06-0501_MILLENNIUM HOUSING CORPORATION_Loan Agreement0",
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RVE'U13TBAM709429.1
LOAN AGREEMENT
by and among the
INDEPENDENT CITIES LEASE FINANCE AUTHORITY
as Authority
rwil
UNION BANK OF CALIFORNIA, N.A.,
as Trustee
and
MILLENNIUM HOUSING CORPORATION,
as Borrower
Dated as of May 1, 2006
Relating to:
Relating to:
$29,660,000
Independent Cities Lease Finance Authority
Mobile Home Park Revenue Bonds
(San Juan Mobile Estates)
Series 2006A
and
$9,765,000
Independent Cities Lease Finance Authority
Mobile Home Park Subordinate Revenue Bonds
(San Juan Mobile Estates)
Series 2006B
and
$485,000
Independent Cities Lease Finance Authority
Mobile Home Park Subordinate Revenue Bonds
(San Juan Mobile Estates)
Taxable Series 2006C
0
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section1.1 Definitions .............................................................................................. ......... I
Section1.2 Interpretation .................................................................................................... 2
Section 1.3 Recitals, Titles and Headings ........................................................................... 2
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations of the Authority ..................................................................... 3
Section 2.2 Representations, Warranties and Covenants of the Borrower ......................... 4
ARTICLE 3
ISSUANCE OF THE BONDS
Section 3.1
Agreement to Issue Bonds ...............................................................................
6
Section 3.2
Delivery of the Bonds and Closing of the Loan ..............................................
6
Section 3.3
Commitment to Execute the Note ....................................................................
6
Section 3.4
Limited Liability ..............................................................................................
6
Section3.5
The Trustee .....................................................................................................
7
Section 3.6
Borrower Accepts Obligations .........................................................................
7
ARTICLE 4
THELOAN
Section 4.1 Amount and Source of Loan ............................................................................ 7
ARTICLE 5
REPAYMENT OF THE LOAN
Section 5.1
Loan Repayment ..............................................................................................
7
Section 5.2
Authority Annual Fee ....................................................................................
10
Section 5.3
Nature of the Borrower's Obligations ............................................................
10
Section 5.4
Extraordinary Mandatory Prepayment of the Note ........................................
10
Section 5.5
Optional Prepayment of Note ........................................................................
I I
Section 5.6
Prepayment of Note From Mandatory Sinking Account Payments
(Series A Bonds) ............................................................................................
11
Section 5.7
Targeted Mandatory Sinking Account Payments (Subordinate Bonds) ........
I I
ARTICLE 6
FURTHER AGREEMENTS
Section 6.1
Successor to the Authority .............................................................................
12
Section 6.2
Borrower Not to Dispose of Assets; Conditions Under Which
Exceptions Permitted .....................................................................................
12
Section 6.3
Cooperation In Enforcement of Regulatory Agreement ................................
12
Section 6.4
Tax Status of Bonds .......................................................................................
13
RVPURTBAUM\709429.1 -i-
TABLE OF CONTENTS
(continued)
Page
Section 6.5
Additional Instruments ...................................................................................
14
Section 6.6
Books and Records; Annual Budget; Project Manager .................................
14
Section 6.7
Notice of Certain Events ................................................................................
16
Section 6.8
Indemnification of the Authority, the Oversight Agent and the Trustee
....... 16
Section 6.9
Consent to Assignment ..................................................................................
16
Section 6. 10
Compliance With Usury Laws .......................................................................
16
Section 6.11
Title to the Project ..........................................................................................
17
Section 6.12
Operation of the Project .................................................................................
17
Section 6.13
No Untrue Statements ....................................................................................
17
Section6.14
Useful Life .....................................................................................................
17
Section 6.15
Continuing Disclosure ...................................................................................
17
Section 6.16
Minimum Rents; Coverage Requirement Certificate ....................................
18
Section 6.17
Public Liabilities and Workers' Compensation Insurance .............................
18
Section 6.18
Casualty Insurance .........................................................................................
19
Section 6.19
Rental Interruption Insurance ........................................................................
19
Section 6.20
Recordation; Title Insurance ..........................................................................
20
Section 6.21
Insurance Net Proceeds; Form of Policies .....................................................
20
Section 6.22
Repair and Replacement ................................................................................
21
Section 6.23
Other Debt, No Recourse Debt; Other Limitations on Borrower ..................
22
Section 6.24
Intentionally Omitted .....................................................................................
24
Section 6.25
Replenishment of Series A Bonds Debt Service Reserve Fund ....................
24
Section 6.26
Replenishment of Subordinate Bonds Debt Service Reserve Fund ...............
24
Section 6.27
Project Management Agreements ..................................................................
24
Section6.28
Operating Fund ..............................................................................................
24
Section 6.29
Rental Assistance Fund ..................................................................................
24
Section 6.30
Additional Representations and Warranties of the Borrower ........................
25
Section 6.31
Property Tax -Exemption ................................................................................
27
Section 6.32
Operating Reserve Fund ................................................................................
27
ARTICLE 7
EVENTS OF DEFAULT AND REMEDIES
Section 7.1 Events of Default ........................................................................................... 27
Section 7.2 Notice of Default; Opportunity to Cure ......................................................... 28
Section7.3 Remedies ........................................................................................................ 28
Section 7.4 Attorneys' Fees and Expenses ....................................................................... 29
Section 7.5 No Remedy Exclusive .................................................................................... 29
Section 7.6 No Additional Waiver Implied by One Waiver ............................................. 30
ARTICLE 8
MISCELLANEOUS
Section 8.1 Entire Agreement ........................................................................................... 30
Section8.2 Notices ........................................................................................................... 30
Section 8.3 Assignments ................................................................................................... 30
Section 8.4 Severability .................................................................................................... 30
Section 8.5 Execution of Counterparts ............................................................................. 31
Section 8.6 Amendments, Changes and Modifications .................................................... 31
RVPUB\FBAUM\709429.1 -ii-
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RVPUB\FBAUM\709429.1 -iii-
TABLE OF CONTENTS
(continued)
Page
Section8.7
Governing Law ..............................................................................................
31
Section 8.8
Term of Agreement ........................................................................................
31
Section 8.9
Survival of Agreement ...................................................................................
31
Section 8. 10
Survival of Rights ..........................................................................................
31
Section8.11
Recordation ....................................................................................................
31
Section 8.12
Authority as Beneficiary ................................................................................
31
AppendixA
Note ..............................................................................................................
A-1
AppendixB
Deed of Trust .................................................................................................
B-1
Appendix C
List Of Improvements And Scheduled Replacements ...................................
C-1
0
RVPUB\FBAUM\709429.1 -iii-
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreemenf'), dated as of May 1, 2006, is by and
among the Independent Cities Lease Finance Authority, a joint powers authority organized and
existing under the laws of the State of California (the "Authority"), Millennium Housing
Corporation, a California nonprofit public benefit corporation (the "Borrower"), Union Bank of
California, N.A., a national banking association, as trustee (the "Trustee").
For and in consideration of the mutual agreements hereinafter contained, the parties
hereto agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.1 Definitions. The following words and terms as used in'this Agreement
shall have the following meanings. In addition, the capitalized terms used but not defined in this
Agreement shall have the meanings specified in the Indenture and the Regulatory Agreement, as
they may be supplemented or amended from time to time.
"Act of Bankruptcy" means any proceeding instituted under Title 11 of the United States
Code, entitled "Bankruptcy" as in effect now and in the fitture, or any successor statute, or other
applicable insolvency law by or against the Borrower.
"Administration Agreement" means the Administration Agreement dated as of the date
hereof among the Borrower, the Authority, the City and the Oversight Agent.
"Authority Annual Fee" shall have the meaning set forth in the Regulatory Agreement.
"City" means the City of San Juan Capistrano.
"Coverage Requirement Certificate" means the certificate filed by the Borrower as
required by Section 6.16 hereof
"Event of Default" means any of the events described as an event of default in
Section 7.1 hereof
"Indenture" means the Indenture of Trust, dated as of the date hereof, by and between the
Authority and the Trustee.
"Net Operating Revenues" means Operating Revenues, less the Operation and
Maintenance Costs during such fiscal year or period and less the amount to be held by the
Borrower pursuant to Section 6.29 hereof
"Other Borrower Obligations" means the Borrower's obligations (i) under the Loan
Agreement dated November 1, 2001, among the Borrower, the California Mobilehome Park
Financing Authority ("CMHPFA"), and Union Bank of California, N.A., as Trustee relating to
the Rancho Vallecitos Mobilehome Park in San Marcos, California; (ii) under the Loan
Agreement dated May 1, 2002, among the Borrower, the City of Palm Springs, and Union Bank
of California, N.A., as Trustee, relating to the Sahara Mobilehome Park in Palm Springs,
California; (iii) under the Loan Agreement dated March 1, 2003 among the Borrower, CMHPFA
and Union Bank of California, N.A., as trustee, relating to the Palomar Estates East and West
RVPUB\FBAUM\709429.1 I
Mobilehome Park; (iv) the Loan Agreement dated April 1, 2003 among the Borrower, the City of
La Verne and Union Bank of California, N.A., as trustee, relating to the Copacabana
Mobilehome Park; and (v) the Loan Agreement dated September 1, 2003 among the Borrower,
the Authority and Union Bank of California, N.A., as trustee, relating to the Rancho Feliz
Mobilehome Park.
"Operating Revenues" means, for any fiscal year or other period, all rents, income,
receipts and other revenues derived by the Borrower arising from the operation of the Project,
including rental income from mobile home spaces, determined in accordance with Generally
Accepted Accounting Principles, interest earnings in funds held by the Trustee and all other
money howsoever derived by the Borrower from the operation of the Project or arising from the
Project, but not including resident security deposits.
"Operation and Maintenance Costs" means, for any fiscal year or other period, the
reasonable and necessary costs and expenses of operating the common areas of the Project and of
managing and repairing and other expenses necessary to maintain and preserve the common
areas of the Project in good repair and working order, calculated in accordance with Generally
Accepted Accounting Principles, including but not limited to (a) utility services supplied to the
common areas of the Project, which may include, without limitation, janitor service, security,
power, gas, telephone, light, heating, water and all other utility services, (b) compensation to the
management agent, salaries and wages of employees, payments to employee retirement systems,
fees of auditors, accountants, attorneys or engineers, (c) monthly deposits to the Repair and
Replacement Fund pursuant to Section 5.70) of the Indenture, and (d) all other reasonable and
necessary costs of the Borrower or charges required to be paid by it related to the operation and
maintenance of the common areas of the Project, including, but not limited to, costs of insurance
and property taxes, if any, but excluding in all cases (i) depreciation, replacement and
obsolescence charges or reserves therefor, (ii) amortization of intangibles or other bookkeeping
entries of a similar nature, (iii) costs of capital additions, replacements, betterments, extensions
or improvements to the common areas of the Project, which under Generally Accepted
Accounting Principles are chargeable to a capital account or to a reserve for depreciation,
(iv) debt service on the Loan, (v) the amount deposited in the Administration Fund, and
(vi) expenses paid from the Operating Reserve Fund, Repair and Replacement Fund, Surplus
Fund or other Project reserves.
"Project Manager" means the manager of the Project under a management agreement
entered into by the Borrower and such Project Manager.
"Supplemental Regulatory Agreement" means the Supplemental Regulatory Agreement
and Declaration of Restrictive Covenants between the City and the Borrower and dated as of
May 1, 2006.
Section 1.2 Inte1pretation. Unless the context clearly requires otherwise, words of
masculine gender shall be construed to include correlative words of the feminine and neuter
genders and vice versa, and words of the singular number shall be construed to include
correlative words of the plural number and vice versa. This Agreement and all the terms and
provisions hereof shall be construed to effectuate the purpose set forth herein and to sustain the
validity hereof
Section 1.3 Recitals, Titles and Headings. The terms and phrases used in the recitals
of this Agreement have been included for convenience of reference only, and the meaning,
RVPUB\FBAUM\709429.1 2
construction and interpretation of all such terms and phrases for purposes of this Agreement shall
be determined by references to Section 1.1 hereof The titles and headings of the articles and
sections of this Agreement have been inserted for convenience of reference only and are not to
be considered a part hereof, and shall not in any way modify or restrict any of the terms or
provisions hereof and shall never be considered or given any effect in construing this Agreement
or any provision hereof or in ascertaining intent, if any question of intent should arise.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations of the Authorit . The Authority makes the following
representations:
(a) The Authority is a joint powers authority, duly organized and existing under the
Constitution and laws of the State.
(b) The Authority has full legal right, power and authority under the laws of the State
and has taken all official actions necessary (i) to enter into this Agreement, the Regulatory
Agreement and the Indenture, (ii) to issue, execute and deliver the Bonds, (iii) to perform its
obligations hereunder and thereunder and (iv) to consummate all other transactions on its part
contemplated by this Agreement and such other documents, including, without limitation, the
loaning of the proceeds of the Bonds to the Borrower.
(c) This Agreement has been duly executed and delivered by the Authority and
constitutes a valid and binding obligation of the Authority, enforceable against the Authority in
accordance with its terms, except as limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws affecting the rights of creditors generally and equitable
principals. Upon the execution and delivery thereof, the Regulatory Agreement, the Indenture
and the Bonds will constitute valid and binding obligations of the Authority, enforceable against
the Authority in accordance with their respective terms, except as limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting the rights of creditors
generally and equitable principals.
(d) The execution and delivery of this Agreement, the Regulatory Agreement, and
the Indenture, the issuance, execution and delivery of the Bonds, the performance by the
Authority of its obligations hereunder and thereunder and the consummation of the transactions
contemplated hereby and thereby, including, without limitation, the loaning of the proceeds of
the Bonds to the Borrower, do not violate any law, rule, regulation or ordinance or any order,
judgment or decree of any federal, state or local court by which the Authority is bound, and do
not conflict with, or constitute a breach of, or a default under the terms and conditions of any
Agreement, instrument or commitment to which the Authority is a party or by which the
Authority or any of its property is bound.
(e) There is no action, suit, proceeding, inquiry or investigation pending or, to the
knowledge of the Authority, threatened against the Authority by or before any court,
governmental agency or public board or body which (i) questions the existence or the territorial
jurisdiction of the Authority or the title to office of any member of the Authority, (ii) seeks to
prohibit, restrain or enjoin the execution and delivery of this Agreement, the Regulatory
Agreement or the Indenture, the issuance, execution or delivery of the Bonds or the loaning of
the proceeds of the Bonds to the Borrower; (iii) questions the validity or enforceability of this
RVPUB\FBAUM\709429.i 3
Agreement, the Regulatory Agreement, the Indenture, or the Bonds; (iv) questions the exclusion
from gross income for federal income tax purposes of interest on the Bonds; or (v) questions the
power or authority of the Authority to carry out the transactions contemplated by this
Agreement, the hidenture, the Regulatory Agreement, or the Bonds.
(f) The Authority has determined that the financing of the Project and the issuance of
the Bonds to obtain moneys to carry out the purposes of the Project will serve the public interest
and will further the purposes of the Act.
