Stradling Yocca Carlson & Rauth
Draft dated April 10, 2025
4912-4692-2535v3/022620-0118
BORROWER LOAN AGREEMENT
among
ANAHEIM HOUSING AUTHORITY,
as Governmental Lender,
CENTER HOUSING PARTNERS LP,
a California limited partnership
and
CN FINANCING, INC.,
as Funding Lender
Dated as of ____________ 1, 2025
relating to:
$________________
Anaheim Housing Authority
Multifamily Housing Revenue Note
(Tampico Motel Conversion),
Series 2025A
The interest of the Governmental Lender in this Borrower Loan Agreement (except for certain rights described herein) has been pledged and assigned to CN Financing, Inc. , as funding lender (the “Funding Lender”), under that certain Funding Loan Agreement, of even date herewith, by and between the Anaheim Housing Authority (the “Governmental Lender”) and the Funding Lender, under which the Funding Lender is originating a loan to the Governmental Lender to fund the Borrower Loan made under this Borrower Loan Agreement.
TABLE OF CONTENTS
Page
i
4912-4692-2535v3/022620-0118
ARTICLE I
PRINCIPLES OF CONSTRUCTION; DEFINITIONS
1.1 Principles of Construction ..................................................................................................... 1
1.2 Definitions ............................................................................................................................. 2
ARTICLE II
GENERAL
2.1 Origination of Borrower Loan ............................................................................................... 9
2.2 Security for the Funding Loan ............................................................................................... 9
2.3 Loan; Borrower Note; Conditions to Closing ..................................................................... 11
2.4 Borrower Loan Payments .................................................................................................... 12
2.5 Additional Borrower Payments ........................................................................................... 12
2.6 Overdue Payments; Payments if Default ............................................................................. 13
2.7 Borrower Loan Disbursements ............................................................................................ 13
2.8 Disbursement into Project Fund .......................................................................................... 13
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Borrower Representations ................................................................................................... 14
3.2 Survival of Representations and Covenants ........................................................................ 20
ARTICLE IV
AFFIRMATIVE COVENANTS
4.1 Existence ............................................................................................................................. 20
4.2 Taxes and Other Charges ..................................................................................................... 20
4.3 Repairs; Maintenance and Compliance; Physical Condition .............................................. 20
4.4 Litigation ............................................................................................................................. 21
4.5 Performance of Other Agreements ...................................................................................... 21
4.6 Notices ................................................................................................................................. 21
4.7 Cooperate in Legal Proceedings .......................................................................................... 21
4.8 Further Assurances .............................................................................................................. 21
4.9 Governmental Lender’s and Funding Lender’s Fees .......................................................... 22
4.10 Expenses .............................................................................................................................. 22
4.11 Indemnity ............................................................................................................................. 23
4.12 No Warranty of Condition or Suitability by Lenders .......................................................... 25
4.13 Notice of Default ................................................................................................................. 25
4.14 Covenant With Governmental Lender and Funding Lender ............................................... 25
4.15 Obligation of the Borrower to Construct or Rehabilitate the Project .................................. 25
4.16 Tax Covenants ..................................................................................................................... 25
4.17 Arbitrage Rebate .................................................................................................................. 30
4.18 Covenants Under Funding Loan Agreement ....................................................................... 30
TABLE OF CONTENTS
(continued)
Page
ii
4912-4692-2535v3/022620-0118
ARTICLE V
NEGATIVE COVENANTS
5.1 Dissolution ........................................................................................................................... 30
5.2 Change in Business or Operation of Property ..................................................................... 30
5.3 Transfers .............................................................................................................................. 31
5.4 No Hedging Arrangements .................................................................................................. 31
ARTICLE VI
DEFAULTS
6.1 Events of Default ................................................................................................................. 31
6.2 Remedies ............................................................................................................................. 32
ARTICLE VII
MISCELLANEOUS
7.1 Notices ................................................................................................................................. 33
7.2 Survival ............................................................................................................................... 33
7.3 Preferences .......................................................................................................................... 33
7.4 Construction of Documents ................................................................................................. 34
7.5 No Third Party Beneficiaries ............................................................................................... 34
7.6 Governmental Lender, Funding Lender and Servicer Not in Control; No Partnership ....... 34
7.7 Term of Borrower Loan Agreement .................................................................................... 34
7.8 Reimbursement of Expenses ............................................................................................... 35
7.9 Governing Law .................................................................................................................... 35
7.10 Successors and Assigns ....................................................................................................... 35
7.11 Severability .......................................................................................................................... 35
7.12 Entire Agreement; Amendment and Waiver ....................................................................... 35
7.13 Counterparts/Electronic Signatures ..................................................................................... 35
7.14 Captions ............................................................................................................................... 36
7.15 Time of the Essence............................................................................................................. 36
7.16 Judicial Reference ............................................................................................................... 36
7.17 Servicer ................................................................................................................................ 37
ARTICLE VIII
LIMITATIONS ON LIABILITY
8.1 Limitation on Liability ........................................................................................................ 37
8.2 Limitation on Liability of Governmental Lender ................................................................ 38
8.3 Waiver of Personal Liability ............................................................................................... 38
8.4 Limitation on Liability of Governmental Lender’s and Funding Lender’s Commissioners, Officers, Employees, Etc ..................................................................................................... 38
1 4912-4692-2535v3/022620-0118
BORROWER LOAN AGREEMENT
THIS BORROWER LOAN AGREEMENT (as amended, modified, supplemented, and replaced from time to time, this “Borrower Loan Agreement”), dated as of _____________, 20 25, is by and among the ANAHEIM HOUSING AUTHORITY, a public body, corporate and politic, duly organized and validly existing under the laws of the State of California (together with its successors and assigns, the “Governmental Lender”), CENTER HOUSING PARTNERS LP, a [California] limited partnership (together with its successors and assigns, the “Bor rower”) and CN FINANCING, INC., a _____________ (together with its successors and assigns, the “Funding Lender”).
RECITALS:
WHEREAS, pursuant to the provisions of the Housing Law (as defined herein), the Governmental Lender is authorized (a) to make mortgage loans to any person to provide financing for residential rental developments located within the jurisdiction of any of it s members and intended to be occupied in part or in whole by persons of low and very low income; (b) to borrow funds for the purpose of obtaining moneys to make such loans and provide such financing; and (c) to pledge the revenues and receipts to be receiv ed by the Governmental Lender from or in connection with such loans, and to mortgage, pledge or grant security interests in such loans or other property of the Governmental Lender in order to secure the repayment of any such borrowing by the Governmental Lender; and
WHEREAS, the Borrower has applied to the Governmental Lender for the Borrower Loan (as defined herein) to pay costs of the acquisition, rehabilitation and development of the Project (as defined herein); and
WHEREAS, the Borrower’s repayment obligations under this Borrower Loan Agreement are evidenced by the Borrower Note (as defined herein); and WHEREAS, the Borrower has requested the Governmental Lender to enter into that certain Funding Loan Agreement, (as defined herein) pursuant to which the Funding Lender will make the Funding Loan (as defined herein) to the Governmental Lender, the proceeds of which will be loaned under this Borrower Loan Agreement to the Borrower to finance the acquisition, rehabilitation, development and equipping of the Project; and;
WHEREAS, the Borrower Loan is secured by, among other things, the Deed of Trust (as defined herein).
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and the mutual representations, covenants and agreements herein contained, the parties hereto do hereby agree as follows:
ARTICLE I
PRINCIPLES OF CONSTRUCTION; DEFINITIONS
1.1 Principles of Construction. For all purposes of this Borrower Loan Agreement, except as otherwise expressly provided or unless the context otherwise requires:
2 4912-4692-2535v3/022620-0118
(a) Unless specifically defined herein, all capitalized terms shall have the meanings ascribed thereto in the Deed of Trust or, if not defined in the Deed of Trust, in the Funding Loan Agreement.
(b) Unless otherwise specified, (i) all references to sections and schedules are to those in this Borrower Loan Agreement, (ii) the words “hereof,” “herein” and “hereunder” and words of similar import refer to this Borrower Loan Agreement as a whole and not to any particular provision, (iii) all definitions are equally applicable to the singular and plural forms of the terms defined and (iv) the word “including” means “including but not limited to.”
1.2 Definitions. The following terms, when used in this Borrower Loan Agreement (including when used in the above recitals), shall have the following meanings:
“Additional Borrower Payments” shall mean the payments payable pursuant to Section 2.5 (Additional Borrower Payments), Section 2.6 (Overdue Payments; Payments in Default) and Section
4.10 (Expenses) hereof, and Section ___ of the Covenant Agreement and Section ___ of the Borrower Note.
“Authorized Borrower Representative” shall mean a person at the time designated and authorized to act on behalf of the Borrower by a written certificate furnished to the Governmental Lender, the Funding Lender and Fiscal Agent and containing the specimen signature of such person and signed on behalf of the Borrower which certificate may designate one or more alternates. “Borrower” shall have the meaning set forth in the first paragraph of this Borrower Loan Agreement.
“Borrower Loan” shall mean the loan made by the Governmental Lender to the Borrower pursuant to this Borrower Loan Agreement, in the maximum principal amount of the Borrower Loan Amount, as evidenced by the Borrower Note.
“Borrower Loan Amount” shall mean $_________, being the original maximum aggregate principal amount of the Borrower Note.
“Borrower Loan Documents” shall mean this Borrower Loan Agreement, the Covenant Agreement, the Borrower Note, the Deed of Trust, the Environmental Indemnity Agreement, the Guaranty, and all other documents or agreements evidencing, securing or otherwise pe rtaining to the Borrower Loan as more particularly described in the Covenant Agreement, as the same may be amended, modified, supplemented or replaced from time to time. “Borrower Loan Payments” shall mean the monthly loan payments payable pursuant to the Borrower Note.
“Borrower Loan Proceeds” shall mean proceeds of the Borrower Loan, to be disbursed in accordance with Section 2.7 of this Borrower Loan Agreement and the terms of the Covenant Agreement.
“Borrower Note” shall mean that certain Promissory Note Secured by Deed of Trust of even date herewith in the original principal amount of $________ made by Borrower and payable to Governmental Lender, as endorsed and assigned to the Funding Lender, as it may be amended, modified, supplemented or replaced from time to time.
3 4912-4692-2535v3/022620-0118
“Borrower Payment Obligations” shall mean all payment obligations of the Borrower under the Borrower Loan Documents, including, but not limited to, the Borrower Loan Payments and the Additional Borrower Payments.
“Business Day” shall mean any day other than (i) a Saturday or Sunday, or (ii) a day on which Funding Lender is authorized or obligated by law, regulation, governmental decree or executive order to be closed.
“Closing Date” shall mean ______, 20 25, being the date that the initial Borrower Loan Proceeds are disbursed hereunder.
“CNF” shall mean CN Financing, Inc., a __________, in its capacity as the Funding Lender and as the assignee and agent of the Governmental Lender with respect to the Borrower Loan pursuant to the terms of the Funding Loan Agreement.
“Code” shall mean the Internal Revenue Code of 1986 as in effect on the Closing Date or (except as otherwise referenced herein) as it may be amended to apply to obligations issued on the Closing Date, together with applicable proposed, temporary and final regulations promulgated, and applicable official public guidance published, under the Code. “Collateral” shall mean all collateral described in (i) this Borrower Loan Agreement (including, without limitation, all property in which the Governmental Lender and the Funding Lender is granted a security interest pursuant to any provision of this Borrower Loan Agreement), (ii) the Deed of Trust, or (iii) any other document securing the Borrower Loan, which Collateral shall include the Project, all of which collateral (exclusive of the Unassigned Rights) is pledged and assigned to Funding Lender under the Funding Loan Agreement to secure the Funding Loan. “Computation Date” shall have the meaning ascribed thereto in Section 1.148 3(e) of the Regulations.
“Costs of Funding” shall mean the Governmental Lender’s Closing Fee (if any) and the fees, costs, expenses and other charges incurred in connection with the funding of the Borrower Loan and the Funding Loan, the negotiation and preparation of this Borrower Loan Agreement and each of the other Borrower Loan Documents and Funding Loan Documents and shall include, but shall not be limited to, the following: (i) counsel fees (including but not limited to Tax Counsel, counsel to the Governmental Lender, Borrower’s counsel and Funding Lender’s counsel); (ii) financial advisor fees incurred in connection with the closing of the Borrower Loan and the Funding Loan; (iii) certifying and authenticating agent fees and expenses related to funding of the Funding Loan; (iv) printing costs (for any preliminary and final offering materials relating to the Funding Loan); (v) any recording fees; (vi) any additional fees charged by the Governmental Lender including the fees and expenses of the Governmental Lender’s financial ad visor; and (vii) costs incurred in connection with any required public notices generally and costs of any public hearing related to the Funding Loan and the financing of the Project with the proceeds thereof.
“County” shall mean the County of Orange, California.
“Covenant Agreement” shall mean that certain Construction and Permanent Loan Covenant Agreement of even date herewith, between CNF and Borrower, pursuant to which the Borrower Loan will be advanced to the Borrower and setting forth certain provisions relating to disbursement of the
4 4912-4692-2535v3/022620-0118
Borrower Loan during construction and other matters, as such agreement may be amended, modified, supplemented and replaced from time to time.
“Day” or “Days” shall mean calendar days unless expressly stated to be Business Days. “Deed of Trust” shall mean the Deed of Trust, Leasehold Assignment of Rents, Security Agreement and Fixture Filing as of even date herewith executed by Borrower for the benefit of Funding Lender encumbering the Project and securing the Borrower Loan, as amended, modified, supplemented, and replaced from time to time.
“Default Rate” shall have the meaning given to that term in the Borrower Note. “Determination of Taxability” shall mean (i) a determination by the Commissioner or any District Director of the Internal Revenue Service, (ii) a private ruling or Technical Advice Memorandum concerning the Governmental Lender Note issued by the National Office of the Internal Revenue Service in which Governmental Lender and Borrower were afforded the opportunity to participate, (iii) a determination by any court of competent jurisdiction, (iv) the enactment of legislation or (v) receipt by the Funding Lender, at the request of the Governmental Lender, the Borrower or the Funding Lender, of an opinion of Tax Counsel, in each case to the effect that the interest on the Governmental Lender Note is includable in gross income for federal income tax purposes of any holder or any former holder of all or a portion of the Governmental Lender Note, other than a holder who is a “substantial user” of the Project or a “related person” (as such terms are defined in Section 147(a) of the Code); provided, however, that no s uch Determination of Taxability under clause (i) or (iii) shall be deemed to have occurred if the Governmental Lender (at the sole expense of the Borrower), the Funding Lender (at the sole expense of the Borrower) or the Borrower is contesting such determination, has elected to contest such determination in good faith and is proceeding with all applicable dispatch to prosecute such contest until the earliest of (a) a final determination from which no appeal may be taken with respect to such determination, (b) abandonment of such appeal by the Governmental Lender or the Borrower, as the case may be, or (c) one year from the date of initial determination. “Environmental Indemnity Agreement” shall mean the Environmental Indemnity Agreement, dated as of the date thereof, executed by the Borrower [and the Guarantor] for the benefit of the Funding Lender and Governmental Lender.
