Loan Agreement SLS SAMPLE DOCUMENT 07/11/17 THIS IS A LOAN AGREEMENT ( Agreement ) dated as of / /20, between [ ], a California corporation ( Client ), and, a California corporation ( Borrower ). Background Client is a nonprofit organization whose primary activity is [ ]. In line with its mission, Client provides financial support on a limited basis to nonprofits. To that end, Borrower wishes to borrow from Client under the terms of this Agreement. Client and Borrower agree as follows: 1. Loan 1.1 Loan Client will lend Borrower $ in a single lump sum (the Loan ). This is an unsecured loan. [1.2 Payment Schedule; Interest Rate Borrower will repay this Loan in consecutive [monthly] [quarterly] [biannual] payments of $, payable on the [first] [last] day of each [month] [quarter] [halfyear]. Borrower will make the first payment on / /20 and will make the final payment on / /20. Except as provided in Section 1.3, the Loan will bear interest at the [monthly] [quarterly] [biannual] rate of %, calculated on the basis of a 365-day year for the actual number of days for which interest is calculated.] 1.3 Late Fee If Borrower makes a payment later than days after it is due, Borrower will pay Client a late fee equal to the lesser of % of the unpaid amount until paid or the maximum interest rate permitted under applicable law. 1.4 Payments by Borrower Borrower will make payments to Client by check to the order of Client, to the following address: [ ] 1.5 Prepayment Borrower may pay without penalty all or a portion of the amount owed earlier than it is due. 2. Representations and Warranties Borrower represents and warrants to Client the following: 2.1 Due Organization and Qualification; Nonprofit Status Borrower is a duly organized, validly existing nonprofit corporation, and in good standing under California law. Borrower is exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code. 2.2 Due Authorization; No Conflict Borrower s entry into and performance of the Agreement is within its corporate powers, has been authorized by its Board of Directors, will not violate any provision of its Articles Note: This document does not reflect or constitute legal advice. This is a sample made available by the Organizations and Transactions Clinic at Stanford Law School on the basis set out at nonprofitdocuments.law.stanford.edu. Your use of this document does not create an attorney-client relationship with the Clinic or any of its lawyers or students.
of Incorporation or Bylaws, and will not result in a breach or default under any contract or law by which Borrower is bound. 2.3 Enforceable Agreement This Agreement has been duly signed and delivered by Borrower and is the legal, valid, and binding obligation of Borrower, enforceable against it in accordance with its terms. 2.4 Financial Information Borrower has delivered to Client its most recent annual and quarterly statements of financial position, statements of activities, and statements of cash flows. These statements fairly present, in all material respects, the financial position of Borrower and results of Borrower s activities, including all indebtedness. 2.5 Consents Borrower has obtained all necessary consents from, made filings with, and given all notices to all governmental and other third parties in connection, as may be required with Borrower s execution of this Agreement. 2.6 Legal Matters Except as disclosed to Client, there is no pending, or to Borrower's knowledge threatened, litigation proceeding, or investigation concerning Borrower, that could result in termination of any material contract to which Borrower is a party or otherwise be expected to have a materially adverse effect on Borrower. 2.7 Solvency; Payment of Debts Borrower is solvent prior to and after giving effect to the Loan and is able to pay its debts (including accounts payable) as they become due. 3. Borrower Conduct 3.1 Good Standing; Nonprofit Status; Compliance with Law Borrower will remain in good standing under California law. Borrower will remain taxexempt under Section 501(c)(3) of the Internal Revenue Code. Borrower will comply with all applicable laws, regulations, and orders. 3.2 Books and Records Borrower will keep correct, up-to-date and complete books, records, and accounts, in accordance with appropriate accounting principles. Borrower will promptly provide to Client all financial documents and other information as Client may reasonably request. 3.3 Inspection Borrower will permit Client, or any persons designated by Client, at any reasonable time, to inspect Borrower s facilities and inspect, audit, and make copies of Borrower s books and records. 3.4 Insurance Borrower will maintain and keep in force insurance of the types and amounts customarily carried by comparable organizations, in amounts satisfactory to Client in its reasonable discretion. Borrower will upon request promptly provide to Client information regarding insurance then in effect. 3.5 Net Assets Borrower will maintain positive net assets by the end of each fiscal quarter. 2