Section 2.2 Representations, Warranties and Covenants of the Borrower. The
Borrower as of the date hereof, represents, warrants and covenants that:
(a) The Borrower is a California nonprofit public benefit corporation duly formed
under the laws of the State with full legal right, power and authority (i) to own its properties and
assets and to carry on its business as now being conducted, (ii) to enter into this Agreement, the
Regulatory Agreement, the Note, the Deed of Trust, the Supplemental Regulatory Agreement,
the Administration Agreement and the Continuing Disclosure Agreement, (iii) to be bound by
the terms of this Agreement and the Indenture to the extent that they apply to the Loan, (iv) to
perform its obligations hereunder and thereunder and (v) to consummate the transactions
contemplated by this Agreement, the Indenture, the Regulatory Agreement, the Note, the Deed
of Trust, the Supplemental Regulatory Agreement, the Administration Agreement and the
Continuing Disclosure Agreement.
(b) (i) The Borrower is qualified as an organization described in Section 501(c)(3) of
the Code and has received a Determination Letter (the "Determination Letter") from the hiternal
Revenue Service to the effect that it is an organization described in Section 501(c)(3) of the
Code; (ii) the Determination Letter has not been modified, limited or revoked; (iii) the Borrower
is in compliance with all terms, limitations and conditions, if any, contained in its Determination
Letter; (iv) the facts and circumstances which form the basis of the Determination Letter as
represented to the Internal Revenue Service continue substantially to exist, and the Borrower is
exempt from federal income taxes under Section 501 (a) of the Code.
(c) The Borrower is a corporation (i) organized and operated exclusively for
educational or charitable purposes and not for pecuniary profit; and (ii) no part of the net
earnings of the Borrower inures to the benefit of any person or private individual, all within the
meaning, respectively, of Section 3(a)(4) of the Securities act of 1933, as amended, and of
Section 12(g)(2)(d) of the Securities Exchange Act of 1934, as amended.
(d) The Borrower will maintain its status as an organization described in Section
501(c)(3) of the Code and its exemption from federal income taxation under Section 501(a) of
the Code.
(e) All property financed with the proceeds of the Bonds at all times will be owned
(as ownership is determined for purposes of federal income taxation) by the Borrower, or by an
organization described in Section 501(c)(3) of the Code and operated in such a manner as to not
constitute an unrelated trade or business of such organization or by a governmental unit (as
described in Section 145 of the Code). The Borrower agrees to limit any use of the Project
(other than by tenants or owners as contemplated by the Regulatory Agreement) by other than
(i) an organization described in Section 501(c)(3) of the Code in a manner so as to not constitute
an unrelated trade or business of such organization or (ii) a governmental unit described in
RVPUB\FBAUM\709429.1 4
Section 145 of the Code to no more than the allocable portion of the overall cost of the Project
not paid from the proceeds of the Bonds, or pursuant to an agreement which complies with the
requirements of Revenue Procedure 97-13, as the same arc now in effect or as later modified.
(f) This Agreement has been duly executed and delivered by the Borrower and
constitutes a valid and binding obligation of the Borrower, enforceable in accordance with its
terms, except as limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws or judicial decisions affecting the rights of creditors generally. Upon the execution and
delivery thereof, the Regulatory Agreement, the Note, the Deed of Trust, the Administration
Agreement, and the Continuing Disclosure Agreement, will constitute valid and binding
obligations of the Borrower, enforceable in accordance with their terms, except as limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws or judicial decisions
affecting creditors' rights generally and by judicial discretion in the exercise of equitable
remedies.
(g) The execution and delivery of this Agreement, the Regulatory Agreement, the
Note, the Deed of Trust, the Supplemental Regulatory Agreement, the Administration
Agreement, and the Continuing Disclosure Agreement, the performance by the Borrower of its
obligations hereunder and thereunder and the consummation of the transactions contemplated
hereby and thereby will not violate any law, regulation, rule or ordinance or any order, judgment
or decree of any federal, state or local court and do not conflict with, or constitute a breach of, or
a default under, any document, instrument or commitment to which the Borrower is a party or by
which the Borrower or any of its property is bound.
(h) The Borrower has not been served with and, to the knowledge of the Borrower
there is no action, suit, proceeding, inquiry or investigation by or before any court, governmental
agency or public board or body pending or threatened against the BorTower which (i) 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 this Agreement, the
Indenture, the Regulatory Agreement, the Continuing Disclosure Agreement, the Supplemental
Regulatory Agreement, the Administration Agreement, the Note or the Deed of Trust, (ii) affects
or questions the validity or enforceability of this Agreement, the Bonds, the Indenture, the
Regulatory Agreement, the Note, the Administration Agreement, the continuing Disclosure
Agreement or the Deed of Trust, (iii) questions the exclusion from gross income for federal
income tax purposes of interest on the Bonds, or (iv) questions the power or authority of the
Borrower to carry out the transactions contemplated by, or to perfonn its obligations under, this
Agreement, the Regulatory Agreement, the Indenture, the Continuing Disclosure Agreement, the
Note, the Deed of Trust, the Supplemental Regulatory Agreement, the Administration
Agreement or the powers of the Borrower to own and operate the Project.
(i) The Borrower is not in default under any document, instrument or commitment to
which the Borrower is a party or to which it or any of its property is subject which default would
or could affect the ability of the Borrower to carry out its obligations under this Agreement, the
Regulatory Agreement, the Supplemental Regulatory Agreement, the Administration Agreement,
the Deed of Trust, the Note or the Continuing Disclosure Agreement.
0) The Borrower has filed or caused to be filed all federal, state and local tax returns,
which are required to be filed, and has paid or caused to be paid all taxes as shown on said
returns or on any assessment received by it, to the extent that such taxes have become due.
RVPUB\FBAUM\709429.1 5
fl,'% Any certificate signed by the Borrower or a Borrower Representative and
delivered pursuant to this Agreement, the Regulatory Agreement, the Continuing Disclosure
Agreement, the Indenture, the Administration Agreement, the Supplemental Regulatory
Agreement, the Note or the Deed of Trust shall be deemed a representation and warranty by the
Borrower as to the statements made therein.
(1) 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
this Agreement, the Regulatory Agreement, the Continuing Disclosure Agreement, the
Administration Agreement, the Supplemental Regulatory Agreement, the Note and the Deed of
Trust by the Borrower have been obtained or made.
ARTICLE 3
ISSUANCE OF THE BONDS
Section 3.1 Agreement to Issue Bonds. In order to provide funds for the purpose of
making the Loan, the Authority agrees that it will use its best efforts to sell the Bonds and cause
them to be delivered to the initial purchasers thereof and deposit the proceeds thereof with the
Trustee for application in accordance with Section 5.4 of the Indenture.
Section 3.2 Delivery of the Bonds and Closing of the Loan. The delivery of the Bonds
and the closing of the Loan shall not occur until the following conditions, in addition to those
required by Section 2.2 of the Indenture, are met:
(a) the Trustee shall have received an original executed counterpart of this
Agreement, the Note, the Continuing Disclosure Agreement, the Regulatory Agreement, the
Supplemental Regulatory Agreement and the Deed of Trust, together with evidence satisfactory
to the Trustee (which may be telephonic notice from the title company submitting such
documents for recordation) of the recordation of the Regulatory Agreement, the Supplemental
Regulatory Agreement and the Deed of Trust in the Office of the County Recorder for Orange
County;
(b) no Event of Default nor any event which with the passage of time and/or the
giving of notice would constitute an Event of Default under this Agreement shall have occurred
as evidenced by a certificate received from the Borrower; and
(c) all legal matters incident to the transactions contemplated by this Agreement shall
be concluded to the reasonable satisfaction of Bond Counsel.
Section 3.3 Commitment to Execute the Note. The Borrower agrees to execute and
deliver the Note simultaneously with the execution of this Agreement.
Section 3.4 Limited Liability.
(a) All obligations of the Authority incurred hereunder shall be special obligations of
the Authority, payable solely and only from the Trust Estate. The Bonds, and the interest
thereon, do not constitute a debt, liability, general or moral obligation or pledge of the faith or
loan of the credit of the Authority, the state or any other political subdivision of the state, within
the meaning of any constitutional or statutory limitation or provision. Neither the faith and credit
nor the taxing power of the State or any political subdivision thereof (including the Authority) is
RVPUBTBAUM\709429.1
pledged to the payment of the principal of or premiurn, if any, or interest on the Bonds or any
other costs incident thereto. The Authority's liability hereunder is further limited to the extent
set forth in Section 14.3 of the Indenture.
(b) Neither the Borrower's directors, officers, employees and agents, nor any of its
other affiliates, has or is intended to have any liabilities, with the exception for any liability
arising as the result of fraud or misappropriation of funds by the Borrower, under or in respect of
this Loan Agreement, the Indenture of Trust, the Continuing Disclosure Agreement, the Note,
the Deed of Trust, the Regulatory Agreement or any of the other documents or transactions
contemplated by any of them.
Section 3.5 The Trustee. The Trustee acts hereunder solely as trustee for the benefit
of the registered Bondowners and not in its individual capacity. The Trustee shall perform such
acts as specifically and expressly provided herein and in the Indenture; provided, however, that
the Trustee shall not do anything which is not permitted by the Indenture. The Trustee may act
as the agent of and on behalf of the Authority and any act required to be performed by the
Authority as herein provided shall be deemed taken if such act is performed by the Trustee.
Neither the Trustee nor any of its officers, directors or employees shall be liable for any action
taken or omitted to be taken by it hereunder or in connection herewith except for its or their own
negligence or willful misconduct. The Trustee may consult with legal counsel selected by it (the
reasonable fees of which counsel shall be paid by the Borrower) and any action taken or suffered
by it in good faith in accordance with the opinion of such counsel shall be full justification and
protection to it. The rights of the Trustee to rely on documents, the manner in which it may
prove or establish a matter and the scope of its liabilities and protections shall be as set forth in
Article VIII of the hidenture.
Section 3.6 Borrower Accepts Obligations. The Borrower acknowledges, by
execution of this Agreement, that it has read and approved the Indenture and hereby agrees to all
of the terms and provisions of the Indenture and accepts each of its obligations expressed or
implied thereunder.
ARTICLE 4
THELOAN
Section 4.1 Amount and Source of Loan. The Authority hereby makes to the
Borrower and agrees to fund, and the Borrower hereby accepts from the Authority, upon the
terms and conditions set forth herein and in the Indenture, the Loan in an amount equal to the
principal amount of the Bonds and agrees that the proceeds of the Loan shall be applied and
disbursed in accordance with the Indenture and the written instructions of the Authority provided
to the Trustee on the Closing Date and when the Trustee acknowledges receipt of the proceeds of
the Bonds and the conditions specified in Section 3.2 hereof and in Section 2.2 of the hidenture
have been satisfied.
ARTICLE 5
REPAYMENT OF THE LOAN
Section 5.1 Loan Roavmc . The Loan shall be evidenced by the Note which shall
be executed by the Borrower in the form attached hereto as Exhibit A. The Borrower agrees to
pay to the Trustee, on behalf of the Authority, the principal of, premium (if any) and interest on
the Loan at the times, in the manner, in the amount and at the rates of interest provided in the
RVPUB\FBAUM\709429.1 7
Note and this Agreement. To secure its obligations to repay the Loan, the Borrower will grant
the Authority a security interest in the Project pursuant to the terms of the Deed of Trust and will
take all actions necessary to perfect such security interest. In order to satisfy its obligations
under this Section 5.1 and Section 5.2, the Borrower agrees to pay to the Trustee not later than
the thirteenth (I 3th) day of each month, commencing July 13, 2006, all budgeted Net Operating
Revenues from the prior month, and not otherwise remitted in the prior month. Any budgeted
Net Operating Revenues received by the Borrower after the l3th day of each month shall be
transferred to the Trustee on the 13th day of the immediately following calendar month.
To secure its obligations hereunder, the Borrower hereby pledges the Operating Revenues
(including the Revenues) to the Trustee, as assignee of the Authority hereunder. The Borrower
shall provide to the Authority and the Trustee the name, location and account numbers of any
accounts into which Operating Revenues will be deposited and will provide appropriate notice to
the applicable financial institution of the security interest therein of the Trustee on behalf of the
Bondholders. Notwithstanding the foregoing, so long as the Borrower has Net Operating
Revenues that are at least equal to said month's portion of items (a) through (i) of Section 5.7 of
the Indenture, then the Borrower may retain from Net Operating Revenues for such month the
Administration Fee for such month.
(a) The Borrower agrees to pay, in repayment of the Loan, all budgeted Net
Operating Revenues for the immediately preceding calendar month resulting from operating the
Project to the Trustee for the account of the Authority until the principal of, premium (if any) and
interest on the Bonds shall have been paid or provision for payment shall have been made in
accordance with the Indenture, in federal or other immediately available funds at the corporate
trust office designated by the Trustee, on the fifteenth (15th) day of each month to cause the
Trustee to pay the amount equal to (i) the interest on the Bonds which will become due on each
Interest Payment Date and (ii) the principal of and redemption premium, if any, on the Bonds
which will become due (whether at maturity, by prior redemption or otherwise) on each Interest
Payment Date. The Borrower may remit such funds net of accrued interest on investments on
the funds and accounts held under the Indenture. In addition, the Borrower agrees to repay the
principal of the Loan, plus interest accrued thereon until the date fixed for redemption of the
Bonds to be redeemed with such repayment, in the amounts and at the times specified in Section
5.3 hereof
In the event the Net Operating Revenues deposited with the Trustee in any two
consecutive month period are less than 90% of the amount set forth in the annual budget
described in Section 6.6 hereof, the Borrower shall, concurrently with its transfer of the amount
to the Trustee, provide notice of a written explanation for the variance to the Authority and the
Oversight Agent and, upon written request of the Oversight Agent, the Borrower shall submit a
written report within 30 days with recommendations to the Authority and the Oversight Agent
with respect to the ability of the Borrower and its recommendations as to how to stay within the
amounts contemplated in the final annual budget. The Oversight Agent shall review the
Borrower's written recommendations and submit any comments to the Borrower. The Oversight
Agent shall notify the Authority in the event the Borrower shall not comply substantially with
the recommendations submitted by the Borrower (and as commented on by the Oversight
Agent). In such event, the Authority, based on such advice as it may deem appropriate, may
direct the Borrower to remove the manager of the Project (the "Project Manager") and approve a
new Project Manager acceptable to the Authority.
RVPUB\FBAUM\709429.1 8
In the event the Net Operating Revenues deposited in the succeeding month are less than
90% of the amount set forth in the annual budget, then the Oversight Agent shall notify the
Authority and the Trustee and, thereafter: (a) upon written order of the Authority determined in
its discretion based on the advice of the Oversight Agent and such other information as the
Authority may determine to be appropriate, all Operating Revenues of the Project shall be
deposited with and held by the Trustee and the Trustee shall deposit the budgeted Operation and
Maintenance Costs, as contemplated in the annual budget, as directed in writing by the Authority
or the Oversight Agent on behalf of the Authority, in a depository account to be established by
the Trustee for the benefit of the Borrower's operation and maintenance of the Project; and
(b) the Authority, based on such advice of the Oversight Agent as it may deem appropriate, shall
have the right to direct the Borrower to remove the Project Manager and approve a new Project
Manager acceptable to the Authority. Upon receipt by the Trustee of a certificate from the
Oversight Agent which certifies that Net Operating Revenues in a subsequent month are either
(i) at least equal to 90% or more of the amount set forth in the annual budget described in
Section 6.6 hereof or (ii) equal or greater than the amount needed to make all payments on the
Bonds for the immediately preceding month, the Trustee shall no longer be required to hold the
Operating Revenues as set forth in this Section 5.1(a) and shall take all necessary action to
transfer the Operating Revenues to another financial institution as directed in writing by the
Borrower.