“Event of Default” shall mean any Event of Default set forth in Section 6.1 of this Borrower Loan Agreement. An Event of Default shall “exist” if a Potential Default shall have occurred and be continuing beyond any applicable cure period.
“Excess Revenues” shall have the meaning ascribed thereto in Section 2.2(e) hereof. “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended. “Fair Market Value” shall mean the price at which a willing buyer would purchase the investment from a willing seller in a bona fide, arm’s length transaction (determined as of the date the contract to purchase or sell the investment becomes binding) if th e investment is traded on an established securities market (within the meaning of Section 1273 of the Code) and, otherwise, the term “Fair Market Value” means the acquisition price in a bona fide arm’s length transaction (as referenced above) if (i) the in vestment is a certificate of deposit that is acquired in accordance with applicable regulations under the Code, (ii) the investment is an agreement with specifically negotiated
5 4912-4692-2535v3/022620-0118
withdrawal or reinvestment provisions and a specifically negotiated interest rate (for example, a guaranteed investment contract, a forward supply contract or other investment agreement) that is acquired in accordance with applicable regulations under the Code, (iii) the investment is a United States Treasury Security State and Local Government Series that is acquired in accordance with applicable regulations of the United States Bureau of Public Debt, or (iv) the investment is an interest in any commingled investment fund in which the Governmental Lender and related parties do not own more than a ten percent (10%) beneficial interest therein if the return paid by the fund is without regard to the source of investment.
“Fiscal Agent” shall mean Wilmington Trust, National Association, in its capacity as the fiscal agent under the Funding Loan Agreement.
“Funding Lender” shall mean CN Financing, Inc., a ___________, in its capacity as lender under the Funding Loan.
“Funding Loan” shall mean the Funding Loan in the original maximum principal amount of $___________ made by Funding Lender to Governmental Lender under the Funding Loan Agreement, the proceeds of which are used by the Governmental Lender to make the Borrower Loan. “Funding Loan Agreement” shall mean the Funding Loan Agreement, of even date herewith, by and among the Governmental Lender, the Funding Lender and Fiscal Agent, as it may from time to time be amended, modified, supplemented or replaced from time to time. “Funding Loan Documents” shall have the meaning given to that term in the Funding Loan Agreement.
“General Partner” shall mean, collectively, (i) JHC–Center, LLC, a [California] limited liability company, as the managing general partner, (ii) Jamboree Housing Corporation, a [California] corporation, as Managing Member, and/or (iii) any other Person that the partners of the Borrower, with the prior written approval of the Funding Lender (or as otherwise permitted without the Funding Lender’s approval pursuant to the Borrower Loan Documents), selected to be a general partner of the Borrower.
“Governmental Authority” shall mean (i) any governmental municipality or political subdivision thereof, (ii) any governmental or quasi -governmental agency, authority, board, bureau, commission, department, instrumentality or public body, or (iii) any court , administrative tribunal or public utility, agency, commission, office or authority of any nature whatsoever for any governmental unit (federal, state, county, district, municipal, city or otherwise), now or hereafter in existence. “Governmental Lender” shall have the meaning set forth in the first paragraph of this Borrower Loan Agreement.
“Governmental Lender Note” shall mean the Multifamily Housing Revenue Note ( Tampico Motel Conversion), Series 2025A dated the Closing Date in the original maximum principal amount of $_________, as it may be amended, modified, supplemented or replaced from time to time. “Governmental Lender’s Closing Fee” shall mean the issuance fee of the Governmental Lender in the amount and payable as set forth in Section 22 of the Regulatory Agreement.
6 4912-4692-2535v3/022620-0118
“Gross Proceeds” shall mean, without duplication, the aggregate of:
(a) the net amount (after payment of all expenses of originating the Funding Loan) of Funding Loan proceeds received by the Governmental Lender as a result of the origination of the Funding Loan;
(b) all amounts received by the Governmental Lender as a result of the investment of the Funding Loan proceeds;
(c) any amounts held in any fund or account to the extent that the Governmental Lender reasonably expects to use the amounts in such fund to pay any portion of the Funding Loan; and (d) any securities or obligations pledged by the Governmental Lender or by the Borrower as security for the payment of any portion of the Funding Loan. “Guarantor” shall mean, any person or entity which may hereafter become a guarantor of any of the Borrower’s obligations under the Borrower Loan.
“Guaranty” shall mean any guaranty of any of the Borrower’s obligations under the Borrower Loan Documents.
“Housing Law” shall mean Chapter 1 of Part 2 of Division 24 of the California Health and Safety Code, as amended from time to time.
“Improvements” shall mean the 31-unit (including 1 managers’ unit) multifamily residential rental project to be constructed upon the Land and known or to be known as the “Tampico Motel Conversion”, and all other buildings, structures, fixtures, wiring, systems, equipment and other improvements and personal property to be constructed, rehabilitated and/or installed at or on the Land in accordance the Plans and Specifications.
“Indemnified Party” shall have the meaning set forth in Section 4.11 hereof. “Interest Rate” shall mean the rate of interest accruing on the Borrower Loan pursuant to the Borrower Note.
“Land” shall mean the real property described on Exhibit A to the Deed of Trust. “Legal Requirements” shall mean statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and injunctions of Governmental Authorities affecting all or part of the Project or any property (including the Project) or the construction, rehabil itation, use, alteration or operation thereof, whether now or hereafter enacted and in force, and all permits, licenses and authorizations and regulations relating thereto, and all covenants, agreements, restrictions and encumbrances contained in any instrument, either of record or known to the Borrower, at any time in force affecting all or part of the Project, including any that may (i) require repairs, modifications or alterations in or to all or part of the Project, or (ii) in any way limit the use and enjoyment thereof. “Nonpurpose Investment” shall mean any investment property (as defined in Section 148(b) of the Code) that is acquired with the Gross Proceeds of the Funding Loan and which is not acquired to carry out the governmental purpose of the Funding Loan.
7 4912-4692-2535v3/022620-0118
“Ongoing Governmental Lender Fee” shall mean the annual fee of the Governmental Lender in the amount, and payable, as set forth in Section 22 of the Regulatory Agreement. “Partnership Agreement” shall mean that certain [Amended and Restated Agreement of Limited Partnership] of the Borrower, dated as of [________ 1, 20__] as executed and in effect on the Closing Date, as the same may be amended, restated or modified in accordance with its terms. “Person” shall mean a natural person, a partnership, a joint venture, an unincorporated association, a limited liability company, a corporation, a trust, any other legal entity, or any Governmental Authority.
“Plans and Specifications” shall mean the plans and specifications for the construction and/or rehabilitation, as the case may be, of the Project approved by Funding Lender pursuant to the Covenant Agreement.
“Potential Default” shall mean the occurrence of an event which, under this Borrower Loan Agreement or any other Borrower Loan Document, would, but for the giving of notice or passage of time, or both, be an Event of Default.
“Project” shall mean the Property and Improvements thereon owned by the Borrower and encumbered by the Deed of Trust, together with all rights pertaining to such real property and Improvements, as more particularly described in the Deed of Trust. “Project Fund” has the meaning given to that term in the Funding Loan Agreement. “Property” shall have the meaning given to that term in the Deed of Trust. “Qualified Project Costs” shall mean costs paid with respect to the Project that meet each of the following requirements: (i) the costs are properly chargeable to capital account (or would be so chargeable with a proper election by the Borrower or but for a proper election by the Borrower to deduct such costs) in accordance with general federal income tax principles and in accordance with Section 1.103-8(a)(1) of the Regulations, provided, however, that only such portion of the interest accrued during rehabilitation or construction of the Project shall be eligible to be a Qualified Project Cost as is so capitalized and as bears the same ratio to all such interest as the Qualified Project Costs bear to all costs of the acquisition and construction or rehabilitation of the Project; and provided further that interest accruing after the date of completion of the construction or rehabilitation of the Project shall not be a Qualified Project Cost; and provided still further that if any portion of the Project is being constructed or rehabilitated by a Borrower Affiliate (whether as general contractor or a subcontractor), Qualified Project Costs shall include only (A) the actual out of pocket costs incurred by such Affiliate in constructing or rehabilitating the Project (or any portion thereof) and (B) any overhead expense s incurred by such Affiliate which are directly attributable to the work performed on the Project, and shall not include, for example, intercompany profits resulting from members of an “affiliated group” (within the meaning of Section 1504 of the Code) participating in the construction or rehabilitation of the Project or payments received by such Affiliate due to early completion of the Project (or any portion thereof); (ii) the costs are paid with respect to a qualified residential rental project or projec ts within the meaning of Section 142(d) of the Code, (iii) the costs are paid after the earlier of 60 days prior to August 13, 2024, being the date on which the Governing Board of the Governmental Lender adopted Resolution No. AHA-2024-007 first declaring its “official intent” to reimburse costs paid with respect to the Project (within the meaning of Section 1.150 -2 of the Regulations) or the date of issue of the
8 4912-4692-2535v3/022620-0118
Governmental Lender Note, and (iv) if the costs of the acquisition and construction or rehabilitation, as the case may be, of the Project were previously paid and are to be reimbursed with proceeds of the Funding Loan such costs were (A) “preliminary expen ditures” (within the meaning of Section 1.150 2(f)(2) of the Regulations) with respect to the Project (such as architectural, engineering and soil testing services) incurred before commencement of acquisition and construction or rehabilitation, as the case may be, of the Project that do not exceed twenty percent (20%) of the issue price of the Governmental Lender Note (as defined in Section 1.148-1 of the Regulations), or (B) were capital expenditures with respect to the Project that are reimbursed no later than 18 months after the later of the date the expenditure was paid or the date the Project is placed in service (but no later than three years after the expenditures is paid); provided, however, that (w) Costs of Funding shall not be deemed to be Qualified Project Costs; (x) fees, charges or profits (including, without limitation, developer fees) payable to the Borrower or a “related person” (within the meaning of Section 144(a)(3) of the Code) shall not be deemed to be Qualified Project Costs; (y) letter of credit fees and municipal bond insurance premiums which represent a transfer of credit risk shall be allocated between Qualified Project Costs and other costs and expenses to be paid from the proceeds of the Funding Loan; and (z) letter of credit fees and municipal bond insurance premiums which do not represent a transfer of credit risk (including, without limitation, letter of credit fees payable to a “related person” to the Borrower) shall not constitute Qualified Project Costs.
“Rebate Analyst” shall mean the rebate analyst selected by the Borrower and acceptable to the Governmental Lender and the Funding Lender
“Rebate Analyst’s Fee” shall mean the fee of the Rebate Analyst. The Rebate Analyst’s Fee is payable by the Borrower to the Rebate Analyst.
“Regulatory Agreement” shall mean the Regulatory Agreement and Declaration of Restrictive Covenants of even date herewith, by and between the Governmental Lender and the Borrower, as in effect on the Closing Date and as it may thereafter be amended or modi fied in accordance with its terms.
“Servicer” shall mean the Servicer as defined in Section 7.17 hereof. “State” shall mean the State of California.
“Tax Counsel” shall have the meaning set forth in the Funding Loan Agreement. “Taxes” shall mean all real estate and personal property taxes, assessments, water rates or sewer rents, now or hereafter levied or assessed or imposed against all or part of the Project. “Term” shall mean the term of this Borrower Loan Agreement pursuant to Section 7.7. “Title Company” shall mean First American Title Company. “Title Insurance Policy” shall mean the mortgagee title insurance policy, in form acceptable to the Funding Lender, issued with respect to the Mortgaged Property and insuring the lien of the Deed of Trust.
“Unassigned Rights” shall have the meaning given to that term in the Funding Loan Agreement.
9 4912-4692-2535v3/022620-0118
“Written Consent” and “Written Notice” shall mean a written consent or notice signed by an Authorized Borrower Representative or an authorized representative of the Governmental Lender or the Funding Lender, as appropriate.
ARTICLE II
GENERAL
2.1 Origination of Borrower Loan . In order to provide funds for the purposes provided herein, the Governmental Lender agrees that it will, in accordance with the Housing Law, enter into the Funding Loan Agreement and accept the Funding Loan from the Funding Lender. The proceeds of the Funding Loan shall be advanced by the Funding Lender to the Borrower in accordance with the terms of the Covenant Agreement and this Borrower Loan Agreement.
The Governmental Lender hereby appoints the Funding Lender as its agent with full authority and power to act on its behalf (other than with respect to the Unassigned Rights) to disburse the Borrower Loan for the account of the Governmental Lender, to take all actions and exercise all remedies with respect to the Borrower Loan, and for the other purposes set forth in this Borrower Loan Agreement and to do all other acts necessary or incidental to the performance and execution thereof.
This appointment is co upled with an interest and is irrevocable except as expressly set forth herein.
Accordingly, references to the rights of the Funding Lender to take actions under this Borrower Loan Agreement shall refer to Funding Lender in its role as agent of the Govern mental Lender. Borrower hereby consents to all such assignments and appointment of Funding Lender as agent of the Governmental Lender. The Funding Lender may, in its discretion, designate Servicer to fulfill the rights and responsibilities granted by Gov ernmental Lender to Funding Lender pursuant to this Section 2.1.
2.2 Security for the Funding Loan.
(a) As security for the Funding Loan, the Governmental Lender has pledged and assigned to the Funding Lender under and pursuant to the Funding Loan Agreement (a) the Borrower Note and all of its right, title and interest in and to this Borrower Loan Agreement and the Borrower Loan Documents (except for the Unassigned Rights) and all revenues and receipts therefrom and the security therefor (including the Deed of Trust) and (b) the amounts on deposit from time to time in any and all funds established under the F unding Loan Agreement. All revenues and assets pledged and assigned thereby shall immediately be subject to the lien of such pledge without any physical delivery thereof or any further act, except in the case of the Borrower Note, which shall be delivered to the Funding Lender. The Borrower hereby acknowledges and consents to such assignment to the Funding Lender.
(b) With respect to the Unassigned Rights, subject to the limitations set forth in this Section, the Governmental Lender may:
(i) Tax Covenants . Seek specific performance of, and enforce, the covenants in Section 8.7 of the Funding Loan Agreement, the provisions of the Regulatory Agreement, the Tax Certificate and the covenants of the Borrower in Section 4.16 of this Borrower Loan Agreement, and seek injunctive relief against acts which may be in violation of any of the foregoing covenants;
10 4912-4692-2535v3/022620-0118
(ii) Regulatory Agreement. Seek specific performance of the obligations of the Borrower or any other owner of the Project under the Regulatory Agreement and injunctive relief against acts which may be in violation of the Regulatory Agreement or otherwise in accordance with the provisions of the Regulatory Agreement; provided, however, that the Governmental Lender may enforce any right it may have under the Regulatory Agreement for monetary damages only against Excess Revenues (defined below), if any, of the Borrower, unless Funding Lender otherwise specifically consents in writing to the use of other funds; and
(iii) Unassigned Rights. Take whatever action at law or in equity which appears necessary or desirable to enforce the other Unassigned Rights; provided, however, that the Governmental Lender or any person under its control may only enforce any right it may have for monetary damages against Excess Revenues, if any, of the Borrower, unless Funding Lender otherwise specifically consents in writing to the enforcement against other funds of the Borrower.
