EXHIBIT 10.8
MEZZANINE LOAN AGREEMENT
Dated as of March __, 1998
by and among
THE HARBOR VILLAGE BUSINESS TRUST
(as Borrower)
BROOKDALE LIVING COMMUNITIES OF ILLINOIS-HV, INC.
(as Operator and Guarantor)
and
NOMURA ASSET CAPITAL CORPORATION
(as Mezzanine Lender)
TABLE OF CONTENTS
Page
ARTICLE I CERTAIN DEFINITIONS............................................ 2
Section 1.1. Definitions............................................... 2
ARTICLE II GENERAL TERMS.................................................. 20
Section 2.1. Amount of the Mezzanine Loan........................... 20
Section 2.2. Use of Proceeds........................................ 20
Section 2.3. Security for the Mezzanine Loan........................ 20
Section 2.4. Borrower's Mezzanine Note.............................. 20
Section 2.5. Principal and Interest Payments........................ 21
Section 2.6. Intentionally deleted.................................. 22
Section 2.7. Prepayment............................................. 22
Section 2.8. Application of Payments................................ 22
Section 2.9. Payment of Debt Service, Method and Place of Payment... 23
Section 2.10. Taxes.................................................. 23
Section 2.11. Intentionally deleted.................................. 23
Section 2.12. Intentionally deleted.................................. 23
Section 2.13. Security Agreement..................................... 24
Section 2.15. Supplemental Mortgage Affidavits....................... 27
ARTICLE III CONDITIONS PRECEDENT........................................... 27
Section 3.1. Conditions Precedent to the Loan....................... 27
Section 3.2. Form of Mezzanine Loan Documents and Related Matters... 31
ARTICLE IV REPRESENTATIONS AND WARRANTIES................................. 32
Section 4.1. Representations and Warranties of Borrower and Operator 32
Section 4.2. Survival of Representations and Warranties............. 52
ARTICLE V AFFIRMATIVE COVENANTS.......................................... 53
Section 5.1. Borrower and Operator Covenants........................ 53
ARTICLE VI NEGATIVE COVENANTS............................................. 72
Section 6.1. Borrower and Operator Negative Covenants............... 72
Page
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ARTICLE VII DEFAULTS
Section 7.1. Event of Default................................ 78
Section 7.2. Remedies........................................ 82
Section 7.3. Remedies Cumulative............................. 83
Section 7.4. Mezzanine Lender's Right to Perform............. 84
Section 7.5. Operator's Limited Right to Cure................ 84
ARTICLE VIII MISCELLANEOUS.......................................... 85
Section 8.1. Survival........................................ 85
Section 8.2. Mezzanine Lender's Discretion................... 86
Section 8.3. Governing Law................................... 86
Section 8.4. Modification, Waiver in Writing................. 87
Section 8.5. Delay Not a Waiver.............................. 87
Section 8.6. Notices......................................... 88
SECTION 8.7. TRIAL BY JURY................................... 89
Section 8.8. Headings........................................ 89
Section 8.9. Assignment...................................... 89
Section 8.10. Severability.................................... 89
Section 8.11. Preferences..................................... 90
Section 8.12. Waiver of Notice................................ 90
Section 8.13. Intentionally Omitted........................... 90
Section 8.14. Exculpation..................................... 90
Section 8.15. Exhibits Incorporated........................... 92
Section 8.16. Offsets, Counterclaims and Defenses............. 92
Section 8.17. No Joint Venture or Partnership................. 93
Section 8.18. Waiver of Marshalling of Assets Defense......... 93
Section 8.19. Waiver of Counterclaim.......................... 93
Section 8.20. Conflict; Construction of Documents............. 93
Section 8.21. Brokers and Financial Advisors.................. 93
Section 8.22. Counterparts.................................... 94
Section 8.23. Estoppel Certificates........................... 94
Section 8.24. Payment of Expenses............................. 94
Section 8.25. Bankruptcy Waiver............................... 95
Section 8.26. Entire Agreement................................ 95
Section 8.27. Dissemination of Information.................... 95
Section 8.28. Limitation of Interest.......................... 96
Section 8.29. Indemnification................................. 97
Section 8.30. Borrower and Operator Acknowledgments........... 97
Section 8.31. Publicity....................................... 98
Section 8.32. Recalculation of First Mortgage Loan Amount..... 98
Section 8.34. Amendments to Operator Lease.................... 98
Section 8.35. Subordination and Standstill ................... 99
Page
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Section 8.36. Limitation of Liability........................ 100
Exhibit 10.8
MEZZANINE LOAN AGREEMENT
THIS MEZZANINE LOAN AGREEMENT, made as of March ___, 1998, is by and
among NOMURA ASSET CAPITAL CORPORATION, a Delaware corporation, having an
address at 2 World Xxxxxxxxx Xxxxxx, Xxxxxxxx X, Xxx Xxxx, Xxx Xxxx 00000-0000,
Attention: Xxxxxxx X. Xxxxxxx, Telefax Number (000) 000-0000 (together, with
its successors and assigns, "Mezzanine Lender"), THE HARBOR VILLAGE BUSINESS
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TRUST, a Delaware business trust with an address of c/o Wilmington Trust
Company, as Trustee, Xxxxxx Square North, 0000 Xxxxx Xxxxxx Xxxxxx, Xxxxxxxxxx,
Xxxxxxxx 00000-0000, Attention: Corporate Trust Administration, Telefax Number
(000) 000-0000 (the "Borrower") and BROOKDALE LIVING COMMUNITIES OF ILLINOIS-HV,
--------
INC., a Delaware corporation, having an address of c/o Brookdale Living
Communities, Inc., 00 Xxxx Xxxxxx Xxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000,
Attention: Xxxxxx X. Xxxxxxxx, Xx., Telecopier Number 312/997-3699 (the
"Operator").
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RECITALS
WHEREAS, Borrower desires to obtain a loan (the "Mezzanine Loan") from
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Mezzanine Lender in an aggregate principal amount of $1,750,000 (the "Mezzanine
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Loan Amount");
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WHEREAS, Mezzanine Lender is willing to make the Mezzanine Loan on the
condition that Borrower and Operator each joins in the execution and delivery of
this Agreement which shall establish the terms and conditions of the Mezzanine
Loan; and
WHEREAS, Mezzanine Lender, Borrower and Operator contemplate that all
or any portion of Mezzanine Lender's interest in the Mezzanine Loan and to the
Mezzanine Loan Documents may be assigned, in whole or in part, by Mezzanine
Lender to another Person.
NOW, THEREFORE, in consideration of the making of the Mezzanine Loan
by Mezzanine Lender and the covenants, agreements, representations and
warranties set forth in this Agreement, the parties hereby covenant, agree,
represent and warrant as follows:
ARTICLE I
CERTAIN DEFINITIONS
-------------------
Section 1.1. Definitions. For all purposes of this Agreement:
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(a) the capitalized terms defined in this Article I have the meanings
---------
assigned to them in this Article I, and include the plural as well as the
singular;
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(b) capitalized terms used in this Agreement and not otherwise
defined herein shall have those meanings assigned to them in the First Mortgage
Loan Agreement;
(c) all accounting terms have the meanings assigned to them in
accordance with GAAP;
(d) the words "herein", "hereof", and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section, or other subdivision; and
(e) the following terms have the following meanings:
"Account Collateral" has the meaning provided in Section 2.13(a).
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"Accounts" means the "Accounts" as defined and described in each of
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the Mezzanine Mortgages.
"Affiliate" of any specified Person means any other Person
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controlling, controlled by or under common control with such specified Person.
For the purposes of this Agreement, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities or other beneficial interests, by contract or otherwise; and the
terms "controls", "controlling" and "controlled" have the meanings correlative
to the foregoing.
"Agreement" and "Loan Agreement" each mean this Mezzanine Loan
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Agreement, as the same may from time to time hereafter be modified, supplemented
or amended.
"Annual Operating Budget" means an annual budget for the operations of
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the Facility (broken down on a month-by-month basis) prepared, and submitted by
Operator to Mezzanine Lender for the period from the Closing Date until December
31, 1998.
"Appraisals" means the appraisals, if any, with respect to the
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Facility delivered to Mezzanine Lender in connection with the Mezzanine Loan and
any more recent appraisal of the Facility delivered to Mezzanine Lender or
Mezzanine Lender's servicer, as applicable, each made by an Appraiser at the
request of Operator or Mezzanine Lender, as any of the same may be updated by
recertification from time to time (and pursuant to the terms of this Agreement)
by the Appraiser performing such Appraisal.
"Appraiser" means any Independent appraiser selected by Operator (and
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reasonably satisfactory to Mezzanine Lender) who is (i) a member of the
Appraisal Institute with
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a national practice and who has at least ten years experience with real estate
of the same type and in the geographic area of the Facility to be appraised or
(ii) otherwise reasonably acceptable to Mezzanine Lender.
"Base Payment" has the meaning set forth in Section 2.5(b).
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"Beneficial Owner" means SELCO Service Corporation, an Ohio
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corporation.
"Beneficial Owner's Certificate" means the Beneficial Owner's
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Certificate in form and substance satisfactory to Mezzanine Lender in Mezzanine
Lender's reasonable discretion dated as of the Closing Date.
"Borrower" has the meaning provided in the first paragraph of this
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Agreement.
"Borrower's Trustee" means Wilmington Trust Company, a Delaware
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banking association, not in its individual capacity but solely as trustee under
the Trust Agreement.
"Business Day" means any day other than (i) a Saturday or a Sunday,
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and (ii) a day on which federally insured depository institutions in New York,
New York, Chicago, Illinois, Wilmington, Delaware or any jurisdiction in which
the Facility, Cash Collateral Account or Collection Account is located are
authorized or obligated by law, regulation, governmental decree or executive
order to be closed.
"Closing Date" means the date of this Agreement.
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"Collateral" means, collectively, the Land, Appurtenant Rights,
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Improvements, Equipment, Rents, Leases, Accounts, Account Collateral, General
Intangibles, goods, Instruments, Inventory, Money, Permitted Investments and (to
the full extent assignable) Permits, investment properties, and proceeds of
written letters of credit and all Proceeds and products of the foregoing, all
whether now owned or hereafter acquired and all other property which is or
hereafter may become subject to a Lien in favor of Mezzanine Lender as security
for the Mezzanine Loan; provided, however, the "Collateral" shall not include
the Excepted Property.
"Collateral Security Instrument" means any right, document or
------------------------------
instrument, other than the Mezzanine Mortgages, given as security for the
Mezzanine Loan (including, without limitation, the Mezzanine Assignments of
Leases and the Mezzanine Assignments of Agreements), as the same may hereafter
from time to time be supplemented, amended, extended or modified.
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"Collection Account Agreement" means the collection account agreement
----------------------------
by and among Borrower, Operator, First Mortgage Lender and Collection Account
Bank.
"Collection Account Bank" means, with respect to the Facility, the
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applicable collection bank for the Facility and any successor bank hereafter
selected by Operator and reasonably approved by the First Mortgage Lender.
"Condemnation Proceeds" has the meaning set forth in the Mezzanine
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Mortgages.
"Debt Service" means, for any period, the principal, interest
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payments, Default Rate interest, Late Charges and Yield Maintenance Premium, if
any, that accrue or are due and payable in accordance with the Mezzanine Loan
Documents during such period.
"Default" means the occurrence of any event which, but for the giving
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of notice or the passage of time, or both, would be an Event of Default.
"Default Collateral" has the meaning provided in Section 8.14.
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"Default Rate" means the per annum interest rate equal to the lesser
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of (i) the Maximum Amount or (ii) the Interest Rate plus five percent (5%).
"Equipment" means the "Equipment" defined and described in the
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Mezzanine Mortgages.
"Event of Default" has the meaning set forth in Section 7.1.
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"Facility" means the Collateral relating to Borrower and Operator
--------
encumbered by the Mezzanine Loan Documents.
"First Leasehold Mortgage" means that certain Leasehold Mortgage,
------------------------
Assignment of Rents, Security Agreement and Fixture Filing dated as of the date
hereof, by Operator to the First Mortgage Lender.
"First Mortgage Debt" means the indebtedness of the Borrower to the
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First Mortgage Lender under the First Mortgage Loan Agreement.
"First Mortgage Lender" means NACC, its successors and assigns as
---------------------
holders of the First Mortgage Note.
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"First Mortgage Loan" means the first mortgage loan of even date
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hrewith made by NACC, as lender, to Borrower, as borrower, pursuant to the First
Mortgage Loan Agreement.
"First Mortgage Loan Agreement" means that certain loan agreement,
-----------------------------
dated as of the date hereof, by and among First Mortgage Lender, as lender,
Borrower, as borrower and Operator, as guarantor.
"First Mortgage Loan Documents" means all documents executed or
-----------------------------
delivered in connection with the First Mortgage Loan.
"First Mortgage" means that certain Mortgage, Assignment of Rents,
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Security Agreement and Fixture Filing dated as of the date hereof, by Borrower
to the First Mortgage Lender and "First Mortgages" means the First Mortgage and
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the First Leasehold Mortgage, collectively.
"First Mortgage Note" means that certain promissory note dated as of
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the date hereof made by Borrower to First Mortgage Lender in connection with the
First Mortgage Loan.
"Fiscal Year" means the 12-month period ending on December 31 of each
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year or such other fiscal year of Borrower as Borrower may select from time to
time with the prior written consent of Mezzanine Lender not to be unreasonably
withheld or delayed.
"General Intangibles" means the "General Intangibles" defined and
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described in the Mezzanine Mortgages.
"Impositions" means the "Impositions" defined and described in the
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Mezzanine Mortgages.
"Improvements" means the "Improvements" as defined and described in
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the Mezzanine Mortgages.
"Indebtedness" means, at any given time, the Principal Indebtedness,
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together with all accrued and unpaid interest thereon and all other obligations
and liabilities due or to become due to Mezzanine Lender pursuant hereto, under
the Mezzanine Note or in accordance with any of the other Mezzanine Loan
Documents, and all other amounts, sums and expenses paid by or payable to
Mezzanine Lender hereunder or pursuant to the Mezzanine Note or any of the other
Mezzanine Loan Documents.
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"Indemnified Party" shall have the meaning set forth in Section
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8.29.
----
"Instruments" means the "Instruments" defined and described in the
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Mezzanine Mortgages.
"Insurance Proceeds" has the meaning set forth in the Mezzanine
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Mortgages.
"Insurance Requirements" means all material terms of any insurance
----------------------
policy required pursuant to the Mezzanine Loan Documents and all material
regulations and then current standards applicable to or affecting the Facility
or any part thereof or any use or condition thereof, which may, at any time, be
recommended by the Board of Fire Underwriters, if any, having jurisdiction over
the Facility, or such other body exercising similar functions.
"Interest Accrual Period" means each period of time running from and
-----------------------
including the eleventh (11th) day of a calendar month to and including the tenth
(10th) day of the following calendar month during the term of the Mezzanine
Loan. If the Closing Date shall occur prior to the tenth (10th) day of a
calendar month, the first Interest Accrual Period shall commence on and include
the Closing Date and end on and include the tenth (10th) day of the calendar
month in which the Closing Date occurs. If the Closing Date shall occur after
the tenth (10th) day of a calendar month, the first Interest Accrual Period
shall commence on the Closing Date and end on and include the tenth (10th) day
of the calendar month following the month in which the Closing Date occurs. If
the Closing Date shall occur on the tenth (10th) day of a calendar month, the
first Interest Accrual Period shall consist of a one (1) day period consisting
of the Closing Date.
"Interest Rate" means _____%, per annum.
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"Inventory" means all of the "Inventory" defined and described in
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the Mezzanine Mortgages.
"Land" has the meaning provided in the Mezzanine Mortgages.
----
"Late Charge" means the lesser of (i) five percent (5%) of any amount
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which was due and payable but which was not paid within the applicable grace
period and (ii) the maximum late charge permitted to be charged under the laws
of the State of New York.
"Late Payment" means Borrower's failure to pay any amount hereunder
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when due, without giving effect to any cure period, if any.
"Leases" means all of the "Leases" defined and described in the
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Mezzanine
7
Mortgages.
"Legal Requirements" means all statutes, laws, rules, orders,
------------------
regulations, ordinances, judgments, decrees and injunctions of Governmental
Authorities affecting Borrower, Operator, the Mezzanine Loan Documents, the
Facility or any part thereof, or the ownership, construction, use, alteration or
operation thereof, or any part thereof, enacted and in force as of the relevant
date, and all Permits, Licenses and regulations relating thereto, and all
covenants, agreements, restrictions and encumbrances contained in any
instruments, either of record or known to Borrower or Operator, at any time in
force affecting the Facility or any part thereof, including, without limitation,
any which (i) may require repairs, modifications, or alterations in or to the
Facility or any part thereof, or (ii) in any way limit the use and enjoyment
thereof.
"Licenses" has the meaning set forth in Section 4.1(d)(AK)(ii).
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"Lien" means any mortgage, deed of trust, deed to secure debt, lien
----
(statutory or other), pledge, easement, restrictive covenant, hypothecation,
assignment, preference, priority, security interest, or any other encumbrance or
charge on or affecting the Facility or any portion thereof or any Collateral, or
Operator or any interest therein, including, without limitation, any conditional
sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, the filing of
any financing statement or similar instrument under the UCC or comparable law of
any other jurisdiction, domestic or foreign, and mechanic's, materialmen's and
other similar liens and encumbrances.
"Liquidation Event" means (i) any sale, transfer or other disposition
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or liquidation of the Facility or any portion thereof (including a foreclosure
sale), (ii) any casualty to the Facility or any portion thereof, (iii) any
condemnation of the Facility or any portion thereof or (iv) any refinancing of
the Facility or the First Mortgage Loan.
"Liquidation Proceeds" means, with respect to any Liquidation Event,
--------------------
all amounts paid to or received by or on behalf of Borrower or Operator in
connection with such Liquidation Event, including, without limitation, proceeds
of any sale, refinancing or other disposition or liquidation, the amount of any
award or payment in connection with any condemnation or taking by eminent
domain, and the amount of any insurance proceeds paid in connection with any
casualty loss, as applicable, other than, in the case of a casualty loss or
condemnation award, amounts required or permitted by the terms of the First
Mortgage Loan Documents to be applied to the restoration or repair of the
Facility or to the repayment of the First Mortgage Loan.
"Losses" has the meaning provided in Section 5.1(b)(I).
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8
"Material Adverse Effect" means a material adverse effect upon (i) the
-----------------------
business or the financial position or results of operation of Borrower or
Operator, as applicable, (ii) the ability of Borrower or Operator, as
applicable, to perform, or of Mezzanine Lender to enforce, any of the Mezzanine
Loan Documents or (iii) the value of (x) the Collateral (as defined herein and
in the First Mortgage Loan Agreement) taken as a whole or (y) the Facility.
"Material Lease" has the meaning set forth in the Mezzanine
--------------
Mortgages.
"Maturity Date" means the date which is one year after the Maturity
-------------
Date (as defined in the First Mortgage Loan Agreement).
"Maximum Amount" means the maximum rate of interest designated by
--------------
applicable laws relating to payment of interest and usury.
"Mezzanine Assignments of Agreements" means, collectively, the
-----------------------------------
Mezzanine Assignment of Agreements - Borrower and the Mezzanine Assignment of
Agreements - Operator.
"Mezzanine Assignment of Agreements - Borrower" means, with respect to
---------------------------------------------
the Facility, a Mezzanine Assignment of Agreements Affecting Real Estate, in
form and substance satisfactory to Mezzanine Lender in Mezzanine Lender's
reasonable discretion, dated as of the Closing Date, from Borrower, as assignor,
to Mezzanine Lender, as assignee, as the same may thereafter from time to time
be supplemented, amended, modified or extended by one or more written agreements
supplemental thereto.
"Mezzanine Assignment of Agreements - Operator" means, with respect to
---------------------------------------------
the Facility, a Mezzanine Assignment of Agreements Affecting Real Estate, in
form and substance satisfactory to Mezzanine Lender in its reasonable
discretion, dated as of the Closing Date from the Operator, as assignor, to
Mezzanine Lender, as assignee, as the same may thereafter from time to time be
supplemented, amended, modified or extended by one or more written agreements
supplemental thereto.
"Mezzanine Assignment of Leases - Borrower" means, with respect to the
-----------------------------------------
Facility, a Mezzanine Assignment of Leases and Rents, in form and substance
satisfactory to Mezzanine Lender in Mezzanine Lender's reasonable discretion,
dated as of the Closing Date from Borrower, as assignor, to Mezzanine Lender, as
assignee, assigning to Mezzanine Lender Borrower's interest in and to the Leases
(as defined in the Mezzanine Mortgages) and the Rents (as defined in the
Mezzanine Mortgage) with respect to the Facility as security for the Mezzanine
Loan, as the same may thereafter from time to time be supplemented, amended,
modified or extended by one or more written agreements supplemental thereto.
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"Mezzanine Assignment of Leases - Operator" means, with respect to the
-----------------------------------------
Facility, a Mezzanine Assignment of Leases and Rents, in form and substance
satisfactory to Mezzanine Lender in Mezzanine Lender's reasonable discretion,
dated as of the Closing Date from Operator, as assignor, to Mezzanine Lender, as
assignee, assigning to Mezzanine Lender Operator's interest in and to the Leases
(as defined in the Mezzanine Leasehold Mortgage) and the Rents (as defined in
the Mezzanine Leasehold Mortgage) with respect to the Facility as security for
the Mezzanine Loan, as the same may thereafter from time to time be
supplemented, amended, modified or extended by one or more written agreements
supplemental thereto.
"Mezzanine Assignments of Leases" means the Mezzanine Assignment of
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Leases - Borrower and Mezzanine Assignment of Leases - Operator, collectively.
"Mezzanine Environmental Guaranty" means the Mezzanine Environmental
--------------------------------
Indemnity Agreement in form and substance satisfactory to Mezzanine Lender in
Mezzanine Lender's reasonable discretion dated as of the Closing Date from the
Parent to Mezzanine Lender, as the same may thereafter be from time to time
supplemented, amended, modified or extended by one or more agreements
supplemental thereto.
"Mezzanine Guaranty" means a Mezzanine Guaranty and Suretyship
------------------
Agreement in form and substance satisfactory to Mezzanine Lender in Mezzanine
Lender's reasonable discretion dated as of the Closing Date from the Operator to
Mezzanine Lender as the same may thereafter from time to time be supplemented,
amended, modified or extended by one or more written agreements supplemental
thereto.
"Mezzanine Leasehold Mortgage" means, with respect to the Facility, a
----------------------------
Mezzanine Leasehold Mortgage, Assignment of Rents, Security Agreement and
Fixture Filing, in form and substance satisfactory to Mezzanine Lender in
Mezzanine Lender's reasonable discretion, dated as of the Closing Date, granted
by Operator to Mezzanine Lender with respect to the Facility as security for the
Mezzanine Guaranty, as the same may thereafter from time to time be
supplemented, amended, modified or extended by one or more written agreements
supplemental thereto.
"Mezzanine Lender" has the meaning provided in the first paragraph
----------------
of this Agreement.
"Mezzanine Loan" has the meaning provided in the Recitals hereto.
--------------
"Mezzanine Loan Amount" has the meaning provided in the Recitals
---------------------
hereto.
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"Mezzanine Loan Documents" means, collectively, this Agreement, the
------------------------
Mezzanine Note, the Mezzanine Mortgages, the Mezzanine Assignments of Leases,
the Mezzanine Assignments of Agreements, the Mezzanine Guaranty and all other
agreements, instruments, certificates and documents executed or delivered by or
on behalf of Borrower, Operator or any Affiliate to evidence or secure the
Mezzanine Loan or otherwise in satisfaction of the requirements of this
Agreement, the Mezzanine Mortgages or the other documents listed above.
"Mezzanine Mortgage" means, with respect to the Facility, a Mezzanine
------------------
Mortgage, Assignment of Rents, Security Agreement and Fixture Filing, in form
and substance satisfactory to Mezzanine Lender in Mezzanine Lender's reasonable
discretion, dated as of the Closing Date, granted by Borrower to Mezzanine
Lender with respect to the Facility as security for the Mezzanine Loan, as the
same may thereafter from time to time be supplemented, amended, modified or
extended by one or more written agreements supplemental thereto and "Mezzanine
---------
Mortgages" means, collectively, the Mezzanine Mortgage and the Mezzanine
---------
Leasehold Mortgage.
"Mezzanine Note" means and refers to the promissory note, in form and
--------------
substance satisfactory to Mezzanine Lender in Mezzanine Lender's reasonable
discretion, dated the Closing Date, made by Borrower to Mezzanine Lender
pursuant to this Agreement as such note may be modified, amended, supplemented,
extended or consolidated in writing, and any note(s) issued in exchange therefor
or in replacement thereof.
"Mortgaged Property" means, at any time, the Facility encumbered by
------------------
the Mezzanine Mortgages.
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"NAAC" means Nomura Asset Capital Corporation.
----
"Net Liquidation Proceeds" means all Liquidation Proceeds, less (i)
------------------------
in the case of a sale, other than a foreclosure sale under the First Mortgage
Loan, such reasonable and customary costs and expenses of sale (including
brokerage commissions) as shall be approved by the Mezzanine Lender pursuant to
the terms hereof, (ii) in the case of a foreclosure sale, such costs and
expenses incurred by the First Mortgage Lender under the First Mortgage Loan
Documents as the First Mortgage Lender shall be entitled to receive
reimbursement for under the terms of the First Mortgage Loan Documents or under
applicable law, (iii) in the case of a casualty loss or condemnation, such costs
and expenses of collection of the related insurance proceeds or condemnation
award as shall be approved by the First Mortgage Lender pursuant to the terms of
the First Mortgage Loan Documents, or if the First Mortgage Loan has been paid
in full, by the Mezzanine Lender under the Mezzanine Loan, and (iv) in the case
of a refinancing of the First Mortgage Loan, or the Facility, such costs and
expenses of such refinancing as shall be approved by the Mezzanine Lender.
