EXHIBIT 10.2
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 Lender)
TABLE OF CONTENTS
Page
ARTICLE I CERTAIN DEFINITIONS................................................................... 2
Section 1.1. Definitions.......................................................................... 2
ARTICLE II GENERAL TERMS......................................................................... 46
Section 2.1. Amount of the Loan; Advances....................................................... 46
Section 2.2. Use of Proceeds.................................................................... 46
Section 2.3. Security for the Loan.............................................................. 46
Section 2.4. Borrower's Note.................................................................... 47
Section 2.5. Principal and Interest Payments.................................................... 47
Section 2.6. Voluntary Defeasance............................................................... 49
Section 2.7. Prepayment......................................................................... 50
Section 2.8. Application of Payments............................................................ 50
Section 2.9. Payment of Debt Service, Method and Place of Payment............................... 51
Section 2.10. Taxes.............................................................................. 51
Section 2.11. Defeasance Requirements............................................................ 52
Section 2.12. Central Cash Management............................................................ 53
Section 2.13. Security Agreement................................................................. 66
Section 2.14. Securitization..................................................................... 68
Section 2.15. Supplemental Mortgage Affidavits................................................... 71
ARTICLE III CONDITIONS PRECEDENT.................................................................. 71
Section 3.1. Conditions Precedent to the Closing Date Advance................................... 71
Section 3.2. Conditions Precedent to the Earn-Out Advance....................................... 78
Section 3.3. Form of Loan Documents and Related Matters......................................... 80
ARTICLE IV REPRESENTATIONS AND WARRANTIES........................................................ 80
Section 4.1. Representations and Warranties of Borrower and Operator............................ 80
Section 4.2. Survival of Representations and Warranties......................................... 101
ARTICLE V AFFIRMATIVE COVENANTS................................................................. 101
Section 5.1. Borrower and Operator Covenants.................................................... 101
ARTICLE VI NEGATIVE COVENANTS.................................................................... 126
Section 6.1. Borrower and Operator Negative Covenants........................................... 126
ARTICLE VII DEFAULTS.............................................................................. 131
Page
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Section 7.1. Event of Default............................................................... 131
Section 7.2. Remedies....................................................................... 136
Section 7.3. Remedies Cumulative............................................................ 137
Section 7.4. Lender's Right to Perform...................................................... 137
Section 7.5. Operator's Limited Right to Cure............................................... 138
ARTICLE VIII MISCELLANEOUS......................................................................... 139
Section 8.1. Survival....................................................................... 139
Section 8.2. Lender's Discretion............................................................ 139
Section 8.3. Governing Law.................................................................. 139
Section 8.4. Modification, Waiver in Writing................................................ 141
Section 8.5. Delay Not a Waiver............................................................. 141
Section 8.6. Notices........................................................................ 141
SECTION 8.7. TRIAL BY JURY.................................................................. 143
Section 8.8. Headings....................................................................... 143
Section 8.9. Assignment..................................................................... 143
Section 8.10. Severability................................................................... 143
Section 8.11. Preferences.................................................................... 143
Section 8.12. Waiver of Notice............................................................... 144
Section 8.13. Intentionally Omitted.......................................................... 144
Section 8.14. Exculpation.................................................................... 144
Section 8.15. Exhibits Incorporated.......................................................... 146
Section 8.16. Offsets, Counterclaims and Defenses............................................ 146
Section 8.17. No Joint Venture or Partnership................................................ 147
Section 8.18. Waiver of Marshalling of Assets Defense........................................ 147
Section 8.19. Waiver of Counterclaim......................................................... 147
Section 8.20. Conflict; Construction of Documents............................................ 147
Section 8.21. Brokers and Financial Advisors................................................. 148
Section 8.22. Counterparts................................................................... 148
Section 8.23. Estoppel Certificates.......................................................... 148
Section 8.24. Payment of Expenses............................................................ 148
Section 8.25. Bankruptcy Waiver.............................................................. 149
Section 8.26. Entire Agreement............................................................... 149
Section 8.27. Dissemination of Information................................................... 150
Section 8.28. Limitation of Interest......................................................... 150
Section 8.29. Indemnification................................................................ 151
Section 8.30. Borrower and Operator Acknowledgments.......................................... 151
Section 8.31. Publicity...................................................................... 152
Section 8.32. Recalculation of Loan Amount................................................... 152
Section 8.33. Transfer of Fee Simple Interest in the Facility to Operator on the
Optional Prepayment Date....................................................... 156
Section 8.34. Amendments to Operator Lease................................................... 157
Section 8.35. Subordination and Standstill................................................... 158
Page
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Section 8.36. Limitation of Liability................................................... 159
Section 8.37. Intentionally deleted..................................................... 160
Section 8.38. Buy-Up.................................................................... 160
Section 8.39. Cross-Default and Cross-Collateralization................................. 161
EXHIBITS
Exhibit A - Operating Expense Certificate
Exhibit B - Additional Definitions
Exhibit C-1 - Description of Construction Project
Exhibit C-2 - Description of Environmental Remediation
Exhibit D - Terms of Class B Equity
Exhibit E - Terms of Class C Equity
Exhibit F - Preferred Cash Management Terms
Exhibit G - Underwriting NOI Criteria
LOAN AGREEMENT
THIS 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, "Lender"), THE HARBOR VILLAGE BUSINESS TRUST, a Delaware business
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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")
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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 "Loan") from Lender in
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an aggregate principal amount of $15,000,000 (such amount together with the
amount of the Earn-Out Advance, if any, the "Loan Amount");
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WHEREAS, Lender is willing to make the 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 Loan; and
WHEREAS, Lender, Borrower and Operator contemplate that all or any
portion of Lender's interest in the Loan and to the Loan Documents may be
assigned, in whole or in part, by Lender to another Person, including, without
limitation, to a trustee on behalf of security holders in connection with a
Securitization.
NOW, THEREFORE, in consideration of the making of the Loan by Lender
and the covenants, agreements, representations and warranties set forth in this
Agreement, the parties hereby covenant, agree, represent and warrant as follows:
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ARTICLE I
CERTAIN DEFINITIONS
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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
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assigned to them in this Article I, and include the plural as well as the
singular;
(b) all accounting terms have the meanings assigned to them in
accordance with GAAP;
(c) 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
(d) the following terms have the following meanings:
"1940 Act" has the meaning set forth within the definition of
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"Eligible Trustee."
"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 Mortgages.
"Accrued Interest" has the meaning provided in Section 2.5(e).
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"Actual Construction Costs" means all of the costs and expenses
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actually incurred by Borrower to bona fide third parties in connection with the
actual renovation of the Facility in accordance with the Construction Project.
Any costs or expenses for materials and supplies that are not incorporated into
the improvements at the Facility or that are stored on, at, or off of the
Facility shall not be deemed part of the Actual Construction Costs unless Lender
decides in its reasonable discretion to deem such costs or expenses as part of
the Actual Construction Costs. Any costs or expenses that are not related to the
Facility shall not be deemed part of the Actual Construction Costs unless Lender
decides in its reasonable discretion to deem such costs or expenses as part of
the Actual Construction Costs.
"Actual Prepayment Amount" has the meaning provided in Section
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8.32(c).
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"Adjusted Net Operating Income" means, for any period, the Net
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Operating Income for such period reduced by (i) a capital expenditure reserve
amount, pro rated for the applicable period, equal to the greater of (a) $250
multiplied by the number of apartment units in the Facility per annum and (b)
the amount indicated in the Engineering Report(s) as the annual amount required
to maintain the Facility, (ii) annual base management fees, pro rated for the
applicable period, equal to the greater of (y) actual management fees or (z)
five percent (5%) of Gross Revenues, and (iii) an amount necessary to reflect a
minimum annual vacancy factor, pro rated for the applicable period, equal to the
greatest of (a) the actual vacancy for the Facility, (b) five percent (5%) of
Gross Revenues and (c) the market vacancy rate. Notwithstanding the foregoing
part of this definition of "Adjusted Net Operating Income" to the contrary, if
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the period for which Adjusted Net Operating Income is being calculated includes
periods prior to the Closing Date, Adjusted Net Operating Income shall be
calculated for such period based on the applicable pro rata portion of Base
Adjusted NOI.
"Advance" means each of the Closing Date Advance and the Earn-Out
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Advance.
"Advance Closing Date" means, with respect to any Advance, the date
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on which Lender makes such Advance.
"Advisor" means Nomura Securities International, Inc.
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"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.
"Aggregate Principal Indebtedness" means the Principal Indebtedness
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plus the Principal Indebtedness (as defined in the Mezzanine Loan Agreement).
"Agreement and Loan Agreement" each means this Loan Agreement, as the
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same may from time to time hereafter be modified, supplemented or amended.
"Amortizable Amount" has the meaning provided in Section 8.32(c)(i).
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"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
4
Lender for the period from the Closing Date until December 31, 1998. Thereafter,
Operator shall only be required to submit such a budget to Lender (i) on the
date on which the Preferred Equity Holder acquires equity interests in the
Borrower and/or Operator and (ii) on the Optional Prepayment Date, and after
each such date on each December 1 (provided in the case of clause (i) such
obligation shall only be during the time in which the Preferred Equity Holder
holds equity interests in the Borrower and/or Operator) for each succeeding
calendar year, all in form and substance reasonably satisfactory to Lender and
as reasonably approved by Lender, as the same shall be amended by Operator from
time to time, with Lender's written consent which shall not be unreasonably
withheld. Lender's approval shall be deemed given if Lender does not respond to
Operator's proposed budget or amendment thereto within thirty (30) days of
Lender's receipt thereof.
"Appraisals" means the appraisals, if any, with respect to the
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Facility delivered to Lender in connection with the Loan and any more recent
appraisal of the Facility delivered to Lender or Lender's servicer, as
applicable, each made by an Appraiser at the request of Operator or 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 Lender) who is (i) a member of the Appraisal
Institute with 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 Lender.
"Appurtenant Rights" has the meaning set forth in the Mortgages.
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"Assignments of Agreements" means, collectively, the Assignment of
-------------------------
Agreements - Borrower and the Assignment of Agreements - Operator.
"Assignment of Agreements - Borrower" means, with respect to the
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Facility, a first priority Assignment of Agreements Affecting Real Estate, in
form and substance satisfactory to Lender in Lender's reasonable discretion,
dated as of the Closing Date, from Borrower, as assignor, to 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.
"Assignment of Agreements - Operator" means, with respect to the
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Facility, a first priority Assignment of Agreements Affecting Real Estate, in
form and substance satisfactory to Lender in its reasonable discretion, dated as
of the Closing Date from the Operator, as assignor, to 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
5
thereto.
"Assignment of Leases - Borrower" means, with respect to the Facility,
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a first priority Assignment of Leases and Rents, in form and substance
satisfactory to Lender in Lender's reasonable discretion, dated as of the
Closing Date from Borrower, as assignor, to Lender, as assignee, assigning to
Lender Borrower's interest in and to the Leases (as defined in the Mortgage) and
the Rents (as defined in the Mortgage) with respect to the Facility as security
for the Loan, as the same may thereafter from time to time be supplemented,
amended, modified or extended by one or more written agreements supplemental
thereto.
"Assignment of Leases - Operator" means, with respect to the Facility,
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a first priority Assignment of Leases and Rents, in form and substance
satisfactory to Lender in Lender's reasonable discretion, dated as of the
Closing Date from Operator, as assignor, to Lender, as assignee, assigning to
Lender Operator's interest in and to the Leases (as defined in the Leasehold
Mortgage) and the Rents (as defined in the Leasehold Mortgage) with respect to
the Facility as security for the Loan, as the same may thereafter from time to
time be supplemented, amended, modified or extended by one or more written
agreements supplemental thereto.
"Assignments of Leases" means the Assignment of Leases - Borrower and
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Assignment of Leases - Operator, collectively.
"Base Adjusted NOI" means the amount shown on Exhibit B.
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"Base Payment" has the meaning provided in Section 2.5(c).
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"Basic Carrying Costs" means the following costs with respect to the
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Facility (i) real property taxes, assessments and Impositions (including without
limitation any payments due under any ground lease and any ground rents)
applicable to the Facility, and (ii) insurance premiums for policies of
insurance required or permitted to be maintained by Borrower and/or Operator
pursuant to this Agreement, the Operator Lease or the other Loan Documents.
"Basic Carrying Costs Monthly Installment" means, with respect to the
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Facility, Lender's reasonable and good faith estimate of one-twelfth (1/12th) of
the annual amount of the Basic Carrying Costs (provided, that Lender may
calculate reasonably and in good faith the monthly amount to assure that funds
are reserved in sufficient amounts to enable the payment of all Impositions,
including, without limitation, taxes and insurance premiums thirty (30) days
prior to their respective due dates). Should the Basic Carrying Costs for the
then current Fiscal Year or payment period not be ascertainable by Lender at the
time a monthly deposit is required to be made, the Basic Carrying Costs Monthly
Installment shall be Lender's
6
reasonable and good faith estimate based on one-twelfth (1/12th) of the
aggregate Basic Carrying Costs for the prior Fiscal Year or payment period, with
reasonable adjustments as reasonably determined by Lender. As soon as the Basic
Carrying Costs are fixed for the then current Fiscal Year or period, the next
ensuing Basic Carrying Costs Monthly Installment shall be adjusted to reflect
any deficiency or surplus in prior Basic Carrying Costs Monthly Installments.
"Basic Carrying Costs Sub-Account" means the Sub-Account of the Cash
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Collateral Account established and maintained pursuant to Section 2.12 relating
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to the payment of Basic Carrying Costs.
"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 Lender in 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 (as defined in the Operator Loan).
"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.
"Capital Improvement Costs" means costs incurred by Borrower and/or
-------------------------
Operator in connection with capital improvements to the Facility, exclusive of
Actual Construction Costs.
"Capital Reserve Amount" means with respect to the Facility, an amount
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equal to the greater of (i) $250 multiplied by the number of apartment units in
the Facility per annum and (ii) the amount indicated in the Engineering
Report(s) as the annual amount required to maintain the Facility.
"Capital Reserve Monthly Installment" means, with respect to the
-----------------------------------
Facility, an amount equal to one-twelfth (1/12th) of the Capital Reserve Amount.
7
"Capital Reserve Sub-Account" means the Sub-Account of the Cash
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Collateral Account established and maintained pursuant to Section 2.12 relating
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to the payment of Capital Improvement Costs.
"Cash Collateral Account Bank" means the bank chosen by Lender to hold
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the Cash Collateral Account, or any successor bank hereafter selected by Lender
in accordance with the terms hereof.
"Cash Management Event" shall mean any one or more of the following:
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(i) the occurrence of a Late Payment three (3) times in a twelve (12) month
consecutive period; (ii) a Default (other than as described in clause (i)) or an
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Event of Default; (iii) Borrower's or Operator's failure to comply with the
third or fourth sentences of Section 2.12(a)(ii); (iv) Borrower's or Operator's
-------------------
failure to comply with the second or third sentence of Section 2.12(a)(iii); (v)
--------------------
if the audited financial reports delivered to Lender pursuant to Section
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5.1(b)(Q) indicates that less than ninety percent (90%) of Rents, Money and
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Gross Revenue has been deposited in the Collection Account; (vi) the Optional
Prepayment Date; or (vii) the ownership by the Preferred Equity Holder of any
equity interests in the Operator and/or the Borrower pursuant to Section 8.32
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hereof.
"Class B Amount" has the meaning provided in Section 8.32(c)(i).
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"Class B Equity Interests" has the meaning set forth in Exhibit D.
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"Class C Amount" has the meaning provided in Section 8.32(c)(ii).
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"Class C Equity Interests" has the meaning set forth on Exhibit E
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hereto.
"Closing Date" means the date of this Agreement.
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"Closing Date Advance" means the Advance made by Lender to Borrower
--------------------
on the Closing Date in the amount of $15,000,000.
"Code" means the Internal Revenue Code of 1986, as amended, and as it
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may be further amended from time to time, any successor statutes thereto, and
applicable U.S. Department of Treasury regulations issued pursuant thereto in
temporary or final form.
"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)
8
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 Lender as security for the Loan; provided, however, the
"Collateral" shall not include the Excepted Property.
"Collateral Security Instrument" means any right, document or
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instrument, other than the Mortgages, given as security for the Loan (including,
without limitation, the Assignments of Leases and the Assignments of
Agreements), as the same may hereafter from time to time be supplemented,
amended, extended or modified.
"Collection Account" has the meaning provided in Section 2.12(a)(i).
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"Collection Account Agreement" has the meaning set forth in Section
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2.12(b).
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"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 Lender.
"Completion of Construction" means the date on which all of the
--------------------------
following conditions have been satisfied (as reasonably determined by Lender in
its discretion and all of which shall be in form and substance reasonably
acceptable to Lender in its discretion):
(i) The renovation of the Improvements have been substantially
completed in accordance with the description of the Construction
Project set forth on Exhibit C-2, as certified by Operator;
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(ii) All Permits required for the use and occupancy of the Land
and the Improvements (including, but not limited to, a temporary (if
reasonably acceptable to Lender) or permanent unconditional
certificate of occupancy for each building comprising any part of the
Improvements and each other improvement requiring any such Permit
under applicable laws) for the purposes intended have been issued by
the appropriate Governmental Authority and are final and unappealable
and in full force and effect, confirming completion of construction
and renovation of the Improvements sufficient to permit use and
occupancy of the space by Borrower, Operator, tenants or guests as the
case may be; and all utilities services necessary for the full
operation of the Facility are installed, permitted, hooked-up and
operational;
(iii) The Improvements have been equipped with all material
fixtures,
9
furnishings, and equipment required for the intended use and operation
of the Improvements as a congregate care facility with related
amenities or which may be required by applicable Legal Requirements;
and
(iv) All Actual Construction Costs and other costs and expenses
incurred in connection with the Construction Project (including any
and all non-construction and "soft" costs and expenses in connection
with the Facility and all Transaction Costs) shall have been paid in
full or are available from undisbursed funds in the Construction Sub-
Account or Operator equity (as demonstrated by Operator to Lender to
Lender's reasonable satisfaction) for such purpose.
"CON" has the meaning set forth in Section 4.1(d)(AK)(ii).
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"Condemnation Proceeds" has the meaning provided in Section 2.12(h).
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"Construction Budget" means a detailed business plan and construction
-------------------
budget which shall be in form and substance satisfactory to Lender in its
reasonable discretion and which shall include, without limitation, all in form
and substance reasonably acceptable to Lender, (i) a detailed time schedule for
performance of the Construction Project, (ii) the estimated Construction
Completion Date, (iii) a detailed breakdown of Estimated Construction Costs and
other costs and expenses required to achieve Completion of Construction through
and including the Construction Completion Date, (iv) a detailed breakdown of
when the Estimated Construction Costs and other costs and expenses in clause
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(iii) are expected to be incurred and (v) a contingency reserve, which budget
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may be amended not more frequently than twice with Lender's prior written
consent (which consent may be withheld in Lender's reasonable discretion).
"Construction Completion Date" means the date specified in the
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Construction Budget on which Operator projects the Construction Project to be
completed, which date shall not be later than eighteen (18) months after the
Closing Date.
"Construction Project" means the construction and renovation project
--------------------
for the Facility as described on Exhibit C-1 attached hereto.
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"Construction Sub-Account" means the Sub-Account established and
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maintained pursuant to Section 2.12 relating to the payment of Actual
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Construction Costs.
"Contingent Obligation" means, with respect to Borrower or Operator,
---------------------
as applicable, any obligation of Borrower or Operator, as applicable,
guaranteeing any
10
indebtedness, leases, dividends or other obligations ("primary obligations") of
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any other Person (the "primary obligor") in any manner, whether directly or
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indirectly, including, without limitation, any obligation of Borrower or
Operator, as applicable, whether or not contingent, (i) to purchase any such
primary obligation or any property constituting direct or indirect security
therefor, (ii) to advance or supply funds (x) for the purchase or payment of any
such primary obligation or (y) to maintain working capital or equity capital of
the primary obligor, (iii) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary obligation
of the ability of the primary obligor to make payment of such primary obligation
or (iv) otherwise to assure or hold harmless the owner of such primary
obligation against loss in respect thereof. The amount of any Contingent
Obligation shall be deemed to be an amount equal to the stated or determinable
amount of the primary obligation in respect of which such Contingent Obligation
is made (taking into account the non-recourse or limited recourse nature of such
Contingent Obligation, if applicable) or, if not stated or determinable, the
maximum anticipated liability in respect thereof (assuming that Borrower, or
Operator, as applicable, is required to perform thereunder) as determined by
Lender in good faith (taking into account the non-recourse or limited recourse
nature of such Contingent Obligation, if applicable).
"Current Interest Accrual Period" has the meaning provided in Section
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2.12(g).
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"Cut-Off Date" means March 11, 2000.
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"Debt Service" means, for any period, the principal, interest
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payments, Default Rate interest, Late Charges and Yield Maintenance Premium that
accrue or are due and payable in accordance with the Loan Documents during such
period.
"Debt Service Coverage Ratio" means, for any period, the quotient
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obtained by dividing Adjusted Net Operating Income for the specified period by
the aggregate amount of the Base Payments due for such period.
"Debt Service Payment Sub-Account" means the Sub-Account of the Cash
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Collateral Account established and maintained pursuant to Section 2.12 relating
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to the payment of Debt Service.
"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%).
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"Defeasance Deposit" means the following in each of the following
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circumstances:
(i) in the case of a total defeasance of the Loan and Facility
pursuant to Section 2.11, "Defeasance Deposit" means the amount that
will 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 Defeasance Release Date) upon which
Payment Dates interest and principal payments would be required under
the Note as though the Maturity Date of the Note was the Optional
Prepayment Date and (B) in amounts sufficient to pay all scheduled
principal and interest payments on the Note as if the Maturity Date of
the Note was the Optional Prepayment Date (but without any adjustment
of the monthly amortization schedule); and
(ii) in the case of a partial defeasance of the Loan pursuant to
Section 5.1(b)(P), "Defeasance Deposit" means the amount that will be
sufficient to purchase U.S. Obligations (A) having maturity dates on
or prior to, but as close as possible to, the successive scheduled
Payment Dates (after the date of such voluntary defeasance) upon which
Payment Dates interest and principal payments would be required under
the Note as though the Maturity Date of the Note was the Optional
Prepayment Date and (B) in amounts sufficient to pay all scheduled
principal and interest payments on the Note (1) as if the Maturity
Date of the Note was the Optional Prepayment Date (but without any
adjustment of the monthly amortization schedule) and (2) as if the
outstanding principal indebtedness due under the Note was an amount
equal to the amount required to be defeased pursuant to Section
5.1(b)(P) in connection with such partial defeasance.
"Defeasance Release Date" has the meaning provided in Section
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2.11(a).
-------
"Difference" has the meaning provided in Section 8.32(c).
---------- ------- -------
"DOH" has the meaning set forth in Section 4.1(d)(AK)(i).
--- ------- -------------
"Earn-Out Advance" means the Advance (if any) made by Lender to
----------------
Borrower pursuant to Section 8.32(b).
---------------
"Eligible Account" means (i) an account maintained with a federal or
----------------
state chartered depository institution or trust company whose (x) commercial
paper, short-term debt
12
obligations or other short-term deposits are rated at least A-1 by each Rating
Agency if the deposits in such account are to be held in such account for thirty
(30) days or less or (y) long-term unsecured debt obligations are rated at least
AA- by each Rating Agency if the deposits in such account are to be held in such
account for more than thirty (30) days; or (ii) a segregated trust account
maintained with the trust department of a federal or state chartered depository
institution or trust company acting in its fiduciary capacity which institution
or trust company is subject to regulations regarding fiduciary funds on deposit
substantially similar to 12 C.F.R. (S) 9.10(b); or (iii) an account otherwise
acceptable to each Rating Agency, as confirmed in writing that such account
would not, in and of itself, result in a downgrade, qualification or withdrawal
of the then current ratings assigned to any security issued in connection with a
Securitization.
"Eligible Trustee" shall mean a bank (within the meaning of Section
----------------
2(a)(5) of the Investment Company Act of 1940 (the "1940 Act")) that meets the
--------
requirements of Section 26(a)(1) of the 1940 Act, is not an Affiliate of the
Beneficial Owner, the Borrower or the Operator, or an Affiliate of any Person
involved in the organization or operation of the Beneficial Owner, the Borrower
or the Operator, is organized and doing business under the laws of any state or
the United States of America, is authorized under such laws to exercise
corporate trust powers and to accept the trust conferred under the Trust
Agreement, has a combined capital and surplus and undivided profits of at least
$100,000,000 and is subject to supervision or examination by federal or state
authority. If such bank publishes reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or examining
authority, then for the purposes of this definition the combined capital surplus
and undivided profits of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published.
"Engineer" means any reputable Independent engineer, properly licensed
--------
in the relevant jurisdiction and approved by Lender in Lender's reasonable
discretion.
"Engineering Reports" means the structural engineering reports with
-------------------
respect to the Facility prepared by an Engineer and delivered to Lender in
connection with the Loan and any amendments or supplements thereto delivered to
Lender.
"Entity" means with respect to the Borrower or Operator, as
------
applicable, (a) corporation, if Borrower or Operator, as applicable, is listed
as a corporation in the first paragraph of this Agreement, (b) limited
partnership, if Borrower or Operator, as applicable, is listed as a limited
partnership in the first paragraph of this Agreement, (c) limited liability
company, if Borrower or Operator, as applicable, is listed as a limited
liability company in the first paragraph of this Agreement or (d) a business
trust, if Borrower or Operator, as applicable, is listed as a business trust in
the first paragraph of this Agreement.
13
"Environmental Claim" means any written request for information by a
-------------------
Governmental Authority, or any written notice, notification, claim,
administrative, regulatory or judicial action, suit, judgment, demand or other
written communication by any Person or Governmental Authority requiring,
alleging or asserting liability with respect to Borrower, Operator, or the
Facility, whether for damages, contribution, indemnification, cost recovery,
compensation, injunctive relief, investigatory, response, remedial or cleanup
costs, damages to natural resources, personal injuries, fines or penalties
arising out of, based on or resulting from (i) the presence, Use, Release or
threatened Release into the environment of any Hazardous Substance in violation
of any Environmental Law originating at or from, or otherwise affecting the
Facility, (ii) any fact, circumstance, condition, or occurrence forming the
basis of any violation, or alleged violation, of any Environmental Law by
Borrower, Operator or otherwise affecting the Facility or (iii) any alleged
injury or threat of injury to health, safety or the environment in violation of
any Environmental Law by Borrower, Operator or otherwise affecting the Facility.
"Environmental Guaranty" means the Environmental Indemnity Agreement
----------------------
in form and substance satisfactory to Lender in Lender's reasonable discretion
dated as of the Closing Date from the Parent to Lender, as the same may
thereafter be from time to time supplemented, amended, modified or extended by
one or more agreements supplemental thereto.
"Environmental Laws" means any and all applicable federal, state,
------------------
local and foreign laws, rules, regulations or municipal ordinances, each as
amended from time to time, any judicial or administrative orders, decrees,
settlement agreements or judgments thereunder, and any Permits, approvals,
licenses, registrations, filings and authorizations, in each case as in effect
as of the relevant date, relating to the environment, health or safety, or the
Release or threatened Release of Hazardous Substances into the indoor or outdoor
environment including, without limitation, ambient air, soil, surface water,
ground water, wetlands, land or subsurface strata, or otherwise relating to the
presence or Use of Hazardous Substances.
"Environmental Reports" means, with respect to the Facility, the
---------------------
environmental audit reports delivered to Lender in connection with the Loan and
any amendments or supplements thereto delivered to Lender.
"Equipment" means the "Equipment" defined and described in the
---------
Mortgages.
"Equity Interests" means with respect to the Borrower or Operator (a)
----------------
if the Borrower or Operator, as applicable, is a limited partnership, limited
partnership interests in Borrower or Operator, as applicable; (b) if the
Borrower or Operator, as applicable, is a limited liability company, membership
interests in the Borrower or Operator, as applicable; (c) if the Borrower or
Operator, as applicable, is a corporation, shareholder interests in the Borrower
or
14
Operator, as applicable; or (d) if Borrower or Operator, as applicable, is a
business trust, beneficial interests in the Borrower or Operator, as applicable;
provided, however, that Equity Interests shall not include any equity interests
of the Preferred Equity Holder in the Borrower or Operator.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time, and the regulations promulgated thereunder. Section
references to ERISA are to ERISA, as in effect at the date of this Agreement
and, as of the relevant date, any subsequent provisions of ERISA, amendatory
thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" means, with respect to Operator or Borrower, any
---------------
corporation or trade or business that is a member of any group of organizations
(i) described in Section 414(b) or (c) of the Code of which Borrower or
Operator, as applicable, is a member, and (ii) solely for purposes of potential
liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of the Code
and the lien created under Section 302(f) of ERISA and Section 412(n) of the
Code, described in Section 414(m) or (o) of the Code of which Borrower or
Operator, as applicable, is a member.
"Estimated Construction Costs" means Operator's good-faith, reasonable
----------------------------
and detailed estimates of all of the costs and expenses that Operator will incur
in connection with the Construction Project.
"Event of Default" has the meaning set forth in Section 7.1.
