62

Section 17.13 Expiration of Compliance Period.........................63

Section 17.14 Number and Gender.......................................64

Section 17.15 Entire Agreement........................................64

Section 17.16 Governing Law...........................................64

Section 17.17 Attorney's Fees.........................................64

Section 17.18 Receipt of Correspondence...............................64

Section 17.19 Security Interest and Right of Set-Off..................64

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EXHIBIT A - Legal Description..........................................A-1

EXHIBIT B - Form of Legal Opinion................................B-1 - B-4

EXHIBIT C - Certification and Agreement..........................C-1 - C-4

EXHIBIT D - Form of Completion Certificate.............................D-1

EXHIBIT E - Accountant's Certificate...................................E-1

EXHIBIT F - Contractor's Letter........................................F-1

EXHIBIT G - Operations..........................................G-1 - H-10

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AMENDED AND RESTATED AGREEMENT

OF LIMITED PARTNERSHIP OF

FDI-SHADY OAKS, LTD.

This Amended and Restated Agreement Of Limited Partnership is being

entered into effective as of the date written below by and between Fieser

Holdings, Inc., 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., as the special limited partner (the "Special

Limited Partner") and Patricia A. Fieser as the withdrawing limited partner (the

"Original Limited Partner").

RECITALS

WHEREAS, a partnership agreement dated August 20, 2004 was entered into

by and between Fieser Holdings, Inc. as the general partner (the "Initial

General Partner), and Patricia A. Fieser as the limited partner (the "Initial

Limited Partner") (the "Original Partnership Agreement"). A Certificate of

Limited Partnership was filed with the Texas Secretary of State on August 25,

2004.

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:

ARTICLE I

DEFINITIONS

Section 1.1 "Accountant" shall mean Lee E. Shafer, P.C., 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 14.3 of this Agreement.

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Section 1.2 "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.

Section 1.3 "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.

Section 1.4 "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.

Section 1.5 "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.

Section 1.6 "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, refer to this Agreement

as a whole, unless the context otherwise requires.

Section 1.7 "Apartment Housing" shall collectively mean the approximately

3.224 acres of land in Prairie View, Waller County, Texas, as more fully

described in Exhibit "A" attached hereto and incorporated herein by this

reference, and the Improvements.

Section 1.8 "Architect of Record" shall mean David Albright. The General

Partner, on behalf of the Partnership, shall enter into a contract with the

Architect of Record to perform certain duties and responsibilities including,

but not limited to: designing the Improvements; preparing the construction

blueprints, preparing the property specifications manual; contracting for

administrative services; completing the close-out procedures; inspecting for and

overseeing resolution of the Contractor's final punch list; receiving and

approving operations and maintenance manuals; and collecting, reviewing,

approving and forwarding to the Partnership all product, material and

construction warranties.

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Section 1.9 "Asset Management Fee" shall have the meaning set forth in

Section 9.2(d) hereof and the Minimum Amount (as defined in Section 9.2(d)),

shall be paid monthly to the Limited Partner.

Section 1.10 "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 has not become a Substitute Limited Partner.

Section 1.11 "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, 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 the Bankruptcy of such Partner shall have occurred and be

continuing.

Section 1.12 "Break-even Operations" shall mean at such time as the

Partnership has Cash Receipts equal to 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 outstanding Partnership

obligations and any management fee or portion thereof, which is currently

deferred and not paid; and (c) Cash Expenses shall include the amount of any

reserve required to be funded in accordance with Article VIII that is currently

deferred and not paid. In addition, 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. Moreover, in the event any

rent concession is granted for the rental of an apartment unit the value of the

rental concession shall be amortized over the term of the lease.

Section 1.13 "Budget" shall mean the annual operating Budget of the

Partnership as more fully described in Section 14.3 of this Agreement.

Section 1.14 "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 10.4 hereof, and decreased by

the amount of any Distributions made to such Partner, and allocations to such

Partner of Partnership Losses (or items thereof) and any items in the nature of

expenses or losses which are specially allocated pursuant to Section 10.3 or

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

<PAGE>

Treasury Regulation Section 1.704-1(b), as amended or any successor thereto, and

shall be interpreted and applied in a manner consistent with such Treasury

Regulation.

Section 1.15 "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, 7.4 or 7.6 of

this Agreement. A loan to the Partnership by a Partner shall not be considered a

Capital Contribution.

Section 1.16 "Cash Expenses" shall mean all cash operating

obligations of the Partnership (other than those covered by Insurance) in

accordance with the applicable Budget, including without limitation, the payment

of the monthly Mortgage payments, the Management Agent fees (which shall be

deemed to include that portion of such fees which is currently deferred and not

paid), 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. Cash Expenses payable to Partners or Affiliates of Partners shall

be paid after Cash Expenses payable to third parties.