"Net Liquidation Proceeds After Debt Service" means, with respect to
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any Liquidation Event, the Net Liquidation Proceeds with respect thereto other
than any portion thereof applied to the payment of the First Mortgage Debt under
the terms of the First Mortgage Loan Documents.
"Operator" has the meaning set forth in the first paragraph of this
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Agreement.
"Operator Lease" means that certain Lease dated on or about the
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Closing Date between the Borrower and the Operator for the lease of all of the
Facility, together with any guarantees, supplements, amendments, modifications,
extensions and renewals of the same, and all additional remainders, reversions,
and other rights and estates appurtenant thereto.
"Other Borrowings" means, with respect to Operator or Borrower, as
----------------
applicable, without duplication (but not including the Indebtedness, the First
Mortgage Loan or any Transaction Costs payable in connection with the
Transactions), (i) all indebtedness of Borrower or Operator, as applicable, for
borrowed money or for the deferred purchase price of property or services, (ii)
all indebtedness of Borrower or Operator, as applicable, evidenced by a note,
bond, debenture or similar instrument, (iii) the face amount of all letters of
credit issued for the account of Borrower or Operator, as applicable, and,
without duplication, all unreimbursed amounts drawn thereunder, (iv) all
indebtedness of Borrower or Operator, as applicable, secured by a Lien on any
property owned by Borrower or Operator, as applicable, whether or not such
indebtedness has been assumed, (v) all Contingent Obligations of Borrower or
Operator, as applicable, and (vi) all payment obligations of Borrower or
Operator, as applicable, under any
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interest rate protection agreement (including, without limitation, any interest
rate swaps, caps, floors, collars or similar agreements) and similar agreements.
"Parent" means Brookdale Living Communities, Inc., a Delaware
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corporation.
"Payment Date" means the eleventh (11th) day of each calendar month
------------
during the term of the Mezzanine Loan, provided, however, that for purposes of
making payments hereunder, but not for purposes of calculating interest accrual
periods, if the eleventh (11th) day of a given month shall not be a Business
Day, then the Payment Date for such month shall be the next succeeding Business
Day.
"Permits" means, all the "Permits" defined and described in the
-------
Mezzanine Mortgages.
"Permitted Encumbrances" means, with respect to the Facility,
----------------------
collectively, (i) the Liens created by the First Mortgages, the other First
Mortgage Loan Documents of record, the Liens created by the Mezzanine Mortgages
and the other Mezzanine Loan Documents of record (ii) all Liens and other
matters disclosed in the Title Insurance Policy concerning the Facility, or any
part thereof, (iii) Liens, if any, for Impositions imposed by any Governmental
Authority not yet due or delinquent or being contested in good faith and by
appropriate proceedings in accordance with the Mezzanine Mortgages, (iv) without
limiting the foregoing, any and all governmental, public utility and private
restrictions, covenants, reservations, easements, licenses or other agreements
which may be granted by Borrower after the Closing Date and which do not
materially and adversely affect (A) the ability of Borrower to pay any of its
obligations to any Person as and when due, (B) the marketability of title to the
Facility, (C) the fair market value of the Facility or the fair market value of
the Facility as of the date of Completion of Construction, or (D) the
renovation, use or operation of the Facility as of the Closing Date and
thereafter, and (v) all other Liens to which Mezzanine Lender in its sole
discretion has given its prior written consent.
"Permitted Transfers" shall mean, provided that no Event of Default
-------------------
has occurred, (i) Permitted Encumbrances; (ii) all transfers of worn out or
obsolete furnishings, fixtures or equipment that are not reasonably necessary
for the operation of the Facility or, if necessary for the operation of the
Facility, are replaced with equivalent property; (iii) all Leases which are not
Material Leases; (iv) all Material Leases which have been approved by First
Mortgage Lender in writing; (v) transfers of Equity Interests which in the
aggregate during the term of the Mezzanine Loan (a) do not exceed 49% of the
total interests in the Borrower or Operator, as applicable, and (b) do not
result in any partner's, member's, shareholder's, beneficial owner's or other
Person's interest in the Borrower or Operator (other than the Persons who own
interests in the Borrower or Operator on the Closing Date), as applicable,
exceeding 49% of the
13
total interests in the Borrower or Operator, as applicable; (vi) any other
transfer of Equity Interests provided that (a) First Mortgage Lender shall have
consented to such transfer or transfers, (b) acceptable opinions relating to
such transfer or transfers shall have been delivered by Borrower or Operator, as
applicable, to Mezzanine Lender (including without limitation tax and bankruptcy
opinions), and (d) Borrower or Operator, as applicable, pays all reasonable
expenses incurred by Mezzanine Lender in connection with such transfer or
transfers; and (vii) a transfer of the Facility to a single purchaser including,
but not limited to, a transfer of the Facility by Borrower to the Operator
(pursuant to the Operator Lease or Section 8.33 or otherwise), not more than
------------
one time during the term of the Mezzanine Loan, provided that prior to such
transfer (a) First Mortgage Lender shall have consented to such transfer, (b)
acceptable opinions relating to such transfer shall have been delivered by
Borrower to Mezzanine Lender (including without limitation tax and bankruptcy
opinions), (c) the transferee assumes in writing all obligations of the
transferor under the Mezzanine Loan Documents and executes and delivers such
other documentation as may be required by Mezzanine Lender and (d) Borrower or
Operator pays all reasonable expenses incurred by Mezzanine Lender in connection
with such transfer.
"Physical Plant Standards" has the meaning provided in Section
------------------------ -------
4.1(d)(AK)(vii).
---------------
"Principal Indebtedness" means the principal amount of the entire
----------------------
Mezzanine Loan outstanding as the same may be increased or decreased, as a
result of prepayment or otherwise, from time to time.
"Proceeds" means all of the "Proceeds" defined and described in the
--------
Mezzanine Mortgages.
"Recourse Distributions" has the meaning provided in Section 8.14.
---------------------- ------------
"Remedial Work" has the meaning provided in Section 5.1(b)(D)(i).
------------- ------- ------------
"Rents" means all of the "Rents" defined and described in the
-----
Mezzanine Mortgages.
"Required Debt Service Payment" means, on any Payment Date, the Debt
-----------------------------
Service then due and payable by Borrower.
"Secretary's Certificate" means, with respect to Operator, the
-----------------------
certificate in form and substance satisfactory to Mezzanine Lender in Mezzanine
Lender's reasonable discretion dated as of the Closing Date.
14
"Single-Purpose Entity" means a corporation, limited partnership,
---------------------
limited liability company or business trust which, at all times since its
formation and thereafter (a) was and will be organized solely for the purpose
of owning and/or operating the Facility, (b) has not and will not engage in any
business unrelated to the ownership and/or operation of the Facility, (c) has
not and will not have any assets other than those related to the Facility, (d)
has not and will not engage in, seek or consent to any dissolution, winding up,
liquidation, consolidation or merger, and, except as otherwise expressly
permitted by this Agreement, has not and will not engage in, seek or consent to
any asset sale, transfer of partnership, membership, shareholder or beneficial
interests, or (A) as to The Harbor Village Business Trust, amend its trust
agreement or trust certificate, and (B) as to any other entity which owns or
operates the Facility, amend its limited partnership agreement, articles of
incorporation, articles of organization, certificate of formation or operating
agreement (as applicable), with respect to those portions of such documents
relating to its compliance with the definition of "Single-Purpose Entity",
without the prior written consent of Mezzanine Lender, which consent shall not
be unreasonably withheld, and, after a Securitization, written confirmation by
the Rating Agencies that a proposed amendment will not result in a downgrade,
withdrawal or qualification of the then applicable ratings assigned to the
securities issued in a Securitization, (e) if such entity is a limited
partnership, has and will have as its only general partners, general partners
which are and will be Single-Purpose Entities which are corporations, (f) if
such entity is a business trust, has and will have, as its trustee, an
Independent Eligible Trustee, (g) if such entity is a corporation, at all
relevant times, has and will have at least one Independent Director, (h) the
board of directors of such entity has not taken and will not take any action
requiring the unanimous affirmative vote of 100% of the members of the board of
directors unless all of the directors, including without limitation all
Independent Directors, shall have participated in such vote, (i) has not failed
and will not fail to correct any known misunderstanding regarding the separate
identity of such entity, (j) if such entity is a limited liability company, has
and will have at least one member that is and will be a Single-Purpose Entity
which is and will be a corporation, and such corporation is and will be the
managing member of such limited liability company, (k) without the unanimous
consent of all of the partners, directors (including without limitation all
Independent Directors), members, beneficial owners or trustees, as applicable,
has not and will not with respect to itself or to any other entity in which it
has a direct or indirect legal or beneficial ownership interest (a) file a
bankruptcy, insolvency or reorganization petition or otherwise institute
insolvency proceedings or otherwise seek any relief under any laws relating to
the relief from debts or the protection of debtors generally; (b) seek or
consent to the appointment of a receiver, liquidator, assignee, trustee,
sequestrator, custodian or any similar official for such entity or all or any
portion of such entity's properties; (c) make any assignment for the benefit of
such entity's creditors; or (d) take any action that might cause such entity to
become insolvent, (l) has maintained and will maintain its accounts, books and
records separate from any other person or entity, (m) has maintained and will
maintain its books, records, resolutions and agreements as official records,
(n) has not commingled and will not commingle its funds or assets with those of
15
any other entity, (o) has held and will hold its assets in its own name, (p) has
conducted and will conduct its business in its name, (q) has maintained and will
maintain its financial statements, accounting records and other entity documents
separate from any other person or entity, (r) has paid and will pay its own
liabilities out of its own funds and assets, (s) has observed and will observe
all partnership, corporate, limited liability company or business trust
formalities as applicable, (t) has maintained and will maintain an arms-length
relationship with its affiliates, (u) (a) if such entity owns the Facility, has
and will have no indebtedness other than the Indebtedness, the First Mortgage
Loan, the SELCO Debt and unsecured trade payables in the ordinary course of
business relating to the ownership and operation of the Facility which (1) do
not exceed, at any time, a maximum amount of Ten Thousand Dollars ($10,000) and
(2) are paid within ninety (90) days of the date incurred, or (b) if such entity
operates the Facility, has and will have no indebtedness other than as permitted
under this Loan Agreement and unsecured trade payables in the ordinary course of
business relating to the ownership and/or operation of the Facility which (1) do
not exceed, at any time, one percent (1%) of the Mezzanine Loan Amount plus the
Loan Amount (as defined in the First Mortgage Loan Agreement) and (2) are paid
within ninety (90) days of the date incurred, (v) has not and will not assume or
guarantee or become obligated for the debts of any other entity or hold out its
credit as being available to satisfy the obligations of any other entity except
for the Indebtedness, (w) has not acquired and will not acquire obligations or
securities of its partners, members, beneficial owners, trustees or
shareholders, (x) has allocated and will allocate fairly and reasonably shared
expenses, including, without limitation, shared office space and uses separate
stationery, invoices and checks, (y) except pursuant hereto, has not and will
not pledge its assets for the benefit of any other person or entity (other than,
with respect to Operator, the pledge by the Operator of Certificate A (as
defined in the SELCO Loan Agreement)), (z) has held and identified itself and
will hold itself out and identify itself as a separate and distinct entity under
its own name and not as a division or part of any other person or entity, (aa)
has not made and will not make loans to any person or entity, (bb) has not and
will not identify its partners, members beneficial owners, trustees or
shareholders, or any affiliates of any of them as a division or part of it, (cc)
if such entity is a limited liability company, such entity shall dissolve only
upon the bankruptcy of the managing member, and such entity's articles of
organization, certificate of formation and/or operating agreement, as
applicable, shall contain such provision, (dd) has not entered and will not
enter into or be a party to, any transaction with its partners, members,
beneficial owners, trustees, shareholders or its affiliates except in the
ordinary course of its business and on terms which are intrinsically fair and
are no less favorable to it than would be obtained in a comparable arms-length
transaction with an unrelated third party, (ee) has paid and will pay the
salaries of its own employees from its own funds, (ff) has maintained and will
maintain adequate capital in light of its contemplated business operations and
(gg) if such entity is a limited liability company, limited partnership or
trust, and such entity has one or more managing members, general partners or
trustees, as applicable, then such entity shall continue (and not dissolve) for
so long as a solvent managing member, general partner or trustee, as applicable,
exists and such entity's
16
organizational documents shall contain such provision.
"Tax Fair Market Value" means, with respect to the Facility, the fair
---------------------
market value of the Facility, and (x) shall not include the value of any
personal property or other property that is not an "interest in real property"
within the meaning of Treasury Regulation (S)(S)1.860G-2 and 1.856-3(c), or is
not "qualifying real property" within the meaning of Treasury Regulation
(S)1.593-11(b)(iv), and (y) shall be reduced by the "adjusted issue price"
(within the meaning of Code (S) 1272(a)(4)) (the "Tax Adjusted Issue Price") of
------------------------
any indebtedness, other than the Mezzanine Loan, secured by a Lien affecting the
Facility, which Lien is prior to or on a parity with the Lien created under the
Mezzanine Mortgages.
"Title Instruction Letter" means an instruction letter in form and
------------------------
substance satisfactory to Mezzanine Lender in Mezzanine Lender's sole
discretion.
"Title Insurance Policy" means, with respect to the Facility, the loan
----------------------
policy of title insurance for the Facility issued by Title Insurer with respect
to the Facility in an amount acceptable to Mezzanine Lender and insuring the
second priority lien in favor of Mezzanine Lender created by the Mezzanine
Mortgage and, as to the Leasehold Estate, the Mezzanine Leasehold Mortgage and
acceptable to Mezzanine Lender in Mezzanine Lender's reasonable discretion.
"Title Insurer" means Lawyer's Title Insurance Corporation and any
-------------
reinsurer reasonably required by Mezzanine Lender and/or any other nationally
recognized title insurance company acceptable to Mezzanine Lender in Mezzanine
Lender's reasonable discretion, provided, however, that the reinsurer of any
Title Insurance Policy may include, in amounts reasonably acceptable to
Mezzanine Lender, Chicago Title Insurance Company, First American Title
Insurance Company or Xxxxxxx Title Insurance Company.
"Transaction Costs" means all fees, costs, expenses and disbursements
-----------------
paid or payable by Borrower relating to the Transactions, including, without
limitation, all appraisal fees, legal fees, accounting fees and the costs and
expenses described in Section 8.24.
------- ----
"Transactions" means each of the transactions contemplated by the
------------
Mezzanine Loan Documents.
"Transfer" means any conveyance, transfer (including, without
--------
limitation, any transfer of any direct or indirect legal or beneficial interest
(including, without limitation, any profit interest) in Borrower or the
Operator), sale, Lease (including, without limitation, any amendment, extension,
modification, waiver or renewal thereof), or Lien, whether by law or otherwise,
of, on or affecting any Collateral, Borrower or the Operator, other than a
Permitted
17
Transfer.
"UCC" means, with respect to the Collateral, the Uniform Commercial
---
Code in effect in the jurisdiction in which the relevant Collateral is located.
"Yield Maintenance Premium" means if all or any portion of the
-------------------------
Mezzanine Note is accelerated, the amount that, when added to the amount
otherwise due as a result of such acceleration, would be sufficient to purchase
U.S. Obligations (A) having maturity dates on or prior to, but as close as
possible to, successive scheduled Payment Dates (after the date of such
acceleration of the Mezzanine Note) upon which Payment Dates interest and
principal payments would be required under the Mezzanine Note as though the
Maturity Date of the Mezzanine Note was the Optional Prepayment Date and (B) in
amounts sufficient to pay all scheduled principal and interest payments on the
Mezzanine Note as if the Maturity Date of the Mezzanine Note was the Optional
Prepayment Date (but without any adjustment of the monthly amortization
schedule).
ARTICLE II
GENERAL TERMS
-------------
Section 2.1. Amount of the Mezzanine Loan. Subject to the terms and
----------------------------
conditions of this Agreement, Mezzanine Lender shall lend Borrower the Mezzanine
Loan Amount.
Section 2.2. Use of Proceeds. Proceeds of the Mezzanine Loan shall
---------------
be deposited into the Construction Sub-Account to be disbursed in accordance
with the First Mortgage Loan Agreement.
Section 2.3. Security for the Mezzanine Loan. The Mezzanine Note and
-------------------------------
Borrower's obligations hereunder and under the other Mezzanine Loan Documents
shall be secured by the Mezzanine Mortgages, the Mezzanine Guaranty, the
Mezzanine Assignments of Leases, the Mezzanine Assignments of Agreements, and
the security interests and Liens granted in this Agreement and in the other
Mezzanine Loan Documents.
Section 2.4. Borrower's Mezzanine Note. (a) Borrower's obligation to
-------------------------
pay the principal of and interest on the Mezzanine Loan (including Late Charges
and Default Rate interest, and the Yield Maintenance Premium, if any), shall be
evidenced by this Agreement and by the Mezzanine Note, duly executed and
delivered by Borrower. The Mezzanine Note shall be payable as to principal,
interest, Late Charges and Default Rate interest and Yield Maintenance
18
Premium, if any, as specified in this Agreement, with a final maturity on the
Maturity Date. Borrower shall pay all outstanding Indebtedness on the Maturity
Date.
(b) Mezzanine Lender is hereby authorized, at its sole option, to
endorse on a schedule attached to the Mezzanine Note (or on a continuation of
such schedule attached to the Mezzanine Note and made a part thereof) an
appropriate notation evidencing the date and amount of each payment of
principal, interest, Late Charges and Default Rate interest and Yield
Maintenance Premium, if any, in respect thereof, which books and records shall
be made available to Borrower, at Borrower's sole cost and expense on reasonable
advance notice, for examination at Mezzanine Lender's offices.
Section 2.5. Principal and Interest Payments.
-------------------------------
(a) Accrual of Interest. Interest shall accrue on the outstanding
-------------------
principal balance of the Mezzanine Note and all other amounts due to Mezzanine
Lender under the Mezzanine Loan Documents at the Interest Rate.
(b) Payment of Interest. Commencing on the first Payment Date
-------------------
after the Closing Date, Borrower shall pay to Mezzanine Lender monthly payments
of accrued interest only on the Principal Indebtedness. Each payment required to
be made by Borrower pursuant to this Section 2.5(b) is hereinafter sometimes
------- ------
referred to as a "Base Payment."
------------
(c) Payment Dates. All payments required to be made pursuant to
-------------
paragraphs (a) and (b) above shall be made beginning on the first Payment Date
----------
immediately after the end of the second Interest Accrual Period; provided,
however, that Borrower shall pay interest for the first Interest Accrual Period
on the Closing Date.
(d) Calculation of Interest. Interest shall accrue on the
-----------------------
outstanding principal balance of the Mezzanine Loan and all other amounts due to
Mezzanine Lender under the Mezzanine Loan Documents commencing upon the Closing
Date. Interest shall be computed on the actual number of days elapsed in each
year over a 360-day year.
(e) Default Rate Interest. Upon the earlier to occur of a Late
---------------------
Payment or an Event of Default, if any, the entire unpaid amount outstanding
hereunder and under the Mezzanine Note will bear interest at the Default Rate.
(f) Late Charge. If Borrower fails to make any payment of any
-----------
sums due under the Mezzanine Loan Documents after the same is due, and the same
remains unpaid after the expiration of any applicable cure period, if any,
Borrower shall pay a Late Charge.
19
(g) Maturity Date. On the Maturity Date Borrower shall pay to
-------------
Mezzanine Lender all amounts owing under the Mezzanine Loan Documents, including
without limitation, interest, principal, Late Charges and Default Rate interest,
and any Yield Maintenance Premium. Notwithstanding the foregoing, it is the
intent of the parties that on the Stabilization Date Payment Date the Mezzanine
Loan will be rolled up into the First Mortgage Loan as described in Section
-------
8.32. The Yield Maintenance Premium shall only be due and payable on the date of
----
acceleration of the Mezzanine Note.
(h) Payment of Liquidation Proceeds. Upon the receipt of any
-------------------------------
Liquidation Proceeds, the Borrower shall be required, on the date of receipt
thereof, to apply the related Net Liquidation Proceeds After Debt Service to the
prepayment of principal on the Mezzanine Note, together with accrued interest
for the entire Interest Accrual Period in which such prepayment occurs, and all
other amounts then due and payable on the Mezzanine Note. The Borrower shall
notify the Mezzanine Lender of any Liquidation Event not later than one Business
Day following the first date on which the Borrower has knowledge of any
Liquidation Event.
Section 2.6. Intentionally Deleted.
Section 2.7. Prepayment. (a) Borrower may not voluntarily prepay
----------
the Mezzanine Loan prior to the Stabilization Date Payment Date. On and after
the Stabilzation Date Payment Date, Borrower may prepay the Mezzanine Loan
without the payment of a Yeild Maintenance Premium.
(b) If Borrower is required by Lender under the provisions of the
Mezzanine Mortgage to prepay the Mezzanine Loan or any portion thereof in the
event of damage to or destruction of or a Taking of all or any portion of the
Facility, Borrower shall prepay the Mezzanine Loan to the full extent of the Net
Liquidation Proceeds after Debt Service, and there shall be no Yield Maintenance
Premium or penalty assessed against Borrower by reason of such prepayment.
Section 2.8. Application of Payments. Prior to the occurrence and
-----------------------
continuance of an Event of Default, all proceeds of any repayment, including
prepayments, of the Mezzanine Loan shall be applied to pay: first, any costs
-----
and expenses of Mezzanine Lender, including, without limitation, the Mezzanine
Lender's reasonable attorney's fees and disbursements actually arising as a
result of such repayment or reasonably expended by Mezzanine Lender to protect
the Collateral; second, accrued and unpaid interest at, the Interest Rate;
------
third, to the Principal Indebtedness and fourth, any other amounts then due and
----- ------
owing under the Mezzanine Loan Documents. After the occurrence and during the
continuance of an Event of Default, all proceeds of repayment, including any
payment or recovery on the Collateral shall, unless
20
otherwise provided in the Mezzanine Mortgages, be applied to amounts which
Borrower is obligated to pay under the Mezzanine Loan Documents in such order
and in such manner as Mezzanine Lender shall elect in its sole discretion.
Section 2.9. Payment of Debt Service, Method and Place of Payment. (a)
----------------------------------------------------
Except as otherwise specifically provided herein, all payments and prepayments
under this Agreement and the Mezzanine Note shall be made to Mezzanine Lender
not later than 12:00 noon, New York City time, on the date when due and shall be
made in lawful money of the United States of America in federal or other
immediately available funds to an account specified to Borrower by Mezzanine
Lender in writing, and any funds received by Mezzanine Lender after such time,
for all purposes hereof, shall be deemed to have been paid on the next
succeeding Business Day.
(b) All payments made by Borrower hereunder or by Borrower under the
other Mezzanine Loan Documents, shall be made irrespective of, and without any
deduction for, any set-offs or counterclaims.
(c) Unless a Cash Management Event has occurred and is continuing,
Borrower shall pay to the Mezzanine Lender or its designee, on or prior to each
Payment Date, the Required Debt Service Payment for such Payment Date. If a
Cash Management Event has occurred and is continuing, the First Mortgage Lender,
its designee or the Cash Collateral Account Bank, shall transfer to Mezzanine
Lender the amounts deposited in the Mezzanine Debt Service Payment Sub-Account
in accordance with the First Mortgage Loan.
Section 2.10. Taxes. All payments made by Borrower under this
-----
Agreement and under the other Mezzanine Loan Documents shall be made free and
clear of, and without deduction or withholding for or on account of, any present
or future income, stamp or other taxes, levies, imposts, duties, charges, fees,
deductions or withholdings, now or hereafter imposed, levied, collected,
withheld or assessed by any Governmental Authority (other than taxes imposed on
the income of Mezzanine Lender).
Section 2.11. Intentionally deleted.
Section 2.12. Intentionally deleted.
Section 2.13. Security Agreement. (a) Pledge of Accounts. To
------------------ ------------------
secure the full and punctual payment and performance of all of the Indebtedness,
each of Borrower and Operator hereby sells, assigns, conveys, pledges and
transfers to Mezzanine Lender and grants to Mezzanine Lender a second and
continuing security interest (subject to the security interest of the First
Mortgage Lender therein) in and to, the following property, whether now owned or
21
existing or hereafter acquired or arising and regardless of where located
(collectively, the "Account Collateral"):
------------------
(i) all of the right, title and interest of Borrower and Operator
in the Cash Collateral Account (including all Sub-Accounts) and all Money
(except to the extent funds therein constitute any SELCO Required Quarterly
Payment) and Permitted Investments, if any, from time to time deposited or
held in the Cash Collateral Account;
(ii) all of the right, title and interest of Borrower and Operator
in the Collection Account and Security Deposit Account and all Money, if
any, from time to time deposited or held in the Collection Account and
Security Deposit Account;
(iii) all interest, dividends, Money, Instruments and other
property from time to time received, receivable or otherwise payable in
respect of, or in exchange for, any of the foregoing; and
(iv) to the extent not covered by clauses (i), (ii), or (iii)
----------- ---- -----
above, all Proceeds and products of any or all of the foregoing.
(b) Covenants. (A) Borrower covenants that (i) all Rents (as defined
---------
in the Mezzanine Mortgage) and Money received by Borrower, shall be deposited by
Borrower directly into the Collection Account or the Security Deposit Account,
as applicable, in accordance with Section 2.12(a) (provided, however, Lessor
------- -------
Basic Rent, SELCO Basic Rent and any Supplemental Rent (as each such term is
defined in the Operator Lease) to which Borrower is entitled shall not be
deposited in the Collection Account) and (ii) so long as any portion of the
Indebtedness is outstanding, Borrower shall not open (nor permit Operator or any
Person to open) any other account for the collection of Rents (as defined in the
Mezzanine Mortgage), Money or other items of Gross Revenue, other than a
replacement Collection Account or Security Deposit Account approved by Mezzanine
Lender in Mezzanine Lender's reasonable discretion.