---------------- ------- ---
"Excepted Operating Income" means (i) SELCO Basic Rent (as defined in
-------------------------
the Operator Lease) and Lessor Basic Rent (as defined in the Operator Lease)
actually paid to Borrower; (ii) all indemnity payments paid to Borrower under
the Operator Lease or the Pledge Agreements (as defined in the Operator Lease);
(iii) to the extent not included in the foregoing, any amounts actually paid to
Borrower to reimburse Borrower or it Affiliates for performing or complying with
any of the obligations of Operator under the Loan Documents or the Operator
Lease; (iv) Transaction Expenses (as defined in the Lease) paid to the Borrower;
and (v) any payments of interest actually paid to Borrower with respect to any
of the foregoing.
"Excepted Property" means (i) SELCO Basic Rent (as defined in the
-----------------
Operator Lease), Lessor Basic Rent (as defined in the Operator Lease), the Break
Costs (as defined in the Operator Lease) and the right to receive any of the
foregoing; (ii) any and all rights of the Borrower under the Pledge Agreements
(as defined in the Operator Lease); and (iii) any and all rights to declare a
default under the Operator Lease and exercise the remedies under Section 20.2(k)
of the Operator Lease (provided, however, "Excepted Property" shall not include
all
15
other rights to declare a default under the Operator Lease).
"Excess Cash Flow" has the meaning set forth in Section
---------------- -------
2.12(g)(viii).
-------------
"Excess Proceeds" has the meaning set forth in Section 8.39(b).
--------------- ------- -------
"Extra Funds" has the meaning set forth in Section 2.12(f)(vi).
----------- ------- -----------
"Facility" means the Collateral relating to Borrower and Operator
--------
encumbered by the Mortgages, Assignments of Leases, Assignments of Agreements
and other Loan Documents.
"Fiscal Year" means the 12-month period ending on December 31 of each
-----------
year or such other fiscal year of Borrower as Borrower may select from time to
time with the prior written consent of Lender not to be unreasonably withheld or
delayed.
"GAAP" means generally accepted accounting principles consistently
----
applied in the United States of America as of the date of the applicable
financial report.
"General Intangibles" means the "General Intangibles" defined and
-------------------
described in the Mortgages.
"Governmental Authority" means any national or federal government, any
----------------------
state, regional, local or other political subdivision thereof with jurisdiction
and any Person with jurisdiction exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government.
"Gross Revenue" means, with respect to the Facility, the total dollar
-------------
amount of all income and receipts (excluding each SELCO Required Quarterly
Payment to the extent paid to Borrower) whatsoever received by Borrower and
Operator in the ordinary course of its respective business with respect to the
Facility, including, without limitation, all Rents (but excluding security
deposits) and Money.
"Guaranty" means a Guaranty and Suretyship Agreement in form and
--------
substance satisfactory to Lender in Lender's reasonable discretion dated as of
the Closing Date from the Operator to Lender as the same may thereafter from
time to time be supplemented, amended, modified or extended by one or more
written agreements supplemental thereto.
16
"Hazardous Substance" means, collectively, (i) any petroleum or
-------------------
petroleum products or waste oils, explosives, radioactive materials, asbestos,
urea formaldehyde foam insulation, polychlorinated biphenyls ("PCBs"), lead in
----
drinking water, and lead-based paint, the presence, generation, use,
transportation, storage or disposal of or exposure to which (x) is regulated or
could lead to liability under any Environmental Law or (y) is subject to notice
or reporting requirements under any Environmental Law, (ii) any chemicals or
other materials or substances which are now or hereafter become defined as or
included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "extremely hazardous wastes," "restricted hazardous
wastes," "toxic substances," "toxic pollutants," "contaminants," "pollutants" or
words of similar import under any Environmental Law and (iii) any other chemical
or any other material or substance, exposure to which is now or hereafter
prohibited, limited or regulated under any Environmental Law.
"Impositions" means the "Impositions" defined and described in the
-----------
Mortgages.
"Improvements" means the "Improvements" as defined and described in
------------
the Mortgages.
"Indebtedness" means, at any given time, the Principal Indebtedness,
------------
together with all accrued and unpaid interest thereon and all other obligations
and liabilities due or to become due to Lender pursuant hereto, under the Note
or in accordance with any of the other Loan Documents, and all other amounts,
sums and expenses paid by or payable to Lender hereunder or pursuant to the Note
or any of the other Loan Documents.
"Indemnified Party" shall have the meaning set forth in Section
----------------- -------
8.29.
----
"Independent" means, when used with respect to any Person, a Person
-----------
who (i) does not have any direct financial interest or any material indirect
financial interest in Borrower, Operator or in any Affiliate of Borrower or
Operator, and (ii) is not connected with Borrower, Operator or any Affiliate of
Borrower or Operator as an officer, employee, promoter, underwriter, trustee,
partner, member, manager, creditor, director or person performing similar
functions.
"Independent Director" means a duly appointed member of the board of
--------------------
directors of the relevant entity who shall not have been, at the time of such
appointment or at any time in the preceding five (5) years, (a) a direct or
indirect legal or beneficial owner in such entity or any of its affiliates, (b)
a creditor, supplier, employee, officer, director, manager or contractor of such
entity or any of its affiliates, (c) a person who controls such entity or any of
its affiliates, or (d) a member of the immediate family of a person defined in
(a), (b) or (c) above.
--- --- ---
17
"Initial Basic Carrying Costs Amount" means an amount that, when added
-----------------------------------
with the Basic Carrying Costs Monthly Installments to be made from and after the
Stabilization Date through the date(s) on which the Basic Carrying Costs are
next due and payable, will be sufficient to pay such Basic Carrying Costs, as
reasonably determined by Lender.
"Initial Capital Reserve Amount" means the amount shown on Exhibit
------------------------------ -------
B.
--
"Initial Construction Amount" means the amount shown on Exhibit B.
--------------------------- ---------
"Initial Interest Rate" means the lesser of the (a) Maximum Amount and
---------------------
(b) (i) with respect to the Closing Date Advance, 7.46% per annum until the
earlier of the Optional Prepayment Date and the date on which the Earn-Out
Advance is made, if any, and (ii) if the Earn-Out Advance is made, a per annum
rate calculated at the time of the Earn-Out Advance equal to the quotient
(expressed as a percentage) obtained by dividing (i) the sum of (A) the product
of the Closing Date Advance multiplied by 7.46% plus (B) the product of amount
of the Earn-Out Advance multiplied by the then prevailing interest rate equaling
the yield on the then prevailing U.S. treasury rate with a term commencing on
the date of the Earn-Out Advance to but not including the Optional Prepayment
Date, as determined by Lender in Lender's sole discretion at the time of such
Advance plus 1.80%, by (ii) the sum of the Closing Date Advance and the Earn-Out
Advance, if any.
"Initial Securitization Expense Amount" means the amount shown on
-------------------------------------
Exhibit B.
---------
"Initial Trustee Expense Amount" means the amount shown on Exhibit B.
------------------------------ ---------
"Instruments" means all of the "Instruments" defined and described in
-----------
the Mortgages.
"Insurance Proceeds" means all of the "Insurance Proceeds" defined
------------------
and described in the Mortgages.
"Insurance Requirements" means all material terms of any insurance
----------------------
policy required pursuant to the 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
-----------------------
18
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 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, (i) during the period commencing on (and
-------------
including) the Closing Date to the Optional Prepayment Date, provided that no
Event of Default has occurred, the Initial Interest Rate, and (ii) commencing on
(and including) the Optional Prepayment Date, provided no Event of Default has
occurred, the Revised Interest Rate.
"Inventory" means all of the "Inventory" defined and described in
---------
the Mortgages.
"Investor" has the meaning provided in Section 8.27.
-------- ------- ----
"Issuer" means any issuer of securities issued in connection with a
------
Securitization.
"Key" means Key Corporate Capital, Inc., a Michigan corporation.
---
"Land" has the meaning provided in the Mortgages.
----
"Late Charge" means the lesser of (i) five percent (5%) of any amount
-----------
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
------------
when due, without giving effect to any cure period, if any.
"Leasehold Mortgage" means, with respect to the Facility, a first
------------------
priority Leasehold Mortgage, Assignment of Rents, Security Agreement and Fixture
Filing, in form and substance satisfactory to Lender in Lender's reasonable
discretion, dated as of the Closing Date, granted by Operator to Lender with
respect to the Facility as security for the Guaranty, as the same may thereafter
from time to time be supplemented, amended, modified or extended by one or more
written agreements supplemental thereto.
19
"Leases" means all of the "Leases" defined and described in the
------
Mortgages.
"Legal Requirements" means all statutes, laws, rules, orders,
------------------
regulations, ordinances, judgments, decrees and injunctions of Governmental
Authorities affecting Borrower, Operator, the 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.
"Lender" has the meaning provided in the first paragraph of this
------
Agreement.
"Liabilities" has the meaning set forth in Section 2.14.
----------- ------- ----
"Licenses" has the meaning set forth in Section 4.1(d)(AK)(ii).
-------- ------- --------------
"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.
"Loan" has the meaning provided in the Recitals hereto.
----
"Loan Amount" has the meaning provided in the Recitals hereto.
-----------
"Loan Documents" means, collectively, this Agreement, the Note, the
--------------
Mortgages, the Assignments of Leases, the Assignments of Agreements, the
Environmental Guaranty, the Guaranty, the Collection Account Agreement 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
Loan or otherwise in satisfaction of the requirements of this Agreement, the
Mortgages or the other documents listed above.
"Losses" has the meaning provided in Section 5.1(b)(I).
------ -----------------
20
"Management Agreement" means, with respect to the Facility, any
---------------------
management agreement entered into after the Closing Date pertaining to the
management of the Facility, which agreement or agreements shall be in form and
substance satisfactory to Lender in its reasonable discretion.
"Management Appointment DSCR" means (i) 1.15, if the Debt Service
---------------------------
Coverage Ratio, computed for the twelve (12) month period ending on the
Stabilization Date is 1.30 or greater or (ii) 1.10, if the Debt Service Coverage
Ratio, computed for the twelve (12) month period ending on the Stabilization
Date is less than 1.30.
"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 Lender to enforce, any of the Loan Documents or
(iii) the value of (x) the Collateral taken as a whole or (y) the Facility.
"Material Lease" has the meaning set forth in the Mortgages.
--------------
"Maturity Date" means the first (1st) Business Day after the day which
-------------
is the last day in the Number of Interest Accrual Periods in Amortization
Schedule, assuming the amortization schedule commences on the Stabilization Date
Payment Date.
"Maximum Advance Amount" means the Closing Date Advance plus the
----------------------
Maximum Earn-Out Advance.
"Maximum Amount" means the maximum rate of interest designated by
--------------
applicable laws relating to payment of interest and usury.
"Maximum Earn-Out Advance" means $3,000,000.
------------------------
"Mezzanine Debt Service" means the "Debt Service" as defined in the
----------------------
Mezzanine Loan Agreement.
"Mezzanine Debt Service Payment Sub-Account" means the Sub-Account of
------------------------------------------
the Cash Collateral Account established and maintained pursuant to Section 2.12
------------
relating to the payment of the Mezzanine Debt Service.
"Mezzanine Lender" means Nomura Asset Capital Corporation, a
----------------
Delaware corporation, and its successors and assigns.
"Mezzanine Loan" means the mezzanine loan in the original principal
--------------
amount
21
of $1,750,000 made by Nomura Asset Capital Corporation to Borrower of even date
herewith.
"Mezzanine Loan Agreement" means that certain mezzanine loan
------------------------
agreement of even date herewith evidencing the Mezzanine Loan among Borrower,
Operator and Mezzanine Lender.
"Mezzanine Loan Documents" means the Mezzanine Loan Agreement and all
------------------------
other agreements, instruments, certificates and documents delivered by or on
behalf of Borrower, Operator, any Affiliate or any of them to evidence or secure
the Mezzanine Loan.
"Mezzanine Required Base Debt Service Payment" means, on any Payment
--------------------------------------------
Date, the Mezzanine Debt Service then due and payable by Borrower.
"Money" means all moneys, cash, rights to deposit or savings accounts,
-----
credit card receipts, rents or other items of legal tender obtained from or for
use in connection with the ownership or operation of the Facility.
"Mortgage" means, with respect to the Facility, a first priority
--------
Mortgage, Assignment of Rents, Security Agreement and Fixture Filing, in form
and substance satisfactory to Lender in Lender's reasonable discretion, dated as
of the Closing Date, granted by Borrower to Lender with respect to the Facility
as security for the 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 "Mortgages" means, collectively, the Mortgage and the
---------
Leasehold Mortgage.
"Mortgaged Property" means, at any time, the Facility encumbered by
------------------
the Mortgages.
"Multiemployer Plan" means, with respect to Borrower or Operator, a
-------------------
multiemployer plan defined as such in Section 3(37) of ERISA to which
contributions have been made by Borrower or Operator, as applicable, or any
ERISA Affiliate and which is covered by Title IV of ERISA.
22
"Net Operating Income" means for any period the excess, if any, of
--------------------
Operating Income for such period over Operating Expenses for such period.
"Note" means and refers to the promissory note, in form and substance
----
satisfactory to Lender in Lender's reasonable discretion, dated the Closing
Date, made by Borrower to 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.
"Number of Interest Accrual Periods in Amortization Schedule" means a
-----------------------------------------------------------
number (rounded down to the nearest whole number) equal to a quotient (i) the
numerator of which is the sum of (x) the product of the Gross Revenue not
attributable to the provision of assisted living service to occupants of the
Facility for the twelve (12) month period ending on the Stabilization Date
multiplied by 360 plus (y) the product of the Gross Revenue attributable to the
provision of assisted living services to occupants of the Facility for the
twelve (12) month period ending on the Stabilization Date multiplied by 300 and
(ii) the denominator of which is the total Gross Revenue for the twelve (12)
month period ending on the Stabilization Date.
"Officer's Certificate" means, with respect to Operator or Beneficial
---------------------
Owner, a certificate of the Operator or Beneficial Owner, as applicable, which
is signed by an authorized officer of the Borrower or Beneficial Owner, as
applicable.
"Operating Expense Certificate" means a certificate of the Operator in
-----------------------------
the form attached hereto as Exhibit A.
---------
"Operating Expense Monthly Installment" means, with respect to a given
-------------------------------------
Interest Accrual Period, the amount shown on the Annual Operating Budget for
such period.
"Operating Expense Sub-Account" means the Sub-Account of the Cash
-----------------------------
Collateral Account established and maintained pursuant to Section 2.12 relating
------- ----
to the payment of operating expenses, as reasonably approved by Lender.
"Operating Expenses" means, for any period, for Borrower and Operator,
------------------
(a) all expenditures by Borrower and, without duplication (b) all expenditures
by Operator, as and to the extent required to be expensed under GAAP during such
period in connection with the ownership, operation, maintenance, repair or
leasing of the Facility, including, without limitation or duplication:
(i) expenses in connection with cleaning, repair, replacement,
painting
23
and maintenance;
(ii) wages, benefits, payroll taxes, uniforms, insurance costs
and all other related expenses for employees of Borrower, Operator or
any Affiliate engaged in repair, operation, maintenance of the
Facility or service to tenants or patrons in and of the Facility;
(iii) any management fees and expenses;
(iv) the cost of all electricity, oil, gas, water, steam,
heat, ventilation, air conditioning and any other energy, utility or
similar item and overtime services;
(v) the cost of cleaning supplies;
(vi) Impositions;
(vii) business interruption, liability, casualty and fidelity
insurance premiums;
(viii) legal, accounting and other professional fees and
expenses incurred in connection with the ownership, leasing or
operation of the Facility, including, without limitation, collection
costs and expenses;
(ix) costs and expenses of security and security systems;
(x) trash removal and exterminating costs and expenses;
(xi) advertising and marketing costs;
(xii) costs of environmental audits and monitoring,
environmental investigation, remediation or other response actions or
any other expenses incurred with respect to compliance with
Environmental Laws;
(xiii) all other ongoing expenses which in accordance with GAAP
are required to be or are included in Borrower's or Operator's annual
financial statements as operating expenses of the Facility; and
(xiv) with respect to Operator only, the SELCO Required
Quarterly Payment.
24
Notwithstanding the foregoing, Operating Expenses shall not include (x) any
taxes imposed on Borrower's net income, (y) depreciation or amortization of
intangibles or (z) Debt Service (as defined herein and in the Mezzanine Loan
Agreement) and other payments in connection with the Indebtedness (as defined
herein and in the Mezzanine Loan Agreement). Operating Expenses shall be
calculated in accordance with GAAP.
"Operating Income" means, for any period, for Borrower and Operator,
----------------
(a) all regular ongoing income of Operator during such period from the operation
of the Facility and, without duplication, (b) all regular ongoing income of
Borrower during such period from the operation of the Facility from any source
other than Operator, including, without limitation:
(i) all amounts payable as Rents (other than security
deposits) and all other amounts payable under Leases or other third
party agreements relating to the ownership and operation of the
Facility;
(ii) business interruption proceeds; and
(iii) all other amounts which in accordance with GAAP are
required to be or are included in Borrower's or Operator's annual
financial statements as operating income of the Facility, except that,
in the case of the Borrower, such other amounts shall only be included
if from a source other than Operator;
provided, however, with respect to Borrower only, Operating Income shall not
-------- -------
include the Excepted Operating Income.
"Operator" has the meaning set forth in the first paragraph of this
--------
Agreement.
"Operator Lease" means that certain Lease dated on or about the
--------------
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.
"Optional Prepayment Date" means the tenth (10th) anniversary of the
------------------------
Stabilization Date Payment Date.
"Other Borrower" means any borrower to which Lender makes a loan and
--------------
which borrower leases the property securing such loan to an Other Operator and
"Other Borrowers" shall mean all such borrowers, collectively.
----------------
25
"Other Borrowings" means, with respect to Operator or Borrower, as
----------------
applicable, without duplication (but not including the Indebtedness, the
Mezzanine 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 interest rate protection agreement
(including, without limitation, any interest rate swaps, caps, floors, collars
or similar agreements) and similar agreements.
"Other Loan" means any loan to an Other Borrower and "Other Loans"
---------- -----------
means all such loans collectively.
"Other Loan Agreement" shall mean each loan agreement executed by an
--------------------
Other Borrower and "Other Loan Agreements" mean all such loan agreements
---------------------
collectively.
"Other Loan Documents" means all of the Loan Documents (as defined in
--------------------
any Other Loan Agreement).
"Other Operator" shall mean any affiliate of the Operator which
--------------
affiliate guaranties an Other Loan and "Other Operators" means all such
---------------
Operators collectively.
"Parent" means Brookdale Living Communities, Inc., a Delaware
------
corporation.
"Payment Date" means the eleventh (11th) day of each calendar month
------------
during the term of the 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.
"PBGC" means the Pension Benefit Guaranty Corporation established
----
under ERISA, or any successor thereto.
"PCBs" has the meaning provided in the definition of "Hazardous
---- ---------
Substance."
---------
"Permits" means, all the "Permits" defined and described in the
-------
Mortgages.
26
"Permitted Encumbrances" means, with respect to the Facility,
-----------------------
collectively, (i) the Liens created by the Mortgages, the other Loan Documents
of record, and the 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 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 Lender in its sole discretion has
given its prior written consent and, after a Securitization, with respect to
which the Rating Agencies have confirmed in writing that such Liens will not
result in a downgrade, withdrawal or qualification of the then-applicable
ratings of any securities issued in a Securitization.
"Permitted Investments" means any one or more of the following
---------------------
obligations or securities payable on demand or having a scheduled maturity on or
before the Business Day immediately preceding the date upon which the funds in
the Cash Collateral Account are required to be drawn, and having at all times
the required ratings, if any, provided for in this definition, unless each
Rating Agency shall have confirmed in writing to Lender that a lower rating
would not, in and of itself, result in a downgrade, qualification or withdrawal
of the then current ratings assigned to any security issued in connection with a
Securitization:
(i) obligations of, or obligations fully guaranteed as to payment of
principal and interest by, the United States or any agency or
instrumentality thereof provided such obligations are backed by
the full faith and credit of the United States of America
including, without limitation, obligations of: the U.S. Treasury
(all direct or fully guaranteed obligations), the Farmers Home
Administration (certificates of beneficial ownership), the
General Services Administration (participation certificates), the
U.S. Maritime Administration (guaranteed Title XI financing), the
Small Business Administration (guaranteed participation
certificates and guaranteed pool certificates), the U.S.
Department of Housing and Urban Development (local authority
bonds) and the Washington Metropolitan Area Transit Authority
(guaranteed transit bonds); provided, however, that the
-------- -------
investments described in this clause must (A) have a
predetermined
27
fixed dollar amount of principal due at maturity that cannot
vary or change, (B) if rated by S&P, must not have an "r"
highlighter affixed to their rating, (C) if such investments
have a variable rate of interest, such interest rate must be
tied to a single interest rate index plus a fixed spread (if
any) and must move proportionately with that index, and (D)
such investments must not be subject to liquidation prior to
their maturity;
(ii) Federal Housing Administration debentures;
(iii) obligations of the following United States government sponsored
agencies: Federal Home Loan Mortgage Corp. (debt obligations),
the Farm Credit System (consolidated systemwide bonds and
notes), the Federal Home Loan Banks (consolidated debt
obligations), the Federal National Mortgage Association (debt
obligations), the Student Loan Marketing Association (debt
obligations), the Financing Corp. (debt obligations), and the
Resolution Funding Corp. (debt obligations); provided, however,
-------- -------
that the investments described in this clause must (A) have a
predetermined fixed dollar amount of principal due at maturity
that cannot vary or change, (B) if rated by S&P, must not have
an "r" highlighter affixed to their rating, (C) if such
investments have a variable rate of interest, such interest
rate must be tied to a single interest rate index plus a fixed
spread (if any) and must move proportionately with that index,
and (D) such investments must not be subject to liquidation
prior to their maturity;
(iv) federal funds, unsecured certificates of deposit, time
deposits, bankers' acceptances and repurchase agreements with
maturities of not more than 365 days of any bank, the short
term obligations of which are rated in the highest short term
rating category by each Rating Agency (or otherwise acceptable
to each Rating Agency, as confirmed in writing that such
investment would not, in and of itself, result in a downgrade,
qualification or withdrawal of the then current ratings
assigned to any security issued in connection with a
Securitization), provided, however, that the investments
-------- -------
described in this clause must (A) have a predetermined fixed
dollar amount of principal due at maturity that cannot vary or
change, (B) if rated by S&P, must not have an "r" highlighter
affixed to their rating, (C) if such investments have a
variable rate of interest, such interest rate must be tied to a
single interest rate index plus a fixed spread (if any) and
must move proportionately
28
with that index, and (D) such investments must not be subject
to liquidation prior to their maturity;
(v) fully Federal Deposit Insurance Corporation-insured demand and
time deposits in, or certificates of deposit of, or bankers'
acceptances issued by, any bank or trust company, savings and
loan association or savings bank, the short term obligations of
which are rated in the highest short term rating category by
each Rating Agency (or otherwise acceptable to each Rating
Agency, as confirmed in writing that such investment would not,
in and of itself, result in a downgrade, qualification or
withdrawal of the then current ratings assigned to any security
issued in connection with a Securitization), provided, however,
-------- -------
that the investments described in this clause must (A) have a
predetermined fixed dollar amount of principal due at maturity
that cannot vary or change, (B) if rated by S&P, must not have
an "r" highlighter affixed to their rating, (C) if such
investments have a variable rate of interest, such interest
rate must be tied to a single interest rate index plus a fixed
spread (if any) and must move proportionately with that index,
and (D) such investments must not be subject to liquidation
prior to their maturity;
(vi) debt obligations with maturities of not more than 365 days and
rated by each Rating Agency (or otherwise acceptable to each
Rating Agency, as confirmed in writing that such investment
would not, in and of itself, result in a downgrade,
qualification or withdrawal of the then current ratings
assigned to any security issued in connection with a
Securitization), in its highest long-term unsecured rating
category; provided, however, that the investments described in
-------- -------
this clause must (A) have a predetermined fixed dollar amount
of principal due at maturity that cannot vary or change, (B) if
rated by S&P, must not have an "r" highlighter affixed to their
rating, (C) if such investments have a variable rate of
interest, such interest rate must be tied to a single interest
rate index plus a fixed spread (if any) and must move
proportionately with that index, and (D) such investments must
not be subject to liquidation prior to their maturity;
(vii) commercial paper (including both non-interest-bearing discount
obligations and interest-bearing obligations payable on demand
or on a specified date not more than one year after the date of
issuance thereof) with maturities of not more than 365 days and
that is rated by each Rating Agency (or otherwise acceptable to
each Rating Agency, as
29
confirmed in writing that such investment would not, in and of
itself, result in a downgrade, qualification or withdrawal of
the then current ratings assigned to any security issued in
connection with a Securitization), in its highest short-term
unsecured debt rating; provided, however, that the investments
-------- -------
described in this clause must (A) have a predetermined fixed
dollar amount of principal due at maturity that cannot vary or
change, (B) if rated by S&P, must not have an "r" highlighter
affixed to their rating, (C) if such investments have a
variable rate of interest, such interest rate must be tied to a
single interest rate index plus a fixed spread (if any) and
must move proportionately with that index, and (D) such
investments must not be subject to liquidation prior to their
maturity;
(viii) the Federated Prime Obligation Money Market Fund (the "Fund")
so long as the Fund is rated "AAAm" or "AAAm-G" by S&P, or the
equivalent by each other Rating Agency (or otherwise acceptable
to each Rating Agency, as confirmed in writing that such
investment would not, in and of itself, result in a downgrade,
qualification or withdrawal of the then current ratings
assigned to any security issued in connection with a
Securitization);
(ix) any other demand, money market or time deposit, demand
obligation or any other obligation, security or investment,
provided that each Rating Agency has confirmed in writing to
Lender, that such investment would not, in and of itself,
result in a downgrade, qualification or withdrawal of the then
current ratings assigned to any security issued in connection
with a Securitization; and
(x) such other obligations as are acceptable as Permitted
Investments to each Rating Agency, as confirmed in writing to
Lender, that such obligations would not, in and of itself,
result in a downgrade, qualification or withdrawal of the then
current ratings assigned to any security issued in connection
with a Securitization;
provided, however, that, in the judgment of Lender, such instrument continues to
-------- -------
qualify as a "cash flow investment" pursuant to Code Section 860G(a)(6) earning
a passive return in the nature of interest and provided further that no
-------- ------- ----
instrument or security shall be a Permitted Investment if (i) such instrument or
security evidences a right to receive only interest payments, (ii) the right to
receive principal and interest payments derived from the underlying investment
provides a yield to maturity in excess of one hundred twenty percent (120%) of
the yield to
30
maturity at par of such underlying investment or (iii) such investments have a
maturity in excess of one year.
"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 Lender in
writing in Lender's discretion; (v) transfers of Equity Interests which in the
aggregate during the term of the 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 total interests in the Borrower or Operator, as applicable; (vi) any
other transfer of Equity Interests provided that (a) prior to any
Securitization, Lender shall have consented to such transfer or transfers, (b)
after any Securitization, Lender shall have consented to such transfer or
transfers and the Rating Agencies shall have confirmed in writing that such
transfer or transfers shall not result in a downgrade, withdrawal or
qualification of any securities issued in connection with such Securitization,
(c) acceptable opinions relating to such transfer or transfers shall have been
delivered by Borrower or Operator, as applicable, to Lender and the Rating
Agencies (including without limitation tax and bankruptcy opinions), and (d)
Borrower or Operator, as applicable, pays all reasonable expenses incurred by
Lender in connection with such transfer or transfers; (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 Loan,
----
provided that prior to such transfer (a) prior to a Securitization, Lender
shall have consented to such transfer, (b) after a Securitization, (i) Lender
shall have consented to such transfer and (ii) the Rating Agencies shall have
confirmed in writing that such transfer or transfers shall not result in a
downgrade, withdrawal or qualification of any securities issued in connection
with such Securitization, (c) acceptable opinions relating to such transfer
shall have been delivered by Borrower to Lender and to the Rating Agencies
(including without limitation tax and bankruptcy opinions), (d) the transferee
assumes in writing all obligations of the transferor under the Loan Documents
and executes and delivers such other documentation as may be required by Lender
or the Rating Agencies and (e) Borrower or Operator pays all reasonable expenses
incurred by Lender in connection with such transfer; and (viii) transfers of the
Preferred Equity Holder's equity interests in Borrower and/or Operator provided
that prior to such transfer or transfers, if the transfer or transfers by the
Preferred Equity Holder occurs after a Securitization and is to someone other
than an Affiliate of the Preferred Equity Holder, the Rating Agencies then
rating any securities issued in connection with a Securitization shall have
confirmed in writing that such transfer or transfers shall not result in a
downgrade, withdrawal or qualification of any
31
securities issued in connection with such Securitization.
"Person" means any individual, corporation, limited liability company,
------
partnership, joint venture, estate, trust, unincorporated association, or any
other entity, any federal, state, county or municipal government or any bureau,
department or agency thereof and any fiduciary acting in such capacity on behalf
of any of the foregoing.
"Physical Plant Standards" has the meaning provided in Section
------------------------ -------
4.1(d)(AK)(vii).
---------------
"Plan" means an employee benefit or other plan established or
----
maintained by Borrower or any ERISA Affiliate and that is covered by Title IV of
ERISA, other than a Multiemployer Plan.
"Preferred Beneficial Owner" has the meaning set forth in Section
-------------------------- -------
8.32(c).