Section 1.17 "Cash Receipts" shall mean actual cash received on a cash

basis by the Partnership from operating revenues of the Partnership, including

without limitation rental income (but not any subsidy thereof from the General

Partner or an Affiliate thereof), tenant security deposits that have been

forfeited by tenants pursuant to the laws of the State, laundry income, paid to

the Partnership, telephone hook-up or service income, cable fees or hook-up

costs, telecommunications or satellite fees or hook-up costs, but excluding

prepayments, security deposits, Capital Contributions, borrowings, the Mortgage

Loan, lump-sum payments, any extraordinary receipt of funds, and any income

earned on investment of its funds. Neither the General Partner nor its

Affiliates shall be entitled to payment of any Cash Receipts for any reason,

including but not limited to a separate contract, agreement, obligation or the

like.

Section 1.18 "Code" shall mean the Internal Revenue Code of 1986, as

amended from time to time, or any successor statute.

Section 1.19 "Completion of Construction" shall mean the date the

Partnership receives the required certificate of occupancy (or the local

equivalent) for all 40 apartment units, and by the issuance of the Construction

Inspector's certification, in a form substantially similar to the form attached

hereto as Exhibit D and incorporated herein by this reference, with respect to

completion of all the 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. In

<PAGE>

addition to the above, Completion of Construction shall occur only when the

statutory time period for the filing of any liens by the Contractor,

subcontractors, material suppliers or any one else entitled to file a lien

against the property has lapsed unless such filed liens, other than the Mortgage

Loan, have been bonded over and have been approved by the Special Limited

Partner; and the Special Limited Partner has approved the Completion of

Construction.

Section 1.20 "Compliance Period" shall mean the period set forth in Section

42 (i)(1) of the Code, as amended, or any successor statute.

Section 1.21 "Consent of the Special Limited Partner" shall mean the prior

written consent or approval of the Special Limited Partner.

Section 1.22 "Construction Budget" shall mean 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 Construction

Budget is referenced in the Development, Construction and Operating Budget

Agreement entered into by and between the Partners the even date hereof. The

Development, Construction and Operating Budget Agreement shall: list all

subcontractors and material suppliers who will account for five percent or more

of the cost of construction of the Improvements; and show a trade payment

breakdown specifying the cost of each classification of construction

requirements pursuant to the Plans and Specifications.

Section 1.23 "Construction Contract" shall mean the construction contract

March 22, 2005 in the amount of $674,560 per year entered into between the

Partnership and the Contractor pursuant to which the Improvements are being

constructed in accordance with the Plans and Specifications. The Construction

Contract shall be a fixed price agreement (includes materials and labor) at a

cost consistent with the Development Budget. Any modifications to the

Construction Contract requires the Consent of the Special Limited Partner.

Section 1.24 "Contractor" shall mean LCJ Management, Inc. dba LCJ

Construction, which is the general construction contractor for the Apartment

Housing.

Section 1.25 "Debt Service Coverage" shall mean for the applicable period

the ratio between the Net Operating Income (excluding Mortgage payments) 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 "G" 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 currently deferred and not paid.

Section 1.26 "Deferred Management Fee" shall have the meaning set forth in

Section 9.2(c) hereof.

<PAGE>

Section 1.27 "Developer" shall mean Fieser Development, Inc.

Section 1.28 "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

the land or syndication activities.

Section 1.29 "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.

Section 1.30 "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.

Section 1.31 "Financial Interest" shall mean the General Partner's capital

interest in the Partnership to be contributed and maintained pursuant to the

requirements of FmHA Instruction 1944-E, Section 1944.211(a)(13)(ii) or any

amendments thereto. Such Financial Interest shall not affect the Partners'

allocable share of the Profits, Losses, Tax Credits or Cash Flow From Operations

as set forth in this Agreement.

Section 1.32 "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. Section 1.33 "FmHA"

shall mean the United States Department of Agriculture, Rural Development

(formerly Farmers Home Administration) or any successor thereto.

Section 1.34 "FmHA Interest Credit Agreement" shall mean the Multiple

Family Housing Interest Credit and Rental Assistance Agreement (Form FmHA 1944-7

or any successor thereof) between the FmHA and the Partnership whereby FmHA will

provide a monthly credit subsidy to the Partnership's Mortgage account when the

Partnership makes each monthly payment on the Mortgage.

Section 1.35 "FmHA Loan Agreement" shall mean the Loan Agreement for an RRH

Loan to a Limited Partnership Operating on a Limited Profit Basis (Form FmHA

1944-34 or any successor thereof) between the FmHA and the Partnership made in

consideration of the Mortgage Loan to the Partnership by the FmHA pursuant to

Section 515(b) of the Housing Act of 1949 to build a low to moderate income

apartment complex.