(b) The Borrower further agrees to pay or cause to be paid all taxes and assessments,
general or special, including, without limitation, all ad valorem taxes, concerning or in any way
related to the Project, or any part thereof, and any other governmental charges and impositions
whatsoever, foreseen or unforeseen, and all utility and other charges and assessments; provided,
however, that the Borrower reserves the right to contest in good faith the legality of any tax or
governmental charge concerning or in any way related to the Project.
(c) The Borrower further agrees to timely pay the premiums or other amounts
required to be paid to maintain the insurance required by Sections 6.18, 6.19 and 6.20 hereof.
(d) The Borrower further agrees to pay, until the principal of and interest on all
Outstanding Bonds shall have been fully paid, to the Trustee for deposit in the accounts of the
Administration Fund established by the Indenture such amounts as the Trustee may from time to
time request for deposit into the General Account of the Administration Fund the fees and
ordinary expenses of the Trustee and the Paying Agent, the annual fees and expenses of the
Oversight Agent as provided in the Administration Agreement, and into the Borrower
Administration Fee Account of the Administration Fund the Borrower Administration Fee, all as
provided in the Indenture; provided that the Trustee fees and expenses incurred in connection
with the enforcement of the Regulatory Agreement and reasonable compensation or
reimbursement for extraordinary services, indemnification, and expenses of the Trustee, as
required by Section 8.5 of the Indenture shall be paid upon demand of the Trustee. The
Borrower agrees to pay the cost of any rebate analyst in connection with the calculation of rebate
(within the meaning of Section 148(f) of the Code) and to pay to the Trustee all amounts
required to be remitted to the United States.
(e) The Borrower agrees to the establishment of the Repair and Replacement Fund
into which the Trustee shall deposit $1,000,000 of the proceeds of the Bonds on the Closing
Date. Thereafter, there shall be deposited into the Repair and Replacement Fund the amounts
required by Section 5.7(h) of the Indenture. Moneys on deposit in the Repair and Replacement
RVPUi3\FBAUM\709429.1 9
Fund shall be disbursed as provided in Section 5.13 of the Indenture and Section 6.22 of this
Agreement.
(f) The Borrower agrees to the establishment of the Operating Reserve Fund to be
funded and used as provided in Section 5.19 of the Indenture.
(g) The Borrower agrees to the establishment of the Surplus Fund into which all
remaining Net Operating Revenues will be deposited.
Section 5.2 Authority Annual Fee. The Borrower agrees to pay the Authority Annual
Fee to the Authority pursuant to the terms of the Regulatory Agreement.
Section 5.3 Nature of the Borrower's Obligations. The Borrower shall repay the Loan
pursuant to the terms of the Note irrespective of any rights of set off, recoupment or
counterclaim the Borrower might otherwise have against the Authority, the Trustee or any other
person. The Borrower will not suspend, discontinue or reduce any such payment or (except as
expressly provided herein) terminate this Agreement for any cause, including, without limiting
the generality of the foregoing, (i) any delay or interruption in the operation of the Project;
(ii) the failure to obtain any permit, order or action of any kind from any governmental agency
relating to the Loan or the Project; (iii) any event constituting force majeure; (iv) any acts or
circumstances that may constitute commercial frustration of purpose; (v) the termination of this
Agreement; (vi) any change in the laws of the United States of America, the state or any political
subdivision thereof; or (vii) any failure of the Authority to perform or observe any covenant
whether expressed or implied, or to discharge any duty, liability or obligation arising out of or
connected with the Note, this Loan Agreement, the Regulatory Agreement or any other contract
with the Borrower; it being the intention of the parties that, as long as the Note or any portion
thereof remains outstanding and unpaid, the obligation of the Borrower to repay the Loan and
provide such moneys shall continue in all events. This Section 5.3 shall not be construed to
release the Authority from any of its obligations hereunder, the Trustee from any of its
obligations under the Indenture, or, except as provided in this Section 5.3, to prevent or restrict
the Authority from asserting any rights which it may have against the Borrower under the Note
or the Deed of Trust or under any provision of law or to prevent or restrict the Borrower, at its
own cost and expense, from prosecuting or defending any action or proceeding by or against the
Authority or the Trustee or taking any other action to protect or secure its rights.
Section 5.4 Extraordinary Mandatory Proa3ment of the Note. The Note is subject to
extraordinary mandatory prepayment in whole or in part, at a price equal to 100% of the
principal amount thereof to be prepaid, together with accrued interest, if any, to the date fixed for
redemption of the Bonds to be redeemed with such prepayment as follows:
(a) On the day selected by the Trustee for redemption of the Bonds after the Trustee
has accelerated the amounts due with respect to the Bonds or the Note, as the case may be, as a
result of an Event of Default under, and as defined in, the Indenture or this Agreement, in an
amount equal to the then unpaid principal amount of the Note;
(b) On the day selected by the Trustee for redemption of the Bonds in the event of an
involuntary loss or the substantial destruction of the Project as a result of unforeseen events (e.g.,
fire, seizure, requisition, change in a federal law or an action of a federal agency after the date of
issuance of the Bonds which prevents the Authority from enforcing the requirements of Section
1. 103 8(b) of the regulations, or condenmation), upon receipt of Net Proceeds or, if there are to
RVPUB\FBAUM\709429.1 10
be no such payments, after the event giving rise to the involuntary loss or substantial destruction
of the Project, in an amount equal to the then unpaid principal amount of the Note.
Notwithstanding the foregoing, the Note will not have to be prepaid in whole in such
circumstances if (i) within 90 days of the event giving rise to the loss or destruction, the
Borrower notifies the Trustee and the Authority in writing, that the Project can be restored within
18 months to a condition permitting the conduct of normal business operations; (ii) within 180
days of the event giving rise to such taking, loss or destruction, the Borrower commences to use
such amounts to reconstruct the Project pursuant to the terms of this Agreement and the
Indenture; and (iii) such amounts are disbursed for the restoration of the Project within 18
months after the date of the notice from the Borrower referred to in clause (i) hereof, but, rather,
the Note shall be prepaid, in part, to the extent of undisbursed fimds on deposit in the
Redemption Fund created pursuant to the Indenture at the expiration of the period described in
(iv) above unless such period is extended with the consent of the Authority and receipt by the
Trustee of an opinion of Bond Counsel to the effect that such extension will not result in interest
on the Bonds becoming includable in the gross income of the recipients thereof for federal
income tax purposes; provided, however, that prepayment in whole shall be immediately due and
payable if in the written opinion of Bond Counsel filed with the Authority, the Borrower and the
Trustee a failure to make such prepayment will cause interest on the Bonds to be includable in
gross income for federal income tax purposes;
If the required principal amount of any prepayment in part pursuant to this Section 5.4
shall not be an authorized denomination of the Bonds to be redeemed with such prepayment,
then the required principal amount of such prepayment shall be deemed to be the next greater
integral multiple of an authorized denomination of the Bonds to be redeemed therewith, and any
interest due with such prepayment shall be calculated using such higher amount.
The Trustee shall deposit and use prepayments of the Note pursuant to this Section and
Section 5.5 in accordance with the Indenture.
In the event of a partial prepayment of the Note, pursuant to this Section or Section 5.5,
the principal amount of the Borrower's obligation under the Note shall be reduced by the
principal amount of Bonds to be redeemed with the proceeds of such prepayment.
Section 5.5 Optional Prepayment of Note. The Borrower, at its option, may prepay
the Note, in whole or in part on any date that Bonds are permitted to be optionally redeemed
pursuant to Section 4.1(b) of the Indenture, following written notice of the Borrower's intention
to do so as provided hereinbelow, in authorized denominations and, at the redemption prices
specified by Section 4. 1 (b) of the Indenture. The Borrower shall give 30 days written notice to
the Authority and the Trustee of the principal amount to be optionally prepaid and the amount of
the premium, if any.
Section 5.6 PrepaMent of Note From Mandatory Sinking Account PaMents
(Series A Bonds). The Note is also subject to mandatory prepayment in part at the principal
amount thereof (without prepayment penalty), plus accrued interest thereon from mandatory
sinking account payments on the dates and in the amounts with respect to mandatory sinking
fund redemption of the Series A Term Bonds set forth in Section 4.01 (a)(i) of the Indenture.
Section 5.7 Targeted Mandatory Sinking Account Payments (Subordinate Bonds).
The Note is also subject to targeted mandatory prepayment from Subordinate Residual Revenues
available for such payment at the targeted Mandatory Sinking Account Payments (without
RVPUBTBAUM\709429.1 I I
prepayment penalty) on the dates and in the amounts with respect tot Targeted Mandatory
Sinking Fund redemption with respect to the Subordinate Bonds set forth in Section 4.01(a)(ii) of
the Indenture.
ARTICLE 6
FURTHER AGREEMENTS
Section 6.1 Successor to the Authori . The Authority shall at all times use its best
efforts to maintain the powers, functions, duties and obligations now reposed in it pursuant to
law or assure the assumptions of its obligations hereunder by any public trust or political
subdivision succeeding to its powers.
Section 6.2 Borrower Not to DiMose of Assets; Conditions Under VVhich Excqptions
Permitted.
(a) The Borrower agrees that during the term of this Agreement it will not dispose of
all or substantially all of its assets nor consolidate with nor merge into any entity unless: (i) the
acquirer of its assets or the entity with which it shall consolidate or into which it shall merge
shall be (A) an organization described in Section 501(c)(3) of the Code that agrees to operate the
Project in a manner that does not constitute an unrelated trade or business of such organization or
a governmental unit (as described in Section 145 of the Code) or (B) an entity that will not, in the
opinion of Bond Counsel, adversely affect the exclusion of interest on the Bonds from the gross
incomes of owners of the Bonds for purposes of federal income taxation and is permissible under
State law; (ii) such acquiring or remaining entity shall assume in writing all of the obligations of
the Borrower under this Agreement, the Regulatory Agreement, the Supplemental Regulatory
Agreement, the Continuing Disclosure Agreement, the Note and the Deed of Trust; (iii) the
Authority, after having consulted with such counsel or advisor as deemed by the Authority to be
necessary shall have consented in writing to such transfer, such consent not to be unreasonably
withheld; and (iv) the written instrument or instruments evidencing such assumption are
provided to the Trustee and the Authority. hi addition to the requirements set forth herein, the
Borrower shall have the right to sell the Project in accordance with and subject to the provisions
of Section 10 of the Supplemental Regulatory Agreement.
(b) In no event shall the Borrower sell the Project for an amount that, when added to
the amount of all moneys held in the funds and accounts established under the Indenture that are
legally available to redeem Outstanding Series A Bonds, is less than the sum of one -hundred
percent (100%) of the Outstanding principal amount of the Series A Bonds plus accrued interest,
unless the Borrower obtains and provides to the Trustee the written consent to such sale of one -
hundred percent (100%) of the Owners of the Outstanding Series A Bonds. This Section 6.2(b)
shall not be amended without the written approval of one -hundred percent (100%) of the Owners
of the Outstanding Series A Bonds. Notice of such proposed sale shall be provided to S&P if
S&P is then rating the Series A Bonds.
Section 6.3 Cooperation In Enforcement of Regulatory Agreement. The Borrower
hereby covenants and agrees as follows:
0 (a) to comply with all provisions of the Regulatory Agreement;
RVPUB\FBAUM\709429.1 12
(b) to advise the Authority, the Trustee and the Oversight Agent in writing promptly
upon learning of any default with respect to the covenants, obligations and agreements of the
Borrower set forth in the Regulatory Agreement;
(c) upon written direction by the Authority, the Oversight Agent or the Trustee, to
cooperate fully and promptly with the Authority, the Oversight Agent and the Trustee in
enforcing the terms and provisions of the Regulatory Agreement; and
(d) to file in accordance with the time limits established by the Regulatory Agreement
all reports and certificates required thereunder.
Neither the Trustee nor the Authority shall incur any liability in the event of any breach
or violation of the Regulatory Agreement by the Borrower, and the Borrower agrees to
indemnify and hold harmless the Authority and the Trustee from any claim or liability, joint or
several, for such breach pursuant to Section 6.8 hereof.
Section 6.4 Tax Status of Bonds. The Borrower hereby covenants, represents and
agrees as follows:
(a) the Borrower has not knowingly taken and will not knowingly take or permit to be
taken any action that would have the effect, directly or indirectly, of causing interest on any of
the Bonds (other than the Series C Bonds) to be included in gross income for federal income tax
purposes and, if it should take or permit to be taken any such action, the Borrower shall take all
lawful actions that it can take to rescind such action promptly upon having knowledge thereof,
(b) the Borrower will take such action or actions, including amending the Loan, the
Note, and the Deed of Trust as may be 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 Section 145 of the Code which are applicable to the Bonds;
(c) the Borrower will take no action or permit or suffer to be taken any action the
result of which would cause the Bonds to be "federally guaranteed" within the meaning of
Section 149(b) of the Code;
(d) no portion of the proceeds of the Bonds shall be used to provide any airplane,
skybox or other private luxury box, facility primarily used for gambling, or store the principal
business of which is the sale of alcoholic beverages for consumption off premises;
(e) the Borrower is aware of the provisions of Section 150(b)(3) of the Code and
covenants that any use of the Project by other than an organization described in Section
501(c)(3) of the Code or a governmental unit (as described in Section 145 of the Code) will not
be such as to cause the Borrower to violate the covenant contained in Section 2.2(e) hereof;
(f) the Borrower covenants and agrees that it will not use or permit the use of any of
the funds provided by the Authority hereunder or any other funds of the Borrower, directly or
indirectly, or direct the Trustee to invest any funds held by it hereunder or under the Indenture, 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, for the purchase of the
Bonds that would, or take or ornit to take any other action that would cause any Bond to be an
RVPUB\FBAUM\709429.1 13
"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;
(g) in the event that at any time the Borrower is of the opinion or becomes otherwise
aware that for purposes of this Section 6.4 or Section 7.13 of the Indenture it is necessary to
restrict or to limit the yield on the investment of any moneys held by the Trustee under the
Indenture, the Borrower shall determine the limitations and so instruct the Trustee in writing
(with a copy to the Authority) and cause the Trustee to comply with those limitations under the
Indenture;
(h) the Borrower will take such action or actions as may be reasonably necessary in
the opinion of Bond Counsel, or of which it otherwise becomes aware, to comply fully with
Section 148 of the Code;
(i) the Borrower will take such action or actions as necessary to ensure compliance
with Sections 7.13 and 7.14 of the Indenture; and
0) the Borrower shall not, pursuant to an arrangement, formal or informal, purchase
Bonds in an amount related to the amount of the Loan.
