HomeMy WebLinkAbout1999-05-18; City Council; 15209; Poinsettia Station Affordable Apartment Project- I I?
CITY OF CARLSBAD - AGENDA BILL I I’
I I
AB# js.itOy
MTG. 5118199
DEPT. . H/RED
TITLE: AUTHORIZATION TO SELL, ISSUE AND DELIVER
MULTI-FAMILY HOUSING REVENUE BONDS IN AN AMOUNT
NOT TO EXCEED $6,325,000 FOR THE CONSTRUCTION OF ClTYAlTY. THE POINSETTIA STATION AFFORDABLE APARTMENT
PROJECT AND APPROVAL OF RELATED DOCUMENTS
RECOMMENDED ACTION: SDP 98-q
That the City Council ADOPT Resolution No. 99 L ! 7 7 , AUTHORIZING the sale, issuance and delivery of multi-family housing revenue bonds in an amount not to exceed $6,325,000 for the
construction of the Poinsettia Station Affordable Apartment Project within the City of Carlsbad and
APPROVING the related Loan Agreement, Regulatory Agreement and Indenture of Trust.
ITEM EXPLANATION
Project Descriotion
Poinsettia Station (formerly referred to as Poinsettia Gardens) is a 92 unit Affordable Apartment
Project which was approved by the City Council on April 13, 1999 (SDP98-09). The project will
satisfy the entire lnclusionary Housing Ordinance requirements for the Poinsettia Properties Specific
Plan. The project will include 36 one bedroom (39%) 44 two bedroom (48%) and 12 three bedroom
units (13%). All 92 units will rent for a maximum of 60% of the area median income. The project will
be developed by Poinsettia Housing Associates (Developer), a subsidiary of Bridge Housing
Corporation.
I Financial Assistance
On December 8, 1998, the City Council approved a construction loan for the subject project in the
amount of $920,000, or $10,000 per unit, from the Housing Trust Fund. The Council also agreed to
exempt the project from the Public Facility Fee (PFF) as permitted by City Council Policy No. 17.
In addition to the above noted forms of direct financial assistance, the City Council also declared its
intent to issue tax-exempt multi-family revenue bonds in an amount not to exceed $6500,000 to
assist in financing the project. Prior to the issuance and sale of the bonds, the City Council must first
review and approve the governing documents. The bond issuing process and the governing
documents are discussed in further detail below.
Bond Issuance
Prior to issuing tax exempt multi-family revenue bonds, the City must first receive a bond allocation
from the California Debt Limit Allocation Committee (CDLAC). In its December 15, 1998 application to
CDLAC, the City requested a $6500,000 bond allocation. For the first time, CDLAC received
applications for allocations that exceeded the amount available. In order to best leverage State
financial assistance, and to accommodate the largest number of projects, CDLAC required that each
project combine tax-exempt and taxable debt. Thus, all projects received less tax-exempt allocation
than requested. On March 10, 1999, the CDLAC approved an allocation of $5,525,000, or 85% of our original request, in tax-exempt bonds for the project.
PAGE 2 OF AGENDA BILL NO. 15, t 0 4
In order to obtain adequate project financing, the Developer is requesting that the City issue both tax
exempt and taxable bonds. The tax-exempt bonds will amount to a total of $5,525,000, and the
taxable bonds will amount to $800,000. While the bond issuance is no longer 100% tax-exempt as
previously indicated to the Council, the total issuance will remain below the original amount of $6.5
million for the housing revenue bonds.
To account for the two types of bond issues, the financing has been structured into three Bond
Series. Series 1999A will be a tax exempt bond in the amount of $4,450,000 and will be outstanding
for the entire 30 year period of the bond. Series 1999B will also be tax exempt in the amount of
$1,075,000. Series 19998 represents a “bridge loan” to pay for short term expenses. Series 1999B
will be repaid approximately 4.5 years from the date of issuance with funds received from equity
contributions to the project from the tax credit equity partner. Series 1999B-T will be a taxable bond
in the amount of $800,000. This taxable bond will also be for short term expenses and will be repaid
approximately 4.5 years from the date of issuance. The total amount of the three bonds issued by the
City will be $6,325,000.
As a condition of the bond allocation, CDLAC requires that the bonds be issued no later than 90 days
after the allocation (3-10-99). All parties related to the Poinsettia Station project have been working
diligently to develop the attached bond documents and process them in order to meet the CDLAC
deadline. If the City Council approves the issuance of the bonds and the attached documents, it is
anticipated that the issuance will occur on June 1, 1999.
Bond Documents
On January 12, 1999, the City Council adopted an Inducement Resolution which expressed the City’s
intent to issue the above described bonds. However, before the bonds can be sold, the City Council
must adopt the attached Issuance Resolution. The Resolution will authorize the actual sale and
issuance of the bonds and approve the related regulatory documents.
The sale of the bonds has been structured as a private placement issuance. The City of Carlsbad will
be the bond issuer, Bank of America will be the Bond Owner, and Poinsettia Housing Associates, a
subsidiary of Bridge Housing Corporation, will be the Borrower. A fourth party to the transaction, the Trustee, will be selected by the City prior to sale of the bonds.
The regulatory agreements for this transaction are attached as Exhibits 2, 3 and 4 for City Council’s review. The Council is being asked to approve, in substantially the form presented, the Loan
Agreement, Regulatory Agreement and hdenture of Trust, which are described below:
1. Loan Agreement - states the terms and conditions relating to the repayment of the bond
proceeds to the bond owner. This document must be executed by the City, the Borrower, and the Bond Owner prior to the sale and issuance of the bonds.
2. Regulatory Agreement - records the terms of affordability and the operation requirements for
the project for the 30 year term of the bonds. This document must be executed by the City, the Borrower, and the Trustee prior to the sale and issuance of the bonds.
3. Indenture of Trust - grants authority from the City to the Trustee to accept and disburse the
bond proceeds. This document also stipulates the Trustee’s role in insuring that the bonds
maintain their tax exempt status and provides for the redemption of the bonds. This document
must be executed by the City and Trustee prior to the sale and issuance of the bonds.
PACE 3 OF AGENDA BILL NO. j 5, a0 4
ENVIRONMENTAL REVIEW
An Environmental Impact Report was approved by the City Council for the entire Poinsettia Properties
Master Plan on January 20, 1998, (EIR 96-01). No further environmental review is required as part of
the approval of the subject financial assistance or the bond issuance.
FISCAL IMPACT
The City’s loan to the project of $920,000 will be provided in the form of a residual receipts loan
secured by a note and deed of trust. The outstanding principal and accrued interest on the City loan
will be amortized over fifty-five years and repaid from the project’s operational cash surplus in equal
annual installments of principal and interest. In the event that there is not adequate cash surplus to
repay the City loan, the outstanding balance shall accrue with simple interest at 3% per annum.
With respect to.the bond issuance, all associated costs (staff time, bond counsel, financial consultant,
etc.) will be repaid to the City with bond proceeds. Further, the City will collect an annual fee equal to
one-tenth of one percent of the total bond issuance ($6,325) for the 30-year term of the bond to
recover staff costs associated with project monitoring. Therefore, there will be no fiscal impact to the
City resulting from the issuance of the bonds.
EXHIBITS
1. City Council Resolution No. ?9 - r 7 7 to approve the Indenture of Trust, Loan Agreement, and
Regulatory Agreement related to the bond issuance Poinsettia Station Apartments Affordable
Housing Project and to authorize the sale and issuance of the bonds.
2. Loan Agreement 3. Regulatory Agreement
4. Indenture of Trust
RESOLUTION NO. 99-177
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
CARLSBAD, CALIFORNIA, TO AUTHORIZE THE ISSUANCE,
SALE AND DELIVERY OF MULTI-FAMILY HOUSING
REVENUE BONDS, AND TO APPROVE AND AUTHORIZE THE
EXECUTION AND DELIVERY OF RELATED DOCUMENTS AND
ACTIONS IN CONNECTION THEREWITH.
APPLICANT: POINSETTIA HOUSING ASSOCIATES
CASE NO: SDP 98-09
WHEREAS, the City of Carlsbad (the “City”) is authorized by Chapter 7 of Part 5 of Division
3 1 of the Health and Safety Code of the State of California (the “Act”) to issue and sell revenue bonds
for the purpose of financing the acquisition, construction and development of multi-family rental
housing facilities to be occupied in part by low income tenants; and
WHEREAS, the City hereby finds and declares that it is necessary, essential and a public
purpose for the City to engage in a program (the “Program”) of financing the acquisition, construction
and development of multi-family rental housing facilities, and has determined to borrow money for
such purpose by the issuance of revenue bonds as authorized by the Act; and
WHEREAS, the City hereby finds and declares that this resolution is being adopted pursuant
to the powers granted by the Act; and
WHEREAS, Poinsettia Housing Associates, a California limited partnership (the “Developer”)
has requested the City to issue and deliver multifamily housing revenue bonds (the “Bonds”), the
proceeds of which shall be used by the Developer to finance the acquisition, construction and
development of a multi-family housing rental facility to be located at the northwest comer of
Poinsettia Lane and Avenida Encinas in the City of Carlsbad, California and to be commonly known
as Poinsettia Station Apartments (the “Project”); and
WHEREAS, all conditions, things and acts required to exist, to have happened and to have
been performed precedent to and in connection with the issuance of the Bonds and the implementation
of the Program as contemplated by this resolution and the documents referred to herein will exist, have
happened and have been performed in due time, form and manner as required by the laws of the State .
of California, including the Act;
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NOW, THEREFORE, BE IT HEREBY RESOLVED by the City Council of the City of
Carlsbad, California, as follows
1.
2.
The City hereby finds and determines that the foregoing recitals are true and correct.
Pursuant to the Act, this Resolution and Indenture (as hereafter defined) the issuance
of tax-exempt Bonds in an aggregate principal amount not to exceed$5,525,000 and
taxable Bonds in an aggregate principal amount not to exceed $800,000 is hereby
authorized. The City Manager of the City, or such other officials of the City as may
be designated by the City Manager (each an “Authorized Officer”), each acting alone,
is hereby separately authorized and directed to execute the Bonds for, and on behalf
of, the City by manual or facsimile signature, in the form set forth in the Indenture,
with such changes, deletions and insertions as may be approved by such Authorized
Officer and legal counsel to the City, such approvals being conclusively evidenced by
the execution and delivery thereof, and the Authorized Officers, each acting alone, are
hereby authorized and directed to attest the Bonds in said form and otherwise in
accordance with the Indenture.
3. The following documents, substantially in the forms on tile with the City Clerk, are
hereby approved (collectively, the “Bond Documents”):
a. the Indenture of Trust by and between the City and Bank One Trust Co., N.A.
(the “Trustee”);
b. the Loan Agreement by and among the City, Bank of America, FSB, and the
Borrower; and
C. the Regulatory Agreement by and among the City, the Borrower and the
Trustee.
4. The Authorized Officers, each acting alone, are hereby authorized for, in the name of
and on behalf of the City to execute and deliver the Bond Documents, and the City
Clerk, or any deputy thereof, is hereby authorized and directed for, in the name of and
on behalf of the City, to attest the Authorized Officer’s signature on the Bond
Documents, in substantially said form, with such changes, additions or deletions as are
recommended or approved by such officers upon consultation with bond counsel to
the City, including such changes, additions or deletions as are necessary or advisable
in accordance with Section 5 hereof (provided that no changes, additions or deletions
shall authorize an aggregate principal amount of Bonds in excess of $6,325,000), the
approval of such changes, additions or deletions to be conclusively evidenced by the
execution and delivery thereof. The date, maturity dates, interest rate or rates, interest
payment dates, denominations, form registration privileges, manner of execution,
place of payment, terms of redemption, the right of the owners of the Bonds to tender
their Bonds for repurchase, and other terms of the Bonds shall be as provided in the
Indenture as finally executed.
5. The Bonds, when executed, shall be delivered to the Trustee for authentication. The
Trustee is hereby requested and directed to authenticate the Bonds by executing the
Trustee’s certificate of authentication and registration appearing thereon, and to
deliver the Bonds, when duly executed and authenticated, to the purchasers thereof in
accordance with written instructions executed on behalf of the City by one of the
XRESONO.q% IT,7
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Authorized Officers, which instructions such officers are, and each of them is, hereby
authorized and directed, for and in the name and on behalf of the City, to execute and
deliver to the Trustee.
6. All actions heretofore taken by the officers and agents of the City with respect to the
establishment of the Program and the sale and issuance of the Bonds are hereby
approved, confirmed and ratified, and the proper officers of the City, including the
Authorized Officers, are hereby authorized and directed, for and in the name and on
behalf of the City, to do any and all things and take any and all actions and execute
and deliver any and all certificates, agreements and other documents, including
without limitation a tax certificate, which they, or any of them, may deem necessary or
advisable in order to consummate the lawful issuance and delivery of the Bonds in
accordance with this Resolution and resolutions heretofore adopted by the City and in
order to carry out the Program, including but not limited to those certificates,
agreements, deeds of trust and other documents described in the Bond Documents and
the other documents herein approved and any certificates, agreements or documents as
may be necessary to further the purpose hereof or evidence credit support or additional
security for the Bonds, but which shall not create any obligation or liability of the City
other than with respect to the revenues and assets derived from the proceeds of the
Bonds. All actions to be taken by a specified Authorized Officer, as specified herein,
may be taken by the Authorized Officer or any designee, with the same force and
effect as if taken by such Authorized Officer.
7. This resolution shall take effect upon its adoption.
PASSED, APPROVED, AND ADOPTED at a regular meeting of the City Council of
the City of Carlsbad, California, held on the 18* day of May, 1999, by the following vote, to wit:
AYES: Council Members Lewis, Nygaard, Finnila, Hall & Kulchin
NOES: None
ABSENT: None
ABSTAIN: None
ATTEST:
NZ, City Clerk
KAREN R. KUNDTZ, uistant City Clerk
(SEfi)
CCRESONO.=W-i-t7
PACE3
13061- 09 JH:SRF:LDW 4/15/99 5/3/99
LOAN AGREEMENT
among
CITY OF CARLSBAD
as Issuer
BANK OF AMERICA, FSB
as Bondowner Representative
and
POINSETTIA HOUSING ASSOCIATES
as Borrower
Relating to
$4,450,000
City of Carlsbad
Multifamily Housing Mortgage Revenue Bonds
(Poinsettia Station Apartments)
Series 1999A
$1,075,000
City of Carlsbad
Multifamily Housing Mortgage Revenue Bonds
(Poinsettia Station Apartments)
Series 1999B
and
$800,000
City of Carlsbad
Taxable Multifamily Housing Mortgage Revenue Bonds (Poinsettia Station Apartments)
Series 1999B-T
Dated as of June 1, 1999
The interests of the Issuer in this Loan Agreement, excluding
the Unassigned Rights, have been assigned to
Bank One Trust Company, N.A., as Trustee pursuant to an
Indenture of Trust dated as of June 1, 1999
between the Issuer and the Trustee
7
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TABLE OF CONTENTS
ARTICLE I
Section 1.1. Section 1.2.
Section 1.3.
DEFINITIONS, EXHIBITS AND RULES OF INTERPRETATION Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .., . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ,.., . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Schedule and Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Rules of Interpretation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
Section 2.1.
Section 2.2.
Section 2.3.
Section 2.4.
Section 2.5.
REPRESENTATIONS OF ISSUER AND BORROWER Representations of the Issuer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..I................................... 4
Representations of the Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
General Tax Representations, Warranties and Covenants of Borrower... . . , ,.. . . . . . . . ,. 9
Additional Tax-Related Representations, Certifications, Expectations and
Warranties of Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Representations of Borrower as Single Purpose Entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.1.
Section 3.2. Section 3.3.
Section 3.4.
Section 3.5.
ARTICLE III
ISSUANCE OF BONDS; PAYMENT OF COSTS
Issuance of Bonds. ........................................................................................................... 13
No Warranty by Issuer. ................................................................................................. ,13
Disbursements From the Project Fund and the Costs of Issuance Fund.. ............ .14
Payment of Issuance Costs by Borrower.. .................................................................. .14
Title Insurance.. ............................................................................................................... ,15
ARTICLE IV
Section 4.1. Section 4.2.
Section 4.3.
Section 4.4.
Section 4.5.
THE LOAN, LOAN REPAYMENT AND ADDITIONAL CHARGES
The Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .... 16
Loan Repayment .,.................................,.......,..,, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ,..,... ..,.. . . . . . . . . . . . . . . . ,16
Additional Charges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Borrower’s Obligations Unconditional. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Assignment of Issuer’s Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.1.
Section 5.2.
Section 5.3.
Section 5.4.
Section 5.5. Section 5.6.
Section 5.7.
Section 5.8.
Section 5.9.
Section 5.10.
Section 5.11.
Section 5.12. Section 5.13. Section 5.14. Section 5.15. Section 5.16.
Section 5.17.
ARTICLE V
PROJECT COVENANTS
Project, Title, Operation and Maintenance ................................................................ .18
Sale or Lease of Project and Interest in Borrower.. ................................................... .19
Advances.. ......................................................................................................................... 20
Alterations to the Project and Removal of Equipment.. .......................................... .20
Insurance.. ........................................................................................................................ -20
Required Cash Deposits. ............................................................................................... .2 1
Commencement and Completion of Facility.. ........................................................... .2 1
Construction. ................................................................................................................... .22
“in balance”. ..................................................................................................................... .22
Preservation of Rights.. .................................................................................................. .22
Maintenance and Repair. .............................................................................................. .22
Changes ............................................................................................................................ .22
Construction Information and Verification.. ............................................................. .23
Permits, Licenses and Approvals ................................................................................ .24
Purchase of Materials; Conditional Sales Contracts. ............................................... .24
Site Visits; Right to Stop Work.. ................................................................................... .25
Protection Against Lien Claims. .................................................................................. .26
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Section 5.18. Section 5.19. Section 5.20. Section 5.21. Section 5.22.
Section 5.23.
Section 5.24.
Cooperation. .................................................................................................................... .26
Income from Project. ...................................................................................................... .26
Payment of Expenses. ..................................................................................................... 26
Performance of Acts. ....................................................................................................... 27
Management Agreement.. ............................................................................................. .27
Tax Service Contract ...................................................................................................... .27
Continued Perfection. ..................................................................................................... 27
ARTICLE VI
Section 6.1. Section 6.2. Section 6.3.
Section 6.4.
Section 6.5.
DAMAGE, DESTRUCTION AND CONDEMNATION Damage and Destruction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Condemnation . . . . . . . ..I........................................................................................................ 27
Parties To Give Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Conditions to Restoration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Conditions to Disbursement of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ,.. 28
Section 7.1.
Section 7.2. Section 7.3. Section 7.4.
Section 7.5. Section 7.6. Section 7.7. Section 7.8. Section 7.9. Section 7.10.
Section 7.11.
Section 7.12. Section 7.13.
Section 7.14.
Section 7.15. Section 7.16.
Section 7.17.
Section 7.18.
Section 7.19. Section 7.20.
ARTICLE VII
BORROWERS COVENANTS
Covenant for the Benefit of the Bondholders.. .......................................................... .28
Inspection and Access ..................................................................................................... 29
Continuing Disclosure.. ................................................................................................. .29
Indemnity.. ........................................................................................................................ 29
[Reserved] ........................................................................................................................ .32
Keeping Guarantor Informed.. ..................................................................................... .32
Status of Borrower ........................................................................................................... 32
Filing of Financing Statements. ..................................................................................... 32
Proceedings Relating to a Determination of Taxability.. ......................................... .33
Financial Information. .................................................................................................... 33
Notices. .............................................................................................................................. 33
Notice of Change. ........................................................................................................... .34
Negative Covenants. ...................................................................................................... .34
Tax Status of Tax-Exempt Bonds. ................................................................................. 34
Incorporation of Owner Tax Certificates. .................................................................. ,35
Loss of Tax Exclusion.. .................................................................................................... 35
Tax Credits.. ..................................................................................................................... .35
Payment of Rebate Amounts.. ...................................................................................... .36
Rental Project.. ................................................................................................................. .38
Certification as to Qualified Project Period. .............................................................. .38
Section 8.1,
Section 8.2.
Section 8.3. Section 8.4.
Section 8.5.
Section 8.6.
ARTICLE VIII PRO FORMA SCHEDULE: LEASES
Pro Forma Schedule ........................................................................................................ 39
Use of the Project Premises and Lease Approval.. ................................................... .39
Leasing Information and Documents. ........................................................................ .40
Purpose and Effect of Lease Approval. ...................................................................... .40
Landlord’s Obligations. ................................................................................................. .41
Income from Project. ...................................................................................................... -4 1
Section 9.1. Section 9.2. Section 9.3.
ARTICLE IX
HAZARDOUS SUBSTANCES
Definition of Hazardous Substance. .,.......................................................................... 41 Representation and Warranty Regarding Hazardous Substances. . . . . . . . . . . . . . . . . . . . . . . . -41 Compliance Regarding Hazardous Substances. .,......,......,........................................ 41
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Section 9.4. Section 9.6. Section 9.7.
Section 9.8.
Section 9.9. Section 9.10. Section 9.11.
Notices Regarding Hazardous Substances. ................................................................ 41
Site Visits, Observations and Testing. ........................................................................ .42
Remedial Work. ............................................................................................................... 43
Secured Obligation.. ....................................................................................................... .43
Indemnity Regarding Hazardous Substances .......................................................... .44
Defense of Indemnified Parties. ................................................................................... .44
Remedies Upon Default ................................................................................................ .44
ARTICLE X
Section 10.1. Section 10.2. Section 10.3.
PREPAYMENT: BORROWER’S OPTIONS
Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Direction of Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Termination of Loan Agreement; Required Prepayment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 11 .O.
Section 11.2.
Section 11.3.
Section 11.4.
Section 11.5. Section 11.6. Section 11.7. Section 11.8.
Section 11.9. Section 11.10. Section 11.11.
Section 11.12.
Section 11.13.
Section 12.1. Section 12.2. Section 12.3. Section 12.4. Section 12.5. Section 12.6.
Section 12.7.
Section 12.8. Section 12.9.
Section 12.10.
Section 12.11.
Section 12.12.
Section 12.13.
Section 12.14.
Section 12.15. Section 12.16.
Section 12.17. Section 12.18. Section 12.19.
Section 12.20.
Section 12.21.