Section 1.36 "Force Majeure" shall mean any act of God, strike, lockout, or

other industrial disturbance, act of the public enemy, war, blockage, public

<PAGE>

riot, fire, flood, explosion, governmental action, governmental delay, restraint

or inaction and any other cause or event, whether of the kind enumerated

specifically herein, or otherwise, which is not reasonably within the control of

a Partner to this Agreement claiming such suspension.

Section 1.37 "General Partner(s)" shall mean Fieser Holdings, Inc., 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 refer to such General Partners and vice versa.

Section 1.38 "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;

Partner shall be adjusted to equal the Fair Market Value of such asset on the

date of distribution as determined by the distributee and the General Partner,

provided that, if the distributee is a General Partner, the determination of the

Fair Market Value of the distributed asset shall be determined by appraisal; and

(d) the Gross Asset Values of Partnership assets shall be increased (or

decreased) to reflect any adjustments to the adjusted basis of such assets

pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent

that such adjustments are taken into account in determining Capital Accounts

pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m) and Section

10.3(g) hereof; provided however, that Gross Asset Values shall not be adjusted

pursuant to this Section 1.38(d) to the extent the General Partner determines

that an adjustment pursuant to Section 1.38(b) hereof is necessary or

appropriate in connection with a transaction that would otherwise result in an

adjustment pursuant to this Section 1.38(d).

If the Gross Asset Value of an asset has been determined or adjusted

pursuant to Section 1.38(a), Section 1.38(b), or Section 1.38(d) hereof, such

<PAGE>

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.

Section 1.39 "Hazardous Substance" shall mean and include any substance,

material or waste, including 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, the 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.

Section 1.40 "Improvements" shall mean the seven (7) buildings containing

Forty (40) apartment units and ancillary and appurtenant facilities (including

those intended for commercial use, if any,) being constructed for families built

in accordance with the Project Documents. It shall also include all furnishings,

equipment and personal property used in connection with the operation thereof.

Section 1.41 "In-Balance" shall mean, on any occasion, that the amount of

the undisbursed Limited Partner's Capital Contribution are sufficient in the

Limited Partner's reasonable judgment to pay, through Completion of

Construction, all of the following sums: (a) all costs of construction,

marketing, ownership, maintenance and leasing of the Apartment Housing units;

and (b) all sums payable under the Construction documents.

Section 1.42 "Incentive Management Fee" shall have the meaning set forth in

Section 9.2(e) hereof.

Section 1.43 "Income and Losses" 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 1.43 shall be added to such taxable income or loss;

(b) any expenditures of the Partnership described in Code Section

705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to

Regulation Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in

computing Income and Losses pursuant to this Section 1.43 shall be subtracted

from such taxable income or loss;

pursuant to Section 1.38(a) or (b) hereof, 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;

<PAGE>

(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 Sections 10.3 or 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.

Section 1.44 "Inspecting Architect" shall mean

AECC, Inc. The Inspecting Architect shall make regular inspections of the

construction site, but in no event less than once a month, to confirm that

construction of the Improvements is in conformance with the Plans and

Specifications. The Inspecting Architect will sign-off on all the draw requests

made by the Contractor and provide the documents specified in Section 14.3 of

this Agreement. If there comes into being any identity of interest between the

Partnership and the Inspecting Architect, or between the Contractor and the

Inspecting Architect, then the General Partner will immediately relieve the

Inspecting Architect of any inspecting duties.

Section 1.45 "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;

(b) during operations the Partnership will provide and maintain business

interruption coverage covering actual sustained loss for 12 months; worker's

<PAGE>

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;

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 minimum builder's risk coverage shall be in an amount equal to the

construction contract amount; and

(h) 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.

Section 1.46 "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.

Section 1.47 "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.

Section 1.48 "Involuntary Withdrawal" shall mean any Withdrawal caused by

the death, adjudication of insanity or incompetence, Bankruptcy of a General

Partner, or the removal of a General Partner pursuant to Section 13.2 hereof.

Section 1.49 "Land Acquisition Fee" shall mean the fee payable to the

General Partner in an amount equal to $1,920 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.

Section 1.50 "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.

<PAGE>

Section 1.51 "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.

Section 1.52 "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

Hamilton Valley Management, Inc.

Section 1.53 "Management Agreement" shall mean the agreement between the

Partnership and the Management Agent for property management services. The

management fee shall equal to $30 per occupied unit per month. Neither the

Management Agreement nor ancillary agreement shall provide for an initial

rent-up fee, a set-up fee, nor any other similar pre-management fee 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.