(c) In no event shall the Governmental Lender, except at the express written direction of the Funding Lender:
(i) prosecute its action to a lien on the Project; or
(ii) except in connection with actions permitted under Section 2.2(b) above, take any action which may have the effect, directly or indirectly, of impairing the ability of the Borrower to timely pay the principal of, interest on, or other amounts due under, the Borrower Loan or which the Governmental Lender has reason to know or expect would have the effect, of causing the Borrower to file a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Borrower under any applica ble liquidation, insolvency, bankruptcy, rehabilitation, composition, reorganization, conservation or other similar law in effect now or in the future; or
(iii) interfere with the exercise by Funding Lender or Servicer of any of their rights under the Borrower Loan Documents upon the occurrence of an event of default by the Borrower under the Borrower Loan Documents or the Funding Loan Documents; or (iv) take any action to accelerate or otherwise enforce payment or seek other remedies with respect to the Borrower Loan or the Funding Loan. (d) The Governmental Lender shall provide Written Notice to the Funding Lender and the Servicer immediately upon taking any action at law or in equity to exercise any remedy or direct any proceeding under the Borrower Loan Documents or the Funding Loan Documents. (e) As used in this Section 2.2, the term “Excess Revenues” means, for any period, the net cash flow of the Borrower available for distribution or payment to shareholders, members or partners (as the case may be) for such period, after the payment of all interest expense, the amortization of all principal of all indebtedness coming due during such period (whether by maturity, mandatory sinking fund payment, acceleration or otherwise) with respect to the Project, the payment of all fees, costs and expenses on an occasional or recurring basis in connection with the Borrower Loan or the Funding Loan, the payment of all operating, overhead, ownership and other expenditures of the Borrower directly or indirectly in connection with the Project (whether any such expend itures are
11 4912-4692-2535v3/022620-0118
current, capital or extraordinary expenditures), and the setting aside of all reserves for taxes, insurance, water and sewer charges or other similar impositions, capital expenditures, repairs and replacements and all other amounts which the Borrower is required to set aside pursuant to agreement, but excluding depreciation and amortization of intangibles.
2.3 Loan; Borrower Note; Conditions to Closing.
(a) The Funding Loan shall be funded from the Project Fund maintained by the Fiscal Agent pursuant to the Funding Loan Agreement (except as may otherwise be provided in the Funding Loan Agreement). upon satisfaction of the conditions set forth in this Borrower Loan Agreement and the Covenant Agreement, in one or more installments not to exceed the Borrower Loan Amount in accordance with the disbursement procedures set forth in the Covenant Agreement. Upon funding of each installment of the Funding Loan, the Governmental Lender shall be deemed to have made the Borrower Loan to the Borrower in a like principal amount and Borrower acknowledges that amounts of the Funding Loan funded directly to Borrower shall constitute the disbursement of the Borrower Loan. The Borrower Loan shall mature and be payable at the times and in the amounts required under the terms hereof and of the Borrower Note. The proceeds of the Borrower Loan shall be used by the Borrower to pay costs of the acquisition, construction and equipping of the Project. The Borrower hereby accepts the Borrower Loan and acknowledges that the Governmental Lender shall cause the Funding Lender to fund the Borrower Loan in the manner set forth herein, in the Funding Loan Agreement and in the Covenant Agreement. The Governmental Lend er acknowledges that the Borrower Loan shall be funded by the Funding Lender for the account of the Governmental Lender. (b) The Borrower hereby accepts the Borrower Loan. As evidence of its obligation to repay the Borrower Loan, simultaneously with its execution and delivery of this Borrower Loan Agreement, the Borrower hereby agrees to execute and deliver the Borrower Note. The Borrower Loan shall mature and be payable at the times and in the amounts required under the terms hereof and of the Borrower Note.
(c) Closing of the Borrower Loan on the Closing Date shall be conditioned upon satisfaction or waiver by the Funding Lender in its sole discretion of each of the conditions precedent to closing set forth in the Covenant Agreement and the following:
(i) evidence of proper recordation of the Deed of Trust, an assignment of the Deed of Trust from the Governmental Lender to the Funding Lender, the Regulatory Agreement, and each of the other documents specified for recording in instructions delivered to the Title Company by or on behalf of the Funding Lender (or that such documents have been delivered to an authorized agent of the Title Company for recordation under binding recording instructions from Funding Lender’s counsel; and
(ii) delivery into escrow with the Title Company (or separate escrow company, if applicable) of all amounts required to be paid in connection with the origination of the Borrower Loan and the Funding Loan and any underlying real estate transfers or transactions, all as specified in written instructions delivered to the Title Company by or on behalf of the Funding Lender; and
(iii) Borrower shall have paid (or will pay concurrently with the issuance of the Governmental Lender Note, the initial Fiscal Agent Fees (as defined in the Funding Loan Agreement); and
12 4912-4692-2535v3/022620-0118
(iv) payment of all fees payable in connection with the closing of the Borrower Loan including the Governmental Lender’s Closing Fee and the initial fees and expenses of the Funding Lender.
In addition, closing of the Borrower Loan shall be subject to the delivery of an opinion of counsel to the Borrower addressed to the Governmental Lender and the Funding Lender, dated the Closing Date, in form and substance acceptable to Tax Counsel, regard ing the due execution by the Borrower of, and the enforceability against the Borrower of, the Borrower Loan Documents.
2.4 Borrower Loan Payments.
(a) The Borrower shall make Borrower Loan Payments in accordance with the Borrower Note. Payments made on the Governmental Lender Note shall be deemed to be made on the same date and in the same amount as on the Borrower Note. In addition, the Borrower shall make Borrower Loan Payments in accordance with the Borrower Note in the amounts and at the times necessary to make all payments due and payable on the Funding Loan. All payments made by the Borrower hereunder or by the Borrower under the other Borrower L oan Documents, shall be made irrespective of, and without any deduction for, any set -offs or counterclaims, but such payment shall not constitute a waiver of any such set offs or counterclaims. (b) Unless there is no Servicer, payments of principal and interest on the Borrower Note shall be paid to the Servicer and the Servicer shall then remit such funds to the Funding Lender.
If there is no Servicer, payments of principal and interest on the Borrower Note shall be paid directly to the Funding Lender.
2.5 Additional Borrower Payments.
(a) The Borrower shall pay the following amounts:
(i) to the Governmental Lender, the Ongoing Governmental Lender Fee and initial issuance fee in and at the times and in the amounts specified in the Regulatory Agreement, and, on demand, all fees, charges, costs, advances, indemnities and expenses, including agent and counsel fees, of the Governmental Lender incurred by the Governmental Lender in connection with the Borrower Loan Documents or the Funding Loan Documents or the Project, including, without limitation, reasonable counsel fees and expenses incurred in connection with the interpretation, performance, or amendment and all counsel fees and expenses relating to the enforcement of the Borrower Loan Documents or the Funding Loan Documents or any other documents relating to the Project or the Borrower Loan or in connection with questions or other matters arising under such documents or in connection with any federal or state tax audit, as and when the same become due; (ii) all Costs of Funding and fees, charges and expenses, including agent and counsel fees incurred in connection with the origination of the Borrower Loan and the Funding Loan, as and when the same become due;
(iii) to the Funding Lender, on demand, all charges, costs, advances, indemnities and expenses, including agent and counsel fees, of the Funding Lender incurred by the Funding Lender at any time in connection with the Borrower Loan, the Funding Loan or the Project, including, without limitation, reasonable counsel fees and expenses incurred in
13 4912-4692-2535v3/022620-0118
connection with the interpretation, performance, or amendment and all counsel fees and expenses relating to the enforcement of the Borrower Loan Documents or the Funding Loan Documents or any other documents relating to the Project or the Borrower Loan or in connection with questions or other matters arising under such documents or in connection with any federal or state tax audit;
(iv) any Fiscal Agent’s Fees (as defined in the Funding Loan Agreement) to the Fiscal Agent in accordance with the terms of the Funding Loan Agreement. (v) any Late Charge due and payable under the terms of the Borrower Note and Section 2.6 hereof; provided, however, that all payments made pursuant to this subsection (v) shall be made to the Servicer, and if there is no Servicer, such payments shall be made to the Funding Lender; and
(vi) to the entity entitled thereto, when due and payable, all taxes and assessments levied by public agencies on the Project.
(b) The Borrower shall pay to the party entitled thereto as expressly set forth in this Borrower Loan Agreement or the other Borrower Loan Documents or Funding Loan Documents:
(i) all expenses incurred in connection with the enforcement of any rights under this Borrower Loan Agreement or any other Borrower Loan Document, the Regulatory Agreement, or any Funding Loan Document by the Governmental Lender, the Funding Lender or the Servicer;
(ii) all other payments of whatever nature that the Borrower has agreed to pay or assume under the provisions of this Borrower Loan Agreement or any other Borrower Loan Document or Funding Loan Document; and
(iii) all expenses, costs and fees relating to inspections of the Project required by the Governmental Lender, the Funding Lender, the Servicer or any third party, in accordance with the Borrower Loan Documents or the Funding Loan Documents or to reimburse such parties for such expenses, costs and fees.
2.6 Overdue Payments; Payments if Default. If any Borrower Payment Obligation is not paid by or on behalf of the Borrower when due, the Borrower shall pay to the Servicer, a Late Charge in the amount and to the extent set forth in the Borrower Note, if any.
2.7 Borrower Loan Disbursements. The Borrower Loan shall be disbursed by the Funding Lender, as agent for the Governmental Lender, pursuant to the Covenant Agreement.
2.8 Disbursement into Project Fund. Notwithstanding anything to the contrary contained in the Funding Loan Documents or the Borrower Loan Documents, if the Funding Loan has not been fully disbursed by December 1, 20 28 and Conversion has not yet occurred, in the event the Funding Lender determines that legislative, judicial or other developments have occurred or other circumstances have emerged which could result in interest on any undisbursed portions of the Funding Loan (the “Remaining Undisbursed Funding Loan”) not being excluded from gross income for federal income tax purposes, or otherwise determines that it is in the Funding Lender’s best interest to fully fund the Funding Loan in order to assure that interest on the Funding Loan will remain excluded from
14 4912-4692-2535v3/022620-0118
gross income for federal income tax purposes (each a “Contingency Event”), then Funding Lender may, in its discretion, upon five (5) days’ written notice to Borrower, disburse all or any portion of the Remaining Undisbursed Funding Loan into the Project Fund, at which time the proceeds so advanced shall constitute (i) an advance of the Funding Loan to the Governmental Lender, (ii) an advance of the Borrower Loan by Governmental Lender to the Borrower, and (iii) Borrower’s Funds, unless Funding Lender receives an opinion of Tax Counsel to the effect that the draw of Funding Loan proceeds after the Contingency Event will not adversely affect the exclusion of interest on the Funding Loan Notes from gross income for federal income tax purposes. The portion of the Borrower Loan disbursed into the Project Fund pursuant to this Section shall be deemed outstanding as of the date advanced into the Project Fund and will immediately commence to accrue interest as provided in the Borrower Note.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Borrower Representations. To induce the Governmental Lender and Funding Lender to execute this Borrower Loan Agreement and to induce Funding Lender to make disbursements of the Borrower Loan, Borrower represents and warrants for the benefit of the Governmental Lender, Funding Lender and Servicer, that the representations and warranties set forth in this Section 3.1 are complete and accurate as of the Closing Date and, subject to Section 3.2 hereof, shall survive the making of the Borrower Loan and will be complete and accurate, and deemed remade, except as otherwise noted through notice to Funding Lender and approved by Funding Lender and as of the date of each disbursement of the Borrower Loan.
(a) Organization; Special Purpose . The Borrower is in good standing under the laws of the State, has full legal right, power and authority to enter into the Borrower Loan Documents to which it is a party, and to carry out and consummate all transactions contemplated by the Borrower Loan Documents to which it is a party, and by proper limited partnership action has duly authorized the execution, delivery and performance of the Borrower Loan Documents to which it is a party. The Person(s) of the Borrower executing the Borrower Loan Documents and the Funding Loan Documents to which the Borrower is a party are fully authorized to execute the same. The Borrower Loan Documents and the Funding Loan Documents to which the Borrower is a party have been duly authorized, executed and delivered by the Borrower. The sole business of the Borrower is the ownership, management and operation of the Project.
(b) Proceedings; Enforceability . Assuming due execution and delivery by the other parties thereto, the Borrower Loan Documents and the Funding Loan Documents to which the Borrower is a party will constitute the legal, valid and binding agreements of the Borrower enforceable against the Borrower in accordance with their terms; except in each case as enforcement may be limited by bankruptcy, insolvency or other laws affecting the enforcement of creditors’ rights generally, by the application of equitable principles regardless of whether enforcement is sought in a proceeding at law or in equity and by public policy.
(c) No Conflicts. The execution and delivery of the Borrower Loan Documents and the Funding Loan Documents to which the Borrower is a party, the consummation of the transactions herein and therein contemplated and the fulfillment of or compliance with the terms and conditions hereof and thereof, will not conflict with or constitute a violation or breach of or default (with due notice or the passage of time or both) under the Partnership Agreement of the Borrower, or to the best knowledge of the Borrower and wi th respect to the Borrower, any applicable law or
15 4912-4692-2535v3/022620-0118
administrative rule or regulation, or any applicable court or administrative decree or order, or any mortgage, deed of trust, loan agreement, lease, contract or other agreement or instrument to which the Borrower is a party or by which it or its properties are otherwise subject or bound, or result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever (other than the lien of the Deed of Trust) upon any of the property or assets of the Borrower, which conflict, violation, breach, default, lien, charge or encumbrance might have consequences that would materially and adversely affect the consummation of the transactions contemplated by the Borrower Loan Documents and the Funding Loan Documents, or the financial condition, asse ts, properties or operations of the Borrower.