ARTICLE XI
EVENTS OF DEFAULT AND REMEDIES
Events of Default. ........................................................................................................... .50
Remedies. ......................................................................................................................... ,52
Disposition of Funds.. .................................................................................................... ,54
Nonexclusive Remedies. ............................................................................................... .54
Attorneys’ Fees and Expenses. ..................................................................................... .54
Effect of Waiver. ............................................................................................................. .55
Issuer and Trustee May File Proofs of Claim. ........................................................... .55
Restoration of Positions. ................................................................................................. 55
Suits To Protect the Project. .......................................................................................... .55
Performance by Third Parties. ..................................................................................... -55
Exercise of the Issuer’s Remedies by Bondholders.. ................................................. .55
Reference and Arbitration .............................................................................................. 56
Limited Recourse Obligation. ......................................................................................... 56
ARTICLE XII
GENERAL PROVISIONS
Amounts Remaining in Funds. .................................................................................... -59
Notices. .............................................................................................................................. 59
Binding Effect. ................................................................................................................. .60
Complete Agreement. ..................................................................................................... 60
Severability. ...................................................................................................................... 60
Amendments, Changes and Modifications. .............................................................. .60
Execution in Counterparts. ........................................................................................... .61
Required Approvals.. ..................................................................................................... .6 1
Limitation on Issuer’s Liability. ................................................................................... -6 1
No Waiver; Consents. .................................................................................................... .61
Purpose and Effect of Bondowner Representative Approval. ............................... .61
No Commitment to Increase Loan. ............................................................................. .61
No Third Parties Benefitted. ......................................................................................... .61
Authority to File Notices. ............................................................................................... 62
[Reserved] ........................................................................................................................ .62
Actions.. ............................................................................................................................. 62
Attorneys’ Fees,. .............................................................................................................. .62
In-House Counsel Fees. ................................................................................................. .62
Applicable Law ’ 62 ................................................................................................................
Heirs, Successors and Assigns; Participation. ............................................................ 62
Relationships With Other Bondowner Representative Customers.. ..................... .63
. . . -111 -
Section 12.22.
Section 12.23.
Section 12.24.
Section 12.25. Section 12.26.
Section 12.27.
Section 12.28.
Section 12.29.
Section 12.30.
Section 12.31.
Disclosure to Title Company. ....................................................................................... ,63
Improvement District. .................................................................................................. ..6 3
Restriction on Disposition of Personal Property. ..................................................... .63
Interpretation. ................................................................................................................. .63
Miscellaneous. ................................................................................................................. .63
Publicity. .......................................................................................................................... .63
Loan Commission.. ......................................................................................................... .64
Compliance with Usury Laws ....................................................................................... 64
General Partners. ............................................................................................................ .64
Integration and Relation to Loan Commitment.. ...................................................... .64
-iv -
LOAN AGREEMENT
-
THIS LOAN AGREEMENT (this “Agreement”) is made and entered into as of June 1, 1999 by and among the CITY OF CARLSBAD, a municipal corporation duly organized and
existing under the laws of the State of California (the “Issuer”), BANK OF AMERICA, FSB, a
federal savings bank (the initial “Bondowner Representative”) and POINSETTIA HOUSING
ASSOCIATES, a California limited partnership (the “Borrower”).
WITNESSETH:
WHEREAS, the Issuer is authorized by (the “Act”) and a resolution of the City Council adopted on May 18, 1999 (the “Resolution”) to issue revenue bonds and use the net proceeds thereof to make mortgage loans and to provide financial assistance to housing developers for the purpose of financing the construction, development, rehabilitation or purchase of residential
housing for persons of low and moderate income; and
WHEREAS, the Borrower has requested the Issuer to issue its Multifamily Housing
Mortgage Revenue Bonds (Poinsettia Station Apartments) Series 1999A in the original principal
amount of $4,450,000, its Multifamily Housing Mortgage Revenue Bonds (Poinsettia Station Apartments) Series 1999B in the original principal amount of $1,075,000, and its Taxable Multifamily Housing Mortgage Revenue Bonds (Poinsettia Station Apartments) Series 1999B-T in the original principal amount of $800,000 (collectively, the “Bonds”) for the purposes of making a loan to finance the lease of the Project Premises and development and construction of
a 92-unit apartment project in Carlsbad, California (the “Project”): and
WHEREAS, the Issuer deems it desirable and in keeping with its purpose to issue its
bonds and loan the proceeds thereof to the Borrower for the purposes described above under
the terms and conditions contained in this Agreement: and
WHEREAS, to evidence the Loan, the Borrower is making to the order of Issuer its promissory notes (collectively, the “Notes”) in the principal sums of $4,450,000 evidencing the
debt represented by the Series A Bonds (the “Series A Note”), $1,075,000 evidencing the debt represented by the Series B Bonds (the “Series B Note”), and $800,000 evidencing the debt represented by the Series B-T Bonds (the “Series B-T Note”), substantially in the forms attached
hereto as Schedules B-l, B-2 and B-3: the Notes provide for the repayment of the Loan in payments sufficient to pay, when due the principal of, premium, if any, and interest on the
Bonds and the Borrower has executed or caused to be executed the Mortgage and the
Assignment (as such terms are hereinafter defined) with respect to the Project to secure, among other things, the payments due and other obligations under this Agreement: and
WHEREAS, BRIDGE Housing Corporation, a California nonprofit public benefit
corporation (the “Guarantor”) is executing a Payment Guaranty (the “Guaranty”) with respect to the Loan: and
WHEREAS, the execution and delivery of this Agreement and the issuance of the Bonds have been in all respects duly and validly authorized by the Issuer;
NOW, THEREFORE, the Issuer, the Bondowner Representative and the Borrower, each
in consideration of the representations, covenants and agreements of the other as set forth herein, mutually represent, covenant and agree as follows:
ARTICLE I
DEFINITIONS, EXHIBITS AND RULES OF INTERPRETATION
Section 1.1. Definitions. In this Agreement, all capitalized terms used herein and not defined shall have the meaning ascribed thereto in Section 1.1 of the Indenture of Trust dated as
of June 1,1999, by and between the Issuer and the Trustee (the “Indenture”).
Section 1.2. Schedule and Exhibits. The following Schedules and Exhibits are attached to and by reference made a part of this Agreement:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
(15)
0’3)
07)
W-9
Schedule A:
Schedule A- 1:
Schedule A-2:
Schedule B-l:
Schedule B-2:
Schedule B-3:
Schedule C:
Schedule C- 1:
Schedule D:
Schedule E:
Schedule F:
Schedule F- 1:
Schedule G:
Schedule H:
Schedule I:
Schedule J:
Schedule K:
Schedule L:
Legal Description of Project Premises:
Title Policy Requirements:
Permitted Encumbrances;
Form of Series A Note:
Form of Series B Note;
Form of Series B-T Note:
Project Costs;
Initial Cost Breakdown;
Disbursement Schedule:
Pro Forma Schedule;
Conditions Relating to Reserve Account;
Reserve Deposit Requirements;
[Reserved]
Required Equity Deposits:
Conversion Conditions:
[Reserved];
List of Required Approvals: and
List of Hazardous Substances Reports.
Section 1.3. Rules of Interoretation.
This Agreement shall be governed by and construed in accordance with the laws and
judicial decisions of the State of California (the “State”), except as they may be preempted by
federal rules, regulations and laws applicable to the Issuer. The Issuer and the Borrower
expressly acknowledge and agree that any judicial action to enforce any rights of the Issuer
2
under this Agreement shall be brought and maintained at the option of the Issuer in the
Superior Court of the State of California or in the United States District Court for the Southern
District of California or in any United States Bankruptcy Court in any case involving or having
jurisdiction over the Borrower or over the Project.
The words “herein,” ” hereof’ and “hereunder” and words of similar import, without
reference to any particular section or subdivision, refer to this Agreement as a whole rather than
to any particular section or subdivision of this Agreement.
References in this Agreement to any particular article, section or subdivision hereof are
to the designated article, section or subdivision of this Agreement as originally executed.
All accounting terms not otherwise defined herein have the meanings assigned to them
in accordance with generally accepted accounting principles: and all computations provided for herein shall be made in accordance with generally accepted accounting principles consistently applied and applied on the same basis as in prior years.
The Table of Contents and titles of articles and sections herein are for convenience of
reference only and are not a part of this Agreement, and shall not define or limit the provisions
hereof.
Unless the context hereof clearly requires otherwise, the singular shall include the plural
and vice versa and the masculine shall include the feminine and vice versa.
Articles, sections, subsections and clauses mentioned by number only are those so numbered which are contained in this Agreement.
Any opinion of counsel required hereunder shall be a written opinion of such counsel.
References to the Bonds as “tax exempt” or to the “tax exempt status of the Tax-Exempt Bonds” are to the exclusion of interest on the Tax-Exempt Bonds from gross income for federal income tax purposes pursuant to Section 103(a) of the Code (other than Tax-Exempt Bonds held
by a “substantial user” of the Project or a “related person” within the meaning of Section 147(a) of the Code).
Every “request,” “order,” “demand,” “direction,” “application,” “appointment,” “notice,”
“statement, ” “certificate, ” “consent,” or similar action under this Agreement by any party shall,
unless the form of such instrument is specifically provided, be in writing signed by a duly
authorized representative of such party with a duly authorized signature.
The parties hereto acknowledge that each such party and its respective counsel have participated in the drafting and revisions of this Loan Agreement and the Indenture.
Accordingly, the parties agree that any rule of construction which disfavors the drafting party
shall not apply to the interpretation of this Loan Agreement and the Indenture or any
amendment or supplement or exhibit hereto or thereto.
ARTICLE II
REPRESENTATIONS OF ISSUER AND BORROWER
Section 2.1. Representations of the Issuer. The Issuer makes the following representations and warranties as the basis for its covenants herein:
(1) The Issuer is organized and existing as a public body politic and corporate under the laws of the State, and is authorized to issue the Bonds to finance the acquisition and
construction of the Project pursuant to the Act.
(2) The Issuer has lawful power and authority under the Act to enter into this
Agreement, the Regulatory Agreement and the Indenture and to carry out its obligations
hereunder and under the Regulatory Agreement and the Indenture. By proper action of its
governing body, the Issuer has been duly authorized to execute and deliver this Agreement, acting by and through its duly authorized officers. The Indenture, the Regulatory Agreement and this Agreement have been duly executed by the Issuer and each constitutes a valid, legal, binding and enforceable obligation of the Issuer (subject to bankruptcy, insolvency or other laws affecting creditors’ rights generally and to the application of principles of equity
generally). The execution, delivery and performance of the Indenture, the Regulatory Agreement and this Agreement by the Issuer will not violate any law, regulation, order or decree of any governmental authority and all consents, approvals, authorizations, orders or
filings of or with any court or governmental agency or body, if any, required for the execution,
delivery and performance of such documents by the Issuer have been obtained or made.
(3) There is no pending action, suit or proceeding, arbitration or governmental
investigation against such entity, an adverse outcome of which materially affects performance
under the Indenture and this Agreement by the Issuer.
(4) The Project constitutes “multifamily rental housing” within the meaning of the Act and the Resolution.
(5) To finance the costs of the Project, the Issuer proposes to issue the Bonds in the
aggregate principal amount of $6,325,000. The Bonds will bear interest and be scheduled to mature and will be subject to redemption prior to maturity in accordance with the provisions of
the Indenture. The Bonds are to be issued under and secured by the Indenture, pursuant to
which the payments, revenues and receipts derived by the Issuer pursuant to this Agreement,
other than certain Unassigned Rights, will be pledged and assigned to the Bondholders as
security for payment of the principal of, premium, if any, and interest on the Bonds.
V-3 Under the provisions of the Indenture, the Issuer’s interest in this Agreement (other than Unassigned Rights) and certain payments due hereunder are pledged and assigned to the Bondholders as security for the payment of the principal of, interest on, and premium, if any, on the Bonds and the Issuer will not otherwise or further assign its interest in this Agreement.
(7) To the extent within its reasonable control, the Issuer will not knowingly engage
in any activity which might result in the interest on the Tax-Exempt Bonds becoming includable in gross income of any Holder of the Tax-Exempt Bonds (other than “substantial users” or “related persons” within the meaning of Section 147(a) of the Code) for federal income tax purposes.
(8) The execution, delivery and performance of the Indenture and this Agreement by the Issuer will not cause or constitute a default under or conflict with its organizational documents or other agreements to which it is a party or otherwise materially adversely affect performance of the duties of the Issuer under such organizational documents or other agreements.
Section 2.2. Renresentations of the Borrower The Borrower makes the following representations and warranties as the basis for its covenants herein:
(1) The Borrower is a limited partnership duly formed and existing under the laws
of the State, and is duly authorized to conduct its business in the State and all other states where its activities require such authorization, has power to enter into this Agreement and the other Loan Documents to which the Borrower is a party, and to use the Project for the purposes set
forth in this Agreement, and by proper corporate action has authorized the execution and
delivery of this Agreement and the other Loan Documents to which the Borrower is a party,
and has approved the Indenture.
(2) This Agreement and the other Loan Documents to which the Borrower is a party have been duly executed and delivered by the Borrower; such documents constitute valid, legal,
binding and enforceable obligations of the Borrower (subject to bankruptcy, insolvency or other
laws affecting creditors’ rights generally and to application of principles of equity generally), without offset, defense or counterclaim; the execution, delivery and performance of such
documents by the Borrower will not violate any applicable law, regulation, order or decree of
any governmental authority: and all consents, approvals, authorizations, orders or filings of or with any court or governmental agency or body, if any, required for the execution, delivery and performance of such documents by the Borrower have been obtained or made.
(3) The execution and delivery of this Agreement and the other Loan Documents to
which the Borrower is a party, the consummation of the transactions contemplated thereby, and
the fulfillment of the terms and conditions thereof do not and will not conflict with or result in a breach of any of the terms or conditions of the Partnership Agreement or any restriction, any agreement or any other instrument to which the Borrower is now a party or by which it is
bound or to which any property of the Borrower is subject, and do not and will not constitute a
default under any of the foregoing, or, to the best of the Borrower’s knowledge, cause the
Borrower to be in violation of any order, decree, statute, rule or regulation of any court or any state or federal regulatory body having jurisdiction over the Borrower or the Project and do not
and will not result in the creation or imposition of any lien, charge or encumbrance of any
nature upon any of the property or assets of the Borrower contrary to the terms of any instrument or agreement to which the Borrower is a party or by which it is bound. The Borrower and General Partner have complied with any and all laws and regulations concerning their organization, existence and the transaction of their business, and each is in good standing in each state in which it conducts its business. The Borrower has the right and power to own
the Project and to develop the Project as contemplated in the Loan Documents. The Borrower
and General Partner are authorized to execute, deliver and perform under the Loan Documents.
Those documents are valid and binding obligations of the Borrower.
(4) The Borrower is familiar with, and has complied with, all of the Requirements
(as defined in Section 5.1 herein), as well as all other applicable laws, regulations and
ordinances. The Project and the Project Premises and the actual use and intended thereof by the
Borrower comply in all material respects with the Requirements. The Borrower has received no
notices of violations of any Requirement. There are no claims, actions, proceedings or
investigations pending or threatened against the Borrower or affecting the Project except for
those previously disclosed by the Borrower to Bondowner Representative, in writing. The
5
Borrower has obtained all permits, licenses and approvals necessary to construct the Facility
except for the permits, licenses and approvals listed on Schedule K attached to this Agreement, and will obtain the permits, licenses and approvals listed on Schedule K attached to this
Agreement within thirty (30) days after issuance of the Bonds. The Borrower has delivered to Bondowner Representative true and correct copies of each permit, license and approval referred
to in this Section. No information or fact exists that would reasonably cause the Borrower to
believe that all permits, licenses and approvals required to construct, occupy, operate, market
and lease or sell the Facility that have not been obtained as of the date hereof will not be readily
and properly obtainable prior to the Completion Date. No provision or obligation of the
Borrower contained in any of the Loan Documents violates any of the Requirements, any other
applicable law, regulation or ordinance or any order or ruling of any court or governmental entity. No such provision or obligation conflicts with, or constitutes a breach or default under, any agreement binding or regulating the Project.
(5) No obligations other than the Bonds have been or are expected to be issued under Section 103 of the Code for sale at substantially the same time as the Bonds are sold pursuant to a common plan of marketing and at substantially the same rate of interest as the
Bonds and which are payable in whole or part by the Borrower or otherwise have with the
Bonds any common or pooled security for the payment of debt service thereon, or which are
otherwise treated as the same “issue of obligations” as the Bonds under current Treasury regulations.
(6) The Borrower is not in the trade or business of selling properties such as the
Project and has acquired the Project for investment purposes only or otherwise for use by the
Borrower in its trade or business, and therefore the Borrower has no present intention to voluntarily sell, surrender or otherwise transfer, in whole or part, its interest in the Project in the foreseeable future.
(7) There are no actions, suits, proceedings or inquiries or investigations at law or in
equity pending or, to the knowledge of the Borrower, threatened against the Borrower or any property of the Borrower in any court or before any federal, state, municipal or other governmental agency, which, (i) if decided adversely to the Borrower, would have a material
adverse effect upon the Borrower or upon the business or properties of the Borrower or upon its power, authority and right to enter into this Agreement and the other Loan Documents to
which the Borrower is a party; (ii) affects or seeks to prohibit, restrain or enjoin the issuance,
sale or delivery of the Bonds or the loaning of the proceeds of the Bonds to the Borrower or the
execution and delivery of the Loan Documents, (iii) affects or questions the validity or enforceability of the Loan Documents, (iv) questions the exclusion from gross income for federal income tax purposes of interest on the Tax-Exempt Bonds, (v) questions the power or authority
or otherwise affects the Borrower’s ability to carry out the transactions contemplated by, or to
perform its obligations under, the Loan Documents and the Borrower is not in default with
respect to any order of any court or governmental agency.
(8) The Borrower has filed all federal and state income tax returns, if any, which, to
the knowledge of the Borrower, are required to be filed and has paid all taxes shown on said returns and all assessments and governmental charges received by it to the extent that they have become due. The Borrower knows of no additional basis for any additional assessment of federal or state taxes against it.
to The Borrower has reviewed and approved the provisions of the Indenture.
(10) To the best of the Borrower’s knowledge, no member of the governing body of the Issuer or any other officer of the Issuer has any significant or conflicting interest, financial, employment or otherwise, in the Borrower, the Project or the transactions contemplated hereby.
(11) The covenants, representations and warranties of the Borrower in the Regulatory
Agreement and the Tax Certificates are true and correct and are incorporated herein by reference and made a part of this Agreement,
(12) The Borrower has not entered into the transaction evidenced hereby with the
actual intent to hinder, delay or defraud any creditor and the Borrower has received reasonably
equivalent value in exchange for its obligations hereunder and under the Mortgage, the Security
Agreement and the Regulatory Agreement.
(13) The Borrower has no known material contingent liabilities,
(14) The Borrower has no material financial obligation under any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to which the
Borrower is a party or by which the Borrower or the Project are otherwise bound, other than (a) obligations under this Agreement and the other Loan Documents to which the Borrower is a party: (b) a loan from the City of Carlsbad in a principal amount not to exceed $920,000 (the
“City Loan”): and (c) obligations which may be incurred by Borrower from time to time in the ordinary course of business.
(15) The Borrower has not borrowed or received other debt financing that has not been heretofore repaid in full, except for equipment financing relating to laundry facilities at the Project.
(16) The Borrower is not (a) an “investment company” or a company “controlled by an investment company” within the meaning of the Investment Company Act of 1940, as amended;
(b) a “holding company” or a “subsidiary company” of a “holding company” or an “affiliate” of
either a “holding company” or a “subsidiary company” within the meaning of the Public Utility Holding Company Act of 1935, as amended; or (c) subject to any other federal or state law or regulation which purports to restrict its ability to borrow money.
(17) Except as disclosed in the Title Policy, there are no pending or, to the knowledge
of the Borrower, proposed special or other assessments for public improvements affecting the
Project, nor, to the knowledge of the Borrower, are there any contemplated improvements to the Project that may result in such special or other assessments.
(18) No statement of fact made herein or in the Loan Documents to which the Borrower is a party made by the Borrower contains any untrue statement of a material fact or
omits to state any material fact necessary to make statements made herein or therein by the
Borrower not misleading. There is no fact presently known to the Borrower which has not been disclosed to the Issuer and the Bondowner Representative which adversely affects nor as far as the Borrower can foresee would adversely affect the business, operations or conditions (financial or otherwise) of the Borrower.
(19) All financial information which has been and will be prepared and delivered by
or on behalf of Borrower to the Issuer or the Bondowner Representative, including all
information relating to the financial condition of the Borrower or any of its partners,
shareholders and the Project does and will fairly and accurately represent (or, in the case of
materials prepared by persons other than the Borrower or its partners, principals or employees,
to the best of the Borrower’s knowledge does and will fairly and accurately represent) the
7
financial condition being reported on. All such information prepared by or on behalf of Borrower was and will be prepared in accordance with generally accepted accounting principles consistently applied, unless otherwise noted. As of the date hereof, there has been no material adverse change in any financial condition reported at any time to the Issuer or the Bondowner Representative. The Borrower has disclosed to the Issuer and the Bondowner
Representative any and all leases affecting the Project or any portion of or interest in it.
(20) All reports, documents, instruments, information and forms of evidence
delivered by or on behalf of Borrower to the Issuer or the Bondowner Representative
concerning the Loan or required by the Loan Documents are (or, in the case of materials
prepared by persons other than the Borrower or its partners, principals or employees, are to the best of the Borrower’s knowledge) accurate, correct and sufficiently complete to give the Issuer and the Bondowner Representative true and accurate knowledge of their subject matter.
(21) The Loan is “in balance” (as defined in Schedule D attached to this Agreement)
and the undisbursed Loan funds, together with any sums provided or to be provided by the
Borrower as shown in the cost breakdown, are sufficient to construct the Facility through
completion and to accomplish the purposes contemplated by the Loan Documents.
(22) All utility services, including gas, water, sewage, electrical and telephone,
necessary to develop and occupy the Project Premises and Facility are available at or within the boundaries of the Project Premises. In the alternative, the Borrower has taken all steps necessary to assure that all utility services will be available upon completion of the Facility.
(23) The Borrower owns directly, and not through any affiliated entity, all of the
personal property and fixtures necessary for the operation and management of the Project for the uses presently being conducted thereon, except for certain leased laundry facilities on the Project Premises.
(24) The Borrower will hold and dispose of all tenant security deposits relating to the Project in accordance with State law.
(25) The Borrower is not a “foreign person” within the meaning of Section 1445(f)(3)
of the Internal Revenue Code of 1986, as amended from time to time.
(26) The Borrower shall comply with all applicable requirements of the Act and any
and all lawful rules, policies and applicable regulations of the Issuer adopted pursuant to the Act.
(27) All tenant lists, applications and waiting lists relating to the Project shall at all
times be kept separate and identifiable from any other business of the Borrower which is
unrelated to the Project, and shall be maintained in a reasonable condition for proper audit and
be subject to examination during business hours by representatives of the Issuer or the Trustee.
(28) The Borrower warrants the material validity and accuracy of information
prepared by the Borrower and provided to the Issuer by the Borrower and hereby reaffirms and
ratifies such information and incorporates the same herein as if set forth in full herein.