Section 1.54 "Minimum Set-Aside Test" shall mean the 40-60 set aside test

pursuant to Section 42(g), as amended and any successor thereto, of the Code

with respect to the percentage of 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.

Section 1.55 "Mortgage" or "Mortgage Loan" shall mean the following

permanent nonrecourse financing: a loan from Rural Development, or its successor

or assignee, in the principal amount of $1,015,804, plus interest on the

principal at 1.0% per annum over a term of 50 years and amortized over 50 years

and a HOME loan in the principal amount of $465,000, plus interest on the

principal at 1.0% per annum over a term of 30 years and amortized over 30 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 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 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 any outstanding hard construction costs including labor and materials.

Section 1.56 "Net Operating Income" shall mean the cash available for

Distribution on an annual basis, when Cash Receipts exceed Cash Expenses.

Section 1.57 "Nonrecourse Deductions" shall have the meaning given it in

Treasury Regulations Section 1.704-2(b)(1).

<PAGE>

Section 1.58 "Nonrecourse Liability" shall have the meaning given it in

Treasury Regulations Section 1.704-2(b)(3).

Section 1.59 "Operating Deficit" shall mean, for the applicable period,

insufficient funds to pay operating costs when Cash Expenses exceed the sum of

Cash Receipts and any amount in the Rent-Up Reserve, as determined by the

Accountant and approved by the Special Limited Partner.

Section 1.60 "Operating Deficit Guarantee Period" shall mean the period

commencing with the date the first apartment unit in the Apartment Housing is

available for its intended use (for properties being rehabilitated with tenants

in residence, the period commences with the signing of this Agreement). The

period ending three years following the achievement of three consecutive months

of Break-even Operations (for properties being rehabilitated with tenants in

residence, the Operating Deficit Guarantee Period ends following three

consecutive months of Breakeven Operations after completion of all the

rehabilitation as approved in the Plans and Specifications or scope of work).

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 XI of this Agreement.

Section 1.61 "Original Limited Partner" shall mean Patricia A. Fieser.

Section 1.62 "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.

Section 1.63 "Partner Nonrecourse Debt" shall have the meaning set forth in

Section 1.704-2(b)(4) of the Treasury Regulations.

Section 1.64 "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.

Section 1.65 "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.

Section 1.66 "Partnership" shall mean the limited partnership continued

under this Agreement.

Section 1.67 "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).

Section 1.68 "Permanent Mortgage Commencement" shall mean the first date on

which all of the following have occurred: (a) the Mortgage shall have closed and

funded; and (b) amortization of the Mortgage shall have commenced.

<PAGE>

Section 1.69 "Person" shall collectively mean an individual,

proprietorship, trust, estate, partnership, joint venture, association, company,

corporation or other entity.

Section 1.70 "Plans and Specifications" shall mean the plans and

specifications 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. For rehabilitated properties without

Plans and Specifications, this definition shall include any specifications

manual and the unit by unit scope of work approved by the local city or county

building department, if applicable, and the Special Limited Partner.

Section 1.71 "Project Documents" shall mean all documents relating to the

Mortgage Loan and Construction Contract. 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.

Section 1.72 "Projected Annual Tax Credits" shall mean LIHTC in the amount

of $63,699 for 2005, $122,303 per year for each of the years 2006 through 2014,

and $50,959 for 2015, 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 $1,223,025

to be available to the Partnership.

Section 1.73 "Projected Tax Credits" shall mean LIHTC in the aggregate

amount of $1,223, 025.

Section 1.74 "Qualified Tenants" shall mean any tenants who have incomes of

60% or less of the area median gross income, as adjusted for family size, so as

to make the Project eligible for LIHTC.

Section 1.75 "Real Estate Taxes" shall mean the sum of $10,000 required to

be paid annually by the Partnership to the tax assessor, school district or

similar representative, of the Katy, Harris County, for real estate taxes

assessed against the Apartment Housing. The Real Estate Taxes are payable as

follows: Paid on January 1 of each year in the amount of $10,000.

Section 1.76 "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.

<PAGE>

Section 1.77 "Rent-Up Reserve" means the Partnership reserve in the initial

amount of $0 established to fund the rent-up of the Apartment Complex.

Section 1.78 "Revised Projected Tax Credits" shall have the meaning set

forth in Section 7.4(a) hereof.

Section 1.79 "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 or 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."

Section 1.80 "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.

Section 1.81 "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.

Section 1.82 "State" shall mean the State of Texas.

Section 1.83 "State Tax Credit Agency" shall mean the state agency of Texas

which has the responsibility and authorization to administer the LIHTC program

in Texas.

Section 1.84 "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.