(B) Operator covenants that (i) all Rents (as defined in the
Mezzanine Leasehold Mortgage) and Money received by Operator shall be deposited
by Operator directly into the Collection Account or the Security Deposit
Account, as applicable, in accordance with Section 2.12(a) and (ii) so long as
------- -------
any portion of the Indebtedness is outstanding, Operator shall not open any
other account for the collection of Rents (as defined in the Mezzanine Leasehold
Mortgage), Money or other items of Gross Revenue, other than a replacement
Collection Account or Security Deposit Account approved by Mezzanine Lender in
Mezzanine Lender's reasonable discretion.
22
(c) Instructions and Agreements. On or before the Closing Date,
---------------------------
Borrower and Operator will submit to the Collection Account Bank for the
Facility a Collection Account Agreement to be executed by the Collection Account
Bank.
(d) Financing Statements; Further Assurances. Borrower and Operator
----------------------------------------
will execute and deliver to Mezzanine Lender for filing financing statements in
connection with the Account Collateral in the form required to properly perfect
Mezzanine Lender's security interest in the Account Collateral to the extent
that it may be perfected by such a filing. Each of Operator and Borrower agrees
that at any time and from time to time, at the expense of Borrower and/or
Operator, Borrower and Operator shall promptly execute and deliver all further
instruments, and take all further action, that Mezzanine Lender may request, in
order to perfect and protect the pledge and security interest granted or
purported to be granted hereby, or to enable Mezzanine Lender to exercise and
enforce Mezzanine Lender's rights and remedies hereunder with respect to, the
Account Collateral.
(e) Transfers and Other Liens. Each of Borrower and Operator agrees
-------------------------
that it will not sell or otherwise dispose of any of the Account Collateral
other than pursuant to the terms hereof, the First Mortgage Loan Documents and
of the other Loan Documents, or create or permit to exist any Lien upon or with
respect to all or any of the Account Collateral, except for the Lien granted to
Mezzanine Lender under this Agreement and to First Mortgage Lender under the
First Mortgage Loan Agreement.
(f) Mezzanine Lender's Reasonable Care. Beyond the exercise of
----------------------------------
reasonable care in the custody thereof, Mezzanine Lender shall not have any duty
as to any Account Collateral or any income thereon in its possession or control
or in the possession or control of any agents for, or of Mezzanine Lender, or
the preservation of rights against any Person or otherwise with respect thereto
other than the gross negligence or willful misconduct of Mezzanine Lender or its
agents, employees or bailees. Mezzanine Lender shall be deemed to have exercised
reasonable care in the custody of the Account Collateral in its possession if
the Account Collateral is accorded treatment substantially equal to that which
Mezzanine Lender accords its own property, it being understood that Mezzanine
Lender shall not be liable or responsible for (i) any loss or damage to any of
the Account Collateral, or for any diminution in value thereof from a loss of,
or delay in Mezzanine Lender's acknowledging receipt of, any wire transfer from
the Collection Account Bank or (ii) any loss, damage or diminution in value by
reason of the act or omission of Mezzanine Lender, or Mezzanine Lender's agents,
employees or bailees other than for gross negligence or willful misconduct of
Mezzanine Lender or its agents, employees or bailees.
(g) Mezzanine Lender Appointed Attorney-In-Fact. Each of Borrower and
-------------------------------------------
Operator, respectively, hereby irrevocably constitutes and appoints Mezzanine
Lender as
23
Borrower's and Operator's true and lawful attorney-in-fact, with full power of
substitution, at any time after the occurrence and during the continuance of an
Event of Default to execute, acknowledge and deliver any instruments and to
exercise and enforce every right, power, remedy, option and privilege of
Borrower and Operator with respect to the Account Collateral, and do in the
name, place and stead of Borrower and Operator, all such acts, things and deeds
for and on behalf of and in the name of Borrower and Operator with respect to
the Account Collateral, which Borrower and Operator could or might do or which
Mezzanine Lender may deem necessary or desirable to more fully vest in Mezzanine
Lender the rights and remedies provided for herein with respect to the Account
Collateral and to accomplish the purposes of this Agreement. The foregoing
powers of attorney are irrevocable and coupled with an interest.
(h) Continuing Security Interest; Termination. This Section 2.13
----------------------------------------- ------- ----
shall create a continuing pledge of and security interest in the Account
Collateral and shall remain in full force and effect until payment in full of
the Indebtedness. Upon payment in full of the Indebtedness, each of Borrower
and Operator shall be entitled to the return, upon their request and at their
expense, of such of the Account Collateral as shall not have been sold or
otherwise applied pursuant to the terms hereof, and Mezzanine Lender shall
execute such instruments and documents as may be reasonably requested by
Borrower or Operator to evidence such termination and the release of the pledge
and Lien hereof, provided, however, that Borrower shall pay within ten (10)
-------- -------
calendar days following written demand all of Mezzanine Lender's expenses in
connection therewith.
Section 2.14. Intentionally deleted.
---------------------
Section 2.15. Supplemental Mortgage Affidavits. The Liens to be created by
--------------------------------
the Mezzanine Mortgages are intended to encumber the Facility described therein
to the full extent of Borrower's obligations under the Mezzanine Loan Documents.
As of the Closing Date, Borrower shall have paid all state, county and municipal
recording and all other taxes imposed upon the execution and recordation of the
Mezzanine Mortgages.
ARTICLE III
CONDITIONS PRECEDENT
--------------------
Section 3.1. Conditions Precedent to the Loan. (a) As a condition
--------------------------------
precedent to the making of the Mezzanine Loan, Borrower shall have satisfied
each of the conditions set forth in Article III of the First Mortgage Loan
Agreement and the following conditions (unless waived by Mezzanine Lender in
accordance with Section 8.4) with respect to the Facility on or before
------- ---
24
the Closing Date:
(A) Mezzanine Loan Documents.
------------------------
(i) Mezzanine Loan Agreement. Borrower shall have executed and
------------------------
delivered this Agreement to Mezzanine Lender.
(ii) Mezzanine Note. Borrower shall have executed and delivered
--------------
to Mezzanine Lender the Mezzanine Note.
(iii) Mezzanine Mortgages. Borrower shall have executed and
-------------------
delivered to Mezzanine Lender the Mezzanine Mortgage and Operator shall
have executed and delivered to Mezzanine Lender the Mezzanine Leasehold
Mortgage and such Mezzanine Mortgages shall have been filed of record in
the appropriate filing offices in the jurisdiction in which the Facility is
located or irrevocably delivered to a title agent for such recordation.
(iv) Mezzanine Assignments of Leases. Borrower shall have
-------------------------------
executed and delivered to Mezzanine Lender the Mezzanine Assignment of
Leases - Borrower and Operator shall have executed and delivered to
Mezzanine Lender the Mezzanine Assignment of Leases - Operator and the
Mezzanine Assignments of Leases shall have been filed of record in the
appropriate filing offices in the jurisdiction in which the Facility is
located or irrevocably delivered to a title agent for such recordation.
(v) Mezzanine Assignments of Agreements. Borrower shall have
-----------------------------------
executed and delivered to Mezzanine Lender the Mezzanine Assignment of
Agreements - Borrower and Operator shall have executed and delivered to
Mezzanine Lender the Mezzanine Assignment of Agreements - Operator and the
Mezzanine Assignments of Agreements shall, to the extent prudent pursuant
to local practice, have been filed of record in the appropriate filing
offices in the jurisdiction in which the Facility is located or irrevocably
delivered to a title agent for such recordation.
(vi) Financing Statements. Borrower and Operator shall have
--------------------
executed and delivered to Mezzanine Lender all financing statements
required by Mezzanine Lender and such financing statements shall have been
filed of record in the appropriate filing offices in each of the
appropriate jurisdictions or irrevocably delivered to a title agent for
such recordation.
(vii) Intentionally deleted.
25
(viii) Intentionally deleted.
(ix) Mezzanine Environmental Guaranty. The Parent shall have
--------------------------------
executed and delivered to Mezzanine Lender the Mezzanine Environmental
Guaranty.
(x) Intentionally deleted.
(xi) Mezzanine Guaranty. Operator shall have executed and
------------------
delivered the Mezzanine Guaranty and executed copies of such agreement
shall have been delivered to Mezzanine Lender.
(B) Opinions of Counsel. Mezzanine Lender shall have received from
-------------------
counsel reasonably satisfactory to Mezzanine Lender, legal opinions in form
and substance satisfactory to Mezzanine Lender in Mezzanine Lender's
reasonable discretion (including without limitation, bankruptcy opinions
regarding Borrower and Operator). All such legal opinions will be addressed
to Mezzanine Lender, dated as of the Closing Date, and in form and
substance reasonably satisfactory to Mezzanine Lender and its counsel. Each
of Borrower and Operator hereby instructs any of the foregoing counsel, to
the extent that such counsel represents Borrower or Operator, to deliver to
Mezzanine Lender such opinions addressed to Mezzanine Lender.
(C) Secretary's, Trustee's and Beneficial Owner's Certificates.
----------------------------------------------------------
Mezzanine Lender shall have received a Beneficial Owner's Certificate with
respect to Beneficial Owner, a Secretary's Certificate with respect to
Operator and a Trustee's Certificate from Borrower's Trustee.
(D) Insurance. Mezzanine Lender shall have received certificates of
---------
insurance demonstrating insurance coverage in respect of the Facility of
types, in amounts, with insurers and otherwise in compliance with the
terms, provisions and conditions set forth in the Mezzanine Mortgages.
Such certificates shall indicate that Mezzanine Lender is an additional
insured as its interests may appear and, to the extent required by the
Mezzanine Mortgages, shall contain a loss payee endorsement in favor of
Mezzanine Lender with respect to the property policies required to be
maintained under the Mezzanine Mortgages and the other policies required to
be maintained hereunder. All insurance policies required to be maintained
hereunder shall be maintained from the Closing Date throughout the term of
this Agreement in the types and amounts required hereunder and under the
Mezzanine Mortgages.
(E) Intentionally deleted.
26
(F) Title Insurance Policy. Mezzanine Lender shall have received (i)
----------------------
a Title Insurance Policy or a marked up commitment (in form and substance
reasonably satisfactory to Mezzanine Lender in Mezzanine Lender's
reasonable discretion) from Title Insurer to issue the Title Insurance
Policy and (ii) a fully executed copy of the Title Instruction Letter from
the Title Insurer.
(G) Intentionally deleted.
(H) Consents, Licenses, Approvals. Mezzanine Lender shall have
-----------------------------
received copies of all consents, licenses and approvals, if any, required
in connection with the execution, delivery and performance by Borrower
under, and the validity and enforceability of, the Mezzanine Loan
Documents, and such consents, licenses and approvals shall be in full force
and effect.
(I) Additional Matters. Mezzanine Lender shall have received such
------------------
other Permits, certificates (including certificates of occupancy reflecting
the use of the Facility as of the Closing Date), opinions, documents and
instruments (including without limitation, written proof from the
appropriate Governmental Authority regarding the zoning of the Facility in
form and substance reasonably satisfactory to Mezzanine Lender in Mezzanine
Lender's reasonable discretion) relating to the Mezzanine Loan as may have
been reasonably requested by Mezzanine Lender and all other documents and
all legal matters in connection with the Mezzanine Loan shall be
satisfactory in form and substance to Mezzanine Lender.
(J) Representations and Warranties. The representations and
------------------------------
warranties herein and in the other Mezzanine Loan Documents shall be true
and correct in all material respects.
(K) Intentionally deleted.
(L) No Injunction. No law or regulation shall have been adopted, no
-------------
order, judgment or decree of any Governmental Authority shall have been
issued, and no litigation shall be pending or threatened, which in the good
faith judgment of Mezzanine Lender would enjoin, prohibit or restrain, or
impose or result in a Material Adverse Effect upon the making or repayment
of the Mezzanine Loan or the consummation of the Transactions.
(M) Transaction Costs. Borrower shall have paid or caused to be paid
-----------------
all Transaction Costs.
(b) Mezzanine Lender shall not make the Mezzanine Loan unless and
until each of the applicable conditions precedent set forth in Section 3.1(a) is
------- ------
satisfied and until Borrower and Operator each provides any other information
reasonably required by Mezzanine
27
Lender.
(c) In connection with the Mezzanine Loan, Borrower and Operator shall
execute and/or deliver to Mezzanine Lender all additions, amendments,
modifications and supplements to the items set forth in this Section 3.1(a),
--------------
including without limitation, amendments, modifications and supplements to the
Mezzanine Note, Mezzanine Mortgages, Mezzanine Assignments of Leases and
Mezzanine Assignments of Agreements, if reasonably requested by Mezzanine Lender
to effectuate the provisions hereof, and to provide Mezzanine Lender with the
full benefit of the security intended to be provided under the Mezzanine Loan
Documents. Without in any way limiting the foregoing, such additions,
modifications and supplements shall include those deemed reasonably desirable by
Mezzanine Lender's counsel in the jurisdiction in which the Facility is located.
(d) The making of the Mezzanine Loan shall constitute, without the
necessity of specifically containing a written statement to such effect, a
confirmation, representation and warranty by Borrower and Operator to Mezzanine
Lender that all of the applicable conditions to be satisfied in connection with
the making of the Mezzanine Loan have been satisfied (unless waived by Mezzanine
Lender in accordance with Section 8.4,) and that all of the representations and
------- ---
warranties of Borrower set forth in the Mezzanine Loan Documents are true and
correct in all material respects as of the date of the making of the Mezzanine
Loan.
Section 3.2. Form of Mezzanine Loan Documents and Related Matters.
----------------------------------------------------
The Mezzanine Loan Documents and all of the certificates, agreements, legal
opinions and other documents and papers referred to in this Article III, unless
-----------
otherwise specified, shall be delivered to Mezzanine Lender, and shall be
reasonably satisfactory in form and substance to Mezzanine Lender.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
------------------------------
Section 4.1. Representations and Warranties of Borrower and Operator.
-------------------------------------------------------
(a) Closing Date Representations and Warranties of Borrower. Borrower
-------------------------------------------------------
represents and warrants that, as of the Closing Date:
(A) Organization. Borrower (i) is a duly organized and validly
------------
existing Entity in good standing under the laws of the State of its
formation, (ii) is duly qualified as a foreign Entity in each jurisdiction
in which the nature of its business, the Facility or any of the Collateral
makes such qualification necessary or desirable, (iii) has the requisite
28
Entity power and authority to carry on its business as now being conducted,
and (iv) has the requisite Entity power to execute and deliver, and perform
its obligations under, the Mezzanine Loan Documents executed by Borrower.
(B) Authorization. The execution and delivery by Borrower of the
-------------
Mezzanine Loan Documents to which it is a party, Borrower's performance of
its obligations thereunder and the creation of the security interests and
Liens provided for by Borrower in the Mezzanine Loan Documents (i) have
been duly authorized by all requisite Entity action on the part of
Borrower, (ii) will not violate any provision of any applicable Legal
Requirements, any order of any court or other Governmental Authority, any
organizational document of Borrower or any indenture or agreement or other
instrument to which Borrower is a party or by which Borrower is bound,
(iii) will not be in conflict with, result in a breach of, or constitute
(with due notice or lapse of time or both) a default under, or result in
the creation or imposition of any Lien of any nature whatsoever upon any of
the property or assets of Borrower pursuant to, any such indenture or
agreement or instrument except as permitted under any of the Mezzanine Loan
Documents and (iv) have been duly executed and delivered by Borrower.
Except for the Mezzanine Mortgage, the Mezzanine Assignment of Rents-
Borrower, Mezzanine Assignment of Agreements-Borrower, and a memorandum of
the Operator Lease, all of which must be recorded in the Office of the
Recorder of Deeds of Xxxx County, Illinois and the Financing Statements,
which must be recorded in the Office of the Recorder of Deeds of Xxxx
County, Illinois and filed in the offices of the Secretary of the and the
Secretary of the State of Delaware and those consents, approvals and
authorizations obtained or filed on or prior to the Closing Date, Borrower
is not required to obtain any consent, approval or authorization from, or
to file any declaration or statement with, any Governmental Authority or
other agency in connection with or as a condition to the execution,
delivery or performance of the Mezzanine Loan Documents. The Mezzanine
Loan Documents to which Borrower is a party have been duly authorized,
executed and delivered by Borrower.
(C) Single-Purpose Entity.
---------------------
(i) Borrower has been, and will continue to be, a duly formed
and existing Entity, and a Single-Purpose Entity.
(ii) Borrower at all times since its formation has complied, and
will continue to comply, with the provisions of all of its organizational
documents, and the laws of the state in which Borrower was formed relating
to the Entity.
(iii) All customary formalities regarding the Entity existence
of
29
Borrower have been observed at all times since its formation and will
continue to be observed.
(iv) Borrower has been at all times since its formation and will
continue to be adequately capitalized in light of the nature of its
business.
(b) Additional Closing Date Borrower Representations and Warranties.
---------------------------------------------------------------
Borrower represents and warrants that as of the Closing Date:
(A) Litigation. There are no actions, suits or proceedings at law or
----------
in equity by or before any Governmental Authority or other agency now
pending and served or, to the knowledge of Borrower, threatened against
Borrower or the Facility where a judgment adverse to Borrower would be
reasonably likely to individually or in the aggregate result in a Material
Adverse Effect.
(B) Agreements. Borrower is not a party to any agreement or
----------
instrument or subject to any restriction which is likely to have a Material
Adverse Effect. Borrower is not in default in any material respect in the
performance, observance or fulfillment of any of the obligations, covenants
or conditions contained in any agreement or instrument to which it is a
party or by which Borrower is bound would be reasonably likely result in a
Material Adverse Effect.
(C) No Bankruptcy Filing. Borrower is not contemplating either the
--------------------
filing of a petition by it under any state or federal bankruptcy or
insolvency laws or the liquidation of all or a major portion of Borrower's
assets or property, and Borrower has no knowledge of any Person
contemplating the filing of any such petition against it.
(D) Full and Accurate Disclosure. No statement of fact made by or on
----------------------------
behalf of Borrower in the Mezzanine Loan Documents or in any other document
or certificate delivered to Mezzanine Lender by Borrower contains any
untrue statement of a material fact or omits to state any material fact
necessary to make statements contained herein or therein not misleading.
There is no fact presently known to Borrower which has not been disclosed
to Mezzanine Lender which would have a Material Adverse Effect nor, as far
as Borrower can foresee, would have a Material Adverse Effect.
(E) Location of Chief Executive Offices. The location of Borrower's
-----------------------------------
principal place of business and the location of Borrower's chief executive
office is c/o Wilmington Trust Company, 0000 Xxxxx Xxxxxx Xxxxxx,
Xxxxxxxxxx, Xxxxxxxx 00000-0000.
(F) Compliance. Borrower and, to the best of Borrower's knowledge,
----------
30
Borrower's ownership of the Facility comply in all material respects with
all applicable Legal Requirements, including without limitation, building
and zoning ordinances and codes. Borrower is not in default or violation
of any order, writ, injunction, decree or demand of any Governmental
Authority, the violation of which is reasonably likely to have a Material
Adverse Effect.
(G) Other Debt and Obligations. Borrower has no financial obligation
--------------------------
under any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which Borrower is a party, or by which Borrower
is bound, other than the First Mortgage Loan, the SELCO Debt and unsecured
trade payables incurred in the ordinary course of business relating to the
ownership of the Facility which do not exceed, at any time, a maximum
amount of Ten Thousand Dollars ($10,000) and are paid within ninety (90)
days of the date incurred, and other than obligations under the Mezzanine
Mortgage and the other Mezzanine Loan Documents. Except for the SELCO Debt
and the First Mortgage Loan, Borrower has not borrowed or received other
debt financing that has not been heretofore repaid in full and Borrower has
no known material contingent liabilities.
(H) ERISA. Each Plan and, to the knowledge of Borrower, each
-----
Multiemployer Plan, is in compliance in all material respects with, and has
been administered in all material respects in compliance with, its terms
and the applicable provisions of ERISA, the Code and any other federal or
state law, and no event or condition has occurred as to which Borrower
would be under an obligation to furnish a report to Mezzanine Lender under
Section 5.1(a)(T).
------- ---------
(I) Solvency. Borrower (i) has not entered into this Agreement or any
--------
Mezzanine Loan Document with the actual intent to hinder, delay, or defraud
any creditor, and (ii) has received reasonably equivalent value in exchange
for its obligations under the Mezzanine Loan Documents. Giving effect to
the transactions contemplated hereby, the fair saleable value of Borrower's
assets exceeds and will, immediately following the execution and delivery
of this Agreement, exceed Borrower's total liabilities, including, without
limitation, subordinated, unliquidated, or disputed liabilities or
Contingent Obligations. The fair saleable value of Borrower's assets is
and will, immediately following the execution and delivery of this
Agreement, be greater than Borrower's probable liabilities, including the
maximum amount of its Contingent Obligations or its debts as such debts
become absolute and matured. Borrower's assets do not and, immediately
following the execution and delivery of this Agreement, will not,
constitute unreasonably small capital to carry out its business as
conducted or as proposed to be conducted. Borrower does not intend to, and
does not believe that it will, incur debts and liabilities (including,
without limitation, Contingent Obligations and other commitments) beyond
its ability to pay such debts as they mature (taking into account the
31
timing and amounts to be payable on or in respect of obligations of
Borrower).
(J) Not Foreign Person. Borrower is not a "foreign person" within the
------------------
meaning of (S) 1445(f)(3) of the Code.
(K) Intentionally Omitted.
(L) Investment Company Act; Public Utility Holding Company Act.
----------------------------------------------------------
Borrower is not (i) an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of
1940, as amended, (ii) a "holding company" or a "subsidiary company" of a
"holding company" or an "affiliate" of either a "holding company" or a
"subsidiary company" within the meaning of the Public Utility Holding
Company Act of 1935, as amended, or (iii) subject to any other federal or
state law or regulation which purports to restrict or regulate its ability
to borrow money.
(M) No Defaults. No Default or Event of Default exists under or with
-----------
respect to any Mezzanine Loan Document.
(N) Labor Matters. Borrower is not a party to any collective
-------------
bargaining agreements.
(O) Title to the Mortgaged Property. Borrower owns good,
-------------------------------
indefeasible, marketable and insurable fee simple title to the Facility,
free and clear of all Liens, other than the Permitted Encumbrances
applicable to the Facility. Except as set forth in the Operator Lease,
Borrower has not granted any options to purchase or rights of first refusal
with respect to the Facility.
(P) Use of Proceeds; Margin Regulations. Borrower will use the
-----------------------------------
proceeds of the Mezzanine Loan for the purposes described in Section 2.2.
------- ---
No part of the proceeds of the Mezzanine Loan will be used for the purpose
of purchasing or acquiring any "margin stock" within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System or for
any other purpose which would be inconsistent with such Regulation U or any
other Regulations of such Board of Governors, or for any purposes
prohibited by applicable Legal Requirements.
(Q) Intentionally deleted.
(R) Intentionally deleted.
32
(S) Intentionally deleted.
(T) Intentionally deleted.
(U) Environmental Matters. Borrower represents, warrants and
---------------------
covenants as to itself and the Facility:
(i) There is no Environmental Claim pending or, to Borrower's
knowledge, threatened, and no penalties arising under Environmental Laws
have been assessed against Borrower.
(ii) There have been no environmental investigations, studies,
audits, reviews or other analyses conducted by or on behalf of Borrower
that are in the possession or control of Borrower in relation to the
Facility which have not been provided to Mezzanine Lender.
(V) Intentionally deleted.
(W) Intentionally deleted.
(X) Mezzanine Mortgages and Other Liens. The Mezzanine Mortgage
-----------------------------------
creates a valid and enforceable second mortgage Lien on the Borrower's fee
simple title to the Facility as security for the repayment of the
Indebtedness subject only to the Permitted Encumbrances applicable to the
Facility. Each Collateral Security Instrument executed by Borrower
establishes and creates a valid, subsisting and enforceable Lien on and a
security interest in, or claim to, the rights and property described
therein. All property covered by such Collateral Security Instrument which
is subject to the UCC is subject to a UCC financing statement filed and/or
recorded, as appropriate, (or irrevocably delivered to an agent for such
recordation or filing) in all places necessary to perfect a valid Lien
(second in priority to the First Mortgage Loan) with respect to the rights
and property that are the subject of such Collateral Security Instrument to
the extent governed by the UCC.
(Y) Enforceability. The Mezzanine Loan Documents executed by Borrower
--------------
in connection with the Mezzanine Loan, including, without limitation, any
Collateral Security Instrument executed by Borrower, are the legal, valid
and binding obligations of Borrower, enforceable against Borrower in
accordance with their terms, subject to bankruptcy, insolvency and other
limitations on creditors' rights generally and to equitable principles.
Such Mezzanine Loan Documents are, as of the Closing Date, not subject to
any right of rescission, set-off, counterclaim or defense by Borrower,
including the defense of usury, nor will the operation of any of the terms
of the Mezzanine Note, the Mezzanine Mortgage, or such other Mezzanine Loan
Documents executed by
33
Borrower, or the exercise of any right thereunder, render the Mezzanine
Mortgage unenforceable against Borrower, in whole or in part, or subject to
any right of rescission, set-off, counterclaim or defense by Borrower,
including the defense of usury, and Borrower has not asserted any right of
rescission, set-off, counterclaim or defense with respect thereto.
(Z) No Liabilities. Borrower has no liabilities or obligations
--------------
including without limitation Contingent Obligations (and including, without
limitation, liabilities or obligations in tort, in contract, at law, in
equity, pursuant to a statute or regulation, or otherwise) other than those
liabilities and obligations expressly permitted by this Agreement.
(AA) No Prior Assignment. As of the Closing Date, (i) Mezzanine
-------------------
Lender is the assignee of Borrower's interest under the Operator Lease, and
(ii) except for the assignments in connection with the First Mortgage Loan,
there are no prior assignments, pledges or hypothecations by Borrower of
the Operator Lease or any portion of the Rent due and payable thereunder or
to become due and payable thereunder which are presently outstanding.