(d) Litigation; Adverse Facts. There is no legal action, nor is there a basis known to Borrower for any legal action, before or by any court or federal, state, municipal or other governmental authority, pending, or to the knowledge of the Borrower, after reasonable investigation, threatened, against or affecting the Borrower, the General Partner or the Guarantor, or their respective assets, properties or operations which, if determined adversely to the Borrower or its interests, would have a material adverse e ffect upon the consummation of the transactions contemplated by, or the validity of, the Borrower Loan Documents or the Funding Loan Documents, upon the ability of each of Borrower, General Partner and Guarantor to perform their respective obligations under the Borrower Loan Documents and the Funding Loan Documents to which it is a party, or upon the financial condition, assets (including the Project), properties or operations of the Borrower, the General Partner or the Guarantor. None of the Borrower, General Partner or Guarantor is in default (and no event has occurred and is continuing which with the giving of notice or the passage of time or both could constitute a default) with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal or other governmental authority, which default might have consequences that would materially and adversely affect the consummation of the transactions contemplated by the Borrower Loan Documents and the Funding Loan Documents, the ability of each of Borrower, General Partner and Guarantor to perform their respective obligations under the Borrower Loan Documents and the Funding Loan Documents to which it is a party, or the financial condition, assets, properties or operat ions of the Borrower, General Partner or Guarantor. None of Borrower, General Partner or Guarantor are (a) in violation of any applicable law, which violation materially and adversely affects or may materially and adversely affect the business, operations, assets (including the Project), condition (financial or otherwise) or prospects of Borrower, General Partner or Guarantor, as applicable; (b) subject to, or in default with respect to, any other Legal Requirement that would have a material adverse effect on the business, operations, assets (including the Project), condition (financial or otherwise) or prospects of Borrower, General Partner or Guarantor, as applicable; or (c) in default with respect to any agreement to which Borrower, General Partner or Gu arantor, as applicable, are a party or by which they are bound, which default would have a material adverse effect on the business, operations, assets (including the Project), condition (financial or otherwise) or prospects of Borrower, General Partner or Guarantor, as applicable; and (d) there is no Legal Action pending or, to the knowledge of Borrower, threatened against or affecting Borrower, General Partner or Guarantor questioning the validity or the enforceability of this Borrower Loan Agreement or an y of the other Borrower Loan Documents or the Funding Loan Documents. All tax returns (federal, state and local) required to be filed by or on behalf of the Borrower have been filed, and all taxes shown thereon to be due, including interest and penalties, except such, if any, as are being actively contested by the Borrower in good faith, have been paid or adequate reserves have been made for the payment thereof which reserves, if any, are reflected in the audited financial statements described therein. Th e Borrower enjoys the peaceful and undisturbed possession of all of the premises upon which it is operating its facilities.
16 4912-4692-2535v3/022620-0118
(e) Agreements; Consents; Approvals. Except as contemplated by the Borrower Loan Documents and the Funding Loan Documents, the Borrower is not a party to any agreement or instrument or subject to any restriction that would materially adversely affect the Borrower or the Project, or the Borrower’s business, properties, operations or financial condition or business prospects.
The Borrower is not in default in any material respect in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement or instrument to which it is a party or by which it or the Project is bound.
No consent or approval of any trustee or holder of any indebtedness of the Borrower, and to the best knowledge of the Borrower and only with respect to the Borrower, no consent, permission, authorization, order or license of, or filing or registration with, any governmental authority is necessary in connection with the execution and delivery of the Borrower Loan Documents or the Funding Loan Documents, or the consummation of any transaction herein or therein contemplated, or the fulfillment of or compliance with the terms and conditions hereof or thereof, except as have been obtained or made and as are in full force and effect.
(f) Title. The Borrower shall have marketable title to the Project, free and clear of all liens except as permitted in the Deed of Trust. The Deed of Trust, when properly recorded in the appropriate records, together with any UCC financing statements required to be filed in connection therewith, will create (i) a valid, perfected first priority lien on the fee (or leasehold, if applicable) interest in the Project and (ii) perfected security interests in and to, and perfected collateral assignments of, all per sonalty included in the Project (including the Leases), all in accordance with the terms thereof, in each case subject only to any applicable encumbrances permitted in the Deed of Trust. To the Borrower’s knowledge, there are no delinquent real property taxes or assessments, including water and sewer charges, with respect to the Project, nor are there any claims for payment for work, labor or materials affecting the Project which are or may become a lien prior to, or of equal priority with, the liens created by the Borrower Loan Documents and the Funding Loan Documents. (g) No Bankruptcy Filing. The Borrower is not contemplating either the filing of a petition by it under any state or federal bankruptcy or insolvency law or the liquidation of all or a major portion of its property, and the Borrower has no knowledge of any Person contemplating t he filing of any such petition against it. As of the Closing Date, the Borrower has the ability to pay its debts as they become due.
(h) Full and Accurate Disclosure. No statement of fact made by the Borrower in any Borrower Loan Document or any Funding Loan Document contains any untrue statement of a material fact or omits to state any material fact necessary to make statements contained therein in light of the circ umstances in which they were made, not misleading. There is no material fact or circumstance presently known to the Borrower that has not been disclosed to the Governmental Lender and the Funding Lender which materially and adversely affects the Project or the business, operations or financial condition or business prospects of the Borrower or the Borrower’s ability to meet its obligations under this Borrower Loan Agreement and the other Borrower Loan Documents and Funding Loan Documents to which it is a party in a timely manner. (i) Compliance. The Borrower, the Project and the use thereof will comply, to the extent required, in all material respects with all applicable Legal Requirements. The Borrower is not in default or violation of any order, writ, injunction, decree or demand of any Governmental Authority, the violation of which would materially adversely affect the financial condition or business prospects or the business of the Borrower. There has not been committed by the Borrower or any Borrower
17 4912-4692-2535v3/022620-0118
Affiliate involved with the operation or use of the Project any act or omission affording any Governmental Authority the right of forfeiture as against the Project or any part thereof or any moneys paid in performance of the Borrower’s obligations under any Borrower Loan Document or any Funding Loan Documents.
(j) Financial Information . All financial data, including any statements of cash flow and income and operating expense, that have been delivered to the Governmental Lender or the Funding Lender in respect of the Project by or on behalf of the Borrower, to the best knowledge of the Borrower, (i) are accurate and complete in all material respects, (ii) accurately represent the financial condition of the Project as of the date of such reports, and (iii) to the extent prepared by an independent certified public accounting firm, have been prepared in accordance with generally accepted accounting principles consistently applied throughout the periods covered, except as disclosed therein. Other than pursuant to or permitted by the Borrower Loan Documents or the Fundin g Loan Documents or the Borrower organizational documents, the Borrower has no contingent liabilities, unusual forward or long-term commitments or unrealized or anticipated losses from any unfavorable commitments. Since the date of such financial statemen ts, there has been no materially adverse change in the financial condition, operations or business of the Borrower from that set forth in said financial statements. (k) Condemnation. No condemnation or other proceeding has been commenced or, to the Borrower’s knowledge, is contemplated, threatened or pending with respect to all or part of the Project or for the relocation of roadways providing access to the Project. (l) Federal Reserve Regulations. No part of the proceeds of the Borrower Loan will be used for the purpose of purchasing or acquiring any “margin stock” within the meaning of Regulation U of the Board of Governors of the Federal Reserve System or for any other purpose that would be inconsistent with such Regulation U or any other regulation of such Board of Governors, or for any purpose prohibited by Legal Requirements or any Borrower Loan Document or Funding Loan Document.
(m) Not a Foreign Person . The Borrower is not a “foreign person” within the meaning of §1445(f)(3) of the Code.
(n) Enforceability. The Borrower Loan Documents and the Funding Loan Documents are not subject to, and the Borrower has not asserted, any right of rescission, set -off, counterclaim or defense, including the defense of usury. (o) State Law Requirements . The Borrower hereby represents, covenants and agrees to comply with the provisions of all applicable State laws, including but not limited to the Act, relating to the Borrower Loan, the Funding Loan and the Project. (p) Ownership of the Borrower. Except as set forth in the Partnership Agreement of the Borrower, the Borrower has no obligation to any Person to purchase, repurchase or issue any ownership interest in the Borrower.
(q) Environmental Matters. To the best of Borrower’s knowledge, the Project is not in violation of any Legal Requirement pertaining to or imposing liability or standards of conduct concerning environmental regulation, contamination or clean-up, and will comply with covenants and requirements relating to environmental hazards as set forth in the Deed of Trust.
18 4912-4692-2535v3/022620-0118
(r) Name; Principal Place of Business. Unless prior Written Notice is given to the Funding Lender, the Borrower does not use and will not use any trade name, and has not done and will not do business under any name other than its actual name set forth herein. The principal place of business of the Borrower is its primary address for notices as set forth in Section 10.1 hereof, and the Borrower has no other place of business, other than the Project and such principal place of business. (s) Filing of Taxes. The Borrower has filed (or has obtained effective extensions for filing) all federal, state and local tax returns required to be filed and has paid or made adequate provision for the payment of all federal, state and local taxes, charges and assessments, if any, payable by the Borrower.
(t) General Tax. All representations, warranties and certifications of the Borrower set forth in the Regulatory Agreement and the Tax Certificate are incorporated by reference herein and the Borrower will comply with such as if set forth herein. In the event of any con flict between the terms of this Borrower Loan Agreement and the requirements of the Tax Certificate, the Tax Certificate shall control.
(u) Approval of the Borrower Loan Documents and Funding Loan Documents. By its execution and delivery of this Borrower Loan Agreement, the Borrower approves the form and substance of the Borrower Loan Documents and the Funding Loan Documents, and agrees to carry out the responsibilities and duties specified in the Borrower Loan Documents and the Funding Loan Documents to be carried out by the Borrower. The Borrower acknowledges that (i) it understands the nature and structure of the transactions relating to t he financing of the Project, (ii) it is familiar with the provisions of all of the Borrower Loan Documents and the Funding Loan Documents and other documents and instruments relating to the financing, (iii) it understands the risks inherent in such transactions, including without limitation the risk of loss of the Project, and (iv) it has not relied on the Governmental Lender, the Funding Lender or the Servicer for any guidance or expertise in analyzing the financial or other consequences of the transactions contemplated by the Borrower Loan Documents and the Funding Loan Documents or otherwise relied on the Governmental Lender, the Funding Lender or the Servicer in any manner.
(v) Funding Loan Agreement. The Borrower has read and accepts and agrees that it is bound by the Funding Loan Agreement and the Funding Loan Documents. (w) Requirements of Housing Law, Code and Regulations. The Project satisfies all requirements of the Housing Law and the Code (including any regulations thereunder) applicable to the Project.
(x) Regulatory Agreement . The Project is, as of the date of origination of the Funding Loan, in compliance with all requirements of the Regulatory Agreement to the extent such requirements are applicable; and the Borrower intends to cause the residential units in the Project to be rented or available for rental on a basis which satisfies the requirements of the Regulatory Agreement, including all applicable requirements of the Housing Law and the Code and the Regulations, and pursuant to leases which comply with all applicable laws. (y) Intention to Hold Project. The Borrower intends to hold the Project for its own account and has no current plans, and has not entered into any agreement, to sell the Project or any part of it; and the Borrower intends to occupy the Project or cause the Project to be occupied and to operate it or cause it to be operated at all times during the term of this Borrower Loan Agreement in compliance
19 4912-4692-2535v3/022620-0118
with the terms of this Borrower Loan Agreement and the Regulatory Agreement and does not know of any reason why the Project will not be so used by it in the absence of circumstances not now anticipated by it or totally beyond its control.
(z) Government and Private Approvals . All governmental or regulatory orders, consents, permits, authorizations and approvals required for the construction, use, occupancy and operation of the Improvements, that may be granted or denied in the discretion of any Governmental Authority, have been obtained and are in full force and effect (or, in the case of any of the foregoing that Borrower is not required to have as of the Closing Date, will be obtained), and will be maintained in full force and effect at all t imes during the construction of the Improvements. All such orders, consents, permits, authorizations and approvals that may not be denied in the discretion of any Governmental Authority shall be obtained prior to the commencement of any work for which suc h orders, consents, permits, authorizations or approvals are required, and, once obtained, such orders, consents, permits, authorizations and approvals will be maintained in full force and effect at all times during the construction of the Improvements. E xcept as set forth in the preceding two sentences, no additional governmental or regulatory actions, filings or registrations with respect to the Improvements, and no approvals, authorizations or consents of any trustee or holder of any indebtedness or obligation of Borrower, are required for the due execution, delivery and performance by Borrower or General Partner of any of the Borrower Loan Documents or the Funding Loan Documents. All required zoning approvals have been obtained, and the zoning of the P roject is not conditional upon the happening of any further event.
(aa) No Material Defaults. Except as previously disclosed to Funding Lender and the Governmental Lender in writing, there exists no material violation of or material default by Borrower under, and, to the best knowledge of Borrower, no event has occurred which, upon the giving of notice or the passage of time, or both, would constitute a material default with respect to: (i) the terms of any instrument evidencing, securing or guaranteeing any indebtedness secured by the Project or any portion or interest thereof or therein; (ii) any lease or other agreement affecting the Project or to which Borrower is a party; (iii) any license, permit, statute, ordinance, law, judgment, order, writ, injunction, decree, rule or regulation of any Governmental Authority, or any determination or award of any arbitrator to which Borrower or the Project may be bound; or (iv) any mortgage, instrument, agreement or document by which Borrower or any of its respective properties is bound; in the case of any of the foregoing: (1) which involves any Borrower Loan Document or Funding Loan Document; (2) which involves the Project and is not adequately covered by insurance; (3) that might materially and adversely affect the ability of Borrower, General Partner or Guarantor or to perform any of its respective obligations under any of the Borrower Loan Documents or the Funding Loan Documents or any other material instrument, agreement or document to which it is a party; or (4) which might adversely affect the priority of the liens created by this Borrower Loan Agreement or any of the Borrower Loan Documents or the Funding Loan Documents.
(bb) Payment of Taxes . Except as previously disclosed to Funding Lender in writing: (i) all tax returns and reports of Borrower, General Partner and Guarantor required to be filed have been timely filed, and all taxes, assessments, fees and other governmental charges upon Borrower, General Partner and Guarantor, and upon their respective properties, assets, income and franchises, which are due and payable have been paid when due and payable; and (ii) Borrower knows of no proposed tax assessment against it or against General Partner or Guarantor that would be material to the condition (financial or otherwise) of Borrower, General Partner or Guarantor, and neither Borrower nor General Partner have contracted with any Governmental Authority in connection with such taxes.
20 4912-4692-2535v3/022620-0118
(cc) Other Documents. Each of the representations and warranties of Borrower or General Partner contained in any of the other Borrower Loan Documents or the Funding Loan Documents is true and correct in all material respects (or, in the case of representations or warranties contained in any of the other Borrower Loan Documents or Funding Loan Documents that speak as of a particular date, were true and correct in all material respects as of such date). All of such representations and warranties are incorporated herein for the benefit of Funding Lender.
3.2 Survival of Representations and Covenants. All of the representations and warranties in Section 3.1 hereof and elsewhere in the Borrower Loan Documents (i) shall survive for so long as any portion of the Borrower Payment Obligations remains due and owing and (ii) shall be deemed to have been rel ied upon by the Governmental Lender , the Funding Lender or the Servicer notwithstanding any investigation heretofore or hereafter made by the Governmental Lender or the Funding Lender or on its or their behalf.
ARTICLE IV
AFFIRMATIVE COVENANTS
During the term of this Borrower Loan Agreement, the Borrower hereby covenants and agrees with the Governmental Lender, the Funding Lender and the Servicer that:
4.1 Existence. The Borrower shall (i) do or cause to be done all things necessary to preserve, renew and keep in full force and effect its existence and its material rights, and franchises, (ii) continue to engage in the business presently conducted by it, (iii) obtain and m aintain all material licenses, and (iv) qualify to do business and remain in good standing under the laws of the State.