Section 1.85 "Syndication Fee" shall mean the fee payable to the General

Partner in an amount equal to $20,000 for the General Partner's services in

forming the Partnership, locating and approving the Limited Partner and Special

Limited Partner as the investors in the Partnership, negotiating and finalizing

this Partnership Agreement and for such other services referenced in Treasury

Regulation Section 1.709-2(B).

Section 1.86 "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.

Section 1.87 "Tax Credit Compliance Fee" shall mean the fee payable to the

General Partner in accordance with Section 9.2(f) of this Agreement.

<PAGE>

Section 1.88 "Tax Credit Conditions" shall mean, for the duration of the

Compliance Period, any and all restrictions including, but not limited to,

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.

Section 1.89 "Tax Credit Period" shall mean the ten year time period

referenced in Code Section 42(f)(1) over which the Projected Tax Credits are

allocated to the Partners. It is the intent of the Partners that the Projected

Tax Credits will be allocated during the Tax Credit Period and not a longer

term.

Section 1.90 "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 a TLTA Owners title policy naming the

Partnership as insured. The Title Policy shall also insure against

rights-of-way, easements, or claims of easements, not shown by public records.

The Title Policy shall be in an amount equal to the Mortgage Loan amount and the

Limited Partner's Capital Contribution.

Section 1.91 "TRA 1986" shall mean the Tax Reform Act of 1986.

Section 1.92 "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).

Section 1.93 "Withdrawing" or "Withdrawal" (including the verb form

"Withdraw" and the adjectival forms "Withdrawing" and "Withdrawn") shall mean,

as to a General Partner, the occurrence of the death, adjudication of insanity

or incompetence, Bankruptcy of such Partner or any of its principals, the

withdrawal, removal or retirement from the Partnership of such Partner for any

reason, including any sale, pledge, encumbering, assignment or other transfer of

all or any part of its General Partner Interest and those situations when a

General Partner may no longer continue as a General Partner by reason of any law

or pursuant to any terms of this Agreement.

ARTICLE II

NAME

The name of the Partnership shall be "FDI-SHADY OAKS, 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 26735 Stockdick School Road, Katy, Texas 77493 or

at such other place or places within the State as the General Partner may

hereafter designate.

<PAGE>

Section 3.2 Agent for Service of Process. The name of the agent for service

of process on the Partnership is James W. Fieser, whose address is 26735

Stockdick School Road, Katy, Texas 77493.

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. 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, 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 Plans and Specifications;

Restriction Test and consistent with the requirements of the Project Documents

so long as any Project Documents remain in force;

(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 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 furtherance

of the Partnership business and in accordance with this Agreement.

<PAGE>

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 the State, and shall continue until August 20, 2059,

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

has made a Capital Contribution equal to $300.

Section 6.2 Construction Obligations.

(a) The General Partner hereby guarantees a lien free completion of

construction of the Apartment Housing on or before August 1, 2005 ("Completion

Date"), at a total development cost of not more than $2,398,257 ("Development

Budget"), which includes all hard and soft costs incident to the acquisition,

development and construction of the Apartment Housing in accordance with the

Construction Budget, the Construction Contract, the other Project Documents and

the Plans and Specifications. If the Development Budget exceeds the sum of the

Capital Contributions, the Mortgage amount as specified herein and the

Development Fee then the General Partner shall be responsible for and shall be

obligated to pay the difference thereof. Any advances by the General Partner

pursuant to the previous sentence 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. If the Special Limited Partner, in

good faith, ascertains that the cost of completing the Improvements in

substantial accordance with the Plans and Specifications is greater than the sum

of (1) the then remaining undisbursed portion of the Capital Contributions; (2)

the then remaining undisbursed portion of the Mortgage amount as specified

herein; and (3) the then remaining undisbursed portion of the Development Fee;

then the Special Limited Partner may request the General Partner to advance

funds into a construction account in an amount required to complete the

Improvements.

(b) In addition, if (1) the Improvements are not completed on or before the

Completion Date (which date may be extended in the event of Force Majeure, but

in no event longer than three months from the Completion Date); (2) prior to

completing the Improvements, there is an uncured default under or termination of

the Mortgage Loan commitment, or other material documents; 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

<PAGE>

Special Limited Partner shall have no further Interest in the Partnership. If

the Limited Partner elects to have the General Partner repurchase the Interest

of the Limited Partner then the repurchase shall occur within 90 days after the

General Partner receives written demand from the Limited Partner.

Section 6.3 Operating Obligations. From the date of this Agreement until

three consecutive months of Break-even Operations (for properties being

rehabilitated, the Operating Deficit Guarantee Period ends following three

consecutive months of Breakeven Operations after completion of all

rehabilitation as approved in the Plans and Specifications or scope of work),

the General Partner will provide 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 provide Operating Loans to pay any Operating Deficits. The

aggregate maximum amount of the Operating Loan(s) the General Partner will be

$135,693 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 XI 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.