The Authority covenants that it will not knowingly take or knowingly permit to be taken
any action which will cause interest on the Bonds (other than the Series C Bonds) to become
includable in gross income for federal income tax purposes; provided that none of the covenants
and agreements herein contained shall require any of the Borrower, the Trustee or the Authority
to enter an appearance or intervene in any administrative, legislative or judicial proceeding in
connection with any changes in applicable laws, rules or regulations or in connection with any
decisions of any court or administrative agency or other governmental body affecting the
exclusion from gross income for federal income tax purposes of interest on the Bonds (other than
the Series C Bonds); and provided further that the Authority's responsibility under this paragraph
shall be limited to actions within its control and to only such actions as are permitted or required
to be undertaken under the terms of the Indenture, this Agreement or the Regulatory Agreement.
Section 6.5 Additional Instruments. The Borrower hereby covenants to execute and
deliver such additional instruments and to perform such additional acts as may be necessary, in
the opinion of the Authority or the Trustee, to carry out the intent of the Loan, the Note, or to
perfect or give further assurances of any of the rights granted or provided for in the Loan and the
Note, including the filing of any continuation statements in connection with UCC statements
delivered and filed at closing from the Borrower in favor of the Trustee.
Section 6.6 Books and Records; Annual Budget; Proiect Manage .
(a) The Borrower hereby covenants to permit the Authority, the Oversight Agent, the
Program Administrator and the Trustee (who shall have no duty to audit or inspect), or their duly
authorized representatives, access to the books and records of the Borrower pertaining to the
Loan and the Project during normal business hours and upon prior notice, and to make such
books and records available for audit and inspection to the Authority, the Oversight Agent, the
Trustee and their duly authorized representatives at reasonable times and under reasonable
conditions.
RVPUB\FBAUM\709429.1 14
"N (b) Prior to the delivery date and at least 60 days prior to the beginning of each fiscal
year of the Borrower, the Borrower shall prepare an annual budget and submit such budget for
approval by the Authority and the Oversight Agent. Such annual budget shall provide for Net
Operating Revenues, including projected interest income on the Series A Bonds Debt Service
Reserve Fund and Subordinate Bonds Debt Service Reserve Fund, at least equal to (i) 1.30 times
scheduled debt service on the Series A Bonds in such fiscal year, (ii) 1.10 times the sum of
(A) the aggregate scheduled debt service on the Series A Bonds and the Subordinate Bonds in
such fiscal year, and 03) the annual fees of the Trustee and the Oversight Agent for such fiscal
year, (iii) amounts necessary to replenish the amount on deposit in the Repair and Replacement
Fund to the amount required by Section 5.70) of the Indenture, (iv) amounts necessary to
replenish any withdrawal from the Series A Debt Service Reserve Fund and Subordinate Bonds
Debt Service Reserve Fund, and (v) an amount sufficient to pay the Authority Annual Fee and
the fees and expenses of the Fiduciaries. Within 20 days of receiving such annual budget, the
Authority, and the Oversight Agent shall provide comments (not inconsistent with the
requirements of this Agreement and the Regulatory Agreement), if any (including any suggested
changes acceptable to the Oversight Agent), in writing to the Borrower. The Borrower shall
attempt in good faith to address comments and concerns of the Authority in its final budget. The
Borrower shall prepare a revised annual budget and provide such revised budget to the Authority
and the Oversight Agent for their review and comment. The Borrower shall provide a copy of
the final annual budget to the Authority and the Oversight Agent prior to the beginning of the
Borrower's fiscal year. In the event the annual budget as adopted does not provide for the
coverage set forth in the second sentence of this paragraph (b), then in the case of a failure to
meet the coverage requirement set forth in subsection (i) of said sentence, the Owners of a
majority in Outstanding Principal Amount of the Series A Bonds each shall have the right, in
addition to all other rights provided under this Loan Agreement and the Indenture, to direct the
Borrower to remove the Project Manager and appoint a Project Manager acceptable to the
Authority and such Owners.
(c) Within 20 days after the last day of each quarter, the Borrower shall prepare a
statement for the immediately preceding quarter for review by the Authority and the Oversight
Agent, which shall include statement of income, balance sheet, casliflow, budget variances,
occupancy rates, rental activity and rental rates for the Project.
(d) Within 60 days after the last day of each fiscal year of the Borrower, the Borrower
shall provide a certificate to the Authority and the Oversight Agent that the Borrower has made a
review of its activities during the preceding fiscal year for the purpose of determining whether or
not the Borrower has complied with all of the terms, provisions and conditions of this
Agreement, the Regulatory Agreement and the Deed of Trust and shall certify that the Borrower
has kept, observed, performed and ftilfilled each and every covenant, provision and condition of
this Agreement, the Regulatory Agreement and the Deed of Trust on its part to be performed and
is not in default in the performance or observance of any of the terms, covenants, provisions or
conditions hereof or thereof, or if the Borrower shall be in default then such certificate shall
specify all such defaults and the nature thereof All affordability restrictions required under the
Regulatory Agreement shall be subject to review by the Oversight Agent and the Authority.
(e) The Borrower agrees that Bond holders, upon written request, may request and
receive information on the Project and the Borrower, including audited financial statements,
from the Oversight Agent,
RVPUB\FBAUM\709429.1 15
Section 6.7 Notice of Certain Events. The Borrower hereby covenants to advise the
Authority, the Oversight Agent and the Trustee promptly in writing of the occurrence of any
Event of Default hereunder or any event which, with the passage of time or service of notice, or
both, would constitute an Event of Default hereunder, specifying the nature and period of
existence of such event and the actions being taken or proposed to be taken with respect thereto.
In addition, the Borrower hereby covenants to advise the Authority, the Oversight Agent and the
Trustee promptly in writing of the occurrence of any default under the Loan or of the occurrence
of an Act of Bankruptcy.
Section 6.8 Indemnification of the Authority, the Oversight Agent and the Trustee.
The Borrower hereby covenants and agrees to indemnify, hold harmless and defend the
Authority, the Oversight Agent, the Trustee and their respective officers, members, directors,
officials and employees and each of them (each, an "Indemnified Party") from and against
(i) any and all threats of a claim, claims, losses, damages, liabilities, joint or several, by or on
behalf of any person arising from any cause whatsoever in connection with the issuance of the
Bonds or the making of the Loan; (ii) any and all threats of a claim, claims, losses, damages,
liabilities, joint or several, arising from any act or omission of the Borrower or any of its agents,
servants, employees or licensees, in connection with the Bonds, the Loan or the Project; (iii) all
reasonable costs, counsel fees, expenses or liabilities incurred in connection with any such claim
or proceeding brought thereon; (iv) any and all threats of a claim, claims, losses, damages,
liabilities, joint or several arising from the presence on, under or about, or the release from, the
Project or the property of any substances, materials or wastes which are or which become
regulated or classified as hazardous or toxic under state, federal or local law; and (v) any and all
losses, claims, damages, liabilities or expenses, joint or several, arising out of or connected with
the Trustee's acceptance or administration of the trusts created by the Indenture and its exercise
of powers or duties thereunder, or under this Agreement, the Regulatory Agreement or any other
agreements in connection therewith to which it is a party, except as to the respective parties to
the extent any of the foregoing are caused by the respective negligence or willful misconduct of
the Trustee, the Oversight Agent or the Authority or any of their respective officers, members,
directors, officials and employees. In the event that any action or proceeding is brought against
the Authority, the Oversight Agent or the Trustee or any of their respective officers, members,
directors, officials or employees, with respect to which indemnity may be sought hereunder, the
Borrower, upon written notice from the Indemnified Party, shall assume the investigation and
defense thereof, including the employment of counsel selected by the Indemnified Party and
reasonably acceptable to the Borrower and the payment of all reasonable expenses related
thereto, with full power to litigate, compromise or settle the same; provided that the Authority,
the Oversight Agent and the Trustee, as the case may be, shall have the right to review and
approve or disapprove any such compromise or settlement, such approval shall not be
unreasonably withheld.
Section 6.9 Consent to Assignment. The Authority has made an assignment to the
Trustee under the Indenture for the benefit of the Owners of the Bonds of all rights and interest
of the Authority in and to this Agreement (except its rights under Sections 6.6, 6.8 and 7.4
hereof), the Note, and the Deed of Trust; and the Borrower hereby consents to all such
assignments.
Section 6. 10 Compliance With Usury Laws. Notwithstanding any other provision of
this Agreement, it is agreed and understood that in no event shall this Agreement, with respect to
the Note or other instrument of indebtedness, be construed as requiring the Borrower or any
RVPUB\FBAUM\709429.1 16
other person to pay interest and other costs or considerations that constitute interest under any
applicable law of the State which are contracted for, charged or received pursuant to this
Agreement in an amount in excess of the maximum amount of interest allowed under any
applicable law of the State.
In the event of any acceleration of the payment of the principal amount of the Note or
other evidence of indebtedness, that portion of any interest payment in excess of the maximum
legal rate of interest, if any, provided for in this Agreement or related documents shall be
canceled automatically as of the date of such acceleration, or if theretofore paid, credited to the
principal amount. The provisions of this section prevail over any other provision of this
Agreement.
Section6.11 Title to the Project. The BorTower has fee title to the Project free and clear
of any lien or encumbrance except for (i) liens for nondelinquent assessments and taxes not yet
due or which are being contested in good faith by appropriate proceedings; (ii) the Regulatory
Agreement; (iii) the Deed of Trust; and (iv) the Supplemental Regulatory Agreement. On or
prior to the closing date as required by Section 6.20, the Borrower shall cause to be delivered to
the Trustee and the Authority one or more ALTA title policies, insuring the lien interests of the
Authority and the Trustee as the insureds, as their respective interests may appear under the Deed
of Trust.
Section 6.12 Operation of the Projec . The operation of the Project in the manner
contemplated on the Closing Date and as described herein does not conflict with any zoning,
water or air pollution or other ordinance, order, law or regulation applicable thereto; the
Borrower will cause the Project to be operated in accordance with all applicable federal, state
and local laws or ordinances (including rules and regulations) relating to zoning, building, safety,
and environmental quality and will obtain and maintain in effect any licenses, permits, franchises
or other governmental authorizations necessary for the operation of the Project.
Section 6.13 No Untrue Statements. Neither this Agreement nor any other document,
certificate or statement furnished to the Trustee or the Authority by or on behalf of the Borrower,
contains to the best of its knowledge any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein and therein not
misleading or incomplete as of the date thereof and as of the Closing Date. It is specifically
understood by Borrower that all such statements, representations and warranties shall be deemed
to have been relied upon by the Authority as an inducement to make the Loan and that if any
such statements, representations and warranties were materially incorrect at the time they were
made or as of the Closing Date, the Authority may consider any such misrepresentation or breach
an Event of Default.
Section 6.14 Useful Life. Within the meaning of Section 147(b) of the Code, the
average maturity of the Bonds does not exceed 120 percent of the average reasonably expected
remaining economic life of the Project.
Section 6.15 Continuing Disclosure. The Borrower hereby covenants and agrees that it
will comply with and carry out all of the provisions of the Continuing Disclosure Agreement.
Notwithstanding any other provision of this Agreement, failure of the Borrower to comply with
the continuing Disclosure Agreement shall not be considered an Event of Default under the
Indenture or the Loan Agreement; however, the Trustee may (and, at the request of any
participating underwriter (as defined in the Continuing Disclosure Agreement), or the holders of
RVPUB\FBAUM\709429.1 17
at least 25% in aggregate principal amount of outstanding Bonds, subject to payment of its fees
and expenses, including reasonable attorneys' fees, shall) or any bondholder may, take such
actions as may be necessary and appropriate, including seeking specific performance by court
order, to cause the Borrower to comply with its obligations under this Section 6.15.
Section 6.16 Minimum Rentsz Coverage Reguirement Certificate. The Borrower shall,
at all times while any of the Bonds remain outstanding, fix, prescribe and collect rents, fees and
charges in connection with the Project, so as to yield (i) Net Operating Revenues including any
earnings on the Series A Bonds Debt Service Reserve Fund for the immediately preceding 12
month period that will result in a Coverage Ratio at least equal to 1.30 (rounded up to the nearest
hundredth) with respect to the Series A Bonds debt service and (ii) Net Operating Revenues,
including any earnings on the Series A Bonds Debt Service Reserve Fund and Subordinate
Bonds Debt Service Reserve Fund in the immediately preceding 12 -month period, which will
result in a Coverage Ratio of at least 1. 10 (rounded up to the nearest hundredth) with respect to
the aggregate of the Series A Bonds and the Subordinate Bonds debt service. The Borrower
shall file with the Authority, the Oversight Agent, the Trustee and S&P (if S&P is then rating the
Series A Bonds), a Coverage Requirement Certificate demonstrating compliance with this
Section 6.16: (i) within 60 days of the last day of the first six months of each fiscal year based on
unaudited financial statements, and (ii) within 100 days of the last day of each fiscal year
beginning with fiscal year 2007 based on audited financial statements. In the event such
coverage requirements are not satisfied, then the Authority shall have the right to direct the
Borrower to remove and replace the Project Manager in the same manner as set forth in Section
6.6(b) hereof. The Borrower acknowledges that it is aware of the provisions of Title 2, Chapter
2, Article 9 of the City's Municipal Code in existence on the Closing Date with respect to rent
increases and that the Borrower and the Project are subject to said provisions.
Section 6.17 Public Liabilities and Workers' Compensation Insurance.
(a) Public Liability Insurance. The Borrower shall maintain or cause to be
maintained so long as Bonds are Outstanding under the Indenture, a commercial general liability
coverage, including products, completed operations, contractual, bodily injury, personal injury,
and property damage in the amount of at least Five Million Dollars ($5,000,000) combined
single limits, naming the Authority, the Trustee and their officers, officials, employees,
volunteers, agents, and representatives as additional insureds. All such insurance (i) shall be
primary insurance and not contributory with any other insurance with the Authority, the Trustee
or their officers, officials, employees, volunteers, agents, or representatives may have; (ii) shall
contain no special limitations on the scope of protection afforded to the Authority, the Trustee
and their officers, officials, employees, volunteers, agents, and representatives; (iii) shall be "per
occurrence" rather than "claims made" insurance (in the event the Borrower is unable to obtain
such policy, or believes that such policy's premium is not reasonable, the Borrower shall submit
proof of such contention to the Authority, upon which event the Authority may, after review of
such information, authorize a "claims made" policy for the Project); (iv) shall apply separately to
each insured against whom claim is made or suit is brought, except with respect to the limits of
the insurer's liability; (v) shall provide that the policy will not be canceled or limited in scope by
the insurer or the Borrower's contractor unless there is a minimum of thirty (30) days prior
written notice by certified mail, return receipt requested to the Authority and Oversight Agent;
(vi) shall be written by an insurer with a Best rating of not less than B+ (and if the Series A
bonds are then rate by S&P, at least "BBB-" by S&P); and (vii) shall be endorsed to state that
any failure to comply with the reporting provisions of the policies shall not affect coverage
RVPUB\FBAUM\709429.1 18
provided to the Authority and its officers, officials, employees, volunteers, agents, and
representatives.
None of the above described policies shall include a deductible or self insured retention
amount of more than Ten Thousand Dollars ($10,000) unless approved in writing by an
authorized representative of the Authority upon the advice of the Oversight Agent.
Such insurance may be maintained as part of or in conjunction with any other insurance
coverage carried by the Borrower. The Net Proceeds of such liability insurance shall be applied
by the Borrower toward extinguishment or satisfaction of the liability with respect to which the
Net Proceeds of such insurance shall have been paid.
