1
EXHIBIT 10.2
AMENDED AND RESTATED
FINANCING AND SECURITY AGREEMENT
(MASTER AGREEMENT)
ALS HOLDINGS, INC., ET AL
AS BORROWER
BANK UNITED
AS AGENT
February 12, 1999
2
TABLE OF CONTENTS
SECTION 1.1 CERTAIN DEFINED TERMS..................................................................1
SECTION 1.2 ACCOUNTING TERMS AND OTHER DEFINITIONAL PROVISIONS....................................17
ARTICLE II..............................................................................................17
SECTION 2.1 THE LOAN..............................................................................17
SECTION 2.2 PROCEDURE FOR ADVANCES................................................................19
SECTION 2.3 FEES..................................................................................20
SECTION 2.4 INTEREST RATE MATTERS.................................................................20
SECTION 2.5 EXTENSIONS............................................................................23
ARTICLE III.............................................................................................23
COLLATERAL..............................................................................................23
SECTION 3.1 COLLATERAL............................................................................23
SECTION 3.2 ELIGIBLE PROJECTS.....................................................................23
SECTION 3.3 GUARANTIES............................................................................24
SECTION 3.4 COLLATERAL FOR OBLIGATIONS............................................................24
SECTION 3.5 COSTS.................................................................................24
ARTICLE IV..............................................................................................24
GENERAL FINANCING PROVISIONS............................................................................24
SECTION 4.1 CONDITIONS PRECEDENT TO CREDIT FACILITY CLOSING AND ADDITION OF DEEDS OF
TRUST.................................................................................24
SECTION 4.2 CONDITIONS PRECEDENT TO ACCEPTING AN ELIGIBLE PROJECT WHICH IS UNDER
CONSTRUCTION OR TO BE CONSTRUCTED:....................................................26
SECTION 4.3 CONDITIONS PRECEDENT TO ACCEPTING AN ELIGIBLE PROJECT WHICH HAS BEEN
CONSTRUCTED OR ACQUIRED:..............................................................30
SECTION 4.4 CONDITIONS PRECEDENT TO DETERMINING ADDITIONAL AVAILABILITY UNDER
BORROWING BASE........................................................................32
SECTION 4.5 CONDITIONS UNDER WHICH AN ELIGIBLE PROJECT IS A COMPLETED PROJECT.....................35
SECTION 4.6 VERIFICATION OF OPERATING RESERVE EXPENDITURES........................................36
SECTION 4.7 ASSIGNMENTS OF PAYMENTS...............................................................36
SECTION 4.8 LIABILITY OF THE LENDERS..............................................................36
SECTION 4.9 COMPUTATION OF INTEREST AND FEES......................................................37
SECTION 4.10 LIENS; SETOFF.........................................................................37
SECTION 4.11 PAYMENT AND PERFORMANCE OF OBLIGATIONS................................................37
SECTION 4.12 PAYMENTS TO OTHERS FOR THE ACCOUNT OF THE BORROWER....................................37
SECTION 4.13 PREPAYMENT............................................................................38
ARTICLE V...............................................................................................38
REPRESENTATIONS AND WARRANTIES..........................................................................38
SECTION 5.1 GOOD STANDING.........................................................................38
SECTION 5.2 POWER AND AUTHORITY...................................................................39
SECTION 5.3 BINDING AGREEMENTS....................................................................39
SECTION 5.4 LITIGATION............................................................................39
SECTION 5.5 NO CONFLICTING AGREEMENTS.............................................................40
SECTION 5.6 FINANCIAL INFORMATION.................................................................40
SECTION 5.7 NO DEFAULT UNDER OTHER AGREEMENTS.....................................................40
SECTION 5.8 TAXES.................................................................................40
SECTION 5.9 PLACE(S) OF BUSINESS AND LOCATION OF COLLATERAL.......................................40
i
3
SECTION 5.10 TITLE TO PROPERTIES...................................................................41
SECTION 5.11 MARGIN STOCK..........................................................................41
SECTION 5.12 ERISA.................................................................................41
SECTION 5.13 GOVERNMENTAL CONSENT..................................................................41
SECTION 5.14 FULL DISCLOSURE.......................................................................42
SECTION 5.15 BUSINESS NAMES AND ADDRESSES..........................................................42
SECTION 5.16 LICENSES AND CERTIFICATIONS...........................................................42
SECTION 5.17 OPERATING AGREEMENTS AND MANAGEMENT CONTRACTS.........................................43
SECTION 5.18 PARTICIPATION AGREEMENTS AND RESIDENT AGREEMENTS......................................43
SECTION 5.19 COMPLIANCE WITH LAWS..................................................................43
SECTION 5.20 PRESENCE OF HAZARDOUS MATERIALS OR HAZARDOUS MATERIALS CONTAMINATION..................44
SECTION 5.21 COMPLIANCE IN ZONING..................................................................44
SECTION 5.22 PLANS AND SPECIFICATIONS..............................................................44
SECTION 5.23 BUILDING PERMITS; OTHER PERMITS.......................................................44
SECTION 5.24 UTILITIES.............................................................................44
SECTION 5.25 ACCESS; ROADS.........................................................................45
SECTION 5.26 OTHER LIENS...........................................................................45
SECTION 5.27 DEFAULTS..............................................................................45
SECTION 5.28 NATURE OF CREDIT FACILITY; USURY; DISCLOSURES.........................................45
SECTION 5.29 SURVIVAL; UPDATES OF REPRESENTATIONS AND WARRANTIES...................................45
SECTION 5.30 ACCOUNTS..............................................................................46
ARTICLE VI..............................................................................................46
CONDITIONS OF LENDING...................................................................................46
SECTION 6.1 NO DEFAULT............................................................................46
SECTION 6.2 OPINION OF COUNSEL FOR THE BORROWER...................................................47
SECTION 6.3 APPROVAL OF COUNSEL FOR THE LENDERS...................................................47
SECTION 6.4 SUPPORTING DOCUMENTS..................................................................47
SECTION 6.5 FINANCING DOCUMENTS...................................................................47
SECTION 6.6 INSURANCE.............................................................................47
SECTION 6.7 SECURITY DOCUMENTS....................................................................47
SECTION 6.8 ADDITIONAL BORROWER JOINDER SUPPLEMENT................................................48
ARTICLE VII.............................................................................................48
AFFIRMATIVE COVENANTS OF BORROWER.......................................................................48
SECTION 7.1 FINANCIAL STATEMENTS..................................................................48
SECTION 7.2 FINANCIAL COVENANTS...................................................................49
SECTION 7.3 TAXES AND CLAIMS......................................................................52
SECTION 7.4 LEGAL EXISTENCE.......................................................................52
SECTION 7.5 CONDUCT OF BUSINESS AND COMPLIANCE WITH LAWS..........................................53
SECTION 7.6 USE OF PROCEEDS.......................................................................54
SECTION 7.7 INSURANCE.............................................................................54
SECTION 7.8 MAINTENANCE OF PROPERTIES.............................................................57
SECTION 7.9 MAINTENANCE OF THE COLLATERAL.........................................................57
SECTION 7.10 OTHER LIENS, SECURITY INTERESTS, ETC..................................................57
SECTION 7.11 DEFENSE OF TITLE AND FURTHER ASSURANCES...............................................57
SECTION 7.12 SUBSEQUENT OPINION OF COUNSEL AS TO RECORDING REQUIREMENTS............................58
SECTION 7.13 BOOKS AND RECORDS.....................................................................58
SECTION 7.14 COLLECTIONS...........................................................................58
SECTION 7.15 NOTICE TO ACCOUNT DEBTORS AND ESCROW ACCOUNT..........................................59
SECTION 7.16 BUSINESS NAMES........................................................................59
SECTION 7.17 ERISA.................................................................................59
SECTION 7.18 MANAGEMENT............................................................................59
SECTION 7.19 SURVEYS...............................................................................60
ii
4
SECTION 7.20 INSPECTIONS; COOPERATION; PAYMENT OF INSPECTING ENGINEER..............................60
SECTION 7.21 VOUCHERS AND RECEIPTS.................................................................61
SECTION 7.22 PAYMENTS FOR LABOR AND MATERIALS......................................................61
SECTION 7.23 CORRECTION OF CONSTRUCTION DEFECTS....................................................61
SECTION 7.24 FEES AND EXPENSES; INDEMNITY..........................................................62
SECTION 7.25 GOVERNMENTAL SURVEYS OR INSPECTIONS...................................................62
SECTION 7.26 COST REPORTS..........................................................................62
SECTION 7.27 UPDATED APPRAISALS....................................................................62
SECTION 7.28 NOTIFICATION OF CERTAIN EVENTS, EVENTS OF DEFAULT AND ADVERSE
DEVELOPMENTS..........................................................................63
SECTION 7.29 COMPLIANCE WITH ENVIRONMENTAL LAWS....................................................64
SECTION 7.30 HAZARDOUS MATERIALS; CONTAMINATION....................................................64
SECTION 7.31 PARTICIPATION IN REIMBURSEMENT PROGRAMS...............................................65
ARTICLE VIII............................................................................................65
NEGATIVE COVENANTS OF BORROWER..........................................................................65
SECTION 8.1 BORROWINGS............................................................................65
SECTION 8.2 DEEDS OF TRUST AND PLEDGES............................................................65
SECTION 8.3 SALE OR TRANSFER OF ASSETS............................................................66
SECTION 8.4 OTHER LIENS; TRANSFERS; "DUE-ON-SALE"; ETC............................................66
SECTION 8.5 ADVANCES AND LOANS....................................................................66
SECTION 8.6 CONTINGENT LIABILITIES................................................................66
SECTION 8.7 LICENSES..............................................................................66
SECTION 8.8 ERISA COMPLIANCE......................................................................67
SECTION 8.9 TRANSFER OF COLLATERAL................................................................67
SECTION 8.10 SALE OF ACCOUNTS OR RECEIVABLES.......................................................68
SECTION 8.11 AMENDMENTS; TERMINATIONS..............................................................68
SECTION 8.12 PROHIBITION ON HAZARDOUS MATERIALS....................................................68
SECTION 8.13 SUBSIDIARIES..........................................................................68
SECTION 8.14 MERGERS OR ACQUISITIONS...............................................................68
SECTION 8.15 CONDITIONAL SALES.....................................................................69
SECTION 8.16 CHANGES TO PLANS AND SPECIFICATION....................................................69
SECTION 8.17 CONSTRUCTION CONTRACT; CONSTRUCTION MANAGEMENT........................................69
SECTION 8.18 LINE OF BUSINESS......................................................................69
ARTICLE IX..............................................................................................69
EVENTS OF DEFAULT.......................................................................................69
SECTION 9.1 FAILURE TO PAY AND/OR PERFORM THE OBLIGATIONS.........................................69
SECTION 9.2 BREACH OF REPRESENTATIONS AND WARRANTIES..............................................70
SECTION 9.3 FAILURE TO COMPLY WITH COVENANTS......................................................70
SECTION 9.4 FAILURE TO COMPLY WITH FINANCIAL REPORTING OR BOOKS AND RECORDS.......................70
SECTION 9.5 OTHER DEFAULTS........................................................................70
SECTION 9.6 DEFAULT UNDER OTHER FINANCING DOCUMENTS...............................................70
SECTION 9.7 RECEIVER; BANKRUPTCY..................................................................70
SECTION 9.8 JUDGMENT..............................................................................70
SECTION 9.9 EXECUTION; ATTACHMENT.................................................................71
SECTION 9.10 DEFAULT UNDER OTHER BORROWINGS........................................................71
SECTION 9.11 CHANGE IN STATUS OR OWNERSHIP.........................................................71
SECTION 9.12 DAMAGE TO IMPROVEMENTS................................................................71
SECTION 9.13 MECHANIC'S LIEN.......................................................................71
SECTION 9.14 SURVEY MATTERS........................................................................71
SECTION 9.15 GENERAL CONTRACTOR DEFAULT............................................................72
SECTION 9.16 ZONING................................................................................72
SECTION 9.17 JOINT VENTURE.........................................................................72
iii
5
SECTION 9.18 JOINT VENTURE LEASES..................................................................72
ARTICLE X...............................................................................................72
RIGHTS AND REMEDIES UPON DEFAULT........................................................................72
SECTION 10.1 DEMAND; ACCELERATION..................................................................72
SECTION 10.2 FURTHER ADVANCES; IMMEDIATE ACCELERATION..............................................72
SECTION 10.3 FURTHER ADVANCES; MATERIAL ADVERSE CHANGE OR IMPAIRMENT OF POSITION...................73
SECTION 10.4 SPECIFIC RIGHTS WITH REGARD TO COLLATERAL.............................................73
SECTION 10.5 PERFORMANCE BY LENDERS................................................................75
SECTION 10.6 UNIFORM COMMERCIAL CODE AND OTHER REMEDIES............................................76
SECTION 10.7 RECEIVER OR OTHER COURT ORDER.........................................................77
ARTICLE XI..............................................................................................77
MISCELLANEOUS...........................................................................................77
SECTION 11.1 NOTICES...............................................................................77
SECTION 11.2 CONSENTS AND APPROVALS................................................................78
SECTION 11.3 REMEDIES, ETC. CUMULATIVE.............................................................78
SECTION 11.4 NO WAIVER OF RIGHTS BY THE LENDERS....................................................78
SECTION 11.5 ENTIRE AGREEMENT......................................................................79
SECTION 11.6 SURVIVAL OF AGREEMENT; SUCCESSORS AND ASSIGNS.........................................79
SECTION 11.7 EXPENSES..............................................................................79
SECTION 11.8 COUNTERPARTS..........................................................................80
SECTION 11.9 GOVERNING LAW.........................................................................80
SECTION 11.10 MODIFICATIONS........................................................................80
SECTION 11.11 ILLEGALITY...........................................................................80
SECTION 11.12 GENDER, ETC..........................................................................80
SECTION 11.13 HEADINGS.............................................................................80
SECTION 11.14 WAIVER OF TRIAL BY JURY..............................................................80
SECTION 11.15 NO WARRANTY BY LENDERS...............................................................81
SECTION 11.16 LIABILITY OF THE LENDERS.............................................................81
SECTION 11.17 LICENSE OF TRADENAME.................................................................82
SECTION 11.18 NO PARTNERSHIP.......................................................................82
SECTION 11.19 THIRD PARTIES; BENEFIT...............................................................82
SECTION 11.20 CONDITIONS; VERIFICATION.............................................................82
SECTION 11.21 SIGNS; PUBLICITY.....................................................................83
SECTION 11.22 MANDATORY ARBITRATION................................................................83
SECTION 11.23 TIME OF ESSENCE......................................................................84
iv
6
AMENDED AND RESTATED FINANCING AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED FINANCING AND SECURITY AGREEMENT
(the "Agreement") is made this 12th day of February, 1999, by and between ALS
HOLDINGS, INC., a Delaware corporation ("Holdings"), ALS WISCONSIN HOLDINGS,
INC., a Delaware corporation ("Wisconsin Holdings"), and BANK UNITED as agent
(the "Agent") for itself and for certain additional Lenders (as hereinafter
defined).
R E C I T A L S
A. The Lenders have made a Credit Facility available to the Borrower
and any Additional Borrowers in the original maximum principal sum of
$80,000,000 or such greater amount as may be from time to time committed by the
Agent and the other Lenders.
B. The Credit Facility is governed by a Financing and Security
Agreement dated September 28, 1998 (as amended, modified, substituted, extended
and renewed from time to time the "Existing Financing Agreement") by and between
the Borrower and the Agent on behalf of the other Lenders.
C. Pursuant to the terms of an Additional Borrower Joinder Supplement
dated December 10, 1998, Wisconsin Holdings became an Additional Borrower under
the Credit Facility.
D. The Borrower has requested and the Agent has agreed to modify
certain of the provisions of the Existing Financing Agreement as hereinafter set
forth on the condition that this Agreement be executed and delivered to the
Agent amending and restating the Existing Financing and Security Agreement in
its entirety.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises, the mutual agreements
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower and the Lender hereby
agree as follows:
DEFINITIONS
Section 1.1 Certain Defined Terms.
As used herein, the terms defined in the Preamble and Recitals hereto
shall have the respective meanings specified therein, and the following terms
shall have the following meanings:
1
7
"Account", individually, and "Accounts", collectively, mean with
respect to any Borrower and with respect to the Guarantor pertaining to all
Eligible Projects, all presently existing or hereafter acquired or created
accounts, accounts receivable, contract rights, notes, drafts, instruments,
acceptances, chattel paper, leases and writings evidencing a monetary obligation
or a security interest in or a lease of goods, all rights to receive the payment
of money or other consideration under present or future contracts arising out of
or relating to any and all Eligible Projects (including, without limitation, all
rights to receive the payment of money or other consideration from, or on behalf
of, any private pay patient), or by virtue of services rendered, loans and
advances made or other considerations given, by or set forth in, or arising out
of, any present or future chattel paper, note, draft, lease, acceptance,
writing, bond, insurance policy, instrument, document or general intangible, and
all extensions and renewals of any thereof, all rights under or arising out of
present or future contracts, agreements which gave rise to any or all of the
foregoing insofar as they pertain to the Eligible Projects, including all claims
or causes of action now existing or hereafter arising in connection with or
under any agreement or document or by operation of law or otherwise, all
collateral security of any kind (including real property mortgages) given by any
person with respect to any of the foregoing, including, without limitation, all
rights to receive payment of money or other consideration from, or on behalf of,
any private pay patient, all rights to receive payments under all Resident
Agreements, and all third-party payor contracts (including Medicare and Medicaid
to the extent permitted by Law), including, but not limited to, the Veterans
Administration, Participation Agreements, and any and all depository accounts
(other than resident trust accounts) into which the proceeds of all or any
portion of such accounts may be now or hereafter deposited, and all proceeds
(cash and non-cash) of the foregoing.
"Account Debtor" means any Person who is obligated on a Receivable and
"Account Debtors" mean all Persons who are obligated on the Receivables.
"Act of Bankruptcy" means the filing of a petition in bankruptcy under
the Bankruptcy Code or the other commencement of a proceeding under any other
applicable law concerning insolvency, reorganization or bankruptcy, now or
hereafter in effect.
"Acquired Project" means a Facility, purchased by a Borrower from a
third party as a Completed Project, which has been open and operating for less
than twelve (12) months.
"Acquisition Project" means a Facility, purchased by a Borrower from a
third party as a Completed Project, which has been open and operating for twelve
(12) consecutive months or longer.
"Additional Borrower" means each Wholly Owned Subsidiary of Holdings or
ALS which is acceptable to the Agent and which has executed and delivered an
Additional Borrower Joinder Supplement and has otherwise complied with the
provisions of Section 4.1.
2
8
"Additional Borrower Joinder Supplement" means an Additional Borrower
Joinder Supplement in the form to be provided by the Agent, with the blanks
appropriately completed and executed and delivered by the Additional Borrower
and by the Borrowers.
"Affiliate" means an entity in which ALS (or another entity which ALS
controls), holds an ownership interest equal to or greater than fifty-one
percent (51%).
"Agency Agreement" means that any Agency Agreement which may be
executed by and among the Agent and the other Lenders, as the same may be
amended, restated or substituted from time to time.
"Agent" means Bank United, its successors and assigns.
"Agreement" means this Financing and Security Agreement and all
amendments, extensions, restatements, substitutions and supplements hereto which
may from time to time become effective in accordance with the provisions of
Section 11.10 hereof.
"ALS" means Alternative Livings Services, Inc. a Delaware corporation.
"Architect" means the architect named in an Architect's Contract, if
any, and his or its successors and permitted assigns.
"Architect's Contract" means an agreement by and between the Borrower,
as owner, and the architect for a particular Facility, or any contract for
architectural services relating to the development of the Land and/or the
construction of the Improvements for each of the Eligible Projects made by the
Borrower and an architect and approved in writing by the Agent, as the same may
be amended from time to time with the prior written approval of the Agent.
"Banking Days" means a day on which a Lender is open for the conduct of
substantially all of its banking business at its office in the city in which the
Note is payable and must also be a day on which dealings are carried on in the
applicable interbank Eurodollar market.
"Bankruptcy Code" means the United States Bankruptcy Code, 11 U.S.C.
101 et seq.
"Borrower" means individually and/or collectively Holdings or any
Additional Borrower.
"Borrowing Base" means at any time an amount equal to the lesser of (a)
the lesser of the aggregate dollar amounts of the Deed of Trust Lien Amounts for
each of the Eligible Projects or the aggregate dollar amounts of: (i) 75% of the
appraised value of
3
9
each Pool A Project, (ii) 60% of the appraised value of each Pool B Project and
(iii) 40% of the appraised value of each Pool C Project; or (b) the aggregate
dollar amount equal to 80% of the Costs Incurred to Date for each Pool A
Project, 60% of the Costs Incurred to Date for each Pool B Project, and 40% of
the Costs Incurred to Date for each Pool C Project.
"Borrowing Base Report" shall have the meaning set forth in Section
2.1(d) hereof.
"Campus Project" means more than one Facility at a single location
consisting of two or more Senior Living Facility buildings of one or more model
type.
"Chattel Paper" means a writing or writings which evidence both a
monetary obligation and a security interest in or lease of specific goods; any
returned, rejected or repossessed goods covered by any such writing or writings
and all proceeds (in any form including, without limitation, accounts, contract
rights, documents, chattel paper, instruments and general intangibles) of such
returned, rejected or repossessed goods; and all proceeds (cash and non-cash) of
the foregoing.
"Collateral" means all of the Borrower's Accounts, Equipment, General
Intangibles, documents, Chattel Paper, Instruments and Inventory, all right,
title and interest of the Borrower in and to the Operating Agreements and
Management Contracts (including, without limitation, the Management Agreement),
Resident Agreements (to the extent and only to the extent the same can be
pledged or assigned in compliance with applicable law), Physician Contracts,
Participation Agreements, the Licenses to the extent and only to the extent the
same can be pledged or assigned in compliance with applicable law (whether or
not designated with initial capital letters), and all other management
contracts, operating agreements, service agreements and any other agreements
pertaining to the Eligible Projects as those terms are defined herein and in the
Uniform Commercial Code as presently adopted and in effect in the State of
Texas, and shall also cover, without limitation, (i) any and all property
specifically included in those respective terms in this Agreement or in the
Financing Documents, (ii) all right, title and interest of the Borrower in and
to Leases or subleases, rents, royalties, issues, profits, revenues, earnings,
income or other benefits of the Property, or arising from the use or enjoyment
of the Property, or from any lease or other use and occupancy agreement
pertaining to the Property (to the extent and only to the extent the same can be
pledged or assigned in compliance with applicable law), (iii) all right, title
and interest of the Borrower under all construction, architectural and design
contracts and plans and specifications,(iv) any and all property and/or
collateral described in any of the Security Documents, including, without
limitation, this Agreement, and the Deeds of Trust, (v) any and all bank
accounts or other deposit accounts of the Borrower wherever located, and (vi)
all proceeds (cash and non-cash, including, without limitation, insurance
proceeds) of the foregoing.
"Collateral Assignments" means collectively the Collateral Assignment
of Licenses, Participation Agreements and Resident Agreements executed in
connection
4
10
with each Facility Closing among the Borrower, the Management Company and the
Agent and the Collateral Assignment of Operating Agreements and Management
Contracts executed in connection with each Facility Closing among the Borrower,
the Management Company and the Agent.
"Commonly Controlled Entity" means an entity, whether or not
incorporated, which is under common control with the Borrower within the meaning
of Section 414(b) or (c) of the Internal Revenue Code of 1986, as amended and
the regulations promulgated or issued thereunder.
"Completion Guaranty" or "Completion Guaranties" means, individually or
collectively, a Guaranty of Completion executed by the Guarantor in favor of the
Lenders in connection with the Facility Closing for a Development Project which
is not a Completed Project.
"Completed Project" means an Eligible Project for which the Lender has
received all of the due diligence items listed in Section 4.4 hereof.
"Construction Contract" or "Construction Contracts" means, individually
or collectively, the general contractor's agreements by and between the
Borrower, as owner, and a general contractor for the development of any of the
Land and/or the construction of any of the Improvements and approved in writing
by the Agent, as the same may be amended from time to time with the prior
written approval of the Agent.
"Costs Incurred to Date" means as to an Eligible Project constructed or
under construction by a Borrower, actual costs expended by the Borrower or a
Wholly Owned Subsidiary under a Total Development Budget and reported to the
Lender through the requisition process as verified by the Lender pursuant to the
provisions of the Financing Agreement; provided, however, no cost overruns not
otherwise covered by a contingency category in the Total Development Budget will
be included in the definition of Costs Incurred to Date without the Lender's
prior written consent. "Costs Incurred to Date" for an Acquisition Project or a
completed Eligible Project means the purchase price and related expenses of
acquisition.
"Credit Facility" means the revolving line of credit in a maximum
principal sum at any one time outstanding equal to the Credit Facility Committed
Amount.
"Credit Facility Closing" shall mean the date on which the documents
evidencing and initially securing the Credit Facility are executed and delivered
to the Agent.
"Credit Facility Committed Amount" means $80,000,000 or such larger
amount, not to exceed $100,000,000, which the Lenders may from time to time
severally commit to lend to the Borrower pursuant to the terms of the Agency
Agreement, any amendment to this Agreement and the applicable Note.
5
11
"Debt Service" means for any period of determination the annual
principal and interest payments required to fully amortize an Eligible Project's
Costs Incurred to Date in equal monthly installments of principal and interest
based on a 25-year amortization schedule and a rate equal to 200 basis points
per annum in excess of the then current rate for ten (10) year United States
Treasury Notes, as reported in the most recent Federal Reserve Statistical
Release H.15(519) but in no event shall the rate (as calculated as aforesaid) be
less than 7.5% per annum.