ARTICLE VII

CAPITAL CONTRIBUTIONS OF LIMITED PARTNER

AND SPECIAL LIMITED PARTNER

Section 7.1 Original Limited Partner. The Original Limited Partner made a

Capital Contribution of $100. Effective as of the date of this Agreement, the

Original Limited Partner's Interest has been liquidated and the Partnership has

reacquired the Original Limited Partner's Interest in the Partnership. The

Original Limited Partner acknowledges that it has no further interest in the

Partnership as a limited 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 $917,269, 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.

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(a) $687,952 (which includes the Special Limited Partner's Capital

Contribution of $92) shall be payable upon the Limited Partner's receipt and

approval of the following documents:

(1) the execution of this Agreement;

(2) an ALTA survey;

(3) a legal opinion in a form substantially similar to the form of opinion

attached hereto as Exhibit "B" and incorporated herein by this reference;

(4) a fully executed Certification and Agreement in the form attached

hereto as Exhibit "C" and incorporated herein by this reference;

(5) a copy of the title commitment, (in a form and substance satisfactory

to the Special Limited Partner) constituting an agreement by such title company

to issue the Title Policy within fifteen working days. The title commitment will

show the Apartment Housing to be free from liens and free from other exceptions

not previously approved by the Special Limited Partner;

(6) Insurance required during construction;

(7) copy of building permit;

(8) a copy of the recorded grant deed (warranty deed);

(9) copy of Limited Partner's independent engineer's report;

(10) copy of Construction Contract;

(11) copy of firm commitment from Mortgage Lender; and

(12) full set of Plans and Specifications.

(13) payment of $15,000 to the Limited Partner for costs and expenses

incurred by the Limited Partner in connection with the Limited Partner's

underwriting of the Apartment Housing and Improvements.

(b) $91,727 shall e payable upon the Limited partner's receipt and approval

of documents substantiating 50% construction completion, with all accompanying

documents including lien releases and date downs;

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;

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(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) endorsement to the Title Policy dated no more than ten days prior to

the scheduled Capital Contribution providing an as-built survey and confirming

that there are no liens, claims or 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).

(d) $45,863 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) achievement by the Partnership of a Debt Service Coverage of 1.15 for

90 consecutive days;

(3) 90% tax credit qualified occupancy and 90% actual occupancy for 90

consecutive days;

(4) an audited construction cost certification (which includes an itemized

cost breakdown);

(5) an updated Title Policy;

(6) 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; and

(7) an as-built survey.

(e) $45,863 shall be payable upon the Limited Partner's receipt and

approval of the following documents;

(1) 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;

<PAGE>

(2) copies of the executed lease agreement with the tenants;

(3) the current rent roll;

(4) the construction documents required pursuant to Section 14.3(a) of this

Agreement, if not previously provided to the Limited Partner;

(5) first year tax return in which Tax Credits are taken;

(6) a copy of the declaration of restrictive covenants/extended use

agreement entered into between the Partnership and the State Tax Credit Agency;

(7) a copy of the Partnership's audited financial statement;

(8) Internal Revenue Code Form 8609, or any successor form; and

(9) any documents previous not provided to the Limited Partner but required

pursuant to this Section 7.2 and Sections 14.3(a) and (b).

(f) In the event the Limited Partner fails to pay a portion of any Capital

Contribution by its due date, and any such failure is not cured within forty

five (45) days after written request for the payment from the General Partner

(after all such prerequisites to receive such payment are met), the Limited

Partner shall be deemed to be in default of its obligations under this Agreement

and the General Partner shall be entitled to institute a suit of law or in

equity.

Section 7.3 Repurchase of Limited Partner's Interest. Within 90 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 February 1,

2006;

(b) achieve 90% occupancy of the Apartment Housing by satisfying the

Minimum Set-Aside Test by February 1, 2006;

(d) 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.

Section 7.4 Adjustment of Limited Partner's Capital Contribution.

