Initial Loans This Agreement shall not become effective nor shall the Lenders be required to make the initial Loans unless (i) since December 31, 2009, no event, development or circumstance shall have occurred that has had, or could reasonably be expected to have, a material adverse effect on the business, assets, operations or financial condition of Harley and its subsidiaries taken as a whole and (ii) the Borrowers shall have (a) paid all fees required to be paid in connection with the execution of this Agreement, (b) furnished to the Global Administrative Agent, with sufficient copies (other than in the case of any Notes) for each of the Lenders, such documents as the Global Administrative Agent or any Lender or its counsel may have reasonably requested, including, without limitation, all of the documents reflected on the List of Closing Documents attached as Exhibit D to this Agreement, (c) obtained all governmental and third party approvals necessary in connection with the financing contemplated hereby and the continuing operations of Harley and its Subsidiaries (including the Borrowers) and such approvals remain in full force and effect, (d) delivered to the Lenders (1) audited consolidated financial statements of Harley (on a Consolidated basis), (2) unaudited Consolidated financial statements of Harley (excluding HDFS and its Subsidiaries), (3) audited Consolidated financial statements of HDFS and its Subsidiaries (on a Consolidated basis), in the case of each of the foregoing clauses (1), (2) and (3), for the two most recent fiscal years ended prior to the Closing Date as to which such financial statements are available and (4) financial statement projections of (A) Harley (on a Consolidated basis), (B) Harley (excluding HDFS and its Subsidiaries) and (C) HDFS and its Subsidiaries, in the case of each of the foregoing clauses (A), (B) and (C), for the 2010 fiscal year, together with key underlying assumptions in reasonable detail and (e) delivered evidence reasonably satisfactory to the Global Administrative Agent of the payment of all principal, interest, fees and premiums, if any, on all Indebtedness under the Existing Credit Agreement, and the termination of the applicable agreements relating thereto, all taking effect concurrently with the effectiveness of this Agreement; provided that any Lender hereunder which is also a “Lender” under the Existing Credit Agreement hereby waives any requirement of five (5) Business Days notice by the “Borrowers” under the Existing Credit Agreement prior to the reduction of the commitments thereunder and the termination thereof.
Loan Advances (a) Advances shall be made only with respect to an Eligible Property which is added to the Collateral Pool and in any and all events, Lender shall be satisfied, in the exercise of its sole judgment and discretion with the Eligible Property. In any and all events, only a real property which has been fully improved and is being legally used as a residential rental multi-family property can be an Eligible Property and added to the Collateral Pool. Notwithstanding anything to the contrary in this Agreement, Borrower acknowledges and agrees that whether an individual Eligible Property is added to the Collateral Pool and the aggregate amount of the proceeds of the Loan which Lender approves to be advanced with respect to the same are within Lender’s sole discretion. Additionally, Lender may require an additional covenant, as specified below, regarding the Debt Service Coverage Ratio (as defined in this Agreement) with respect to an Eligible Property, which may not be applicable to any or all of the other Eligible Properties within the Collateral Pool. The additional covenant will be set to measure the actual performance of the Eligible Property on a going forward basis compared to the Borrower’s projections for the same, which projections were submitted to and approved by Lender at the time the Eligible Property was admitted to the Collateral Pool. The additional covenant shall require such Eligible Property to have a Debt Service Coverage Ratio of at least 1.25 to 1.00 measured on the 1st day after 18 full calendar months have elapsed from the date that the Eligible Property was admitted to the Collateral Pool.
(b) Lender shall not be required to make any Advance hereunder until the pre-closing requirements, all other conditions and all other requirements set forth in this Agreement have been completed and fulfilled to satisfaction of Lender, at Borrower’s sole cost and expense. In no event shall Lender be obligated to make an Advance if an Event of Default has occurred and is continuing.
(c) On or prior to the date of the making of an Advance (including the initial Advance) of the Loan, Borrower shall provide to Lender each of the following, in form and substance acceptable to the Lender for each Eligible Property which is being added to the Collateral Pool by a the owner of the same who is being added as a Borrower pursuant to the terms of to this Agreement:
(i) A written draw request for an Advance in a specific amount and written authorization and instructions for the funding of the same to the Borrower which will receive the same.
(ii) A policy of title insurance insuring the lien of the Mortgage as a first lien in an amount equal to the allocated portion of such Advance for each such Eligible Property, with such coverages and endorsements, and in such form and content, as Lender shall require and as may be available under law from a title insurance company as is acceptable to Lender.
(iii) Four (4) copies of a current, certified Survey of each such Eligible Property, which shall be prepared in accordance with the Lender’s requirements therefor.
(iv) An environmental assessment or report for each such Eligible Property, in form and substance satisfactory to the Lender and addressed to the Lender.
(v) A physical condition report for each such Eligible Property addressed to Lender and completed by a consultant acceptable to Lender and attesting to the structural integrity and useful lives of the components of the existing improvements.
(vi) Certificates of insurance indicating that all insurance required by Lender as set forth in Section 4.4 hereof, from time to time, and satisfactory as to coverage, limits, deductibles and companies, are in place.