-------
"Preferred Cash Collateral Account" means that certain bank account
---------------------------------
established pursuant to that certain Preferred Cash Management Agreement.
"Preferred Cash Collateral Account Bank" means the bank chosen by the
--------------------------------------
Preferred Equity Holder to hold the Preferred Cash Collateral Account, or any
successor bank hereafter selected by Lender in accordance with the terms hereof.
"Preferred Cash Management Agreement" means that certain cash
-----------------------------------
management agreement to be executed among Preferred Equity Holder, Borrower,
Operator, the other holders of equity interests in Borrower and/or Operator and
the Preferred Cash Collateral Account Bank (the terms of which are summarized on
Exhibit F hereof) as the same may from time to time be supplemented, amended,
---------
modified or extended and in effect from time to time.
"Preferred Equity Holder" means Nomura Asset Capital Corporation, a
-----------------------
Delaware corporation, and its successors and assigns or an affiliate of Lender
designated by Lender in Lender's discretion and such affiliate's successors and
assigns.
"Preferred Shareholder" has the meaning set forth in Section
--------------------- -------
8.32(c).
-------
"Principal Indebtedness" means the principal amount of the entire Loan
----------------------
outstanding as the same may be increased, by additional Advances or otherwise,
or decreased, as a result of prepayment or otherwise, from time to time.
"Proceeds" means all of the "Proceeds" defined and described in the
--------
32
Mortgages.
"Rating Agencies" means Fitch Investors Service, Inc., Xxxxx'x
---------------
Investors Service, Inc., Duff & Xxxxxx Credit Rating Co. and S&P or any
successor thereto, and any other nationally recognized statistical rating
organization to the extent that any of the foregoing have been or will be
engaged by Lender or its designees in connection with a Securitization (each,
individually a "Rating Agency").
-------------
"Recalculated Loan Amount" has the meaning provided in Section
------------------------ -------
8.32(a).
-------
"Recourse Distributions" has the meaning provided in Section 8.14.
---------------------- ------- ----
"Release" means any release, threatened release, spill, emission,
-------
leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching
or migration into the indoor or outdoor environment, including, without
limitation, the movement of Hazardous Substances through ambient air, soil,
surface water, ground water, wetlands, land or subsurface strata.
"Remedial Work" has the meaning provided in Section 5.1(b)(D)(i).
------------- ------- ------------
"REMIC" means a real estate mortgage investment conduit as defined
-----
under Section 860 D(a) of the Code.
"Rents" means all of the "Rents" defined and described in the
-----
Mortgages.
"Request for Advance" shall have meaning provided in Section 3.2(D).
------------------- ------- ------
"Request for Draw" means a request by Operator to Lender for a
----------------
disbursement from the Construction Sub-Account in writing and signed by a duly
authorized representative of Operator which (i) contains the amount of the
requested draw and all back up documentation therefor and (ii) is in form and
substance reasonably satisfactory to Lender in its discretion.
"Required Base Debt Service Payment" means all of the Required Debt
----------------------------------
Service Payment except for that portion of the Required Debt Service Payment
which consists of payments of Excess Cash Flow which may be due and payable on
and after the Optional Prepayment Date.
"Required Debt Service Payment" means, on any Payment Date, the Debt
-----------------------------
Service then due and payable by Borrower.
"Resizing DSCR" means a number equal to a quotient (i) the numerator
-------------
of
33
which is the sum of (x) the product of the Gross Revenue not attributable to the
provision of assisted living services to occupants of the Facility for the
twelve (12) month period ending on the Stabilization Date multiplied by 1.20
plus (y) the product of the Gross Revenue attributable to the provision of
assisted living services to occupants of the Facility for the twelve (12) month
period ending on the Stabilization Date multiplied by 1.35 and (ii) the
denominator of which is the total Gross Revenue for the twelve (12) month period
ending on the Stabilization Date.
"Revised Interest Rate" means the greater of (x) the sum of five
---------------------
hundred (500) basis points plus the Initial Interest Rate and (y) as of the
Optional Prepayment Date, the sum of the Treasury Rate plus six hundred eighty
(680) basis points, such Revised Interest Rate not to exceed the Maximum Amount.
"S&P" means Standard & Poor's Ratings Services, a division of The
---
McGraw Hill Companies, Inc.
"Secretary's Certificate" means, with respect to Operator, the
-----------------------
certificate in form and substance satisfactory to Lender in Lender's reasonable
discretion dated as of the Closing Date and each Advance Closing Date, as
applicable.
"Securitization" shall have the meaning provided in Section 2.14.
-------------- ------- ----
"Securitization Closing Date" means the date on which a
---------------------------
Securitization is effected.
"Securitization Costs" shall have the meaning set forth in Section
-------------------- -------
2.14.
----
"Securitization Expense Sub-Account" means the Sub-Account of the Cash
----------------------------------
Collateral Account established and maintained pursuant to Section 2.12.
"Security Agreement" has the meaning provided in Section 2.11(a).
------------------ ------- -------
"Security Deposit Account" has the meaning set forth in Section
------------------------ -------
2.12(a)(i).
----------
"SELCO" means SELCO Service Corporation, an Ohio corporation,
-----
together with its permitted successors and assigns.
"SELCO Debt" means debt of Borrower to Key subordinate in all respects
----------
to the Indebtedness in the principal amount of $5,075,000 evidenced by that
certain Loan Agreement dated as of the Closing Date (the "SELCO Loan Agreement")
--------------------
and secured only by Certificate A (as defined in the SELCO Loan Agreement) and
the other cash collateral pledge
34
pursuant to the Certificate Pledge Agreement (as defined in the SELCO Loan
Agreement), which debt shall be evidenced by the SELCO Loan Agreement the form
and substance of which shall be satisfactory to Lender in its reasonable
discretion.
"SELCO Loan Agreement" has the meaning set forth in the definition
--------------------
of the term "SELCO Debt".
"SELCO Payment Date" means every third (3rd) Payment Date. For
------------------
example, if the Closing Date is prior to March 11, 1998, the first SELCO Payment
Date is May 11, 1998, the second SELCO Payment Date is August 11, 1998 and so
on.
"SELCO Payment Sub-Account" means the Sub-Account of the Cash
-------------------------
Collateral Account established and maintained pursuant to Section 2.12 relating
------- ----
to the payment of the SELCO Required Quarterly Payment.
"SELCO Required Quarterly Payment" means with respect to a SELCO
--------------------------------
Payment Date, the sum of the SELCO Basic Rent (as defined in the Operator
Lease), the Lessor Basic Rent (as defined in the Operator Lease) and the Break
Costs (as defined in the Operator Lease) due and payable on such SELCO Payment
Date, in each case, due and payable to Borrower pursuant to the Operator Lease.
"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 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
35
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, k. 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 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 Mezzanine 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 aggregate of the Loan Amount and
the Mezzanine Loan Amount (as defined in the Mezzanine 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
36
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, cc. 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 organizational
documents shall contain such provision.
"Stabilization Date" means the earlier to occur of (i) the date on
------------------
which Borrower (A) has requested that Lender recalculate the Aggregate Principal
Indebtedness outstanding on such date, (B) provided to Lender all information
required pursuant to Section 8.32, and (C) has established, to Lender's
------- ----
satisfaction, that the Recalculated Loan Amount (calculated based upon the
Underwriting NOI Criteria and in accordance with the methodology and debt
service coverage ratio tests set forth in Section 8.32(a)), will be an amount
----------------
equal to or exceeding the then outstanding Indebtedness, and (ii) the Cut-Off
Date.
"Stabilization Date Loan Amount" means the outstanding Aggregate
------------------------------
Principal Indebtedness on the Stabilization Date (and before giving effect to
any recalculation of the Loan Amount (as defined hereunder and under the
Mezzanine Loan Agreement) on the Stabilization Date).
"Stabilization Date Payment Date" means the second Payment Date
-------------------------------
after the Stabilization Date.
"Stabilization Debt Service Constant" means a number (expressed as a
-----------------------------------
37
percentage) equal to a quotient (i) the numerator of which is the sum of (x) the
product of the Gross Revenue not attributable to the provision of assisted
living services to occupants of the Facility for the twelve (12) month period
ending on the Stabilization Date multiplied by 8.81% plus (y) the product of the
Gross Revenue attributable to the provision of assisted living services to
occupants of the Facility for the twelve (12) month period ending on the
Stabilization Date which are assisted living multiplied by 9.65% and (ii) the
denominator of which is the total Gross Revenue for the twelve (12) month period
ending on the Stabilization Date.
"Start-Up Day" means the "start-up day," within the meaning of Section
------------
860G(a)(9) of the Code, of any "real estate mortgage investment conduit," within
the meaning of Section 860D of the Code, that holds the Note.
"Sub-Account" shall have the meaning provided in Section 2.12(c).
----------- ------- -------
"Successor Obligor" shall have the meaning provided in Section
----------------- -------
2.11(b).
-------
"Survey" means, with respect to the Facility, a survey of the Facility
------
satisfactory to Lender, prepared by a registered Independent surveyor reasonably
satisfactory to Lender and Title Insurer, together with a metes and bounds legal
description of the land corresponding with the survey and containing the
Surveyor's Certification.
"Surveyor's Certification" means a surveyor's certification in form
------------------------
and substance satisfactory to Lender in Lender's reasonable discretion.
"Taking" means a taking or voluntary conveyance during the term hereof
------
of all or part of the Facility, or any interest therein or right accruing
thereto or use thereof, as the result of, or in settlement of, any condemnation
or other eminent domain proceeding by any Governmental Authority affecting the
Facility or any portion thereof.
"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 Loan, secured by a Lien affecting the Facility,
which Lien is prior to or on a parity with the Lien created under the Mortgage.
"Title Instruction Letter" means an instruction letter in form and
------------------------
substance satisfactory to Lender in Lender's sole discretion.
38
"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 Lender and insuring the first
priority lien in favor of Lender created by the Mortgage and, as to the
Leasehold Estate, the Leasehold Mortgage and acceptable to Lender in Lender's
reasonable discretion.
"Title Insurer" means Lawyer's Title Insurance Corporation and any
-------------
reinsurer reasonably required by Lender and/or any other nationally recognized
title insurance company acceptable to Lender in Lender's reasonable discretion,
provided, however, that the reinsurer of any Title Insurance Policy may include,
in amounts reasonably acceptable to 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 Loan
------------
Documents, including, without limitation, (i) the satisfaction of the conditions
precedent to the making of each and every Advance, (ii) the making of each and
every Advance and (iii) the transactions contemplated by Section 8.32 and
------------
Section 8.38.
------------
"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 Transfer.
"Treasury Rate" means the yield, calculated by linear interpolation
-------------
(rounded to three decimal places) of the yields of United States Treasury
Constant Maturities with terms (one longer and one shorter) most nearly
approximating that of noncallable United States Treasury obligations having
maturities as close as possible to the Maturity Date, as determined by Lender on
the basis of Federal Reserve Statistical Release H.15-Selected Interest Rates
under the heading U.S. Governmental Security/Treasury Constant Maturities, or
other recognized source of financial market information selected by Lender for
the week prior to the Optional Prepayment Date.
"Trust Agreement" means that certain Trust Agreement between the
---------------
Beneficial
39
Owner and Borrower's Trustee dated on or about the Closing Date as amended,
modified and in effect from time to time.
"Trust Company" means Wilmington Trust Company in its individual
-------------
capacity.
"Trustee Expense Monthly Installment" means one-twelfth (1/12/th)
-----------------------------------
of the Trustee's Annual Fee.
"Trustee Expense Sub-Account" means the Sub-Account of the Cash
---------------------------
Collateral Account established and maintained pursuant to Section 2.12 related
to the payment of amount due Borrower's Trustee under the Declaration of Trust.
"Trustee's Annual Fee" means $2,500.00.
--------------------
"Trustee's Certificate" means a Trustee's Certificate in form and
---------------------
substance satisfactory to Lender in Lender's reasonable discretion dated as of
the Closing Date.
"UCC" means, with respect to any Collateral, the Uniform Commercial
---
Code in effect in the jurisdiction in which the relevant Collateral is located.
"UCC Searches" has the meaning specified in Section 3.1(a)(E).
------------ ------- ---------
"Undisbursed Construction Amount" means, at any point in time with
-------------------------------
respect to any time, the excess of (i) the Initial Construction Amount over (ii)
the amount of funds at such time on deposit in the Construction Sub-Account.
"U.S. Obligations" means obligations or securities not subject to
----------------
prepayment, call or early redemption which are direct obligations of, or
obligations fully guaranteed as to timely payment by, the United States of
America or any agency or instrumentality of the United States of America, the
obligations of which are backed by the full faith and credit of the United
States of America.
"Underwriting NOI Criteria" is set forth in Exhibit G.
------------------------- ---------
"Unpaid Excess Loan Amount" has the meaning provided in Section
------------------------- -------
8.32(c)(i).
----------
"Use" means, with respect to any Hazardous Substance, the generation,
---
manufacture, processing, distribution, handling, use, treatment, recycling or
storage of such Hazardous Substance or transportation to or from the property by
any Person of any Hazardous
40
Substance.
"Warrants" has the meaning set forth in Exhibit E hereto.
-------- ---------
"Yield Maintenance Premium" means if all or any portion of the 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 Note) upon
which Payment Dates interest and principal payments would be required under the
Note as though the Maturity Date of the Note was the Optional Prepayment Date
and (B) in amounts sufficient to pay all scheduled principal and interest
payments on the Note as if the Maturity Date of the 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 Loan; Advances.
----------------------------
(a) Amount of the Loan. Subject to the terms and conditions of
------------------
this Agreement, Lender shall lend Borrower the Closing Date Advance and may lend
Borrower the Earn-Out Advance for a Loan Amount of up to the Maximum Advance
Amount.
(b) Closing Date Advance. On the Closing Date, the Lender shall
--------------------
fund the Closing Date Advance.
(c) Earn-Out Advance. On the Stabilization Date Payment Date,
----------------
Lender shall fund the Earn-Out Advance, if any, pursuant to and in accordance
with Section 8.32 and all other terms and conditions of this Agreement.
------------
Section 2.2. Use of Proceeds. Proceeds of the Loan shall be used
---------------
only for the following purposes: (i) to pay the acquisition costs for the
Facility, (ii) to fund any upfront reserves or escrow amounts required
hereunder, (iii) to pay Transaction Costs in connection with the closing of the
Loan and (iv) to pay for Actual Construction Costs. Any excess will be available
to Borrower to advance to Operator and may be used in connection with the
renovation at the Facility.
Section 2.3. Security for the Loan. The Note and Borrower's
---------------------
obligations hereunder and under the other Loan Documents shall be secured by the
Mortgages, the Guaranty,
41
the Assignments of Leases, the Assignments of Agreements, and the security
interests and Liens granted in this Agreement and in the other Loan Documents
and, to the extent the Loan is cross-collateralized with the Other Loans
pursuant to Section 8.39, the Other Loan Documents.
------------
Section 2.4. Borrower's Note. (a) Borrower's obligation to pay the
---------------
principal of and interest on the Loan (including Late Charges, Default Rate
interest, and the Yield Maintenance Premium, if any), shall be evidenced by this
Agreement and by the Note, duly executed and delivered by Borrower. The Note
shall be payable as to principal, interest, Late Charges, Default Rate interest
and Yield Maintenance 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) Lender is hereby authorized, at its sole option, to endorse
on a schedule attached to the Note (or on a continuation of such schedule
attached to the Note and made a part thereof) an appropriate notation evidencing
the date and amount of each payment of principal, interest, Late Charges,
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 Lender's
offices.
Section 2.5. Principal and Interest Payments.
-------------------------------
(a) Accrual of Interest before the Optional Prepayment Date.
-------------------------------------------------------
Prior to the Optional Prepayment Date, interest shall accrue on the outstanding
principal balance of the Note and all other amounts due to Lender under the Loan
Documents from (and including) the Closing Date to the Optional Prepayment Date
at the Initial Interest Rate.
(b) Accrual of Interest on or after the Optional Prepayment
-------------------------------------------------------
Date. On and after the Optional Prepayment Date, interest shall accrue on the
----
outstanding principal balance of the Note and all other amounts due to Lender
under the Loan Documents at the Revised Interest Rate.
(c) Monthly Base Payments of Principal and Interest.
-----------------------------------------------
Commencing on the first Payment Date after the Closing Date, and continuing on
each Payment Date thereafter through and including the Stabilization Date
Payment Date, Borrower shall pay to Lender monthly payments of accrued interest
only on the Principal Indebtedness. On each Payment Date commencing on the
Payment Date immediately following the Stabilization Date Payment Date, Borrower
shall pay to Lender a monthly constant payment of principal and interest, which
payment shall be based on the Initial Interest Rate and an amortization schedule
equal to the number of months from the Stabilization Date to the Maturity Date
(calculated on the basis of a calendar year consisting of twelve thirty day
months). Each payment required to be made by
42
Borrower pursuant to this Section 2.5(c) is hereinafter sometimes referred to
------- ------
as a "Base Payment."
------------
(d) Payments of Excess Cash Flow. On and after the earlier to
----------------------------
occur of (i) the Optional Prepayment Date or (ii) at Lender's sole election,
upon the occurrence of an Event of Default hereunder, any date on or after the
occurrence of such Event of Default, in addition to the Base Payment, Borrower
shall pay to Lender all Excess Cash Flow to be applied as described in Section
-------
2.8.
---
(e) Payments of Excess of Revised Interest Rate Over Initial
--------------------------------------------------------
Interest Rate. To the extent, for any period, that accrued interest at the
-------------
Revised Interest Rate exceeds interest required to be paid hereunder for such
period at the Initial Interest Rate (such amount, the "Accrued Interest"),
----------------
Borrower shall only be required to pay such Accrued Interest after the
outstanding principal balance of the Note has been paid in full. Unpaid Accrued
Interest shall accrue interest at the Revised Interest Rate and shall be
computed based on the actual number of days elapsed in each year over a 360-day
year.
(f) Payment Dates. All payments required to be made pursuant to
-------------
paragraphs (a) through (e) 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.
(g) Calculation of Interest. Interest shall accrue on the
-----------------------
outstanding principal balance of the Loan and all other amounts due to Lender
under the Loan Documents commencing upon the Closing Date. Interest shall accrue
on Accrued Interest commencing on the first Payment Date following the Optional
Prepayment Date. Interest shall be computed on the actual number of days elapsed
in each year over a 360-day year.
(h) 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 Note will bear interest at the Default Rate.
(i) Late Charge. If Borrower fails to make any payment of any
-----------
sums due under the 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.
(j) Maturity Date. On the Maturity Date Borrower shall pay to
-------------
Lender all amounts owing under the Loan Documents, including without limitation,
interest, principal, Late Charges, Default Rate interest, Accrued Interest and
any Yield Maintenance Premium. The Yield Maintenance Premium shall only be due
and payable on the date of acceleration of the
43
Note.
(k) Cash Management Fees. After the occurrence of a Cash
--------------------
Management Event, a fee shall accrue on the outstanding principal balance of the
Note and all other amounts due to Lender under the Loan Documents at a rate of
.015% per annum which fee shall be paid, by Borrower to Lender, on each Payment
Date, for the Interest Accrual Period immediately preceding such Payment Date.
Section 2.6. Voluntary Defeasance.
--------------------
(a) Provided that no Event of Default has occurred and is then
continuing, on and after the date which is two years after the Start-Up Day (but
only before the Optional Prepayment Date), Borrower may voluntarily defease (A)
all of the Loan or (B) a portion of the Loan, but only pursuant to Section
-------
5.1(b)(P); provided, that, for any defeasance, Borrower must comply with Section
--------- -------- -------
2.11.
----
(b) In the event of any such voluntary defeasance Borrower shall give
Lender written notice of its intent to defease, which notice shall be given at
least ten (10) days, in the case of a defeasance pursuant to Section 5.1(b)(P),
------- ---------
and at least thirty (30) days, in all other cases, prior to the date upon which
defeasance is to be made and shall specify the Payment Date and the amount of
such defeasance. If any such notice of defeasance is given, Borrower shall be
required to defease the Loan or a portion thereof pursuant to Section 5.1(b)(P)
------- ---------
on the specified Payment Date (unless such notice is revoked by Borrower prior
to the Payment Date specified therein in which event Borrower shall immediately
reimburse Lender within ten (10) calendar days after demand for any reasonable
costs incurred by Lender in connection with Borrower's giving of such notice and
revocation).
(c) Any voluntary defeasance of the Loan by Borrower is required to
be made on a Payment Date.
(d) Borrower shall not be permitted at any time to defease all or any
part of the Loan except as expressly provided in this Section 2.6.
-----------
Section 2.7. Prepayment. (a) On and after the earlier to occur of
----------
(i) the Optional Prepayment Date or (ii) at Lender's sole election, upon the
occurrence and during the continuance of an Event of Default hereunder, any date
on or after such Event of Default, in addition to all other payments required
hereunder, Borrower shall pay and use all Excess Cash Flow to prepay the Loan on
each Payment Date in accordance with Section 2.12(g) and Section 2.8 and, after
--------------- -----------
payment in full of the Principal Indebtedness (but not Accrued Interest or
interest thereon) to pay Accrued Interest and interest thereon and all other
amounts then owing.
44
(b) If Borrower is required by Lender under the provisions of the
Mortgage to prepay the 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 Loan to the full extent of the Insurance Proceeds or the Condemnation
Proceeds, as applicable and there shall be no Yield Maintenance Premium or
penalty assessed against Borrower by reason of such prepayment.
(c) On and after the Optional Prepayment Date, Borrower may
voluntarily prepay the Loan in whole or, if no Event of Default has occurred and
is continuing, in part, and there shall be no Yield Maintenance Premium or
penalty assessed against Borrower by reason thereof.
(d) All prepayments made pursuant to this Section 2.7 shall be
------- ---
applied in accordance with the provisions of Section 2.8.
------- ---
(e) Any prepayment of the Loan by Borrower is required to be made
on a Payment Date.
(f) Borrower shall not be permitted at any time to prepay all or any
part of the Loan except as expressly provided in this Section 2.7.
------- ---
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 Loan shall be applied to pay: first, any costs and expenses
-----
of Lender, including, without limitation, the Lender's reasonable attorney's
fees and disbursements actually arising as a result of such repayment or
reasonably expended by Lender to protect the Collateral; second, accrued and
------
unpaid interest at, the Initial Interest Rate; third, to the Principal
-----
Indebtedness (but not to Accrued Interest or interest thereon); fourth, to
------
Accrued Interest and interest accrued thereon; and fifth, any other amounts then
-----
due and owing under the 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 otherwise provided in the
Mortgages, be applied to amounts which Borrower is obligated to pay under the
Loan Documents in such order and in such manner as 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 Note shall be made to 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 Lender in writing, and
any funds received by Lender after such time, for all purposes hereof, shall be
45
deemed to have been paid on the next succeeding Business Day.
(b) All payments made by Borrower hereunder or by Borrower under the
other 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 Lender or its designee, on or prior to each Payment
Date, the Required Debt Service Payment for such Payment Date, the Basic
Carrying Costs Monthly Installment for the Interest Accrual Period immediately
preceding such Payment Date (but only on and after the Stabilization Date) and
the Capital Reserve Monthly Installment for the Interest Accrual Period
immediately preceding such Payment Date (but only on and after the Stabilization
Date). If a Cash Management Event has occurred and is continuing, the
Collection Account Bank, shall transfer to Lender all amounts due under the Loan
Documents (and all other amounts in the Collection Account pursuant to the
Collection Account Agreement and Section 2.12 hereof).
------------
Section 2.10. Taxes. All payments made by Borrower under this
-----
Agreement and under the other 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 Lender).
Section 2.11. Defeasance Requirements. (a) Subject to Section 2.6,
----------------------- ------- ---
the Loan may be defeased (A) in whole, or (B) in part, but only pursuant to
Section 5.1(b)(P); provided that Operator: (i) provides, in the case of a
------- ---------
defeasance pursuant to Section 5.1(b)(P), not less than ten (10) days', and, in
------- ---------
all other cases, not less than thirty (30) days prior written notice to the
Lender specifying a Payment Date (the "Defeasance Release Date") on which the
---------- ------- ----
payments provided in clauses (ii) and (iii) below are to be made and the deposit
provided in clause (iv) below is to be made, (ii) pays all interest accrued and
unpaid on the Principal Indebtedness to and including the Defeasance Release
Date, (iii) pays all other sums then due and payable under the Loan Documents,
(iv) deposits with the Lender an amount equal to the Defeasance Deposit, (v)
intentionally omitted, (vi) intentionally omitted, and (vii) delivers to the
Lender (A) a security agreement, in form and substance reasonably satisfactory
to Lender, creating a first priority perfected Lien on the deposits required
pursuant to this Section and the U.S. Obligations purchased on behalf of
Borrower in accordance with this Section (the "Security Agreement"), (B) for
-------- ---------
execution by the Lender, a release of the Mortgaged Property from the liens of
the Mortgages and the Assignments of Leases and the other Loan Documents
(including, without limitation, liens on fixtures) in a form appropriate for the
jurisdiction in which the Mortgaged Property is located, (C) an Officer's
Certificate of Operator certifying that the requirements set forth in this
46
Section have been satisfied, (D) an opinion of counsel from Borrower's or
Operator's counsel in form and substance reasonably satisfactory to the Lender
stating, among other things, (x) that, without qualification, the U.S.
Obligations have been duly and validly assigned and delivered to Lender and
Lender has a first priority perfected security interest on the deposits required
pursuant to this Section and a first priority perfected lien on the U.S.
Obligations and the proceeds thereof purchased hereunder and (y) that the
defeasance will not adversely affect the status of any REMIC formed in
connection with a Securitization, and (E) such other certificates, documents or
instruments as the Lender may reasonably request including, without limitation,
(x) written confirmation from the relevant Rating Agencies that such defeasance
will not cause any Rating Agency to withdraw, qualify or downgrade the then-
applicable rating on any security issued in connection with any Securitization
and (y) a certificate from an Independent certified public accountant certifying
that the amounts of the U.S. Obligations comply with all of the requirements of
this Loan Agreement. The U.S. Obligations shall mature on or be redeemable, or
provide for payment thereon, on or prior to the Business Day preceding the date
on which payments under the Note are due and payable and the proceeds thereof
shall be payable directly to the Cash Collateral Account. In connection with the
foregoing, Borrower and Operator each appoints the Lender as its agent for the
purpose of applying the amounts delivered pursuant to clause (iv) above to
purchase U.S. Obligations. Notwithstanding anything in this Agreement to the
contrary, in the event the Yield Maintenance Premium is due as a result of the
acceleration of the Indebtedness after the occurrence of an Event of Default,
Lender shall have the right to receive and collect the Yield Maintenance Premium
but shall have no obligation to purchase U.S. Obligations or otherwise comply
with this Section 2.11. Upon a complete defeasance of the Loan in accordance
------- ----
with this Section and subject to Section 2.11(c), Lender's recourse shall be
------- -------- -------
limited to the U.S. Obligations purchased with the Defeasance Deposit and the
proceeds thereof.
(b) Upon compliance with the requirements of this Section 2.11 in the
------- ----
event of a total defeasance of the Loan, the Mortgaged Property as to which the
defeasance has been consummated shall be released from the liens of the
Mortgages and all other Collateral which has been pledged as security for the
Loan shall be released from all the other Loan Documents. In connection with a
defeasance of the Loan, Borrower may be required by Lender to assign its
obligations under the Note, the other Loan Documents and the Security Agreements
together with the pledged U.S. Obligations to such other entity or entities
established or designated by Lender (the "Successor Obligor"). Such Successor
--------- -------
Obligor shall assume the obligations under the Note, the other Loan Documents
and the Security Agreements and, upon such assignment Borrower and Operator
shall be relieved of their respective obligations thereunder.
(c) Nothing in this Section 2.11 shall release Operator from any
------- ----
liability or obligation relating to any environmental matters arising under
Sections 4.1(d)(U) or 5.1(b)(D)-(I), inclusive, hereof.
-------- --------- -------------
47
Section 2.12. Central Cash Management. (a) Collection Account and
----------------------- ----------------------
Security Deposit Account.
------------------------
(i) Borrower and Operator shall open and maintain at the
Collection Account Bank two (2) trust accounts (the "Collection Account"
------------------
and the "Security Deposit Account", respectively).
------------------------
(ii) The Collection Account shall be assigned an identification
number by the Collection Account Bank and shall be opened and maintained in
the name "Brookdale Living Communities of Illinois-HV, Inc., d/b/a Harbor
Village as Mortgagor of Nomura Asset Capital Corporation/Collection
Account." Borrower and Operator shall not have any right of withdrawal
from the Collection Account. Operator shall direct all tenants and
subtenants of the Facility to deposit all lease payments, Rents, Moneys and
other items of Gross Revenue (other than security deposits) directly into
the Collection Account and shall cause all relevant checks to be made
payable to the name of the Collection Account. Without in any way limiting
Borrower's or Operator's obligations pursuant to the preceding two (2)
sentences, Borrower and Operator shall deposit directly into the Collection
Account all Rents, Moneys or other items of Gross Revenue (other than
security deposits and, prior to a Cash Management Event, the SELCO Basic
Rent and Lessor Basic Rent (each as defined in the Operator Lease))
received by Borrower or Operator in violation or contradiction of the
preceding two (2) sentences within one (1) Business Day after receipt
thereof.