(b) Workers' Compensation Insurance. The Borrower shall maintain or cause to be
maintained to the extent required by law so long as Bonds are Outstanding under the Indenture,
workers' compensation insurance, including Employer's Liability Coverage, with limits not less
than $1,000,000 per accident, issued by a responsible carrier authorized under the laws of the
State to insure employers against liability for compensation under the Labor Code of the State, or
any act enacted as an amendment or supplement thereto or in lieu thereof, such workers'
compensation insurance to cover all persons (if any) employed by the Borrower in connection
with the Project and to cover full liability for compensation under such act. Such insurance shall
be endorsed to include a waiver of subrogation rights against the Authority and its officers,
officials, employees, volunteers, agents and representatives, and notice of cancellation as
described in (v) under Section 6.17(a) above. Such insurance shall be underwritten by California
licensed insurers with Best ratings of not less than B+ (and if the Series A Bonds are then rated
by S&P, at least "BBB-" by S&P). Such insurance may be maintained as part of or in
conjunction with any other insurance coverage carried by the Borrower.
Section 6.18 Casualty Insurance. The Borrower shall procure and maintain, or cause to
be procured and maintained, so long as Bonds are Outstanding under the Indenture, all risk
property and casualty insurance against loss or damage to the Improvements located on the
Project, in an amount at least equal to one hundred percent (100%) of the replacement value of
the Improvements. Such insurance shall, as nearly as practicable, cover loss or damage by
explosion, windstorm, riot, aircraft, vehicle damage, smoke, fire and such other hazards
(excluding earthquake and flood coverage) as are normally covered by such insurance. Such
insurance shall be subject to such deductibles as are customarily maintained by municipalities
with respect to works and properties of like character, but in any case shall not exceed $ 100,000.
Such insurance may be maintained as a part of or in conjunction with any other insurance
coverage carried by the Borrower. Any insurer providing such insurance must be rated at least
"B+" by A.M. Best (and if any Series A Bonds are then rated by S&P, at least "BBB-" by S&P).
Such insurance shall be reviewed by an independent insurance consultant retained by the
Borrower at least once every other year, and shall be maintained as recommended by the
consultant as customarily obtained by similarly situated entities. The Net Proceeds of such
insurance shall be applied as provided in Section 7.9 of the Indenture. Any such insurance
policy shall provide that it shall not be changed, modified, amended or cancelled without at least
30 days written notice to the Borrower and the Trustee.
Section 6.19 Rental Interruption Insurance. The Borrower shall procure and maintain,
or cause to be procured and maintained, so long as Bonds are Outstanding under the Indenture,
rental interruption or use and occupancy insurance to cover the Borrower's loss, total or partial,
of payments for the Loans resulting from the loss, total or partial, of the use of the Improvements
RVPUB'TBAUMN709429.1 19
located on the Project as a result of any of the hazards covered in the insurance required by
Section 6.18, in an amount at least equal to the sums of (i) Maximum Annual Debt Service on
the Bonds and (ii) budgeted Operation and Maintenance Costs coming due and payable during
the current Fiscal Year; provided, however, that with respect to budgeted Operation and
Maintenance Costs, in the first Fiscal Year such amount shall be as agreed to by the Borrower
and the Oversight Agent and that in any future Fiscal Year such amount shall be the greater of
the budgeted Operation and Maintenance Costs or the prior Fiscal Year's actual Operation and
Maintenance Costs. Such insurance may be maintained as part of or in conjunction with any
other insurance coverage carried by the Borrower. Any insurer providing such insurance must
be rated at least "B+" by A.M. Best (and if any Series A Bonds are then rated by S&P, at least
"BBB-" by S&P). The Net Proceeds of such insurance, if any, shall be paid to the Trustee and
deposited in the Series A Bonds Debt Service Fund, and shall be credited towards the payment of
the Bonds as the same become due and payable. Any such insurance policy shall provide that it
shall not be changed, modified, amended or cancelled without at least 30 days written notice to
the Borrower and the Trustee.
Section 6.20 Recordation, Title Insurance. On or before the Closing Date the Borrower
shall, at its expense, (a) cause the Deed of Trust, to be recorded in the Office of the Orange
County Recorder, and (b) obtain an ALTA title insurance policy naming the Trustee as its
interests may appear under the Deed of Trust and insuring the Borrower's fee simple title to the
Project, subject only to Permitted Encumbrances, in an amount at least equal to the aggregate
principal amount of the Bonds. All Net Proceeds received under any such title insurance policy
shall be deposited with the Trustee, as assignee of the Borrower under the Indenture, and applied
as set forth in Section 7.9 of the Indenture. The following shall be true with respect to such
policy: (i) the policy is in fill force and effect, (ii) the policy is assignable to and will inure to the
benefit of the duly authorized and qualified transferee (subject to recordation of assignment of
mortgage) without the consent or any notification to the insurer, (iii) the premium for such policy
was paid in full, (iv) such policy is issued by a title insurance company licensed to issue policies
in the state in which the related mortgaged property is located, (v) no claims have been made
under any title insurance policy and no other action has been taken that would materially impair
such policy and (vi) such policy contains no exclusions for any of the following circumstances,
or it affirmatively insures (unless the related mortgage property is located in a jurisdiction where
such affirmative insurance in not available,) (a) that the related mortgaged property has access to
a public road, and (b) that the area shown on the survey, reviewed or prepared in connection with
the origination of the related mortgage loan, is the same as the property legally described in the
related mortgage.
Section 6.21 Insurance Net Proceeds, Form of Policies. Each policy of insurance
maintained pursuant to Sections 6.18, 6.19 and 6.20 shall name the Trustee as mortgagee and
loss payee so as to provide that all proceeds thereunder shall be payable to the Trustee. The
Borrower shall pay or cause to be paid when due the premiums for all insurance policies required
by this Indenture. All such policies shall provide that the Trustee shall be given thirty (30) days'
prior notice of each expiration, and intended cancellation thereof or reduction of the coverage
provided thereby. The Trustee shall not be responsible for the sufficiency, adequacy or amount
of any insurance herein required and shall be ftilly protected in accepting payment on account of
such insurance or any adjustment, compromise or settlement of any loss. The Borrower shall
cause to be delivered to the Trustee, the Authority and the Oversight Agent annually, no later
than August 5th each year, a certificate stating that all of the insurance policies required by this
Agreement are in full force and effect and that the Trustee has been named as mortgagee and loss
RVPUB\FBAUM\709429.1 20
0
payee in all policies required to be maintained under Sections 6.18 and 6.19. Failure to comply
with the above requirements shall constitute an Event of Default hereunder.
Section 6.22 Repair and Rolacement.
(a) The Borrower agrees to cause to be performed a preliminary inspection by a
consultant experienced in mobilehome parks, selected by the Borrower and approved by the
Authority, which approval shall not be unreasonably withheld, of the Project at such time or
times as the Oversight Agent but in any event no less frequently than once very five (5) years as
provided in subsection (e) below may reasonably determine to be necessary based on
information with respect to the Project available to the Oversight Agent, and if it is determined
that further inspection is needed after a preliminary inspection, such further inspection, providing
a report of a licensed contractor qualified to do the type of work proposed to be performed, to
identify any repairs, replacements or capital improvements required to maintain the Project as a
safe and sanitary mobile home park in accordance with the requirements of this Agreement, the
Regulatory Agreement and all associated agreements. Any such inspections shall be at the
expense of the Borrower. All such repairs, replacements or capital improvements and costs of
inspections shall be paid from moneys on deposit in the Repair and Replacement Fund to the
extent of the monies deposited in such Fund.
(b) In the event that expenses are incurred, or in the opinion of the Borrower ought
properly be incurred for replacement or additional improvements on the Project, for other capital
facilities which may be of direct or indirect benefit to the Project which are not identified in a
report of a licensed contractor qualified to do the type of work proposed to be performed
(pursuant to Section 6.22(a) herein), beyond ordinary and necessary maintenance and repairs
which are paid as part of the Operation and Maintenance Expenses, the Borrower shall submit to
the Oversight Agent a request for payment or reimbursement of such costs. The request shall
(a) identify the total amount of such costs to be paid pursuant to such requisition, including all
items of cost in such details as may be available to the Borrower, (b) state with respect to such
disbursement (i) the amount to be disbursed for payment of such costs, and (ii) that each item of
costs identified therein has been properly incurred and has not been the basis of any previous
disbursement; and (c) to be accompanied by an invoice, if any. Upon approval by the Oversight
Agent of such a request from the Borrower, the Oversight Agent shall submit or cause to be
submitted the request to the Trustee pursuant to the Indenture for payment of such costs from the
Repair and Replacement Fund.
(c) Moneys deposited in the Repair and Replacement Fund on the Closing Date shall
be applied to pay for or reimburse the Borrower for initial improvements, if any, to the Project as
set forth in Exhibit C hereto, as said Exhibit C may be amended from time to time with the
approval of the Borrower and the Oversight Agent, or as described in the preceding paragraph
(b). Moneys deposited in the Repair and Replacement Fund pursuant to Section 5.7 of the
Indenture may be used for an expense described in the preceding subsection (b).
(d) With respect to each expenditure from the Repair and Replacement Fund, the
Borrower shall file a requisition with the Oversight Agent. The requisition shall (a) identify the
total amount of such costs to be paid pursuant to such requisition, including all items of cost in
such details as may be available to the Borrower, (b) state with respect to such disbursement
(i) the amount to be disbursed for payment of such costs, and (ii) that each item of costs
identified therein has been properly incurred and has not been the basis of any previous
disbursement; and (c) to be accompanied by an invoice, if any. Upon approval by the Oversight
RVPUB\FBAUM\709429.1 21
Agent of such a requisition from the Borrower, the Oversight Agent shall submit or cause to be
submitted the requisition to the Trustee pursuant to the Indenture for payment of such costs from
the Repair and Replacement Fund.
(e) On or about the fifth anniversary of the Closing Date and on or about each fifth
year thereafter, the Borrower shall cause an updated report with respect to the physical needs of
the Project (the "Updated Physical Assessment Report") to be prepared by a qualified
professional approval by the Oversight Agent and a copy of said Updated Physical Assessment
Report shall be filed with the Oversight Agent and the Authority. Thereafter, to the extent
specified in the Updated Physical Assessment Report, the Borrower shall cause to be deposited
into the Repair and Replacement Fund pursuant to Section 5.70) of the Indenture the amount
specified in said Updated Physical Assessment Report.
(f) Moneys in the Repair and Replacement Fund may also be used, if necessary as
determined by the Borrower and the Oversight Agent, to make payments for debt service on the
Bonds.
Section 6.23 Other Debt, No Recourse Debt� Other Limitations on Borrower
(A) The Borrower represents, covenants and warrants that:
(a) Other than the Loan and the Other Borrower Obligations, there are no
other debt obligations of the Borrower with a maturity of greater than one year.
(b) The Borrower is not a debtor, guarantor or otherwise an obligor under any
loan arrangement, promissory note or other evidence of indebtedness that is a recourse
obligation against the Borrower.
(c) The Borrower shall not incur any recourse debt nor shall the Borrower act
as guarantor or enter into any other arrangement if by doing so would subject the
Borrower to recourse liability.
(d) The Borrower shall not incur any long term debt payable from Operating
Revenues (other than the Loan) and unless the actual Net Operating Revenues for each of
the two most recent fiscal years are at least equal to (i) 1.30 times the maximum annual
debt service on the Series A Bonds, and (ii) 1. 10 times the maximum annual debt service
on the Series A Bonds and the Subordinate Bonds, plus, in each case, the proposed
additional long term debt.
(B) The Borrower further represents, covenants and warrants that:
(a) The Borrower will not engage in any business or activity other than those
necessary for or incidental to its ownership and operation of the Project and the
ownership and operation of other mobile home park projects.
(b) The unanimous consent of the directors of the Borrower shall be required
to (i) file, consent to the filing of, or join in any filing of, a bankruptcy or insolvency
petition or otherwise institute insolvency proceedings; (ii) dissolve, liquidate, consolidate,
merge, or sell all or substantially all of the assets of the Borrower; (iii) engage in any
RVPUB\FBAUM\709429.1 22
other business activity other than described in (a) above; or (iv) amend the articles of
incorporation of the Borrower.
(C) The Borrower further covenants:
(i) To maintain books and records separate from any other person or entity;
(ii) To maintain its accounts separate from those of any other person or entity;
(iii) Not to commingle assets with those of any other entity;
(iv) To conduct its own business in its own name;
(v) To maintain separate financial statements;
(vi) To pay its own liabilities out of its own fimds;
(vii) To observe all corporate formalities and other formalities required by its
articles and bylaws;
(viii) To maintain an arm's-length relationship with its affiliates, if any;
(ix) To pay the salaries of its own employees and maintain a sufficient number
of employees in light of its contemplated business operations;
(x) Not to guarantee or become obligated for the debts of any other entity or
hold out its credit as being available to satisfy the obligations of others;
(xi) Not to acquire obligations or securities of its members, directors, or
employees;
(xii) To allocate fairly and reasonably any overhead for shared office space;
(xiii) To use separate stationery, invoices, and checks;
(xiv) Not to pledge its assets for the benefit of any other entity or make any
loans or advances to any entity;
(xv) To hold itself out as a separate entity;
(xvi) To correct any known misunderstanding regarding its separate identity;
and
(xvii) To maintain adequate capital in light of its contemplated business
operations.
(D) The Borrower also makes the following representations and warranties:
(a) There is no proceeding threatened or pending for the total or partial
condemnation, appropriation, or recapture of any material portion of the Project that
would materially affect the Borrower's performance under the Loan Agreement, Deed of
RVPUB\FBAUM\709429.1 23
Trust, Regulatory Agreement or Supplemental Regulatory Agreement, or the use, value,
or operation of the Project.
(b) The Project is (a) free and clear of any damage that would materially and
adversely affect the use or value of the Project as security for the Loan, (b) in good repair
and condition so as not to materially and adversely affect the use or value of the Project
as security for the Loan, and (c) all building systems contained therein are in good
working order so as not to materially and adversely affect the use or value of the Project
as security for the Loan.
(c) The Project constitutes one or more separate tax parcels.
Section 6.24 Intentionally Omitted.
Section 6.25 Replenishment of Series A Bonds Debt Service Reserve Fund. The
Borrower agrees to make payments sufficient to restore the Series A Bonds Debt Service
Reserve Fund to the Series A Bonds Debt Service Reserve Fund Requirement (a) in 12
consecutive equal monthly installments beginning in the month following any withdrawal from
the Series A Bonds Debt Service Reserve Fund which causes the amount therein to be less than
the Series A Bonds Debt Service Reserve Fund Requirement, or (b) in four consecutive equal
monthly installments beginning in the month following any calculation of the value of the
Series A Bonds Debt Service Reserve Fund at an amount less than the Series A Bonds Debt
Service Reserve Fund Requirement.
Section 6.26 Replenishment of Subordinate Bonds Debt Service Reserve Fund. The
Borrower agrees to make payments as soon as possible to restore the Subordinate Bonds Debt
Service Reserve Fund to the Subordinate Bonds Debt Service Reserve Fund Requirement, such
moneys for such purpose to come from available moneys in the Surplus Fund.