(a) The amount of the Limited Partner's and Special Limited Partner's

Capital Contribution was determined in part upon the amount of Tax Credits that

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were expected to be available to the Partnership, at a cost of 75.00% and was

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, and the audited construction

cost certification provided to the Limited Partner and Special Limited Partner

are less than $1,223,025 (the new 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 75.00% of the Revised Projected Tax Credits

so anticipated to be allocated to the Limited Partner and Special Limited

Partner. If the Capital Contribution adjustment referenced in this Section

7.4(a) is a reduction which is greater than the remaining Capital Contribution

to be paid by the Limited Partner and the Special Limited Partner then the

General Partner shall have ninety days from the date the General Partner

receives notice from either the Limited Partner or the Special Limited Partner

to pay the shortfall. If the Capital Contribution adjustment referenced in this

Section 7.4(a) is an increase then the Limited Partner and Special Limited

Partner shall have ninety 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 tenants who meet the Minimum

Set-Aside Test throughout the Compliance Period. If at the end of each calendar

year during the first five calendar years following the year in which the

Apartment Housing is placed in service, the Actual Tax Credit for any 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 (collectively the "Annual Tax Credit") (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 ninety days to pay the Annual

Credit Shortfall from the date the General Partner receives notice from the

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.

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 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

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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 $63,699 in 2005 and $122,303 in

2006. In the event the 2005 and 2006 Actual Tax Credits are less than projected

then the Limited Partner's Capital Contribution shall be reduced by an amount

equal to 75% times the difference between the Projected Annual Tax Credits for

2005 and 2006 and the Actual Tax Credits for 2005 and 2006. If the 2005 and 2006

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 ninety days of the General Partner receiving notice of the

reduction from the Limited Partners and/or the Special Limited Partner.

(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 of the Apartment Housing causing a

recapture of Tax Credits previously allocated to the Limited Partner; (2) a

reduction in the qualified basis of the Apartment Housing for income tax

purposes following an audit by the Internal Revenue Service (IRS) resulting in a

recapture of Tax Credits previously claimed; (3) a decision by the United States

Tax Court upholding the assessment of such deficiency against the Partnership

with respect to any Tax Credit 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

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

the sum of (A) the income tax deficiency assessed against the Limited Partner or

Special Limited Partner as a result of the Tax Credit recapture, (B) any

interest and penalties imposed on the Limited Partner or Special Limited Partner

with respect to such deficiency, and (C) 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) and (B).

(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

<PAGE>

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 $92 at the time of the

Limited Partner's Capital Contribution payment referenced in Section 7.2(a) upon

the same conditions. The Special Limited Partner shall be in a different class

from the Limited Partner and, except as otherwise expressly stated in this

Agreement, shall not participate in any rights allocable to or exercisable by

the Limited Partner under this Agreement.

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 Operating and Maintenance Account. The General Partner, on

behalf of the Partnership, shall establish an operating and maintenance account

and shall deposit thereinto, or provide a letter of credit, in an amount

required by the FmHA, to be used for initial operating capital as permitted or

required by applicable FmHA regulations. Said amount shall be reimbursed,

without interest, out of Apartment Housing funds as shall be authorized in

accordance with applicable FmHA regulations, and if not so reimbursed within

five years of the deposit, any amount remaining unreimbursed shall be forgiven

and shall constitute an ordinary and necessary business expense of the General

Partner as part consideration for the payment of the Development Fee.

Section 8.2 Reserve for Replacements. The Partnership shall fund, establish

and maintain a reserve account in an amount required by the FmHA Loan Agreement

which funds shall be used in accordance with FmHA Regulation 7 CFR Part 1930-C,

or any successor thereof, as evidenced by the FmHA Loan Agreement.

<PAGE>

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 equal installments. 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 Other Reserves. The General Partner shall 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

Code and applicable FmHA regulations; and (b) any real estate taxes, Insurance,

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.

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 $299,695 in accordance with the Development Fee Agreement entered into

by and between the Developer and the Partnership on the even date hereof. The

<PAGE>

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

development costs 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, 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.

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 one year, and the execution or renewal of any Management

Agreement shall be subject to the prior Consent of the Special Limited Partner.

If the Management Agent is an Affiliate of the General Partner then commencing

with the termination of the Operating Deficit Guarantee Period, in any year in

which the Apartment Housing has an Operating Deficit, 40% of the management fee

will be deferred ("Deferred Management Fee"). 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 for cause.

(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 2006 equal to 15% of the Net Operating Income but in no event

less than $1,323 for the Limited Partner's services in monitoring the operations

of the Partnership and for services in connection with the Partnership's

accounting matters and assisting with the preparation of tax returns and the

reports required in Sections 14.2 and 14.3 of this Agreement. The Asset

Management Fee of $1,323 shall be payable within seventy-five (75) days

following each calendar year and shall be payable from Net Operating Income in

the manner and priority set forth in Section 11.1 of this Agreement; provided,

however, that if in any year Net Operating Income is insufficient to pay the

full $1,323, the unpaid portion thereof shall accrue and be payable on a

cumulative basis in the first year in which there is sufficient Net Operating

<PAGE>

Income, as provided in Section 11.1, or sufficient Sale or Refinancing Proceeds,

as provided in Section 11.2.