(iii) The Security Deposit Account shall be assigned an
identification number by the Collection Account Bank and shall be opened
and maintained in the name "Brookdale Living Communities of Illinois-HV,
Inc., d/b/a Harbor Village as Mortgagor of Nomura Asset Capital
Corporation/Security Deposit Account." Borrower will direct the Operator
to, and the Operator shall, deposit all security deposits with respect to
the Facility directly into the Security Deposit Account and shall cause all
relevant checks to be made payable to the name of the Security Deposit
Account. Without in any way limiting the obligations of Borrower or
Operator pursuant to the preceding sentence, Borrower and Operator shall
deposit directly into the Security Deposit Account all security deposits
received by Borrower or Operator in violation or contradiction of the
preceding sentence, within one (1) Business Day after receipt thereof.
Borrower and Operator shall not have any right of withdrawal from the
Security Deposit Account except that, prior to the occurrence of an Event
of Default, Operator may withdraw funds from the Security Deposit Account
in accordance with the Collection Account Agreement. Operator may
designate a new financial institution to serve as a Collection Account Bank
if approved by Lender in Lender's reasonable discretion. If any Collection
Account Bank resigns pursuant to the terms of any Collection Account
Agreement,
48
Operator shall replace such Collection Account Bank with a bank and
documentation acceptable to Lender prior to the date that such resignation
becomes effective pursuant to such Collection Account Agreement.
(iv) Any breach of this Section by Borrower or Operator shall be
an Event of Default
(b) Payments. Prior to the occurrence of a Cash Management
--------
Event, Borrower shall pay to Lender or Lender's designee or to an account
identified by Lender or Lender's designee on or prior to each Payment Date, the
Required Debt Service Payment for such Payment Date, the Basic Carrying Costs
Monthly Installment for the Interest Accrual Period immediately preceding such
Payment Date (but only on and after the Stabilization Date) and the Capital
Reserve Monthly Installment for the Interest Accrual Period immediately
preceding such Payment Date (but only on and after the Stabilization Date).
After the occurrence of a Cash Management Event, pursuant to the Collection
Account Agreement between the Collection Account Bank, Borrower and Lender (the
"Collection Account Agreement"), Borrower and Operator will authorize and direct
----------------------------
the Collection Account Bank to transfer on a daily basis all funds deposited in
the Collection Account for the Facility to Lender or Lender's designee to be
held in an Eligible Account established by Lender or Lender's designee (the
"Cash Collateral Account"). Notwithstanding the foregoing, in the event funds
-----------------------
in the Collection Account are being transferred to the Cash Collateral Account
as described in the foregoing sentence due to the occurrence of a Cash
Management Event described in clauses (i) through (iv) of the definition of the
term "Cash Management Event", on the date which is twelve (12) months after the
occurrence of such Cash Management Event and provided no Cash Management Event
exists on such date, the funds shall not be transferred to Lender or Lender's
designee for deposit into the Cash Collateral Account but shall be transferred
to an account designated by Borrower until a Cash Management Event occurs in
which event the funds in the Collection Account shall be transferred to the Cash
Collateral Account pursuant to the foregoing sentence. The Cash Collateral
Account shall be under the sole dominion and control of Lender. Neither
Borrower nor Operator shall have any right of withdrawal in respect to the Cash
Collateral Account.
(c) Establishment of Sub-Accounts. The Cash Collateral
-----------------------------
Account shall contain a Debt Service Payment Sub-Account, a Basic Carrying Costs
Sub-Account, a Capital Reserve Sub-Account, a Mezzanine Debt Service Payment
Sub-Account, a Securitization Expense Sub-Account, an Operating Expense Sub-
Account, a Trustee Expense Sub-Account, a Construction Sub-Account and a SELCO
Payment Sub-Account each of which accounts (individually, a "Sub-Account" and
-----------
collectively, the "Sub-Accounts") shall be an Eligible Account to which certain
------------
funds shall be allocated and from which disbursements shall be made pursuant to
the terms of this Loan Agreement.
49
(d) Permitted Investments. Upon the written request of
---------------------
Operator, which request may be made once per Interest Accrual Period, Lender
shall direct (x) the Cash Collateral Account Bank to invest and reinvest any
balance in the Cash Collateral Account from time to time in Permitted
Investments as instructed by Operator and (y) the Collection Account Bank to
invest and reinvest any balance in the Security Deposit Account from time to
time in Permitted Investments as instructed by Operator; provided, however, that
-------- -------
(i) if Operator fails to so instruct Lender, or if an Event of Default shall and
the Collection Account Bank, as applicable, to invest and reinvest such balance
in Permitted Investments as Lender shall determine in Lender's sole discretion,
(ii) the maturities of any Permitted Investment on deposit in the Cash
Collateral Account shall, to the extent such dates are ascertainable, be
selected and coordinated to become due not later than the day before any
disbursements from the Sub-Accounts must be made, (iii) all such Permitted
Investments shall be held in the name and be under the sole dominion and control
of Lender; (iv) no Permitted Investment shall be made unless Lender shall retain
a perfected first priority Lien in such Permitted Investment securing the
Indebtedness and all filings and other actions necessary to ensure the validity,
perfection, and priority of such Lien have been taken; (v) Lender shall only be
required to follow the investment instructions which were most recently received
by Lender and Borrower and Operator shall be bound by such last received
investment instructions; and (vi) any written request from Operator containing
investment instructions shall contain an Officer's Certificate from Operator
(which may be conclusively relied upon by Lender and its agents) that any such
investments constitute Permitted Investments. It is the intention of the parties
hereto that all amounts deposited in the Cash Collateral Account and the
Security Deposit Account shall at all times be invested in Permitted
Investments. All funds in the Security Deposit Account and the Cash Collateral
Account that are invested in a Permitted Investment are deemed to be held in
such accounts for all purposes of this Agreement and the other Loan Documents.
Lender shall have no liability for any loss in investments of funds in the
Security Deposit Account or the Cash Collateral Account that are invested in
Permitted Investments (unless invested contrary to Operator's request other than
after the occurrence of an Event of Default) and no such loss shall affect
Borrower's obligation to fund, or liability for funding, the Cash Collateral
Account and each Sub-Account, as the case may be. Borrower, Operator and Lender
agree that Operator shall include all such earnings and losses (other than those
for Lender's account in accordance with the immediately preceding sentence) on
the Cash Collateral Account as income of Operator for federal and applicable
state tax purposes. Borrower shall be responsible for any and all fees, costs
and expenses with respect to Permitted Investments.
(e) Interest on Accounts. All interest paid or other earnings
--------------------
on the Permitted Investments made hereunder shall be deposited into the Security
Deposit Account or the Cash Collateral Account, as applicable, and shall be
subject to allocation and distribution like any other monies deposited therein.
50
(f) Payment of Basic Carrying Costs, Debt Service, Capital
------------------------------------------------------
Improvement Costs, Mezzanine Debt Service, Securitization Expenses, Operating
-----------------------------------------------------------------------------
Expenses, Trustee Fees, Actual Construction Costs and SELCO Required Quarterly
------------------------------------------------------------------------------
Payment.
-------
(i) Payment of Basic Carrying Costs. At least five (5) Business Days
-------------------------------
prior to the due date of any Basic Carrying Cost, and not more frequently
than once each Interest Accrual Period, Operator shall notify Lender in
writing and request that Lender pay such Basic Carrying Cost on behalf of
Borrower and Operator on or prior to the due date thereof. Together with
each such request, Operator shall furnish Lender with copies of bills and
other documentation as may be reasonably required by Lender to establish
that such Basic Carrying Cost is then due. Lender shall make such payments
out of the Basic Carrying Cost Sub-Account before the same shall be
delinquent to the extent that there are funds available in the Basic
Carrying Cost Sub-Account and Lender has received appropriate documentation
to establish the amount(s) due and the due date(s) as and when provided
above.
(ii) Payment of Debt Service. At or before 12:00 noon, New York City
-----------------------
time, on each Payment Date during the term of the Loan, Lender shall
transfer to Lender's own account from the Debt Service Payment Sub-Account
an amount equal to the Required Debt Service Payment for the applicable
Payment Date. Borrower shall be deemed to have timely made the Required
Debt Service Payment pursuant to Section 2.9 regardless of the time Lender
------- ---
makes such transfer as long as sufficient funds are on deposit in the Debt
Service Payment Sub-Account at 12:00 noon, New York City time on the
applicable Payment Date.
(iii) Payment of Capital Improvement Costs. Not more frequently than
------------------------------------
once each Interest Accrual Period and provided that no Event of Default has
occurred and is continuing, Operator may notify Lender in writing and
request that Lender release to Operator or its designee funds out of the
Capital Reserve Sub-Account to the extent funds are available therein for
payment of Capital Improvement Costs (other than those Capital Improvement
Costs which are Actual Construction Costs which may be advanced from the
Construction Sub-Account pursuant to clause (iv)). Together with each such
------ ----
request, Operator shall furnish Lender with copies of bills and other
documentation as may be reasonably required by Lender to establish that
such Capital Improvement Costs are reasonable, that the work relating
thereto has been completed and that such amounts are then due or have been
paid. If Lender approves of such Capital Improvement Costs, Lender shall
release the funds to Operator or its designee within ten (10) Business Days
of Lender's receipt of Operator's written request. Upon completion of the
environmental remediation to the Facility itemized on Exhibit C-2 hereto,
-----------
Operator may provide Lender with the documentation described in this
paragraph sufficient to indicate that the
51
remediation has been completed in accordance with the description set forth
on Exhibit C-2 and subject to the terms set forth in this paragraph, Lender
-----------
shall release the remainder of the Initial Capital Reserve Amount, to the
extent such funds have not been released to Operator.
(iv) Payment of Actual Construction Costs. Not more frequently than
------------------------------------
twice each Interest Accrual Period and provided that no Event of Default
has occurred and is continuing, Operator may delivery a Request for Draw to
Lender requesting that Lender release to Operator or its designee funds
out of the Construction Sub-Account to the extent funds are available
therein for payment of Actual Construction Costs. Together with each such
request, Operator shall furnish Lender with (A) copies of bills and other
documentation as may be reasonably required by Lender to establish that
such Actual Construction Costs are reasonable and in accordance with the
Construction Budget, that the work relating thereto has been completed and
that such amounts are then due or have been paid and (B) evidence
reasonably acceptable to Lender that demonstrates that immediately
following disbursement of such draw, the Undisbursed Construction Amount,
plus any sums deposited in the Construction Sub-Account by Operator shall
be sufficient to complete the Construction Project. Notwithstanding
anything to the contrary in this clause (iv), prior to Operator's being
------ ----
entitled to receive any funds from the Construction Sub-Account, Operator
shall have delivered to Lender a copy of the Construction Budget, and such
budget shall be in form and substance reasonably satisfactory to Lender
(including, without limitation, a determination by Lender that such budget
in no way underestimates any Actual Construction Costs). Provided the
foregoing terms have been satisfied, Lender shall release the funds to
Operator or its designee within ten (10) Business Days of Lender's receipt
of such Request for Draw. Upon Completion of Construction, Operator may
delivery a Request for Draw and, provided that no Event of Default has
occurred and is continuing, Lender shall release to Operator the remainder
of the Initial Construction Amount on deposit in the Construction Sub-
Account, to the extent such funds have not been released to Operator.
(v) Payment of Securitization Expenses. To the extent funds are
----------------------------------
available therein to pay the amounts for which Operator or Borrower is
responsible pursuant to Section 2.14, Lender may release funds out of the
------------
Securitization Expense Sub-Account to (a) pay such amounts or, (b) after
Lender has paid all of the amounts for which Borrower is responsible
pursuant to Section 2.14, provided no Event of Default has occurred and is
------------
then continuing, to remit to Operator all amounts remaining in the
Securitization Expense Sub-Account.
(vi) Payment of Operating Expenses. During each of the following
-----------------------------
52
periods (i) any period in which the Preferred Equity Holder is an equity
owner in Operator and/or Borrower and (ii) on and after the Optional
Prepayment Date, not more frequently than once each Interest Accrual Period
and provided that no Event of Default has occurred and is then continuing,
Lender shall direct the Cash Collateral Account Bank to, within five (5)
Business Days of Lender's receipt of an Operating Expense Certificate from
Operator, such Operating Expense Certificate to be delivered by Operator
not more frequently than once each Interest Accrual Period, transfer funds
to Operator or its designee out of the Operating Expense Sub-Account to the
extent that there are funds available therein in an amount not to exceed
the amount stated in the Operating Expense Certificate up to the Operating
Expense Monthly Installment. Together with each such Operating Expense
Certificate, Operator shall furnish Lender with an Officer's Certificate
stating that all operating expenses from the second previous Interest
Accrual Period and all Interest Accrual Periods prior thereto have been
paid in full and that such amounts are then due or have been paid.
(vii) Extra Funds for Operating Expenses. During each of the
----------------------------------
following periods (i) any period in which the Preferred Equity Holder is an
equity owner in Operator and/or Borrower and (ii) on and after the Optional
Prepayment Date, not more frequently than once each Interest Accrual Period
and provided that no Event of Default has occurred and is continuing if in
a given Interest Accrual Period, the Operator requires amounts in excess of
the Operating Expense Monthly Installment ("Extra Funds"), Operator, at the
-----------
time it delivers the Operating Expense Certificate, may deliver a written
request to Lender for a disbursement of Extra Funds stating the amount of
such Extra Funds and the purpose for which such amount is intended with
attachments of copies of bills and other documentation as may be required
by Lender to establish that such Operating Expenses are reasonable and that
such amounts are then due or expected to become due in that month. If
Lender approves of such costs (such approval not to be unreasonably
withheld), Lender shall release the funds to Operator or its designee
within ten (10) Business Days of Lender's receipt of Operator's written
request.
(viii) Reconciliation. Operator shall furnish Lender monthly, on each
--------------
Payment Date on and after the Optional Prepayment Date, a budget variance
report reconciling the Operating Expenses shown on the Annual Operating
Budget with requested disbursements for payment of Operating Expenses
pursuant to Section 2.12(f).
---------------
(ix) Payment of Trustee Expenses. Borrower or Borrower's Trustee
---------------------------
may notify Lender in writing and request Lender to pay to Borrower's
Trustee funds out of the Trustee Expense Sub-Account for the payment of
amounts due to Borrower's Trustee under the Trust Agreement. Lender shall
release such funds to Borrower's Trustee within five (5) Business Days of
the written request for such amounts (which written request
53
shall be accompanied by such documentation as Lender may reasonably
request).
(x) Payment of SELCO Required Quarterly Payment. Provided that no
-------------------------------------------
Event of Default has occurred and is continuing, on each SELCO Payment Date
during the term of the Operator Lease, Lender shall transfer to Borrower by
wire transfer pursuant to instructions given to Lender by Borrower from the
SELCO Payment Sub-Account an amount equal to the SELCO Required Quarterly
Payment for such SELCO Payment Date plus any SELCO Required Quarterly
Payment that was due and owing on any previous SELCO Payment Date which was
not paid (and any interest payable thereon pursuant to the Operator Lease)
to SELCO to the extent that there are funds available in the SELCO Payment
Sub-Account.
(xi) Payment of Mezzanine Debt Service. At or before 12:00 noon,
---------------------------------
New York City time, on each Payment Date during the term of the Mezzanine
Loan, Lender shall transfer to Mezzanine Lender from the Mezzanine Debt
Service Payment Sub-Account an amount equal to the Mezzanine Required Debt
Service Payment for the applicable Payment Date. Borrower shall be deemed
to have timely made the Mezzanine Required Debt Service Payment pursuant to
the Mezzanine Loan Agreement regardless of the time Lender makes such
transfer as long as sufficient funds are on deposit in the Mezzanine Debt
Service Payment Sub-Account at 12:00 noon, New York City time on the
applicable Payment Date.
(g) Monthly Funding of Sub-Accounts. During each Interest Accrual
-------------------------------
Period and except as provided below, during the term of the Loan commencing with
the Interest Accrual Period in which the Closing Date occurs (each, the "Current
-------
Interest Accrual Period"), Lender shall allocate all funds then on deposit
-----------------------
(irrespective of whether such funds were transferred by the Collection Account
Bank to the Cash Collateral Account Bank or by Borrower to the Lender pursuant
to Section 2.9(c)) in the Cash Collateral Account among the Sub-Accounts as
------- ------
follows and in the following priority:
(i) first, during each of the following periods (i) on and after
-----
the occurrence of an Event of Default and during the continuance thereof
and (ii) on and after the Stabilization Date, to the Basic Carrying Costs
Sub-Account, until an amount equal to the Basic Carrying Costs Monthly
Installment for the Current Interest Accrual Period has been allocated to
the Basic Carrying Costs Sub-Account;
(ii) second, to the Debt Service Payment Sub-Account, until an amount
------
equal to the Required Base Debt Service Payment for the Payment Date
immediately after the Current Interest Accrual Period has been allocated to
the Debt Service Payment Sub-Account;
54
(iii) third, during each of the following periods (i) on and after
-----
the occurrence of an Event of Default and during the continuance thereof
and (ii) on and after the Stabilization Date, to the Capital Reserve Sub-
Account, until an amount equal to the Capital Reserve Monthly Installment
for the Current Interest Accrual Period has been allocated to the Capital
Reserve Sub-Account;
(iv) fourth, to the Securitization Expense Sub-Account, provided,
------
however, that only the Initial Securitization Expense Amount shall be
allocated to the Securitization Sub-Account;
(v) fifth, to the Trustee Expense Sub-Account until an amount equal
-----
to the Trustee Expense Monthly Installment has been allocated to the
Trustee Expense Sub-Account;
(vi) sixth, during each of the following periods (i) any period in
-----
which the Preferred Equity Holder is an equity owner in Operator and/or
Borrower and (ii) on and after the Optional Prepayment Date, or at Lender's
sole election, upon the occurrence of an Event of Default, any date on or
after the occurrence of such Event of Default and during the continuance
thereof, to the Operating Expense Sub-Account, until an amount equal to the
Operating Expense Monthly Installment for the Current Interest Accrual
Period has been allocated to the Operating Expense Sub-Account;
(vii) seventh, during any period in which the Mezzanine Loan is
-------
outstanding, to the Mezzanine Debt Service Payment Sub-Account until an
amount, equal to the Mezzanine Required Base Debt Service Payment for the
Payment Date immediately after the Current Interest Annual Period has been
allocated to the Mezzanine Debt Service Payment Sub-Account;
(viii) eighth, provided that no Event of Default has occurred and is
------
continuing, Lender agrees that in each Current Interest Accrual Period any
amounts deposited into or remaining in the Cash Collateral Account
(excluding all sums in the Construction Sub-Account) after (A) the minimum
amounts set forth in clauses (i), (ii), (iii), (iv), (v), (vi) and (vii)
----------- ---- ----- ---- --- ---- -----
above have been satisfied with respect to the Current Interest Accrual
Period and any periods prior thereto and (B) the funding of additional
reserves at levels determined by Operator to be prudent for working
capital, Capital Improvement Costs and other Borrower or Operator costs,
which levels shall be reasonably satisfactory to Lender, in Lender's
reasonable discretion, prior to the Optional Prepayment Date, to the SELCO
Payment Sub-Account, until an amount equal to the SELCO Required Quarterly
Payment for the next SELCO Payment Date plus any SELCO Required
55
Quarterly Payment that was due and owing on any previous SELCO Payment Date
(plus interest payable thereon pursuant to the Operator Lease) which was
not paid to SELCO has been allocated to the SELCO Payment Sub-Account; and
(ix) ninth, provided that (i) no Event of Default has occurred and is
-----
continuing and (ii) Lender has received all financial information described
in Sections 5.1(a)(Q) and 5.1(b)(Q) for the most recent periods for which
-------- --------- ---------
the same are due, Lender agrees that in each Current Interest Accrual
Period any amounts deposited into or remaining in the Cash Collateral
Account (other than the Construction Sub-Account) after the minimum amounts
set forth in clauses (i), (ii), (iii), (iv), (v), (vi), (vii) and (viii)
----------- ---- ----- ---- --- ---- ----- ------
above have been satisfied with respect to the Current Interest Accrual
Period and any periods prior thereto, shall be disbursed by Lender on the
first Payment Date after the end of the then Current Interest Accrual
Period, at Borrower's expense, to the Preferred Cash Collateral Account (if
the Preferred Equity Holder is an equity owner in Operator and/or Borrower
or (if the Preferred Equity Holder does not own an equity interest in the
Operator and/or the Borrower) such account that Operator may request in
writing. Lender and its agents shall not be responsible for monitoring
Operator's use of any funds disbursed from the Cash Collateral Account or
any of the Sub-Accounts. Notwithstanding anything in this Agreement to the
contrary, on and after the Optional Prepayment Date, any amounts deposited
into or remaining in the Cash Collateral Account (other than the
Construction Sub-Account) after (A) the minimum amounts set forth in
clauses (i), (ii), (iii), (iv), (v), (vi), (vii), and (viii) above have
----------- ---- ----- ---- --- ---- ----- ------
been satisfied with respect to the Current Interest Accrual Period and any
periods prior thereto and (B) the funding of additional reserves at levels
determined by Operator to be prudent for working capital, Capital
Improvement Costs and other Borrower or Operator costs, which levels shall
be reasonably satisfactory to Lender, in Lender's reasonable discretion
(the "Excess Cash Flow"), shall be allocated to the Debt Service Sub-
----------------
Account and be applied by Lender on each Payment Date in accordance with
Section 2.8 and shall not be disbursed to Borrower or Operator; and further
------- ---
provided, however, that if an Event of Default has occurred and is
continuing any amounts deposited into or remaining in the Cash Collateral
Account shall be for the account of Lender and may be withdrawn by Lender
to be applied to amounts payable by Borrower and/or Operator under the Loan
Documents in any manner as Lender may elect in Lender's sole discretion.
If an Event of Default has occurred and is continuing or if on any
Payment Date the balance in any Sub-Account (other than the Construction Sub-
Account) is insufficient to make the required payment due from such Sub-Account,
Lender may, in its sole discretion, in addition to any other rights and remedies
available hereunder, withdraw funds from any other Sub-Account to pay such
deficiency. In the event that Lender elects to apply funds of any such Sub-
Account to pay any Required Base Debt Service Payment, Borrower shall, upon
demand,
56
repay to Lender the amount of such withdrawn funds to replenish such Sub-
Account, and if Borrower shall fail to repay such amounts within two (2)
Business Days after notice of such withdrawal, an Event of Default shall exist
hereunder. Notwithstanding anything contained herein to the contrary, Borrower
shall deposit (i) on the Stabilization Date, the Initial Basic Carrying Costs
Amount into the Basic Carrying Costs Sub-Account, (ii) on the Closing Date, the
Initial Securitization Expense Amount into the Securitization Expense Sub-
Account, (iii) on the Stabilization Date, the Initial Capital Reserve Amount in
the Capital Reserve Sub-Account and (iv) on the Closing Date, the Initial
Construction Amount into the Construction Sub-Account.
(h) Condemnation Proceeds and Insurance Proceeds. In the event of a
--------------------------------------------
Taking with respect to the Facility, Borrower and Operator shall cause all the
proceeds in respect of any Taking ("Condemnation Proceeds") to be paid to the
---------------------
Lender who shall, except as otherwise provided in the second succeeding sentence
or in Section 2.12(c) of the Mortgage or the Leasehold Mortgage, apply such
Condemnation Proceeds to reduce the Indebtedness in accordance with Section 2.7
------- ---
and Section 2.8. In the event of a casualty with respect to the Facility,
------- ---
except as otherwise provided in the next sentence or in Section 2.5 of the
Mortgage or the Leasehold Mortgage, Borrower and Operator, as applicable, shall
cause all Proceeds of any insurance policy maintained by either Borrower or
Operator, as applicable ("Insurance Proceeds") to be paid to the Lender who
------------------
shall apply such Insurance Proceeds to reduce the Indebtedness in accordance
with Section 2.7 and Section 2.8. All Insurance Proceeds received by Borrower,
------- --- ------- ---
Operator or Lender in respect of business interruption coverage and all
Condemnation Proceeds received in respect of a temporary Taking shall be
maintained in the Cash Collateral Account, to be applied by Lender in the same
manner as Rents (other than security deposits) received from Borrower and/or
Operator with respect to the ownership and/or operation of the Facility;
provided, further, that in the event that the Insurance Proceeds of any such
-------- -------
business interruption insurance policy or Condemnation Proceeds of such
temporary Taking are paid in a lump sum in advance, Lender shall hold such
Insurance Proceeds or Condemnation Proceeds in a segregated interest-bearing
escrow account at the Cash Collateral Account Bank, and Lender shall estimate
the number of months required for Operator to restore the damage caused by the
casualty to the Facility or that the Facility will be affected by such temporary
Taking, as the case may be, shall divide the aggregate business interruption
Insurance Proceeds or Condemnation Proceeds in connection with such casualty or
temporary Taking by such number of months, and shall disburse from such escrow
account into the Cash Collateral Account each month during the performance of
such restoration or pendency of such temporary Taking such monthly installment
of said Insurance Proceeds or Condemnation Proceeds. Any Insurance Proceeds or
Condemnation Proceeds made available to Operator for restoration or repair in
accordance herewith and with the Mortgage or Leasehold Mortgage, to the extent
not used by Operator in connection with, or to the extent they exceed the cost
of, such restoration, shall be paid to Operator.
57
(i) Payment of Basic Carrying Costs. Except to the extent that
-------------------------------
Lender is obligated to pay Basic Carrying Costs from the Basic Carrying Costs
Sub-Account pursuant to the terms of Section 2.12(f), Borrower and Operator
------- -------
shall pay all Basic Carrying Costs with respect to themselves and the Facility
in accordance with the provisions of the Mortgages, subject, however, to
Borrower's and Operator's rights to contest payment of same in accordance with
the Mortgages. The obligation of Borrower and Operator to pay (or cause Lender
to pay) Basic Carrying Costs pursuant to this Agreement shall include, to the
extent permitted by applicable law, Impositions resulting from future changes in
law which impose upon Lender an obligation in connection with the Loan to pay
any property taxes or other Impositions or which otherwise adversely affect
Lender's interests. (In the event such a change in law prohibits Borrower from
assuming liability for payment of any such Imposition, the outstanding
Indebtedness shall, at the sole option of Lender, become due and payable on the
date that is 120 days after such change in law without payment of a Yield
Maintenance Premium and failure to pay such amounts on the date due shall be an
Event of Default. Should an Event of Default have occurred and be continuing,
the proceeds on deposit in the Basic Carrying Costs Sub-Account may be applied
by Lender to amounts Borrower and/or Operator is obligated to pay under the Loan
Documents in any manner as Lender in its sole discretion may determine.
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 Lender and grants to Lender a first and continuing security
interest in and to, the following property, whether now owned or 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
58
products of any or all of the foregoing.
(b) Covenants. (A) Borrower covenants that (i) all Rents (as defined
---------
in the 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 Mortgage),
Money or other items of Gross Revenue, other than a replacement Collection
Account or Security Deposit Account approved by Lender in Lender's reasonable
discretion.
(B) Operator covenants that (i) all Rents (as defined in the
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 Leasehold Mortgage),
Money or other items of Gross Revenue, other than a replacement Collection
Account or Security Deposit Account approved by Lender in Lender's reasonable
discretion.
(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 Lender for filing financing statements in connection
with the Account Collateral in the form required to properly perfect 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 Lender may request, in order to perfect and
protect the pledge and security interest granted or purported to be granted
hereby, or to enable Lender to exercise and enforce 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 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 Lender under this Agreement.
59
(f) Lender's Reasonable Care. Beyond the exercise of reasonable care
------------------------
in the custody thereof, 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 Lender, or the preservation of
rights against any Person or otherwise with respect thereto other than the gross
negligence or willful misconduct of Lender or its agents, employees or bailees.
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 Lender accords its own property, it
being understood that 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 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 Lender, or Lender's agents,
employees or bailees other than for gross negligence or willful misconduct of
Lender or its agents, employees or bailees.
(g) Lender Appointed Attorney-In-Fact. Each of Borrower and
---------------------------------
Operator, respectively, hereby irrevocably constitutes and appoints Lender as
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
Lender may deem necessary or desirable to more fully vest in 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 or a total defeasance of the Loan in accordance with Section
-------
2.11. Upon payment in full of the Indebtedness or total defeasance of the Loan
----
in accordance with Section 2.11, 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 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 Lender's
expenses in connection therewith.
