The terms and conditions of the loan are originally defined in the Lender Term Sheet which is included in the closing binder as supplied by Hoover Slovacek, LLP.
That Letter Agreement describes the recourse provisions “except for bad boy” acts specified in the Loan Documents, the Loan shall be non-recourse for which personal liability of Borrower and Sponsor shall be limited to the collateral for the Loan. Sponsor or another individual acceptable to Lender shall execute a re-course carve-out guarantee with respect to the aforesaid “bad boy” acts. Additionally, each of Borrower and Sponsor shall enter into an environmental indemnity agreement in favor of Lender”.
The Loan Agreement “Exculpation”, defines those Borrower Limited Provisions as follows: “Subject to the qualifications below, Lender shall not enforce the liability and obligation of Borrower to perform and observe the obligations contained in the Note, this Agreement, the Security Instrument or the Loan Documents by any action or proceeding wherein a money judgement or any deficiency judgement or other judgement establishing personal liability shall be sought against Borrower or any principal, director, officer, employee, beneficiary, shareholder, partner, member, trustee, agent of Affiliate of Borrower……..except Lender may bring a foreclosure action…..” Carve outs include fraud / misrepresentation; gross negligence or willful misconduct, litigation relating to the Debt; waste to the property caused by intentional acts or omissions; misapplication, misappropriation of Insurance proceeds, condemnation awards, rents, security deposits, reserve funds; failure to pay taxes and insurance premiums; failure to deliver security deposits or advance deposits to Lender upon foreclosure, failure to comply with the Cash Management provisions; modification or cancellation of the TIC Agreements without approval’ violation or breach of the law mandating a foreclosure action; failure to make any REMIC Payments and a major breach of the property documents.
The Promissory Note is secured by the Security Instrument and the other Loan Documents and all of the terms and conditions contained in the Loan Agreement, the Security Agreement and the other Loan Documents are made a part of the Note to the same extent and with the same force as if they were fully set forth in the Note.
The Limited Recourse Guarantee and the Environmental Indemnity Agreement further define the obligations of Borrower Again, the term ‘’Guaranteed Recourse Obligations of Borrower”, means all obligations and liabilities of Borrower for which Borrower is personally liable pursuant to the Loan Agreement (see above).