Disaster Recovery Grantee’s Letterhead

LOAN Award Letter

Small Business Loan GrantImplementation Tool #6

Description:As part of the Disaster Recovery Small Business Loan and Grant Program Design and Implementation Toolkit, theLoan Award Letter can be used to notify participants of funding allocations, reinforce programmatic details, and provide guidance on the next steps in the Small Business Loan and Grant Program.

Modification of Source Documents Provided by: State of Louisiana Disaster Recovery Unit, Office of Community Development.

Caveat: This is an informational tool and/or template that should be adapted to each grantee’s specific program design.

Thisisnotan official HUD document and hasnotbeen reviewed byHUD counsel. Itisprovided forinformational purposesonly.Anybinding agreementshould be reviewed byattorneysforthe parties to the agreement andmustconform to state and local laws.

U.S.DepartmentofHousingandUrbanDevelopment

Community Planning and Development, Disaster Recovery and Special Issues Division

Date

Recipient Name

Organization

Address

City, State Zip

RE:The Disaster Recovery (DR) Grantee’s ProgramApplication

DearMr.XX,

Thispresentsthedetailedtermsandconditionsoftheprogramloanawardpresentedtoyouinthe DR grantee’slettertoyou datedMonthDay, Year.

TheStateof{insert name} isprovidingfundsfromtheUnitedStatesofAmerica,HUDCommunityDevelopment BlockGrant (CDBG)Programtoqualifiedapplicants.I ampleasedtoinformyouthat by thisletter,your applicationforDisaster Recoveryfundingforthe DR granteeProgramfor{insert name} is herebyconditionallyapproved.

TheLoanReviewCommitteehasperformedafinancial andcreditanalysisofyourproject,andoffersa{insert amount}loan(the“Loan”)onthetermsandconditionssetforthbelow.

BORROWER:Development,L.L.C.(Borrowershallberequiredtoexecutea ratificationdocumentwheretheBorroweradoptsandcertifiestheaccuracyof theapplicationof Development,L.L.C.andallitsamendments.)

GUARANTORS:Mr. Smith,DevelopmentL.L.C. andeachothermemberofBorrower, anysuchmember’smembers and suchotherindividualsorentitiesasmaybesatisfactory tothe DR granteeinitssole discretion. EachGuarantorwillexecuteaCommercialGuaranty anda Performanceand CompletionandJob CreationGuaranty

LENDER:{insert name}

LOAN:{insert amount}

PROJECTDESCRIPTION:TheBorrowerisseekingprogram funds fortherevitalizationof(the “Project”),whichwillconsistofthereconstruction oftheappearance ofthe shoppingcenterandthedevelopmentandbuildoutofagrocerystore.These improvementsincludethepurchaseandinstallationofcoolers,shelving,and cashregistersto operatea grocerystore.

USEOFFUNDS:The DR granteeLoanproceeds may only beused for payingforequipment, hard constructionandfaçadeimprovementcostsrelatedtotheProject. Borrowerwill bemonitoredfortheeligibleuseoffunds.

JOBCREATION:Inadditiontomeetingtherequirementssetoutintheprogramguidelines,in ordertomeetthenational objective ofcreating lowtomoderate jobs,Borrower and/orBorrower’stenantsmustcreateaminimumof{insert number}newpermanentfull timeequivalent(FTE)jobs,withatleast{insert amount}%ofsuchnew jobsbeingjobsmade available toorheldbyLMIpersons,within{insert amount}yearsofthecompletion of construction.Additionally,Borrower willberequiredto completetherenovation work,installation work,andotherpurchases asdetailedinthecostestimate includedinyourapplication, dated{insert date} within{insert number}months ofthe executionoftheLoandocuments.

