DRAFT

Page 1- Promissory Note Project #_____________ DRAFT

Loan Number: ________

PROMISSORY NOTE

$_________________

______________, 20__

principal amount of __________________________________ ($_______________), or so much

thereof as may be disbursed pursuant to the terms of that certain Loan Agreement of even date

herewith between Borrower and Lender ("Loan Agreement"), together with any accrued interest,

less any Project Cost Savings returned to Lender and applied to the Loan balance pursuant to

Section 5 of this Note. Interest under this Note will be computed on the basis of a 360-day year

consisting of twelve 30-day months.

This promissory note ("Note") is the note referred to in the Loan Agreement and is

entitled to the benefits of, and subject to the limitations of, the Loan Agreement. All capitalized

terms not defined herein will have the respective meanings given thereto in the Loan Agreement.

Lender, the Construction Loan Period may be extended for two, three-month periods upon

written request. Subject to Section 2 below and the provisions of this Note requiring earlier

payment, the Construction Loan will be due and payable in full on the last day of the

Construction Loan Period.

2. PERMANENT LOAN

If the conditions set forth in Section 4.1 of the Loan Agreement are satisfied as provided

therein, the Loan will be converted to a Permanent Loan, the initial principal balance of which

will be the balance of the Construction Loan at conversion. Permanent Loan interest will accrue

DRAFT

Page 2- Promissory Note Project #_____________ DRAFT

interest, is paid in full, or the first day of _____________ (“Maturity Date”) [will align with

affordability period]. The unpaid principal balance of this Note and all unpaid accrued interest

thereon and all sums payable by Borrower in connection with this Note shall be due and payable

in full on the Maturity Date or, at Lender's option, upon any Event of Default.

[To Be Determined – intent is to defer to primary lender if there is one, if LIFT is the only loan

in the project any identified project cost savings will be used to benefit tenant or be used for a reserve

account; language pending]

6. SUBSIDIZED LOAN; DUE ON TRANSFER; NO CHANGE IN USE

[To Be Determined – reference to transfer restrictions in the Operating Agreement]

(a) Borrower acknowledges that the terms of the Loan, including the interest rate, are

subsidized by public funds and are more favorable than the prevailing market rate for similar

loans obtainable in the private marketplace. Borrower further acknowledges that the more

favorable terms on the Loan are not intended to benefit Borrower or any subsequent owner of the

Project in the event of any sale or transfer of the Project or of a beneficial interest in Borrower.

Accordingly, any sale or transfer (or any attempted sale or transfer) of all or any part of,

lease, master lease or other lease not in the ordinary course of business, land sale contract,

foreclosure, deed in lieu of foreclosure, or transfer (by operation of law or otherwise) pursuant to

any dissolution, liquidation, merger, reorganization or consolidation, and with respect to a

beneficial interest in Borrower, a sale, gift or other transfer of any partnership, stock,

membership or other ownership interest in Borrower other than a transfer upon death of the

owner of such interest. However “sale or transfer” will not include,

(i) if the Borrower is a partnership or limited liability company, a

transfer to a general partner or managing member who is as of the date of this Note a general

partner of the partnership or managing member of the limited liability company,

DRAFT

Page 3- Promissory Note Project #_____________ DRAFT

agency pursuant to a right-of-first refusal under IRC section 42(i) (7), or

(iii) a transfer pursuant to a qualified contract under IRC section

42(h)(6)(F).

resulting from the limited partner’s exercise of its removal rights pursuant to Borrower’s Limited

Notwithstanding who is the holder of this Note, Lender reserves the right to approve a sale or

transfer as described in this Section. Any transferee will be bound by the terms of this Note.

(b) Borrower will not change the use of the Property without Lender’s prior written

consent, which may be withheld or conditioned in Lender’s sole and absolute discretion.

7 EVENTS OF DEFAULT

An Event of Default will occur under this Note if one or more of the Events of Default

described in the Trust Deed or the Loan Agreement, which are incorporated by reference in this

incorporated by reference in this Note.

Upon the occurrence of any Event or Events of Default, interest under this Note will

accrue on the unpaid principal balance from the date of the Event of Default, or if the Event of

Default is a payment default, from the date the first unpaid payment was due, at a rate equal to

the lesser of four percent (4%) per annum or the maximum interest which may be collected from

Borrower under applicable law (the “Default Rate”). If the unpaid principal balance and all

accrued interest are not paid in full on the Maturity Date, the unpaid principal balance and all

accrued interest will bear interest from the Maturity Date at the Default Rate. Borrower agrees

that the increase in the rate of interest payable under this Note to the Default Rate represents a

DRAFT

Page 4- Promissory Note Project #_____________ DRAFT

9. RECOURSE PROVISION

The obligations under this Note, including the obligations secured by the Trust Deed, are

with recourse to the Borrower and any of its general partners unless and until the Loan is

converted to the Permanent Loan. Upon conversion of the Loan to the Permanent Loan,

notwithstanding any other provision of this Note or the Loan Agreement, but subject to the

or arising under this Note will be nonrecourse as to Borrower and its general partners except as to

described in the Trust Deed, (b) retention by Borrower or its general partners of any rental or

other income or insurance or condemnation proceeds arising with respect to such collateral

which, under the terms of the Trust Deed, should have been paid to Lender, and (c) any liability

or losses incurred by Lender as a result of any fraud or deceit by Borrower in connection with

this Loan.

10. MISCELLANEOUS

This Note may not be modified or amended except in writing and signed by Borrower and

Lender. This Note also reflects and sets forth the entire agreement and supersedes all prior

agreements and understanding relating to such subject matter. Time is of the essence of each

[Remainder of Page Intentionally Left Blank]

DRAFT

Page 5- Promissory Note Project #_____________ DRAFT

Name:________________________