(e) The Partnership shall pay to the General Partner through the Compliance

Period an annual Incentive Management Fee equal to 15% of Net Operating Income

commencing in 2006 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.

(f) The Partnership shall pay to the General Partner through the Compliance

Period an annual Tax Credit Compliance Fee equal to 15% of Net Operating Income

commencing in 2004 for the services of the General Partner in ensuring

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.

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;

(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;

funds in a manner consistent with the provisions of this Agreement;

(d) execute the Mortgage; and

(e) execute, acknowledge and deliver any and all instruments to effectuate

any of the foregoing.

<PAGE>

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.

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.

(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;

the Special Limited Partner;

(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) admit a Person as a Limited Partner except as provided in this

Agreement;

(g) violate any provision of the Mortgage;

(h) cause the Apartment Housing apartment units to be rented to anyone

other than Qualified Tenants;

<PAGE>

(i) violate the Minimum Set-Aside Test or the Rent Restriction Test for the

Apartment Housing;

(j) allow the Insurance to expire;

(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;

(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;

(o) allow the Real Estate Taxes to be unpaid if the Partnership fails to

pay the same when due;

(p) take any action that would cause termination of the Partnership;

(q) encumber the Apartment Housing, except as provided herein;

(r) execute an assignment for the benefit of creditors; or

(s) permit the Partnership to make any loan to any Person.

Section 9.6 Restrictions on Authority of General Partner. Without the

Consent of the Special Limited Partner the General Partner shall not:

(a) sell, exchange, lease or otherwise dispose of the Apartment Housing;

(b) incur indebtedness other than the Mortgage Loan in the name of the

Partnership;

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

<PAGE>

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, Inspecting Architect,

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;

(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

except as otherwise provided in this Agreement;

(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

<PAGE>

filed a petition or answer seeking any reorganization, arrangement, composition,

readjustment, liquidation, dissolution or similar relief under any statute, law

or rule;

(u) settle any audit with the Internal Revenue Service concerning the

adjustment or readjustment of any Partnership tax item, extend any statute of

limitations, or initiate or settle any judicial review or action concerning the

amount or character of any Partnership tax item; or

(v) make, amend or revoke any tax election.

Section 9.7 Duties of General Partner. The General Partner agrees that it

shall at all times:

(a) diligently and faithfully devote such of its time to the business of

the Partnership as may be necessary to properly conduct the affairs of the

Partnership;

(b) file and publish all certificates, statements or other instruments

required by law for the formation and operation of the Partnership as a limited

partnership in all appropriate jurisdictions;

(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 and not employ or permit another to employ such funds or assets in

any manner except for the benefit of the Partnership;

(e) 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;

(f) 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;

(g) 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;

<PAGE>

(h) pay, before the same becomes due or expires, the Insurance premium and

utilities to the Apartment Housing;

(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 Partnership to pay, before the same becomes due, the Mortgage

payment, subject to available funds, including funds provided under Section 6.3

or Section 6.4;

(n) 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

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;

(o) pay, before the same becomes due the Real Estate Taxes;

(p) maintain the initial tenant files, as may be corrected by the

Management Agent following the third party review, in a clean, dry, fireproof

location for a minimum period of twenty-one years; and

(q) abide by State law governing the operations of partnerships.

(r) perform such other acts as may be expressly required of it under the

terms of this Agreement.

<PAGE>

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

(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.

<PAGE>

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 is in breach or

violation of any provisions thereof.

accordance with all applicable requirements of all appropriate governmental

entities and the Plans and Specifications of the Apartment Housing.

(d) All conditions to the funding of the Mortgage have been met.

(e) 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.

(f) Except as to any non-recourse carveouts which maybe contained in the

Mortgage Loan, the General Partner does not have any personal liability with

respect to and has not personally guaranteed the payment of the Mortgage.

(g) The Partnership is or will be after completion of rehabilitation 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.

<PAGE>

(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 Partnership will require the Accountant to depreciate the

Improvements over a 27 1/2-year term. Site work shall be broken out separately

from Improvements and depreciated over 15 years using the cost recovery system,

mid-year 200% declining balance depreciation method. Landscaping and personal

property (cabinets, appliances, carpet and window coverings) shall be

depreciated over 5 years for regular tax or 9 years for alternative minimum tax.

(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 will use its best efforts to keep the Apartment Housing free of

Hazardous Substances and shall not use or generate, manufacture, refine,

transport, treat, store, handle, dispose of, transfer, produce or process

Hazardous Substance, and shall immediately take all remedial action as required

by any governmental agency or as required by law which is necessary to remove

such Hazardous Substance, except in connection with the normal maintenance and

operation of any portion of the Apartment Housing. The General Partner shall

comply, and use its best efforts to 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

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