Loan No. 1002753
PROMISSORY NOTE
$________________
Los Angeles, California
______________, 2012
FOR VALUE RECEIVED, the undersigned, SC SENIOR APARTMENTS, L.P., a California limited
partnership (“Borrower”), hereby promises to pay to the order of the COUNTY OF ORANGE, a political
subdivision organized and existing under the Constitution and the laws of the State of California (the
“Issuer”), the principal sum of _______________ and NO/100 DOLLARS ($_______________), or so
much thereof as shall be advanced, with interest on the unpaid balance thereof from date of
advancement until repaid at the rate or rates hereinafter provided, both principal and interest payable as
hereinafter provided.
This Promissory Note (the “Note”) is executed and delivered in connection with the issuance by
the Issuer of $_________________ in face principal amount of its County of Orange Multifamily Housing
Revenue Bond (San Clemente Senior Apartments Project) Series 2012A (the “Bonds”) pursuant to the
terms of that certain Trust Indenture dated as of _______________, 2012 (the “Indenture”) by and
among the Issuer, U.S. Bank National Association, as trustee (“Bond Trustee”), and Wells Fargo Bank,
National Association, as initial purchaser of the Bonds (“Bondowner Representative”), and pursuant to
the terms of that certain Loan Agreement dated as of ______________, 2012 (the “Loan Agreement”) by
and among Bondowner Representative, Borrower and the Issuer. The Loan Agreement provides for the
terms of the loan during the construction phase and upon satisfaction of the Conversion Conditions and
Conversion of the loan on the Conversion Date (each as defined therein) during the permanent phase.
Simultaneously with the issuance of the Bonds, the Issuer will assign this Note to Bond Trustee for the
benefit of Bondowner Representative and will execute that certain Assignment of Deed of Trust, made by
Issuer in favor of Bond Trustee, in order to assign its rights under that certain Construction and
Permanent Deed of Trust With Absolute Assignment of Leases and Rents, Security Agreement and
Fixture Filing, executed as of even date herewith, made by Borrower for the benefit of Issuer, to Bond
Trustee for the benefit of Bondowner Representative. All capitalized terms used but not otherwise
defined herein shall have the meanings given them in the Indenture or in the Loan Agreement.
Borrower, Bondowner Representative and California Community Reinvestment Corporation
(“CCRC”) have entered into that certain Bond Purchase Agreement dated as of _______________, 2012
(the “Bond Purchase Agreement”) pursuant to the terms and subject to the conditions of which CCRC
has agreed to purchase the Bonds and the security for the repayment of the Bonds, including Bondowner
Representative’s interest under this Note, on the Conversion Date. Effective as of the Conversion Date
and CCRC’s purchase of the Bonds any reference herein to Bondowner Representative shall mean
CCRC.
A.
Provisions Applicable Prior to the Conversion Date. This Note shall be governed by the
terms in this Section A until the Conversion Date. If for any reason, including reasons outside Borrower’s
control, the Conversion Date never occurs, these terms shall control until all sums owing under this Note
are paid in full.
1.
Loan Agreement; Collateral. This Note is the Promissory Note referred to in the Loan
Agreement and is entitled to all of the benefits of the Loan Agreement and the collateral described therein
and such other collateral which is given by Borrower to secure Borrower’s obligations thereunder or
hereunder.
2.
Interest Rate and Payment Terms.
2.1
Interest Only Payments. Borrower shall make monthly interest only payments in
arrears on the first Business Day of each month beginning on ____________ 1, 2012 on the
principal portion of this Note outstanding and advanced by the Issuer from time to time pursuant
to the terms of the Loan Agreement.
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Loan No. 1002753
2.2
Interest Rate. Prior to the Conversion Date, and provided no Default, breach, or
failure of condition exists under the Loan Agreement or any of the Loan Documents described
therein (this Note is one of the Loan Documents), the “Effective Rate” upon which interest shall
be calculated for this Note shall be one or more of the following (capitalized terms used in this
Section are defined in Section 2.2(c) below), provided, however, that the Effective Rate shall in
no event be more than the lesser of twelve percent (12.00%) or the maximum rate permitted
under applicable law:
(a)
For the initial disbursement of principal under this Note, and for any
subsequent disbursement of principal during any calendar month, the Effective Rate on
such principal amount shall be the One Month LIBO Rate on the date of disbursement as
determined by Bondowner Representative. Such Effective Rate shall apply to such
principal amount from the date of disbursement through and including the date
immediately preceding the first Business Day of the next calendar month. On the first
Business Day of the next calendar month, any principal disbursed during the prior
calendar month shall be added to (or become) the One Month LIBO Rate Portion for
purposes of calculation of the Effective Rate under Section 2.2(b) below.
(b)
Commencing with the first Business Day of the first calendar month after
the initial disbursement of principal under this Note, and continuing thereafter on the first
Business Day of each succeeding calendar month, the Effective Rate on the outstanding
One Month LIBO Rate Portion under this Note (i.e., all outstanding principal on such first
Business Day) shall be reset to the One Month LIBO Rate, as determined by Bondowner
Representative on each such first Business Day. Notwithstanding the foregoing,
Borrower, by written notice to Bondowner Representative not less than three (3)
Business Days prior to the first Business Day of any calendar month, may elect that the
Effective Rate for all or any part of the outstanding principal balance on this Note for the
One Month LIBO Rate Period commencing on such first Business Day shall be the One
Month LIBO Rate, as determined by Bondowner Representative, reset daily. Each such
election shall apply only to a single One Month LIBO Rate Period. Any such written
request by Borrower to Bondowner Representative shall be delivered to Bondowner
Representative at Wells Fargo Bank, N.A., Minneapolis Loan Center, MAC #N9303-110,
608 Second Avenue South, 11th Floor, Minneapolis, Minnesota 55402, Attention: Tari
Mock, with a copy to Bondowner Representative at Wells Fargo Bank, N.A., Community
Lending and Investment, MAC #E2818-181, 707 Wilshire Blvd., 18th Floor, Los Angeles,
California 90017, Attention: Sandra Smith-Martin, Loan No. 1002753.
