<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Period Ended March 31, 2000
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the Transition Period From _____________ to _____________
COMMISSION FILE NUMBER: 0-20765
SUNRISE ASSISTED LIVING, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 54-1746596
(State or other jurisdiction of (I.R.S.Employer
incorporation of organization) Identification No.)
7902 WESTPARK DRIVE
MCLEAN, VIRGINIA 22102
(Address of principal executive offices)
(703) 273-7500
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
periods that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No _____
--------
As of May 3, 2000, there were 21,689,326 shares of the Registrant's Common
Stock outstanding.
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<PAGE> 2
SUNRISE ASSISTED LIVING, INC.
FORM 10-Q
MARCH 31, 2000
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets at March 31, 2000 and
December 31, 1999 3
Consolidated Statements of Income for the three
months ended March 31, 2000 and 1999 4
Consolidated Statements of Cash Flows for the three
months ended March 31, 2000 and 1999 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
Item 3. Quantitative and Qualitative Disclosure About Market Risk 26
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 27
Signatures 29
</TABLE>
<PAGE> 3
SUNRISE ASSISTED LIVING, INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
-------------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 55,931 $ 53,540
Accounts receivable, net 13,923 15,441
Notes receivable 3,254 1,051
Deferred income taxes 5,604 8,221
Assets held for sale 34,377 33,724
Prepaid expenses and other current assets 55,576 54,568
----------- -----------
Total current assets 168,665 166,545
Property and equipment, net 819,735 763,306
Notes receivable 60,986 59,654
Management contracts and leaseholds, net 24,998 33,994
Costs in excess of assets acquired, net 35,511 35,412
Investments in unconsolidated assisted living facilities, net 20,121 20,435
Investments 5,750 5,750
Other assets 21,428 18,355
----------- -----------
Total assets $ 1,157,194 $ 1,103,451
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 4,769 $ 4,114
Accrued expenses and other current liabilities 27,188 23,373
Deferred revenue 1,461 7,475
Current maturities of long-term debt 32,620 36,103
----------- -----------
Total current liabilities 66,038 71,065
Long-term debt, less current maturities 720,716 664,840
Investments in unconsolidated assisted living facilities 2,649 2,561
Deferred income taxes 22,128 22,128
Other long-term liabilities 4,059 3,985
----------- -----------
Total liabilities 815,590 764,579
Minority interests 3,787 3,748
Preferred stock, $0.01 par value, 10,000,000 shares authorized,
no shares issued and outstanding - -
Common stock, $0.01 par value, 60,000,000 shares authorized,
21,829,326 and 21,938,742 shares issued and outstanding
in 2000 and 1999 218 219
Additional paid-in capital 302,614 304,014
Retained earnings 34,985 30,891
----------- -----------
Total stockholders' equity 337,817 335,124
----------- -----------
Total liabilities and stockholders' equity $ 1,157,194 $ 1,103,451
=========== ============
</TABLE>
Note: The balance sheet at December 31, 1999 has been derived from the
audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
See accompanying notes.
3
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SUNRISE ASSISTED LIVING, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three months ended
March 31,
-----------------------------
2000 1999
------------- --------------
(Unaudited) (Unaudited)
<S> <C> <C>
Operating revenue:
Resident fees $ 64,545 $ 44,318
Management and contract services 6,202 6,093
Income from property sales 6,055 967
----------- ----------
Total operating revenue 76,802 51,378
----------- ----------
Operating expenses:
Facility operating 40,173 25,406
Management and contract services 2,248 1,028
Facility development and pre-rental 2,121 1,067
General and administrative 6,463 3,651
Depreciation and amortization 7,405 5,840
Facility lease 2,794 684
----------- ----------
Total operating expenses 61,204 37,676
----------- ----------
Income from operations 15,598 13,702
Interest income (expense):
Interest income 3,081 2,586
Interest expense (11,162) (6,706)
----------- ----------
Total interest expense (8,081) (4,120)
Equity in losses of unconsolidated assisted
living facilities (695) (6)
Minority interests (111) (191)
----------- ----------
Income before income taxes 6,711 9,385
Provision for income taxes (2,617) (2,159)
----------- ----------
Net income $ 4,094 $ 7,226
=========== ==========
Net income per common share:
Basic $ 0.19 $ 0.37
=========== ==========
Diluted $ 0.19 $ 0.35
=========== ==========
</TABLE>
See accompanying notes.
4
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SUNRISE ASSISTED LIVING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
2000 1999
------------ ------------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 4,094 $ 7,226
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on sale of interests - (70)
Equity in losses of unconsolidated assisted living facilities 695 6
Minority interests 111 191
Provision for bad debts 380 191
Provision for deferred income taxes 2,617 1,410
Depreciation and amortization 7,405 5,840
Amortization of discount on investments - (575)
Amortization of premium on investments - 6
Amortization of financing costs and discount on long-term debt 920 535
Changes in operating assets and liabilities:
(Increase) decrease:
Accounts receivable 1,138 3,957
Prepaid expenses and other current assets 3,573 (1,526)
Other assets (2,841) (2,035)
Assets held for sale (55) -
Increase (decrease):
Accounts payable and accrued expenses 4,483 66
Deferred revenue (6,014) (732)
Other liabilities 88 (126)
--------- ---------
Net cash provided by operating activities 16,594 14,364
--------- ---------
INVESTING ACTIVITIES
Proceeds from sale of properties 428 -
Acquisition of interests in facilities (1,098) -
Investment in property and equipment (54,700) (51,533)
Increase in investment and notes receivable (30,716) (18,190)
Proceeds from investments and notes receivable 23,985 5,133
Increase in restricted cash and cash equivalents (785) (231)
Contributions to investments in unconsolidated
assisted living facilities (657) (145)
Distributions from investments in unconsolidated
assisted living facilities 3 19
--------- ---------
Net cash used in investing activities (63,540) (64,947)
--------- ---------
FINANCING ACTIVITIES
Net proceeds from exercised options 2 1,923
Additional borrowings under long-term debt 112,661 33,061
Repayment of long-term debt (60,400) (456)
Financing costs paid (1,523) (253)
Capital contribution from minority interest - 1,000
Repurchase of stock (1,403) -
Net cash provided by financing activities 49,337 35,275
--------- ---------
Net increase (decrease) in cash and cash equivalents 2,391 (15,308)
Cash and cash equivalents at beginning of period 53,540 54,197
--------- ---------
Cash and cash equivalents at end of period $ 55,931 $ 38,889
========= =========
</TABLE>
See accompanying notes.
5
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SUNRISE ASSISTED LIVING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements of Sunrise Assisted
Living, Inc. and subsidiaries ("Sunrise") are unaudited and include all normal
recurring adjustments which are, in the opinion of management, necessary for a
fair presentation of the results for the three-month periods ended March 31,
2000 and 1999 pursuant to the instructions to Form 10-Q and Article 10 of
Regulation S-X. Certain information and footnote disclosures normally included
in the financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. These consolidated financial statements should be read in
conjunction with Sunrise's consolidated financial statements and the notes
thereto for the year ended December 31, 1999 included in Sunrise's 1999 Annual
Report to Shareholders. Operating results for the three-month period ended
March 31, 2000 are not necessarily indicative of the results that may be
expected for the entire year ending December 31, 2000.
Certain 1999 balances have been reclassified to conform with the 2000
presentation.
2. LONG-TERM DEBT
Long-term debt was $753.3 million at March 31, 2000 compared to $700.9
million at December 31, 1999.
A subsidiary of Sunrise has a syndicated revolving credit facility for
$400.0 million. The facility is used for general corporate purposes, including
the continued construction and development of assisted living facilities.
Sunrise guarantees the repayment of all amounts outstanding under this credit
facility. The credit facility is secured by cross-collateralized first
mortgages on the real property and improvements and first liens on all other
assets of the subsidiary. Advances under the facility bear interest at LIBOR
plus 1.75%. The credit facility expires in July 2002. There were $193.4 million
of advances outstanding under this credit facility as of March 31, 2000.
A subsidiary has a revolving credit facility totaling $19.7 million. The
repayment of the amounts outstanding under this credit facility is also
guaranteed by Sunrise. The credit facility is secured by real property and
first liens on other assets. Advances under this facility totaled $16.3 million
as of March 31, 2000 and bear interest at LIBOR plus 1.95%.
On June 6, 1997, Sunrise issued and sold $150.0 million aggregate principal
amount of 5 1/2% convertible subordinated notes due 2002. The convertible notes
bear interest at 5 1/2% per annum, payable semiannually on June 15 and December
15 of each year. The conversion price is $37.1875 (equivalent to a conversion
rate of 26.89 shares per $1,000 principal amount of the Notes). The convertible
notes are redeemable at the option of Sunrise commencing June 15, 2000, at
specified premiums. The holders of the convertible notes may require Sunrise to
repurchase the convertible notes upon a change of control of Sunrise.
6
<PAGE> 7
Sunrise has an $85.5 million, excluding a $0.5 million discount,
multi-property mortgage, collateralized by a blanket first mortgage on all
assets of a subsidiary of Sunrise, consisting of 15 facilities. The
multi-property mortgage consists of two separate debt classes: Class A in the
amount of $65.0 million bears a fixed interest rate of 8.56% and is interest
only until the maturity date of May 31, 2001; and Class B in the amount of
$20.5 million bears a variable interest rate of LIBOR plus 1.75% and is payable
in installments through May 2001.
In May 1999, Sunrise entered into a multi-property first mortgage for $88.0
million secured by eight properties. The loan accrues interest at 7.14% and
matures on June 1, 2009. The proceeds were used to reduce the balance of one of
Sunrise's credit facilities and, as a result, convert a portion of Sunrise's
variable rate debt into a fixed rate debt. At March 31, 2000, $86.9 million was
outstanding.
On March 22, 2000, Sunrise closed a $75.0 million loan secured by eight
properties. The loan bears interest at a fixed rate of 8.66% and matures in
April 2007. The proceeds of the loan were used to repay $59.0 million of
floating rate construction debt and to help fund Sunrise's development and
$30.0 million stock repurchase programs. There were $75.0 million of advances
outstanding under this line as of March 31, 2000.
As of March 31, 2000, Sunrise has various other debt outstanding totaling
approximately $146.2 million with interest rates ranging from 4.2% to 10.0%.
Sunrise has entered into a swap transaction whereby, effective during the
period June 18, 1998 through June 18, 2001, outstanding advances of up to $19.0
million LIBOR floating rate debt bear interest at a fixed rate based on a fixed
LIBOR base rate of 7.30%.
3. STOCK OPTION PLANS
Sunrise has stock option plans providing for the grant of incentive and
non-qualified stock options to employees, directors, consultants and advisors
for a fixed number of shares with an exercise price equal to the fair market
value of the shares at the date of grant. Sunrise accounts for stock option
grants in accordance with APB Opinion No. 25, Accounting for Stock Issued to
Employees and accordingly recognizes no compensation expense for the stock
option grants.
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<PAGE> 8
A summary of Sunrise's stock option activity and related information as of
March 31, 2000, is presented below:
<TABLE>
<CAPTION>
Weighted-
Average
Shares Exercise
Options (000) Price
------- -----------------------------------------
<S> <C> <C>
Outstanding - January 1, 2000 5,250 $23.28
Granted 892 12.38
Exercised (1) 3.00
Canceled (265) 25.81
---------------
Outstanding - March 31, 2000 5,876 22.39
===============
Exercisable - March 31, 2000 2,076
===============
</TABLE>
The following table summarizes information about stock options outstanding
at March 31, 2000:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-----------------------------------------------------------------------
Weighted- Weighted- Weighted-
Number Average Average Number Average
Range of Outstanding Remaining Exercise Exercisable Exercise
Exercise Prices (000) Contractual Life Price (000) Price
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 3.00 - 8.00 156 4.9 $ 4.95 156 $ 4.95
8.01 - 20.00 1,893 9.1 13.28 336 15.95
20.01 - 25.63 2,710 7.3 24.96 1,327 25.02
25.64 - 44.56 1,117 8.7 34.05 257 37.94
----------- --------
5,876 2,076
=========== ========
</TABLE>
4. COMMITMENTS
Sunrise has entered into contracts to purchase and lease properties for
development of additional assisted living facilities. Total contracted purchase
price of these sites amounts to $70.1 million. Sunrise is pursuing additional
development opportunities and also plans to acquire additional facilities as
market conditions warrant.
8
<PAGE> 9
5. NET INCOME PER COMMON SHARE
The following table summarizes the computation of basic and diluted net
income per share amounts presented in the accompanying consolidated statements
of operations (in thousands, except per share data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------------
2000 1999
---------------------------
<S> <C> <C>
Numerator for basic and diluted net income
per share $ 4,094 $ 7,226
======== ========
Denominator:
Denominator for basic net income per
common share-weighted average shares 21,937 19,491
Effect of dilutive securities:
Employee stock options 119 1,052
-------- --------
Denominator for diluted net income per common
share-weighted average shares plus assumed
conversions 22,056 20,543
-------- --------
Basic net income per common share $ 0.19 $ 0.37
======== ========
Diluted net income per common share $ 0.19 $ 0.35
======== ========
</TABLE>
Shares issuable upon the conversion of convertible subordinated notes have
been excluded from the computation because the effect of their inclusion would
be anti-dilutive.
6. PREPAID EXPENSES AND OTHER CURRENT ASSETS
Included in prepaid expenses and other current assets are net receivables
from unconsolidated partnerships or limited liability companies of $40.1
million and $38.6 million as of March 31, 2000 and December 31, 1999,
respectively, which relate primarily to development activities.
9
<PAGE> 10
7. ACQUISITIONS
On May 14, 1999, Sunrise completed its acquisition of Karrington Health,
Inc. through a tax-free, stock-for-stock transaction in which it issued 2.3
million common shares in exchange for all the outstanding shares of Karrington
and Karrington became a wholly owned subsidiary of Sunrise. The total
transaction was valued at $85.1 million, including merger and stock issuance
costs of $8.4 million and the fair value of assumed employee stock options of
$1.5 million. Karrington operates assisted living facilities providing services
to the elderly.
The acquisition was accounted for using the purchase method of accounting
and, accordingly, the results of operations of Karrington for the period from
May 14, 1999 (excluding assets held for sale) are included in the accompanying
consolidated financial statements. The purchase price was allocated to the
assets acquired and liabilities assumed based on their estimated fair values,
which are subject to adjustment when additional information concerning asset
and liability valuations is finalized. Based on the preliminary allocation of
the purchase price, the excess purchase price over the estimated fair value of
the net assets acquired was $35.5 million. Sunrise acquired cash of $2.4
million in the Karrington acquisition, which is included in the statement of
cash flows. The remainder of the Karrington transaction was a non-cash
transaction for the statement of cash flows.
The following unaudited pro forma information presents the results of
operations of Sunrise for the three-month period ended March 31, 1999 as if the
acquisition of Karrington had taken place as of January 1, 1999. This pro forma
information excludes the results of operations of the assets held for sale. See
Note 9. Assets Held For Sale (in thousands, except per share).
1999
---------------
Revenue $59,437
Net income 328
Basic earnings per share 0.02
Diluted earnings per share 0.01
These pro forma results of operations have been prepared for comparative
purposes only and do not purport to be indicative of the results of operations
which actually would have resulted had the acquisition occurred on the date
indicated, or which may result in the future.
8. INFORMATION ABOUT SUNRISE'S SEGMENTS
In the first quarter of 2000, Sunrise reorganized and began reporting the
results of its three operating divisions - Sunrise Management Services, Sunrise
Properties and Sunrise Ventures. Sunrise Assisted Living, Inc. continues as the
parent company of each division and develops Sunrise's strategy and overall
business plan and coordinates the activities of all business divisions. The
Sunrise Management Services division provides full-service assisted living
management services, in the U.S. and internationally, for all homes owned by
Sunrise or managed by Sunrise for third-parties. The Sunrise Management
Services division also
10
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provides consulting services on market and site selection and pre-opening sales
and marketing. The Sunrise Properties division is responsible for all Sunrise
real estate operations, including development, construction, property
management, project and permanent financing, real estate and property sales.
Sunrise Ventures is a new division that is responsible for the development of
new business opportunities in senior care and services.
Segment information is as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
2000 1999
-------------------------
<S> <C> <C>
Operating Revenue:
Sunrise Management Services $51,186 $33,376
Sunrise Properties 71,812 47,453
Elimination of intersegment revenue (46,196) (29,451)
-------------------------
Total consolidated operating revenue 76,802 51,378
-------------------------
Operating Expenses:
Sunrise Management services 46,891 29,051
Sunrise Properties 58,495 37,328
Sunrise Ventures 152 27
Elimination of intersegment expenses (46,196) (29,451)
-------------------------
Total consolidated operating expenses 59,342 36,955
-------------------------
Segment operating income 17,460 14,423
Reconciliation to net income:
Corporate operating expenses 1,862 721
-------------------------
Income from operations 15,598 13,702
Interest expense, net (8,081) (4,120)
Equity in losses of unconsolidated assisted living facilities (695) (6)
Minority interests (111) (191)
Provision for income taxes (2,617) (2,159)
-------------------------
Total consolidated net income $ 4,094 $ 7,226
=========================
</TABLE>
Management and contract services revenue from operations in England was
$0.1 million and $0.4 million for the three months ended March 31, 2000 and
1999, respectively. Management and contract services revenue from operations in
Canada was $0.2 million for the three months ended March 31, 1999. The
remaining revenues and all long-lived assets are domestic.
9. ASSETS HELD FOR SALE
Sunrise intends to sell the remaining 16 operating properties and four
zoned development sites acquired from Karrington Health, Inc. Sunrise believes
that these properties do not fit with its strategy because these properties are
not located within its target markets, cannot be repositioned easily as Sunrise
facilities and would not be able to achieve benefits of regional clustering.
Consequently, these assets are presented on the balance sheet as assets held
for sale at their estimated fair values less estimated costs to sell. The
operating
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results of these assets are not reflected in Sunrise's consolidated operating
results. During the first quarter of 2000, Sunrise entered into a definitive
purchase and sale agreement for two of the operating assets. Sunrise
anticipates completing the sale of substantially all of the assets held for
sale by the third quarter of 2000.
The operating results of these properties for the three-months ended March
31, 2000 are as follows:
Revenue $ 3,695
Operating expenses 3,063
Interest expense 989
-----------------
Net loss $ (357)
=================
12
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the information
contained in the consolidated financial statements, including the related notes,
and other financial information appearing elsewhere in this Form 10-Q. This
management's discussion and analysis contains certain forward-looking statements
that involve risks and uncertainties. Sunrise's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of various factors, including development and construction risks,
acquisition risks, licensing risks, business conditions, competition, Sunrise's
ability to operate the Karrington properties profitably, risks of downturns in
economic conditions generally, satisfaction of closing conditions and
availability of financing for development and acquisitions. Some of these
factors are discussed elsewhere in this Form 10-Q and in Sunrise's 1999 Annual
Report on Form 10-K. Unless the context suggests otherwise, references herein to
"Sunrise" mean Sunrise Assisted Living, Inc. and its subsidiaries.
OVERVIEW
Sunrise is a provider of assisted living services for seniors. Sunrise
currently operates 152 facilities in 23 states with a capacity of over 12,000
residents, including 121 facilities owned by Sunrise or in which it has
ownership interests, 16 facilities owned by Sunrise and held for sale following
the acquisition of Karrington Health, Inc. and 15 facilities managed for third
parties.
In the first quarter of 2000, Sunrise reorganized and began reporting the
results of its three operating divisions--Sunrise Management Services, Sunrise
Properties and Sunrise Ventures. Sunrise Assisted Living, Inc. continues as the
parent company of each division. It develops Sunrise's strategy and overall
business plan and coordinates the activities of all business divisions. The
Sunrise Management Services division provides full-service assisted living
management services, in the U.S. and internationally, for all homes owned by
Sunrise or managed by Sunrise for third-parties. The Sunrise Management Services
division also provides consulting services on market and site selection and
pre-opening sales and marketing. The Sunrise Properties division is responsible
for all Sunrise real estate operations, including development, construction,
property management, project and permanent financing, real estate and property
sales. Sunrise Ventures is a new division that is responsible for the
development of new business opportunities in senior care and services.
Sunrise's management believes that Sunrise's divisional reorganization will
help Sunrise to manage growth more efficiently and pursue new business
opportunities, while allowing Sunrise to better serve its residents and its
growing number of third-party property owners.
13
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RESULTS OF OPERATIONS
CONSOLIDATED
Sunrise has continued to experience growth in operations over the 12 months
ended March 31, 2000. During this period, Sunrise began operating an additional
66 facilities in which it has an ownership interest (including facilities held
for sale following the acquisition of Karrington) and managing an additional
four facilities for independent third parties. As a result, operating revenue
increased to $76.8 million for the three months ended March 31, 2000 from $51.4
million for the three months ended March 31, 1999. Net income decreased by $3.1
million to $4.1 million for the three months ended March 31, 2000, or $0.19 per
share (diluted), from $7.2 million for the three months ended March 31, 1999, or
$0.35 per share (diluted). The decrease in net income between the two periods
was primarily due to $4.2 million in pre-tax start-up losses recognized in the
first quarter 2000 for the 22 communities opened by Sunrise in the fourth
quarter 1999 and the first quarter 2000, more than triple the number of homes
Sunrise opened during the same period last year. Sunrise recognized $6.1
million in income from the sale of communities in prior periods. See below for
further discussion.
SUNRISE MANAGEMENT SERVICES
The following table sets forth the components of Sunrise Management Services net
income (in thousands):
<TABLE>
<CAPTION>
Three Months Ended March 31,
- -------------------------------------------------------------------------------------------------------------
2000 1999
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operating revenue:
Management and contract services $51,186 $33,376
Operating expenses:
Management and contract services 42,499 26,434
General and administrative 4,077 2,443
Depreciation and amortization 315 174
- -------------------------------------------------------------------------------------------------------------
Total operating expenses 46,891 29,051
- -------------------------------------------------------------------------------------------------------------
Operating income 4,295 4,325
Provision for income taxes (1,674) (995)
- -------------------------------------------------------------------------------------------------------------
Sunrise Management Services net income $ 2,621 $ 3,330
- -------------------------------------------------------------------------------------------------------------
</TABLE>
Note: Management and contract services revenues include revenue from Sunrise
Properties in the amounts of $46,196 and $29,451 for the first quarter of
2000 and 1999, respectively.
Sunrise Management Services provides full-service assisted living
management services, in the U.S. and internationally, for all communities owned
or managed by Sunrise. In addition, the Sunrise Management Services division
provides management and consulting services to third parties on market and site
selection, pre-opening sales and marketing, start-up training, and management
services for properties under development and construction. During the first
quarter 2000, Sunrise Management Services opened and began managing ten new
communities and began providing pre-opening services for eight new communities
under
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construction. Sunrise Management Services had net income of $2.6 million, or
$0.12 per share (diluted), for the first quarter 2000 compared to $3.3 million,
or $0.16 per share (diluted), in the prior year quarter. The reduction in net
income was due primarily to a 69% increase in divisional general and
administrative expenses and an increase in the income tax rate between the first
quarter 2000 and the first quarter 1999.
Operating Revenue. The Management Services division revenues include
management and contract services revenues from third-party owners and internal
management services revenues for services provided to the Sunrise Properties
division. Internal fees reflect market-based fees for the management services.
Total revenues for Sunrise Management Services increased 53% to $51.2 million
for the three months ended March 31, 2000 from $33.4 million for the three
months ended March 31, 1999. This increase was primarily due to the growth in
the number of communities operated by the Management Services division. The
total number of communities operated increased 88% to 150 for first quarter 2000
up from 80 communities in the first quarter of 1999. This growth resulted from
the addition of 43 facilities in conjunction with the Karrington acquisition,
the completion and opening of 23 additional facilities, and the addition of four
managed facilities.
Operating Expenses. The Management Services division operating expenses
include all operating expenses of facilities managed for third-party owners and
the Sunrise Properties division. Total operating expenses for the three months
ended March 31, 2000 increased 61% to $46.9 million from $29.1 million for the
three months ended March 31, 1999. Management and contract services expenses for
the three months ended March 31, 2000 increased $16.1 million, or 61%, to $42.5
million from $26.4 million for the three months ended March 31, 1999. This
increase was directly related to the increase in the number of communities
operated by Management Services to 150 in the first quarter of 2000 compared to
80 in the first quarter of 1999. General and administrative expenses increased
$1.6 million, or 67%, to $4.1 million for the three months ended March 31, 2000
from $2.4 million for the three months ended March 31, 1999. The general and
administrative expenses for the Management Services division have increased as
the division added personnel and other infrastructure to prepare for the
Karrington acquisition in May 1999 and for the substantial increase in home
openings during the last six months.
15
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SUNRISE PROPERTIES
The following table sets forth the components of Sunrise Properties net income
(in thousands):
<TABLE>
<CAPTION>
Three Months Ended March 31,
- -------------------------------------------------------------------------------------------------------------
2000 1999
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operating revenue:
Resident fees $64,545 $44,318
Management and contract services 1,212 2,168
Income from property sales 6,055 967
- -------------------------------------------------------------------------------------------------------------
Total operating revenue 71,812 47,453
Operating expenses:
Facility operating 40,173 25,406
Management and contract services 5,945 4,045
Facility development and pre-rental 2,121 1,067
General and administrative 809 499
Depreciation and amortization 6,653 5,627
Facility lease 2,794 684
- -------------------------------------------------------------------------------------------------------------
Total operating expenses 58,495 37,328
- -------------------------------------------------------------------------------------------------------------
Operating income 13,317 10,125
Interest expense, net (8,081) (4,120)
Equity in losses of unconsolidated assisted
living facilities (695) (6)
Minority interest (111) (191)
Provision for income taxes (1,728) (1,336)
- -------------------------------------------------------------------------------------------------------------
Sunrise Properties net income $2,702 $4,472
- -------------------------------------------------------------------------------------------------------------
</TABLE>
Note: Operating expenses include costs with Sunrise Management Services in the
amounts of $46,196 and $29,451 for the first quarter of 2000 and 1999,
respectively.
Sunrise Properties is responsible for all Sunrise real estate operations,
including development, construction, project and permanent financing, and real
estate sales. As of March 31, 2000, the Sunrise Properties division wholly-owned
109 communities, a 76% increase over the 62 communities wholly-owned as of March
31, 1999. In addition, Sunrise Properties has majority ownership interests in
four communities, minority ownership interests in another 22 communities, 24
communities under construction, and over 40 other properties under development.
Sunrise Properties' growth objectives include developing new Sunrise model
assisted living facilities and selectively acquiring existing facilities.
Sunrise Properties currently has 24 facilities under construction with a
resident capacity of over 1,900. Sunrise Properties has also entered into
contracts to purchase 43 additional development sites, 24 of which are zoned,
and to lease 2 additional sites under long-term ground leases. Sunrise
Properties is pursuing additional development opportunities and also plans to
acquire additional facilities as market conditions warrant.
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<PAGE> 17
Sunrise Properties' operating objectives include its previously-announced
plan of selling selected real estate properties, subject to market conditions,
as a normal part of its operations while retaining long-term management through
operating agreements. This strategy of selling selected real estate properties
as a normal part of operations is expected to enable Sunrise to reduce debt,
redeploy its capital into new development projects and realize gains on
appreciated real estate. In June 1999, Sunrise completed the sale of two
assisted living facilities located in Columbia, Maryland and Norwood,
Massachusetts for an aggregate sales price of $27.9 million in cash. The
transaction resulted in the realization of $11.3 million in gain over the 3
quarters following the sale, subject to certain contingencies being met or
waived by the buyers, of which the final $6.1 million was recognized during the
three months ended March 31, 2000. Previously, in September 1998, Sunrise
completed the sale of two assisted living facilities located in Maryland for an
aggregate sales price of $29.3 million in cash that will result in the
realization of up to a $6.4 million gain. As of March 31, 2000, Sunrise has
recognized $3.4 million of the gain. The remaining gain is deferred, the
recognition of which is contingent upon future events. For tax purposes, the
transactions are tax-free exchanges. Sunrise continues to operate the facilities
under long-term operating agreements.
Sunrise Properties continues to explore international development and
acquisition possibilities in the United Kingdom and Canada and has entered into
a joint venture arrangement with a third party that is providing up to $55.3
million of the equity capital to develop up to 22 projects. Currently, the joint
venture has one property operating in the United Kingdom, eight properties under
development in Canada, and purchase commitments for two properties in the United
Kingdom. Sunrise Properties and Sunrise Management Services provide management
and contract services to the joint venture on a contract-fee basis with rights
to acquire the assets in the future and have agreed to invest up to $2.8 million
of equity capital in the joint venture. As of March 31, 2000, the third party
has provided approximately $20.8 million and Sunrise Properties has provided
$1.7 million of equity capital to the joint venture.
Sunrise Properties had net income of $2.7 million, or $0.12 per share
(diluted), for the first quarter 2000 compared to $4.5 million, or $0.22 per
share (diluted), in the prior year period. This decrease in net income was due
primarily to start-up losses from the record number of new communities opened in
the previous two quarters.
Operating Revenue. Sunrise Properties revenues include resident fees from
Sunrise owned properties, management service revenues from consulting and
pre-opening services contracts with third parties, and income from the sales of
owned communities. Sunrise Properties revenues increased 51% to $71.8 million
for the three months ended March 31, 2000 from $47.5 million for the three
months ended March 31, 1999. Resident fees, including community fees, for the
three months ended March 31, 2000 increased $20.2 million, or 46%, to $64.5
million from $44.3 million for the three months ended March 31, 1999. This
increase was due primarily to the inclusion for the three months ended March 31,
2000 of approximately $16.5 million of resident fees generated from the
operations of
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<PAGE> 18
assisted living facilities open during the three months ended March 31, 2000
that were not open during the three months ended March 31, 1999. The remaining
increase in resident fees was due primarily to an increase in the average daily
resident rate, excluding community fees, offset, in part, by a decrease in the
average resident occupancy for facilities that were owned and operated by
Sunrise during both periods.
Average resident occupancy for owned facilities operated by Sunrise for at
least 12 months or that have achieved stabilization of 95% or above at the
beginning of the period, decreased to 93.5% for the three months ended March 31,
2000 compared to 95.6% for the three months ended March 31, 1999. The average
daily resident fee, excluding community fees, for these stabilized facilities
increased to $105 for the three months ended March 31, 2000 from $96 for the
three months ended March 31, 1999. The increase in the average daily resident
fee is due to the inclusion of additional stabilized prototype facilities which
have higher basic care rates, a general increase in the basic care rate at other
facilities, and an increase in the number of residents receiving plus care and
reminiscence care services.
Management and contract services revenue decreased $1.0 million to $1.2
million for the three months ended March 31, 2000 from $2.2 million for the
three months ended March 31, 1999. This decrease is due to the number of
third-party contracts in place during each of the respective periods, and the
stage of completion on each contact. There were 13 contracts in place during
the three months ended March 31, 2000 compared to 17 contracts for the three
months ended March 31, 1999.
During the three months ended March 31, 2000, Sunrise Properties income
from property sales was $6.1 million compared to $1.0 million for the three
months ended March 31, 1999, for an increase of $5.1 million. The $6.1 million
of income recognized in the first quarter of 2000 and the $1.0 million
recognized in the first quarter of 1999 were part of the income deferred from
previous property sales until certain contingencies were met or waived by the
buyers. These sales were part of Sunrise's asset sale/long-term manage-back
program.
Operating Expenses. Sunrise Properties operating expenses for the three
months ended March 31, 2000 increased 57% to $58.5 million from $37.3 million
for the three months ended March 31, 1999. Facility operating expenses for the
three months ended March 31, 2000 increased 58% to $40.2 million from $25.4
million for the three months ended March 31, 1999. Of the $14.8 million
increase, approximately $12.4 million was attributable to expenses from
operations of additional assisted living facilities open during the three months
ended March 31, 2000 that were not open during the same period in 1999. The
remaining balance of the increase was primarily due to an increase in labor and
other expenses at facilities that were operational for a full quarter in both
periods.
Management and contract services expense represents amounts Sunrise
Properties pays to Sunrise Management Services for management of its
wholly-owned and majority owned facilities. Management and contract services
expense for the three months ended March 31, 2000 increased $1.9 million to $5.9
million from $4.0 million for the three months ended
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<PAGE> 19
March 31, 1999. This increase is attributable directly to the growth in
wholly-owned properties to 109 as of March 31, 2000 from 62 as of March 31,
1999.
Facility development and pre-rental expense increased $1.0 million to $2.1
million for the three months ended March 31, 2000 compared to $1.1 million for
the same period in 1999. The primary cause of this increase is the number of
properties that incurred pre-rental expenses in each period; 22 properties (10
wholly-owned) which were opened during the six months ended March 31, 2000
compared to 6 properties (3 wholly-owned) which were opened during the six
months ended March 31, 1999.
Depreciation and amortization for the three months ended March 31, 2000
increased $1.0 million, or 18%, to $6.6 million from $5.6 million for the three
months ended March 31, 1999. Of this increase, $0.8 million relates to the
depreciable assets acquired from Karrington and the remainder is due to the
increase in the number of facilities open during the three months ended March
31, 2000 that were not open during the same period in 1999.
Facility lease expense was $2.8 million for the three months ended March
31, 2000 compared to $0.7 million for the three months ended March 31, 1999.
This is directly attributable to the addition of 14 leased facilities in
conjunction with the Karrington acquisition in May 1999.
Interest Income (Expense). Interest income increased to $3.1 million for
the three months ended March 31, 2000 compared to $2.6 million for the three
months ended March 31, 1999. This increase was primarily due to an increase in
notes receivable. Interest expense increased for the three months ended March
31, 2000 to $11.2 million from $6.7 million for the three months ended March 31,
1999. Of this $4.5 million increase, $1.7 million was due to additional
borrowings under the $400.0 million credit facility, $0.4 million relates to
debt on facilities acquired from Karrington, and the remainder due to an overall
increase in total debt as of March 31, 2000 compared to March 31, 1999.
Equity in losses of unconsolidated assisted living facilities. Equity in
losses of unconsolidated assisted living facilities was $0.7 million for the
three months ended March 31, 2000 compared to zero for the three months ended
March 31, 1999. The primary reason for the increase is start-up losses on ten
joint venture facilities opened in the six months ended March 31, 2000.
SUNRISE VENTURES
Operating Expenses. Sunrise Ventures operating expenses for the three
months ended March 31, 2000 were $0.2 million compared to $0.02 million for the
three months ended March 31, 1999. These expenses were primarily general and
administrative expenses.
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<PAGE> 20
CORPORATE EXPENSES
Operating Expenses. Parent company operating expenses for the three months
ended March 31, 2000 increased 158% to $1.9 million from $0.7 million for the
three months ended March 31, 1999. The increase was due to the addition of
personnel and other infrastructure in anticipation of the substantial growth of
the company.
Provision for Income Taxes. The provision for income taxes for Sunrise was
$2.6 million for the three months ended March 31, 2000 compared to $2.2 million
for the three months ended March 31, 1999. The increase was due to an increase
in the effective tax rate to 39% in the first quarter of 2000 compared to 23% in
the first quarter of 1999. Utilization of operations-related deferred tax
benefits reduced Sunrise's federal and state income taxes by $1.4 million for
the three months ended March 31, 1999.
LIQUIDITY AND CAPITAL RESOURCES
To date, Sunrise has financed its operations from long-term borrowings,
equity offerings and cash generated from operations. At March 31, 2000, Sunrise
had $753.3 million of outstanding debt, at a weighted average interest rate of
7.48%. Of the amount of outstanding debt, Sunrise had $444.2 million of
fixed-rate debt, excluding a $0.5 million loan discount, at a weighted average
interest rate of 7.22%, and $309.6 million of variable rate debt at a weighted
average interest rate of 7.85%.
At March 31, 2000, Sunrise had approximately $55.9 million in unrestricted
cash and cash equivalents, including $21.7 million in high-quality, short-term
investments (A1/P1 rated) and currently has $210.1 million of unused lines of
credit.
A subsidiary of Sunrise has a syndicated revolving credit facility for
$400.0 million. Sunrise guarantees the repayment of all amounts outstanding
under this credit facility. The credit facility expires in July 2002. The credit
facility is secured by cross-collateralized first mortgages on the real property
and improvements and first liens on all other assets of the subsidiary. Advances
under the facility bear interest at LIBOR plus 1.75%. There were $193.4 million
of advances outstanding under this credit facility as of March 31, 2000.
A subsidiary of Sunrise has a revolving credit facility totaling $19.8
million. The repayments of the amounts outstanding under this credit facility
are guaranteed by Sunrise. The credit facility is secured by real property and
first liens on other assets. Advances under this facility bear interest at LIBOR
plus 1.95% and totaled $16.3 million as of March 31, 2000.
On June 6, 1997, Sunrise issued and sold $150.0 million aggregate principal
amount of 5 1/2% convertible subordinated notes due 2002. The convertible notes
bear interest at 5 1/2% per annum payable semiannually on June 15 and December
15 of each year. The conversion price is $37.1875, which is equivalent to a
conversion rate of 26.89 shares per $1,000
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<PAGE> 21
principal amount of the notes. The convertible notes are redeemable at the
option of Sunrise commencing June 15, 2000, at specified premiums. The holders
of the convertible notes may require Sunrise to repurchase the notes upon a
change of control of Sunrise, as defined in the convertible notes.