(BB) Intentionally deleted.
(CC) Intentionally deleted.
(DD) Intentionally deleted.
(EE) Intellectual Property. All trademarks, trade names and service
---------------------
marks that Borrower owns or has pending, or under which it is licensed, are
in good standing and uncontested. There is no trademark, trade name or
service xxxx necessary to the business of Borrower as presently conducted
or as Borrower contemplates conducting its business. Borrower has not
infringed, is not infringing, and has not received notice of infringement
with respect to asserted trademarks, trade names and service marks of
others. To Borrower's knowledge, there is no infringement by others of
trademarks, trade names and service marks of Borrower.
(FF) Intentionally deleted.
(GG) Conduct of Business. Borrower does not conduct its business
-------------------
"also known as," "doing business as" or under any other name provided,
however, that the Facility is operated under the name "Harbor Village."
34
(HH) Intentionally deleted.
(II) Intentionally deleted.
(JJ) Leases. (a) Borrower is the sole owner of the entire lessor's
------
interest in the Operator Lease; (b) the Operator Lease is valid and
enforceable obligation of Borrower; (c) none of the Rents under the
Operator Lease have been collected for more than one (1) month in advance;
(d) the Operator is the sole tenant of the Lessor; (e) to the knowledge of
Borrower after due inquiry, there exist no offsets or defenses to the
payment of any portion of the Rents under the Operator Lease; (f) except as
set forth in the Operator Lease, the Borrower has not granted the Operator
any option to purchase, right of first refusal to purchase, or any other
similar provision; (g) except for Permitted Encumbrances, Lessor has not
granted any Person any possessory interest in, or right to occupy, the
Facility except under and pursuant to the Operator Lease; and (h) the
Operator Lease is subordinate to the Mezzanine Loan Documents, pursuant to
its terms.
(c) Closing Date Representation and Warranties of Operator. Operator
------------------------------------------------------
represents and warrants that as of the Closing Date:
(A) Organization. Operator (i) is a duly organized and validly
------------
existing Entity in good standing under the laws of the State of its
formation, (ii) is duly qualified as a foreign Entity in each jurisdiction
in which the nature of its business, the Facility or any of the Collateral
makes such qualification necessary or desirable, (iii) has the requisite
Entity power and authority to carry on its business as now being conducted,
and (iv) has the requisite Entity power to execute and deliver, and perform
its obligations under, the Mezzanine Loan Documents executed by Operator.
(B) Authorization. The execution and delivery by Operator of the
-------------
Mezzanine Loan Documents to which it is a party, Operator's performance of
its obligations thereunder and the creation of the security interests and
Liens provided for by Operator in the Mezzanine Loan Documents (i) have
been duly authorized by all requisite Entity action on the part of
Operator, (ii) will not violate any provision of any applicable Legal
Requirements, any order of any court or other Governmental Authority, any
organizational document of Operator or any indenture or agreement or other
instrument to which Operator is a party or by which Operator is bound,
(iii) will not be in conflict with, result in a breach of, or constitute
(with due notice or lapse of time or both) a default under, or result in
the creation or imposition of any Lien of any nature whatsoever upon any of
the property or assets of Operator pursuant to, any such indenture or
agreement or instrument except as permitted under any of the Mezzanine Loan
Documents and (iv) have been duly executed and delivered by Operator.
Except for the Mezzanine Leasehold
35
Mortgage, the Mezzanine Assignment of Rents-Operator, Mezzanine Assignment
of Agreements-Operator, and a memorandum of the Operator Lease, all of
which must be recorded in the Office of the Recorder of Deeds of Xxxx
County, Illinois and the Financing Statements, which must be recorded in
the Office of the Recorder of Deeds of Xxxx County, Illinois and filed in
the offices of the Secretary of the State of Illinois and the Secretary of
the State of Delaware and those consents, approvals and authorizations
obtained or filed on or prior to the Closing Date Operator is not required
to obtain any consent, approval or authorization from, or to file any
declaration or statement with, any Governmental Authority or other agency
in connection with or as a condition to the execution, delivery or
performance of the Mezzanine Loan Documents. The Mezzanine Loan Documents
to which Operator is a party have been duly authorized, executed and
delivered by Operator.
(C) Single-Purpose Entity.
---------------------
(i) Operator has been, and will continue to be, a duly formed
and existing Entity, and a Single-Purpose Entity.
(ii) Operator at all times since its formation has complied, and
will continue to comply, with the provisions of all of its organizational
documents, and the laws of the state in which Operator was formed relating
to the Entity.
(iii) All customary formalities regarding the Entity existence
of Operator have been observed at all times since its formation and will
continue to be observed.
(iv) Operator has been at all times since its formation and will
continue to be adequately capitalized in light of the nature of its
business.
(d) Additional Closing Date Operator Representations and Warranties.
---------------------------------------------------------------
Operator represents and warrants that, as of the Closing Date:
(A) Litigation. There are no actions, suits or proceedings at law or
----------
in equity by or before any Governmental Authority or other agency now
pending and served or, to the knowledge of Operator, threatened against
Operator or the Facility where a judgment adverse to Operator or the
Facility would be reasonably likely to individually or in the aggregate
result in a Material Adverse Effect.
(B) Agreements. Operator is not a party to any agreement or
----------
instrument or subject to any restriction which is likely to have a Material
Adverse Effect. Operator is
36
not in default in any material respect in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in
any agreement or instrument to which it is a party or by which Operator or
the Facility is bound which would be reasonably likely result in a Material
Adverse Effect.
(C) No Bankruptcy Filing. Operator is not contemplating either the
--------------------
filing of a petition by it under any state or federal bankruptcy or
insolvency laws or the liquidation of all or a major portion of Operator's
assets or property, and Operator has no knowledge of any Person
contemplating the filing of any such petition against it.
(D) Full and Accurate Disclosure. No statement of fact made by or on
----------------------------
behalf of Operator in the Mezzanine Loan Documents or in any other document
or certificate delivered to Mezzanine Lender by Operator contains any
untrue statement of a material fact or omits to state any material fact
necessary to make statements contained herein or therein not misleading in
any material respect. There is no fact presently known to Operator which
has not been disclosed to Mezzanine Lender which would have a Material
Adverse Effect, nor, as far as Operator can foresee, would have a Material
Adverse Effect.
(E) Location of Chief Executive Offices. The location of Operator's
-----------------------------------
principal place of business and the location of Operator's chief executive
office is 00 Xxxx Xxxxxx Xxxxx, Xxxxxxx, Xxxxxxxx 00000.
(F) Compliance. Operator, the Facility and Operator's use thereof and
----------
operations thereat comply in all material respects with all applicable
Legal Requirements, including without limitation, building and zoning
ordinances and codes. Operator is not in default or violation of any order,
writ, injunction, decree or demand of any Governmental Authority, the
violation of which is reasonably likely to have a Material Adverse Effect.
(G) Other Debt and Obligations. Operator has no financial obligation
--------------------------
under any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which Operator is a party, or by which Operator
or the Facility is bound, other than the First Mortgage Loan, unsecured
trade payables incurred in the ordinary course of business relating to the
ownership and operation of the Facility which do not exceed, at any time, a
maximum amount of one percent (1%) of the Mezzanine Loan Amount and the
Loan Amount (as defined in the First Mortgage Loan) and are paid within
ninety (90) days of the date incurred, and other than obligations under the
Mezzanine Leasehold Mortgage, the other Mezzanine Loan Documents, the
Operator Lease and those Pledge Agreements (as defined in the Operator
Lease) executed by Operator. Operator has not
37
borrowed or received other debt financing that has not been heretofore
repaid in full and Operator has no known material contingent liabilities.
(H) ERISA. Each Plan and, to the knowledge of Operator, each
-----
Multiemployer Plan, is in compliance in all material respects with, and has
been administered in all material respects in compliance with, its terms
and the applicable provisions of ERISA, the Code and any other federal or
state law, and no event or condition has occurred as to which Operator
would be under an obligation to furnish a report to Mezzanine Lender under
Section 5.1(b)(T).
------- ---------
(I) Solvency. Operator (i) has not entered into this Loan Agreement
--------
or any Mezzanine Loan Document with the actual intent to hinder, delay, or
defraud any creditor, and (ii) has received reasonably equivalent value in
exchange for its obligations under the Mezzanine Loan Documents. Giving
effect to the transactions contemplated hereby, the fair saleable value of
Operator's assets exceeds and will, immediately following the execution and
delivery of this Agreement, exceed Operator's total liabilities, including,
without limitation, subordinated, unliquidated, or disputed liabilities or
Contingent Obligations. The fair saleable value of Operator's assets is and
will, immediately following the execution and delivery of this Agreement,
be greater than Operator's probable liabilities, including the maximum
amount of its Contingent Obligations or its debts as such debts become
absolute and matured. Operator's assets do not and, immediately following
the execution and delivery of this Agreement, will not, constitute
unreasonably small capital to carry out its business as conducted or as
proposed to be conducted. Operator does not intend to, and does not believe
that it will, incur debts and liabilities (including, without limitation,
Contingent Obligations and other commitments) beyond its ability to pay
such debts as they mature (taking into account the timing and amounts to be
payable on or in respect of obligations of Operator).
(J) Not Foreign Person. Operator is not a "foreign person" within the
------------------
meaning of (S) 1445(f)(3) of the Code.
(K) Intentionally Omitted.
(L) Investment Company Act; Public Utility Holding Company Act.
----------------------------------------------------------
Operator is not (i) an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of
1940, as amended, (ii) a "holding company" or a "subsidiary company" of a
"holding company" or an "affiliate" of either a "holding company" or a
"subsidiary company" within the meaning of the Public Utility Holding
Company Act of 1935, as amended, or (iii) subject to any other federal or
state law or regulation which purports to restrict or regulate its ability
to
38
borrow money.
(M) No Defaults. No Default or Event of Default exists under or with
-----------
respect to any Mezzanine Loan Document.
(N) Labor Matters. Operator is not a party to any collective
-------------
bargaining agreements.
(O) Title to the Mortgaged Property. Operator owns good,
-------------------------------
indefeasible, marketable and insurable leasehold title to the Facility,
free and clear of all Liens, other than the Permitted Encumbrances
applicable to the Facility. Except as set forth in the Operator Lease,
there are no options to purchase or rights of first refusal affecting
Operator's interest in the Facility or, to Operator's knowledge, there are
no outstanding options to purchase or rights of first refusal affecting
Borrower's interest in the Facility. The Permitted Encumbrances do not and
will not materially and adversely affect (i) the ability of Operator to pay
in full all sums due under the Mezzanine Guaranty, or any of its other
obligations in a timely manner or (ii) the use of the Facility for the use
currently being made thereof, the operation of the Facility as currently
being operated or the value of the Facility.
(P) Intentionally deleted.
(Q) Financial Information. All historical financial data concerning
---------------------
Operator and, to the knowledge of Operator, the Facility that has been
delivered by Operator to Mezzanine Lender is true, complete and correct in
all material respects. Since the delivery of such data, except as
otherwise disclosed in writing to Mezzanine Lender, there has been no
material adverse change in the financial position of Operator or, to the
knowledge of Operator, the Facility, or in the results of operations of
Operator. Operator has not incurred any obligation or liability,
contingent or otherwise, not reflected in such financial data which might
materially adversely affect its business operations or the Facility.
(R) Condemnation. No Taking has been commenced or, to Operator's
------------
knowledge, is contemplated with respect to all or any portion of the
Facility or for the relocation of roadways providing access to the
Facility.
(S) Intentionally Omitted.
(T) Utilities and Public Access. The Facility has adequate rights of
---------------------------
access to public ways and is served by adequate water, sewer, sanitary
sewer and storm drain
39
facilities as are adequate for full utilization of the Facility for its
current purpose. Except as otherwise disclosed by the Surveys, all public
utilities necessary to the continued use and enjoyment of the Facility as
presently used and enjoyed are located in the public right-of-way abutting
the premises, and all such utilities are connected so as to serve the
Facility either (i) without passing over other property or, (ii) if such
utilities pass over other property, pursuant to valid easements. All roads
necessary for the full utilization of the Facility for its current purpose
have been completed and dedicated to public use and accepted by all
Governmental Authorities or are the subject of access easements for the
benefit of the Facility.
(U) Environmental Compliance. Operator represents, warrants and
------------------------
covenants, as to itself and the Facility:
(i) Except as shown on the Environmental Reports delivered to
Mezzanine Lender prior to the Closing Date, Operator and the Facility are
in compliance in all material respects with all applicable Environmental
Laws in effect as of the date hereof, which compliance includes, but is not
limited to, the possession by Borrower or the Operator, as applicable, of
and compliance with all environmental, health and safety Permits, licenses
and other governmental authorizations required in connection with the
ownership and operation of the Facility under all Environmental Laws,
except where the failure to comply with such laws is not reasonably likely
to result in a Material Adverse Effect.
(ii) Except as shown on the Environmental Reports delivered to
Mezzanine Lender prior to the Closing Date, there is no Environmental Claim
pending or, to Operator's knowledge, threatened, and no penalties arising
under Environmental Laws have been assessed against Operator or, to
Operator's knowledge, the Borrower or the Facility or against any Person
whose liability for any Environmental Claim Operator has or may have
retained or assumed either contractually or by operation of law, and no
investigation or review is pending or, to the knowledge of Operator,
threatened by any Governmental Authority, citizens group, employee or other
Person with respect to any alleged failure by Borrower, Operator, or the
Facility to have any environmental, health or safety permit, license or
other authorization required under, or to otherwise comply with, any
Environmental Law in effect as of the date hereof or with respect to any
alleged liability of Borrower or Operator for any Use or Release of any
Hazardous Substances in violation of any Environmental Law in effect as of
the Closing Date or the presence, Use, or Release of any Hazardous
Substances at, on, in, under, or from any Facility in violation of any
Environmental Law in effect as of the Closing Date.
(iii) To the knowledge of Operator, except as may be disclosed
on the
40
Environmental Reports delivered to Mezzanine Lender prior to the Closing
Date, there have been and are no past or present Releases or threats of
Release of any Hazardous Substance that are likely to form the basis of any
Environmental Claim against Borrower, Operator, the Facility or, to
Operator's knowledge, against any Person whose liability for any
Environmental Claim Operator has or may have retained or assumed either
contractually or by operation of law.
(iv) To the knowledge of Operator and except as disclosed in
the Environmental Reports, without limiting the generality of the
foregoing, there is not present at, on, in or under the Facility, PCB-
containing equipment, asbestos or asbestos containing materials,
underground or aboveground storage tanks or surface impoundments for
Hazardous Substances, lead in drinking water (except in concentrations that
comply with all Environmental Laws), or lead-based paint (nor have there
been any underground storage tanks present at, on, in, or under the
Facility) in violation of any Environmental Laws in effect as of the
Closing Date.
(v) No Liens are presently recorded with the appropriate land
records under or pursuant to any Environmental Law with respect to the
Facility and, to Operator's knowledge, no Governmental Authority has been
taking or is in the process of taking any action that could subject the
Facility to Liens under any Environmental Law.
(vi) There have been no environmental investigations, studies,
audits, reviews or other analyses conducted by or on behalf of Borrower or
Operator that are in the possession or control of Operator in relation to
the Facility which have not been provided to Mezzanine Lender.
(vii) Except as disclosed in the Environmental Report, no
conditions exist on the Facility which would require Borrower or Operator
under any Environmental Laws in effect as of the Closing Date to place a
notice on any deed to the Facility with respect to the presence, Use or
Release of Hazardous Substances at, on, in, under or from the Facility and
the Facility has no such notice in its deed.
(V) No Joint Assessment; Separate Lots. Operator has not permitted
----------------------------------
or initiated the joint assessment of the Facility (i) with any other real
property constituting a separate tax lot, and (ii) with any portion of the
Facility which may be deemed to constitute personal property, or any other
procedure whereby the lien of any taxes which may be levied against such
personal property shall be assessed or levied or charged to the Facility as
a single lien. The Facility is comprised of one or more parcels, each of
which constitutes a separate tax lot and none of which constitutes a
portion of any other tax lot.
41
(W) Assessments. Except as disclosed in the Title Insurance Policy,
-----------
there are no pending or, to the knowledge of Operator, proposed special or
other assessments for public improvements or otherwise affecting the
Facility, nor, to the knowledge of Operator, are there any contemplated
improvements to the Facility that may result in such special or other
assessments.
(X) Mortgages and Other Liens. The Mezzanine Leasehold Mortgage
-------------------------
creates a valid and enforceable second mortgage Lien on the Operator's
leasehold title to the Facility as security for the repayment of the
Indebtedness, subject only to the Permitted Encumbrances applicable to the
Facility. Each Collateral Security Instrument executed by Operator
establishes and creates a valid, subsisting and enforceable Lien on and a
security interest in, or claim to, the rights and property described
therein. All property covered by such Collateral Security Instrument which
is subject to the UCC is subject to a UCC financing statement filed and/or
recorded, as appropriate, (or irrevocably delivered to an agent for such
recordation or filing) in all places necessary to perfect a valid Lien
(second in priority to the First Mortgage Loan) with respect to the rights
and property that are the subject of such Collateral Security Instrument to
the extent governed by the UCC.
(Y) Enforceability. The Mezzanine Loan Documents executed by Operator
--------------
in connection with the Mezzanine Loan, including, without limitation, any
Collateral Security Instrument executed by Operator, are the legal, valid
and binding obligations of Operator, enforceable against Operator in
accordance with their terms, subject to bankruptcy, insolvency and other
limitations on creditors' rights generally and to equitable principles.
Such Mezzanine Loan Documents are, as of the Closing Date, not subject to
any right of rescission, set-off, counterclaim or defense by Operator,
including the defense of usury, nor will the operation of any of the terms
of the Mezzanine Note, the Mezzanine Mortgages, or such other Mezzanine
Loan Documents, or the exercise of any right thereunder, render the
Mezzanine Leasehold Mortgage unenforceable against Operator, in whole or in
part, or subject to any right of rescission, set-off, counterclaim or
defense by Operator, including the defense of usury, and Operator has not
asserted any right of rescission, set-off, counterclaim or defense with
respect thereto.
(Z) No Liabilities. Operator has no liabilities or obligations
--------------
including without limitation Contingent Obligations (and including, without
limitation, liabilities or obligations in tort, in contract, at law, in
equity, pursuant to a statute or regulation, or otherwise) other than those
liabilities and obligations expressly permitted by this Agreement.
(AA) No Prior Assignment. As of the Closing Date, (i) Mezzanine
-------------------
Lender is the assignee of Operator's interest under the Leases (as defined
in the Mezzanine Leasehold
42
Mortgage), and (ii) except for the assignments in connection with the First
Mortgage Loan, there are no prior assignments of such Leases or any portion
of the Rent due and payable with respect to such Leases or to become due
and payable which are presently outstanding.
(BB) Certificate of Occupancy. Operator has obtained (in its own name
------------------------
and/or in the Borrower's name, as applicable and in any event, in the name
of the Person(s) as required under all applicable Legal Requirements) all
Permits necessary to use and operate the Facility for the use described in
Section 3.1(S), and all such Permits are in full force and effect. The use
------- ------
being made of the Facility is in conformity in all respects with the
certificate of occupancy and/or Permits for the Facility and any other
restrictions, covenants or conditions affecting the Facility. Each
Facility contains all Equipment necessary to use and operate such Facility
as described in Section 3.1(S) in a manner consistent with the standards
--------------
applicable to properties of a similar nature in the geographic area in
which the Facility is located and in any event not less than the standards
applied by Affiliates of Operator for other comparable properties owned or
leased by such Affiliates in such geographic area.
(CC) Flood Zone. Except as shown on the Survey, the Facility is not
----------
located in a special flood hazard area as defined by the Federal Insurance
Administration.
(DD) Physical Condition. Except as disclosed in the Engineering
------------------
Reports, the Facility is free of material structural defects and all
building systems contained therein are in good working order in all
material respects subject to ordinary wear and tear.
(EE) Intellectual Property. All trademarks, trade names and service
---------------------
marks that Operator owns or has pending, or under which it is licensed, are
in good standing and uncontested. There is no trademark, trade name or
service xxxx necessary to the business of Operator as presently conducted
or as Operator contemplates conducting its business. Operator has not
infringed, is not infringing, and has not received notice of infringement
with respect to asserted trademarks, trade names and service marks of
others. To Operator's knowledge, there is no infringement by others of
trademarks, trade names and service marks of Operator.
(FF) Security Deposits. All security deposits with respect to the
-----------------
Facility on the Closing Date have been transferred to the Security Deposit
Account on or prior to the Closing Date, and Operator is in compliance with
all applicable Legal Requirements relating to such security deposits.
(GG) Conduct of Business. Operator does not conduct its business
-------------------
"also known
43
as," "doing business as" or under any other name provided, however, that
the Facility is operated under the name "Harbor Village."
(HH) Title Insurance. The Facility is covered by either an American
---------------
Land Title Association (ALTA) mortgagee's title insurance policy, or a
commitment to issue such a title insurance policy, insuring a valid second
mortgage lien on the Facility, which is in full force and effect and is
freely assignable to and will inure to the benefit of Mezzanine Lender and
any successor or assignee of Mezzanine Lender subject only to the Permitted
Encumbrances.
(II) Tax Fair Market Value. The Mezzanine Loan Amount does not exceed
---------------------
the Tax Fair Market Value of the Facility.
(JJ) Leases. (a) Subject to Borrower's reversionary interest under
------
the Operator Lease, Operator is the sole owner of the entire lessor's
interest in the Leases (as defined in the Mezzanine Leasehold Mortgage);
(b) such Leases are valid and enforceable; (c) the terms of all
alterations, modifications and amendments to such Leases are reflected in
the certified rent roll statement delivered to and approved by Mezzanine
Lender; (d) none of the Rents reserved in such Leases have been assigned or
otherwise pledged or hypothecated; (e) none of such Rents have been
collected for more than one (1) month in advance (provided, however,
Borrower may accept SELCO Basic Rent (as defined in the Operator Lease) and
the Lessor Basic Rent (as defined in the Operator Lease) in advance for a
period of three (3) months); (f) the premises demised under such Leases
have been completed and the tenants under such Leases have accepted the
same and have taken possession of the same on a rent-paying basis; (g) to
the knowledge of Operator, there exist no offsets or defenses to the
payment of any portion of such Rents; (h) no such Lease contains an option
to purchase, right of first refusal to purchase, or any other similar
provision; (i) except for Permitted Encumbrances, no Person has any
possessory interest in, or right to occupy, the Facility except under and
pursuant to a Lease (as defined in the Mezzanine Leasehold Mortgage); and
(j) each such Lease is subordinate to the Mezzanine Loan Documents,
pursuant to its terms.
(AK) Use-Specific Representations.
----------------------------
(i) Compliance with Laws. Borrower, Operator and the Facility
--------------------
comply in all material respects with all applicable federal, state and
local laws, regulations, quality and safety standards, accreditation and
certification standards and requirements of the applicable state and local
Department of Public Health (each a "DOH") and all other Governmental
---
Authorities relating to the operation of a managed residential community
with assisted living services.
44
(ii) Licenses. All material governmental licenses, permits,
--------
regulatory agreements or other approvals or agreements necessary or
desirable for the use, establishment or operation of the Facility as
intended are held by the Borrower and/or the Operator, as applicable, and
in any event are held by the Person(s) required under all applicable Legal
Requirements and are in full force and effect, including, without
limitation, (a) a valid certificate of need for the provision of assisted
living services ("CON") to the extent required by applicable Legal
---
Requirements; (b) a valid license to provide assisted living services to
the extent required by applicable Legal Requirements to the extent required
by applicable Legal Requirements; and (c) a valid registration of the
Facility with DOH as a managed residential community with assisted living
services to the extent required by applicable Legal Requirements
(collectively, the "Licenses").
--------
(iii) Ownership of Licenses. The Licenses, including without
---------------------
limitation, each, if any, CON:
(a) may not be, and have not been, transferred to any
location other than the Facility;
(b) have not been pledged as collateral security for any
other loan or indebtedness;
(c) are held free from restrictions or known conflicts
which would materially impair the use or operation of the Facility as
intended, and are not provisional, probationary or restricted in any way;
and
(d) have at all applicable times been, and are, in full
force and effect.
(iv) Intentionally deleted.
(v) Intentionally deleted.
(vi) Governmental Proceedings and Notices. None of Operator or
------------------------------------
the Facility, or, to the knowledge of Operator, the Borrower is currently
the subject of any proceeding by any Governmental Authority, and no notice
of any violation has been received from a Governmental Authority that
would, directly or indirectly, or with the passage of time:
(a) affect Operator's ability to accept and/or retain
tenants or
45
result in the imposition of a fine, a sanction, a lower rate certification
or a lower reimbursement rate for services rendered to eligible tenants; or
(b) modify, limit or annul or result in the transfer,
suspension, revocation or imposition of probationary use on any License.
(vii) Physical Plant Standards. The Facility and the use
------------------------
thereof complies in all material respects with all local, state and federal
building codes, fire codes, health care and other similar regulatory
requirements (the "Physical Plant Standards") and no waivers of Physical
------------------------
Plant Standards exist at such Facility.
(viii) Past Violations. The Facility is in material
---------------
compliance with all local, federal and state laws and regulations relating
to independent living or congregate living facilities with assisted living
services and no statement of charges or deficiencies has been made or
penalty enforcement action has been undertaken against the Facility or
against Operator, or any partner, member, officer, director or stockholder
of Operator or, to the knowledge of Operator, against Borrower or any
beneficial owner of Borrower, by any Governmental Authority.
(ix) Intentionally deleted.
(x) Pledges of Receivables. Except for the pledge in
----------------------
connection with the First Mortgage Loan, Operator has not pledged its
receivables as collateral security for any other loan or indebtedness.
(xi) Intentionally deleted.