(c)
In the event the One Month LIBO Rate, for any reason, should become
prohibited or unavailable to Bondowner Representative, or if in Bondowner
Representative’s good faith judgment, it is not possible or practical for Bondowner
Representative to set a One Month LIBO Rate, THEN, the Effective Rate shall be the
Replacement Rate.
(d)
meanings:
As used in this Section 2.2, the following terms shall have the following
(i)
“Federal Funds Rate” means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the weighted
average of the rates on overnight Federal Funds transactions with members of
the Federal Reserve System arranged by Federal Funds brokers, as published
for such day (or, if such day is not a Business Day, for the next preceding
Business Day) by the Federal Reserve Bank of New York, or, if such rate is not
so published for any day which is a Business Day, the average of the quotations
for such day on such transactions received by Bondowner Representative from
three (3) Federal Funds brokers of recognized standing selected by Bondowner
Representative.
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Loan No. 1002753
(ii)
“One Month LIBO Rate” means the rate of interest, rounded
upward to the nearest whole multiple of one-hundredth of one percent (0.01%),
equal to the sum of: (a) ___________ percent (____%) plus (b) the rate of
interest, rounded upward to the nearest whole multiple of one-sixteenth of one
percent (0.0625%), quoted by Bondowner Representative from time to time as
the London Inter-Bank Offered Rate in effect for deposits in U.S. Dollars at
approximately 9:00 a.m., California time, for a period of one month (the “One
Month Rate”), divided by one (1.00) minus the Reserve Percentage, as shown
below. Any change in an Effective Rate due to a change in the One Month LIBO
Rate shall become effective on the day each such change occurs.
One Month LIBO Rate = ____% +
One Month Rate
(1 - Reserve Percentage)
.
(iii)
“One Month LIBO Rate Period” means a period of one (1)
month from the first Business Day of a calendar month to, but not including, the
first Business Day of the next calendar month; provided that no One Month LIBO
Rate Period shall extend beyond the Maturity Date.
(iv)
“One Month LIBO Rate Portion” means the then outstanding
principal balance of this Note which is subject to the One Month LIBO Rate.
(v)
“Regulatory Costs” are, collectively, future, supplemental,
emergency or other changes in Reserve Percentages, assessment rates
imposed by the FDIC, or similar requirements or costs imposed by any domestic
or foreign governmental authority and related in any manner to a One Month
LIBO Rate.
(vi)
“Replacement Rate” means for any day, a fluctuating rate of
interest equal to ____________ percent (____%) plus the Federal Funds Rate
plus one and one-half percent (1.50%).
(vii)
“Reserve Percentage” means, at any time, the percentage
announced by Bondowner Representative as the reserve percentage under
Regulation D (as promulgated by the Board of Governors of the Federal Reserve
System, or its successor) for loans and obligations making reference to a One
Month LIBO Rate. The Reserve Percentage shall be based on Regulation D or
other regulations from time to time in effect concerning reserves for Eurocurrency
Liabilities (as defined in Regulation D) from related institutions as though
Bondowner Representative were in a net borrowing position, as promulgated by
the Board of Governors of the Federal Reserve System, or its successor.
(viii)
“Taxes” are collectively, all withholdings, interest equalization
taxes, stamp taxes or other taxes (except income and franchise taxes) imposed
by any domestic or foreign governmental authority and related in any manner to
a One Month LIBO Rate.
2.3
One Month LIBO Rate Price Adjustment. Borrower acknowledges that any
prepayment or acceleration of a One Month LIBO Rate Portion and corresponding early
redemption of any portion of the Bonds during a One Month LIBO Rate Period prior to the
Conversion Date shall result in Issuer incurring additional costs, expenses and/or liabilities and
that it is extremely difficult and impractical to ascertain the extent of such costs, expenses and/or
liabilities. Therefore, on the date a One Month LIBO Rate Portion is prepaid or the date all sums
payable hereunder become due and payable, by acceleration or otherwise (a “Price Adjustment
Date”), and any corresponding portion of the Bonds are redeemed prior to the Conversion Date
pursuant to Sections 4.01(a) or (b) of the Indenture, Borrower will pay Issuer on the date of
redemption (in addition to all other sums then owing to Issuer) an amount (the “One Month LIBO
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Loan No. 1002753
Rate Price Adjustment”) equal to the then present value of (a) the amount of interest that would
have accrued on the One Month LIBO Rate Portion and the corresponding portion of the Bonds
redeemed for the remainder of the One Month LIBO Rate Period at the One Month LIBO Rate set
on the first (1st) Business Day of the month in which such amount is prepaid or becomes due, less
(b) the amount of interest that would accrue on the same One Month LIBO Rate Portion and
corresponding portion of the Bonds redeemed for the same period if the One Month LIBO Rate
were set on the Price Adjustment Date at the One Month LIBO Rate in effect on the Price
Adjustment Date. The present value shall be calculated by using as a discount rate the One
Month Rate quoted on the Price Adjustment Date.
By initialing this provision where indicated below, Borrower confirms that Issuer’s
agreement to make the Loan evidenced by this Note at the interest rates and on the other terms
set forth herein and in the other Loan Documents constitutes adequate and valuable
consideration, given individual weight by Borrower, for this agreement.
BORROWER’S INITIALS: ____________________
2.4
Taxes, Regulatory Costs and Reserve Percentages.