FUNDING:Nofundsshallbeprovided oradvanced bythe DR granteeuntilBorrowerhasprovided evidencethatfunds of Borrower’sintheamountof ${insert amount} havebeen used forandexpendedfortheProjectandthattheProjectcanbecompleted infull with the DR grantee loan amount. The DR granteefunds shall be drawndown on a reimbursement basis.Supportdocumentationthatwillberequiredpriortoeach draw,includes,but isnotlimited to:AIADocumentsG702703(Contractor’s ApplicationforPaymentandSupportDocumentation); lienwaiverfrom contractor(s);andinspectionreportthatatteststothepercentageofcompletion ofworkinvoicedintheContractor’sApplicationforPayment.Allloan fundsmustbedrawn downonthedatethatis{insert number}monthsafterthedateofthe loanclosing.

INTERESTRATES:InterestRateof{insert number}%perannumpriortodefaultand{insert number}%afteraneventofdefault whichwillberetroactivelyapplied. Interestshallnotaccrueduringthefirst{insert number}monthsoftheLoan.Thereafter,interestshallaccrueand becalculatedon adaily basisbasedona 360day year.

MATURITYAND

PAYMENTS:Thetermof theLoanwillbe{insert number}years.Interestshall begintoaccrue onthedate thatis{insert number}months afterthedateoftheLoan. Interestonly shallbedueand payablemonthlywith thefirstsuchpayment beingdueandpayableseven months afterthedateoftheLoan.Principal andinterestshallbedueand payablemonthly (basedona9yearamortizationschedule)withsuchfirst paymentofprincipalandinterestbeingdue andpayable{insert number}monthsafter thedate oftheLoan.

OTHERFINANCINGAND

SCHEDULEOFVALUES:Prior to theclosing,Borrowermust provide all updates to additional funding received for disaster-related issues, including but not limited to: FEMA, SBA and private insurance.

ACCELERATION:Thedocumentswillbedraftedsuchthatitwillbeaneventofdefault (givingthe DR granteetherighttoacceleratetheloanandrequireimmediatere-payment oftheloaninfullwithinterestatthedefault rateof{insert number}%perannum being retroactivelyapplied tothedateoffirstfunding)ifthejobcreationrequirements arenotmetwithinthetimeframedescribedinour{insert date}letterorif thepropertyissoldpriortothejobcreationrequirementsbeingmet. Ofcourse therewillbe otherstandardeventsofdefaultthatwouldalsogive the DR granteethe right to accelerate.

PREPAYMENT:OnceBorrowerhascreated{insert number}newfulltimeequivalentjobsinconnectionwith theProject,withatleast{insert number}%ofsuchnew jobsbeingjobsmadeavailabletoor heldby LMIpersons,BorrowersshallhavetherighttoprepaytheLoan,in wholeorinpart,withoutpremium orpenalty. TotheextentBorrower, voluntarily orinvoluntarily prepaystheLoan,inwholeorinpart,priortothe creationof{insert number}newfulltimeequivalent jobs,withatleast{insert number}%ofsuchnewjobs beingjobsmadeavailable toorheldbyLMIpersons,Borrower shallowea prepayment penaltyintheamountof{insert number}%perannumfromdateoffundingonthe amountofprincipalbeingprepaidlessanyinterestactuallypreviouslypaidon suchprincipalbeingrepaid.

SECURITY:Borrower shallgrantthe DR granteevalidandperfectedliens andsecurity interests onall ofits assets,secondin priorityonlytoanyliensandsecurityinterestsinfavor of USDA,andanassignmentofleasesandrents.