(xii) Resident Records. To the best of Operator's knowledge,
----------------
all resident records at the Facility are true, complete and correct in all
material respects. From and after the date hereof, all resident records at
the Facility shall be maintained in accordance with all applicable Legal
Requirements, including, without limitation, with respect to retention and
confidentiality.
Section 4.2. Survival of Representations and Warranties. Each of the
------------------------------------------
Operator and the Borrower agrees that (i) all of the representations and
warranties of Borrower and Operator set forth in this Agreement and in the other
Mezzanine Loan Documents delivered on the Closing Date are made as of the
Closing Date (except as expressly otherwise provided) and (ii) all
representations and warranties made by Borrower and Operator shall survive the
delivery of the Mezzanine Note and continue for so long as any amount remains
owing to Mezzanine Lender under this Agreement, the Mezzanine Note or any of the
other Mezzanine Loan
46
Documents; provided, however, that the representations, warranties and covenants
-------- -------
of the Operator set forth in Section 4.1(d)(U) and Sections 5.1(b)(D) through
----------------- ------------------
5.1(b)(I), inclusive shall survive in perpetuity and shall not be subject to the
---------
exculpation provisions of Section 8.14. All representations, warranties,
-------------
covenants and agreements made in this Agreement or in the other Mezzanine Loan
Documents shall be deemed to have been relied upon by Mezzanine Lender
notwithstanding any investigation heretofore or hereafter made by Mezzanine
Lender or on its behalf.
ARTICLE V
AFFIRMATIVE COVENANTS
---------------------
Section 5.1. Borrower and Operator Covenants. (a) Borrower covenants
-------------------------------
and agrees that, from the date hereof and until payment in full of the
Indebtedness:
i. Existence; Compliance with Legal Requirements; Insurance.
--------------------------------------------------------
Borrower shall do or cause to be done all things necessary to preserve,
renew and keep in full force and effect its Entity existence, rights,
licenses, Permits and franchises necessary for the conduct of its business
and comply in all material respects with all applicable Legal Requirements
applicable to it. Borrower shall notify Mezzanine Lender promptly of any
written notice or order that Borrower receives from any Governmental
Authority relating to Borrower's or the Facility's failure to comply with
such applicable Legal Requirements and promptly take any and all actions
necessary to bring itself into compliance in all material respects with
applicable Legal Requirements (and shall comply in all materials respects
with the requirements of such Legal Requirements that at any time are
applicable to its ownership of the Facility) provided, that Borrower at its
expense may, after prior notice to the Mezzanine Lender, contest by
appropriate legal, administrative or other proceedings conducted in good
faith and with due diligence, the validity or application, in whole or in
part, of any such applicable Legal Requirements as long as (i) neither the
applicable Collateral nor any part thereof or any interest therein, will be
sold, forfeited or lost if Borrower pays the amount or satisfies the
condition being contested, and Borrower would have the opportunity to do
so, in the event of Borrower's failure to prevail in the contest, (ii)
Mezzanine Lender would not, by virtue of such permitted contest, be exposed
to any risk of any civil liability for which Borrower has not furnished
additional security as provided in clause (iii) below, or to any risk of
------------
criminal liability, and neither the applicable Collateral nor any interest
therein would be subject to the imposition of any Lien as a result of the
failure to comply with such Legal Requirement or of such proceeding and
(iii) Borrower shall have furnished to the Mezzanine Lender additional
security in respect of the claim being contested or the loss or damage that
may result from Borrower's failure to prevail in such contest in such
amount as may be reasonably
47
requested by Mezzanine Lender but in no event less than one hundred and
twenty five percent (125%) of the amount of such claim. Borrower shall at
all times maintain, preserve and protect all franchises and trade names and
preserve all the remainder of its property necessary for the continued
ownership of the Facility.
(B) Impositions and Other Claims. Borrower shall pay and discharge or
----------------------------
cause to be paid and discharged all Impositions, as well as all lawful
claims for labor, materials and supplies or otherwise, which could become a
Lien, all as more fully provided in, and subject to any rights to contest
contained in, the Mezzanine Mortgages.
(C) Litigation. Borrower shall give prompt written notice to
----------
Mezzanine Lender of any litigation or governmental proceedings pending or
threatened against Borrower which is reasonably likely to have a Material
Adverse Effect.
(D) Environmental Remediation. Unless otherwise required by law,
-------------------------
Environmental Laws or any Governmental Authority and except as contemplated
in Exhibit C-2 to the First Mortgage Loan Agreement, Borrower shall not
-----------
undertake any Remedial Work, nor enter into any settlement agreement,
consent decree or other compromise relating to any Hazardous Substances or
Environmental Laws which is reasonably likely to have a Material Adverse
Effect. Notwithstanding the foregoing, if the presence or threatened
presence or Release of Hazardous Substances at, on, in, under, from or
about the Facility poses an immediate threat to the health, safety or
welfare of any Person or the environment, or is of such a nature that an
immediate response is necessary, Borrower may complete all necessary
Remedial Work. In such events, Borrower shall notify Mezzanine Lender as
soon as practicable and, in any event, within three Business Days, of any
action taken.
(E) Environmental Matters; Inspection.
---------------------------------
(i) Borrower shall not cause or authorize a Hazardous Substance
to be present at, on, in, under or to emanate from the Facility, or migrate
from adjoining property controlled by Borrower onto or into the Facility in
violation of any Environmental Law, except under conditions permitted by
applicable Environmental Laws and, in the event that such Hazardous
Substances are present at, on, in, under or emanate from the Facility, or
migrate onto or into the Facility, Borrower shall cause the performance of
Remedial Work, removal or remediation of such Hazardous Substances, in
accordance with this Agreement and Environmental Laws.
(ii) Mezzanine Lender shall have the right at all reasonable
times after ten (10) calendar days' prior written notice to Borrower and
subject to the rights of
48
tenants therein to enter upon and inspect all or any portion of the
Facility. If Mezzanine Lender has reason to believe that Remedial Work may
be required, Mezzanine Lender may select or may require Operator to select
a consulting environmental Engineer reasonably satisfactory to Mezzanine
Lender to conduct and prepare environmental reports assessing the
environmental condition of the Facility. Mezzanine Lender shall be given a
reasonable opportunity to review any reports, data and other documents or
materials reviewed or prepared by the environmental Engineer. The
inspection rights granted to Mezzanine Lender in this Section 5.1(a)(E)
-----------------
shall be in addition to, and not in limitation of, any other inspection
rights granted to Mezzanine Lender in the Mezzanine Loan Documents, and
shall expressly include the right (if Mezzanine Lender has reason to
suspect that Remedial Work may be required) to conduct or require Operator
to conduct soil borings, establish ground water monitoring xxxxx and
conduct other customary environmental tests, assessments and audits.
(F) Environmental Notices. Borrower shall promptly provide notice to
---------------------
Mezzanine Lender of:
(i) Environmental Claim asserted or threatened (in writing)
by any Governmental Authority or other Person with respect to any Hazardous
Substance at, on, in, under or emanating from the Facility, to which
Borrower has knowledge which could reasonably be expected to impair the
value of Mezzanine Lender's security interests hereunder or have a Material
Adverse Effect;
(ii) any Environmental Claim or proceeding, investigation or
inquiry commenced or threatened in writing by any Person or Governmental
Authority, against Borrower, with respect to the presence, suspected
presence, Release or threatened Release of Hazardous Substances from or
onto, in or under any property not owned by Borrower, including, without
limitation, proceedings under the Comprehensive Environmental Response,
Compensation, and Liability Act, as amended, 42 U.S.C. (S) 9601, et seq.,
-- ----
which could reasonably be expected to impair the value of Mezzanine
Lender's security interests hereunder or have a Material Adverse Effect;
(iii) all Environmental Claims asserted or threatened against
Borrower, against any other party occupying the Facility or any portion
thereof or against the Facility which become known to Borrower, which could
reasonably be expected to impair the value of Mezzanine Lender's security
interests hereunder or have a Material Adverse Effect;
(iv) the discovery by Borrower of any occurrence or condition on
the Facility or on any real property adjoining or in the vicinity of the
Facility which could
49
reasonably be expected to lead to an Environmental Claim against Borrower
or Mezzanine Lender which such Environmental Claim is reasonably likely to
have a Material Adverse Effect; and
(v) the commencement or completion of any Remedial Work by
Borrower.
(G) Copies of Notices. Borrower shall immediately transmit to
-----------------
Mezzanine Lender copies of any citations, orders, notices or other written
communications received from any Person or any Governmental Authority and
any notices, reports or other written communications submitted to any
Governmental Authority with respect to the matters described in Section
-------
5.1(a)(F).
---------
(H) Environmental Claims. Mezzanine Lender may join and participate
--------------------
in, as a party if Mezzanine Lender so determines, any legal or
administrative proceeding or action concerning the Facility or any portion
thereof under any Environmental Law, if, in Mezzanine Lender's reasonable
judgment, the interests of Mezzanine Lender will not be adequately
protected by Borrower or Operator.
(I) Environmental Waiver. Borrower waives and releases Mezzanine
--------------------
Lender from any rights or defenses Borrower may have against Mezzanine
Lender under common law or Environmental Laws for liability arising from or
resulting from the presence, Use or Release of Hazardous Substances except
to the extent directly caused by the gross negligence, fraud or willful
misconduct of Mezzanine Lender.
(J) Access to Facility. Subject to the terms of Section 8.2 of the
------------------
Operator Lease, Borrower shall permit agents, representatives and employees
of Mezzanine Lender to inspect the Facility or any part thereof at such
reasonable times as may be requested by Mezzanine Lender upon advance
notice.
(K) Notice of Default. Borrower shall promptly advise Mezzanine
-----------------
Lender of any material adverse change in Borrower's condition, financial or
otherwise, or of the occurrence of any Default of which the Borrower has
knowledge or Event of Default of which Borrower has knowledge.
(L) Cooperate in Legal Proceedings. Except with respect to any claim
------------------------------
by Borrower against Mezzanine Lender, Borrower shall cooperate with
Mezzanine Lender with respect to any proceedings before any Governmental
Authority which may in any way affect the rights of Mezzanine Lender
hereunder or any rights obtained by Mezzanine Lender under any of the
Mezzanine Loan Documents and, in connection
50
therewith, not prohibit Mezzanine Lender, at its election, from
participating in any such proceedings.
(M) Perform Mezzanine Loan Documents. Borrower shall observe, perform
--------------------------------
and satisfy all the terms, provisions, covenants and conditions required to
be observed, performed or satisfied by it, and shall pay when due all
costs, fees and expenses required to be paid by it, under the Mezzanine
Loan Documents executed and delivered by Borrower.
(N) Insurance Benefits. Borrower shall cooperate with Mezzanine
------------------
Lender in obtaining for Mezzanine Lender the benefits of any Insurance
Proceeds lawfully or equitably payable to Mezzanine Lender in connection
with the Facility, and Mezzanine Lender shall be reimbursed for any
reasonable expenses incurred in connection therewith (including reasonable
attorneys' fees and disbursements) and the payment by Borrower of the
expense of an Appraisal on behalf of Mezzanine Lender in case of a fire or
other casualty affecting the Facility or any part thereof out of such
Insurance Proceeds, all as more specifically provided in the Mezzanine
Mortgage.
(O) Further Assurances. Borrower shall, at Borrower's sole cost and
------------------
expense:
(i) execute and deliver to Mezzanine Lender such documents,
instruments, certificates, assignments and other writings, and do such
other acts necessary, to evidence, preserve and/or protect the Collateral
at any time securing or intended to secure the Mezzanine Note, as Mezzanine
Lender may require in Mezzanine Lender's reasonable discretion; and
(ii) do and execute all and such further lawful acts, conveyances
and assurances for the better and more effective carrying out of the
intents and purposes of this Agreement and the other Mezzanine Loan
Documents, as Mezzanine Lender shall require from time to time in its
reasonable discretion.
(P) Intentionally deleted.
51
(Q) Financial Reporting. Borrower shall furnish Mezzanine Lender with
-------------------
any of the financial statements, reports and information provided to the First
Mortgage Lender pursuant to Section 5.1(a)(Q) of the First Mortgage Loan
Agreement at the same time that it provides such financial statements, reports
and information to the First Mortgage Lender and Mezzanine Lender shall have the
same rights with respect to such financial statements, reports and information
as the First Mortgage Lender has under the First Mortgage Loan Agreement.
Borrower shall furnish to Mezzanine Lender such other financial information with
respect to Borrower as Mezzanine Lender may reasonably request.
(R) Intentionally deleted.
(S) Intentionally Omitted.
(T) Certain Matters Relating to ERISA. Borrower hereby represents,
---------------------------------
warrants and covenants that, at all times on and before the date upon which
Mezzanine Lender makes the Mezzanine Loan and at all times after the date
upon which Mezzanine Lender makes the Mezzanine Loan, neither Borrower nor
any ERISA Affiliate of Borrower (i) maintains, contributes to or is
obligated to contribute to, or has maintained, contributed to or been
obligated to contribute to, or will maintain, contribute to or be obligated
to contribute to any Plan (including, without limitation, any benefit plan
or other plan subject to minimum funding requirements of ERISA Section 302
or Code Section 412) or Multiemployer Plan and (ii) has been, is or will
become subject to any liability or obligation under or in connection with
ERISA. Any violation of this Section 5.1(a)(T) by Borrower shall constitute
-----------------
an Event of Default.
(U) Single Purpose Entity. Borrower shall at all times be a Single
---------------------
Purpose Entity.
(V) Trade Indebtedness. Borrower will pay, its trade payables within
------------------
ninety (90) days of the date incurred, unless Borrower is in good faith
contesting Borrower's obligation to pay such trade payables in a manner
reasonably satisfactory to Mezzanine Lender (which may include Mezzanine
Lender's requirement that Borrower, as the case may be, post security with
respect to the contested trade payable).
(W) SELCO Debt. Borrower (i) shall pay all amounts due with respect
----------
to the SELCO Debt when due, subject to applicable grace periods, (ii) shall
not permit a default with respect to the SELCO Debt to exist which default
is not cured within applicable grace periods and (iii) without Mezzanine
Lender's prior written consent, which shall not be unreasonably withheld
shall not amend, modify or supplement the loan documents evidencing the
SELCO Debt.
52
(b) Operator covenants and agrees that, from the date hereof and until
payment in full of the Indebtedness:
(A) Existence; Compliance with Legal Requirements; Insurance.
--------------------------------------------------------
Operator shall do or cause to be done all things necessary to preserve,
renew and keep in full force and effect its Entity existence, rights,
Licenses, Permits and franchises necessary for the conduct of its business
and comply in all material respects with all applicable Legal Requirements
and Insurance Requirements applicable to it and the Facility. Operator
shall notify Mezzanine Lender promptly of any written notice or order that
Operator receives from any Governmental Authority relating to Operator's
failure to comply with such applicable Legal Requirements relating to the
Facility and promptly take any and all actions necessary to bring itself
and its operations at the Facility into compliance in all material respects
with such applicable Legal Requirements (and shall comply in all material
respects with the requirements of such Legal Requirements that at any time
are applicable to its operations at the Facility) provided, that Operator
at its expense may, after prior notice to the Mezzanine Lender, contest by
appropriate legal, administrative or other proceedings conducted in good
faith and with due diligence, the validity or application, in whole or in
part, of any such applicable Legal Requirements as long as (i) neither the
applicable Collateral nor any part thereof or any interest therein, will be
sold, forfeited or lost if Operator pays the amount or satisfies the
condition being contested, and Operator would have the opportunity to do
so, in the event of Operator's failure to prevail in the contest, (ii)
Mezzanine Lender would not, by virtue of such permitted contest, be exposed
to any risk of any civil liability for which Operator has not furnished
additional security as provided in clause (iii) below, or to any risk of
------------
criminal liability, and neither the applicable Collateral nor any interest
therein would be subject to the imposition of any Lien as a result of the
failure to comply with such Legal Requirement or of such proceeding and
(iii) Operator shall have furnished to the Mezzanine Lender additional
security in respect of the claim being contested or the loss or damage that
may result from Operator's failure to prevail in such contest in such
amount as may be reasonably requested by Mezzanine Lender but in no event
less than one hundred and twenty five percent (125%) of the amount of such
claim. Operator shall at all times maintain, preserve and protect all
franchises and trade names and preserve all the remainder of its property
necessary for the continued conduct of its business and keep the Facility
in good repair, working order and condition, except for reasonable wear and
use, and from time to time make, or cause to be made, all necessary
repairs, renewals, replacements, betterments and improvements thereto, all
as more fully provided in the Mezzanine Mortgages. Operator shall keep the
Facility insured at all times, by financially sound and reputable insurers,
to such extent and against such risks, and maintain liability and such
other insurance, as is more fully provided herein and in the
53
Mezzanine Mortgages.
(B) Impositions and Other Claims. Operator shall pay and discharge or
----------------------------
cause to be paid and discharged all Impositions, as well as all lawful
claims for labor, materials and supplies or otherwise, which could become a
Lien, all as more fully provided in, and subject to any rights to contest
contained in, the Mezzanine Mortgages.
(C) Litigation. Operator shall give prompt written notice to
----------
Mezzanine Lender of any litigation or governmental proceedings pending or
threatened against Operator which is reasonably likely to have a Material
Adverse Effect.
54
(D) Environmental Remediation.
-------------------------
(i) If any investigation, site monitoring, cleanup, removal,
abatement, restoration remedial work or other response action of any kind
or nature is required pursuant to an order or directive of any Governmental
Authority or under any applicable Environmental Law (collectively, the
"Remedial Work"), because of or in connection with the (x) past, present or
--------------
future presence, suspected presence, Release or threatened Release of a
Hazardous Substance at, on, in, under or from the Facility or any portion
thereof or (y) violation of or compliance with applicable Environmental
Laws, Operator shall promptly commence and diligently prosecute to
completion all such Remedial Work. Subject to the provisions of Exhibit C-
---------
2 of the First Mortgage Loan Agreement, in all events, such Remedial Work
-
shall be commenced within the time period ordered or directed by such
Governmental Authority or such shorter period as may be required under any
applicable Environmental Law; provided, however, that Operator shall not be
-------- ------- ----
required to commence such Remedial Work within the above specified time
periods: (x) if prevented from doing so by any Governmental Authority, (y)
if commencing such Remedial Work within such time periods would result in
Operator or such Remedial Work violating any Environmental Law or (z) if
Operator, at its expense and after prior notice to Mezzanine Lender, is
contesting by appropriate legal, administrative or other proceedings,
conducted in good faith and with due diligence, the need to perform
Remedial Work, as long as (1) Operator is permitted by the applicable
Environmental Laws to delay performance of the Remedial Work pending such
proceedings, (2) neither the Facility nor any part thereof or interest
therein will be sold, forfeited or lost if Operator performs the Remedial
Work being contested, and Operator would have the opportunity to do so, in
the event of Operator's failure to prevail in the contest, (3) Mezzanine
Lender would not, by virtue of such permitted contest, be exposed to any
risk of any civil liability for which Operator has not furnished additional
security as provided in clause (4) below, or to any risk of criminal
----------
liability, and neither the Facility nor any interest therein would be
subject to the imposition of any Lien for which Operator has not furnished
additional security as provided in clause (4) below, as a result of the
----------
failure to perform such Remedial Work and (4) Operator shall have furnished
to Mezzanine Lender additional security in respect of the Remedial Work
being contested and the loss or damage that may result from Operator's
failure to prevail in such contest in such amount as may be reasonably
requested by Mezzanine Lender but in no event less than 125% of the cost of
such Remedial Work and any loss or damage that may result from Operator's
failure to prevail in such contest.
(ii) All Remedial Work under clause (i) above shall be performed
----------
by contractors, and under the supervision of a consulting environmental
Engineer, each
55
approved in advance by Mezzanine Lender which approval will not be
unreasonably withheld or delayed. All costs and expenses incurred in
connection with such Remedial Work shall be paid by Operator; provided,
however, Operator shall be entitled to disbursement of funds from the
Capital Reserve Sub-Account to pay for the Remedial Work described on
Exhibit C-2 of the First Mortgage Loan Agreement and provided, further,
-----------
that the terms of Section 2.12(f)(iii) have been satisfied to Mezzanine
------- ------------
Lender's discretion. If Operator does not timely commence and diligently
prosecute to completion the Remedial Work, Mezzanine Lender may (but shall
not be obligated to), upon sixty (60) days prior written notice to Operator
of its intention to do so, cause such Remedial Work to be performed.
Operator shall pay or reimburse Mezzanine Lender within ten (10) calendar
days following written demand for all Advances (as defined in the Mezzanine
Mortgages) and expenses (including reasonable attorneys' fees and
disbursements) relating to or incurred by Mezzanine Lender in connection
with monitoring, reviewing or performing any Remedial Work in accordance
herewith.
(iii) Unless otherwise required by law, Environmental Laws or
any Governmental Authority, Operator shall not commence any Remedial Work
under clause (i) above, nor enter into any settlement agreement, consent
----------
decree or other compromise relating to any Hazardous Substances or
Environmental Laws which is reasonably likely to have a Material Adverse
Effect. Notwithstanding the foregoing, if the presence or threatened
presence or Release of Hazardous Substances at, on, in, under, from or
about the Facility poses an immediate threat to the health, safety or
welfare of any Person or the environment, or is of such a nature that an
immediate response is necessary, Operator may complete all necessary
Remedial Work. In such events, Operator shall notify Mezzanine Lender as
soon as practicable and, in any event, within three (3) Business Days, of
any action taken.
(E) Environmental Matters; Inspection.
---------------------------------
(i) Operator shall not cause, allow or authorize a Hazardous
Substance to be present at, on, in, under or to emanate from the Facility,
or migrate from adjoining property controlled by Operator onto or into the
Facility in violation of any Environmental Law, except under conditions
permitted by applicable Environmental Laws and, in the event that such
Hazardous Substances are present at, on, in, under or emanate from the
Facility, or migrate onto or into the Facility, Operator shall cause the
performance of Remedial Work, removal or remediation of such Hazardous
Substances, in accordance with this Agreement and Environmental Laws.
Operator shall use reasonable efforts to prevent, and to seek the
remediation of, any migration of Hazardous Substances onto or into the
Facility from any adjoining property in violation of any Environmental Law.
56
(ii) Mezzanine Lender shall have the right at all reasonable
times after ten (10) calendar days' prior written notice to Operator and
subject to the rights of tenants therein to enter upon and inspect all or
any portion of the Facility. If Mezzanine Lender has reason to believe that
Remedial Work may be required, Mezzanine Lender may select or may require
Operator to select a consulting environmental Engineer reasonably
satisfactory to Mezzanine Lender to conduct and prepare environmental
reports assessing the environmental condition of the Facility. Mezzanine
Lender shall be given a reasonable opportunity to review any reports, data
and other documents or materials reviewed or prepared by the environmental
Engineer. The inspection rights granted to Mezzanine Lender in this
Section 5.1(b)(E) shall be in addition to, and not in limitation of, any
------- ---------
other inspection rights granted to Mezzanine Lender in the Mezzanine Loan
Documents, and shall expressly include the right (if Mezzanine Lender has
reason to suspect that Remedial Work may be required) to conduct or require
Operator to conduct soil borings, establish ground water monitoring xxxxx
and conduct other customary environmental tests, assessments and audits.
(iii) Operator agrees to bear and shall pay or reimburse
Mezzanine Lender within ten (10) calendar days following written demand for
all sums advanced and expenses incurred (including reasonable attorneys'
fees and disbursements, but excluding internal overhead, administrative and
similar costs of Mezzanine Lender) relating to, or incurred by Mezzanine
Lender in connection with, the inspections and reports described in this
Section 5.1(b)(E) in the following situations:
------- ---------
(x) If Mezzanine Lender has reasonable grounds to believe, at
the time any such inspection is ordered, that there exists an
occurrence or condition that could lead to an Environmental Claim;
(y) If any such inspection reveals an occurrence or condition
that could lead to an Environmental Claim;
(z) If an Event of Default with respect to the Facility exists
at the time any such inspection is ordered, and such Event of Default
relates to any representation, covenant or other obligation pertaining
to Hazardous Substances, Environmental Laws or any other environmental
matter.
(F) Environmental Notices. Operator shall promptly provide notice to
---------------------
Mezzanine Lender of:
(i) any Environmental Claim asserted or threatened (in
writing) by
57
any Governmental Authority or other Person with respect to any Hazardous
Substance at, on, in, under or emanating from the Facility, which could
reasonably be expected to impair the value of Mezzanine Lender's security
interests hereunder or have a Material Adverse Effect;
(ii) any Environmental Claim or proceeding, investigation or
inquiry commenced or threatened in writing by any Person or Governmental
Authority, against Operator, with respect to the presence, suspected
presence, Release or threatened Release of Hazardous Substances from or
onto, in or under any property not owned by Operator, including, without
limitation, proceedings under the Comprehensive Environmental Response,
Compensation, and Liability Act, as amended, 42 U.S.C. (S) 9601, et seq.,
-- ----
which could reasonably be expected to impair the value of Mezzanine
Lender's security interests hereunder or have a Material Adverse Effect;
(iii) all Environmental Claims asserted or threatened against
Operator, against any other party occupying the Facility or any portion
thereof or against the Facility which become known to Operator, which could
reasonably be expected to impair the value of Mezzanine Lender's security
interests hereunder or have a Material Adverse Effect;
(iv) the discovery by Operator of any occurrence or condition
on the Facility or on any real property adjoining or in the vicinity of the
Facility which could reasonably be expected to lead to an Environmental
Claim against Operator or Mezzanine Lender which such Environmental Claim
is reasonably likely to have a Material Adverse Effect; and
(v) the commencement or completion of any Remedial Work.
(G) Copies of Notices. Operator shall immediately transmit to
-----------------
Mezzanine Lender copies of any citations, orders, notices or other written
communications received from any Person or any Governmental Authority and
any notices, reports or other written communications submitted to any
Governmental Authority with respect to the matters described in Section
-------
5.1(b)(F).