Sunrise has an $85.5 million, excluding a $0.5 million discount,
multi-property mortgage, collateralized by a blanket first mortgage on all
assets of a subsidiary of Sunrise, consisting of 15 facilities. The
multi-property mortgage consists of two separate debt classes: Class A in the
amount of $65.0 million bears a fixed interest rate of 8.56% and is interest
only until the maturity date of May 31, 2001; and Class B in the amount of $20.5
million bears a variable interest rate of LIBOR plus 1.75% and is payable in
installments through May 2001.
In May 1999, Sunrise entered into a multi-property first mortgage for $88.0
million secured by eight properties. The loan accrues interest at 7.14% and
matures on June 1, 2009. The proceeds were used to reduce the balance of one of
Sunrise's credit facilities and, as a result, convert a portion of Sunrise's
variable rate debt into a fixed rate debt. At March 31, 2000, $86.9 million was
outstanding.
On March 22, 2000, Sunrise closed a $75.0 million loan secured by eight
properties. The loan bears interest at a fixed rate of 8.66% and matures in
April 2007. The proceeds of the loan were used to repay $59.0 million of
floating rate construction debt and to help fund Sunrise's development and $30.0
million stock repurchase programs. There were $75.0 million of advances
outstanding under this line as of March 31, 2000.
As of March 31, 2000, Sunrise had various other debt outstanding totaling
approximately $146.2 million with interest rates ranging from 4.2% to 10.0%.
Sunrise has entered into a swap transaction whereby, effective during the
period June 18, 1998 through June 18, 2001, outstanding advances of up to $19.0
million LIBOR floating rate debt bear interest at a fixed rate based on a fixed
LIBOR base rate of 7.30%. Sunrise recorded net interest expense for the three
months ended March 31, 2000 and 1999 in the amounts of $63,000 and $132,000,
respectively, for swap transactions.
There are various financial covenants and other restrictions in Sunrise's
debt instruments, including provisions which:
- require it to meet specified financial tests. For example, Sunrise's
$85.5 million multi-property mortgage, which is secured by 15 of its
facilities, requires that these facilities maintain a cash flow to
interest expense coverage ratio of at least 1.25 to 1. Sunrise's
$400.0 million credit facility requires Sunrise to have a consolidated
tangible net worth of at least $258.0 million and to maintain a
consolidated minimum cash liquidity balance of at least $25.0 million.
These tests are administered on a monthly or quarterly basis,
depending on the covenant;
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<PAGE> 22
- require consent for changes in management or control of Sunrise. For
example, Sunrise's $400.0 million revolving credit facility requires
the lender's consent for any merger where Paul Klaassen or Teresa
Klaassen does not remain chairman of the board and chief executive
officer of Sunrise;
- restrict the ability of Sunrise subsidiaries to borrow additional
funds, dispose of assets or engage in mergers or other business
combinations without lender consent; and
- require that Sunrise maintain minimum occupancy levels at its
facilities to maintain designated levels of borrowings. For example,
Sunrise's $400.0 million credit facility requires that 85% occupancy
be achieved after 12 months for a newly opened facility and, following
this 12-month period, be maintained at or above that level.
Working capital increased to $102.6 million at March 31, 2000 from $95.5
million at December 31, 1999, primarily due to a decrease in deferred revenue
resulting from the recognition of the deferred gain on the sale of two assisted
living facilities in 1999.
Net cash provided by operating activities for the three months ended March
31, 2000 and 1999 was approximately $16.6 million and $14.4 million,
respectively, corresponding to the increased number of facilities operated by
Sunrise at March 31, 2000, compared to March 31, 1999.
During the three months ended March 31, 2000 and 1999, Sunrise used $63.5
million and $64.9 million, respectively, for investing activities. Investing
activities included investment in property and equipment in the amounts of $54.7
million and $51.5 million for the three months ended March 31, 2000 and 1999,
respectively, related to the construction of assisted living facilities. For the
three months ended March 31, 2000, Sunrise also invested $30.7 million in notes
receivable to facilitate the development of assisted living facilities with
third parties.
Net cash provided by financing activities was $49.3 million for the three
months ended March 31, 2000 compared to $35.3 million for the three months ended
March 31, 1999. Financing activities for the three months ended March 31, 2000
included additional borrowings of $112.7 million, offset, in part, by debt
repayments of $60.4 million. Additional borrowings during the three months ended
March 31, 2000 were primarily used to fund Sunrise's continued development of
assisted living facilities. During the three months ended March 31, 1999,
additional borrowings were $33.1 million and debt repayments were $0.5 million.
Sunrise currently estimates that the existing credit facilities, together
with existing working capital, proceeds from sales of selected real estate
assets as a normal part of its operations, financing commitments and financing
expected to be available, will be sufficient to fund facilities currently under
construction. Additional financing will, however, be required to complete
additional development and to refinance existing indebtedness. Sunrise estimates
that it will cost between $107.0 million and $155.0 million to complete the
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<PAGE> 23
facilities Sunrise currently has under construction. Sunrise expects that the
cash flow from operations, together with borrowings under existing credit
facilities, will be sufficient to fund Sunrise's needs for at least the next
twelve months. Sunrise expects from time to time to seek additional funding
through public or private financing sources including equity or debt financing.
There can be no assurance that required financing and refinancing will be
available on acceptable terms.
The ability of Sunrise to achieve its development plans will depend upon a
variety of factors, many of which will be outside the control of Sunrise. These
factors include:
- obtaining zoning, land use, building, occupancy, licensing and other
required governmental permits for the construction of new facilities
without experiencing significant delays;
- completing construction of new facilities on budget and on schedule;
- the ability to work with third-party contractors and subcontractors
who construct the facilities;
- shortages of labor or materials that could delay projects or make them
more expensive;
- adverse weather conditions that could delay projects;
- finding suitable sites for future development activities at acceptable
prices; and
- addressing changes in laws and regulations or how existing laws and
regulations are applied.
Sunrise cannot assure that it will not experience delays in completing
facilities under construction or in development or that it will be able to
identify suitable sites at acceptable prices for future development activities.
If it fails to achieve its development plans, its growth could slow, which would
adversely impact its revenues and results of operations.
Sunrise's growth plan includes the possible acquisition of assisted living
facilities or the companies operating assisted living facilities. The success of
Sunrise's acquisitions will be determined by numerous factors, including
Sunrise's ability to identify suitable acquisition candidates, competition for
such acquisitions, the purchase price, the financial performance of the
facilities after acquisition and the ability of Sunrise to integrate or operate
acquired facilities effectively. Any failure to do so may have a material
adverse effect on Sunrise's business, financial condition, revenues and
earnings.
The long-term care industry is highly competitive and the assisted living
segment is becoming increasingly competitive. Sunrise competes with numerous
other companies that provide similar long-term care alternatives, such as home
health care agencies, facility-based service programs, retirement communities,
convalescent centers and other assisted living providers. In general, regulatory
and other barriers to competitive entry in the assisted living industry are not
substantial. In pursuing its growth strategies, Sunrise has experienced and
expects to continue to experience increased competition in its efforts to
develop and acquire assisted living facilities. Some of the present and
potential competitors of Sunrise are significantly larger and have, or may
obtain, greater financial resources than Sunrise.
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<PAGE> 24
Consequently, Sunrise cannot assure that it will not encounter increased
competition that could limit its ability to attract residents or expand its
business, which could have a material adverse effect on its revenues and
earnings.
Sunrise expects that the number of owned and operated facilities will
continue to increase substantially as it pursues its development and acquisition
programs for new assisted living facilities. This rapid growth will place
significant demands on Sunrise's management resources. Sunrise's ability to
manage its growth effectively will require it to continue to expand its
operational, financial and management information systems and to continue to
attract, train, motivate, manage and retain key employees. If Sunrise is unable
to manage its growth effectively, its business, financial condition and results
of operations could be adversely affected.
Sunrise believes that some assisted living markets have become or are on
the verge of becoming overbuilt. As described above, regulation and other
barriers to entry into the assisted living industry are not substantial.
Consequently, the development of new assisted living facilities could outpace
demand. Overbuilding in Sunrise market areas could, therefore, cause Sunrise to
experience decreased occupancy, depressed margins or lower operating results.
Sunrise believes that each local market is different and Sunrise is and will
continue to react in a variety of ways, including selective price discounting,
to the specific competitive environment that exists in each market.
STOCK REPURCHASE PROGRAM
Sunrise previously announced that its Board of Directors has authorized the
Company to repurchase its outstanding shares up to an aggregate purchase price
of $30.0 million over a period of 12 months. To date, Sunrise has repurchased
250,000 shares at an average price of $13.34 per share through open-market
purchases during the period from March 30, 2000 to April 14, 2000.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement No.
133, Accounting for Derivative Instruments and Hedging Activities, which was to
be effective for all fiscal quarters of fiscal years beginning after June 15,
1999. In June 1999, the financial Accounting Standards Board issued statement
No. 137, Accounting for Derivative Instruments and Hedging Activities - Deferral
of the Effective Date of FASB statement No. 133. Statement No. 137 defers for
one year the effective date of statement No. 133, which will apply to all fiscal
quarters of all fiscal years beginning after June 15, 2000. Statement 133
standardizes the accounting for derivative instruments. Sunrise participates in
interest rate swap transactions, which would be considered derivatives under
Statement 133. Sunrise has not entered into any other derivative transactions.
To date, the net effect of the interest rate swaps to Sunrise's results of
operations has not been material. Therefore, Statement 133 is not anticipated to
affect results of operations or the financial position of Sunrise.
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<PAGE> 25
IMPACT OF INFLATION
Resident fees from owned assisted living facilities and management services
income from facilities operated by Sunrise for third parties are the primary
sources of revenue for Sunrise. These revenues are affected by daily resident
fee rates and facility occupancy rates. The rates charged for the delivery of
assisted living services are highly dependent upon local market conditions and
the competitive environment in which the facilities operate. In addition,
employee compensation expense is the principal cost element of property
operations. Employee compensation, including salary increases and the hiring of
additional staff to support Sunrise's growth initiatives, have previously had a
negative impact on operating margins and may again do so in the foreseeable
future.
Substantially all of Sunrise's resident agreements are for terms of one
year, but are terminable by the resident at any time upon 30 days' notice, and
allow, at the time of renewal, for adjustments in the daily fees payable, and
thus may enable Sunrise to seek increases in daily fees due to inflation or
other factors. Any increase would be subject to market and competitive
conditions and could result in a decrease in occupancy of Sunrise's facilities.
Sunrise believes, however, that the short-term nature of its resident agreements
generally serves to reduce the risk to Sunrise of the adverse effect of
inflation. There can be no assurance that resident fees will increase or that
costs will not increase due to inflation or other causes.
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<PAGE> 26
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
Sunrise is exposed to market risks related to fluctuations in interest
rates on its notes receivable, investments and debt. The purpose of the
following analyses is to provide a framework to understand Sunrise's sensitivity
to hypothetical changes in interest rates as of March 31, 2000.
Sunrise has investments in notes receivable and bonds. Investments in notes
receivable are primarily with joint venture arrangements in which Sunrise has
equity ownership percentages ranging from 9% to 20%. Sunrise's investment in
bonds is secured by the operating property subject to the debt and managed by
Sunrise. The majority of the investments have fixed rates. One of the notes has
an adjustable rate. Sunrise utilizes a combination of debt and equity financing
to fund its development, construction and acquisition activities. Sunrise seeks
the financing at the most favorable terms available at the time. When seeking
debt financing, Sunrise uses a combination of variable and fixed rate debt,
which ever is more favorable, in management's judgment at the time of financing.
Sunrise has used interest rate swaps to manage the interest rates on some
of its long-term borrowings. As of March 31, 2000, Sunrise had one interest rate
swap agreement which effectively establishes a fixed rate of 7.3% on up to $19.0
million of long-term debt until June 2001. Sunrise does not utilize forward or
option contracts on foreign currencies or commodities, or other types of
derivative financial instruments.
For fixed rate debt, changes in interest rates generally affect the fair
market value, but not earnings or cash flows. Conversely, for variable rate
debt, changes in interest rates generally do not impact fair market value, but
do affect the future earnings and cash flows. Sunrise generally cannot prepay
fixed rate debt prior to maturity without penalty. Therefore, interest rate risk
and changes in fair market value should not have a significant impact on the
fixed rate debt until Sunrise would be required to refinance such debt. Holding
the variable rate debt balance of $309.6 million at March 31, 2000 constant,
each one percentage point increase in interest rates would result in an increase
in annual interest expense of approximately $3.1 million.
The table below details by category the principal amount, the average
interest rates and the estimated fair market value. Some items in the various
categories of debt, excluding the convertible debentures, require periodic
principal payments prior to the final maturity date. Management considers the
fair market value of notes receivable to be equivalent to book value. The fair
market value estimates for debt securities are based on discounting future cash
flows utilizing current rates offered to Sunrise for debt of the same type and
remaining maturity. The fair market value estimate of the convertible notes is
based on the market value at March 31, 2000.
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<TABLE>
<CAPTION>
Estimated
Maturity Date Fair Market
2001 2002 2003 2004 2005 Thereafter Value
---- ---- ---- ---- ---- ---------- -----
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Notes receivable
Fixed rate $ 3,254 $ 3,829 $ 17,032 -- -- $ 14,743 $ 38,858
Average interest rate 7.2% 12.0% 10.0% -- -- 10.0% --
Variable rate -- -- -- $25,382 -- -- $ 25,382
Average interest rate -- -- -- 11.1% -- -- --
Investments
Bonds -- -- -- -- -- $5,750 $ 5,750
Average interest rate -- -- -- -- -- 11.0% --
LIABILITIES
Debt
Fixed rate $ 3,212 $ 68,620 $ 24,409 $ 3,629 $ 5,251 $ 189,118 $219,457
Average interest rate 7.8% 8.5% 7.1% 8.0% 8.0% 8.1% --
Variable rate $ 29,408 $ 24,715 $ 231,917 $10,880 $ 8,066 $ 4,600 $309,586
Average interest rate 7.6% 7.9% 7.9% 7.9% 8.3% 4.2% --
Convertible notes -- -- $150,000 -- -- -- $125,625
Average interest rate -- -- 5.5% -- -- -- --
</TABLE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit No. Exhibit Name
----------- ------------
10.1 Cross-Collateralization Agreement, dated as of March
22, 2000 by and among GMAC Commercial Mortgage
Corporation and Sunrise Borrowers (as defined in the
agreement)
10.2 Form of Multifamily Note (Multistate), dated as of
March 22, 2000, by and among GMAC Commercial Mortgage
Corporation and Sunrise Borrowers (as defined in the
note)
10.3 Form of Multifamily Mortgage, Assignment of Rents and
Security Agreement, dated as of March 22, 2000 by and
among GMAC Commercial Mortgage Corporation and Sunrise
Borrowers (as defined in the mortgage)
10.4 Form of Limited Guaranty, dated as of March 22, 2000,
by and among GMAC Commercial Mortgage Corporation and
Sunrise Borrowers (as defined in the guaranty)
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10.5+ Chief Executive Officer Severance Plan
10.6+ Senior Executive Officer Severance Plan
10.7+ Consulting Agreement dated as of April 1, 2000 by and
between Sunrise and David W. Faeder
10.8+ 1996 Non-Incentive Stock Option Plan, as amended
27 Financial Data Schedule, which is submitted
electronically to the Securities and Exchange
Commission for information only and is not filed.
(b) REPORTS ON FORM 8-K
On March 9, 2000, Sunrise filed a Form 8-K with the Securities and Exchange
Commission announcing the date of its 2000 Annual Meeting of Stockholders.
+ Represents management contract or compensatory plan.
28
<PAGE> 29
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SUNRISE ASSISTED LIVING, INC.
(Registrant)
Date: May 15, 2000 /s/ Larry E. Hulse
---------------------------- -------------------------------
Larry E. Hulse
Chief Financial Officer
29
<PAGE> 30
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Exhibit Name Page
----------- ------------ ----
<S> <C> <C>
10.1 Cross-Collateralization Agreement, dated as of March 22,
2000 by and among GMAC Commercial Mortgage Corporation and
Sunrise Borrowers (as defined in the agreement)
10.2 Form of Multifamily Note (Multistate), dated as of March
22, 2000, by and among GMAC Commercial Mortgage Corporation
and Sunrise Borrowers (as defined in the note)
10.3 Form of Multifamily Mortgage, Assignment of Rents and
Security Agreement, dated as of March 22, 2000 by and among
GMAC Commercial Mortgage Corporation and Sunrise Borrowers
(as defined in the mortgage)
10.4 Form of Limited Guaranty, dated as of March 22, 2000, by
and among GMAC Commercial Mortgage Corporation and Sunrise
Borrowers (as defined in the guaranty)
10.5 Chief Executive Officer Severance Plan
10.6 Senior Executive Officer Severance Plan
10.7 Consulting Agreement dated as of April 1, 2000 by and
between Sunrise and David W. Faeder
10.8 1996 Non-Incentive Stock Option Plan, as amended
27 Financial Data Schedule, which is submitted electronically
to the Securities and Exchange Commission for information
only and is not filed.
</TABLE>
30
<PAGE> 1
EXHIBIT 10.1
CROSS-COLLATERALIZATION AGREEMENT
THIS CROSS-COLLATERALIZATION AGREEMENT (this "Agreement") is
made as of the 22nd day of March, 2000, by and among GMAC COMMERCIAL
MORTGAGE CORPORATION, a California corporation ("Lender") and the following
borrowers (each referred to individually as a "Borrower" and all referred
to collectively as the "Borrowers"):
<TABLE>
<CAPTION>
BORROWER Type of Entity
- -------------------------------------------------------------------------------
<S> <C>
Sunrise Bellevue A Washington limited
Assisted Living Partnership partnership
- -------------------------------------------------------------------------------
Sunrise Cohasset A Massachusetts
Assisted Living limited
Limited Partnership partnership
- -------------------------------------------------------------------------------
Sunrise Decatur A Georgia
Assisted Living limited
Limited Partnership partnership
- -------------------------------------------------------------------------------
Sunrise Glen Cove A New York
Assisted Living, L.P. limited
partnership
- -------------------------------------------------------------------------------
Sunrise Lafayette A Pennsylvania
Hills Assisted limited
Living, L.P. partnership
- -------------------------------------------------------------------------------
Sunrise Paoli A Pennsylvania
Assisted Living, L.P. limited
partnership
- -------------------------------------------------------------------------------
Sunrise Paramus A New Jersey
Assisted Living limited
Limited Partnership partnership
- -------------------------------------------------------------------------------
Sunrise Walnut Creek A California
Assisted Living limited
Limited Partnership partnership
- -------------------------------------------------------------------------------
</TABLE>
RECITALS
The Lender has agreed to make a loan to each Borrower
(each, a "Loan" and collectively, the "Loans"), in the
following amounts:
<PAGE> 2
<TABLE>
<CAPTION>
BORROWER AMOUNT
- -------------------------------------------------------------------------------
<S> <C>
Sunrise Bellevue $9,000,000
Assisted Living
Partnership
- -------------------------------------------------------------------------------
Sunrise Cohasset $8,315,000
Assisted Living
Limited Partnership
- -------------------------------------------------------------------------------
Sunrise Decatur $9,000,000
Assisted Living
Limited Partnership
- -------------------------------------------------------------------------------
Sunrise Glen Cove $13,200,000
Assisted Living, L.P.
- -------------------------------------------------------------------------------
Sunrise Lafayette $7,980,000
Hills Assisted Living,
L.P.
- -------------------------------------------------------------------------------
Sunrise Paoli Assisted $11,100,000
Living, L.P.
- -------------------------------------------------------------------------------
Sunrise Paramus $8,845,000
Assisted Living
Limited Partnership
- -------------------------------------------------------------------------------
Sunrise Walnut Creek $7,560,000
Assisted Living
Limited Partnership
- -------------------------------------------------------------------------------
</TABLE>
Each Borrower's Loan will be secured by a Mortgage (as defined
below) on real property identified in the following table, which is more
particularly described in the exhibit to this Agreement specified in the
following table, and on other property included within the definition of
"Mortgaged Property" in that Mortgage:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
BORROWER PROPERTY NAME CITY AND STATE EXHIBIT
- -----------------------------------------------------------------------------------------------------------------------------------
Sunrise Bellevue Sunrise Assisted Bellevue, Exhibit A
Assisted Living Living of Washington
Partnership Bellevue
- -----------------------------------------------------------------------------------------------------------------------------------
Sunrise Cohasset Sunrise Assisted Cohasset, Exhibit B
Assisted Living Living of Massachusetts
Limited Partnership Cohasset
- -----------------------------------------------------------------------------------------------------------------------------------
Sunrise Decatur Sunrise of Decatur, Georgia Exhibit C
Assisted Living Decatur
Limited Partnership
- -----------------------------------------------------------------------------------------------------------------------------------
Sunrise Glen Cove Sunrise Assisted Glen Cove, New Exhibit D
Assisted Living, Living of Glen York
L.P. Cove
- -----------------------------------------------------------------------------------------------------------------------------------
Sunrise Lafayette Sunrise Assisted Lafayette Hill, Exhibit E
Hills Assisted Living of Pennsylvania
Living, L.P. Lafayette Hill
- -----------------------------------------------------------------------------------------------------------------------------------
Sunrise Paoli Sunrise Assisted Malvern, Exhibit F
Assisted Living, Living of Paoli Pennsylvania
L.P.
- -----------------------------------------------------------------------------------------------------------------------------------
Sunrise Paramus Sunrise Assisted Paramus, New Exhibit G
Assisted Living Living of Paramus Jersey
Limited Partnership
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Sunrise Walnut Sunrise of Walnut Creek, Exhibit H
Creek Assisted Walnut Creek California
Living Limited
Partnership
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Each Borrower is an affiliate of the other Borrowers and will
receive a direct and material benefit from the Loans to the other
Borrowers. The Lender is willing to make a Loan to each Borrower only if
that Borrower agrees to pay all of the Indebtedness of the other Borrowers
with respect to the other Borrowers' respective Loans.
Each Borrower is executing this Agreement to evidence its
agreement (a) to pay as and when due all of the Indebtedness of the other
Borrowers under the other Borrowers' Loan Documents, (b) that its
obligations under this Agreement shall be secured by the Mortgage
encumbering that Borrower's Property provided, however, and (c) to bear
joint and several liability for the Indebtedness of all other Borrowers as
set forth in this Agreement.
1. DEFINITIONS. For purposes of this Agreement, the
following terms shall have the meanings indicated:
"COMBINED OBLIGATIONS" means, with respect to each Borrower,
that Borrower's obligations both (a) to pay its Indebtedness and (b) to pay
all other amounts payable under this Agreement and under the other
Borrowers' Loan Documents.
"EVENT OF DEFAULT" shall have the meaning set forth in Section
4.
"FORECLOSURE" means, with respect to any Mortgage, a
foreclosure of the Mortgage, a deed in lieu of such foreclosure, a sale of
the Property pursuant to a power of sale or lawful order of a court of
competent jurisdiction in a bankruptcy case filed under Title 11 of the
United States Code, or any other similar disposition of the Property
encumbered by the Mortgage.
"FRAUDULENT TRANSFER LAWS" means Section 548 of Title 11 of the
United States Code or any applicable provisions of comparable state law,
including any provisions of the Uniform Fraudulent Conveyance Act or
Uniform Fraudulent Transfer Act, as adopted under state law.
"INDEBTEDNESS" means, with respect to each Borrower, the
"Indebtedness" as defined in that Borrower's Mortgage, without regard to
additional obligations of that Borrower that are created by this Agreement.
"LOAN DOCUMENTS" means, with respect to each Borrower's Loan,
the "Loan Documents" as defined in that Borrower's Mortgage, including
without limitation the
3
<PAGE> 4
Mortgage and the related Note. "Loan Documents", when not used in reference
to a particular Loan, refers to the Loan Documents of all Borrowers
relating to all Loans.
"LOANS " means the loans identified in the Recitals to this
Agreement.
"MORTGAGE" with respect to each Borrower means the Multifamily
Mortgage, Deed of Trust or Deed to Secure Debt that secures that Borrower's
Loan.
"NOTE" with respect to each Borrower means the Multifamily Note
evidencing that Borrower's obligation to repay its Loan.
"PROPERTY" means, with respect to each Borrower and that
Borrower's Mortgage, the "Mortgaged Property" as defined in that Mortgage.
"TOTAL PROPERTY" means the aggregate of all the Properties.
Capitalized terms not otherwise defined in this Agreement shall
have the meanings set forth in the Mortgages.
2. JOINT AND SEVERAL LIABILITY; INTEGRATION OF OBLIGATIONS.
(a) Notwithstanding anything to the contrary in this
Agreement or any Borrower's Loan Documents, each Borrower shall pay the
Indebtedness of each other Borrower, as and when due. Accordingly, the
Indebtedness of each Borrower shall be the joint and several obligation of
each other Borrower.
(b) While each Loan represents a separate and independent
obligation of each Borrower, the Borrowers acknowledge that, in requesting
the Lender to make the Loans, they intend:
(i) that the Loans be treated as if they were a single,
integrated indebtedness of the Borrowers, and
(ii) that the Total Property secure to
the Lender the payment and performance of all of the Borrowers' Combined
Obligations.
Accordingly, if any Borrower fails to pay fully, when due, any
amount payable to the Lender under this Agreement or any Loan Document,
then the Lender may elect, in its discretion, to treat that amount as being
due and owing by the other Borrowers, on a joint and several basis; may
enforce its rights and remedies against and collect such amounts from the
other Borrowers on a joint and several basis; and may recover such amounts
from
4
<PAGE> 5
the value of each of the Properties, on a pro rata basis or otherwise, as
determined by the Lender in its discretion.
3. AMENDMENT OF BORROWER MORTGAGE TO GRANT ADDITIONAL SECURITY.
Each Borrower's Mortgage is hereby amended to provide that:
(a) such Mortgage secures the Combined Obligations of that
Borrower under this Agreement as well as the Indebtedness of that Borrower
under its own Loan Documents, and
(b) the Total Property secures all Borrowers' Combined
Obligations, without apportionment or allocation of any Property or any
portion of any Property (except that the Combined Obligations may be
apportioned among the Properties for the sole and limited purpose of
determining the amount of transfer or recordation taxes or documentary
stamps required in connection with recordation of this Agreement and the
Mortgages).
4. EVENTS OF DEFAULT. Each of the following events shall
constitute an "Event of Default" under this Agreement:
(a) A default or breach by any Borrower of any provision of
this Agreement.
(b) A default or breach by any Borrower under any of its
Loan Documents beyond any notice, grace or cure period set forth in that
Loan Document; or
(c) Any event or condition defined as an "Event of Default"
under any Loan Document.
5. AMENDMENT OF MORTGAGE TO PROVIDE FOR CROSS-DEFAULT. Each
Borrower's Mortgage is hereby amended to provide that any Event of Default
under this Agreement shall constitute an Event of Default under that
Mortgage.
6. REMEDIES. Upon the occurrence of an Event of Default, the
Lender in its discretion may, but shall not be obligated to, exercise any
or all of the following remedies:
(a) declare immediately due and payable the Indebtedness of
any or all Borrowers whether or not the Lender exercises its right to
declare immediately due and payable the Indebtedness related to a
particular Mortgage under which the Event of Default may have occurred; and
5
<PAGE> 6
(b) exercise any or all of its rights and remedies under
this Agreement, any Loan Document or applicable law.
The Lender may exercise such remedies in one or more
proceedings, whether contemporaneous or consecutive or a combination of
both, to be determined by Lender in its sole discretion. The Lender may
enforce its rights against any one or more Properties or portions of
Properties, in such order and manner as it may elect in its sole
discretion. The enforcement of any one Mortgage shall not constitute an
election of remedies, and shall not limit or preclude the enforcement of
any other Mortgage or Loan Document, through one or more additional
proceedings. The Lender may bring any action or proceeding, including but
not limited to judicial or non-judicial foreclosure proceedings, without
regard to the fact that one or more other proceedings may have been
commenced elsewhere with respect to the same Property or Properties or any
portion of them. Each Borrower, for itself and for any and all persons or
entities now or in the future holding or claiming any lien on, security
interest in, or other interest or right of any nature in or to any
Property, and who have actual or constructive notice of this Agreement,
hereby unconditionally and irrevocably waives any rights it may have, now
or in the future, whether at law or in equity, to require the Lender to
enforce or exercise any of its rights or remedies under this Agreement,
under any Mortgage, or under any other Loan Document in any particular
manner or order or in any particular state or county, or to apply the
proceeds of any foreclosure sale or sales in any particular manner or
order, including, without limitations, any and all benefits arising under
or referred to in CALIFORNIA CIVIL CODE SECTIONS 2845, 2849 and 2850.
No judgment obtained by Lender in any one or more enforcement
proceedings shall merge the related Indebtedness into that judgment, and all
Indebtedness which remains unpaid shall remain a continuing obligation of the
Borrowers.
7. APPLICATION OF PROCEEDS. Proceeds of the enforcement or
foreclosure of any Mortgage shall be applied to the payment of the Combined
Obligations in such order as the Lender may determine in its sole
discretion.
8. ADJUSTMENT OF OBLIGATIONS. If the Combined Obligations of
any Borrower are otherwise subject to avoidance under any Fraudulent
Transfer Law, then the Combined Obligations of that Borrower shall be
limited to the largest amount that would not render its Combined
Obligations subject to avoidance as a fraudulent transfer or conveyance
under that Fraudulent Transfer Law.
9. BORROWERS' RIGHTS OF SUBROGATION, ETC.
6
<PAGE> 7
(a) Until the Combined Obligations have been paid and
performed in full, each Borrower shall withhold exercise of any right of
subrogation, contribution, reimbursement or indemnity (whether contractual,
statutory, equitable, under common law or otherwise) and any other rights
to enforce any claims or remedies which it has now or may have in the
future against any other Borrower or any of the Properties or against any
guarantor or security for the Combined Obligations.
(b) If a Borrower's agreement under Subsection (a) to
withhold exercise of rights of subrogation, contribution, reimbursement and
indemnity is found by a court of competent jurisdiction to be void or
voidable for any reason, any such rights a Borrower may have against
another Borrower, any Properties or any guarantor or security for the
Combined Obligations shall be subordinate to any rights the Lender may have
against the other Borrower, such Properties, such guarantor or such
security.
10. SUBORDINATION OF OBLIGATIONS BETWEEN BORROWERS. Any
indebtedness or other obligation of a Borrower (a "Debtor Borrower") held
by another Borrower (a "Creditor Borrower") shall be subordinate to rights
of the Lender against that Debtor Borrower. If the Lender so requests at a
time when an Event of Default has occurred and is continuing, any Creditor
Borrower shall enforce and collect any such indebtedness or other
obligation as trustee for the Lender and shall pay over to the Lender any
amount collected, on account of the Combined Obligations of the Debtor
Borrower.
11. RELEASE OF PROPERTIES. The Lender will release a Borrower's
Property (the "Released Property") from the liens created by this Agreement
and by that Borrower's Mortgage upon the satisfaction of all of the
following conditions:
(a) The Lender has received from the applicable Borrower
(the "Requesting Borrower") at least thirty (30) days' prior written notice
of the date proposed for such release (the 'Release Date").
(b) No Event of Default has occurred and is continuing as of the
date of the notice and as of the Release Date.
(c) The release will not cause the Combined Debt Service
Coverage Ratio of the remaining Properties to be less than the greater of
(I) Combined Debt Service Coverage Ratio of the Released Property and the
remaining Properties or (II) 1.50. As to any group of Properties, "Combined
Debt Service Coverage Ratio" means the ratio, as determined by the Lender
in its discretion, of (i) the aggregate net operating income from the
operations of those Properties that during the last twelve full calendar
months preceding the Release Date was available for repayment of debt,
after deducting operating expenses, to (ii) the aggregate principal and
interest that will be payable under the Notes
7
<PAGE> 8
related to those Properties during the twelve full calendar months
following the Release Date. The Borrowers shall provide the Lender such
financial statements and other information as the Lender may require to
make this determination, and a certificate of the Chief Financial Officer
(or comparable officer or principal) of the Borrower requesting the release
stating that such statements are true, correct and complete in all material
respects and certifying that all conditions precedent to the release of the
Released Property contained in this Section have been complied with, and
the Lender shall have a reasonable time following its receipt of all such
information in which to make the determination called for by this
subparagraph (c).
(d) The Borrowers shall have paid to the Lender all of the
following:
(i) All amounts required to satisfy all Indebtedness of
the Requesting Borrower under its Loan, including but not limited to
principal, accrued and unpaid interest and any prepayment premium.
(ii) A release price (the "Release Price") equal to one
hundred fifteen percent (115%) of the outstanding principal balance of the
Indebtedness of the Requesting Borrower, to be applied by the Lender as a
prepayment of one or more of the Loans (each, a "Prepaid Loan") other than
the Loan relating to the Released Property, in such amount and allocation
as the Lender may determine in its discretion.
(iii) All accrued and unpaid interest and all other
charges payable in connection with each such prepayment of a Prepaid Loan,
including but not limited to any prepayment premiums.
(iv) All of the Lender's costs and expenses, including
without limitation reasonable attorneys' fees, in connection with the
release of the Released Property.
12. LENDER'S RIGHTS. Each Borrower agrees that the Lender may,
without demand and at any time and from time to time and without the
consent of, or notice to, the Borrower, without incurring responsibility to
the Borrower, and without impairing or releasing the Combined Obligations
of any Borrower, upon or without any terms or conditions and in whole or in
part:
(a) change the manner, place or terms of payment, or change
or extend the time of payment of, or renew, increase, accelerate or alter,
any of the Indebtedness or Combined Obligations of any of the other
Borrowers, any security for such Indebtedness or Combined Obligations, or
any liability incurred directly or indirectly with respect to such
Indebtedness or Combined Obligations;
8
<PAGE> 9
(b) take and hold security for the payment of the
Indebtedness or Combined Obligations of any of the other Borrowers and
sell, exchange, release, surrender, realize upon or otherwise deal with in
any manner and in any order any property pledged or mortgaged to secure
such Indebtedness or Combined Obligations;
(c) exercise or refrain from exercising any rights against
any other Borrower or any Properties;
(d) release or substitute any one or more endorsers,
guarantors, or other obligors with respect to the Indebtedness or Combined
Obligations of any of the other Borrowers;
(e) settle or compromise any of the Indebtedness or Combined
Obligations of any of the other Borrowers (including but not limited to
obligations under this Agreement), any security for such Indebtedness or
Combined Obligations or any liability incurred directly or indirectly with
respect to such Indebtedness or Combined Obligations, or subordinate the
payment of all or any part of such Indebtedness or Combined Obligations to
the payment of any liability (whether due or not) of any other Borrower to
its creditors other than the Lender;
(f) apply any sums realized to any liability or liabilities
of any other Borrower to the Lender regardless of what liability or
liabilities of the Borrower to the Lender remain unpaid; and
(g) consent to or waive any breach by any other Borrower of,
or any act, omission or default by any other Borrower under, this Agreement
or any Loan Documents.
13. WAIVER OF PRESENTMENT, MARSHALLING, CERTAIN SURETYSHIP
DEFENSES, ETC.
(a) With respect to its obligations under this Agreement
each Borrower and each guarantor of such obligations waives presentment,
demand, notice of dishonor, protest, notice of acceleration, notice of
intent to demand or accelerate payment or maturity, presentment for
payment, notice of nonpayment, grace, and diligence in collecting such
obligations.
(b) Notwithstanding the existence of any other security
interests in any Property held by the Lender or by any other party, the
Lender shall have the right to determine in its
9
<PAGE> 10
discretion the order in which any or all of the Properties or portions of
any of the Properties shall be subjected to the remedies provided in this
Agreement and the Loan Documents or applicable law. The Lender shall have
the right to determine in its discretion the order in which any or all
portions of the Combined Obligations are satisfied from the proceeds
realized upon the exercise of such remedies. Each Borrower and any party
who now or in the future acquires a lien on or security interest in any of
the Properties and who has actual or constructive notice of this Agreement
hereby unconditionally and irrevocably waives any and all right to require
the marshalling of assets or to require that any of the Properties or
portions of any of the Properties be sold in the inverse order of
alienation or in parcels or as an entirety in connection with the exercise
of any such remedies.
(c) To the extent that, notwithstanding any provisions of
this Agreement to the contrary, if a Borrower may be deemed to be a surety
or guarantor with respect to the Indebtedness of any other Borrower or with
respect to any of the Combined Obligations, then in such capacity:
(i) Each Borrower hereby waives any and all benefits and
defenses under California Civil Code SECTION 2810 and agrees that by doing
so that Borrower shall be liable for each other Borrower's Indebtedness
even if such other Borrower had no liability at the time of execution of
such other Borrower's Note, Security Instrument and other Loan Documents,
or thereafter ceases to be liable. Each Borrower hereby waives any and all
benefits and defenses under California Civil Code SECTION 2809 and agrees
that by doing so each Borrower's liability may be larger in amount and more
burdensome than that of any other Borrower.