60
Section 2.14. Securitization. Each of Operator and Borrower hereby
--------------
acknowledges that Lender, its successors or assigns, may sell or securitize the
Loan or portions thereof in one or more transactions through the issuance of
securities, which may be rated by the Rating Agencies (each, a "Securitization";
--------------
collectively, the "Securitizations"). Each of Operator and Borrower,
---------------
respectively, agrees that it shall reasonably cooperate with Lender and use its
best efforts to facilitate the consummation of each Securitization including,
but not limited to, by (a) amending or causing the amendment of this Agreement,
the documents evidencing the Class B Equity Interests and, if any, the Class C
Equity Interests, the Mezzanine Loan Documents and the other Loan Documents, and
executing such additional documents including amendments to Borrower's or
Operator's organizational documents (provided such additional documents and
amendments do not materially expand Borrower's or Operator's economic
obligations hereunder) and preparing financial statements as requested by the
Rating Agencies to conform the terms of the Loan to the terms of similar loans
underlying completed or pending securitized transactions having or seeking
ratings the same as those then being sought in connection with the relevant
Securitization and; (b) promptly and reasonably providing such information as
may be reasonably requested in connection with the preparation of a private
placement memorandum or a registration statement required to privately place or
publicly distribute the securities in a manner which does not conflict with
federal or state securities laws. Operator, additionally agrees that it shall
further reasonably cooperate with Lender by (a) providing in connection with
each of (i) a preliminary and a private placement memorandum or (ii) a
preliminary and final prospectus, as applicable, an indemnification certificate
(x) certifying that Operator has carefully examined sections of the memorandum
or prospectus, as applicable, including, without limitation, the sections
entitled "Special Considerations," "Description of the Mortgage Loan" and "The
Underlying Mortgaged Property," "The Operator," "Borrower" and "Certain Legal
Aspects of the Mortgage Loan," and such sections (and any other sections
reasonably requested) insofar as they relate to Borrower or Operator, their
respective Affiliates, the Loan or the Facility do not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements made, in the light of the circumstances under which they
were made, not misleading, provided, however, that Operator shall not be
required to indemnify Lender for any losses relating to untrue statements or
omissions which Operator identified to Lender in writing at the time of
Operator's examination of such memorandum or prospectus as applicable, and (y)
indemnifying Lender (and its officers, directors, partners, employees,
affiliates and agents and each other person, if any, controlling 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), the Issuer and the Advisor for any losses, claims, damages, costs,
expenses or liabilities (including, without limitation, all liabilities under
all applicable federal and state securities laws) (other than those relating to
untrue statements or omissions which Operator identified to Lender in writing at
the time of Operator's examination of the relevant portions of such prospectus
or memorandum) (the foregoing liabilities for which Operator is responsible as
described in this clause (y), collectively, the "Liabilities") to which
------ --- -----------
61
any of them may become subject (i) insofar as the Liabilities arise directly out
of or are based directly upon any untrue statement or alleged untrue statement
of any material fact relating to Operator, Borrower, their respective
Affiliates, the Loan, the Facility, the Mezzanine Loan or any aspect of the
subject financing or the parties directly involved therein contained in such
sections or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated in such sections or
necessary in order to make the statements in such sections, in light of the
circumstances under which they were made, not misleading or (ii) as a result of
any untrue statement of material fact in any of the financial statements of
Operator or Borrower incorporated into any placement memorandum, prospectus,
registration statement or other document connected with the issuance of
securities or the failure to include in such financial statements or in any
placement memorandum, prospectus, registration statement or other document
connected with the issuance of securities any material fact relating to
Borrower, Operator, their respective Affiliates, the Facility, the Mezzanine
Loan, the Loan, and any aspect of the subject financing necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading; provided that Operator shall have had an opportunity to
review and comment upon the relevant portions of such documents and Operator's
comments thereon have been incorporated therein or otherwise addressed to
Operator's reasonable satisfaction; and (z) agreeing to reimburse Lender, the
Issuer and the Advisor for any legal or other expenses reasonably incurred by
Lender, the Issuer and the Advisor in connection with investigating or defending
the Liabilities; (b) causing to be rendered such customary opinion letters as
shall be reasonably requested by the Rating Agencies for other securitizations
having or seeking ratings comparable to that then being sought for the relevant
Securitization; (c) making such representations, warranties and covenants, as
may be reasonably requested by the Rating Agencies and comparable to those
required in other securitized transactions having or seeking the same rating as
is then being sought for the Securitization; (d) providing such information
regarding the Collateral as may be reasonably requested by the Rating Agencies
or otherwise required in connection with the formation of a REMIC; and (e)
providing any other information and materials required in the Securitization
process. Subject to Lender's application of funds in the Securitization Expense
Sub-Account, Operator agrees to pay on the Securitization Closing Date and, if
earlier, within thirty (30) days after the incurrence thereof, within ten (10)
calendar days following demand, all of Operator's pro rata share of reasonable
out-of-pocket costs of Lender (and not previously reimbursed by Borrower or
Operator) in connection with the Securitization (or any attempt to securitize
the Loan), including, without limitation, the cost of preparing a private
placement memorandum or prospectus, Rating Agency fees and expenses (including
ongoing surveillance fees), legal fees and disbursements (including without
limitation, in connection with the rendering of legal opinions), third party due
diligence expenses, including appraisals, engineering reports and environmental
reports, the fees and expenses of any trustee, servicer or special servicer,
including any ongoing servicing or special servicing fees, and the cost of
market studies and SEC filing fees (collectively, "Securitization Costs"),
provided, however, that Operator's liability for Securitization Costs shall
62
not exceed the Initial Securitization Expense Amount. Each of Borrower and
Operator acknowledges and agrees that the Lender may, at any time on or after
the Closing Date, assign its duties, rights or obligations hereunder or under
any Loan Document in whole, or in part, to a servicer and/or a trustee in
Lender's discretion. Nothing herein shall in any way limit Lender's right to
sell all or a portion of the Loan in a transaction which is not a
Securitization.
Section 2.15. Supplemental Mortgage Affidavits. The Liens to be
--------------------------------
created by the Mortgages are intended to encumber the Facility described therein
to the full extent of Borrower's obligations under the 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
Mortgages.
ARTICLE III
CONDITIONS PRECEDENT
--------------------
Section 3.1. Conditions Precedent to the Closing Date Advance. (a)
------------------------------------------------
As a condition precedent to the making of the Closing Date Advance, Borrower
shall have satisfied the following conditions (unless waived by Lender in
accordance with Section 8.4) with respect to the Facility on or before the
------- ---
Closing Date:
(A) Loan Documents.
--------------
(i) Loan Agreement. Borrower shall have executed and delivered
--------------
this Agreement to Lender.
(ii) Note. Borrower shall have executed and delivered to
----
Lender the Note.
(iii) Mortgages. Borrower shall have executed and delivered to
---------
Lender the Mortgage and Operator shall have executed and delivered to
Lender the Leasehold Mortgage and such 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) Assignments of Leases. Borrower shall have executed and
---------------------
delivered to Lender the Assignment of Leases - Borrower and Operator shall
have executed and delivered to Lender the Assignment of Leases - Operator
and the 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
63
such recordation.
(v) Assignments of Agreements. Borrower shall have executed
-------------------------
and delivered to Lender the Assignment of Agreements - Borrower and
Operator shall have executed and delivered to Lender the Assignment of
Agreements -Operator and the 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 Lender all financing statements required by
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.
(viii) Intentionally deleted.
(ix) Environmental Guaranty. The Parent shall have executed
----------------------
and delivered to Lender the Environmental Guaranty.
(x) Intentionally deleted.
(xi) Guaranty. Operator shall have executed and delivered the
--------
Guaranty and executed copies of such agreement shall have been delivered to
Lender.
(xii) Collection Account Agreement. Borrower, Operator and the
----------------------------
Collection Account Bank shall have executed and delivered the Collection
Account Agreement and shall have delivered an executed copy of such
agreement to Lender.
(xiii) Mezzanine Loan Documents. Borrower and Operator shall
------------------------
have executed the Mezzanine Loan Agreement and the other Mezzanine Loan
Documents and Borrower and Operator shall have delivered executed copies of
all such documents to Lender.
(B) Opinions of Counsel. Lender shall have received from counsel
-------------------
reasonably satisfactory to Lender, legal opinions in form and substance
satisfactory to Lender in Lender's reasonable discretion (including without
limitation, bankruptcy opinions regarding Borrower and Operator). All such
legal opinions will be addressed to Lender and the Rating Agencies, dated
as of the Closing Date, and in form and substance
64
reasonably satisfactory to Lender, the Rating Agencies and their 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 Lender such opinions addressed to Lender and the Rating
Agencies.
(C) Secretary's, Trustee's and Beneficial Owner's Certificates.
----------------------------------------------------------
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. 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 Mortgages. Such certificates
shall indicate that Lender is an additional insured as its interests may
appear and, to the extent required by the Mortgages, shall contain a loss
payee endorsement in favor of Lender with respect to the property policies
required to be maintained under the 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 Mortgages.
(E) Lien Search Reports. Lender shall have received satisfactory
-------------------
reports of UCC (collectively, the "UCC Searches"), federal tax lien,
------------
bankruptcy, state tax lien, judgment and pending litigation searches
conducted by a search firm reasonably acceptable to Lender. Such searches
shall have been received in relation to the owner of the Facility
immediately prior to the Borrower's acquisition of the Facility, Borrower,
Operator and each equity owner in Borrower and Operator as well as under
any "doing business as" or "also known as" names of such entities. Such
searches shall have been conducted in each of the locations designated by
Lender in Lender's reasonable discretion and shall have been dated not more
than fifteen (15) days prior to the Closing Date.
(F) Title Insurance Policy. Lender shall have received (i) a Title
----------------------
Insurance Policy or a marked up commitment (in form and substance
reasonably satisfactory to Lender in 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) Environmental Matters. Lender shall have received an
---------------------
Environmental Report with respect to the Facility, addressed to Lender,
which Environmental Report shall be (i) prepared by a firm approved by
Lender in Lender's reasonable discretion, (ii) prepared based on a scope of
work determined by Lender in Lender's reasonable
65
discretion and (iii) in form and content reasonably acceptable to Lender,
such Environmental Report to be conducted by an Independent environmental
Engineer.
(H) Consents, Licenses, Approvals. 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 Loan Documents, and such consents,
licenses and approvals shall be in full force and effect.
(I) Additional Matters. 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 Lender in Lender's reasonable
discretion) relating to the Loan as may have been reasonably requested by
Lender and all other documents and all legal matters in connection with the
Loan shall be satisfactory in form and substance to Lender. Borrower shall
provide Lender with information reasonably satisfactory to Lender regarding
the Basic Carrying Costs on or before the Closing Date.
(J) Representations and Warranties. The representations and
------------------------------
warranties herein and in the other Loan Documents shall be true and correct
in all material respects.
(K) Accounting and Regulatory Review. Lender shall have received an
--------------------------------
accounting and regulatory review reasonably satisfactory to Lender showing
no anticipated decrease in cash flow. Such review shall be (i) prepared by
a firm approved by Lender in Lender's reasonable discretion, (ii) prepared
based on a scope of work determined by Lender in Lender's reasonable
discretion and (iii) in form and content acceptable to Lender in Lender's
reasonable discretion.
(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 Lender would enjoin, prohibit or restrain, or impose or
result in a Material Adverse Effect upon the making or repayment of the
Loan or the consummation of the Transactions.
(M) Survey. Lender shall have received a Survey with respect to the
------
Facility which Survey shall be (i) prepared by a firm approved by Lender in
Lender's reasonable discretion, (ii) prepared based on a scope of work
determined by Lender in Lender's reasonable discretion and (iii) in form
and content acceptable to Lender in Lender's reasonable discretion.
(N) Engineering Report. Lender shall have received an Engineering
------------------
Report
66
with respect to the Facility prepared by an Engineer (addressed to Lender)
and which reports shall be (i) prepared by a firm approved by Lender in
Lender's reasonable discretion, (ii) prepared based on a scope of work
determined by Lender in Lender's reasonable discretion and (iii) in form
and content acceptable to Lender in Lender's reasonable discretion.
(O) Appraisal. Lender shall have received an Appraisal satisfactory
---------
to Lender with respect to the Facility which shall be (i) prepared by a
firm approved by Lender in Lender's reasonable discretion, (ii) prepared
based on a scope of work determined by Lender in Lender's reasonable
discretion and (iii) in form and content acceptable to Lender in Lender's
reasonable discretion.
(P) Security Deposits. All security deposits with respect to the
-----------------
Facility on the Closing Date shall have been transferred to the Security
Deposit Account, and Borrower shall be in compliance in all material
respects with all applicable Legal Requirements relating to such security
deposits.
(Q) Service Contracts and Permits. Borrower shall have delivered to
-----------------------------
Lender a copy of all material contracts and Permits relating to the
Facility.
(R) Site Inspection. Unless waived by Lender in accordance with
---------------
Section 8.4, Lender shall have performed, or caused to be performed on its
------- ---
behalf, an on-site due diligence review of the Facility to be acquired or
refinanced with the Loan satisfactory to Lender in Lender's reasonable
discretion.
(S) Use. The Facility shall be operating only as a congregate care or
---
independent living facility with assisted living services.
(T) Financial Information. Lender shall have received all financial
---------------------
information (which financial information shall be satisfactory to Lender in
Lender's reasonable discretion) relating to the Facility including, without
limitation, audited financial statements of Parent and other financial
reports requested by Lender in Lender's reasonable discretion. Such
financial information shall be (i) prepared by a firm approved by Lender in
Lender's reasonable discretion, (ii) prepared based on a scope of work
determined by Lender in Lender's reasonable discretion and (iii) in form
and content acceptable to Lender in Lender's reasonable discretion.
(U) Intentionally Omitted.
---------------------
(V) Leases; Operator Estoppel and Subordination Agreement. With
-----------------------------------------------------
respect to
67
the Facility, Operator shall have delivered a true, complete and correct
rent roll and a copy of each of the Leases identified in such rent roll,
and each Lease shall be satisfactory to Lender in Lender's reasonable
discretion. Operator shall deliver evidence that each of Leases is
subordinate to the Mortgages. Operator shall deliver an estoppel and
subordination agreement in form reasonably satisfactory to Lender.
(W) Subdivision. Evidence reasonably satisfactory to Lender
-----------
(including title endorsements) that the Land with respect to the Facility
constitutes a separate lot for conveyance and real estate tax assessment
purposes.
(X) Transaction Costs. Borrower shall have paid or caused to be paid
-----------------
all Transaction Costs.
(b) Lender shall not make the 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 Lender.
(c) In connection with the Loan, Borrower and Operator shall execute
and/or deliver to 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 Note, Mortgages,
Assignments of Leases and Assignments of Agreements, if reasonably requested by
Lender to effectuate the provisions hereof, and to provide Lender with the full
benefit of the security intended to be provided under the Loan Documents.
Without in any way limiting the foregoing, such additions, modifications and
supplements shall include those deemed reasonably desirable by Lender's counsel
in the jurisdiction in which the Facility is located.
(d) The making of the 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 Lender that all of the
applicable conditions to be satisfied in connection with the making of the Loan
have been satisfied (unless waived by Lender in accordance with Section 8.4,)
------- ---
and that all of the representations and warranties of Borrower set forth in the
Loan Documents are true and correct in all material respects as of the date of
the making of the Loan.
Section 3.2. Conditions Precedent to the Earn-Out Advance. As a
--------------------------------------------
condition precedent to the making of the Earn-Out Advance, Borrower and Operator
shall have satisfied (as determined by Lender in its reasonable discretion) the
following conditions (unless waived by Lender in accordance with Section 8.4) on
-----------
or before the date upon which the Earn-Out Advance
68
is to be made:
(A) Prior Conditions. All of the conditions precedent to the making
----------------
of the Loan set forth in Section 3.1 shall have been satisfied as to the Earn-
-----------
Out Advance.
(B) Damage or Injury. The existing Improvements relating to the
----------------
Facility shall not have been materially injured or damaged by fire or other
casualty unless previously remediated by Operator in a manner satisfactory to
Lender in Lender's discretion.
(C) Title Requirements. Title Insurer shall have issued prior to the
------------------
date of the Earn-Out Advance (1) a continuation of title showing title to all
Land and Improvements to be vested in Borrower, with no subordinate items and
with no exceptions to the title of the Land and Improvements other than
Permitted Encumbrances, and (2) an endorsement to the Title Insurance Policy
issued by the Title Insurer insuring the continued priority of the lien of the
Mortgage, subject only to Permitted Encumbrances, for the full amount of the
Earn-Out Advance and the Closing Date Advance. Such continuation of title shall
contain affirmative insurance that no mechanic's or supplier's liens have
attached and, if available and applicable, that neither public nor private
conditions, covenants or restrictions, if any, affecting the Land have been
violated.
(D) Request for Advance. Operator and Borrower shall submit to Lender
-------------------
thirty (30) days prior to the Stabilization Date a written request for the Earn-
Out Advance signed by a duly authorized representative of Operator and Borrower
and all back-up documentation therefor all in form and substance satisfactory to
Lender in Lender's reasonable discretion ("Request for Advance").
-------------------
(E) Change. No material adverse change with respect to the Facility,
------
Operator or Borrower shall have occurred.
(F) Information. Operator shall have provided all financial
-----------
information Operator is required to provide pursuant to Section 5.1(b)(Q) when
------- --------
due and any other information requested by Lender in connection with the Earn-
Out Advance.
(G) Audit. Operator shall have provided Lender with the results of a
-----
financial audit, at least thirty (30) days prior to the Stabilization Date,
reasonably satisfactory to Lender in Lender's discretion and prepared by an
auditor reasonably satisfactory to Lender in Lender's discretion.
(H) Transaction Costs. Borrower and/or Operator shall have paid (or
-----------------
agreed to pay at closing from the proceeds of the Earn-Out Advance) all
Transaction
69
Costs then due and payable which have not been previously paid (including,
without limitation, any and all reasonable costs and expenses of Lender in
connection with the Earn-Out Advance).
(I) Financial Statements. At least thirty (30) days prior to the
--------------------
Stabilization Date, Operator shall have provided Lender with respect to the
Facility, (i) two (2) years historical operating statements of the Facility (or
such lesser time dating from the Closing Date to the end of the fiscal quarter
immediately preceding the Request for Advance), (ii) a statement of property
operations for the preceding twelve (12) months, and (iii) operating and capital
budgets for the year ending December 31, 2000, all audited by an Independent
accounting firm acceptable to Lender in Lender's discretion.
(J) Additional Information. Borrower and Operator shall have
----------------------
delivered to Lender any and all additional information requested by Lender in
Lender's reasonable discretion.
(K) No Default. No Default or Event of Default shall have
----------
occurred and be continuing.
(L) Customary Due Diligence. Lender shall have completed Lender's
-----------------------
customarily required due diligence with results satisfactory to Lender in
Lender's discretion.
(M) Amendments. Borrower and Operator shall have executed and
----------
delivered amendments to any or all of the Loan Documents as reasonably requested
by Lender (including, without limitation, amendments to reflect changes to loan
amounts, interest rates and amortization schedules) and in form and substance
satisfactory to Lender in Lender's discretion.
(N) Additional Reserves. Lender shall have established and Operator
-------------------
shall have funded such additional reserves as are established by Lender in
Lender's discretion, including, without limitation, reserves to fund all
deferred maintenance items set forth on the updated Engineering Report.
(O) Third Party Reports. Operator shall deliver all third party
-------------------
reports requested by Lender in Lender's discretion.
(P) Maximum Earn-Out Advance Amount. The amount of the Earn-Out
-------------------------------
Advance shall not exceed the Maximum Earn Out Advance Amount.
Section 3.3. Form of Loan Documents and Related Matters. The Loan
------------------------------------------
70
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 Lender, and shall be reasonably satisfactory in
form and substance to 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 and in the case of any
Advance other than the Closing Date Advance, if any, as of the date of each such
other Advance:
(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
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 Loan Documents executed by Borrower.
(B) Authorization. The execution and delivery by Borrower of the 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 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 Loan Documents and (iv) have been duly executed and delivered by
Borrower. Except for the Mortgage, the Assignment of Rents-Borrower,
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
71
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 Loan Documents. The 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 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 and in the case of
the Earn-Out Advance the date of the Earn-Out Advance:
(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.
72
(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 Loan Documents or in any other document or
certificate delivered to 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 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,
----------
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 SELCO Debt, the Mezzanine 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 Mortgage
and the other Loan Documents. Except for the SELCO Debt, 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
73
report to Lender under Section 5.1(a)(T).
------- ---------
(I) Solvency. Borrower (i) has not entered into this Loan Agreement
--------
or any 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 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
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 Loan Document.
(N) Labor Matters. Borrower is not a party to any collective
-------------
bargaining agreements.
74
(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 Loan for the purposes described in Section 2.2. No part of
------- ---
the proceeds of the 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.
(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 Lender.
(V) Intentionally deleted.
(W) Intentionally deleted.
(X) Mortgages and Other Liens. The Mortgage creates a valid and
-------------------------
enforceable first 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
75
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 first
priority Lien 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 Loan Documents executed by Borrower in
--------------
connection with the 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 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 Note,
the Mortgage, or such other Loan Documents executed by Borrower, or the
exercise of any right thereunder, render the 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) Lender is the
-------------------
assignee of Borrower's interest under the Operator Lease, and (ii) 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.
76
(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."
(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 Loan Documents, pursuant to its terms.
(c) Closing Date Representation and Warranties of Operator. Operator
------------------------------------------------------
represents and warrants that, as of the Closing Date and in the case of any
Advance other than the Closing Date Advance, if any, as of the date of such
other Advance:
(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
77
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 Loan Documents executed by Operator.
(B) Authorization. The execution and delivery by Operator of the
-------------
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 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 Loan Documents and (iv)
have been duly executed and delivered by Operator. Except for the Leasehold
Mortgage, the Assignment of Rents-Operator, 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
Loan Documents. The 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
78
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 and in the case of
the Earn-Out Advance as of the date of the Earn-Out Advance:
(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 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 Loan Documents or in any other document or
certificate delivered to 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 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
79
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 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 Loan Amount and are paid within ninety (90) days of the
date incurred, and other than obligations under the Leasehold Mortgage, the
other Loan Documents, the Mezzanine Loan Documents, the Operator Lease and
those Pledge Agreements (as defined in the Operator Lease) executed by
Operator. Operator has not 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 Lender under Section
---------
5.1(b)(T).
-------
(I) Solvency. Operator (i) has not entered into this Loan Agreement
--------
or any 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 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
80
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 borrow money.
(M) No Defaults. No Default or Event of Default exists under or with
-----------
respect to any 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 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 Lender is true, complete and correct in all
material respects. Since the delivery of such data,
81
except as otherwise disclosed in writing to 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 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 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 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
82
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 Environmental Reports delivered to 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 Lender.
83
(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.
(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 Leasehold Mortgage creates a
-------------------------
valid and enforceable first 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 first priority Lien 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 Loan Documents executed by Operator in
--------------
connection with the 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 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 Note,
the Mortgages, or such other Loan Documents,
84
or the exercise of any right therender the 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) Lender is the
-------------------
assignee of Operator's interest under the Leases (as defined in the
Leasehold Mortgage), and (ii) 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
85
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 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 first
lien on the Facility, which is in full force and effect and is freely
assignable to and will inure to the benefit of Lender and any successor or
assignee of Lender, including but not limited to the trustee in a
Securitization, subject only to the Permitted Encumbrances.
(II) Tax Fair Market Value. The Closing Date Advance does not exceed
---------------------
the Tax Fair Market Value of the Facility. If a Note with respect to the
Facility is significantly modified prior to the closing date of a
Securitization so as to result in a taxable exchange under Code Section
1001, Operator will, if requested by Lender, represent that the amount of
such Note does not exceed the Tax Fair Market Value of the Facility as of
the date of such significant modification.
(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 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 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
86
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
Leasehold Mortgage); and (j) each such Lease is subordinate to the 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.
(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
87
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 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. Operator has not pledged its
----------------------
receivables as collateral security for any other loan or indebtedness.
88
(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
Loan Documents delivered on the Closing Date are made as of the Closing Date
(except as expressly otherwise provided), (ii) all of the representations and
warranties of Borrower and Operator set forth in Section 4.1 and elsewhere in
------- ---
this Agreement and in the other Loan Documents are made and shall be deemed
remade and reaffirmed as of each Advance Closing Date and on the date of any
draw on the Construction Sub-Account and (iii) all representations and
warranties made by Borrower and Operator shall survive the delivery of the Note
and continue for so long as any amount remains owing to Lender under this
Agreement, the Note or any of the other Loan 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 Loan Documents shall be deemed to have been
relied upon by Lender notwithstanding any investigation heretofore or hereafter
made by 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 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
89
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 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)
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 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 requested by 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 Mortgages.
(C) Litigation. Borrower shall give prompt written notice to Lender
----------
of any litigation or governmental proceedings pending or threatened against
Borrower which is reasonably likely to have a Material Adverse Effect.
90
(D) Environmental Remediation. Unless otherwise required by law,
-------------------------
Environmental Laws or any Governmental Authority and except as contemplated
in Exhibit C-2 to this 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 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) 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 tenants therein to enter upon and inspect all or any portion of
the Facility. If Lender has reason to believe that Remedial Work may be
required, Lender may select or may require Operator to select a consulting
environmental Engineer reasonably satisfactory to Lender to conduct and
prepare environmental reports assessing the environmental condition of the
Facility. 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 Lender in this
Section 5.1(a)(E) shall be in addition to, and not in limitation of, any
-----------------
other inspection rights granted to Lender in the Loan Documents, and shall
expressly include the right (if 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.
91
(F) Environmental Notices. Borrower shall promptly provide notice to
---------------------
Lender of:
(i) any 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 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 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 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 reasonably be expected to lead to an Environmental
Claim against Borrower or 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 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. Lender may join and participate in, as a
--------------------
party if
92
Lender so determines, any legal or administrative proceeding or action
concerning the Facility or any portion thereof under any Environmental Law,
if, in Lender's reasonable judgment, the interests of Lender will not be
adequately protected by Borrower or Operator.
(I) Environmental Waiver. Borrower waives and releases Lender from
--------------------
any rights or defenses Borrower may have against 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
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 Lender to inspect the Facility or any part thereof at such reasonable
times as may be requested by Lender upon advance notice.
(K) Notice of Default. Borrower shall promptly advise 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 Lender, Borrower shall cooperate with Lender with
respect to any proceedings before any Governmental Authority which may in
any way affect the rights of Lender hereunder or any rights obtained by
Lender under any of the Loan Documents and, in connection therewith, not
prohibit Lender, at its election, from participating in any such
proceedings.
(M) Perform 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 Loan Documents
executed and delivered by Borrower.
(N) Insurance Benefits. Borrower shall cooperate with Lender in
------------------
obtaining for Lender the benefits of any Insurance Proceeds lawfully or
equitably payable to Lender in connection with the Facility, and 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 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
Mortgage.
93
(O) Further Assurances. Borrower shall, at Borrower's sole cost and
------------------
expense:
(i) execute and deliver to 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 Note, as Lender may require in 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 Loan Documents, as
Lender shall require from time to time in its reasonable discretion.
(P) Intentionally deleted.
(Q) Financial Reporting.
-------------------
(i) Borrower shall keep and maintain or shall cause to be kept
and maintained on a Fiscal Year basis on an accrual tax basis, books,
records and accounts reflecting in reasonable detail all of the financial
affairs of Borrower and all items of income and expense in connection with
the ownership of the Facility. Lender, at Lender's cost and expense, shall
have the right from time to time and at all times during normal business
hours upon reasonable prior written notice to Borrower to examine such
books, records and accounts at the office of Borrower or other Person
maintaining such books, records and accounts and to make such copies or
extracts thereof as Lender shall desire. After the occurrence of an Event
of Default with respect to the Facility, Borrower shall pay any costs and
expenses incurred by Lender during the continuance of such Event of Default
to examine any and all of Borrower's, the Operator's or any other Person's
books, records and accounts as Lender shall determine in Lender's
reasonable discretion to be necessary or appropriate in the protection of
Lender's interest.
(ii) Intentionally deleted.
(iii) Borrower shall furnish to Lender annually within forty (40)
days following the end of each Fiscal Year, true, complete and correct
copies of Borrower's a statement of operations (profit and loss), statement
of cash flows, a calculation of Net Operating Income, and such other
information or reports as shall be reasonably requested by Lender or any
applicable Rating Agency which shall (a) be in form and substance
acceptable to Lender in Lender's reasonable discretion, (b) be prepared on
an accrual tax basis and (c) be accompanied by an Officer's Certificate
from a senior executive of the
94
Trustee certifying as of the date thereof (x) that such statement is true,
correct, complete and accurate and fairly reflects the results of
operations and financial condition of Borrower for the relevant period, and
(y) notice of whether to the knowledge of Borrower there exists an Event of
Default, and if such Event of Default exists, the nature thereof, the
period of time it has existed and the action then being taken to remedy
same.
(iv) Intentionally deleted.
(v) Borrower shall, concurrently with Borrower's delivery to
Lender, provide a copy of the items required to be delivered to Lender
under this Section 5.1(a)(Q) to the Rating Agencies, the trustee,
-----------------
and any servicer and/or special servicer that may be retained in
conjunction with the Loan or any Securitization. Borrower shall furnish to
Lender written notice, within ten (10) business days after receipt by
Borrower, of any Rents, Money or other items of Gross Revenue that Borrower
is not required by this Agreement to deposit in the Collection Account or
is permitted to retain, Cash Collateral Account or the Security Deposit
Account, together with such other documents and materials relating to such
Rents, Money or other items of Gross Revenue as Lender requests in Lender's
reasonable discretion.
(vi) Borrower shall furnish to Lender such other financial
information with respect to Borrower as Lender may reasonably request
(including, without limitation, in the case of a defeasance pursuant to
Section 2.11, a review by a third party acceptable to Lender, of the
------------
calculations required to be made pursuant to Section 2.11).
------------
(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
Lender makes the Loan and at all times after the date upon which Lender
makes the 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.
-----------------
95
(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 Lender (which may include 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 Lender's
prior written consent, which shall not be unreasonably withheld and, after
a Securitization, written confirmation by the Rating Agencies that a
proposed amendment, modification or supplement to the loan documents
evidencing the SELCO Debt would not result in a downgrade, withdrawal or
qualification of the then applicable ratings of the securities issued in a
Securitization, shall not amend, modify or supplement the loan documents
evidencing the SELCO Debt.