---------
(H) Environmental Claims. Mezzanine Lender may join and participate
--------------------
in, as a party if Mezzanine Lender so determines, any legal or
administrative proceeding or action concerning the Facility or any portion
thereof under any Environmental Law, if, in Mezzanine Lender's reasonable
judgment, the interests of Mezzanine Lender will not be adequately
protected by Operator. Operator agrees to bear and shall pay or reimburse
Mezzanine Lender within ten (10) calendar days following written demand for
all
58
reasonable sums advanced and reasonable expenses (including reasonable
attorneys' fees and disbursements), incurred by Mezzanine Lender in
connection with any such action or proceeding.
(I) Indemnification. Operator agrees to indemnify, reimburse, defend
---------------
(with counsel reasonably satisfactory to Mezzanine Lender) and hold
harmless Mezzanine Lender for, from, and against all demands, claims,
actions or causes of action, assessments, losses, damages, liabilities,
costs and expenses, including, without limitation, interest, penalties,
consequential damages, attorneys' fees, disbursements and expenses, and
consultants' fees, disbursements and expenses, including costs of Remedial
Work (collectively, "Losses") asserted against, resulting to, imposed on,
------
or incurred by Mezzanine Lender, directly or indirectly, in connection with
any of the following:
(i) events, circumstances, or conditions which are alleged to,
or do, form the basis for an Environmental Claim;
(ii) the presence, Use or Release of Hazardous Substances at,
on, in, under or from the Facility, which presence, Use or Release requires
or would reasonably likely require Remedial Work;
(iii) any Environmental Claim against Operator Mezzanine Lender,
or any Person whose liability for such Environmental Claim Operator has or
may have assumed or retained either contractually or by operation of law;
or
(iv) the breach of any representation, warranty or covenant set
forth in Section 4.1(b)(U), 4.1(d)(U) and Sections 5.1(a)(D) through
------- --------- --------- -------- ---------
5.1(a)(I) and 5.1(b)(D) through 5.1(b)(I), inclusive.
--------- --------- ---------
The indemnity provided in this Loan Agreement shall not be included in
any exculpation of Operator from personal liability provided in this Loan
Agreement or in any of the other Mezzanine Loan Documents. Nothing in this
Section 5.1(b)(I) shall be deemed to deprive Mezzanine Lender of any rights
------- ---------
or remedies provided to it elsewhere in this Agreement or the other
Mezzanine Loan Documents or otherwise available to it under law. Operator
waives and releases Mezzanine Lender from any rights or defenses Operator
may have under common law or Environmental Laws for liability arising from
or resulting from the presence, Use or Release of Hazardous Substances
except to the extent directly caused by the gross negligence, fraud or
willful misconduct of Mezzanine Lender. Notwithstanding the foregoing,
Operator shall not indemnify Mezzanine Lender with respect to any Losses
incurred in connection with, or as a direct result of, any or all of the
matters described above in clauses (i) through (iv) to the extent that
------- --- ----
Operator can
59
establish directly and solely that such Losses result from Hazardous
Substances being placed on, above or under the Facility (a) by the
affirmative act or gross negligence of Mezzanine Lender or any employees,
agents or bailees of Mezzanine Lender; or (b) subsequent to (i) Mezzanine
Lender taking title to the Facility; or (ii) a foreclosure by Mezzanine
Lender; or (iii) acceptance by Mezzanine Lender or its designees of a deed-
in-lieu of foreclosure with respect to the Facility.
(J) Access to Facility. Operator shall permit agents, representatives
------------------
and employees of Mezzanine Lender to inspect the Facility or any part
thereof at such reasonable times as may be requested by Mezzanine Lender
upon two (2) Business Days prior written notice and subject to the rights
of tenants under Leases (as defined in the Mezzanine Leasehold Mortgage);
provided, such written notice shall not be required upon the occurrence and
continuation of a Default or Event of Default.
(K) Notice of Default. Operator shall promptly advise Mezzanine
-----------------
Lender of any material adverse change in Operator's condition, financial or
otherwise, or of the occurrence of any Default of which Operator has
knowledge or Event of Default of which Operator has knowledge.
(L) Cooperate in Legal Proceedings. Except with respect to any claim
------------------------------
by Operator against Mezzanine Lender, Operator shall cooperate with
Mezzanine Lender with respect to any proceedings before any Governmental
Authority which may in any way affect the rights of Mezzanine Lender
hereunder or any rights obtained by Mezzanine Lender under any of the
Mezzanine Loan Documents and, in connection therewith, not prohibit
Mezzanine Lender, at its election, from participating in any such
proceedings.
(M) Perform Mezzanine Loan Documents. Operator shall observe, perform
--------------------------------
and satisfy all the terms, provisions, covenants and conditions required to
be observed, performed or satisfied by it, and shall pay when due all
costs, fees and expenses required to be paid by it, under the Mezzanine
Loan Documents executed and delivered by Operator.
(N) Insurance Benefits; Condemnation Claims. Borrower and Operator
---------------------------------------
shall cooperate with Mezzanine Lender in settling any insurance or
condemnation claim and/or obtaining for Mezzanine Lender the benefits of
any Insurance Proceeds lawfully or equitably payable to Mezzanine Lender in
connection with the Facility, and Mezzanine Lender shall be reimbursed for
any reasonable expenses incurred in connection therewith (including
reasonable attorneys' fees and disbursements) and the payment by Operator
of the expense of an Appraisal on behalf of Mezzanine Lender in case of a
fire or other
60
casualty affecting the Facility or any part thereof out of such Insurance
Proceeds, all as more specifically provided in the Mezzanine Leasehold
Mortgage.
(O) Further Assurances. Operator shall, at Operator's sole cost and
------------------
expense:
(i) upon Mezzanine Lender's reasonable request therefor given
from time to time after the occurrence and during the continuance of any
Event of Default pay for (a) reports of UCC, federal tax lien, state tax
lien, judgment and pending litigation searches with respect to Operator and
(b) searches of title to the Facility, each such search to be conducted by
search firms reasonably designated by Mezzanine Lender in each of the
locations reasonably designated by Mezzanine Lender.
(ii) furnish to Mezzanine Lender, upon Mezzanine Lender's
reasonable request therefor, all instruments, documents, boundary surveys,
footing or foundation surveys, certificates, plans and specifications,
Appraisals, title and other insurance reports and agreements, and each and
every other document, certificate, agreement and instrument required to be
furnished pursuant to the terms of the Mezzanine Loan Documents;
(iii) execute and deliver to Mezzanine Lender such documents,
instruments, certificates, assignments and other writings, and do such
other acts necessary, to evidence, preserve and/or protect the Collateral
at any time securing or intended to secure the Mezzanine Note, as Mezzanine
Lender may require in Mezzanine Lender's reasonable discretion; and
(iv) do and execute all and such further lawful acts,
conveyances and assurances for the better and more effective carrying out
of the intents and purposes of this Agreement and the other Mezzanine Loan
Documents, as Mezzanine Lender shall require from time to time in its
reasonable discretion.
(P) Management of Mortgaged Property. Without the prior written
--------------------------------
consent of the Mezzanine Lender, the Borrower will not execute a Management
Agreement or retain a manager to manage the Facility. To the extent
required by the First Mortgage Lender pursuant to Section 5.1(b)(P) of the
First Mortgage Loan Agreement, Operator will enter into a Management
Agreement with a manager identified by First Mortgage Lender which manager
shall be deemed acceptable to the Mezzanine Lender in its reasonable
discretion.
61
(Q) Financial Reporting. Operator shall furnish Mezzanine Lender with
-------------------
any of the financial statements, reports and information provided to the First
Mortgage Lender pursuant to Section 5.1(b)(Q) of the First Mortgage Loan
Agreement at the same time that it provides such financial statements, reports
and information to the First Mortgage Lender and Mezzanine Lender shall have the
same rights with respect to such financial statements, reports and information
as the First Mortgage Lender has under the First Mortgage Loan Agreement.
Operator shall furnish to Mezzanine Lender such other financial information with
respect to Operator as Mezzanine Lender may reasonably request.
(R) Conduct of Business. Operator shall cause the operation of the
-------------------
Facility to be conducted at all times in a manner consistent with at least
the level of operation of the Facility as of the Closing Date, including,
without limitation, the following:
(i) to maintain or cause to be maintained the standard of
operations at the Facility at all times at a level necessary to insure a
level of quality for the Facility consistent with similar facilities in the
same competitive market;
(ii) to operate or cause to be operated the Facility in a
prudent manner in compliance in all material respects with applicable Legal
Requirements and Insurance Requirements relating thereto and cause all
Licenses, Permits, and any other agreements necessary for the continued use
and operation of the Facility to remain in effect; and
(iii) to maintain or cause to be maintained sufficient Inventory
and Equipment of types and quantities at the Facility to enable the
Operator to operate the Facility.
(S) Intentionally Omitted.
(T) ERISA. Operator shall deliver to Mezzanine Lender as soon as
-----
possible, and in any event within ten days after Operator knows or has
reason to believe that any of the events or conditions specified below with
respect to any Plan or Multiemployer Plan has occurred or exists, a
statement signed by a senior financial officer of Operator setting forth
details respecting such event or condition and the action, if any, that
Operator or its ERISA Affiliate proposes to take with respect thereto (and
a copy of any report or notice required to be filed with or given to PBGC
by Operator or an ERISA Affiliate with respect to such event or condition):
(i) any reportable event, as defined in Section 4043(b) of ERISA
and the regulations issued thereunder, with respect to a Plan, as to which
PBGC has not by regulation waived the requirement of Section 4043(a) of
ERISA that it be notified within
62
30 days of the occurrence of such event (provided that a failure to meet
the minimum funding standard of Section 412 of the Code or Section 302 of
ERISA, including, without limitation, the failure to make on or before its
due date a required installment under Section 412(m) of the Code or Section
302(e) of ERISA, shall be a reportable event regardless of the issuance of
any waivers in accordance with Section 412(d) of the Code); and any request
for a waiver under Section 412(d) of the Code for any Plan;
(ii) the distribution under Section 4041 of ERISA of a notice
of intent to terminate any Plan or any action taken by Operator or an ERISA
Affiliate to terminate any Plan;
(iii) the institution by PBGC of proceedings under Section 4042
of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, or the receipt by Operator or any ERISA Affiliate of
a notice from a Multiemployer Plan that such action has been taken by PBGC
with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal from a Multiemployer
Plan by Operator or any ERISA Affiliate that results in liability under
Section 4201 or 4204 of ERISA (including the obligation to satisfy
secondary liability as a result of a purchaser default) or the receipt by
Operator or any ERISA Affiliate of notice from a Multiemployer Plan that it
is in reorganization or insolvency pursuant to Section 4241 or 4245 of
ERISA or that it intends to terminate or has terminated under Section 4041A
of ERISA;
(v) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against Operator or any ERISA Affiliate to enforce
Section 515 of ERISA, which proceeding is not dismissed within 30 days;
(vi) the adoption of an amendment to any Plan that, pursuant to
Section 401(a)(29) of the Code or Section 307 of ERISA, would result in the
loss of tax-exempt status of the trust of which such Plan is a part if
Operator or an ERISA Affiliate fails to timely provide security to the Plan
in accordance with the provisions of said Sections; and
(vii) the imposition of a lien or a security interest in
connection with a Plan.
(U) Single Purpose Entity. Operator shall at all times be a Single
---------------------
Purpose Entity.
63
(V) Trade Indebtedness. Operator will pay its trade payables within
------------------
ninety (90) days of the date incurred, unless Operator is in good faith
contesting Operator's obligation to pay such trade payables in a manner
reasonably satisfactory to Mezzanine Lender (which may include Mezzanine
Lender's requirement that Operator, as the case may be, post security with
respect to the contested trade payable).
(W) Intentionally Deleted.
---------------------
(X) Annual Operating Budgets. Operator shall submit to Mezzanine
------------------------
Lender Annual Operating Budgets at those times and in such form and
substance as set forth in the definition of "Annual Operating Budget" in
this Agreement.
(Y) Use Specific Covenants. Operator shall:
----------------------
(1) operate the Facility or cause the Facility to be operated in
full compliance with the laws and requirements referred to in Section
-------
4.1(d)(AK)(i); and
-------------
(2) operate the Facility or cause the Facility to be operated in
a manner such that the Licenses shall remain in full force and effect
and such that any new or additional License that may, at any time or
from time to time, be required pursuant to any Legal Requirements are
timely obtained and maintained in full force and effect; and
(3) cooperate with all governmental agencies, such cooperation
shall include, but not be limited to, timely and completely responding
to all requests for records, as well as developing and implementing an
appropriate and acceptable plan to correct any deficiency in the
operation of the Facility to the extent required pursuant to any Legal
Requirements and Operators right to contest in accordance with the
Mezzanine Leasehold Mortgage.
ARTICLE VI
NEGATIVE COVENANTS
------------------
Section 6.1. Borrower and Operator Negative Covenants. (a) Borrower
----------------------------------------
covenants and agrees that, until payment in full of the Indebtedness, it will
not do, directly or indirectly, any of the following unless Mezzanine Lender
consents thereto in writing:
64
(A) Liens on the Mortgaged Property. Incur, create, assume, become or
-------------------------------
be liable in any manner with respect to, or permit to exist, any Lien with
respect to the Facility, except: (i) Liens in favor of Mezzanine Lender,
and (ii) the Permitted Encumbrances.
(B) Transfer. Except as expressly permitted by or pursuant to this
--------
Agreement or the Mezzanine Mortgages, allow any Transfer to occur, or enter
into a Management Agreement with respect to the Facility.
(C) Other Borrowings. Incur, except for the First Mortgage Loan, the
----------------
SELCO Debt and unsecured trade payables incurred in the ordinary course of
business relating to the ownership and operation of the Facility which do
not exceed, at any time, a maximum amount of Ten Thousand Dollars ($10,000)
and are paid within ninety (90) days of the date incurred, create, assume,
become or be liable in any manner with respect to Other Borrowings.
Notwithstanding the foregoing, Borrower may in good faith contest
Borrower's obligation to pay such trade payables in a manner satisfactory
to Mezzanine Lender (which may include Mezzanine Lender's requirement that
Borrower post security with respect to the contested trade payable (such
security not to exceed one hundred and twenty-five percent (125%) of the
amount of the claim being contested)).
(D) Intentionally Omitted.
---------------------
(E) Change In Business. Cease to be a Single-Purpose Entity or make
------------------
any material change in the scope or nature of its business objectives,
purposes or operations, or undertake or participate in activities other
than the continuance of its present business.
(F) Debt Cancellation. Except as permitted in the Operator Lease,
-----------------
cancel or otherwise forgive or release any material claim or debt owed to
Borrower by any Person, except for adequate consideration or in the
ordinary course of Borrower's business.
(G) Affiliate Transactions. Enter into, or be a party to, any
----------------------
transaction with an Affiliate of Borrower, except in the ordinary course of
business and on terms which are no less favorable to Borrower or such
Affiliate than would be obtained in a comparable arm's length transaction
with an unrelated third party, and, if the amount to be paid to the
Affiliate pursuant to the transaction or series of related transactions is
greater than $50,000 (determined annually on an aggregate basis) fully
disclosed to Mezzanine Lender in advance.
(H) Creation of Easements. Create, or permit the Facility or any part
---------------------
thereof to become subject to, any easement, license or restrictive
covenant, other than a Permitted
65
Encumbrance.
(I) Misapplication of Funds. Distribute any Rents or Money received
-----------------------
from Accounts in violation of the provisions of Section 2.12.
------- ----
(J) Certain Restrictions. Enter into any agreement other than the
--------------------
Operator Lease and the First Mortgage Loan Agreement which expressly
restricts the ability of Borrower to enter into amendments, modifications
or waivers of any of the Mezzanine Loan Documents.
(K) Issuance of Equity Interests. Issue or allow to be created any
----------------------------
stocks or shares or shareholder, partnership, membership or beneficial
ownership interests, as applicable, or other ownership interests other than
the stocks, shares, shareholder, partnership, membership, or beneficial
ownership interests and other ownership interests which are outstanding or
exist on the Closing Date or any security or other instrument which by its
terms is convertible into or exercisable or exchangeable for stock, shares,
shareholder, partnership, membership or beneficial ownership interests or
other ownership interests in Borrower, except as contemplated by the First
Mortgage Loan Agreement.
(L) Assignment of Licenses and Permits. Except in connection with the
----------------------------------
First Mortgage Loan, consent to the assignment or transfer any of any
interest in any Permits pertaining to the Facility, or assign, transfer or
remove or permit any other Person to assign, transfer or remove any records
pertaining to the Facility without Mezzanine Lender's prior written consent
which consent may be granted or refused in Mezzanine Lender's reasonable
discretion.
(M) Place of Business. Change its chief executive office or its
-----------------
principal place of business or place where its books and records are kept
without giving Mezzanine Lender at least thirty (30) days' prior written
notice thereof and promptly providing Mezzanine Lender such information as
Mezzanine Lender may reasonably request in connection therewith.
(b) Operator covenants and agrees that, until payment in full of the
Indebtedness, it will not do, directly or indirectly, any of the following
unless Mezzanine Lender consents thereto in writing:
(A) Liens on the Mortgaged Property. Incur, create, assume, become or
-------------------------------
be liable in any manner with respect to, or permit to exist, any Lien with
respect to the Facility, except: (i) Liens in favor of Mezzanine Lender,
and (ii) the Permitted
66
Encumbrances.
(B) Transfer; Joint Assessment. Except as expressly permitted by or
--------------------------
pursuant to this Agreement or the Mezzanine Mortgages, allow any Transfer
to occur or enter into a management agreement with respect to the Facility.
Operator shall not suffer, permit or initiate the joint assessment of the
Facility (i) with any other real property constituting a separate tax lot,
and (ii) with any portion of the Facility which may be deemed to constitute
personal property, or any other procedure whereby the lien of any taxes
which may be levied against such personal property shall be assessed or
levied or charged to the Facility as a single lien.
(C) Other Borrowings. Incur, except for the First Mortgage Loan,
----------------
unsecured trade payables incurred in the ordinary course of business
relating to the ownership and operation of the Facility which do not
exceed, at any time, a maximum amount of one percent (1%) of the Mezzanine
Loan Amount plus the Loan Amount (as defined in the First Mortgage Loan
Agreement) and are paid within ninety (90) days of the date incurred,
create, assume, become or be liable in any manner with respect to Other
Borrowings. Notwithstanding the foregoing, Operator may in good faith
contest Operator's obligation to pay such trade payables in a manner
satisfactory to Mezzanine Lender (which may include Mezzanine Lender's
requirement that Operator post security with respect to the contested trade
payable (such security not to exceed one hundred and twenty-five percent
(125%) of the amount of the claim being contested)); provided, however, to
the extent the First Mortgage Lender has required Borrower to post such
security pursuant to the First Mortgage Loan, Borrower shall not be
required to post security pursuant to this Agreement.
(D) Intentionally Omitted.
---------------------
(E) Change In Business. Cease to be a Single-Purpose Entity or make
------------------
any material change in the scope or nature of its business objectives,
purposes or operations, or undertake or participate in activities other
than the continuance of its present business.
(F) Debt Cancellation. Cancel or otherwise forgive or release any
-----------------
material claim or debt owed to Operator by any Person, except for adequate
consideration or in the ordinary course of Operator's business.
(G) Affiliate Transactions. Enter into, or be a party to, any
----------------------
transaction with an Affiliate of Operator, except in the ordinary course of
business and on terms which are no less favorable to Operator or such
Affiliate than would be obtained in a comparable arm's length transaction
with an unrelated third party, and, if the amount to be paid to the
67
Affiliate pursuant to the transaction or series of related transactions is
greater than $50,000 (determined annually on an aggregate basis) except as
(i) set forth in an Annual Operating Budget which is approved by Mezzanine
Lender pursuant to this Agreement or (ii) otherwise fully disclosed to
Mezzanine Lender in advance. Notwithstanding the foregoing, Operator may in
good faith contest Operator's obligation to pay such trade payables in a
manner satisfactory to Mezzanine Lender (which may include Mezzanine
Lender's requirement that Operator post security with respect to the
contested trade payable (such security not to exceed one hundred and
twenty-five percent (125%) of the amount of the claim being contested).
(H) Creation of Easements. Create, or permit the Facility or any part
---------------------
thereof to become subject to, any easement, license or restrictive
covenant, other than a Permitted Encumbrance.
(I) Misapplication of Funds. Distribute any Rents or Money received
-----------------------
from Accounts in violation of the provisions of Section 2.12.
------- ----
(J) Certain Restrictions. Enter into any agreement other than the
--------------------
Operator Lease which expressly restricts the ability of Operator to enter
into amendments, modifications or waivers of any of the Mezzanine Loan
Documents.
(K) Issuance of Equity Interests. Issue or allow to be created any
----------------------------
stocks or shares or shareholder, partnership, membership or beneficial
ownership interests, as applicable, or other ownership interests other than
the stocks, shares, shareholder, partnership, membership, or beneficial
ownership interests and other ownership interests which are outstanding or
exist on the Closing Date or any security or other instrument which by its
terms is convertible into or exercisable or exchangeable for stock, shares,
shareholder, partnership, membership or beneficial ownership interests or
other ownership interests in Operator, except as contemplated by the First
Mortgage Loan Agreement.
(L) Assignment of Licenses and Permits. Except in connection with the
----------------------------------
First Mortgage Loan, assign or transfer any of its interest in any Permits
pertaining to the Facility, or assign, transfer or remove or permit any
other Person to assign, transfer or remove any records pertaining to the
Facility without Mezzanine Lender's prior written consent which consent may
be granted or refused in Mezzanine Lender's reasonable discretion.
(M) Place of Business. Change its chief executive office or its
-----------------
principal place of business or place where its books and records are kept
without giving Mezzanine
68
Lender at least thirty (30) days' prior written notice thereof and promptly
providing Mezzanine Lender such information as Mezzanine Lender may
reasonably request in connection therewith.
(N) Use Specific Negative Covenants: Operator shall not do any of the
-------------------------------
following unless Mezzanine Lender consents thereto in writing:
(1) transfer any License to any location other than the Facility
nor pledge any License as collateral security for any other loan or
indebtedness;
(2) rescind, withdraw, revoke, amend, modify, supplement, or
otherwise alter the nature, tenor or scope of any License for the
Facility which rescission, withdrawal, revocation, amendment,
modification, supplement or other alteration would have a Material
Adverse Effect; or
(3) enter into any resident care agreements with residents or
with any other persons which deviate in any material respect from the
standard form customarily used at the Facility; or
(4) fail to satisfy all requirements established by law,
regulation or administrative instruction for the operation of the
Facility; or
(5) fail to operate the Facility in a manner that is consistent
with all relevant standards of care and service in the community.