(ii) Each Borrower understands that the exercise by
Lender of certain rights and remedies contained in one or more Mortgages
(such as a nonjudicial foreclosure sale) may affect or eliminate that
Borrower's right of subrogation against another Borrower or Borrowers and
that that Borrower may therefore incur a partially or totally
nonreimburseable liability under this Agreement. Nevertheless, each
Borrower hereby authorizes and empowers Lender to exercise, in its sole and
absolute discretion, any right or remedy, or any combination thereof, which
may then be available, since it is the intent and purpose of each Borrower
that the obligations under this Agreement shall be absolute, independent
and unconditional under any and all circumstances. Each Borrower expressly
waives any defense (which defense, if that Borrower had not given this
waiver, that Borrower might otherwise have) to a personal judgment against
that Borrower by reason of a nonjudicial foreclosure of any of the Combined
Property. Without limiting the generality of the foregoing, each Borrower
hereby expressly waives any and all benefits under (i) California Code of
Civil Procedure SECTION 580a (which Section, if this waiver had not been
given, might otherwise limit that Borrower's liability after a nonjudicial
foreclosure sale to the difference between the obligations of that Borrower
under this Agreement and the fair market value of the property or interests
sold at such nonjudicial foreclosure sale), (ii) California Code of Civil
Procedure SECTIONS 580b and 580d (which
10
<PAGE> 11
Sections, if this waiver had not been given, might otherwise limit Lender's
right to recover a deficiency judgment with respect to purchase money
obligations and after a nonjudicial foreclosure sale, respectively), and (iii)
California Code of Civil Procedure SECTION 726 (which Section, if this waiver
had not been given, among other things, might otherwise require Lender to
exhaust all of its security before a personal judgment could be obtained for a
deficiency). Notwithstanding any foreclosure of the lien of any Mortgage,
whether by the exercise of the power of sale contained in that Mortgage, by an
action for judicial foreclosure or by Lender's acceptance of a deed in lieu of
foreclosure, each Borrower shall remain bound under this Agreement.
(iii) In accordance with SECTION 2856 of the California
Civil Code, each Borrower also waives any right or defense based upon an
election of remedies by Lender, even though such election (e.g.,
nonjudicial foreclosure with respect to any collateral held by Lender to
secure repayment of the Combined Obligations) destroys or otherwise impairs
the subrogation rights of that Borrower or any right of that Borrower
(after payment of the Combined Obligations) to proceed against another
Borrower for reimbursement, or both, by operation of SECTION 580d of the
California Code of Civil Procedure or otherwise.
(iv) In accordance with SECTION 2856 of the California
Civil Code, each Borrower waives any and all other rights and defenses
available to that Borrower by reason of SECTIONS 2787 through 2855,
inclusive, of the California Civil Code, including, without limitation, any
and all rights or defenses that Borrower may have by reason of protection
afforded to that Borrower with respect to any of the obligations of that
Borrower under this Agreement pursuant to the antideficiency or other laws
of the State of California limiting or discharging any other Borrower's
Indebtedness or Lender's right of recovery of such other Borrower's
Indebtedness, including, without limitation, SECTIONS 580a, 580b, 580d, and
726 of the California Code of Civil Procedure.
(v) In accordance with SECTION 2856 of the California
Civil Code, each Borrower agrees to withhold the exercise of any and all
subrogation and reimbursement rights against all other Borrowers, against
any other person, and against any collateral or security for the Combined
Obligations, including, without limitation, any such rights pursuant to
SECTIONS 2847 and 2848 of the California Civil Code, until the Combined
Obligations have been indefeasibly paid and satisfied in full, all
obligations owed to Lender under the Notes, Mortgages and other Loan
Documents have been fully performed, and Lender has released, transferred
or disposed of all of its right, title and interest in such collateral or
security.
14. OBLIGATIONS ABSOLUTE. No invalidity, irregularity or
unenforceability of all or any part of the Combined Obligations of any
Borrower shall affect, impair or be a
11
<PAGE> 12
defense to the recovery by the Lender of the Indebtedness or Combined
Obligations of any other Borrower, and the liability of each Borrower under
this Agreement and the Loan Documents with respect to the Indebtedness of
each other Borrower shall be primary, absolute and unconditional
notwithstanding the occurrence of any event or the existence of any other
circumstances which might constitute a legal or equitable discharge of a
surety or guarantor for the Indebtedness of any other Borrower except
payment and performance in full of that other Borrower's Indebtedness.
15. NON-RECOURSE LIABILITY. No Borrower shall have any personal
liability for the Indebtedness of any other Borrower.
16. NOTICES. All notices to each Borrower under this Agreement
shall be in writing and shall be given in the manner provided in that
Borrower's Mortgage for notices to that Borrower. All notices to the Lender
by any Borrower under this Agreement shall be in writing and shall be given
in the manner in that Borrower's Mortgage for notices to the Lender.
17. GOVERNING LAW. The parties intend that the Lender will
assign the Loans, the Mortgages and this Agreement to the Federal Home Loan
Mortgage Corporation, a congressionally-chartered government-sponsored
enterprise having its principal place of business in McLean, Virginia.
Except as provided to the contrary below, this Agreement shall be governed
by and construed in accordance with the internal laws of the Commonwealth
of Virginia applicable to contracts made and to be performed in such state
(without regard to principles thereof governing conflicts of law);
provided, however, that with respect to the provisions hereof which relate
to title or the creation, perfection, priority, enforcement or foreclosure
of liens, security interests, and/or assignments encumbering any of the
Mortgaged Property then this Agreement shall be governed by the laws of the
state in which such Mortgaged Property is located.
18. CAPTIONS, CROSS REFERENCES AND EXHIBITS. The captions
assigned to provisions of this Agreement are for convenience only and shall
be disregarded in construing this Agreement. Any reference in this
Agreement to a "Section", a "Subsection" or an "Exhibit" shall, unless
otherwise explicitly provided, be construed as referring to a section of
this Agreement, to a subsection of the section of this Agreement in which
the reference appears or to an Exhibit attached to this Agreement. All
Exhibits referred to in this Agreement are hereby incorporated by
reference.
19. NUMBER AND GENDER. Use of the singular in this Agreement
includes the plural, use of the plural includes the singular, and use of
one gender includes all other genders, as the context may require.
12
<PAGE> 13
20. STATUTES AND REGULATIONS. Any reference in this Agreement
to a statute or regulation shall include all amendments to and successors
to such statute or regulation, whether adopted before or after the date of
this Agreement.
21. NO PARTNERSHIP. This Agreement is not intended to, and
shall not, create a partnership or joint venture among the parties, and no
party to this Agreement shall have the power or authority to bind any other
party except as explicitly provided in this Agreement.
22. SUCCESSORS AND ASSIGNS.
(a) Except as provided in Subsection (b), no party to this
Agreement may assign its rights or delegate its obligations under this
Agreement without the prior written consent of all other parties.
(b) The Borrowers hereby consent to the Lender's assignment
of the Loans, the Mortgages and this Agreement to the Federal Home Loan
Mortgage Corporation ("Freddie Mac"). Freddie Mac may assign its rights and
delegate its obligations under this Agreement to any person or entity to
whom Freddie Mac transfers any of the Notes or Mortgages.
(c) This Agreement shall be binding upon and shall inure to
the benefit of the parties and their respective heirs, successors, and
permitted assigns.
23. SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity of any other
provision, and all other provisions shall remain in full force and effect.
24. ENTIRE AGREEMENT. This instrument, together with the Note,
Mortgage and Loan Documents relating to each Loan, contains the entire
agreement among the parties as to the rights granted and the obligations
assumed in this instrument.
25. WAIVER; NO REMEDY EXCLUSIVE. Any forbearance by a party to
this Agreement in exercising any right or remedy given under this Agreement
or existing at law or in equity shall not constitute a waiver of or
preclude the exercise of that or any other right or remedy. Unless
otherwise explicitly provided, no remedy under this Agreement is intended
to be exclusive of any other available remedy, but each remedy shall be
cumulative and shall be in addition to other remedies given under this
Agreement or existing at law or in equity.
13
<PAGE> 14
26. THIRD PARTY BENEFICIARIES. Neither any creditor of any
party to this Agreement, nor any other person, is intended to be a third
party beneficiary of this Agreement.
27. COURSE OF DEALING. No course of dealing among the parties
to this Agreement shall operate as a waiver of any rights of any party
under this Agreement.
28. FURTHER ASSURANCES AND CORRECTIVE INSTRUMENTS. To the
extent permitted by law, the parties shall, from time to time, execute,
acknowledge and deliver, or cause to be executed, acknowledged and
delivered, such supplements to this Agreement and such further instruments
as may reasonably be required for carrying out the intention of or
facilitating the performance of this Agreement.
29. NO PARTY DEEMED DRAFTER. No party shall be deemed the
drafter of this Agreement, and this Agreement shall not be construed
against either party as the drafter of the Agreement.
30. WAIVER OF TRIAL BY JURY. EACH BORROWER AND THE LENDER (A)
COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE
ARISING OUT OF THIS AGREEMENT THAT IS TRIABLE OF RIGHT BY A JURY AND (B)
WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE TO THE EXTENT
THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE. THIS WAIVER OF RIGHT TO
TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND VOLUNTARILY
WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL.
[SIGNATURES BEGIN ON FOLLOWING PAGE]
14
<PAGE> 15
IN WITNESS WHEREOF, Borrower has signed and delivered this
Agreement, or has caused this Agreement to be signed and delivered by its
duly authorized representative, as a sealed agreement.
PLEASE BE ADVISED THAT ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY,
EXTEND CREDIT OR TO FOREBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT
ENFORCEABLE UNDER WASHINGTON LAW.
BORROWER:
WITNESS:
SUNRISE BELLEVUE ASSISTED LIVING LIMITED
PARTNERSHIP, a Washington
limited partnership
By: SUNRISE ASSISTED LIVING
INVESTMENTS, INC., a
Virginia corporation,
General Partner
- ----------------- By: s/ James S. Pope (SEAL)
-------------------
- ----------------- James S. Pope
Print Name Vice President
15
<PAGE> 16
THE DISTRICT OF COLUMBIA ) ss:
I, _____________________, a Notary Public in and for the
jurisdiction aforesaid do hereby certify that James S. Pope, who is
personally known to me as the Vice President of Sunrise Assisted Living
Investments, Inc., a Virginia corporation, the general partner of Sunrise
Bellevue Assisted Living Limited Partnership, a Washington limited
partnership, named in the foregoing instrument being dated as of the ____
day of March, 2000, and hereto annexed, personally appeared before me in
said jurisdiction and as Vice President, as aforesaid, acknowledged the
same to be the act and deed of Sunrise Bellevue Assisted Living Limited
Partnership, the Borrower named therein.
Given under my hand and seal this ____ day of March, 2000.
----------------------------
Notary Public
My Commission Expires:
[Seal]
16
<PAGE> 17
PLEASE BE ADVISED THAT ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY,
EXTEND CREDIT OR TO FOREBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT
ENFORCEABLE UNDER WASHINGTON LAW.
LENDER:
WITNESS:
GMAC COMMERCIAL MORTGAGE
CORPORATION, a California
corporation
- -------------------- By: s/ Philip A. Brooks (SEAL)
---------------------
- -------------------- Philip A. Brooks
Print Name Senior Vice President
17
<PAGE> 18
THE DISTRICT OF COLUMBIA ) ss:
I, _____________________, a Notary Public in and for the
jurisdiction aforesaid do hereby certify that Philip A. Brooks, who is
personally known to me as a Senior Vice President of GMAC Commercial
Mortgage Corporation, a California corporation, named in the foregoing
instrument being dated as of the ____ day of March, 2000, and hereto
annexed, personally appeared before me in said jurisdiction and as Senior
Vice President, as aforesaid, acknowledged the same to be the act and deed
of GMAC Commercial Mortgage Corporation, the Lender named therein.
Given under my hand and seal this ____ day of March, 2000.
--------------------------
Notary Public
My Commission Expires:
[Seal]
18
<PAGE> 19
IN WITNESS WHEREOF, Borrower has signed and delivered this
Agreement, or has caused this Agreement to be signed and delivered by its
duly authorized representative, as a sealed instrument.
WITNESS: BORROWER:
SUNRISE COHASSET ASSISTED LIVING
LIMITED PARTNERSHIP, a Massachusetts
limited partnership
By: SUNRISE ASSISTED LIVING
INVESTMENTS, INC., a
Virginia corporation,
General Partner
- ------------------ By: s/ James S. Pope (SEAL)
----------------------
James S. Pope
- ------------------ Vice President
Print Name
THE DISTRICT OF COLUMBIA ) ss:
I, _____________________, a Notary Public in and for the
jurisdiction aforesaid do hereby certify that James S. Pope, who is
personally known to me as the Vice President of Sunrise Assisted Living
Investments, Inc., a Virginia corporation, the general partner of Sunrise
Bellevue Assisted Living Limited Partnership, a Massachusetts limited
partnership, named in the foregoing instrument being dated as of the ____
day of March, 2000, and hereto annexed, personally appeared before me in
said jurisdiction and as Vice President, as aforesaid, acknowledged the
same to be the act and deed of Sunrise Bellevue Assisted Living Limited
Partnership, the Borrower named therein.
Given under my hand and seal this ____ day of March, 2000.
--------------------------------
Notary Public
My Commission Expires:
19
<PAGE> 20
[Seal]
20
<PAGE> 21
LENDER:
WITNESS:
GMAC COMMERCIAL MORTGAGE
CORPORATION, a California
corporation
- ------------------------- By: s/ Philip A. Brooks (SEAL)
-------------------
- ------------------------- Philip A. Brooks
Print Name Senior Vice President
THE DISTRICT OF COLUMBIA ) ss:
I, _____________________, a Notary Public in and for the
jurisdiction aforesaid do hereby certify that Philip A. Brooks, who is
personally known to me as a Senior Vice President of GMAC Commercial
Mortgage Corporation, a California corporation, named in the foregoing
instrument being dated as of the ____ day of March, 2000, and hereto
annexed, personally appeared before me in said jurisdiction and as Senior
Vice President, as aforesaid, acknowledged the same to be the act and deed
of GMAC Commercial Mortgage Corporation, the Lender named therein.
Given under my hand and seal this ____ day of March, 2000.
--------------------
Notary Public
My Commission Expires:
[Seal]
21
<PAGE> 22
IN WITNESS WHEREOF, Borrower has signed and delivered this
Agreement, or has caused this Agreement to be signed and delivered by its
duly authorized representative, as a sealed instrument.
BORROWER:
WITNESS:
SUNRISE DECATUR ASSISTED LIVING LIMITED
PARTNERSHIP, a Georgia
limited partnership
By: SUNRISE ASSISTED LIVING
INVESTMENTS, INC., a
Virginia corporation,
General Partner
- -------------------- By: s/ James S. Pope (SEAL)
-----------------
- -------------------- James S. Pope
Print Name Vice President
ATTEST:
- ----------------
Witness By:
-----------------------------
Name:
-----------------------------
Secretary/Assistant Secretary
[Corporate Seal Required]
22
<PAGE> 23
THE DISTRICT OF COLUMBIA ) ss:
I, ____________________, a Notary Public in and for the
jurisdiction aforesaid do hereby certify that James S. Pope, who is
personally known to me as a Vice President of Sunrise Decatur Assisted
Living Limited Partnership, a Georgia limited partnership, named in the
foregoing instrument being dated as of the ____ day of March, 2000, and
hereto annexed, personally appeared before me in said jurisdiction and as
Vice President, as aforesaid, acknowledged the same to be the act and deed
of Sunrise Decatur Assisted Living Limited Partnership, the Borrower named
therein.
Given under my hand and seal this ____ day of March, 2000.
---------------------------------
Notary Public
My Commission Expires:
[Seal]
23
<PAGE> 24
LENDER:
WITNESS:
GMAC COMMERCIAL MORTGAGE
CORPORATION, a California
corporation
- --------------------- By: s/ Philip A. Brooks (SEAL)
---------------------------
- --------------------- Philip A. Brooks
Print Name Senior Vice President
ATTEST:
- --------------------- By:
-----------------------------
Witness
Name:
---------------------------
Secretary/Assistant Secretary
[Corporate Seal Required]
24
<PAGE> 25
THE DISTRICT OF COLUMBIA ) ss:
I, _____________________, a Notary Public in and for the
jurisdiction aforesaid do hereby certify that Philip A. Brooks, who is
personally known to me as a Senior Vice President of GMAC Commercial
Mortgage Corporation, a California corporation, named in the foregoing
instrument being dated as of the ____ day of March, 2000, and hereto
annexed, personally appeared before me in said jurisdiction and as Senior
Vice President, as aforesaid, acknowledged the same to be the act and deed
of GMAC Commercial Mortgage Corporation, the Lender named therein.
Given under my hand and seal this ____ day of March, 2000.
-------------------------------
Notary Public
My Commission Expires:
[Seal]
25
<PAGE> 26
IN WITNESS WHEREOF, Borrower has signed and delivered this
Agreement, or has caused this Agreement to be signed and delivered by its
duly authorized representative, as a sealed instrument.
BORROWER:
WITNESS:
SUNRISE GLEN COVE ASSISTED LIVING LIMITED
PARTNERSHIP, a New York
limited partnership
By: SUNRISE ASSISTED LIVING
INVESTMENTS, INC., a
Virginia corporation,
General Partner
By: s/ James S.Pope (SEAL)
- --------------------------- ----------------
James S. Pope
Vice President
- ---------------------------
Print Name
THE DISTRICT OF COLUMBIA ) ss:
I, ____________________, a Notary Public in and for the
jurisdiction aforesaid do hereby certify that James S. Pope, who is
personally known to me as a Vice President of Sunrise Glen Cove Assisted
Living Limited Partnership, a NewYork limited partnership, named in the
foregoing instrument being dated as of the ____ day of March, 2000, and
hereto annexed, personally appeared before me in said jurisdiction and as
Vice President, as aforesaid, acknowledged the same to be the act and deed
of Sunrise Glen Cove Assisted Living Limited Partnership, the Borrower
named therein.
Given under my hand and seal this ____ day of March, 2000.
-----------------------------
Notary Public
My Commission Expires:
[Seal]
26
<PAGE> 27
LENDER:
WITNESS:
GMAC COMMERCIAL MORTGAGE
CORPORATION, a California
corporation
By: s/ Philip A. Brooks (SEAL)
--------------------
Philip A. Brooks
Senior Vice President
- ---------------------------------------
- ---------------------------------------
Print Name
THE DISTRICT OF COLUMBIA ) ss:
I, _____________________, a Notary Public in and for the
jurisdiction aforesaid do hereby certify that Philip A. Brooks, who is
personally known to me as a Senior Vice President of GMAC Commercial
Mortgage Corporation, a California corporation, named in the foregoing
instrument being dated as of the ____ day of March, 2000, and hereto
annexed, personally appeared before me in said jurisdiction and as Senior
Vice President, as aforesaid, acknowledged the same to be the act and deed
of GMAC Commercial Mortgage Corporation, the Lender named therein.
Given under my hand and seal this ____ day of March, 2000.
----------------------------
Notary Public
My Commission Expires:
[Seal]
27
<PAGE> 28
IN WITNESS WHEREOF, Borrower has signed and delivered this
Agreement, or has caused this Agreement to be signed and delivered by its duly
authorized representative, as a sealed instrument.
BORROWER:
WITNESS:
SUNRISE LAFAYETTE HILLS ASSISTED LIVING LIMITED
PARTNERSHIP, a Pennsylvania
limited partnership
By: SUNRISE ASSISTED LIVING
INVESTMENTS, INC., a
Virginia corporation,
General Partner
By: s/ James S. Pope (SEAL)
- ---------------------------- -----------------
James S. Pope
Vice President
- ----------------------------
Print Name
THE DISTRICT OF COLUMBIA ) ss:
I, _____________________, a Notary Public in and for the
jurisdiction aforesaid do hereby certify that James S. Pope, who is
personally known to me as the Vice President of Sunrise Assisted Living
Investments, Inc., a Virginia corporation, the general partner of Sunrise
Bellevue Assisted Living Limited Partnership, a Pennsylvania limited
partnership, named in the foregoing instrument being dated as of the ____
day of March, 2000, and hereto annexed, personally appeared before me in
said jurisdiction and as Vice President, as aforesaid, acknowledged the
same to be the act and deed of Sunrise Bellevue Assisted Living Limited
Partnership, the Borrower named therein.
Given under my hand and seal this ____ day of March, 2000.
-----------------------------------
Notary Public
My Commission Expires:
28
<PAGE> 29
[Seal]
29
<PAGE> 30
LENDER:
WITNESS:
GMAC COMMERCIAL MORTGAGE
CORPORATION, a California
corporation
By: s/ Philip A. Brooks (SEAL)
- --------------------- -------------------
Philip A. Brooks
Senior Vice President
- ---------------------
Print Name
THE DISTRICT OF COLUMBIA ) ss:
I, _____________________, a Notary Public in and for the
jurisdiction aforesaid do hereby certify that Philip A. Brooks, who is
personally known to me as a Senior Vice President of GMAC Commercial
Mortgage Corporation, a California corporation, named in the foregoing
instrument being dated as of the ____ day of March, 2000, and hereto
annexed, personally appeared before me in said jurisdiction and as Senior
Vice President, as aforesaid, acknowledged the same to be the act and deed
of GMAC Commercial Mortgage Corporation, the Lender named therein.
Given under my hand and seal this ____ day of March, 2000.
----------------------------
Notary Public
My Commission Expires:
[Seal]
30
<PAGE> 31
IN WITNESS WHEREOF, Borrower has signed and delivered this
Agreement, or has caused this Agreement to be signed and delivered by its
duly authorized representative, as a sealed instrument.
BORROWER:
WITNESS:
SUNRISE PAOLI ASSISTED LIVING, L.P., a
Pennsylvania limited partnership
By: SUNRISE ASSISTED LIVING
INVESTMENTS, INC., a
Virginia corporation,
General Partner
By: s/ James S. Pope (SEAL)
- ---------------------- ----------------
James S. Pope
Vice President
- ----------------------
Print Name
THE DISTRICT OF COLUMBIA ) ss:
I, _____________________, a Notary Public in and for the
jurisdiction aforesaid do hereby certify that James S. Pope, who is
personally known to me as the Vice President of Sunrise Assisted Living
Investments, Inc., a Virginia corporation, the general partner of Sunrise
Bellevue Assisted Living Limited Partnership, a Pennsylvania limited
partnership, named in the foregoing instrument being dated as of the ____
day of March, 2000, and hereto annexed, personally appeared before me in
said jurisdiction and as Vice President, as aforesaid, acknowledged the
same to be the act and deed of Sunrise Bellevue Assisted Living Limited
Partnership, the Borrower named therein.
Given under my hand and seal this ____ day of March, 2000.
---------------------------
Notary Public
My Commission Expires:
[Seal]
31
<PAGE> 32
LENDER:
WITNESS:
GMAC COMMERCIAL MORTGAGE
CORPORATION, a California
corporation
By: s/ Philip A. Brooks (SEAL)
- -------------------- --------------------
Philip A. Brooks
Senior Vice President
- --------------------
Print Name
THE DISTRICT OF COLUMBIA ) ss:
I, _____________________, a Notary Public in and for the
jurisdiction aforesaid do hereby certify that Philip A. Brooks, who is
personally known to me as a Senior Vice President of GMAC Commercial
Mortgage Corporation, a California corporation, named in the foregoing
instrument being dated as of the ____ day of March, 2000, and hereto
annexed, personally appeared before me in said jurisdiction and as Senior
Vice President, as aforesaid, acknowledged the same to be the act and deed
of GMAC Commercial Mortgage Corporation, the Lender named therein.
Given under my hand and seal this ____ day of March, 2000.
----------------------------------
Notary Public
My Commission Expires:
[Seal]
32
<PAGE> 33
IN WITNESS WHEREOF, Borrower has signed and delivered this
Agreement, or has caused this Agreement to be signed and delivered by its
duly authorized representative, as a sealed instrument.
BORROWER:
WITNESS:
SUNRISE PARAMUS ASSISTED LIVING LIMITED
PARTNERSHIP, a New Jersey limited
partnership
By: SUNRISE ASSISTED LIVING
INVESTMENTS, INC., a
Virginia corporation,
General Partner
By: s/ James S. Pope (SEAL)
- ------------------ -----------------
James S. Pope
Vice President
- ------------------
Print Name
33
<PAGE> 34
STATE OF )
---------------------------------------
) SS:
COUNTY OF )
--------------------------------------
I CERTIFY that on March _____, 2000, ________________
personally appeared before me and this person acknowledged under oath, to
my satisfaction, that:
(a) this person is the _____________________ of Sunrise
Assisted Living Investments, Inc., a corporation of the State of Virginia,
which is a general partner of the limited partnership named in the attached
instrument; and
(b) this person signed the attached instrument as the attesting
witness for the proper corporate officer who is James S. Pope, the Vice
President of such corporation; and
(c) the said Vice President was authorized to execute the
attached instrument on behalf of such corporation; and
(d) this person witnessed the said Vice President execute the
attached instrument as the act of such corporation on behalf of, and as the
act of, such partnership; and
(e) this person signed this acknowledgment to attest to the
truth of these facts.
-----------------------------------
(Attesting Witness)
Signed and Sworn to before
me on March ___, 2000.
- -----------------------------------
(Notary Public)
34
<PAGE> 35
LENDER:
WITNESS:
GMAC COMMERCIAL MORTGAGE
CORPORATION, a California
corporation
By: s/ Philip A. Brooks (SEAL)
- ----------------------- ---------------------
Philip A. Brooks
Senior Vice President
- -----------------------
Print Name
35
<PAGE> 36
The District of Columbia ) SS:
I CERTIFY that on March _____, 2000, Philip A. Brooks
personally appeared before me and this person acknowledged under oath, to
my satisfaction, that this person:
(a) signed the attached instrument as a Senior Vice President
of GMAC COMMERCIAL MORTGAGE CORPORATION, a corporation of the State of
California, which is the corporation named in the attached instrument; and
(b) was authorized to execute the attached instrument on behalf
of such corporation; and
(c) executed the attached instrument on behalf of, and as the
voluntary act of such corporation.
Signed and Sworn to before
me on March ___, 2000.
---------------------------------------
(Notary Public)
My Commission Expires:
36
<PAGE> 37
IN WITNESS WHEREOF, Borrower has signed and delivered this
Agreement, or has caused this Agreement to be signed and delivered by its
duly authorized representative, as a sealed instrument.
BORROWER:
WITNESS:
SUNRISE WALNUT CREEK ASSISTED LIVING LIMITED
PARTNERSHIP, a California
limited partnership
By: SUNRISE ASSISTED LIVING
INVESTMENTS, INC., a
Virginia corporation,
General Partner
By: s/ James S.Pope (SEAL)
- ----------------------------- -------------------------
James S. Pope
Vice President
- -----------------------------
Print Name
37
<PAGE> 38
[CALIFORNIA]
ACKNOWLEDGMENT
<TABLE>
<S> <C>
State of ________________________)
) ss:
County of _______________________)
On______________, _______ ,before me,__________________________________________________________
(name, title of officer, e.g., "Jane Doe, Notary Public")
personally appeared _______________________________________________________________________________________
(name(s) of signer(s))
( ) personally known to me -OR-
( ) proved to me on the basis of satisfactory evidence
to be the person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity/ies, and that by his/her/their
signature(s) on the instrument the person(s), or the entity upon behalf of
which person(s) acted, executed the instrument.
Witness my hand and official seal. ____________________________________________________________
(Signature of Notary)
___________________________________________________________________________________________________________
Capacity claimed by signer: (This section is optional)
( ) Individual
( ) Corporate Officer(s): _____________________________________________________________
( ) Partner(s):
( ) General ( ) Limited
( ) Attorney-in-fact
( ) Trustee(s)
( ) Guardian/Conservator
( ) Other:_____________________________________________________________________________
Signer is representing:_____________________________________________________________________________
(Name of person(s) or entity(ies))
Attention Notary: Although the information requested below is
OPTIONAL, it could prevent fraudulent attachment of this certificate to an
unauthorized document.
THIS CERTIFICATE MUST BE ATTACHED Title or Type of Document________________________________________________
TO THE DOCUMENT DESCRIBED AT _________________________________________________________________________
RIGHT: Number of Pages_____________Date of Document_____________________________
Signer(s) Other Than Named Above_________________________________________
</TABLE>
38
<PAGE> 39
LENDER:
WITNESS:
GMAC COMMERCIAL MORTGAGE
CORPORATION, a California corporation
By: s/ Philip A. Brooks (SEAL)
- ---------------------- -------------------
Philip A. Brooks
Senior Vice President
- ----------------------
Print Name
<PAGE> 40
[CALIFORNIA]
ACKNOWLEDGMENT
<TABLE>
<S> <C>
State of ________________________)
) ss:
County of _______________________)
On______________, _______ ,before me,__________________________________________________________
(name, title of officer, e.g., "Jane Doe, Notary Public")
personally appeared _______________________________________________________________________________________
(name(s) of signer(s))
( ) personally known to me -OR-
( ) proved to me on the basis of satisfactory evidence
to be the person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity/ies, and that by his/her/their
signature(s) on the instrument the person(s), or the entity upon behalf of
which person(s) acted, executed the instrument.
Witness my hand and official seal. ____________________________________________________________
(Signature of Notary)
___________________________________________________________________________________________________________
Capacity claimed by signer: (This section is optional)
( ) Individual
( ) Corporate Officer(s): _____________________________________________________________
( ) Partner(s):
( ) General ( ) Limited
( ) Attorney-in-fact
( ) Trustee(s)
( ) Guardian/Conservator
( ) Other:_____________________________________________________________________________
Signer is representing:_____________________________________________________________________________
(Name of person(s) or entity(ies))
Attention Notary: Although the information requested below is
OPTIONAL, it could prevent fraudulent attachment of this certificate to an
unauthorized document.
THIS CERTIFICATE MUST BE ATTACHED Title or Type of Document________________________________________________
TO THE DOCUMENT DESCRIBED AT _________________________________________________________________________
RIGHT: Number of Pages_____________Date of Document_____________________________
Signer(s) Other Than Named Above_________________________________________
</TABLE>
<PAGE> 41
EXHIBIT A
---------
[LEGAL DESCRIPTION FOR BELLEVUE]
<PAGE> 42
EXHIBIT B
---------
[LEGAL DESCRIPTION FOR COHASSET]
<PAGE> 43
EXHIBIT C
---------
[LEGAL DESCRIPTION FOR DECATUR]
<PAGE> 44
EXHIBIT D
---------
[LEGAL DESCRIPTION FOR GLEN COVE]
<PAGE> 45
EXHIBIT E
---------
[LEGAL DESCRIPTION FOR LAFAYETTE HILL]
<PAGE> 46
EXHIBIT F
---------
[LEGAL DESCRIPTION FOR PAOLI]
<PAGE> 47
EXHIBIT G
---------
[LEGAL DESCRIPTION FOR PARAMUS]
<PAGE> 48
EXHIBIT H
---------
[LEGAL DESCRIPTION FOR WALNUT CREEK]
<PAGE> 1
EXHIBIT 10.2
MULTIFAMILY NOTE
(MULTISTATE)
US $___________________________ March 22, 2000
FOR VALUE RECEIVED, the undersigned ("BORROWER") jointly and severally
(if more than one) promises to pay to the order of GMAC COMMERCIAL MORTGAGE
CORPORATION, a California corporation, the principal sum of
______________________________________________________________________
__________________________ Dollars (US $____________________), with interest on
the unpaid principal balance at the annual rate of __________________ percent
(____%).
1. DEFINED TERMS. As used in this Note, (i) the term "LENDER" means the
holder of this Note, and (ii) the term "INDEBTEDNESS" means the principal of,
interest on, or any other amounts due at any time under, this Note, the Security
Instrument or any other Loan Document, including prepayment premiums, late
charges, default interest, and advances to protect the security of the Security
Instrument under Section 12 of the Security Instrument. "Event of Default" and
other capitalized terms used but not defined in this Note shall have the
meanings given to such terms in the Security Instrument.
2. ADDRESS FOR PAYMENT. All payments due under this Note shall be payable
at c/o GMAC Commercial Mortgage Corporation, 650 Dresher Road, P.O. Box 1015,
Horsham, Pennsylvania 19044-8015, or such other place as may be designated by
written notice to Borrower from or on behalf of Lender.
3. PAYMENT OF PRINCIPAL AND INTEREST. Principal and interest shall be
paid as follows:
(a) Unless disbursement of principal is made by Lender to Borrower on the
first day of the month, interest for the period beginning on the date of
disbursement and ending on and including the last day of the month in which such
disbursement is made shall be payable simultaneously with the execution of this
Note. Interest under this Note shall be computed on the basis of a 360-day year
consisting of twelve 30-day months.
(b) Consecutive monthly installments of principal and interest, each in
the amount of_________________________________________________________________
Dollars (US $__________________________), shall be payable on the first day of
each month beginning on March 1, 2000, until the entire unpaid principal balance
evidenced by this Note is fully paid. Any accrued interest remaining past due
for 30 days or more shall be added to and become part of the unpaid principal
balance and shall bear interest at the rate or rates specified in this Note, and
any reference below to "accrued interest" shall refer to accrued interest which
has not become part of the unpaid principal balance. Any remaining principal and
interest
- --------------------------------------------------------------------------------
MULTIFAMILY NOTE (FREDDIE MAC) - MULTISTATE PAGE 1
<PAGE> 2
shall be due and payable on February 1, 2007, or on any earlier date on which
the unpaid principal balance of this Note becomes due and payable, by
acceleration or otherwise (the "MATURITY DATE"). The unpaid principal balance
shall continue to bear interest after the Maturity Date at the Default Rate set
forth in this Note until and including the date on which it is paid in full.
(c) Any regularly scheduled monthly installment of principal and interest
that is received by Lender before the date it is due shall be deemed to have
been received on the due date solely for the purpose of calculating interest
due.
4. APPLICATION OF PAYMENTS. If at any time Lender receives, from Borrower
or otherwise, any amount applicable to the Indebtedness which is less than all
amounts due and payable at such time, Lender may apply that payment to amounts
then due and payable in any manner and in any order determined by Lender, in
Lender's discretion. Borrower agrees that neither Lender's acceptance of a
payment from Borrower in an amount that is less than all amounts then due and
payable nor Lender's application of such payment shall constitute or be deemed
to constitute either a waiver of the unpaid amounts or an accord and
satisfaction.
5. SECURITY. The Indebtedness is secured, among other things, by a
multifamily mortgage, deed to secure debt or deed of trust dated as of the date
of this Note (the "SECURITY INSTRUMENT"), and reference is made to the Security
Instrument for other rights of Lender as to collateral for the Indebtedness.
6. ACCELERATION. If an Event of Default has occurred and is continuing,
the entire unpaid principal balance, any accrued interest, the prepayment
premium payable under Paragraph 10, if any, and all other amounts payable under
this Note and any other Loan Document shall at once become due and payable, at
the option of Lender, without any prior notice to Borrower. Lender may exercise
this option to accelerate regardless of any prior forbearance.
7. LATE CHARGE. If any monthly amount payable under this Note or under
the Security Instrument or any other Loan Document is not received by Lender
within ten (10) days after the amount is due, Borrower shall pay to Lender,
immediately and without demand by Lender, a late charge equal to five percent of
such amount. Borrower acknowledges that its failure to make timely payments will
cause Lender to incur additional expenses in servicing and processing the loan
evidenced by this Note (the "LOAN"), and that it is extremely difficult and
impractical to determine those additional expenses. Borrower agrees that the
late charge payable pursuant to this Paragraph represents a fair and reasonable
estimate, taking into account all circumstances existing on the date of this
Note, of the additional expenses Lender will incur by reason of such late
payment. The late charge is payable in addition to, and not in lieu of, any
interest payable at the Default Rate pursuant to Paragraph 8.
8. DEFAULT RATE. So long as (a) any monthly installment under this Note
remains
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MULTIFAMILY NOTE (FREDDIE MAC) - MULTISTATE PAGE 2
<PAGE> 3
past due for 30 days or more, or (b) any other Event of Default has occurred and
is continuing, interest under this Note shall accrue on the unpaid principal
balance from the earlier of the due date of the first unpaid monthly installment
or the occurrence of such other Event of Default, as applicable, at a rate (the
"DEFAULT RATE") equal to the lesser of 4 percentage points above the rate stated
in the first paragraph of this Note or the maximum interest rate which may be
collected from Borrower under applicable law. If the unpaid principal balance
and all accrued interest are not paid in full on the Maturity Date, the unpaid
principal balance and all accrued interest shall bear interest from the Maturity
Date at the Default Rate. Borrower also acknowledges that its failure to make
timely payments will cause Lender to incur additional expenses in servicing and
processing the Loan, that, during the time that any monthly installment under
this Note is delinquent for more than 30 days, Lender will incur additional
costs and expenses arising from its loss of the use of the money due and from
the adverse impact on Lender's ability to meet its other obligations and to take
advantage of other investment opportunities, and that it is extremely difficult
and impractical to determine those additional costs and expenses. Borrower also
acknowledges that, during the time that any monthly installment under this Note
is delinquent for more than 30 days or any other Event of Default has occurred
and is continuing, Lender's risk of nonpayment of this Note will be materially
increased and Lender is entitled to be compensated for such increased risk.
Borrower agrees that the increase in the rate of interest payable under this
Note to the Default Rate represents a fair and reasonable estimate, taking into
account all circumstances existing on the date of this Note, of the additional
costs and expenses Lender will incur by reason of the Borrower's delinquent
payment and the additional compensation Lender is entitled to receive for the
increased risks of nonpayment associated with a delinquent loan.
9. LIMITS ON PERSONAL LIABILITY.
(a) Except as otherwise provided in this Paragraph 9, Borrower shall have
no personal liability under this Note, the Security Instrument or any other Loan
Document for the repayment of the Indebtedness or for the performance of any
other obligations of Borrower under the Loan Documents, and Lender's only
recourse for the satisfaction of the Indebtedness and the performance of such
obligations shall be Lender's exercise of its rights and remedies with respect
to the Mortgaged Property and any other collateral held by Lender as security
for the Indebtedness. This limitation on Borrower's liability shall not limit or
impair Lender's enforcement of its rights against any guarantor of the
Indebtedness or any guarantor of any obligations of Borrower.