"Debt Service Coverage Ratio" means the ratio of Net Operating Income
to Debt Service.
"Deed of Trust" or "Deeds of Trust" means, individually or
collectively, a Deed of Trust, Assignment and Security Agreement, a Mortgage,
Assignment and Security Agreement, an Indemnity Deed of Trust, Assignment and
Security Agreement or an Indemnity Mortgage, Assignment and Security Agreement
or comparable security documents covering Property and securing the Obligations
as the same may be from time to time amended, restated, or replaced.
"Deed of Trust Lien Amount" means the dollar amount of the Lien created
by a Deed of Trust on the Borrower's fee simple interest in an Eligible Project,
the lien amount being the lesser of (i) 75% of such Eligible Project's appraised
value at stabilization, or (ii) 80% of such Eligible Project's Total Development
Budget.
"Default" means, with respect to each Financing Document, a default
which, with the giving of notice or the passage of time, or both, would
constitute an Event of Default.
"Development Project" means a Facility being constructed by a Borrower
which has not been open and operating for more than one (1) year, or a Facility
which has been acquired by a Borrower which has been open for less than one (1)
year.
"EBITDAR" means earnings before interest, taxes, depreciation,
amortization, and Rent, plus the dollar amount of the Guarantor's minority
interest in losses of unconsolidated subsidiaries.
"Eligible Project" means any location in the United States (a) of a
Development Project, an Acquisition Project or a Stabilized Project; (b) for
which the Agent has received and reviewed all pre-closing due diligence items;
(c) for which the Agent has received a Total Development Budget including a pro
forma operating budget acceptable to the Agent; (d) for which a Facility Closing
has been completed and a Deed of Trust has been recorded on the Eligible
Project; and (e) for which Agent has received other documentation necessary to
perfect a lien on the Collateral in favor of the Bank Group.
"Enforcement Costs" means all expenses, charges, costs and fees
whatsoever (including, without limitation, attorney's fees and expenses) of any
nature whatsoever paid or incurred by or on behalf of the Lenders in connection
with (a) the collection or
6
12
enforcement of any or all of the Obligations, (b) the preparation of or changes
to this Agreement, the Note, the Security Documents and/or any of the other
Financing Documents, (c) the creation, perfection, collection, maintenance,
preservation, defense, protection, realization upon, disposition, sale or
enforcement of all or any part of the Collateral, including, without limitation,
those sums paid or advanced, and costs and expenses, more specifically described
in Sections 10.4 and 11.7, (d) the monitoring, administration, processing,
servicing of any or all of the Obligations and/or the Collateral (e)
post-judgment enforcement or collection actions, and (f) bankruptcy proceedings
of the Borrower.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Equipment" means all equipment, machinery, furniture and fixtures and
supplies of every nature, presently existing or hereafter acquired or created
and wherever located, together with all accessions, additions, fittings,
accessories, special tools, and improvements thereto and substitutions therefor
and all parts and equipment which may be attached to or which are necessary for
the operation and use of such personal property, whether or not the same shall
be deemed to be affixed to real property, and all rights under or arising out of
present or future contracts relating to the foregoing and all proceeds (cash and
non-cash) of the foregoing.
"Eurodollar Period" or "Eurodollar Periods" shall have the meaning set
forth in the Note.
"Eurodollar Rate" means, for any portion of the principal sum for any
Eurodollar Period therefor, the rate per annum (rounded upwards, if necessary,
to the nearest 1/100 of 1%) appearing on Telerate Page 3750 (or any successor
page) as the London interbank offered rate for deposits in Dollars at
approximately 11:00 a.m. (London Time) three (3) Banking Days prior to the first
day of such Eurodollar Period for a term comparable to such Eurodollar Period.
If for any reason such rate is not available, the term "Eurodollar Rate" shall
mean, for any Eurodollar Loan for any Eurodollar Period therefor, the rate per
annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on
Reuters Screen LIBO Page as the London interbank offered rate for deposits in
Dollars at approximately 11:00 a.m. (London Time) three (3) Banking Days prior
to the first day of such Eurodollar Period for a term comparable to such
Eurodollar Period; provided, however, if more than one rate is specified on
Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of
all such rates.
"Event(s) of Default" means the occurrence of any one or more of the
events specified in Part IX of this Agreement or in the other Financing
Documents and the continuance of such event beyond the applicable grace and/or
cure periods therefor, if any, set forth in Part IX or in the other Financing
Documents.
"Expense Payments" shall have the meaning set forth in Section 10.5
hereof.
7
13
"Facility" and "Facilities" mean, individually or collectively, a
Senior Living Facility.
"Facility Closing" has the meaning set forth in Section 4.1 hereof.
"Financing Documents" means at any time collectively this Agreement,
the Note, the Deeds of Trust, the Guaranty Agreement, the Performance Guaranty,
any Additional Borrower Joinder Supplements, the Management Fee Subordination
Agreement, the Security Documents, and any other instrument, agreement or
document previously, simultaneously or hereafter executed and delivered by the
Borrower and/or any other Person, singly or jointly with another Person or
Persons, evidencing, securing, guarantying or in connection with any of the
Obligations and/or in connection with this Agreement, the Note and/or any of the
Security Documents, as the same may from time to time be amended, restated,
supplemented or otherwise modified.
"GAAP" means generally accepted accounting principles in effect in the
United States of America from time to time.
"General Contractor" or "General Contractors" shall mean individually
or collectively the general contractors named in the Construction Contracts and
his or its respective successors and permitted assigns.
"General Intangibles" means any and all general intangibles of every
nature, whether presently existing or hereafter acquired or created arising out
of or relating to any or all of the Eligible Projects, including without
limitation all books, correspondence, credit files, records, computer programs,
computer tapes, cards and other papers and documents in the possession or
control of the Borrower or the Guarantor, claims (including without limitation
all claims for income tax and other refunds), choses in action, judgments,
patents, patent licenses, trademarks, trademark licenses (excluding any license
to the Borrower for the "Wynwood", "Crossings", "Clare Bridge", "Wovenhearts"
"Sterling House" or "Sterling Cottage" trademarks or tradenames), licensing
agreements, rights in intellectual property, goodwill, as that term is defined
in accordance with GAAP (including all goodwill of the Borrower's business
symbolized by, and associated with, any and all trademarks, trademark licenses,
copyrights and/or service marks), royalty payments, contractual rights, rights
as lessee under any lease of real or personal property, literary rights,
copyrights, service names, service marks, logos, trade secrets, all amounts
received as an award in or settlement of a suit in damages, deposit accounts,
interests in joint ventures or general or limited partnerships, all Licenses,
construction permits, Operating Agreements and Management Contracts,
Participation Agreements, Management Agreements and Resident Agreements, and all
proceeds (cash and non-cash) of the foregoing.
8
14
"Governmental Authority or Authorities" means any nation or government,
any state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Guarantor" means ALS.
"Guaranty Agreement" means the Guaranty of Payment Agreement by the
Guarantor of even date herewith.
"Hazardous Materials" means any flammable explosives, radioactive
materials, hazardous waste, toxic substances or related materials, including,
without limitation, asbestos, polychlorinated biphenyls, urea-formaldehyde,
radon, and any substance defined as or included in the definition of (a) any
"hazardous waste" as defined by the Resource Conservation Recovery Act of 1976,
as amended from time to time, and regulations promulgated thereunder; (b) any
"hazardous substance" as defined by the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended from time to time, and
regulations promulgated thereunder; (c) any "toxic substance" as defined by the
Toxic Substances Control Act, as amended from time to time, and regulations
promulgated thereunder; (d) any hazardous or infectious medical waste including,
but not limited to, cultures and stocks of infectious agents and associated
biologicals, pathological wastes, human and animal blood specimens and blood
products, anatomical materials, blood, blood-soiled articles, contaminated
materials, microbiological laboratory wastes, sharps, chemical wastes,
infectious wastes, chemotherapeutic wastes, and radioactive wastes; (e) any
substance, the presence of which on any property now or hereafter owned,
operated or acquired by the Borrower is prohibited or regulated under any
applicable Federal or state laws or regulations; and (f) any other substance,
pollutant, contaminant, chemical, or industrial toxic hazardous substance or
waste, including without limitation hazardous materials, which by law is
prohibited or is otherwise regulated as a hazardous material.
"Hazardous Materials Contamination" means the contamination by, release
or spill of (whether presently existing or occurring after the date of this
Agreement), Hazardous Materials of or on any property owned, operated or
controlled by the Borrower, or for which the Borrower has responsibility,
including, without limitation, improvements, facilities, soil, ground water, air
or other elements on, or of, any property now or hereafter owned, operated or
acquired by the Borrower, and any other contamination by Hazardous Materials for
which the Borrower is, or is claimed to be, responsible.
"Holdings" means ALS Holdings, Inc., a Delaware corporation.
"Hydric Soils" means any soil category upon which building would be
prohibited or restricted under applicable governmental requirements (including,
without limitation, those imposed by the U.S. Army Corps of Engineers based upon
its guidelines as to, among other things, soil, vegetation and effect on the
ecosystem).
9
15
"Improvements" shall have the meaning given to that term in each Deed
of Trust.
"Inspecting Engineer" shall mean such person or firm as the Agent may
from time to time appoint or designate for purposes related to the inspection of
the progress of the development of any of the Land and the construction of any
of the Improvements, conformity of construction with the applicable Plans and
Specifications, and for such other purposes as the Agent may from time to time
deem appropriate or as may be required by the terms of this Agreement.
"Instruments" means any and all notes, notes receivable, drafts,
acceptances, and similar instruments or documents, both now owned or hereafter
created or acquired arising out of or relating to the Facility (or any part
thereof).
"Interest" means the sum of all interest expense (as defined by GAAP),
net of interest income.
"Inventory" means any and all inventory of the Borrower and all right,
title and interest of the Borrower in, and to, all of its now owned and
hereafter acquired goods, merchandise and other personal property furnished
under any contract of service or intended for sale or lease arising out of or
relating to any and all Facilities, including, without limitation, all supplies
of any kind, nature or description which are used or consumed in the Borrower's
business and all documents of title or documents representing the same and all
proceeds (cash and non-cash) and products of the foregoing.
"Joint Venture" means an entity formed as a joint venture between ALS
or a Wholly Owned Subsidiary and one (1) or more joint venture partners as a
single-purpose, bankruptcy-remote legal entity.
"Joint Venture Lease" means a lease between a Borrower and a Joint
Venture to operate an Eligible Project.
"Land" shall have the meaning described in the Deeds of Trust or in
any applicable Deed of Trust as the context shall indicate.
"Laws" means all ordinances, statutes, rules, regulations, orders,
injunctions, writs or decrees of any Governmental Authority or any court or
similar entity established by any thereof.
"Lease" shall have the meaning set forth in a Deed of Trust.
"Lenders" means collectively, except as the context may otherwise
indicate, the Agent and any and all additional lenders who are or shall be from
time to time
10
16
participating as lenders under the Credit Facility pursuant to any Agency
Agreement. "Lender" means any of the Lenders individually.
"Lender Tax" means any present or future tax, levy, cost or charge of
any nature imposed by any Governmental Authority, excluding taxes on or measured
by the net income of any Lender imposed by the Internal Revenue Service or by
any jurisdiction in which the principal or relevant lending office of such
Lender is located.
"Licenses" means any and all licenses, certificates of need, operating
permits, franchises, and other licenses, authorizations, certifications,
permits, or approvals, other than construction permits, issued by, or on behalf
of, any Governmental Authority now existing or at any time hereafter issued,
with respect to the acquisition, construction, renovation, expansion, leasing,
management, ownership and/or operation of any and all Facilities, accreditation
of any Facility, and/or the participation or eligibility for participation in
any third party payment or reimbursement programs to the extent the Borrower or
any Guarantor Subsidiary is participating in such programs (but specifically
excluding any and all Participation Agreements to the extent required by law),
any and all operating licenses issued by any state Governmental Authority, any
and all pharmaceutical licenses and other licenses related to the purchase,
dispensing, storage, prescription or use of drugs, medications, and other
"controlled substances," any and all licenses relating to the operation of food
or beverage facilities or amenities, if any, and any and all certifications and
eligibility for participation in Medicare, Medicaid, Blue Cross and/or Blue
Shield, or any of the Managed Care Plans, private insurer, employee assistance
programs or other third party payment or reimbursement programs as the same may
from time to time be amended, renewed, restated, reissued, restricted,
supplemented or otherwise modified.
"Lien" means any mortgage, deed of trust, deed to secure debt, grant,
pledge, security interest, assignment, encumbrance, judgment, lien or charge of
any kind, whether perfected or unperfected, avoidable or unavoidable, consensual
or non-consensual, including, without limitation, any conditional sale or other
title retention agreement, filed or un-filed tax liens, any lease in the nature
thereof, and the filing of or agreement to give any financing statement under
the Uniform Commercial Code of any jurisdiction.
"Liquidation Costs" shall have the meaning set forth in Section 10.6
hereof.
"Loan" shall have the meaning set forth in Section 2.1 hereof.
"Managed Care Plans" means any health maintenance organization,
preferred provider organization, individual practice association, competitive
medical plan, or similar arrangement, entity, organization, or Person.
"Management Agreement" means any and all Management Agreements entered
into or to be entered into by and between the Borrower or the Joint Venture and
the
11
17
Management Company relating to the management of an Eligible Facility, as the
same may from time to time be amended, restated, supplemented or otherwise
modified.
"Management Company" means ALS, its successors and assigns and any
other Person which may become the manager of the Facilities.
"Management Fee Subordination Agreement" shall have the meaning set
forth in Section 7.18 hereof.
"Material Lease" shall mean a lease of a portion of any of the Property
which generates $25,000 per year or more in gross revenue for such Property.
"Maximum Construction Period" means construction has been on-going for
not longer than the applicable period for the Facility model type as set forth
in Section 7.2.2 hereof.
"Minimum Occupancy Requirement" means for an Eligible Project a minimum
Resident Occupancy for the particular type and model of Facility as set forth in
Section 7.2.2 hereof.
"Mortgage Lien Amount" means Deed of Trust Lien Amount.
"Multiemployer Plan" shall mean a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"Net Operating Income" means total operating revenue less total
operating expenses (excluding interest, federal and state income taxes,
depreciation and amortization) but including a management fee to the Management
Company of the higher of five percent (5%) of gross revenues net of management
expenses reflected in the income statement for the Facility or the actual
management fee if paid to a non-affiliate of the Guarantor for the period in
question as shown in financial information provided by the Borrowers.
"Note" shall have the meaning set forth in Section 2.1 hereof.
"Obligations" means all present and future debts, obligations, and
liabilities, whether now existing or hereafter arising, of the Borrower to the
Agent or any Lender under, arising pursuant to, in connection with and/or on
account of the provisions of this Agreement, the Note, the Deeds of Trust, each
Security Document, and any of the other Financing Documents, including, without
limitation, the principal of, and interest on, the Note, late charges,
Enforcement Costs, and other prepayment penalties (if any), letter of credit
fees or fees charged with respect to any guaranty of any letter of credit, and
also means all other present and future indebtedness, liabilities and
obligations, whether now existing or hereafter arising, of the Borrower to the
Lenders of any nature whatsoever regardless of whether such debts, obligations
and liabilities be direct, indirect, primary,
12
18
secondary, joint, several, joint and several, fixed or contingent, and any and
all renewals, extensions and rearrangements of any such debts, obligations and
liabilities.
"Operating Agreements and Management Contracts" means any and all
contracts and agreements previously, now or at any time hereafter at any time
entered into by the Borrower with respect to the acquisition, construction or
renovation of a significant nature, expansion, ownership, operation,
maintenance, use or management of any or all of the Facilities or otherwise
concerning the operations and business of any or all of the Facilities,
including, without limitation, any and all service and maintenance contracts,
any employment contracts, any and all management agreement other than the
Management Agreements, any and all consulting agreements, laboratory servicing
agreements, pharmaceutical contracts, physician, other clinician or other
professional services provider contracts, food and beverage service contracts,
and other contracts for the operation and maintenance of, or provision of
services to, a Facility, as the same may from time to time be amended, restated,
supplemented, renewed, or modified.
"Operating Month" means the first full calendar month after the
issuance of all required Licenses for any Facility and each month thereafter.
"Operating Reserve" shall mean a reserve in an amount approved by the
Agent included in each Total Development Budget to cover the costs of leasing up
a Facility and initial operating deficits.
"Participation Agreements" means any and all third party payor
participation or reimbursement agreements now or at any time hereafter existing
for the benefit of the Borrower relating to rights to payment or reimbursement
from, and claims against, private insurers, Managed Care Plans, material
employee assistance programs, Blue Cross and/or Blue Shield, federal, state and
local Governmental Authorities, including without limitation, Medicare and
Medicaid, and other third party payors, as the same may from time to time be
amended, restated, extended, supplemented or modified.
"Performance Guaranty" means individually or collectively a Guaranty of
Performance by the Guarantor in connection with a Facility Closing.
"Permitted Equipment Financing" means equipment leases with an
aggregate present value of the total rents of not in excess of $250,000 per
Facility.
"Permitted Liens" means: (a) Liens for Taxes which are not delinquent
or which the Agent has determined in the exercise of its sole and absolute
discretion (i) are being diligently contested in good faith and by appropriate
proceedings, (ii) the Borrower has the financial ability to pay, with all
penalties and interest, at all times without materially and adversely affecting
the Borrower, and (iii) are not, and will not be with appropriate filing, the
giving of notice and/or the passage of time, entitled to priority over any Lien
of the Lenders; (b) deposits or pledges to secure obligations under workers'
compensation, social security or similar laws, or under unemployment insurance
in the ordinary course
13
19
of business; (c) Liens in favor of the Lenders pursuant to the Credit Facility;
(d) judgment Liens to the extent the entry of such judgment does not constitute
an Event of Default under the terms of this Agreement or result in the sale of,
or levy of execution on, any of the Collateral; (e) the Permitted Equipment
Financing; and (f) such other Liens, if any, as are identified as Permitted
Encumbrances as defined in a Deed of Trust.
"Person" shall mean and include an individual, a corporation, a
partnership, a limited liability company, a joint venture, a trust, an
unincorporated association, any Governmental Authority or any other entity.
"Plans and Specifications" shall mean any and all plans and
specifications prepared in connection with the development of the Land and/or
the construction of the Improvements for any Eligible Project which is a
Development Project and which are approved in writing by the Agent, as the same
may from time to time be amended with the prior written approval of the Agent,
including but not limited to, plans and specifications prepared by an Architect,
a copy of which have been initialed by the Borrower and the Agent for
identification and delivered to the Agent.
"Pool A Project" means any Eligible Project which, at any time when the
Borrowing Base is computed, meets the applicable Pool A covenants set forth in
Section 7.2.2 hereof.
"Pool B Project" means any Eligible Project which, when the Borrowing
Base is computed, has not met the definition of a Pool A Project for the most
recent three (3) months or which fails to meet the applicable Joint Venture
buy-out provision of Section 7.2.2(i).
"Pool C Project" means any Eligible Project which, when the Borrowing
Base is computed, has not met the definition of a Pool A Project for the most
recent six (6) months or which fails to meet the applicable Joint Venture
buy-out provision of Section 7.2.2(i).
"Post Default Rate" means the interest rate on the Note in the absence
of an Event of Default plus two percent (2%) per annum.
"Prime Rate" shall have the meaning set forth in Section 2.4.2 hereof.
"Pro Forma Operating Statement" means the Borrower's projection for not
less than 36 months from the first Operating Month including occupancy
projections and projected operating expenses and operating losses.
"Property" shall mean collectively the "Property" as that term is
defined in each of the Deeds of Trust.
14
20
"Receivables" means all of the Borrower's now or hereafter owned,
acquired or created Accounts, Chattel Paper, Contract Rights, General
Intangibles and Instruments, and all cash and noncash proceeds and products
thereof.
"Rent" means lease expense as defined pursuant to GAAP.
"Reportable Event" shall mean any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder.
"Requisition" or "Requisitions" shall have the meaning set forth in
Section 2.2 hereof.
"Resident Agreements" means any and all contracts, authorizations,
agreements and/or consents executed by, or on behalf of any resident or other
person seeking services from the Borrower pursuant to which the Borrower
provides or furnishes health or assisted living care and related services at any
and all of the Facilities, including the consent to treatment, assignment of
payment of benefits by third party, as the same may from time to time be
amended, restated, supplemented or modified.
"Resident Occupancy" means the number of residents who are in occupancy
at a Facility and paying fees pursuant to a resident agreement.
"Revolving Credit Expiration Date" means September 24, 2001 or any date
to which it may be extended from time to time pursuant to the terms of Section
2.5 hereof.
"Revolving Credit Termination Date" means the earlier of (a) the
Revolving Credit Expiration Date, or (b) the date on which the Credit Facility
is terminated pursuant to Article X hereof or otherwise.
"Security Documents" shall mean, collectively, any assignment,
including, without limitation, the Collateral Assignments and any assignment,
pledge agreement, security agreement, mortgage, deed of trust (including the
Deeds of Trust), leasehold mortgage, leasehold deed of trust, deed to secure
debt, financing statement, initial transaction statement and any similar
instrument, document or agreement under or pursuant to which a Lien is now or
hereafter granted to, or for the benefit of, the Lenders on any collateral to
secure the Obligations, as the same may from time to time be amended, restated,
supplemented or otherwise modified.
"Senior Living Facility" and "Senior Living Facilities" mean
individually or collectively, an assisted living facility, an independent living
facility or a dementia care facility for persons with Alzheimer's disease and
other forms of memory impairment.
"Stabilized Project" means an Eligible Project with a Resident
Occupancy of at least 85% and shall include a Development Project which has been
open for twelve (12)
15
21
months or longer or which has earlier achieved a ratio of Net Operating Income
to Debt Service of not less than 1.25 to 1.00 measured for three consecutive
months.
"Subordinated Debt" means any indebtedness of a person incurred at any
time the repayment of which is subordinated to other indebtedness of such person
pursuant to a written agreement and specifically including (i) the Guarantor's
$143,750,000 aggregate original principal amount of 5.25% convertible
subordinated debentures due December 15, 2002; (ii) the Guarantor's $50,000,000
aggregate original principal amount of 7.00% convertible subordinated debentures
due June 1, 2004; (iii) the Guarantor's $35,000,000 aggregate original principal
amount of 6.75% convertible subordinated debentures due June 20, 2006.
"Survey" shall mean a plat of the Land for any Facility which clearly
designates at least (i) the location of the perimeter of such Land by courses
and distances; (ii) the location of all easements, rights-of-way, alleys,
streams, waters, paths and encroachments; (iii) the location of all building
restriction lines and set-backs, however established; (iv) the location of any
streets or roadways abutting such Land; and (v) the "as-built" locations of the
Improvements located on such Land and the relation of such Improvements by
courses and distances to the perimeter of such Land, building restriction lines
and set-backs, all in conformity with the Minimum Standard Detail Requirements
for Land Title Surveys adopted by the American Congress on Surveying and Mapping
(1992 Edition).
"Taxes" means all taxes and assessments whether general or special,
ordinary or extraordinary, or foreseen or unforeseen, of every character
(including all penalties or interest thereon), which at any time may be
assessed, levied, confirmed or imposed by any Governmental Authority on the
Borrower or any of its properties or assets or any part thereof or in respect of
any of its franchises, businesses, income or profits.
"Total Capital" means the sum of Net Worth, Total Funded Debt and
Subordinated Debt.
"Total Development Budget" means the development, construction and
opening operating expense budget or acquisition and opening operating expense
budget for an Eligible Project as reviewed and approved by the Agent.
"Total Funded Debt" at any time means the sum at such time of (a)
indebtedness for borrowed money or for the deferred purchase price of property
or services, (b) any obligations in respect of letters of credit, banker's or
other acceptances or similar obligations issued or created for the account of
the Guarantor, (c) lease obligations which have been or should be, in accordance
with GAAP, capitalized on the books of the Guarantor, (d) all liabilities
secured by any property owned by the Guarantor, as the case may be, to the
extent attached to the Guarantor's interest in such property, even though the
Guarantor has not assumed or become liable for the payment thereof, and (e) in
the case of the Guarantor, any obligation of the Guarantor or a Commonly
Controlled Entity
16
22
to a Multiemployer Plan; but excluding trade and other accounts payable in the
ordinary course of business in accordance with customary trade terms and which
are not overdue (as determined in accordance with customary trade practices) or
which are being disputed in good faith by the Guarantor and for which adequate
reserves are being provided on the books of the Guarantor in accordance with
GAAP and excluding Subordinated Debt.
"Wholly Owned Subsidiary" or "Wholly Owned Subsidiaries" means one or
more subsidiaries 100% owned by ALS which is or has been created for the sole
purpose of acquiring or constructing and owning and operating a Facility.
Section 1.2 Accounting Terms and Other Definitional Provisions.
Unless otherwise defined in this Agreement, as used in this Agreement
and in any certificate, report or other document made or delivered pursuant
hereto, accounting terms not otherwise defined in this Agreement, and accounting
terms only partly defined in this Agreement, to the extent not defined, shall
have the respective meanings given to them under GAAP. Unless otherwise defined
in this Agreement, all terms used in this Agreement which are defined by the
Texas Uniform Commercial Code shall have the same meanings as assigned to them
by the Texas Uniform Commercial Code unless and to the extent varied by this
Agreement. The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, Section, subsection, schedule
and exhibit references are references to sections or subsections of, or
schedules or exhibits to, as the case may be, this Agreement unless otherwise
specified. As used in this Agreement, the singular number shall include the
plural, the plural the singular and the use of the masculine, feminine or neuter
gender shall include all genders, as the context may require. Any reference to
Land, the Improvements or the Property shall mean all or any portion of each of
the foregoing, respectively unless the context indicates that such terms refer
to an individual Facility. Reference to any one or more of the Financing
Documents and any of the Financing Documents shall mean the same as the
foregoing may from time to time be amended, restated, substituted, extended,
renewed, supplemented or otherwise modified.