(vii) A copy of the Organizational Documents of the Borrower owning such Eligible Property, certified as true, correct and complete by an officer or authorized signatory of such Borrower, together with (i) a current certificate of good standing from the jurisdiction in which such Borrower is organized (and from the jurisdiction in which its Eligible Property is located, if different from the jurisdiction in which such Borrower is organized), and (ii) resolutions and/or consents of those parties necessary to authorize the transaction contemplated hereby.
(viii) The most current available financial statements of all Borrowers and Guarantor, signed and certified as true, correct and complete by either an officer or authorized signatory of the same, which are to be satisfactory to Lender in form and substance and a certificate, in form and substance satisfactory to Lender, from the Chief Financial Officer or Chief Executive Officer of Guarantor certifying to Guarantor’s compliance with the financial covenants set forth on Schedule 8.
(ix) Information satisfactory to Lender that each such Eligible Property is in compliance with all applicable zoning regulations.
(x) A flood zone certification from a consultant acceptable to the Lender indicating that such Eligible Property is not located in a flood plain or any other flood-prone area as designated by any governmental agency; provided, however, that if any Eligible Property is so located and flood insurance is required by law, Borrower shall provide proof of flood insurance to the Lender.
(xi) Property tax information with respect to each Eligible Property satisfactory to Lender.
(xii) A true, complete and correct rent roll for the Eligible Property and a true, correct and complete copy of the form of lease being used at the Eligible Property, both of which must be acceptable to Lender in its sole discretion in form and content. Borrower acknowledges that without limiting any other term, covenant or condition for an Advance based on an Eligible Property being part of the Collateral Pool, the tenancy at such Eligible Property must be as set forth on the rent roll approved by Lender with all leases (unless otherwise specified on the approved rent roll) being in full force and effect, with the tenants listed thereon having accepted possession and paying full and all rent and all other sums due and payable under their leases as are set forth on the rent roll and for the term of the leases, as set forth on the rent roll.
(xiii) An appraisal with respect to each such Eligible Property in form and substance satisfactory to Lender.
(xiv) Copy of the Swap Contract, if applicable.
(xv) The Budget, Plans and Specifications, Project Schedule, Construction Contracts (including the identity of all Contractors) and all permits with respect to any and all construction of Improvements with respect to the Eligible Property achieving Stabilization, are delivered to and approved by Lender in the exercise of its sole discretion. In the case of permits, the same shall be issued, final and non-appealable, without any appeal having been filed and pending. In the case of the Budget, if the total cost exceeds the amount of all Advances to be made with respect to such Eligible Property in order for the same to achieve Stabilization, then Borrower shall demonstrate to Lender that it has the necessary funds on hand and available and prior to Lender making any Advance, Borrower shall demonstrate to Lender’s satisfaction, in the exercise of Lender’s sole discretion, that Borrower has first paid for all costs in excess of the amount of the Advance and that the amount of the Advance shall be sufficient to pay for the remaining costs which will be incurred and/or need to be paid in order for the Eligible Property to achieve Stabilization. In connection with the construction of Improvements, in addition to Lender first approving any and all Contractors, Lender shall also approve of the Architect, in the exercise of Lender’s sole discretion.
(xvi) All such other agreements, documents, instruments, certificates and/or exhibits which may be required, in the Lender’s judgment, including market data on the locale of the Eligible Property, to assure compliance with the requirements of this Agreement and to enable Lender to determine, in the exercise of its sole discretion, that such Eligible Property satisfies its underwriting requirements for residential rental multi-family properties , an Advance and to be part of the Collateral Pool.
(d) On or prior to the date of closing and, as applicable, the making of any Advance (including the initial Advance) under the Loan, the following documents shall be executed and delivered to Lender, in quantity, form and substance acceptable to the Lender and to its counsel, to evidence and secure the Loan:
(i) This Agreement executed by Opportunity OP at the closing of the Loan.
(ii) The Note executed by Opportunity OP at the closing of the Loan. In the case of a new entity which is to become a Borrower and thereby adding an Eligible Property to the Collateral Pool, an allonge to the Note, in form and content as required by Lender and its counsel whereby such new entity shall join in the Note and this Agreement as a Borrower thereunder and hereunder.
(iii) A Mortgage executed by each added Borrower that owns an Eligible Property to the Collateral Pool to secure the obligations of such Borrower under this Agreement, the Note and the other Loan Documents. The amount of each such Mortgage shall be in the amount of the Advances to be received by such Borrower with respect to the Eligible Property owned by it and being added to the Collateral Pool.
(iv) A security agreement (which may be incorporated within the Mortgage), which creates a first priority security interest in all equipment and in all of such Borrower’s intangible property relating to such Eligible Property, perfected by appropriate Uniform Commercial Code Financing Statements naming such Borrower, as debtor, and Lender, as Secured Party.
(v) The Assignments of Leases and Rents from each Borrower executing a Mortgage.
(vi) The Guaranty executed by Guarantor at the closing of the Loan. At such time as an additional Borrower is added and an Eligible Property is added to the Collateral Pool, Guarantor shall execute and deliver such consent, acknowledgement and confirmation of its liability with respect to the same and any and all Mortgages and other Loan Documents as Lender shall require
(vii) An Environmental Indemnity with respect to each Eligible Property executed by the Borrower owning such Eligible Property, Opportunity OP and Guarantor.