(29) As of the Closing Date, the Borrower shall be in compliance with all
requirements of the Tax Certificates, and the representations set forth in the Tax Certificates
executed by the Borrower shall be true and accurate and hereby incorporates the same as if set
forth herein.
(30) The Borrower acknowledges that (a) it understands the nature and structure of
the transactions relating to the financing of the Project, (b) it is familiar with the provisions of all of the documents and instruments relating to such financing to which it or the Issuer is a party
or of which it is a beneficiary, (c) it understands the risks inherent in such transactions, including without limitation the risk of loss of the Project, and (d) it has not relied on the Issuer for any guidance or expertise in analyzing the financial or other consequences of the transactions contemplated by this Agreement and the other Bond Documents or the Loan Documents or otherwise relied on the Issuer in any manner.
(31) 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 Agreement for Project purposes 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.
(32) On the basis of reasonable review and assessment undertaken by Borrower of
Borrower’s computer applications and reasonable inquiry made of Borrower’s key business
suppliers, vendors and customers including contractors and property managers, Borrower
reasonably believes that the “Year 2000 problem” (that is, the risk that computer applications
used by any person may be unable to recognize and perform properly date-sensitive functions
involving certain dates prior to and any date after December 31, 1999) will not result in any significant adverse change in the operations, business, properties or conditions (financial or otherwise) of the Borrower.
(33) Before Guarantor became so obligated in connection with the Loan, the Borrower
made full disclosure to Guarantor regarding the Borrower’s financial condition and business operations, the present and former condition, uses and ownership of the Project and all other circumstances bearing upon the Borrower’s ability to pay and perform its obligations under the Loan Documents.
Section 2.3. General Tax Reuresentations, Warranties and Covenants of Borrower The Borrower further represents, warrants and covenants as follows:
(1) The Borrower will use and operate the Project in a manner consistent with the Regulatory Agreement and will use and operate the Project in accordance with the terms of the
Regulatory Agreement until the date on which the Qualified Project Period terminates, and knows of no reason why the Project will not be so operated. If in the future there is a cessation of that operation, the Borrower will use its best efforts to resume that operation or accomplish an alternate use by the Borrower or others which will be consistent with the Act and the tax- exempt status of the Bonds. The Borrower is not now in default under the Regulatory
Agreement and specifically agrees to continue to meet its requirements.
(2) The Borrower will file all appropriate returns, reports and attachments to income
tax returns which are now or hereafter required by the provisions of the Code, including without limitation assisting the Issuer in filing the Information Return for Private Activity Bond Issues (Form 8038) required under the Code.
(3) The weighted average maturity of the Tax-Exempt Bonds, calculated in
accordance with the requirements of Section 147(b) of the Code, is less than 120% of the average reasonably expected economic life of the Project.
(4) No proceeds of the Tax-Exempt Bonds shall be invested in federally insured
deposits or accounts except as part of a bona fide debt service fund or a reasonably required reserve fund.
9
(5) The Borrower covenants and agrees that it will not use or permit the use of any of the proceeds of the Bonds or any other funds of the Borrower, directly or indirectly, in such
manner as would, or enter into, or allow any “related person” (as defined in Section 147(a)(2) of the Code) to enter into, any arrangement, formal or informal, that would, or take or omit to take any other action that would, cause the Tax-Exempt Bonds to be an “arbitrage bond” within the meaning of Section 148 of the Code or “federally guaranteed” within the meaning of Section 149(b) of the Code and applicable regulations promulgated from time to time thereunder.
(6) In the event that at any time the Borrower is of the opinion or is otherwise aware
that for purposes of this Section 2.3 or Section 5.7 of the Indenture it is necessary to restrict or to
limit the yield on the investment of any moneys held by, or on behalf of, the Issuer under the
Indenture, the Borrower shall obtain an opinion of Bond Counsel, which shall determine the limitations and so instruct and direct in writing the Issuer to take such actions as the Borrower believes are necessary in order to comply with these limitations under the Indenture.
(7) The Borrower covenants to comply with the covenants and procedures set forth in Section 5.7 of the Indenture and the Tax Certificates and to deposit in the Rebate Fund such amounts as may be necessary to maintain the amount on deposit in the Rebate Fund at the Rebate Requirement.
(8) Notwithstanding any provisions of this Section 2.3, if the Borrower shall provide
to the Issuer an opinion of Bond Counsel that any specified action required under this Section 2.3 or under Section 5.7 of the Indenture is no longer required or that some further or different
action is required to maintain the exclusion from federal income tax of interest on the Tax-
Exempt Bonds, the Issuer and the Borrower may conclusively rely on such opinion in
complying with the requirements of this Section 2.3 and Section 5.7 of the Indenture and be
protected in so doing, and the covenants hereunder shall be deemed to be modified to that extent.
(9) The Borrower further warrants and covenants that it has not executed and will
not execute any other agreement, or any amendment or supplement to any other agreement,
with provisions contradictory to, or in opposition to, the provisions hereof, of the Indenture and
of the Regulatory Agreement, and that in any event, the requirements of this Agreement and the Regulatory Agreement are paramount and controlling as to the rights and obligations herein set forth and supersede any other requirements in conflict herewith and therewith.
(10) Not less than ninety-five percent (95%) of the proceeds of the Tax-Exempt Bonds
will be expended, if at all, for Qualified Project Costs.
(11) The Borrower hereby covenants, represents and agrees as follows:
(4 not to take or omit to take any action with respect to this Agreement or
the Project that would adversely affect the exclusion from federal income taxation of the
interest on the Tax-Exempt Bonds (so long as the Tax-Exempt Bonds are not owned by a
person or entity which is a “substantial user” of the Project or a “related person” within
the meaning of Section 147(a) of the Code);
(b) to file of record such documents and take such other steps as are
necessary in order to insure that the requirements and restrictions of the Regulatory Agreement will be binding upon all owners of the Project, including, but not limited to,
the execution and recordation of the Regulatory Agreement in the real property records
of San Diego County, California.
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(4 to include the requirements and restrictions contained in the Regulatory
Agreement in any deed or other document transferring any interest in the Project to
another person to the end that such transferee has notice of, and is bound by, such restrictions, and to obtain the agreement from any transferee so to abide; and
(4 to provide to the Issuer notice of any action which impacts the Issuer’s rights hereunder or under the Regulatory Agreement.
(12) The Project will be owned and operated by the Borrower. The Project is located
on a single parcel or contiguous parcels of land.
(13) No more than two percent (2%) of the proceeds of the Tax-Exempt Bonds will be
used to pay expenses incurred in connection with the issuance of the Bonds (“Issuance
Expenses”). None of the Issuance Expenses with respect to the Bonds is contingent upon the
occurrence of events subsequent to the date of issuance of the Bonds, and ninety-five percent (95%) of the Issuance Expenses will be paid within one hundred eighty (180) days of the date hereof.
(14) None of the proceeds of the Tax-Exempt Bonds will be used to finance or
refinance any airplane, skybox or other private luxury box, facility primarily used for gambling,
or any store the principal business of which is the sale of alcoholic beverages for consumption off premises.
Section 2.4. Additional Tax-Related Representations, Certifications, Expectations and
Warranties of Borrower. The Borrower hereby covenants, represents and warrants to the Issuer and the Bondowner Representative as follows:
(4 The Borrower will not knowingly directly or indirectly use or permit the
use of any proceeds of the Tax-Exempt Bonds or any other funds of the Borrower, or take or omit to take any action, that would cause the Bonds to be considered “federally guaranteed” within the meaning of Section 149(b) of the Code.
M Less than twenty-five percent (25%) of the proceeds of the Tax-Exempt
Bonds will be spent on costs chargeable to the capital account of land or interests in
land.
(4 Except for the acquisition of land, if any, proceeds of the Tax-Exempt
Bonds will not be used to acquire any property unless such property is first used by the
Borrower.
(4 The information contained in the Form 8038 to be filed no later than the
date upon which the same is required to be filed with the Internal Revenue Service in accordance with the Code, in connection with the issuance of the Tax-Exempt Bonds, a copy of which has been delivered to Bondowner Representative, was supplied by the Issuer and the Borrower and, to the extent provided by each, is correct.
(4 The Borrower will not use any Bond Proceeds directly or indirectly to
make or finance loans to two or more ultimate borrowers.
(0 The Tax-Exempt Bonds are not and will not be a part of a transaction or
series of transactions that (i) enables the Issuer, the Borrower or any related person to exploit the difference between tax-exempt and taxable interest rates to gain a material
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financial advantage and (ii) overburdens the market for tax-exempt obligations in any manner, including without limitation, by selling bonds that would not otherwise be sold or selling more bonds, or issuing them sooner, or allowing them to remain outstanding longer, than would otherwise be necessary.
@ The proceeds of sale of the Bonds will be used exclusively to finance the costs of the Project and issuance of the Bonds. No principal, interest or premium on any governmental obligation, other than the Tax-Exempt Bonds, will be paid directly or indirectly from proceeds of the Tax-Exempt Bonds.
Section 2.5. Representations of Borrower as Single Purnose Entity.
(1) Borrower covenants and agrees that it shall not:
(4 (i) incur, create or assume any indebtedness for borrowed money except
the City Loan and indebtedness represented by an invoice, statement of account, check,
work request, purchase order or other similar document representing expenses relating
to activities of the Borrower undertaken in accordance with its charter or (ii) transfer or lease the Project or any interest therein, except as permitted under the Mortgage;
(b> engage, directly or indirectly, in any business other than that arising out
of entering into this Agreement and the other Loan Documents to which Borrower is a
party and the ownership, management, leasing, construction, development, operation and maintenance of the Project;
(4 commingle its assets with the assets of any other entity;
(4 partition the Project except as expressly permitted under the Mortgage: or
(4 voluntarily file or consent to the filing of a petition for bankruptcy, reorganization, assignment for the benefit of creditors or similar proceeding under any federal or state bankruptcy, insolvency, reorganization or other similar law, without the
unanimous consent of its partners.
Borrower represents and warrants that as the date hereof it does not have any indebtedness or obligations which would cause it to be in violation of the foregoing covenants.
Further, Borrower covenants that it will do or cause to be done all things necessary to preserve and keep in full force and effect its existence, will not engage in, seek or consent to any
dissolution, winding up, liquidation, consolidation, merger or asset sale; will not modify the
Partnership Agreement (or other organizational document) in any way which could have a
material adverse effect upon its ability to perform its obligations under the Bond Documents, without the prior written consent of the Bondowner Representative (with notice of such consent
given to Issuer), which the Bondowner Representative shall not unreasonably withhold; will
pay all expenses of the Project from assets of Borrower; will maintain separate books and records and bank accounts; will at all times hold itself out to the public as a separate and
distinct legal entity (including in its leasing activities, in entering into any contract and in preparing its financial statements) and will observe corporate formalities in conducting its business: will file its own tax returns; and will cause its management to meet regularly to carry on its business.
(2) Borrower shall do all things necessary to preserve and keep in full force and effect its existence, rights and privileges under the laws of the State and its right to own
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property or transact business in the State. Borrower further represents and warrants that it is, and, so long as any portion of the Loan shall remain unpaid, shall do all things necessary to continue to be, an entity which is formed or organized solely for the purpose of holding,
directly, an ownership interest in the Project, does not engage in any business unrelated to such
properties and the financing thereof, does not have any assets other than those related to its
interest in the Project or the financing thereof or any indebtedness other than as permitted by the Mortgage or the other Loan Documents, has its own separate books and records and its own accounts, in each case which are separate and apart from the books and records and accounts of any other entity and will maintain the same as official records, holds itself out as being an
entity, separate and apart from any other entity and will conduct its business in its own name.
(3) The Borrower will not fail to correct any known misunderstanding regarding the separate identity of the Borrower.
(4) The Borrower will not assume or guarantee or become obligated for the debts of
any other entity or hold out its credit as being available to satisfy the obligations of any other
entity; will allocate fairly and reasonably any overhead for shared office space: will not pledge
its assets for the benefit of any other person or entity: will not make loans to any person or entity; will not identify its partners or affiliates as a division or part of the Borrower and will not
enter into or be a party to any transaction with its partners or affiliates except (a) pursuant to
the Partnership Agreement as it exists as of the date of this Agreement, or as it may be amended
in accordance with this Agreement, or (b) in the ordinary course of business and on terms which are intrinsically fair and are no less favorable to it than would be obtained in a comparable arm’s-length transaction with an unrelated third party.
(5) Any firm, corporation or partnership which can make the representations and warranties and satisfy the covenants set forth in this Section 2.5 shall constitute a “Single
Purpose Entity.”
ARTICLE III
ISSUANCE OF BONDS; PAYMENT OF COSTS
Section 3.1. Issuance of Bonds, The Issuer has determined to issue the Bonds pursuant
to the Indenture, and the Borrower has reviewed and does hereby approve the terms of the
Indenture. Upon execution of this Agreement, the other Loan Documents and the Indenture,
the Issuer will execute the Bonds and deliver the Bonds to the initial purchaser(s) thereof or to
its order upon payment of the purchase price and delivery to the Trustee of all other documents required to be so delivered as a condition to such delivery pursuant to Section 2.5 of the Indenture. The proceeds of the Bonds will be deposited with the Trustee and disbursed in
accordance with Section 5.2 of the Indenture.
Section 3.2. No Warrantv bv Issuer. The Borrower agrees that, because the components of the Project have been and are to be designated and selected by it, THE ISSUER HAS NOT MADE AN INSPECTION OF THE PROJECT OR OF ANY FIXTURE OR OTHER ITEM CONSTITUTING A PORTION THEREOF, AND THE ISSUER MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED OR OTHERWISE, WITH RESPECT TO THE SAME OR THE LOCATION, USE, DESCRIPTION, DESIGN, MERCHANTABILITY, FITNESS FOR USE FOR ANY PARTICULAR PURPOSE, CONDITION OR DURABILITY THEREOF, OR AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, IT BEING AGREED THAT ALL RISKS INCIDENT THERETO ARE TO BE BORNE BY THE BORROWER.
IN THE EVENT OF ANY DEFECT OR DEFICIENCY OF ANY NATURE IN THE PROJECT OR ANY FIXTURE OR OTHER ITEM CONSTITUTING A PORTION THEREOF, WHETHER
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PATENT OR LATENT, THE ISSUER SHALL HAVE NO RESPONSIBILITY OR LIABILITY
WITH RESPECT THERETO. THE PROVISIONS OF THIS SECTION 3.2 HAVE BEEN NEGOTIATED AND ARE INTENDED TO BE A COMPLETE EXCLUSION AND NEGATION OF ANY WARRANTIES OR REPRESENTATIONS BY THE ISSUER, EXPRESS OR IMPLIED, WITH RESPECT TO THE PROJECT OR ANY FIXTURE OR OTHER ITEM CONSTITUTING A PORTION THEREOF, WHETHER ARISING PURSUANT TO THE UNIFORM COMMERCIAL CODE OR ANY OTHER LAW NOW OR HEREAFTER IN EFFECT.
Section 3.3. Disbursements From the Project Fund and the Costs of Issuance Fund.
0) The Issuer has authorized and directed the Trustee to make payments
from the Costs of Issuance Fund in accordance with the cost breakdown attached as
Schedule D-l to pay the costs of issuing the Bonds, and to reimburse the Borrower for
any of the foregoing paid or incurred by the Borrower before or after the execution and
delivery of this Agreement and the issuance and delivery of the Bonds in accordance
with the requirements of Section 5.10 of the Indenture, and the Bondowner Representative has consented to Trustee’s making of such payments in accordance with the conditions contained in Section 5.2 of the Indenture. The Borrower may request an
advance under the Series B-T Bonds prior to the full advance of the purchase price of the
Series A Bonds and the Series B Bonds. Upon request, until the full face amount of the
Bonds of any series has been so advanced, the Bondowner Representative shall advise the Issuer, the Trustee and the Bondholders of the outstanding principal amount of the
Bonds.
(2) The balance of the Bond Proceeds may be disbursed by the Trustee only in accordance with Section 5.2 of the Indenture, including delivery of a written requisition of the Borrower satisfying the requirements of Section 5.2 of the Indenture and approved in writing by the Bondowner Representative, which approval by the Bondowner Representative will be granted upon satisfaction of the conditions and
performance of the covenants and conditions set forth in this Agreement and in
Schedule D attached to this Agreement.
Section 3.4. Payment of Issuance Costs bv Borrower. The Borrower agrees that it will provide any and all funds required for the prompt and full payment of all costs of issuance of
the Bonds, including, but not limited to, the following items:
(1) all legal (including Bond Counsel and the respective counsel to the
Borrower, Issuer, Bondowner Representative and Trustee), abstracters’, title insurance, financial, engineering, environmental, construction services, appraisal and accounting fees and expenses, administrative fees, printing and engraving costs and other expenses
incurred and to be incurred by the Borrower, Issuer, Bondowner Representative and
Trustee on or before or in connection with issuance of the Bonds:
(2) premiums on all insurance required to be taken out and maintained until
this Agreement is terminated pursuant to Section 10.3 hereof;
(3) all recording fees and other taxes, charges, assessments, license or
registration fees of every nature whatsoever incurred and to be incurred in connection with this financing;
(4) all initial fees and expenses of the Trustee, the Paying Agent and the
Issuer, including without limitation an initial Issuer’s fee of one-eighth of one percent (0.125%) of the aggregate face amount (maximum principal amount) of the Bonds:
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(5) all fees and expenses for title insurance, survey and related matters: and
(6) a fee due the initial Bondowner Representative upon execution of this
Agreement, in the amount of Dollars ($ ).
(7) all other Costs of Issuance (as defined in the Indenture).
Section 3.5. Title Insurance.
(1) The Borrower agrees to furnish to the Trustee, concurrently with delivery of the
Mortgage, a mortgagee’s policy or policies of title insurance issued with respect to the Project and Borrower’s leasehold interest in the Project Premises by the Title Company which complies with the requirements set forth in Schedule A-l attached to this Agreement, insuring the lien of the Mortgage as a valid lien on the Project, subject only to the matters listed in Schedule A-2
attached hereto (the “Permitted Encumbrances”).
(2) At such time or times as reasonably required by Bondowner Representative, the Borrower agrees to furnish to the Issuer and the Trustee, at the Borrower’s expense, an endorsement to the Title Policy evidencing, in conjunction with any lien waivers, lien-free completion of the repair or restoration of the Project.
(3) The Borrower hereby represents that the Permitted Encumbrances do not and will not materially adversely affect (a) the ability of the Borrower to pay in full the principal of and interest on the Notes in a timely manner or (b) the use of the Project for the use currently being made thereof or the value of the Project.
(4) The Borrower has good and marketable fee simple title to the Facility, good and
marketable ground leasehold interest in and to the Project Premises, and good title to the personal property used in connection with the Project (other than laundry facilities on the Project Premises, which are held by Borrower under a lease), subject to no liens, charges or encumbrances other than the Permitted Encumbrances,
(5) Upon the execution by the Borrower and the recording of the Mortgage, and upon the execution and filing of UCC-1 financing statements, the Trustee will have a valid first
lien on the Project and a valid security interest in the personal property encumbered by the
Mortgage, subject to no liens, charges or encumbrances other than the Permitted Encumbrances.
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ARTICLE IV THE LOAN, LOAN REPAYMENT AND ADDITIONAL CHARGES
Section 4.1. The Loan. The Issuer agrees, upon the terms and conditions herein
specified, to lend to the Borrower the proceeds received by the Issuer from the sale of the Bonds,
excluding any accrued interest, by causing such proceeds to be deposited with the Trustee for
disposition as provided herein and in the Indenture. The obligation of the Issuer to make the Loan shall be deemed fully discharged upon the deposit of the proceeds of the Bonds with the Trustee. The Loan shall be evidenced by the Notes, in the forms attached as Schedules B-l, B-2 and B-3 hereto, and contemporaneously with the issuance of the Bonds, the Issuer will endorse the Notes without recourse to the order of and will pledge the Notes to the Trustee, as the
assignee of the Issuer.
Section 4.2. Loan Renavment.
ta) The Borrower will repay the Loan in accordance with the provisions of the Notes and this Agreement. Notwithstanding anything to the contrary contained herein, the Borrower covenants that it shall make payments, at such times and in such amount to assure that payment of the principal of and premium, if any, and interest on the Bonds shall be made when due, whether at maturity, by call for redemption, by acceleration or otherwise.
04 Subject to the Borrower’s right of prepayment granted in Section 10.1, the Borrower hereby acknowledges its indebtedness to the Issuer and agrees to make monthly payments, on the twenty-fifth day of each month (or, if such twenty-fifth day is not a Business
Day, on the first Business Day which precedes such twenty-fifth day), commencing Dune 251,
1999, which monthly payments shall be in an amount equal to the sum of each of the following which will be due (whether at maturity or by redemption or acceleration or otherwise pursuant to the Indenture) on the next Payment Date (or other date upon which any of the following items are payable), or on the due date for such monthly payment, if such date is a Payment
Date, divided by the number of calendar months which remain prior to such Payment Date (or
other date) (collectively, “Basic Payments”):
0) Principal and interest on the Series A Bonds:
(ii) Ordinary Fees and Expenses of the Trustee;
(iii) Reasonable fees and expenses of the Arbitrage Consultant;
(iv) An annual Issuer fee equal to 0.1% of the Outstanding principal amount
of the Bonds, and other expenses of the Issuer;
(4 Amounts required to be deposited in the Rebate Fund;
(vi) [Reserved] ; and
(vii) Amounts required to be deposited in the Reserve Account of the
Servicing Fund.
The Basic Payments shall be applied toward the payment of principal of and interest on
the Series A Note and, prior to the Series B Conversion Date, toward the payment of interest on
16
21
the Series B Note and the Series B-T Note, in addition to the other uses thereof as set forth in the Indenture and this Agreement.
(c) The Borrower shall make the following payments (collectively, the “Limited Partner Equity Payments”) on the dates set forth below, which will represent limited partner
equity contributions received by the Borrower from the Investor Limited Partner or such other amounts available to the Borrower:
,200l ,2002 : ,2003 $
The Limited Partner Equity Payments shall be applied toward the payment of principal
of and interest on the Series B Note and the Series B-T Note.
(4 The Borrower shall pay to the Trustee, within ten (10) days after written demand therefor, the Extraordinary Fees and Expenses of the Trustee.
(4 The Loan shall be due and payable in full, with a Prepayment Premium as
provided in Section 10.1 on December 15, 2000 (or such later date for purchase as the
Bondowner Representative approves) unless both the Series A Conversion and the Series B Conversion have occurred on or before December 1,200O.
(0 The Borrower agrees to purchase, on the later to occur of the Series A Conversion
Date or the Series B Conversion Date, a sufficient principal amount of Series A Bonds to comply
with the requirements of Schedule I attached hereto.