(X) Mezzanine Loan. Borrower will pay all amounts required to be paid
--------------
by Borrower pursuant to the Mezzanine Loan when such amounts are due
(subject to cure rights set forth in the Mezzanine Loan Agreement).
(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 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 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
96
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)
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 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 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
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 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 Mortgages.
(C) Litigation. Operator shall give prompt written notice to Lender
----------
of any litigation or governmental proceedings pending or threatened against
Operator which is reasonably likely to have a Material Adverse Effect.
97
(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, 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 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)
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 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
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 approved in advance by Lender which approval will not be
unreasonably withheld or
98
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 and provided, further,
-----------
that the terms of Section 2.12(f)(iii) have been satisfied to Lender's
------- ------------
discretion. If Operator does not timely commence and diligently prosecute
to completion the Remedial Work, 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 Lender within ten (10) calendar days following written demand for
all Advances (as defined in the Mortgages) and expenses (including
reasonable attorneys' fees and disbursements) relating to or incurred by
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 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.
(ii) Lender shall have the right at all reasonable times after
ten (10)
99
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 Lender has reason to believe that Remedial Work may be
required, Lender may select or may require Operator to select a consulting
environmental Engineer reasonably satisfactory to Lender to conduct and
prepare environmental reports assessing the environmental condition of the
Facility. 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 Lender in this
Section 5.1(b)(E) shall be in addition to, and not in limitation of, any
------- ---------
other inspection rights granted to Lender in the Loan Documents, and shall
expressly include the right (if 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 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 Lender) relating to, or incurred by Lender in connection with, the
inspections and reports described in this Section 5.1(b)(E) in the
------- ---------
following situations:
(x) If 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
---------------------
Lender of:
(i) any 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, which
could reasonably be expected to impair the value of Lender's security
interests hereunder or have a Material Adverse
100
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 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 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 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 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. Lender may join and participate in, as a
--------------------
party if Lender so determines, any legal or administrative proceeding or
action concerning the Facility or any portion thereof under any
Environmental Law, if, in Lender's reasonable judgment, the interests of
Lender will not be adequately protected by Operator. Operator agrees to
bear and shall pay or reimburse Lender within ten (10) calendar days
following written demand for all reasonable sums advanced and reasonable
expenses (including reasonable attorneys' fees and disbursements), incurred
by Lender in connection with any such action or proceeding.
(I) Indemnification. Operator agrees to indemnify, reimburse, defend
---------------
(with
101
counsel reasonably satisfactory to Lender) and hold harmless 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 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, 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 Loan Documents. Nothing in this Section
-------
5.1(b)(I) shall be deemed to deprive Lender of any rights or remedies
---------
provided to it elsewhere in this Agreement or the other Loan Documents or
otherwise available to it under law. Operator waives and releases 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
Lender. Notwithstanding the foregoing, Operator shall not indemnify 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 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 Lender
or any employees, agents or bailees of Lender; or (b) subsequent to (i)
Lender taking title to the Facility; or (ii) a foreclosure by Lender; or
(iii) acceptance by Lender or its designees of a deed-in-lieu of
foreclosure with respect to the Facility.
102
(J) Access to Facility. Operator shall permit agents, representatives
------------------
and employees of Lender to inspect the Facility or any part thereof at such
reasonable times as may be requested by Lender upon two (2) Business Days
prior written notice and subject to the rights of tenants under Leases (as
defined in the 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 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 Lender, Operator shall cooperate with Lender with
respect to any proceedings before any Governmental Authority which may in
any way affect the rights of Lender hereunder or any rights obtained by
Lender under any of the Loan Documents and, in connection therewith, not
prohibit Lender, at its election, from participating in any such
proceedings.
(M) Perform 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 Loan Documents
executed and delivered by Operator.
(N) Insurance Benefits; Condemnation Claims. Borrower and Operator
---------------------------------------
shall cooperate with Lender in settling any insurance or condemnation claim
and/or obtaining for Lender the benefits of any Insurance Proceeds and/or
Condemnation Proceeds lawfully or equitably payable to Lender in connection
with the Facility, and 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 Lender in case of a fire or other casualty affecting
the Facility or any part thereof out of such Insurance Proceeds and/or
Condemnation Proceeds, all as more specifically provided in the Leasehold
Mortgage.
(O) Further Assurances. Operator shall, at Operator's sole cost and
------------------
expense:
(i) upon 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
103
with respect to Operator and (b) searches of title to the Facility, each
such search to be conducted by search firms reasonably designated by Lender
in each of the locations reasonably designated by Lender.
(ii) furnish to Lender, upon 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 Loan Documents;
(iii) execute and deliver to 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 Note, as Lender may require in 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 Loan Documents,
as Lender shall require from time to time in its reasonable discretion.
104
(P) Management of Mortgaged Property. Without the prior written
--------------------------------
consent of the Lender, the Borrower will not execute a Management Agreement
or retain a manager to manage the Facility. Upon thirty (30) days written
request from Lender to Operator, Operator will enter into a Management
Agreement with a manager identified by Lender, (i) upon the occurrence of
an Event of Default or (ii) after the first anniversary of the
Stabilization Date, in the event that, as of the last day of a calendar
quarter, the Debt Service Coverage Ratio for the Facility, computed on the
basis of the prior twelve (12) calendar months, is less than the applicable
Management Appointment DSCR. In the case described in clause (ii), Lender
-----------
shall not have the right to require Operator to retain a manager to manage
the Facility, if on the first Payment Date after Lender has made the
determination pursuant to clause (ii) above, Borrower defeases the Loan in
accordance with the terms of Sections 2.6 and 2.11 in an amount sufficient
-------- --- ----
to cause the Debt Service Coverage Ratio (calculated as if such amount
was actually applied to reduce the Principal Indebtedness upon which Debt
Service was paid and calculated as if the Principal Indebtedness was
reamortized on a straight-line basis (as if the reduction had occurred)
over the remaining number of months until the Maturity Date) for the
Facility, computed on the basis of the prior twelve (12) calendar months,
to be at least equal to 1.20 (in the case of a Management Appointment DSCR
described in clause (ii) of the definition of such term) or 1.25 (in the
------ ----
case of a Management Appointment DSCR described in clause (i) of the
------ ---
definition of such term). In the event that Borrower fails to defease as
provided in the previous sentence and Lender requires Operator to retain a
manager, any such manager shall (i) be a reputable management company
having at least seven years' experience in the management of commercial
properties with similar uses as the Facility and in the jurisdiction in
which the Facility is located, (ii) shall not be paid management fees in
excess of fees which are market fees for comparable managers of comparable
properties in the same geographic area and (iii) shall not result in a
downgrade, withdrawal or qualification of the then applicable ratings
assigned by the Rating Agencies to any securities issued in a
Securitization.
105
(Q) Financial Reporting.
-------------------
(i) Operator shall keep and maintain or shall cause to be kept
and maintained on a Fiscal Year basis, in accordance with GAAP, books,
records and accounts reflecting in reasonable detail all of the financial
affairs of Operator and all items of income and expense in connection with
the operation of the Facility and in connection with any services,
equipment or furnishings provided in connection with the operation of the
Facility. Lender, at Lender's cost and expense, shall have the right from
time to time and at all times during normal business hours upon reasonable
prior written notice to Operator to examine such books, records and
accounts at the office of Operator or other Person maintaining such books,
records and accounts and to make such copies or extracts thereof as Lender
shall desire. After the occurrence of an Event of Default with respect to
the Facility, Operator shall pay, within ten (10) calendar days of written
demand therefore, any costs and expenses incurred by Lender during the
continuance of such Event of Default to examine any and all of the
Operator's books, records and accounts as Lender shall determine in
Lender's reasonable discretion to be necessary or appropriate in the
protection of Lender's interest.
(ii) Operator shall furnish to Lender annually within ninety
(90) days following the end of each Fiscal Year, true, complete and correct
copies of Operator's financial statements audited by a Big Six Accounting
Firm or other firm acceptable to Lender in Lender's reasonable discretion
which shall (a) be in form and substance acceptable to Lender in Lender's
reasonable discretion, (b) be prepared in accordance with GAAP, (c)
include, without limitation, a statement of operations (profit and loss), a
statement of cash flows, a calculation of Net Operating Income, a
consolidated balance sheet, if applicable, an aged accounts receivable
report and such other information or reports as shall be reasonably
requested by Lender or any applicable Rating Agency, (d) be accompanied by
an Officer's Certificate from a senior executive of Operator certifying as
of the date thereof (x) that such statement is true, correct, complete and
accurate and fairly reflects the results of operations and financial
condition of Operator for the relevant period, and (y) notice of whether to
the knowledge of Operator, there exists an Event of Default, and if such
Event of Default exists, the nature thereof, the period of time it has
existed and the action then being taken to remedy same and (e) be
accompanied by an opinion from an Independent certified public accountant
acceptable to Lender in Lender's reasonable discretion.
(iii) Operator shall furnish to Lender annually within forty
(40) days following the end of each Fiscal Year, true, complete and correct
copies of Operator's unaudited financial statements which shall (a) be in
form and substance acceptable to Lender in Lender's reasonable discretion,
(b) be prepared in accordance with GAAP, (c)
106
include, without limitation, a statement of operations (profit and loss), a
statement of cash flows, a calculation of Net Operating Income, a
consolidated balance sheet, if applicable, an aged accounts receivable
report and such other information or reports as shall be reasonably
requested by Lender or any applicable Rating Agency and (d) be accompanied
by an Officer's Certificate from a senior executive of Operator certifying
as of the date thereof (x) that such statement is true, correct, complete
and accurate and fairly reflects the results of operations and financial
condition of Operator for the relevant period, and (y) notice of whether to
the knowledge of Operator, there exists an Event of Default, and if such
Event of Default exists, the nature thereof, the period of time it has
existed and the action then being taken to remedy same.
(iv) Operator shall furnish to Lender within thirty (30) days
following the end of each calendar month, true, correct and complete
monthly unaudited financial statements for Operator which shall (a) be in
form and substance acceptable to Lender in Lender's reasonable discretion,
(b) be prepared in accordance with GAAP, (c) include, without limitation, a
statement of operations (profit and loss), a statement of cash flows, a
calculation of Net Operating Income, a consolidated balance sheet, if
applicable, an aged accounts receivable report and such other information
or reports as shall be reasonably requested by Lender or any applicable
Rating Agency and (d) be accompanied by an Officer's Certificate from a
senior executive of Operator certifying as of the date thereof (x) that
such statement is true, correct, complete and accurate and fairly reflects
the results of operations and financial condition of Operator for the
relevant period, and (y) notice of whether, to the knowledge of Operator,
there exists an Event of Default, and if such Event of Default exists, the
nature thereof, the period of time it has existed and the action then being
taken to remedy same.
(v) Operator shall furnish to Lender, within thirty (30) days
following the end of each calendar month, a true, complete and correct rent
roll and occupancy report and such other occupancy statistics as Lender
shall request in Lender's reasonable discretion. Each such document shall
(a) be in form and substance acceptable to Lender in Lender's reasonable
discretion, and (b) be accompanied by an Officer's Certificate from a
senior executive of Operator certifying as of the date thereof (x) that
such statement is true, correct, complete and accurate and (y) notice of
whether, to the knowledge of Operator, there exists an Event of Default,
and if such Event of Default exists, the nature thereof, the period of time
it has existed and the action then being taken to remedy same.
(vi) Operator shall furnish to Lender, within fifteen (15)
Business Days after request, such further information with respect to the
operation of the Facility and the financial affairs of Operator as may be
reasonably requested by Lender, including without limitation all business
plans prepared for Operator.
107
(vii) Operator shall furnish to Lender, within fifteen (15)
Business Days after request, such further information regarding any Plan or
Multiemployer Plan and any reports or other information required to be
filed under ERISA as may be reasonably requested by Lender.
(viii) Operator shall, concurrently with Operator's delivery to
Lender, provide a copy of the items required to be delivered to Lender
under this Section 5.1(b)(Q) to the Rating Agencies, the trustee, and any
-----------------
servicer and/or special servicer that may be retained in conjunction with
the Loan or any Securitization. Operator shall furnish to Lender written
notice, within two (2) Business Days after receipt by Operator, of any
Rents, Money or other items of Gross Revenue that Operator is not required
by this Agreement to deposit in the Collection Account, Cash Collateral
Account or the Security Deposit Account, together with such other documents
and materials relating to such Rents, Money or other items of Gross Revenue
as Lender requests in Lender's reasonable discretion.
(ix) Operator shall provide Lender with updated information
(satisfactory to Lender in Lender's reasonable discretion) concerning the
Basic Carrying Costs for the next succeeding Fiscal Year prior to the
termination of each Fiscal Year.
(x) Operator shall furnish to Lender such other financial
information with respect to Operator as Lender may reasonably request
(including, without limitation, in the case of a defeasance pursuant to
Section 2.11, a review by a third party acceptable to Lender, of the
------------
calculations required to be made pursuant to Section 2.11).
------------
(xi) Operator shall furnish or shall cause to be furnished to
Lender, within fifteen (15) days of the receipt by Operator any and all
notices (regardless of form) from any licensing and/or certifying agency
that any License relating to the Facility or Operator is being downgraded
to a substandard category, revoked, or suspended, or that action is pending
or being considered to downgrade to a substandard category, revoke, or
suspend any License or certification;
(xii) Intentionally deleted; and
(xiii) Operator shall furnish to Lender, within fifteen (15)
Business Days of receipt, a copy of any licensing agency survey or report
and any statement of deficiencies, and within the time period required by
the particular agency for furnishing a plan of correction also shall
furnish or cause to be furnished to Lender a copy of the plan of correction
generated from such survey or report for the Facility, and correct or cause
to
108
be corrected any deficiency, the curing of which is a condition of
continued licensure by the date required for cure by such agency (plus
extensions granted by such agency).
(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 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 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;
109
(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.
(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 Lender (which may include Lender's requirement
that Operator, as the case may be, post security with respect to the
contested trade payable).
110
(W) Construction Project. Operator shall complete the Construction
--------------------
Project on or before the Construction Completion Date.
(X) Annual Operating Budgets. Operator shall submit to 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
Leasehold Mortgage.
(Z) Mezzanine Loan. Operator will pay all amounts required to be
--------------
paid by Operator pursuant to the Mezzanine Loan when such amounts are due
(subject to cure rights set forth in the Mezzanine Loan Agreement).
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 Lender consents
thereto in writing:
(A) Liens on the Mortgaged Property. Incur, create, assume, become
-------------------------------
or be
111
liable in any manner with respect to, or permit to exist, any Lien with
respect to the Facility, except: (i) Liens in favor of Lender, and (ii) the
Permitted Encumbrances.
(B) Transfer. Except as expressly permitted by or pursuant to this
--------
Agreement or the Mortgages, allow any Transfer to occur, or enter into a
Management Agreement with respect to the Facility.
(C) Other Borrowings. Incur, except for the SELCO Debt, the Mezzanine
----------------
Loan 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 Lender (which may include 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 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 Encumbrance.
112
(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 Borrower to enter
into amendments, modifications or waivers of any of the 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 this
Agreement.
(L) Assignment of Licenses and Permits. 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 Lender's prior
written consent which consent may be granted or refused in 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 Lender at least thirty (30) days' prior written notice
thereof and promptly providing Lender such information as 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 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 Lender, and (ii)
the Permitted Encumbrances.
(B) Transfer; Joint Assessment. Except as expressly permitted by or
--------------------------
pursuant to this Agreement or the 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
113
Facility as a single lien.
(C) Other Borrowings. Incur, except for its obligations under the
----------------
Mezzanine Loan 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 one percent (1%) of the
Loan Amount 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 Lender (which may include 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)).
(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
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 Lender
pursuant to this Agreement or (ii) otherwise fully disclosed to 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 Lender (which may include 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, the Operator may take the action
described in Section 8.29 to cross-collateralize the Loan as described
------------
therein.
(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
114
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 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 this
Agreement.
(L) Assignment of Licenses and Permits. 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 Lender's prior written consent which
consent may be granted or refused in 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 Lender at least thirty (30) days' prior written notice
thereof and promptly providing Lender such information as Lender may
reasonably request in connection therewith.
(N) Use Specific Negative Covenants: Operator shall not do any of the
-------------------------------
following unless Lender consents thereto in writing:
a. 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
115
(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 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
116
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
Loan Documents as constituting an "Event of Default" hereunder or
thereunder;
(vii) a Transfer, unless the prior written consent of Lender is
obtained (which consent may be withheld with or without cause in Lender's
discretion);
(viii) if Borrower or Operator fails to pay any other amount
payable pursuant to this Agreement or any other 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 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 Note or any other 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;
(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
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
117
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 Lender of the
occurrence of a Default under any of the 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 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
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 Note, the Mortgages or the
other 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 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 Lender or its successors or assigns, in the case of any
other default (unless otherwise provided herein or in such other Loan
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 Lender; provided, further,
-------- -------
if Borrower or Operator provides to Lender a certificate certifying and
demonstrating that Borrower or Operator is diligently attempting to cure
such default as determined by Lender in its reasonable discretion and such
non-monetary default still is capable of being cured as determined by
Lender in its reasonable discretion and if Borrower or Operator, as
applicable, is diligently attempting to cure such default, as determined by
Lender in its reasonable discretion, such period shall be extended by
Lender in its reasonable discretion for an additional period of time not to
exceed sixty (60) days;
118
(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 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 Lender, a
Material Adverse Effect;
(xvii) if without 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) if any Event of Default occurs (as to any party) under
the Operating Lease (subject to any applicable notice and cure periods
required under the Operating Lease);
(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 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 Lender's prior written consent;
(xxii) if Operator fails to provide 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) if Lender determines in its discretion that the Operator
has not achieved Completion of Construction at the Facility as of the
Construction Completion Date;
119
(xxiv) for any period in which the Borrower's obligations
hereunder are cross-defaulted with any Other Loans pursuant to Section
-------
8.39(a) and/or the Operator's obligations hereunder are cross-defaulted and
-------
cross-collateralized with any Other Operator's obligations under any Other
Loans pursuant to Section 8.39(b), the occurrence of an "Event of Default"
------- -------
as defined in any Other Loan Document evidencing such Other Loans with
which the Loan is so cross-collateralized and/or cross-defaulted; and
(xxv) if an "Event of Default" (as defined in the Mezzanine
Loan Agreement) occurs under any of the Mezzanine 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 Lender against Borrower and
Operator under this Agreement, the Note, the Mortgage, the Leasehold Mortgage or
any of the other Loan Documents, or at law or in equity may be exercised by
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 Lender shall have commenced any
foreclosure proceeding or other action for the enforcement of its rights and
remedies under any of the Loan Documents with respect to the Facility or all or
any portion of the Collateral. Any such actions taken by Lender shall be
cumulative and concurrent and may be pursued independently, singly,
successively, together or otherwise, at such time and in such order as 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 Lender
permitted by law, equity or contract or as set forth herein or in the other 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 Lender
upon the occurrence of 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
Lender in writing.
120
Section 7.3. Remedies Cumulative. The rights, powers and remedies of
-------------------
Lender under this Agreement shall be cumulative and not exclusive of any other
right, power or remedy which Lender may have against Borrower or Operator
pursuant to this Agreement or the other Loan Documents executed by or with
respect to Borrower or Operator, or existing at law or in equity or otherwise.
Lender's rights, powers and remedies may be pursued singly, concurrently or
otherwise, at such time and in such order as Lender may determine in 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 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 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, Lender reserves the right to seek a
deficiency judgment or preserve a deficiency claim, in connection with the
foreclosure of the Mortgage or Leasehold Mortgage on the Facility, to the extent
necessary to foreclose on other parts of the Mortgaged Property.
Section 7.4. 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 Lender, Lender may, but shall have no obligation to, itself
perform, or cause performance of, such covenant or obligation, and the expenses
of Lender incurred in connection therewith shall be payable by Borrower and
Operator to Lender within ten (10) calendar days after written demand therefor.
Notwithstanding the foregoing, 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 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
Lender desires to exercise its rights under this Article VII, provided no Event
of Default exists with respect to Operator, Lender shall give Operator written
notice of such Event of Default and of Lender's intent to exercise its rights
and remedies under this Article VII and 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
121
of a monetary Event of Default with respect to Borrower. 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 Loan Documents and has
executed and delivered such other documentation as may be required by Lender
and, if the Loan has been transferred in a Securitization, the Rating Agencies,
(ii) if the Loan has been transferred in a Securitization, the Rating Agencies
shall have confirmed in writing that such transfer shall not result in a
downgrade, withdrawal or qualification of any securities issued in connection
with such Securitization, (iii) satisfactory opinions relating to such transfer
shall have been delivered by Operator to Lender and, if the Loan has been
transferred in a Securitization, to the Rating Agencies (including without
limitation tax and bankruptcy opinions), (iv) to the extent curable, Operator
shall have cured such non-monetary Event of Default, (v) Operator pays all
reasonable expenses incurred by Lender in connection with such transfer, (vi)
Operator shall have delivered to Lender an updated Title Insurance Policy
showing fee simple title to the Facility in Operator and insuring that Lender
has a valid first lien on the Operator's fee simple interest in the Facility
together with such modifications, amendments or supplements to the Loan
Documents as 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
Loan Documents executed by the Borrower, Operator shall be considered the
"Borrower" under the Loan Documents as well as the "Operator" under the Loan
Documents and shall have all of the obligations of "Borrower" under the Loan
Documents as well as the obligations of "Operator" under the 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, Lender shall be entitled to exercise all of its rights and remedies
-------
pursuant to this Article VII.
122
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 Lender of the
Note and the Operator of the 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 Lender. Nothing in this Agreement or in any other
Loan Document, express or implied, shall give to any Person other than the
parties and the holder(s) of the Note, the Mortgage and the other Loan
Documents, and their legal representatives, successors and assigns, any benefit
or any legal or equitable right, remedy or claim hereunder.
Section 8.2. Lender's Discretion. Whenever pursuant to this
-------------------
Agreement, Lender exercises any right given to it to approve or disapprove, or
any arrangement or term is to be satisfactory to Lender, the decision of 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 Lender.
Section 8.3. Governing Law. (a) The proceeds of the 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 Note, and this Agreement and the 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 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
123
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 LENDER'S RIGHTS HEREUNDER. EACH OPERATOR AND BORROWER (I) SHALL GIVE PROMPT
NOTICE TO 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 Note or any other 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 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 Borrower or Operator
to any other or future notice or demand in the same, similar or other
circumstances.
124
Section 8.5. Delay Not a Waiver. Neither any failure nor any delay
------------------
on the part of 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 Note, or of any other 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 Note or any
other Loan Document, 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 Note or the other 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 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 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 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-
1198, Attention: Legal Counsel, Telefax Number (000) 000-0000. 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: (000) 000-0000; Brookdale
Living Communities, Inc., 00 Xxxx Xxxxxx Xxxxx, Xxxxxxx, Xxxxxxxx 00000,
Attention: Xxxxxx X. Xxxxxx, Esq. Telefax Number: (000) 000-0000; 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
125
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 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 NOTE OR THE OTHER 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. Lender shall have the right to assign in
----------
whole or in part this Agreement and/or any of the other Loan Documents and the
obligations hereunder or thereunder to any Person and to participate all or any
portion of the Loan evidenced hereby, including without limitation, any servicer
or trustee in connection with a Securitization. Lender shall provide Borrower
and Operator with written notice of any such assignment; provided, however, that
such notice shall not be a condition of Lender's right to assign this Agreement
and/or any of the 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.
Section 8.11. Preferences. 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 Note or any other Loan Document. 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
126
Operator hereunder. To the extent Borrower or Operator makes a payment or
payments to 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 Lender.
Section 8.12. Waiver of Notice. Borrower and Operator shall not be
----------------
entitled to any notices of any nature whatsoever from Lender except with respect
to matters for which this Agreement or the other Loan Documents specifically and
expressly provide for the giving of notice by 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 Loan
Documents does not specifically and expressly provide for the giving of notice
by 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, Lender shall not enforce the
------- ---- ------- ---
liability and obligation of Borrower or Operator to perform and observe the
obligations contained in this Agreement, the Note, the Mortgages, the Guaranty
or any of the other Loan Documents executed and delivered by Borrower or
Operator except that 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 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 to (i) Borrower or its
shareholders, partners, members or beneficial owners, as applicable, or
affiliates during or with respect to any period for which Lender did not receive
the full amounts it was entitled to receive as prepayments of the 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 Lender did not receive the full amounts it was entitled to
receive as prepayments of the 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 Lender under the
----------------------
Loan Documents or those Other Loan Documents which are the subject of cross-
collateralization and cross-default pursuant to Section
-------
127
8.39, if any, ((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 (as defined herein and in any Other Loan Agreement which evidences
an Other Loan which is cross-collateralized and cross-defaulted with the Loan
pursuant to Section 8.39, if any) evidenced by the Loan Documents or those Other
------- ----
Loan Documents which evidence an Other Loan which is cross-collateralized and
cross-defaulted with the Loan pursuant Section 8.39, if any or in any way affect
------- ----
or impair the Liens (as defined herein and in any Other Loan Agreement which
evidences an Other Loan which is cross-collateralized and cross-defaulted with
the Loan pursuant to Section 8.39, if any) of the Mortgage or any of the other
------- ----
Loan Documents or those Other Loan Documents which evidence an Other Loan which
is cross-collateralized and cross-defaulted with the Loan pursuant to Section
8.39, if any, or the right of Lender to foreclose the Mortgage (as defined
herein and in any Other Loan Agreement which evidences an Other Loan which is
cross-collateralized and cross-defaulted with the Loan pursuant to Section 8.39,
------- ----
if any) or Leasehold Mortgage (as defined herein and in any Other Loan Agreement
which evidences an Other Loan which is cross-collateralized and cross-defaulted
with the Loan pursuant to Section 8.39, if any) following an Event of Default
------- ----
(as defined herein and in any Loan Agreement which evidences an Other Loan which
is cross-collateralized and cross-defaulted with the Loan pursuant to Section
8.39, if any); (b) impair the right of Lender to name any Person as a party
defendant in any action or suit for judicial foreclosure and sale under the
Mortgage (as defined herein and in any Other Loan Agreement which evidences an
Other Loan which is cross-collateralized and cross-defaulted with the Loan
pursuant to Section 8.39, if any) or Leasehold Mortgage (as defined herein and
------- ----
in any Other Loan Agreement which evidences an Other Loan which is cross-
collateralized and cross-defaulted with the Loan pursuant to Section 8.39, if
------- ----
any); (c) affect the validity or enforceability of the Note, the Mortgage or the
other Loan Documents or those Other Loan Documents which is cross-collateralized
and cross-defaulted pursuant to Section 8.39, if any; (d) impair the right of
------- ----
Lender to obtain the appointment of a receiver; (e) impair the right of 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
Note, the Mortgage or the other Loan Documents; (f) impair the right of Lender
to obtain the Recourse Distributions received by any Person; (g) intentionally
omitted; (h) impair the right of Lender to obtain Insurance Proceeds or
Condemnation Proceeds due to Lender pursuant to the Mortgage or Leasehold
Mortgage; (i) impair the right of 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 Mortgage or the
-------- ------------- ------- ---
Leasehold Mortgage or the Environmental Guaranty even after repayment in full by
Borrower of the Indebtedness; (j) prevent or in any way hinder 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 (as defined herein and in any Other Loan
128
Agreement which evidences an Other Loan which is cross-collateralized and cross-
defaulted with the Loan pursuant to Section 8.39, if any) securing the Note as
------- ----
provided in the Loan Documents; (k) impair the right of 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 Lender to
xxx for, seek or demand a deficiency judgment against any Person solely for the
purpose of foreclosing the Mortgaged Property (as defined in the Loan Documents
and the Other Loan Documents which evidence an Other Loan which is cross-
collateralized and cross-defaulted with the Loan pursuant to Section 8.39, if
------- ----
any) 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 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, 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
-----------------------------------
Lender's interest in and to this Agreement, the Note, the Mortgages and the
other Loan Documents shall take the same free and clear of all offsets,
counterclaims or defenses which are unrelated to the Loan, this Agreement, the
Note, the Mortgages and the other 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 Note, the
Mortgages and other 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 Lender
-------------------------------
intend that the relationship created hereunder be solely that of borrower and
lender. Operator and 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 Lender or between Operator and Lender nor to grant 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,
129
reduce or affect the right of Lender under the 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 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 proceeding brought against Borrower or Operator,
as applicable by Lender or 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
Note, the Mortgage or any of the other 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
Loan Documents and that the 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
------------------------------
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 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 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 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
-------- ------- ----
Lender's obligation to deliver the statement pursuant to this Section, that
-------
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
130
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 limitation, reasonable out-of-pocket fees, costs, expenses, and
disbursements of Lender and its attorneys, local counsel, accountants and other
contractors in connection with (i) the negotiation, preparation, execution and
delivery of the Loan Documents and the documents and instruments referred to
therein, (ii) the creation, perfection or protection of 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 Loan Documents, and (iv) the preservation of
rights under and enforcement of the Loan Documents and the documents and
instruments referred to therein, including any restructuring or rescheduling of
the Indebtedness and (v) the making of each and every Advance hereunder and draw
under from the Construction Sub-Account.