(viii) A current written opinion from outside counsel of Borrower and the Guarantor in form and substance reasonably acceptable to the Lender, addressed to the Lender at the closing of the Loan and as each Eligible Property is added to the Collateral Pool.
(ix) The Assignment from Opportunity OP in favor of Lender with respect to each Borrower as each Eligible Property is added to the Collateral Pool.
(x) The Assignment and Subordination of Property Management Agreement with respect to each Management Agreement and the Eligible Property which is added to the Collateral Pool and a subordination agreement executed by Guarantor and Advisor with respect to the payment of fees and any other sums by Guarantor to Advisor pursuant to the Advisory Agreement with respect to any Eligible Property which is added to the Collateral Pool upon the occurrence and during the continuance of an Event of Default under this Agreement or any of the other Loan Documents.
(xi) The Assignment of Contracts and the Contractor’s Consent and Certificate from any and all Contractors and the Architect’s Consent and Certificate from the Architect, to the extent there is any Construction of Improvements at such Eligible Property.
(xii) Such other Loan Documents or other documents as the Lender may, in the exercise of its reasonable judgment, require to evidence and secure the Loan. The Lender may designate which of the Loan Documents are to be filed and/or placed of record, the order of filing and/or recording thereof, and the offices in which the same are to be filed and/or recorded. Borrower shall pay all filing, documentary, recording and/or registration taxes and/or fees, if any, due upon the Loan Documents.
(e) A Property shall be an “Eligible Property” and added to the Collateral Pool if such Property meets the following requirements, as determined by Lender in its sole discretion, and provided that Lender shall have the right to reject any Property proposed by Borrower as an Eligible Property to be included in the Collateral Pool for any or no reason. Borrower acknowledges and agrees that no Property will be added to the Collateral Pool after May 31, 2014, provided, in the event an Eligible Property is added to the Collateral Pool on or prior to May 31, 2014, Advances for the same may be made after May 31, 2014 provided the approval of such Eligible Property and addition to the Collateral Pool provides for the making of such Advances as part of the Budget for the same and all other terms, covenants and conditions of this Agreement for the making of any or all such Advances are satisfied pursuant to this Agreement. Borrower acknowledges and agrees that notwithstanding anything to the contrary, in no event shall Lender make an additional Advance pursuant to Section 2.1(d) after May 31, 2014.
(i) Such Property shall (i) be lawfully zoned, used and occupied as a residential multi-family rental property; (ii) owned in fee by an entity which is wholly owned by Opportunity OP and which entity owns no other assets or is engaged in any other business other than the ownership and operation of such Property and (iii) meet all of Lender’s underwriting and due diligence criteria in the exercise of Lender’s sole discretion, including, without limitation, those pertaining to environmental matters, market criteria, rental rates and physical condition. Borrower acknowledges and agrees that in order to be considered by Lender to be an Eligible Property and added to the Collateral Pool, Borrower shall submit to Lender a submission package including such information as Lender may require, from time to time, including, without limitation, a full description of the Property, a cash flow projection at acquisition and Stabilization, a plan to achieve Stabilization, including the Budget and Project Schedule.
(ii) All of the conditions set forth in Section 2.2(c) above as may pertain to the entity desiring to become a Borrower hereunder and owning the Property or to the Property which is being considered to be added to the Collateral Pool shall be satisfied as determined by Lender.
(iii) All of the documents listed in Section 2.2(d) shall be executed and delivered as they pertain to such new Borrower, Guarantor, Opportunity OP and/or the Property and all of the other requirements and conditions to qualify such Property as an Eligible Property to be added to the Collateral Pool required under or pursuant to this Agreement shall be satisfied, as determined by Lender in the exercise of Lender’s sole discretion.
(f) No Advance shall constitute a waiver of any condition precedent to the agreement of Lender to make any future Advance. All conditions precedent to the obligation of Lender to make any Advance are imposed hereby solely for the benefit of Lender, and no other party may require satisfaction of any such condition precedent or shall be entitled to assume that Lender will make or refuse to make any Advance in the absence of strict compliance with such condition precedent. Lender, in its sole discretion, may waive any requirement of this Agreement for any Advance. Notwithstanding anything to the contrary contained herein, in the event that Lender has made an Advance and then determines that a condition precedent to such Advance required to be satisfied was, in fact, not satisfied, upon the request of Lender, Borrower agrees to cooperate with Lender and use good faith efforts to satisfy any such requirement to extent such requirement can then be satisfied, provided, however, under no circumstances shall Borrower be required to prepay such Advance nor shall such failure to satisfy such requirement constitute an Event of Default unless Borrower ceases to cooperate with Lender or ceases to use good faith efforts to satisfy such requirement.
(g) As a condition to the making of any Advance of proceeds of the Loan, Guarantor shall demonstrate to Lender’s satisfaction, in the exercise of Lender’s sole judgment, that Guarantor has, on a consolidated basi