Section 6.27 Proiect Management Agreement . Any Project management agreement
shall permit the Borrower to remove the Project Manager (without penalty) for nonperformance
or if the Borrower fails to meet the rate covenant in Section 6.16 hereof (unless it could be
established that causes outside the operator's control were causing the rate covenant violation).
If the Borrower removes the Project Manager, the Borrower, shall promptly appoint a
replacement Project Manager acceptable to the Oversight Agent and the Authority, and pending
such appointment, may act as Project Manager on a temporary basis.
Section 6.28 Operating Fund. The Borrower shall have an operating cash balance for
the Project equal to at least 15 days of annual budgeted Operation and Maintenance Costs as of
the Closing Date and as of the last day of each fiscal year (such cash balance shall be exclusive
of any amounts in the funds and accounts held by the Trustee or fimds representing resident
security deposits).
Section 6.29 Rental Assistance Fund,
(a) The Borrower shall establish with the Trustee the Rental Assistance Fund, which
shall be held by the Trustee pursuant to Section 5.18 of the Indenture. The Rental Assistance
Fund shall be placed in an interest bearing account selected by the Trustee. Signature of the
Borrower shall be required for withdrawal of any tunds from the Rental Assistance Fund.
RVPUB\FBAtJM\709429.1 24
Moneys in the Rental Assistance Fund shall not be pledged to repayment of the Bonds and none
of the Bondowners, the Trustee or the Authority shall have any claim to such moneys.
(b) The Borrower is authorized to make monthly withdrawals and utilize moneys in
the Rental Assistance Fund to provide a subsidy for rental payments (the "Subsidy Payments") to
be made by Residents in the Project. The amounts of the Subsidy Payments and the Residents in
the Project who from time to time are to be beneficiaries of such Subsidy Payments shall be
determined by the Borrower in its reasonable discretion in accordance with the provisions of the
Supplemental Regulatory Agreement, provided that in any event written information with respect
to all Subsidy Payments shall be regularly provided by the Trustee to the Authority and the
Oversight Agent at least quarterly.
(c) Moneys in the Rental Assistance Fund shall be used and applied by the Borrower
in accordance with the terms and provisions of Section 2(b) of the Supplemental Regulatory
Agreement.
Section 6.30 Additional Roresentations and Warranties of the Borrower. The
Borrower may make the following representations and warranties:
(a) No Litigation. There are no pending actions, suits or proceedings, arbitrations or
governmental investigations against the Project, an adverse outcome of which would materially
affect the Borrower's performance under this Loan Agreement, the Deed of Trust, the
Regulatory Agreement or the Supplemental Regulatory Agreement (collectively, the
"Transaction Documents");
(b) Title. The Borrower has good and marketable fee simple title to the Property and
good title to the personal property constituting a part of the Project, subject to no liens, charges
or encumbrances other than the Permitted Encumbrances;
(c) Permitted Encumbrances. The Permitted Encumbrances do not and will not
materially and adversely affect (1) the ability of the Borrower to pay in full the principal and
interest on the Loan in a timely manner or (2) the use of the Project for the use currently being
made thereof, the operation of the Project as currently being operated or the value of the Project;
(d) First Lien. Upon the execution by the Borrower and the recording of the Deed of
Trust, and upon the execution and filing of any required UCC -I financing statements or
amendments thereto, the Trustee will have a valid first lien on the Property and a valid security
interest in the personal property constituting a part of the Project subject to no liens, charges or
encumbrances other than the Permitted Encumbrances;
(e) ERISA. The Borrower has made and shall continue to make all required
contributions to all employee benefit plans, if any, and the Borrower has no knowledge of any
material liability which has been incurred by the Borrower which remains unsatisfied for any
taxes or penalties with respect to any employee benefit plan or any multi-employer plan, and
each such plan has been administered in compliance with its terms and the applicable provisions
of ERISA and any other federal or state law;
40 (f) Contingent Liabilities. The Borrower has no known material contingent
liabilities;
RVPUI3\FBAUM\709429.1 25
(g) No Other Obligations. 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 is otherwise bound, other
than obligations incurred in the ordinary course of the operation of the Project and other than the
Other Borrower Obligations and the obligations under the Loan, the Deed of Trust, the
Regulatory Agreement, the Agency Loan and the Supplemental Regulatory Agreement.
(h) No Other Debt. Other than debt financing for the Other Borrower Obligations,
the Borrower has not borrowed or received other debt financing that has not been heretofore
repaid in fall;
(i) Fraudulent Conveyance. The Borrower (1) has not entered into the transaction
contemplated by this Agreement or any Transaction Document with the actual intent to hinder,
delay, or defraud any creditor and (2) received reasonably equivalent value in exchange for its
obligations under the Transaction Documents. Giving effect to the transactions contemplated by
the Transaction Documents, the fair saleable value of the Borrower's assets exceeds and will,
immediately following the execution and delivery of the Transaction Documents, exceed the
Borrower's total liabilities, including, without limitation, subordinated, unliquidated, disputed or
contingent liabilities. The fair saleable value of the Borrower's assets is and will, immediately
following the execution and delivery of the Transaction Documents, be greater than the
Borrower's probable liabilities, including the maximum amount of its contingent liabilities or its
debts as such debts become absolute and matured. The Borrower's assets do not and,
immediately following the execution and delivery of the Transaction Documents will not,
constitute unreasonably small capital to carry out its business as conducted or proposed to be
conducted. The Borrower does not intend to, and does not believe that it will, incur debts and
liabilities (including, without limitation, contingent liabilities and other commitments) beyond its
ability to pay such debts as they mature (taking into account the timing and amounts to be
payable on or in respect of obligations of the Borrower);
0) Investment Company Act. The Borrower is not (1) an "investment company" or
a company "controlled" by an "investment company," within the meaning of the Investment
Company Act of 1940, as amended; (2) 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 1934, as amended; or
(3) subject to any other federal or state law or regulation which purports to restrict or regulate its
ability to borrow money;
(k) AccessfUtilities. The Project has adequate rights of access to public ways and is
served by adequate water, sewer, sanitary sewer and storm drain facilities. All public utilities
necessary to the continued use and enjoyment of the Project as presently used and enjoyed are
located in the public right-of-way abutting the Project, and all such utilities are connected so as
to serve the Project without passing over other property. All roads necessary for the full
utilization of the Project for its current purpose have been completed and dedicated to public use
and accepted by all governmental authorities or are the subject to access casements for the
benefit of the Project;
(1) Special Assessments. Except as disclosed in the title insurance policy relating to
the Property, there are no pending or, to the knowledge of the Borrower, proposed special or
other assessments for public improvements or otherwise affecting the Property, nor, to the
RVPUB\FBAUM\709429.1 26
knowledge of the Borrower, are there any contemplated improvements to the Property that may
result in such special or other assessments;
(in) Flood Zone. The Property is not located in a flood hazard area as defined by the
Federal Insurance Administration; and
(n) Misstatements of Fact. No statement of fact made by the Borrower in the
Transaction Documents contains any untrue statement of a material fact or omits to state any
material fact necessary to make statements contained herein or therein not misleading. There is
no fact presently known to the Borrower which has not been disclosed which adversely affects,
nor as far as the Borrower can foresee, might adversely affect the business, operations or
condition (financial or otherwise) of the Borrower.
Section 6.31 Property Tax -Exemption. The Borrower covenants to timely apply and re-
apply for, and pursue, property tax -exemption for all qualifying spaces in the Project.
Section 6.32 Operating Reserve Fund. The Borrower agrees to the establishment and
operation of the Operating Reserve Fund as set forth in Section 5.19 of the Indenture.
ARTICLE 7
EVENTS OF DEFAULT AND REMEDIES
Section 7.1 Events of Default. Each of the following shall be an "Event of Default":
(a) The Borrower shall fail to pay when due the amounts required to be paid under
this Agreement or the Note when the same shall become due and payable in accordance with the
terms of this Agreement or the Note, including a failure to repay any amounts which have been
previously paid but are recovered, attached or enjoined pursuant to any insolvency, receivership,
liquidation or similar proceedings; or
(b) The Borrower shall fail to perform or observe any of its covenants or agreements
contained in this Agreement, the Regulatory Agreement, the Indenture, the Note or the Deed of
Trust, other than as specified in paragraph (a) above, and such failure shall continue during and
after the period specified in Section 7.2;
(c) Any representation or warranty of the Borrower shall be determined by the
Trustee or the Authority to have been false in any material respect when made;
(d) The Borrower shall generally not pay its debts as they become due, or shall admit
in writing its inability to pay its debts generally, or shall make a general assignment for the
benefit of creditors or shall institute any proceeding or voluntary case seeking to adjudicate it a
bankrupt or insolvent or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief or protection of debtors, or seeking the entry
of an order for relief or the appointment of a receiver, trustee, custodian or other similar official
for it or for any substantial part of its property; or the Borrower shall take any action to authorize
any of the actions described above in this paragraph (d), or any proceeding shall be instituted
against the Borrower seeking to adjudicate it a bankrupt or insolvent or seeking liquidation,
winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its
debts under any law relating to bankruptcy, insolvency or reorganization or relief or protection of
RVPUB\FBAUM\709429.1 27
debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee,
custodian or other similar official for it or for any substantial part of its property, and, if such
proceeding is being contested by the Borrower in good faith, such proceeding shall remain
undismissed or unstayed for a period of 60 days; or
(e) An event of default shall have occurred under Section 11. 1 of the Indenture and
the Series A Bonds shall have been declared due and payable pursuant to Section 11.2 of the
Indenture.
Section 7.2 Notice of Default, Opportunity to Cure. No default under Section 7.1(b)
hereof shall constitute an Event of Default until:
(a) The Trustee, by registered or certified mail, shall give notice to the Borrower
(with a copy to the Authority and S&P if S&P is then rating the Series A Bonds) of such default
specifying the same and stating that such notice is a "Notice of Default"; and
(b) The Borrower shall have 60 days after receipt of such notice to correct the default
and shall not have corrected it; provided, however, that if the default stated in the notice is of
such a nature that it cannot be corrected within 60 days, such default shall not constitute an Event
of Default hereunder so long as (i) the Borrower institutes corrective action within said 60 days
and diligently pursues such action until the default is corrected, and (ii) in the opinion of Bond
Counsel, the failure to cure said default within 60 days will not adversely affect the exclusion
from gross income for federal income tax purposes of interest on the Bonds.
Section 7.3 Remedies. Whenever any Event of Default under Section 7.1 hereof shall
have happened and be continuing, the following remedial steps shall be taken, subject to the
provisions of Section 7.15 of the Indenture:
(a) Immediately upon the occurrence of any Event of Default under Section 7.1 the
Trustee shall declare all amounts due under this Agreement and the Note to be immediately due
and payable; provided, however, that in the case of an Event of Default described in (b), (c) or
(d) of Section 7.1 hereof, the amounts due under this Agreement and the Note shall not be
accelerated unless the Trustee receives either (i) written notice from the Authority to accelerate
the Loan and declare all amounts due under this Agreement and the Note or (ii) an opinion of
Bond Counsel that the failure to accelerate the Loan under such circumstances will adversely
affect the exclusion from gross income for federal income tax purposes of interest on the Bonds;
provided, however, as is set forth in the Indenture, if any Series A Bonds are Outstanding and
there has been no default with respect to the Series A Bonds under the Indenture, the Subordinate
Bonds shall not be subject to acceleration;
(b) Subject to the provisions of the Indenture (including Article 8 thereof) and
Section 5.4 hereof, the Trustee shall take whatever action at law or in equity may appear
necessary or desirable to collect the payments required to be made by the Borrower under this
Agreement, the Deed of Trust, and the Note, or to enforce performance and observance of any
obligation or agreement of the Borrower under this Agreement, the Note, the Deed of Trust or
the Regulatory Agreement, but in no event shall the Trustee be obligated to take any such action
which in its opinion will or might cause it to expend time or money or otherwise incur liability
unless and until an indemnity bond satisfactory to it has been fumished to it;
RVPUBT13AUM\709429.1 28
(c) The Authority may, upon consultation with the Oversight Agent, terminate the
Project Manager and shall upon the recommendation of the Oversight Agent or such other advice
as the Authority deems appropriate, select a new Project Manager;
(d) Upon an Event of Default hereunder, either the Authority may operate and
administer, or cause to be operated and administered, the Project in the place and stead of the
Borrower and in the manner required by the terms and provisions of the Regulatory Agreement.
In so doing, the Authority or such party as it may appoint to operate and administer the Project,
to the extent it may have moneys available hereunder for such purposes, shall complete the
rehabilitation and equipping of any incomplete component of the Project to be funded with
proceeds of the Bonds, and shall pay from the Operating Revenues received with respect to such
Project (to the extent available) the Loan repayments and Fees and Charges, if any, which the
Borrower was obligated to pay pursuant to the terms and provisions of this Loan Agreement and
the Deed of Trust. The Trustee or other depository shall be authorized to pay the Authority or its
designee as directed by an Officer's Certificate any moneys on deposit in the Project Fund to the
extent that the Authority shall certify in writing that such moneys are required by the Authority
or its designee to pay any items that would have been included in the Cost of Project had the
Authority or its designee not acquired the same.
(e) The Authority may, upon the recommendation of the Oversight Agent or such
other advice as it may deem appropriate, commence foreclosure proceedings as set forth in
Section 7. 10 of the Indenture;
(f) Upon an Event of Default and continuing until at least one year after all Events of
Default have been cured, all Operating Revenues then on hand and thereafter received by the
Borrower or otherwise shall be delivered to the Trustee, for deposit to a depository account for
the benefit of the Bond Owners to be applied by the Trustee first to the payment of debt service
on the Series A Bonds, then to the debt service on the Subordinate Bonds, and then to the
payment of reasonable and necessary Operation and Maintenance Costs, with any remaining
amounts used as provided in Section 5.7 of the Indenture.
Any amounts collected as payments made on the Note and pursuant to Article 5 hereof,
or applicable to such payments, and any other amounts which would be applicable to payment of
principal of, premium, if any, and interest on the Bonds collected pursuant to action taken under
this Section shall be applied in accordance with the provisions of the Indenture. Upon payment
in full of all amounts owing under the Indenture, including all fees and expenses of the Trustee,
the Oversight Agent and the Authority, the Authority and the Trustee shall transfer any
remaining right, title or interest that each has in the Indenture, this Agreement, the Note and the
Deed of Trust to the Borrower, except any rights to receive payment of fees and expenses and to
be indemnified, as provided for herein and in the Indenture.
Section 7.4 Attomas' Fees and Expenses. If an Event of Default occurs and if the
Authority or the Trustee should employ attorneys or incur expenses for the enforcement of any
obligation or agreement of the Borrower contained herein, the Borrower on demand will pay to
the Authority or the Trustee the reasonable fees of such attorneys and the reasonable expenses so
incurred, including court appeals.
Section 7.5 No Remedy Exclusive. No remedy herein conferred upon or reserved to
the Authority 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
RVPU13\FBAUMV709429.1 29
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 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 Authority or the Trustee to exercise any remedy reserved to either of them in
this Article 7, it shall not be necessary to give any notice, other than such notice as may be herein
expressly required. Such rights and remedies as are given the Authority hereunder shall also
extend to the Owners of the Bonds, and the Owners of the Bonds shall be deemed third party
beneficiaries of all covenants and agreements herein contained.