ARTICLE II
BORROWING
Section 2.1 The Loan.
(a) The Lenders agree to lend to the Borrower pursuant to
the terms and conditions of this Agreement and the Borrower agrees to borrow on
a revolving basis from the Lenders from time to time the principal amount (the
"Loan") not to exceed at any time outstanding the lesser of (i) the Credit
Facility Committed Amount, or (ii) the Borrowing Base.
17
23
(b) The obligation of the Borrower to repay the Loan shall
be evidenced by the Promissory Note of even date herewith payable to the Lender
in the form attached hereto as EXHIBIT A and any other Promissory Notes which
may be executed by the Borrower in the future payable to the Lenders in
substantially the form set forth in EXHIBIT A (collectively, as amended,
restated, substituted, extended, renewed and otherwise modified from time to
time, the "Note"). The Note shall bear interest and shall be repaid by the
Borrower in the manner and at the times set forth in the Note.
(c) The conditions precedent for making an advance under
the Loan shall be as set forth in this Agreement. Sums borrowed and repaid may
be readvanced under the terms and conditions of this Agreement.
(d) Not more frequently than monthly but at least
quarterly, the Agent will prepare a Borrowing Base Report (each a "Borrowing
Base Report") in the form attached or to be attached hereto as EXHIBIT B which
must be certified by the Borrower listing for each of the Eligible Projects (i)
the applicable Deed of Trust Lien Amount, (ii) the status of the Eligible
Facility as a Development Project, an Acquired Project or a Stabilized Project,
(iii) the Costs Incurred to Date, as described in the applicable Total
Development Budget, (iii) the length of time the Facility has been under
construction (if applicable), and (iv) its status as of the most recent
reporting date as a Pool A, Pool B or Pool C Project. The foregoing
notwithstanding, the Borrowing Base Report will be issued more frequently than
monthly if the Borrower requests the addition of an additional Eligible Project
or Projects with a value of at least $3,000,000 to the Borrowing Base; provided,
however, Borrowing Base Reports will not be issued more frequently than
semi-monthly. The Borrowing Base Report will be based on the outcome of the cost
verification procedures hereinafter described, appraisals obtained by the Agent
and other information on the Eligible Projects provided by the Borrower or
obtained by the Agent. The Borrowing Base shall be computed based on the
Borrowing Base Report most recently prepared by the Agent. In the event the
Borrower shall fail to furnish other current reports or information as
reasonably required by the Agent pursuant to the Financing Documents, or in the
event the Agent believes that a Borrowing Base Report is no longer accurate, the
Agent may, in its reasonable discretion exercised from time to time and without
limiting its other rights and remedies under the Financing Documents, upon
notice to the Borrower and the expiration of a cure period of five (5) Banking
Days, designate any Eligible Project as a Pool C Project or suspend the making
of or limit advances under the Loan. The Borrowing Base shall be subject to
reduction as a result of the following events: (i) the release of an Eligible
Project from the lien of the applicable Deed of Trust; (ii) the change of any
Eligible Project's status as a Pool A or B Project to a Pool B or C Project
respectively as determined by the Agent; or (iii) the diminution in the value of
an Eligible Project based upon an appraisal obtained pursuant to Section 7.28.
The Borrowing Base shall be subject to increase as a result of the following
events: (i) addition of Eligible Projects; (ii) increase in the Costs Incurred
to Date as determined by the Agent during the period since the last Borrowing
Base Report; or (iii) the change
18
24
of an Eligible Project's status as a Pool B or C Project to a Pool A Project
since the date of the most recent Borrowing Base Report as determined by the
Agent.
(e) No advances may be made or be outstanding under the
Credit Facility in respect of availability under the Borrowing Base from Pool B
or C Projects until there are at least five (5) Pool A Projects in the Borrowing
Base and until and during such times as sixty percent (60%) of all Eligible
Projects in the Borrowing Base are Pool A Projects.
(f) For purposes of determining Costs Incurred to Date,
each Total Development Budget may include the cost of (i) the acquisition by the
Borrower of the Land which is the site of such Facility or, in the case of an
Acquired Facility, the Land and the Facility's Improvements including the
purchase price paid and expenses incurred in connection with due diligence and
in closing of such acquisition; (ii) the construction on the Property of a
Facility which is not an Acquired Facility containing residential units and
common facilities; (iii) marketing, staffing and similar pre-opening expenses;
and (iv) an Operating Reserve.
(g) The Borrower shall furnish to the Agent such
schedules, certificates, lists, records, reports, information and documents as
required by the Agent from time to time so that the Agent may, in its reasonable
discretion, determine the Borrowing Base.
(h) If at any time the aggregate principal amount of the
Loan outstanding exceeds the Borrowing Base, a borrowing base deficiency
("Borrowing Base Deficiency") shall exist. Each time a Borrowing Base Deficiency
exists, the Borrower shall within three (3) Banking Days of notice thereof from
the Agent either pay the amount of the Borrowing Base Deficiency and/or add
Eligible Projects to increase the Borrowing Base to an amount which is at least
equal to the aggregate principal amount outstanding under the Loan.
Section 2.2 Procedure for Advances.
(a) The Agent will make advances not more frequently than
twice during each month upon receipt of a written request from the Borrower in
the form designated by the Agent (each a Requisition, collectively, the
"Requisitions") signed by ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ or ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ on behalf of
Borrower.
(b) Each Requisition is subject to Agent's determination
that after giving effect to the Requisition, the outstanding principal balance
of the Loan would not exceed the lesser of the then applicable Credit Facility
Committed Amount or the Borrowing Base. Each advance under the Loan shall be in
an amount of not less than $1,000,000, and in increments of $100,000 in excess
thereof. Advances or the renewal of a Eurodollar Period shall be requested by
the Borrower orally or in writing by 11:00 A.M. (Houston time) five (5) Banking
Days prior to the Banking Day on which
19
25
the funds will be advanced or the applicable Eurodollar Period will expire. The
Agent shall have no obligation to make any advance if at the time such advance
is requested and/or is proposed to be funded, there exists an Event of Default
or an event which upon notice or lapse of time or both would constitute an Event
of Default under the Financing Documents. If the Borrower fails to advise the
Agent five (5) Banking Days in advance of the expiration of a Eurodollar Period
of its intention to either pay off such portion of the Loan or renew the
applicable Eurodollar Period, it shall be assumed by the Agent that the
Eurodollar Period is to be renewed.
(c) Unless the Agent shall have received notice from
Lender prior to the date on which such Lender is to provide funds to the Agent
for an advance to be made by such Lender that such Lender will not make
available to the Agent such funds, the Agent may assume that such Lender has
made such funds available to the Agent on the date of such advance in accordance
with the terms of the Agency Agreement and the Agent in its sole discretion may,
but the Agent shall not be obligated to, in reliance upon such assumption, make
available to the Borrower on such date a corresponding amount.
(d) In addition, if the Agent has reason to believe a
Default or an Event of Default has occurred, the Borrower hereby irrevocably
authorizes the Lenders to make advances of the Loan at any time and from time to
time, without further request from or notice to the Borrower, which the Lenders,
in their sole and absolute discretion, deems necessary or appropriate to protect
the Lenders' interests under this Agreement or otherwise, including, without
limitation, advances of the Loan made to cover interest on the Loan, fees,
and/or Enforcement Costs, prior to, on, or after the termination of this
Agreement, regardless of whether the aggregate amount of the advances of the
Loan which the Lenders may make hereunder exceeds the Credit Facility Committed
Amount. The Lenders shall have no obligation whatsoever to make any advance
under this subsection and the making of one or more advances under this
subsection shall not obligate the Lenders to make other similar advances. Any
such advances will be evidenced by the Note secured by the Collateral and the
Deeds of Trust.
Section 2.3 Fees.
The Borrower shall pay to the Agent the fees described in the Fee
Agreement between the Borrower and the Agent of even date herewith.
Section 2.4 Interest Rate Matters.
2.4.1 Lender Tax Adjustment
Each payment made by the Borrower under the Note shall either (i) be
exempt from, and be made without reduction by reason of, any Lender Tax or (ii)
to the extent that any such payment shall be subject to any Lender Tax, be
accompanied by an additional payment by the Borrower of such amount as may be
necessary so that the net
20
26
amount received by each Lender (after deducting all applicable Taxes) is the
same as such Lender would have received had such payment not been subject to
such Lender Tax. Upon any payment of Lender Tax by the Borrower, the Borrower
shall promptly (and in any event within 30 days) furnish to the Agent and
applicable Lender such tax receipts, certificates an other evidence of such
payment as the Borrower may have or the Agent or the applicable Lender may
reasonably request.
2.4.2 Inability to Determine Eurodollar Rate.
In the event that the Agent determines (which determination shall be
conclusive absent manifest error) that, by reason of circumstances affecting the
London interbank market, quotation of Eurodollar Rates for any portion of the
Note are not being provided in the relevant amounts or for the relevant
maturities for the purpose of determining a Eurodollar Rate for any portion of
the Principal Sum, the Agent will give notice of such determination to the
Borrower and each Lender at least one day prior to the date of an advance or any
subsequent Eurodollar Period for the Loan. If any such notice is given, no
Lender shall have any obligation to make any advance or maintain any principal
sum outstanding at a Eurodollar Rate. Until the earlier of the date any such
notice has been withdrawn by the Agent or the date when the Lenders and the
Borrower have mutually agreed upon an alternate method of determining the rates
of interest payable on the Loan, as the case may be, the Borrower shall not have
the right to have additional advances or maintain any portion of the Credit
Facility at a Eurodollar Rate and interest shall accrue on all sums then
outstanding under the Note and on any additional advances at the fluctuating
prime rate of interest established and declared by the Agent from time to time
(the "Prime Rate") and shall be adjusted immediately and contemporaneously with
any change in the Prime Rate. Interest accruing at the Prime Rate shall be
computed for the actual number of days which have elapsed from the date of each
advance at the Prime Rate or the date of conversion to the Prime Rate on the
basis of a 360-day year. The Prime Rate does not necessarily represent the
lowest rate of interest charged by the Agent to Borrowers.
2.4.3 Illegality
Notwithstanding any other provision of the Financing Documents to the
contrary, in the event that it shall become unlawful for any Lender to obtain
funds in the London interbank market or for such Lender to maintain the Loan at
the Eurodollar Rate, then, by written notice to the Borrower and to the Agent,
such Lender may declare that advances will not thereafter be made or the Loan
maintained by such Lender hereunder at the Eurodollar Rate, whereupon the
Lenders and the Borrower shall mutually agree upon an alternate method of
determining the rates of interest payable on the Loan or interest shall
immediately commence to accrue at the Prime Rate as provided in Section 2.4.2.
21
27
2.4.4 Increased Costs and Reduced Return.
(a) If any event shall occur (whether in the form of
a reserve requirement (not included in the definition of the Eurodollar Rate),
exchange control regulations, governmental charges, compliance with any
guideline or request from any central bank or other Governmental Authority,
changes in the London interbank market or the position of any Lender in such
market or otherwise) and the result of any such event is, in such Lender's
reasonable judgment, to increase the costs which such Lender determines are
attributable to its making or maintaining the Loan at the Eurodollar Rate, or
its obligation to make available the Loan at the Eurodollar Rate or to reduce
the amount of any sum received or receivable by such Lender under the Note,
then, within ten (10) days after demand by such Lender, Borrower hereby agrees
to pay to such Lender such additional amount or amounts as will compensate such
Lender for such increased cost or reduction.
(b) In addition to any amounts payable pursuant to
Section 2.4.2 if any Lender shall have determined that the applicability of any
law, rule, regulation or guideline adopted pursuant to or arising out of the
July 1988 report of the Basle Committee on Banking Regulations and Supervisory
Practices entitled "International Convergence of Capital Measurement and Capital
Standards," or the adoption after the date hereof of any other law, rule,
regulation or guideline regarding capital adequacy, or any change in any of the
foregoing or in the enforcement or interpretation or administration of any of
the foregoing by any court or any central bank or other Governmental Authority,
charged with the enforcement or interpretation or administration thereof, or
compliance by such Lender (or any lending office of such Lender) or such
Lender's holding company with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority, central
bank or comparable agency, has or would have the effect of reducing the rate of
return on such Lender's capital or on the capital of such Lender's holding
company, if any, as a consequence of its making or maintaining the Loan or its
incurring any obligations under this Agreement to a level below that which such
Lender or such Lender's holding company could have achieved but for such
applicability, adoption, change or compliance (taking into consideration such
Lender's policies and the policies of such Lender's holding company with respect
to capital adequacy) by an amount deemed by such Lender to be material, then,
upon demand by such Lender, the Borrower hereby agrees to pay to such Lender
from time to time such additional amount or amounts as will compensate such
Lender or such Lender's holding company for any such reduction suffered.
(c) If any Lender shall seek payment of any amounts
from Borrower pursuant to this Section or under Section 2.4.2, it shall notify
the Borrower and the Agent of the amount payable by the Borrower to such Lender
hereunder. A certificate of such Lender seeking payment setting forth in
reasonable detail the factual basis for and the computation of the amount
specified, shall be conclusive and binding on all parties for all purposes,
absent manifest error, as to the
22
28
amounts owned. The Borrower's obligations under this Section shall survive the
termination of this Agreement and the repayment of the Obligations.
Section 2.5 Extensions.
Provided that no Event of Default has occurred, at any time not later
than sixty (60) days nor earlier than one hundred twenty (120) days prior to the
Revolving Credit Expiration Date or any anniversary of the date of this
Agreement, the Borrower may request that the Agent and the Lenders, in their
sole discretion, may agree to extend the Revolving Credit Expiration Date one
(1) or more times for a period of twelve (12) months each.
ARTICLE III
COLLATERAL
Section 3.1 Collateral.
As security for the payment of any and all of the Obligations and for
the Borrower's performance of, and compliance with, all of the terms, covenants,
conditions, stipulations and agreements contained in the Financing Documents,
the Borrower hereby assigns, grants and conveys to the Lenders, and agrees that
the Lenders shall have, to the extent permitted by law a perfected, continuing
security interest in, all of the Collateral. The Borrower further agrees that
the Lenders shall have in respect of the Collateral all of the rights and
remedies of a secured party under the Texas Uniform Commercial Code and the
Uniform Commercial Code of those other states in which the Facilities are
located, whichever is applicable, and under other applicable Laws as well as
those provided in this Agreement. The Borrower covenants and agrees to execute
and deliver such financing statements and other instruments and filings as are
necessary in the opinion of the Agent to perfect such security interest.
Notwithstanding the fact that the proceeds of the Collateral constitute a part
of the Collateral, the Borrower may not dispose of the Collateral, or any part
thereof, other than in the ordinary course of its business or as otherwise may
be permitted by this Agreement or other Security Agreements.
Section 3.2 Eligible Projects.
The Borrower shall from time to time designate Facilities owned by
the Borrower as Eligible Projects included in the Borrowing Base pursuant to the
terms hereof. The Facilities which are then Eligible Projects shall be listed on
any future Borrowing Base Report. The Credit Facility shall be secured by (a)
the first lien Deeds of Trust on the fee simple interests of the Borrower in the
Eligible Projects, (b) a first lien security interest in all fixtures, building
materials and all other machinery, equipment and other personalty used or
installed by the Borrower or each of the premises of an Eligible Project or in
the Improvements constructed thereon, with the exception of equipment
23
29
subject to Permitted Equipment Financing, and (c) all of the other Collateral
relating to the Eligible Projects. The Borrower may release an Eligible Project
from the lien of its Deed of Trust at any time provided no Event of Default has
occurred and is continuing and provided at least sixty percent (60%) Eligible
Projects which will remain in the Borrowing Base are Pool A Projects.
Section 3.3 Guaranties.
The Obligations are the subject of the Guaranty Agreement executed and
delivered by the Guarantor in favor of the Lenders and of one or more completion
Guaranties which may from time to time be executed and delivered by the
Guarantor.
Section 3.4 Collateral for Obligations.
The Borrower acknowledges that it is the intention of the Borrower
that the Collateral and all the Deeds of Trust be security for all of the
Obligations, both those now existing and those hereafter created or incurred by
future loans, advances, extensions of credit or otherwise and whether or not
currently contemplated by the Borrower and/or the Lenders on or about the date
hereof.
Section 3.5 Costs.
The Borrower agrees to pay on demand, to the fullest extent permitted
by applicable laws, all reasonable fees, commissions, costs, charges, travel
expenses and other expenses incurred by the Lenders, or any of them, in
connection with the taking, perfection, preservation, protection and/or release
of any security interest or lien on any of the Collateral or Deeds of Trust. The
foregoing notwithstanding, the Borrower shall not be obligated to pay the travel
expenses of the Lenders with the exception of travel expenses incurred in
connection with any enforcement actions following the occurrence of an Event of
Default.
ARTICLE IV
GENERAL FINANCING PROVISIONS.
Section 4.1 Conditions Precedent to Credit Facility Closing and
Addition of Deeds of Trust.
Conditions Precedent to Facility Closing. The following shall be
conditions precedent to the Credit Facility Closing or to the addition of a
Borrower and/or the addition of an Eligible Project to the Borrowing Base (a
"Facility Closing"):
(a) The Note, the Deeds of Trust and Security
Documents and the other Financing Documents in connection with the Eligible
Projects initially securing the Loan shall have been properly executed and
delivered to the Agent, the applicable Deeds of Trust shall be acknowledged and
recorded in the appropriate
24
30
public office or delivered to a representative of the title company for
recording and payment shall have been made for all conveyancing and recording in
connection with the settlement of the Loan, and for any transfer or documentary
stamp taxes due under any federal, state or municipal law.
(b) The Agent shall have received and approved a
copy of the Borrower's fully executed Articles of Incorporation and By-Laws. In
connection with the provision of a Deed of Trust by an Additional Borrower, the
Agent shall have received and approved copies of all organizational documents,
including certified copies of all documents on record with the State in which
such entity is organized.
(c) The Agent shall have received and approved a
secretary's certificate of borrowing resolution authorizing the execution and
delivery of the Financing Documents and consenting to the Loan and similar
resolutions.
(d) The Agent shall have received and approved a
current certificate of good standing from the State of Delaware for Holdings and
a certificate of good standing or certificate of fact or status from the State
in which any additional Borrower is formed and certificates of authority to do
business in any state in which an Eligible Project is located.
(e) The Agent shall have received and approved an
opinion of counsel for the Borrower as to the Borrower's good standing, form,
powers and authority and as to the validity, binding effect and enforceability
of the Financing Documents.
(f) The Agent shall have received a properly
executed Additional Borrower Joinder Supplement from any Additional Borrower.
(g) The Agent shall have reviewed and approved the
Borrower's standard form of Joint Venture Lease. Any material change from such
form for an individual Eligible Project must be consented to by the Agent prior
to the Facility Closing for such Eligible Project.
(h) The Agent shall have reviewed and approved the
Borrower's standard form of Management Agreement. Any material change from such
form for an individual Eligible Project must be consented to by the Agent prior
to the Facility Closing for such Eligible Project.
(i) At the time it requests the consent of the Agent
to the inclusion of a Facility as an Eligible Project, the Borrower shall have
advised the Agent of the following information regarding the proposed new
Eligible Project (i) the type and tradename of the Facility, (ii) its status as
a Development Project, an Acquisition Project or a Stabilized Project, (iii)
whether it is a Campus Project, (iv) the stage of construction of any Facility
under construction (v) the location of the Facility including ▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇, (▇▇) the name of the entity which owns the Facility
25
31
and its relationship to ALS and any other Borrower and (vii) whether a Joint
Venture Lease is or will be applicable to the Facility. The Agent will determine
whether the Facility will be added as an Eligible Project to the Borrowing Base.
(j) the Agent shall have received a certified
financial statement in form and detail satisfactory to the Agent regarding any
Additional Borrower.
(k) In the case of any Eligible Project which is
subject to a Joint Venture Lease, the Agent shall have received a Security
Document in the form of a Pledge, Assignment and Security Agreement, in form and
substance satisfactory to the Agent, pledging to the Agent on behalf of the
Lenders the ownership interest of ALS or any Affiliate in the applicable Joint
Venture.
Section 4.2 Conditions Precedent to Accepting an Eligible Project
Which is Under Construction or to be Constructed:
(a) The Facility Closing shall have been completed.
(b) The Agent shall have received a certificate of
authority to do business for the Borrower in the jurisdiction where the Facility
is located.
(c) The Total Development Budget for such Eligible
Project shall have been reviewed and approved in writing by the Agent. Each
Total Development Budget for an Eligible Project under construction or to be
constructed shall include (A) a project summary describing such proposed
Eligible Project in reasonable detail, (B) indicating whether or not such
Facility is one of the types of projects covered by the Master Plans and
Specifications, and if such Facility involves any material deviations from the
Master Plans and Specifications, describing such deviations in reasonable
detail, (C) containing a detailed construction cost estimate and a 2-year
estimated cash flow analysis (or such longer period as is necessary to include
at least 12 complete calendar months of full commercial operation), and (D)
containing other cost, feasibility, demographic and marketing information and
analysis with respect to such Project; and all such material shall be
satisfactory in all respects to the Lender, in its reasonable discretion. Such
Total Development Budget shall demonstrate to the Agent's satisfaction in its
sole discretion that the Eligible Project will qualify and continue as a Pool A
Project. Such review for a Facility to be constructed or under construction
shall include a review of the Plans and Specifications (as hereinafter defined)
by an inspecting engineer selected by the Agent to verify that the Improvements
can be constructed for the amount set forth in the Total Development Budget.
(d) The Pro Forma Operating Statement for such
Eligible Project shall have been reviewed and approved in writing by the Agent.
Each Pro Forma Operating Statement shall demonstrate to the Agent's satisfaction
in its sole discretion that the Eligible Project will qualify and continue to
qualify as a Pool A Project.
(e) The Agent shall have received a paid policy of
title insurance (American Land Title Association Standard Form "B" Loan
Policy-Current
26
32
Edition) covering the Facility or a valid and enforceable commitment to issue
the same, together with such reinsurance agreements and direct access agreements
as may be required by the Agent and/or endorsements to policies issued to the
Agent in connection with the Credit Facility Closing, in the amount agreed upon
by the Agent from either Chicago Title Insurance Company or ▇▇▇▇▇▇▇ Title
Insurance Company and which may be endorsed or assigned to the successors and
assigns of the Lenders and to additional Lenders without additional cost,
insuring the liens of the Deeds of Trust to be valid first liens on the
Property, free and clear of all defects, exceptions and encumbrances except such
as the Agent and its counsel shall have approved but without a creditor's rights
exception and (unless otherwise agreed by the Agent) containing affirmative
insurance against mechanic's liens.
(f) The Agent shall have received advice, in form
and substance and from a search company or other source satisfactory to the
Agent, to the effect that a UCC, judgment and tax lien search of the applicable
public records discloses no conditional sales contracts, chattel mortgages,
leases of personalty, financing statements or title retention agreements filed
or recorded against the Property except such as the Agent shall have approved.
(g) The Agent shall have received ▇▇▇▇▇ Evidence
forms evidencing all policies of insurance required by the terms hereof and by
the other Financing Documents to be in effect from a company or companies and in
form and amount satisfactory to the Agent, including without limitation, flood
insurance (in the amount required by the applicable Deed of Trust or evidence
that flood insurance is not available or otherwise required with respect to the
Property), together with written evidence, in form and substance satisfactory to
the Agent, that all fees and premiums due on account thereof have been paid in
full.
(h) The Agent shall have received and accepted an
appraisal of the Facility.
(i) Master Plans and Specifications, for Standard
Projects Already Approved, etc. The Borrower shall submit to the Agent for
approval Master Plans and Specifications covering the approximately five (5)
different types of project improvements typically constructed by the Borrower
and Affiliates. Such Master Plans and Specifications shall be approved by an
Inspecting Engineer and acceptable to the Agent (the "Master Plans and
Specifications").
(j) Delivery and Approval of Specific Plans and
Specifications for Non-Standard Projects, etc. If the Improvements for a
particular Eligible Project which the Borrower proposes be included in the
Borrowing Base are not one of the types of project improvements covered by the
Master Plans and Specifications, or involve any material design or construction
deviations (e.g., siding, roofing, foundation, unit mix, etc., exclusive of
adaptions to meet local building codes or other
27
33
requirements) from the Master Plans and Specifications which are anticipated for
such proposed Project:
(i) The Borrower shall have submitted to the
Agent and the Inspecting Consultant (1) copies of either (x) the
proposed Plans and Specifications for the Improvements on such specific
Project, or (y) an identification of the particular Master Plans and
Specifications which will be used for such specific Project, and a
reasonably detailed description of the material deviations, if any,
from such Master Plans and Specifications which will be involved for
such Project, in either case which shall be satisfactory to the Agent
and the Inspecting Engineer, in their reasonable discretion, together
with (2) evidence satisfactory to the Agent that such Plans and
Specifications (or the Master Plans and Specifications with such
material deviations) have been approved by (or will in the normal
course of business, without undue difficulty, be approved by) all
Governmental Authorities in accordance with all applicable Legal
Requirements, and
(ii) The Agent shall have received from the
Inspecting Engineer a favorable report with respect to such Plans and
Specifications or such deviations from the Master Plans and
Specifications, as the case may be, and such report shall be
satisfactory in all respects to the Agent in its reasonable discretion.
(k) The Agent shall have received and approved a
fully executed copy of the applicable Construction Contract and the Architect's
Contract as well as any information regarding the General Contractor or the
Architect which the Agent has requested.