Upon Bondowner
Representative’s demand, Borrower shall pay to Issuer, in addition to all other amounts which
may be, or become, due and payable under this Note and the Loan Documents, any and all
Taxes and Regulatory Costs, to the extent they are not internalized by calculation of an Effective
Rate. Further, at Bondowner Representative’s option, the Effective Rate shall be automatically
adjusted by adjusting the Reserve Percentage, as determined by Bondowner Representative in
its prudent banking judgment, from the date of imposition (or subsequent date selected by
Bondowner Representative) of any such Regulatory Costs. Bondowner Representative shall give
Borrower notice of any Taxes and Regulatory Costs as soon as practicable after their occurrence,
but Borrower shall be liable for any Taxes and Regulatory Costs regardless of whether or when
notice is so given.
2.5
Purchase, Sale and Matching of Funds. Borrower understands, agrees and
acknowledges the following: (x) Bondowner Representative has no obligation to purchase, sell
and/or match funds with regard to its draw down purchases of the Bonds in connection with the
use of a One Month Rate as a basis for calculating an Effective Rate or One Month LIBO Rate
Price Adjustment; (y) a One Month Rate is used merely as a reference in determining an Effective
Rate and One Month LIBO Rate Price Adjustment; and (z) Borrower has accepted a One Month
Rate as a reasonable and fair basis for calculating an Effective Rate or a One Month LIBO Rate
Price Adjustment. Borrower further agrees to pay the One Month LIBO Rate Price Adjustment,
Taxes and Regulatory Costs, if any, whether or not Bondowner Representative elects to
purchase, sell and/or match funds.
3.
General Interest Rate and Payment Terms.
3.1
Calculation of Interest. Prior to Conversion, Interest will be computed on the
basis of a three hundred sixty (360) day year and actual days elapsed, which results in more
interest than if a three hundred sixty five (365) day year were used.
3.2
Payments. All amounts payable under this Note are payable in lawful money of
the United States during normal business hours on a Business Day. Checks constitute payment
only when collected. Except as otherwise set forth herein or in any other Loan Document,
payments shall be applied in such order and manner as the Issuer may determine in its sole and
absolute discretion. All payments made under this Note shall be made without offset, demand,
counter-claim, deduction or recoupment (each of which is hereby waived), and acceptance by
Issuer of any payment in an amount less than the amount then due shall be deemed an
acceptance on account only, notwithstanding a notation on or accompanying such partial
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Loan No. 1002753
payment to the contrary and shall not excuse the existence of an Event of Default. The term
“Business Day” is a day of the week (but not a Saturday, Sunday or holiday) on which the offices
of Bondowner Representative are open to the public for carrying on substantially all of
Bondowner Representative’s business functions. All amounts payable under this Note shall be
payable at the office of Bond Trustee or at such other place as may be designated in writing by
the Issuer.
3.3
Authorization of Direct Debit. In order to assure timely payment to Issuer of
accrued interest, principal, fees and late charges due and owing under the Loan evidenced by
this Note, Borrower hereby irrevocably authorizes Bond Trustee to directly debit Borrower’s
demand deposit account with Bondowner Representative, account no. ____________________,
for payment when due of all such amounts payable to Issuer. Borrower represents and warrants
to Issuer that Borrower is the legal owner of said account. Written confirmation of the amount
and purpose of any such direct debit shall be given to Borrower by Bondowner Representative
and/or Bond Trustee not less frequently than once a month. In the event any direct debit
hereunder is returned for insufficient funds, Borrower shall pay Issuer upon demand, in
immediately available funds, all amounts and expenses then due and owing to Issuer.
4.
Principal Prepayments. On or before the Conversion Date, Borrower may prepay some
or all of the principal under this Note, from time to time, without penalty or premium at the times permitted
under the terms of the Loan Agreement, subject to the terms of Section A.2.3 above, provided however,
that so long as the Bond Purchase Agreement is in effect, any such prepayments shall not reduce the
principal under the Bonds and under this Note below $_________.00, unless such prepayment is (i) with
the prior consent of Bondowner Representative and CCRC, or (ii) unless CCRC requires a further
paydown pursuant to the terms of the Bond Purchase Agreement.
5.
Maturity Date. The outstanding principal balance, less any required amortization thereof,
plus accrued and unpaid interest, shall be due and payable as hereinafter provided on ____________
(the “Maturity Date”). Notwithstanding the foregoing, if the Conversion Date and CCRC’s purchase of the
Bonds does not occur by the Mandatory Conversion Date (as defined in the Loan Agreement), then the
entire outstanding principal amount of this Note together with all accrued and unpaid interest and all other
amounts owing under the Loan Documents shall be due and payable on the Mandatory Conversion Date
unless extended pursuant to the Loan Agreement.
6.
Bondowner Representative’s Damages. Borrower recognizes that its default in making
any payment as provided herein or in any other Loan Document as agreed to be paid when due, or the
occurrence of any other Default hereunder or under any other Loan Document, will require Bondowner
Representative to incur additional expense in servicing and administering the Loan, in loss to Bondowner
Representative of the use of the money due and in frustration to Bondowner Representative in meeting its
other financial and loan commitments and that the damages caused thereby would be extremely difficult
and impractical to ascertain. Borrower agrees (a) that an amount equal to the Late Charge plus the
accrual of interest at the Default Rate (as such terms are defined in Section C.1.1 and C.1.2 respectively)
is a reasonable estimate of the damage to Bondowner Representative in the event of a late payment, and
(b) that the accrual of interest at the Default Rate following any other Default is a reasonable estimate of
the damage to Bondowner Representative in the event of such other Default, regardless of whether there
has been an acceleration of the Loan evidenced hereby. Nothing in this Note shall be construed as an
obligation on the part of Bondowner Representative to accept, at any time, less than the full amount then
due hereunder, or as a waiver or limitation of Bondowner Representative’s right to compel prompt
performance.