Section 7.6 No Additional Waiver Implied by One Waive . In the event any
agreement or covenant contained in this Agreement should be breached by the Borrower and
thereafter waived by the Authority or the Trustee, such waiver shall be limited to the particular
breach so waived and shall not be deemed to waive any other breach hereunder including any
other breach of the same agreement or covenant.
ARTICLE 8
MISCELLANEOUS
Section 8.1 Entire AgLeement. This Agreement, the Note, the Indenture, the
Regulatory Agreement, the Supplemental Regulatory Agreement, the Continuing Disclosure
Agreement, the Administration Agreement and the Deed of Trust, constitute the entire agreement
and supersede all prior agreements and understandings, both written and oral, between the
Authority and the Borrower with respect to the subject matter hereof.
Section 8.2 Notices. All notices, certificates or other communications shall be in
writing and shall be sufficiently given and shall be deemed given on the second day following
the date on which the same have been personally delivered or mailed by first class mail, postage
prepaid, addressed as follows: to the Authority, to Independent Cities Lease Finance Authority,
Post Office Box 1750, Palmdale, California 93590-1750, Attention: Program Administrator; if to
the Borrower, to Millennium Housing Corporation, 660 Newport Center Drive, Suite 1020,
Newport Beach, CA 92660, Attention: George Turk; if to the Trustee, to Union Bank of
California, N.A., 350 California Street, I Ith Floor, San Francisco, California 94104, Attention:
Corporate Trust Department. A duplicate copy of each notice, certificate or other
communication given hereunder shall also be given to each of the above. All other documents
required to be submitted to any of the foregoing parties shall also be submitted to such party at
its address set forth above. Any of the foregoing parties may, by notice given hereunder,
designate any further or different addresses to which subsequent notices, certificates, documents
or other communications shall be sent.
Section 8.3 Assignments. This Agreement may not be assigned by any party without
the prior written consent of the other, which consent shall not be unreasonably withheld, except
that the Authority shall assign to the Trustee its rights under this Agreement and may assign its
rights under this Agreement as provided in Section 7.3, the Trustee may assign its rights and
duties to a successor trustee pursuant to Section 8.7 or 8.8 of the Indenture and the Borrower
may assign its rights under this Agreement as provided by Section 6.2 hereof
Section 8.4 Severability. If any provision of this Agreement shall be held or deemed
to be or shall, in fact, be illegal, inoperative or unenforceable, the same shall not affect any other
RVPUBTRAUM\709429.1 30
0
provision or provisions herein contained or render the same invalid, inoperative, or
unenforceable to any extent whatever.
Section 8.5 Execution of Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall constitute but one and the
same instrument.
Section 9.6 Amendments, Chanpes and Modifications. Except as otherwise provided
in this Agreement or in the Indenture, subsequent to the issuance of the Bonds and prior to their
payment in full (or provision for payment thereof having been made in accordance with the
provisions of the Indenture), this Agreement may not be effectively amended, changed,
modified, altered or terminated without the written consent of all parties hereto.
Section 8.7 Governing L This Agreement shall be governed exclusively by and
construed in accordance with the applicable laws of the State.
Section 8.8 Term of Agreement. This Agreement shall be in full force and effect from
the date hereof until such time as all Bonds shall have been fully paid or provision made for such
payment pursuant to the Indenture, whichever shall be earlier. Time is of the essence in this
Agreement.
Section 8.9 Survival of Ageement. All agreements, representations and warranties
made herein shall survive the making of the Loan.
Section 8.10 Survival of Rights. The Trustee's rights to indemnification and to the
payment of fees and expenses properly owing under the Indenture, the Regulatory Agreement or
hereunder shall survive its resignation or removal and final payment or defeasance of the Bonds,
all as provided in Article VIII of the Indenture. The Authority's rights to indemnification and
the Authority's rights to the payment of its expenses properly owing under the Indenture, the
Regulatory Agreement or hereunder and the fees and expenses of the Oversight Agent, shall
survive the final payment or defeasance of the Bonds.
Section 8.11 Recordation. The Borrower covenants fliat it will cause the Regulatory
Agreement, the Deed of Trust, and any financing statement and all supplements thereto and any
other such instruments as may from time to time be required to, be kept, recorded and filed in
such a manner and in such places as may be required by law in order to fully preserve and
protect the security of the Owners of the Bonds and the rights of the Authority and the Trustee
under the Regulatory Agreement, and the Deed of Trust.
Section 8.12 Authority as Benefici . So long as any Bonds are Outstanding and the
Note has not been paid -in -full the Authority shall be intended as a third party beneficiary of this
Agreement.
RVPUBTBALJM\709429.1 31
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, all as of the
date first above written.
INDEPENDENT CITIES LEASE FINANCE
AUTHORITY
By:
Presidenit
By:
Program Admin'PStrator
UNION BANK OF CALIFORNIA, N.A., as
Trustee
By:
Authorized Officer
MILLENNIUM HOUSING CORPORATION, a
California nonprofit public benefit corporation
B_v- 4�Pres�ident
RVPUB\FBAUM\709429.1 32
E
F*
$39,910,000
NOTE
June 1, 2006
MILLENNIUM HOUSING CORPORATION, a California nonprofit public benefit
corporation (die "Borrower"), hereby PROMISES TO PAY TO THE ORDER OF THE
INDEPENDENT CITIES LEASE FINANCE AUTHORITY (the "Authority"), a California joint
powers authority duly organized and existing under the laws of the State of California, the
principal sum of $39,910,000 together with interest from the date hereof on the unpaid principal
balance owing hereunder at the rates set forth below per annum This note (the "Note") is issued,
executed and delivered pursuant to that certain Loan Agreement, dated as of May 1, 2006 (the
"Loan Agreement"), by and among the Borrower, the Authority and UNION BANK OF
CALIFORNIA, N.A., as trustee (the "Trustee"). All capitalized terms in the Loan Agreement or
in the Indenture of Trust, dated as of May 1, 2006 (the "Indenture"), by and between the
Authority and the Trustee.
A portion of the principal amount of this Note reflecting the principal amount of the
Series A Bonds issued and delivered under the Indenture ($29,660,000) shall be due and payable
on May and November 15 in the years and in the amounts, and shall bear interest at the rates as
follows:
In addition, the remaining portion of this Note in the amount of $10,250,000 representing
the principal amount of the Series B Bonds and the Series C Bonds issued and delivered under
the Indenture, shall be due and payable on May 15 in the years and in the amounts, and shall bear
interest at the rates as follows, but only to the extent of Subordinate Residual Revenues available
for such payment:
RVPU13\FBAUM\709429.1 A-1
$29,660,000 Series A Bonds
Principal
Maturity
Interest
Amount
Date
Rate
$2,535,000.00
11/15/2012
5.000%
225,000.00
05/15/2013
4.350%
230,000.00
11/15/2013
4.350%
235,000.00
05/15/2014
4A00%
1,255,000.00
11/15/2016
5.000%
1,415,000.00
05/15/2019
4.750%
1,260,000.00
05/15/2021
4.750%
2,230,000.00
05/15/2026
4.875%
1,500,000.00
05/15/2026
5.000%
4,765,000.00
05/15/2031
5.000%
14,010,OWOO
05/15/2041
5.125%
In addition, the remaining portion of this Note in the amount of $10,250,000 representing
the principal amount of the Series B Bonds and the Series C Bonds issued and delivered under
the Indenture, shall be due and payable on May 15 in the years and in the amounts, and shall bear
interest at the rates as follows, but only to the extent of Subordinate Residual Revenues available
for such payment:
RVPU13\FBAUM\709429.1 A-1
In the event that Subordinate Residual Revenues are not sufficient to pay the accrued
interest due and payable on the Subordinate Bonds (being the Series B Bonds and the Series C
Bonds) on an Interest Payment Date, such unpaid interest shall be deferred for payment on the
following Interest Payment Date. Nonpayment of Interest on this Note representing the interest
portion of payments with respect to the Subordinate Bonds on any Interest Payment Date due to
insufficient Subordinate Residual Revenues, shall not be an Event of Default under the Loan
Agreement.
Interest on this Note shall be computed on the basis of a 360 -day year consisting of
twelve 30 -day months, payable on May 15 and November 15 of each year, commencing
November 15,2006.
In order to satisfy its obligations hereunder, the Borrower agrees to pay to the Trustee not
later than the thirteenth (13th) day of each month, commencing July 13, 2006, all Net Operating
Revenues.
All payments on this Note shall be made in lawful money of the United States of America
at the principal corporate trust office of the Trustee. All sums paid hereon shall be applied first
to the satisfaction of interest due and the balance to the unpaid principal owing hereunder, and
shall be applied in accordance with the terms of the Loan Agreement.
Immediately following the execution hereof the Authority's interest in this Note will be
assigned to Union Bank of California, N.A., as Trustee, and concurrently therewith, this Note
will be secured by a Deed of Trust ("Deed of Trust") of even date herewith, executed by the
Borrower in favor of Authority's assignee, Union Bank of Califon-tia, N.A., as Trustee.
This Note is subject to extraordinary mandatory prepayment in the following principal
amounts, plus interest accrued to the date fixed by the Trustee for redemption of the Bonds to be
redeemed with such prepayment:
(a) On the day selected by the Trustee for redemption of the Bonds after the Trustee
has accelerated the Amounts due with respect to the Loan or this Note, as the case may be, as a
result of an Event of Default under, and as defined in, the Indenture or the Loan Agreement, in
RVPUB\FBAUM\709429.1 A-2
SERIES B BONDS
Principal
Maturity
Interest
Amount
Date
Rate
$230,000.00
05/15/2008
4.250%
475,000.00
05/15/2012
4.850%
580,000.00
05/15/2016
5.125%
905,000.00
05/15/2021
5.350%
1,190,000.00
05/15/2026
5.450%
1,560,000.00
05/15/2031
5.550%
4,825,000.00
05/15/2041
5.850%
SERIES C BONDS
Principal
Maturity
Interest
Amount
Date
Rate
$485,000
05/15/2016
7.750%
In the event that Subordinate Residual Revenues are not sufficient to pay the accrued
interest due and payable on the Subordinate Bonds (being the Series B Bonds and the Series C
Bonds) on an Interest Payment Date, such unpaid interest shall be deferred for payment on the
following Interest Payment Date. Nonpayment of Interest on this Note representing the interest
portion of payments with respect to the Subordinate Bonds on any Interest Payment Date due to
insufficient Subordinate Residual Revenues, shall not be an Event of Default under the Loan
Agreement.
Interest on this Note shall be computed on the basis of a 360 -day year consisting of
twelve 30 -day months, payable on May 15 and November 15 of each year, commencing
November 15,2006.
In order to satisfy its obligations hereunder, the Borrower agrees to pay to the Trustee not
later than the thirteenth (13th) day of each month, commencing July 13, 2006, all Net Operating
Revenues.
All payments on this Note shall be made in lawful money of the United States of America
at the principal corporate trust office of the Trustee. All sums paid hereon shall be applied first
to the satisfaction of interest due and the balance to the unpaid principal owing hereunder, and
shall be applied in accordance with the terms of the Loan Agreement.
Immediately following the execution hereof the Authority's interest in this Note will be
assigned to Union Bank of California, N.A., as Trustee, and concurrently therewith, this Note
will be secured by a Deed of Trust ("Deed of Trust") of even date herewith, executed by the
Borrower in favor of Authority's assignee, Union Bank of Califon-tia, N.A., as Trustee.
This Note is subject to extraordinary mandatory prepayment in the following principal
amounts, plus interest accrued to the date fixed by the Trustee for redemption of the Bonds to be
redeemed with such prepayment:
(a) On the day selected by the Trustee for redemption of the Bonds after the Trustee
has accelerated the Amounts due with respect to the Loan or this Note, as the case may be, as a
result of an Event of Default under, and as defined in, the Indenture or the Loan Agreement, in
RVPUB\FBAUM\709429.1 A-2
an amount equal to the then unpaid principal amount of this Note, plus accrued interest to the
date of redemption of the Bonds;
(b) On the day selected by the Trustee for the redemption of the Bonds in the event of
an involuntary loss or the substantial destruction of the Project as a result of unforeseen events
(e.g., fire, seizure, requisition, change in a federal law or an action of a federal agency after the
date of issuance of the Bonds which prevents the Agency from enforcing the requirements of
Section 1.103-8(b) of the Regulations, or condemnation), upon receipt of insurance or other
compensation or, if there are to be no such payments, after the event giving rise to the
involuntary loss or substantial destruction of the Project, in an amount equal to the then unpaid
principal amount of this Note. Notwithstanding the foregoing, this Note will not have to be
prepaid in whole in such circumstances if (i) within 90 days of the event giving rise to the loss or
destruction, the Borrower notifies the Trustee and the Authority, in writing, that the Project can
be restored within 18 months to a condition permitting the conduct of normal business
operations; (ii) within 180 days of the event giving rise to such taking, loss or destruction, the
Borrower commences to use such amounts to reconstruct the Project pursuant to the terms of the
Loan Agreement and the Indenture; and (iii) such amounts are disbursed for the restoration of the
Project within 18 months after the date of the notice from the Borrower referred to in clause (i)
hereof, but, rather, this Note shall be prepaid, in part, to the extent of undisbursed ftmds on
deposit in the Redemption Fund created pursuant to the Indenture at the expiration of the period
described in (iii) above unless such period is extended with the consent of the authority and an
opinion of Bond Counsel is received the Trustee to the effect that such extension will not result
in interest on the Bonds becoming includable in the gross income of the recipients thereof for
federal income tax purposes; provided, however, that such prepayment in whole shall be
immediately due and payable if in the written opinion of Bond Counsel filed with the Authority,
the Borrower and the Trustee a failure to make such prepayment will cause interest on the Bonds
to be included in gross income for federal income tax purposes;
If the required principal amount of any prepayment in part pursuant to Sections 5.4 and
5.5 of the Loan Agreement shall not be an Authorized Denomination of the Bonds to be
redeemed with such prepayment, then the required principal amount of such prepayment shall be
deemed to be the next greater integral multiple of an Authorized Denomination of the Bonds to
be redeemed therewith, and any interest due with such prepayment shall be calculated using such
higher amount.
The Trustee shall deposit and use prepayments of this Note pursuant to Sections 5.4 and
5.5 of the Loan Agreement in accordance with the Indenture.
In the event of a partial prepayment of this Note, pursuant to Section 5.4 or 5.5 of the
Loan Agreement, the principal amount of the Borrower's obligation under this Note shall be
reduced by the principal amount of Bonds to be redeemed with the proceeds of such prepayment.
The Borrower, at its option, may prepay this Note, in whole or in part of any date that
Bonds are permitted to be optionally redeemed pursuant to Section 4.1(b) of the Indenture
following written notice of the Borrower's intention to do so as provided below, in Authorized
Denominations, at the times and redemption prices permitted by such Section 4.1(b) of the
Indenture.