(b) Borrower shall be personally liable to Lender for the repayment of a
portion of the Indebtedness equal to zero percent (0%) of the unpaid principal
balance of this Note, plus any other amounts for which Borrower has personal
liability under this Paragraph 9.
(c) In addition to Borrower's personal liability under Paragraph 9(b),
Borrower shall be personally liable to Lender for the repayment of a further
portion of the Indebtedness equal to any loss or damage suffered by Lender as a
result of (1) failure of Borrower to pay to
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MULTIFAMILY NOTE (FREDDIE MAC) - MULTISTATE PAGE 3
<PAGE> 4
Lender upon demand after an Event of Default all Rents to which Lender is
entitled under Section 3(a) of the Security Instrument and the amount of all
security deposits collected by Borrower from tenants then in residence; (2)
failure of Borrower to apply all insurance proceeds and condemnation proceeds as
required by the Security Instrument; or (3) failure of Borrower to comply with
Section 14(d) or (e) of the Security Instrument relating to the delivery of
books and records, statements, schedules and reports.
(d) For purposes of determining Borrower's personal liability under
Paragraph 9(b) and Paragraph 9(c), all payments made by Borrower or any
guarantor of this Note with respect to the Indebtedness and all amounts received
by Lender from the enforcement of its rights under the Security Instrument shall
be applied first to the portion of the Indebtedness for which Borrower has no
personal liability.
(e) Borrower shall become personally liable to Lender for the repayment
of all of the Indebtedness upon the occurrence of any of the following Events of
Default: (1) Borrower's acquisition of any property or operation of any business
not permitted by Section 33 of the Security Instrument; (2) a Transfer
(including, but not limited to, a lien or encumbrance) that is an Event of
Default under Section 21 of the Security Instrument, other than a Transfer
consisting solely of the involuntary removal or involuntary withdrawal of a
general partner in a limited partnership or a manager in a limited liability
company; or (3) fraud or written material misrepresentation by Borrower or any
officer, director, partner, member or employee of Borrower in connection with
the application for or creation of the Indebtedness or any request for any
action or consent by Lender.
(f) In addition to any personal liability for the Indebtedness, Borrower
shall be personally liable to Lender for (1) the performance of all of
Borrower's obligations under Section 18 of the Security Instrument (relating to
environmental matters); (2) the costs of any audit under Section 14(d) of the
Security Instrument; and (3) any costs and expenses incurred by Lender in
connection with the collection of any amount for which Borrower is personally
liable under this Paragraph 9, including fees and out of pocket expenses of
attorneys and expert witnesses and the costs of conducting any independent audit
of Borrower's books and records to determine the amount for which Borrower has
personal liability.
(g) To the extent that Borrower has personal liability under this
Paragraph 9, Lender may exercise its rights against Borrower personally without
regard to whether Lender has exercised any rights against the Mortgaged Property
or any other security, or pursued any rights against any guarantor, or pursued
any other rights available to Lender under this Note, the Security Instrument,
any other Loan Document or applicable law. For purposes of this Paragraph 9, the
term "MORTGAGED PROPERTY" shall not include any funds that (1) have been applied
by Borrower as required or permitted by the Security Instrument prior to the
occurrence of an Event of Default or (2) Borrower was unable to apply as
required or permitted by the Security Instrument because of a bankruptcy,
receivership, or similar judicial proceeding.
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MULTIFAMILY NOTE (FREDDIE MAC) - MULTISTATE PAGE 4
<PAGE> 5
10. VOLUNTARY AND INVOLUNTARY PREPAYMENTS.
(a) A prepayment premium shall be payable in connection with any
prepayment made under this Note as provided below:
(1) Borrower may voluntarily prepay all of the unpaid principal
balance of this Note on the last Business Day of a calendar month if Borrower
has given Lender at least 30 days prior notice of its intention to make such
prepayment. Such prepayment shall be made by paying (A) the amount of principal
being prepaid, (B) all accrued interest, (C) all other sums due Lender at the
time of such prepayment, and (D) the prepayment premium calculated pursuant to
Schedule A. For all purposes including the accrual of interest, any prepayment
received by Lender on any day other than the last calendar day of the month
shall be deemed to have been received on the last calendar day of such month.
For purposes of this Note, a "BUSINESS DAY" means any day other than a Saturday,
Sunday or any other day on which Lender is not open for business. Borrower shall
not have the option to voluntarily prepay less than all of the unpaid principal
balance.
(2) Upon Lender's exercise of any right of acceleration under this
Note, Borrower shall pay to Lender, in addition to the entire unpaid principal
balance of this Note outstanding at the time of the acceleration, (A) all
accrued interest and all other sums due Lender, and (B) the prepayment premium
calculated pursuant to Schedule A.
(3) Any application by Lender of any collateral or other security to
the repayment of any portion of the unpaid principal balance of this Note prior
to the Maturity Date and in the absence of acceleration shall be deemed to be a
partial prepayment by Borrower, requiring the payment to Lender by Borrower of a
prepayment premium. The amount of any such partial prepayment shall be computed
so as to provide to Lender a prepayment premium computed pursuant to Schedule A
without Borrower having to pay out-of-pocket any additional amounts.
(b) Notwithstanding the provisions of Paragraph 10(a), no prepayment
premium shall be payable with respect to (A) any prepayment made no more than
180 days before the Maturity Date, or (B) any prepayment occurring as a result
of the application of any insurance proceeds or condemnation award under the
Security Instrument.
(c) Schedule A is hereby incorporated by reference into this Note.
(d) Any permitted or required prepayment of less than the unpaid
principal balance of this Note shall not extend or postpone the due date of any
subsequent monthly installments or change the amount of such installments,
unless Lender agrees otherwise in writing.
(e) Borrower recognizes that any prepayment of the unpaid principal
balance of this
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MULTIFAMILY NOTE (FREDDIE MAC) - MULTISTATE PAGE 5
<PAGE> 6
Note, whether voluntary or involuntary or resulting from a default by Borrower,
will result in Lender's incurring loss, including reinvestment loss, additional
expense and frustration or impairment of Lender's ability to meet its
commitments to third parties. Borrower agrees to pay to Lender upon demand
damages for the detriment caused by any prepayment, and agrees that it is
extremely difficult and impractical to ascertain the extent of such damages.
Borrower therefore acknowledges and agrees that the formula for calculating
prepayment premiums set forth on Schedule A represents a reasonable estimate of
the damages Lender will incur because of a prepayment.
(f) Borrower further acknowledges that the prepayment premium provisions
of this Note are a material part of the consideration for the Loan, and
acknowledges that the terms of this Note are in other respects more favorable to
Borrower as a result of the Borrower's voluntary agreement to the prepayment
premium provisions.
11. COSTS AND EXPENSES. Borrower shall pay all expenses and costs,
including fees and out-of-pocket expenses of attorneys and expert witnesses and
costs of investigation, incurred by Lender as a result of any default under this
Note or in connection with efforts to collect any amount due under this Note, or
to enforce the provisions of any of the other Loan Documents, including those
incurred in post-judgment collection efforts and in any bankruptcy proceeding
(including any action for relief from the automatic stay of any bankruptcy
proceeding) or judicial or non-judicial foreclosure proceeding.
12. FORBEARANCE. Any forbearance by Lender in exercising any right or
remedy under this Note, the Security Instrument, or any other Loan Document or
otherwise afforded by applicable law, shall not be a waiver of or preclude the
exercise of that or any other right or remedy. The acceptance by Lender of any
payment after the due date of such payment, or in an amount which is less than
the required payment, shall not be a waiver of Lender's right to require prompt
payment when due of all other payments or to exercise any right or remedy with
respect to any failure to make prompt payment. Enforcement by Lender of any
security for Borrower's obligations under this Note shall not constitute an
election by Lender of remedies so as to preclude the exercise of any other right
or remedy available to Lender.
13. WAIVERS. Presentment, demand, notice of dishonor, protest, notice of
acceleration, notice of intent to demand or accelerate payment or maturity,
presentment for payment, notice of nonpayment, grace, and diligence in
collecting the Indebtedness are waived by Borrower and all endorsers and
guarantors of this Note and all other third party obligors.
14. LOAN CHARGES. If any applicable law limiting the amount of interest
or other charges permitted to be collected from Borrower in connection with the
Loan is interpreted so that any interest or other charge provided for in any
Loan Document, whether considered separately or together with other charges
provided for in any other Loan Document, violates that law, and Borrower is
entitled to the benefit of that law, that interest or charge is hereby reduced
to the extent necessary to eliminate that violation. The amounts, if any,
previously
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MULTIFAMILY NOTE (FREDDIE MAC) - MULTISTATE PAGE 6
<PAGE> 7
paid to Lender in excess of the permitted amounts shall be applied by Lender to
reduce the unpaid principal balance of this Note. For the purpose of determining
whether any applicable law limiting the amount of interest or other charges
permitted to be collected from Borrower has been violated, all Indebtedness that
constitutes interest, as well as all other charges made in connection with the
Indebtedness that constitute interest, shall be deemed to be allocated and
spread ratably over the stated term of the Note. Unless otherwise required by
applicable law, such allocation and spreading shall be effected in such a manner
that the rate of interest so computed is uniform throughout the stated term of
the Note.
15. COMMERCIAL PURPOSE. Borrower represents that the Indebtedness is
being incurred by Borrower solely for the purpose of carrying on a business or
commercial enterprise, and not for personal, family or household purposes.
16. COUNTING OF DAYS. Except where otherwise specifically provided, any
reference in this Note to a period of "days" means calendar days, not Business
Days.
17. GOVERNING LAW. This Note shall be governed by the law of the
jurisdiction in which the Land is located.
18. CAPTIONS. The captions of the paragraphs of this Note are for
convenience only and shall be disregarded in construing this Note.
19. NOTICES. All notices, demands and other communications required or
permitted to be given by Lender to Borrower pursuant to this Note shall be given
in accordance with Section 31 of the Security Instrument.
20. CONSENT TO JURISDICTION AND VENUE. Borrower agrees that any
controversy arising under or in relation to this Note shall be litigated
exclusively in the jurisdiction in which the Land is located (the "PROPERTY
JURISDICTION"). The state and federal courts and authorities with jurisdiction
in the Property Jurisdiction shall have exclusive jurisdiction over all
controversies which shall arise under or in relation to this Note. Borrower
irrevocably consents to service, jurisdiction, and venue of such courts for any
such litigation and waives any other venue to which it might be entitled by
virtue of domicile, habitual residence or otherwise.
21. WAIVER OF TRIAL BY JURY. BORROWER AND LENDER EACH (A) AGREES NOT TO
ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS NOTE OR THE
RELATIONSHIP BETWEEN THE PARTIES AS LENDER AND BORROWER THAT IS TRIABLE OF RIGHT
BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE
TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE. THIS WAIVER OF
RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND
VOLUNTARILY WITH THE BENEFIT OF
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MULTIFAMILY NOTE (FREDDIE MAC) - MULTISTATE PAGE 7
NTMUFR02.WP
<PAGE> 8
COMPETENT LEGAL COUNSEL.
ATTACHED SCHEDULES. THE FOLLOWING SCHEDULES ARE ATTACHED TO THIS NOTE:
|X| SCHEDULE A PREPAYMENT PREMIUM (REQUIRED)
---
|X| SCHEDULE B MODIFICATIONS TO MULTIFAMILY NOTE
---
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MULTIFAMILY NOTE (FREDDIE MAC) - MULTISTATE PAGE 8
<PAGE> 9
IN WITNESS WHEREOF, Borrower has signed and delivered this Note or has
caused this Note to be signed and delivered by its duly authorized
representative.
BORROWER:
WITNESS:
SUNRISE PARAMUS ASSISTED LIVING LIMITED
PARTNERSHIP, a New Jersey limited partnership
By: SUNRISE ASSISTED LIVING
INVESTMENTS, INC., a Virginia
corporation, General Partner
By: _______________________(SEAL)
James S. Pope
Vice President
Print Name
---------------------------------------------
Borrower's Social Security/Employer ID Number
PAY TO THE ORDER OF FEDERAL HOME LOAN MORTGAGE CORPORATION, WITHOUT RECOURSE
This ___ day of January, 2000.
GMAC COMMERCIAL MORTGAGE CORPORATION,
a California corporation
By: ___________________________(SEAL)
Philip Brooks
Vice President
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MULTIFAMILY NOTE (FREDDIE MAC) - MULTISTATE PAGE 9
<PAGE> 10
SCHEDULE A
PREPAYMENT PREMIUM
Any prepayment premium payable under Paragraph 10 of this Note shall be computed
as follows:
(a) If the prepayment is made between the date of this Note and the date
that is seventy-eight (78) months after the first day of the first calendar
month following the date of this Note (the "YIELD MAINTENANCE PERIOD"), the
prepayment premium shall be the greater of:
(i) 1.0% of the unpaid principal balance of this Note; or
(ii) the product obtained by multiplying:
(A) the amount of principal being prepaid,
by
(B) the excess (if any) of the Monthly Note Rate over the
Assumed Reinvestment Rate,
by
(C) the Present Value Factor.
For purposes of subparagraph (ii), the following definitions shall
apply:
MONTHLY NOTE RATE: one-twelfth (1/12) of the annual interest rate
of the Note, expressed as a decimal calculated to five digits.
PREPAYMENT DATE: in the case of a voluntary prepayment, the date
on which the prepayment is made; in any other case, the date on
which Lender accelerates the unpaid principal balance of the Note.
ASSUMED REINVESTMENT RATE: one-twelfth (1/12) of the yield rate as
of the date 5 Business Days before the Prepayment Date, on the
______% U.S. Treasury Security due ______________________, as
reported in The Wall Street Journal, expressed as a decimal
calculated to five digits. In the event that no yield is published
on the applicable date for the Treasury Security used to determine
the Assumed Reinvestment Rate, Lender, in its discretion, shall
select the non-callable Treasury Security maturing in the same
year as the Treasury Security
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MULTIFAMILY NOTE (FREDDIE MAC) - MULTISTATE PAGE A-1
<PAGE> 11
specified above with the lowest yield published in The Wall Street
Journal as of the applicable date. If the publication of such
yield rates in The Wall Street Journal is discontinued for any
reason, Lender shall select a security with a comparable rate and
term to the Treasury Security used to determine the Assumed
Reinvestment Rate. The selection of an alternate security pursuant
to this Paragraph shall be made in Lender's discretion.
PRESENT VALUE FACTOR: the factor that discounts to present value
the costs resulting to Lender from the difference in interest
rates during the months remaining in the Yield Maintenance Period,
using the Assumed Reinvestment Rate as the discount rate, with
monthly compounding, expressed numerically as follows:
Install Equation Editor and double-
click here to view equation.
n = number of months remaining in Yield Maintenance Period
ARR = Assumed Reinvestment Rate
(b) If the prepayment is made after the expiration of the Yield
Maintenance Period but more than 180 days before the Maturity Date, the
prepayment premium shall be 1.0% of the unpaid principal balance of this Note.
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MULTIFAMILY NOTE (FREDDIE MAC) - MULTISTATE PAGE A-2
<PAGE> 12
SCHEDULE B
MODIFICATIONS TO MULTIFAMILY NOTE
1. Section 9(c) of the Multifamily Note is amended to add the
following Subsection (4):
(4) Failure by Borrower to pay the amount of any hazard or other
insurance premiums in accordance with the terms of the Security Instrument.
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MULTIFAMILY NOTE (FREDDIE MAC) - MULTISTATE PAGE B-1
<PAGE> 13
LIMITED GUARANTY
(MULTISTATE)
This Limited Guaranty ("GUARANTY") is entered into as of 22nd day of
March, 2000, by the undersigned person(s) (the "GUARANTOR" whether one or more),
for the benefit of_________________________________________________________
_____________________________________________________________, and/or any
subsequent holder of the Note (the "LENDER").
RECITALS
A. ____________________________________________________________ (the
"BORROWER") has requested that Lender make a loan to Borrower in the amount of
$________________________________(the "LOAN"). The Loan will be evidenced by a
Multifamily Note from Borrower to Lender dated as of the date of this Guaranty
(the "NOTE"). The Note will be secured by a Multifamily Mortgage, Deed of Trust,
or Deed to Secure Debt dated the same date as the Note (the "SECURITY
INSTRUMENT"), encumbering the real property described in the Security Instrument
(the "PROPERTY").
B. As a condition to making the Loan to Borrower, Lender requires that
the Guarantor execute this Guaranty.
NOW, THEREFORE, in order to induce Lender to make the Loan to Borrower,
and in consideration thereof, Guarantor agrees as follows:
1. "Indebtedness" and other capitalized terms used but not defined in
this Guaranty shall have the meanings assigned to them in the Security
Instrument.
2. Guarantor hereby absolutely, unconditionally and irrevocably
guarantees to Lender the full and prompt payment when due, whether at maturity
or earlier, by reason of acceleration or otherwise, and at all times thereafter,
and the full and prompt performance when due, of all of the following:
(a) A portion of the Indebtedness equal to _________ percent
(______%) of the _________________ principal balance of the
Note (the "BASE GUARANTY").
(b) In addition to the Base Guaranty, all other amounts for
which Borrower is personally liable under Paragraphs 9(c)
through 9(f) of the Note.
(c) The payment and performance of all of Borrower's
obligations under Section 18 of the Security Instrument.
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LIMITED GUARANTY (FREDDIE MAC) - MULTISTATE PAGE 1
<PAGE> 14
(d) The entire Indebtedness, in the event that (i) Borrower
voluntarily files for bankruptcy protection under the
United States Bankruptcy Code or voluntarily becomes
subject to any reorganization, receivership, insolvency
proceeding or other similar proceeding pursuant to any
other federal or state law affecting debtor and creditor
rights, or (ii) an order for relief is entered against
Borrower in any involuntary bankruptcy filing by any
creditor of Borrower (other than Lender) pursuant to the
United States Bankruptcy Code or other federal or state law
affecting debtor and creditor rights.
(e) All costs and expenses, including reasonable fees and out
of pocket expenses of attorneys and expert witnesses,
incurred by Lender in enforcing its rights under this
Guaranty.
For purposes of determining Guarantor's liability under this Guaranty, all
payments made by Borrower with respect to the Indebtedness and all amounts
received by Lender from the enforcement of its rights under the Security
Instrument shall be applied first to the portion of the Indebtedness for which
neither Borrower nor Guarantor has personal liability.
3. The obligations of Guarantor under this Guaranty shall survive any
foreclosure proceeding, any foreclosure sale, any delivery of any deed in lieu
of foreclosure, and any release of record of the Security Instrument, and, in
addition, the obligations of Guarantor relating to Borrower's obligations under
Section 18 of the Security Instrument shall survive any repayment or discharge
of the Indebtedness.
4. Guarantor's obligations under this Guaranty constitute an
unconditional guaranty of payment and not merely a guaranty of collection.
5. The obligations of Guarantor under this Guaranty shall be performed
without demand by Lender and shall be unconditional irrespective of the
genuineness, validity, regularity or enforceability of the Note, the Security
Instrument, or any other Loan Document, and without regard to any other
circumstance which might otherwise constitute a legal or equitable discharge of
a surety or a guarantor. Guarantor hereby waives the benefit of all principles
or provisions of law, statutory or otherwise, which are or might be in conflict
with the terms of this Guaranty and agrees that Guarantor's obligations shall
not be affected by any circumstances, whether or not referred to in this
Guaranty, which might otherwise constitute a legal or equitable discharge of a
surety or a guarantor. Guarantor hereby waives the benefits of any right of
discharge under any and all statutes or other laws relating to guarantors or
sureties and any other rights of sureties and guarantors thereunder. Without
limiting the generality of the foregoing, Guarantor hereby waives, to the
fullest extent permitted by law, diligence in collecting the Indebtedness,
presentment, demand for payment, protest, all notices with respect to the Note
and this Guaranty which may be required by statute, rule of law or otherwise to
preserve Lender's rights against Guarantor under this Guaranty, including, but
not limited to, notice of acceptance, notice of any amendment of the Loan
Documents, notice of the occurrence of any default or Event of Default, notice
of intent to accelerate, notice of acceleration, notice of dishonor, notice of
foreclosure, notice of protest, and notice of the incurring by Borrower
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LIMITED GUARANTY (FREDDIE MAC) - MULTISTATE PAGE 2
<PAGE> 15
of any obligation or indebtedness. Guarantor also waives, to the fullest extent
permitted by law, all rights to require Lender to (a) proceed against Borrower
or any other guarantor of Borrower's payment or performance with respect to the
Indebtedness (an "OTHER GUARANTOR") (b) if Borrower or any Other Guarantor is a
partnership, proceed against any general partner of Borrower or the Other
Guarantor, (c) proceed against or exhaust any collateral held by Lender to
secure the repayment of the Indebtedness, or (d) pursue any other remedy it may
now or hereafter have against Borrower, or, if Borrower is a partnership, any
general partner of Borrower.
6. At any time or from time to time and any number of times, without
notice to Guarantor and without affecting the liability of Guarantor, (a) the
time for payment of the principal of or interest on the Indebtedness may be
extended or the Indebtedness may be renewed in whole or in part; (b) the time
for Borrower's performance of or compliance with any covenant or agreement
contained in the Note, the Security Instrument or any other Loan Document,
whether presently existing or hereinafter entered into, may be extended or such
performance or compliance may be waived; (c) the maturity of the Indebtedness
may be accelerated as provided in the Note, the Security Instrument, or any
other Loan Document; (d) the Note, the Security Instrument, or any other Loan
Document may be modified or amended by Lender and Borrower in any respect,
including, but not limited to, an increase in the principal amount; and (e) any
security for the Indebtedness may be modified, exchanged, surrendered or
otherwise dealt with or additional security may be pledged or mortgaged for the
Indebtedness.
7. If more than one person executes this Guaranty, the obligations of
those persons under this Guaranty shall be joint and several. Lender, in its
sole and absolute discretion, may (a) bring suit against Guarantor, or any one
or more of the persons constituting Guarantor, and any Other Guarantor, jointly
and severally, or against any one or more of them; (b) compromise or settle with
any one or more of the persons constituting Guarantor for such consideration as
Lender may deem proper; (c) release one or more of the persons constituting
Guarantor, or any Other Guarantor, from liability; and (d) otherwise deal with
Guarantor and any Other Guarantor, or any one or more of them, in any manner,
and no such action shall impair the rights of Lender to collect from Guarantor
any amount guaranteed by Guarantor under this Guaranty. Nothing contained in
this paragraph shall in any way affect or impair the rights or obligations of
Guarantor with respect to any Other Guarantor.
8. Any indebtedness of Borrower held by Guarantor now or in the future is
and shall be subordinated to the Indebtedness and any such indebtedness of
Borrower shall be collected, enforced and received by Guarantor, as trustee for
Lender, but without reducing or affecting in any manner the liability of
Guarantor under the other provisions of this Guaranty.
9. Guarantor shall have no right of, and hereby waives any claim for,
subrogation or reimbursement against Borrower or any general partner of Borrower
by reason of any payment by Guarantor under this Guaranty, whether such right or
claim arises at law or in equity or under any contract or statute, until the
Indebtedness has been paid in full and there has expired the maximum
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LIMITED GUARANTY (FREDDIE MAC) - MULTISTATE PAGE 3
<PAGE> 16
possible period thereafter during which any payment made by Borrower to Lender
with respect to the Indebtedness could be deemed a preference under the United
States Bankruptcy Code.
10. If any payment by Borrower is held to constitute a preference under
any applicable bankruptcy, insolvency, or similar laws, or if for any other
reason Lender is required to refund any sums to Borrower, such refund shall not
constitute a release of any liability of Guarantor under this Guaranty. It is
the intention of Lender and Guarantor that Guarantor's obligations under this
Guaranty shall not be discharged except by Guarantor's performance of such
obligations and then only to the extent of such performance.
11. Guarantor shall from time to time, upon request by Lender, deliver to
Lender such financial statements as Lender may reasonably require.
12. Lender may assign its rights under this Guaranty in whole or in part
and upon any such assignment, all the terms and provisions of this Guaranty
shall inure to the benefit of such assignee to the extent so assigned. The terms
used to designate any of the parties herein shall be deemed to include the
heirs, legal representatives, successors and assigns of such parties; and the
term "LENDER" shall include, in addition to Lender, any lawful owner, holder or
pledgee of the Note.
13. This Guaranty and the other Loan Documents represent the final
agreement between the parties and may not be contradicted by evidence of prior,
contemporaneous or subsequent oral agreements. There are no unwritten oral
agreements between the parties. All prior or contemporaneous agreements,
understandings, representations, and statements, oral or written, are merged
into this Guaranty and the other Loan Documents. Guarantor acknowledges that it
has received copies of the Note and all other Loan Documents. Neither this
Guaranty nor any of its provisions may be waived, modified, amended, discharged,
or terminated except by an agreement in writing signed by the party against
which the enforcement of the waiver, modification, amendment, discharge, or
termination is sought, and then only to the extent set forth in that agreement.
14. Guarantor agrees that any controversy arising under or in relation to
this Guaranty shall be litigated exclusively in the jurisdiction where the Land
is located (the "PROPERTY JURISDICTION"). The state and federal courts and
authorities with jurisdiction in the Property Jurisdiction shall have exclusive
jurisdiction over all controversies which shall arise under or in relation to
this Guaranty, the Note, the Security Instrument or any other Loan Document.
Guarantor irrevocably consents to service, jurisdiction, and venue of such
courts for any such litigation and waives any other venue to which it might be
entitled by virtue of domicile, habitual residence or otherwise.
15. GUARANTOR AND LENDER EACH (A) AGREES NOT TO ELECT A TRIAL BY JURY
WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS GUARANTY OR THE RELATIONSHIP
BETWEEN THE PARTIES AS GUARANTOR AND LENDER THAT IS TRIABLE OF RIGHT BY A JURY
AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE TO THE
EXTENT THAT ANY SUCH
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LIMITED GUARANTY (FREDDIE MAC) - MULTISTATE PAGE 4
<PAGE> 17
RIGHT EXISTS NOW OR IN THE FUTURE. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS
SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF
COMPETENT LEGAL COUNSEL.
ATTACHED EXHIBIT. The following Exhibit is attached to this Guaranty:
|__| Exhibit A Modifications to Guaranty
IN WITNESS WHEREOF, Guarantor has signed and delivered this Guaranty or
has caused this Guaranty to be signed and delivered by its duly authorized
representative.
[SIGNATURES AND ACKNOWLEDGMENTS]
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LIMITED GUARANTY (FREDDIE MAC) - MULTISTATE PAGE 5
<PAGE> 18
EXHIBIT A
MODIFICATIONS TO GUARANTY
The following modifications are made to the text of the Guaranty that precedes
this Exhibit:
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LIMITED GUARANTY (FREDDIE MAC) - MULTISTATE PAGE A-1
<PAGE> 1
EXHIBIT 10.3
MULTIFAMILY MORTGAGE,
ASSIGNMENT OF RENTS
AND SECURITY AGREEMENT
THIS MULTIFAMILY MORTGAGE, ASSIGNMENT OF RENTS AND SECURITY AGREEMENT
(the "INSTRUMENT") is made as of the 22nd day of March, 2000, between
____________________________________________________________________
_____________________________ a _____________________________________________
organized and existing under the laws of ____________________________________,
whose address is_____________________________________________________________
_________________________________________________, as mortgagor
("BORROWER"), and ___________________________________________________________, a
__________________________________________ organized and existing under the
laws of _____________________________________________, whose address is
____________________________________________________________________________
_____________________, as mortgagee ("LENDER").
Borrower is indebted to Lender in the principal amount of
$________________, as evidenced by Borrower's Multifamily Note payable to
Lender, dated as of the date of this Instrument, and maturing on
_________________, _____.
TO SECURE TO LENDER the repayment of the Indebtedness, and all
renewals, extensions and modifications of the Indebtedness, and the performance
of the covenants and agreements of Borrower contained in the Loan Documents,
Borrower mortgages, warrants, grants, conveys and assigns to Lender the
Mortgaged Property, including the Land located in_______________________________
County, State of New Jersey and described in Exhibit A attached to this
Instrument.
Borrower warrants and represents that Borrower is lawfully seized of
the Mortgaged Property and has the right, power and authority to mortgage,
grant, convey and assign the Mortgaged Property, and that the Mortgaged
Property is unencumbered. Borrower covenants that Borrower will warrant and
defend generally the title to the Mortgaged Property against all claims and
demands, subject to any easements and restrictions listed in a schedule of
exceptions to coverage in any title insurance policy issued to Lender
contemporaneously with the execution and recordation of this Instrument and
insuring Lender's interest in the Mortgaged Property.
COVENANTS. Borrower and Lender covenant and agree as follows:
1. DEFINITIONS. The following terms, when used in this
Instrument (including when used in the above recitals), shall have the
following meanings:
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SECURITY INSTRUMENT (FREDDIE MAC) - NEW JERSEY PAGE 1
<PAGE> 2
(a) "BORROWER" means all persons or entities identified as
"Borrower" in the first paragraph of this Instrument, together with their
successors and assigns.
(b) "COLLATERAL AGREEMENT" means any separate agreement between
Borrower and Lender for the purpose of establishing replacement reserves for
the Mortgaged Property, establishing a fund to assure the completion of repairs
or improvements specified in that agreement, or assuring reduction of the
outstanding principal balance of the Indebtedness if the occupancy of or income
from the Mortgaged Property does not increase to a level specified in that
agreement, or any other agreement or agreements between Borrower and Lender
which provide for the establishment of any other fund, reserve or account.
(c) "CONTROLLING ENTITY" means an entity which owns, directly or
indirectly through one or more intermediaries, (A) a general partnership
interest or more than 50% of the limited partnership interests in Borrower (if
Borrower is a partnership or joint venture), (B) a manager's interest in
Borrower or more than 50% of the ownership or membership interests in Borrower
(if Borrower is a limited liability company), or (C) more than 50% of any class
of voting stock of Borrower (if Borrower is a corporation).
(d) "ENVIRONMENTAL PERMIT" means any permit, license, or other
authorization issued under any Hazardous Materials Law with respect to any
activities or businesses conducted on or in relation to the Mortgaged Property.
(e) "EVENT OF DEFAULT" means the occurrence of any event listed
in Section 22.
(f) "FIXTURES" means all property which is so attached to the
Land or the Improvements as to constitute a fixture under applicable law,
including: machinery, equipment, engines, boilers, incinerators, installed
building materials; systems and equipment for the purpose of supplying or
distributing heating, cooling, electricity, gas, water, air, or light;
antennas, cable, wiring and conduits used in connection with radio, television,
security, fire prevention, or fire detection or otherwise used to carry
electronic signals; telephone systems and equipment; elevators and related
machinery and equipment; fire detection, prevention and extinguishing systems
and apparatus; security and access control systems and apparatus; plumbing
systems; water heaters, ranges, stoves, microwave ovens, refrigerators,
dishwashers, garbage disposers, washers, dryers and other appliances; light
fixtures, awnings, storm windows and storm doors; pictures, screens, blinds,
shades, curtains and curtain rods; mirrors; cabinets, paneling, rugs and floor
and wall coverings; fences, trees and plants; swimming pools; and exercise
equipment.
(g) "GOVERNMENTAL AUTHORITY" means any board, commission,
department or body of any municipal, county, state or federal governmental
unit, or any subdivision of any of them, that has or acquires jurisdiction over
the Mortgaged Property or the use, operation or improvement of the Mortgaged
Property.
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SECURITY INSTRUMENT (FREDDIE MAC) - NEW JERSEY PAGE 2
<PAGE> 3
(h) "HAZARDOUS MATERIALS" means petroleum and petroleum products
and compounds containing them, including gasoline, diesel fuel and oil;
explosives; flammable materials; radioactive materials; polychlorinated
biphenyls ("PCBs") and compounds containing them; lead and lead-based paint;
asbestos or asbestos-containing materials in any form that is or could become
friable; underground or above-ground storage tanks, whether empty or containing
any substance; any substance the presence of which on the Mortgaged Property is
prohibited by any federal, state or local authority; any substance that
requires special handling; and any other material or substance now or in the
future defined as a "hazardous substance," "hazardous material," "hazardous
waste," "toxic substance," "toxic pollutant," "contaminant," or "pollutant"
within the meaning of any Hazardous Materials Law.
(i) "HAZARDOUS MATERIALS LAWS" means all federal, state, and
local laws, ordinances and regulations and standards, rules, policies and other
governmental requirements, administrative rulings and court judgments and
decrees in effect now or in the future and including all amendments, that
relate to Hazardous Materials and apply to Borrower or to the Mortgaged
Property. Hazardous Materials Laws include, but are not limited to, the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
Section 9601, et seq., the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901, et seq., the Toxic Substance Control Act, 15 U.S.C. Section 2601,
et seq., the Clean Water Act, 33 U.S.C. Section 1251, et seq., and the
Hazardous Materials Transportation Act, 49 U.S.C. Section 5101, and their state
analogs.
(j) "IMPOSITIONS" and "IMPOSITION DEPOSITS" are defined in
Section 7(a).
(k) "IMPROVEMENTS" means the buildings, structures, improvements,
and alterations now constructed or at any time in the future constructed or
placed upon the Land, including any future replacements and additions.
(l) "INDEBTEDNESS" means the principal of, interest on, and all
other amounts due at any time under, the Note, this Instrument or any other
Loan Document, including prepayment premiums, late charges, default interest,
and advances as provided in Section 12 to protect the security of this
Instrument.
(m) "INITIAL OWNERS" means, with respect to Borrower or any other
entity, the persons or entities who on the date of the Note own in the
aggregate 100% of the ownership interests in Borrower or that entity.
(n) "LAND" means the land described in Exhibit A.
(o) "LEASES" means all present and future leases, subleases,
licenses, concessions or grants or other possessory interests now or hereafter
in force, whether oral or written, covering or affecting the Mortgaged
Property, or any portion of the Mortgaged Property (including proprietary
leases or occupancy agreements if Borrower is a cooperative housing
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SECURITY INSTRUMENT (FREDDIE MAC) - NEW JERSEY PAGE 3
<PAGE> 4
corporation), and all modifications, extensions or renewals.
(p) "LENDER" means the entity identified as "Lender" in the first
paragraph of this Instrument, or any subsequent holder of the Note.
(q) "LOAN DOCUMENTS" means the Note, this Instrument, all
guaranties, all indemnity agreements, all Collateral Agreements, O&M Programs,
and any other documents now or in the future executed by Borrower, any
guarantor or any other person in connection with the loan evidenced by the
Note, as such documents may be amended from time to time.
(r) "LOAN SERVICER" means the entity that from time to time is
designated by Lender to collect payments and deposits and receive notices under
the Note, this Instrument and any other Loan Document, and otherwise to service
the loan evidenced by the Note for the benefit of Lender. Unless Borrower
receives notice to the contrary, the Loan Servicer is the entity identified as
"Lender" in the first paragraph of this Instrument.
(s) "MORTGAGED PROPERTY" means all of Borrower's present and
future right, title and interest in and to all of the following:
(1) the Land;
(2) the Improvements;
(3) the Fixtures;
(4) the Personalty;
(5) all current and future rights, including air rights,
development rights, zoning rights and other similar
rights or interests, easements, tenements,
rights-of-way, strips and gores of land, streets,
alleys, roads, sewer rights, waters, watercourses,
and appurtenances related to or benefitting the Land
or the Improvements, or both, and all rights-of-way,
streets, alleys and roads which may have been or may
in the future be vacated;
(6) all proceeds paid or to be paid by any insurer of
the Land, the Improvements, the Fixtures, the
Personalty or any other part of the Mortgaged
Property, whether or not Borrower obtained the
insurance pursuant to Lender's requirement;
(7) all awards, payments and other compensation made or
to be made by any municipal, state or federal
authority with respect to the Land, the
Improvements, the Fixtures, the Personalty or any
other part of the Mortgaged Property, including any
awards or settlements resulting from
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SECURITY INSTRUMENT (FREDDIE MAC) - NEW JERSEY PAGE 4
<PAGE> 5
condemnation proceedings or the total or partial
taking of the Land, the Improvements, the Fixtures,
the Personalty or any other part of the Mortgaged
Property under the power of eminent domain or
otherwise and including any conveyance in lieu
thereof;
(8) all contracts, options and other agreements for the
sale of the Land, the Improvements, the Fixtures,
the Personalty or any other part of the Mortgaged
Property entered into by Borrower now or in the
future, including cash or securities deposited to
secure performance by parties of their obligations;
(9) all proceeds from the conversion, voluntary or
involuntary, of any of the above into cash or
liquidated claims, and the right to collect such
proceeds;
(10) all Rents and Leases;
(11) all earnings, royalties, accounts receivable, issues
and profits from the Land, the Improvements or any
other part of the Mortgaged Property, and all
undisbursed proceeds of the loan secured by this
Instrument and, if Borrower is a cooperative housing
corporation, maintenance charges or assessments
payable by shareholders or residents;
(12) all Imposition Deposits;
(13) all refunds or rebates of Impositions by any
municipal, state or federal authority or insurance
company (other than refunds applicable to periods
before the real property tax year in which this
Instrument is dated);
(14) all tenant security deposits which have not been
forfeited by any tenant under any Lease; and
(15) all names under or by which any of the above
Mortgaged Property may be operated or known, and all
trademarks, trade names, and goodwill relating to
any of the Mortgaged Property.