4.2 Taxes and Other Charges . The Borrower shall pay all Taxes and other charges and impositions as the same become due and payable and prior to their becoming delinquent in accordance with the Deed of Trust, except to the extent that the amount, validity or application thereof is b eing contested in good faith as permitted by the Deed of Trust. The Borrower covenants to pay all Taxes and other charges and impositions of any type or character charged to the Funding Lender affecting the amount available to the F unding Lender from payments to be received hereunder or in any way arising due to the transactions contemplated hereby (including Taxes and other charges and impositions assessed or levied by any public agency or governmental authority of whatsoever charac ter having power to levy taxes or assessments) but excluding franchise taxes based upon the capital and/or income of the Funding Lender and taxes based upon or measured by the net income of the Funding Lender; provided, however, that the Borrower shall hav e the right to protest any such Taxes or other charges and impositions and to require the Funding Lender, at the Borrower’s expense, to protest and contest any such Taxes or other charges and impositions levied upon them and that the Borrower shall have the right to withhold payment of any such Taxes or other charges and impositions pending disposition of any such protest or contest unless such withholding, protest or contest would adversely affect the rights or interests of the Funding Lender. This obliga tion shall remain valid and in effect notwithstanding repayment of the Borrower Loan hereunder or termination of this Borrower Loan Agreement.
4.3 Repairs; Maintenance and Compliance; Physical Condition. The Borrower shall cause the Project to be maintained in a good, habitable and safe (so as to not threaten the health or safety of the Project’s tenants or their invited guests) condition and repair (reasonable wear and tear excepted) as set forth in the Deed of Trust and shall not remove, demolish or materially alter the Improvements
21 4912-4692-2535v3/022620-0118
or equipment (except for removal of aging or obsolete equipment or furnishings in the normal course of business), except as provided in the Deed of Trust.
4.4 Litigation. The Borrower shall give prompt Written Notice to the Governmental Lender, the Funding Lender and the Servicer of any litigation, governmental proceedings or claims or investigations regarding an alleged actual violation of a Legal Requirement pending or, to the Borrower’s knowledge, threatened against the Borrower which might materially adversely affect the Borrower’s condition (financial or otherwise) or business or the Project.
4.5 Performance of Other Agreements . The Borrower shall observe and perform in all material respects each and every term to be observed or performed by it pursuant to the terms of any agreement or instrument affecting or pertaining to the Project.
4.6 Notices. The Borrower shall promptly advise the Governmental Lender , the Funding Lender and the Servicer of (i) any material adverse change in the Borrower’s financial condition, assets, properties or operations other than general changes in the real estate market, (ii) any fact or circumstance affecting the Borrower or the Project that materially and adversely affects the Borrower’s ability to meet its obligations hereunder or under any of the other Borrower Loan Document to which it is a party in a timely manner, or (iii) the occurrence of any Potential Default or Event of Default of which the Borrower has knowledge. If the Borrower becomes subject to federal or state securities law filing requirements, the Borrower shall cause to be delivered to the Governmental Lender, the Funding Lender and the Servicer any Securities and Exchange Commission or other public filings, if any, of the Borrower within two (2) Business Days of such filing.
4.7 Cooperate in Legal Proceedings . The Borrower shall cooperate fully with the Governmental Lender, the Funding Lender and the Servicer with respect to, and permit the Governmental Lender, the Funding Lender and the Servicer at their option, to participate in, any proceedings before any Governmental Authority that may in any way affect the rights of the Governmental Lender, the Funding Len der and/or the Servicer under any Borrower Loan Document or Funding Loan Document.
4.8 Further Assurances. The Borrower shall, at the Borrower’s sole cost and expense, (i) furnish to the Funding Lender and Servicer all instruments, documents, boundary surveys, footing or foundation surveys (to the extent that Borrower’s construction or renovation of the Project alters any existing building foundations or footprints), certificates, plans and specifications, appraisals , title and other insurance reports and agreements relating to the Project, reasonably requested by the Funding Lender or Servicer for the better and more efficient carrying out of the intents and purposes of the Borrower Loan Documents and the Funding Loan Documents; (ii) execute and deliver to the Funding Lender and Servicer such documents, instruments, certificates, assignments and other writings, and do such other acts necessary or desirable, to evidence, preserve and/or protect the collateral at any time securing or intended to secure the Borrower Loan, as the Funding Lender and Servicer may reasonably require from time to tim e; (iii) do and execute all and such further lawful and reasonable acts, conveyances and assurances for the better and more effective carrying out of the intents and purposes of the Borrower Loan Documents and the Funding Loan Documents, as the Funding Len der and Servicer shall reasonably require from time to time; provided, however, with respect to clauses (i)-(iii) above, the Borrower shall not be required to do anything that has the effect of (A) changing the essential economic terms of the Borrower Loan or (B) imposing upon the Borrower greater personal liability under the Borrower Loan Documents and the Funding Loan Documents; and (iv) upon the Funding Lender’s or Servicer’s request therefor given from time to time after the occurrence of any Potential
22 4912-4692-2535v3/022620-0118
Default or Event of Default for so long as such Potential Default or Event of Default, as applicable, is continuing pay for (a) reports of UCC, federal tax lien, state tax lien, judgment and pending litigation searches with respect to the Borrower and (b) searches of title to the Project, each such search to be conducted by search firms reasonably designated by the Funding Lender or Servicer in each of the locations reasonably designated by the Funding Lender or Servicer.
4.9 Governmental Lender’s and Funding Lender’s Fees . The Borrower covenants to pay the reasonable fees and expenses of the Governmental Lender (including the Ongoing Governmental Lender Fee) and the Funding Lender or any agents, attorneys, accountants, consultants selected by the Governmental Lender or the Funding Lender to act on its behalf in connection with this Borrower Loan Agreement and the other Borrower Loan Documents, the Regulatory Agreement and the Funding Loan Documents, including, without limitation, any and all reasonable expenses incurred in connection with the making of the Borrower Loan or in connection with any litigation which may at any time be instituted involving the Borrower Loan, this Borrower Loan Agreement, the other Borrower Loan Documents, the Regulatory Agreement and the Funding Loan Documents or any of the other documents contemplated thereby, or in connection with the reasonable supervision or inspection of the Borrower, its properties, assets or operations or otherwise in connection with the administration of the foregoing. This obligation shall remain valid and in effect notwithstanding repayment of the Borrower Loan hereunder or termination of this Borrower Loan Agreement.
4.10 Expenses. The Borrower shall pay all reasonable expenses incurred by the Governmental Lender, the Funding Lender and Servicer in connection with the Borrower Loan and the Funding Loan, including reasonable fees and expenses of the Governmental Lender’s , the Funding Lender’s and Servicer’s attorneys, environmental, engineering and other consultants, and fees, charges or taxes for the recording or filing of the Borrower Loan Documents and the Funding Loan Documents.
The Borrower shall pay or cause to be pai d all reasonable expenses of the Governmental Lender , the Funding Lender and Servicer in connection with the issuance or administration of the Borrower Loan and the Funding Loan, including audit costs, inspection fees, settlement of condemnation and casualty awards, and premiums for title insurance and endorsements thereto. The Borrower shall, upon request, promptly reimburse the Governmental Lender , the Funding Lender and Servicer for all reasonable amounts expended, advanced or incurred by the Government al Lender , the Funding Lender and Servicer to collect the Borrower Note, or to enforce the rights of the Governmental Lender, the Funding Lender and Servicer under this Borrower Loan Agreement or any other the Borrower Loan Document, or to defend or assert the rights and claims of the Governmental Lender , the Funding Lender and Servicer under the Borrower Loan Documents and the Funding Loan Documents arising out of an Event of Default or with respect to the Project (by litigation or other proceedings) arisi ng out of an Event of Default, which amounts will include all court costs, attorneys’ fees and expenses, fees of auditors and accountants, and investigation expenses as may be reasonably incurred by the Governmental Lender, the Funding Lender and Servicer in connection with any such matters (whether or not litigation is instituted), together with interest at the Default Rate on each such amount from the date of disbursement until the date of reimbursement to the Governmental Lender, the Funding Lender and Servicer, all of which shall constitute part of the Borrower Loan and the Funding Loan and shall be secured by the Borrower Loan Documents and the Funding Loan Documents. The obligations and liabilities of the Borrower under this Section shall survive the term of this Borrower Loan Agreement and the exercise by the Governmental Lender , the Funding Lender and Servicer, as the case may be, of any of its rights or remedies under the Borrower Loan Documents and the Funding Loan Documents, including the acquisition of the Project by foreclosure or a conveyance in lieu of foreclosure.
Notwithstanding the foregoing, the Borrower shall not be obligated to pay amounts incurred as a result
23 4912-4692-2535v3/022620-0118
of the willful misconduct of the Governmental Lender or the gross negligence or willful misconduct of any other party.
4.11 Indemnity. In addition to its other obligations hereunder, and in addition to any and all rights of reimbursement, indemnification, subrogation and other rights of Governmental Lender or Funding Lender pursuant hereto, pursuant to the Regulatory Agreement and under law or equity, to the fullest extent permitted by law, the Borrower agrees to indemnify, hold harmless and defend the Governmental Lender, its members, the Funding Lender, the Servicer, the Fiscal Agent and each of their respective board members , officers, directors, employees, attorneys and agents (each an “Indemnified Party”), against any and all losses, damages, claims, actions, liabilities, reasonable costs and expenses of any nature, kind or character (including, without limitation, reasonable attorneys’ fees, litigation and court costs, amounts paid in settlement (to the extent that the Borrower has consented to such settlement) and amounts paid to discharge judgments) to which the Indemnified Parties, or any of them, may become subject unde r federal or state securities laws or any other statutory law or at common law or otherwise, to the extent arising out of or based upon or in any way relating to:
(a) The Borrower Loan Documents and the Funding Loan Documents or the execution or amendment thereof or in connection with transactions contemplated thereby; (b) Any act or omission of the Borrower or any of its agents, contractors, servants, employees or licensees in connection with the Borrower Loan, the Funding Loan or the Project, the operation of the Project, or the condition, environmental or otherwise, occup ancy, use, possession, conduct or management of work done in or about, or from the planning, design, acquisition, installation, construction or rehabilitation, as the case may be, of, the Project or any part thereof; (c) Any lien (other than a lien permitted by the Deed of Trust) or charge upon payments by the Borrower to the Governmental Lender or the Funding Lender hereunder, or any taxes (including, without limitation, all ad valorem taxes and sales taxes), assessments, impositions and other charges or impositions imposed on the Governmental Lender or the Funding Lender in respect of any portion of the Project;
(d) Any violation of any environmental law, rule or regulation with respect to, or the release of any toxic substance from, the Project or any part thereof during the period in which the Borrower is in possession or control of the Project;
(e) The enforcement of, or any action taken by the Governmental Lender or the Funding Lender related to remedies under, this Borrower Loan Agreement and the other Borrower Loan Documents and the Funding Loan Documents;
(f) Any untrue statement or misleading statement or alleged untrue statement or alleged misleading statement of a material fact by the Borrower made in the course of Borrower applying for the Borrower Loan or the Funding Loan or contained in any of the Borrowe r Loan Documents or Funding Loan Documents to which the Borrower is a party; (g) Any Determination of Taxability;
(h) Any breach (or alleged breach) by Borrower of any representation, warranty or covenant made in or pursuant to this Borrower Loan Agreement or in connection with any written or oral representation, presentation, report, appraisal or other information given or delivered by Borrower,
24 4912-4692-2535v3/022620-0118
General Partner or Guarantor to Governmental Lender, the Funding Lender, the Servicer or any other Person in connection with the Borrower’s application for the Borrower Loan and the Funding Loan (including, without limitation, any breach or alleged breach by Borrower of any agreement with respect to the provision of any substitute credit enhancement); (i) any failure (or alleged failure) by Borrower, the Funding Lender or Governmental Lender to comply with applicable federal and state laws and regulations pertaining to the making of the Borrower Loan and the Funding Loan;
(j) the Project, or the condition, occupancy, use, possession, conduct or management of, or work done in or about, or from the planning, design, acquisition, installation, construction or rehabilitation, as the case may be, of, the Project or any part thereof; or (k) the use of the proceeds of the Borrower Loan and the Funding Loan, except in the case of the foregoing indemnification of the Governmental Lender or any related Indemnified Party, to the extent such damages are caused by the willful misconduct of such Indemnified Party, and except in the case of the foregoing indemnification of the Funding Lender or any related Indemnified Party, to the extent such damages are caused by the gross negligence or willful misconduct of such Indemnified Party. In the event that any action or proceeding is brought against any Indemnified Party with respect to which indemnity may be sought hereunder, the Borrower, upon written notice from the Indemnified Party (which notice shall be timely given so as not to materially impair the Borrower’s right to defend), shall assume the investigation and defense thereof, including the employment of counsel reasonably approved by the Indemnified Party, and shall assume the payment of all expenses related thereto, with full power to litigate, compromise or settle the same in its sole discretion; provided that the Indemnified Party shall have the right to review and approve or disapprove any such compromise or settlement, which approval shall not be unreasonably withheld. Each Indemnified Party shall have the right to employ separate counsel in any such action or proceeding and to participate in the investigation and defense thereof. The Borrower shall pay the reasonable fees and expenses of such separate counsel; provided, however, that such Ind emnified Party may only employ separate counsel at the expense of the Borrower if and only if in such Indemnified Party’s good faith judgment (based on the advice of counsel) a conflict of interest exists or could arise by reason of common representation.
Notwithstanding any transfer of the Project to another owner in accordance with the provisions of this Borrower Loan Agreement or the Regulatory Agreement, the Borrower shall remain obligated to indemnify each Indemnified Party pursuant to this Section if such subsequent owner fails to indemnify any party entitled to be indemnified hereunder, unless the Governmental Lender and the Funding Lender have consented to such transfer and to the assignment of the rights and obligations of the Borrower hereunder.
The rights of any persons to indemnity hereunder shall survive the final payment of the Borrower Loan and the Funding Loan. The provisions of this Section shall survive the termination of this Borrower Loan Agreement.
Nothing contained in this Section shall in any way be construed to limit the indemnification rights of the Governmental Lender contained in Section 11 of the Regulatory Agreement. With respect to the Governmental Lender, the Regulatory Agreement shall control in any conflicts between this Section and Section 11 of the Regulatory Agreement.
25 4912-4692-2535v3/022620-0118
4.12 No Warranty of Condition or Suitability by Lenders . Neither the Governmental Lender, nor the Funding Lender makes any warranty, either express or implied, as to the condition of the Project or that it will be suitable for the Borrower’s purposes or needs.
4.13 Notice of Default . The Borrower will advise the Governmental Lender and the Funding Lender promptly in writing following the occurrence of any Potential Default or Event of Default describing the details of such event of Potential Default or Event of Default and any curat ive action Borrower proposes to take.
4.14 Covenant With Governmental Lender and Funding Lender. The Borrower agrees that this Borrower Loan Agreement is executed and delivered in part to induce the purchase by others of the Governmental Lender Note and, accordingly, all covenants and agreements of the Borrower contained in this Borrower Loan Agree ment are hereby declared to be for the benefit of the Governmental Lender, the Funding Lender and any lawful owner, holder or pledgee of the Borrower Note or the Governmental Lender Note from time to time.