B.
Provisions Applicable After the Conversion Date. This Note shall be governed by the
following terms in this Section B from and after the Conversion Date.
1.
Amortization Payments and Interest Rate.
1.1
Interest Payment Dates. On the Conversion Date, Borrower shall make a
payment of interest only for interest due in advance from the Conversion Date to the first day of
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Loan No. 1002753
the month following the Conversion Date. Thereafter, Borrower promises to pay interest in
arrears and principal on this Note on the first day of each month, commencing on the first day of
the month following the first full month after the Conversion Date (each, a “Payment Date”) until
the Maturity Date. This Note shall bear interest on and after the Conversion Date at the First
Reset Rate until the Second Reset Date and at the Second Reset Rate on and after the Second
Reset Rate until the CCRC Takeout Loan Maturity Date (as such terms are defined below).
1.2
Interest Rate. The “First Reset Rate” on this Note from the Conversion Date
until the Second Reset Date shall be a fixed interest rate of __________ percent (___%) per
annum, provided that the Conversion Date occurs on or prior to _____________. If CCRC
agrees in its sole discretion to extend the Termination Date under the Bond Purchase Agreement,
and the Conversion Date occurs after ____________ in accordance with such extension, then
unless CCRC otherwise conditions such extension, the First Reset Rate shall be determined as
of the date ten (10) days prior to the Conversion Date as the greater of (a) _______% or (b) the
percentage obtained by adding 2.00% to the Index; provided, however, that in no event shall the
First Reset Rate exceed the lesser of (i) twelve percent (12.00%) per annum or (ii) the maximum
rate permitted by law.
1.3
Interest Rate Adjustment. Provided that the Conversion Date occurs on or prior
to _____________, on the fifteenth (15th) anniversary of the first day of the month following the
Conversion Date (the “Second Reset Date”), the interest rate on this Note (the “Second Reset
Rate”) shall be a fixed interest rate and shall be adjusted to a rate determined as of the greater of
(a) the First Reset Rate, or (b) the percentage obtained by adding two and one-quarter percent
(2.25%) to the Index, and shall continue in effect until the CCRC Takeout Loan Maturity Date;
provided, however, that in no event shall the Second Reset Rate exceed the lesser of (i) twelve
percent (12.00%) per annum or (ii) the maximum rate permitted by law. As used herein, “Index”
means the yield to maturity on a composite of national AAA rated, municipal tax exempt revenue
bonds with a fifteen (15) year term as reported on Bloomberg.com (or, if such report is
discontinued, in a comparable industry source selected by CCRC), adjusted to constant maturity,
and as available forty-five (45) days prior to the date upon which the interest rate then in effect on
this Note shall be adjusted.
1.4
Calculation of Interest. After Conversion, interest shall be computed on the basis
of a three hundred sixty (360) day year consisting of twelve (12) thirty (30) day months.
1.5
Amortization Payments. On and after the Conversion Date until the CCRC
Takeout Loan Maturity Date, the Loan shall be represented by two (2) separate tranches of
principal, with amortizing payments thereof as follows:
(a)
For the period beginning on the first Payment Date, and on each
Payment Date thereafter until the ___________ (__) anniversary of the first day of the
month following the Conversion Date (the “Non-Section 8 Portion Maturity Date”),
Borrower shall pay to the Lender equal monthly installments of principal and interest in
arrears in the amount that would fully amortize that portion of the Loan equal to
______________ and No/100 Dollars ($________.00) (the “Non-Section 8 Portion”)
commencing on the first day of the month following the Conversion Date over a
____________ (__) year period, subject to adjustment and reamortization on the Second
Reset Date. On the Non-Section 8 Portion Maturity Date, the entire remaining principal
balance of the Non-Section 8 Portion, together with all accrued and unpaid interest
thereon, shall be due and payable; provided, however, that the Non-Section 8 Portion
Maturity Date shall not be a date later than the Maturity Date set forth in Section A.5
above.
(b)
For the period beginning on the first Payment Date, and on each
Payment Date thereafter until the ___________ (__) anniversary of the first day of the
month following the Conversion Date (the “Section 8 Portion Maturity Date”), Borrower
shall pay to the Lender equal monthly installments of principal and interest in arrears in
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Loan No. 1002753
the amount that would fully amortize that portion of the Loan equal to ______________
and No/100 Dollars ($________.00) (the “Section 8 Portion”) commencing on the first
day of the month following the Conversion Date over a ____________ (__) year period,
[subject to adjustment and reamortization on the Second Reset Date]. On the Section 8
Portion Maturity Date, the entire remaining principal balance of the Section 8 Portion,
together with all accrued and unpaid interest thereon, shall be due and payable;
provided, however, that the Section 8 Portion Maturity Date shall not be a date later than
the Maturity Date set forth in Section A.5 above. For the purposes of this Note, the
“CCRC Takeout Loan Maturity Date” shall collectively mean the Non-Section 8 Portion
Maturity Date as to the Non-Section 8 Portion, and the Section 8 Maturity Date as to the
Section 8 Portion.
2.
Maturity Date. All unpaid principal and interest under this Note shall be due and payable
in full on the earlier of the CCRC Takeout Loan Maturity Date or the Maturity Date. Borrower
acknowledges and agrees that the CCRC Takeout Loan Maturity Date may result in a required payoff of
this Note and the Bonds prior to the stated maturity date of the Bonds, which is ___________.
3.
Payments. All principal, interest, and all other amounts owing in connection herewith
shall be paid by Borrower in lawful money of the United States of America such that the Issuer has
received immediately available funds for the credit of Borrower not later than 3:00 p.m. Pacific time on the
date that such payment is due. Any payment made after 3:00 p.m. Pacific time shall be deemed received
on the next Business Day. Payment shall otherwise be made as provided in paragraph A.3.2 above.
4.
Prepayment. Beginning with the Conversion Date and continuing to the CCRC Takeout
Loan Maturity Date (the “Yield Maintenance Period”), Borrower may prepay all but not part of the
principal balance of this Note upon giving Issuer and Bondowner Representative not less than sixty (60)
days’ prior written notice thereof, and paying all of the unpaid principal balance of this Note on the
Business Day before the next scheduled monthly payment date following such 60-day notice, and by also
paying (in addition to the entire unpaid principal balance of this Note and all accrued interest and any
other sums due Issuer at the time of prepayment) a prepayment premium equal to the greater of (i) one
percent (1%) of the amount of principal being prepaid, or (ii) the product obtained by multiplying (A) the
amount of principal being prepaid, times (B) the difference obtained by subtracting from the interest rate
then in effect on this Note the Yield Rate (as defined below) on the fifth Business Day preceding the date
notice of prepayment is given to Issuer and Bondowner Representative (where prepayment is voluntary),
or the date Issuer accelerates the loan, times (C) the present value factor calculated using the following
formula:
1 - (1 + r)-n/12
r
r=
Yield Rate
n=
the number of months remaining between (1) either of the following, as
applicable: (i) the prepayment date, if the prepayment is voluntary, or (ii)
the date on which Issuer accelerates any unpaid principal balance of this
Note, and (2) the expiration of the Yield Maintenance Period
“Yield Rate” means the yield calculated by interpolating the yields for the immediately shorter and
longer term U.S. “Treasury constant maturities” (as reported in the Federal Reserve Statistical Release
H.15 Selected Interest Rates (the "Fed Release") under the heading "U.S. government securities")
closest to the remaining term of the Yield Maintenance Period, as follows (rounded to three decimal
places):
 (a  b)


 ( z  y)   b
 ( x  y)

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Loan No. 1002753
Where:
a=
b=
x=
y=
z=
the yield for the longer U.S. Treasury constant maturity
the yield for the shorter U.S. Treasury constant maturity
the term of the longer U.S. Treasury constant maturity
the term of the shorter U.S. Treasury constant maturity
“n” (as defined in the present value factor calculation above)
divided by 12
Notwithstanding any provision to the contrary, if “z” equals a term reported under the U.S.
“Treasury constant maturities” subheading in the Fed Release, the yield for such term shall be used, and
interpolation shall not be necessary. If publication of the Fed Release is discontinued by the Federal
Reserve Board, Bondowner Representative shall determine the Yield Rate from another source selected
by Bondowner Representative. Any determination of the Yield Rate by Bondowner Representative will be
binding absent manifest error.
After the expiration of the Yield Maintenance Period and upon giving Issuer sixty (60) days prior
written notice, Borrower may prepay the entire unpaid principal balance of this Note on the last Business
Day before a scheduled Payment Date by paying (in addition to the entire unpaid principal balance of this
Note and all accrued interest and any other sums due Issuer at the time of prepayment) a prepayment
premium equal to one percent (1%) of the entire unpaid principal balance of this Note. No partial
prepayment shall be permitted without the consent of Issuer in its sole discretion.
Provided, however, that no prepayment premium shall be due for any full prepayment made by
Borrower in accordance with the provisions of this section within ninety (90) days immediately preceding
the CCRC Takeout Loan Maturity Date. No partial prepayment shall be permitted without the consent of
Bondowner Representative in its sole discretion.
Borrower shall pay the prepayment premium due under this Note whether prepayment is
voluntary or involuntary in connection with Issuer’s acceleration of the unpaid principal balance of this
Note or the satisfaction or release of the Deed of Trust by foreclosure (whether by power of sale or
judicial proceeding, deed in lieu of foreclosure or by any other means). Notwithstanding any other
provision herein to the contrary, Borrower shall not be required to pay any prepayment premium in
connection with any prepayment occurring as a result of the application of insurance proceeds or
condemnation awards under the Deed of Trust.
If the Loan is prepaid after the Conversion Date on any day other than the first day of a calendar
month, whether such prepayment is voluntary, involuntary or upon full acceleration of the principal
amount of the Loan by Issuer following a Default, Borrower shall pay to Issuer on the prepayment date (in
addition to all other sums then due and owing to Issuer under the Note and the other Loan Documents)
an additional prepayment charge equal to the interest which would otherwise have accrued on the
amount prepaid (had such prepayment not occurred) during the period from and including the
prepayment date to and including the last day of the calendar month in which the prepayment occurred.
5.
No Deduction. All payments on this Note shall be made without deduction for any
present or future taxes, levies, imposts, deductions, charges or withholdings (excluding franchise taxes or
United States, state or local taxation on or measured by the overall net income of Bondowner
Representative), which amount shall be paid by Borrower as additional interest. Borrower shall pay the
amounts necessary such that the gross amount of principal and interest payments received by Bond
Trustee is not less than that required by this Note. All stamp and documentary taxes shall be paid by
Borrower. If, notwithstanding the foregoing sentences, Bondowner Representative pays any such taxes,
Borrower shall reimburse Bondowner Representative for the amount paid if, as and to the extent such
reimbursement is permitted by applicable law. Borrower shall furnish to Bondowner Representative
official tax receipts or other evidence of payment of all such taxes.
6.
Loan Document Event of Default. If any default or Event of Default occurs under the
Loan Agreement or any other Loan Document and continues beyond any applicable notice and cure
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Loan No. 1002753
period, then the whole of the principal, interest and charges owing on this Note may become or be
declared immediately due and payable and Issuer and/or Bondowner Representative may exercise all
remedies under the Loan Documents, or at law, in equity or otherwise, including the right to accelerate
the payment of the principal, interest and charges owing hereunder and under the Loan Documents.
7.
Limited Recourse.
7.1
Generally. Except as set forth herein and in the other Loan Documents, the
personal liability of Borrower or any partner of Borrower to pay the principal of and interest on the
debt evidenced by this Note and any other Loan Document or agreement evidencing Borrower’s
obligations under this Note and the Deed of Trust shall be limited to the following: (a) the Subject
Property (as defined in the Deed of Trust); (b) the personal property pledged under the Deed of
Trust and under any Loan Document executed in connection with the Secured Obligations (as
defined in the Deed of Trust); (c) the Payments (as defined in the Deed of Trust); and (d) all other
property or assets of Borrower secured by the Loan Documents. Except as set forth herein and
in the Loan Documents, Issuer shall not seek (i) any judgment for a deficiency against Borrower
or any partner of Borrower, or Borrower’s or any of Borrower’s partner’s members, shareholders,
managers, officers, directors, heirs, legal representatives, successors or assigns, in any action to
enforce any right or remedy under the Deed of Trust or the Loan Documents, or (ii) any judgment
on this Note, except as may be necessary in any action brought under the Deed of Trust or the
Loan Documents to enforce the lien against the Property or to exercise any remedies under any
Loan Document.
7.2
Exceptions; Personal Liability. Notwithstanding the preceding Section, the
Borrower and any general partner of Borrower (each individually, or on a joint and several basis if
more than one) shall be personally liable in the amount of any loss, damage or cost (including but
not limited to reasonable attorneys’ fees) resulting from one or more of the following: (a) fraud or
written material misrepresentation by Borrower or its agents or employees, or Borrower’s partner
or its agents or employees, in connection with obtaining the Loan evidenced by this Note, or in
complying with any of Borrower’s obligations under the Bond Documents and the Loan
Documents; (b) Borrower’s failure to pay (beyond any applicable notice and cure periods) any
and all insurance proceeds, condemnation awards, damage proceeds, security deposits received
from tenants or other sums or payments received by or on behalf of Borrower in its capacity as
owner of the Property and not applied in accordance with the provisions of the Deed of Trust and
the Loan Documents (except to the extent that Borrower did not have the legal right because of a
bankruptcy, receivership or similar judicial proceeding, to direct disbursement of such sums or
payments); (c) Borrower’s failure to pay all Payments (as defined in the Deed of Trust) actually
received by Borrower and not applied to the payment of the reasonable operating expenses of
the Project as set forth herein and then to the payment of principal and interest then due and
owing under this Note or the Loan Agreement and any other amounts arising or due and owing
under the Bond Documents and the Loan Documents, including but not limited to deposits or
reserves payable under any Loan Document (except to the extent that Borrower did not have the
legal right, because of a bankruptcy, receivership or similar judicial proceeding, to direct the
disbursement of such sums); (d) Borrower’s failure, following an event of default under any of the
Bond Documents and/or the Loan Documents beyond any applicable notice or cure period to
deliver to Issuer on demand all Payments (as defined in the Deed of Trust) (except to the extent
that Borrower did not have the legal right because of a bankruptcy, receivership or similar judicial
proceeding to direct the disbursement of such sums), books and records relating to the Project;
(e) commission of material waste by Borrower (or any general partner, officer, director or agent of
Borrower or any guarantor or owner of any collateral as described in the Deed of Trust or the
Loan Documents); provided, however, that failure of Borrower to restore or repair the Project after
damage or destruction to them shall not be material waste, notwithstanding the availability of
insurance proceeds or condemnation awards in connection therewith; and (f) the presence or
release of any “Hazardous Materials” (as defined in the Hazardous Materials Indemnity
Agreement (Unsecured)) on, in or under the Project.
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7.3
Guaranties; Other Rights of Issuer Relating to Collection of Amounts Owed.
Notwithstanding the foregoing, no provision of this Section shall (a) affect any guaranty or similar
agreement executed in connection with the debt evidenced by this Note, (b) release or reduce the
debt evidenced by this Note, (c) impair the right of Issuer and/or Bondowner Representative to
enforce any provisions of the Deed of Trust or the Bond Documents or the Loan Documents, or
(d) impair the liens of the Deed of Trust or the Bond Documents or the Loan Documents. Nothing
herein shall directly or indirectly limit the right of Issuer and/or Bondowner Representative to
collect or recover any collateral as described in the Deed of Trust or Loan Documents from
Borrower or any person holding or receiving the same without the written consent of Issuer,
including any partner, shareholder, member or affiliate of Borrower or any partner of Borrower
who receives the Payments (as defined in the Deed of Trust) assigned to Issuer after the same
become payable to Issuer or under circumstances where the same are recoverable by Issuer
under applicable law or by contract. Furthermore, nothing in any other provision of this Note or
the other Bond Documents or Loan Documents shall be deemed to limit Issuer’s right to enforce
collection from Borrower (or any other person liable therefor) of all reasonable attorneys’ fees,
costs, expenses, indemnity liabilities and other amounts payable to Issuer apart from principal or
interest owing under this Note. This Section shall only apply to principal constituting the original
loan evidenced by this Note and interest accrued thereon under this Note and shall not affect
other indebtedness owing under the Loan Documents. Nothing in this Section is intended to
subordinate any obligation or liability of Borrower to Issuer to any operating expenses of the
Project, and upon an event of default under any Loan Document or Bond Document, Issuer may
apply Payments (as defined in the Deed of Trust) to any secured or unsecured obligation owing
to Issuer, in any order. Notwithstanding anything herein to the contrary, no limited partner of
Borrower (to the extent it continues to act in a capacity as a limited partner of Borrower) shall
have any personal liability in connection with a default by Borrower under this Note or the Deed of
Trust.
8.
Applicability. The limited recourse described in Section B.7 and the other provisions
within this Section B shall apply only after the Conversion Date.
C.
Provisions Applicable at All Times. This Note shall be governed by the following terms in
this Section C at all times, whether before or after the Conversion Date.
1.
Late Payments: Default Rate.
1.1
Late Charge for Overdue Payments. Prior to the Conversion Date, if the holder
of this Note has not received the full amount of any monthly payment by the end of fifteen (15)
calendar days after the date it is due, Borrower shall pay a late charge (the “Late Charge”) to the
holder in the amount of four percent (4%) of the overdue payment. On and after the Conversion
Date, if the holder of this Note has not received the full amount of any monthly payment, other
than the first principal payment, by the end of ten (10) calendar days after the date it is due,
Borrower shall pay a late charge to the holder in the amount of five percent (5%) of the overdue
payment. Borrower shall pay this late charge only once on any late payment.
1.2
Default Rate. The interest rate in effect from time to time under this Note may be
herein referred to as the “Note Rate.” Upon the occurrence of any default hereunder or Event of
Default under the Loan Documents or Bond Documents (as defined therein, subject to any
applicable notice and cure periods), the Loan shall bear interest at the rate which is five percent
(5%) above the then current Note Rate (the “Default Rate”), provided, however, that in no event
shall the Default Rate exceed the lesser of (i) the maximum rate permitted by law or (ii) twelve
percent (12%) per annum. Additionally, from and after (a) the CCRC Takeout Loan Maturity
Date, (b) the Mandatory Conversion Date, to the extent that the Conversion Date does not occur
prior to the Mandatory Conversion Date (unless extended pursuant to the Loan Agreement), or
(c) any other date that all sums owing on this Note become due and payable by acceleration or
otherwise, this Note shall bear interest at the Default Rate. Accrued interest, at the Note Rate, if
not paid when due, shall accrue at the Default Rate, as hereinabove provided, which may result
in compounding of interest. Except as otherwise set forth herein or in any other Loan Document,
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payments under this Note or under any other Loan Document that are due on demand, shall bear
interest at the Default Rate (i) from the date costs or expenses are incurred by the holder of this
Note that give rise to the demand or (ii) if there is no such date, then from the date of demand,
until Borrower pays the full amount of such payment, including interest.
1.3
Acceleration. If: (a) Borrower shall fail to pay when due any sums payable
hereunder, subject to any applicable notice and cure period; or (b) a Default (as defined in the
Loan Agreement) occurs under the Deed of Trust or under any obligation secured thereby; THEN
Bondowner Representative may, at its sole option, direct Bond Trustee to declare all sums owing
under this Note immediately due and payable; provided, however, that if any document related to
this Note provides for automatic acceleration of payment of sums owing hereunder, all sums
owing hereunder shall be automatically due and payable in accordance with the terms of that
document.
2.
Deed of Trust and Loan Documents. This Note is secured by, among other additional
security, the Deed of Trust, which covers Borrower’s fee simple interest in that certain real property
located in the City of San Clemente, County of Orange, State of California, as described therein (the
“Property”). Upon the occurrence of an Event of Default as specified in the Loan Agreement, the Deed
of Trust or any other instrument now or hereafter securing the payment of this Note (that continues
beyond any applicable notice and cure period), the holder of this Note shall have the option, without
notice, of declaring the principal balance hereof and the interest accrued thereon to be immediately due
and payable. The Loan Documents contain or expressly incorporate by reference the entire agreement of
the parties with respect to the matters contemplated therein and supercede all prior negotiations or
agreements, written or oral. The Loan Documents shall not be modified except by written instrument
executed by all parties. Any reference to the Loan Documents includes any amendments, renewals or
extensions now or hereafter approved by Bondowner Representative in writing.
3.
Attorneys’ Fees.
3.1
Attorneys’ Fees Generally. Borrower shall reimburse Issuer, Bond Trustee,
Bondowner Representative and any other holder of this Note (collectively, the “Issuer Parties”)
for all reasonable attorneys’ fees, costs and expenses incurred by the Issuer Parties in
connection with the enforcement of the Issuer Parties’ rights under this Note and each of the
other Loan Documents, including, without limitation, reasonable attorneys’ fees, costs and
expenses for trial, appellate proceedings, out-of-court negotiations, workouts and settlements,
and for enforcement of rights under any state or federal statute, including, without limitation,
reasonable attorneys’ fees, costs and expenses incurred to protect the Issuer Parties’ security
and attorneys fees, costs and expenses incurred in bankruptcy and insolvency proceedings such
as (but not limited to) in connection with seeking relief from stay in a bankruptcy proceeding. For
purposes of this Section 3.1, the term “expenses,” means any expenses incurred by the Issuer
Parties in connection with any of the out-of-court, or state, federal or bankruptcy proceedings
referenced above, including, but not limited to, the fees and expenses of any appraisers,
consultants and expert witnesses retained or consulted by the Issuer Parties in connection with
any of those proceedings.
3.2
Post-Judgment Proceedings. Each of the Issuer Parties shall also be entitled to
its reasonable attorneys fees, costs and expenses incurred in any post-judgment proceedings to
collect and enforce the judgment. This provision is separate and several and shall survive the
merger of this agreement into any judgment on this agreement.
3.3
Payment Upon Demand. Borrower shall pay all amounts due under this Section
promptly upon demand with interest thereon until paid at the Default Rate then in effect which
shall be compounded monthly. Borrower’s reimbursement obligations hereunder shall be part of
the indebtedness secured by the Loan Documents.
4.
Waivers. Borrower, and any and all endorsers, guarantors and sureties of this Note, and
all other persons liable or to become liable on this Note, severally waive presentment for payment,
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demand, notice of demand and of dishonor and nonpayment of this Note, notice of intention to accelerate
the maturity of this Note, protest and notice of protest, diligence in collecting and the bringing of suit
against any other party, notice of default or delinquency, notice of costs, expenses or losses and interests
thereon and notice of late charges, and agree to all renewals, extensions, modifications, partial payments,
releases or substitutions of security, in whole or in part, with or without notice, before or after maturity.
The pleading of any statute of limitations as a defense to any demand against the makers, endorsers,
guarantors and sureties hereof is expressly waived by each and all such parties to the extent permitted by
law.
5.
Absence of Usury. Borrower and Issuer intend that the loan evidenced by this Note be
exempt from the restrictions contained in the California usury law and be in strict compliance with any
applicable usury law. In furtherance thereof, Borrower and Issuer stipulate and agree that none of the
terms and provisions contained in this Note, or in any other Loan Document executed in connection
herewith, shall ever be construed to create a contract to pay for the use, forbearance or detention of
money, or interest at a rate in excess of the maximum interest rate permitted to be charged by applicable
law. Therefore, if a court ultimately determines that the loan evidenced by this Note is not exempt from
the California usury law, or if a court determines that the usury law of another jurisdiction should be
applied to the loan evidenced by this Note: (a) neither Borrower nor any endorsers or other parties now or
hereafter becoming liable for payment of this Note shall ever be required to pay interest on this Note at a
rate in excess of the maximum interest that may be lawfully charged under applicable law, and the
provisions of this Section shall control over all other provisions of this Note and any other Loan Document
now or hereafter executed in connection herewith; (b) if the maturity of this Note shall be accelerated for
any reason or if the principal of this Note is paid prior to the end of the term of this Note, and as a result
thereof the interest received for the actual period of existence of the loan evidenced by this Note would be
unlawful, the holder of this Note shall refund to Borrower the amount of such excess or shall credit the
amount of such excess against the principal balance of this Note then outstanding; and (c) in the event
that Issuer or any other holder of this Note shall collect monies which are deemed to constitute interest
which would increase the effective interest rate on this Note to a rate in excess of that permitted to be
charged by applicable law, all such sums deemed to constitute interest in excess of the legal rate shall,
upon such determination, at the option of the holder of this Note, be immediately returned to Borrower or
credited against the principal balance of this Note then outstanding.
6.
Time is of the Essence. Time is of the essence with respect to every provision hereof.
7.
Governing Law. This Note shall be construed and enforced in accordance with the laws
of the State of California, except to the extent that Issuer shall at any time have greater rights under
federal law, in which instances federal law shall control. All persons and entities in any manner obligated
under this Note consent to the jurisdiction of any federal or state court within the State of California having
proper venue and also consent to service of process by any means authorized by California or federal
law.
8.
WAIVER OF RIGHT TO TRIAL BY JURY. TO THE EXTENT PERMITTED BY
APPLICABLE LAW, BORROWER AND BONDOWNER REPRESENTATIVE EACH EXPRESSLY
WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION
(a) ARISING UNDER THE LOAN DOCUMENTS, INCLUDING, WITHOUT LIMITATION, ANY PRESENT
OR FUTURE MODIFICATION THEREOF OR (b) IN ANY WAY CONNECTED WITH OR RELATED OR
INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO
THE LOAN DOCUMENTS (AS NOW OR HEREAFTER MODIFIED) OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE
TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION IS NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND THE BONDOWNER
REPRESENTATIVE AND THE BORROWER EACH HEREBY AGREES AND CONSENTS THAT ANY
PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH
ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF BONDOWNER REPRESENTATIVE
AND BORROWER TO THE WAIVER OF ANY RIGHT THEY MIGHT OTHERWISE HAVE TO TRIAL BY
JURY.
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Loan No. 1002753
9.
Exhibits. All exhibits, schedules or other items attached hereto are incorporated into this
Note by such attachment for all purposes.
10.
No Waiver. No previous waiver and no failure or delay by Bondowner Representative or
Bond Trustee 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.
11.
Joint and Several Liability. If this Note is executed by more than one person or entity as
Borrower, the obligations of each such person or entity shall be joint and several. No person or entity
shall be a mere accommodation make, but each shall be primarily and directly liable hereunder.
[Signature Page to Follow.]
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Loan No. 1002753
IN WITNESS WHEREOF, the undersigned has executed this Promissory Note as of the date first
above written.
“Borrower”
SC SENIOR APARTMENTS, L.P.,
a California limited partnership
By:
SC Senior Apartments, LLC,
a California limited liability company,
its Administrative General Partner
By:
Meta Housing Corporation,
a California corporation,
its Manager
By:
John M. Huskey,
Manager and Sole Member
By:
WCH Affordable VII, LLC,
a California limited liability company,
its Managing General Partner
By:
Western Community Housing, Inc.,
a California nonprofit public benefit
corporation, its Sole Member
By:
Graham P. Espley-Jones, President
Signature Page to Promissory Note
S-1
23344141
Loan No. 1002753
ALLONGE
Attached to that certain Promissory Note made by SC SENIOR APARTMENTS, L.P., a California
limited partnership, and payable to the order of COUNTY OF ORANGE, a political subdivision organized
and existing under the Constitution and the laws of the State of California (the “Note”), and dated as of
even date with the Note.
Pay to the order of U.S. BANK NATIONAL ASSOCIATION, as Bond Trustee, without recourse.
COUNTY OF ORANGE
By:
Public Finance Director
Allonge to Promissory Note
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