CONDITIONSPRECEDENT

TOALLDRAWS:Usual and customary for loan transactions of this type, including, without limitation, the following: (i) execution of loan documents in form and substance acceptable to the DR grantee; (ii) all of the representations and warranties in the loan documentation shall be true and correct in all material respects as of the date of such extension of credit; (iii) no event of default under the Loan shall have occurred and be continuing, or would result from such extension of credit; (iv) commencement of construction of the Project within 30 days after closing; (v) the DR grantee shall have received the audited financial statements of any proposed guarantor and a certificate from each accepted Guarantor evidencing adequate liquid capital to satisfy the DR grantee that the obligations of the Guarantor hereunder and under the Commercial Guaranty and the Performance and Completion and Job Creation Guaranty are adequately secured; (vi) the DR grantee shall have received and approved a copy of the construction budget and line item breakdown of Construction Costs, including hard and soft costs, approved by the grantee, along with a sources and uses of funds in the amount of the Total Development Costs, a draw schedule and estimated development timing assumptions; (vii) the DR grantee shall have received certificates of insurance as to Builder's Risk and Hazard Insurance in completed value form with extended coverage in the amount of the full value of the Project, as completed, but which shall, in any case, include such insurance coverage sufficient to meet the standards established in Part V, Section 106 of the Fannie Mae U.S. Guide, effective November 3, 2003, as amended from time to time and certificates evidencing all other insurance required by this Agreement; (viii) the DR grantee shall have received certificates of insurance for flood, Commercial General Liability and such other insurance as may be reasonably required by the DR grantee;(ix) the grantee shall have received and approved a fixed price construction contract for the Project and payment and performance bonds from a U.S. Treasury approved surety in the full amount of the general contractor’s contract price which lists the grantee as a dual oblige; (x) the DR grantee shall have received and approved the architect’s contract, the plans and specifications, the site plan and floor plans, an appraisal, utility availability letters, and such other documentation as the DR grantee may reasonably require; (xi) the grantee shall have received a copy of the building permit authorizing construction of the Project together with a certificate from the public official issuing the building permit(s) that the Project will conform to existing zoning laws and specified variances, if any and all other authorizations, permits or approvals, if any, required by any governmental authorities for the construction and operation of the Project, which are presently procurable; (xii) the DR grantee shall have received the vesting deed (act of sale) or ground lease, as applicable, evidencing Borrower’s title or interest in the land and a mortgagee’s policy of title insurance from a title insurance company or agent acceptable to the grantee, insuring the DR grantee’s Mortgage lien on the Project, with the standard “preprinted” exceptions deleted, and containing only those exceptions acceptable to the grantee, in its sole discretion; (xiii) the DR grantee shall have received a Survey of the current condition of the Land, certified to the DR grantee, showing any buildings or other improvements located thereon and platting building setback lines, servitudes, roads, encroachments, any plattable exceptions that are acceptable to the DR grantee in its sole discretion and any other locatable or visible survey or title-related issues affecting the Land together with a statement as to the flood elevation and zoning for the Land and such other requirements and certification as the DR grantee may reasonably require; (xiv) the DR grantee shall have received an opinion of Borrower’s and Guarantors’ counsel covering such matters as are reasonably required by the grantee, including, without limitation, the existence and good standing of Borrower and Guarantors; that the Loan Documents have been duly authorized, executed and delivered by Borrower and Guarantors; the enforceability of the Loan Documents; and the creation and perfections of the liens and encumbrances intended to be created thereby; (xv) the DR grantee shall have received certified copies of Borrower’s and Guarantor’s organizational documents, good standing certificates from the Secretary of State for the State and the applicable states of organization or formation, for Borrower and Borrower’s managing entities and the Guarantors, and such resolutions, certificates, and consents as the DR grantee deems necessary or proper to authorize the execution and delivery by Borrower and the Guarantors of the Loan Documents; (xvi) the DR grantee shall have received federal and state tax lien, judgment, UCC and pending litigation searches for Borrower, and such other parties as the DR grantee shall require for each state and parish (or county) in which such entity was formed, as well as the State and the parish in which the Project is located, in each case, dated not more than sixty (60) days prior to the date of disbursement; (xvii) the DR grantee shall have received an acceptable environmental assessment, soils report and wetlands study of the Project that comply with the CDBG regulations and requirements and have been approved by the DR grantee; and (xviii) a long term lease with a grocery store tenant acceptable to the DR grantee in all respects.