(l) The Agent shall have received and approved a
copy of a current Survey of the Land certified to the Agent and to the title
insurance company.
(m) The Agent shall have received and approved a
site plan for the Improvements approved by all appropriate Governmental
Authorities.
(n) The Agent shall have received from the Borrower
written evidence, in form and substance satisfactory to the Agent, from all
Governmental Authorities having or claiming jurisdiction to the effect that all
building, construction and other permits required in connection with the
development of the Land and the construction of the Improvements have been
validly issued, that all fees and bonds required in connection therewith have
been paid in full or posted, as the circumstances may require, and that the
Improvements meet zoning requirements and all sewer and storm drain
requirements.
(o) The Agent shall have received and approved a
report setting forth a construction progress schedule in form and substance
satisfactory to
28
34
the Agent, calling for the completion of the Improvements by a date no later
than the end of the applicable Maximum Construction Period.
(p) If construction work of any kind has commenced
upon the Land or materials have been placed or stored upon the Land prior to the
recordation of the Deed of Trust among the Land Records where the Land is
located, the same shall be fully insured against by the title insurance company.
(q) The Agent shall have received and approved
evidence that the applicable General Contractor carries public liability and
property damage insurance and workers' compensation insurance in form and
amounts and issued by companies acceptable to the Agent.
(r) The Agent shall have received and accepted a
Phase I environmental audit of the applicable Facility prepared by a person or
firm acceptable to the Agent. ATEC and ▇▇▇▇▇ are environmental audit firms
acceptable to the Agent.
(s) The Agent shall have received evidence
acceptable in all respects through certification by the Architect or other
source acceptable to the Agent that the applicable Improvements, when
constructed, will comply with all legal requirements regarding access and
facilities for handicapped or disabled persons, including, without limitation
and to the extent applicable to assisted living facilities (or, if applicable,
independent living facilities), The Federal Architectural Barriers Act (42
U.S.C. Section 4151 et seq.), The Fair Housing Amendments Act of 1988 (42 U.S.C.
Section 3601 et seq.), The Americans With Disabilities Act of 1990 (42 U.S.C.
Section 12101 et seq.), The Rehabilitation Act of 1973 (29 U.S.C. Section 794)
and any applicable state statutes relating to access and facilities for
handicapped or disabled persons.
(t) The Agent shall have received and approved soil
reports demonstrating that the soil conditions of the Property are suitable for
construction of the Improvements, which reports shall include evidence to the
Agent's satisfaction that there are no hydric soils on the Land.
(u) The Agent shall have received and approved
copies of any executed Material Leases and any fully executed Joint Venture
Lease of the applicable Facility or of any portion thereof and subordination and
attornment agreements acceptable to the Lender (with non-disturbance provisions
for Joint Venture Leases and if acceptable to the Agent for other Material
Leases) from each.
(v) The Agent shall have received and approved an
opinion of Borrower's outside or in-house regulatory counsel regarding licensing
requirements and the transferability of licenses and an opinion of local counsel
in the jurisdiction where the applicable Facility is located that the Financing
Documents applicable to that Facility are enforceable and for the Borrower that
neither the making nor the servicing of the Loan will subject the Lenders to a
requirement of qualifying to do
29
35
business or taxation (except ad valorem taxes on the Property) in the State
where the applicable Facility is located and that the Loan is not usurious,
which opinion must also inform the Lenders (i) of the cost and timing of
foreclosure; (ii) of any limitations on the Lenders' right to obtain, or the
amount of, a deficiency judgment; and (iii) the existence of and details
surrounding any redemption period enjoyed by the Borrower following a sale at
foreclosure.
(w) With regard to any Deed of Trust for a Facility
located in any state having such requirement, the Agent shall have received
evidence satisfactory to the Agent that a Certificate of Need has been issued
for such Facility.
(x) The Lender shall have received and approved any
Management Agreement then in place for the Facility.
(y) The Lender shall have received and approved a
market feasibility study for the Facility satisfactory to the Lender including,
but not limited to, information regarding market occupancy rates, proposed and
existing competition, monthly rates and a Claritas Senior Life Report (or other
source acceptable to the Lender) on the defined market area for the Facility.
(z) The Lender shall have received a copy of any
acquisition contract for the Property.
(aa) If applicable in the state where the Property
is located, the Lender shall have received evidence that the Borrower has
applied for or is otherwise diligently pursuing obtaining a certificate of
occupancy for the Improvements being constructed.
Section 4.3 Conditions Precedent to Accepting an Eligible Project
Which Has Been Constructed or Acquired:
(a) The Facility Closing shall have been completed.
(b) The Agent shall have received a certificate of
authority to do business for the Borrower in the jurisdiction where the Facility
is located.
(c) The Total Development Budget for such Eligible
Project shall have been reviewed and approved in writing by the Agent consistent
with the provision of Section 2.1. Each Total Development Budget shall
demonstrate to the Agent's satisfaction in its sole discretion that the Eligible
Project will be designated as a Pool A Project.
(d) The Pro Forma Operating Statement for any such
Eligible Project which is not a Stabilized Project shall have been reviewed and
approved in writing by the Lender. Each Pro Forma Operating Statement shall
demonstrate to the Lender's satisfaction in its sole discretion that the
Eligible Project will qualify and continue to qualify as a Pool A Project.
30
36
(e) The Agent shall have received a paid policy of
title insurance (American Land Title Association Standard Form "B" Loan
Policy-Current Edition) covering the Facility or a valid and enforceable
commitment to issue the same, together with such reinsurance agreements and
direct access agreements as may be required by the Agent and/or endorsements to
policies issued to the Agent in connection with the Credit Facility, in the
amount agreed upon by the Agent from either Chicago Title Insurance Company or
▇▇▇▇▇▇▇ Title Insurance Company and which may be endorsed or assigned to the
successors and assigns of the Lenders and to additional Lenders without
additional cost, insuring the liens of the Deeds of Trust to be valid first
liens on the Property, free and clear of all defects, exceptions and
encumbrances except such as the Agent and its counsel shall have approved but
without a creditor's rights exception and (unless otherwise agreed by the Agent)
containing affirmative insurance against mechanic's liens.
(f) The Agent shall have received advice, in form
and substance and from a search company satisfactory to the Agent, to the effect
that a UCC, judgment and tax lien search of the applicable public records
discloses no conditional sales contracts, chattel mortgages, leases of
personalty, financing statements or title retention agreements filed or recorded
against the Property except such as the Agent shall have approved.
(g) The Agent shall have received ▇▇▇▇▇ Evidence
forms evidencing all policies of insurance required by the terms hereof and by
the other Financing Documents to be in effect from a company or companies and in
form and amount satisfactory to the Agent, including without limitation, flood
insurance (in the amount required by the applicable Deed of Trust or evidence
that flood insurance is not available or otherwise required with respect to the
Property), together with written evidence, in form and substance satisfactory to
the Agent, that all fees and premiums due on account thereof have been paid in
full.
(h) The Agent shall have received and accepted an
appraisal of the Facility.
(i) The Agent shall have received and approved a
copy of a current Survey of the Land certified to the Agent and to the title
insurance company.
(j) The Agent shall have received and accepted a
Phase I environmental audit of the applicable Facility prepared by a person or
firm acceptable to the Agent. ATEC and ▇▇▇▇▇ are environmental audit firms
acceptable to the Agent.
(k) The Agent shall have received evidence
acceptable in all respects through certification by the Architect or other
source acceptable to the Agent that the applicable Improvements comply with all
legal requirements regarding access and facilities for handicapped or disabled
persons, including, without limitation and to the extent applicable to assisted
living facilities (or, if applicable, independent
31
37
living facilities), The Federal Architectural Barriers Act (42 U.S.C. Section
4151 et seq.), The Fair Housing Amendments Act of 1988 (42 U.S.C. Section 3601
et seq.), The Americans With Disabilities Act of 1990 (42 U.S.C. Section 12101
et seq.), The Rehabilitation Act of 1973 (29 U.S.C. Section 794) and any
applicable state statutes relating to access and facilities for handicapped or
disabled persons.
(l) The Agent shall have received and approved
copies of any executed Material Leases of the applicable Property or of any
portion thereof and any fully executed Joint Venture Lease and subordination and
attornment agreements acceptable to the Agent (with non-disturbance provisions
for Joint Venture Leases and other leases if acceptable to the Agent) from each.
(m) The Agent shall have received and approved an
opinion of Borrower's outside or in-house regulatory counsel regarding licensing
requirements and the transferability of licenses and an opinion of local counsel
in the jurisdiction where the applicable Facility is located that the Financing
Documents applicable to that Facility are enforceable and for the Borrower that
neither the making nor the servicing of the Loan will subject the Lenders to a
requirement of qualifying to do business or taxation (except ad valorem taxes on
the Property) in the State where the applicable Facility is located and that the
Loan is not usurious, which opinion must also inform the Lenders (i) of the cost
and timing of foreclosure; (ii) of any limitations on the Lenders' right to
obtain, or the amount of, a deficiency judgment; and (iii) the existence of and
details surrounding any redemption period enjoyed by the Borrower following a
sale at foreclosure.
(n) With regard to any Deed of Trust for a Facility
located in any state having such requirement, the Agent shall have received
evidence satisfactory to the Agent that a Certificate of Need has been issued
for such Facility.
(o) The Agent shall have received a copy of the
fully executed Management Agreement for the Facility.
(p) The Agent shall have received each of the items
listed in Section 4.5 hereof.
Section 4.4 Conditions Precedent to Determining Additional
Availability Under Borrowing Base.
The Lenders shall not be obligated to include any costs incurred by the
Borrower under a Total Development Budget in the calculation of the Borrowing
Base unless the conditions described in Sections 4.1, 4.2 and 4.3 and the
following additional conditions shall have been satisfied to the Agent's
satisfaction:
(a) Construction cost reports prepared by a
construction manager and certified by an officer of ALS showing the percentage
of completion and setting forth in trade breakdown form and in such detail as
may be required by the Agent,
32
38
the amounts expended and/or costs incurred for work done and necessary materials
incorporated into the Improvements. The cost reports shall also show the
percentage of completion of each line item on the Borrower's cost breakdown
approved by the Agent. The Borrower shall submit with each cost report a
statement that the work completed to the date of such cost report is of quality
consistent with the applicable Plans and Specifications. In addition, at the
time of delivery of each cost report by the Borrower, the Borrower shall furnish
to the Agent such additional information (such as paid receipts, invoices,
statements of accounts, etc.) as the Agent may reasonably require to assure that
amounts shown in the cost report have been paid by the Borrower.
(b) Cost reports verified by the Agent's
Construction Real Estate Loan Administration Group during the period since the
issuance of the last Borrowing Base Report will be included in the calculation
of the next Borrowing Base Report. Unless otherwise agreed to by the Agent and
to the extent specifically permitted by the Agent, the process of verification
of Requisitions shall confirm the payment by the Borrower of the following costs
and expenses related to the development of the Land and the construction of the
Improvements and no others may be included in a Total Development Budget: (i)
the payment of interest when due without further authorization or consent of the
Borrower; (ii) the actual cost of the Land and all labor, services, materials,
supervision, construction fees and the like reasonably incurred by the Borrower
in connection with the construction upon the Land of the Improvements in
accordance with the Plans and Specifications; (iii) for the actual cost of
pre-opening expenses, marketing expenses and operations of the Facility to the
extent of operating deficits; (iv) for the actual cost of commitment fees,
extension fees, appraisal fees, closing or settlement costs, fees of attorneys,
engineers, architects and accountants, insurance and bond premiums, ad valorem
real estate taxes and other costs directly related to the development of the
Land and the construction, marketing, initial start-up operating of the
Improvements; and (v) for the Development Fee and other pre-opening fees.
(c) The cost verification procedure hereunder will
be administered by the Lender's Real Estate Loan Administration group.
Validation of Costs Incurred to Date for Development Projects under the
construction or constructed by a Borrower shall be based upon inspections and
certifications by or on behalf of the Lender demonstrating that the work
included in Costs Incurred to Date shown in the most current reports submitted
by the Borrower has been completed in a manner satisfactory to the Lender and
upon verification by the Lender that the Borrower has paid for the Costs
Incurred to Date shown on such requisition. In determining the percentage of
completion, the Lender shall primarily utilize the information contained in the
forms described in sub-paragraph (a) below and the supporting materials provided
in connection therewith. In addition, from time to time, at intervals which
approximate 1/3 completion, 2/3 completion and 100% completion, or more
frequently if reasonably required by the Lender, the Lender will cause the
Inspecting Engineer to make physical inspections of the Improvements to such
Eligible Project and to issue a report with respect thereto. The Lender shall
use the information so provided by the Inspecting Engineer to verify that the
construction disbursements which have theretofore been made by the Borrower
33
39
accurately reflected the amount of construction completed at such times. It
shall not be a condition to issuing a new Borrowing Base Report reflecting
updated Costs Incurred to Date that the Lender shall have actually received a
report of the Inspecting Engineer verifying that the actual construction
completed and paid for conforms to the percentage of completion reflected in the
Borrower's reports to the Lender. Rather, it is anticipated that the Lender will
use reasonable discretion in scheduling the physical inspections and reports by
the Inspecting Engineer so that such reports may be used by the Lender as a
periodic verification of the information contained in the Borrowing Base Report.
The applicable Borrower shall make arrangements for advance payment or
reimbursement by the Borrower of the fees and expenses of the Inspecting
Engineer in making any such physical inspections. The following provisions shall
also be applicable to advances under the Loan:
(d) All reports of costs incurred shall be made on
forms approved by the Lender similar to construction loan requisition forms
detailing the purpose and application of the Costs Incurred to Date by Eligible
Project at such times as the Borrower may determine, using (x) as to "hard
costs", AIA Form 0702, or such other standardized forms or formats for
information typically used by the Borrower as shall be reasonably acceptable to
the Lender accompanied by a cost breakdown, the accuracy of which shall be
certified by the Company on behalf of such Borrower, and (y) as to "soft costs",
a standardized request form, containing such information and/or documentation,
certified by the Borrower on behalf of the applicable Borrower, as the Lender
may reasonably require hereunder.
(e) Costs Incurred to Date on Acquisition Projects
will be verified from the settlement sheet signed at the closing of the
acquisition and other records deemed acceptable by the Lender.
(f) Validation of requisitions will also be
contingent upon receipt of the most current monthly report to title to all
Eligible Projects which are under construction or have been completed less than
120 days (or such longer beyond as the Lender shall deem necessary based on
applicable mechanics' lien laws), which must be satisfactory to the Lender. If
required by the terms of the existing title insurance policy, the Agent shall
have received an endorsement which shall have the effect of advancing the
effective date of the policy to the date of the advance then being made and
increasing the coverage of the policy by an amount equal to the cost report
being verified if the policy does not by its terms provide for such an increase.
(g) No Default or Event of Default shall have
occurred and be continuing under any Note or any of the other Financing
Documents.
(h) The Improvements shall not have been materially
damaged by fire or other casualty unless the Agent shall have received proceeds
of insurance sufficient in the judgment of the Agent to effect a satisfactory
restoration of such Improvements in accordance with the terms of the Deed of
Trust.
34
40
(i) The Agent shall have received written evidence,
in form and substance satisfactory to the Agent, in its reasonable discretion,
to the effect that all work requiring inspection by Governmental Authorities
having or claiming jurisdiction has been duly inspected and approved by such
authorities and by any rating or inspection organization, bureau, association or
office having or claiming jurisdiction.
(j) The representations and warranties made in
ARTICLE V of this Agreement shall be true and correct in all material respects
on and as of the date of the advance with the same effect as if made on such
date.
(k) All terms and conditions of the Financing
Documents required to be met as of the date of consideration applicable cost
report shall have been met to the complete satisfaction of the Agent.
(l) In the reasonable judgment of the Agent, all
work completed on the applicable Eligible Project under construction at the time
of the application for an advance has been performed in a good and workmanlike
manner and all materials and fixtures usually furnished and installed at that
stage of construction have been furnished and installed. All costs covered by
the cost report have been paid by the Borrower.
(m) At least sixty percent (60%) of the Eligible
Projects in the Borrowing Base shall be Pool A Projects. The Agent shall have
determined whether each Eligible Project is a Pool A, Pool B or Pool C Project.
(n) Before verifying any cost report for
construction costs, the Agent shall require the Borrower to obtain from the
applicable General Contractor and, if required by the applicable title insurance
company, from all subcontractors and material suppliers acknowledgments of
payment and releases of liens and rights to claim liens for work performed or
materials delivered covered by such Requisition. All such acknowledgments and
releases shall be in form of AIA Forms G706 or G706A.
Section 4.5 Conditions Under Which an Eligible Project is a Completed
Project.
The Agent shall verify that an Eligible Project is a Completed Project
based on the satisfaction of the following additional conditions:
(a) The Agent shall have received the final "as
built" Survey for the applicable Facility within sixty (60) days after the
issuance of the applicable certificate of occupancy.
(b) The Agent shall have received written evidence
from a qualified third party, in form and substance satisfactory to the Agent,
to the effect that the applicable Improvements have been substantially completed
in accordance with
35
41
their Plans and Specifications within sixty (60) days after the issuance of the
applicable certificate of occupancy.
(c) The Agent shall have received written evidence,
in form and substance satisfactory to the Agent, to the effect that requisite
certificates for permanent occupancy or completion of the Improvements have been
validly issued.
(d) Final waivers of liens of the General
Contractor, and if required by the applicable title insurance company,
subcontractors, laborers and material suppliers have been furnished to the Agent
or, as to any disputed lien or claim of lien, a bond in form and substance
acceptable to the Agent has been provided or other arrangements satisfactory to
the Agent have been made.
(e) The Agent shall have received a copy of an
operating License for the Facility or other evidence satisfactory to the Agent
that the Facility may be lawfully operated as contemplated by the Financing
Documents.
Section 4.6 Verification of Operating Reserve Expenditures.
No portion of any costs included in the Operating Reserve shall be
verified until both a certificate of occupancy has been issued by the applicable
Governmental Authorities and, if applicable to the Facility, an operating
License has been issued for the Facility by the appropriate Governmental
Authority or Authorities. Advances from the Operating Reserve shall be for the
sole purpose of paying a portion of the Debt Service on the Loan or net
operating losses as shown on a monthly financial report for such Facility
prepared in accordance with the requirements set forth in the Financing
Agreement, and certified by the Chief Financial Officer of the Borrower.
Section 4.7 Assignments of Payments.
The Borrower agrees not to transfer, assign, pledge or hypothecate any
right or interest in any payment or advance due pursuant to this Agreement, or
any of the other benefits of this Agreement, without the prior written consent
of the Agent. Any assignment made or attempted by the Borrower without the prior
written consent of the Agent shall be void and of no effect. No consent by the
Agent to an assignment by the Borrower shall release the Borrower as the party
primarily obligated and liable under the terms of this Agreement unless the
Borrower shall be released specifically by the Agent in writing. No consent by
the Agent to an assignment shall be deemed to be a waiver of the requirement of
prior written consent by the Agent with respect to each and every further
assignment and as a condition precedent to the effectiveness of such assignment.
Section 4.8 Liability of the Lenders.
The Lenders shall in no event be responsible or liable to any person
other than the Borrower for the disbursement of or failure to disburse the Loan
proceeds or any part thereof and neither the General Contractor nor any
subcontractor, laborer or material
36
42
supplier shall have any right or claim against the Lenders under this Agreement
or the administration thereof.
Section 4.9 Computation of Interest and Fees.
All applicable fees and interest shall be calculated on the basis of a
year of 360 days for the actual number of days elapsed pursuant to the terms of
each Note and interest shall be payable monthly in arrears.
Section 4.10 Liens; Setoff.
The Borrower hereby grants to the Lenders a continuing lien and
security interest for all the Obligations upon any and all monies, securities,
and other property of the Borrower and the proceeds thereof, now or hereafter
held or received by or in transit to, the Lenders, or any affiliate of any of
the Lenders, from or for the Borrower, and also upon any and all deposits
(general or special) and credits of the Borrower with any of the Lenders, if
any, at any time existing. During the continuance of any Event of Default under
this Agreement, each Lender is hereby authorized by the Borrower at any time and
from time to time, without notice to the Borrower, to set off, appropriate and
apply any or all items hereinabove referred to against all Obligations then
outstanding.
Section 4.11 Payment and Performance of Obligations.
The payment and performance by the Borrower of the Obligations shall be
absolute and unconditional, irrespective of any defense or any rights of
set-off, recoupment or counterclaim it might otherwise have against the Lenders,
or any of them, and the Borrower shall pay absolutely net all of the
Obligations, free of any deductions and without abatement, diminution or
set-off; and until payment in full of all of the Obligations, the Borrower: (a)
will not suspend or discontinue any payments provided for in the Note and (b)
will perform and observe all of its other agreements contained in this
Agreement, including (without limitation) all payments required to be made to
the Agent, and (c) will not terminate or attempt to terminate this Agreement or
any of the other Financing Documents to which the Borrower is a party for any
cause.
Section 4.12 Payments to Others for the Account of the Borrower
At the option of the Agent and without any request from the Borrower,
and without waiving any of its rights hereunder, the Agent may do the following:
(a) Elect to cure or avoid any default by the
Borrower under the Financing Documents by applying amounts due hereunder or
advancing the Lenders' own funds to the satisfaction of the conditions of the
Financing Documents and any amounts so applied shall be part of the Loan and
shall be secured by the Deeds of Trust and the other Collateral. The Agent
agrees to endeavor to give the Borrower notice of any such payment or performing
such act and the amount of any payment whether prior to or contemporaneously
with its making such payment or performance of such act; provided, however, that
failure to give such notice shall not constitute a waiver by the Lenders of, or
constitute a defense to, any of the rights of the Lenders under this
37
43
Agreement, or the Deeds of Trust, including (without limitation) the right of
the Lenders to repayment of the amount of such payment.
(b) Apply amounts due hereunder to the satisfaction
of the conditions of the Financing Documents and any amounts so applied shall be
part of the Loan and shall be secured by the Deeds of Trust and other
Collateral. At the option of the Agent, and without limiting the generality of
the foregoing, the Agent may pay directly from the Loan proceeds all interest
bills rendered by the Agent in connection with the Loan, and following the
occurrence of an Event of Default may make advances directly to the General
Contractor, the title insurance company, any subcontractor or materialmen, or to
any of them jointly, and the execution hereof by the Borrower shall, and hereby
does, constitute an irrevocable authorization to so advance the proceeds of the
Loan. No further direction or authorization from the Borrower shall be necessary
to warrant such direct advances and all such advances shall satisfy pro tanto
the obligations of the Lenders hereunder and shall be secured by the Deeds of
Trust and other Collateral as fully as if made to the Borrower, regardless of
the disposition thereof by the party or parties to whom such advances is made.
Section 4.13 Prepayment.
The Borrower shall have the right to prepay the Loan in full or in
part, at any time and from time to time, upon five (5) days' prior written
notice to the Agent without premium or penalty. The foregoing notwithstanding,
in connection with any prepayment of a principal sum on any day other than the
last day of the Eurodollar Period applicable thereto, the Borrower shall pay to
the Agent upon request by the Agent, such amount as shall be sufficient to
compensate any of the Lenders for any and all losses or expenses which such
Lender may sustain or incur (including without limitation, any such loss or
expense arising from the redeployment of funds obtained by such Lender). Unless
an Event of Default has occurred, any partial prepayment shall be applied first
to such breakage costs, second to accrued and unpaid interest and third to the
outstanding principal balance of the Loan due and owing at maturity. Sums
borrowed and repaid may be readvanced. The Borrower's obligations under this
Section shall survive the termination of this Agreement and the repayment of the
Obligations.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
To induce the Lenders to make available the Credit Facility,
the Borrower represents and warrants to the Lenders that:
Section 5.1 Good Standing.
The Borrower (a) is a legal entity duly organized and existing and in
good standing under the laws of the state of formation, (b) has the power to own
its property and to carry on its business as now being conducted, and (c) is
duly qualified to do business and is in good standing in each jurisdiction in
which each Facility it owns is
38
44
located and in which the character of the properties owned by it therein or in
which the transaction of its business makes such qualification necessary.
Section 5.2 Power and Authority
The Borrower has full power and authority to execute and deliver this
Agreement and each of the other Financing Documents executed and delivered by
it, to make the borrowing hereunder, and to incur the Obligations, all of which
have been duly authorized by all proper and necessary corporate action. No
consent or approval of holders of ownership interests in or lenders to, the
Borrower, and no consent or approval of any Governmental Authority or any third
party payor on the part of the Borrower, is required as a condition to the
validity or enforceability of this Agreement or any of the other Financing
Documents executed and delivered by the Borrower or to the payment or
performance by the Borrower of the Obligations.
Section 5.3 Binding Agreements.
This Agreement and each of the other Financing Documents executed and
delivered by the Borrower have been properly executed by the Borrower,
constitute valid and legally binding obligations of the Borrower, and are fully
enforceable against the Borrower in accordance with their respective terms.
Section 5.4 Litigation.
There are no proceedings pending before any court or arbitrator or
before or by any Governmental Authority which, in any one case or in the
aggregate, will cause a material adverse change in the financial condition or
operations of the Borrower or affect the authority of the Borrower to enter into
this Agreement or any of the other Financing Documents executed and delivered by
the Borrower. There is no pending revocation, suspension, termination,
probation, restriction, limitation or non-renewal of any License, Participation
Agreement or any similar accreditation or approval organization or Governmental
Authority for healthcare providers, including, without limitation, the issuance
of any provisional License or other License with a term of less than twelve (12)
months, as a consequence of any sanctions imposed by any Governmental Authority,
nor is there any pending assessment of any civil or criminal penalties by any
Governmental Authority, the outcome of which, if determined adversely to the
Borrower, could result in a material adverse change in the business or financial
condition of the Borrower. The Borrower does not have any appeals regarding
rates or reimbursements currently pending or contemplated before any
Governmental Authority or any administrator of any third party payor or
preferred provider program or referral source, the outcome of which, if
determined adversely to the Borrower, could result in a material adverse change
in the financial condition or operations of the Borrower. There are no Medicare
or Medicaid recoupments of any other third party payor being sought, requested
or claimed, against the Borrower, the outcome of which, if determined adversely
to the Borrower, could materially impair the Borrower's ability to pay the
Obligations, except as otherwise disclosed in writing to, and approved by, the
Agent.