Section 4.3. Additional Charges. The Borrower agrees to pay, when due, all reasonable costs and expenses incurred in connection with the Bonds (but only to the extent the same are not included in Ordinary Fees and Expenses and are not paid pursuant to Section 4.2) (in the aggregate, the “Additional Charges”), including without limitation, the expenses listed in Section 3.4 and each and all of the following:
(1) all fees of the Trustee for services rendered under the Indenture, any amounts due to the Trustee under Section 7.4 hereof (but only to the extent the same are not included in Ordinary Fees and Expenses and are not paid pursuant to Section 4.2), and all fees and charges of any registrars, legal counsel, accountants, engineers, public agencies and others incurred in
the performance of services required under the Indenture for which such persons are entitled to
payment or reimbursement (provided that the Borrower may, upon notice to the Trustee and the Bondowner Representative and without creating a default hereunder, contest in good faith the necessity or reasonableness of any such services), any fees or charges of public agencies and
any fees or expenses resulting directly or indirectly from a default by the Borrower;
(2) (a) all indemnity payments required to be made to the Issuer under Section 7.4 (such indemnity payments being due to the Issuer upon written demand therefor and accruing interest at the Default Rate following 60 days after notice of demand therefor); (b) all reasonable
expenses (including reasonable legal fees and expenses) incurred by the Issuer or the Trustee to
exercise its rights under this Agreement following an Event of Default; and (c) all other
expenses incurred by the Issuer in relation to the Project which are not otherwise required to be
paid by the Borrower under the terms of this Agreement or any separate fee agreement,
including costs incurred as a result of a request by the Borrower:
(3) amounts advanced by the Trustee pursuant to Section 9.10 of the Indenture: and
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(4) interest, at the Default Rate, on all payments not made by the Borrower under Section 4.2 and under this Section 4.3 when due, to the parties entitled thereto.
Section 4.4. Borrower’s Oblipations Unconditional. The obligations of the Borrower to perform and observe the agreements on its part contained herein shall be absolute and unconditional and payment of the Loan, the Basic Payments, the Limited Partner Equity Payments and the Additional Charges and all other payments required of the Borrower
hereunder or under the Notes shall be paid without notice or demand and without set off,
counterclaim or defense for any reason and without abatement or deduction or defense. The
Borrower will not suspend or discontinue any such payments, and will perform and observe all
of its other agreements in this Agreement, and, except as expressly permitted in Section 10.3, will not terminate this Agreement for any cause, including but not limited to any acts or circumstances that may constitute failure of consideration, destruction or damage to the Project or the Borrower’s business, the taking of the Project or the Borrower’s business by
Condemnation or otherwise, the lawful prohibition of the Borrower’s use of the Project or the
Borrower’s business, the interference with such use by any private person or corporation, the
invalidity or unenforceability or lack of due authorization or other infirmity of this Agreement, the lack of right, power or authority of the Issuer to enter into this Agreement, eviction by paramount title, commercial frustration of purpose, bankruptcy or insolvency of the Issuer or the Trustee, change in the tax or other laws or administrative rulings or actions of the United States of America or of the State or any political subdivision thereof, or failure of the Issuer to
perform and observe any agreement, whether express or implied, or any duty, liability or
obligation arising out of or connected with this Agreement, or for any other cause whether
similar or dissimilar to the foregoing, any present or future law to the contrary notwithstanding, it being the intention of the parties hereto that the payment of the Loan and other amounts payable by the Borrower hereunder or under the Notes shall be paid in full
when due without any delay or diminution whatever.
Section 4.5. Assignment of Issuer’s Rights. As security for the payment of the Bonds, the Issuer will pledge the amounts payable hereunder and assign, without recourse or liability, to the Trustee, the Issuer’s rights under this Agreement and the Notes, including the right to
receive payments hereunder (but excluding the Unassigned Rights), and hereby directs the
Borrower to make said payments directly to the Trustee, or otherwise upon the order of the Trustee. The Borrower herewith assents to such assignment and will make payments under this Agreement directly to the Trustee, or otherwise upon the order of the Trustee without defense or set off by reason of any dispute between the Borrower and the Issuer, the Bondholders or the Trustee.
ARTICLE V PROJECT COVENANTS
Section 5.1. Project. Title, Operation and Maintenance.
(1) The Issuer shall not be under any obligation to operate, maintain or repair the Project or the Project Premises. The Borrower agrees that until this Agreement is terminated pursuant to Section 10.3 hereof, it will, at its own expense, (a) keep the Project and the Project Premises in safe repair and in such operating condition as is needed for its operations: (b) make all necessary repairs and replacements to the Project (whether ordinary or extraordinary, structural or nonstructural); (c) operate the Project in a sound and economic manner in accordance with usual business practice; (d) operate the Project in compliance with all applicable laws, codes, environmental laws, zoning laws, the Americans with Disabilities Act of 1990 and laws regulating construction, occupancy or maintenance of property of a character
18
included in the Project; and (e) comply with all applicable existing and future laws, regulations, orders, building codes and restrictions and requirements of, and all permits and approvals from, and agreements with and commitments to, all governmental, judicial or legal authorities
having jurisdiction over the Project or the Borrower’s business, conducted thereon or therefrom, and with all restrictive covenants and other title encumbrances encumbering the Project or the
Project Premises, including without limitation those contained in the Regulatory Agreement (all
collectively, the “Requirements”).
(2) The Borrower shall pay all expenses of the operation and maintenance of the Project including, but without limitation, the policies of insurance required pursuant to Section
5.5, and all taxes and special assessments levied upon or with respect to the Project and payable
during the term of this Agreement, all in conformance with and subject to any good faith contest provisions provided in the Mortgage.
(3) In the event the Borrower shall fail to maintain, or cause to be maintained, the
full insurance coverage required by this Agreement or shall fail to keep the Project in as
reasonably safe condition as its operating conditions will permit, or shall fail to keep the Project
in good repair and good operating condition and make all necessary repairs and replacements
to the Project, the Trustee, or direction from the Bondowner Representative, or the Bondowner
Representative may (but shall be under no obligation to) contract for the required policies of
insurance and pay the premiums on the same or make any required repairs, renewals and
replacements; and the Borrower agrees to reimburse the Trustee or the Bondowner
Representative, as the case may be, to the extent of the amounts so advanced, and in addition
shall pay interest on any such amount at the Default Rate from the date such amount was due until the date such amount was paid or reimbursed by the Borrower.
(4) The Borrower shall obtain or cause to be obtained all necessary permits and approvals for the operation and maintenance of the Project and shall comply with all applicable lawful requirements of any governmental body regarding the use or condition of the Project,
whether existing or later enacted or whether involving any change in governmental policy or
requiring structural or other changes to part or all of the Project and irrespective of the cost of
making the same.
(5) Notwithstanding the provisions of this Section 5.1, the Borrower may in good
faith contest the validity or the applicability of any law, ordinance, rule or regulation provided that during the period of such contest and any appeal therefrom, (i) such failure to comply with such requirement or requirements will not adversely affect the lien of the Mortgage or materially endanger such liens or the Project or any part thereof, (ii) will not subject the Project or any part thereof to loss or forfeiture and (iii) the Borrower will post with the Trustee, for the
benefit of the Bondholders, cash or a bond in an amount equal to 125 % of the disputed amount.
(6) The Borrower agrees not to permit or suffer others to commit a nuisance in or about the Project or the Project Premises or themselves commit a nuisance in connection with their use or occupancy of the Project or the Project Premises.
Section 5.2. Sale or Lease of Project and Interest in Borrower. While there are Bonds
Outstanding, the Borrower will not sell, transfer or otherwise dispose of the Project, or any portion thereof (other than leases or rental agreements of units for individual tenant use as
contemplated in the Regulatory Agreement), except for a transfer otherwise permitted by Section 6.1 of the Mortgage and the applicable provisions of the Regulatory Agreement that is (a) a transfer to a purchaser which qualifies as a Single Purpose Entity (as such term is defined in Section 2.5 hereof), or (b) a one-time transfer of the Project on or after [December 1, 20151
Wanuary 1, 20161, to a Single Purpose Entity that is an affiliate of BRIDGE Housing Corporation,
19 3Q
with the consent of the Issuer and the Bondowner Representative (which shall not be
unreasonably withheld), pursuant to that certain [Option Agreement] dated as of May _, 1999,
by and between the Borrower and BRIDGE Housing Corporation. While there are Bonds Outstanding, the Borrower shall not sell, transfer or otherwise dispose of any partnership interest in it except for a transfer otherwise permitted by the applicable provisions of the Mortgage and the Regulatory Agreement and for which the Issuer and the Bondowner Representative have given their written consent (which shall not be unreasonably withheld): provided, however, that the Issuer and the Bondowner Representative acknowledge and consent to the admission of the Investor Limited Partner as a limited partner of the Borrower, the removal of the Initial Limited Partner as a limited partner of the Borrower, and the
execution of an amended and restated Partnership Agreement in connection therewith, [all in accordance with the [funding commitment letter] dated as of May -, 1999 executed by the Investor Limited Partner and approved by the Issuer and Bondowner Representative].
Section 5.3. Advances. The Borrower acknowledges and agrees that under this
Agreement and certain of the other Loan Documents, the Bondholders may, but shall be under no obligation to, take certain action and make certain advances relating to the Project from certain funds held under the Indenture or otherwise, or to certain other matters as expressly provided therein, and the Borrower shall be obligated to repay all such advances on demand with interest from the date such payment was originally due until paid, at the Default Rate.
Section 5.4. Alterations to the Proiect and Removal of Eouiument.
(1) Without the consent of Bondowner Representative, the Borrower shall not
remodel or make any additions, modifications, alterations, improvements or changes
(collectively referred to as “alterations”) in or to the Project or remove any equipment therefrom
other than in the ordinary course of business in the operation of the Project. Notwithstanding
the provisions of the Mortgage, no such alteration or removal will be made if to do so would impair the character of the Project as a “project” within the meaning of the Act, or impair the exclusion of interest on the Tax-Exempt Bonds from gross income for federal income tax purposes.
(2) The Borrower shall be entitled to use funds held by the Trustee in the Reserve
Account to pay for alterations, improvements, replacements and maintenance of the Project, including, but not limited to, appliances, air conditioners, furnaces, hot water heaters, roofs, carpeting, floor vinyl, decks, pool equipment replacement, concrete replacement, tie walls,
gutters, downspouts, window replacement, blinds and similar items, and for the costs of alterations or replacements, provided that the written consent of the Bondowner Representative is obtained for each such disbursement. The Bondowner Representative shall consent to disbursements from the Reserve Account which are required in order to maintain the Project in the condition and state of repair required pursuant to this Agreement and the Mortgage, subject
to the terms and conditions of Schedule F.
Section 5.5. Insurance.
(4 The Borrower must provide, maintain and keep in force at all times during any
period of construction the builder’s “all risk” insurance required pursuant to Schedule D. At all
times prior to repayment of the Loan, the Borrower must provide, maintain and keep in force all
other insurance required by Schedule D. Also at all such times, the Borrower must provide,
maintain and keep in force any and all additional insurance as Bondowner Representative in its reasonable judgment may from time to time require, against commonly insured hazards for
similarly situated properties. Such additional insurance may include flood insurance as
required by federal law and earthquake insurance as required by Bondowner Representative.
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At Bondowner Representative’s request, the Borrower must supply Bondowner Representative with an original or underlier of any policy.
(b) All policies of insurance required hereunder must be issued by companies approved by Bondowner Representative having an A.M. Best’s rating acceptable to Bondowner
Representative, with limits, coverage, forms, deductibles, inception and expiration dates and cancellation provisions acceptable to Bondowner Representative. In addition, each required property insurance policy must contain a Lender’s Loss Payable Form (Form 438 BFU or equivalent) in favor of the Trustee and the Bondowners and provide that all proceeds be payable to the Trustee to the extent of its interest. An approval by Bondowner Representative is
not, and may not be deemed to be, a representation of the solvency of any insurer or the sufficiency of any amount of insurance.
(d Each policy of insurance required under the Loan Documents must provide that
it may not be modified or canceled without at least thirty (30) days’ prior written notice to
Bondowner Representative. At least fifteen (15) days before expiration of any required insurance policy, the Borrower must furnish Bondowner Representative with proof acceptable
to Bondowner Representative that the policy has been reinstated or a new policy issued,
continuing in force the insurance covered by the expired policy. The Borrower must also
furnish evidence satisfactory to the Bondowner Representative that all premiums for such
policy have been paid within fifteen (15) days of renewal or issuance. If the Bondowner Representative fails to receive such proof and evidence, the Bondowner Representative has the
right, but not the obligation, to advance funds to Trustee to enable the Trustee to obtain current
coverage. The Borrower must repay the Bondowner Representative immediately on demand
for any advance for such premiums, which will be an additional loan to the Borrower bearing
interest at the Default Rate, and secured by the Mortgage and any other collateral held by the Trustee in connection with the Loan: provided, however, that interest on any such advances will be included in gross income for federal income tax purposes.
Section 5.6. Required Cash Deoosits. The Borrower agrees to deposit with the Trustee,
for deposit by the Trustee into the Project Fund and Costs of Issuance Fund and disbursement subject to the conditions to disbursement of funds from the Project Fund and Costs of Issuance Fund as set forth in the Indenture, the amounts set forth in Schedule H attached to this Agreement.
Section 5.7. Commencement and Comoletion of Facilitv.
(4 The Borrower shall commence construction of improvements to the Facility (the “Construction”) on or before July 15, 1999 and Borrower shall continuously prosecute the Construction diligently to completion.
(b) By the Completion Date set forth in Schedule E, the Borrower must have completed Construction of the Facility, as hereinafter defined. As used in this Agreement, “Construction of the Facility” means construction of the structural components, operating systems and all other elements of such improvements to buildings. The Construction of the Facility is deemed complete for all purposes of this Agreement when the Construction has been substantially completed in accordance with the Plans and Specifications, as evidenced by the written certification of the architect for the Project (the “Architect”) and the general contractor
for the Project (the “Contractor”) in a form satisfactory to Bondowner Representative and filed
with the Trustee and Bondowner Representative (the “Completion Certificate”), and Bondowner
Representative has received evidence satisfactory to it that:
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(1) All of the buildings constituting the Facility have been “placed in service” within the meaning of Section 42 of the Code; and
(2) The completed Facility has been inspected by and received all approvals of governmental authorities having jurisdiction over the Project, permitting occupancy
by residential tenants of all units in the Project.
(4 By the date set forth in the Proforma Schedule, both the Series A Conversion and
the Series B Conversion must have occurred.
Section 5.8. Construction. The Borrower must conduct the Construction of the Facility in a good and workmanlike manner in accordance with sound building practices, as well as the Plans and Specifications and the recommendations of any geotechnical inspection or engineering report satisfactory to Bondowner Representative.
Section 5.9. “in balance”. At all times the Loan shall be “in balance” (as defined in
Schedule D attached to this Agreement) and the undisbursed Loan funds, together with any
sums provided or to be provided by the Borrower as shown in the cost breakdown, shall be
sufficient to construct the Facility through completion and to accomplish the purposes
contemplated by the Loan Documents.
Section 5.10. Preservation of Rights. The Borrower must obtain, preserve and maintain in good standing, as applicable, all rights, privileges and franchises necessary or desirable for
the operation of the Project and the conduct of the Borrower’s business thereon or therefrom.
Section 5.11. Maintenance and ReDair. The Borrower must (i) maintain the Project and the Project Premises, including the parking and landscaping portions thereof, in good condition and repair, (ii) promptly make all necessary structural and non-structural repairs to the Facility (or cause tenants under any leases to perform such obligation), and (iii) not demolish, alter,
remove or add to any Facility, excepting (A) the repair and restoration of Facility following damage thereto as permitted by this Agreement, (B) the construction or installation of non- structural alterations or improvements, provided the same are in all respects consistent with the character and utility of the existing Facility, (C) the installation or construction of tenant improvements and related demolition in connection with any leases approved in accordance
with this Agreement, in each case without the prior written consent of Bondowner
Representative, and (iv) not erect any new buildings, structures or building additions on the Project Premises, without the prior written consent of Bondowner Representative. The Borrower must pay when due all claims for labor performed and materials furnished therefor in connection with any improvement or construction activities, unless such claims are being contested in good faith. If a claim of lien is recorded which affects the Project or a stop notice or similar notice from a potential mechanic’s lien claimant is served upon Borrower, Borrower
shall, within twenty (20) calendar days of such recording or service or within five (5) calendar
days of Bondowner Representative’s demand, whichever occurs first (a) effect the release
thereof by recording or delivering to Bondowner Representative a surety bond in sufficient form and amount; or (b) provide Bondowner Representative with other assurances which Bondowner Representative reasonably determines to be satisfactory for the payment of such
claim of lien or stop notice and for the full and continuous protection of Bondowner
Representative and Trustee from the effect of such lien or stop notice.
Section 5.12. Changes.
(4 The Borrower agrees to provide Bondowner Representative with copies of all
change orders pursuant to which changes are proposed to the Plans and Specifications or to the
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design of the Facility, together with all additional documents relating to the proposed change
that Bondowner Representative may require. These documents may include the following: (i) plans and specifications indicating the proposed change; (ii) a written description of the
proposed change and related working drawings; and (iii) a written estimate of the cost of the proposed change and the time necessary to complete it.
(b> The Borrower must obtain Bondowner Representative’s prior written approval of any change order which involves more than $20,000 in changes in costs of the Project or which, when aggregated with other change orders not previously approved by Bondowner
Representative, involves more than $50,000 in changes in costs of the Project.
(c) In addition, the Borrower must obtain Bondowner Representative’s prior written approval of all material changes in the scope or general conditions of the contract with the Contractor for the Construction of the Facility (the “Construction Contract”), the contract with the Architect for the design of the Facility (the “Architecture Contract”) or any other contracts
for the construction of the Facility. Finally, the Borrower must obtain from the appropriate
persons or entities all approvals of any changes in plans, specifications, work, materials or
contracts required by any of the Requirements or under the terms of any lease, loan commitment or other agreement relating to the Project.
(4 Bondowner Representative may take a reasonable time to evaluate any requests
for proposed changes and may require that all approvals required from other parties be
obtained before it reviews any requested change. Bondowner Representative may approve or disapprove changes in the exercise of its reasonable judgment. The Borrower acknowledges that delays may result and agrees that, so long as the delays are not unreasonable in duration, they will not affect the Borrower’s obligation to complete the Facility by the Completion Date.
Section 5.13. Construction Information and Verification.
(4 Within fifteen (15) days after receiving a written request from Bondowner Representative to do so, the Borrower shall deliver to Bondowner Representative any and all of the following information and documents, all in forms acceptable to Bondowner
Representative:
0) Current plans and specifications for the Facility certified by the Architect
as being complete and accurate;
(ii) A current, complete and correct list showing the name, address and telephone number of each contractor, subcontractor and material supplier engaged in
connection with the construction of the Facility and the total dollar amount of each contract and subcontract (including any changes), together with the amounts paid through the date of the list;
(iii) True and correct copies of the most current versions of all executed contracts and subcontracts identified in the list described in clause (ii) above, including any changes:
(iv) A current construction progress schedule showing the progress of Construction and the projected sequencing and completion times for uncompleted work, all as of the date of the schedule;
(4 Any update to any item described above, previously delivered to Bondowner Representative: and
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(vi) As-built plans and specifications for the Facility as actually completed to date, certified by the Architect as being complete and accurate (provided, however, if the Architect is not reasonably able to deliver such as-built plans and specifications within
such fifteen (15) day period, Bondowner Representative agrees to extend the Borrower’s
deadline up to an additional thirty (30) days).
04 The Borrower expressly authorizes Bondowner Representative to contact the Architect, Contractor or any contractor, subcontractor, material supplier, surety or any governmental authority or agency to verify or discuss any information disclosed in accordance
with this Section and any other information Bondowner Representative may reasonably require.
(4 The Borrower shall promptly notify the Bondowner Representative of any default by any architect, contractor, subcontractor, material supplier or surety under its respective agreement which is not cured after the passage of applicable notice and cure periods.
Any architect, contractor, subcontractor, material supplier or surety who terminates or
materially breaches its contract must be replaced promptly, and the Borrower must deliver
promptly all required information and documents to Bondowner Representative regarding each replacement architect, contractor, subcontractor, material supplier and surety. Bondowner Representative may disapprove any architect, contractor, subcontractor, material supplier,
surety or other party that Bondowner Representative in its reasonable judgment deems financially or otherwise unqualified: provided, however, that except with respect to an architect
or a contractor (as to which the absence of disapproval shall not be deemed approval), the
failure of Bondowner Representative to disapprove any such party within 10 days after receipt
of all information and documents that Bondowner Representative requires shall be deemed
approval.
(4 If, based on any construction progress schedule or other materials submitted by
the Borrower, Bondowner Representative in its reasonable judgment determines that the
Facility will not be completed by the Completion Date, Bondowner Representative may request the Borrower in writing to reschedule the work of construction to permit timely completion. In addition, if Bondowner Representative in its reasonable judgment determines that any building constituting the Facility will not be “placed in service” (within the meaning of Section 42 of the Code) by the Completion Date, Bondowner Representative may request the Borrower in writing to reschedule the work of construction. Within fifteen (15) days after receiving such a request from Bondowner Representative, the Borrower must deliver to Bondowner Representative a
revised construction progress schedule and Pro Forma Schedule showing completion of the
Facility by the Completion Date. As a condition to any agreement to extend the Completion Date, Bondowner Representative may require the Borrower to reapply for and obtain an allocation of Tax Credits for the Project, in amounts acceptable to Bondowner Representative, for the immediately succeeding year.
Section 5.14. Permits, Licenses and Annrovals The Borrower must obtain properly,
comply with and keep in effect all permits, licenses and approvals required from governmental bodies in order to construct, occupy, operate, market and lease or sell the Project Premises and Facility. The Borrower must deliver copies of all such permits, licenses and approvals to
Bondowner Representative promptly, and in any event within five (5) days after receipt thereof.
Section 5.15. Purchase of Materials: Conditional Sales Contracts. Without Bondowner
Representative’s prior written consent, the Borrower may not: (i) purchase or contract for any
materials, equipment, furnishings, fixtures or articles of personal property (other than laundry
equipment) to be placed or installed on the Project Premises or in any Facility under any security agreement or other agreement where the seller reserves or purports to reserve title or
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the right of removal or repossession, or the right to consider them personal property after their incorporation in the work of construction: or (ii) remove or permit to be removed from the Project Premises or the Facility any equipment, machinery or fixtures used in connection with the management, maintenance, operation or enjoyment thereof unless replaced by articles of
equal suitability and value owned by the Borrower free and clear of any lien or security interest.
Section 5.16. Site Visits: Right to Stop Work.