CONDITIONSPRECEDENT

TO FINALDRAW:The DR granteeshallhavereceived(i)CertificatesofoccupancyforeachbuildingintheProject,oritsequivalentfromtheapplicablegovernmentalauthoritiesforthe StateortheParishinwhichtheProjectislocated; (ii)Certificatefrom the Borrower’s architectorengineeringfirmthattheProjecthasbeencompletedin substantialcompliancewiththeplansand specificationsfortheProject,andwith theArchitecturalBarriersActof1968(42U.S.C.§§4151-4157); theUniform FederalAccessibilityStandards,assetforthin24CFRSection570.614;the AmericanswithDisabilitiesActof1990;forexistingpropertiesbuildpriorto 1978,theLead-Based PaintPoisoning Protection Act(42U.S.C.§4831(b))and Section504oftheRehabilitation Actof1973;(iii)Certificatefromthe DR grantee’s inspectorthattheProjecthasbeencompleted inaccordancewiththePlansand Specifications inagoodandworkmanlikemanner(the“Certificate of Completion”); (iv)anALTA“AsBuilt”Survey,certifiedtothe DR grantee,showingthe buildingsandimprovementscomprisingtheProjecttobewithinlotlinesand building setbacklines,alleasements, roads,rightsofwayandmattersaffecting title,andanyother informationrequiredbythe DR grantee;(v)an endorsementto thetitle insurancepolicyupdatingthetitleinsurancepolicytothecompletion date, increasing theinsurance coverage tothefullamountoftheLoanandcontaining no additionalexceptionsnotpreviouslyapprovedbythe DR grantee;(vi)a completesetof signedandsealed"asbuilt"PlansandSpecifications; (vii)compliancewithall laws, rules, regulations, ordinances and codes applicable to the Project, includingwithoutlimitationCDBGregulations,totheextentnotwaivedin writing,applicable totheProject;(viii)currentfederalandstatetaxlien, judgment,UCCandpendinglitigationsearchesforBorrower,andsuchother partiesasthe DR granteeshallrequireforeachstateandparish (orcounty)inwhichsuch entitywasformed,aswellastheStateandtheparishinwhichtheProjectis located, ineachcase,datednotmorethansixty (60)dayspriortothedateof disbursement; (ix)the DR granteeshallhaveapprovedtheCostCertificationAuditfrom Borrowerandshallhavecompleted thefinalsubsidy layering review ofthe Projectcosts(IfthereareExcess Proceeds, the DR granteemayreducetheamountofthe finaldisbursement bysuchamount-iftheamountoftheExcessProceeds exceedstheproposedamountofthefinaldisbursement,Borrowershallpay the DR granteetheamountofanyExcessProceedsinonelump sumpayment withinthirty (30)daysofreceivingwrittennoticefromthe DR granteethattheExcessProceedsare dueandpayable);(x)currentcertificatesofinsuranceasrequiredbytheloan documents; (xi)anestoppel certificatefrom anyotherlenders providing financing fortheProject statingthatnodefaultshaveoccurredandthatitsloan termsarebeingcompliedwith;(xii)updatedfinancialinformation from BorrowerandeachGuarantor,includingcopiesofthemostrecentyear’stax returnsandauditedfinancialstatement, andsuchotherinformation asthe DR grantee deemsnecessary;(xiii)acertificateof Borrowerevidencingcompliancewith all Davis-Baconrequirements; (xiv)awarrantyfromtheconstructioncontractor, acceptabletothe DR granteeinitssolediscretion, providing afullguaranteeforall workmanship andmaterials,withoutregardtowhethersuchworkormaterials waspaidbythe DR granteeorotherfunding sources,foraperiod ofnotlessthantwelve (12)monthsfromthedateof theCertificateofCompletion. (Thewarrantyshall alsoguaranteeanystructuralworkagainstdefectinmaterialsorworkmanship foraperiod ofnotlessthanfiveyearsfromthedateoftheCertificate of Completion); (xv)currentgoodstandingcertificatesandcertifiedcopiesofthe Organizational DocumentsforBorrower,itsgeneralpartner(s)/managing member(s),Guarantor(s) andsuchotherpartiesasrequiredbythe DR grantee;(xvi) evidenceofLien-freecompletion oftheProject(asevidencedbyfinallien waiversinformandsubstancesatisfactorytothe DR granteeanditscounselfromthe general contractor and all major subcontractors,and expiration of the lien periods providedbyapplicable Louisiana law,withnoliensbeingfiledagainst the Project) and completion of the Project within eighteen (18) months followingtheactualconstructionstartdate.