ARTICLE VII
DEFAULTS
--------
Section 7.1. Event of Default. The occurrence of one or more of the
----------------
following events shall be an "Event of Default" hereunder:
----------------
(i) if on any Payment Date the funds in the Debt Service
Payment Sub-Account are insufficient to pay the Required Debt Service
Payment due on such Payment Date; provided, however, that if a Cash
Management Event has not occurred, such failure shall not constitute an
Event of Default if Borrower shall cure such failure within five (5) days
after such Payment Date;
(ii) if on any Payment Date Borrower fails to pay the Required
Debt
69
Service Payment due on such Payment Date; provided, however, that if a Cash
Management Event has not occurred, such failure shall not constitute an
Event of Default if Borrower shall cure such failure within five (5) days
after such Payment Date;
(iii) if Borrower fails to pay the outstanding Indebtedness on
the Maturity Date;
(iv) if on any Payment Date on which Borrower is required under
this Agreement to pay a Basic Carrying Costs Monthly Installment, Borrower
and/or Operator fails to pay the Basic Carrying Costs Monthly Installment
or the Capital Reserve Monthly Installment due on such Payment Date;
provided, however, that if a Cash Management Event has not occurred, such
failure shall not constitute an Event of Default if Borrower and/or
Operator shall cure such failure within five (5) days after such Payment
Date;
(v) if on the date any payment of a Basic Carrying Cost would
become delinquent, unless such Basic Carrying Cost was already paid, the
funds in the Basic Carrying Costs Sub-Account are insufficient to make such
payment;
(vi) the occurrence of the events identified elsewhere in the
Mezzanine Loan Documents as constituting an "Event of Default" hereunder or
thereunder;
(vii) a Transfer, unless the prior written consent of Mezzanine
Lender is obtained (which consent may be withheld with or without cause in
Mezzanine Lender's discretion);
(viii) if Borrower or Operator fails to pay any other amount
payable pursuant to this Agreement or any other Mezzanine Loan Document
when due and payable in accordance with the provisions hereof or thereof,
as the case may be, and such failure is not remedied within any applicable
grace periods;
(ix) if any representation or warranty made herein or in any
other Mezzanine Loan Document, or in any report, certificate, financial
statement or other Instrument, agreement or document furnished by Borrower
or Operator in connection with this Agreement, the Mezzanine Note or any
other Mezzanine Loan Document executed and delivered by Borrower or
Operator, shall be false in any material respect as of the date such
representation or warranty was made or remade;
(x) if Borrower or Operator makes an assignment for the
benefit of creditors;
70
(xi) if a receiver, liquidator or trustee shall be appointed
for Borrower or Operator or if Borrower or Operator shall be adjudicated as
bankrupt or insolvent, or if any petition for bankruptcy, reorganization or
arrangement pursuant to federal bankruptcy law, or any similar federal or
state law, shall be filed by or against, consented to, or acquiesced in by
Borrower or Operator or if any proceeding for the dissolution or
liquidation of Borrower or Operator shall be instituted; provided, however,
-------- -------
that if such appointment, adjudication, petition or proceeding was
----
involuntary and not consented to by Borrower or Operator as the case may
be, upon the same not being discharged, stayed or dismissed within 90 days;
or if Borrower or Operator shall generally not be paying its debts as they
become due;
(xii) if either Borrower or Operator attempts to delegate its
obligations or assign its rights under this Agreement, any of the other
Mezzanine Loan Documents or any interest herein or therein, except as
permitted by this Agreement;
(xiii) except as permitted under this Agreement, if any provision
of any organizational document of Borrower is amended or modified in any
respect, or if Borrower, Operator or Borrower's Trustee or any of their
respective partners, members, beneficial owners, trustees or shareholders
as applicable, fails to perform or enforce the provisions of such
organizational documents or attempts to dissolve Borrower or Operator; or
if Borrower or Operator or any of their respective partners, members,
beneficial owners, trustees or shareholders, as applicable, breaches any of
the covenants set forth in Sections 5.1(a)(U), 5.1(b)(U), 6.1(a)(E) or
-------- --------- --------- ---------
6.1(b)(E);
--------
(xiv) if Borrower or Operator fails to (A) notify Mezzanine
Lender of the occurrence of a Default under any of the Mezzanine Loan
Documents within ten (10) Business Days of the day on which Borrower or
Operator first has knowledge of such Default or (B) give any notice due to
any Person under any Mezzanine Loan Document (a) within five (5) Business
Days after such notice was due or (b) in accordance with the applicable
procedural requirements set forth in the Mezzanine Loan Documents;
(xv) if Borrower or Operator shall be in default under any of
the other obligations, agreements, undertakings, terms, covenants,
provisions or conditions of this Agreement, the Mezzanine Note, the
Mezzanine Mortgages or the other Mezzanine Loan Documents, not otherwise
referred to in this Section 7.1, for ten (10) Business Days after written
------- ---
notice to Borrower or Operator, as applicable, from Mezzanine Lender or its
successors or assigns, in the case of any default which can be cured by the
payment of a sum of money or for thirty (30) Business Days after written
notice to Borrower or Operator, as applicable, from Mezzanine Lender or its
successors or assigns, in the case of any other default (unless otherwise
provided herein or in such other Mezzanine Loan
71
Document); provided, however, that if such non-monetary default under this
-------- -------
subparagraph is susceptible of cure but cannot reasonably be cured within
------------
such thirty (30) Business Day period and provided further that Borrower
shall have commenced to cure such default within such thirty (30) Business
Day period and thereafter diligently and expeditiously proceeds to cure the
same, such thirty (30) Business Day period shall be extended for such time
as is reasonably necessary for Borrower in the exercise of due diligence to
cure such default, but in no event shall such period exceed one hundred
twenty (120) days after the original notice from Mezzanine Lender;
provided, further, if Borrower or Operator provides to Mezzanine Lender a
-------- -------
certificate certifying and demonstrating that Borrower or Operator is
diligently attempting to cure such default as determined by Mezzanine
Lender in its reasonable discretion and such non-monetary default still is
capable of being cured as determined by Mezzanine Lender in its reasonable
discretion and if Borrower or Operator, as applicable, is diligently
attempting to cure such default, as determined by Mezzanine Lender in its
reasonable discretion, such period shall be extended by Mezzanine Lender in
its reasonable discretion for an additional period of time not to exceed
sixty (60) days;
(xvi) if an event or condition specified in Sections 5.1(a)(T)
-------- ---------
or 5.1(b)(T) shall occur or exist with respect to any Plan or Multiemployer
---------
Plan and, as a result of such event or condition, together with all other
such events or conditions, Borrower or any ERISA Affiliate shall incur or
in the opinion of Mezzanine Lender shall be reasonably likely to incur a
liability to a Plan, a Multiemployer Plan or PBGC (or any combination of
the foregoing) which would constitute, in the reasonable determination of
Mezzanine Lender, a Material Adverse Effect;
(xvii) unless resulting from First Mortgage Lender's exercise of
its rights under the First Mortgage Loan, if without Mezzanine Lender's
prior written consent (A) any management agreement (other than the
Management Agreement) is entered into for the Facility or (B) after the
execution of a Management Agreement pursuant to Section 5.1(b)(P) there is
------- ---------
any change in or termination of such Management Agreement for the Facility;
(xviii) Intentionally deleted.
(xix) if Borrower shall fail to correct, within the time
deadlines set by any health, licensing or similar agency, any deficiency
that justifies either of the following actions by such agency with respect
to the Facility and such agency commences a termination of any License;
(xx) if the Facility is assessed material fines or penalties
(as
72
distinguished from establishment of standard settlement accounts) by any
state or health, licensing or similar agency having jurisdiction over
Borrower, Operator or the Facility;
(xxi) if (A) Borrower shall fail to pay any amount due with
respect to the SELCO Debt when due and such failure shall continue beyond
any applicable grace period or (B) a default or event of default shall
occur with respect to the SELCO Debt which shall continue beyond any
applicable grace period or (C) if any of the loan documents evidencing the
SELCO Loan is amended without the Mezzanine Lender's prior written consent;
(xxii) if Operator fails to provide Mezzanine Lender with the
written notice (together with the required deliveries) set forth in Section
-------
8.33 which failure is not remedied within five (5) days of the date such
----
written notice and deliveries were due;
(xxiii) Intentionally deleted;
(xxiv) an "Event of Default" occurs under the First Mortgage
Loan Agreement or any of the other First Mortgage Loan Documents.
Section 7.2. Remedies. (a) Upon the occurrence of an Event of Default
--------
and during the continuance thereof, all or any one or more of the rights, powers
and other remedies available to Mezzanine Lender against Borrower and Operator
under this Agreement, the Mezzanine Note, the Mezzanine Mortgage, the Mezzanine
Leasehold Mortgage or any of the other Mezzanine Loan Documents, or at law or in
equity may be exercised by Mezzanine Lender at any time and from time to time
(including, without limitation, the right to accelerate and declare the
outstanding principal amount, unpaid interest, Default Rate interest, Late
Charges, Yield Maintenance Premium and any other amounts owing by Borrower to be
immediately due and payable), without notice or demand, whether or not all or
any portion of the Indebtedness shall be declared due and payable, and whether
or not Mezzanine Lender shall have commenced any foreclosure proceeding or other
action for the enforcement of its rights and remedies under any of the Mezzanine
Loan Documents with respect to the Facility or all or any portion of the
Collateral. Any such actions taken by Mezzanine Lender shall be cumulative and
concurrent and may be pursued independently, singly, successively, together or
otherwise, at such time and in such order as Mezzanine Lender may determine in
its sole discretion, to the fullest extent permitted by law, without impairing
or otherwise affecting the other rights and remedies of Mezzanine Lender
permitted by law, equity or contract or as set forth herein or in the other
Mezzanine Loan Documents. Notwithstanding anything contained to the contrary
herein, the outstanding principal amount, unpaid interest, Default Rate
interest, Late Charges, Yield Maintenance Premium and any other amounts owing by
Borrower shall be accelerated and immediately due and payable, without any
election by Mezzanine Lender upon the occurrence of
73
an Event of Default described in Section 7.1(x) or Section 7.1 (xi).
-------------- ----------------
Notwithstanding that this Agreement may refer to a continuing Event of Default,
and without limiting Borrower's or Operator's right to cure a Default which may,
with the passage of time, become an Event of Default, neither Borrower nor
Operator shall have any right pursuant to this Agreement to cure any Event of
Default unless this Agreement is amended by Borrower, Operator and Mezzanine
Lender in writing.
Section 7.3. Remedies Cumulative. The rights, powers and remedies of
-------------------
Mezzanine Lender under this Agreement shall be cumulative and not exclusive of
any other right, power or remedy which Mezzanine Lender may have against
Borrower or Operator pursuant to this Agreement or the other Mezzanine Loan
Documents executed by or with respect to Borrower or Operator, or existing at
law or in equity or otherwise. Mezzanine Lender's rights, powers and remedies
may be pursued singly, concurrently or otherwise, at such time and in such order
as Mezzanine Lender may determine in Mezzanine Lender's sole discretion. No
delay or omission to exercise any remedy, right or power accruing upon an Event
of Default shall impair any such remedy, right or power or shall be construed as
a waiver thereof, but any such remedy, right or power may be exercised from time
to time and as often as may be deemed expedient. A waiver of any Default or
Event of Default shall not be construed to be a waiver of any subsequent Default
or Event of Default or to impair any remedy, right or power consequent thereon.
Any and all of Mezzanine Lender's rights with respect to the Collateral shall
continue unimpaired, and Borrower and Operator shall be and remain obligated in
accordance with the terms hereof, notwithstanding (i) the release or
substitution of Collateral at any time, or of any rights or interest therein or
(ii) any delay, extension of time, renewal, compromise or other indulgence
granted by Mezzanine Lender in the event of any Default or Event of Default with
respect to the Collateral or otherwise hereunder. Notwithstanding any other
provision of this Agreement, Mezzanine Lender reserves the right to seek a
deficiency judgment or preserve a deficiency claim, in connection with the
foreclosure of the Mezzanine Mortgage or Mezzanine Leasehold Mortgage on the
Facility, to the extent necessary to foreclose on other parts of the Mortgaged
Property.
Section 7.4. Mezzanine Lender's Right to Perform. If Borrower or
-----------------------------------
Operator fails to perform any covenant or obligation contained herein and such
failure shall continue beyond any applicable grace period and thereafter
continue for a period of five Business Days after Borrower's or Operator's, as
applicable, receipt of written notice thereof, without in any way limiting
Section 7.1 hereof, from Mezzanine Lender, Mezzanine Lender may, but shall have
-----------
no obligation to, itself perform, or cause performance of, such covenant or
obligation, and the expenses of Mezzanine Lender incurred in connection
therewith shall be payable by Borrower and Operator to Mezzanine Lender within
ten (10) calendar days after written demand therefor; provided, however, if
First Mortgage Lender is performing, or causing the performance of, such
covenant or obligations, Mezzanine Lender shall refrain from performing, or
causing the
74
performance of such covenant or obligation. Notwithstanding the foregoing,
Mezzanine Lender shall have no obligation to send notice to Borrower or Operator
of any such failure.
Section 7.5. Operator's Limited Right to Cure. Notwithstanding
--------------------------------
anything in this Agreement or the Mezzanine Loan Documents to the contrary, if a
non-monetary Event of Default occurs and is continuing with respect to Borrower
which Event of Default was not caused directly or indirectly by Operator and
Mezzanine Lender desires to exercise its rights under this Article VII, provided
no Event of Default exists with respect to Operator, Mezzanine Lender shall give
Operator written notice of such Event of Default and of Mezzanine Lender's
intent to exercise its rights and remedies under this Article VII and Mezzanine
Lender shall abstain from exercising its rights and remedies under this Article
VII until the earlier to occur of (a) the date which is forty-five (45) days
after delivery of such written notice, (b) the occurrence of an Event of Default
with respect to Operator and (c) the occurrence of a monetary Event of Default
with respect to Borrower. Mezzanine Lender shall not exercise its rights under
this Article VII in connection with the Event of Default with respect to
Borrower identified in the written notice delivered to Operator if prior to the
dates or events described in clauses (a) through (c) of the foregoing sentence,
the following events and conditions shall have occurred or been satisfied, as
applicable, (i) the Operator has acquired fee simple title to the Facility or
acquired the beneficial interest of SELCO in Borrower, has assumed all of the
obligations of the Borrower under the Mezzanine Loan Documents and has executed
and delivered such other documentation as may be required by Mezzanine Lender
(ii) satisfactory opinions relating to such transfer shall have been delivered
by Operator to Mezzanine Lender, (iii) to the extent curable, Operator shall
have cured such non-monetary Event of Default, (iv) Operator pays all reasonable
expenses incurred by Mezzanine Lender in connection with such transfer, (v)
Operator shall have delivered to Mezzanine Lender an updated Title Insurance
Policy showing fee simple title to the Facility in Operator and insuring that
Mezzanine Lender has a valid second mortgage lien on the Operator's fee simple
interest in the Facility together with such modifications, amendments or
supplements to the Mezzanine Loan Documents as Mezzanine Lender may reasonably
request. Upon consummation of the transfer of fee simple title in the Facility
to the Operator and the assignment by the Borrower and assumption by the
Operator of the Borrower's obligations under the Mezzanine Loan Documents
executed by the Borrower, Operator shall be considered the "Borrower" under the
Mezzanine Loan Documents as well as the "Operator" under the Mezzanine Loan
Documents and shall have all of the obligations of "Borrower" under the
Mezzanine Loan Documents as well as the obligations of "Operator" under the
Mezzanine Loan Documents. If the events described in clauses (a) through (c) of
------- --- ---
the first sentence of this Section occur or the events or conditions described
-------
in the second sentence of this Section do not occur or are not satisfied prior
-------
to the occurrence of the events described in clauses (a) through (c) of the
------- --- ---
first sentence of this Section, Mezzanine Lender shall be entitled to exercise
-------
all of its rights and remedies pursuant to this Article VII.
75
ARTICLE VIII
MISCELLANEOUS
-------------
Section 8.1. Survival. Subject to Section 4.2, this Agreement and all
-------- ------- ---
covenants, agreements, representations and warranties made herein and in the
certificates delivered pursuant hereto shall survive the execution and delivery
of this Agreement and the execution and delivery by Borrower to Mezzanine Lender
of the Mezzanine Note and the Operator of the Mezzanine Guaranty, and shall
continue in full force and effect so long as any portion of the Indebtedness is
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. All covenants, promises and agreements in this Agreement
contained, by or on behalf of Borrower or Operator, shall inure to the benefit
of the respective successors and assigns of Mezzanine Lender. Nothing in this
Agreement or in any other Mezzanine Loan Document, express or implied, shall
give to any Person other than the parties and the holder(s) of the Mezzanine
Note, the Mezzanine Mortgage and the other Mezzanine Loan Documents, and their
legal representatives, successors and assigns, any benefit or any legal or
equitable right, remedy or claim hereunder.
Section 8.2. Mezzanine Lender's Discretion. Whenever pursuant to this
-----------------------------
Agreement, Mezzanine Lender exercises any right given to it to approve or
disapprove, or any arrangement or term is to be satisfactory to Mezzanine
Lender, the decision of Mezzanine Lender to approve or disapprove or to decide
whether arrangements or terms are satisfactory or not satisfactory shall (except
as is otherwise specifically herein provided) be in the sole discretion of
Mezzanine Lender.
Section 8.3. Governing Law. (a) The proceeds of the Mezzanine Note
-------------
delivered pursuant hereto were disbursed from New York, which State the parties
agree has a substantial relationship to the parties and to the underlying
transaction embodied hereby, and in all respects, including, without limitation,
matters of construction, validity and performance, this Agreement and the
obligations arising hereunder shall be governed by, and construed in accordance
with, the laws of the State of New York applicable to contracts made and
performed in such State and any applicable law of the United States of America.
To the fullest extent permitted by law, Borrower and Operator each hereby
unconditionally and irrevocably waives any claim to assert that the law of any
other jurisdiction governs this Agreement and the Mezzanine Note, and this
Agreement and the Mezzanine Note shall be governed by and construed in
accordance with the laws of the State of New York pursuant to (S) 5-1401 of the
New York General Obligations Law.
(b) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST BORROWER OR OPERATOR
ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE INSTITUTED IN ANY FEDERAL
OR STATE COURT IN NEW YORK, NEW
76
YORK, PURSUANT TO (S) 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW OR IN ANY
FEDERAL OR STATE COURT IN THE JURISDICTION IN WHICH THE COLLATERAL IS LOCATED
AND EACH OF OPERATOR AND BORROWER WAIVES ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING,
AND EACH OF OPERATOR AND BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION
OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. EACH OF OPERATOR AND
BORROWER DOES HEREBY DESIGNATE AND APPOINT CT CORPORATION SYSTEMS, 0000
XXXXXXXX, XXX XXXX, XXX XXXX 00000, AS ITS AUTHORIZED AGENT TO ACCEPT AND
ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY AND ALL PROCESS WHICH MAY BE SERVED IN
ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY FEDERAL OR STATE COURT AND AGREES
THAT SERVICE OF PROCESS UPON SAID AGENT AT SAID ADDRESS (OR AT SUCH OTHER OFFICE
AS MAY BE DESIGNATED BY BORROWER OR OPERATOR FROM TIME TO TIME IN ACCORDANCE
WITH THE TERMS HEREOF) WITH A COPY TO BORROWER AND OPERATOR, AS APPLICABLE, AT
ITS PRINCIPAL EXECUTIVE OFFICES, ATTENTION: GENERAL COUNSEL AND WRITTEN NOTICE
OF SAID SERVICE OF BORROWER OR OPERATOR, AS APPLICABLE, MAILED OR DELIVERED TO
BORROWER OR OPERATOR, AS APPLICABLE, IN THE MANNER PROVIDED HEREIN SHALL BE
DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON BORROWER OR OPERATOR,
AS APPLICABLE, IN ANY SUCH SUIT, ACTION OR PROCEEDING. A COPY OF SERVICE OF
PROCESS WITH RESPECT TO BORROWER SHALL BE DELIVERED TO OPERATOR AND COPY OF
SERVICE OF PROCESS WITH RESPECT TO OPERATOR SHALL BE DELIVERED TO BORROWER;
PROVIDED, HOWEVER, FAILURE TO RECEIVE SUCH COPIES SHALL NOT AFFECT ANY OF
MEZZANINE LENDER'S RIGHTS HEREUNDER. EACH OPERATOR AND BORROWER (I) SHALL GIVE
PROMPT NOTICE TO MEZZANINE LENDER OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT
HEREUNDER, (II) MAY AT ANY TIME AND FROM TIME TO TIME DESIGNATE A SUBSTITUTE
AUTHORIZED AGENT (WHICH OFFICE SHALL BE DESIGNATED AS THE ADDRESS FOR SERVICE OF
PROCESS), AND (III) SHALL PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS AUTHORIZED
AGENT CEASES TO HAVE AN OFFICE OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR.
Section 8.4. Modification, Waiver in Writing. No modification,
-------------------------------
amendment, extension, discharge, termination or waiver of any provision of this
Agreement, the Mezzanine Note or any other Mezzanine Loan Document, or consent
to any departure by Borrower or Operator therefrom, shall in any event be
effective unless the same shall be in a writing signed by each of Borrower,
Operator, and Mezzanine Lender, and then such waiver or consent shall be
effective only in the specific instance, and for the purpose, for which given.
Except as otherwise expressly provided herein, no notice to or demand on
Operator or Borrower shall entitle
77
Borrower or Operator to any other or future notice or demand in the same,
similar or other circumstances.
Section 8.5. Delay Not a Waiver. Neither any failure nor any delay
------------------
on the part of Mezzanine Lender in insisting upon strict performance of any
term, condition, covenant or agreement, or exercising any right, power, remedy
or privilege hereunder, or under the Mezzanine Note, or of any other Mezzanine
Loan Document, or any other instrument given as security therefor, shall operate
as or constitute a waiver thereof, nor shall a single or partial exercise
thereof preclude any other future exercise, or the exercise of any other right,
power, remedy or privilege. In particular, and not by way of limitation, by
accepting payment after the due date of any amount payable under this Agreement,
the Mezzanine Note or any other Mezzanine Loan Document, Mezzanine Lender shall
not be deemed to have waived any right either to require prompt payment when due
of all other amounts due under this Agreement, the Mezzanine Note or the other
Mezzanine Loan Documents, or to declare a default for failure to effect prompt
payment of any such other amount.
Section 8.6. Notices. All notices, consents, approvals and requests
-------
required or permitted hereunder or under any other Mezzanine Loan Document shall
be given in writing and shall be effective for all purposes if hand delivered or
sent by (a) hand delivery, with proof of attempted delivery, (b) certified or
registered United States mail, postage prepaid, (c) expedited prepaid delivery
service, either commercial or United States Postal Service, with proof of
attempted delivery, or (d) by telecopier (with answerback acknowledged) provided
that such telecopied notice must also be delivered by one of the means set forth
in (a), (b) or (c) above, addressed (I) if to Mezzanine Lender at its address
set forth on the first page hereof, (II) if to Borrower at its designated
address set forth on the first page hereof, and (III) if to Operator at its
address set forth on the first page hereof, or, in each such case, at such other
address and to such other Person as shall be designated from time to time by any
party hereto, as the case may be, in a written notice to the other parties
hereto in the manner provided for in this Section 8.6. A copy of all notices,
------- ---
consents, approvals and requests directed to Mezzanine Lender shall be delivered
concurrently to each of the following: Xxxxxx X. Xxxx, Esquire, Dechert Price &
Xxxxxx, 0000 Xxxx Xxxxxx, 0000 Xxxx Xxxxxxxx Xxxxx, Xxxxxxxxxxxx, XX 00000,
Telefax Number 215/994-2222; Two World Xxxxxxxxx Xxxxxx, Xxxxxxxx X, Xxx Xxxx,
XX 00000-0000, Attention: Xxxxxxx Xxxxxxx, Telefax Number (000) 000-0000; Two
World Xxxxxxxxx Xxxxxx, Xxxxxxxx X, Xxx Xxxx, XX 00000-0000, Attention: Xxxxxx
XxXxxx, Telefax Number (000) 000-0000; and Two World Xxxxxxxxx Xxxxxx, Xxxxxxxx
X, Xxx Xxxx, XX 00000-0000, Attention: Legal Counsel, Telefax Number (212)
667-1022. A copy of all notices, consents and approvals and requests addressed
to Borrower or to Operator shall be delivered concurrently to each of the
following: Brookdale Living Communities, Inc., 00 Xxxx Xxxxxx Xxxxx, Xxxxxxx,
Xxxxxxxx 00000, Attention: Xxxxxx X. Xxxxxxxx, Xx., Telefax Number: (312) 977-
3699; Brookdale Living Communities, Inc., 00 Xxxx Xxxxxx Xxxxx, Xxxxxxx,
Xxxxxxxx 00000, Attention: Xxxxxx X. Xxxxxx, Esq. Telefax Number: (312)
78
977-3699; and Xxxxxxx X. Xxxxxxx, Esq., Xxxxx, Xxxxxx, XxXxx & Serritella, 000
Xxxxx Xxxxxx Xxxxxx, 00xx Xxxxx, XXX Xxxxx, Xxxxxxx, Xxxxxxxx 00000-0000,
Telefax Number (000) 000-0000; and Wilmington Trust Company, 0000 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000-0000, Attn: Corporate Trust Administration. A
notice shall be deemed to have been given: (a) in the case of hand delivery, at
the time of delivery; (b) in the case of registered or certified mail, when
delivered or the first attempted delivery on a Business Day; (c) in the case of
expedited prepaid delivery, upon the first attempted delivery on a Business Day;
or (d) in the case of telecopier, upon receipt of answerback confirmation
received prior to 4:00 p.m. local time on a Business Day or if such confirmation
is received after 4:00 p.m. local time, the next succeeding Business Day,
provided that such telecopied notice was also delivered as required in this
Section 8.6. A party receiving a notice which does not comply with the technical
-----------
requirements for notice under this Section 8.6 may elect to waive any
-----------
deficiencies and treat the notice as having been properly given.
SECTION 8.7. TRIAL BY JURY. BORROWER, OPERATOR AND MEZZANINE LENDER,
-------------
TO THE FULLEST EXTENT THAT THEY MAY LAWFULLY DO SO, HEREBY WAIVE TRIAL BY JURY
IN ANY ACTION OR PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY TORT ACTION,
BROUGHT BY ANY PARTY HERETO WITH RESPECT TO THIS AGREEMENT, THE MEZZANINE NOTE
OR THE OTHER MEZZANINE LOAN DOCUMENTS.
Section 8.8. Headings. The Article and Section headings in this
--------
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
Section 8.9. Assignment. Mezzanine Lender shall have the right to
----------
assign in whole or in part this Agreement and/or any of the other Mezzanine Loan
Documents and the obligations hereunder or thereunder to any Person and to
participate all or any portion of the Mezzanine Loan evidenced hereby, including
without limitation, any servicer; provided, however, any assignee shall be
specifically bound by the provisions of Section 8.32. Mezzanine Lender shall
------------
provide Borrower and Operator with written notice of any such assignment;
provided, however, that such notice shall not be a condition of Mezzanine
Lender's right to assign this Agreement and/or any of the Mezzanine Loan
Documents and the failure to deliver such notice shall not constitute a default
under this Loan Agreement.
Section 8.10. Severability. Wherever possible, each provision of
------------
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be prohibited
by or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
79
Section 8.11. Preferences. Mezzanine Lender shall have no obligation
-----------
to marshal any assets in favor of Borrower or Operator or any other party or
against or in payment of any or all of the obligations of Borrower or Operator
pursuant to this Agreement, the Mezzanine Note or any other Mezzanine Loan
Document. Mezzanine Lender shall have the continuing and exclusive right to
apply or reverse and reapply any and all payments by Borrower or Operator to any
portion of the obligations of Borrower or Operator hereunder. To the extent
Borrower or Operator makes a payment or payments to Mezzanine Lender for
Borrower's or Operator's benefit, which payment or proceeds or any part thereof
are subsequently invalidated, declared to be fraudulent or preferential, set
aside or required to be repaid to a trustee, receiver or any other party under
any bankruptcy law, state or federal law, common law or equitable cause, then,
to the extent of such payment or proceeds received, the obligations hereunder or
part thereof intended to be satisfied shall be revived and continue in full
force and effect, as if such payment or proceeds had not been received by
Mezzanine Lender.
Section 8.12. Waiver of Notice. Borrower and Operator shall not be
----------------
entitled to any notices of any nature whatsoever from Mezzanine Lender except
with respect to matters for which this Agreement or the other Mezzanine Loan
Documents specifically and expressly provide for the giving of notice by
Mezzanine Lender to Borrower or Operator and except with respect to matters for
which Borrower or Operator is not, pursuant to applicable Legal Requirements,
permitted to waive the giving of notice. To the maximum extent permitted by
applicable Legal Requirements, Borrower and Operator each hereby expressly
waives the right to receive any notice from Lender with respect to any matter
for which this Agreement or the other Mezzanine Loan Documents does not
specifically and expressly provide for the giving of notice by Mezzanine Lender
to Borrower.
Section 8.13. Intentionally Omitted.