39
45
Section 5.5 No Conflicting Agreements.
There is (a) no provision of the Borrower's Articles of Incorporation
or By-Laws and no provision of any existing mortgage, indenture, contract or
agreement binding on the Borrower or affecting its property, and (b) to the
knowledge of the Borrower no provision of law or order of court binding upon the
Borrower, which would conflict with or in any way prevent the execution,
delivery, or performance of the terms of this Agreement or of any of the other
Financing Documents executed and delivered by the Borrower, or which would be
violated as a result of such execution, delivery or performance, or, if so, all
necessary consents have been obtained.
Section 5.6 Financial Information.
All financial statements or information hereto furnished to the Lenders
with respect to the Borrower, each Facility and the Guarantor is complete and
correct in all material respects and fairly presents the financial position of
the Borrower, the Facilities and the Guarantor. There are no liabilities, direct
or indirect, fixed or contingent, of the Borrower or Guarantor which are not
reflected in the their respective financial statements or in the notes thereto
except those incurred subsequently in the ordinary course of their business.
There has been no material adverse change in the financial condition or
operations of the Guarantor since the financial statements dated June 30, 1998
(and to the Borrower's and Guarantor's knowledge, no such material adverse
change is pending), and neither the Borrower nor the Guarantor has guaranteed
the obligations of, or made any investments in or advances to, any company,
individual or other entity, except as disclosed in such information and except
those incurred subsequently in the ordinary course of their business.
Section 5.7 No Default Under Other Agreements.
The Borrower is not in default under or with respect to any obligation
under any agreement to which the Borrower is a party in any respect which could
result in a material adverse change in the financial condition or operations of
the Borrower.
Section 5.8 Taxes.
The Borrower has filed or has caused to have been filed all federal,
state and local tax or informational returns which are required by law to be
filed, and has paid or caused to have been paid all Taxes as shown on such
returns or on any assessment received by it, to the extent that such Taxes have
become due, or which are required by law to be paid, unless and to the extent
only that such Taxes, assessments and governmental charges are currently
contested in good faith and by appropriate proceedings by the Borrower and
adequate reserves therefor have been established as required under GAAP.
Section 5.9 Place(s) of Business and Location of Collateral.
The Borrower warrants that the address of the Borrower's chief
executive office is as specified in EXHIBIT C attached hereto and made a part
hereof and that the address of each other place of business of the Borrower, if
any, is as disclosed in EXHIBIT C. The Collateral and all books and records
pertaining to the Collateral are and/or will be located at the addresses
indicated on EXHIBIT C. The Borrower will immediately advise the
40
46
Agent in writing of the opening of any new place of business or the closing of
any existing place of business of the Borrower, and of any change in the
location of the places where the Collateral, or any part thereof, or the books
and records concerning the Collateral, or any part thereof, are kept. EXHIBIT C
may be modified from time to time to add the locations of additional Facilities.
Section 5.10 Title to Properties.
The Borrower has good and marketable title to all of its properties,
including, without limitation, the Property and the Collateral, and the Property
and the Collateral are free and clear of mortgages, pledges, liens, charges and
other encumbrances other than the Permitted Liens.
Section 5.11 Margin Stock.
None of the proceeds of the Loan will be used, directly or indirectly,
by the Borrower for the purpose of purchasing or carrying, or for the purpose of
reducing or retiring any indebtedness which was originally incurred to purchase
or carry, any "margin security" within the meaning of Regulation G (12 CFR Part
207), or "margin stock" within the meaning of Regulation U (12 CFR Part 221), of
the Board of Governors of the Federal Reserve System (herein called "margin
security" and "margin stock") or for any other purpose which might make the
transactions contemplated herein a "purpose credit" within the meaning of said
Regulation G or Regulation U, or cause this Agreement to violate any other
regulation of the Board of Governors of the Federal Reserve System or the
Securities Exchange Act of 1934 or the Small Business Investment Act of 1958, as
amended, or any rules or regulations promulgated under any of such statutes.
Section 5.12 ERISA.
With respect to any "pension plan", as defined in Section 3(2) of
ERISA, which plan is now or previously has been maintained or contributed to by
the Borrower and/or by any Commonly Controlled Entity: (a) no "accumulated
funding deficiency" as defined in Code 412 or ERISA 302 has occurred, whether or
not that accumulated funding deficiency has been waived; (b) no "reportable
event" as defined in ERISA 4043 has occurred; (c) no termination of any plan
subject to Title IV of ERISA has occurred; (d) neither the Borrower nor any
Commonly Controlled Entity has incurred a "complete withdrawal" within the
meaning of ERISA 4203 from any multiemployer plan; (e) neither the Borrower nor
any Commonly Controlled Entity has incurred a "partial withdrawal" within the
meaning of ERISA 4205 with respect to any multiemployer plan; (f) no
multiemployer plan to which the Borrower or any Commonly Controlled Entity has
an obligation to contribute is in "reorganization" within the meaning of ERISA
4241 nor has notice been received by the Borrower or any Commonly Controlled
Entity that such a multiemployer plan will be placed in "reorganization".
Section 5.13 Governmental Consent.
Neither the nature of the Borrower or of its business or properties,
nor any relationship between the Borrower and any other Person, nor any
circumstance in connection with the making of the Loan, or the offer, issue,
sale or delivery of the Note is
41
47
such as to require a consent, approval or authorization of, or filing,
registration or qualification with, any Governmental Authority, on the part of
the Borrower, as a condition to the execution and delivery of this Agreement or
any of the other Financing Documents, the borrowing of the principal amounts of
the Loan or the offer, issue, sale or delivery of the Note.
Section 5.14 Full Disclosure.
The financial statements referred to in this Part V do not, nor does
this Agreement, nor do any written statements furnished by the Borrower to the
Agent in connection with the making available of the Credit Facility, contain
any untrue statement of fact or knowingly omit a material fact necessary to make
the statements contained therein or herein not materially misleading. The
Borrower has not failed to disclose any fact to the Agent in writing which
materially adversely affects or, will or could prove to materially adversely
affect the properties, business, prospects, profits or condition (financial or
otherwise) of the Borrower or the ability of the Borrower to perform this
Agreement or any of the other Financing Documents.
Section 5.15 Business Names and Addresses.
The Borrower has not conducted business under any name other than its
current name, and has not conducted its business in any jurisdiction other than
those listed on EXHIBIT C. The Borrower intends to operate the Facilities under
the names set forth on EXHIBIT C. The Borrower shall promptly notify the Agent
of any change in the name of any Facility.
Section 5.16 Licenses and Certifications.
The Borrower further represents and warrants to the Lenders that, with
respect to any License it possesses or has applied for, (a) no Default or Event
of Default has occurred or is continuing under the terms of any of the Licenses,
or any condition to the issuance, maintenance, renewal and/or continuance of any
License, (b) the Borrower has paid all fees, charges and other expenses to the
extent due and payable with respect to, and has provided all information and
otherwise complied with all material conditions precedent to, the issuance,
maintenance, renewal, and continuance of all Licenses, (c) the Borrower has not
received any notice from any Governmental Authority relating to any actual or
pending suspension, revocation, restriction, or imposition of any probationary
use, of any License, nor has any License been materially amended, supplemented,
rescinded, terminated, or otherwise modified except as otherwise disclosed in
writing to, and approved by, the Agent, (d) the Borrower has not made any
previous assignment of any of the Licenses to any Person, and (e) no financing
statement covering any of the Licenses is on file in any public office except
financing statements in favor of the Lenders. Without implying any limitation to
the other representations and warranties contained in this Agreement, the
Borrower is not required by any applicable Law of any state, county or city in
which any of the Facilities is located to obtain a Certificate of Need to
operate any Facility for its intended purpose or has applied for and obtained
such Certificate(s) of Need. Licenses to operate are required in most states
where the Facilities are located and Certificates of Need are also required in
the certain states.
42
48
Section 5.17 Operating Agreements and Management Contracts.
The Borrower has furnished to the Agent photocopies of all material
Operating Agreements and Management Contracts entered into with respect to the
Facilities, and all amendments, supplements and modifications thereto including,
without limitation, the Management Agreement. The Borrower further represents
and warrants to the Lenders that (a) all of the material Operating Agreements
and Management Contracts are or will be at the time of execution and delivery
thereof valid and binding on the parties thereto and in full force and effect,
(b) no Default or Event of Default has occurred or is continuing under the terms
of any of the material Operating Agreements and Management Contracts, and no
party thereto has attempted or threatened to terminate any such Management
Contract or Operating Agreement, (c) the Borrower has not made any previous
assignment of any Operating Agreements, Management Contracts, Management
Agreements or Management Lease to any Person, and (d) no financing statement
covering any of the Operating Agreements, Management Contracts, Management
Agreement or Management Leases is on file in any public office, except financing
statements in favor of the Lenders in connection with the Credit Facility.
Section 5.18 Participation Agreements and Resident Agreements.
(a) The Borrower has furnished to the Agent, on or
before the applicable Facility Closing, the Borrower's form of Resident
Agreement used with respect to all Facilities and, if requested by the Agent,
copies of all current, executed Resident Agreements.
(b) The Borrower further covenants to the Lenders
that, with respect to the Participation Agreements, if any, (i) to the best of
its knowledge, all Participation Agreements will be at the time of execution and
delivery thereof valid and binding on the parties thereto and in full force and
effect, and (ii) all Participation Agreements will provide for payment to the
Borrower for services rendered to residents. The Borrower represents and
warrants that as of the date hereof it has not entered into any Participation
Agreement for any Facility.
(c) To the extent the Borrower participates or will
participate in Medicare or Medicaid payment and reimbursement programs, the
Borrower has complied and will comply with all notice and other requirements
under Title XVIII and Title XIX of the Social Security Act to enable the
Borrower to participate in the Medicare and Medicaid payment and reimbursement
programs.
Section 5.19 Compliance with Laws.
The Borrower is not in violation of any applicable laws of any
Governmental Authority pertaining to employment practices, health standards or
controls, environmental and occupational standards or controls or order of any
court or arbitrator, the violation of which, considered in the aggregate, would
result in a material adverse change in the financial condition or operations of
the Borrower. The Borrower is in compliance with all material accreditation
standards and requirements to which it is subject. The Borrower has obtained or
will obtain all Licenses necessary to the
43
49
ownership of its property or to the conduct of its activities which, if not
obtained, could materially adversely affect the ability of the Borrower to
conduct its activities of operating each Facility as a Senior Living Facility,
including, without limitation if and as required by any Governmental Authorities
for the dispensing, storage, prescription, disposal, and use of drugs,
medications and other "controlled substances" and for the maintenance of
cafeteria and other food and beverage facilities or services or the condition
(financial or otherwise) of the Borrower.
Section 5.20 Presence of Hazardous Materials or Hazardous Materials
Contamination.
The Borrower has not placed Hazardous Materials on any real property
owned, controlled or operated by the Borrower or for which the Borrower is
responsible. To the best of the Borrower's knowledge, no Hazardous Materials are
located on any real property owned, controlled or operated by the Borrower or
for which the Borrower is responsible, except for reasonable quantities of
necessary supplies for use by the Borrower in the ordinary course of its current
line of business and stored, used and disposed of in accordance with applicable
Laws, and no property owned, controlled or operated by the Borrower has ever
been used by the Borrower or, to the best of the Borrower's knowledge, by any
other Person as a manufacturing, storage, or dump site for Hazardous Materials
nor is such property affected by Hazardous Materials Contamination, except as
may be disclosed in any Phase I environmental assessment delivered to the Agent.
Section 5.21 Compliance in Zoning.
The anticipated use of each Eligible Project complies with applicable
zoning ordinances, regulations and restrictive covenants affecting such Land,
all use requirements of any Governmental Authority having jurisdiction have been
satisfied, and no violation of any law or regulation exists with respect
thereto.
Section 5.22 Plans and Specifications.
The Borrower represents and warrants that, to the extent required by
applicable law or any effective restrictive covenant, the Plans and
Specifications for each Eligible Project have been approved by all Governmental
Authorities having or claiming jurisdiction and by any beneficiary of any such
restrictive covenant.
Section 5.23 Building Permits; Other Permits.
All building, construction and other permits then necessary or required
in connection with the development of the Land and the construction of the
Improvements have been or, will be on a timely basis, unless otherwise agreed to
by the Agent, validly issued and all fees and bonds required in connection
therewith have been paid or posted, as the circumstances may require.
Section 5.24 Utilities.
All utility services necessary for the development of all the Land and
the construction of the Improvements for each Eligible Project and the operation
thereof for
44
50
their intended purpose are or will be available at the boundaries of all the
Land, including, without limitation, telephone service, water supply, storm and
sanitary sewer facilities, natural gas (if available) and electric facilities.
Section 5.25 Access; Roads.
All roads and other accesses necessary for the development of all the
Land and the construction of all the Improvements for all Eligible Projects and
full utilization thereof for their intended purposes have either been completed
or the necessary rights of way therefor have either been or will be acquired by
the appropriate Governmental Authorities or have been or will be dedicated to
public use and accepted by such Governmental Authorities and all necessary steps
have been taken by the Borrower or such Governmental Authorities to assure the
complete construction and installation thereof by a date sufficient to ensure
the timely completion of the Improvements and in no event later than the end of
the applicable Maximum Construction Period.
Section 5.26 Other Liens.
Except as otherwise provided in the Financing Documents, the Borrower
has made no contract or arrangement of any kind the performance of which by the
other party thereto would give rise to a lien on any Eligible Project.
Section 5.27 Defaults.
There is no default on the part of the Borrower under the Financing
Documents and no event has occurred and is continuing which, with notice or the
passage of time, or both, would constitute a default under the Note or any of
the other Financing Documents.
Section 5.28 Nature of Credit Facility; Usury; Disclosures.
The Borrower is a business or commercial organization, and the Credit
Facility is being made solely for the purpose of carrying on or acquiring a
business or commercial enterprise. The rate or rates of interest charged on the
Note do not, and will not, violate any applicable usury Law or interest rate
limitation. The Credit Facility is not subject to the federal Consumer Credit
Protection Act (15 U.S.C. 1601 et. seq.) nor any other federal or state
disclosure or consumer protection laws. The Credit Facility is being transacted
solely for business or commercial purposes and not for personal, family or
household purposes.
Section 5.29 Survival; Updates of Representations and Warranties.
Each Requisition shall constitute an affirmation that the foregoing
representations and warranties of the Borrower and those set forth in the other
Financing Documents are true and correct as of the date thereof and, unless the
Agent is notified to the contrary prior to the disbursement of an advance, will
be so as of the date thereof. All representations and warranties contained in or
made under or in connection with this Agreement and the other Financing
Documents shall survive the date of this Agreement and the Loan made hereunder.
The Lenders acknowledge and agree that any and all representations and
warranties contained in, or made under, or in connection with, this Agreement
may be amended, changed or otherwise modified by the Borrower at any time
45
51
and from time to time after the date of this Agreement so as to accurately
reflect the matters represented and warranted therein; provided, that such
amendments, changes and/or modifications are disclosed in writing to the Agent.
The Lenders shall have no obligation to waive any Event of Default due to any
present or future inaccuracy of such representation or warranty or to agree to
any amendment, change or modification of any such representation or warranty.
Section 5.30 Accounts.
With respect to all of the Borrower's Accounts and to the best of the
Borrower's knowledge (a) they are genuine, and in all respects what they purport
to be, and are not evidenced by a judgment, an instrument, or chattel paper
(unless such judgment has been assigned and such instrument or chattel paper has
been endorsed and delivered to the Agent); (b) they represent undisputed, bona
fide transactions completed in accordance with the terms and provisions
contained in the invoices relating thereto; (c) the services rendered which
resulted in the creation of the Accounts have been delivered or rendered to and
accepted by the Account Debtor; (d) the amounts shown on the Borrower's books
and records, with respect thereto are actually and absolutely owing to the
Borrower and are not contingent for any reason; (e) there are no set-offs,
counterclaims or disputes known by the Borrower or asserted with respect
thereto, and the Borrower has made no agreement with any Account Debtor thereof
for any deduction or discount of the sum payable thereunder except regular
discounts allowed by the Borrower in the ordinary course of its business for
prompt payment; (f) there are no facts, events or occurrences known to the
Borrower which in any way impair the validity or enforcement thereof or tend to
reduce the amount payable thereunder; (g) all Account Debtors thereof, to the
best of the Borrower's knowledge, have the capacity to contract; (h) the
services furnished giving rise thereto are not subject to any Liens other than
Permitted Liens; and (i) the Borrower has no knowledge of any fact or
circumstance which would impair the validity or collectibility thereof.
ARTICLE VI
CONDITIONS OF LENDING
The making of any advance under the Loan is subject to the
conditions set forth under this Agreement and the following conditions
precedent:
Section 6.1 No Default.
No Event of Default and no event which with the giving of notice or the
passage of time would become an Event of Default has occurred and is existing
and all representations and warranties set forth herein or in the other
Financing Documents are true and correct.
46
52
Section 6.2 Opinion of Counsel for the Borrower.
At the Facility Closing and when a lien on an Eligible Project is
subsequently granted by the Borrower, the Lenders shall receive a written
opinion of counsel for the Borrower and the Guarantor satisfactory in all
respects to the Agent.
Section 6.3 Approval of Counsel for the Lenders.
All legal matters incident to the Loan and all documents necessary in
the opinion of the Agent to make the Loan or the addition of either an Eligible
Project to the Borrowing Base or add such Deeds of Trust and related Collateral
shall be satisfactory in all material respects to counsel for the Lenders.
Section 6.4 Supporting Documents.
The Agent shall receive at the Credit Facility Closing and in
connection with the subsequent Facility Closing: (a) a certificate of a duly
authorized officer of the Borrower, in a form acceptable to the Agent in all
respects, dated as of the date hereof and certifying (i) that attached thereto
is a true, complete and correct copy of resolutions duly adopted by board of
directors of the Borrower authorizing the execution and delivery of this
Agreement, the Note and the other Financing Documents, the borrowing thereunder,
and the performance of the Obligations, and (ii) as to the incumbency and
specimen signature of the authorized officer of the Borrower executing this
Agreement, the Note and the other Financing Documents; (b) such other documents
as the Agent may reasonably require the Borrower to execute, in form and
substance acceptable to the Agent; and (c) such additional information,
instruments, opinions, documents, certificates and reports as the Agent may
reasonably deem necessary.
Section 6.5 Financing Documents.
All of the Financing Documents required by the Agent whether at the
Credit Facility Closing or any subsequent Facility Closing shall be executed,
delivered and, if deemed necessary by the Agent, recorded, all at the sole
expense of the Borrower.
Section 6.6 Insurance.
The Borrower shall have satisfied the Agent that any and all insurance
required by this Agreement is in effect as of the date of this Agreement or as
of the date of the addition of a Deed of Trust and related Collateral, and that,
to the extent required by the Financing Documents, the Lenders have been named
as an insured lienholder.
Section 6.7 Security Documents.
In order to perfect the lien and security interest created by this
Agreement, the Borrower shall have executed and delivered to the Agent all
Security Documents (in form and substance acceptable to the Agent in its sole
discretion) deemed necessary by the Agent, in a sufficient number of
counterparts for recordation, and, at the Borrower's sole expense, shall record
all such financing statements and Security Documents, or cause them to be
recorded, in all public offices deemed necessary by the Agent.
47
53
Section 6.8 Additional Borrower Joinder Supplement.
In order to add an Additional Borrower, under the Credit Facility,
confirm that such additional Borrower is jointly and severally liable with
existing Borrower for all the Obligations, perfect the lien and security
interest of the Lenders in the Collateral related to the construction and
operation of any Facility encumbered by a Deed of Trust provided by an
Additional Borrower, such Additional Borrower shall execute and deliver to the
Agent, an Additional Borrower Joinder Supplement joining in the Note, this
Agreement, such assignments of Collateral and such other Security Documents as
the Agent may require and in sufficient number of counterparts for recordation,
and, at the Borrower's sole expense, shall make available for recording all such
financing statements and other Security Documents, or cause them to be recorded,
in all public offices deemed necessary to the Agent.
ARTICLE VII
AFFIRMATIVE COVENANTS OF BORROWER
Until payment in full and the performance of all of the
Obligations hereunder, the Borrower shall:
Section 7.1 Financial Statements.
Furnish to the Agent:
(a) as soon as available but in no event more than
one hundred twenty (120) days after the close of each of the Borrower's fiscal
years, (i) a copy of the consolidated annual financial statement of the Borrower
in reasonable detail satisfactory to the Agent, prepared on a basis of
accounting consistent with that of the Guarantor consistently applied, which
financial statement shall include a balance sheet of the Borrower, as at the end
of such fiscal year and a certificate of compliance signed by the Borrower's
Chief Financial Officer regarding the covenants contained in the Financing
Documents and whether there has been an event which constitutes an Event of
Default under the Financing Documents, or which would constitute such an Event
of Default with the giving of notice or the lapse of time or both, and, if so,
stating the facts with respect thereto, (ii) and the related statements of
operations in a format acceptable to the Agent;
(b) beginning with the first Operating Month, as
soon as available but in no event more than thirty (30) days after the last day
of each such calendar month, operating statements for each Eligible Project for
such month, including an income and expense statement for such period and
certified rent roll with respect to each Eligible Project then operating for
such period;
48
54
(c) with reasonable promptness such additional
information, reports or statements as the Agent may from time to time reasonably
request; and
(d) all required financial statements, required
pursuant to Sub-paragraphs (a) and (b) hereof shall include the following
certification:
"The undersigned, as of ,
certifies that the financial information contained in the financial
statement dated , is true and complete when interpreted in
conjunction with the Guarantor's most recent annual and quarterly
financial statements, as of this date. This statement is provided
to Bank United (the "Bank") as agent for the Lenders set forth in
the Agency Agreement dated , , as amended,
restated or substituted from time to time, for the purpose of
obtaining credit or in fulfillment of the terms and conditions of
credit already provided. Accordingly, it is intended that the Bank
may rely on this information."
(e) All required financial statements required under
(a) hereof shall be accompanied by a certificate of compliance with the
applicable financial covenants signed by a responsible officer of the Borrower
and shall include the Borrower's computation of such covenants.
(f) as soon as available but in no event more than
forty-five (45) days after the close of each of the Borrower's fiscal quarters
internally prepared, consolidated and consolidating financial statements of the
Borrower, a balance sheet on a year-to-date basis and as of the close of such
period and an income and expense statement for such period, certified by a
responsible officer of the Borrowers; and
(g) in addition, the Borrower will provide or cause
the Guarantor to provide to the Agent a quarterly certificate of compliance with
financial covenants applicable to either the Borrower or the Guarantor within
thirty (30) days of the end of each of the Borrower's or the Guarantor's fiscal
quarters in the form attached hereto as EXHIBIT D and duly certified by a
responsible officer of such entity.
Section 7.2 Financial Covenants.
7.2.1 Minimum Pool A Projects.
At least sixty percent (60%) of the Eligible Projects shall qualify as
Pool A Projects. The foregoing notwithstanding, if the Borrower fails to satisfy
this covenant and at the time of such failure no more than four (4) Eligible
Projects are Pool B or Pool C Projects, such failure shall not constitute an
event of default under the Financing
49
55
Documents unless the Borrower fails within ninety (90) days thereof to restore
the composition of the Borrowing Base to not less than sixty (60%) Pool A
Projects.
7.2.2 Pool A Project Covenants.
Each Development Project, Stabilized Project, Acquired Project or
Acquisition Project shall satisfy the applicable performance requirements
hereinafter set forth to qualify as a Pool A Project as set forth below:
(a) Maximum Construction Period. Each Development Project
will be individually monitored for on-going construction for not more than the
applicable period as follows:
-----------------------------------------------------------------------------------------------------------
Model Sterling House
-----------------------------------------------------------------------------------------------------------
Types WovenHearts Clare Bridge Crossings Wynwood Campus
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
Maximum
-----------------------------------------------------------------------------------------------------------
Construction
-----------------------------------------------------------------------------------------------------------
Period 12 months 12months 14 months 14 months 24 months
-----------------------------------------------------------------------------------------------------------
The construction period shall be measured from the date of commencement
of construction as reported by the Borrower, regardless of whether it owned the
Facility as of the commencement date, and as verified by the Agent.
(b) Minimum Occupancy Requirement. Each Development
Project shall maintain a minimum resident occupancy as of the Operating Month
shown below:
-----------------------------------------------------------------------------------------------------------
Min. Occupancy Sterling House Acquired
-----------------------------------------------------------------------------------------------------------
Requirement WovenHearts Clare Bridge Crossings Wynwood Project.