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 Lender, so as to permit Lender to exercise any and all of its remedies, upon
request of 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 and the other 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
131
Loan Documents and supersedes all prior agreements, understandings and
negotiations between the parties.
Section 8.27. Dissemination of Information. If Lender determines at
----------------------------
any time to sell, transfer or assign the Note, this Loan Agreement and any other
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, Lender may forward to each purchaser, transferee,
assignee, servicer, participant or investor in such securities (collectively,
the "Investor") or any Rating Agency rating such securities and each prospective
--------
Investor, all documents and information which Lender now has or may hereafter
acquire relating to the 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 Loan Document, or otherwise
furnished in connection with the Loan, as Lender in its sole discretion
determines necessary or desirable.
Section 8.28. Limitation of Interest. It is the intention of
----------------------
Borrower, Operator and 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 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 Loan Document or
otherwise in connection with the Loan shall under no circumstances exceed the
maximum amount of interest allowed by applicable law, and any excess shall be
credited to principal by Lender (or if the Loan shall have been paid in full,
refunded to Borrower); and (ii) in the event that maturity of the Loan is
accelerated by reason of an election by 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 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 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,
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 Loan so that the interest rate is uniform
throughout the entire term of the Loan; provided, that if the Loan is paid and
performed in full
132
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, Lender shall refund to Borrower the amount of such
excess, and in such event, Lender shall not be subject to any penalties 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
---------------
each of the Borrower, the Trust Company, Lender and each of its affiliates
(including its officers, directors, partners, employees and agents and each
other person, if any, controlling 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 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
-------------------------------------
Operator and Borrower hereby acknowledges to and agrees with Lender that (i) the
scope of 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 Loan Documents.
Section 8.31. Publicity. Lender shall have the right to issue press
---------
releases, advertisements and other promotional materials describing Lender's
participation in the origination of the Loan or the Loan's inclusion in any
Securitization effectuated or to be effectuated by Lender.
Section 8.32. Recalculation of Loan Amount.
----------------------------
133
(a) On the Stabilization Date, Lender shall calculate a new aggregate
loan amount for the Aggregate Principal Indebtedness then outstanding (the
"Recalculated Loan Amount") utilizing an underwriting cash flow methodology
------------------------
(calculated by Lender in Lender's reasonable discretion) based upon the
Underwriting NOI Criteria and a debt service constant equal to the greater of
the actual constant and the Stabilization Debt Service Constant and a minimum
Debt Service Coverage Ratio (calculated based upon the debt service payable with
respect to the Aggregate Principal Indebtedness) equal to the Resizing DSCR;
provided, however, if a Default or an Event of Default has occurred and be
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continuing, Lender shall have the right but not the obligation to calculate a
new loan amount; and provided, further, Lender's obligation to calculate a new
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loan amount is subject to completion of Lender's due diligence with respect to
the Facility including receipt of due diligence items identified in Section 3.2
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hereof as of the Stabilization Date. The parties hereto intend that the
Mezzanine Loan shall be rolled up into the Loan on the Stabilization Date
Payment Date, the Loan Documents amended to reflect such rollup and the recorded
Mezzanine Loan Documents released such that there is one loan to the Borrower in
the amount of the Aggregate Principal Indebtedness, as reduced or increased
pursuant to the terms of this Section.
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(b) If the Recalculated Loan Amount is greater than the Stabilization
Date Loan Amount, then, provided that (i) no Event of Default has occurred and
is continuing; (ii) Lender determines in its reasonable discretion that Borrower
has as of the Stabilization Date (or the Stabilization Date Payment Date, as
applicable), satisfied all of the other conditions precedent to the payment of
the Earn-Out Advance set forth in Section 3.2 and all other terms and conditions
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of this Agreement; and (iii) Borrower, or Operator on behalf of Borrower, has
elected, in its sole and absolute discretion, to borrow the Earn-Out Advance as
evidenced by delivery of the Request for Advance specified in Section 3.4, then
-----------
Lender shall make the Earn-Out Advance in an amount equal to the excess of (A)
the Recalculated Loan Amount over (B) the Stabilization Date Loan Amount.
(c) If the Recalculated Loan Amount is less than the Stabilization
Date Loan Amount (the excess of the Stabilization Date Loan Amount over the
Recalculated Loan Amount, the "Difference"), then Operator shall, within five
----------
(5) Business Days after the Stabilization Date, notify Lender of the amount
which Borrower shall prepay on the Stabilization Date Payment Date, which
amount (the "Actual Prepayment Amount") shall not exceed the Difference. If
------------------------
Operator fails to provide such notice to Lender, the Actual Prepayment Amount
shall be deemed to equal zero. If the Borrower prepays the Actual Prepayment
Amount on the Stabilization Date Payment Date, Borrower shall also pay to Lender
on the Stabilization Date Payment Date any applicable hedging or interest rate
management breakage costs incurred by Lender (but not a Yield Maintenance
Premium). Any failure by Borrower to pay Lender the Actual Prepayment Amount
and any applicable hedging or interest rate management breakage costs incurred
by Lender on the Stabilization Date Payment Date shall constitute an immediate
134
Event of Default.
(i) If the Actual Prepayment Amount is zero or is less than the
Difference, and the Unpaid Excess Loan Amount (as hereinafter defined) does
not exceed the Amortizable Amount (as hereinafter defined), then Lender
shall convert into Class B Equity Interests a portion of the principal
amount of the Loan in an amount (the "Class B Amount") equal to the Unpaid
--------------
Excess Loan Amount. As used herein, the "Amortizable Amount" shall mean
------------------
that amount which Lender determines can be fully amortized within a five
(5) year period, as calculated by Lender in Lender's sole discretion, and
using among other things, a minimum debt service coverage ratio as
determined by Lender (which ratio shall be computed by (A) determining the
product of seventy-five percent (75%) and Lender's projection of Excess
Cash Flow for a period of time determined by Lender, and (B) dividing that
product by Lender's projection of the payments that would be due for such
period of time in respect of the Class B Amount). As used herein, the
"Unpaid Excess Loan Amount" shall mean the excess of the Difference over
-------------------------
the Actual Prepayment Amount. Lender shall receive Class B Equity
Interests in the amount of the Class B Amount pursuant to documentation
satisfactory to Lender in Lender's sole discretion, some of the material
terms of which are described on Exhibit D, and upon such conversion
Lender shall be the "Preferred Shareholder" in the Operator and the
"Preferred Beneficial Owner" in the Borrower. In addition to all other
amounts due Lender, Borrower shall pay to Lender, in addition to any
amounts set forth in the first paragraph of Section 8.32(c) above, on the
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Stabilization Date Payment Date, (x) an amount equal to any applicable
hedging or interest rate management breakage costs incurred by Lender, and
(y) a fee equal to two percent (2%) of the Class B Amount. Any failure by
Borrower to pay to Lender any applicable hedging or interest rate
management breakage costs incurred by Lender and fee in connection with any
prepayment or conversion pursuant to this Section on the Stabilization Date
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Payment Date shall constitute an immediate Event of Default.
(ii) If the Unpaid Excess Loan Amount exceeds the Amortizable
Amount, Lender may, at Lender's option exercisable by Lender in Lender's
discretion and exercisable at any time, convert a portion of the Loan as
set forth in Section 8.32(c)(i) above, and in addition convert a portion of
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the principal amount of the Advance (in an amount (the "Class C Amount"),
--------------
not to exceed the excess of the Unpaid Excess Loan Amount over the
Amortizable Amount, into Class C Equity Interests pursuant to documentation
satisfactory to Lender in Lender's sole discretion, the material terms of
which are described on Exhibit E. If Lender does not elect to exercise the
---------
option described in this subparagraph, then Borrower shall be required to
prepay the Loan on the Stabilization Date Payment Date in an amount equal
to the Difference less the Class B Amount determined pursuant to Section
-------
8.32(c)(i), if any. If Lender exercises the option
----------
135
set forth herein, in addition to the Class B Equity Interests which Lender
receives pursuant to clause (i) above, Lender shall receive Class C Equity
------ ---
Interests in an amount equal to the Class C Amount, and Warrants in
Operator and the Borrower in an amount calculated in accordance with the
formula described in Exhibit E. If Lender exercises the option described
---------
in this Subparagraph, Borrower shall pay to Lender, in addition to any
------------
amounts set forth in Section 8.32(c)(i), on the Stabilization Date Payment
------- ----------
Date, (x) an amount equal to any applicable hedging or interest rate
two percent (2%) of management breakage costs incurred by Lender, and (y)
a fee equal to the Class C Amount. Any failure by Borrower to pay to
Lender the Difference less the Class B Amount determined pursuant to
Section 8.32(c)(i), as required hereunder and any applicable hedging or
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interest rate management breakage costs incurred by Lender and fee in
connection with any prepayment or conversion pursuant to this Section on
-------
the Stabilization Date Payment Date shall constitute an immediate Event of
Default.
(d) All prepayments made pursuant to this Section shall be
-------
applied in accordance with the provisions of Section 2.7.
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(e) Notwithstanding anything in this Section to the contrary, if
-------
an Event of Default has occurred and is continuing, and without in any way
limiting any other right Lender may have under any Loan Document, Lender shall,
in Lender's discretion, have the right in connection with the recalculation of
the Loan Amount pursuant to this Section to require the Borrower to (i) prepay
-------
the Loan in full, or (ii) convert a portion of the Loan into Class B Equity
Interests (to the extent the Borrower does not pay the Difference) or (iii)
convert a portion of the Loan into Class C Equity Interests and Warrants or (iv)
do any combination of (i), (ii) or (iii) above, in Lender's sole discretion.
--- ---- -----
(f) Any failure by Borrower or Operator to provide all annual
financial information that Borrower or Operator is required to provide pursuant
to Sections 5.1(a)(Q) and 5.1(b)(Q) when due shall constitute an immediate Event
-------- --------- ---------
of Default. Any failure by Borrower or Operator to provide any other
information requested by Lender in connection with the recalculation of the Loan
amount pursuant to this Section within five (5) Business Days after request
-------
therefor (provided that Borrower could reasonably provide such information
within such period) shall constitute an immediate Event of Default.
(g) If Lender exercises any option or right to acquire equity in
Borrower pursuant to this Section, Borrower agrees (i) that the form and
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substance of any such equity arrangements shall be documented, at Borrower's
expense, with documents, including, without limitation, the terms described in
Exhibit D, Exhibit E and Exhibit F, in form and substance satisfactory to Lender
--------- --------- ---------
in Lender's reasonable discretion, (ii) all such documents shall be executed
within ten (10) days of receipt thereof from Lender and in no event later than
the
136
Stabilization Date Payment Date, (iii) Lender shall be admitted as the
Preferred Shareholder in Operator and the Preferred Beneficial Owner in Borrower
on or before the Stabilization Date Payment Date, and (iv) any breach of (i),
---
(ii) or (iii) shall constitute an immediate Event of Default. In addition, in
---- -----
connection with any such equity arrangements Borrower shall and Borrower shall
cause its affiliates to, provide to Lender any additional collateral to Lender
to secure such arrangements, including without limitation, equity pledges and
guaranties, as Lender may require in Lender's sole discretion.
(h) Notwithstanding anything contained herein to the contrary (i) on
the Stabilization Date Payment Date, Operator shall fund such reserves and
additional reserves as are established by Lender in Lender's reasonable
discretion; and (ii) Operator and Borrower shall have satisfied all of the
requirements set forth in Section 3.4, including, without limitation, the
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payment of all Transaction Costs in connection with this Section 8.32 even if no
------------
Earn-Out Advance is actually made.
Section 8.33. Transfer of Fee Simple Interest in the Facility to
--------------------------------------------------
Operator on the Optional Prepayment Date. Notwithstanding anything in the
----------------------------------------
Operator Lease or the Loan Documents to the contrary, on the Optional Prepayment
Date, if the Loan is not prepaid in full pursuant to Section 2.7 of this
------- ---
Agreement as a result of the Operator's failure to meet its obligations pursuant
to the Lease or otherwise, (i) Borrower shall transfer its fee simple title in
the Facility to Operator in consideration for Operator's assumption of
Borrower's obligations under the Loan Documents executed by Borrower, (ii)
Operator shall accept fee simple title in the Facility and shall assume
Borrower's obligations under the Loan Documents executed by the Borrower
pursuant to such documents as Lender shall reasonably request, (iii) Operator
shall deliver to Lender an updated Title Insurance Policy showing fee simple
title to the Facility in Operator and insuring that Lender has a valid first
lien on the Operator's fee simple interest in the Facility together with such
modification, amendments or supplements to the Loan Documents and legal opinions
as Lender may reasonably request and (iv) Operator shall pay all of Lender's
fees, costs and expenses incurred in connection with such transfer (including,
reasonable attorneys' fees and costs) and all recording costs, fees and taxes
associated with the transfer. Operator shall provide Lender with written notice
sixty (60) days prior to the Optional Prepayment Date indicating whether
Operator anticipates (a) that the Loan be prepaid in full on the Optional
Prepayment Date together with information regarding the sources of the funds for
such prepayment or (b)(i) that Operator will acquire the Borrower's fee simple
interest in the Facility together with the proposed documents effectuating the
transfer of the Facility and the assumption of the Loan and a copy of a
commitment for the Title Policy referenced above in clause (iii) or (ii) that
SELCO will be transferring its beneficial interests in Borrower to Operator
pursuant to the penultimate sentence of this Section 8.33 together with copies
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of the proposed documents effectuating such transfer and the proposed amendment
to the Operator Lease referenced in clause (iv) of the penultimate sentence of
this Section 8.33. Upon consummation
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137
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 Loan Documents executed by the Borrower, Operator shall be
considered the "Borrower" under the Loan Documents as well as the "Operator"
under the Loan Documents and shall have all of the obligations of "Borrower"
under the Loan Documents as well as the obligations of "Operator" under the Loan
Documents. As an alternative to transferring fee simple title to the Facility to
Operator if the Loan is not prepaid in full pursuant to Section 2.7 of this
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Agreement, on the Optional Prepayment Date, (i) Operator shall acquire all of
SELCO's beneficial ownership interests in the Borrower, (ii) the Operator shall
deliver such modifications, amendments or supplements to the Loan Documents and
legal opinions as Lender may reasonably request, (iii) Operator shall deliver
the various items sets forth in clause (v) of the definition of "Permitted
------ ---
Transfers" and (iv) Operator shall execute an amendment to the Operator Lease
extending the Operator Lease to the Maturity Date and such other amendments as
are consistent with the fact that the SELCO Debt will be eliminated all as
Lender may reasonably request and as will not result in a downgrade, withdrawal
or qualification of the ratings assigned to any of the securities issued in a
Securitization as confirmed in writing by the Rating Agencies. Failure of
Borrower or Operator to comply with the terms of this Section shall constitute
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an Event of Default.
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 Lender not to be unreasonably withheld. 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 Lender or its designee by foreclosure or
deed-in-lieu of foreclosure, (c) until after acquisition of title to the
Mortgaged Property by 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.
----------------------------
(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
138
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 (i)(x)
prior to a Cash Management Event, from Operator (but only after payment of the
amounts set forth in the first sentence of Section 2.12(b), and (y) after a Cash
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Management Event, from the SELCO Payment Sub-Account and from Excess Cash Flow
and (ii) from realization on the collateral pledged to Borrower pursuant to
those Pledge Agreements (as defined in the Operator Lease) executed by Operator.
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 Lender, and shall promptly deliver to 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 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 Facilities 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
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 8.35, Borrower
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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 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
139
Proceeding), SELCO shall first use 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 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 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 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).
Section 8.37 Intentionally deleted.
Section 8.38 Buy-Up. On the Stabilization Date Payment Date,
------
regardless of the amount of the Recalculated Loan Amount, Lender shall have the
option in Lender's reasonable discretion to change the amortization schedule and
to decrease the Loan Amount (after giving effect to the resizing in Section
-------
8.32) in consideration for which Lender will agree to pay
----
140
Borrower a buy-up payment. All such changes shall be determined by Lender in
Lender's discretion and Borrower and Operator each hereby agrees to be bound by
any and all of such changes, provided that such changes shall generally result
in (i) an interest rate approximating the Initial Interest Rate as of the
Stabilization Date Payment Date, (ii) an amortization schedule equal to the
number months from the Stabilization Date Payment Date to the Maturity Date
equal to the Number of Interest Accrual Periods in Amortization Schedule, (iii)
a Loan Amount (after giving effect to any changes in this Section 8.38) that
------------
would result in an outstanding Principal Indebtedness at the Optional Prepayment
Date (assuming all payments are timely made) equal to the outstanding Principal
Indebtedness at the Optional Prepayment Date (assuming all payments are timely
made) as if none of the changes required by this Section 8.38 had been made, and
------------
(iv) a buy up payment payable to Borrower equal to the excess of (a) the Loan
Amount on the Stabilization Date Payment Date (prior to giving effect to any
changes required by this Section 8.38) over (b) the Loan Amount on the
------------
Stabilization Date Payment Date (after giving effect to any changes required by
this Section 8.38). Borrower hereby agrees (i) to pay all Transaction Costs in
------------
connection with this Section 8.38 and (ii) to make any and all amendments,
------------
modifications and other changes to the Loan Documents as required by Lender in
Lender's reasonable discretion in connection with this Section 8.38. Subject to
------------
the following sentence, Lender agrees that Lender will treat and report the any
buy-up payment as additional issue price for Federal income tax purposes
pursuant to Treasury Regulation (S)1.1273-2(g)(3). Lender reserves the right to
change its treatment and reporting of any buy-up payment in the event of any
change, amendment or modification to any applicable law, rule, revenue ruling or
regulation or in the event Lender receives notice from the Internal Revenue
Service requiring a change in Lender's treatment on reporting of the buy-up
payment. Lender will notify Borrower and Operator in the event it is changing
its reporting or treatment of any buy-up payment.
Section 8.39 Cross-Default and Cross-Collateralization. (a) Borrower
-----------------------------------------
hereby agrees that (i) with respect to any Other Loan which contains terms
similar to those set forth in Section 8.32 with respect to stabilization and
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resizing of such Other Loan (a "Stabilization Loan"), the relevant Other
------------------
Borrower's obligations under such Other Loan and the Other Loan Documents shall
be cross-defaulted with this Loan until the earlier of (y) the date on which
such Stabilization Loan or this Loan has been resized pursuant to such terms and
transferred in a Securitization (as defined herein and in the relevant Other
Loan Agreements) for loans which have stabilized of which the Loan or applicable
Other Loans are not a part and (z) Lender's election to release the cross-
default and (ii) the Loan shall be cross-defaulted with any Other Loan which is
included in the same Securitization (as defined herein and in the relevant Other
Loan Agreement) as the Loan. During the term of any cross-default and with
respect to those Other Loans which are the subject of such cross-default,
without limitation to any other right or remedy provided to Lender in this
Agreement or any of the other Loan Documents, Borrower covenants and agrees that
upon the occurrence of an Event of Default (1) Lender shall have the right to
pursue all of its rights and remedies in one proceeding, or separately and
independently
141
in separate proceedings which it, as Lender, in its sole and absolute
discretion, shall determine from time to time, (2) Lender is not required to
either xxxxxxxx assets, sell Collateral (as defined in the Loan Documents and
the relevant Other Loan Documents) in any inverse order of alienation, or be
subjected to any "one action" or "election of remedies" law or rule, (3) the
exercise by Lender of any remedies against any Collateral (as defined in the
Loan Documents and the relevant Other Loan Documents) will not impede Lender
from subsequently or simultaneously exercising remedies against any other
Collateral (as defined in the Loan Documents and the relevant Other Loan
Documents) and (4) all Liens (as defined herein and in the relevant Other Loan
Agreements) and other rights, remedies and privileges provided to Lender in this
Agreement and the other Loan Documents and the relevant Other Loan Documents or
otherwise shall remain in full force and effect until Lender has exhausted all
of its remedies against the Collateral (as defined in the Loan Documents and the
relevant Other Loan Documents) and all Collateral (as defined in the Loan
Documents and the relevant Other Loan Documents) has been foreclosed, sold
and/or otherwise realized upon. Borrower hereby consents and agrees that
Operator's interest in the Facility shall be security for the performance of the
obligations of relevant Other Operators' obligations under the Other Loan and
the Other Loan Documents and the relevant Other Operator's interest in the
relevant Facility (as defined in the relevant Other Loan Agreement) shall be
security for the Operator's obligations hereunder and under the Loan Documents.
During the term of any cross-default and with respect to those Other Loans which
are the subject of such cross-default, without limitation to any other right or
remedy provided to Lender in this Agreement or any of the other Loan Documents
Borrower acknowledges and agrees (y) the obligations of the relevant Other
Borrower shall be cross-defaulted with the Borrower's obligation under the Loan
and (z) the Operator shall be jointly and severally liable for the obligations
of the relevant Other Operators under the applicable relevant Other Loan
Documents. Borrower hereby waives its right, title and interest in and to Excess
Proceeds and hereby agrees that, subject to this Loan Agreement, all such Excess
Proceeds are the property of Operator (provided, however, Operator has assigned
all its right, title and interest in and to any Excess Proceeds to Lender). If
Borrower receives any Excess Proceeds, Borrower hereby agrees to immediately
remit such Excess Proceeds to Lender.
(b) Operator hereby agrees that (i) with respect to any Other Loan
which is a Stabilization Loan, the relevant Other Operator's obligations under
such Other Loan and under the Other Loan Documents shall be cross-collateralized
and cross-defaulted with Operator's obligations hereunder and under the other
Loan Documents until the earlier of (y) the date on which such Stabilization
Loan or this Loan has been resized pursuant to such terms and transferred in a
Securitization (as defined herein and in the relevant Other Loan Agreements) for
loans which have stabilized of which the Loan or applicable Other Loans are not
a part and (z) Lender's election to release the cross-collateralization and
cross-default and (b) the Operator's obligations hereunder and under the other
Loan Documents shall be cross-collateralized and cross-defaulted with any Other
Operator's obligations under any Other Loan which is included in
142
the same Securitization (as defined herein and in the relevant Other Loan
Agreement) as the Loan. During the term of any cross-collateralization and
cross-default and with respect to those Other Loans which are the subject of
such cross-collateralization and cross-default, without limitation to any other
right or remedy provided to Lender in this Agreement or any of the other Loan
Documents, Operator covenants and agrees that upon the occurrence of an Event of
Default (1) Lender shall have the right to pursue all of its rights and remedies
in one proceeding, or separately and independently in separate proceedings which
it, as Lender, in its sole and absolute discretion, shall determine from time to
time, (2) Lender is not required to either xxxxxxxx assets, sell Collateral (as
defined in the Loan Documents and the relevant Other Loan Documents) in any
inverse order of alienation, or be subjected to any "one action" or "election of
remedies" law or rule, (3) the exercise by Lender of any remedies against any
Collateral (as defined in the Loan Documents and the relevant Other Loan
Documents) will not impede Lender from subsequently or simultaneously exercising
remedies against any other Collateral (as defined in the Loan Documents and the
relevant Other Loan Documents), (4) all Liens (as defined herein and in the
relevant Other Loan Agreements) and other rights, remedies and privileges
provided to Lender in this Agreement and the other Loan Documents and the
relevant Other Loan Documents or otherwise shall remain in full force and effect
until Lender has exhausted all of its remedies against the Collateral (as
defined in the Loan Documents and the relevant Other Loan Documents) and all
Collateral (as defined in the Loan Documents and the relevant Other Loan
Documents) has been foreclosed, sold and/or otherwise realized upon and (5)
Operator's interest in the Facility shall be security for the performance of the
obligations of each relevant Other Operator under the Other Loan Documents and
each Other Operator's interest in the relevant Facility (as defined in the
relevant Other Loan Agreement) shall be security for the performance of the
obligations of Operator hereunder and under the other Loan Documents. In
furtherance of the foregoing, Operator hereby grants to Lender a continuing
security interest in all of Operator's right, title and interest in any and all
proceeds to which Operator may be entitled after foreclosure on, or sale
pursuant to a power of sale of, the Facility (the "Excess Proceeds") and hereby
---------------
agrees that such Excess Proceeds may be applied by Lender to any Other
Operator's obligations under any Other Loan. During the term of any cross-
collateralization and cross-default and with respect to those Other Loans which
are the subject of such cross-collateralization and cross-default, without
limitation to any other right or remedy provided to Lender in this Agreement or
any of the other Loan Documents, Operator acknowledges and agrees that (w) it
shall be jointly and severally liable for the obligations of the relevant Other
Operators under the relevant Other Loan Documents, (y) the relevant Other
Operators shall be jointly and severally liable for the obligations of the
Operator under the Loan Documents and (z) the Borrower's obligations under the
Loan shall be cross-defaulted with the obligations of the relevant Other
Borrowers under the applicable relevant Other Loan Documents.
[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.
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]
EXHIBIT A
Operating Expense Certificate
Nomura Asset Capital Corporation
Two World Xxxxxxxxx Xxxxxx, Xxxxxxxx X
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxxx Xxxxxxx
Re: Loan Agreement (the "Loan Agreement") dated as of _____________,
1998 among ____________________ ("Borrower"), ________________
("Operator") and Nomura Asset Capital Corporation (together with
its successors and assigns "Lender")
Ladies and Gentlemen:
This certificate is delivered in accordance with Section 2.12(f) of
---------------
the Loan Agreement. All capitalized terms not defined herein shall have the
meanings ascribed to them in the Loan Agreement.
Operator hereby certifies that the Operating Expenses for the Interest
Accrual Period from ______________, ____ to ______________, ____ are
______________________ Dollars ($_________) and that such Operating Expenses are
equal to or less than the Operating Expenses for such period set forth on the
Operating Budget.
_______________________, a _____________
By: ____________________________________,
a _____________, its ______________
EXHIBIT B
Additional Definitions
Base Adjusted NOI $1,068,000.00
Initial Capital Reserve Amount $ 0.00
Initial Construction Amount $3,350,000.00
Initial Secritization Expense Amount $ 33,750.00
Initial Trustee Expense Amount
B-1
EXHIBIT C-1
Description of Construction Project
C-1
EXHIBIT C-2
Description of Environmental Remediation
None
C-2
EXHIBIT D
Within ten (10) days of receipt thereof from Lender (and in no event
later than the Stabilization Date Payment Date), the Secretary (or other
authorized Officer) of the Company will deliver to Lender amended and restated
articles of incorporation for the Company (the "Articles"), enforceable against
the Company and the other then existing shareholders in the Company (the "Other
Shareholders") in form and substance satisfactory to Lender in Lender's sole
discretion, provided, however, that (i) in the event the Company is a trust, the
Company will deliver to Lender an amended and restated trust agreement (an
"Agreement"), in form and substance satisfactory to Lender in Lender's sole
---------
discretion, and (ii) notwithstanding anything to the contrary set forth herein,
nothing contained in any such Articles or Agreement shall change the economic
provisions establishing (x) the Preferred Rate and Adjusted Preferred Rate set
forth in this Exhibit, (y) the methodology for calculating the Initial Capital
Amount set forth in this Exhibit or Section 8.32 of the Loan Agreement or (z)
the distribution priorities and amounts set forth in this Exhibit. The Articles
will contain, inter alia, the following terms (conformed as appropriate for a
----- ----
trust agreement):
1. Issuance of Preferred Stock. The consent and agreement of the Other
---------------------------
Shareholders to the issuance of preferred shares of stock in the Company (each,
a "Class B Equity Interests") to the Preferred Shareholder in an amount equal to
------------------------
the Class B Amount. Each Class B Equity Interests shall have a par value of
$5,000.00. The Company may issue fractional Class B Equity Interests.
2. Class A Shares. The total equity ownership interest of the Other
--------------
Shareholders in the Company shall consist of 1,000 shares of common stock in the
Company (each, a "Class A Share").
-------------
3. Purpose. Until the Loan has been paid in full and the Class B Equity
-------
Interests and the Other Class B Interests have been redeemed in full, the
Company shall at all times be a Single Purpose Entity.
4. Independent Director. Until the Loan has been paid in full and the
--------------------
Class B Equity Interests and the Other Class B Interests have been redeemed in
full, (a) no Independent Director may be removed unless a successor Independent
Director (which meets the requirements to be an Independent Director) has been
approved by the Preferred Shareholder, and (ii) in the event of a resignation,
death or incapacity of the Independent Director, or such position is otherwise
vacated, no action requiring the unanimous affirmative vote of the board of
directors of the Company shall be taken until a successor Independent Director
(which meets the requirements to be an Independent Director and has been
approved by the Preferred Shareholder) has been appointed.
D-1
5. Dividends. On each Distribution Date, after the Company has made all
---------
payments required on such Distribution Date under the Loan Documents in
accordance with the terms thereof, and prior to making any distributions to the
Other Shareholders (except as provided hereunder), the Company shall distribute,
to the extent of funds available for distribution the following amounts in the
following priority:
(1) First, to the Preferred Shareholder, all Monthly Preferred Yield
Amounts (or portions thereof) with respect to prior Distribution Dates that have
not previously been paid (in the order of the Distribution Dates to which such
amounts relate, amounts with respect to the earliest Distribution Dates being
paid first) plus additional yield thereon at the Adjusted Preferred Rate
accruing from the Distribution Date on which the unpaid Monthly Preferred Yield
Amount would have been distributed had there been funds available to make such
distribution in the Preferred Cash Collateral Account;
(2) Second, to the Preferred Shareholder, the Monthly Preferred Yield
Amount with respect to the current Distribution Date;
(3) Third, to the Preferred Shareholder, all Monthly Redemption
Amounts (or portions thereof) with respect to prior Distribution Dates that have
not previously been paid (in the order of the Distribution Dates to which such
amounts relate, amounts with respect to the earliest Distribution Dates being
paid first);
(4) Fourth, to the Preferred Shareholder, the Monthly Redemption
Amount with respect to the current Distribution Date; and
(5) Fifth, provided all amounts due and payable to the Lender
pursuant to the Loan Documents and to the Preferred Shareholder hereunder have
been paid, and provided further that no Breach exists, in the sole discretion of
the Company, to the Other Shareholders pro rata in respect of the Class A Shares
--------
owned by each.