(t) "NOTE" means the Multifamily Note described on page 1 of this
Instrument, including all schedules, riders, allonges and addenda, as such
Multifamily Note may be amended from time to time.
(u) "O&M PROGRAM" is defined in Section 18(a).
(v) "PERSONALTY" means all furniture, furnishings, equipment,
machinery, building materials, appliances, goods, supplies, tools, books,
records (whether in written or electronic
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SECURITY INSTRUMENT (FREDDIE MAC) - NEW JERSEY PAGE 5
<PAGE> 6
form), computer equipment (hardware and software) and other tangible personal
property (other than Fixtures) which are used now or in the future in
connection with the ownership, management or operation of the Land or the
Improvements or are located on the Land or in the Improvements, and any
operating agreements relating to the Land or the Improvements, and any surveys,
plans and specifications and contracts for architectural, engineering and
construction services relating to the Land or the Improvements and all other
intangible property and rights relating to the operation of, or used in
connection with, the Land or the Improvements, including all governmental
permits relating to any activities on the Land.
(w) "PROPERTY JURISDICTION" is defined in Section 30(a).
(x) "RENTS" means all rents (whether from residential or
non-residential space), revenues and other income of the Land or the
Improvements, including parking fees, laundry and vending machine income and
fees and charges for food, health care and other services provided at the
Mortgaged Property, whether now due, past due, or to become due, and deposits
forfeited by tenants.
(y) "TAXES" means all taxes, assessments, vault rentals and other
charges, if any, general, special or otherwise, including all assessments for
schools, public betterments and general or local improvements, which are
levied, assessed or imposed by any public authority or quasi-public authority,
and which, if not paid, will become a lien, on the Land or the Improvements.
(z) "TRANSFER" means (A) a sale, assignment, transfer or other
disposition (whether voluntary, involuntary or by operation of law); (B) the
granting, creating or attachment of a lien, encumbrance or security interest
(whether voluntary, involuntary or by operation of law); (C) the issuance or
other creation of an ownership interest in a legal entity, including a
partnership interest, interest in a limited liability company or corporate
stock; (D) the withdrawal, retirement, removal or involuntary resignation of a
partner in a partnership or a member or manager in a limited liability company;
or (E) the merger, dissolution, liquidation, or consolidation of a legal entity
or the reconstitution of one type of legal entity into another type of legal
entity. "Transfer" does not include (i) a conveyance of the Mortgaged Property
at a judicial or non-judicial foreclosure sale under this Instrument or (ii)
the Mortgaged Property becoming part of a bankruptcy estate by operation of law
under the United States Bankruptcy Code. For purposes of defining the term
"Transfer," the term "partnership" shall mean a general partnership, a limited
partnership, a joint venture and a limited liability partnership, and the term
"partner" shall mean a general partner, a limited partner and a joint venturer.
2. UNIFORM COMMERCIAL CODE SECURITY AGREEMENT. This Instrument
is also a security agreement under the Uniform Commercial Code for any of the
Mortgaged Property which, under applicable law, may be subject to a security
interest under the Uniform Commercial Code, whether acquired now or in the
future, and all products and cash and non-cash proceeds thereof (collectively,
"UCC COLLATERAL"), and Borrower hereby
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SECURITY INSTRUMENT (FREDDIE MAC) - NEW JERSEY PAGE 6
<PAGE> 7
grants to Lender a security interest in the UCC Collateral. Borrower shall
execute and deliver to Lender, upon Lender's request, financing statements,
continuation statements and amendments, in such form as Lender may require to
perfect or continue the perfection of this security interest. Borrower shall
pay all filing costs and all costs and expenses of any record searches for
financing statements that Lender may require. Without the prior written consent
of Lender, Borrower shall not create or permit to exist any other lien or
security interest in any of the UCC Collateral. If an Event of Default has
occurred and is continuing, Lender shall have the remedies of a secured party
under the Uniform Commercial Code, in addition to all remedies provided by this
Instrument or existing under applicable law. In exercising any remedies, Lender
may exercise its remedies against the UCC Collateral separately or together,
and in any order, without in any way affecting the availability of Lender's
other remedies. This Instrument constitutes a financing statement with respect
to any part of the Mortgaged Property which is or may become a Fixture.
3. ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN
POSSESSION.
(a) As part of the consideration for the Indebtedness, Borrower
absolutely and unconditionally assigns and transfers to Lender all Rents. It is
the intention of Borrower to establish a present, absolute and irrevocable
transfer and assignment to Lender of all Rents and to authorize and empower
Lender to collect and receive all Rents without the necessity of further action
on the part of Borrower. Promptly upon request by Lender, Borrower agrees to
execute and deliver such further assignments as Lender may from time to time
require. Borrower and Lender intend this assignment of Rents to be immediately
effective and to constitute an absolute present assignment and not an
assignment for additional security only. For purposes of giving effect to this
absolute assignment of Rents, and for no other purpose, Rents shall not be
deemed to be a part of the "Mortgaged Property" as that term is defined in
Section 1(s). However, if this present, absolute and unconditional assignment
of Rents is not enforceable by its terms under the laws of the Property
Jurisdiction, then the Rents shall be included as a part of the Mortgaged
Property and it is the intention of the Borrower that in this circumstance this
Instrument create and perfect a lien on Rents in favor of Lender, which lien
shall be effective as of the date of this Instrument.
(b) After the occurrence of an Event of Default, Borrower
authorizes Lender to collect, sue for and compromise Rents and directs each
tenant of the Mortgaged Property to pay all Rents to, or as directed by,
Lender. However, until the occurrence of an Event of Default, Lender hereby
grants to Borrower a revocable license to collect and receive all Rents, to
hold all Rents in trust for the benefit of Lender and to apply all Rents to pay
the installments of interest and principal then due and payable under the Note
and the other amounts then due and payable under the other Loan Documents,
including Imposition Deposits, and to pay the current costs and expenses of
managing, operating and maintaining the Mortgaged Property, including
utilities, Taxes and insurance premiums (to the extent not included in
Imposition Deposits), tenant improvements and other capital expenditures. So
long as no Event of Default
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SECURITY INSTRUMENT (FREDDIE MAC) - NEW JERSEY PAGE 7
<PAGE> 8
has occurred and is continuing, the Rents remaining after application pursuant
to the preceding sentence may be retained by Borrower free and clear of, and
released from, Lender's rights with respect to Rents under this Instrument.
From and after the occurrence of an Event of Default, and without the necessity
of Lender entering upon and taking and maintaining control of the Mortgaged
Property directly, or by a receiver, Borrower's license to collect Rents shall
automatically terminate and Lender shall without notice be entitled to all
Rents as they become due and payable, including Rents then due and unpaid.
Borrower shall pay to Lender upon demand all Rents to which Lender is entitled.
At any time on or after the date of Lender's demand for Rents, Lender may give,
and Borrower hereby irrevocably authorizes Lender to give, notice to all
tenants of the Mortgaged Property instructing them to pay all Rents to Lender,
no tenant shall be obligated to inquire further as to the occurrence or
continuance of an Event of Default, and no tenant shall be obligated to pay to
Borrower any amounts which are actually paid to Lender in response to such a
notice. Any such notice by Lender shall be delivered to each tenant personally,
by mail or by delivering such demand to each rental unit. Borrower shall not
interfere with and shall cooperate with Lender's collection of such Rents.
(c) Borrower represents and warrants to Lender that Borrower has
not executed any prior assignment of Rents (other than an assignment of Rents
securing indebtedness that will be paid off and discharged with the proceeds of
the loan evidenced by the Note), that Borrower has not performed, and Borrower
covenants and agrees that it will not perform, any acts and has not executed,
and shall not execute, any instrument which would prevent Lender from
exercising its rights under this Section 3, and that at the time of execution
of this Instrument there has been no anticipation or prepayment of any Rents
for more than two months prior to the due dates of such Rents. Borrower shall
not collect or accept payment of any Rents more than two months prior to the
due dates of such Rents.
(d) If an Event of Default has occurred and is continuing, Lender
may, regardless of the adequacy of Lender's security or the solvency of
Borrower and even in the absence of waste, enter upon and take and maintain
full control of the Mortgaged Property in order to perform all acts that Lender
in its discretion determines to be necessary or desirable for the operation and
maintenance of the Mortgaged Property, including the execution, cancellation or
modification of Leases, the collection of all Rents, the making of repairs to
the Mortgaged Property and the execution or termination of contracts providing
for the management, operation or maintenance of the Mortgaged Property, for the
purposes of enforcing the assignment of Rents pursuant to Section 3(a),
protecting the Mortgaged Property or the security of this Instrument, or for
such other purposes as Lender in its discretion may deem necessary or
desirable. Alternatively, if an Event of Default has occurred and is
continuing, regardless of the adequacy of Lender's security, without regard to
Borrower's solvency and without the necessity of giving prior notice (oral or
written) to Borrower, Lender may apply to any court having jurisdiction for the
appointment of a receiver for the Mortgaged Property to take any or all of the
actions set forth in the preceding sentence. If Lender elects to seek the
appointment of a receiver for the Mortgaged Property at any time after an Event
of Default has occurred and is continuing, Borrower, by its execution of this
Instrument, expressly consents
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SECURITY INSTRUMENT (FREDDIE MAC) - NEW JERSEY PAGE 8
<PAGE> 9
to the appointment of such receiver, including the appointment of a receiver ex
parte if permitted by applicable law. Lender or the receiver, as the case may
be, shall be entitled to receive a reasonable fee for managing the Mortgaged
Property. Immediately upon appointment of a receiver or immediately upon the
Lender's entering upon and taking possession and control of the Mortgaged
Property, Borrower shall surrender possession of the Mortgaged Property to
Lender or the receiver, as the case may be, and shall deliver to Lender or the
receiver, as the case may be, all documents, records (including records on
electronic or magnetic media), accounts, surveys, plans, and specifications
relating to the Mortgaged Property and all security deposits and prepaid Rents.
In the event Lender takes possession and control of the Mortgaged Property,
Lender may exclude Borrower and its representatives from the Mortgaged
Property. Borrower acknowledges and agrees that the exercise by Lender of any
of the rights conferred under this Section 3 shall not be construed to make
Lender a mortgagee-in-possession of the Mortgaged Property so long as Lender
has not itself entered into actual possession of the Land and Improvements.
(e) If Lender enters the Mortgaged Property, Lender shall be
liable to account only to Borrower and only for those Rents actually received.
Lender shall not be liable to Borrower, anyone claiming under or through
Borrower or anyone having an interest in the Mortgaged Property, by reason of
any act or omission of Lender under this Section 3, and Borrower hereby
releases and discharges Lender from any such liability to the fullest extent
permitted by law.
(f) If the Rents are not sufficient to meet the costs of taking
control of and managing the Mortgaged Property and collecting the Rents, any
funds expended by Lender for such purposes shall become an additional part of
the Indebtedness as provided in Section 12.
(g) Any entering upon and taking of control of the Mortgaged
Property by Lender or the receiver, as the case may be, and any application of
Rents as provided in this Instrument shall not cure or waive any Event of
Default or invalidate any other right or remedy of Lender under applicable law
or provided for in this Instrument.
4. ASSIGNMENT OF LEASES; LEASES AFFECTING THE MORTGAGED
PROPERTY.
(a) As part of the consideration for the Indebtedness, Borrower
absolutely and unconditionally assigns and transfers to Lender all of
Borrower's right, title and interest in, to and under the Leases, including
Borrower's right, power and authority to modify the terms of any such Lease, or
extend or terminate any such Lease. It is the intention of Borrower to
establish a present, absolute and irrevocable transfer and assignment to Lender
of all of Borrower's right, title and interest in, to and under the Leases.
Borrower and Lender intend this assignment of the Leases to be immediately
effective and to constitute an absolute present assignment and not an
assignment for additional security only. For purposes of giving effect to this
absolute assignment of the Leases, and for no other purpose, the Leases shall
not be
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SECURITY INSTRUMENT (FREDDIE MAC) - NEW JERSEY PAGE 9
<PAGE> 10
deemed to be a part of the "Mortgaged Property" as that term is defined in
Section 1(s). However, if this present, absolute and unconditional assignment
of the Leases is not enforceable by its terms under the laws of the Property
Jurisdiction, then the Leases shall be included as a part of the Mortgaged
Property and it is the intention of the Borrower that in this circumstance this
Instrument create and perfect a lien on the Leases in favor of Lender, which
lien shall be effective as of the date of this Instrument.
(b) Until Lender gives notice to Borrower of Lender's exercise of
its rights under this Section 4, Borrower shall have all rights, power and
authority granted to Borrower under any Lease (except as otherwise limited by
this Section or any other provision of this Instrument), including the right,
power and authority to modify the terms of any Lease or extend or terminate any
Lease. Upon the occurrence of an Event of Default, the permission given to
Borrower pursuant to the preceding sentence to exercise all rights, power and
authority under Leases shall automatically terminate. Borrower shall comply
with and observe Borrower's obligations under all Leases, including Borrower's
obligations pertaining to the maintenance and disposition of tenant security
deposits.
(c) Borrower acknowledges and agrees that the exercise by Lender,
either directly or by a receiver, of any of the rights conferred under this
Section 4 shall not be construed to make Lender a mortgagee-in-possession of
the Mortgaged Property so long as Lender has not itself entered into actual
possession of the Land and the Improvements. The acceptance by Lender of the
assignment of the Leases pursuant to Section 4(a) shall not at any time or in
any event obligate Lender to take any action under this Instrument or to expend
any money or to incur any expenses. Lender shall not be liable in any way for
any injury or damage to person or property sustained by any person or persons,
firm or corporation in or about the Mortgaged Property. Prior to Lender's
actual entry into and taking possession of the Mortgaged Property, Lender shall
not (i) be obligated to perform any of the terms, covenants and conditions
contained in any Lease (or otherwise have any obligation with respect to any
Lease); (ii) be obligated to appear in or defend any action or proceeding
relating to the Lease or the Mortgaged Property; or (iii) be responsible for
the operation, control, care, management or repair of the Mortgaged Property or
any portion of the Mortgaged Property. The execution of this Instrument by
Borrower shall constitute conclusive evidence that all responsibility for the
operation, control, care, management and repair of the Mortgaged Property is
and shall be that of Borrower, prior to such actual entry and taking of
possession.
(d) Upon delivery of notice by Lender to Borrower of Lender's
exercise of Lender's rights under this Section 4 at any time after the
occurrence of an Event of Default, and without the necessity of Lender entering
upon and taking and maintaining control of the Mortgaged Property directly, by
a receiver, or by any other manner or proceeding permitted by the laws of the
Property Jurisdiction, Lender immediately shall have all rights, powers and
authority granted to Borrower under any Lease, including the right, power and
authority to modify the terms of any such Lease, or extend or terminate any
such Lease.
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SECURITY INSTRUMENT (FREDDIE MAC) - NEW JERSEY PAGE 10
<PAGE> 11
(e) Borrower shall, promptly upon Lender's request, deliver to
Lender an executed copy of each residential Lease then in effect. All Leases
for residential dwelling units shall be on forms approved by Lender, shall be
for initial terms of at least six months and not more than two years, and shall
not include options to purchase.
(f) Borrower shall not lease any portion of the Mortgaged
Property for non-residential use except with the prior written consent of
Lender and Lender's prior written approval of the Lease agreement. Borrower
shall not modify the terms of, or extend or terminate, any Lease for
non-residential use (including any Lease in existence on the date of this
Instrument) without the prior written consent of Lender. Borrower shall,
without request by Lender, deliver an executed copy of each non-residential
Lease to Lender promptly after such Lease is signed. All non-residential
Leases, including renewals or extensions of existing Leases, shall specifically
provide that (1) such Leases are subordinate to the lien of this Instrument;
(2) the tenant shall attorn to Lender and any purchaser at a foreclosure sale,
such attornment to be self-executing and effective upon acquisition of title to
the Mortgaged Property by any purchaser at a foreclosure sale or by Lender in
any manner; (3) the tenant agrees to execute such further evidences of
attornment as Lender or any purchaser at a foreclosure sale may from time to
time request; (4) the Lease shall not be terminated by foreclosure or any other
transfer of the Mortgaged Property; (5) after a foreclosure sale of the
Mortgaged Property, Lender or any other purchaser at such foreclosure sale may,
at Lender's or such purchaser's option, accept or terminate such Lease; and (6)
the tenant shall, upon receipt after the occurrence of an Event of Default of a
written request from Lender, pay all Rents payable under the Lease to Lender.
(g) Borrower shall not receive or accept Rent under any Lease
(whether residential or non-residential) for more than two months in advance.
5. PAYMENT OF INDEBTEDNESS; PERFORMANCE UNDER LOAN DOCUMENTS;
PREPAYMENT PREMIUM. Borrower shall pay the Indebtedness when due in accordance
with the terms of the Note and the other Loan Documents and shall perform,
observe and comply with all other provisions of the Note and the other Loan
Documents. Borrower shall pay a prepayment premium in connection with certain
prepayments of the Indebtedness, including a payment made after Lender's
exercise of any right of acceleration of the Indebtedness, as provided in the
Note.
6. EXCULPATION. Borrower's personal liability for payment of the
Indebtedness and for performance of the other obligations to be performed by it
under this Instrument is limited in the manner, and to the extent, provided in
the Note.
7. DEPOSITS FOR TAXES, INSURANCE AND OTHER CHARGES.
(a) Borrower shall deposit with Lender on the day monthly
installments of principal or interest, or both, are due under the Note (or on
another day designated in writing by
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SECURITY INSTRUMENT (FREDDIE MAC) - NEW JERSEY PAGE 11
<PAGE> 12
Lender), until the Indebtedness is paid in full, an additional amount
sufficient to accumulate with Lender the entire sum required to pay, when due
(1) any water and sewer charges which, if not paid, may result in a lien on all
or any part of the Mortgaged Property, (2) the premiums for fire and other
hazard insurance, rent loss insurance and such other insurance as Lender may
require under Section 19, (3) Taxes, and (4) amounts for other charges and
expenses which Lender at any time reasonably deems necessary to protect the
Mortgaged Property, to prevent the imposition of liens on the Mortgaged
Property, or otherwise to protect Lender's interests, all as reasonably
estimated from time to time by Lender, plus one-sixth of such estimate. The
amounts deposited under the preceding sentence are collectively referred to in
this Instrument as the "IMPOSITION DEPOSITS". The obligations of Borrower for
which the Imposition Deposits are required are collectively referred to in this
Instrument as "IMPOSITIONS". The amount of the Imposition Deposits shall be
sufficient to enable Lender to pay each Imposition before the last date upon
which such payment may be made without any penalty or interest charge being
added. Lender shall maintain records indicating how much of the monthly
Imposition Deposits and how much of the aggregate Imposition Deposits held by
Lender are held for the purpose of paying Taxes, insurance premiums and each
other obligation of Borrower for which Imposition Deposits are required. Any
waiver by Lender of the requirement that Borrower remit Imposition Deposits to
Lender may be revoked by Lender, in Lender's discretion, at any time upon
notice to Borrower.
(b) Imposition Deposits shall be held in an institution (which
may be Lender, if Lender is such an institution) whose deposits or accounts are
insured or guaranteed by a federal agency. Lender shall not be obligated to
open additional accounts or deposit Imposition Deposits in additional
institutions when the amount of the Imposition Deposits exceeds the maximum
amount of the federal deposit insurance or guaranty. Lender shall apply the
Imposition Deposits to pay Impositions so long as no Event of Default has
occurred and is continuing. Unless applicable law requires, Lender shall not be
required to pay Borrower any interest, earnings or profits on the Imposition
Deposits. Borrower hereby pledges and grants to Lender a security interest in
the Imposition Deposits as additional security for all of Borrower's
obligations under this Instrument and the other Loan Documents. Any amounts
deposited with Lender under this Section 7 shall not be trust funds, nor shall
they operate to reduce the Indebtedness, unless applied by Lender for that
purpose under Section 7(e).
(c) If Lender receives a bill or invoice for an Imposition,
Lender shall pay the Imposition from the Imposition Deposits held by Lender.
Lender shall have no obligation to pay any Imposition to the extent it exceeds
Imposition Deposits then held by Lender. Lender may pay an Imposition according
to any bill, statement or estimate from the appropriate public office or
insurance company without inquiring into the accuracy of the bill, statement or
estimate or into the validity of the Imposition.
(d) If at any time the amount of the Imposition Deposits held by
Lender for payment of a specific Imposition exceeds the amount reasonably
deemed necessary by Lender plus one-sixth of such estimate, the excess shall be
credited against future installments of Imposition
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SECURITY INSTRUMENT (FREDDIE MAC) - NEW JERSEY PAGE 12
<PAGE> 13
Deposits. If at any time the amount of the Imposition Deposits held by Lender
for payment of a specific Imposition is less than the amount reasonably
estimated by Lender to be necessary plus one-sixth of such estimate, Borrower
shall pay to Lender the amount of the deficiency within 15 days after notice
from Lender.
(e) If an Event of Default has occurred and is continuing, Lender
may apply any Imposition Deposits, in any amounts and in any order as Lender
determines, in Lender's discretion, to pay any Impositions or as a credit
against the Indebtedness. Upon payment in full of the Indebtedness, Lender
shall refund to Borrower any Imposition Deposits held by Lender.
8. COLLATERAL AGREEMENTS. Borrower shall deposit with Lender
such amounts as may be required by any Collateral Agreement and shall perform
all other obligations of Borrower under each Collateral Agreement.
9. APPLICATION OF PAYMENTS. If at any time Lender receives, from
Borrower or otherwise, any amount applicable to the Indebtedness which is less
than all amounts due and payable at such time, then Lender may apply that
payment to amounts then due and payable in any manner and in any order
determined by Lender, in Lender's discretion. Neither Lender's acceptance of an
amount which is less than all amounts then due and payable nor Lender's
application of such payment in the manner authorized shall constitute or be
deemed to constitute either a waiver of the unpaid amounts or an accord and
satisfaction. Notwithstanding the application of any such amount to the
Indebtedness, Borrower's obligations under this Instrument and the Note shall
remain unchanged.
10. COMPLIANCE WITH LAWS. Borrower shall comply with all laws,
ordinances, regulations and requirements of any Governmental Authority and all
recorded lawful covenants and agreements relating to or affecting the Mortgaged
Property, including all laws, ordinances, regulations, requirements and
covenants pertaining to health and safety, construction of improvements on the
Mortgaged Property, fair housing, zoning and land use, and Leases. Borrower
also shall comply with all applicable laws that pertain to the maintenance and
disposition of tenant security deposits. Borrower shall at all times maintain
records sufficient to demonstrate compliance with the provisions of this
Section 10. Borrower shall take appropriate measures to prevent, and shall not
engage in or knowingly permit, any illegal activities at the Mortgaged Property
that could endanger tenants or visitors, result in damage to the Mortgaged
Property, result in forfeiture of the Mortgaged Property, or otherwise
materially impair the lien created by this Instrument or Lender's interest in
the Mortgaged Property. Borrower represents and warrants to Lender that no
portion of the Mortgaged Property has been or will be purchased with the
proceeds of any illegal activity.
11. USE OF PROPERTY. Unless required by applicable law, Borrower
shall not (a) except for any change in use approved by Lender, allow changes in
the use for which all or any part of the Mortgaged Property is being used at
the time this Instrument was executed, (b) convert any individual dwelling
units or common areas to commercial use, (c) initiate or
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SECURITY INSTRUMENT (FREDDIE MAC) - NEW JERSEY PAGE 13
<PAGE> 14
acquiesce in a change in the zoning classification of the Mortgaged Property,
or (d) establish any condominium or cooperative regime with respect to the
Mortgaged Property.
12. PROTECTION OF LENDER'S SECURITY.
(a) If Borrower fails to perform any of its obligations under
this Instrument or any other Loan Document, or if any action or proceeding is
commenced which purports to affect the Mortgaged Property, Lender's security or
Lender's rights under this Instrument, including eminent domain, insolvency,
code enforcement, civil or criminal forfeiture, enforcement of Hazardous
Materials Laws, fraudulent conveyance or reorganizations or proceedings
involving a bankrupt or decedent, then Lender at Lender's option may make such
appearances, disburse such sums and take such actions as Lender reasonably
deems necessary to perform such obligations of Borrower and to protect Lender's
interest, including (1) payment of fees and out of pocket expenses of
attorneys, accountants, inspectors and consultants, (2) entry upon the
Mortgaged Property to make repairs or secure the Mortgaged Property, (3)
procurement of the insurance required by Section 19, and (4) payment of amounts
which Borrower has failed to pay under Sections 15 and 17.
(b) Any amounts disbursed by Lender under this Section 12, or
under any other provision of this Instrument that treats such disbursement as
being made under this Section 12, shall be added to, and become part of, the
principal component of the Indebtedness, shall be immediately due and payable
and shall bear interest from the date of disbursement until paid at the
"DEFAULT RATE", as defined in the Note.
(c) Nothing in this Section 12 shall require Lender to incur any
expense or take any action.
13. INSPECTION. Lender, its agents, representatives, and
designees may make or cause to be made entries upon and inspections of the
Mortgaged Property (including environmental inspections and tests) during
normal business hours, or at any other reasonable time.
14. BOOKS AND RECORDS; FINANCIAL REPORTING.
(a) Borrower shall keep and maintain at all times at the
Mortgaged Property or the management agent's offices, and upon Lender's request
shall make available at the Mortgaged Property, complete and accurate books of
account and records (including copies of supporting bills and invoices)
adequate to reflect correctly the operation of the Mortgaged Property, and
copies of all written contracts, Leases, and other instruments which affect the
Mortgaged Property. The books, records, contracts, Leases and other instruments
shall be subject to examination and inspection at any reasonable time by
Lender.
(b) Borrower shall furnish to Lender all of the following:
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SECURITY INSTRUMENT (FREDDIE MAC) - NEW JERSEY PAGE 14
<PAGE> 15
(1) within 120 days after the end of each fiscal year of
Borrower, a statement of income and expenses for
Borrower's operation of the Mortgaged Property for
that fiscal year, a statement of changes in
financial position of Borrower relating to the
Mortgaged Property for that fiscal year and, when
requested by Lender, a balance sheet showing all
assets and liabilities of Borrower relating to the
Mortgaged Property as of the end of that fiscal
year;
(2) within 120 days after the end of each fiscal year of
Borrower, and at any other time upon Lender's
request, a rent schedule for the Mortgaged Property
showing the name of each tenant, and for each
tenant, the space occupied, the lease expiration
date, the rent payable for the current month, the
date through which rent has been paid, and any
related information requested by Lender;
(3) within 120 days after the end of each fiscal year of
Borrower, and at any other time upon Lender's
request, an accounting of all security deposits held
pursuant to all Leases, including the name of the
institution (if any) and the names and
identification numbers of the accounts (if any) in
which such security deposits are held and the name
of the person to contact at such financial
institution, along with any authority or release
necessary for Lender to access information regarding
such accounts;
(4) within 120 days after the end of each fiscal year of
Borrower, and at any other time upon Lender's
request, a statement that identifies all owners of
any interest in Borrower and any Controlling Entity
and the interest held by each, if Borrower or a
Controlling Entity is a corporation, all officers
and directors of Borrower and the Controlling
Entity, and if Borrower or a Controlling Entity is a
limited liability company, all managers who are not
members;
(5) upon Lender's request, quarterly income and expense
statements for the Mortgaged Property;
(6) upon Lender's request at any time when an Event of
Default has occurred and is continuing, monthly
income and expense statements for the Mortgaged
Property;
(7) upon Lender's request, a monthly property management
report for the Mortgaged Property, showing the
number of inquiries made and rental applications
received from tenants or prospective tenants and
deposits received from tenants and any other
information requested by Lender;
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SECURITY INSTRUMENT (FREDDIE MAC) - NEW JERSEY PAGE 15
<PAGE> 16
and
(8) upon Lender's request, a balance sheet, a statement
of income and expenses for Borrower and a statement
of changes in financial position of Borrower for
Borrower's most recent fiscal year.
(c) Each of the statements, schedules and reports required by
Section 14(b) shall be certified to be complete and accurate by an individual
having authority to bind Borrower, and shall be in such form and contain such
detail as Lender may reasonably require. Lender also may require that any
statements, schedules or reports be audited at Borrower's expense by
independent certified public accountants acceptable to Lender.
(d) If Borrower fails to provide in a timely manner the
statements, schedules and reports required by Section 14(b), Lender shall have
the right to have Borrower's books and records audited, at Borrower's expense,
by independent certified public accountants selected by Lender in order to
obtain such statements, schedules and reports, and all related costs and
expenses of Lender shall become immediately due and payable and shall become an
additional part of the Indebtedness as provided in Section 12.
(e) If an Event of Default has occurred and is continuing,
Borrower shall deliver to Lender upon written demand all books and records
relating to the Mortgaged Property or its operation.
(f) Borrower authorizes Lender to obtain a credit report on
Borrower at any time.
15. TAXES; OPERATING EXPENSES.
(a) Subject to the provisions of Section 15(c) and Section 15(d),
Borrower shall pay, or cause to be paid, all Taxes when due and before the
addition of any interest, fine, penalty or cost for nonpayment.
(b) Subject to the provisions of Section 15(c), Borrower shall
pay the expenses of operating, managing, maintaining and repairing the
Mortgaged Property (including insurance premiums, utilities, repairs and
replacements) before the last date upon which each such payment may be made
without any penalty or interest charge being added.
(c) As long as no Event of Default exists and Borrower has timely
delivered to Lender any bills or premium notices that it has received, Borrower
shall not be obligated to pay Taxes, insurance premiums or any other individual
Imposition to the extent that sufficient Imposition Deposits are held by Lender
for the purpose of paying that specific Imposition. If an Event of Default
exists, Lender may exercise any rights Lender may have with respect to
Imposition Deposits without regard to whether Impositions are then due and
payable. Lender shall have no liability to Borrower for failing to pay any
Impositions to the extent that any
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SECURITY INSTRUMENT (FREDDIE MAC) - NEW JERSEY PAGE 16
<PAGE> 17
Event of Default has occurred and is continuing, insufficient Imposition
Deposits are held by Lender at the time an Imposition becomes due and payable
or Borrower has failed to provide Lender with bills and premium notices as
provided above.
(d) Borrower, at its own expense, may contest by appropriate
legal proceedings, conducted diligently and in good faith, the amount or
validity of any Imposition other than insurance premiums, if (1) Borrower
notifies Lender of the commencement or expected commencement of such
proceedings, (2) the Mortgaged Property is not in danger of being sold or
forfeited, (3) Borrower deposits with Lender reserves sufficient to pay the
contested Imposition, if requested by Lender, and (4) Borrower furnishes
whatever additional security is required in the proceedings or is reasonably
requested by Lender, which may include the delivery to Lender of the reserves
established by Borrower to pay the contested Imposition.
(e) Borrower shall promptly deliver to Lender a copy of all
notices of, and invoices for, Impositions, and if Borrower pays any Imposition
directly, Borrower shall promptly furnish to Lender receipts evidencing such
payments.
16. LIENS; ENCUMBRANCES. Borrower acknowledges that, to the
extent provided in Section 21, the grant, creation or existence of any
mortgage, deed of trust, deed to secure debt, security interest or other lien
or encumbrance (a "LIEN") on the Mortgaged Property (other than the lien of
this Instrument) or on certain ownership interests in Borrower, whether
voluntary, involuntary or by operation of law, and whether or not such Lien has
priority over the lien of this Instrument, is a "TRANSFER" which constitutes an
Event of Default and subjects Borrower to personal liability under the Note.
17. PRESERVATION, MANAGEMENT AND MAINTENANCE OF MORTGAGED
PROPERTY. Borrower (a) shall not commit waste or permit impairment or
deterioration of the Mortgaged Property, (b) shall not abandon the Mortgaged
Property, (c) shall restore or repair promptly, in a good and workmanlike
manner, any damaged part of the Mortgaged Property to the equivalent of its
original condition, or such other condition as Lender may approve in writing,
whether or not insurance proceeds or condemnation awards are available to cover
any costs of such restoration or repair, (d) shall keep the Mortgaged Property
in good repair, including the replacement of Personalty and Fixtures with items
of equal or better function and quality, (e) shall provide for professional
management of the Mortgaged Property by a residential rental property manager
satisfactory to Lender under a contract approved by Lender in writing, and (f)
shall give notice to Lender of and, unless otherwise directed in writing by
Lender, shall appear in and defend any action or proceeding purporting to
affect the Mortgaged Property, Lender's security or Lender's rights under this
Instrument. Borrower shall not (and shall not permit any tenant or other person
to) remove, demolish or alter the Mortgaged Property or any part of the
Mortgaged Property except in connection with the replacement of tangible
Personalty.
18. ENVIRONMENTAL HAZARDS.
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SECURITY INSTRUMENT (FREDDIE MAC) - NEW JERSEY PAGE 17
<PAGE> 18
(a) Except for matters covered by a written program of operations
and maintenance approved in writing by Lender (an "O&M PROGRAM") or matters
described in Section 18(b), Borrower shall not cause or permit any of the
following:
(1) the presence, use, generation, release, treatment,
processing, storage (including storage in above
ground and underground storage tanks), handling, or
disposal of any Hazardous Materials on or under the
Mortgaged Property or any other property of Borrower
that is adjacent to the Mortgaged Property;
(2) the transportation of any Hazardous Materials to,
from, or across the Mortgaged Property;
(3) any occurrence or condition on the Mortgaged
Property or any other property of Borrower that is
adjacent to the Mortgaged Property, which occurrence
or condition is or may be in violation of Hazardous
Materials Laws; or
(4) any violation of or noncompliance with the terms of
any Environmental Permit with respect to the
Mortgaged Property or any property of Borrower that
is adjacent to the Mortgaged Property.
The matters described in clauses (1) through (4) above are referred to
collectively in this Section 18 as "PROHIBITED ACTIVITIES OR CONDITIONS".
(b) Prohibited Activities and Conditions shall not include the
safe and lawful use and storage of quantities of (1) pre-packaged supplies,
cleaning materials and petroleum products customarily used in the operation and
maintenance of comparable multifamily properties, (2) cleaning materials,
personal grooming items and other items sold in pre-packaged containers for
consumer use and used by tenants and occupants of residential dwelling units in
the Mortgaged Property; and (3) petroleum products used in the operation and
maintenance of motor vehicles from time to time located on the Mortgaged
Property's parking areas, so long as all of the foregoing are used, stored,
handled, transported and disposed of in compliance with Hazardous Materials
Laws.
(c) Borrower shall take all commercially reasonable actions
(including the inclusion of appropriate provisions in any Leases executed after
the date of this Instrument) to prevent its employees, agents, and contractors,
and all tenants and other occupants from causing or permitting any Prohibited
Activities or Conditions. Borrower shall not lease or allow the sublease or use
of all or any portion of the Mortgaged Property to any tenant or subtenant for
nonresidential use by any user that, in the ordinary course of its business,
would cause or permit any Prohibited Activity or Condition.
(d) If an O&M Program has been established with respect to
Hazardous Materials,
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SECURITY INSTRUMENT (FREDDIE MAC) - NEW JERSEY PAGE 18
<PAGE> 19
Borrower shall comply in a timely manner with, and cause all employees, agents,
and contractors of Borrower and any other persons present on the Mortgaged
Property to comply with the O&M Program. All costs of performance of Borrower's
obligations under any O&M Program shall be paid by Borrower, and Lender's
out-of-pocket costs incurred in connection with the monitoring and review of
the O&M Program and Borrower's performance shall be paid by Borrower upon
demand by Lender. Any such out-of-pocket costs of Lender which Borrower fails
to pay promptly shall become an additional part of the Indebtedness as provided
in Section 12.
(e) Borrower represents and warrants to Lender that, except as
previously disclosed by Borrower to Lender in writing:
(1) Borrower has not at any time engaged in, caused or
permitted any Prohibited Activities or Conditions;
(2) to the best of Borrower's knowledge after reasonable
and diligent inquiry, no Prohibited Activities or
Conditions exist or have existed;
(3) except to the extent previously disclosed by
Borrower to Lender in writing, the Mortgaged
Property does not now contain any underground
storage tanks, and, to the best of Borrower's
knowledge after reasonable and diligent inquiry, the
Mortgaged Property has not contained any underground
storage tanks in the past. If there is an
underground storage tank located on the Property
which has been previously disclosed by Borrower to
Lender in writing, that tank complies with all
requirements of Hazardous Materials Laws;
(4) Borrower has complied with all Hazardous Materials
Laws, including all requirements for notification
regarding releases of Hazardous Materials. Without
limiting the generality of the foregoing, Borrower
has obtained all Environmental Permits required for
the operation of the Mortgaged Property in
accordance with Hazardous Materials Laws now in
effect and all such Environmental Permits are in
full force and effect;
(5) no event has occurred with respect to the Mortgaged
Property that constitutes, or with the passing of
time or the giving of notice would constitute,
noncompliance with the terms of any Environmental
Permit;
(6) there are no actions, suits, claims or proceedings
pending or, to the best of Borrower's knowledge
after reasonable and diligent inquiry, threatened
that involve the Mortgaged Property and allege,
arise out of, or relate to any Prohibited Activity
or Condition; and
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SECURITY INSTRUMENT (FREDDIE MAC) - NEW JERSEY PAGE 19
<PAGE> 20
(7) Borrower has not received any complaint, order,
notice of violation or other communication from any
Governmental Authority with regard to air emissions,
water discharges, noise emissions or Hazardous
Materials, or any other environmental, health or
safety matters affecting the Mortgaged Property or
any other property of Borrower that is adjacent to
the Mortgaged Property.