---------------------
Section 8.14. Exculpation. Except as otherwise set forth in this
-----------
Section 8.14 and Section 4.2 to the contrary, Mezzanine Lender shall not enforce
------- ---- ------- ---
the liability and obligation of Borrower or Operator to perform and observe the
obligations contained in this Agreement, the Mezzanine Note, the Mezzanine
Mortgages, the Mezzanine Guaranty or any of the other Mezzanine Loan Documents
executed and delivered by Borrower or Operator except that Mezzanine Lender may
pursue any power of sale, bring a foreclosure action, action for specific
performance, action for money judgment, or other appropriate action or
proceeding (including, without limitation, to obtain a deficiency judgment)
against Borrower or Operator or any other Person solely for the purpose of
enabling Mezzanine Lender to realize upon (a) the Collateral, and (b) the Rents
and Accounts arising from the Facility to the extent (x) (i) received by
Borrower (or any of its affiliates), after the occurrence of an Event of
Default, or (ii) received by Operator (or any of their affiliates), after the
occurrence of an Event of Default or (y) distributed
80
to (i) Borrower or its shareholders, partners, members or beneficial owners, as
applicable, or affiliates during or with respect to any period for which
Mezzanine Lender did not receive the full amounts it was entitled to receive as
prepayments of the Mezzanine Loan pursuant to Section 2.7 or (ii) Operator, or
-----------
its shareholders, partners, members or beneficial owners, as applicable, or
affiliates during or with respect to any period for which Mezzanine Lender did
not receive the full amounts it was entitled to receive as prepayments of the
Mezzanine Loan pursuant to Section 2.7 (all Rents and Accounts covered by
-----------
clauses (x) and (y) being hereinafter referred to as the "Recourse
----------- --- --------
Distributions") and (c) any other collateral given to Mezzanine Lender under the
-------------
Mezzanine Loan Documents ((a), (b), and (c) collectively, the "Default
-------
Collateral"); provided, however, that any judgment in any such action or
---------- -------- ------- ----
proceeding shall be enforceable only to the extent of any such Default
Collateral. The provisions of this Section 8.14 shall not, however, (a) impair
------- ----
the validity of the Indebtedness evidenced by the Mezzanine Loan Documents or in
any way affect or impair the Liens of the Mezzanine Mortgage or any of the other
Mezzanine Loan Documents or the right of Mezzanine Lender to foreclose the
Mezzanine Mortgage or Mezzanine Leasehold Mortgage following an Event of
Default; (b) impair the right of Mezzanine Lender to name any Person as a party
defendant in any action or suit for judicial foreclosure and sale under the
Mezzanine Mortgage or Mezzanine Leasehold Mortgage; (c) affect the validity or
enforceability of the Mezzanine Note, the Mezzanine Mortgage or the other
Mezzanine Loan Documents; (d) impair the right of Mezzanine Lender to obtain the
appointment of a receiver; (e) impair the right of Mezzanine Lender to bring
suit for any damages, losses, expenses, liabilities or costs resulting from
fraud, intentional misrepresentation, intentional physical waste of all or any
portion of the Facility, or wrongful removal or disposal of all or any portion
of the Facility by any Person in connection with this Agreement, the Mezzanine
Note, the Mezzanine Mortgage or the other Mezzanine Loan Documents; (f) impair
the right of Mezzanine Lender to obtain the Recourse Distributions received by
any Person; (g) intentionally omitted; (h) impair the right of Mezzanine Lender
to obtain Insurance Proceeds or Condemnation Proceeds due to Lender pursuant to
the Mezzanine Mortgage or Mezzanine Leasehold Mortgage; (i) impair the right of
Mezzanine Lender to enforce (against the parties liable therefore other than the
Borrower) the provisions of Sections 4.1(b)(U), 4.1(d)(U) or 5.1(b)(D)-(I) of
------------------ --------- -------------
this Agreement, Section 2.8 of the Mezzanine Mortgage or the Mezzanine Leasehold
-----------
Mortgage or the Mezzanine Environmental Guaranty even after repayment in full by
Borrower of the Indebtedness; (j) prevent or in any way hinder Mezzanine Lender
from exercising, or constitute a defense, or counterclaim, or other basis for
relief in respect of the exercise of, any other remedy against any or all of the
Collateral securing the Mezzanine Note as provided in the Mezzanine Loan
Documents; (k) impair the right of Mezzanine Lender to bring suit with respect
to any intentional misapplication of any funds including without limitation any
intentional misappropriation of security deposits or Rents collected more then
one month in advance; or (l) impair the right of Mezzanine Lender to xxx for,
seek or demand a deficiency judgment against any Person solely for the purpose
of foreclosing the Mortgaged Property or any part thereof, or realizing upon the
Default Collateral; provided, however, that any such deficiency judgment
-------- ------- ----
referred to in this clause (l) shall be enforceable only
----------
81
to the extent of any of the Default Collateral.
Section 8.15. Exhibits Incorporated. The information set forth on
---------------------
the cover, heading and recitals hereof, and the Exhibits attached hereto, if
any, are hereby incorporated herein as a part of this Agreement with the same
effect as if set forth in the body hereof.
Section 8.16. Offsets, Counterclaims and Defenses. Any assignee of
-----------------------------------
Mezzanine Lender's interest in and to this Agreement, the Mezzanine Note, the
Mezzanine Mortgages and the other Mezzanine Loan Documents shall take the same
free and clear of all offsets, counterclaims or defenses which are unrelated to
the Mezzanine Loan, this Agreement, the Mezzanine Note, the Mezzanine Mortgages
and the other Mezzanine Loan Documents which Borrower or Operator may otherwise
have against any assignor, and no such unrelated counterclaim or defense shall
be interposed or asserted by Borrower or Operator in any action or proceeding
brought by any such assignee upon this Agreement, the Mezzanine Note, the
Mezzanine Mortgages and other Mezzanine Loan Documents and any such right to
interpose or assert any such unrelated offset, counterclaim or defense in any
such action or proceeding is hereby expressly waived by Borrower and Operator.
Section 8.17. No Joint Venture or Partnership. Borrower and
-------------------------------
Mezzanine Lender intend that the relationship created hereunder be solely that
of borrower and lender. Operator and Mezzanine Lender intend that the
relationship created hereunder be solely that of guarantor and lender. Nothing
herein is intended to create a joint venture, partnership, tenancy-in-common, or
joint tenancy relationship between Borrower and Mezzanine Lender or between
Operator and Mezzanine Lender nor to grant Mezzanine Lender any interest in the
Mortgaged Property other than that of mortgagee or lender.
Section 8.18. Waiver of Marshalling of Assets Defense. To the
---------------------------------------
fullest extent that Borrower and Operator may legally do so, each of Borrower
and Operator waives all rights to a marshalling of the assets of Borrower or
Operator, and others with interests in Borrower or Operator, and of the
Mortgaged Property, or to a sale in inverse order of alienation in the event of
foreclosure of the interests hereby created, and agrees not to assert any right
under any laws pertaining to the marshalling of assets, the sale in inverse
order of alienation, homestead exemption, the administration of estates of
decedents, or any other matters whatsoever to defeat, reduce or affect the right
of Mezzanine Lender under the Mezzanine Loan Documents to a sale of the Facility
for the collection of the Indebtedness without any prior or different resort for
collection, or the right of Mezzanine Lender to the payment of the Indebtedness
in preference to every other claimant whatsoever.
Section 8.19. Waiver of Counterclaim. Borrower and Operator each
----------------------
hereby waives the right to assert a counterclaim, other than compulsory
counterclaim, in any action or
82
proceeding brought against Borrower or Operator, as applicable by Mezzanine
Lender or Mezzanine Lender's agents.
Section 8.20. Conflict; Construction of Documents. In the event of
-----------------------------------
any conflict between the provisions of this Agreement and the provisions of the
Mezzanine Note, the Mezzanine Mortgage or any of the other Mezzanine Loan
Documents, the provisions of this Agreement shall prevail. The parties hereto
acknowledge that they were represented by counsel in connection with the
negotiation and drafting of the Mezzanine Loan Documents and that the Mezzanine
Loan Documents shall not be subject to the principle of construing their meaning
against the party which drafted same.
Section 8.21. Brokers and Financial Advisors. Borrower, Operator and
------------------------------
Mezzanine Lender hereby represent that they have dealt with no financial
advisors, brokers, underwriters, placement agents, agents or finders in
connection with the transactions contemplated by this Agreement except Advisor.
Borrower and Operator each hereby agrees to indemnify and hold Mezzanine Lender
harmless from and against any and all claims, liabilities, costs and expenses of
any kind in any way relating to or arising from a claim by any Person (other
than Advisor), that such Person acted on behalf of Borrower or Operator in
connection with the transactions contemplated herein. The provisions of this
Section shall survive the expiration and termination of this Agreement and the
-------
repayment of the Indebtedness.
Section 8.22. Counterparts. This Agreement may be executed in any
------------
number of counterparts, each of which when so executed and delivered shall be an
original, but all of which shall together constitute one and the same
instrument.
Section 8.23. Estoppel Certificates. Borrower, Operator and
---------------------
Mezzanine Lender each hereby agree at any time and from time to time upon not
less than fifteen (15) Business Days prior written notice by Borrower, Operator
or Mezzanine Lender to execute, acknowledge and deliver to the party specified
in such notice, a statement, in writing, certifying that this Agreement is
unmodified and in full force and effect (or if there have been modifications,
that the same, as modified, is in full force and effect and stating the
modifications hereto), and stating whether or not, to the knowledge of such
certifying party, any Default or Event of Default has occurred, and, if so,
specifying each such Default or Event of Default; provided, however, that it
-------- ------- ----
shall be a condition precedent to Mezzanine Lender's obligation to deliver the
statement pursuant to this Section, that Mezzanine Lender shall have received,
-------
together with Borrower's or Operator's request for such statement, an Officer's
Certificate stating that no Default or Event of Default exists as of the date of
such certificate (or specifying such Default or Event of Default).
Section 8.24. Payment of Expenses. Borrower shall, whether or not
-------------------
the Transactions are consummated, pay all Transaction Costs, which shall
include, without
83
limitation, reasonable out-of-pocket fees, costs, expenses, and disbursements of
Mezzanine Lender and its attorneys, local counsel, accountants and other
contractors in connection with (i) the negotiation, preparation, execution and
delivery of the Mezzanine Loan Documents and the documents and instruments
referred to therein, (ii) the creation, perfection or protection of Mezzanine
Lender's Liens in the Collateral (including, without limitation, fees and
expenses for title and lien searches and filing and recording fees, intangibles
taxes, personal property taxes, mortgage recording taxes, due diligence
expenses, travel expenses, accounting firm fees, costs of the Appraisals,
Environmental Reports (and an environmental consultant), Surveys and the
Engineering Reports), (iii) the negotiation, preparation, execution and delivery
of any amendment, waiver or consent relating to any of the Mezzanine Loan
Documents, and (iv) the preservation of rights under and enforcement of the
Mezzanine Loan Documents and the documents and instruments referred to therein,
including any restructuring or rescheduling of the Indebtedness.
Section 8.25. Bankruptcy Waiver. Borrower and Operator each hereby
-----------------
agrees that, in consideration of the recitals and mutual covenants contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, in the event Borrower or Operator
shall (i) file with any bankruptcy court of competent jurisdiction or be the
subject of any petition under Title 11 of the U.S. Code, as amended, (ii) be the
subject of any order for relief issued under Title 11 of the U.S. Code, as
amended, (iii) file or be the subject of any petition seeking any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any present or law relating to bankruptcy, insolvency or
other relief of debtors, (iv) have sought or consented to or acquiesced in the
appointment of any trustee, receiver, conservator or liquidator or (v) be the
subject of any order, judgement or decree entered by any court of competent
jurisdiction approving a petition filed against such party for any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any present or future federal or state act or law
relating to bankruptcy, insolvency or other relief for debtors, the automatic
stay provided by the Federal Bankruptcy Code shall be modified and annulled as
to Mezzanine Lender, so as to permit Mezzanine Lender to exercise any and all of
its remedies, upon request of Mezzanine Lender made on notice to Borrower and
any other party in interest but without the need of further proof or hearing.
Borrower, Operator and any of their respective Affiliates shall not contest the
enforceability of this Section.
-------
Section 8.26. Entire Agreement. This Agreement, together with the
----------------
Exhibits hereto, if any, and the other Mezzanine Loan Documents constitutes the
entire agreement among the parties hereto with respect to the subject matter
contained in this Agreement, the Exhibits hereto and the other Mezzanine Loan
Documents and supersedes all prior agreements, understandings and negotiations
between the parties.
Section 8.27. Dissemination of Information. If Mezzanine Lender
----------------------------
determines at
84
any time to sell, transfer or assign the Mezzanine Note, this Loan Agreement and
any other Mezzanine Loan Document and any or all servicing rights with respect
thereto, or to grant participations therein or issue mortgage pass-through
certificates or other securities evidencing a beneficial interest in a rated or
unrated public offering or private placement, Mezzanine Lender may forward to
each Investor and each prospective Investor, all documents and information which
Mezzanine Lender now has or may hereafter acquire relating to the Mezzanine
Loan, Borrower, Operator, any guarantor, any indemnitor and the Facility, which
shall have been furnished by Borrower, Operator, any guarantor, any indemnitor,
or any party to any Mezzanine Loan Document, or otherwise furnished in
connection with the Mezzanine Loan, as Mezzanine Lender in its sole discretion
determines necessary or desirable.
Section 8.28. Limitation of Interest. It is the intention of
----------------------
Borrower, Operator and Mezzanine Lender to conform strictly to applicable usury
laws. Accordingly, if the transactions contemplated hereby would be usurious
under applicable law, then, in that event, notwithstanding anything to the
contrary in any Mezzanine Loan Document, it is agreed as follows: (i) the
aggregate of all consideration which constitutes interest under applicable law
that is taken, reserved, contracted for, charged or received under any Mezzanine
Loan Document or otherwise in connection with the Mezzanine Loan shall under no
circumstances exceed the maximum amount of interest allowed by applicable law,
and any excess shall be credited to principal by Mezzanine Lender (or if the
Mezzanine Loan shall have been paid in full, refunded to Borrower); and (ii) in
the event that maturity of the Mezzanine Loan is accelerated by reason of an
election by Mezzanine Lender resulting from any default hereunder or otherwise,
or in the event of any required or permitted prepayment, then such consideration
that constitutes interest may never include more than the maximum amount of
interest allowed by applicable law, and any interest in excess of the maximum
amount of interest allowed by applicable law, if any, provided for in the
Mezzanine Loan Documents or otherwise shall be cancelled automatically as of the
date of such acceleration or prepayment and, if theretofore prepaid, shall be
credited to principal (or if the principal portion of the Mezzanine Loan and any
other amounts not constituting interest shall have been paid in full, refunded
to Borrower).
In determining whether or not the interest paid or payable under any
specific contingency exceeds the maximum amount allowed by applicable law,
Mezzanine Lender shall, to the maximum extent permitted under applicable law (a)
exclude voluntary prepayments and the effects thereof, and (b) amortize,
prorate, allocate and spread, in equal parts, the total amount of interest
throughout the entire contemplated term of the Mezzanine Loan so that the
interest rate is uniform throughout the entire term of the Mezzanine Loan;
provided, that if the Mezzanine Loan is paid and performed in full prior to the
end of the full contemplated term hereof, and if the interest received for the
actual period of existence thereof exceeds the maximum amount allowed by
applicable law, Mezzanine Lender shall refund to Borrower the amount of such
excess, and in such event, Mezzanine Lender shall not be subject to any
penalties
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provided by any laws for contracting for, charging or receiving interest in
excess of the maximum amount allowed by applicable law.
Section 8.29. Indemnification. Operator shall indemnify and hold
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each of the Borrower, the Trust Company, Mezzanine Lender and each of its
affiliates (including its officers, directors, partners, employees and agents
and each other person, if any, controlling Mezzanine Lender or any of its
affiliates within the meaning of either Section 15 of the Securities Act of
1933, as amended, or Section 20 of the Securities Exchange Act of 1934, as
amended) (each, including the Borrower, the Trust Company, and the Mezzanine
Lender, an "Indemnified Party") harmless against any and all losses, claims,
-----------------
damages, costs, expenses (including the reasonable fees and disbursements of
outside counsel retained by any such person) or liabilities in connection with,
arising out of or as a result of the transactions and matters referred to or
contemplated by this Agreement (provided that the indemnity provided in Section
-------
2.14 shall apply to the matters to which it relates), except to the extent that
----
it is finally judicially determined that any such loss, claim, damage, cost,
expense or liability resulted directly and solely from the gross negligence,
fraud or willful misconduct of such Indemnified Party. In the event that any
Indemnified Party becomes involved in any action, proceeding or investigation in
connection with any transaction or matter referred to or contemplated in this
Agreement, Operator shall periodically reimburse any Indemnified Party upon
demand therefor in an amount equal to its reasonable legal and other expenses
(including the costs of any investigation and preparation) incurred in
connection therewith to the extent such legal or other expenses are the subject
of indemnification hereunder.
Section 8.30. Borrower and Operator Acknowledgments. Each of
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Operator and Borrower hereby acknowledges to and agrees with Mezzanine Lender
that (i) the scope of Mezzanine Lender's business is wide and includes, but is
not limited to, financing, real estate financing, investment in real estate and
other real estate transactions which may be viewed as adverse to or competitive
with the business of Borrower or Operator or their respective Affiliates and
(ii) Borrower and Operator each has been represented by competent legal counsel
and has consulted with such counsel prior to executing this Loan Agreement and
any of the other Mezzanine Loan Documents.
Section 8.31. Publicity. Mezzanine Lender shall have the right to
---------
issue press releases, advertisements and other promotional materials describing
Mezzanine Lender's participation in the origination of the Mezzanine Loan.
Section 8.32. Recalculation of First Mortgage Loan Amount. It is the
-------------------------------------------
intent of the parties hereto that on the Stabilization Date Payment Date the
Principal Indebtedness shall be rolled up into the First Mortgage Loan, the
First Mortgage Loan Documents amended to reflect such rollup and the recorded
Mezzanine Loan Documents released such that there is one loan to
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the Borrower in Aggregate Principal Indebtedness, as reduced or increased
pursuant to the terms of Section 8.32 of the First Mortgage Loan Agreement.
Section 8.33. Intentionally deleted.
---------------------
Section 8.34. Amendments to Operator Lease. Borrower hereby agrees
----------------------------
that it will not amend, modify or terminate the Operator Lease without the prior
written consent of the Mezzanine Lender not to be unreasonably withheld.
Mezzanine Lender hereby agrees that it will not amend, modify or waive without
the prior written consent of Borrower, not to be unreasonably withheld (a) any
provision of the Operator Lease regarding the determination of or obligation to
pay SELCO Basic Rent (as defined in the Operator Lease) or Lessor Basic Rent (as
defined in the Operator Lease) to the extent any waiver, modification or
amendment relates to SELCO Basic Rent or Lessor Basic Rent which is due and
payable to Borrower, (b) any provision of the Operator Lease regarding
indemnities in favor of Borrower or any of its Affiliates, agents, officers,
directors or employees to the extent any waiver, modification or amendment
relates to the period prior to acquisition of title to the Mortgaged Property by
Mezzanine Lender or its designee by foreclosure or deed-in-lieu of foreclosure,
(c) until after acquisition of title to the Mortgaged Property by Mezzanine
Lender or its designee by foreclosure or deed-in-lieu of foreclosure, Sections
19.1(ii), 22.1, 24.1, 24.2 and 25.1 of the Operator Lease; and (d) Section
20.2(k) of the Operator Lease.
Section 8.35. Subordination and Standstill.
----------------------------
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(a) Borrower hereby agrees that all of the indebtedness, liabilities
and obligations of Operator evidenced by the Operator Lease and those Pledge
Agreements (as defined in the Operator Lease) executed by Operator
(collectively, the "Subordinate Obligations") and the lien of any judgment
-----------------------
entered on behalf of Borrower in connection with the Subordinate Obligations,
whether in breach of the terms hereof or otherwise, is and shall be subject,
subordinate and rendered junior to the prior indefeasible payment in full of the
Indebtedness. Except as specifically provided in the following sentence, no
payment shall be made by Operator for or on account of the Subordinate
Obligations, and the Borrower shall not take or receive from Operator in cash or
other property or by setoff or in any other manner, including , without
limitation, from or by way of collateral, payment of all or any of the
Subordinate Obligations, unless and until the Indebtedness shall have been
indefeasibly paid in full. Notwithstanding the foregoing sentence, Borrower may
receive payments with respect to the related Subordinate Obligations as provided
in the First Mortgage Loan Agreement. If any payments are made to the Borrower
on account of the Subordinate Obligations contrary to the terms of this
Agreement or in excess of what the Borrower is entitled to receive under this
Agreement, Borrower shall hold the same in trust as trustee for Mezzanine
Lender, and shall promptly deliver to Mezzanine Lender in the form received,
endorsed or assigned, as may be appropriate for application on account of, or as
security for the Indebtedness.
(b) Until the Indebtedness is paid in full, Borrower shall not
institute any Enforcement Action (including, but not limited to, filing an
Insolvency Proceeding against Operator or acquiescing to the filing of an
Insolvency Proceeding by the Operator) against the Operator. Without limiting
the foregoing, in the event of an Insolvency Action with respect to the
Operator, (i) the Borrower hereby agrees that it shall not object to or oppose
any efforts by Mezzanine Lender to obtain relief in the Operator's bankruptcy
from the automatic stay under Section 362 of the United States Bankruptcy Code
or to seek to cause the Operator's bankruptcy estate to abandon the Facility or
any part thereof and (ii) so long as the beneficial interests of Borrower are
owned by SELCO, it shall not object to or oppose any efforts by Borrower to
obtain relief in the Operator's bankruptcy from the automatic stay under Section
362 of the United States Bankruptcy Code or to seek to cause the Operator's
estate to abandon the Facility or any part thereof. Notwithstanding the
foregoing, in the event Operator fails to pay to Borrower any SELCO Required
Quarterly Payment, Borrower shall be entitled to exercise its rights and
remedies with respect to the collateral pledged to Borrower pursuant to those
Pledge Agreements (as defined in the Operator Lease) executed by Operator.
Notwithstanding anything in this Agreement to the contrary, Borrower hereby
agrees it shall not xxx for or make any claim with respect to the Collateral and
Mezzanine Lender hereby agrees that it shall not xxx for or make any claim with
respect to the Excepted Property. Notwithstanding the terms of this Section
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8.35, Borrower shall be entitled to bring an Enforcement Action (but not an
----
Insolvency Proceeding) against Operator solely for the purpose of realizing and
foreclosing on the collateral
88
pledged to Borrower pursuant to the Pledge Agreements (as defined in the
Operator Lease) executed by the Operator, provided, however, that as a condition
to bringing such Enforcement Action (but not an Insolvency Proceeding), SELCO
shall first us its reasonable good faith efforts to exercise its rights with
respect to realizing on the Collateral by non-judicial means. For the purposes
of this Section, the following terms have the indicated meanings: (i)
-------
"Enforcement Action" means the commencement or the exercise of any remedies
------------------
against the Operator, including, without limitation, the commencement of any
litigation and the commencement of any Insolvency Proceeding; and (ii)
"Insolvency Proceeding" means any proceeding under Title 11 of the United States
---------------------
Code (11 U.S.C. Sec. 101 et seq.) or any insolvency, liquidation, reorganization
-- ---
or other similar proceeding concerning the Operator, any dissolution of the
Operator any proceeding (judicial or otherwise) concerning the application of
the assets of the Operator for the benefit of its creditors, the initiation of
any proceeding seeking the appointment of a trustee, receiver or other similar
custodian for all of any substantial part of the assets of the Operator or any
other action concerning the adjustment of the debts of the Operator or the
cessation of business by the Operator.
(c) Borrower shall deliver to Mezzanine Lender a copy of any and all
notices of default (or respecting acts or occurrences which could, with the
giving of notice, the passage of time, or both, constitute a default) that are
delivered by Borrower to Mezzanine Lender as required by law or otherwise given,
whether in breach of terms hereof or otherwise, to Operator by Borrower.
Section 8.36. Limitation of Liability. It is expressly understood
-----------------------
and agreed by the parties hereto that (a) this Loan Agreement is executed and
delivered by Wilmington Trust Company, not individually or personally but solely
as trustee of the Borrower, in the exercise of the powers and authority
conferred and vested in it under the Trust Agreement, (b) each of the
representations, undertakings and agreements herein made on the part of the
Borrower is made and intended not as personal representations, undertakings and
agreements by Wilmington Trust Company but is made and intended for the purpose
of binding only the Borrower and (c) under no circumstances shall Wilmington
Trust Company be personally liable for the payment of any indebtedness or
expenses of the Borrower or be liable for the breach or failure of any
obligation, representation, warranty or covenant made or undertaken by the
Borrower under this Loan Agreement or the other Mezzanine Loan Documents
provided, that Wilmington Trust Company accepts the benefits running to it
--------
hereunder and agrees that it shall be liable in its individual capacity for its
own gross negligence or willful misconduct to the extent expressly provided in
the Trust Agreement (as defined in the Operator Lease).
[Signatures on the following pages]
IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement to
be duly executed by their duly authorized representatives, all as of the day
and year first above written.
MEZZANINE LENDER:
NOMURA ASSET CAPITAL CORPORATION, a Delaware
corporation
By:__________________________________________
Name:
Title:
[signatures continued on following page]
BORROWER:
THE HARBOR VILLAGE BUSINESS TRUST, a Delaware
business trust
By: Wilmington Trust Company, a
Delaware banking corporation,
not in its individual capacity,
but solely as trustee under the Trust
By: ______________________
Name:
Title:
[signatures continue on the following page]
OPERATOR:
BROOKDALE LIVING COMMUNITIES OF ILLINOIS-HV, INC.,
a Delaware corporation
By: ______________________
Name:
Title:
[signatures continued on following page]