(4 The Borrower grants to the Bondowner Representative, and its agents and representatives, the right to enter and visit the Project at any reasonable time for the purposes of
performing an appraisal, observing the work of construction, inspecting the property, taking
soil or groundwater samples, conducting tests to, among other things, investigate for the
presence of Hazardous Substances, as defined in Section 9.1, and examining all materials, plans, specifications, working drawings and other matters relating to the construction. For purposes of these site visits, the Borrower must maintain at all times a full set of working drawings at the construction site. Bondowner Representative has the right to examine, copy and audit the books, records, accounting data and other documents of the Borrower and its contractors
relating to the Project Premises or construction of the Facility. Bondowner Representative is
under no duty to visit or observe the Project, or to examine any books or records. Any site visit,
observation or examination by Bondowner Representative will be solely for the purpose of
protecting and preserving the rights of Trustee and the Bondholders under this Agreement and the Mortgage. Neither the Borrower nor any other party is entitled to rely on any site visit,
observation or testing by Bondowner Representative, its agents or representatives. Bondowner
Representative owes no duty of care to protect the Borrower or any other party against, or to
inform the Borrower or any other party of, any adverse condition affecting the Project or the Project Premises, including any defects in the design or construction of any improvements on the Project Premises or the presence of any Hazardous Substances on the Project Premises. In
each instance, Bondowner Representative will give the Borrower reasonable notice before
entering the Project Premises and make reasonable efforts to avoid interfering with the
Borrower’s use of the Project and the Project Premises when exercising any of the rights granted in this Section.
(b) If Bondowner Representative in its reasonable judgment determines that any work or materials fail to conform to the approved Plans and Specifications or sound building
practices, or that they otherwise depart from any of the requirements of this Agreement,
Bondowner Representative may require the work to be stopped and withhold its consent to
disbursements until the matter is corrected. If this occurs, the Borrower must correct the work to Bondowner Representative’s reasonable satisfaction promptly, and if such corrective work is not sooner completed, upon three (3) days’ prior notice from Bondowner Representative to Borrower, halt all other work pending completion of such corrective work. No such action by Bondowner Representative will affect the Borrower’s obligation to complete the Facility in
accordance with the Pro Forma Schedule and on or before the Completion Date.
(4 Bondowner Representative has no duty to visit the construction site, to supervise or observe construction or to examine any books or records. Any site visit, observation or examination by Bondowner Representative is solely for the purpose of protecting Bondowner Representative’s rights and interests. No site visit, observation or examination by Bondowner Representative will impose any liability on Bondowner Representative or result in a waiver of any default of the Borrower or be a representation that the Borrower is or will be in compliance with the Plans and Specifications, that the construction is free from defective materials or workmanship, or that the construction complies with all applicable Requirements. Neither the
Borrower nor any other party is entitled to rely on any site visit, observation or examination by Bondowner Representative. Bondowner Representative owes no duty of care to protect the
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Borrower or any other party against, or to inform the Borrower or any other party of, any negligent or defective design or construction of the Facility or any other adverse condition affecting the Project.
Section 5.17. Protection Against Lien Claims. The Borrower must pay or otherwise
discharge promptly all claims and liens for labor done and materials and services furnished in
connection with the construction of the Facility. The Borrower has the right to contest in good
faith any claim or lien, provided that it does so diligently and without prejudice to Bondowner
Representative or delay in completing the Facility. Promptly upon Bondowner Representative’s request, the Borrower must provide a bond, cash deposit or other security satisfactory to
Bondowner Representative in the exercise of its reasonable judgment.
Section 5.18. Cooueration. The Borrower must cooperate at all times with Bondowner Representative, Issuer and/or Trustee in bringing about the timely completion of the Facility, and the Borrower must resolve all disputes arising during the work of construction in a manner
allowing work to proceed expeditiously. Further, from time to time the Issuer may direct the
Borrower to file such additional reports as the Issuer reasonably determines to be necessary to comply with State or federal laws or regulations in connection with administration of the Loan and operation of the Project hereunder and the Borrower agrees to file such reports promptly. Further, the Borrower covenants and agrees to execute such additional instruments as may be reasonably requested by the Trustee or the Issuer in order to carry out the provisions of this Agreement and the other Loan Documents and to perfect or give further assurances of any of
the rights granted or provided for in the Bond Documents and the Loan Documents.
Section 5.19. Income from Project. The Borrower must first apply all income from leases, and all other income derived from the Project, to pay costs and expenses then due and payable and associated with the ownership, maintenance, development, operation and
marketing of the Project, including all amounts then required to be paid under this Agreement,
before using or applying such income for any other purpose. Prior to the later to occur of the
Series A Conversion Date or the Series B Conversion Date, the Borrower may not distribute any
income to any of its partners or shareholders, allow any partner or shareholder to withdraw
capital or make any payments on indebtedness owed to any partner or shareholder other than (i) payments on unsecured loans to the Partnership by the Investor Limited Partner to the extent
such payments are funded from capital contributions of the Investor Limited Partner and
payments from the General Partner and (ii) reimbursement of expenses authorized under the Loan Documents.
Section 5.20. Payment of Expenses. The Borrower must pay Bondowner Representative’s reasonable costs and expenses incurred in connection with the making, disbursement and administration of the Loan. The Borrower must also pay any and all Bondowner Representative’s costs and expenses incurred in connection with any revisions,
extensions, renewals or “workouts” of the Loan, and in the exercise of any of Bondowner
Representative’s rights or remedies under this Agreement. Such costs and expenses include
charges for title insurance (including endorsements), filing, recording and escrow charges, fees for appraisal, architectural and engineering review, construction services and environmental services, mortgage taxes, document review and preparation, legal fees and expenses of
Bondowner Representative’s counsel and any other reasonable fees and costs for services, regardless of whether such services are furnished by Bondowner Representative’s employees or agents or independent contractors. The Borrower acknowledges that amounts payable under this Section are not included in any loan or commitment fees for the Loan. All such sums incurred by Bondowner Representative and not immediately reimbursed by the Borrower will be considered an additional loan to the Borrower secured by the Mortgage and bearing interest at the Default Rate; provided, however, that interest on any such advances will be included in
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gross income for federal income tax purposes. In addition, the Borrower must pay to Issuer all
fees and expenses of Issuer described in the Regulatory Agreement.
Section 5.21. Performance of Acts. Upon Bondowner Representative’s request, the Borrower must perform all acts necessary or advisable to perfect any lien or security interest provided for in the Loan Documents or to carry out the intent of the Loan Documents.
Section 5.22. Management Agreement. Bondowner Representative must review and approve any agreement providing for the management or operation of the Project, including any material modifications or amendments thereto, before the Borrower can enter into such
agreement.
Section 5.23. Tax Service Contract. Throughout the term of the Loan, at the Borrower’s
sole expense, Trustee must be furnished with a tax services contract issued by a tax reporting
agency satisfactory to it.
Section 5.24. Continued Perfection. The Borrower shall take such actions (including the
filing of UCC financing statements) as may be necessary to maintain the liens of the Trustee pursuant to the Mortgage and the Security Agreement as continuously perfected first priority liens on the property therein described.
ARTICLE VI
DAMAGE, DESTRUCTION AND CONDEMNATION
Section 6.1. DamaPe and Destruction. If the Bonds are Outstanding when the Project is
damaged or destroyed by fire or other casualty, the Borrower shall restore the Project if the
conditions contained in Section 6.4 are satisfied; otherwise, Borrower shall use any proceeds received in respect of such casualty to prepay the Loan in whole or in part.
Section 6.2. Condemnation. If the Bonds are Outstanding when the Project or any part thereof is taken by Condemnation, the Borrower shall restore the Project if the conditions contained in Section 6.4 are satisfied: otherwise Borrower shall use any proceeds received in respect of such Condemnation to prepay the Loan in whole or in part or take such other action,
as is required or permitted by the Mortgage and the other Loan Documents.
Section 6.3. Parties To Give Notice. In the case of material damage to or destruction of all or any part of the Project, the Borrower shall give prompt notice thereof to the Issuer, the Trustee and the Bondowner Representative in the manner prescribed by Section 12.2. In the case
of a taking or proposed taking of all or any part of the Project by Condemnation, the party
hereto upon which notice of such taking or proposed taking is served shall give prompt notice
thereof to the Issuer, the Trustee and the Bondowner Representative in the manner prescribed
by Section 12.2. Any such notice shall describe generally the nature and extent of such damage, destruction, taking or proposed taking.
Section 6.4. Conditions to Restoration. The following shall be conditions precedent to the obligation of the Borrower to restore the Project following the occurrence of a casualty or Condemnation:
(4 No Event of Default shall have occurred, and no event which, with the giving of notice or the passage of time, or both, would be an Event of Default shall have occurred and be continuing;
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(b) following:
Bondowner Representative shall have received and approved each of the
(i> Plans and specifications for the reconstruction of the Facility;
(ii) Facility: copies of all contracts and subcontracts for the reconstruction of the
(iii) if required by Bondowner Representative, payment and performance
bonds for the reconstruction of the Facility;
(iv) Assignments by Borrower to Trustee of each of the contracts and
subcontracts described in clause (ii), in form and content satisfactory to Bondowner Representative, and consents to such assignment, in form and content satisfactory to Bondowner Representative, duly executed by the contractors and subcontractors;
(VI a line item budget setting forth, in form and level of detail satisfactory to
Bondowner Representative, all costs of reconstruction of the Facility in accordance with the plans and specifications described in clause (i), above:
(4 All proceeds of casualty insurance policies or Condemnation awards, as the case
may be, shall have been received by the Trustee:
(4 To the extent that available proceeds received by Trustee are insufficient to pay
all costs of reconstruction of the Facility, Borrower shall have delivered the amount of any shortfall, as determined by Bondowner Representative, into the Borrower’s Funds Account established pursuant to Schedule D; and
(4 Bondowner Representative shall have determined that the Facility will, following
reconstruction, have a fair market value which is at least equal to its value prior to the casualty or Condemnation.
Section 6.5. Conditions to Disbursement of Proceeds. If all of the foregoing conditions
are satisfied, proceeds held by Trustee and funds in the Borrower’s Funds Account established pursuant to Schedule D shall be disbursed subject to the consent of Bondowner Representative, in the same manner and subject to the same conditions (including without limitation consent of Bondowner Representative to each disbursement), subject to adjustment to reflect the different nature of construction, as applied with respect to the initial disbursement of the proceeds of the Loan. When obtaining disbursements from the Project Fund established under the Indenture, the Borrower agrees to the conditions contained in, and agrees to comply with the procedures
set forth in Section 5.2 of the Indenture.
ARTICLE VII
BORROWER’S COVENANTS
Section 7.1. Covenant for the Benefit of the Bondholders. The Borrower recognizes the authority of the Issuer to assign its interest in and right to receive moneys receivable under this Agreement (other than the Unassigned Issuer’s Rights) to the Trustee as security for the payment of the principal of and interest and redemption premiums, if any, on the Bonds, and the payment of all Additional Charges. The Borrower hereby agrees to be bound by, and grants a security interest to, the Trustee in any right and interest the Borrower may have in sums held in the Funds described in Article 5 of the Indenture, pursuant to the terms and conditions thereof, to secure payment of the Bonds and payments made under the Loan Documents. Each
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of the terms and provisions of this Agreement is a covenant for the use and benefit of the Bondholders and the Bondowner Representative, so long as the Bonds shall remain Outstanding; but upon discharge of the Bonds in accordance with Article 7 of the Indenture and payment of all fees and charges of the Issuer, the Trustee, and any Paying Agent all references in this Agreement to the Bondowner Representative, the Bonds and the Bondholders shall be ineffective, and the Bondholders and the Bondowner Representative shall thereafter have no
rights hereunder, save and except those that shall have theretofore vested or that arise from
provisions hereunder or under the Regulatory Agreement which survive termination of this Agreement.
Section 7.2. Insoection and Access.
(1) The Borrower agrees that the Issuer, the Trustee and their duly authorized agents
shall have the right to examine and inspect during normal business hours, and for that purpose to enter upon, the Project, and shall also have such right of access thereto at reasonable times and under reasonable conditions and subject to the rights of tenants in possession as may be reasonably necessary to cause the Project to be properly maintained in accordance with Article 5 and in accordance with the applicable provisions of the other Loan Documents.
(2) The Borrower hereby covenants to execute, acknowledge and deliver all such
further documents, and do all such other acts and things as may be necessary in order to grant to the Issuer and the Trustee the rights of access and entry described herein and agrees that
such rights of access and entry shall not be terminated, curtailed or otherwise limited by any
assignment, lease or other transfer of the Project by the Borrower to any other person.
Section 7.3. Continuing Disclosure.
The Borrower covenants and agrees to take all actions required in order to comply with Rule 15~2-12 adopted under the Securities Exchange Act of 1934, as the same may be amended
from time to time, if, in the opinion of counsel to Bondowner Representative, such compliance is
required at any time while the Bonds are Outstanding in order to enable the Bondowner
Representative or any “participating underwriter” (within the meaning of Rule 15~2-12) to
satisfy its obligations under Rule 15~2-12.
Section 7.4. Indemnitv.
(1) The Borrower will pay, defend, and will protect, indemnify, and save the Trustee, the Issuer and each Holder of the Bonds (including without limitation Bondowner Representative), and the members of the governing body and staff, directors, officials, officers,
attorneys, agents and employees of each of them and any person who controls any of them within the meaning of the Securities Act of 1933 (for purposes of this Section 7.4 only, collectively, the “Indemnified Parties”) from and against all liabilities, losses, damages, costs, expenses (including, without limitation, reasonable attorneys’ fees, litigation and court costs,
amounts paid in settlement and amounts paid to discharge judgments), causes of action
(whether in contract, tort, or otherwise), suits, claims, demands and judgments of every kind,
character and nature whatsoever (collectively referred to herein as the “Liabilities”) directly or
indirectly arising from or relating to the Bonds, the loan of the proceeds of the Bonds, this Agreement, the Project or the operation thereof, the Mortgage, the Security Agreement, the
Regulatory Agreement, the Indenture or any document related to the issuance and sale of the Bonds, including, but not limited to, the following:
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(4 the Indenture and Regulatory Agreement or the execution or amendment thereof or the transactions contemplated thereby, including the issuance, sale, resale or remarketing of the Bonds or any of them;
04 any act or omission of the Borrower or any of its agents, contractors,
servants, employees or licensees in connection with the Loan or the Project, the
operation of the Project, or the condition, environmental or otherwise, occupancy, use,
possession, conduct or management of work done in or about, or from the planning,
design, acquisition, installation or construction of, the Project or any part thereof;
(4 any injury to or death of any person or damage to property in or upon the
Project or growing out of or connected with the use, non-use, condition or occupancy of
the Project or any part thereof;
(4 any lien or charge upon payments by the Borrower to the Issuer and the Trustee hereunder, or any taxes (including, without limitation, all ad valorem taxes and sales taxes), assessments, impositions and other charges imposed on the Issuer or the
Trustee in respect of any portion of the Project;
(4 violation by the Borrower of any agreement or condition of this
Agreement, the Regulatory Agreement or the Mortgage;
(0 violation by the Borrower of any contract, agreement or restriction relating to the Project;
0 violation by the Borrower of any law, ordinance or regulation affecting
the Project or any part thereof, or the ownership, occupancy or use thereof, including
without limitation 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;
04 the redemption, in whole or in part, of the Bonds;
(9 any statement, information or certificate furnished by the Borrower to the
Issuer which is misleading, untrue or incorrect in any material respect, including
without limitation any untrue statement or misleading statement or alleged untrue statement or alleged misleading statement of a material fact by the Borrower contained in any offering statement or document for the Bonds or any of the documents relating to the Bonds to which the Borrower is a party, or any omission or alleged omission from any offering statement or document for the Bonds of any material fact necessary to be
stated therein in order to make the statements made therein by the Borrower, in the light of the circumstances under which they were made, not misleading;
6) the Trustee’s acceptance or administration of the trust of the Indenture, or the exercise or performance of any of its powers or duties thereunder or under any of the documents relating to the Bonds to which it is a party;
04 any and all Liabilities directly or indirectly arising out of or resulting from construction of any improvements on the Project Premises, including any defective workmanship or materials;
(1) any failure to satisfy any requirements of any laws, regulations,
ordinances, governmental policies or standards, reports, subdivision maps or development agreements that apply or pertain to the Project or the Project Premises:
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(m) breach of any representation or warranty made or given by the Borrower to any of the Indemnified Parties or to any prospective or actual buyer of all or any portion of the Project; and
(4 any claim or cause of action of any kind by any party that any Indemnified Party is liable for any act or omission of the Borrower or any other person or entity in connection with the ownership, sale, operation or development of the Project.
(2) The Borrower also agrees to indemnify and hold harmless each of the Indemnified Parties from and against the Liabilities directly or indirectly arising from or relating to any fraud or misrepresentations or omissions by the Borrower or its agents occurring
during any proceedings of the Issuer relating to the issuance of the Bonds or pertaining to the
financial condition of the Borrower which, if known to the Bondholder(s) purchasing the Bonds,
might be considered a factor in their decision to purchase the Bonds.
(3) Nothing in Sections 7.4(l) and 7.4(2) shall be deemed to provide indemnification to an Indemnified Party with respect to Liabilities arising from the fraud, negligence, willful
misconduct or breach of contractual duty of such Indemnified Party.
(4) Promptly after receipt by an Indemnified Party of notice of the commencement
of any action or proceeding with respect to which indemnification is being sought hereunder,
such Indemnified Party will notify the Borrower of the commencement of such proceeding.
Receipt of such notification shall be a necessary condition precedent to the Borrower’s
indemnification obligation hereunder, but failure of the Borrower to receive such notification or defects in such notification will not relieve the Borrower from any liability to an Indemnified
Party which the Borrower may have otherwise. If the Borrower so elects, it may assume the
defense of such action or proceeding, including the employment of counsel reasonably
satisfactory to the Indemnified Party and will pay the fees and disbursements of such counsel. However, notwithstanding the foregoing, (i) if counsel for such Indemnified Person and counsel for the Borrower agree that (A) having common counsel to represent both the Borrower and the Indemnified Party would present a conflict of interest or (B) defenses are available to such Indemnified Party which are not available to the Borrower or (ii) if the Borrower fails to assume the defense of the action or proceeding in a timely manner, then such Indemnified Person may employ separate counsel to represent or defend it in any such action or proceeding and the
Borrower will pay the reasonable fees and disbursements of such counsel. However, in no
event shall the Borrower be liable for more than one counsel (in addition to any local counsel)
separate from its own counsel for the Indemnified Parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. In any action or proceeding the defense of which the Borrower
assumes, the Indemnified Party will have the right to participate in such litigation and to retain
its own counsel at such Indemnified Party’s own expense. No Indemnified Party shall settle
any complaint, claim, action, suit or other proceeding for which indemnification is being sought hereunder, without the prior consent of the Borrower.
(5) The Indemnified Parties, other than the Issuer, shall be considered to be third
party beneficiaries of this agreement for purposes of Section 7.4.
Notwithstanding any transfer of the Project to another owner in accordance with the
provisions of this 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 Bondowner Representative and the
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Issuer have consented to such transfer and to the assignment of the rights and obligations of the
Borrower hereunder in accordance with Section 12.20 hereof.
Anything to the contrary in any other Loan Document notwithstanding, (i) the provisions of this Section 7.4 are not secured by the Mortgage, and survive the termination of this Agreement, repayment of the Loan and foreclosure of the Mortgage or similar proceedings, final payment or defeasance of the Bond and (in the case of the Trustee) any resignation or removal, insofar as such indemnification relates to acts, omissions or claims arising from
Trustee’s services prior to such resignation or removal.
The obligations of the Borrower under this Section 7.4 are independent of any other contractual obligation of the Borrower to provide indemnity to the Indemnified Parties named herein, and the obligation of the Borrower to provide indemnity hereunder may not be
interpreted, construed or limited in light of any other separate indemnification obligation of the Borrower. Any Indemnified Party is entitled simultaneously to seek indemnity under this Section 7.4 and any other provision under which it is entitled to indemnity from the Borrower, provided, however, such Indemnified Party shall be entitled to only one recovery of indemnity for the same liabilities.
Section 7.5. [ReservedI.
Section 7.6. Keening Guarantor Informed. The Borrower must keep the Guarantor informed of the Borrower’s financial condition and business operations, the condition and all uses of the Project, including all changes in condition or use, and any and all other
circumstances that might affect the Borrower’s ability to pay or perform its obligations under
this Agreement.
Section 7.7. Status of Borrower.
(1) Throughout the term of this Agreement, the Borrower will maintain its existence
as a limited partnership organized under the laws of the State in good standing and qualified to
transact business in the State and will not wind up or otherwise dispose of all or substantially
all of its assets except as provided in the Mortgage and Section 5.2 of this Agreement.
(2) Notwithstanding the provisions of the Mortgage, the Borrower shall not effect a merger, consolidation or transfer if the result thereof would cause the interest on the Tax-
Exempt Bonds (in the hands of any person who is not a “substantial user” of the Project or a
“related person”) to become includable in gross income for federal income tax purposes,
(3) Upon any change in the status of the Borrower, by way of substitution, sale or otherwise, the Issuer, the Trustee and the Bondowner Representative shall be promptly informed and, if requested, the Borrower as newly constituted shall deliver to the Issuer, the Trustee and the Bondholders an instrument in form satisfactory to each of them affirming the liability of the Borrower hereunder, subject in all events to the terms and conditions of Section 11.13 hereof.
Section 7.8. Filing of Financing Statements. The Borrower agrees that it will, at its sole expense, file or cause to be filed, any financing statements or continuation statements required
or requested by the Bondowner Representative to perfect and preserve the security interest of
the Issuer and the Trustee in this Agreement and the payments to be made hereunder, as granted in the Indenture.
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Section 7.9. Proceedings Relating to a Determination of Taxability. If any action or proceeding is commenced which questions the exclusion of interest on the Tax-Exempt Bonds
from gross income under Section 103(a) of the Code or which might result in a Determination of
Taxability, the Borrower, the Issuer, the Trustee or the Bondholders may contest such action or Determination of Taxability. All reasonable costs of such contest shall be borne by the Borrower. No such action or proceeding shall be settled by the Borrower or the Trustee without the written consent of the Issuer and the Bondowner Representative, and no such action or proceeding shall be settled by the Issuer, the Trustee or the Bondowner Representative without the written consent of the Borrower.