4.15 Obligation of the Borrower to Construct or Rehabilitate the Project . The Borrower shall proceed with reasonable dispatch to construct or rehabilitate, as the case may be, and equip the Project. The Borrower shall not be entitled to any reimbursement from the Governmental Lender or the Funding Lender in respect of any such costs or to any diminution or abatement in the repayment of the Borrower Loan. The Governmental Lender, the Funding Lender or the Servicer shall not be liable to the Borrower or any other person if for any reason the Project is not completed or if the proceeds of the Borrower Loan are insufficient to pay all costs of the Project. The Governmental Lender and the Funding Lender do not make any representation or warranty, either express or implied, that moneys, if any, which will be made available to the Borrower will be sufficient to complete the Project, and the Governmental Lender and the Funding Lender shall not be liable to the Borrower or any other person if for any reason the Project is not completed.
4.16 Tax Covenants. The Borrower further represents, warrants and covenants as follows:
(a) General. The Borrower shall not take any action or omit to take any action which, if taken or omitted, respectively, would adversely affect the exclusion of interest on the Governmental Lender Note from gross income (as defined in Section 61 of the Code), for fe deral income tax purposes and, if it should take or permit any such action, the Borrower will take all lawful actions that it can take to rescind such action promptly upon having knowledge thereof and that the Borrower will take such action or actio ns, including amendment of this Borrower Loan Agreement, the Deed of Trust and the Regulatory Agreement, as may be necessary, in the opinion of Tax Counsel, to comply fully with all applicable rules, rulings, policies, procedures, regulations or other offi cial statements promulgated or proposed by the Department of the Treasury or the Internal Revenue Service applicable to the Governmental Lender Note, the Funding Loan or affecting the Project. Capitalized terms used in this Section shall have the respecti ve meanings assigned to them in the Regulatory Agreement or, if not defined therein, in the Funding Loan Agreement. With the intent not to limit the generality of the foregoing, the Borrower covenants and agrees that, prior to the final maturity of the Governmental Lender Note, unless it has received and filed with the Governmental Lender and the Funding Lender a Tax Counsel No Adverse Effect Opinion (other than with respect to interest on any portion of the Governmental Lender Note for a period during which such portion of the Governmental Lender Note is held by a “substantial user” of any facility financed with the proceeds of the Governmental Lender Note or a “related person,” as such terms are used in Section 147(a) of the Code), the Borrower will comply with this Section.
26 4912-4692-2535v3/022620-0118
(b) Use of Proceeds. The use of the net proceeds of the Funding Loan at all times will satisfy the following requirements:
(i) Limitation on Net Proceeds . At least 95% of the net proceeds of the Funding Loan (within the meaning of the Code) actually expended shall be used to pay Qualified Project Costs that are costs of a “qualified residential rental project” (within the meaning of Sections 142(a)(7) and 142(d) of the Code) and property that is “functionally related and subordinate” thereto (within the meaning of Sections 1.103 -8(a)(3) and 1.103‒ 8(b)(4)(iii) of the Regulations).
(ii) Limit on Costs of Funding. The proceeds of the Funding Loan will be expended for the purposes set forth in this Borrower Loan Agreement and in the Funding Loan Agreement and no portion thereof in excess of two percent of the proceeds of the Funding Loan, within the meaning of Sec tion 147(g) of the Code, will be expended to pay Costs of Funding of the Funding Loan.
(iii) Prohibited Facilities. The Borrower shall not use or permit the use of any proceeds of the Funding Loan or any income from the investment thereof to provide any airplane, skybox, or other private luxury box, health club facility, any facility primarily used for gambling, or any store the principal business of which is the sale of alcoholic beverages for consumption off premises.
(iv) Limitation on Land . Less than 25 percent of the net proceeds of the Funding Loan actually expended will be used, directly or indirectly, for the acquisition of land or an interest therein, nor will any portion of the net proceeds of the Funding Loan be used, directly or indirectly, for the acquisition of land or an interest therein to be used for farming purposes.
(v) Limitation on Existing Facilities. No portion of the net proceeds of the Funding Loan will be used for the acquisition of any existing property or an interest therein unless (A) the first use of such property is pursuant to such acquisition or (B) the rehabilitation expenditures with res pect to any building and the equipment therefor equal or exceed 15 percent of the cost of acquiring such building financed with the proceeds of the Funding Loan (with respect to structures other than buildings, this clause shall be applied by substituting 100 percent for 15 percent). For purposes of the preceding sentence, the term “rehabilitation expenditures” shall have the meaning set forth in Section 147(d)(3) of the Code. (vi) Accuracy of Information. The information furnished by the Borrower and used by the Governmental Lender in preparing its certifications with respect to Section 148 of the Code and the Borrower’s information statement pursuant to Section 149(e) of the Code is accurate and complete as of the date of origination of the Funding Loan. (vii) Limitation of Project Expenditures. The acquisition, construction and equipping of the Project were not commenced (within the meaning of Section 144(a) of the Code) prior to the 60th day preceding the adoption of Resolution No. AHA-2024-007 of the Governmental Lender with respect to the Project on August 13, 2024, and no obligation for which reimbursement will be sought from proceeds of the Funding Loan relating to the acquisition, construction or rehabilitation, as the case may be, or equipping of the Project was paid or incurred prior to 60 days prior to such date, except for permissible “preliminary
27 4912-4692-2535v3/022620-0118
expenditures”, which include architectural, engineering surveying, soil testing, reimbursement bond issuance and similar costs incurred prior to the commencement of construction or acquisition of the Project.
(viii) Qualified Costs . The Borrower hereby represents, covenants and warrants that the proceeds of the Funding Loan shall be used or deemed used exclusively to pay costs which (i) are (A) capital expenditures (as defined in Section 1.150-1(a) of the Code’s regulations) and (B) not made for the acquisition of existing property, to the extent prohibited in Section 147(d) of the Code and that for the greatest number of buildings the proceeds of the Funding Loan shall be deemed allocated on a pro rata basis to each building in the Project and the land on which it is located so that each building and the land on which it is located will have been financed fifty percent (50%) or more by the proceeds of the Funding Loan for the purpose of complying with Section 42(h)(4)(B) of the Code; provided however, the foregoing representation, covenant and warranty is made for the benefit of the Borrower and its partners and neither the Funding Lender nor the Governmental Lender shall have any obligation to enforce this statement n or shall they incur any liability to any person, including without limitation, the Borrower, the partners of the Borrower, any other affiliate of the Borrower or the holders or payees of the Funding Loan and the Borrower Note for any failure to meet the intent expressed in the foregoing representation, covenant and warranty; and provided further, failure to comply with this representation, covenant and warranty shall not constitute a default or event of default under this Borrower Loan Agreement or the Funding Loan Agreement. (c) Limitation on Maturity . The average maturity of the Governmental Lender Note does not exceed 120 percent of the average reasonably expected economic life of the Project to be financed by the Funding Loan, weighted in proportion to the respective cost of each item comprising the property the cost of which has been or will be financed, directly or indirectly, with the Net Proceeds of the Funding Loan. For purposes of the preceding sentence, the reasonably expected economic life of property shall be determined as of the later of (A) the Closing Date for the Funding Loan or (B) the date on which such property is placed in service (or expected to be placed in service). In addition, land shall not be taken into account in determining the reasonably expected economic life of property. (d) No Arbitrage. The Borrower shall not take any action or omit to take any action with respect to the Gross Proceeds of the Funding Loan or of any amounts expected to be used to pay the principal thereof or the interest thereon which, if taken or omitted, respectively, would cause the Governmental Lender Note to be classified as an “arbitrage bond” within the meaning of Section 148 of the Code. Except as provided in the Funding Loan Agreement and this Borrower Loan Agreement, the Borrower shall not pledge or o therwise encumber, or permit the pledge or encumbrance of, any money, investment, or investment property as security for payment of any amounts due under this Borrower Loan Agreement or the Borrower Note relating to the Funding Loan, shall not establish any segregated reserve or similar fund for such purpose and shall not prepay any such amounts in advance of the redemption date of an equal principal amount of the Funding Loan, unless the Borrower has obtained in each case a Tax Counsel No Adverse Effect Opinion with respect to such action, a copy of which shall be provided to the Governmental Lender and the Funding Lender. The Borrower shall not, at any time prior to the final maturity of the Funding Loan, invest or cause any Gross Proceeds to be invested in any investment (or to use Gross Proceeds to replace money so invested), if, as a result of such investment the Yield of all investments acquired with Gross Proceeds (or with money replaced thereby) on or prior to the date of such investment exceeds the Yield of the Funding Loan to the Maturity Date, except as permitted by Section 148 of the Code and Regulations thereunder or as provided in the Regulatory Agreement. The Borrower further covenants and agrees that it will comply
28 4912-4692-2535v3/022620-0118
with all applicable requirements of said Section 148 and the rules and Regulations thereunder relating to the Funding Loan and the interest thereon, including the employment of a Rebate Analyst acceptable to the Governmental Lender and Funding Lender for the calculation of rebatable amounts to the United States Treasury Department. The Borrower agrees that it will cause the Rebate Analyst to calculate the rebatable amounts not later than forty-five days after the fifth anniversary of the Closing Date and each five years thereafter and not later than forty -five (45) days after the final Computation Date and agrees that the Borrower will pay all costs associated therewith. The Borrower agrees to provide evidence of the employment of the Rebate Analyst satisf actory to the Governmental Lender and Funding Lender.
(e) No Federal Guarantee. Except to the extent permitted by Section 149(b) of the Code and the Regulations and rulings thereunder, the Borrower shall not take or omit to take any action which would cause the Governmental Lender Note to be “federally guaranteed” within the meaning of Section 149(b) of the Code and the Regulations and rulings thereunder. (f) Representations. The Borrower has supplied or caused to be supplied to Tax Counsel all documents, instruments and written information requested by Tax Counsel, and all such documents, instruments and written information supplied by or on behalf of the Borrower at the request of Tax Counsel, which have been reasonably relied upon by Tax Counsel in rendering its opinion with respect to the exclusion from gross income of the interest on the Governmental Lender Note for federal income tax purposes, are true and correct in all material respects, do not contain any untrue statement of a material fact and do not omit to state any material fact necessary to be stated therein in order to make the information provided therein, in light of the circumstances under whic h such information was provided, not misleading, and the Borrower is not aware of any other pertinent information which Tax Counsel has not requested.
(g) Qualified Residential Rental Project . The Borrower hereby covenants and agrees that the Project will be operated as a “qualified residential rental project” within the meaning of Section 142(d) of the Code, on a continuous basis during the longer of the Qualified Project Period (as defined in the Regulatory Agreement) or any period during which any portion of the Governmental Lender Note remains outstanding, to the end that the interest on the Governmental Lender Note shall be excluded from gross income for federal income tax purposes. The Borrower hereby covenants and agrees, continuously during the Qualified Project Period, to comply with all the provisions of the Regulatory Agreement.
(h) Information Reporting Requirements . The Borrower will comply with the information reporting requirements of Section 149(e)(2) of the Code requiring certain information regarding the Governmental Lender Note to be filed with the Internal Revenue Service within prescribed time limits.
(i) Funding Loan Not a Hedge Bond. The Borrower covenants and agrees that not more than 50% of the proceeds of the Funding Loan will be invested in Nonpurpose Investments having a substantially guaranteed Yield for four years or more within the meaning of Section 149(f)(3)(A)(ii) of the Code, and the Borrower reasonably expects that at least 85% of the spendable proceeds of the Funding Loan will be used to carry out the governmental purposes of the Funding Loan within the three-year period beginning on the Closing Date. (j) Termination of Restrictions . Although the parties hereto recognize that, subject to the provisions of the Regulatory Agreement, the provisions of this Borrower Loan
29 4912-4692-2535v3/022620-0118
Agreement shall terminate in accordance with Section 7.7 hereof, the parties hereto recognize that pursuant to the Regulatory Agreement, certain requirements, including the requirements incorporated by reference in this Section, may continue in effect beyond the term hereof. (k) Public Approval. The Borrower covenants and agrees that the proceeds of the Funding Loan will not be used in a manner that deviates in any substantial degree from the Project described in the written notice of a public hearing regarding the Governmental Lender Note. (l) 40/60 Test Election. The Borrower and the Governmental Lender hereby elect to apply the requirements of Section 142(d)(1)(B) to the Project. The Borrower hereby represents, covenants and agrees, continuously during the Qualified Project Period, to comply with all the provisions of the Regulatory Agreement.
(m) Modification of Tax Covenants. Subsequent to the origination of the Funding Loan and prior to its payment in full (or provision for the payment thereof having been made in accordance with the provisions of the Funding Loan Agreement), this Section may not be amended, changed, modifie d, altered or terminated except as permitted herein and by the Funding Loan Agreement and with the Written Consent of the Governmental Lender and the Funding Lender.
Anything contained in this Borrower Loan Agreement or the Funding Loan Agreement to the contrary notwithstanding, the Governmental Lender, the Funding Lender and the Borrower hereby agree to amend this Borrower Loan Agreement and, if appropriate, the Funding Loan Agreement and the Regulatory Agreement, to the exten t required, in the opinion of Tax Counsel, in order for interest on the Governmental Lender Note to remain excludable from gross income for federal income tax purposes. The party requesting such amendment, which may include the Funding Lender, shall notify the other parties to this Borrower Loan Agreement of the proposed amendment and send a copy of such requested amendment to Tax Counsel. After review of such proposed amendment, Tax Counsel shall render to the Funding Lender and the Governmental Lender a n opinion as to the effect of such proposed amendment upon the includability of interest on the Governmental Lender Note in the gross income of the recipient thereof for federal income tax purposes. The Borrower shall pay all necessary fees and expenses incurred with respect to such amendment. The Borrower, the Governmental Lender and, where applicable, the Funding Lender per written instructions from the Governmental Lender shall execute, deliver and, if applicable, the Borrower shall file of record, any and all documents and instruments, including without limitation, an amendment to the Regulatory Agreement, with a file - stamped copy to the Funding Lender, necessary to effectuate the intent of this Section, and the Borrower and the Governmental Lender her eby appoint the Funding Lender as their true and lawful attorney-in-fact to execute, deliver and, if applicable, file of record on behalf of the Borrower or the Governmental Lender, as is applicable, any such document or instrument (in such form as may be approved by and upon instruction of Tax Counsel) if either the Borrower or the Governmental Lender defaults in the performance of its obligation under this Section; provided, however, that the Funding Lender shall take no action under this Section without first notifying the Borrower or the Governmental Lender, as is applicable, of its intention to take such action and providing the Borrower or the Governmental Lender, as is applicable, a reasonable opportunity to comply with the requirements of this Section.
The Borrower irrevocably authorizes and directs the Funding Lender and any other agent designated by the Governmental Lender to make payment of such amounts from funds of the Borrower, if any, held by the Funding Lender, or any agent of the Governmental Le nder or the Funding Lender.
The Borrower further covenants and agrees that, pursuant to the requirements of Treasury Regulation
30 4912-4692-2535v3/022620-0118
Section 1.148 -1(b), it (or any related person contemplated by such regulations) will not purchase interests in the Funding Loan in an amount related to the amount of the Borrower Loan. (n) Compliance With Tax Certificate . In furtherance of the covenants in this Section, the Borrower shall execute, deliver and comply with the provisions of the Tax Certificate, which are by this reference incorporated into this Borrower Loan Agreement and made a part of this Borrower Loan Agreement as if set forth in this Borrower Loan Agreement in full. In the event of a conflict between the terms of this Borrower Loan Agreement and the Tax Certificate, the terms of the Tax Certificate shall control.