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
50% by 6 mos by 6 mos by 7 mos by 7 mos by 6mos
-----------------------------------------------------------------------------------------------------------
75% by 9 mos by 9 mos by 10 mos by 10 mos by 9mos
-----------------------------------------------------------------------------------------------------------
85% by 12 mos by 12 mos by 14 mos by 14 mos by12mo
-----------------------------------------------------------------------------------------------------------
(c) Debt Service Coverage Ratio (Stabilized
Project). Each Stabilized Project shall maintain an 85% minimum resident
occupancy requirement, and a Debt Service Coverage Ratio equal to not less than
1.25 to 1.0 as of the end of each fiscal quarter ending, as set forth below:
50
56
----------------------------------------------------------------------------------------------------
Stabilized Projects 1Q 2Q 3Q 4Q thereafter
----------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
Debt Service Coverage
----------------------------------------------------------------------------------------------------
Ratio 1.25x 1.25x 1.25x 1.25x 1.25x
----------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
Rolling Historical
----------------------------------------------------------------------------------------------------
Operations 3 mos 6 mos 9 mos 12 mos 12mos
----------------------------------------------------------------------------------------------------
Test test test test test
----------------------------------------------------------------------------------------------------
(d) Debt Service Coverage Ratio (Acquisition
Project). Each Acquisition Project, shall maintain a Debt Service Coverage Ratio
equal to not less than 1.25 to 1.0 as of the end of each fiscal quarter ending
after its acquisition, as set forth below:
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
Acquisition Projects 1Q 2Q 3Q 4Q 5Q thereafter
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
Debt Service
----------------------------------------------------------------------------------------------------------
Coverage Ratio NA 1.25x 1.25x 1.25x 1.25x 1.25x
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
Rolling Historical
----------------------------------------------------------------------------------------------------------
Operations NA 3 mos 6 mos 9 mos 12 mos 12mos
----------------------------------------------------------------------------------------------------------
test test test test test
----------------------------------------------------------------------------------------------------------
(e) Maximum Period for Opening. Each Development
Project shall be open for full operations within ninety (90) days of issuance of
its certificate of occupancy.
(f) Product Types. Provided the Agent consents to
the addition of a new product type to the Borrowing Base, Eligible Projects of
types other than those commonly designated by the tradenames "Wynwood",
"Crossings", "Clare Bridge", "Wovenhearts" or "Sterling House" shall be required
to meet the covenants set forth in 7.2.2 (a) and (b) for a "Sterling House" or
"Wovenhearts" Facility unless otherwise agreed by the Agent.
(g) Campus Projects. Except as provided in 7.2.2
(a), each Facility in a Campus Project will be measured separately for
compliance with the covenants hereunder to determine whether such Facility
qualifies as a Pool A Project.
(h) Special Conditions for Borrowing Base Consisting
of Acquisition Projects. At such time or times as the Eligible Projects in the
Borrowing Base are either all Acquisition Projects or when Acquisition Projects
must be included to meet the requirement hereunder that 60% of all Eligible
Projects be Pool A Projects, but such Acquisition Projects have been too
recently acquired to meet the Debt Service
51
57
Coverage Ratio set forth in Section 7.2.2 (d) above, then each such new
Acquisition Project shall be tested under the Debt Service Coverage Ratio set
forth in Section 7.2.3 and must meet such test in order to qualify as a Pool A
Project for any purpose under this Agreement.
(i) Eligible Facilities Subject to Joint Venture
Leases. In the case of any Eligible Project which otherwise qualifies as a Pool
A Project which is subject to a Joint Venture Lease, ALS or an Affiliate shall
exercise its rights to buy-out the ownership interests of all other partners or
other owning entities in the Joint Venture within six (6) months from the date
on which such Eligible Project becomes a Stabilized Facility or the Eligible
Project will be classified by the Agent as a Pool B Project. If such buy-out has
not been completed within nine (9) months of the Eligible Project's becoming a
Stabilized Project, such Eligible Project will be classified by the Agent as a
Pool C Project.
(j) to the extent the Agent has agreed from time to
time in its sole discretion to modify or waive any requirements for an
individual Eligible Project to qualify as a Pool A Project, such Eligible
Project and the specific terms of such waiver are set forth on EXHIBIT E
attached hereto or any replacement EXHIBIT E which may from time to time be
attached to this Financing Agreement.
7.2.3 Debt Service Coverage Prospective Test for
Acquisition Projects.
Prior to the inclusion of any Acquisition Projects which the Borrower
has requested be included in the Borrowing Base (each, a "Prospective
Acquisition Project"), all Stabilized Projects and all Acquisition Projects
already in the Borrowing Base plus the Prospective Acquisition Project(s) shall
maintain a Debt Service Coverage Ratio of not less than 1.25 to 1.0 projected on
an annualized basis measured using the Borrowing Base Report for the most recent
three (3) months and operating statements for Prospective Acquisition Project(s)
for the same period.
Section 7.3 Taxes and Claims.
Pay and discharge all taxes, assessments and governmental charges or
levies imposed upon it or any of its income or properties prior to the date on
which penalties attach thereto, and all lawful claims which, if unpaid, might
become a lien or charge upon any of its properties; provided, however, the
Borrower shall not be required to pay any such tax, assessment, charge, levy or
claim, the payment of which is being contested in good faith and by proper
proceedings.
Section 7.4 Legal Existence.
Maintain its legal existence in good standing in the state of its
formation and in each jurisdiction where it is required to register or qualify
to do business.
52
58
Section 7.5 Conduct of Business and Compliance with Laws.
7.5.1 Maintenance of Agreements
Do or cause to be done all things necessary to obtain, enter into,
preserve and to keep in full force and effect its material rights and its trade
names, patents, trademarks and Licenses, Participation Agreements, and Operating
Agreements and Management Contracts which are necessary for the operation of
each Facility as its respective type of Senior Living Facility and as
contemplated by the Borrower.
7.5.2 Maintenance of Agreements
Engage in and continue to engage substantially only in the business of
owning and operating a Senior Living Facility and related services in compliance
with all applicable laws of the state in which the applicable Facility is
located or any other Governmental Authority having jurisdiction over such
Facility.
7.5.3 Compliance with Laws Governing Participation
Agreements.
Comply with all applicable Laws, including, without limitation,
regulations issued under the Omnibus Budget Reconciliation Act of 1987 (OBRA'87)
(▇▇▇.▇.▇▇. 100-203), as amended, and observe the valid requirements of
Governmental Authorities, and perform the terms of all Participation Agreements
to which it is a party, the noncompliance with or the nonobservance of which
might materially interfere with the performance of its Obligations or the proper
or prudent conduct of its business or the applicable Property.
7.5.4 Other Operating Covenants.
In addition, the Borrower covenants and agrees that it will:
(a) obtain and maintain in full force and effect all
Licenses necessary to the acquisition and/or ownership and/or operation of each
Facility including, without limitation, Licenses and other approvals related to
the storage, dispensation, use, prescription and disposal of drugs, medications
and other "controlled substances" and, to the extent offered by the Borrower,
the maintenance of cafeteria and other food and beverage facilities or services;
(b) administer, maintain and operate (or will cause
to be administered, maintained and operated) each Facility as a
revenue-producing Senior Living Facility;
(c) to the extent the Borrower participates in any
such programs, maintain and operate each Facility to meet the standards and
requirements and to provide healthcare of such quality and in such manner as
would enable the Borrower to
53
59
participate in, and provide services in connection with, recognized medical and
healthcare insurance programs;
(d) obtain, maintain and comply with all conditions
for the continuance of all Licenses, including without limitation, Licenses
which may at any time be required by the state in which the applicable Facility
is located or other appropriate governmental entity, necessary or desirable for
the operation of each Facility as its applicable Senior Living Facility;
(e) to the extent the Borrower presently
participates or in the future will participate in such programs, obtain,
maintain and comply with all conditions for the continuance of certification
from each applicable Governmental Authority that the Borrower meets all
conditions for participation in the Medicare and Medicaid programs; and
(f) construct the Improvements entirely on the Land
without encroaching upon any easement or right-of-way or upon the land of others
in accordance with all applicable (whether present or future) laws, ordinances,
rules, regulations, requirements and orders of any Governmental Authority having
or claiming jurisdiction, including all applicable building restriction lines
and set-backs, all use or other restrictions and the provisions of any prior
agreements, declarations, covenants and all applicable zoning and subdivision
ordinances and regulations unless a variance shall have been obtained.
Section 7.6 Use of Proceeds.
Use the proceeds of the Loan for the purpose or purposes set forth in
Section 2.l and, without the prior written consent of the Agent for no other
purpose or purposes.
Section 7.7 Insurance.
Provide or cause to be provided to the Agent and maintain in full force
and effect at all times during the term of the Loan, such policies of insurance
as may be required by the terms of the Financing Documents from a company or
companies, and in form and amounts satisfactory to the Agent including, by way
of example and not by way of limitation, at least the following:
7.7.1 Builder's Risk Insurance
During any period of construction in or on an Eligible Project,
"builder's risk" insurance, including vandalism and malicious mischief and
collapse endorsements in amounts not less than the replacement cost of the
Improvements being constructed or of the Property and naming the Agent on behalf
of the Lenders as a loss payee in the mortgagee clause thereof;
54
60
7.7.2 Property Insurance
Casualty or physical damage insurance coverage for each completed
Eligible Project affording protection against loss or damage by fire or other
hazards covered in the form of an "all-risk" 100% non-reporting fire and hazard
insurance policy with "extended coverage" endorsement and insurance for boiler
or pressure vessel explosion (if boilers or pressure vessels are located on the
Property) and such other risks as shall be customarily covered with respect to
projects similar in construction, location and use as the Property, or as the
Agent may from time to time otherwise require in amounts necessary to prevent
the application of any co-insurance provisions of any applicable policies up to
an amount not less than the greater of the full insurable value of the
Improvements (as defined in the Deed of Trust) or the aggregate principal amount
of the Obligations; no policy of insurance shall be written such that the
proceeds thereof will produce less than the minimum coverage required by this
Section by reason of co-insurance provisions or otherwise; the term "full
insurable value" means the actual replacement cost of the Property (as defined
in the Deed of Trust) (excluding foundation and excavation costs and costs of
underground flues, pipes, drains and other uninsurable items); and as to
Eligible Projects naming the Agent on behalf of the Lenders as loss payee in the
mortgagee clause thereof;
7.7.3 Liability Insurance
Comprehensive public liability insurance in amounts usually carried by
similar operations against claims for bodily injury or death and property damage
insurance for claims for damage to property (including loss of use) occurring
upon, in or about the Property naming the Agent on behalf of the Lenders as loss
payee thereunder, with such insurance to afford protection to the limit of not
less than $5,000,000 for the aggregate of all occurrences during any given
annual policy period for each Eligible Project shall name the Agent as a
certificate holder and shall prohibit cancellation or reduction in coverage upon
less than thirty (30) days prior written notice to the Agent;
7.7.4 Worker's Compensation Insurance
Workers' compensation insurance in accordance with the requirements of
applicable law or regulation naming the Agent on behalf of the Lenders as loss
payee thereunder;
7.7.5 Business Interruption Insurance
Business interruption insurance naming the Lenders as additional
insureds with respect to each Facility once a certificate of occupancy has been
issued for such Facility in an amount equal to at least twelve (12) months' debt
service on the applicable Loan; and
55
61
7.7.6 Professional Liability Insurance
To the extent that healthcare professionals are employed by the
Borrower, medical liability, malpractice and other healthcare professional
liability insurance protecting the Borrower and its employees against claims
arising from the professional services performed by the Borrower and its
employees with limits of not less than One Million Dollars ($1,000,000.00) with
respect to injury or death for each person or occurrence and an umbrella policy
insuring against such liability in an aggregate amount of not less than Ten
Million Dollars ($10,000,000.00). In addition, the Borrower shall ensure that
all healthcare providers with whom the Borrower contracts to provide services at
any Facility are insured against claims arising from such services with limits
as set forth above.
7.7.7 Flood Insurance.
If required by applicable law or regulation, provide or cause to be
provided to the Agent a separate policy of flood insurance in the aggregate
amount of the applicable Loan or the maximum limit of coverage available with
respect to the Property, whichever is the lesser, from a company or companies
satisfactory to the Agent and written in strict conformity with the Flood
Disaster Protection Act of 1973, as amended, and all applicable regulations
adopted pursuant thereto. In the event that flood insurance is not required by
applicable law or regulation to be provided in connection with the applicable
Loan or is not otherwise available with respect to the Property, the Borrower
shall supply the Agent with written evidence, in form and substance satisfactory
to the Agent, to that effect. Any such policy shall provide that the policy may
not be surrendered, canceled or substantially modified (including, without
limitation, cancellation for nonpayment of premiums) without at least thirty
(30) days' prior written notice to any and all insureds named therein, including
the Lenders.
7.7.8 General Insurance Provisions
The Borrower shall file with the Agent, upon its request, a detailed
list of the insurance then in effect and stating the names of the insurance
companies, the amounts and rates of the insurance, dates of the expiration
thereof and the properties and risks covered thereby. Each policy of insurance
shall (a) be issued by one or more recognized, financially sound and responsible
insurance companies approved by the Agent and which are qualified or authorized
by the laws of the state in which the applicable Facility is located to assume
the risk covered by such policy, (b) with respect to the insurance described
under the preceding subsections 7.7.1, 7.7.2 and 7.7.6, have attached thereto
standard noncontributing, non-reporting mortgagee clauses in favor of and
entitling the Lenders without contribution to collect any and all proceeds
payable under such insurance, (c) provide that such policy shall not be canceled
or modified without at least thirty (30) days prior written notice to the Agent,
and (c) provide that any loss otherwise payable thereunder shall be payable
notwithstanding any act or negligence of the Borrower which might, absent such
agreement, result in a forfeiture of all or a part of
56
62
such insurance payment. Unless an escrow account has been established for
insurance premiums pursuant to the provisions of a Deed of Trust, the Borrower
shall promptly pay all premiums when due on such insurance and, on or prior to
the expiration date of each such policy, the Borrower shall deliver to the Agent
a renewal policy or policies marked "premium paid" and ▇▇▇▇▇ evidence of
insurance or other evidence of payment satisfactory to the Agent. The Borrower
shall immediately give the Agent notice of any cancellation of, or change in,
any insurance policy. The Lenders shall not individually or collectively,
because of accepting, rejecting, approving or obtaining insurance, incur any
liability for (i) the existence, nonexistence, form or legal sufficiency
thereof, (ii) the solvency of any insurer, or (iii) the payment of losses.
Section 7.8 Maintenance of Properties.
Keep its properties, whether owned in fee or otherwise, or leased,
including, without limitation, all of the Property, in good operating condition;
make all proper repairs, renewals, replacements, additions and improvements
thereto needed to maintain such properties in good operating condition; comply
with the provisions of all leases to which it is a party or under which it
occupies property so as to prevent any loss or forfeiture thereof or thereunder;
and comply with all laws, rules, regulations and orders applicable to its
properties or business or any part thereof.
Section 7.9 Maintenance of the Collateral.
Not permit anything to be done to the Collateral which may impair the
value thereof. Any of the Lenders or an agent designated by such Lender, shall
be permitted upon prior notice to the Borrower to enter the premises of the
Borrower and examine, audit and inspect the Collateral at any reasonable time
and from time to time without notice. The Lenders shall not have any duty to,
and the Borrower hereby releases the Lenders from, all claims of loss or damage
caused by the delay or failure to collect or enforce any of the Accounts or
Receivables or to preserve any rights against any other party with an interest
in the Collateral.
Section 7.10 Other Liens, Security Interests, etc.
Keep the Collateral and the Property free from all liens, security
interests and claims of every kind and nature, other than Permitted Liens.
Section 7.11 Defense of Title and Further Assurances.
At its expense, defend the title to the Collateral (or any part
thereof), and promptly upon request execute, acknowledge and deliver any
financing statement, renewal, affidavit, deed, assignment, continuation
statement, security agreement, certificate or other document the Agent may
reasonably require in order to perfect, preserve, maintain, protect, continue
and/or extend any lien or security interest granted to the Lenders under this
Agreement or any of the Security Documents and its priority. The Borrower shall
pay to the Agent, on demand all taxes, costs and expenses incurred by any of the
Lenders, in connection with the preparation, execution, recording and filing of
any such document or instrument.
57
63
Section 7.12 Subsequent Opinion of Counsel as to Recording
Requirements.
Provide to the Agent a subsequent opinion of counsel as to the filing,
recording and other requirements with which the Borrower has complied to
maintain the liens and security interests in favor of the Lenders in the
Collateral in the event that the Borrower shall transfer its principal place of
business or the office where it keeps its records pertaining to the Accounts and
Receivables.
Section 7.13 Books and Records.
(a) Keep and maintain accurate books and records;
(b) make entries on such books and records in form
reasonably satisfactory to the Agent disclosing the Lenders' assignment of, and
security interest in and lien on, the Collateral and all collections received by
the Borrower on its Accounts;
(c) furnish to the Agent promptly upon request such
information, reports, contracts, invoices, lists of purchases of Inventory
(showing names, addresses and amount owing) and other data concerning Account
Debtors and the Borrower's Accounts and Inventory and all contracts and
collection(s) relating thereto as the Agent may from time to time specify; and
(d) unless the Agent shall otherwise consent in
writing, keep and maintain all such books and records mentioned in (a) above
only at the addresses listed in EXHIBIT C, and (a) permit any person designated
by any of the Lenders to enter the premises of the Borrower upon prior notice to
the Borrower and examine, audit and inspect the books and records at any
reasonable time and from time to time.
Section 7.14 Collections.
Until such time as the Agent shall notify the Borrower of the
revocation of such privilege following an Event of Default, (a) at its own
expense exercise the privilege for the account of and in trust for the Lenders
of collecting its Accounts and receiving in respect thereto all items of payment
and shall otherwise completely service all of the Accounts including (i) the
billing, posting and maintaining of complete records applicable thereto, and
(ii) the taking of such action with respect to such Accounts as the Agent may
reasonably request or in the absence of such request, as the Borrower may deem
advisable; and (b) in its discretion, grant, in the ordinary course of business,
to any Account Debtor, any rebate, refund or adjustment to which the Account
Debtor may be lawfully entitled. The Agent may, at its option but solely in
accordance with applicable law, at any time or from time to time after the
occurrence of an Event of Default hereunder, revoke the collection privilege
given to the Borrower herein by either giving notice of its assignment of, and
lien on the Collateral, subject to the provisions of Section 7.15 hereof, to the
Account Debtors or giving notice of such revocation to the Borrower.
58
64
Section 7.15 Notice to Account Debtors and Escrow Account.
In the event that (a) a Default or an Event of Default exists, or (b)
demand has been made for any or all of the Obligations, promptly upon the
request of the Agent in such form and at such times as reasonably specified by
the Agent, give notice of the Lenders' lien on the Accounts to the Account
Debtors requiring those Account Debtors which are permitted by applicable law to
make payments thereon directly to the Agent.
Section 7.16 Business Names.
Immediately notify the Agent of any change in the name or names under
which it conducts its business.
Section 7.17 ERISA.
With respect to any pension plan which the Borrower and/or any Commonly
Controlled Entity maintains or contributes to, either now or in the future,
that: (a) such bonding as is required under ERISA 412 will be maintained; (b) as
soon as practicable and in any event within 15 days after the Borrower or any
Commonly Controlled Entity knows or has reason to know that a "reportable event"
has occurred or is likely to occur, the Borrower will deliver to the Agent a
certificate signed by its chief financial officer setting forth the details of
such "reportable event"; (c) neither the Borrower nor any Commonly Controlled
Entity will: (i) engage in or permit any "prohibited transaction" (as defined in
ERISA 406 or Code 4975) to occur; (ii) cause any "accumulated funding
deficiency" as defined in ERISA 302 and/or Code 412; (iii) terminate any pension
plan in a manner which could result in the imposition of a lien on the property
of the Borrower pursuant to ERISA 4068; (iv) terminate or consent to the
termination of any multiemployer plan; (v) incur a complete or partial
withdrawal with respect to any multiemployer plan within the meaning of ERISA
4203 and 4205; and (d) within 15 days after notice is received by the Borrower
or any Commonly Controlled Entity that any multiemployer plan has been or will
be placed in "reorganization" within the meaning of ERISA 4241, the Borrower
will notify the Agent to that effect. Upon the Agent's request, the Borrower
will deliver to the Agent a copy of the most recent actuarial report, financial
statements and annual report completed with respect to any "defined benefit
plan", as defined in ERISA 3(35).
Section 7.18 Management.
(a) Prior to the Credit Facility Closing, the
Borrower shall provide the Agent with a proposed form of Management Agreement to
be entered into by the Borrower or a Joint Venture with the Management Company.
The terms and provisions of the Management Agreement shall be fully approved by
the Lender prior to each applicable Facility Closing. The interest of the
Borrower in the Management Agreement shall be assigned to the Lender as security
for the Credit Facility.
(b) Subject to the terms of a Management Fee
Subordination Agreement by and among the Borrower, the Management Company and
the Agent executed in connection with each Facility Closing, the Borrower shall
cause the Management Company to subordinate payment of any and all management
fees
59
65
under, or in connection with, the Management Agreement (the "Management Fees")
to payment of the Obligations, in accordance with the terms and conditions of
one or more subordination agreements in form and content acceptable to the Agent
in its reasonable discretion, and shall not amend, restate, supplement,
terminate, cancel or otherwise modify any of the terms or conditions of such
Management Agreement, in any material respect, without the prior written consent
of the Agent; however, payments of Management Fees may be made as contracted for
until the occurrence of an Event of Default.
(c) The Management Agreement shall provide that the
Borrower or subsequent owner may terminate such agreement, at the discretion of
the Borrower, upon thirty (30) days' prior written notice to the Management
Company; the Management Company shall acknowledge and consent in writing to the
assignment by the Borrower of its rights under the Management Agreement to the
Agent. The Borrower hereby agrees to enter into a Management Agreement with an
independent manager, acceptable to the Agent in its reasonable discretion, as
and when directed by the Agent, if the Management Agreement has been terminated
pursuant to the immediately preceding sentence; and it shall constitute an Event
of Default under the Financing Documents if the Borrower fails to do so. Except
as provided hereinafter, the Financing Documents shall provide that termination
of the Management Agreement without the prior written consent of the Agent shall
constitute an Event of Default under the Financing Documents. No consent of the
Lender shall be required for the termination of a Management Agreement if it is
required to meet an obligation for a License and (a) the Management Company
remains the Borrower, ALS or a Wholly Owned Subsidiary of ALS and (b) any
additional assignments of such Management Agreements required by the Agent are
provided by the Borrower.
Section 7.19 Surveys.
Upon the completion of the construction of the Improvements, the
Borrower shall furnish the Agent with an ALTA Survey with a current
certification to the Agent by a registered land surveyor of the jurisdiction in
which the Land is located. At any time the Borrower is required to furnish an
ALTA Survey to the Agent pursuant to the terms of this Agreement, the Borrower
shall also furnish an original print thereof to the title insurance company and
such Survey shall not be sufficient for the purposes of this Agreement unless
and until the title insurance company shall advise the Agent, by endorsement to
the title insurance policy or otherwise, that the Survey discloses no
violations, encroachments or other variances from applicable set-backs or other
restrictions except such as the Agent and its counsel shall approve.
Section 7.20 Inspections; Cooperation; Payment of Inspecting Engineer.
Permit the Lenders and their duly authorized representatives
(including, without limitation, the Inspecting Engineer) to enter upon any of
the Land, to inspect the Improvements and any and all materials to be used in
connection with the development of any of the Land and/or the construction of
the Improvements, to examine all detailed plans and shop drawings and similar
materials as well as all records and books of account
60
66
maintained by or on behalf of the Borrower relating thereto and to discuss the
affairs, finances and accounts pertaining to any Facility and any of the
Improvements with representatives of the Borrower. The Borrower shall at all
times cooperate and cause the General Contractor and each and every one of its
subcontractors and materialmen to cooperate with the Lenders and their duly
authorized representatives (including, without limitation, the Inspecting
Engineer) in connection with or in aid of the performance of the Agent's or
Lenders' functions under this Agreement. The reasonable fees of any Inspecting
Engineer engaged or employed by the Agent in connection with or in aid of the
performance of the Agent's or the Lenders' functions under this Agreement shall
be paid by the Borrower.
Section 7.21 Vouchers and Receipts.
Furnish to the Agent, promptly on demand, any contracts, bills of sale,
statements, receipted vouchers or agreements pursuant to which the Borrower has
any claim of title to any materials, fixtures or other articles delivered or to
be delivered to the Land or incorporated or to be incorporated into any of the
Improvements. The Borrower shall furnish to the Agent, promptly on demand, a
verified written statement, in such form and detail as the Agent may require,
showing all amounts paid for labor and materials and all items of labor and
materials furnished or to be furnished for which payment has not been made and
the amounts to be paid therefor.
Section 7.22 Payments for Labor and Materials.
Pay when due all bills for services or labor performed and materials
supplied in connection with the development of the Land and the construction of
the Improvements. In the event any mechanics' lien or other lien or encumbrance
shall be filed or attached against the Property without the prior written
consent of the Agent in each instance, the Borrower covenants and agrees that,
within twenty (20) days after the filing of such lien, the Borrower will
promptly discharge the same by payment or filing bond or otherwise as permitted
by law; and if the Borrower fails to do so, the Agent may, at its option, in
addition to, and not in limitation of, all other rights and remedies of the
Agent in the Event of Default by the Borrower, and without regard to the
priority of said mechanics' lien or other lien or encumbrance, pay the same, and
all amounts expended by the Agent for such purpose shall constitute loans to the
Borrower and shall be secured by the Deed of Trust and the other Financing
Documents, and be due and payable forthwith by the Borrower to the Agent with
interest thereon at the Reimbursement Rate provided for in the Deed of Trust.
Section 7.23 Correction of Construction Defects.
Promptly following any demand by the Agent, correct or cause the
correction of any structural defects in the Improvements and any material
departures or deviations from the Plans and Specifications, as determined by the
Agent in its sole but reasonable discretion, not approved in writing by the
Agent.
61
67
Section 7.24 Fees and Expenses; Indemnity.