REPRESENTATIONS

ANDWARRANTIES:Usualandcustomaryforloantransactionsofthistype(includingcustomary materialityqualifiers,monetarybasketsandother exceptionsto beagreedupon), including, withoutlimitation, thefollowing:(i)legalexistence,qualificationand power;(ii)dueauthorization andnocontravention oflaw,contractsor organizational documents;(iii)governmental andthirdpartyapprovals and consents; (iv) enforceability; (v) accuracy and completeness of specified financialstatementsandotherinformationandnoeventorcircumstance,either individuallyorintheaggregate,thathashadorcouldreasonablybeexpectedto haveaMaterial AdverseEffect; (vi)nomateriallitigation;(vii)nodefault;(viii) ownershipofproperty (including disclosureofliens,properties,leasesand investments);(ix)insurance matters;(x)environmentalmatters;(xi)taxmatters; (xii)compliancewithallapplicablelaws;(xiii)useofproceeds(xiv)accuracyof disclosure;and(xv)collateraldocuments.

COVENANTS:Thoseaffirmative,negativeandfinancialcovenants(applicableto theBorrowers andtheirsubsidiaries) customarily foundintransactionsofthistype(including customarymaterialityqualifiers,monetarybasketsandotherexceptionstobe agreedupon),including,withoutlimitation,thefollowing:

(a)AffirmativeCovenants-(i)deliveryoffinancialstatements,budgets andforecasts;(ii)delivery ofcertificatesandcertainotherinformation usualandcustomaryina transactionof this type;(iii) deliveryof notices (ofany default,material adversecondition,material changein accountingorfinancialreportingpractices,dispositionofproperty, sale ofequity,incurrenceofdebt);(iv)paymentofobligations; (v) preservation ofexistence;(vi)maintenanceofproperties;(vii) maintenanceofinsurance;(viii)complianceinallmaterialrespects withapplicablelaws;(ix)maintenance ofbooksandrecords;(x) inspection rights;(xi)useofproceeds;(xii)covenanttoguarantee obligations,givesecurity;(xiii)complianceinallmaterialrespectswith applicableenvironmentallaws;and(xiv) furtherassurances;

(b)Negative Covenants – Restrictions, in each case with such exceptions as may be agreed upon in the loan documentation, on (i) liens; (ii) indebtedness; (iii) mergers and other fundamental changes; (iv) sales and other dispositions of property or assets; (v) changes in the nature of business; (vi) transactions with affiliates; (vii) use of proceeds; (viii) amendments of organizational documents; and (ix) modification or termination of documents related to certain indebtedness.

EVENTSOFDEFAULT:Usual and customary in transactions of this type (including customary materialityqualifiers,monetarybaskets,cureperiodsandotherexceptionstobe agreedupon),including,withoutlimitation,thefollowing: (i)nonpaymentof principal,interest,feesorotheramounts;(ii)failuretoperform orobserve covenantssetforthintheloandocumentation withinaspecifiedperiodoftime, wherecustomary andappropriate,aftersuchfailure;(iii)anyrepresentation or warranty provingtohavebeenincorrectinanymaterialrespectwhenmadeor confirmed;(iv)cross-defaulttootherindebtednessinanamounttobeagreed; (v)bankruptcy andinsolvency defaults(withgraceperiodforinvoluntary proceedings); (vi)inabilitytopaydebtsastheybecomedue;(vii)monetary judgment defaults inanamounttobeagreed;(viii)failuretomeetthejob creation requirements;and (iv) failure to complete the constructionof the Projectwithin{insert number} monthsfromthedateoftheLoan.