4.17 Arbitrage Rebate. The Borrower shall take or cause to be taken all actions necessary or appropriate in order to fully and timely comply with Section 148(f) of the Code and to rebate excess investment earnings to the federal government, including the employment of a Rebat e Analyst acceptable to the Governmental Lender and the Funding Lender at all times from and after the Delivery Date for the calculation of rebatable amounts to the United States Treasury Department. The Borrower agrees that it will cause the Rebate Analyst to calculate the rebatable amounts not later than forty-five (45) days after the fifth (5th) anniversary of the Delivery Date and each five (5) years thereafter and not later than forty-five (45) days after the final Computation Date and agrees that the Borrower will pay all costs associated therewith. The Borrower shall cause the Rebate Analyst to provide such calculations to the Funding Lender and the Governmental Lender at such times and with such directions as are necessary to comply fully with the arbitrage and rebate requirements set forth in the Funding Loan Agreement and to comply fully with Section 148 of the Code, including the timely payment of any arbitrage rebate owed.
4.18 Covenants Under Funding Loan Agreement . The Borrower will fully and faithfully perform all the duties and obligations which the Governmental Lender has covenanted and agreed in the Funding Loan Agreement to cause the Borrower to perform and any duties and obligations which the Borrower is required in the Funding Loan Agreement to perform. The foregoing will not apply to any duty or undertaking of the Governmental Lender which by its nature cannot be delegated or assigned.
ARTICLE V
NEGATIVE COVENANTS
Borrower hereby covenants and agrees as follows, which covenants shall remain in effect so long as any Borrower Payment Obligation or other obligation of Borrower under any of the other Borrower Loan Documents or the Funding Loan Documents remains outstanding or unperform ed.
Borrower covenants and agrees that it will not, directly or indirectly:
5.1 Dissolution. Dissolve or liquidate, in whole or in part, merge with or consolidate into another Person.
5.2 Change in Business or Operation of Property . Enter into any line of business other than the ownership and operation of the Project, or make any material change in the scope or nature of its business objectives, purposes or operations, or undertake or participate in activities other than the continuance of its present business and activities incidental or related thereto or otherwise cease to operate the Project as a multi -family property or terminate such business for any reason whatsoever
31 4912-4692-2535v3/022620-0118
(other than temporary cessation in connection with construction or rehabilitation, as the case may be, of the Project).
5.3 Transfers. Make, suffer or permit the occurrence of any transfer other than a transfer permitted under the Deed of Trust and Section 14 of the Regulatory Agreement.
5.4 No Hedging Arrangements. Without the prior Written Consent of the Funding Lender, the Borrower will not enter into or guarantee, provide security for or otherwise undertake any form of contractual obligation with respect to any interest rate swap, interest rate cap or other arrangement that has the effect of an interest rate swap or interest rate cap or that otherwise (directly or indirectly, derivatively or synthetically) hedges interest rate risk associated with being a debtor of variable rate debt or any agreement or other arrangement to enter into any of the above on a future date or after the occurrence of one or more events in the future.
ARTICLE VI
DEFAULTS
6.1 Events of Default. Each of the following events shall constitute an “Event of Default” under this Borrower Loan Agreement:
(a) failure by the Borrower to pay any Borrower Loan Payment in the manner and on the date such payment is due in accordance with the terms and provisions of the Borrower Note, or the failure by the Borrower to pay any Additional Borrower Payment on the date such payment is due in accordance with the terms and provisions of the Borrower Note, the Deed of Trust, this Borrower Loan Agreement or any other Borrower Loan Document;
(b) failure by or on behalf of the Borrower to pay when due any amount (other than as provided in subsection (a) above or elsewhere in this Section) required to be paid by the Borrower under this Borrower Loan Agreement, the Borrower Note, the Deed of Trust or any of the other Borrower Loan Documents or Funding Loan Documents, including a failure to repay any amounts that have been previously paid but are recovered, attached or enjoined pursuant to any insolvency, receivership, liquidation or similar proceedings, which default remains uncured for a period of ten (10) days after Written Notice thereof shall have been given to the Borrower; (c) a default or breach by the Borrower or any Guarantor of its obligations, covenants, representations or warranties under the Borrower Note, the Deed of Trust or any other Borrower Loan Document occurs and any applicable notice and/or cure period has expired; (d) any representation or warranty made by any of the Borrower, the Guarantor or the General Partner in any Borrower Loan Document or Funding Loan Document to which it is a party, or in any report, certificate, financial statement or other instrument, agreement or document furnished by the Borrower, the Guarantor or the General Partner in connection with any Borrower Loan Document or Funding Loan Document, shall be false or misleading in any material respect when made; (e) any failure by the Borrower to perform or comply with any of its obligations under this Borrower Loan Agreement (other than those specified in this Section), as and when required.
32 4912-4692-2535v3/022620-0118
6.2 Remedies.
6.2.1 Acceleration. Upon the occurrence and during the continuance of an Event of Default, in addition to any other rights or remedies available to the Governmental Lender pursuant to the Borrower Loan Documents or at law or in equity, the Funding Lender may, take such act ion, without notice or demand, as the Funding Lender deems advisable to protect and enforce its rights against the Borrower and in and to the Project, including declaring the Borrower Payment Obligations to be immediately due and payable (including, without limitation, the principal of, prepayment premium, if any, and interest on and all other amounts due on the Borrower Note to be immediately due and payable), without notice or demand, and apply such payment of the Borrower Payment Obligations in any manner and in any order determined by Funding Lender, in Funding Lender’s sole and absolute discretion. Notwithstanding anything herein to the contrary, enforcement of remedies hereunder and under the Funding Loan Agreement shall be controlled by the Funding Lender.
6.2.2 Remedies Cumulative. Upon the occurrence of an Event of Default, all or any one or more of the rights, powers, privileges and other remedies available to the Funding Lender against the Borrower under the Borrower Loan Documents or at law or in equity may be exercised by the Funding Lender, at any time and from time to time, whether or not all or any of the Borrower Payment Obligations shall be declared due and payable, and whether or not the Funding Lender shall have commenced any foreclosure proceed ing or other action for the enforcement of its rights and remedies under any of the Borrower Loan Documents. Any such actions taken by the Funding Lender shall be cumulative and concurrent and may be pursued independently, singly, successively, together or otherwise, at such time and in such order as the Funding Lender may determine in its sole discretion, to the fullest extent permitted by law, without impairing or otherwise affecting the other rights and remedies of the Funding Lender permitted by law, e quity or contract or as set forth in the Borrower Loan Documents. Without limiting the generality of the foregoing, the Borrower agrees that if an Event of Default is continuing, all liens and other rights, remedies or privileges provided to the Funding Lender shall remain in full force and effect until it has exhausted all of its remedies, the Deed of Trust has been foreclosed, the Project has been sold and/or otherwise realized upon satisfaction of the Borrower Payment Obligations or the Borrower Payment Obligations have been paid in full. To the extent permitted by applicable law, nothing contained in any Borrower Loan Document shall be construed as requiring the Funding Lender to resort to any portion of the Project for the satisfaction of any of the B orrower Payment Obligations in preference or priority to any other portion, and the Funding Lender may seek satisfaction out of the entire Project or any part thereof, in its absolute discretion.
Notwithstanding any provision herein to the contrary, the Governmental Lender and the Funding Lender agree that any cure of any default made or tendered by the Tax Credit Investor shall be deemed to be a cure by the Borrower and shall be accepted or rejected on the same basis as if made or tendered by the Borrower.
6.2.3 Delay. No delay or omission to exercise any remedy, right, power accruing upon an Event of Default, or the granting of any indulgence or compromise by the Funding Lender shall impair any such remedy, right or power hereunder or be construed as a waiver thereof , but any such remedy, right or power may be exercised from time to time and as often as may be deemed expedient. A waiver of one Potential Default or Event of Default shall not be construed to be a waiver of any subsequent Potential Default or Event of Default or to impair any remedy, right or power consequent thereon. Notwithstanding any other provision of this Borrower Loan Agreement, the Funding Lender reserves the right to seek a deficiency judgment or preserve a deficiency claim, in
33 4912-4692-2535v3/022620-0118
connection with the foreclosure of the Deed of Trust to the extent necessary to foreclose on the Project, the Rents, the funds or any other collateral.
6.2.4 Assumption of Obligations. In the event that the Funding Lender or its assignee or designee shall become the legal or beneficial owner of the Project by foreclosure or deed in lieu of foreclosure, such party shall succeed to the rights and the obligations of the Borrower under th is Borrower Loan Agreement, the Borrower Note, the Regulatory Agreement, and any other Borrower Loan Documents and Funding Loan Documents to which the Borrower is a party. Such assumption shall be effective from and after the effective date of such acquisition and shall be made with the benefit of the limitations of liability set forth therein and without any liability for the prior acts of the Borrower.
6.2.5 Right to Directly Enforce. Notwithstanding any other provision hereof to the contrary, the Funding Lender shall have the right to directly enforce all rights and remedies hereunder with or without involvement of the Governmental Lender, provided that only the Governmental Lender may enforce the Unassigned Rights. In the event that any of the provisions set forth in this Section are inconsistent with the covenants, terms and conditions of the Deed of Trust, the covenants, terms and conditions of the Deed of Trust shall prevail.
ARTICLE VII
MISCELLANEOUS
7.1 Notices. All notices, consents, approvals and requests required or permitted hereunder or under any other Borrower Loan Document or Funding Loan Document (a “notice”) shall be deemed to be given and made when delivered by hand, by recognized overnight delivery s ervice, confirmed facsimile transmission (provided any telecopy or other electronic transmission received by any party after 4:00 p.m., local time, as evidenced by the time shown on such transmission, shall be deemed to have been received the following Business Day), or five (5) calendar days after deposited in the United States mail, registered or certified, postage prepaid, with return receipt requested, addressed to the appropriate party at the addresses set forth in Section 12.1 of the Funding Loan Agreement. Any party may change such party’s address for the notice or demands required under this Borrower Loan Agreement by providing written notice of such change of address to the other parties as provided herein.
7.2 Survival. This Borrower Loan Agreement and all covenants, agreements, representations and warranties made herein and in the certificates delivered pursuant hereto shall survive the making by the Governmental Lender of the Borrower Loan and the execution and delivery to the Governmental Lender of the Borrower Note and the assignment of the Borrower Note to the Funding Lender, and shall continue in full force and effect so long as all or any of the Borrower Payment Obligations is unpaid. All the Borrower’s covenants and agreements in this Borrower Loan Agreement shall inure to the benefit of the respective legal representatives, successors and assigns of the Governmental Lender, the Funding Lender and the Servicer.
7.3 Preferences. The Governmental Lender shall have the continuing and exclusive right to apply or reverse and reapply any and all payments by the Borrower to any portion of the Borrower Payment Obligations. To the extent the Borrower makes a payment to the Governmenta l Lender or the Funding Lender or the Servicer, or the Governmental Lender or the Funding Lender or the Servicer receives proceeds of any collateral, which is in whole or part subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, receiver or any other party
34 4912-4692-2535v3/022620-0118
under any bankruptcy law, state or federal law, common law or equitable cause, then, to the extent of such payment or proceeds received, the Borrower Payment Obligations or part thereof intended to be satisfied shall be revived and continue in full force and effect, as if such payment or proceeds had not been received by the Governmental Lender or the Servicer.
7.4 Construction of Documents . The parties hereto acknowledge that they were represented by counsel in connection with the negotiation and drafting of the Borrower Loan Documents and the Funding Loan Documents and that the Borrower Loan Documents and the Funding Loan Documents shall not be subject to the principle of construing their meaning against the party that drafted them.
7.5 No Third Party Beneficiaries. The Borrower Loan Documents and the Funding Loan Documents are solely for the benefit of the Governmental Lender, the Funding Lender, Servicer and the Borrower, and nothing contained in any Borrower Loan Document shall be deemed to confer upon anyone other than the Governmental Lender, the Funding Lender, Servicer and the Borrower any right to insist upon or to enforce the performance or observance of any of the obligations contained therein.
7.6 Governmental Lender, Funding Lender and Servicer Not in Control; No Partnership .
None of the covenants or other provisions contained in this Borrower Loan Agreement shall, or shall be deemed to, give the Governmental Lender or the Funding Lender the right or power to exercise control over the affairs or management of the Borrower, t he power of the Governmental Lender and the Funding Lender being limited to the rights to exercise the remedies referred to in the Borrower Loan Documents and the Funding Loan D ocuments. The relationship between the Borrower and the Governmental Lender and the Funding Lender is, and at all times shall remain, solely that of debtor and creditor. No covenant or provision of the Borrower Loan Documents or the Funding Loan Documents is intended, nor shall it be deemed or construed, to create a partnership, joint venture, agency or common interest in profits or income between the Borrower and the Governmental Lender or the Funding Lender or to create an equity interest in the Project in the Governmental Lender or the Funding Lender. Neither the Governmental Lender nor the Funding Lender undertakes or assumes any responsibility or duty to the Borrower or to any other person with respect to the Project or the Borrower Loan, except as expressly provided in the Borrower Loan Documents or the Funding Loan Documents; and notwithstanding any other provision of the Borrower Loan Documents and the Funding Loan Documents: (1) the Governmental Lender and the Funding Lender are not, and shall not be construed as, a partner, joint venturer, alter ego, manager, controlling person or other business associate or participant of any kind of the Borrower or its stockholders, members, or partners and the Governmental Lender and the Funding Lender do not intend to ever assume such status; (2) the Governmental Lender and the Funding Lender shall in no event be liable for any the Borrower Payment Obligations, expenses or losses incurred or sustained by the Borrower; and (3) the Governmental Lender and the Fu nding Lender shall not be deemed responsible for or a participant in any acts, omissions or decisions of the Borrower or its stockholders, members, or partners. The Governmental Lender, the Funding Lender and the Borrower disclaim any intention to create any partnership, joint venture, agency or common interest in profits or income between the Governmental Lender, the Funding Lender and the Borrower, or to create an equity interest in the Project in the Governmental Lender or the Funding Lender, or any sharing of liabilities, losses, costs or expenses.
7.7 Term of Borrower Loan Agreement . This Borrower Loan Agreement shall be in full force and effect until all payment obligations of the Borrower hereunder have been paid in full and the Borrower Loan and the Funding Loan have been retired or the payment thereof has been provided for;
35 4912-4692-2535v3/022620-0118
except that on and after payment in full of both Borrower Note, this Borrower Loan Agreement shall be terminated, without further action by the parties hereto.
7.8 Reimbursement of Expenses. If, upon or after the occurrence of any Event of Default or Potential Default, the Governmental Lender or the Funding Lender shall employ attorneys or incur other expenses for the enforcement of performance or observance of any obligation or agreement o n the part of the Borrower contained herein, the Borrower will on demand therefor reimburse the Governmental Lender and the Funding Lender for fees of such attorneys and such other expenses so incurred.