The representations and warranties in this Section 18 shall be continuing
representations and warranties that shall be deemed to be made by Borrower
throughout the term of the loan evidenced by the Note, until the Indebtedness
has been paid in full.
(f) Borrower shall promptly notify Lender in writing upon the
occurrence of any of the following events:
(1) Borrower's discovery of any Prohibited Activity or
Condition;
(2) Borrower's receipt of or knowledge of any complaint,
order, notice of violation or other communication
from any Governmental Authority or other person with
regard to present or future alleged Prohibited
Activities or Conditions or any other environmental,
health or safety matters affecting the Mortgaged
Property or any other property of Borrower that is
adjacent to the Mortgaged Property; and
(3) any representation or warranty in this Section 18
becomes untrue after the date of this Agreement.
Any such notice given by Borrower shall not relieve Borrower of, or result in a
waiver of, any obligation under this Instrument, the Note, or any other Loan
Document.
(g) Borrower shall pay promptly the costs of any environmental
inspections, tests or audits ("ENVIRONMENTAL INSPECTIONS") required by Lender
in connection with any foreclosure or deed in lieu of foreclosure, or as a
condition of Lender's consent to any Transfer under Section 21, or required by
Lender following a reasonable determination by Lender that Prohibited
Activities or Conditions may exist. Any such costs incurred by Lender
(including the fees and out-of-pocket costs of attorneys and technical
consultants whether incurred in connection with any judicial or administrative
process or otherwise) which Borrower fails to pay promptly shall become an
additional part of the Indebtedness as provided in Section 12. The results of
all Environmental Inspections made by Lender shall at all times remain the
property of Lender and Lender shall have no obligation to disclose or otherwise
make available to Borrower or any other party such results or any other
information obtained by Lender in connection with its Environmental
Inspections. Lender hereby reserves the right, and Borrower hereby expressly
authorizes Lender, to make available to any party, including any prospective
bidder at a foreclosure sale of the Mortgaged Property, the results of any
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SECURITY INSTRUMENT (FREDDIE MAC) - NEW JERSEY PAGE 20
<PAGE> 21
Environmental Inspections made by Lender with respect to the Mortgaged
Property. Borrower consents to Lender notifying any party (either as part of a
notice of sale or otherwise) of the results of any of Lender's Environmental
Inspections. Borrower acknowledges that Lender cannot control or otherwise
assure the truthfulness or accuracy of the results of any of its Environmental
Inspections and that the release of such results to prospective bidders at a
foreclosure sale of the Mortgaged Property may have a material and adverse
effect upon the amount which a party may bid at such sale. Borrower agrees that
Lender shall have no liability whatsoever as a result of delivering the results
of any of its Environmental Inspections to any third party, and Borrower hereby
releases and forever discharges Lender from any and all claims, damages, or
causes of action, arising out of, connected with or incidental to the results
of, the delivery of any of Lender's Environmental Inspections.
(h) If any investigation, site monitoring, containment, clean-up,
restoration or other remedial work ("REMEDIAL WORK") is necessary to comply
with any Hazardous Materials Law or order of any Governmental Authority that
has or acquires jurisdiction over the Mortgaged Property or the use, operation
or improvement of the Mortgaged Property under any Hazardous Materials Law,
Borrower shall, by the earlier of (1) the applicable deadline required by
Hazardous Materials Law or (2) 30 days after notice from Lender demanding such
action, begin performing the Remedial Work, and thereafter diligently prosecute
it to completion, and shall in any event complete the work by the time required
by applicable Hazardous Materials Law. If Borrower fails to begin on a timely
basis or diligently prosecute any required Remedial Work, Lender may, at its
option, cause the Remedial Work to be completed, in which case Borrower shall
reimburse Lender on demand for the cost of doing so. Any reimbursement due from
Borrower to Lender shall become part of the Indebtedness as provided in Section
12.
(i) Borrower shall cooperate with any inquiry by any Governmental
Authority and shall comply with any governmental or judicial order which arises
from any alleged Prohibited Activity or Condition.
(j) Borrower shall indemnify, hold harmless and defend (i)
Lender, (ii) any prior owner or holder of the Note, (iii) the Loan Servicer,
(iv) any prior Loan Servicer, (v) the officers, directors, shareholders,
partners, employees and trustees of any of the foregoing, and (vi) the heirs,
legal representatives, successors and assigns of each of the foregoing
(collectively, the "INDEMNITEES") from and against all proceedings, claims,
damages, penalties and costs (whether initiated or sought by Governmental
Authorities or private parties), including fees and out of pocket expenses of
attorneys and expert witnesses, investigatory fees, and remediation costs,
whether incurred in connection with any judicial or administrative process or
otherwise, arising directly or indirectly from any of the following:
(1) any breach of any representation or warranty of
Borrower in this Section 18;
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SECURITY INSTRUMENT (FREDDIE MAC) - NEW JERSEY PAGE 21
<PAGE> 22
(2) any failure by Borrower to perform any of its
obligations under this Section 18;
(3) the existence or alleged existence of any Prohibited
Activity or Condition;
(4) the presence or alleged presence of Hazardous
Materials on or under the Mortgaged Property or any
property of Borrower that is adjacent to the
Mortgaged Property; and
(5) the actual or alleged violation of any Hazardous
Materials Law.
(k) Counsel selected by Borrower to defend Indemnitees shall be
subject to the approval of those Indemnitees. However, any Indemnitee may elect
to defend any claim or legal or administrative proceeding at the Borrower's
expense.
(l) Borrower shall not, without the prior written consent of
those Indemnitees who are named as parties to a claim or legal or
administrative proceeding (a "CLAIM"), settle or compromise the Claim if the
settlement (1) results in the entry of any judgment that does not include as an
unconditional term the delivery by the claimant or plaintiff to Lender of a
written release of those Indemnitees, satisfactory in form and substance to
Lender; or (2) may materially and adversely affect Lender, as determined by
Lender in its discretion.
(m) Borrower's obligation to indemnify the Indemnitees shall not
be limited or impaired by any of the following, or by any failure of Borrower
or any guarantor to receive notice of or consideration for any of the
following:
(1) any amendment or modification of any Loan Document;
(2) any extensions of time for performance required by
any Loan Document;
(3) any provision in any of the Loan Documents limiting
Lender's recourse to property securing the
Indebtedness, or limiting the personal liability of
Borrower or any other party for payment of all or
any part of the Indebtedness;
(4) the accuracy or inaccuracy of any representations
and warranties made by Borrower under this
Instrument or any other Loan Document;
(5) the release of Borrower or any other person, by
Lender or by operation of law, from performance of
any obligation under any Loan Document;
(6) the release or substitution in whole or in part of
any security for the
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SECURITY INSTRUMENT (FREDDIE MAC) - NEW JERSEY PAGE 22
<PAGE> 23
Indebtedness; and
(7) Lender's failure to properly perfect any lien or
security interest given as security for the
Indebtedness.
(n) Borrower shall, at its own cost and expense, do all of the
following:
(1) pay or satisfy any judgment or decree that may be
entered against any Indemnitee or Indemnitees in any
legal or administrative proceeding incident to any
matters against which Indemnitees are entitled to be
indemnified under this Section 18;
(2) reimburse Indemnitees for any expenses paid or
incurred in connection with any matters against
which Indemnitees are entitled to be indemnified
under this Section 18; and
(3) reimburse Indemnitees for any and all expenses,
including fees and out of pocket expenses of
attorneys and expert witnesses, paid or incurred in
connection with the enforcement by Indemnitees of
their rights under this Section 18, or in monitoring
and participating in any legal or administrative
proceeding.
(o) In any circumstances in which the indemnity under this
Section 18 applies, Lender may employ its own legal counsel and consultants to
prosecute, defend or negotiate any claim or legal or administrative proceeding
and Lender, with the prior written consent of Borrower (which shall not be
unreasonably withheld, delayed or conditioned) may settle or compromise any
action or legal or administrative proceeding. Borrower shall reimburse Lender
upon demand for all costs and expenses incurred by Lender, including all costs
of settlements entered into in good faith, and the fees and out of pocket
expenses of such attorneys and consultants.
(p) The provisions of this Section 18 shall be in addition to any
and all other obligations and liabilities that Borrower may have under
applicable law or under other Loan Documents, and each Indemnitee shall be
entitled to indemnification under this Section 18 without regard to whether
Lender or that Indemnitee has exercised any rights against the Mortgaged
Property or any other security, pursued any rights against any guarantor, or
pursued any other rights available under the Loan Documents or applicable law.
If Borrower consists of more than one person or entity, the obligation of those
persons or entities to indemnify the Indemnitees under this Section 18 shall be
joint and several. The obligation of Borrower to indemnify the Indemnitees
under this Section 18 shall survive any repayment or discharge of the
Indebtedness, any foreclosure proceeding, any foreclosure sale, any delivery of
any deed in lieu of foreclosure, and any release of record of the lien of this
Instrument.
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SECURITY INSTRUMENT (FREDDIE MAC) - NEW JERSEY PAGE 23
<PAGE> 24
19. PROPERTY AND LIABILITY INSURANCE.
(a) Borrower shall keep the Improvements insured at all times
against such hazards as Lender may from time to time require, which insurance
shall include but not be limited to coverage against loss by fire and allied
perils, general boiler and machinery coverage, and business income coverage.
Lender's insurance requirements may change from time to time throughout the
term of the Indebtedness. If Lender so requires, such insurance shall also
include sinkhole insurance, mine subsidence insurance, earthquake insurance,
and, if the Mortgaged Property does not conform to applicable zoning or land
use laws, building ordinance or law coverage. If any of the Improvements is
located in an area identified by the Federal Emergency Management Agency (or
any successor to that agency) as an area having special flood hazards, and if
flood insurance is available in that area, Borrower shall insure such
Improvements against loss by flood.
(b) All premiums on insurance policies required under Section
19(a) shall be paid in the manner provided in Section 7, unless Lender has
designated in writing another method of payment. All such policies shall also
be in a form approved by Lender. All policies of property damage insurance
shall include a non-contributing, non-reporting mortgage clause in favor of,
and in a form approved by, Lender. Lender shall have the right to hold the
original policies or duplicate original policies of all insurance required by
Section 19(a). Borrower shall promptly deliver to Lender a copy of all renewal
and other notices received by Borrower with respect to the policies and all
receipts for paid premiums. At least 30 days prior to the expiration date of a
policy, Borrower shall deliver to Lender the original (or a duplicate original)
of a renewal policy in form satisfactory to Lender.
(c) Borrower shall maintain at all times commercial general
liability insurance, workers' compensation insurance and such other liability,
errors and omissions and fidelity insurance coverages as Lender may from time
to time require.
(d) All insurance policies and renewals of insurance policies
required by this Section 19 shall be in such amounts and for such periods as
Lender may from time to time require, and shall be issued by insurance
companies satisfactory to Lender.
(e) Borrower shall comply with all insurance requirements and
shall not permit any condition to exist on the Mortgaged Property that would
invalidate any part of any insurance coverage that this Instrument requires
Borrower to maintain.
(f) In the event of loss, Borrower shall give immediate written
notice to the insurance carrier and to Lender. Borrower hereby authorizes and
appoints Lender as attorney-in-fact for Borrower to make proof of loss, to
adjust and compromise any claims under policies of property damage insurance,
to appear in and prosecute any action arising from such property damage
insurance policies, to collect and receive the proceeds of property damage
insurance, and to deduct from such proceeds Lender's expenses incurred in the
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SECURITY INSTRUMENT (FREDDIE MAC) - NEW JERSEY PAGE 24
<PAGE> 25
collection of such proceeds. This power of attorney is coupled with an interest
and therefore is irrevocable. However, nothing contained in this Section 19
shall require Lender to incur any expense or take any action. Lender may, at
Lender's option, (1) hold the balance of such proceeds to be used to reimburse
Borrower for the cost of restoring and repairing the Mortgaged Property to the
equivalent of its original condition or to a condition approved by Lender (the
"RESTORATION"), or (2) apply the balance of such proceeds to the payment of the
Indebtedness, whether or not then due. To the extent Lender determines to apply
insurance proceeds to Restoration, Lender shall do so in accordance with
Lender's then-current policies relating to the restoration of casualty damage
on similar multifamily properties.
(g) Lender shall not exercise its option to apply insurance
proceeds to the payment of the Indebtedness if all of the following conditions
are met: (1) no Event of Default (or any event which, with the giving of notice
or the passage of time, or both, would constitute an Event of Default) has
occurred and is continuing; (2) Lender determines, in its discretion, that
there will be sufficient funds to complete the Restoration; (3) Lender
determines, in its discretion, that the rental income from the Mortgaged
Property after completion of the Restoration will be sufficient to meet all
operating costs and other expenses, Imposition Deposits, deposits to reserves
and loan repayment obligations relating to the Mortgaged Property; and (4)
Lender determines, in its discretion, that the Restoration will be completed
before the earlier of (A) one year before the maturity date of the Note or (B)
one year after the date of the loss or casualty.
(h) If the Mortgaged Property is sold at a foreclosure sale or
Lender acquires title to the Mortgaged Property, Lender shall automatically
succeed to all rights of Borrower in and to any insurance policies and unearned
insurance premiums and in and to the proceeds resulting from any damage to the
Mortgaged Property prior to such sale or acquisition.
20. CONDEMNATION.
(a) Borrower shall promptly notify Lender of any action or
proceeding relating to any condemnation or other taking, or conveyance in lieu
thereof, of all or any part of the Mortgaged Property, whether direct or
indirect (a "CONDEMNATION"). Borrower shall appear in and prosecute or defend
any action or proceeding relating to any Condemnation unless otherwise directed
by Lender in writing. Borrower authorizes and appoints Lender as
attorney-in-fact for Borrower to commence, appear in and prosecute, in Lender's
or Borrower's name, any action or proceeding relating to any Condemnation and
to settle or compromise any claim in connection with any Condemnation. This
power of attorney is coupled with an interest and therefore is irrevocable.
However, nothing contained in this Section 20 shall require Lender to incur any
expense or take any action. Borrower hereby transfers and assigns to Lender all
right, title and interest of Borrower in and to any award or payment with
respect to (i) any Condemnation, or any conveyance in lieu of Condemnation, and
(ii) any damage to the Mortgaged Property caused by governmental action that
does not result in a Condemnation.
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SECURITY INSTRUMENT (FREDDIE MAC) - NEW JERSEY PAGE 25
<PAGE> 26
(b) Lender may apply such awards or proceeds, after the deduction
of Lender's expenses incurred in the collection of such amounts, at Lender's
option, to the restoration or repair of the Mortgaged Property or to the
payment of the Indebtedness, with the balance, if any, to Borrower. Unless
Lender otherwise agrees in writing, any application of any awards or proceeds
to the Indebtedness shall not extend or postpone the due date of any monthly
installments referred to in the Note, Section 7 of this Instrument or any
Collateral Agreement, or change the amount of such installments. Borrower
agrees to execute such further evidence of assignment of any awards or proceeds
as Lender may require.
21. TRANSFERS OF THE MORTGAGED PROPERTY OR INTERESTS IN BORROWER.
[NO RIGHT TO TRANSFER]
(a) The occurrence of any of the following events shall
constitute an Event of Default under this Instrument:
(1) a Transfer of all or any part of the Mortgaged
Property or any interest in the Mortgaged Property;
(2) if Borrower is a limited partnership, a Transfer of
(A) any general partnership interest, or (B) limited
partnership interests in Borrower that would cause
the Initial Owners of Borrower to own less than 51%
of all limited partnership interests in Borrower;
(3) if Borrower is a general partnership or a joint
venture, a Transfer of any general partnership or
joint venture interest in Borrower;
(4) if Borrower is a limited liability company, a
Transfer of (A) any membership interest in Borrower
which would cause the Initial Owners to own less
than 51% of all the membership interests in
Borrower, or (B) any membership or other interest of
a manager in Borrower;
(5) if Borrower is a corporation, (A) the Transfer of
any voting stock in Borrower which would cause the
Initial Owners to own less than 51% of any class of
voting stock in Borrower or (B) if the outstanding
voting stock in Borrower is held by 100 or more
shareholders, one or more transfers by a single
transferor within a 12-month period affecting an
aggregate of 5% or more of that stock;
(6) if Borrower is a trust, (A) a Transfer of any
beneficial interest in Borrower which would cause
the Initial Owners to own less than 51% of all the
beneficial interests in Borrower, or (B) the
termination or revocation of the trust, or (C) the
removal, appointment or substitution
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SECURITY INSTRUMENT (FREDDIE MAC) - NEW JERSEY PAGE 26
<PAGE> 27
of a trustee of Borrower; and
(7) a Transfer of any interest in a Controlling Entity
which, if such Controlling Entity were Borrower,
would result in an Event of Default under any of
Sections 21(a)(1) through (6) above.
Lender shall not be required to demonstrate any actual impairment of its
security or any increased risk of default in order to exercise any of its
remedies with respect to an Event of Default under this Section 21.
(b) The occurrence of any of the following events shall not
constitute an Event of Default under this Instrument, notwithstanding any
provision of Section 21(a) to the contrary:
(1) a Transfer to which Lender has consented;
(2) a Transfer that occurs by devise, descent, or by
operation of law upon the death of a natural person;
(3) the grant of a leasehold interest in an individual
dwelling unit for a term of two years or less not
containing an option to purchase;
(4) a Transfer of obsolete or worn out Personalty or
Fixtures that are contemporaneously replaced by
items of equal or better function and quality, which
are free of liens, encumbrances and security
interests other than those created by the Loan
Documents or consented to by Lender;
(5) the grant of an easement, if before the grant Lender
determines that the easement will not materially
affect the operation or value of the Mortgaged
Property or Lender's interest in the Mortgaged
Property, and Borrower pays to Lender, upon demand,
all costs and expenses incurred by Lender in
connection with reviewing Borrower's request; and
(6) the creation of a mechanic's, materialman's, or
judgment lien against the Mortgaged Property which
is released of record or otherwise remedied to
Lender's satisfaction within 30 days of the date of
creation.
(c) Lender may consent, in its discretion, to a Transfer that
would otherwise violate this Section 21 if, prior to the Transfer, Borrower has
satisfied each of the following requirements:
(1) the submission to Lender of all information required
by Lender to make the determination required by this
Section 21(c);
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SECURITY INSTRUMENT (FREDDIE MAC) - NEW JERSEY PAGE 27
<PAGE> 28
(2) the Mortgaged Property and the transferee meet all
of the eligibility, credit, management and other
standards (including but not limited to any
standards with respect to previous relationships
between Lender and the transferee and the
organization of the transferee) customarily applied
by Lender to the approval of borrowers and
properties in connection with the origination or
purchase of similar mortgages on multifamily
properties;
(3) the absence of any Event of Default;
(4) the execution of an assumption agreement that is
acceptable to Lender and that, among other things,
requires the transferee to perform all obligations
of Borrower set forth in the Note, this Instrument
and any other Loan Documents, and may require that
the transferee comply with any provisions of this
Instrument or any other Loan Document which
previously may have been waived by Lender; and
(5) Lender's receipt of all of the following:
(A) a review fee in the amount of
$________________;
(B) a transfer fee in an amount equal to _____%
of the unpaid principal balance of the
Indebtedness immediately before the
Transfer; and
(C) the amount of Lender's out-of-pocket costs
(including reasonable attorneys' fees)
incurred in reviewing the Transfer request.
22. EVENTS OF DEFAULT. The occurrence of any one or more of the
following shall constitute an Event of Default under this Instrument:
(a) any failure by Borrower to pay or deposit when due any amount
required by the Note, this Instrument or any other Loan Document;
(b) any failure by Borrower to maintain the insurance coverage
required by Section 19;
(c) any failure by Borrower to comply with the provisions of
Section 33;
(d) fraud or material misrepresentation or material omission by
Borrower, any of its officers, directors, trustees, general partners or
managers or any guarantor in connection with (A) the application for or
creation of the Indebtedness, (B) any financial statement, rent roll, or other
report or information provided to Lender during the term of the Indebtedness,
or (C) any
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SECURITY INSTRUMENT (FREDDIE MAC) - NEW JERSEY PAGE 28
<PAGE> 29
request for Lender's consent to any proposed action, including a request for
disbursement of funds under any Collateral Agreement;
(e) any Event of Default under Section 21;
(f) the commencement of a forfeiture action or proceeding,
whether civil or criminal, which, in Lender's reasonable judgment, could result
in a forfeiture of the Mortgaged Property or otherwise materially impair the
lien created by this Instrument or Lender's interest in the Mortgaged Property;
(g) any failure by Borrower to perform any of its obligations
under this Instrument (other than those specified in Sections 22(a) through
(f)), as and when required, which continues for a period of 30 days after
notice of such failure by Lender to Borrower. However, no such notice or grace
period shall apply in the case of any such failure which could, in Lender's
judgment, absent immediate exercise by Lender of a right or remedy under this
Instrument, result in harm to Lender, impairment of the Note or this Instrument
or any other security given under any other Loan Document;
(h) any failure by Borrower to perform any of its obligations as
and when required under any Loan Document other than this Instrument which
continues beyond the applicable cure period, if any, specified in that Loan
Document;
(i) any exercise by the holder of any debt instrument secured by a
mortgage, deed of trust or deed to secure debt on the Mortgaged Property of a
right to declare all amounts due under that debt instrument immediately due and
payable; and
(j) Borrower voluntarily files for bankruptcy protection under
the United States Bankruptcy Code or voluntarily becomes subject to any
reorganization, receivership, insolvency proceeding or other similar proceeding
pursuant to any other federal or state law affecting debtor and creditor
rights, or an involuntary case is commenced against Borrower by any creditor
(other than Lender) of Borrower pursuant to the United States Bankruptcy Code
or other federal or state law affecting debtor and creditor rights and is not
dismissed or discharged within 60 days after filing.
23. REMEDIES CUMULATIVE. Each right and remedy provided in this
Instrument is distinct from all other rights or remedies under this Instrument
or any other Loan Document or afforded by applicable law, and each shall be
cumulative and may be exercised concurrently, independently, or successively,
in any order.
24. FORBEARANCE.
(a) Lender may (but shall not be obligated to) agree with
Borrower, from time to time, and without giving notice to, or obtaining the
consent of, or having any effect upon the
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SECURITY INSTRUMENT (FREDDIE MAC) - NEW JERSEY PAGE 29
<PAGE> 30
obligations of, any guarantor or other third party obligor, to take any of the
following actions: extend the time for payment of all or any part of the
Indebtedness; reduce the payments due under this Instrument, the Note, or any
other Loan Document; release anyone liable for the payment of any amounts under
this Instrument, the Note, or any other Loan Document; accept a renewal of the
Note; modify the terms and time of payment of the Indebtedness; join in any
extension or subordination agreement; release any Mortgaged Property; take or
release other or additional security; modify the rate of interest or period of
amortization of the Note or change the amount of the monthly installments
payable under the Note; and otherwise modify this Instrument, the Note, or any
other Loan Document.
(b) Any forbearance by Lender in exercising any right or remedy
under the Note, this Instrument, or any other Loan Document or otherwise
afforded by applicable law, shall not be a waiver of or preclude the exercise
of any right or remedy. The acceptance by Lender of payment of all or any part
of the Indebtedness after the due date of such payment, or in an amount which
is less than the required payment, shall not be a waiver of Lender's right to
require prompt payment when due of all other payments on account of the
Indebtedness or to exercise any remedies for any failure to make prompt
payment. Enforcement by Lender of any security for the Indebtedness shall not
constitute an election by Lender of remedies so as to preclude the exercise of
any other right available to Lender. Lender's receipt of any awards or proceeds
under Sections 19 and 20 shall not operate to cure or waive any Event of
Default.
25. LOAN CHARGES. If any applicable law limiting the amount of
interest or other charges permitted to be collected from Borrower is
interpreted so that any charge provided for in any Loan Document, whether
considered separately or together with other charges levied in connection with
any other Loan Document, violates that law, and Borrower is entitled to the
benefit of that law, that charge is hereby reduced to the extent necessary to
eliminate that violation. The amounts, if any, previously paid to Lender in
excess of the permitted amounts shall be applied by Lender to reduce the
principal of the Indebtedness. For the purpose of determining whether any
applicable law limiting the amount of interest or other charges permitted to be
collected from Borrower has been violated, all Indebtedness which constitutes
interest, as well as all other charges levied in connection with the
Indebtedness which constitute interest, shall be deemed to be allocated and
spread over the stated term of the Note. Unless otherwise required by
applicable law, such allocation and spreading shall be effected in such a
manner that the rate of interest so computed is uniform throughout the stated
term of the Note.
26. WAIVER OF STATUTE OF LIMITATIONS. Borrower hereby waives the
right to assert any statute of limitations as a bar to the enforcement of the
lien of this Instrument or to any action brought to enforce any Loan Document.
27. WAIVER OF MARSHALLING. Notwithstanding the existence of any
other security interests in the Mortgaged Property held by Lender or by any
other party, Lender shall have the right to determine the order in which any or
all of the Mortgaged Property shall
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SECURITY INSTRUMENT (FREDDIE MAC) - NEW JERSEY PAGE 30
<PAGE> 31
be subjected to the remedies provided in this Instrument, the Note, any other
Loan Document or applicable law. Lender shall have the right to determine the
order in which any or all portions of the Indebtedness are satisfied from the
proceeds realized upon the exercise of such remedies. Borrower and any party
who now or in the future acquires a security interest in the Mortgaged Property
and who has actual or constructive notice of this Instrument waives any and all
right to require the marshalling of assets or to require that any of the
Mortgaged Property be sold in the inverse order of alienation or that any of
the Mortgaged Property be sold in parcels or as an entirety in connection with
the exercise of any of the remedies permitted by applicable law or provided in
this Instrument.
28. FURTHER ASSURANCES. Borrower shall execute, acknowledge, and
deliver, at its sole cost and expense, all further acts, deeds, conveyances,
assignments, estoppel certificates, financing statements, transfers and
assurances as Lender may require from time to time in order to better assure,
grant, and convey to Lender the rights intended to be granted, now or in the
future, to Lender under this Instrument and the Loan Documents.
29. ESTOPPEL CERTIFICATE. Within 10 days after a request from
Lender, Borrower shall deliver to Lender a written statement, signed and
acknowledged by Borrower, certifying to Lender or any person designated by
Lender, as of the date of such statement, (i) that the Loan Documents are
unmodified and in full force and effect (or, if there have been modifications,
that the Loan Documents are in full force and effect as modified and setting
forth such modifications); (ii) the unpaid principal balance of the Note; (iii)
the date to which interest under the Note has been paid; (iv) that Borrower is
not in default in paying the Indebtedness or in performing or observing any of
the covenants or agreements contained in this Instrument or any of the other
Loan Documents (or, if the Borrower is in default, describing such default in
reasonable detail); (v) whether or not there are then existing any setoffs or
defenses known to Borrower against the enforcement of any right or remedy of
Lender under the Loan Documents; and (vi) any additional facts requested by
Lender.
30. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE.
(a) This Instrument, and any Loan Document which does not itself
expressly identify the law that is to apply to it, shall be governed by the
laws of the jurisdiction in which the Land is located (the "PROPERTY
JURISDICTION").
(b) Borrower agrees that any controversy arising under or in
relation to the Note, this Instrument, or any other Loan Document shall be
litigated exclusively in the Property Jurisdiction. The state and federal
courts and authorities with jurisdiction in the Property Jurisdiction shall
have exclusive jurisdiction over all controversies which shall arise under or
in relation to the Note, any security for the Indebtedness, or any other Loan
Document. Borrower irrevocably consents to service, jurisdiction, and venue of
such courts for any such litigation and waives any other venue to which it
might be entitled by virtue of domicile, habitual residence or otherwise.
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SECURITY INSTRUMENT (FREDDIE MAC) - NEW JERSEY PAGE 31
<PAGE> 32
31. NOTICE.
(a) All notices, demands and other communications ("notice")
under or concerning this Instrument shall be in writing. Each notice shall be
addressed to the intended recipient at its address set forth in this
Instrument, and shall be deemed given on the earliest to occur of (1) the date
when the notice is received by the addressee; (2) the first Business Day after
the notice is delivered to a recognized overnight courier service, with
arrangements made for payment of charges for next Business Day delivery; or (3)
the third Business Day after the notice is deposited in the United States mail
with postage prepaid, certified mail, return receipt requested. As used in this
Section 31, the term "Business Day" means any day other than a Saturday, a
Sunday or any other day on which Lender is not open for business.
(b) Any party to this Instrument may change the address to which
notices intended for it are to be directed by means of notice given to the
other party in accordance with this Section 31. Each party agrees that it will
not refuse or reject delivery of any notice given in accordance with this
Section 31, that it will acknowledge, in writing, the receipt of any notice
upon request by the other party and that any notice rejected or refused by it
shall be deemed for purposes of this Section 31 to have been received by the
rejecting party on the date so refused or rejected, as conclusively established
by the records of the U.S. Postal Service or the courier service.
(c) Any notice under the Note and any other Loan Document which
does not specify how notices are to be given shall be given in accordance with
this Section 31.
32. SALE OF NOTE; CHANGE IN SERVICER. The Note or a partial
interest in the Note (together with this Instrument and the other Loan
Documents) may be sold one or more times without prior notice to Borrower. A
sale may result in a change of the Loan Servicer. There also may be one or more
changes of the Loan Servicer unrelated to a sale of the Note. If there is a
change of the Loan Servicer, Borrower will be given notice of the change.
33. SINGLE ASSET BORROWER. Until the Indebtedness is paid in
full, Borrower (a) shall not acquire any real or personal property other than
the Mortgaged Property and personal property related to the operation and
maintenance of the Mortgaged Property; (b) shall not operate any business other
than the management and operation of the Mortgaged Property; and (c) shall not
maintain its assets in a way difficult to segregate and identify.
34. SUCCESSORS AND ASSIGNS BOUND. This Instrument shall bind, and
the rights granted by this Instrument shall inure to, the respective successors
and assigns of Lender and Borrower. However, a Transfer not permitted by
Section 21 shall be an Event of Default.
35. JOINT AND SEVERAL LIABILITY. If more than one person or
entity signs this Instrument as Borrower, the obligations of such persons and
entities shall be joint and
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SECURITY INSTRUMENT (FREDDIE MAC) - NEW JERSEY PAGE 32
<PAGE> 33
several.
36. RELATIONSHIP OF PARTIES; NO THIRD PARTY BENEFICIARY.
(a) The relationship between Lender and Borrower shall be solely
that of creditor and debtor, respectively, and nothing contained in this
Instrument shall create any other relationship between Lender and Borrower.
(b) No creditor of any party to this Instrument and no other
person shall be a third party beneficiary of this Instrument or any other Loan
Document. Without limiting the generality of the preceding sentence, (1) any
arrangement (a "SERVICING ARRANGEMENT") between the Lender and any Loan
Servicer for loss sharing or interim advancement of funds shall constitute a
contractual obligation of such Loan Servicer that is independent of the
obligation of Borrower for the payment of the Indebtedness, (2) Borrower shall
not be a third party beneficiary of any Servicing Arrangement, and (3) no
payment by the Loan Servicer under any Servicing Arrangement will reduce the
amount of the Indebtedness.
37. SEVERABILITY; AMENDMENTS. The invalidity or unenforceability
of any provision of this Instrument shall not affect the validity or
enforceability of any other provision, and all other provisions shall remain in
full force and effect. This Instrument contains the entire agreement among the
parties as to the rights granted and the obligations assumed in this
Instrument. This Instrument may not be amended or modified except by a writing
signed by the party against whom enforcement is sought.
38. CONSTRUCTION. The captions and headings of the sections of
this Instrument are for convenience only and shall be disregarded in construing
this Instrument. Any reference in this Instrument to an "Exhibit" or a
"Section" shall, unless otherwise explicitly provided, be construed as
referring, respectively, to an Exhibit attached to this Instrument or to a
Section of this Instrument. All Exhibits attached to or referred to in this
Instrument are incorporated by reference into this Instrument. Any reference in
this Instrument to a statute or regulation shall be construed as referring to
that statute or regulation as amended from time to time. Use of the singular in
this Agreement includes the plural and use of the plural includes the singular.
As used in this Instrument, the term "including" means "including, but not
limited to."
39. LOAN SERVICING. All actions regarding the servicing of the
loan evidenced by the Note, including the collection of payments, the giving
and receipt of notice, inspections of the Property, inspections of books and
records, and the granting of consents and approvals, may be taken by the Loan
Servicer unless Borrower receives notice to the contrary. If Borrower receives
conflicting notices regarding the identity of the Loan Servicer or any other
subject, any such notice from Lender shall govern.
40. DISCLOSURE OF INFORMATION. Lender may furnish information
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SECURITY INSTRUMENT (FREDDIE MAC) - NEW JERSEY PAGE 33
<PAGE> 34
regarding Borrower or the Mortgaged Property to third parties with an existing
or prospective interest in the servicing, enforcement, evaluation, performance,
purchase or securitization of the Indebtedness, including but not limited to
trustees, master servicers, special servicers, rating agencies, and
organizations maintaining databases on the underwriting and performance of
multifamily mortgage loans. Borrower irrevocably waives any and all rights it
may have under applicable law to prohibit such disclosure, including but not
limited to any right of privacy.
41. NO CHANGE IN FACTS OR CIRCUMSTANCES. All information in the
application for the loan submitted to Lender (the "LOAN APPLICATION") and in
all financial statements, rent rolls, reports, certificates and other documents
submitted in connection with the Loan Application are complete and accurate in
all material respects. There has been no material adverse change in any fact or
circumstance that would make any such information incomplete or inaccurate.
42. SUBROGATION. If, and to the extent that, the proceeds of the
loan evidenced by the Note are used to pay, satisfy or discharge any obligation
of Borrower for the payment of money that is secured by a pre-existing
mortgage, deed of trust or other lien encumbering the Mortgaged Property (a
"PRIOR LIEN"), such loan proceeds shall be deemed to have been advanced by
Lender at Borrower's request, and Lender shall automatically, and without
further action on its part, be subrogated to the rights, including lien
priority, of the owner or holder of the obligation secured by the Prior Lien,
whether or not the Prior Lien is released.
43. ACCELERATION; REMEDIES. At any time during the existence of
an Event of Default, Lender, at Lender's option, may declare the Indebtedness
to be immediately due and payable without further demand, and may foreclose
this Instrument by judicial proceeding and may invoke any other remedies
permitted by New Jersey law or provided in this Instrument or in any other Loan
Document. Lender shall be entitled to collect all costs and expenses incurred
in pursuing such remedies, including attorneys' fees permitted by Rules of
Court, costs of documentary evidence, abstracts and title reports.
44. RELEASE. Upon payment of the Indebtedness, Lender shall
cancel this Instrument. Borrower shall pay Lender's reasonable costs incurred
in canceling this Instrument.
45. NO CLAIM OF CREDIT FOR TAXES. Borrower will not make or claim
credit on or deduction from the principal or interest on the sums secured by
this Instrument by reason of any municipal or governmental taxes, assessments
or charges assessed upon the Mortgaged Property, or claim any deduction from
the taxable value of the Mortgaged Property by reason of this Instrument.
46. WAIVER OF TRIAL BY JURY. BORROWER AND LENDER EACH (A)
COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY WITH RESPECT
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SECURITY INSTRUMENT (FREDDIE MAC) - NEW JERSEY PAGE 34
<PAGE> 35
TO ANY ISSUE ARISING OUT OF THIS INSTRUMENT OR THE RELATIONSHIP BETWEEN THE
PARTIES AS BORROWER AND LENDER THAT IS TRIABLE OF RIGHT BY A JURY AND (B)
WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT
ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE. THIS WAIVER OF RIGHT TO TRIAL BY
JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND VOLUNTARILY WITH THE
BENEFIT OF COMPETENT LEGAL COUNSEL.
ATTACHED EXHIBITS. The following Exhibits are attached to this
Instrument:
| X | Exhibit A Description of the Land (required).
| _ | Exhibit B Modifications to Instrument
IN WITNESS WHEREOF, Borrower has signed and delivered this Instrument
or has caused this Instrument to be signed and delivered by its duly authorized
representative.
[SIGNATURES AND ACKNOWLEDGMENTS]
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SECURITY INSTRUMENT (FREDDIE MAC) - NEW JERSEY PAGE 35
<PAGE> 36
EXHIBIT A
[DESCRIPTION OF THE LAND]
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SECURITY INSTRUMENT (FREDDIE MAC) - NEW JERSEY PAGE A-1
<PAGE> 37
EXHIBIT B
MODIFICATIONS TO INSTRUMENT
The following modifications are made to the text of the Instrument that
precedes this Exhibit:
1. Item (15) in the definition of "MORTGAGED PROPERTY" in this Instrument
is deleted in its entirety and replaced with the following new Item
(15) in the definition of "MORTGAGED PROPERTY":
all names under or by which any of the above Mortgaged
Property may be operated or known, and all trademarks, trade
names, and goodwill relating to any of the Mortgaged
Property; provided, however, that the name "Sunrise" and/or
associated trademark rights are not assigned to Lender,
subject to Section 50 hereof.
2. Subsection 4(f) of the Instrument is deleted in its entirety and
replaced with the following new Subsection 4(f):
(f) Borrower shall not lease any portion of the
Mortgaged Property for non-residential use for a
rental of more than $15,000 per annum (a "Material
Lease") except with the prior written consent of
Lender and Lender's prior written approval of the
Lease agreement. Borrower shall not modify the
terms of, or extend or terminate, any Material Lease
for non-residential use (including any Material
Lease in existence on the date of this Instrument)
without the prior written consent of Lender.