Section 7.10. Financial Information. The Borrower must keep true and correct financial books and records reflecting the results of operations of the Project in accordance with generally accepted accounting principles consistently applied (or such other accounting method approved in writing by Bondowner Representative). Within one hundred twenty (120) days after the end of each of the Borrower’s fiscal years, the Borrower must deliver to Bondowner
Representative (i) a balance sheet and income statement for Borrower for and as of the end of
such fiscal year, and a statement of changes in Borrower’s financial condition occurring during
such fiscal year, audited by an independent certified public accountant, and (ii) a balance sheet
and income statement for the General Partner and Guarantor for and as of the end of such fiscal
year, and a statement of changes in financial condition occurring during such fiscal year for
General Partner and Guarantor, audited by an independent certified public accountant, in the case of Guarantor, and certified as true and correct by the chief financial officer of General
Partner (in the case of statements of General Partner), Also, the Borrower must deliver
promptly to Bondowner Representative quarterly balance sheets and income statements for
itself, General Partner, Guarantor and the Project if Bondowner Representative requests them. Following the Completion Date the Borrower must also comply with the requirements of Section 8.3. The Borrower must provide Bondowner Representative promptly with any
additional audited financial information that the Borrower or General Partner or Guarantor
may obtain, as well as signed copies of any tax returns and such other information as
Bondowner Representative may reasonably request concerning the affairs and properties of the Borrower, the General Partner or Guarantor. Copies of any and all such information shall be delivered to the Issuer upon request.
Section 7.11, Notices. The Borrower must notify the Issuer and the Bondowner
Representative promptly in writing of:
(4 Any litigation affecting the Borrower or General Partner or Guarantor wherein the amount in issue is in excess of $50,000, where the amount claimed is not fully covered by insurance:
04 Any written or oral communication the Borrower receives from any
governmental, judicial or legal authority giving notice of any claim or assertion that the Project Premises or Facility fail in any respect to comply with any of the Requirements or any other applicable governmental law:
(c) Any material adverse change in the physical condition of the Project or the
Project Premises (including any damage suffered as a result of earthquakes, floods or other natural disasters):
(4 Any material adverse change in the financial condition or operations of the
Borrower, General Partner or Guarantor or any change in the management of the Borrower, General Partner or Guarantor:
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(4 Any default by the Contractor or any subcontractor, material supplier or surety
which could have a material adverse effect on the Borrower or any General Partner or the Project, or any material adverse change in the financial condition or operations of any of them which could have a material adverse effect on the Borrower or the Project;
HI All notices or other documents or communications the Borrower receives from tax or tax credit allocation authorities or from the Issuer or which the Borrower gives to such entities with regard to or relating in any way to the low income housing tax credits allocated to
the Project (the “Tax Credits”); and
k) Any material adverse change in the Borrower’s ability to timely perform any of its obligations under any of the Loan Documents.
Section 7.12. Notice of Change. The Borrower shall give Bondowner Representative prior written notice of any change in:
(4 the location of its place of business or its chief executive office if it has more than one place of business; and
b) the Borrower’s name or business structure.
Unless otherwise approved by Bondowner Representative in writing, the Borrower agrees that all Mortgaged Property that consists of personal property (other than the books and
records) will be located at the Project and that all books and records will be located at the
Borrower’s place of business or chief executive office if the Borrower has more than one place of
business.
Section 7.13. Negative Covenants. Without Bondowner Representative’s prior written consent, the Borrower may not:
(4 engage in any business activities substantially different from the Borrower’s present business:
b) liquidate or dissolve the Borrower’s business;
(cl lease or dispose of (other than pursuant to leases allowed by this Agreement) all
or a substantial part of the Borrower’s business or the Borrower’s assets:
(4 enter into any consolidation, merger, pool, joint venture, syndicate or other
combination.
Section 7.14. Tax Status of Tax-Exempt Bonds. The Borrower hereby covenants, represents and agrees as follows: (a) that the Borrower will not take or permit any action to be taken that would adversely affect the exclusion from gross income for federal income tax purposes of the interest on the Tax-Exempt Bonds and, if it should take or permit any such action, the Borrower will take all lawful actions to rescind such action promptly upon having knowledge thereof; and (b) that the Borrower will take such action or actions, including amending the Loan and this Agreement, as determined reasonably necessary in the opinion of
Bond Counsel to comply fully with all applicable rules, rulings, policies, procedures, regulations or other official statements promulgated or proposed by the United States Department of the Treasury or the Internal Revenue Service under the Code. The Borrower further covenants and agrees that it will direct all investments in compliance with the Code.
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The Borrower covenants and agrees to timely perform all of the obligations of Borrower set
forth in the Owner Tax Certificates and Section 148 of the Code.
Section 7.15. Incorporation of Owner Tax Certificates. The covenants, representations, warranties and agreements of the Borrower set forth in the Owner Tax Certificates are incorporated by reference herein as if fully set forth herein.
Section 7.16. Loss of Tax Exclusion. The Borrower understands that the interest rates
provided under this Agreement with respect to the Tax-Exempt Bonds are based on the
assumption that interest income paid on the Tax-Exempt Bonds and received by the
Bondholders will be excludable from the Bondholders’ gross income under Section 103 of the Code and applicable state law. In the event that
(i) the Borrower receives notice from Bondowner Representative that Bondowner
Representative has discovered any facts, actions or failures to act by the Borrower that would cause the Tax-Exempt Bonds not to be treated as tax-exempt (unless Borrower provides to Bondholders, within thirty (30) days after Borrower’s receipt of such notice from Bondowner Representative, an opinion from a nationally recognized bond counsel firm, acceptable to the Issuer, the Bondholders and the Borrower, that notwithstanding any facts, actions or failures to act by Borrower, interest on the Tax-Exempt Bonds will
be excludable from the Bondholders’ gross income under Section 103 of the Code and
applicable state law), or
(ii) any Bondholder receives notice from the Internal Revenue Service or other
government agency that interest payable on the Tax-Exempt Bonds is not tax-exempt, or
that the Internal Revenue Service is challenging the tax-exempt status of the interest on
the Tax-Exempt Bonds,
then the interest rate on the Notes and on all obligations under this Agreement (other than those to which the Default Rate applies) shall be increased to the after-tax equivalent rate (to be calculated by dividing the interest rate on the Tax-Exempt Bonds, as specified in the Indenture,
by one minus the combined applicable state (if any) and federal marginal tax rates of such
Bondholder).
The interest rates will be increased both prospectively and retroactively to the date on which such loss of the tax exemption on the Tax-Exempt Bonds shall be applicable, and the Borrower shall pay to the Bondholders promptly upon demand any interest due retroactively. The Borrower shall also indemnify, defend and hold Bondowner Representative and Issuer harmless from any penalties, interest expense or other costs, including reasonable attorneys’
fees (including all allocated time and charges of Bondowner Representative’s and Issuer’s “in-
house” and “outside” counsel) and accountants’ costs, resulting from any dispute with the
Internal Revenue Service concerning the proper tax treatment of the Tax-Exempt Bonds and the interest payable to any Bondholder on the Tax-Exempt Bonds. The obligations of the Borrower under this paragraph shall survive termination of this Agreement and repayment of the Loan.
If, following any increase in interest rates pursuant to this Section 7.16, a final determination is made, to the satisfaction of Bondowner Representative, that interest paid on the Tax-Exempt Bonds is excludable from the Bondholders’ gross income under Section 103 of the Code and applicable state law, the Bondholders shall promptly refund to the Borrower any additional interest paid by the Borrower pursuant to this Section 7.16.
Section 7.17. Tax Credits. The Borrower promises to keep each of the following covenants relating to the Tax Credits:
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(4 To observe and perform all obligations imposed on the Borrower in connection with the Tax Credits, including the obligation to have the Project “placed in service” (within the
meaning given in Section 42 of the Code) in a timely manner; and to operate the residential
units of the Project or to use the Borrower’s best efforts to cause the appropriate parties to operate the same in accordance with all statutes and regulations governing the Tax Credits;
M To preserve at all times the allocation and availability of the Tax Credits as collateral for Bondowner Representative’s benefit and security;
(c) Not to release, forego, alter, amend or modify its rights to the Tax Credits without Bondowner Representative’s prior written consent, which Bondowner Representative
may give or withhold in Bondowner Representative’s reasonable discretion;
(4 Not to execute any residential lease of all or any portion of the Project not complying fully with all requirements and regulations governing the Tax Credits, except with Bondowner Representative’s prior written consent, which Bondowner Representative may give
or withhold in Bondowner Representative’s sole discretion;
(4 To cause to be kept all records, and cause to be made all elections and certifications, pertaining to the number and size of apartment units, occupancy thereof by
tenants, income levels of tenants, set-asides for low-income tenants, and any other matters now
or hereafter required to qualify for and maintain the Tax Credits in connection with the low-
income occupancy of the Project;
(0 To comply with the appropriate minimum low-income set-aside requirements under the Code or applicable federal regulations (“Federal Laws”), and all laws and regulations of the State (“State Laws”), if any, applicable to the creation, maintenance and continued availability of the Tax Credits:
w To certify compliance with the set-aside requirement and report the dollar amount of qualified basis and maximum applicable percentage, date of placement in service and any other information required for the Tax Credits at such time periods as required by Federal Laws, or State Laws, if any, for such Tax Credits;
04 To set aside the appropriate number of units for households with incomes
meeting the required standards of the median income to qualify for the Tax Credits (as determined pursuant to Section 42 of the Code and/or State Laws, if any), adjusted for family size, and to operate and maintain all such units as “low-income units” qualifying for the Tax
Credits under Section 42 (i) (3) of the Code and/or State Laws; and
0) To exercise good faith in all activities relating to the operation and maintenance
of the Project in accordance with the requirements of Federal Laws and State Laws, if any.
Section 7.18. Payment of Rebate Amounts. The Borrower covenants and agrees that it will hire an Arbitrage Consultant acceptable to the Issuer to calculate the rebate amount as
required under the Indenture and will provide a copy of each rebate report to the Bondowner
Representative and the Trustee. The Borrower further covenants and agrees as follows:
6) Delivery of Documents and Money on Computation Dates, The Borrower shall cause the Arbitrage Consultant to deliver to the Trustee, within fifty-five (55) days after the end of each fifth Computation Year, commencing , 200- (an “Installment Computation
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Date”) and within fifty-five (55) days after payment in full of the Bonds (the “Final Computation
Date”) :
(4 a statement, signed by the Arbitrage Consultant and the general partner of the Borrower, stating the Rebate Amount as of such date; and
09 (1) if such date is an Installment Computation Date, an amount that, together with any amount then held for the credit of the Rebate Fund, is equal to at least
ninety percent (90%) of the Rebate Amount as of such Installment Computation Date, less any “previous rebate payments” made to the United States (as that term is used in Section 1.148-3(f) (1) of the Regulations), or (2) if such date is the Final Computation Date, an amount that, together with any amount then held for the credit of the Rebate Fund, is equal to the Rebate Amount as of such Final Computation Date, less any
“previous rebate payments” made to the United States (as that term is used in Section
1.148-3 (f) (1) of the Regulations); and
(4 an Internal Revenue Service Form 8038-T properly signed and completed
as of such date.
(ii)
any date
Correction of Underpayment. If the Borrower shall discover or be notified as of
6) that any amount required to be paid to the United States pursuant to this Section and Section 5.6 of the Indenture has not been paid as required: or
03 that any payment paid to the United States pursuant to this Section and
Section 5.6 of the Indenture shall have failed to satisfy any requirement of Section 1.148-
3 of the Regulations (whether or not such failure shall be due to any default by the Borrower or the Trustee),
the Borrower shall
(W deliver to the Trustee (for deposit to the Rebate Fund) and cause the
Trustee to pay to the United States from the Rebate Fund (I) the Rebate Amount that the
Borrower failed to pay, plus any interest, specified in Section 1.148-3(h)(2) of the Regulations, if such correction payment is delivered to and received by the Trustee within 175 days after such discovery or notice, or (II) if such correction payment is not delivered to and received by the Trustee within 175 days after such discovery or notice, the amount determined in accordance with Clause (I) of this subparagraph (X) plus the
fifty percent (50%) penalty required by Section 1.148-3(h)(l) of the Regulations; and
(V deliver to the Trustee an Internal Revenue Service Form 8038-T properly signed and completed as of such date.
Notwithstanding any other actions taken pursuant to this paragraph (ii), the Borrower shall take such steps as are necessary to prevent the Bonds from becoming “arbitrage bond,” within the meaning of Section 148 of the Code.
(iii) Records. The Borrower shall retain all of its accounting records relating to the Funds and Accounts established under the Indenture and all calculations made in preparing the statements described in this Section for at least six years after the date the last Bond is discharged.
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(iv) Fees and Expenses. The Borrower agrees to pay (to the extent not paid pursuant to Section 4.2) all of the fees and expenses of the Arbitrage Consultant, which may be a law firm, a certified public accountant and/or any other necessary consultant employed by the Borrower or the Trustee in connection with computing the Rebate Amount.
In the event that the Trustee receives written notice from the Borrower, the Bondowner Representative or the Issuer that the Borrower has failed to employ a Arbitrage Consultant, the Trustee in consultation with and with the approval of the Bondowner Representative and the Issuer, will use its best efforts to hire a Arbitrage Consultant to calculate the rebate amount as required under the Indenture, provided that such a Arbitrage Consultant can be employed for
amounts which do not exceed on an annual basis, the moneys that are and will be then available
under the Indenture to pay the Arbitrage Consultant’s Annual Fee, or from other moneys furnished to the Trustee; in no event shall the Trustee be required to risk or expend its own
moneys to employ a Arbitrage Consultant.
Section 7.19. Rental Project. The Borrower represents, covenants and warrants that each Unit in the Project (except any property management Unit), once available for occupancy, will
be rented or available for rental on a continuous basis to members of the general public, subject
to the limitations contained in this Agreement and in the Regulatory Agreement, and subject to
the requirements of Section 42 of the Code, throughout the Qualified Project Period.
Section 7.20. Certification as to Qualified Proiect Period. The Borrower shall provide to the Bondowner Representative, the Administrator and the Trustee a certificate certifying (i) within 90 days thereof, the date on which ten percent (10%) of the Units are occupied; and (ii)
within 90 days thereof, the date on which fifty percent (50%) of the Units are occupied.
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ARTICLE VIII PRO FORMA SCHEDULE; LEASES
Section 8.1. Pro Forma Schedule.
(4 The Borrower has prepared and Bondowner Representative has approved the
Pro Forma Schedule attached as Schedule E, and Bondowner Representative will rely upon the Pro Forma Schedule until the later to occur of the Series A Conversion Date or the Series B Conversion Date.
(b) The Borrower understands and acknowledges that Bondowner Representative,
in entering into this Loan Agreement, has relied on the Borrower’s projections as set forth in the
Pro Forma Schedule. The Borrower must use its best efforts to meet the projections of the
currently approved Pro Forma Schedule.
(4 Prior to the later to occur of the Series A Conversion Date or the Series B
Conversion Date, whenever the Borrower knows or believes there has been or will be a material
failure to meet the projections of the Pro Forma Schedule, the Borrower must submit to
Bondowner Representative for its approval a revised Pro Forma Schedule in the form of
Schedule E. Also, whenever Bondowner Representative in its reasonable judgment determines
that there has been or will be a material failure to meet such projections, Bondowner
Representative may make written demand on the Borrower to submit a revised Pro Forma Schedule to Bondowner Representative for its approval. The Borrower must submit a revised Pro Forma Schedule to Bondowner Representative within fifteen (15) days after any such
demand.
(4 Any revised Pro Forma Schedule must identify any changes in any projections or other economic terms and be accompanied by the Borrower’s statement of reasons for the
changes. The Borrower must execute such documentation and provide such endorsements to
Bondowner Representative’s title insurance policy as Bondowner Representative may
reasonably require in connection with the revised Pro Forma Schedule. Bondowner
Representative need consent to no further disbursements unless and until it approves the revised Pro Forma Schedule. Bondowner Representative reserves the right to approve or disapprove any Pro Forma Schedule in its reasonable judgment. The most recently approved Pro Forma Schedule supersedes all previously approved Pro Forma Schedules.
Section 8.2. Use of the Project and Lease Approval.
(4 The Borrower must not change its intended use of the Project without
Bondowner Representative’s prior written approval.
Co) Bondowner Representative must approve the Borrower’s standard form of residential lease or rental agreement prior to its use by the Borrower. The Borrower may not materially modify the approved standard form residential lease without Bondowner Representative’s prior written consent, together with the approval of all other parties whose consent is required.
The Borrower may enter into residential leases (and amendments thereto) in the ordinary course of business with bona fide third party residential tenants if the Borrower uses
the approved standard form residential lease and:
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N Within fifteen (15) days after Bondowner Representative’s written request
therefor, Bondowner Representative receives a copy of the executed lease (accompanied
by all financial information and certificates obtained by the Borrower pertaining to the tenant);
(ii) The Borrower, acting in good faith and exercising due diligence, has
determined that the tenant qualifies as a low-income family for purposes of meeting the
requirements for obtaining Tax Credits;
(iii) The lease meets the standards required by Section 42 of the Code:
(iv) The lease conforms to the projections of the Pro Forma Schedule and reflects an arms-length transaction;
(VI The lease does not affect more than one (1) residential unit within the
Facility; and
(vi) The lease, together with all leases previously executed, does not cause the
Loan to become “out of balance.” The Borrower acknowledges that the Loan may
become “out of balance” if the landlord’s aggregate economic obligations under the
leases exceed, or the net operating income from the Project fails to meet, the Borrower’s projections for such obligations, thereby increasing the cost or decreasing the value of
the Project.
(4 The prior written approval of Bondowner Representative in the exercise of its
sole discretion will be required in connection with any Lease that does not comply with the
foregoing provisions of this Section 8.2. If the Borrower at any time fails to comply with the requirements of this Section 8.2, or if any Event of Default has occurred, Bondowner Representative may make written demand on the Borrower to submit all future leases for
Bondowner Representative’s approval prior to execution. The Borrower must comply with any
such demand by Bondowner Representative.
Section 8.3. Leasing Information and Documents. Following the Completion Date and
prior to the later to occur of the Series A Conversion Date or the Series B Conversion Date,
within 30 days after the end of each month, the Borrower must deliver to Bondowner Representative a monthly rent roll and operating statement for the Project. Commencing with
the second anniversary of the Completion Date or with the later to occur of the Series A Conversion Date or the Series B Conversion Date, if earlier, the Borrower must deliver such rent rolls and operating statements quarterly within 30 days after the end of each calendar quarter.
The Borrower must promptly deliver to Bondowner Representative such tenant income
certificates, leasing schedules and reports and other leasing information as Bondowner Representative from time to time may request. In addition, the Borrower must obtain and deliver to Bondowner Representative promptly such estoppel certificates and subordination and attornment agreements executed by such non-residential tenants in such forms as Bondowner Representative from time to time may require.
Section 8.4. Purnose and Effect of Lease Approval. Bondowner Representative’s approval of any lease is for the sole purpose of protecting Bondowner Representative’s and Issuer’s security and preserving the rights of Issuer, Trustee and the Bondholders under this Agreement and the Mortgage. No approval by Bondowner Representative will result in a waiver of any default of the Borrower. In no event will Bondowner Representative’s approval of any lease be a representation of any kind with regard to the lease, its enforceability or the financial capacity of any tenant or guarantor.
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Section 8.5. Landlord’s Obligations. The Borrower must perform all obligations required to be performed by it as landlord under any lease or sublease affecting any part of the Project Premises or any space within the Facility.
Section 8.6. Income from Proiect. The Borrower must first apply all income derived from the Project, including all income from leases, to pay costs and expenses associated with the
ownership, maintenance, operation and leasing of the Project, including all amounts then
required to be paid under the Loan Documents, before using or applying such income for any other purpose. No such income may be distributed or paid to any partner, shareholder unless all costs and expenses then due have been paid in full.
ARTICLE IX
HAZARDOUS SUBSTANCES
Section 9.1. Definition of Hazardous Substance. For purposes of this Agreement, the
term “Hazardous Substance” means and includes any substance, material or waste, including
asbestos, petroleum and petroleum products (including crude oil), that is or becomes
designated, classified or regulated as “toxic” or “hazardous” or a “pollutant,” or that is or becomes similarly designated, classified or regulated, under any federal, state or local law, regulation or ordinance, but does not include any such substance that is a customary and ordinary household, cleaning, office, swimming pool or landscape maintenance product used on the Project Premises by Borrower or any tenant or agent of Borrower, or customary
construction materials used during the course of construction of Improvements on the Project
Premises by Borrower or Contractor, provided such use is in accordance with applicable hazardous material laws.
Section 9.2. Representation and Warrantv Regarding Hazardous Substances. Before signing this Agreement, Borrower researched and inquired into the previous uses and owners of the Project and the Project Premises and obtained reports and studies described in Schedule
L attached hereto, each of which (collectively, the “Hazardous Substances Reports”) has been
delivered to Bondowner Representative. Based on that due diligence, Borrower represents and
warrants that, except as Borrower has disclosed to Bondowner Representative in writing and in the Hazardous Substances Reports prior to the execution of this Agreement, to the best of Borrower’s knowledge, (i) no Hazardous Substance has been disposed of, or released to or from,
or otherwise now exists in, on, under or around the Project Premises at a level of concentration
that results in the Hazardous Substance being subject to regulation, control, removal or
restriction by any governmental agency under any law, regulation or ordinance, and (ii) no aboveground or underground storage tanks are now or have ever been located on or under the Project Premises.
Section 9.3. Compliance Regarding Hazardous Substances. Borrower has complied, and
will comply and cause all tenants and any other persons who may come upon the Project
Premises to comply, with all federal, state and local laws, regulations and ordinances governing
or applicable to Hazardous Substances, including those requiring disclosures to prospective and actual buyers or tenants of all or any portion of the Project or the Project Premises. Borrower
will not install or allow to be installed any aboveground or underground storage tanks on the
Project Premises. Borrower must comply with the recommendations of any qualified
environmental engineer or other expert engaged by Borrower or Bondowner Representative
with respect to the Project and the Project Premises.
Section 9.4. Notices Regarding Hazardous Substances. Borrower must promptly notify
Bondowner Representative in writing (i) if it knows, suspects or believes there may be any
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Hazardous Substance in or around any part of the Project Premises, any improvements
constructed on the Project Premises, or the soil, groundwater or soil vapor on or under the
Project Premises at a level of concentration that results in the Hazardous Substance being
subject to regulation, control, removal or restriction by any governmental agency under any law, regulation or ordinance, or that Borrower, the Project or the Project Premises may be subject to any threatened or pending investigation by any governmental agency under any law, regulation or ordinance pertaining to any Hazardous Substance, and (ii) of any claim made or threatened by any person, other than a governmental agency, against Borrower arising out of or resulting from any Hazardous Substance being present or released in, on or around any part of the Project Premises, any Improvements constructed on the Project Premises or the soil,
groundwater or soil vapor on or under the Project Premises (any of the matters described in
clauses (i) and (ii) above a “Hazardous Substances Claim”).