3.6 Notice to Client Borrower will promptly notify Client of (a) any material change to Borrower s financial condition or nonprofit status, such as loss of key personnel, material contract, or grant; (b) any legal or regulatory action or investigation threatened or instituted against Borrower that could reasonably be expected to have a material adverse effect on Borrower; (c) any Event of Default or any event that with lapse of time would constitute an Event of Default. 3.7 Additional Loans Borrower will not borrow money from other sources without Client s prior written approval. 3.8 Sale of Assets; Merger Borrower will not, without Client's prior written approval, sell, lease, transfer or dispose of substantially all of its assets to another entity; or merge with another entity. 4. Default and Remedies 4.1 Events of Default Any one or more of the following events will constitute an Event of Default: (a) Payment Default: Borrower fails to make any interest or principal payment or payment of any other obligation under this Agreement within days after it is due. (b) Misrepresentations: Any representation, warranty, or statement Borrower makes in this Agreement or in any financial report Borrower furnishes to Client under this Agreement proves untrue in any material respect as of the date when the representation or statement was made. (c) Covenants: Borrower fails to perform or observe any covenants or any other material provision of this Agreement, aside from payment, and such failure continues for ten days. (d) Insolvency: Borrower becomes insolvent, or dissolves, liquidates, ceases to engage in operations, or commences or suffers any proceeding under any bankruptcy or insolvency law. (e) Breach of Other Agreements: Borrower breaches any material funding or program agreement to which it is a party, the consequences of which have, or may reasonably be expected to have, a material adverse effect on Borrower or Borrower s ability to perform its obligations under this Agreement. (e) [ ] (f) Adverse Change: There occurs a materially adverse change in Borrower s financial condition, ability to operate, or ability to perform its obligations under this Agreement, such as termination of a material contract, an adverse judgment, or loss of nonprofit status. 4.2 Rights and Remedies If an Event of Default exists, Client may, at its sole option, do any one or more of the following: (a) Meeting: Require Borrower s organization to engage in a meeting with Client, to take place within ten days after delivery to Borrower by Client of a notice to that effect, to discuss Loan status. Borrower should be prepared to discuss the reasons for the problem, intended solutions, and timeframe for resolution. 3
(b) [ ] (c) Termination: Terminate this Agreement and declare the outstanding balance of the Loan immediately due and payable. Client s rights and remedies under this Agreement and all other agreements will be cumulative. Client s exercise of one right or remedy will not be deemed an election of or waiver of any other right or remedy. 5. Relationship 5.1 Independent Organizations Client and Borrower are separate corporate entities and independent contracting parties. Borrower acknowledges that conduct of Borrower and its employees and agents, and any other legal obligations of Borrower, are the sole responsibility of Borrower. This Agreement and its performance will not create a partnership, joint venture, fiduciary, or similar relationship. 5.2 Indemnification; Third Parties Borrower will defend, indemnify, and hold Client, and its directors, officers, employees, agents, and affiliates (collectively associates ), harmless from and against any and all claims, liabilities, losses, damages, and expenses, including, without limitation, reasonable attorneys fees and expenses, that may arise, directly or indirectly, from any breach by Borrower of its obligations under this Agreement, or any other act or omission by Borrower. Borrower will have no obligation to indemnify Client to the extent the liability is solely caused by Client s gross negligence or willful misconduct. Client s associates are express third party beneficiaries of this Section 5.2. 5.3 Future Funding Borrower understands and agrees that Client will not be, as a result of this Agreement, obligated to provide future loans or other services or support to Borrower. 6. General Provisions 6.1 Entire Agreement This Agreement is the entire agreement between Client and Borrower and supersedes all prior or contemporaneous communications, representations, understandings, and agreements, either oral or written, relating to the lending relationship stated in this Agreement. This Agreement does not modify or affect Client s rights or obligations under any existing insurance contract between Borrower and Client. 6.2 Governing Law This Agreement will be governed by California law. 6.3 Assignment Borrower will not, directly or indirectly by way of merger or consolidation, assign its rights or delegate its duties under this Agreement without Client s prior written approval. 6.4 Waiver Any waiver of the provisions of this Agreement or of Client s or Borrower s rights or remedies under this Agreement must be in writing and signed by the waiving party to be effective. Failure, neglect, or delay by Client at any time to enforce provisions of this Agreement or its rights or remedies will not be construed as a waiver of its rights or remedies under this Agreement. Borrower waives diligence, presentment, protest, demand and notice of any kind. 4
6.5 Severability If any provision of this Agreement is held illegal, invalid, or unenforceable, all other provisions of this Agreement will nevertheless be effective, and the illegal, invalid, or unenforceable provision will be considered modified such that it is valid to the maximum extent permitted by law. 6.6 Amendments This Agreement may be amended only as stated in a written document signed by both Client and Borrower which states that it is an amendment to this Agreement. 6.7 Counterparts This Agreement may be signed in one or more counterparts, including through electronic means; each counterpart will be deemed an original and all will be taken together and deemed to be one instrument. * * * * * * * * Client and Borrower signed this Agreement as of the date set out in its first paragraph. Client Title: Date: [Borrower] Title: [Executive Director] Date: [Borrower] Title: [Board Chair] Date: 5