Pay all reasonable fees, charges, costs and expenses required to
satisfy the conditions of the Financing Documents. The Borrower shall hold the
Lenders harmless and indemnify the Lenders against all claims of brokers and
"finders" arising by reason of the execution and delivery of the Financing
Documents or the consummation of the transaction contemplated hereby. Neither
party is aware of any broker having a claim for payment.
Section 7.25 Governmental Surveys or Inspections.
Furnish to the Agent upon its request, within thirty (30) days of
receipt thereof, copies of any and all annual surveys or inspections performed
by any Governmental Authority or accreditation or certification organization
with respect to any Facility.
Section 7.26 Cost Reports.
Prepare and file all applicable cost reports to all third-party payors,
if any, to the extent required by any such third-party payor and, within thirty
(30) days thereafter, notify the Agent of any settlement of any cost report
disclosed to the Agent as being open or unsettled as of the Closing Date to the
extent any such cost report would have a materially adverse effect on the
Borrower.
Section 7.27 Updated Appraisals.
In addition, the Agent shall have the right but not the obligation to
require annual updated appraisals of any or all the Property and the Facilities,
which appraisals shall be prepared by an appraiser or appraisers designated by
the Agent and shall be in all respects reasonably acceptable to the Agent which
appraisals shall include, if deemed necessary by the Agent, in its reasonable
discretion, updated discounted cash flow analysis, inspections of and commentary
on the physical status of the applicable Facility and an engineering review. The
basis of the appraisal calculations shown on such appraisal reports and all
other aspects of the appraisal reports must be satisfactory to the Agent in all
material respects. The release of such appraisal reports by the Agent to the
Borrower shall be at the Agent's sole option if the Borrower has not paid the
cost of such appraisal. If the Borrower has paid the cost of the appraisal, a
copy of the appraisal will be provided to the Borrower upon its signing of the
Agent's standard appraisal release letter. The Borrower shall reimburse the
Agent upon demand for all costs and expenses incurred by any of the Lenders with
respect to the preparation and review of all future appraisals required pursuant
to the terms hereof, if either (i) such appraisal is required by law or banking
regulation, (ii) an Event of Default has occurred under the Financing Documents,
or (iii) the Agent has a good faith reason to believe a significant change in
value has occurred in the Facility being appraised due to a material adverse
change in the Facility's occupancy status or operating performance and such
appraisal actually reflects such significant change.
62
68
Section 7.28 Notification of Certain Events, Events of Default and
Adverse Developments.
Promptly give written notice to the Agent who will forward a copy of
the notice to the Lenders upon obtaining knowledge of the occurrence of any of
the following:
(a) any Event of Default under the Financing
Documents;
(b) any event, development or circumstance whereby
the financial statements furnished under the Financing Documents fail in any
material respect to present fairly the financial condition and operational
results of the Borrower;
(c) any judicial, administrative or arbitral
proceeding pending against the Borrower or any judicial or administrative
proceeding known by the Borrower to have been threatened against it in a written
communication which threatened proceeding, if adversely decided, could
materially adversely affect its financial condition or operations (present or
prospective);
(d) (i) the revocation, suspension, probation,
restriction, limitation or refusal to renew, or any administrative procedure
then in process for the revocation, suspension, probation, restriction,
limitation, or refusal to renew, of any License, or (ii) the decertification,
revocation, suspension, probation, restriction, limitation, or refusal to renew,
or the pending, decertification, revocation, suspension, probation, restriction,
limitation, or refusal to renew or any administrative procedure then in process
for any participation or eligibility in any third party payor program in which
the Borrower elects to participate, including, without limitation, Medicare,
Medicaid or other private insurer programs or any accreditation of the Borrower,
or (iii) the issuance or pending issuance of any License for a period of less
than twelve (12) months, as a consequence of sanctions imposed by any
Governmental Authority, or (iv) the assessment or pending assessment, of any
civil or criminal penalties by any Government Authority, any third party payor
or any accreditation organization or Person, which could materially adversely
affect the financial condition or operations of the Borrower or an Affiliate
(present or prospective) as determined by the Agent, in its sole but reasonable
discretion;
(e) any action, including, but not limited to, the
filing of any certificate of need application if required by law, the amendment
of any Facility License or certification, or the issuance of any new License or
certification for any Facility, under which the Borrower proposes (i) to develop
a new Facility or service and/or (ii) eliminate, materially expand or materially
reduce any service;
(f) any actual contingent liability or a potential
contingent liability of the Borrower of $1,000,000 or more;
63
69
(g) any material default or failure to perform by
the Borrower, the General Contractor or any subcontractor or materialmen with
respect to the Property of if such notice relates to any matter requiring the
Agent's or the Lenders' approval hereunder; and
(h) any other development in the business or affairs
of the Borrower results in a material adverse change therein; and in each case
listed in clauses (a) through (g), inclusive, of this Section describing in
detail satisfactory to the Agent the nature thereof and, in the case, if any, of
notification under clause (a), the action the Borrower proposes to take with
respect thereto or a statement that the Borrower intends to take no action and
an explanation of the reasons for such inaction. In addition, the Borrower will
furnish to the Agent immediately after receipt thereof copies of all
administrative notices material to Borrower's business and operation of any
Facility and all responses by or on behalf of the Borrower with respect to such
administrative notices.
Section 7.29 Compliance with Environmental Laws.
If any Hazardous Materials are used, present or generated on any real
property owned or controlled by the Borrower or for which the Borrower is
responsible, use, process, distribute, handle, maintain, treat, store, dispose
of and transport such substance in compliance with all applicable laws,
including, but not limited to, those regulating PCB, underground storage tanks,
radon and medical waste tracking, as well as any laws that are enacted after the
date of this Agreement.
Section 7.30 Hazardous Materials; Contamination.
(a) Give notice to the Agent within five (5) Banking
Days of the Borrower's acquiring knowledge of the presence of any Hazardous
Materials on any property owned or controlled by the Borrower or for which the
Borrower is responsible or of any Hazardous Materials Contamination with a full
description thereof, except for reasonable quantities of necessary supplies for
use by the Borrower in the ordinary course of its current line of business and
stored, used and disposed of in accordance with applicable Laws;
(b) promptly comply with any laws requiring special
handling, maintenance, servicing, removal, treatment or disposal of Hazardous
Materials or Hazardous Materials Contamination and provide the Agent upon
request with satisfactory evidence of such compliance;
(c) provide the Agent, within thirty (30) days after
a demand by the Agent, with a bond, letter of credit or similar financial
assurance evidencing to the Agent's satisfaction that funds are available to pay
the cost of removing, treating, and disposing of such Hazardous Materials or
Hazardous Materials Contamination and discharging any lien which may be
established as a result thereof on any property owned, operated or controlled by
the Borrower or for which the Borrower is responsible; and
64
70
(d) defend, indemnify and hold harmless the Lenders
and each of their agents, employees, trustees, successors and assigns from any
and all claims which may now or in the future (whether before or after the
termination of this Agreement) be asserted as a result of the presence of any
Hazardous Materials on any property owned, operated, controlled or managed by
the Borrower for which the Borrower is responsible for any Hazardous Materials
Contamination.
Section 7.31 Participation in Reimbursement Programs.
In the event the Borrower elects to participate in any or all plans
and/or programs for third party payment and/or reimbursement, and the revenues
derived from a single plan or program exceed ten percent (10%) of the gross
revenues of the applicable Facility, continue its participation in any and all
such plans and/or programs for third party payment and/or reimbursement from,
and claims against, private insurers or programs for payment and/or
reimbursement from federal, state and local governmental agencies and/or private
or quasi-public insurers, including, without limitation, Managed Care Plans,
Medicaid and Medicare and the Veterans Administration (as determined by the
Borrower in the good faith exercise of its prudent and commercially reasonable
business judgment). While participating in such plans, the Borrower shall comply
with any and all rules, regulations, standards, procedures and decrees necessary
to maintain the Borrower's participation in any such third party payment or
reimbursement program or plan.
ARTICLE VIII
NEGATIVE COVENANTS OF BORROWER
Until payment in full and the performance of all of the
Obligations, without the prior written consent of the Agent as permitted
pursuant to the Agency Agreement, the Borrower will not directly or indirectly:
Section 8.1 Borrowings.
Create, incur, assume or suffer to exist any liability for borrowed
money other than the Credit Facility and Permitted Equipment Financing or
unsecured loans from Affiliates which are bearing an interest rate no higher
than that then applicable to the Loan, are fully subordinated as to payment of
principal and interest (either by their terms or by separate written agreement)
to the Credit Facility; provided, however, so long as no Event of Default has
occurred or will occur upon the payment of interest on such indebtedness under
the Financing Documents, the Borrower may make scheduled payments of interest on
such debt.
Section 8.2 Deeds of Trust and Pledges.
Create, incur, assume or suffer to exist any deed of trust, mortgage,
pledge, Lien or other encumbrance of any kind upon, or any security interest in,
any of its property or
65
71
assets, including the Collateral or impair the value thereof, whether now owned
or hereafter acquired.
Section 8.3 Sale or Transfer of Assets.
Directly or indirectly enter into any arrangement whereby the Borrower
shall sell, lease, transfer, assign or otherwise dispose of any of its assets
other than (a) sales or other disposition of assets in the ordinary course of
business for value, provided the proceeds thereof are used to pay down one or
more of the Loans or the asset sold or disposed of is replaced by one of equal
or greater value or (b) the transfer of an Eligible Project or the sale of an
Eligible Project, in either case, in which case the Borrowing Base will be
reduced by the availability attributed to such Facility.
Section 8.4 Other Liens; Transfers; "Due-on-Sale"; etc.
The Borrower shall not, without the prior written consent of the Agent,
create or permit to be created or remain with respect to any of the Property or
any part thereof or income therefrom, any mortgage, pledge, lien, encumbrance or
charge, or security interest, or conditional sale or other title retention
agreement, whether prior or subordinate to the lien of the Financing Documents,
other than in connection with the Financing Documents or as otherwise provided
or permitted therein. Except for any grant, conveyance, sale, assignment or
transfer in the ordinary course of the Borrower's business and which is
specifically conditioned upon the release of records of the lien of the Deed of
Trust and the other Financing Documents as to that Eligible Project granted,
conveyed, sold, assigned or transferred as otherwise permitted hereunder, the
Borrower shall not, without the prior written consent of the Agent, make,
create, permit or consent to any conveyance, sale, assignment or transfer of any
of the Property or any part thereof, other than in connection with the Financing
Documents or as otherwise provided or permitted therein.
Section 8.5 Advances and Loans.
Make loans or advances to any Person, including, without limitation,
Affiliates, partners and employees of the Borrower.
Section 8.6 Contingent Liabilities.
Assume, guarantee, endorse, contingently agree to purchase or otherwise
become liable upon the obligation of any Person, except by the endorsement of
negotiable instruments for deposit and collection or similar transactions in the
ordinary course of business.
Section 8.7 Licenses.
Allow any Licenses, permit, right, franchise or privilege necessary for
the ownership or operation of any Facility for the purposes for which any
Facility is intended to be used to lapse, be suspended, be revoked, be denied
renewal or be forfeited or be placed on probation unless solely due to
administrative delay by the licensing authority; to fail to receive a License
for any Facility within sixty (60) days of the issuance of a certificate of
occupancy for such Facility or to suffer the issuance or pending of any
66
72
License for a period of less than twelve (12) months as a consequence of any
sanctions imposed by any Governmental Authority or the Assessment or pending
assessment of any civil or criminal penalties by any Governmental Authority or
any third party payor.
Section 8.8 ERISA Compliance.
(a) Restate or amend any Plan established and
maintained by the Borrower or any Commonly Controlled Entity and subject to the
requirements of ERISA, in a manner designed to disqualify such Plan and its
related trusts under the applicable requirements of the Code;
(b) permit any partners of the Borrower or any
Commonly Controlled Entity to materially adversely affect the qualified
tax-exempt status of any Plan or related trusts of the Borrower or any Commonly
Controlled Entity under the Code;
(c) engage in or permit any Commonly Controlled
Entity to engage in any Prohibited Transaction;
(d) incur or permit any Commonly Controlled Entity
to incur any Accumulated Funding Deficiency, whether or not waived, in
connection with any Plan;
(e) take or permit any Commonly Controlled Entity to
take any action or fail to take any action which causes a termination of any
Plan in a manner which could result in the imposition of a lien on the property
of the Borrower or any Commonly Controlled Entity pursuant to Section4068 of
ERISA;
(f) fail to notify the Agent that notice has been
received of a "termination" (as defined in ERISA) of any Multiemployer Plan to
which the Borrower or any Commonly Controlled Entity has an obligation to
contribute;
(g) incur or permit any Commonly Controlled Entity
to incur a "complete withdrawal" or "partial withdrawal" (as defined in ERISA)
from any Multiemployer Plan to which the Borrower or any Commonly Controlled
Entity has an obligation to contribute; or
(h) fail to notify the Agent that notice has been
received from the administrator of any Multiemployer Plan to which the Borrower
or any Commonly Controlled Entity has an obligation to contribute that any such
Plan will be placed in "reorganization" (as defined in ERISA).
Section 8.9 Transfer of Collateral.
Transfer, or permit the transfer, to another location of any of the
Collateral or the books and records related to any of the Collateral; provided,
however, that the Borrower
67
73
may transfer the Collateral or the books and records related thereto to another
location if the Borrower shall have provided to the Agent prior to such transfer
an opinion of counsel addressed to the Agent to the effect that the Lenders'
perfected security interest shall not be affected by such move or if it shall be
affected, setting forth the steps necessary to continue the Lender's perfected
security interest together with the commencement of such steps by the Borrower
at its expense.
Section 8.10 Sale of Accounts or Receivables.
Sell, discount, transfer, assign or otherwise dispose of any of its
Accounts or Receivables of any Facility, such as accounts receivable, notes
receivable, installment or conditional sales agreements or any other rights to
receive income, revenues or moneys, however evidenced.
Section 8.11 Amendments; Terminations.
Except as otherwise provided herein, amend or terminate or agree to
amend or terminate any License, the Management Agreement, or any participation
agreement which exceeds 10% of the gross revenue of the applicable Facility, or
except in the ordinary course of business any other Management Contracts and
Operating Agreements which may have been entered into by the Borrower with
respect to any Facility and which exceeds 10% of its gross revenue, or consent
to or waive any material provisions thereof.
Section 8.12 Prohibition on Hazardous Materials.
Place, manufacture or store or permit to be placed, manufactured or
stored, any Hazardous Materials on any property owned, controlled or operated by
the Borrower or any Wholly Owned Subsidiary or for which the Borrower or any
Wholly Owned Subsidiary is responsible, except for reasonable quantities of
necessary supplies for use by the Borrower or any Wholly Owned Subsidiary in the
ordinary course of its current line of business and stored, used and disposed of
in accordance with applicable Laws.
Section 8.13 Subsidiaries.
The Borrower will not create or acquire any Subsidiaries other than
Wholly Owned Subsidiaries of which the Requisite Lenders have approved in the
exercise of their sole and absolute discretion, which approval may be
conditioned, among other things, on the execution and delivery of an Additional
Borrower Joinder Supplemental and such other Financing Documents as the Agent
may require.
Section 8.14 Mergers or Acquisitions.
Enter into any merger or consolidation or amalgamation, wind up or
dissolve itself (or suffer any liquidation or dissolution), or acquire all or
substantially all of the assets of any person, firm, joint venture or
corporation except to acquire a Wholly Owned Subsidiary.
68
74
Section 8.15 Conditional Sales.
The Borrower shall not incorporate in the Improvements any property
acquired under a conditional sales contract, or lease, or as to which the vendor
retains title or a security interest with the exception of Permitted Equipment
Financing, without the prior written consent of the Agent.
Section 8.16 Changes to Plans and Specification.
After review and approval of a Total Development Budget by the Agent,
the Borrower shall not permit any change order increasing the price of the
Improvement for an Eligible Project by more than $50,000 for any one change
order or by more than $50,000 in the aggregate or materially altering the scope
of the Improvements, without the prior written consent of the Agent which
consent will not be unreasonably withheld.
Section 8.17 Construction Contract; Construction Management.
The Borrower shall not execute any contract or agreement or become a
party to any arrangement for the construction of any Improvements or for
construction management services with respect to any Property without the prior
written consent of the Agent.
Section 8.18 Line of Business.
Neither the Borrower nor the Guarantor nor any Subsidiary of either
will enter into any lines or areas of business if as a result, the general
nature of the business, taken on a consolidated basis, which would be engaged in
by the Borrower or the Guarantor individually or on a consolidated basis with
its subsidiaries, would be substantially changed from the general nature of the
business engaged in by the Borrower and the Guarantor on the date hereof.
ARTICLE IX
EVENTS OF DEFAULT
The occurrence of one or more of the following events shall be "Events
of Default" under this Agreement, and the terms "Event of Default" shall mean,
whenever they are used in this Agreement, any one or more of the following
events:
Section 9.1 Failure to Pay and/or Perform the Obligations.
The Borrower shall fail to
(a) make any payment of interest on the Note within
five (5) calendar days of the date when due, or
(b) pay any of the other Obligations including but
not limited to the Expense Payments and Liquidation Costs within five (5)
calendar days of the date when due, except with regard to payment of (a) any
Borrowing Base Deficiency which shall be due as provided in Section 2.1(h)
hereof, and (b) amounts due at maturity for which no notice or cure period shall
be required to be given.
69
75
Section 9.2 Breach of Representations and Warranties.
Any material representation or warranty made in this Agreement or in
any report, certificate, opinion (including any opinion of counsel for the
Borrower), financial statement or other instrument furnished in connection with
the Obligations or with the execution and delivery of any of the Financing
Documents, shall prove to have been false or misleading when made (or, if
applicable, when reaffirmed) in any material respect.
Section 9.3 Failure to Comply with Covenants.
Default shall be made by the Borrower in the due observance and
performance of any covenant, condition or agreement contained in Article VII
hereof (except for Sections 7.8, 7.9, 7.12, 7.13, 7.17, 7.19, 7.20, 7.24, 7.27)
or in Article VIII hereof.
Section 9.4 Failure to Comply with Financial Reporting or Books and
Records.
Default shall be made by the Borrower in the due observance or
performance of Section 7.1 or 7.13, which default shall remain unremedied, and
the Borrower shall cure such default promptly, but in no event more than ten
(10) days after written notice thereof to the Borrower by the Agent.
Section 9.5 Other Defaults.
Default shall be made by the Borrower in the due observance or
performance of any other term, covenant or agreement other than as set forth in
this Article IX, which default shall remain unremedied for more than thirty (30)
days after written notice thereof to the Borrower by the Agent, unless the
nature of the failure is such that (a) it cannot be cured within the thirty (30)
day period, and (b) the Borrower institutes corrective action within the thirty
(30) day period and (c) the Borrower diligently pursues such action and
completes the cure within ninety (90) days.
Section 9.6 Default Under Other Financing Documents.
A Default shall occur under any of the other Financing Documents, and
such Default is not cured within any applicable grace period provided therein.
Section 9.7 Receiver; Bankruptcy.
An Act of Bankruptcy occurs with respect to the Borrower or the
Borrower becomes generally unable to pay its debts as they become due; provided,
however, if a proceeding with respect to an Act of Bankruptcy is filed or
commenced against the Borrower, the same shall not constitute an Event of
Default if such proceeding is dismissed within sixty (60) days from the date of
such Act of Bankruptcy.
Section 9.8 Judgment.
Unless adequately insured in the reasonable opinion of the Agent, the
entry of a final judgment against the Borrower of $1,000,000 or more or any
attachment or other levy against the property of the Borrower remains unpaid,
unstayed on appeal, undischarged, unbonded or undismissed for a period of thirty
(30) days.
70
76
Section 9.9 Execution; Attachment.
Any execution or attachment shall be levied against the Collateral, or
any part thereof, and such execution or attachment shall not be set aside,
discharged or stayed within thirty (30) days after the same shall have been
levied.
Section 9.10 Default Under Other Borrowings.
(a) Default which continues beyond any applicable
grace period shall be made under any obligation of or guaranteed by the Borrower
equal to or greater than $1,000,000, if the effect of such default is to
accelerate the maturity of such obligation or to permit the holder or obligee
thereof to cause such obligation to become due prior to its stated maturity;
(b) Default shall be made under any obligation equal
to or greater than $20,000,000 of a consolidated Affiliate, which is otherwise
non-recourse to the Borrower, if the holder or obligee of such obligation has
commenced action on any of the remedies available to it under the obligation.
Section 9.11 Change in Status or Ownership.
The Borrower is dissolved, merged, consolidated or reorganized, or any
change occurs in the ownership of the outstanding stock of the Borrower without
the prior written consent of the Agent.
Section 9.12 Damage to Improvements.
At any time prior to the issuance of a certificate of occupancy or
completion therefor, any of the Improvements are substantially damaged or
destroyed by fire or other casualty and the Agent determines in good faith that
such Improvements cannot be restored and completed in accordance with the terms
and provisions of the Deed of Trust unless the Borrower excludes the affected
Eligible Project from the calculation of the Borrowing Base.
Section 9.13 Mechanic's Lien.
A lien for the performance of work or the supply of materials which is
perfected against any of the Land remains unsatisfied or un-bonded or for which
no other arrangements satisfactory to the Agent have been made for a period of
twenty (20) days after the date of perfection unless the Borrower excludes the
affected Eligible Project from the calculation of the Borrowing Base.
Section 9.14 Survey Matters.
Any Survey required by the Lenders during the period of construction
shows any matters not approved by the Agent and such matters not approved are
not removed within 30 days after Notice thereof by the Agent to the Borrower
unless the Borrower excludes the affected Eligible Project from the Borrowing
Base.
71
77
Section 9.15 General Contractor Default.
The General Contractor shall have defaulted under any Construction
Contract, which default the Agent, in its sole discretion, shall deem
substantial, and the Borrower, after thirty (30) days Notice from the Agent,
shall fail to commence exercising any resulting right or remedy to which it may
be entitled thereunder and diligently pursue such right or remedy unless the
Borrower excludes the affected Eligible Project from the calculation of the
Borrowing Base.
Section 9.16 Zoning.
Any change in any zoning ordinance or any other public restriction is
enacted, limiting or defining the uses which may be made of any of the Property
or a part thereof, such that the use of any of the Property, as specified
herein, would be in material violation of such restriction or zoning change
unless the Borrower excludes the affected Eligible Project from the calculation
of the Borrowing Base.
Section 9.17 Joint Venture
ALS or any Affiliate which owns any portion of a Joint Venture shall
default in the performance of its obligations under the organizational documents
governing the Joint Venture unless the Borrower excludes the affected Eligible
Project from the Borrowing Base.
Section 9.18 Joint Venture Leases.
Any Joint Venture defaults in the performance of its obligations under
a Joint Venture Lease unless the Borrower excludes the affected Eligible Project
from the Borrowing Base.
ARTICLE X
RIGHTS AND REMEDIES UPON DEFAULT
Section 10.1 DEMAND; ACCELERATION.
THE OCCURRENCE OR NONOCCURRENCE OF AN EVENT OF DEFAULT UNDER THIS
AGREEMENT SHALL IN NO WAY AFFECT OR CONDITION THE RIGHT OF THE LENDERS TO DEMAND
PAYMENT AT ANY TIME OF ANY OF THE OBLIGATIONS WHICH ARE PAYABLE ON DEMAND
REGARDLESS OF WHETHER OR NOT AN EVENT OF DEFAULT HAS OCCURRED. Upon the
occurrence of an Event of Default, and in every such event and at any time
thereafter, the Agent may declare the Obligations due and payable, without
presentment, demand, protest, or any notice of any kind, all of which are hereby
expressly waived, anything contained herein or in any of the other Financing
Documents to the contrary notwithstanding.
Section 10.2 Further Advances; Immediate Acceleration.
Following an Event of Default the Agent may from time to time without
notice to the Borrower suspend, terminate or limit any further advances under
the Loan or other extensions of credit under this Agreement and under any of the
other Financing
72
78
Documents. Further, upon the occurrence of an Event of Default or Default
specified in Article IX above, the unpaid principal amount of the Note (with
accrued interest thereon) and all other Obligations then outstanding, shall
immediately become due and payable in the Agent's sole discretion without
further action of any kind and without presentment, demand, protest or notice of
any kind, all of which are hereby expressly waived by the Borrower.
Section 10.3 Further Advances; Material Adverse Change or Impairment of
Position.
If the Agent determines in its reasonable discretion that (a) a
material adverse change has occurred in the financial condition or operation of
the Guarantor or the Borrower or an event has occurred which impairs the
prospect of payment of the obligations and/or the value of the Facilities or the
Collateral ( in either case, regardless of whether it would constitute an Event
of Default under this Agreement), the Agent may from time to time without notice
to the Borrower suspend, terminate or limit any further advances under the Loan
or other extensions of credit under this Agreement and refuse to include any
additional Eligible Projects in the Borrowing Base.
Section 10.4 Specific Rights With Regard to Collateral.