Section 9.5. [Reserved]
Section 9.6. Site Visits, Observations and Testing.
(4 Bondowner Representative, its parent, subsidiary and any affiliated companies, the Trustee, the Issuer, any purchasers of the Project at any foreclosure sale or from Bondowner Representative or any of its affiliates, and the officers, directors, employees and agents of each
of them (for purposes of Sections 9.5 through 9.10 only, each individually, an “Indemnified
Party,” and all collectively, the “Indemnified Parties”), have the right at any reasonable time to
enter and visit the Project for the purposes of observing the Project, taking and removing soil or
groundwater samples and conducting tests on any part of the Project Premises. The Indemnified Parties have no duty, however, to visit or observe the Project or to conduct tests,
and no site visit, observation or testing by any Indemnified Party imposes any liability on any
Indemnified Party. In no event will any site visit, observation or testing by any Indemnified
Party be a representation that Hazardous Substances are or are not present in, on or under the Project Premises, or that there has been or will be compliance with any law, regulation or ordinance pertaining to Hazardous Substances or any other applicable governmental law. Neither Borrower nor any other party is entitled to rely on any site visit, observation or testing by any Indemnified Party. The Indemnified Parties owe no duty of care to protect Borrower or
any other party against or to inform Borrower or any other party of any Hazardous Substances or any other adverse condition affecting the Project or the Project Premises. Any Indemnified
Party will give Borrower reasonable notice before entering the Project. The Indemnified Party
will make reasonable efforts to avoid interfering with Borrower’s use of the Project and the
Project Premises in exercising any rights provided in this Section,
04 Without limiting the generality of the foregoing, Borrower agrees that the
Indemnified Parties have the same right, power and authority to enter and inspect the Project as are provided to a secured lender in California under Section 2929.5 of the California Civil Code and the right to appoint a receiver to enforce this right to enter and inspect the Project to the extent such authority is provided under California law, including the authority given to a
secured lender in California under Section 564(c) of the California Code of Civil Procedure.
Borrower must pay all costs and expenses incurred by an Indemnified Party in connection with
any inspection or testing conducted in accordance with this Section. The results of all
investigations conducted and/or reports prepared by or for any Indemnified Party must at all
times remain the property of the Indemnified Party and under no circumstances will any
Indemnified Party have any obligation whatsoever to disclose or otherwise make available to
Borrower or any other party the results or any other information obtained by any of them in connection with the investigations and reports. Notwithstanding the foregoing, the
Indemnified Parties hereby reserve the right, and Borrower hereby expressly authorizes any Indemnified Party, to make available to any party (including any governmental agency or
42
53
authority and any prospective bidder at any foreclosure sale of the Project) any and all reports,
whether prepared by any Indemnified Party or prepared by Borrower and provided to any Indemnified Party (collectively, “Environmental Reports”) that any Indemnified Party may have with respect to the Project. Borrower consents to the Indemnified Parties’ notifying any party (either as part of a notice of sale or otherwise) of the availability of any or all of the Environmental Reports and the information contained therein. Borrower acknowledges that the Indemnified Parties cannot control or otherwise assure the truthfulness or accuracy of the Environmental Reports and that the release of the Environmental Reports, or any information
contained therein, to prospective bidders at any foreclosure sale of the Project may have a
material and adverse effect upon the amount that a party may bid at such sale. Borrower agrees that the Indemnified Parties have no liability whatsoever as a result of delivering any or all of the Environmental Reports or any information contained therein to any third party, and Borrower hereby releases and forever discharges the Indemnified Parties from any and all
claims, damages, or causes of action, arising out of, connected with or incidental to the
Environmental Reports or the delivery thereof.
Section 9.7. Remedial Work. Borrower must promptly undertake any and all remedial work (“Remedial Work”) in response to Hazardous Substances Claims to the extent required by governmental agency or agencies involved or as recommended by prudent business practices, if such standard requires a higher degree of remediation, and in all events to minimize any
impairment to Trustee’s security under the Loan Documents. All Remedial Work must be conducted (i) in a diligent and timely fashion by licensed contractors acting under the supervision of a consulting environmental engineer; (ii) pursuant to a detailed written plan for the Remedial Work approved by all public or private agencies or persons with a legal or
contractual right to such approval: (iii) with insurance coverage pertaining to liabilities arising
out of the Remedial Work as is then customarily maintained with respect to such activities: and (iv) only following receipt of any required permits, licenses or approvals. The selection of the
Remedial Work contractors and consulting environmental engineer, the contracts entered into
with such parties, any disclosures to or agreements with any public or private agencies or
parties relating to Remedial Work and the written plan for the Remedial Work (and any
changes thereto) is subject to the prior written approval of Bondowner Representative, which
may not be unreasonably withheld or delayed.
Section 9.8. Secured Obligation. The obligations and rights of the parties under this
Article are secured by the Mortgage until the first to occur of full and final repayment of the
Loan or the transfer of title to all or any part of the Project at a foreclosure sale under the
Mortgage, either pursuant to judicial decree or the power of sale contained in the Mortgage or by deed in lieu of such foreclosure (any of the foregoing transfers being referred to as a “Foreclosure Transfer”). The parties’ obligations and rights under this Article continue in full force and effect after the full and final payment of the Loan or a Foreclosure Transfer, as the case may be, but (i) in the case of a full and final payment of the Loan, Borrower’s obligations under this Article are thereafter limited to the indemnification obligations of Sections 9.9 and 9.10 as to Indemnified Costs (as defined below) arising out of or as a result of events prior to the
full and final payment of the Loan, and (ii) in the case of a Foreclosure Transfer, the obligations
do not include the obligation to reimburse any Indemnified Party for diminution in value of the Project resulting from the presence of Hazardous Substances on the Project Premises before the
date of the Foreclosure Transfer if, and to the extent that the Indemnified Party recovers on a
deficiency judgment including compensation for such diminution in value; provided, however,
that nothing in this sentence impairs or limits an Indemnified Party’s right to obtain a judgment in accordance with applicable law for any deficiency in recovery of all obligations that are secured by the Mortgage, including the Notes. As used in this Agreement, the term
“Indemnified Costs” means all actual or threatened liabilities, claims, actions, causes of action, judgments, orders, damages (including foreseeable and unforeseeable consequential damages),
43
costs, expenses, fines, penalties and losses (including sums paid in settlement of claims and all
consultant, expert and legal fees and expenses of Trustee’s and Bondowner Representative’s counsel), including those incurred in connection with any investigation of site conditions or any clean-up, remedial, removal or restoration work (whether of the Project, the Project Premises or any other property), or any resulting damages, harm or injuries to the person or property of any third parties or to any natural resources.
Section 9.9. Indemnity Regarding Hazardous Substances. Borrower indemnifies, defends and holds the Indemnified Parties harmless from and against any and all Indemnified Costs directly or indirectly arising out of or resulting from any Hazardous Substance being present or released in, on or around any part of the Project Premises, or in the soil, groundwater or soil vapor on or under the Project Premises, including:
(4 any claim for such Indemnified Costs asserted against any Indemnified Party by any federal, state or local governmental agency, including the United States Environmental
Protection Agency and the California Department of Health Services and all of the environmental regulatory authorities of the State, and including any claim that any Indemnified Party is liable for any such Indemnified Costs as an “owner” or “operator” of the Project Premises under any law relating to Hazardous Substances; and
04 any claim for such Indemnified Costs asserted against any Indemnified Party by any person other than a governmental agency, including (i) any person who may purchase, lease or sublease all or any portion of the Project or the Project Premises from Borrower, from any Indemnified Party or from any other purchaser or lessee, (ii) any person who may at any
time have any interest in all or any portion of the Project or the Project Premises, (iii) any person
who may at any time be responsible for any clean up costs or other Indemnified Costs relating
to the Project or the Project Premises, and (iv) any person claiming to have been injured in any
way as a result of exposure to any Hazardous Substance: and
(4 any Indemnified Costs incurred by any Indemnified Party in the exercise by the
Indemnified Party of its rights and remedies under this Agreement: and
(4 any Indemnified Costs incurred by any Indemnified Party as a result of currently
existing conditions in, on or around the Project or the Project Premises, whether known or
unknown by Borrower or the Indemnified Parties at the time this Agreement is executed, or attributable to the acts or omissions of Borrower, any of Borrower’s tenants, or any other person
in, on or around the Project or the Project Premises with the consent or under the direction of
Borrower and
(4 Borrower and the Indemnified Parties intend that, to the extent Indemnified
Costs are not recoverable under Section 736(a) of the California Code of Civil Procedure, Indemnified Costs may be otherwise recoverable under the law of the State of California, as provided in Section 736(d) of the Code of Civil Procedure.
Section 9.10. Defense of Indemnified Parties. Upon demand by any Indemnified Party, Borrower must defend any investigation, action or proceeding involving any Indemnified Costs that is brought or commenced against any Indemnified Party, whether alone or together with Borrower or any other person, all at Borrower’s own cost and by counsel approved by the Indemnified Party. In the alternative, any Indemnified Party may elect to conduct its own defense at Borrower’s expense.
Section 9.11. Remedies Upon Default.
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(4 In addition to any other rights or remedies which the Trustee or Bondowner Representative may have under this Agreement, at law or in equity, upon the occurrence of an Event of Default under this Agreement, the Trustee and Bondowner Representative may (i)
pursue any remedies available to them under applicable law including without limitation California Code of Civil Procedure Sections 726.5 and 736, and/or (ii) do or cause to be done whatever is necessary to cause the Project to comply with any and all laws, regulations and ordinances governing or applicable to Hazardous Substances, and any other applicable law, rule, regulation, order or agreement, and the cost thereof will become immediately due and
payable upon demand by the Trustee or Bondowner Representative, and if not paid when due
will accrue interest at the interest rate applicable to the Series A Bonds until paid. Without limiting any of the remedies provided in the Loan Documents, Borrower acknowledges and agrees that (i) the provisions of this Article are environmental provisions, as that term is defined in Section 736(f)(2) of the California Code of Civil Procedure, made by Borrower relating to the real property security; (ii) Borrower’s failure to comply with the terms of this Agreement is a breach of contract giving the Trustee (on direction from the Bondowner Representative) and
Bondowner Representative the right to enforce monetary and other remedies provided under
Section 736 of the California Code of Civil Procedure (“Section 736”); and (iii) an action by
Bondowner Representative for damages or enforcement of this Agreement does not constitute an action within the meaning of Section 726(a) of the California Code of Civil Procedure or constitute a money judgment for deficiency or a deficiency judgment within the meaning of
Sections 580a, 580b, 580d or 726(b) of the California Code of Civil Procedure, or other applicable
law.
(b) Borrower hereby acknowledges and agrees that any amounts realized by the
Trustee or Bondowner Representative by reason of the following may be applied to pay the obligations secured by the Mortgage prior to being applied to pay Borrower’s obligations to reimburse the Trustee or Bondowner Representative for costs and expenses, including those incurred by the Trustee or Bondowner Representative in enforcing its rights and remedies
under the provisions of this Article: (i) any payments made pursuant to any Loan Document
(other than payments made to the Trustee or Bondowner Representative for reimbursement of costs and expenses or for enforcement of its rights and remedies, under the provisions of this Article); (ii) any foreclosure of the Mortgage or the other documents evidencing or securing the Loan (including any amounts realized by reason of any credit bid in connection with any such foreclosure); (iii) any conveyance in lieu of foreclosure; (iv) any other realization upon any
security for the Loan: (v) any recoveries against Borrower personally (except for recoveries against Borrower for reimbursement of costs and expenses or enforcement of the Trustee’s or
Bondowner Representative’s rights and remedies under this Article); and (vi) any recoveries
against any person or entity other than Borrower (including Guarantor) to the maximum extent
permitted by applicable law.
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ARTICLE X
PREPAYMENT; BORROWER’S OPTIONS
Section 10.1. Preoavment.
(4 Borrower may prepay principal on the Loan subject to Section 10.1 (b), below, in
whole or in part on any date by transmitting funds directly to the Trustee for deposit in the Bond Fund, in addition to amounts, if any, otherwise required at that time pursuant to this Agreement, and direct that said money be utilized by the Trustee as provided in subsection (d) below. Nothing in this Section 10.1 shall require the payment of any Prepayment Premium in connection with the defeasance to maturity of any Bonds pursuant to Section 7.1(l) (B) of the
Indenture.
04 Borrower may prepay principal on the Loan, and shall prepay principal on the
Loan in each case that the Bonds are subject to extraordinary redemption or purchase or mandatory redemption or purchase (the amount of the prepayment shall equal the principal of
the Bonds so required to be redeemed or purchased) including any prepayment resulting from receipt of proceeds of casualty insurance or Condemnation awards, or from acceleration of the
Loan, only subject to the following terms and conditions:
(1) At any time prior to the date which is 30 days prior to the Series A Conversion Date or the Series B Conversion Date, as applicable, Borrower may prepay the Loan in whole or in part, (i) with a Prepayment Premium computed without regard to the provisions of Section 10.1(b) (6) (B)(i), to the extent the prepayment is applied to repayment of the Series A Bonds, or (ii) without payment of any Prepayment Premium,
to the extent the prepayment is applied to repayment of the Series B Bonds or the Series
B-T Bonds. No prepayment of all or any part of the Loan subject to conversion shall be permitted during the period commencing 30 days prior to the applicable Conversion Date and ending on the applicable Conversion Date.
(2) Borrower may not prepay the Loan, in whole or in part, during the period commencing on the earlier to occur of the Series A Conversion Date or the Series B Conversion Date and ending on the tenth (10th) anniversary of the Conversion Date.
(3) At any time after the tenth (10th) anniversary of the Series A Conversion
Date, the Borrower may prepay principal on the Loan in whole or in part.
(4) Prepayment on account of the Loan must be in minimum increments of the Authorized Denominations of Bonds Outstanding, but in any event at least $100,000 or any integral multiple of $5,000 in excess of $100,000 (each prepayment is referred to as
a “Prepaid Amount”). Borrower must give the Trustee and the Bondowner
Representative irrevocable written notice of Borrower’s intention to make the
prepayment, specifying the date and amount of the prepayment, and each notice shall be given not less than 35 days prior to the date on which any Bonds shall be redeemed in connection with such prepayment.
(5) Each Prepayment, whether voluntary, by reason of acceleration or
otherwise, must be accompanied by payment of all accrued interest on the Prepaid Amount and, except as otherwise provided in Section 10,1(b)(l), above, the Prepayment Premium (the “Prepayment Premium”) described below. The Bondowner Representative will submit a certificate to Borrower and Trustee setting forth its
46
determination of any Prepayment Premium, which will be conclusive and binding in the absence of manifest error.
(6) The Prepayment Premium will be the sum of the following:
(A)
(B)
Two Hundred Fifty Dollars ($250); plus
the greater of:
0) three percent (3%) of the Prepaid Amount if the
prepayment occurs or is required to occur in the eleventh (1 lth) Loan
Year; two percent (2%) of the Prepaid Amount, if the prepayment occurs
or is required to occur in the twelfth (12th) Loan Year; one percent (1%) of
the Prepaid Amount, if the prepayment occurs or is required to occur in the thirteenth (13th) Loan Year; and
(ii) if Bank of America FSB (or any of its affiliates) is the
Bondowner Representative, an amount calculated as follows:
(4 subtract the Federal Home Loan Bank Consolidated Obligation Rate applicable to the prepayment from the Cost of Funds Rate (the resulting difference is the “Interest Differential”):
(x) multiply the Interest Differential by a fraction, the
numerator of which is the number of days during the period from
the date of prepayment until the applicable Maturity Date (which, if such prepayment occurs prior to the Series A Conversion Date, shall be deemed to be December 1, 2030, for the Series A Bonds),
and the denominator of which is 360;
W multiply the Prepaid Amount by the product
obtained in subparagraph (x), above;
t4 if the amount determined under subparagraph (y) is less than zero (0), the component of the Prepayment Premium
calculated under this subparagraph (ii) shall be zero (0); plus
0 an amount equal to all costs and expenses Bondowner Representative
reasonably expects to incur in liquidation and reinvestment of the prepaid funds.
(c) Borrower expressly waives any right to prepay the Loan except on the express terms
set forth above. Borrower agrees to pay the Prepayment Premium even if the Prepaid Amount
is due to the Trustee’s acceleration of the Notes by reason of a default by Borrower, by reason of any transfer giving the Trustee the right to accelerate the maturity of these Notes pursuant to the terms of the Mortgage or otherwise pursuant to the Trustee’s rights and remedies under this Agreement. Borrower acknowledges that prepayment of the Loan may result in the Bondowner incurring additional costs (including lost opportunity costs), expenses or liabilities. Borrower agrees that the Prepayment Premium represents a reasonable estimate of the prepayment costs, expenses or liabilities the Bondowner may suffer on a prepayment. Borrower also
acknowledges and agrees that the Bondowner’s willingness to accept a fixed interest rate on the Bonds is sufficient and independent consideration for this waiver. Borrower understands that the Bondowner would not offer a fixed interest rate to Borrower absent this waiver.
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(4 Once money constituting a prepayment of principal has been transmitted to the Trustee to be deposited in the Bond Fund, such money shall be utilized by the Trustee in accordance with the Indenture to:
(1) redeem the Bonds which are then or will be redeemable in accordance with the terms of the Indenture on a date specified by the Borrower: or
(21 provide for the discharge of the Bonds prior to their maturity or redemption date as provided in Section 7.1 of the Indenture on a Discharge Date.
(4 For purposes of this Section 10.1, the following definitions shall apply:
(1) “Banking Day” means a day, other than a Saturday or a Sunday, on which
Bank of America NT & SA (or its successor) is open for business for all banking functions.
(2) “Cost of Funds Rate” means (i) the Permanent Interest Rate applicable to the Series A Bonds, if and to the extent that the prepayment is applied to repayment of the Series A Bonds, (ii) the Permanent Interest Rate applicable to the Series B Bonds, if
and to the extent that the prepayment is applied to repayment of the Series B Bonds, or
(iii) the Permanent Interest Rate applicable to the Series B-T Bonds, if and to the extent
that the prepayment is applied to repayment of the Series B-T Bonds.
(3) “Federal Home Loan Bank Consolidated Obligation Rate” means the fixed
interest rate per annum for obligations with essentially the same characteristics as the
amount being prepaid, determined and quoted by the Federal Home Loan Bank. If the
Federal Home Loan Bank Consolidated Obligation Rate is no longer available or quoted
by the Federal Home Loan Bank on the date of prepayment, the Federal Home Loan
Bank Consolidated Obligation Rate will be defined as the fixed interest rate per annum, determined solely by the Bondowner Representative on the date of prepayment (i) that the Bondowner could obtain by investing funds in the Money Market (if the applicable Maturity Date is (or is deemed to be) less than five (5) years from the date of the prepayment) or (ii) that reflects the Treasury Rate plus one quarter (0.25%) of one
percentage point (if the applicable Maturity Date is (or is deemed to be) more than five
(5) years from the date of prepayment), and that approximates a period of time starting
on the date of the prepayment and ending on the applicable Maturity Date (which, if such prepayment occurs prior to the Series A Conversion Date, shall be deemed to be December 1, 2030, for the Series A Bonds) (or the nearest month thereafter if a quoted rate for that term is not already available). The Bondowner is under no obligation to actually reinvest any prepayment.
(4) “Loan Year” means, for each Series of Bonds, the one-year period
beginning on the applicable Conversion Date and each anniversary thereof.
(5) “Money Market” means one or more wholesale funding markets available to the Bondowner Representative, including domestic negotiable certificates of deposit,
Eurodollar deposits, bank deposit notes or other appropriate money market instruments
selected by the Bondowner Representative.
(6) “Treasury Rate” means the interest rate yield which the Bondowner
Representative determines could be obtained by investing funds in obligations of the U.S. Treasury from the date of prepayment through the applicable Maturity Date (or if a
48
quoted rate for that term is not readily available, the Bondowner Representative’s reasonable approximation of the interest rate yield for that term).
Borrower hereby indicates its agreement to the provisions of this Section 10.1 by its initials
below:
Section 10.2. Direction of Investments. Except during the continuance of an Event of Default, the Borrower shall have the right during the term of this Agreement to direct the Trustee to invest or reinvest all money held for the credit of Funds established by Article 5 of the Indenture in Permitted Investments subject, however, to the further conditions of Article 6
of the Indenture.
Section 10.3. Termination of Loan Agreement: Required Prepayment.
(1) Except during the continuance of an Event of Default, the Borrower shall have the
option of terminating this Agreement if (i) the Bonds have been paid in full or if provision is otherwise made for payment of the Bonds in such manner that the Indenture will be discharged
under Article 7 thereof on or before the date of termination, (ii) such prepayment and
termination is allowed by the Mortgage, (iii) the Borrower provides the Trustee and the Issuer with an opinion of Bond Counsel to the effect that all such conditions have been satisfied and that such action will not affect the exclusion of interest on the Tax-Exempt Bonds from gross income for federal income tax purposes and (iv) the Borrower pays all amounts payable
pursuant to Section 10.1, above: provided that this Agreement may not be terminated unless
and until (a) all of the Borrower’s obligations under the Loan Documents have been satisfied
and (b) all of the Borrower’s obligations with respect to the Issuer’s fees and any rebate obligation have been satisfied and the Borrower has so certified to the Issuer and the Trustee. All obligations of the Borrower under Sections 4.3, 7.4 and 9.9 shall survive termination of this
Agreement.
(2) Notwithstanding the foregoing, the Borrower may not terminate this Agreement
unless and until the Trustee has on deposit an amount equal to the sum of the following:
(a) Funds on deposit in any of the Funds established under Article 5 of the Indenture and available for that purpose which are sufficient to discharge the Indenture in accordance with Article 7 thereof; plus
04 to the extent not paid under subsection (a) above, an amount equal to the
Trustee’s fees and expenses due or to become due under the Indenture no otherwise paid or provided for pursuant to Section 4.2 or 4.3 hereof and any other amounts due and unpaid under Section 7.4 hereof, accrued and to accrue until the Bonds are fully paid and redeemed and all other advances, fees, costs and expenses reasonably incurred and to be incurred on or before the termination date by the Trustee under the Indenture and by the Issuer and the Trustee under this Agreement and/or the other Loan Documents: provided that in any event, in order to effect prepayment or discharge of the Outstanding Bonds the Borrower shall, prior to the termination date, satisfy the requirements of Section 7.1 of the Indenture.