7.9 Governing Law. This Borrower Loan Agreement shall be governed by and enforced in accordance with the laws of the State, without giving effect to the choice of law principles of the State that would require the application of the laws of a jurisdiction other than the State.
7.10 Successors and Assigns. This Borrower Loan Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, legal representatives, successors, successors-in-interest and assigns, as appropriate. The terms used to designate any o f the parties herein shall be deemed to include the heirs, legal representatives, successors, successors -in- interest and assigns, as appropriate, of such parties. References to a “person” or “persons” shall be deemed to include individuals and entities.
7.11 Severability. The invalidity, illegality or unenforceability of any provision of this Borrower Loan Agreement shall not affect the validity, legality or enforceability of any other provision, and all other provisions shall remain in full force and effect.
7.12 Entire Agreement; Amendment and Waiver. This Borrower Loan Agreement contains the complete and entire understanding of the parties with respect to the matters covered. This Borrower Loan Agreement may not be amended, modified or changed, nor shall any waiver of any provision hereof be effective, except by a written instrument signed by the party against whom enforcement of the waiver, amendment, change, or modification is sought, and then only to the extent set forth in that instrument. No specific waive r of any of the terms of this Borrower Loan Agreement shall be considered as a general waiver. Without limiting the generality of the foregoing, no disbursement of the Borrower Loan shall constitute a waiver of any conditions to the Governmental Lender’s or the Funding Lender’s obligation to make further Disbursements nor, in the event Borrower is unable to satisfy any such conditions, shall any such waiver have the effect of precluding the Governmental Lender or the Funding Lender from thereafter declaring such inability to constitute a Potential Default or Event of Default under this Borrower Loan Agreement.
7.13 Counterparts/Electronic Signatures. This Borrower Loan Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same document. Delivery of a signature page to, or an executed counterpart of, this document by facsimile, email transmission of a scanned image, or other electronic means, shall be effective as delivery of an originally executed counterpart. The words “execution,” “signed,” “signature,” and words of like import in this document shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity, or enforceability as a manually executed signature or the use of a paper-based record keeping system, as the case may be, to the extent and as provided for in any applicable law, including, without limitation, Electronic Signatures in Global and National Commerce Act, any other similar state laws
36 4912-4692-2535v3/022620-0118
based on the Uniform Electronic Transactions Act or the Uniform Commercial Code, and the parties hereto hereby waive any objection to the contrary.
7.14 Captions. The captions of the sections of this Borrower Loan Agreement are for convenience only and shall be disregarded in construing this Borrower Loan Agreement.
7.15 Time of the Essence . Time is of the essence with respect to this Borrower Loan Agreement.
7.16 Judicial Reference . It is the desire and intention of the parties to agree upon a mechanism and procedure under which any controversy, lawsuit, breach, or dispute arising out of or relating to this Borrower Loan Agreement or any other Borrower Loan Document will be resolved in a prompt and expeditious manner. Accordingly, any controversy, lawsuit, breach, or dispute arising out of or relating to this Borrower Loan Agreement or any other Borrower Loan Document or relating to the interpretation of any term or provision of such documents (collectively, “Claim”), shall be heard and determined by a referee appointed and acting pursuant to a consensual general reference pursuant to the provisions of California Code of Civil Procedure, Sections 638, et. seq. It is the parties’ intention that the matter be heard by a single referee. The parties shall agree upon a single referee who shall then try all issues, whether of fact or law, and report a statement of decision which either party may file with the clerk or judge, and judgment shall be ent ered thereon. If the parties are unable to agree upon a referee within ten (10) days of a written request to do so by any party, then any party may thereafter seek to have a referee appointed pursuant to California Code of Civil Procedure Sections 638 and 640. The parties agree that the referee(s) shall have the power to decide all issues of fact and law and shall report a statement of decision hereon, and to issue all legal and equitable relief appropriate under the circumstances before him or her. The parties further agree that referee shall be empowered to rule on any motion which would be authorized in a court proceeding, including without limitation motions for summary judgment or summary adjudication. The parties shall promptly and diligently coope rate with one another and the referee(s) and shall perform such acts as may be necessary to obtain prompt and expeditious resolution of the dispute or controversy in accordance with the terms hereof. The referee(s) shall award legal fees and costs (includ ing the fees of the referee(s)) related to this reference proceeding, and to any related litigation, in accordance with the terms of this Borrower Loan Agreement.
(a) Other Remedies. No provision of this Section 7.16 shall limit the right of any party to exercise self-help remedies such as setoff, foreclosure against, or sale of, any real or personal property collateral or security, or to obtain provisional or ancillary remedies from a court of competent jurisdiction before, after, or during the pendency of any reference proceeding. The exercise of any one or more remedies does not waive the right of either party to resort to reference. At Funding Lender’s option, foreclosure under the Deed of Trust may be accomplished either by exercise of power of sale under the Deed of Trust or by judicial foreclosure.
(b) Referee’s Fees and Costs . The referee’s fees and costs shall be paid in accordance with the terms of this Borrower Loan Agreement. In the event the prevailing party pays the Referee’s fees and costs, the prevailing party shall be entitled to recover such costs from the non - prevailing party as costs in the same manner as attorneys’ fees and costs. (c) Jury Waiver . By agreeing to judicial reference, the parties irrevocably and voluntarily waive any right they may have to a trial by jury in respect of any Claim. Without intending in any way to limit the provisions of this Section, to the extent any Claim is not su bmitted to judicial
37 4912-4692-2535v3/022620-0118
reference, the parties irrevocably and voluntarily waive any right they may have to a trial by jury to the extent permitted by applicable law. WHETHER THE CLAIM IS DECIDED BY JUDICIAL
REFERENCE OR BY TRIAL, THE PARTIES AGREE AND UNDERSTAND THAT THE EFFECT OF THIS SECTION IS THAT THEY ARE GIVING UP THE RIGHT TO TRIAL BY JURY. EACH PARTY HERETO (i) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF
ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PERSON WOULD NOT, IN THE EVENT O F LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO
HAVE BEEN INDUCED TO ENTER INTO THIS COVENANT AGREEMENT AND THE OTHER
LOAN DOCUMENTS, BY AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION, AND (iii) CERTIFIES THAT THIS WAIVER IS KNOWINGLY, WILLINGLY, AND VOLUNTARILY MADE.
7.17 Servicer. Borrower hereby acknowledges and agrees that, pursuant to the terms of Funding Loan Agreement: (a) from time to time, the Governmental Lender or the Funding Lender may appoint a servicer to collect payments, escrows and deposits, to give and to receive notices under the Borrower Notes, this Borrower Loan Agreement or the other Borrower Loan Documents, a nd to otherwise service the Borrower Loan and (b) unless Borrower receives Written Notice from the Governmental Lender or the Funding Lender to the contrary, any action or right which shall or may be taken or exercised by the Governmental Lender or the Funding Lender may be taken or exercised by such servicer with the same force and effect. Without limitation of the foregoing or any other provisions set forth elsewhere herein regarding the Servicer, Borrower further acknowledges, agrees and waives any right to assert anything to the contrary that (a) Funding Lender shall have the right to appoint, in its sole and absolute discretion, a Person to se rvice and administer the Funding Loan and the Borrower Loan (the “ Servicer”), which appointment may be subject to a separate agreement between Funding Lender and Servicer, (b) Funding Lender hereby appoints City National Bank, a national banking association, to service and administer the Funding Loan and the Borrower Loan, (c) any references herein to any determinations, consents, approvals, disapprovals, calculations, requirements, requests, acts, actions, elections, selections, opinions, judgments, exerci se of rights, remedies or indemnities, satisfaction of conditions or other decisions of or to be made by Funding Lender (collectively, “Determinations”) if made by the Servicer will have the same force and effect as if made by CNF, with Borrower entitled to rely on any Determinations made by Servicer as having been made by Funding Lender, (d) any information or notice delivered to Servicer shall have the same effect as if delivered to Funding Lender, (e) Servicer is acting on behalf of Funding Lender and as such is afforded all indemnifications, limitations on liability and other protections provided to Funding Lender, (f) Funding Lender may, in its sole discretion, terminate or replace the Servicer, and (g) Servicer is a third -party beneficiary to each of t he Funding Loan Documents and Borrower Loan Documents. Borrower shall not be responsible for monitoring the performance of the Servicer or for any acts or omissions of the Servicer.
ARTICLE VIII
LIMITATIONS ON LIABILITY
8.1 Limitation on Liability. Notwithstanding anything to the contrary herein, the liability of the Borrower hereunder and under the other Borrower Loan Documents and the Funding Loan Documents shall be limited to the extent set forth in the Borrower Note.
38 4912-4692-2535v3/022620-0118
8.2 Limitation on Liability of Governmental Lender. The Governmental Lender shall not be obligated to pay the principal (or prepayment price) of or interest on the Funding Loan, except from moneys and assets received by the Funding Lender on behalf of the Governmental Lender pursuant to the assignment by Governmental Lender to Funding Lender of this Borrower Loan Agreement.
Neither the faith and credit nor the taxing power of the State, or any political subdivision thereof, nor the faith and credit of the Gov ernmental Lender is pledged to the payment of the principal (or prepayment price) of or interest on the Funding Loan. The Governmental Lender shall not be liable for any costs, expenses, losses, damages, claims or actions, of any conceivable kind on any conceivable theory, under or by reason of or in connection with this Borrower Loan Agreement or the Funding Loan Agreement, except only to the extent amounts are received for the payment thereof from the Borrower under this Borrower Loan Agreement.
The Borrower hereby acknowledges that the Governmental Lender’s sole source of moneys to repay the Funding Loan will be provided by the payments made by the Borrower pursuant to this Borrower Loan Agreement, together with investment income on certain funds and accounts held by the Funding Lender under the Funding Loan Agreement, and hereby agrees that if the payments to be made hereunder shall ever prove insufficient to pay all principal (or prepayment price) of and interest on the Funding Loan as the same shall become due (whether by maturity, redemption, acceleration or otherwise), then upon notice from the Funding Lender or the Servicer , the Borrower shall pay such amounts as are required from time to time to prevent any deficiency or default in the payment of such principal (or prepayment price) of or interest on the Funding Loan, including, but not limited to, any deficiency caused by acts, omissions, nonfeasance or malfeasance on the part of the Funding Lender, the Borrower, the Governmental Lender or any third party, subject to any right of reimbursement from the Funding Lender, the Governmental Lender or any such third party, as the case may be, therefor but solely, in the case of the Governmental Lender, from the Pledged Revenues (as defined in the Funding Loan Agreement), other than with respect to any deficiency caused by the willful misconduct of the Governmental Lender.
8.3 Waiver of Personal Liability . No member, officer, agent or employee of the Governmental Lender or any of its members or any director, officer, agent or employee of the Governmental Lender shall be individually or personally liable for the payment of any principal (or prepayment price) of or interest on the Funding Loan or any other sum hereunder or be subject to any personal liability or accountability by reason of the execution and delivery of this Borrower Loan Agreement; but nothing herein contained sha ll relieve any such member, director, officer, agent or employee from the performance of any official duty provided by law or by this Borrower Loan Agreement.
8.4 Limitation on Liability of Governmental Lender’s and Funding Lender’s Commissioners, Officers, Employees, Etc.
(a) Borrower assumes all risks of the acts or omissions of the Governmental Lender and the Funding Lender, provided, however, this assumption is not intended to, and shall not, preclude the Borrower from pursuing such rights and remedies as it may have against the Governmental Lender and the Funding Lender at law or under any other agreement. None of Governmental Lender and the Funding Lender, or their respective commissioners, officers, directors, employees or agents shall be liable or responsible for (i) for any acts or omissions of the Governmental Lender and the Funding Lender; or (ii) the validity, sufficiency or genuineness of any documents, or endorsements, even if such documents should in fact prove to be in any or all respects invalid, insufficient, fraudulent or forged. In furtherance and not in limitation of the foregoing, the Governmental Lender and the
39 4912-4692-2535v3/022620-0118
Funding Lender may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary, unless acceptance in light of such notice or information constitutes gross negligence or willful misconduct on the part of the Funding Lender or willful misconduct on the part of the Governmental Lender. (b) None of the Governmental Lender or the Funding Lender or any of their respective commissioners, officers, directors, employees or agents shall be liable to any contractor, subcontractor, supplier, laborer, architect, engineer or any other party for service s performed or materials supplied in connection with the Project. The Governmental Lender and the Funding Lender shall not be liable for any debts or claims accruing in favor of any such parties against Borrower or others or against the Project. The Borr ower is not and shall not be an agent of the Governmental Lender and the Funding Lender for any purpose. Neither the Governmental Lender nor the Funding Lender is a joint venture partner with Borrower in any manner whatsoever. Prior to default by Borrower under this Borrower Loan Agreement and the exercise of remedies granted herein, the Governmental Lender and the Funding Lender shall not be deemed to be in privity of contract with any contractor or provider of services to the Project, nor shall any paym ent of funds directly to a contractor, subcontractor or provider of services be deemed to create any third party beneficiary status or recognition of same by the Governmental Lender and the Funding Lender. Approvals granted by the Governmental Lender and the Funding Lender for any matters covered under this Borrower Loan Agreement shall be narrowly construed to cover only the parties and facts identified in any written approval or, if not in writing, such approvals shall be solely for the benefit of Borrower. (c) Any obligation or liability whatsoever of the Governmental Lender and the Funding Lender that may arise at any time under this Borrower Loan Agreement or any other Borrower Loan Document shall be satisfied, if at all, out of the Funding Lender’s assets only. No such obligation or liability shall be personally binding upon, nor shall resort for the enforcement thereof be had to, the Project or any of the Governmental Lender’s or the Funding Lender’s shareholders (if any), board members, directors, officers, employees or agents, regardless of whether such obligation or liability is in the nature of contract, tort or otherwise.
[Remainder of Page Intentionally Left Blank]
S-1
[Tampico Motel Conversion -
Signature Page to Borrower Loan Agreement]
4912-4692-2535v3/022620-0118
IN WITNESS WHEREOF, the undersigned has duly executed and delivered this Borrower Loan Agreement or caused this Borrower Loan Agreement to be duly executed and delivered by its authorized representative as of the date first set forth above.
BORROWER:
CENTER HOUSING PARTNERS LP,
a California limited partnership
By:
Its:
S-2
[Tampico Motel Conversion -
Signature Page to Borrower Loan Agreement]
4912-4692-2535v3/022620-0118
GOVERNMENTAL LENDER:
ANAHEIM HOUSING AUTHORITY,
a public body, corporate and politic
By:
Executive Director
or Authorized Designee
ATTEST:
AUTHORITY SECRETARY
Authority Secretary
or Authorized Designee
APPROVED AS TO FORM:
OFFICE OF THE CITY ATTORNEY
Assistant City Attorney
or Authorized Designee
STRADLING YOCCA CARLSON & RAUTH
Housing Authority Special Counsel
S-3
[Tampico Motel Conversion -
Signature Page to Borrower Loan Agreement]
4912-4692-2535v3/022620-0118
FUNDING LENDER:
CN FINANCING, INC., a _______________
By:
Name:
Its: