Operating Deficit Reserve Clause Samples

An Operating Deficit Reserve clause establishes a dedicated fund or account to cover shortfalls in operating income relative to expenses for a property or project. Typically, this reserve is funded at the outset of a project or upon loan closing, and may be replenished as needed to maintain a minimum balance. The clause ensures that there are sufficient funds available to pay for operating costs during periods when revenues are insufficient, thereby protecting both the property owner and lender from financial instability and helping to maintain uninterrupted operations.

Operating Deficit Reserve. The Special Limited Partner on behalf of the Partnership shall retain the sum of $25,000 of the second capital contribution payment specified in Section 7.1(b) of this Agreement into a reserve account under the Partnership's name. Such reserve fund shall only be released to the General Partner upon the earlier of: (a) the Project's achievement of a Debt Service Coverage of 1.15 for 12 consecutive months in 1998; or (b) on December 31, 1999.

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Operating Deficit Reserve. (a) On or before the date hereof, Borrower shall deposit with Bondowner Representative an amount not less than $ (the "Operating Deficit Reserve") in an account or sub-account maintained by Bondowner Representative (the "Operating Deficit Reserve Account"). Bondowner Representative shall have the sole right to make withdrawals from such Operating Deficit Reserve. All investment earnings on funds in the Operating Deficit Reserve shall be calculated by Bondowner Representative and added to and become part of the Operating Deficit Reserve. If applicable law requires and provided that no Event of Default exists under any of the Loan Documents, Bondowner Representative shall pay to Borrower the interest earned on the Operating Deficit Reserve once each year. Borrower hereby assigns to Bondowner Representative, and grants Bondowner Representative a first-priority security interest in, all of Borrower’s interest in the Operating Deficit Reserve Account and all deposits at any time contained therein and the proceeds thereof as additional security for ail of the Borrower’s obligations under this Instrument and the other Loan Documents. Any amounts deposited with Bondowner Representative under this Section 11.36 may be commingled with any other funds held by Bondowner Representative (provided that Bondowner Representative shall maintain separate sub-accounts for such Operating Deficit Reserve) and shall not operate to reduce the Loan, unless applied by Bondowner Representative for that purpose under Section 11.36(c). (b) Upon written request from the Borrower and satisfaction of the requirements set forth herein, including ail Operating Deficit Reserve Disbursement Conditions (as such term is defined below), Bondowner Representative shall disburse, or authorize disbursement of, amounts from the Operating Deficit Reserve Account, subject to the Bondowner Representative’s approval, to cover any Operating Deficit (as such term is defined below) in connection with the Improvements until all funds held in the Operating Deficit Reserve Account have been depleted. As used herein, an "Operating Deficit" shall exist if and to the extent that cash flow from the Improvements is insufficient to pay normal operating expenses and maintenance of the Improvements, Impositions (as defined in Section 11.24) and regularly scheduled debt service of the Borrower; provided that such normal operating expenses and maintenance, Impositions or debt service shall not include any items which a...

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Operating Deficit Reserve. Upon receipt by the Partnership of the First Installment, the Partnership shall establish the Operating Deficit Reserve as a separate, interest bearing account with a financial institution acceptable to BCCC, Inc. and shall deposit therein funds in the amount of $100,000 from the proceeds of the Second Installment. Funds in the Operating Deficit Reserve are intended to be employed solely for the payment of Operating Deficits. All interest earnings on funds on deposit in the Operating Deficit Reserve shall be retained therein for the aforesaid purposes. Withdrawals from the Operating Deficit Reserve shall be made only with the Consent, or upon the direction, of BCCC, Inc. At such time after or at a date three (3) years after Substantial Completion, based upon three (3) consecutive full calendar months with each month taken individually, that the Debt Service Coverage Ratio equals or exceeds 1.15 times Debt Service, $50,000 of the Operating Deficit Reserve shall be released to the Partnership, which amounts shall be utilized by the Partnership to reduce any amounts which remain outstanding under the Development Agreement, and if no such amounts remain outstanding, then such release of the Operating Deficit Reserve shall be made directly to the General Partner. At such time after or at a date six (6) years after Substantial Completion, based upon three (3) consecutive full calendar months with each month taken individually, that the Debt Service Coverage Ratio equals or exceeds 1.25 times Debt Service, the remaining balance of the Operating Deficit Reserve shall be released to the Partnership, which amounts shall be utilized by the Partnership to reduce any amounts which remain outstanding under the Development Agreement, and if no such amounts remain outstanding, then such release of the Operating Deficit Reserve shall be made directly to the General Partner.

Operating Deficit Reserve. The Partnership shall establish an Operating Deficit Reserve Escrow Account (the "Operating Deficit Reserve") as a separate, interest bearing account with and shall deposit therein funds in the amount of $348,500. Funds in the Operating Deficit Reserve are intended to be employed solely for the payment of Operating Deficits (including, without limitation, debt service, taxes and insurance), unless otherwise released from escrow by the Lender and/or Letter of Credit Issuer with the Consent of BCTC 94, Inc., provided that until Rental Achievement the Operating Deficit Reserve must always maintain a minimum balance of $200,000, which may not be depleted by draws on the Operating Deficit Reserve during the period prior to Rental Achievement. All interest earnings on funds on deposit in the Operating Deficit Reserve shall be retained therein for the aforesaid purposes. Withdrawals from the Operating Deficit Reserve shall be made only with the Consent, or upon the direction, of the Lender and BCTC 94, Inc.. The Operating Deficit Reserve shall be maintained until the later of (i) five years after the occurrence of Rental Achievement, or (ii) the achievement of twelve consecutive months at a minimum monthly occupancy rate of 93% plus twelve consecutive months of operations during each of which Cash Available for Debt Service Requirements equals or exceeds 1.15 times Debt Service or (iii) the extension of the Letter of Credit for an additional five-year term. The Operating Deficit Reserve shall also be subject to the requirements of the Letter of Credit Issuer and shall function initially as the Lease Up Reserve required by the Letter of Credit Issuer. Upon Rental Achievement, the Operating Deficit Reserve shall be paid into the account maintained by the Letter of Credit Issuer as the Letter of Credit/Debt Service Account, into which annual payments set forth in Section 11.03 A(b) shall also be paid. Withdrawals from the Operating Deficit Reserve shall always be subject to the consent of both the Lender and BCTC 94, Inc. ARTICLE IX TRANSFERS OF, AND RESTRICTIONS ON TRANSFERS OF INTERESTS OF LIMITED PARTNERS TC "ARTICLE IX - TRANSFERS OF, AND RESTRICTIONS ON TRANSFERS OF INTERESTS OF LIMITED PARTNERS"\l1

Operating Deficit Reserve. The Company shall not be required to establish an Operating Deficit Reserve for the Project.

Operating Deficit Reserve a. The Operating Deficit Reserve will be based on six (6) months of operating expenses and hard debt service (currently estimated at $ ) and will be fully funded by conversion. b. If the Operating Deficit Reserve decreases below the required amount (prior to any release date allowed in the LPA), it will be restored using Cash Flow, as shown above in the Cash Flow Waterfall Priority. On any release date (not expected to occur before exit of ILP), the Operating Deficit Reserve can be reduced to $ , with the remainder to be distributed as follows: • 70% to the Replacement Reserve • 15% to the GP • 15% to the ALP c. Upon re-syndication, the balance (if any) will be used to fund the new operating deficit reserve. d. Any released amount from Operating Deficit Reserve (in addition to release described above) will be split 50%/50% between GP and ALP.

Operating Deficit Reserve. At the Conversion Date, Borrower shall deposit $qp with *Senior Lender or the Escrow Agent, which funds shall be used as an operating deficit reserve (“ODR”). Borrower may only use the funds in the ODR to pay budgeted expense items approved by Lender and scheduled Loan payments, but only if the cash revenues from the Premises are insufficient for those purposes. After the initial deposit into the ODR, Borrower is not required to further fund the ODR, but all interest earned on the ODR shall become a part of the ODR. Before Borrower may draw on the ODR, Borrower must notify Lender in writing, explain the need for the withdrawal, and receive ▇▇▇▇▇▇’s approval of the withdrawal. If Borrower at any time draws on the ODR, Borrower shall first use any “free cash flow” from the Premises *(as defined in section

Operating Deficit Reserve. Upon receipt by the Partnership of the Third Installment, the Partnership shall establish the Operating Deficit Reserve as a separate, interest-bearing account with a financial institution acceptable to BCTC 94, Inc. and shall deposit therein funds in the amount of $52,000.00 from the proceeds of the Third Installment. Funds in the Operating Deficit Reserve are intended to be employed solely for the payment of Operating Deficits. All interest earnings on funds on deposit in the Operating Deficit Reserve shall be retained therein for the aforesaid purposes. The Operating Deficit Reserve shall remain under joint control of the General Partner and BCTC 94, Inc. Withdrawals from the Operating Deficit Reserve shall be made only with the Consent, or upon the direction, of the General Partner and BCTC 94, Inc.

Operating Deficit Reserve. The amount of the Loan was determined on the basis of Borrower's projection of interest on the Loan and expenses of the Property anticipated after the construction phase (the "Lease-Up Expenses"), for which Project revenues will not be sufficient to pay in full, which Lease-Up Expenses are estimated not to exceed $1,514,000.00 (such amount being referred to as the "Operating

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