Borrower shall, without request by Lender, deliver
an executed copy of each non-residential Lease to
Lender promptly after such Lease is signed. All
non-residential Leases, including renewals or
extensions of existing Leases, shall specifically
provide that (1) such Leases are subordinate to the
lien of this Instrument; (2) the tenant shall attorn
to Lender and any purchaser at a foreclosure sale,
such attornment to be self-executing and effective
upon acquisition of title to the Mortgaged Property
by any purchaser at a foreclosure sale or by Lender
in any manner; (3) the tenant agrees to execute such
further evidences of attornment as Lender or any
purchaser at a foreclosure sale may from time to
time request; (4) the Lease shall not be terminated
by foreclosure or any other transfer of the
Mortgaged Property; (5) after a foreclosure sale of
the Mortgaged Property, Lender or any other
purchaser at such foreclosure sale may, at Lender's
or such purchaser's option, accept or terminate such
Lease; and (6) the tenant shall, upon receipt after
the occurrence of an Event of Default of a written
request from Lender, pay all Rents payable under the
Lease to Lender.
3. Subsection 4(g) of the Instrument is deleted in its entirety and
replaced with the following
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SECURITY INSTRUMENT (FREDDIE MAC) - NEW JERSEY PAGE B-1
<PAGE> 38
new Subsection 4(g):
(g) Borrower shall not receive or accept Rent under any
Lease (whether residential or non-residential) for
more than two months in advance, except for
Community Fees pursuant to the Resident Agreement
for units in the Improvements approved by Lender.
4. Section 7 of the Instrument is supplemented and modified by adding the
following new Subsection (f):
(f) Notwithstanding the provisions of Subparagraph 7(a), the
Lender will not require Borrower to deposit with Lender amounts
sufficient to accumulate with Lender the entire sum required to pay
the hazard or other insurance premiums. At least annually, the
Borrower must provide Lender with proof of payment of all such
Impositions for which Lender is not collecting Imposition Deposits. In
the event that Borrower does not timely pay any of the Impositions, or
fails to provide Lender with proof of such payment, or at the any
other time in Lender's discretion, Lender may require Borrower to
deposit with Lender the Imposition Deposits as provided in
Subparagraph 7(a).
5. Subsection 18(b) of the Instrument is deleted in its entirety and
replaced with the following new Section 18(b):
(b) Prohibited Activities and Conditions shall not
include the safe and lawful use and storage of
quantities of (1) pre-packaged supplies, cleaning
materials and petroleum products customarily used in
the operation and maintenance of comparable
multifamily properties, (2) cleaning materials,
personal grooming items and other items sold in
pre-packaged containers for consumer use and used by
tenants and occupants of residential dwelling units
in the Mortgaged Property; (3) petroleum products
used in the operation and maintenance of motor
vehicles from time to time located on the Mortgaged
Property's parking areas, and (4) medical products
or devices or medical waste, so long as all of the
foregoing are used, stored, handled, transported and
disposed of in compliance with Hazardous Materials
Laws.
6. Section 18(n) of the Instrument is amended by the addition of the
following language at the end of such Subsection:
Borrower shall not be obligated to indemnify Lender for any
matter (i) first occurring after Lender acquires the
Mortgaged Property and (ii) caused by the acts or omissions
of the Lender.
7. Section 19(g) of the Instrument is amended by the addition of the
following language at
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SECURITY INSTRUMENT (FREDDIE MAC) - NEW JERSEY PAGE B-2
<PAGE> 39
the end of such Subsection:
Lender shall make such proceeds or awards available to
Borrower for repair and reconstruction of the Mortgaged
Property if such proceeds or awards are less than or equal to
one hundred thousand dollars ($100,000.00) on a per
occurrence basis unless an Event of Default has occurred and
is continuing.
8. Section 21(b) of the Instrument is supplemented and modified by adding
the following new Subsection (7):
(7) A Transfer of limited partnership interests in the
limited partnership constituting Borrower to an
entity in which Sunrise Assisted Living, Inc. holds
an ownership interest equal to or greater than
eighty percent (80%), provided the terms and
conditions set forth in (A) - (C) have been
satisfied:
(A) Borrower must provide Lender with prior
written notice of the proposed Transfer.
(B) At the time of the proposed Transfer, there
must not exist any Event of Default.
(C) Lender shall not be entitled to collect a
transfer fee, review fee or expenses as a
result of these transfers.
9. Section 21(b) of the Instrument is supplemented and modified by adding
the following new Subsection (8):
(8) The Transfer of shares in Sunrise Assisted Living,
Inc., a Delaware corporation, on any publicly traded
exchange.
10. Section 21 of the Instrument is supplemented and modified by adding
the following new Subsection (d):
(d) Borrower shall be permitted to substitute collateral
property (the "Substituted Property") for the
Mortgaged Property (the "Substitution") no more than
one time in every twelve month period during the
term of the loan evidenced by the Note (the "Loan")
so long as:
(1) At the time of Substitution, no Event of
Default (which remains uncured within any
applicable cure period) shall exist under
the Loan Documents;
(2) Not less than sixty (60) days prior to the
requested Substitution,
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SECURITY INSTRUMENT (FREDDIE MAC) - NEW JERSEY PAGE B-3
<PAGE> 40
Borrower shall deliver to Lender written
notice of the requested Substitution, which
shall include a detailed description of the
Substituted Property and a non-refundable
application fee in an amount equal to ten
(10) basis points multiplied by the unpaid
principal balance of the Loan;
(3) The Substituted Property shall have been
constructed and completed no more than two
years prior to the construction and
completion of the Mortgaged Property;
(4) The Substituted Property shall be one or
two independent or assisted living
communities which together are comparable
in size and configuration to the Mortgaged
Property;
(5) The loan to value ratio with respect to the
Substituted Property at the time of the
proposed Substitution is not greater than
the lesser of (A) the loan to value ratio
of the Mortgaged Property which exists as
of the date hereof, or (B) the then current
loan to value ratio of the Mortgaged
Property at the time of any such
Substitution based on an MAI appraisal
(prepared by an appraiser acceptable to
Lender and paid for by Borrower) at the
time of any such Substitution. (As used
herein, "loan to value ratio" means the
ratio of (1) the outstanding principal
balance of the Loan to (2) the value of the
Substituted Property as determined by
Lender in its discretion, expressed as a
percentage);
(6) Lender shall have received an environmental
report on the Substituted Property showing
that no Phase II environmental report is
required;
(7) Lender shall have received an engineering
report on the Substituted Property showing
that there are at least thirty (30) years
of useful life remaining with respect to
the Substituted Property;
(8) Lender shall have received a new currently
dated mortgagee's title insurance policy in
the form and containing the exceptions and
endorsements acceptable to Lender according
to its standards for title insurance
policies in place at the time of the
Substitution, insuring the first lien
mortgage in favor of Lender encumbering the
Substituted Property;
(9) Lender shall have received a currently
dated survey of the Substituted Property,
acceptable to Lender in accordance with its
standards and requirements for surveys in
place at the time of the
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SECURITY INSTRUMENT (FREDDIE MAC) - NEW JERSEY PAGE B-4
<PAGE> 41
Substitution;
(10) The physical condition, location and other
aspects of the Substituted Property,
including, but not limited to, the market
for the Substituted Property, shall be
substantially comparable to the Mortgaged
Property as determined by Lender in its
commercially reasonable discretion;
(11) If the Substitution is approved, (A)
Borrower shall have executed and delivered
to Lender for recordation an amendment to
the Mortgage in form and substance
acceptable to Lender in its discretion,
substituting the Substituted Property for
the Mortgaged Property; and (B) Borrower
shall have executed and delivered such
additional documentation, including without
limitation new Uniform Commercial Code
Financing Statements, as Lender may
reasonably require to grant Lender a
perfected first lien and security interest
in the Substituted Property and to
otherwise implement the Substitution in
accordance with the terms hereof;
(12) The appraised value of the Substituted
Property shall be equal to or greater than
the greater of (A) the appraised value of
the Mortgaged Property which exists as of
the date of the closing of the Loan; or (B)
the appraised value of the Mortgaged
Property at the time of the Substitution
based on the MAI appraisal described in
Subsection 21(d)(5) above;
(13) The Debt Service Coverage Ratio (defined
below), as determined by Lender, for the
Substituted Property shall not be less than
the greater of (A) the Debt Service
Coverage Ratio for the Mortgaged Property
which exists as of the date hereof or (B)
the Debt Service Coverage Ratio for the
Mortgaged Property at the time of
Substitution; and
(14) Lender shall have received the amount of
Lender's actual out-of-pocket costs
(including, without limitation,
commercially reasonable attorneys' fees and
actual disbursements and the costs of
engineering reports, appraisals and
environmental reports) incurred in
reviewing the Substitution request and
implementing the Substitution.
In the event of a substitution of collateral
pursuant to the foregoing, no transfer fee shall be
payable. Lender shall be entitled to a review fee of
$7,000.00, together with reimbursement of its
reasonable costs and expenses (including actual
attorneys' fees) in connection with such
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SECURITY INSTRUMENT (FREDDIE MAC) - NEW JERSEY PAGE B-5
<PAGE> 42
substitution of collateral. As used herein, "Debt
Service Coverage Ratio" means a ratio in which the
first number is the sum of net pre-tax income of the
Borrower from normal operations of the Mortgaged
Property or the Substituted Property (as the case
may be) as set forth in the financial statements
provided to Lender (without deduction for actual
management fees or management expense incurred or
paid in connection with the operation of the
Mortgaged Property), calculated based upon the
preceding twelve (12) months, plus interest expense
or lease expense to the extent deducted in
determining net income and non-cash expenses or
allowances for depreciation and amortization of the
Mortgaged Property or the Substituted Property (as
the case may be) for said period, less an assumed 5%
management fee for said period, and the second
number is the sum of the principal amounts due (even
if not paid) on the Loan (but which shall not
include that portion associated with the balloon
payment of the Loan) for the applicable period plus
the interest amount due on the Loan for the
applicable period. In calculating "net income", any
extraordinary income and extraordinary expense shall
be excluded.
11. Section 33 of the Instrument is deleted in its entirety and replaced
with the following new Section 33:
33. SINGLE ASSET BORROWER AND LIMITATION ON UNSECURED
INDEBTEDNESS. Until the Indebtedness is paid in full,Borrower
(a) shall not acquire any real or personal property other than the Mortgaged
Property and personal property related to the operation and maintenance of the
Mortgaged Property; (b) shall not operate any business other than the
management and operation of the Mortgaged Property; and (c) shall not maintain
its assets in a way difficult to segregate and identify. Sunrise Assisted
Living, Inc., a Delaware corporation ("Guarantor") or an affiliate of the
Guarantor may provide unsecured financing to Borrower. The Borrower may obtain
purchase money financing in an amount not to exceed $75,000 for the purpose of
purchasing equipment for the Mortgaged Property and a vehicle to be used solely
in connection with the operation of the Mortgaged Property. Such financing
shall not result in any lien or encumbrance on the Mortgaged Property.
12. Section 14(b) of the Instrument is deleted in its entirety and
replaced with the following new Subsection 14(b):
(b) Throughout the term of the Loan, Borrower
shall provide Lender or cause to be
provided to Lender, the following financial
statements and information:
(1) Within one hundred twenty (120)
days after the end of the fiscal
years of the Borrower, Sunrise
Assisted Living, Inc., a Delaware
corporation ("Guarantor") and
Sunrise Assisted
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SECURITY INSTRUMENT (FREDDIE MAC) - NEW JERSEY PAGE B-6
<PAGE> 43
Living Management, Inc., a Virginia
corporation ("Manager"), unaudited
(internally prepared in accordance
with GAAP) financial statements of
Borrower and Guarantor and
financial statements of Manager
reviewed by a nationally recognized
accounting firm or independent
certified public accountant
acceptable to Lender. All such
statements shall be prepared in
accordance with GAAP. Borrower's,
Guarantor's and Manager's financial
statements hereunder shall include
a balance sheet and a statement of
income and expenses for the year
then ended, certified by an officer
of Borrower, Guarantor and Manager,
respectively, to be true and
correct. As used herein, the term
"GAAP" means generally accepted
accounting principles, consistently
applied, as promulgated by the
American Institute of Certified
Public Accountants.
(2) Within forty-five (45) days of the
end of each calendar quarter (other
than fiscal year end), unaudited,
internally prepared financial
statements of Guarantor and of
Manager, respectively, prepared in
accordance with GAAP and including
a balance sheet and statement of
income and expenses for the quarter
then ended, certified by an officer
of Guarantor and Manager,
respectively, to be true and
correct.
(3) Within forty-five (45) days of the
end of each calendar quarter,
quarterly financial operating
statements of the operations of the
Mortgaged Property, prepared in
accordance with GAAP, which such
statements shall include a balance
sheet and statement of income and
expenses for the quarter then
ended, certified by an officer of
the Borrower or Manager to be true
and correct.
(4) Within five (5) days of receipt,
any and all written notices from
any and all licensing and/or
certifying agencies that the
applicable Mortgaged Property
license and/or permits are being
downgraded to a substandard
category, revoked, or suspended or
that any such action is pending.
(5) Within forty-five (45) days of the
end of each calendar quarter, a
certificate of an officer of the
Borrower, Guarantor and Manager,
respectively, confirming compliance
with the covenants and requirements
set forth above.
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SECURITY INSTRUMENT (FREDDIE MAC) - NEW JERSEY PAGE B-7
<PAGE> 44
13. Section 14(c) of the Instrument is deleted in its entirety and
replaced with the following new Subsection 14(c):
(c) The Lender reserves the right to require
that the annual financial statements of the
Borrower, Guarantor and Manager be audited
and prepared by a nationally recognized
accounting firm or independent certified
public accountant acceptable to Lender if
(i) an Event of Default exists under the
Loan Documents or (ii) if Lender has
reasonable grounds to believe that the
unaudited financial statements do not
accurately represent the financial
condition of the Borrower, Guarantor or
Manager, as the case may be.
14. Section 14(d) of the Instrument is deleted in its entirety and
replaced with the following new Subsection 14(d):
(d) In the event Lender in good faith believes
that there has been a material adverse
change in operations or financial
conditions of Borrower, Guarantor or
Manager, the Lender shall have the right to
require such other financial information of
Borrower, Guarantor, Manager and/or the
Mortgaged Property, as the case may be, in
such form and at such other times
(including monthly or more frequently) as
Lender shall deem necessary, and Borrower
agrees promptly to provide or to cause to
be provided, such information to Lender.
The content of such other financial
information shall not in any case be a
cause to declare an Event of Default under
the Loan Documents in the absence of any
other Event of Default under the Loan
Documents. Lender may from time to time
reasonably request such further financial
information as Lender deems advisable for
administration of the Loan.
15. Section 14(e) of the Instrument is deleted in its entirety and
replaced with the following new Subsection 14(e):
(e) Borrower shall furnish, together with the
foregoing financial statements and at any
other time upon Lender's request, (i) a
current rent and/or resident contract roll
for the Mortgaged Property, and (ii) a
monthly property management report.
16. Section 14(f) of the Instrument is deleted in its entirety and
replaced with the following new Subsection 14(f):
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SECURITY INSTRUMENT (FREDDIE MAC) - NEW JERSEY PAGE B-8
<PAGE> 45
(f) In addition, upon Lender's request, Lender
shall receive written authorization as
necessary to obtain a credit report for
each principal whose ownership interest in
Borrower is 10% or more. At Lender's
request, such Borrower's principal shall
submit to Lender such financial statements
and credit report authorizations as Lender
may reasonably require.
17. Section 14 of the Instrument is supplemented and modified by adding
the following new Subsection (g):
(g) Borrower shall keep full and accurate books
and records and permit Lender at all
reasonable times and with reasonable notice
to inspect such books and records for the
purpose of determining the correctness of
any statements delivered to Lender.
18. Section 40 of the Instrument is deleted in its entirety and replaced
with the following new Subsection 40:
40. DISCLOSURE OF INFORMATION. Lender may furnish information
regarding Borrower or the Mortgaged Property to third parties with an existing
or prospective interest in the servicing, enforcement, evaluation, performance,
purchase or securitization of the Indebtedness, including but not limited to
trustees, master servicers, special servicers, rating agencies, and
organizations maintaining databases on the underwriting and performance of
multifamily mortgage loans. Borrower irrevocably waives any and all rights it
may have under applicable law to prohibit such disclosure, including but not
limited to any right of privacy; provided, however, that Lender and any such
third parties shall continue to treat such information as confidential and
shall not make such information public or unnecessarily disseminate such
information except to parties with an existing or prospective interest in the
Indebtedness or (in the case of a database) as part of a dissemination of
aggregate information about multiple properties such that the Borrower and the
Mortgaged Property cannot be identified by the recipient of such information.
19. Section 43 of the Instrument is deleted in its entirety and replaced
with the following new Subsection 43:
43. ACCELERATION; REMEDIES. At any time during the existence of
an Event of Default, Lender, at Lender's option, may (i) declare the
Indebtedness to be immediately due and payable without further demand and (ii)
invoke any rights and remedies permitted by the laws of the state where the
Mortgaged Property is located or as provided in this Instrument or in any other
Loan Document. Lender shall be entitled to collect all costs and expenses
incurred in pursuing such remedies, including actual attorneys' fees computed
on an hourly basis, and costs of documentary evidence, abstracts and title
reports.
20. A new Section 47 to the Instrument is added as follows:
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SECURITY INSTRUMENT (FREDDIE MAC) - NEW JERSEY PAGE B-9
<PAGE> 46
47. SENIOR HOUSING.
(a) The Mortgaged Property will be used as an independent and
assisted living facility (the "Intended Use").
(b) ADDITIONAL DEFINITIONS.
(1) The term "Mortgaged Property" shall also
include, where applicable, payments
received from occupants, payment of second
party charges added to base rental income,
base and/or additional meal sales, payments
received from commercial operations located
on the Mortgaged Property or provided as a
service to the occupants of the Mortgaged
Property, rental from guest suites,
seasonal lease charges, rental payment
under furniture leases, income from laundry
service, and fees from any and all other
services provided to third parties in
connection with the Mortgaged Property,
together with the following items: licenses
and contracts, all rights to payments from
Medicare or Medicaid programs or similar
federal, state or local programs or
agencies and rights to payment from
residents or private insurers, arising from
the operation of the Mortgaged Property,
whether as a community residential,
independent living, adult congregate care,
assisted living or skilled nursing care
facility, all personal property acquired by
Borrower after the date of this Instrument
in connection with the ownership and
operation of the Mortgaged Property as such
a facility, utility deposits, unearned
premiums, accrued, accruing or to accrue
under insurance policies obtained by the
Borrower now or in the future and all
proceeds of any conversion of the Mortgaged
Property or any part of it including
replacements and additions thereto.
(2) The term "Lease" shall also include any
occupancy agreements pertaining to
occupants of the Mortgaged Property,
including both residential and commercial
agreements and patient admission or
resident care agreements.
(3) The term "Hazardous Materials" shall also
include any medical products or devices,
including, those materials defined as
"medical waste" or "biological waste" under
relevant statutes or regulations pertaining
to hazardous materials law.
(c) In addition to those representations and warranties contained
in the Instrument, Borrower hereby represents and warrants to
Lender as follows:
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SECURITY INSTRUMENT (FREDDIE MAC) - NEW JERSEY PAGE B-10
<PAGE> 47
(1) Borrower has obtained (in its own name
and/or in the relevant operator's or
manager's name, if any, and in any event in
the name of the person(s) as required under
all applicable legal requirements) all
licenses, permits, certificates, approvals
or authorizations necessary to use and
operate the Mortgaged Property for its
Intended Use (collectively, the
"Licenses"), and all such Licenses are in
full force and effect. The use being made
of the Mortgaged Property is in conformity
in all respects with the certificate of
occupancy and/or Licenses for such property
and any other restrictions, covenants or
conditions affecting such property. The
Mortgaged Property contains all equipment
necessary to use and operate such property
for its Intended Use.
(2) Borrower and the Mortgaged Property (and
its operation) are in compliance in all
material respects with the applicable
provisions of all laws, statutes,
regulations, ordinances, orders, standards,
restrictions and rules of any federal,
state or local government or
quasi-governmental body, agency, board or
authority having jurisdiction over the
operation of the Mortgaged Property,
including: (A) health care and fire safety
codes; (B) laws regulating the handling and
disposal of medical or biological waste;
(C) the applicable provisions of all laws,
rules, regulations and published
interpretations thereof to which the
Borrower or the Mortgaged Property is
subject by virtue of its Intended Use; and
(D) all criteria established to classify
the Mortgaged Property as housing for older
persons under Fair Housing Amendments Act
of 1988.
(3) Borrower does not currently participate in
any Medicaid or Medicare programs or any
other third party payors' programs, or
other similar provider payment programs in
connection with the operation of the
Mortgaged Property.
(4) Borrower and the Mortgaged Property are not
subject to any proceeding, suit or
investigation by any federal, state or
local government or quasi-government body,
or agency or any other administrative or
investigative body, and Borrower has
received no notice from any such agency
which may result in the imposition of a
fine, or alternative, interim or final
sanction, would have a material adverse
effect on Borrower or the operation of the
Mortgaged Property, would result in the
appointment of a receiver or manager, would
affect Borrower's ability to accept and/or
retain residents, or would result in the
revocation, transfer, surrender, suspension
or other impairment of any License for the
Mortgaged Property.
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SECURITY INSTRUMENT (FREDDIE MAC) - NEW JERSEY PAGE B-11
<PAGE> 48
(5) Neither the execution and delivery of the
Note, the Instrument or any other loan
documents, Borrower's performance
thereunder, the recordation of the
Instrument, nor the exercise of any
remedies by Lender, will adversely affect
the Licenses.
(6) Borrower is not a participant in any
federal program whereby any federal, state
or local government or quasi-governmental
body or agency may have the right to
recover funds by reason of the advance of
federal funds. Borrower has received no
notice of, and is not aware of, any
violation of applicable antitrust laws.
(7) In the event any existing management
agreement is terminated or Lender acquires
the Mortgaged Property through foreclosure
or otherwise, neither Borrower, Lender, any
subsequent manager, nor any subsequent
purchaser (through foreclosure or
otherwise) must obtain a certificate of
need from any applicable state health care
regulatory authority or agency (other than
giving such notice required under the
applicable state law or regulation) prior
to applying for any applicable License,
provided that no service or the unit
compliment is changed.
(d) Borrower shall furnish to Lender, within ten (10) days after
receipt by Borrower, any operator or any manager, any and all
notices from any licensing and/or certifying agency that any
License is being downgraded to a substandard category,
revoked, or suspended, or that action is pending or being
considered.
(e) Borrower shall furnish to Lender, within ten (10) days after
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, shall furnish to Lender a copy of the plan of
correction. Borrower shall correct any deficiency, the curing
of which is a condition of continued licensure, by the date
required for cure by such agency.
(f) Upon Lender's request, Borrower shall furnish to Lender true
and correct copies of all residency and resident care
agreements.
(g) Borrower shall operate in a manner such that all applicable
Licenses shall remain in full force and effect.
(h) Without the prior written consent of Lender, which may be
granted or withheld in its discretion, Borrower shall not,
and shall not permit any operator or manager at the Mortgaged
Property to, participate in Medicare and Medicaid, or any
provider agreement under Medicare and Medicaid, or accept any
residents whose ability to reside in the Mortgaged Property
requires that Borrower, the Mortgaged Property or
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SECURITY INSTRUMENT (FREDDIE MAC) - NEW JERSEY PAGE B-12
<PAGE> 49
any operator or manager participate in Medicare, Medicaid or
any similar provider program.
(i) Borrower shall not, and shall not allow any operator or
manager to: (A) transfer any License to any
location other than the Mortgaged Property,
(B) pledge any License as collateral
security for any other loan or
indebtedness; (C) rescind, withdraw,
modify, or otherwise alter any License if
doing so would have a material affect on
the Mortgaged Property; or (D)
pledge any receivables as collateral
security for any other loan or indebtedness.
(j) The Mortgaged Property constitutes but one business
enterprise and shall be deemed to be "single asset real
estate" for purposes of the provisions of Section 362 of the
U.S. Bankruptcy Code, 11 U.S.C. Section 101 et seq. (the
"Code").
21. A new Section 48 to the Instrument is added as follows:
48. ADDITIONAL DEFAULTS. The following shall also constitute an
Event of Default under the Instrument:
(a) Borrower's failure within the time deadlines set by any
federal, state or local licensing or similar agency, to
correct any deficiency that may cause any action by such
agency with respect to the Mortgaged Property that may have a
material adverse affect on the income or operation of the
Mortgaged Property or on Borrower's interest in the Mortgaged
Property, including, a termination, revocation or suspension
of any applicable License, or a ban on new resident
admissions.
(b) Borrower's failure to do any of the following without the
prior written consent of Lender, to be granted or withheld in
its discretion: (1) operate the Mortgaged Property as its
Intended Use; (2) provide facilities and services normally
associated with its Intended Use; (3) provide or contract for
skilled nursing care for any of the units other than that
level of care which Borrower would be permitted to provide or
contract for at the Mortgaged Property given its Intended
Use, state or local statutes, regulations, orders, standards,
rules or restrictions.
(c) (1) non-residential space in the Mortgaged Property exceeds
ten percent (10%) of the net rental area; (2) the Mortgaged
Property is no longer classified as housing for older persons
pursuant to the Fair Housing Amendments Act of 1988; (3)
Borrower participates, or permits the manager, operator or
any resident at the Mortgaged Property to participate in
Medicare, Medicaid, or any similar or successor payment
provider plan; (4) skilled nursing care is provided; or (5)
there is a change in the Intended Use.
(d) If Borrower fails to spend $750.00 per unit each three (3)
year period (commencing with the closing of the Loan) during
the term of the Loan for Capital Replacement
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SECURITY INSTRUMENT (FREDDIE MAC) - NEW JERSEY PAGE B-13
<PAGE> 50
(as hereinafter defined) or provide proof thereof to Lender
by the end of such three (3) year period, such failure shall
be an Event of Default under the Loan Documents. "Capital
Replacement" shall mean the replacement of furniture, carpet,
vinyl flooring, window treatments, roofs, furnace/boilers,
air conditioners, ovens/ranges, refrigerators, dishwashers,
water heaters and garbage disposals.
22. A new Section 49 to the Instrument is added as follows:
49. LENDER'S RIGHT TO USE TRADE NAME. Notwithstanding anything
contained herein, Borrower agrees that Lender shall have an
irrevocable license, coupled with an interest and for which
consideration has been paid and received, to use the name
"Sunrise" and/or associated trademark rights and trade names
relating to any of the Mortgaged Property for a period not to
exceed 120 days after the date Lender acquires the Mortgaged
Property by foreclosure or deed-in-lieu of foreclosure.
23. A new Section 50 to the Instrument is added as follows:
50. CHANGE OF MANAGEMENT AGENT. If at any time Borrower chooses
to begin having the Property managed by a property manager
other than Sunrise Assisted Living Management, Inc, then (a)
the management agent selected by Borrower must be reasonably
acceptable to Lender, (b) Borrower shall enter into a written
management agreement with that agent, which shall be
reasonably acceptable in form and substance to Lender, and
(c) Borrower shall assign all of its rights under the
management agreement to Lender as additional security for the
Indebtedness, using a form of assignment acceptable to Lender
in form and substance.
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SECURITY INSTRUMENT (FREDDIE MAC) - NEW JERSEY PAGE B-14
<PAGE> 1
EXHIBIT 10.4
LIMITED GUARANTY
----------------
(MULTISTATE)
This Limited Guaranty ("GUARANTY") is entered into as of 22nd day of
March, 2000, by the undersigned person(s) (the "GUARANTOR" whether one or
more), for the benefit of ____________________________________________________
__________________________________________________________________, and/or any
subsequent holder of the Note (the "LENDER").
RECITALS
A. ____________________________________________________________
(the "BORROWER") has requested that Lender make a loan to Borrower in the
amount of $________________________________(the "LOAN"). The Loan will be
evidenced by a Multifamily Note from Borrower to Lender dated as of the date of
this Guaranty (the "NOTE"). The Note will be secured by a Multifamily Mortgage,
Deed of Trust, or Deed to Secure Debt dated the same date as the Note (the
"SECURITY INSTRUMENT"), encumbering the real property described in the Security
Instrument (the "PROPERTY").
B. As a condition to making the Loan to Borrower, Lender
requires that the Guarantor execute this Guaranty.
NOW, THEREFORE, in order to induce Lender to make the Loan to
Borrower, and in consideration thereof, Guarantor agrees as follows:
1. "Indebtedness" and other capitalized terms used but not
defined in this Guaranty shall have the meanings assigned to them in the
Security Instrument.
2. Guarantor hereby absolutely, unconditionally and irrevocably
guarantees to Lender the full and prompt payment when due, whether at maturity
or earlier, by reason of acceleration or otherwise, and at all times
thereafter, and the full and prompt performance when due, of all of the
following:
(a) A portion of the Indebtedness equal to _________ percent
(______%) of the _________________ principal balance of the
Note (the "BASE GUARANTY").
(b) In addition to the Base Guaranty, all other amounts for which
Borrower is personally liable under Paragraphs 9(c) through
9(f) of the Note.
(c) The payment and performance of all of Borrower's obligations
under Section 18 of the Security Instrument.
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LIMITED GUARANTY (FREDDIE MAC) - MULTISTATE PAGE 1
<PAGE> 2
(d) The entire Indebtedness, in the event that (i) Borrower
voluntarily files for bankruptcy protection under the United
States Bankruptcy Code or voluntarily becomes subject to any
reorganization, receivership, insolvency proceeding or other
similar proceeding pursuant to any other federal or state law
affecting debtor and creditor rights, or (ii) an order for
relief is entered against Borrower in any involuntary
bankruptcy filing by any creditor of Borrower (other than
Lender) pursuant to the United States Bankruptcy Code or
other federal or state law affecting debtor and creditor
rights.
(e) All costs and expenses, including reasonable fees and out of
pocket expenses of attorneys and expert witnesses, incurred
by Lender in enforcing its rights under this Guaranty.
For purposes of determining Guarantor's liability under this Guaranty, all
payments made by Borrower with respect to the Indebtedness and all amounts
received by Lender from the enforcement of its rights under the Security
Instrument shall be applied first to the portion of the Indebtedness for which
neither Borrower nor Guarantor has personal liability.
3. The obligations of Guarantor under this Guaranty shall
survive any foreclosure proceeding, any foreclosure sale, any delivery of any
deed in lieu of foreclosure, and any release of record of the Security
Instrument, and, in addition, the obligations of Guarantor relating to
Borrower's obligations under Section 18 of the Security Instrument shall
survive any repayment or discharge of the Indebtedness.
4. Guarantor's obligations under this Guaranty constitute an
unconditional guaranty of payment and not merely a guaranty of collection.
5. The obligations of Guarantor under this Guaranty shall be
performed without demand by Lender and shall be unconditional irrespective of
the genuineness, validity, regularity or enforceability of the Note, the
Security Instrument, or any other Loan Document, and without regard to any
other circumstance which might otherwise constitute a legal or equitable
discharge of a surety or a guarantor. Guarantor hereby waives the benefit of
all principles or provisions of law, statutory or otherwise, which are or might
be in conflict with the terms of this Guaranty and agrees that Guarantor's
obligations shall not be affected by any circumstances, whether or not referred
to in this Guaranty, which might otherwise constitute a legal or equitable
discharge of a surety or a guarantor. Guarantor hereby waives the benefits of
any right of discharge under any and all statutes or other laws relating to
guarantors or sureties and any other rights of sureties and guarantors
thereunder. Without limiting the generality of the foregoing, Guarantor hereby
waives, to the fullest extent permitted by law, diligence in collecting the
Indebtedness, presentment, demand for payment, protest, all notices with
respect to the Note and this Guaranty which may be required by statute, rule of
law or otherwise to preserve Lender's rights against Guarantor under this
Guaranty, including, but not limited to, notice of acceptance, notice of any
amendment of the Loan Documents, notice of the occurrence of any default or
Event of Default, notice of intent to accelerate, notice of acceleration,
notice of dishonor, notice of foreclosure, notice of protest, and notice of the
incurring by Borrower
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LIMITED GUARANTY (FREDDIE MAC) - MULTISTATE PAGE 2
<PAGE> 3
of any obligation or indebtedness. Guarantor also waives, to the fullest extent
permitted by law, all rights to require Lender to (a) proceed against Borrower
or any other guarantor of Borrower's payment or performance with respect to the
Indebtedness (an "OTHER GUARANTOR") (b) if Borrower or any Other Guarantor is a
partnership, proceed against any general partner of Borrower or the Other
Guarantor, (c) proceed against or exhaust any collateral held by Lender to
secure the repayment of the Indebtedness, or (d) pursue any other remedy it may
now or hereafter have against Borrower, or, if Borrower is a partnership, any
general partner of Borrower.
6. At any time or from time to time and any number of times,
without notice to Guarantor and without affecting the liability of Guarantor,
(a) the time for payment of the principal of or interest on the Indebtedness
may be extended or the Indebtedness may be renewed in whole or in part; (b) the
time for Borrower's performance of or compliance with any covenant or agreement
contained in the Note, the Security Instrument or any other Loan Document,
whether presently existing or hereinafter entered into, may be extended or such
performance or compliance may be waived; (c) the maturity of the Indebtedness
may be accelerated as provided in the Note, the Security Instrument, or any
other Loan Document; (d) the Note, the Security Instrument, or any other Loan
Document may be modified or amended by Lender and Borrower in any respect,
including, but not limited to, an increase in the principal amount; and (e) any
security for the Indebtedness may be modified, exchanged, surrendered or
otherwise dealt with or additional security may be pledged or mortgaged for the
Indebtedness.
7. If more than one person executes this Guaranty, the
obligations of those persons under this Guaranty shall be joint and several.
Lender, in its sole and absolute discretion, may (a) bring suit against
Guarantor, or any one or more of the persons constituting Guarantor, and any
Other Guarantor, jointly and severally, or against any one or more of them; (b)
compromise or settle with any one or more of the persons constituting Guarantor
for such consideration as Lender may deem proper; (c) release one or more of
the persons constituting Guarantor, or any Other Guarantor, from liability; and
(d) otherwise deal with Guarantor and any Other Guarantor, or any one or more
of them, in any manner, and no such action shall impair the rights of Lender to
collect from Guarantor any amount guaranteed by Guarantor under this Guaranty.
Nothing contained in this paragraph shall in any way affect or impair the
rights or obligations of Guarantor with respect to any Other Guarantor.
8. Any indebtedness of Borrower held by Guarantor now or in the
future is and shall be subordinated to the Indebtedness and any such
indebtedness of Borrower shall be collected, enforced and received by
Guarantor, as trustee for Lender, but without reducing or affecting in any
manner the liability of Guarantor under the other provisions of this Guaranty.
9. Guarantor shall have no right of, and hereby waives any claim
for, subrogation or reimbursement against Borrower or any general partner of
Borrower by reason of any payment by Guarantor under this Guaranty, whether
such right or claim arises at law or in equity or under any contract or
statute, until the Indebtedness has been paid in full and there has expired the
maximum
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LIMITED GUARANTY (FREDDIE MAC) - MULTISTATE PAGE 3
<PAGE> 4
possible period thereafter during which any payment made by Borrower to Lender
with respect to the Indebtedness could be deemed a preference under the United
States Bankruptcy Code.
10. If any payment by Borrower is held to constitute a preference
under any applicable bankruptcy, insolvency, or similar laws, or if for any
other reason Lender is required to refund any sums to Borrower, such refund
shall not constitute a release of any liability of Guarantor under this
Guaranty. It is the intention of Lender and Guarantor that Guarantor's
obligations under this Guaranty shall not be discharged except by Guarantor's
performance of such obligations and then only to the extent of such
performance.
11. Guarantor shall from time to time, upon request by Lender,
deliver to Lender such financial statements as Lender may reasonably require.
12. Lender may assign its rights under this Guaranty in whole or
in part and upon any such assignment, all the terms and provisions of this
Guaranty shall inure to the benefit of such assignee to the extent so assigned.
The terms used to designate any of the parties herein shall be deemed to
include the heirs, legal representatives, successors and assigns of such
parties; and the term "LENDER" shall include, in addition to Lender, any lawful
owner, holder or pledgee of the Note.
13. This Guaranty and the other Loan Documents represent the
final agreement between the parties and may not be contradicted by evidence of
prior, contemporaneous or subsequent oral agreements. There are no unwritten
oral agreements between the parties. All prior or contemporaneous agreements,
understandings, representations, and statements, oral or written, are merged
into this Guaranty and the other Loan Documents. Guarantor acknowledges that it
has received copies of the Note and all other Loan Documents. Neither this
Guaranty nor any of its provisions may be waived, modified, amended,
discharged, or terminated except by an agreement in writing signed by the party
against which the enforcement of the waiver, modification, amendment,
discharge, or termination is sought, and then only to the extent set forth in
that agreement.
14. Guarantor agrees that any controversy arising under or in
relation to this Guaranty shall be litigated exclusively in the jurisdiction
where the Land is located (the "PROPERTY JURISDICTION"). The state and federal
courts and authorities with jurisdiction in the Property Jurisdiction shall
have exclusive jurisdiction over all controversies which shall arise under or
in relation to this Guaranty, the Note, the Security Instrument or any other
Loan Document. Guarantor irrevocably consents to service, jurisdiction, and
venue of such courts for any such litigation and waives any other venue to
which it might be entitled by virtue of domicile, habitual residence or
otherwise.