RVPUB\FBAUM\709429.1 A-3
0
This Note is also subject to mandatory sinking fund prepayment with respect to the
Series A Bonds (without premium), by application of mandatory sinking account payments as
follows:
Series A Bonds Maturing on November 15, 2012
Sinking Fund Redemption Date
Principal Amount
(May 15 and November 15)
To Be Redeemed
11/15/2006
$225,000.00
05/15/2007
165,000.00
11/15/2007
170,000.00
05/15/2008
175,000.00
11/15/2008
180,000.00
0511512009
185,000.00
11/15/2009
190,000.00
05/15/2010
195,000.00
11/15/2010
200,000.00
05/15/2011
205,000.00
11/t5/2011
210,000.00
05/15/2012
215,000.00
11/15/2012 (maturity)
220,000.00
Series A Bonds Maturing on November 15,2016
Sinking Fund Redemption Date
(Mav 15 and November 15)
11/15/2014
05/15/2015
11/15/2015
05/15/2016
11 / 15/2016 (maturity)
Principal Amount
To Be Redeemed
Series A Bonds Maturing on May 15,2019
Sinking Fund Redemption Date
(May 15 and November 15)
05/15/2017
11/15/2017
05/15/2018
11/15/2018
05/15/2019 (maturity)
RVPUR\FBAUM\'709429.1
A-4
$240,000.00
245,000.00
250,000.00
255,000.00
265,000.00
Principal Amount
To Be Redeemed
$270,000.00
275,000.00
285,000.00
290,000.00
295,000.00
0
Series A Bonds Maturing on May 15, 2021
Sinking Fund Redemption Date
(May 15 and November 15)
11/15/2019
05/15/2020
11/15/2020
05/15/2021 (maturity)
Principal Amount
To Be Redeemed
$305,000.00
310,000.00
320,000.00
325,000.00
4.875% Series A Bonds Maturing on May 15,2026
Sinking Fund Redemption Date
Principal Amount
(May 15 and November 15)
To Be Redeemed
11/15/2021
$200,000.00
05/15/2022
205,000.00
11/15/2022
210,000.00
05/15/2023
215,000.00
11/15/2023
220,000.00
05/15/2024
225,000.00
11/15/2024
230,000.00
05/15/2025
235,000.00
11/15/2025
245,000.00
05/15J2026 (maturity)
245,000.00
5.000% Series A Bonds Maturing on May 15,2026
Sinking Fund Redemption Date
(May 15 and November 15)
11/15/2021
05/15/2022
11/15/2022
05/15/2023
11/15/2023
05/15/2024
11/15/2024
05/15/2025
11/15/2025
05/15/2026 (maturity)
RVPUBTBALM709429.1
A-5
Principal Amount
To Be Redeemed
$135,000.00
135,000.00
140,000.00
145,000.00
150,000.00
150,000.00
155,000.00
160,000.00
160,000.00
170,000.00
Series A Bonds Maturing
on May 15,2031
Sinking Fund Redemption Date
Principal Amount
(May 15 and November 15)
To Be Redeemed
11/15/2026
$425,000.00
05/15/2027
435,000.00
11/15/2027
445,000.00
05/15/2028
460,000.00
11/15/2028
470,000.00
05/15/2029
480,000.00
11/15/2029
495,000.00
05/15/2030
505,00U0
11/15/2030
520,000.00
05/15/2031 (maturity)
530,000.00
Series A Bonds Maturing on May 15,2041
Sinking Fund Redemption Date
Principal Amount
(May 15 and November 15)
To Be Redeemed
11/15/2031
$545,000.00
05/15/2032
560,000.00
11/15/2032
575,000.00
05/15/2033
590,000.00
11/15/2033
605,000.00
05/15/2034
620,000.00
11/15/2034
635,000.00
05/15/2035
650,000.00
11/15/2035
665,000.00
05/15/2036
685,000.00
11/15/2036
700,000.00
05/15/2037
720,000.00
11/15/2037
740,000.00
05/15/2038
755,000.00
11/15/2038
775,000.00
05/15/2039
795,000.00
11/15/2039
815,000.00
05/15/2040
840,000.00
11/15/2040
860,000.00
05/15/2041 (maturity)
880,000.00
In addition, this Note is subject to Targeted Mandatory Sinking Fund Prepayment with
respect to the Series B Bonds and the Series C Bonds (without premium) on the May 15 and
November 15 in the years and in the amounts set forth below, but only to the extent that
Subordinate Residual Prepayments are available for such purpose:
RVPUBTRAUM\709429.1 A-6
0
SERIES B BONDS
Series B Term Bonds May 15, 2008
Date
(May 15 and November 15)
11/15/2006
05/15/2007
11/15/2007
05/15/2008
11/15/2008 (maturity)
Targeted Sinking
Fund Amount
$75,000.00
50,000.00
50,000.00
55,000.00
55,000.00
Series B Term Bonds Maturing May 15,2012
Date
Targeted Sinking
Ngy 15 and November 15)
Fund Amount
05/15/2009
$55,000.00
11/15/2009
55,000.00
05/15/2010
60,000.00
11/15/2010
60,000.00
05/15/2011
60,000.00
11/15/2011
65,000.00
05/15/2012 (maturity)
65,000.00
Series B Term Bonds Maturing May 15, 2016
Date
Targeted Sinking
(May 15 and November 15)
Fund Amount
11/15/2012
$65,000.00
05/15/2013
70,000.00
11/15/2013
70,000.00
05/15/2014
70,000.00
11/15/2014
75,000.00
05/15/2015
75,000.00
1111512015
75,000.00
05/15/2016 (maturity)
80,000.00
Series B Term Bonds Maturing May 15, 2021
Date
(Mav 15 and November 15)
11/15/2016
05/15/2017
11/15/2017
05/15/2018
11/15/2018
05/15/2019
11/15/2019
05/15/2020
11/15/2020
05/15/2021 (maturity)
RVPUB\FBALJM\709429. I
A-7
Targeted Sinking
Fund Amount
$80,000.00
85,000.00
85,000.00
85,000.00
90,000.00
90,000.00
95,000.00
95,000.00
100,000.00
100,000.00
Series B Term Bonds Maturing May 15, 2026
Date
Targeted Sinking
(May 15 and November 15)
Fund Amount
11/15/2021
$105,000.00
05/15/2022
110,000.00
11/15/2022
110,000.00
05/15/2023
115,000.00
11/15/2023
115,000.00
05/15/2024
120,000.00
11/15/2024
125,000.00
05/15/2025
125,000.00
11/15/2025
130,000.00
05/15/2026 (maturity)
135,000.00
Series B Term Bonds Maturing May 15,2031
Date
(May 15 and November 15)
11/15/2026
05/15/2027
11/15/2027
05/15/2028
11/15/2028
05/15/2029
11/15/2029
05/15/2030
11/15/2030
05/15/2031 (maturity)
RVPUB\FBAUW09429.1
W-1
Targeted Sinking
Fund Amount
$140,000,00
140,000.00
145,000.00
150,000.00
155,000.00
160,000.00
160,000.00
165,000.00
170,000.00
175,000.00
Series C Term Bonds Maturing May 15,2016
Date Targeted Sinking
(May 15 and November 15) Fund Amount
11/15/2006 $20,000.00
05/15/2007
Series B Term Bonds Maturing May 15,2041
11/15/2007
Date
Targeted Sinking
20,000.00
(May 15 and November 15)
Fund Amount
05/15/2009
11/15/2031
$180,000.00
25,000.00
05/15/2032
185,000.00
05/15/2013
11/15/2032
190,000.00
30,000.00
05/15/2033
195,000.00
11/15/2014
05/15/2015
11/15/2033
205,000.00
30,000.00
05/15/2034
210,000.00
RVPUB\FBAUM\709429.1 A-9
11/15/2034
215,000.00
05/15/2035
220,000.00
11/15/2035
230,000.00
05/15/2036
235,000.00
11/15/2036
240,000.00
05/15/2037
250,000.00
11/15/2037
255,000.00
05/15/2038
265,000.00
11/15/2038
270,000.00
05/15/2039
280,000.00
11/15/2039
285,000.00
05/15/2040
295,000.00
11/15/2040
305,000.00
05/15/2041 (maturity)
315,000.00
SERIES C BONDS
Series C Term Bonds Maturing May 15,2016
Date Targeted Sinking
(May 15 and November 15) Fund Amount
11/15/2006 $20,000.00
05/15/2007
15,000.00
11/15/2007
20,000.00
05/15/2008
20,000.00
11/15/2008
20,000.00
05/15/2009
20,000.00
11/15/2009
20,000.00
05/15/2010
20,000.00
11/15/2010
20,000.00
05/15/2011
25,000.00
11/15/2011
25,000.00
05/15/2012
25,000.00
11/15/2012
25,000.00
05/15/2013
25,000.00
11/15/2013
30,000.00
05/15/2014
30,000.00
11/15/2014
05/15/2015
30,000.00
30,000.00
11/15/2015
30,000.00
05/15/2016
35,000.00
RVPUB\FBAUM\709429.1 A-9
All amounts due under the Note shall be immediately due and payable following an
Event of Default under the Loan Agreement, in accordance with and subject to the provisions of
Section 7.3(a) of the Loan Agreement.
If default is made in the payment of the principal of or any installation of interest on this
Note and the same is placed in the hands of an attorney for collection, or if suit is filed hereon, or
proceedings are had in bankruptcy, probate, receivership, reorganization, arrangement or other
judicial proceedings for the establishment or collection of any amount called for hereunder, or
any amount payable or to be payable hereunder is collected through any such proceedings, the
Borrower agrees to pay to the holder hereof all reasonable costs of collection, including
reasonable attorneys fees.
The Borrower expressly waives demand and presentment for payment, notice of
nonpayment, protest, notice of protest, notice of dishonor, brining of suit, and diligence in taking
any action to collect any amounts called for hereunder and in the handling of properties, rights or
collateral at any time existing in connection herewith.
No previous waiver and no failure or delay by Authority in acting with respect to the
terms of this Note or the Deed of Trust shall constitute a waiver of any breach, default, or failure
of condition under this Note, the Deed of Trust or the obligations secured thereby. A waiver of
any term of this Note, the Deed of Trust or of any of the obligations secured thereby must be
made in writing and shall be limited to the express written terms of such waiver. In the event of
I any inconsistencies between the terms of this Note and the terms of any other document related
to the loan evidenced by this Note, the terms of this Note shall prevail.
The Deed of Trust contains the following provision:
"Transfer of Trust Estate by Trustor. In the event of any Transfer
(as defined below) of the Trust Estate, or any portion thereof or
interest therein, which is not in accordance with Section 6.2 of the
Loan Agreement, Trustee shall have the absolute right at its option,
without prior demand or notice, to declare all sums secured hereby
immediately due and payable. Upon a permitted Transfer under
Section 6.2 of the Loan Agreement, the transferee shall assume all
obligations hereunder and agree to be bound by all provisions
contained herein. As used herein, the term "Transfer" means and
includes the direct or indirect sale, transfer, conveyance,
assignment, or other alienation of the Trust Estate, or any portion
thereof or interest therein, whether voluntary, involuntary, by
operation of law or otherwise, the execution of any installment
land sale contract, sales agreement or similar instrument affecting
all or a portion of the Trust Estate, granting of an option to
purchase any portion of or interest in the Trust Estate or any
interest therein, or the lease of all or substantially all of the Land or
of all or substantially all of the Improvements. "Transfer" shall not
include the leasing of individual mobile home spaces acquired by
Trustor on the Land so long as Trustor complies with the
RVPU]3\FBAUM\709429.1 A-10
0
provisions of the Loan Agreement and the Regulatory Agreement
relating to such leasing activity."
This Note has been issued pursuant to the Loan Agreement and is entitled to the benefit
and security thereof Reference is hereby made to the Loan Agreement for provisions relating to
the acceleration of the indebtedness evidenced hereby upon the occurrence of certain events
stated therein, and for all other relevant purposes. Time is of the essence of each and every
provision hereof This Note has been issued, executed and delivered in the State of California
and shall be governed by and construed in accordance with the laws of the State of Califorriia,
except to the extent that the laws of the United States of America may prevail.
RVPUBTBAUM\:709429.1 A-1 I
W
0
This Note shall be construed to be a nonrecourse obligation of the Borrower. Neither the
Borrower's directors, officers, employees and agents, nor any of its other affiliates, has or is
intended to have any liabilities, except for any liability arising as the result of Fraud or
misappropriation of funds, under or in respect of this Note, the Loan Agreement, the Indenture of
Trust, the Continuing Disclosure Agreement, the Deed of Trust, the Regulatory Agreement or
any other document or transaction contemplated by the foregoing.
MILLENNIUM HOUSING CORPORATION, a
California non-profit public benefit corporation
0
RVPUB�FBAUM\109429.1 A-12
President
0
ENDORSEMENT TO NOTE, dated June 1, 2006, in the principal amount of
$39,910,000 made by Millennium Housing Corporation payable to the order of INDEPENDENT
CITIES LEASE FINANCE AUTHORITY.
PAY TO THE ORDER OF UNION BANK OF CALIFORNIA, N.A., as Trustee, without
recourse.
Date: June 1, 2006 INDEPENDENT CITIES LEASE FINANCE
AUTHORITY
im
RVPU]3\FBAUM\709429.1 A-13
Program Administrator
0
EXHIBIT B
Deed Of Trust
(Included as Item 5 in the Bond Closing Transcript)
RVPU]3\F]3AUM\709429. I B-1
LIST OF RVIPROVEMENTS
AND SCHEDULED REPLACEMENTS
0
TOTAL ESTIMATED COST (YEAR I ) : $70,600.00
TOTAL ESTIMATED COST (YEAR 2-10): $ 347,500.00
TOTAL ESTIMATED COST (YEAR 11-35):
RVPUB\FBALTM\709429.1
C-1
$1,399,000.00
DESCRIPTION
IMMEDIATE
YEAR
1
MID-TERM
YEARS
2 to 10
LONG TERM
YEARS
11 to 35)
Sites:
1
Asphalt double slurry sealing
$ 8,500.00
$ 24,50000
2.
Asphalt repaving, resurfacing
$ 185,000.00
$ 236,000.00
3.
Improved street lighting
$ 8,500.00
4.
Electrical system replaced (all spaces)
$ 930,000.00
5.
Repair trash wood gates
$ 1,500.00
$ 5,000-00
6.
PM on Electrical (pedestals)
$ 62,000.00
$ 85,000.00
7.
Water system isolation valves (replace)
$ 46,500.00
8.
Water install new ball valves (all spaces)
$ 18,800.00
9.
Hydro -jetting sewer minor remediations
$ 5,000.00
$ 15.000.00
$ 30,000.00
10.
Gas system compliance (CP O&M)
$ 4,000.00
$ 6'000�00
$ 12,000.00
Buildings:
11.
Wood fences, property block watts
$17,000.00
$ 25,000.00
12.
13.
Pool equipment, plumbing & heating
Bldg. interior improvements
$10,800.00
$ 5,500.00
$ 9,500.00
$ 13,000.00
14.
Repainting all interiors (clubhouse)
$ 5,000.00
$ 9,000.00
$ 15,000.00
15.
Laundry building renovations
$ 3,500.00
$ 5'000�00
16.
Repainting all exterior buildings
$ 6,500.0()
$ 9,000.00
0
TOTAL ESTIMATED COST (YEAR I ) : $70,600.00
TOTAL ESTIMATED COST (YEAR 2-10): $ 347,500.00
TOTAL ESTIMATED COST (YEAR 11-35):
RVPUB\FBALTM\709429.1
C-1
$1,399,000.00