(3) On the termination date, a closing shall be held at any office mutually agreed upon among the Issuer, the Borrower and the Trustee (which closing may be conducted by first- class mail or recognized overnight delivery service). At the closing the Issuer and the Trustee shall, upon acknowledgment of receipt of the sum set forth in subsection (2) above, execute and
49
deliver to the Borrower such release and other instruments as the Borrower reasonably determines is necessary to terminate this Agreement. All further obligations of the Borrower hereunder (except as specifically provided in Sections 4.3 and 7.4) shall thereupon terminate, provided, however, that the Borrower shall also remain obligated to pay or reimburse the Issuer, and the Trustee for the payment of all other fees, costs and expenses unaccounted for in
the sum paid in accordance with subsection (2) above and reasonably incurred before or
subsequent to such closing in connection with the Bonds.
ARTICLE XI
EVENTS OF DEFAULT AND REMEDIES
Section 11.1. Events of Default. Any one or more of the following events is an Event of Default under this Agreement, and the term “Event of Default,” wherever used herein, means any one of the following events, whatever the reason for such default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body:
(1) the Borrower shall fail to pay (a) any Basic Payment or Limited Partner Equity
Payment due under Section 4.2 on the date such payment is due: and (b) any Additional
Charges when due and such failure shall continue for five (5) days after receipt by the Borrower of a notice to the Borrower by the Issuer, the Trustee or the Bondowner Representative stating that such Additional Charges were not received on the due date;
(2) the Borrower shall fail in any respect to observe and perform or shall breach in
any respect any other provision, covenant, condition or agreement on its part under this Agreement and shall fail to remedy such default or breach within thirty (30) days after notice to the Borrower from the Issuer, the Trustee or the Bondowner Representative, specifying such default or breach and requesting that it be remedied, or such longer period of time (up to an additional sixty (60) days) as may be necessary to remedy such default or breach provided that (a) the Borrower has commenced action during the thirty days necessary to remedy such default
or breach; and (b) the Borrower is proceeding with reasonable diligence to remedy the default
or breach;
(3) an Act of Bankruptcy shall occur with respect to the Borrower, or with respect to the General Partner (unless, in the case of an Act of Bankruptcy of the General Partner, the General Partner is replaced within thirty (30) days after such Act of Bankruptcy with a
replacement reasonably acceptable to Bondowner Representative);
(4) (a) the General Partner shall be dissolved, liquidated or cease doing business
(unless replaced within thirty (30) days after dissolution, liquidation or cessation of business
with a replacement reasonably acceptable to Bondowner Representative), or (b) the Borrower
shall be dissolved, liquidated or cease doing business (other than, in the case of Borrower, when a new entity the long-term unsecured debt obligations of which are rated at least “A” by Standard & Poors Rating Service or at least “Baal” by Moody’s Investors Service assigned to its unenhanced long-term obligations assumes the obligations of the Borrower under the conditions permitting such action contained in Section 5.2 hereof and Section 6.1 of the Mortgage and any applicable provisions of the Regulatory Agreement);
(5) a default shall occur under the Indenture, the Regulatory Agreement or any Loan Document and any applicable period for remedying such default has expired;
50
03) abandonment by the Borrower of the Project prior to payment in full of the Bonds when due or pursuant to the provisions of Article 7 of the Indenture, provided that actions taken by the Borrower in accordance with the provisions of this Agreement shall not be
a default under this paragraph (6); or
(7) Borrower fails to meet the Conversion Conditions on Schedule I prior to December 1.2000.
(8) [Reserved.]
(9) any representation or warranty made by the Borrower herein, or in any
document or certificate furnished to the Issuer and the Bondholders, in connection herewith or
therewith or pursuant hereto or thereto shall prove at any time to be, in any material respect,
incorrect or misleading as of the date made; or
(10) any of the General Partner(s) ceases for any reason to act in that capacity, and is not replaced with a substitute general partner reasonably acceptable to Bondowner
Representative within thirty (30) days; or
01) an Accelerating Transfer (as defined in the Mortgage) occurs, or any interest in Borrower or in any partner in Borrower is transferred to any person or entity if such transfer would result in a Determination of Taxability; or
(12) a Determination of Taxability occurs; or
(13) the Borrower or the Project fails to comply with the Pro Forma Schedule most recently approved by Bondowner Representative: or
(14) construction of the Facility is abandoned or otherwise not completed by the Completion Date; or
(15) construction of the Facility is abandoned or halted prior to the Completion Date
for any period of thirty (30) consecutive days for any cause not beyond the reasonable control of
the Borrower or any of its contractors or subcontractors: or
(16) any governmental, judicial or legal authority having jurisdiction over the Project orders or requires that construction of the Facility be stopped in whole or in part, or any required approval, license or permit is withdrawn or suspended, and the order, requirement, withdrawal or suspension remains in effect either for a period of thirty (30) consecutive days
(“Initial Cure Period”), or so long as the Borrower begins within the Initial Cure Period and
continues diligently to take steps to remove the effect of the order, requirement, withdrawal or
suspension, and Bondowner Representative, exercising reasonable judgment, determines that the Borrower is reasonably likely to prevail, for a total period of ninety (90) days; or
(17) the Trustee fails to have an enforceable first lien on or security interest in any property given as security for the Loan; or
(18) prior to the Completion Date, the Borrower is in default under the Architecture Contract, the Construction Contract, any other contract for the construction of the Facility, either for the Initial Cure Period, or so long as the Borrower begins within the Initial Cure Period and continues diligently to cure the default, and Bondowner Representative, exercising reasonable judgment, determines that the cure cannot be reasonably completed at or before expiration of the Initial Cure Period, for a total period of ninety (90) days; or
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(19) either of the partners in Borrower fails to perform a material obligation of such partner under the Partnership Agreement, and as a result there is a material impairment of
Borrower’s intended use of the Project or of the Borrower’s ability to repay the Loan;
(20) a material adverse change occurs in the Borrower’s or Guarantor’s or General Partner’s financial condition, which materially impairs the Borrower’s intended use of the Project or the Borrower’s ability to repay the Loan: or
(21) a lawsuit is filed against the Borrower or Guarantor or General Partner, or a
judgment or judgments are entered against the Borrower, Guarantor or General Partner, or any government authority takes action, in each case materially adversely affecting (i) the construction of the Facility, (ii) the Borrower’s intended use of the Project or (iii) the Borrower’s ability to repay the Loan; or
(22) the Borrower fails to comply with any provision contained in this Agreement other than those provisions elsewhere referred to in this Section 11.1, and does not cure that
failure either (i) within the Initial Cure Period after written notice from Bondowner
Representative, or (ii) within ninety (90) days after such written notice, so long as the Borrower begins within the Initial Cure Period and continues diligently to cure the failure, and Bondowner Representative, exercising reasonable judgment, determines that the cure cannot be reasonably completed at or before expiration of the Initial Cure Period; or
(23) a default is declared or occurs under any Loan Document other than this
Agreement (and, if a cure period is provided with respect to said default, said default is not
fully cured within the period provided in said Loan Document for cure of such default); or
(24) an “Event of Default” occurs under any of that certain Payment Guaranty
executed as of even date herewith by Guarantor in favor of Trustee, or Guarantor purports to terminate or revoke its obligations under the same, unless the defaulting or terminating Guarantor is replaced with a guarantor reasonably acceptable to Bondowner Representative
within thirty days after notice to Borrower of such Event of Default; or
(25) the Regulatory Agreement shall be amended (including without limitation any
“automatic amendment” to which the Bondowner Representative has not consented within 30 days of its occurence) without the written consent of the Bondowner Representative in such a manner as to impose restrictions more burdensome upon the Project than those contained in the Regulatory Agreement as of the date of sale of the Bonds.
Notwithstanding any provision herein to the contrary, if any action by or against or condition of Guarantor shall give rise to an Event of Default hereunder, such Event of Default
may be cured if, within thirty (30) days following such action of condition, such Guarantor is replaced by an entity reasonably acceptable to the Bondowner Representative.
Section 11.2. Remedies.
(1) Whenever any Event of Default shall have occurred and be continuing, the Trustee, as assignee of the Issuer, may declare all the payments under the Loan payable for the remainder of the term of this Agreement (in an amount equal to that necessary to pay in full the Bonds and the interest thereon, assuming acceleration of the Bonds under the Indenture and to pay all other indebtedness due under the Loan Documents and under this Agreement and the Loan Documents) to be immediately due and payable, whereupon the same shall become immediately due and payable by the Borrower.
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(2) Subject in all events to the provisions of Section 9.10 hereof, whenever any Event
of Default shall have occurred and be continuing, any one or more of the following remedial
steps may also be taken to the extent permitted by law:
(4 the Trustee, as assignee of the Issuer, shall take whatever action at law or in equity as it is directed to take by the Bondowner Representative to collect all sums then due and thereafter to become due, or to enforce performance and observance of any obligation, agreement, covenant, representation or warranty of the Borrower, under this Agreement or any Loan Document, or to foreclose the real property and/or personal
property security for such obligations, or to otherwise compensate the Issuer, the
Trustee and the Bondholders for any damages on account of such Event of Default; and
M the Issuer (without the prior written consent of the Trustee if the Trustee is not enforcing the Issuer’s rights in a manner to protect the Issuer or is otherwise taking action that brings adverse consequences to the Issuer), may take whatever action at law or in equity may appear necessary or appropriate to enforce the Unassigned
Rights: provided that the Issuer will not take any action which would prejudice the
rights of the Bondholders to receive payment on the Bonds.
(3) All of Bondowner Representative’s and Issuer’s rights and remedies are cumulative. If any Event of Default occurs, Issuer’s obligation to lend and Bondholder Representative’s obligation to consent to disbursements of Bond proceeds under the Loan Documents automatically terminates, and Bondowner Representative or Issuer in its sole
discretion may withhold any one or more disbursements (or consent to the same). Bondowner
Representative or Issuer may also withhold any one or more disbursements (or consent to the
same) after an event occurs that, with notice or the passage of time, could become an Event of
Default. No disbursement of Loan funds (or consent to the same) by Bondowner Representative or Issuer will cure any default of the Borrower, unless Bondowner Representative or Issuer agrees otherwise in writing in each instance.
(4) If an Act of Bankruptcy occurs with respect to the Borrower, all of the Borrower’s
obligations under the Loan Documents automatically become immediately due and payable
upon the filing of the petition commencing such proceeding, all without notice of default,
presentment or demand for payment, protest or notice of nonpayment or dishonor, or other notices or demands of any kind or character. Upon the occurrence of any other Event of
Default, all of the Borrower’s obligations under the Loan Documents may become due and
payable immediately without notice of default, presentment or demand for payment, protest or
notice of nonpayment or dishonor or other notices or demands of any kind or character, all at
Bondowner Representative’s option, exercisable in its sole discretion. If such acceleration
occurs, Bondowner Representative may apply any undisbursed Loan funds and any sums in
the Account (as defined in Article III of Schedule D) or the Borrower’s Funds Account to the Borrower’s obligations under the Loan Documents, in any order and proportions in Bondowner Representative’s sole discretion.
(5) Also upon any Event of Default that occurs during the course of construction of the Facility, Trustee (upon direction from the Bondowner Representative) or Bondowner Representative in its sole discretion may enter and take possession of the Project, whether in person, by agent or by court-appointed receiver, and take any and all actions that Bondowner Representative in its sole discretion may consider necessary to complete construction of the
Facility, including making changes in plans, specifications, work or materials and entering into,
modifying or terminating any contractual arrangements, all subject to Bondowner Representative’s right at any time to discontinue any work without liability. By choosing to
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complete the Facility, Bondowner Representative does not assume any liability to the Borrower
or any other person for completing them or for the manner or quality of their construction, and the Borrower expressly waives any such liability. If Bondowner Representative exercises any of the rights or remedies provided in this Section 11.2(5), that exercise will not make Bondowner Representative, or cause Bondowner Representative to be deemed, a partner or joint venturer of the Borrower. Bondowner Representative in its sole discretion may choose to complete construction in its own name. All sums expended by Trustee or Bondowner Representative in
completing construction will be considered to have been disbursed to the Borrower and will be
secured by the Mortgage and any other collateral held by Trustee in connection with the Loan; any sums of principal will be considered to be an additional loan to the Borrower bearing interest at the Default Rate, and be secured by the Mortgage and any other collateral held by Trustee in connection with the Loan. For these purposes Bondowner Representative, in its sole discretion, may reallocate any line item or cost category of the cost breakdown.
(6) From and after the Investor Limited Partner Admission Date, the Issuer shall (or
shall cause the Trustee to) give to Investor Limited Partner a copy of any notice given to the
Borrower of an Event of Default under subsections 11.1(l) or 11-l(3) (each a “Monetary Default”), and the Issuer shall (or shall cause the Trustee to) use its best efforts to give to Investor Limited Partner a copy of any notice given to the Borrower of any other Event of Default (each a “Nonmonetary Default”), at Edison Capital Housing Investments, 18101 Von
Karman Avenue, Suite 1700, Irvine, California 92612, Attention: Asset Manager. The Issuer
shall give (or cause the Trustee to give) copies of these notices concurrently with the giving of any notice to the Borrower: provided, however, that the Issuer’s (or Trustee’s) failure to give any such notice for any reason may not (i) act to impair or waive any remedy or right of the Issuer or the Trustee under this Agreement or any other Loan Document or (ii) subject the Issuer or the Trustee to any liability to Investor Limited Partner for any loss, cost or expense Investor Limited Partner may incur as a result of such default. Investor Limited Partner will
have the right but not the obligation to cure defaults of the Borrower, and the Issuer agrees to
accept cures tendered by Investor Limited Partner on behalf of the Borrower, provided as
follows: (a) Investor Limited Partner will have thirty (30) days from receipt of written notice from the Issuer (or Trustee) that the Borrower has failed to make a payment required under the Loan Documents to cure a Monetary Default; and (b) with respect to any Nonmonetary Default,
Investor Limited Partner will have the same cure period as the Borrower to commence to cure
and thereafter to complete the cure of a Nonmonetary Default.
Section 11.3. Disoosition of Funds. Any amounts collected pursuant to action taken under Section 11.2 (other than sums collected for the Issuer on account of the Unassigned Rights, which sums shall be paid directly to the Issuer) shall be applied in accordance with the provisions of the Indenture.
Section 11.4. Nonexclusive Remedies, No remedy herein conferred upon or reserved to
the Issuer or the Trustee is intended to be exclusive of any other available remedy or remedies,
but each and every such remedy shall be cumulative and shall be in addition to every other
remedy given under this Agreement or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise any right or power accruing upon any Event of Default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Issuer or the Trustee to exercise any remedy reserved to it in this Article, it shall not be necessary to give any notice, other than such notice as may be herein expressly required or as may be required by law.
Section 11.5. Attorneys’ Fees and Exoenses. If an Event of Default shall exist under this Agreement and the Issuer, the Bondowner Representative or the Trustee employ attorneys or
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incur other expenses for the collection of any amounts due hereunder, or for the enforcement of
performance of any obligation or agreement on the part of the Borrower, the Borrower shall
upon demand pay to the Issuer, the Bondowner Representative or the Trustee, as the case may
be, the reasonable fees of such attorneys and such other expenses so incurred.
Section 11.6. Effect of Waiver. In the event any agreement contained in this Agreement is breached by any party and thereafter such breach is waived by another party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other
breach hereunder.
Section 11.7. Issuer and Trustee Mav File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Borrower or the property of the Borrower, the Trustee or the Issuer (with the prior consent of the Trustee), shall be entitled and empowered, by intervention in such proceeding or otherwise:
(1) to file and prove a claim and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Issuer and the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Issuer and Trustee, their agents and counsel) allowed in such judicial proceeding; and
(2) to collect and receive any moneys or other property payable or deliverable on
any such claims, and to distribute the same.
Section 11.8. Restoration of Positions. If a party has instituted any proceeding to enforce any right or remedy under this Agreement, and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to a party, then and in every such case the parties shall, subject to any determination in the proceeding, be restored to the positions they held prior to commencement of such proceedings, and thereafter all rights and
remedies of the parties shall continue as though no such proceeding had been instituted.
Section 11.9. Suits To Protect the Proiect. If the Borrower shall fail to do so after 30 days
prior written notice from the Issuer or the Trustee, the Issuer or the Trustee shall have power to institute and to maintain such proceedings as either of them may deem expedient to prevent any impairment of the Project or any portion thereof, by any acts which may be unlawful or in violation of this Agreement, and such suits and proceedings as the Issuer or the Trustee may
deem expedient to protect its interests in the Project or any portion thereof, including power to
institute and maintain proceedings to restrain the enforcement of or compliance with any
governmental enactment, rule or order that may be unconstitutional or other-wise invalid, if the
enforcement of, or compliance with, such enactment, rule or order would impair or adversely affect the Project or be prejudicial to the interests of the Trustee.
Section 11.10. Performance by Third Parties. The Trustee or the Issuer, with the consent
of the Trustee, may permit third parties to perform any and all acts or take such action as may
be necessary for and on behalf of the Borrower to cure any Event of Default hereunder. The acceptance by the Issuer or the Trustee of any such performance by third parties shall not in any
way diminish or absolve the Borrower of primary liability hereunder.
Section 11.11, Exercise of the Issuer’s Remedies bv Bondholders. Whenever any Event of Default shall have happened and be continuing the Trustee may, but except as otherwise
provided in the Indenture shall not be obligated to, exercise any or all of the rights of the Issuer
under this Article 11, with notice to the Issuer.
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Section 11.12. Reference and Arbitration.
(a> Judicial Reference. In any judicial action between or among the parties, including any action or cause of action arising out of or relating to this Agreement or the Loan Documents or based on or arising from an alleged tort, at the request of any party, all decisions
of fact and law will be referred to a referee in accordance with California Code of Civil
Procedure Sections 638 et seq. The parties will designate to the court a referee or referees
selected under the auspices of the American Arbitration Association (I’AAA”) in the same
manner as arbitrators are selected in AAA-sponsored proceedings. The presiding referee of the panel, or the referee if there is a single referee, must be an active attorney or retired judge. Judgment upon the award rendered by such referee or referees will be entered in the court in which such proceeding was commenced in accordance with California Code of Civil Procedure Sections 644 and 645.
b) Mandatorv Arbitration. After the Mortgage has been released, fully reconveyed or extinguished, any controversy or claim between or among the parties, including those arising out of or relating to this Agreement or the Loan Documents and any claim based on or arising
from an alleged tort, at the request of any party, will be determined by arbitration. The arbitration will be conducted in accordance with the United States Arbitration Act (Title 9, U.S. Code), notwithstanding any choice of law provision in this Agreement, and under the Commercial Rules of the AAA. The arbitrator(s) will determine any controversy concerning whether an issue is arbitrable. Judgment upon the arbitration award may be entered in any court having jurisdiction. The institution and maintenance of an action for judicial relief or pursuit of a provisional or ancillary remedy will not constitute a waiver of the right of any
party, including the plaintiff, to submit the controversy or claim to arbitration if any other
person contests such action for judicial relief.
(c) Real Prooertv Collateral. Notwithstanding the provisions of Section 11.12(b), no controversy or claim may be submitted to arbitration without the consent of all parties if, at the
time of the proposed submission, such controversy or claim arises from or relates to an
obligation secured by real property collateral. If all parties do not consent to submission of such
a controversy or claim to arbitration, the controversy or claim will be determined by reference
as a provided in Section 11.12(a).
(4 Provisional Remedies, Self-Hem and Foreclosure. No provision of this Article
limits the right of any party to this Agreement to exercise self-help remedies such as setoff or
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 arbitration or other proceeding. The exercise of a remedy does not waive the right of any party to resort to arbitration or reference. At Bondowner Representative’s option, foreclosure under a deed of trust or mortgage may be accomplished either by exercise of
power of sale under the deed of trust or mortgage or by judicial foreclosure.
(4 Inapnlicable to Issuer. This Section 11.12 shall not apply to Issuer or to controversies or claims in which the Issuer is a necessary party and shall not apply to the other parties hereto in any dispute in which the Issuer is an indispensable party and does not consent
to arbitration proceedings in accordance with this Section 11.12.
Section 11 .13. Limited Recourse Oblipation.
(4 Prior to the date on which the final adjustment is made to the amount of the
Investor Limited Partner’s capital contribution to the Borrower (the “Adjustment Date”), the
Borrower and the General Partner are personally liable for any deficiency in the payment of any
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“Secured Obligations” (as defined in the Mortgage) that may remain following a judicial
foreclosure (or, to the extent permitted by law, a nonjudicial foreclosure or sale) of the Mortgage.
04 Following the Adjustment Date, the Trustee, as Issuer’s assignee, will neither seek nor obtain judgment against the Borrower, the General Partner or any other partner of Borrower for payment of principal, Prepayment Premium or interest under the Series A Note or for other obligations under the Loan Documents related to or arising under the Series A Note
following a judicial foreclosure (or to the extent permitted by law, a nonjudicial foreclosure) of
the Mortgage, and the Trustee’s sole recourse against the Borrower, the General Partner or any
other partner of Borrower for any default in the payment of principal or interest on the Series A Note is limited to the Project and any other collateral of the Loan: provided, however, that the limitation of liability set forth in this Section will not prejudice or affect the Issuer’s rights to:
(1) Name the Borrower or the General Partner as a party defendant in any action,
proceeding or arbitration, subject to the limitations of this Section; or
(2) Assert any unpaid amounts on the Loan as a defense or offset to or against any claim or cause of action made or alleged against the Issuer by the Borrower; the General Partner or joint venturers, or Guarantor or any indemnitor in connection with the Loan; or
(3) Exercise self-help remedies such as set off or nonjudicial foreclosure against or
sale of any real or personal property collateral or security; or
(4) Collect or recover rents, insurance proceeds, amounts payable under surety
bonds or letters of credit, Condemnation Awards or any other awards arising out of any public action, or any damages or awards arising out of any damage or injury to, or decrease in value
of, all or part of the collateral for the Loan; or
(5) Collect or recover an amount from the Borrower or the General Partner equal to
any rents or other sums of any type that are not applied as required by this Agreement after an
Event of Default has occurred and while it is continuing: or
(6) Enforce and collect or recover all sums owing under Section 7.4 of this
Agreement by the Borrower; or
(7) Enforce any and all of the Borrower’s and the General Partner’s obligation under
this Agreement relating to preserving the condition of the Project or the priority of the Issuer’s
interest in the Project, including obligations to pay all taxes and charges that may affect or
become a lien on the Project, to maintain the Project and all insurance in accordance with this Agreement, and to repay all sums advanced by the Issuer, or the Trustee, as the Issuer’s assignee, for any such purposes; or
(8) Enforce the obligations of Borrower under Article 9 of this Agreement, and enforce any agreement of the Borrower or any other party (other than this Agreement) specifically stating that it is not subject to the limitation of liability contained in this Section; or
(9) Recover any expenses, damages or costs, including attorneys’ fees (including the
allocated costs for services of in-house counsel), that the Issuer or the Trustee, as the Issuer’s assignee, may incur because of the Borrower’s fraud, wilful misrepresentation, misapplication of funds or waste or intentional damage of or to any collateral for the Loan: or
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