6. Liquidation Event Distributions. On the first Business Day after the
-------------------------------
Company receives any Liquidation Proceeds, the Company shall cause the
distribution of the Net Liquidation Proceeds After Debt Service to make the
following payments:
(1) All amounts described in paragraph 5(a)-(d) hereof for all
Distribution Dates occurring on or prior to such Business Day that have not
previously been paid, in the priority set forth in such clause;
(2) An amount equal to the sum of all Daily Preferred Yield Amounts
for each day occurring since the last Distribution Date on or prior to such
Business Day;
(3) In redemption of the Class B Equity Interests at their par value;
and
(4) To the Other Shareholders in accordance with the number of Class
A Shares owned by each of the Other Shareholders.
D-2
7. Redemption of Class B Equity Interests.
--------------------------------------
(1) Upon each distribution by the Company of the Monthly Redemption
Amount or any other amounts in redemption of any Class B Equity Interests,
including fractions thereof, Class B Equity Interests having a par value equal
to such dividends shall automatically be transferred and surrendered by the
Preferred Shareholder to the Company and canceled.
(2) On any Distribution Date, in addition to the amounts referred to
herein, the Company in its sole discretion may make additional distributions to
the Preferred Shareholder to redeem its Class B Equity Interests, and upon
receipt of such distributions the Preferred Shareholder's Class B Equity
Interests having a par value equal to such distributions shall be redeemed and
automatically canceled.
(3) Upon any distribution by the Other Company of the Monthly
Redemption Amount (as defined in the Other Company Agreement) or any other
amounts in redemption of the Other Class B Interests, including fractions
thereof, Class B Equity Interests having a par value equal to such dividends (or
distributions) shall automatically be transferred and surrendered by the
Preferred Shareholder to the Company and canceled.
8. Preferred Shareholder's Consent. The consent of the Preferred
-------------------------------
Shareholder shall be necessary to approve:
(1) The payment of any Affiliated Party Expense or entering into any
contract, agreement or other obligation that provides for the payment of any
Affiliated Party Expense;
(2) The distribution to the Shareholders of any Company property
other than cash or any accumulation of cash in the Company in excess of the
operating needs of the Company, which cash would in the ordinary course of the
business of the Company be distributable to the Shareholders;
(3) The making of any prepayment of the Loan other than any mandatory
prepayment required by the Loan Documents, or any refinance of the Loan except
as otherwise permitted under the Loan Documents;
(4) Any replacement or change in the Officers of the Company or the
Manager of the Facility;
(5) Any amendment of any of the Loan Documents, any Management
Agreement, the Articles, or the Other Company Agreement;
(6) Any: (A) improvement, renovation or refurbishment of the Facility
to a materially higher standard or level than that of comparable properties in
the same geographic area and in the same market segment; (B) removal, demolition
or alteration of the improvements or the equipment (other than routine
replacement of such equipment) on the Facility to the extent
D-3
that any such action would require the incurrence of an expenditure in excess of
$50,000; or (C) material increase in the square footage or gross leasable area
of the improvements on the Facility if any of the expenses in connection
therewith are paid or incurred by the Company;
(7) Any material change in the present method of conducting the
business or affairs of the Company;
(8) The issuance of any Shares or other evidence of interests in the
Company or the Other Company other than the Shares (or other evidence of
interests) outstanding on the date hereof;
(9) Such other matters as may reasonably be determined by Preferred
Shareholder.
9. Termination of Manager. The Preferred Shareholder shall have the same
----------------------
right to require the appointment of a manager pursuant to a Management Agreement
as is held by Lender pursuant to Section 5.1(b)(P) of the Loan Agreement
(regardless of whether the Loan is outstanding). In addition, in the event of a
Breach, in addition to all other rights of the Preferred Shareholder, the
Preferred Shareholder shall have the right to require the appointment of a
manager acceptable to Preferred Shareholder in its sole discretion.
10. Financial Reports. The Company will furnish to the Preferred
-----------------
Shareholder (i) a monthly report showing the Monthly Redemption Amount and the
Class B Equity Interests redeemed from the Preferred Shareholder in form and
substance reasonably satisfactory to the Preferred Shareholder; (ii) copies of
all financial reports required to be provided Lender under Section 5.1(b)(Q) or
-----------------
Section 5.1(a)(Q) as applicable, of the Loan Agreement (regardless of whether
-----------------
the Loan is outstanding); and (iii) such additional calculations, statements,
data and other information regarding the Company and its assets, as the
Preferred Shareholder may reasonably request.
11. Rights of Preferred Shareholder to Transfer. The Preferred
-------------------------------------------
Shareholder shall be entitled to Transfer any of the Shares held by it to any
Person without the consent of the Company or the Other Shareholders provided
that such Transfer shall be in accordance with clause (viii) of the definition
of the term "Permitted Transfers" set forth in the Loan Agreement. Any such
transferee or assignee shall be deemed to be a substitute Preferred Shareholder.
12. Representations and Warranties. The Articles shall contain such
------------------------------
representations and warranties of the Company and the Other Shareholders as
Preferred Shareholder reasonably shall require.
13. Covenants. The Articles shall contain such covenants of the Company
---------
and the Other Shareholders as Preferred Shareholder reasonably shall require.
14. Investment Certificate A and Pledged Securities. To the extent SELCO
-----------------------------------------------
is a beneficial owner of, the Company or the Other Company, nothing in the
Articles or Agreement shall affect the prior claim and right of SELCO to receive
all distributions with respect to the
D-4
Excepted Property.
15. Definitions. As used herein, all capitalized terms not otherwise
-----------
defined shall have the meanings ascribed to them in the Loan Agreement, and in
addition, the following terms shall have the following meanings:
"Adjusted Preferred Rate" means the lesser of: (i) a rate per annum
-----------------------
(adjusted on the first day of each Yield Accrual Period) equal to LIBOR plus
seven hundred (700) basis points; and (ii) the maximum rate permitted by
applicable law.
"Admittance Date" means the date on which the Preferred Shareholder
---------------
acquires Class B Equity Interests in the Company pursuant hereto.
"Affiliate" means with respect to any Person, a second Person which is
---------
controlled by, controls or is under common control with such first Person.
"Affiliated Party Expense" means any expense incurred pursuant to any
------------------------
contract or otherwise with any Affiliate of the Company, or any constituent
party of the Company, but excluding property management fees or expenses payable
pursuant to management agreements previously approved in writing by Preferred
Shareholder.
"Articles" has the meaning set forth in the recitals hereof.
--------
"Breach" means that any of the following have occurred:
------
(i) Failure of the Company to pay any amount when due;
(ii) Failure of the Company to pay to the Preferred Shareholder any
amount due to the Preferred Shareholder (regardless of availability of funds,
including without limitation, the occurrence of a Nonpayment Breach);
(iii) A default in the performance or breach of any covenant by the
Company to the Preferred Shareholder;
(iv) Any representation or warranty of the Company or any Other
Shareholder to the Preferred Shareholder shall have been false or misleading in
any material respect when made;
(v) (A) A bankruptcy, receivership or assignment for the benefit of
creditors by or against, or (B) the insolvency of the Company or any Officer
thereof;
(vi) An Event of Default;
(vii) The Preferred Cash Management Agreement shall cease to be in
full force and effect, or the Company or any Officer thereof shall so assert in
writing;
D-5
(viii) The occurrence of a Breach under the Other Company Agreement
(as defined therein);
(ix) The occurrence of any other event determined by Preferred
Shareholder in its reasonable discretion.
"Breach Period" means upon the occurrence of any Nonpayment Breach, a
-------------
period of time equal to the greater of the period of time from and after the
Distribution Date that caused the occurrence of a Nonpayment Breach until the
entire Preferred Amount has been redeemed and all other amounts due to the
Preferred Shareholder hereunder have been paid in full.
"Company" means [INSERT NAME OF BORROWER OR OPERATOR, AS APPLICABLE].
-------
"Daily Preferred Yield Amount" means, with respect to any day, the product
----------------------------
of: (i) the Preferred Rate on such day; (ii) the Preferred Capital Amount on
such day (after giving effect to any distributions in respect of the Preferred
Capital Amount made on such day), increased by any Monthly Preferred Yield
Amounts (or portions thereof) with respect to Distribution Dates occurring on or
prior to such day that remain unpaid on such day; and (iii) 1/360.
"Determination Date" with respect to any Yield Accrual Period means the
------------------
date which is two London Business Days before the commencement of such Yield
Accrual Period.
"Distribution Date" means the 11th day of each month, or, if such day shall
-----------------
not be a Business Day, the next succeeding Business Day.
"Excess Cash Flow" means, with respect to any Distribution Date, an amount
----------------
equal to the greater of: (a) (i) the amount disbursed to the Company pursuant to
Section 2.12(g) of the Loan Agreement during the Yield Accrual Period ended in
the month in which such Distribution Date occurs minus (ii) any amounts payable
to the Preferred Shareholder as described in Paragraph 5 (a) or (b) hereof with
respect to such Yield Accrual Period; and (b) zero.
"Initial Preferred Capital Amount" shall mean an amount equal to the Class
--------------------------------
B Amount.
"LIBOR" means, with respect to each Yield Accrual Period following the
-----
Admittance Date, the rate (expressed as a percentage per annum) for deposits in
U.S. dollars for a one-month period that appears on Telerate Page 3750 (or the
successor thereto) as of 11:00 a.m., London, England time, on the related
Determination Date. If such rate does not appear on Telerate Page 3750 as of
11:00 a.m., London, England time, on such Determination Date, LIBOR shall be the
arithmetic mean of the offered rates (expressed as a percentage per annum) for
deposits in U.S. dollars for a one-month period that appear on the Reuters
Screen LIBOR Page as of 11:00 a.m., London, England time, on such Determination
Date, if at least two such offered rates so appear. If fewer than two such
offered rates appear on the Reuters Screen LIBOR Page as of 11:00 a.m., London,
England time, on such Determination Date, NACC shall request the principal
London, England office of any four major reference banks in the London interbank
market selected by
D-6
NACC to provide such bank's offered quotation (expressed as a percentage per
annum) to prime banks in the London interbank market for deposits in U.S.
dollars for a one-month period as of 11:00 a.m., London, England time, on such
Determination Date for amounts approximately equal to the Preferred Amount. If
at least two such offered quotations are so provided, LIBOR shall be the
arithmetic mean of such quotations. If fewer than two such quotations are so
provided, the Preferred Shareholder shall request any three major banks in New
York City selected by the Preferred Shareholder to provide such bank's rate
(expressed as a percentage per annum) for loans in U.S. dollars to leading
European banks for a one month period as of approximately 11:00 a.m., New York
City time on the applicable Determination Date for amounts approximately equal
to the Preferred Amount. If at least two such rates are so provided, LIBOR shall
be the arithmetic mean of such rates. If fewer than two rates are so provided,
then LIBOR for the applicable Yield Accrual Period shall be LIBOR that was in
effect for the next preceding Yield Accrual Period. LIBOR shall be determined in
accordance with this section by the Preferred Shareholder or its agent.
"Liquidation Event" means: (i) any sale, transfer or other disposition 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 Loan.
"Liquidation Proceeds" means, with respect to any Liquidation Event, all
--------------------
amounts paid to or received by or on behalf of the Company on or after the
Admittance Date 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 by the
terms of the Loan Documents to be applied to the restoration or repair of the
Facility or to repayment of the Loan.
"London Business Day" means any day other than a Saturday, Sunday or any
-------------------
other day on which banks in the City of London, England are closed for interbank
or foreign exchange transactions.
"Monthly Preferred Yield Amount" means, with respect to each Distribution
------------------------------
Date, the sum of the Daily Preferred Yield Amounts for each day in the related
Yield Accrual Period.
"Monthly Redemption Amount" means, with respect to each Yield Accrual
-------------------------
Period, an amount equal to:
(i) Except as provided in clause (ii) below, the product of (A) 75%
and (B) the Excess Cash Flow for such period; or
(ii) After the occurrence and during the continuance of any Breach
Period, the product of (A) 100% and (B) the Excess Cash Flow for such period.
D-7
"NACC" means Nomura Asset Capital Corporation, together with its successors
----
and assigns.
"Net Liquidation Proceeds" means all Liquidation Proceeds less: (i) in the
------------------------
case of a sale other than a foreclosure sale under the Loan, such reasonable and
customary costs and expenses of sale (including brokerage commissions) as shall
be approved by the Preferred Shareholder; (ii) in the case of a foreclosure
sale, such costs and expenses incurred by the Lender under the Loan Documents as
the Lender shall be entitled to receive reimbursement for under the terms of the
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 Lender, or if the
Loan has been paid in full, by the Preferred Shareholder in its sole discretion;
and (iv) in the case of a refinancing of the Loan, or the Facility, such costs
and expenses of such refinancing as shall be approved by the Preferred
Shareholder.
"Net Liquidation Proceeds After Debt Service" means, with respect to any
-------------------------------------------
Liquidation Event, the Net Liquidation Proceeds with respect thereto other than
any portion thereof applied to the payment of the Loan under the terms of the
Loan Documents.
"Nonpayment Breach" means the failure of the Company to pay, on any
-----------------
Distribution Date, the minimum amount necessary to amortize the Class B Amount
on a straight line basis over a sixty (60) month period, together with interest
thereon at the Preferred Rate.
"Officers" means the duly appointed officers of the Company, appointed
--------
pursuant to the Articles.
"Other Class B Interests" means the Class B beneficial interests or the
-----------------------
Class B Equity Interests, as applicable, held by Preferred Shareholder in the
Other Company.
"Other Company" means [INSERT NAME OF THE BORROWER OR OPERATOR, AS
-------------
APPLICABLE, TO THE EXTENT IT IS NOT THE COMPANY].
"Other Company Agreement" means the trust agreement or articles of
-----------------------
incorporation, as applicable, for the Other Company.
"Other Shareholders" has the meaning set forth in the recitals hereof.
------------------
"Preferred Amount" at any date means the sum of: (i) the sum of all Monthly
----------------
Preferred Yield Amounts for all Distribution Dates on or prior to such date that
have not previously been paid; (ii) the sum of all Daily Preferred Yield Amounts
for each day occurring in the period from the last Distribution Date on or prior
to such date (or if no Distribution Date has yet occurred, from the Admittance
Date) to such date; and (iii) the Preferred Capital Amount.
"Preferred Capital Amount" means the Initial Preferred Capital Amount less
------------------------
all distributions made to the Preferred Shareholder in redemption of the Class B
Preferred Shares pursuant hereto, plus any additional contributions of capital
made by the Preferred Shareholder.
D-8
"Preferred Cash Collateral Account" means the account established pursuant
---------------------------------
to the Preferred Cash Management Agreement.
"Preferred Cash Management Agreement" means a Preferred Cash Management
-----------------------------------
Agreement to be entered into by the Company, Lender and LaSalle National Bank,
as bank, the material terms of which are described in Exhibit F.
---------
"Preferred Rate" means: (i) at any time when a Breach has occurred and is
--------------
continuing or during a Breach Period, the Adjusted Preferred Rate and (ii) at
any other time, a per annum rate equal to LIBOR plus five hundred (500) basis
points adjusted on the first day of each Yield Accrual Period. Each
determination of the Preferred Rate by the Preferred Shareholder pursuant to the
provisions of this Article shall be binding on the Company, absent manifest
error.
"Preferred Shareholder" means Lender or its affiliates, successors,
---------------------
assigns, designees or transferees.
"Reuters Screen LIBOR Page" means the display designated as page "LIBOR" on
-------------------------
the Reuters Monitor Money Rates Service (or such other page as may replace the
LIBOR page on the service for the purpose of displaying interbank rates from
London in U.S. Dollars).
"Secretary" means the secretary of the Company, as appointed in accordance
---------
with the Articles.
"Shareholders" means the holders of the Shares.
------------
"Shares" means Class A Shares and Class B Equity Interests, collectively.
------
"Telerate Page 3750" means the display designated as Page 3750 on the Dow
------------------
Xxxxx Telerate Service (or such other page as may replace Page 3750 on that
service or such other service as may be nominated by the British Banker's
Association as the information vendor for the purpose of displaying British
Bankers' Association Interest Settlement Rates for the U.S. Dollar deposits).
"Yield Accrual Period" means: (i) with respect to the first Distribution
--------------------
Date occurring after the Admittance Date, the period commencing on the
Admittance Date and ending on the tenth (10th) day of the month in which such
Distribution Date occurs; and (ii) in the case of each subsequent Distribution
Date, the period from and including the eleventh (11th) day of the month
immediately preceding the month in which such Distribution Date occurs up to and
including the tenth (10th) day of the month in which such Distribution Date
occurs.
D-9
EXHIBIT E
The documentation evidencing Lender's right to be a Preferred
Shareholder in the Company in accordance with Section 8.32(c)(ii) of the Loan
Agreement shall be based on the termsheet for the Amended and Restated Articles
of Incorporation of the Company (the "Articles") attached to the Loan Agreement
as Exhibit D and the termsheet for the Preferred Cash Management Agreement
---------
attached to the Loan Agreement as Exhibit F, with such changes as Lender shall
---------
require in Lender's sole and absolute discretion provided, however that
notwithstanding anything to the contrary set forth herein, nothing contained in
such documentation shall change the economic provisions establishing (x) the
Preferred Rate and Adjusted Preferred Rate set forth in this Exhibit, (y) the
methodology for calculating the Initial Capital Amount set forth in this Exhibit
or Section 8.32 of the Loan Agreement or (z) the distribution priorities and
amounts set forth in this Exhibit. These changes may include, but shall not be
limited to, the following (conformed if appropriate for a trust):
1. The Articles shall be amended to add an additional class of Shares
(the "Class C Equity Interests") to reflect the preferred shares of the Company
------------------------
to be received by the Preferred Shareholder described in Section 8.32(c)(ii) of
the Loan Agreement, which Class C Equity Interests shall be senior to the Class
A Shares and junior to the Class B Equity Interests (except as provided herein).
2. The Articles shall be amended and restated (in a manner satisfactory
to Lender in Lender's sole discretion) to reflect (i) the creation of Class C
Equity Interests, and (ii) the receipt by Lender of Class A Shares.
3. The "Preferred Rate" with respect to the Class C Equity Interests
--------------
(provided that a Breach has not occurred and is continuing) shall be a per annum
rate equal to LIBOR (as defined in the Articles) plus seven hundred (700) basis
points adjusted on the first day of each Yield Accrual Period.
4. The "Adjusted Preferred Rate" with respect to the Class C Equity
-----------------------
Interests shall mean the lesser of: (i) a rate per annum adjusted on the first
day of each Yield Accrual Period) equal to LIBOR plus nine hundred (900) basis
points; and (ii) the maximum rate permitted by applicable law.
5. The Company shall pay dividends in the following priority:
(i) First, to the Preferred Shareholder, all Monthly Preferred Yield
Amounts due with respect to the Class B Equity Interests (or portions thereof)
for prior Distribution Dates that have not previously been paid (in the order of
the Distribution Dates to which such amounts relate, amounts with respect to the
earliest Distribution Dates being paid first) plus additional yield thereon at
the Adjusted Preferred Rate accruing from the Distribution Date on which the
unpaid Monthly Preferred Yield Amount would have been distributed had there been
funds available to make such distribution in the Preferred Cash Collateral
Account;
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(ii) Second, to the Preferred Shareholder, the Monthly Preferred
Yield Amount due with respect to Class B Equity Interests for the current
Distribution Date;
(iii) Third, to the Preferred Shareholder, all Monthly Preferred Yield
Amounts due with respect to the Class C Equity Interests (or portions thereof)
for prior Distribution Dates that have not previously been paid (in the order of
the Distribution Dates to which such amounts relate, amounts with respect to the
earliest Distribution Dates being paid first) plus additional yield thereon at
the relevant Adjusted Preferred Rate accruing from the Distribution Date on
which the unpaid Monthly Preferred Yield Amount would have been distributed had
there been funds available to make such distribution in the Preferred Cash
Collateral Account;
(iv) Fourth, to the Preferred Shareholder, the Monthly Preferred
Yield Amount due with respect to Class C Equity Interests for the current
Distribution Date;
(v) Fifth, to the Preferred Shareholder, all Monthly Redemption
Amounts due with respect to Class C Equity Interests (or portions thereof) for
prior Distribution Dates that have not previously been paid (in the order of the
Distribution Dates to which such amounts relate, amounts with respect to the
earliest Distribution Dates being paid first);
(vi) Sixth, to the Preferred Shareholder, the Monthly Redemption
Amount with respect to the Class C Equity Interests for the current Distribution
Date;
(vii) Seventh, to the Preferred Shareholder, all Monthly Redemption
Amounts due with respect to Class B Equity Interests (or portions thereof) for
prior Distribution Dates that have not previously been paid (in the order of the
Distribution Dates to which such amounts relate, amounts with respect to the
earliest Distribution Dates being paid first);
(viii) Eighth, to the Preferred Shareholder, the Monthly Redemption
Amount with respect to the Class B Equity Interests for the current Distribution
Date; and
(ix) Ninth to the Other Shareholders (including, without limitation to
Preferred Shareholder), in accordance with the number of Class A Shares owned by
each of the Other Shareholders.
6. The Liquidation Event Distribution provisions will be amended to
provide for the redemption of the Class C Equity Interests at their par value,
after the redemption of the Class B Equity Interests but prior to any
distribution to the Other Shareholders.
7. The "Monthly Redemption Amount" with respect to Class C Equity
-------------------------
Interests shall be the product of (A) 100% and (B) the Excess Cash Flow for such
period.
8. Upon any distribution by the Company of the Monthly Redemption Amount
with respect to Class C Equity Interests, or any other amounts in redemption of
Class C Equity Interests, Class C Equity Interests having a par value equal to
such redemption amount shall be redeemed and otherwise cancelled.
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9. Upon any distribution by the Other Company of the Monthly Redemption
Amount (as defined in the applicable Other Company Agreement) with respect to
the Other Class C Interests, or any other amounts in redemption of Other Class C
Interests, Class C Equity Interests having a par value equal to such redemption
amount shall be redeemed and otherwise cancelled. As used herein, "Other Class
-----------
C Interests" means the Class C beneficiary interests or the Class C Equity
-----------
Interests, as applicable, held by Preferred Shareholder in the Other Company.
10. At the time Lender receives its Class C Equity Interests, Lender also
shall receive equity options (the "Warrants") in the Company, granting Lender
the right to receive Class A Shares in the Company (without payment of
additional consideration) equal to a percentage of the then outstanding Class A
Shares in the Company, such percentage to be derived by (i) dividing the Class C
Amount by the sum of the Equity Value of the Company and the Class C Amount, and
(ii) multiplying the result by eighty percent (80%); provided, however, such
percentage shall in no event be less than eighty percent (80%) of the then
outstanding Class A shares. As used herein, the "Equity Value of the Company"
---------------------------
shall be calculated by multiplying by ten the underwriting net operating income
of the Facility, based on the Underwriting NOI Criteria calculated by Lender in
Lender's reasonable discretion for the preceding twelve (12) calendar months
(for which Lender has been provided the financial information required by
Section 5.1(b)(Q) of the Loan Agreement) or such other methodology as is
-----------------
satisfactory to Lender in its reasonable discretion, of the Property and
subtracting therefrom the sum of (i) the then outstanding Principal Indebtedness
together with any other amounts due on the Loan, (ii) the Class B Amount and
(iii) the Class C Amount. Notwithstanding anything to the contrary set forth
herein, (i)in no event shall the Equity Value of the Company be less than zero
and (ii) in no event shall the Class A Shares which Lender shall be entitled to
receive be less than twenty-five percent (25%) of the outstanding Class A Shares
of the Company.
11. Whenever distributions, including without limitation, liquidation
distributions, are made to any Class A Shares, Lender shall receive a
distribution equal to Lender's percentage ownership of Class A Shares in the
Company.
12. As the holder of its respective percentage of Class A Shares, Lender
may obtain such additional control rights as Lender requires in Lender's
reasonable discretion.
13. The Preferred Cash Management Agreement shall be modified (in Lender's
reasonable discretion) to provide for payment to Lender in respect of its Class
C and Class A Shares. Such amendment shall provide the Company with the right
described in Paragraph 7(2) of Exhibit D with respect to the Class C Equity
---------
Interests and any Class A Shares owned by NACC.
14. All capitalized terms not otherwise defined herein shall have the
meanings ascribed on Exhibit D or the Loan Agreement as applicable.
---------
15. Investment Certificate A and Pledge Securities. To the extent
----------------------------------------------
SELCO is a beneficial owner of the Company or the Other Company, nothing in the
Articles or the Agreement shall affect the prior claim or right of SELCO to
receive all distributions with respect
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to Excepted Property.
E-4
EXHIBIT F
Preferred Cash Management Terms
Lender and the Company will enter into a Preferred Cash Management
Agreement in form and substance satisfactory to Lender in Lender's discretion,
which will contain, without limitation, the following terms (conformed as
appropriate for a trust):
1. The Preferred Cash Collateral Account Bank shall maintain the
Preferred Cash Collateral Account, and shall maintain on a ledger-entry basis
the following sub-accounts thereof:
(i) the Company Sub-Account; and
(ii) the Preferred Disbursement Sub-Account.
2. The Preferred Cash Collateral Account Bank shall deposit into the
Preferred Cash Collateral Account the distributions (the "Equity Distributions")
--------------------
received from the Cash Collateral Account Bank for deposit into the Preferred
Cash Collateral Account.
3. During each Collection Period in which Lender is an equity owner in
the Borrower or Operator, Lender shall direct the Preferred Cash Collateral
Account Bank to disburse amounts from the Preferred Cash Collateral Account in
the following order and priority:
(a) First, to the Preferred Disbursement Sub-Account, an amount equal
-----
to all amounts due the Preferred Shareholder in respect of the Class B Equity
Interests and Class C Equity Interests (if any), in the order and priority set
forth in the Articles; pursuant to the Articles;
(b) Second, to the Preferred Disbursement Sub-Account, an amount
------
equal to all amounts due the Preferred Shareholder (if any) in respect of the
Class A Shares pursuant to the Articles; and
(c) Third, to the Company Sub-Account, any remaining funds.
-----
4. Amounts in the Preferred Disbursement Sub-Account will be disbursed to
the Preferred Shareholder and amounts in the Company Sub-Account will be
disbursed to the Company.
5. The Operator will pay the banking fees and expenses of the Preferred
Cash Collateral Account Bank.
6. The Preferred Cash Collateral Account shall be an Eligible Account (as
defined in the Loan Agreement).
F-1
7. If a Liquidation Event occurs, the Company shall deposit into the
Preferred Cash Collateral Account any Net Liquidation Proceeds After Debt
Service to be applied in accordance with the Articles.
8. All capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in Exhibit D.
---------
F-2
EXHIBIT G
Underwriting NOI Criteria
At the Stabilization Date, Lender shall determine the Adjusted Net
Operating Income of the Facility (as determined in accordance with the terms of
this Exhibit) on a trailing 12-month basis (based on the consecutive 12-month
-------
period ending in the month immediately preceding the Cut-Off Date for which
detailed financial information is available).
Adjusted Net Operating Income will be calculated based on the revenues
based on the trailing twelve (12) month period subject to adjustments for:
(a) all Operating Expenses, including without limitation, a
management fee equal to the greater of actual management fees or
five percent (5.0%) of total revenues;
(b) a reserve for capital expenditures and capital replacements equal
to at least $250 per unit (or such greater amount as shall be
indicated in the independent engineering reports);
(c) an adjustment for a vacancy allowance equal to the greater of (i)
the actual vacancy for the Facility, (ii) five percent (5%) of
Gross Revenues, and (iii) the market vacancy rate (but no less
than five (5%)) if actual vacancy is less than market or five
percent (5%);
(d) reserves for Basic Carrying Costs and Capital Expenses;
(e) verification of all sources of other income to determine whether
such income is recurring; and
(f) any other factors or matters that may have an impact on the
Adjusted Net Operating Income in accordance with Lender's
underwriting standards then in effect.
The expenses will be based on the trailing twelve (12) month period
preceding the Cut-Off Date for which full operating statements are available as
adjusted for any items that are non-recurring or not supported by historical
statements and for anticipated increases.
In determining Adjusted Net Operating Income, all pro forma
adjustments to revenue and expenses shall be approved by Lender in Lender's
reasonable discretion and shall be subject to Lender's full due diligence.
The above underwriting assumes that there is no material adverse
change
G-1
anticipated in the operations of the Facility or in the Adjusted Net Operating
Income of the Facility from the Closing Date to and including the Cut-Off Date.
Other adjustments as determined by Lender in its discretion consistent
with its due diligence findings and prevailing market conditions.
All capitalized terms not otherwise defined herein shall have the
meanings ascribed to such terms in the Agreement.
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