INDEMNIFICATION:TheBorrowerswillindemnifyandholdharmlessthe DR granteeanditsaffiliatesand theirpartners,directors,officers,employees, agents andadvisorsfrom and againstalllosses,claims,damages,liabilitiesandreasonableexpensesarising outoforrelatingtotheLoan,theBorrowers’ useofloanproceeds orthe commitments, including,butnotlimitedto,reasonableattorneys’feesand settlementcostsexcept totheextentthatsuchlosses,claims,damages,liabilities andexpensesaredeterminedinafinal,non-appealable judgmentbyacourtof competent jurisdiction tohaveresultedfrom thegrossnegligence orwillful misconductofsuchindemnified person. Thisindemnificationshallsurviveand continueforthebenefitofallsuchpersonsorentities.

GOVERNINGLAW:Stateof{insert name}

OTHER:Eachofthepartiesshall(i)waiveitsrighttoatrialbyjuryand(ii)submitto exclusivejurisdiction.

COUNSELTOthe DR

GRANTEE:{insert name}

EXPENSES:TheBorrowerwillpayallreasonablecostsandexpensesassociatedwiththe preparation, due diligence (which expenses may include an appraisal of manufacturing plantsandrealestate,environmental reportsandpotentially a fieldexam),syndicationandclosingofallloandocumentation, including, withoutlimitation,thelegalfeesofcounseltothe DR grantee,regardlessofwhetheror nottheLoancloses. TheBorrowerwillalsopay(a)allreasonablecosts andexpenses (includingfeesandexpenses ofcounsel)associatedwiththe administrationoftheLoanaftertheClosingDateandanyamendments, modifications orwaiversoftheapplicableloandocumentationand(b)the reasonableexpensesofthe DR granteeunderinconnectionwiththeenforcementofanyof theloandocumentation.

Uponreceiptofyouracceptance oftheaward,weshallpreparethenecessary closingdocumentstoimplement this award.

Asthesearefederalfunds,theyaresubjecttonumerousfederalstatutesandregulations aswillbedetailedinthe closingdocuments.Ourstaffwillprovideguidanceandmonitoringwithrespectto theuseoftheHUDfunds.

Pleasebeadvisedthatpriortoanychoicelimitingactionsregarding theproject,includingenteringagreements to purchaseorfinanceproperty,demolitionorgradingoftheproperty,commencementofconstruction,orother choice-limitingactions,youmust receive anEnvironmentalNoticetoProceed from the DR granteefollowingobtaining environmental clearanceontheprojectfromallinterestedlocal,stateandfederalentities(24CFRPart58).Ifyou haveanyquestions regardingthisrequirement,youcancontactourenvironmentalofficer.

Iffundsarebeingusedforconstructionactivities, pleasebeadvisedthatyouarerequiredtoensurethat theproperDavis-Baconwagedeterminationsareappliedtoconstructionactivities and/orconstructioncontracts (24 CFR906.37).

Pleaserespondinwritingwithin{insert number}daysofthedateonthislettertoconfirmyourreceiptandacceptance ofthisoffer.Iftheacceptanceisnotreceivedbythisofficewithinthattimeframe,thisofferandtheawardin the DR grantee’slettertoyoudatedMonth Day, Year shallautomaticallyexpire.

Thankyou againforyourcommitmenttopromotingeconomicdevelopmentin theStateof{insert name}.TheProgram Manager, willbeavailabletoassistyouinthenextsteps.

Sincerely,

{insert contact information}

Small Business Loanand Grant Tool: Loan Award Letter 1