Following an Event of Default, in addition to all other rights and
remedies provided hereunder, the Deed of Trust, any of the Financing Documents
or as shall exist at law or in equity from time to time, the Agent may, without
further notice to the Borrower and subject to the terms of the Agency Agreement:
(a) assign any and all Operating Agreements and
Management Contracts to any Person designated by the Agent, and/or exercise all
rights and privileges of the Borrower under such contracts and agreements for
the purpose of realizing on the Collateral and to the extent and for the time
required to realize the value of the Collateral;
(b) to the extent permitted by applicable law,
(i) enter into possession of any of the
Property and perform any and all work and labor necessary to complete
the development of the Land and the construction of the Improvements
thereon (whether or not in accordance with the Plans and Specifications
thereon);
(ii) employ watchmen to protect the Property
and the Improvements; and
(iii) assume such management, operation and
control of the Property to the extent and for the time necessary to
realize the value of the Collateral;
(c) cause the Borrower to engage, contract with,
and/or hire qualified service, billing, collection and other such agents,
organizations and
73
79
companies acceptable to the Agent to collect and/or realize upon any or all of
the Collateral and to remit the proceeds to the Agent;
(d) subject to applicable state and federal laws
pertaining to resident confidentiality, request any Account Debtor obligated on
any of the Accounts to make payments thereon directly to the Agent to the extent
permitted by applicable law, with the Agent taking control of the cash and
non-cash proceeds thereof and/or direct the Borrower to (and the Borrower shall)
turn over to the Agent immediately following receipt all payments with respect
to the Collateral in the form received (with the addition of all necessary
endorsements) and not to deposit, negotiate or otherwise deal with those
payments;
(e) compromise, extend or renew any of the
Collateral or deal with the same as it may deem advisable;
(f) make exchanges, substitutions or surrenders of
all or any part of the Collateral;
(g) remove from any of the Borrower's places of
business all books, records, ledger sheets, correspondence, invoices and
documents, relating to or evidencing any of the Collateral or without cost or
expense to the Lenders, make such use of the Borrower's place of business as may
be reasonably necessary to administer, control and collect the Collateral;
(h) demand, collect, receipt for and give renewals,
extensions, discharges and releases of any of the Collateral;
(i) institute and prosecute legal and equitable
proceedings to enforce collection of, or realize upon, any of the Collateral;
(j) settle, renew, extend, compromise, compound,
exchange or adjust claims in respect of any of the Collateral or any legal
proceedings brought in respect thereof;
(k) endorse the name of the Borrower upon any items
of payment relating to the Collateral or on any Proof of Claim in Bankruptcy
against an Account Debtor; and
(l) notify the Post Office authorities to change the
address for the delivery of mail to the Borrower to such address or Post Office
Box as the Agent may designate and receive and open all mail addressed to the
Borrower.
In addition, the Borrower shall, following an Event of Default
promptly, upon request, execute and deliver to the Agent written assignments, to
the extent permitted by
74
80
applicable law, in form and content acceptable to the Agent, of specific
Accounts or groups of Accounts; provided, however, that the lien and/or security
interest granted to the Lenders under this Agreement shall not be limited in any
way to or by the inclusion or exclusion of Accounts within such assignments.
Such Accounts shall secure payment of the Obligations and are not sold to the
Lenders whether or not any assignment thereof, which is separate from this
Agreement, is in form absolute.
Following an Event of Default, the Lenders may also direct the Borrower
to appoint a manager for any or all of the Facilities and enter into a
management agreement with one or more management companies approved by the
Lenders, the terms of which agreement shall be approved by the Lenders.
Section 10.5 Performance by Lenders.
Following an Event of Default, the Agent without the necessity of prior
notice to or demand upon the Borrower and without waiving or releasing any of
the Obligations or any Event of Default, may (but shall be under no obligation
to) at any time thereafter make such payment or perform such act for the account
and at the expense of the Borrower, and may enter upon the premises of the
Borrower for that purpose and take all such action thereon as the Agent may
consider necessary or appropriate for such purpose. The Agent will give the
Borrower notice at least subsequently of any such performance by the Agent. All
sums so paid or advanced by the Agent and all costs and expenses (including,
without limitation, reasonable attorneys' fees and expenses) incurred in
connection therewith (the "Expense Payments") together with interest thereon
from the date of payment, advance or incurring until paid in full at the
Post-Default Rate shall be paid by the Borrower to the Agent on demand and shall
constitute and become a part of the Obligations and be secured by the Deed of
Trust. For this purpose, the Borrower hereby constitutes and appoints the
Lenders, or the Agent on behalf of the Lenders, its true and lawful
attorney-in-fact with full power of substitution to complete work on any
Eligible Project in the name of the Borrower, and hereby empowers said attorney
or attorneys as follows:
(a) To use any funds of the Borrower including any
balance which may be held in escrow and any funds which may remain un-advanced
under any of the Loan for the purpose of completing the development of any of
the Land and the construction of any of the Improvements, whether or not in the
manner called for in the Plans and Specifications;
(b) To make such additions and changes and
corrections to any of the Plans and Specifications which shall be necessary or
desirable in the judgment of the Agent to complete the development of any of the
Land and the construction of any of the Improvements;
(c) To employ such contractors, subcontractors,
agents, architects and inspectors as shall be necessary or desirable for said
purpose;
75
81
(d) To pay, settle or compromise all existing bills
and claims which are or may be liens against any of the Property, or may be
necessary or desirable for the completion of the work or the clearance of title
to any of the Property;
(e) To execute all applications and certificates
which may be required in the name of the Borrower; and
(f) To do any and every act with respect to the
development of the Land and the construction of the Improvements which the
Borrower may do in its own behalf.
It is understood and agreed that this power of attorney shall be deemed
to be a power coupled with an interest which cannot be revoked. Said
attorney-in-fact shall also have the power to prosecute and defend all actions
or proceedings in connection with the development of the Land and the
construction of the Improvements and to take such actions and to require such
performance as the Lenders may deem necessary.
Section 10.6 Uniform Commercial Code and Other Remedies.
Upon the occurrence of an Event of Default (and in addition to all of
its rights, powers and remedies under this Agreement), the Lenders shall have
all of the rights and remedies of a secured party under the applicable Uniform
Commercial Code and other applicable laws, and the Lenders are authorized to
offset and apply to all or any part of the Obligations all moneys, credits and
other property of any nature whatsoever of the Borrower now or at any time
hereafter in the possession of, in transit to or from, under the control or
custody of, or on deposit with, any of the Lenders; and upon demand by the
Agent, the Borrower shall assemble the Collateral and make it available to the
Lenders, at a place designated by the Agent; and the Lenders or their agents may
enter upon the Borrower's premises to take possession of the Collateral, to
remove it, to render it unusable, or to sell or otherwise dispose of it.
Any written notice of the sale, disposition or other intended action by
the Lenders with respect to the Collateral which is sent by certified mail,
postage prepaid, to the Borrower at the address set forth in Section 11.1
hereof, or such other address of the Borrower which may from time to time be
shown on the Lenders' records, at least ten (10) days prior to such sale,
disposition or other action, shall constitute reasonable notice to the Borrower.
The Borrower shall pay on demand all costs and expenses, including, without
limitation, attorneys' fees and expenses, incurred by or on behalf of the
Lenders, or any of them, in preparing for sale or other disposition, selling,
managing, collecting or otherwise disposing of, the Collateral. All of such
costs and expenses (the "Liquidation Costs") together with interest thereon from
the date incurred until paid in full at the Post-Default Rate, shall be paid by
the Borrower to the Agent on demand and shall constitute and become a part of
the Obligations. Any proceeds of sale or other disposition of the Collateral
will be applied by the Lenders to the payment of the Liquidation Costs and
76
82
Expense Payments, and any balance of such proceeds will be applied by the
Lenders to the payment of the balance of the Obligations in such order and
manner of application as the Lenders may from time to time in its sole
discretion determine. After such application of the proceeds, any balance shall
be paid to the Borrower or to any other party entitled thereto.
Section 10.7 Receiver or Other Court Order.
Following an Event of Default, as a matter of right, following ten (10)
days notice and without regard to the adequacy of the security, and upon
application to a court of competent jurisdiction, the Lenders shall be entitled
to the immediate appointment of a receiver for all or any part of the
Collateral, and of the payments and proceeds thereof and therefrom, whether such
receivership be incidental to a proposed sale of the Collateral or otherwise,
and the Borrower hereby consent to the appointment of such a receiver and to an
order of court directing that payments, including Medicare and Medicaid
payments, be made directly to the receiver. The Borrower will pay to the
Beneficiary, upon demand, all expenses, including receiver's fees, attorney's
fees, costs and agents compensation, advanced by the Borrower and incurred
pursuant to the provisions contained in this Section.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Notices.
All notices, certificates or other communications hereunder shall be
deemed given when delivered by hand or courier, the following Bank Day after
delivery by Federal Express or similar overnight delivery service, or three (3)
Banking Days after being mailed by certified mail, postage prepaid, return
receipt requested, addressed as follows:
if to the Agent
or the Lenders: Bank United
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
and
▇▇▇▇▇ ▇▇▇▇▇, Esq.
Office of General Counsel
Bank United
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
With a courtesy
copy to: ▇▇▇▇ & Valentine L.L.P.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇, Esq.
77
83
if to the Borrower: c/o Alternative Living Services, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
With a Courtesy ▇▇▇▇▇▇ & ▇▇▇▇▇▇
Copy to: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Section 11.2 Consents and Approvals.
If any consent, approval, or authorization of any Governmental
Authority or of any Person having any interest therein, should be necessary to
effectuate any sale or other disposition of the Collateral, the Borrower agrees
to execute all such applications and other instruments, and to take all other
action, as may be required in connection with securing any such consent,
approval or authorization.
Section 11.3 Remedies, etc. Cumulative.
Each right, power and remedy of the Lenders as provided for in this
Agreement or in any of the other Financing Documents or now or hereafter
existing at law or in equity or by statute or otherwise shall be cumulative and
concurrent and shall be in addition to every other right, power or remedy
provided for in this Agreement or in any of the other Financing Documents or now
or hereafter existing at law or in equity, by statute or otherwise, and the
exercise or beginning of the exercise by the Lenders of any one or more of such
rights, powers or remedies shall not preclude the simultaneous or later exercise
by the Lenders of any or all such other rights, powers or remedies. In order to
entitle the Lenders to exercise any remedy reserved to it herein, it shall not
be necessary to give any notice, other than such notice as may be expressly
required in this Agreement.
Section 11.4 No Waiver of Rights by the Lenders.
No failure or delay by the Agent or the Lenders to insist upon the
strict performance of any term, condition, covenant or agreement of this
Agreement or of any of the other Financing Documents, or to exercise any right,
power or remedy consequent upon a breach thereof, including foreclosure on the
Property under the Deed of Trust shall constitute a waiver of any such term,
condition, covenant or agreement or of any such breach or preclude the Agent or
the Lenders from exercising any such right, power or remedy at any later time or
times. By accepting payment after the due date of any amount payable under this
Agreement or under any of the other Financing Documents, neither the Agent nor
the Lenders shall be deemed to waive the right either to require prompt payment
when due of all other amounts payable under this Agreement or under any of the
other Financing Documents, or to declare a default for failure to effect such
prompt payment of any such other amount.
78
84
Section 11.5 Entire Agreement.
The Financing Documents shall completely and fully supersede all other
agreements, both written and oral, between the Lenders and the Borrower relating
to the Obligations. Neither the Lenders nor the Borrower shall hereafter have
any rights under such prior agreements but shall look solely to the Financing
Documents for definition and determination of all of their respective rights,
liabilities and responsibilities relating to the Obligations.
Section 11.6 Survival of Agreement; Successors and Assigns.
All covenants, agreements, representations and warranties made by the
Borrower herein and in any certificate, in the Financing Documents and in any
other instruments or documents delivered pursuant hereto shall survive the
making by the Lenders of the Loan and the execution and delivery of the Note,
and shall continue in full force and effect so long as any of the Obligations
are outstanding and unpaid. Whenever in this Agreement any of the parties hereto
is referred to, such reference shall be deemed to include the successors and
assigns of such party; and all covenants, promises and agreements by or on
behalf of the Borrower, which are contained in this Agreement shall inure to the
benefit of the respective successors and assigns of each of the Lenders, and all
covenants, promises and agreements by or on behalf of the Lenders which are
contained in this Agreement shall inure to the benefit of the permitted
successors and permitted assigns of the Borrower, but this Agreement may not be
assigned by the Borrower without the prior written consent of the Lenders.
Section 11.7 Expenses.
The Borrower agrees to pay all reasonable out-of-pocket expenses of the
Lenders (including the reasonable fees and expenses of the legal counsel of the
Agent or any other Lender) in connection with the preparation of this Agreement,
the issuance of the Loan hereunder, the recordation of all financing statements
and such other instruments as may be required by the Agent at the time of, or
subsequent to, the execution of this Agreement to secure the Obligations
(including any and all recordation tax and other costs and taxes incident to
recording), the administration of the Credit Facility (not otherwise
contemplated by any fee paid by the Borrower), any future modification of the
Financing Documents, the addition of Eligible Projects to the Borrowing Base, or
the enforcement of any provision of this Agreement and the collection of the
Obligations. The Borrower agrees to indemnify and save harmless the Lenders from
any liability resulting from the failure to pay any required recordation tax,
transfer taxes, recording costs or any other expenses incurred by the Lenders in
connection with the Obligations. The provisions of this Section shall survive
the execution and delivery of this Agreement and the repayment of the
Obligations. The Borrower further agrees to reimburse the Lenders upon demand
for all reasonable out-of-pocket expenses (including reasonable attorneys' fees
and legal expenses and travel expenses) incurred by the Lenders, or any of them,
in enforcing any of the Obligations or any security therefor or incurred in
connection with any bankruptcy proceeding or in any post-judgment enforcement or
collection action, together with interest at the Post-Default Rate which
agreement shall survive the termination of this Agreement and the repayment of
the Obligations.
79
85
Section 11.8 Counterparts.
This Agreement may be executed in any number of counterparts all of
which together shall constitute a single instrument.
Section 11.9 Governing Law.
This Agreement and all of the other Financing Documents shall be
governed by and construed in accordance with the laws of the State of Texas;
provided, however, any Deed of Trust and any financing statements covering
fixtures securing such Loan shall be governed by, and construed in accordance
with, the laws of the state in which the applicable Facility is located.
Section 11.10 Modifications.
No modification or waiver of any provision of this Agreement or of any
of the other Financing Documents, nor consent to any departure by the Borrower
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Agent, and then such waiver or consent shall be effective only
in the specific instance and for the purpose for which given. No notice to or
demand on the Borrower in any case shall entitle the Borrower to any other or
further notice or demand in the same, similar or other circumstance.
Section 11.11 Illegality.
If fulfillment of any provision hereof or any transaction related
hereto or to any of the other Financing Documents, at the time performance of
such provision shall be due, shall involve transcending the limit of validity
prescribed by law, then ipso facto, the obligation to be fulfilled shall be
reduced to the limit of such validity; and if any clause or provisions herein
contained other than the provisions hereof pertaining to repayment of the
Obligations operates or would prospectively operate to invalidate this Agreement
in whole or in part, then such clause or provision only shall be void, as though
not herein contained, and the remainder of this Agreement shall remain operative
and in full force and effect; and if such provision pertains to repayment of the
Obligations, then, at the options of the Lenders, all of the Obligations of the
Borrower to the Lenders shall become immediately due and payable.
Section 11.12 Gender, etc.
Whenever used herein, the singular number shall include the plural, the
plural the singular and the use of the masculine, feminine or neuter gender
shall include all genders.
Section 11.13 Headings.
The headings in this Agreement are for convenience only and shall not
limit or otherwise affect any of the terms hereof.
Section 11.14 Waiver of Trial by Jury.
THE BORROWER AND THE LENDERS HEREBY JOINTLY AND SEVERALLY WAIVE TRIAL
BY JURY IN ANY ACTION OR PROCEEDING TO WHICH ANY OF THEM MAY BE PARTIES, NOT
GOVERNED BY THE
80
86
ARBITRATION PROVISIONS OF THE NOTE [OR THE GUARANTIES] ARISING OUT OF OR IN ANY
WAY PERTAINING TO (A) THIS AGREEMENT, (B) ANY OF THE FINANCING DOCUMENTS, OR (C)
THE COLLATERAL. THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS
AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST
PARTIES WHO ARE NOT PARTIES TO THIS AGREEMENT.
This waiver is knowingly, willingly and voluntarily made by the
Borrower and the Lenders, and the Borrower and the Lenders hereby represent that
no representations of fact or opinion have been made by any individual to induce
this waiver of trial by jury or to in any way modify or nullify its effect. The
Borrower and the Lenders further represent that they have been represented in
the signing of this Agreement and in the making of this waiver by independent
legal counsel, selected of their own free will, and that they have had the
opportunity to discuss this waiver with counsel.
Section 11.15 No Warranty by Lenders.
By accepting or approving anything required to be observed, performed
or fulfilled by the Borrower or to be given to the Agent or the Lenders pursuant
to this Agreement, including, without limitation, any certificate, balance
sheet, statement of profit and loss or other financial statement, Survey,
receipt, appraisal or insurance policy, the Lenders shall not be deemed to have
warranted or represented the sufficiency, legality, effectiveness or legal
effect of the same, or of any term, provision or condition thereof and any such
acceptance or approval thereof shall not be or constitute any warranty or
representation with respect thereto by the Lenders.
Section 11.16 Liability of the Lenders.
No Lender shall be liable for another Lender's failure to fund its
ratable share of any advance under the Loan. The Lenders shall not be liable for
any other act or omission by the Lenders, or any of them, pursuant to the
provisions of this Agreement in the absence of fraud or gross negligence. The
Lenders shall incur no liability to the Borrower or any other party in
connection with the acts or omissions of any of the Lenders in reliance upon any
certificate or other paper believed by the Lenders to be genuine or with respect
to any other thing which the Lenders may do or refrain from doing, unless such
act or omission amounts to fraud or gross negligence. The Borrower hereby agrees
that the Lenders shall not be chargeable for any negligence, mistake, act or
omission of any accountant, examiner, agency or attorney employed by the
Lenders, or any of them, (except for the gross negligence or willful misconduct
of any person, corporation, partnership or other entity employed by any of the
Lenders) in making examinations, investigations or collections, or otherwise in
perfecting, maintaining, protecting or realizing upon any lien or security
interest or any other interest in the Collateral or other security for the
Obligations. In connection with the performance of their duties pursuant to this
Agreement, the Lenders may consult with counsel of their own selection, and do
anything which the Lenders may do or refrain from doing, in good faith, in
reliance upon the opinion of such counsel shall be full justification and
protection to the Lenders. The Borrower shall indemnify, defend and hold the
Lenders
81
87
and their successors and assigns harmless from and against any and all claims,
demands, suits, losses, damages, assessments, fines, penalties, costs or other
expenses (including reasonable attorney's fees and court costs) arising from or
in connection with this Agreement. Any indemnity provision for the benefit of
the Lenders set forth herein or in any of the Financing Documents shall extend
to any other lender who becomes a Lender under the Credit Facility. The
provisions of this Section shall survive the termination of the Credit Facility.
Section 11.17 License of Tradename.
The Borrower does hereby grant to each of the Lenders and their
affiliates and any trustee under a Deed of Trust and their management company a
license to use the Borrower's name, and the names "Wynwood", "Crossings", "Clare
Bridge", WovenHearts", or "Sterling Cottage" and "Sterling House" and any marks
associated therewith in the operation of a Facility upon such Lender's or
trustee's taking of possession or taking over management of a Facility or
acquiring title thereto at a foreclosure sale which license shall be in effect
for a period of twenty-four (24) months from the date thereof but shall be
extended for any period up to an additional six (6) months if the Borrower takes
any action to delay or obstruct the Lenders' exercise of their remedies under
the Financing Documents. The Borrower further agrees that a third-party
purchaser of a Facility may continue to operate the Facility under the
Borrower's name unless the Borrower objects in writing thereto.
Section 11.18 No Partnership.
Nothing contained in this Agreement shall be construed in a matter to
create any relationship between the Borrower and the Lenders other than the
relationship of borrower and lender and the Borrower and the Lenders other than
the relationship of borrower and lender and the Borrower and the Lenders shall
not be considered partners or co-venturers for any purpose on account of this
Agreement.
Section 11.19 Third Parties; Benefit.
All conditions to the obligation of the Lenders to make advances
hereunder are imposed solely and exclusively for the benefit of the Lenders and
their assigns and no other persons shall have standing to require satisfaction
of such conditions in accordance with their terms or be entitled to assume that
the Lenders will refuse to make advances in the absence of strict compliance
with any or all thereof and no other person shall, under any circumstances, be
deemed to be the beneficiary of such conditions, any or all of which may be
freely waived in whole or in part by the Agent at any time in the sole and
absolute exercise of its discretion pursuant to its agreements with the Lenders.
The terms and provisions of this Agreement are for the benefit of the parties
hereto and, except as herein specifically provided, no other person shall have
any right or cause of action on account thereof.
Section 11.20 Conditions; Verification.
Any condition of this Agreement which requires the submission of
evidence of the existence or non-existence of a specified fact or facts implies
as a condition to the
82
88
existence or non-existence, as the case may be, of such fact or facts that the
Lenders shall, at all times, be free independently to establish to their
satisfaction and in its absolute discretion such existence or non-existence.
Section 11.21 Signs; Publicity.
At the Agent's request, but at the expense of the Agent, the Borrower
shall place a sign acceptable to the Borrower at a location on each of the
Eligible Projects satisfactory to the Agent, which sign shall recite, among
other things, that the Lenders are financing the development of the Land and the
construction of the Improvements. The Borrower expressly authorizes the Agent to
prepare and to furnish to the news media for publication from time to time news
releases with respect to the Credit Facility and each Eligible Project,
specifically to include but not limited to, releases detailing the Agent's and
the Lenders' involvement with the Credit Facility and the financing of any
Eligible Project, all subject to prior review by the Borrower.
Section 11.22 Mandatory Arbitration.
To the maximum extent not prohibited by law, any controversy, dispute
or claim arising out of, in connection with, or relating to this Agreement or
any other Financing Documents or any transaction provided for therein, including
but not limited to any claim based on or arising from an alleged tort or an
alleged breach of any agreement contained in any of the Financing Documents,
shall, at the request of any party to the Financing Documents (either before or
after the commencement of judicial proceedings) be settled by arbitration
pursuant to Title 9 of the United States Code, which the parties acknowledge and
agree applies to the transaction involved herein, and in accordance with the
Commercial Arbitration Rules of the American Arbitration Association (the
"AAA"). In any such arbitration proceeding: (i) all statutes of limitation which
would otherwise be applicable shall apply; and (ii) the proceeding shall be
conducted in Houston, Texas, by a single arbitrator, if the amount in
controversy is $1 million or less, or by a panel of three arbitrators if the
amount in controversy is over $1 million. All arbitrators shall be selected by
the process of appointment from a panel pursuant to Section 13 of the AAA
Commercial Arbitration Rules and each arbitrator will have AAA acknowledged
expertise in the appropriate subject matter. Any award rendered in any such
arbitration proceeding shall be final and binding, and judgment upon any such
award may be entered in any court having jurisdiction.
If any party to this Agreement or other Financing Documents files a
proceeding in any court to resolve any such controversy, dispute or claim, such
action shall not constitute a waiver of the right of such party or a bar to the
right of any other party to seek arbitration under the provisions of this
Section of that or any other claim, dispute or controversy, and the court shall,
upon motion of any party to the proceeding, direct that such controversy,
dispute or claim be arbitrated in accordance with this Section.
Notwithstanding any of the foregoing, no arbitrator or panel of
arbitrators shall possess or have the power to (i) assess punitive damages, (ii)
dissolve, rescind or reform (except that the arbitrator may construe ambiguous
terms) any Financing Document to
83
89
which the Borrower or the Guarantor is a party, (iii) enter judgment on the
debt, (iv) exercise equitable powers or issue or enter any equitable remedies or
(v) allow discovery of attorney/client privileged information. The Commercial
Arbitration Rules of the AAA are hereby modified to this extent for the purpose
of arbitration of any dispute, controversy or claim arising out of, in
connection with, or relating to any Financing Document to which the Borrower or
the Guarantor is a party. The parties further waive, each to the other, any
claims for punitive damages, and agree that neither an arbitrator nor any court
shall have the power to assess such damages.
No provisions of, or the exercise of any rights under, this Section
shall limit or impair the right of any party to the Financing Documents before,
during or after any arbitration proceeding to take any of the following actions
or contest any of the following actions: (i) exercise self-help remedies such as
set off or repossession, (ii) foreclose (judicially or otherwise) any lien on or
security interest in any real or personal property collateral; or (iii) obtain
emergency relief from a court of competent jurisdiction to prevent the
dissipation, damage, destruction, transfer, hypothecation, pledging or
concealment of assets or of collateral securing any indebtedness, obligation or
guaranty referenced in the Financing Documents. Such emergency relief and action
to contest the same shall include equitable relief and may be in the nature of,
but is not limited to: pre-judgment attachments, garnishments, sequestrations,
appointments of receivers, or other emergency injunctive relief to preserve the
status quo.
In the event applicable law prohibits the submission of a particular
controversy, dispute or claim arising out of or in connection with any of the
Financing Documents or transactions contemplated therein to arbitration, the
parties agree that any actions or proceedings in connection therewith shall be
tried and litigated only in the state and federal courts located in the
jurisdiction in which the Property is located or any other court in which the
Lenders shall initiate legal or equitable proceedings that has subject matter
jurisdiction over the matter in controversy and to the extent permitted by
applicable law, waive any right to assert the doctrine of forum non-conveniens
or to object to the venue to the extent any proceeding is brought in accordance
with this paragraph.
Section 11.23 Time of Essence.
Time shall be of the essence for each and every provision of this
Agreement of which time is an element.
[signature page to follow]
84
90
IN WITNESS WHEREOF, the parties hereto have signed and sealed this
Agreement on the day and year first above written.
WITNESS/ATTEST: ALS HOLDINGS, INC, a
Delaware Corporation
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (SEAL)
------------------------- ------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Vice President and Assistant Secretary
ALS WISCONSIN HOLDINGS, INC.,
a Delaware corporation
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (SEAL)
------------------------- ------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Vice President and Assistant Secretary
WITNESS: BANK UNITED, as Agent for the Lenders
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇▇▇▇▇ (SEAL)
------------------------- ------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: Vice President
85