15. GUARANTOR AND LENDER EACH (A) AGREES NOT TO ELECT A TRIAL BY
JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS GUARANTY OR THE RELATIONSHIP
BETWEEN THE PARTIES AS GUARANTOR AND LENDER THAT IS TRIABLE OF RIGHT BY A JURY
AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE TO THE
EXTENT THAT ANY SUCH
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LIMITED GUARANTY (FREDDIE MAC) - MULTISTATE PAGE 4
<PAGE> 5
RIGHT EXISTS NOW OR IN THE FUTURE. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS
SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF
COMPETENT LEGAL COUNSEL.
ATTACHED EXHIBIT. The following Exhibit is attached to this Guaranty:
|__| Exhibit A Modifications to Guaranty
IN WITNESS WHEREOF, Guarantor has signed and delivered this Guaranty
or has caused this Guaranty to be signed and delivered by its duly authorized
representative.
[SIGNATURES AND ACKNOWLEDGMENTS]
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LIMITED GUARANTY (FREDDIE MAC) - MULTISTATE PAGE 5
<PAGE> 6
EXHIBIT A
MODIFICATIONS TO GUARANTY
The following modifications are made to the text of the Guaranty that precedes
this Exhibit:
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LIMITED GUARANTY (FREDDIE MAC) - MULTISTATE PAGE A-1
<PAGE> 1
EXHIBIT 10.5
SUNRISE ASSISTED LIVING, INC.
SENIOR EXECUTIVE SEVERANCE PLAN
(CHIEF EXECUTIVE OFFICER)
Sunrise Assisted Living, Inc., a Delaware corporation (the "Company"),
sets forth herein the terms of its SENIOR EXECUTIVE SEVERANCE PLAN (the "Plan")
as follows:
SECTION 1. PURPOSE. The Board of Directors of the Company (the "Board")
believes that it is in the best interests of the Company to encourage the
continued employment with and dedication to the Company of certain of the
Company's key executive officers in the face of potentially distracting
circumstances arising from the possibility of a change in control of the
Company, and the Board has established the Plan for this purpose.
SECTION 2. DEFINITIONS.
(a) "ACCRUED OBLIGATIONS" means, with respect to an Executive, the sum
of (1) the Executive's Annual Base Salary through the Date of Termination to the
extent not theretofore paid, (2) the product of (x) the Executive's Annual Bonus
and (y) a fraction, the numerator of which is the number of days in the current
fiscal year through the Date of Termination, and the denominator of which is
365, and (3) any compensation previously deferred by the Executive (together
with any accrued interest or earnings thereon) and any accrued vacation pay, in
each case, to the extent not theretofore paid.
(b) "ANNUAL BASE SALARY" means, with respect to an Executive, the
greater of (a) the annual base salary payable to the Executive by the Company
and its affiliates as of the Date of Termination or (b) the amount equal to
twelve times the highest monthly base salary paid or payable, including any base
salary which has been earned but deferred, to the Executive by the Company and
its affiliate in respect of the twelve-month period immediately preceding the
month in which the Date of Termination occurs.
(c) "ANNUAL BONUS" means, with respect to an Executive, the highest
amount paid to the Executive as bonus payments in a single year during the last
three full fiscal years prior to the Date of Termination (annualized in the
event that the Executive was not employed by the Company for the whole of such
fiscal year).
(d) "BOARD" means the Board of Directors of the Company.
(e) "CAUSE" for termination of an Executive's employment by the
Company shall be deemed to exist if: (a) the Executive is found guilty by a
court of having committed fraud or theft against the Company and such conviction
is affirmed on appeal or the time for appeal has expired; (b) the Executive is
found guilty by a court of having committed a crime involving moral turpitude
and such conviction is affirmed on appeal or the time for appeal has expired;
(c) in the reasonable judgment of the Board, the Executive has compromised trade
secrets or other similarly valuable proprietary information of the Company; or
(d) in the reasonable judgment of the Board, the Executive has engaged in
<PAGE> 2
gross or willful misconduct that causes substantial and material harm to the
business and operations of the Company or any of its affiliates, the
continuation of which will continue to substantially and materially harm the
business and operations of the Company or any of its affiliates in the future.
(f) "CHANGE IN CONTROL" means:
(1) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 50%
of either (i) the then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (ii) the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change in Control: (i) any acquisition by
the Company; (ii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation controlled by
the Company; and (iii) any acquisition by any entity pursuant to a transaction
which complies with clauses (i), (ii) and (iii) of subsection (3) of this
Section 2(f); or
(2) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(3) Consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of the Company (a
"Business Combination"), in each case unless, following such Business
Combination, (i) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the entity
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be, and (ii) no
Person (excluding any corporation resulting from such Business Combination or
any employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly,
- 2 -
<PAGE> 3
35% or more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to the
Business Combination and (iii) at least a majority of the members of the board
of directors of the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination; or
(4) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
(g) "CHANGE IN CONTROL EVENT" means the earlier to occur of (i) a
Change in Control or (ii) the execution and delivery by the Company of an
agreement providing for a Change in Control.
(h) "CHANGE IN CONTROL PERIOD" means the period commencing upon a
Change in Control Event and ending two years after such Change in Control Event.
(i) "COMPANY" means Sunrise Assisted Living, Inc., a Delaware
corporation.
(j) "DATE OF TERMINATION" means, with respect to an Executive, the
effective date of termination of the Executive's employment with the Company.
(k) "EXECUTIVE" means an executive officer of the Company designated
by the Board to participate in the Plan.
(l) "GOOD REASON" means, with respect to an Executive: (1) any
reduction in the Executive's base salary, fringe benefits or bonus eligibility,
except, in the case of fringe benefits or bonus eligibility, in connection with
a reduction in such compensation generally applicable to peer employees of the
Company; (2) that the Executive has his responsibilities or areas of supervision
with the Company substantially reduced ; or (3) that the Executive is required
to move his office outside the metropolitan area in which the office of the
Executive was previously located.
(m) "OTHER BENEFITS" means, with respect to an Executive, any other
amounts or benefits required to be paid or provided or which the Executive is
eligible to receive under any plan, program, policy or practice or contract or
agreement of the Company and its affiliates.
SECTION 3. TERM. This Plan shall be for a period commencing on February
25, 2000 and ending on February 25, 2005; provided, however, that, in the event
of a Change in Control Event during the term of this Plan, the term of this Plan
shall be automatically extended, if necessary, so that this Plan remains in full
force and effect for the Change in Control Period relating to such Change in
Control Event and until all payments required to be made hereunder have been
made. The Board may supend, amend or terminate this Plan in accordance with
Section 10. References herein to the term of this Plan shall include the initial
term and any additional period for which this Plan is extended or renewed.
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<PAGE> 4
SECTION 4. SEVERANCE BENEFITS FOLLOWING A CHANGE IN CONTROL.
(a) GOOD REASON; OTHER THAN FOR CAUSE. If a Change in Control Event
occurs during the term of this Plan and the Company terminates an Executive's
employment other than for Cause or the Executive terminates employment for Good
Reason during the Change in Control Period:
(i) The Company shall pay to the Executive the following
amounts:
A. the Accrued Obligations in a lump sum in cash within
30 days of the Date of Termination;
B. the amount equal to 0.5% of the total enterprise
value of the Company based upon the value realized in the Change in
Control transaction.
C. the amount equal to the product of (1) three (3)
and (2) the sum of (x) the Executive's Annual Base Salary and (y) the
Annual Bonus;
Company shall pay the amounts provided in subparagraphs (B) and (C) in a
lump sum in cash within 30 days of the Date of Termination; provided,
however, that if the Executive is requested by the acquiror in the Change
in Control transaction to provide transition services, payment of up to
one half of amounts due under this Agreement may be deferred until the
completion of a transition period ending up to 120 days following the
consummation of such transaction.
(ii) For two (2) years after the Date of Termination, or such
longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the Company
shall continue benefits to the Executive and/or the
Executive's family at least equal to those which would have
been provided to them in accordance with the welfare
benefit plans, practices, policies and programs provided by
the Company and its affiliates (including, without
limitation, medical, prescription, dental, disability,
employee life, group life, accidental death and travel
accident insurance plans and programs) to the extent
applicable generally to other peer employees of the Company
and its affiliates, as if the Executive's employment had
not been terminated; provided, however, that if the
Executive becomes reemployed with another employer and is
eligible to receive medical or other welfare benefits under
another employer provided plan, the medical and other
welfare benefits described herein shall be secondary to
those provided under such other plan during such applicable
period of eligibility,
(iii) To the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive all Other Benefits.
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<PAGE> 5
(b) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's employment
is terminated for Cause during the Change in Control Period, this Plan shall
terminate without further obligations to the Executive, other than the
obligation to pay to the Executive (x) his Annual Base Salary through the Date
of Termination, (y) the amount of any compensation previously deferred by the
Executive and (z) Other Benefits through the Date of Termination, in each case
to the extent theretofore unpaid. If the Executive voluntarily terminates
employment during the Change in Control Period, excluding a termination for Good
Reason, this Plan shall terminate without further obligations to the Executive,
other than for Accrued Obligations and the timely payment or provision of Other
Benefits through the Date of Termination. In such case, all Accrued Obligations
shall be paid to the Executive in a lump sum in cash within 30 days of the Date
of Termination.
SECTION 5. EFFECT ON OPTION PLANS. Immediately prior to a Change in
Control, all stock option grants made to an Executive by the Company that are
outstanding at the time of such Change in Control shall be accelerated and vest.
Accordingly, all stock options shall be exercisable at such time in accordance
with their terms. This Plan is intended to amend all stock option grants
previously awarded to Executives to accelerate vesting as described above to the
extent vesting would not otherwise be accelerated under the terms of such stock
option grants.
SECTION 6. PARACHUTE LIMITATIONS. Notwithstanding any other provision of
this Plan or of any other agreement, contract or understanding heretofore or
hereafter entered into by an Executive with the Company or any affiliate, except
an agreement, contract or understanding hereafter entered into that expressly
modifies or excludes application of this paragraph (an "Other Agreement"), and
notwithstanding any formal or informal plan or other arrangement for the direct
or indirect provision of compensation to the Executive (including groups or
classes of participants or beneficiaries of which the Executive is a member),
whether or not such compensation is deferred, is in cash, or is in the form of a
benefit to or for the Executive (a "Benefit Arrangement"), if the Executive is a
"disqualified individual" (as defined in Section 280G(c) of the Internal Revenue
Code of 1986, as amended (the "Code")), any right to receive any payment or
other benefit under this Plan shall not become vested (i) to the extent that
such right to payment or other benefit, taking into account all other rights,
payments, or benefits to or for the Executive under this Plan, all Other
Agreements and all Benefit Arrangements, would cause any payment or benefit to
the Executive under this Plan to be considered a "parachute payment" within the
meaning of Section 280G(b)(2) of the Code as then in effect (a "Parachute
Payment") and (ii) if, as a result of receiving a Parachute Payment, the
aggregate after-tax amounts received by the Executive from the Company under
this Plan, all Other Agreements and all Benefit Arrangements would be less than
the maximum after-tax amount that could be received by the Executive without
causing any such payment or benefit to be considered a Parachute Payment. In the
event that the receipt of any such right to payment or other benefit under this
Plan, in conjunction with all other rights, payments or benefits to or for the
Executive under any Other Agreement or any Benefit Arrangement would cause the
Executive to be considered to have received a Parachute Payment under this Plan
that would have the effect of decreasing the after-tax amount received by the
Executive as described in clause (ii) of the preceding sentence, then the
Executive shall have the right, in the Executive's sole discretion, to designate
those rights, payments or benefits under this Plan, any Other Agreements and any
Benefit Arrangements that should be reduced or eliminated so as to avoid
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<PAGE> 6
having the payment or benefit to the Executive under this Plan be deemed to be a
Parachute Payment.
SECTION 7 EXPENSES. The Company shall pay any and all reasonable legal
fees and expenses incurred by an Executive in seeking to obtain or enforce, by
bringing an action against the Company, any right or benefit provided in this
Plan if the Executive is successful in whole or in part in such action.
SECTION 8. WITHHOLDING. Notwithstanding anything in this Plan to the
contrary , all payments required to be made by the Company hereunder to an
Executive or his estate or beneficiaries shall be subject to the withholding of
such amounts relating to taxes as the Company reasonably may determine it should
withhold pursuant to any applicable law or regulation. In lieu of withholding
such amounts, in whole or in part, the Company may, in its sole discretion,
accept other provisions for the payment of taxes and any withholdings as
required by law, provided that the Company is satisfied that all requirements of
law affecting its responsibilities to withhold compensation have been satisfied.
SECTION 9. NO DUTY TO MITIGATE. An Executive's payments received
hereunder shall be considered severance pay in consideration of past service,
and pay in consideration of continued service from the date hereof and
entitlement thereto shall not be governed by any duty to mitigate damages by
seeking further employment.
SECTION 10. AMENDMENT, SUSPENSION OR TERMINATION. This Plan may be
amended, suspended or terminated at any time by the Board; provided, however,
that, following the commencement of a Change in Control transaction or Change in
Control Event and during the Change in Control Period relating to such Change in
Control Event, the Board may not amend, suspend or terminate this Plan without
the consent of all Executives then subject to the Plan. The Board shall notify
the Executives subject to the Plan of any such suspensions, changes, or
terminations.
SECTION 11. GOVERNING LAW. This Plan shall be governed by the laws of
United States to the extent applicable and otherwise by the laws of the State of
Delaware, excluding the choice of law rules thereof.
SECTION 12. SEVERABILITY. If any part of any provision of this Plan shall
be invalid or unenforceable under applicable law, such part shall be ineffective
to the extent of such invalidity or unenforceability only, without in any way
affecting the remaining parts of such provision or the remaining provisions of
this Plan.
SECTION 13. DISCLAIMER OF RIGHTS. No provision in this Plan shall be
construed to confer upon any individual the right to remain in the employ or
service of the Company or any affiliate, or to interfere in any way with any
contractual or other right or authority of the Company either to increase or
decrease the compensation or other payments to any individual at any time, or to
terminate any employment or other relationship between any individual and the
Company. The obligation of the Company to pay any benefits pursuant to this Plan
shall be interpreted as a contractual obligation to pay only those amounts
described herein, in the manner and under the conditions prescribed herein. The
Plan shall in no way be interpreted to require
- 6 -
<PAGE> 7
the Company to transfer any amounts to a third party trustee or otherwise hold
any amounts in trust or escrow for payment to any participant or beneficiary
under the terms of the Plan.
SECTION 14. CAPTIONS. The use of captions in this Plan is for the
convenience of reference only and shall not affect the meaning of any provision
of this Plan.
SECTION 15. NUMBER AND GENDER. With respect to words used in this Plan,
the singular form shall include the plural form, the masculine gender shall
include the feminine gender, etc., as the context requires.
* * * * *
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<PAGE> 8
This Plan was duly adopted and approved by the Board as of the 25th day
of February, 2000.
s/ Thomas B. Newell
----------------------------
Secretary of the Meeting
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<PAGE> 1
EXHIBIT 10.6
SUNRISE ASSISTED LIVING, INC.
SENIOR EXECUTIVE SEVERANCE PLAN
Sunrise Assisted Living, Inc., a Delaware corporation (the
"Company"), sets forth herein the terms of its SENIOR EXECUTIVE SEVERANCE PLAN
(the "Plan") as follows:
SECTION 1. PURPOSE. The Board of Directors of the Company (the
"Board") believes that it is in the best interests of the Company to encourage
the continued employment with and dedication to the Company of certain of the
Company's key executive officers in the face of potentially distracting
circumstances arising from the possibility of a change in control of the
Company, and the Board has established the Plan for this purpose.
SECTION 2. DEFINITIONS.
(a) "ACCRUED OBLIGATIONS" means, with respect to an Executive,
the sum of (1) the Executive's Annual Base Salary through the Date of
Termination to the extent not theretofore paid, (2) the product of (x) the
Executive's Annual Bonus and (y) a fraction, the numerator of which is the
number of days in the current fiscal year through the Date of Termination, and
the denominator of which is 365, and (3) any compensation previously deferred by
the Executive (together with any accrued interest or earnings thereon) and any
accrued vacation pay, in each case, to the extent not theretofore paid.
(b) "ANNUAL BASE SALARY" means, with respect to an Executive,
the greater of (a) the annual base salary payable to the Executive by the
Company and its affiliates as of the Date of Termination or (b) the amount equal
to twelve times the highest monthly base salary paid or payable, including any
base salary which has been earned but deferred, to the Executive by the Company
and its affiliate in respect of the twelve-month period immediately preceding
the month in which the Date of Termination occurs.
(c) "ANNUAL BONUS" means, with respect to an Executive, the
highest amount paid to the Executive as bonus payments in a single year during
the last three full fiscal years prior to the Date of Termination (annualized in
the event that the Executive was not employed by the Company for the whole of
such fiscal year).
(d) "BOARD" means the Board of Directors of the Company.
(e) "CAUSE" for termination of an Executive's employment by the
Company shall be deemed to exist if: (a) the Executive is found guilty by a
court of having committed fraud or theft against the Company and such conviction
is affirmed on appeal or the time for appeal has expired; (b) the Executive is
found guilty by a court of having committed a crime involving moral turpitude
and such conviction is affirmed on appeal or the time for appeal has expired;
(c) in the reasonable judgment of the Board, the Executive has compromised trade
secrets or other similarly valuable proprietary information of the
<PAGE> 2
Company; or (d) in the reasonable judgment of the Board, the Executive has
engaged in gross or willful misconduct that causes substantial and material harm
to the business and operations of the Company or any of its affiliates, the
continuation of which will continue to substantially and materially harm the
business and operations of the Company or any of its affiliates in the future.
(f) "CHANGE IN CONTROL" means:
(1) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more
than 50% of either (i) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (ii) the combined voting
power of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this subsection (a), the
following acquisitions shall not constitute a Change in Control: (i) any
acquisition by the Company; (ii) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Company or any corporation
controlled by the Company; and (iii) any acquisition by any entity pursuant to a
transaction which complies with clauses (i), (ii) and (iii) of subsection (3) of
this Section 2(f); or
(2) Individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or
(3) Consummation of a reorganization, merger or consolidation
or sale or other disposition of all or substantially all of the assets of the
Company (a "Business Combination"), in each case unless, following such Business
Combination, (i) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the entity
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or
more subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, as the case may be, and
(ii) no Person (excluding any corporation resulting from such
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<PAGE> 3
Business Combination or any employee benefit plan (or related trust) of the
Company or such corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 35% or more of, respectively, the
then outstanding shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then outstanding
voting securities of such corporation except to the extent that such ownership
existed prior to the Business Combination and (iii) at least a majority of the
members of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board, providing
for such Business Combination; or
(4) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
(g) "CHANGE IN CONTROL EVENT" means the earlier to occur of (i)
a Change in Control or (ii) the execution and delivery by the Company of an
agreement providing for a Change in Control.
(h) "CHANGE IN CONTROL PERIOD" means the period commencing upon
a Change in Control Event and ending two years after such Change in Control
Event.
(i) "COMPANY" means Sunrise Assisted Living, Inc., a Delaware
corporation.
(j) "DATE OF TERMINATION" means, with respect to an Executive,
the effective date of termination of the Executive's employment with the
Company.
(k) "EXECUTIVE" means an executive officer of the Company
designated by the Board to participate in the Plan.
(l) "GOOD REASON" means, with respect to an Executive: (1) any
reduction in the Executive's base salary, fringe benefits or bonus eligibility,
except, in the case of fringe benefits or bonus eligibility, in connection with
a reduction in such compensation generally applicable to peer employees of the
Company; (2) that the Executive has his responsibilities or areas of supervision
with the Company substantially reduced (in the Executive's reasonable judgment)
or the Executive is requested to report to a lower level supervisor; (3) that
the Executive has his responsibilities or areas of supervision with the Company
substantially increased without an appropriate increase in Executive's
compensation (in the Executive's reasonable judgment); (4) that the Executive is
required to move his office outside the metropolitan area in which the office of
the Executive was previously located; or (5) that the Executive is required to
report to a new supervisor and the Executive and the new supervisor have
irreconcilable working relationship problems or difficulties.
(m) "OTHER BENEFITS" means, with respect to an Executive, any
other amounts or benefits required to be paid or provided or which the Executive
is eligible to receive under any plan, program, policy or practice or contract
or agreement of the Company and its affiliates.
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<PAGE> 4
SECTION 3. TERM. This Plan shall be for a period commencing on
February 25, 2000 and ending on February 25, 2005; provided, however, that, in
the event of a Change in Control Event during the term of this Plan, the term of
this Plan shall be automatically extended, if necessary, so that this Plan
remains in full force and effect for the Change in Control Period relating to
such Change in Control Event and until all payments required to be made
hereunder have been made. References herein to the term of this Plan shall
include the initial term and any additional period for which this Plan is
extended or renewed.
SECTION 4. SEVERANCE BENEFITS FOLLOWING A CHANGE IN CONTROL.
(a) GOOD REASON; OTHER THAN FOR CAUSE. If a Change in Control
Event occurs during the term of this Plan and the Company terminates an
Executive's employment other than for Cause or the Executive terminates
employment for Good Reason during the Change in Control Period:
(i) The Company shall pay to the Executive the following
amounts:
A. the Accrued Obligations in a lump sum in cash
within 30 days of the Date of Termination;
B. the amount equal to the product of (1) three
(3) and (2) the sum of (x) the Executive's Annual Base Salary and
(y) the Annual Bonus; and
C. the amount equal to the value (based on a
Black-Scholes valuation methodology) as of the Date of Termination
of all unexercised stock options held by the Executive as of the
Date of Termination that have exercise prices of $$24.375, 25.00,
25.625 and 37.625 per share whether or not such options have
vested as of the Date of Termination; provided, however, that the
amount paid under this subparagraph (C) shall not exceed an amount
equal to $4 million less the sum of (i) the amounts paid to the
Executive under subparagraph (B) and (ii) the aggregate of the
excess, if any, of the fair market value of a share of the
Company's common stock as of the Date of Termination over the
exercise price of each unexercised option held by the Executive on
the Date of Termination (whether or not such options have vested
as of the Date of Termination and but not including the options
for which payment is being made pursuant to this subparagraph
(C)), multiplied, with respect to each option, by the total number
of shares subject to the unexercised portion of such option. The
following assumptions shall be used in preparing the Black-Scholes
valuation: volatility of 20% and average remaining term on the
options of four years. Upon payment of such amount, the options
shall be no longer exercisable and shall be terminated.
The Company shall pay the amounts provided in subparagraphs (B)
and (C) in a lump sum in cash within 30 days of the Date of
Termination; provided, however, that if requested by the acquiror
in the Change in Control transaction to provided
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<PAGE> 5
transition services, payment of up to one half of amounts due
under this Agreement may be deferred until the completion of a
transition period ending up to 120 days following the consummation
of such transaction.
(ii) For two (2) years after the Date of Termination, or
such longer period as may be provided by the terms of the appropriate
plan, program, practice or policy, the Company shall continue benefits to
the Executive and/or the Executive's family at least equal to those which
would have been provided to them in accordance with the welfare benefit
plans, practices, policies and programs provided by the Company and its
affiliates (including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and travel
accident insurance plans and programs) to the extent applicable generally
to other peer employees of the Company and its affiliates, as if the
Executive's employment had not been terminated; provided, however, that
if the Executive becomes reemployed with another employer and is eligible
to receive medical or other welfare benefits under another employer
provided plan, the medical and other welfare benefits described herein
shall be secondary to those provided under such other plan during such
applicable period of eligibility.
(iv) To the extent not theretofore paid or provided, the
Company shall timely pay or provide to the Executive all Other Benefits.
(b) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's
employment is terminated for Cause during the Change in Control Period, this
Plan shall terminate without further obligations to the Executive, other than
the obligation to pay to the Executive (x) his Annual Base Salary through the
Date of Termination, (y) the amount of any compensation previously deferred by
the Executive and (z) Other Benefits through the Date of Termination, in each
case to the extent theretofore unpaid. If the Executive voluntarily terminates
employment during the Change in Control Period, excluding a termination for Good
Reason, this Plan shall terminate without further obligations to the Executive,
other than for Accrued Obligations and the timely payment or provision of Other
Benefits through the Date of Termination. In such case, all Accrued Obligations
shall be paid to the Executive in a lump sum in cash within 30 days of the Date
of Termination.
SECTION 5. EFFECT ON OPTION PLANS. Immediately prior to a Change
in Control, all stock option grants made to an Executive by the Company that are
outstanding at the time of such Change in Control shall be accelerated and vest.
Accordingly, all stock options shall be exercisable at such time in accordance
with their terms. This Plan is intended to amend all stock option grants
previously awarded to Executives to accelerate vesting as described above to the
extent vesting would not otherwise be accelerated under the terms of such stock
option grants.
SECTION 6. PARACHUTE LIMITATIONS. Notwithstanding any other
provision of this Plan or of any other agreement, contract or understanding
heretofore or hereafter entered into by an Executive with the Company or any
affiliate, except an agreement, contract or understanding hereafter entered into
that expressly modifies or excludes application of this paragraph (an "Other
Agreement"), and notwithstanding any formal or informal plan or other
- 5 -
<PAGE> 6
arrangement for the direct or indirect provision of compensation to the
Executive (including groups or classes of participants or beneficiaries of which
the Executive is a member), whether or not such compensation is deferred, is in
cash, or is in the form of a benefit to or for the Executive (a "Benefit
Arrangement"), if the Executive is a "disqualified individual" (as defined in
Section 280G(c) of the Internal Revenue Code of 1986, as amended (the "Code")),
any right to receive any payment or other benefit under this Plan shall not
become vested (i) to the extent that such right to payment or other benefit,
taking into account all other rights, payments, or benefits to or for the
Executive under this Plan, all Other Agreements and all Benefit Arrangements,
would cause any payment or benefit to the Executive under this Plan to be
considered a "parachute payment" within the meaning of Section 280G(b)(2) of the
Code as then in effect (a "Parachute Payment") and (ii) if, as a result of
receiving a Parachute Payment, the aggregate after-tax amounts received by the
Executive from the Company under this Plan, all Other Agreements and all Benefit
Arrangements would be less than the maximum after-tax amount that could be
received by the Executive without causing any such payment or benefit to be
considered a Parachute Payment. In the event that the receipt of any such right
to payment or other benefit under this Plan, in conjunction with all other
rights, payments or benefits to or for the Executive under any Other Agreement
or any Benefit Arrangement would cause the Executive to be considered to have
received a Parachute Payment under this Plan that would have the effect of
decreasing the after-tax amount received by the Executive as described in clause
(ii) of the preceding sentence, then the Executive shall have the right, in the
Executive's sole discretion, to designate those rights, payments or benefits
under this Plan, any Other Agreements and any Benefit Arrangements that should
be reduced or eliminated so as to avoid having the payment or benefit to the
Executive under this Plan be deemed to be a Parachute Payment.
SECTION 7 EXPENSES. The Company shall pay any and all reasonable
legal fees and expenses incurred by an Executive in seeking to obtain or
enforce, by bringing an action against the Company, any right or benefit
provided in this Plan if the Executive is successful in whole or in part in such
action.
SECTION 8. WITHHOLDING. Notwithstanding anything in this Plan to
the contrary , all payments required to be made by the Company hereunder to an
Executive or his estate or beneficiaries shall be subject to the withholding of
such amounts relating to taxes as the Company reasonably may determine it should
withhold pursuant to any applicable law or regulation. In lieu of withholding
such amounts, in whole or in part, the Company may, in its sole discretion,
accept other provisions for the payment of taxes and any withholdings as
required by law, provided that the Company is satisfied that all requirements of
law affecting its responsibilities to withhold compensation have been satisfied.
SECTION 9. NO DUTY TO MITIGATE. An Executive's payments received
hereunder shall be considered severance pay in consideration of past service,
and pay in consideration of continued service from the date hereof and
entitlement thereto shall not be governed by any duty to mitigate damages by
seeking further employment.
SECTION 10. AMENDMENT, SUSPENSION OR TERMINATION. This Plan may be
amended, suspended or terminated at any time by the Board; provided, however,
that, following a Change in Control Event and during the Change in Control
Period relating to
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<PAGE> 7
such Change in Control Event, the Board may not amend, suspend or terminate this
Plan without the consent of all Executives then subject to the Plan.
SECTION 11. GOVERNING LAW. This Plan shall be governed by the laws
of United States to the extent applicable and otherwise by the laws of the State
of Delaware, excluding the choice of law rules thereof.
SECTION 12. SEVERABILITY. If any part of any provision of this
Plan shall be invalid or unenforceable under applicable law, such part shall be
ineffective to the extent of such invalidity or unenforceability only, without
in any way affecting the remaining parts of such provision or the remaining
provisions of this Plan.
SECTION 13. DISCLAIMER OF RIGHTS. No provision in this Plan shall
be construed to confer upon any individual the right to remain in the employ or
service of the Company or any affiliate, or to interfere in any way with any
contractual or other right or authority of the Company either to increase or
decrease the compensation or other payments to any individual at any time, or to
terminate any employment or other relationship between any individual and the
Company. The obligation of the Company to pay any benefits pursuant to this Plan
shall be interpreted as a contractual obligation to pay only those amounts
described herein, in the manner and under the conditions prescribed herein. The
Plan shall in no way be interpreted to require the Company to transfer any
amounts to a third party trustee or otherwise hold any amounts in trust or
escrow for payment to any participant or beneficiary under the terms of the
Plan.
SECTION 14. CAPTIONS. The use of captions in this Plan is for the
convenience of reference only and shall not affect the meaning of any provision
of this Plan.
SECTION 15. NUMBER AND GENDER. With respect to words used in this
Plan, the singular form shall include the plural form, the masculine gender
shall include the feminine gender, etc., as the context requires.
* * * * *
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<PAGE> 8
This Plan was duly adopted and approved by the Board as of the
25th day of February, 2000.
s/ Thomas B. Newell
-----------------------------------
Secretary of the Meeting
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<PAGE> 1
EXHIBIT 10.7
CONSULTING AGREEMENT
This CONSULTING AGREEMENT (this "Agreement"), dated March 28, 2000, with
an effective date of April 1, 2000, is entered into between SUNRISE ASSISTED
LIVING, INC. (the "Company") and DAVID W. FAEDER (the "Consultant").
WHEREAS, the Company desires to obtain the consulting services of the
Consultant as an independent contractor to assist with real estate related
matters, to provide advice and counsel to its Chairman of the Board and Chief
Executive Officer and to its President and to provide such other advice, counsel
and assistance as its Chairman of the Board and Chief Executive Officer or its
President may require; and
WHEREAS, the parties desire to enter into this Agreement to set forth the
terms and conditions for the consulting relationship of the Consultant with the
Company.
NOW, THEREFORE, it is AGREED as follows:
1. ENGAGEMENT.
(a) During the term of this Agreement (as set out in Section 6
hereof), the Consultant shall serve as a consultant to the Company. The
Consultant shall perform consulting services as and when reasonably requested by
the Chairman of the Board and Chief Executive Officer of the Company or by the
President of the Company. The Consultant shall render advisory and consulting
services to the Company of the type customarily performed by persons serving in
similar limited consulting capacities, consistent with the knowledge and
experience possessed by the Consultant. The Consultant's services shall include
assisting the Company with real estate sales, acquisitions and development
matters, providing related advice and counsel to the Chairman of the Board and
Chief Executive Officer of the Company and to the President of the Company and
providing such other advice, counsel and assistance as the Chairman of the Board
and Chief Executive Officer of the Company or the President of the Company may
reasonably request. Unless the parties otherwise agree in writing, the
Consultant's services to the Company shall terminate at the end of the term of
this Agreement.
(b) The parties acknowledge and agree that the Consultant's
fulfillment of his obligations to the Company hereunder will require
substantially all of the Consultant's full business time.
(c) The parties acknowledge that the Consultant will be elected
to serve as Vice Chairman of the Board of Directors of the Company as long as he
continues as a director of the Company; provided, however, that nothing herein
shall require the Company or any of its directors, officers or employees to
re-nominate the Consultant for election to the Board of Directors at the end of
his next term thereon expiring in May 2003 or at any time thereafter.
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2. COMPENSATION AND EXPENSES. The Company agrees to pay the
Consultant during the term of this Agreement at the rate of $205,000 per year,
payable in equal monthly installments on the first day of each month during the
term of this Agreement (and equitably pro rated for any partial month during the
term of this Agreement). The first such monthly installment shall be due and
payable on or before the first day of the term hereof. The Company shall
reimburse the Consultant for all reasonable travel, lodging, entertainment and
other incidental expenses incurred by the Consultant in connection with the
Consultant's performance of services hereunder, provided that all such expenses
are in accordance with the Company's policies applicable to similar expenses
incurred by its executive management employees. The Company shall (without
limitation) reimburse the Consultant for all legal and other reasonable expenses
incurred by the Consultant in connection with the negotiation and consummation
of this Agreement. The Consultant will invoice the Company monthly for any
reimbursement of expenses payable hereunder in respect of services performed and
expenses incurred during the previous month, and each such invoice shall be
accompanied by receipts and other supporting documentation of expenses incurred
as reasonably requested by the Company. The Company shall pay the expense
reimbursements that are due under this Agreement within a time frame consistent
with its normal practice for senior executives. The parties acknowledge and
agree that any amounts paid by the Company to the Consultant under this
Agreement are in lieu of any compensation or expense reimbursement to which the
Consultant might otherwise be entitled to by virtue of his position on the Board
of Directors and as Vice Chairman of the Board of Directors of the Company.
3. EFFECT ON OPTIONS AGREEMENTS. The Company and the
Consultant agree that notwithstanding anything herein or in any other agreement
entered into by the Company and/or the Consultant to the contrary, all of the
Consultant's existing options, severance benefits and other entitlements will
continue to vest and be exercisable or available pursuant to the terms of the
stock option agreements and severance or other agreements pursuant to which such
options, benefits or entitlements were granted to the Consultant as if his
employment with the Company had continued through March 31, 2003, even if this
Agreement is terminated earlier for any reason. In furtherance thereof, the
Company and the Consultant hereby restate and/or amend all of the option
agreements (the "Option Agreements") granted to the Consultant pursuant to the
applicable stock option plans (including but not limited to the Sunrise Assisted
Living, Inc. 1995 Stock Incentive Plan, the Sunrise Assisted Living, Inc. 1996
Non-Incentive Stock Option Plan, the Sunrise Assisted Living, Inc. 1997
Non-Incentive Stock Option Plan and the Sunrise Assisted Living 1999 Stock
Option Plan) to provide that the Consultant's relationship with the Company as a
consultant, as established pursuant to this Agreement, shall be deemed to be an
employment relationship with the Company for purposes of the Option Agreements
through March 31, 2003, even if this Agreement is terminated earlier for any
reason.
4. OFFICE AND SUPPORT SERVICES. During the term of this
Agreement, the Company shall continue to provide the Consultant with office
space, supplies, secretarial and staff support and other appropriate support
services and facilities that are reasonably required by the Consultant in
connection with his performance of services hereunder. In addition, during the
term of this Agreement, the Consultant shall continue to be entitled to his
current car allowance from the Company under the same terms as his car allowance
from the Company as of the date immediately prior to the date of this Agreement.
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5. TERM. The term of this Agreement shall be for three (3)
years, through March 31, 2003, unless earlier terminated pursuant to Section 8
hereof. The parties by mutual written agreement may extend the term of this
Agreement.
6. STANDARDS. The Consultant shall perform his duties and
responsibilities under this Agreement using his good faith efforts, in a
diligent, timely, professional and workmanlike manner.
7. CONFIDENTIALITY; COOPERATION WITH LEGA1 PROCESS;
NON-COMPETITION; NON SOLICITATION.
(a) The Consultant acknowledges that he has held a
sensitive management position with the Company and will continue to perform
services for the Company as provided herein and that, by virtue of having held
such position and performing such services, he has had access to and has learned
(and will continue to have access to and to learn) certain material proprietary
information and trade secrets reasonably deemed confidential by the Company in
good faith and directly pertaining to its specific business and operations
(collectively, the "Proprietary Information"). The Proprietary Information may
include information marked confidential, restricted or proprietary by the
Company and related to the Company's unique products, systems, software,
finances (including prices, costs and revenues), marketing plans, methods of
operation, prospective and existing contracts, business plans, procedures,
strategies (including acquisition strategies), customer lists, referral sources,
lists of doctors, and other unique information concerning the Company's specific
practices and procedures. The Consultant represents that he will not disclose
any such information to any other person, except as may be required by law or as
may be necessary in furtherance of the performance of services hereunder.
Notwithstanding the foregoing, Proprietary Information shall not include (i)
information in the public domain through no fault of the Consultant; (ii)
information received by the Consultant from a third party not under an
obligation to keep such information confidential; or (iii) the Consultant's
general know-how and professional expertise.
(b) The parties agree that no provision of this Section
7 or any other provision of this Agreement shall be construed or interpreted in
any way to limit, restrict or preclude either party hereto from cooperating with
any governmental agency in the performance of its investigatory or other lawful
duties or producing materials or giving testimony pursuant to a court
proceeding, or restrict the Consultant in the performance of his services to the
Company. The Consultant agrees that if he receives a subpoena or is otherwise
required by law to provide information to a governmental entity or other person
concerning the activities of the Company or his activities in connection with
the Company's business, he will promptly notify the Company of such subpoena or
requirement and deliver to the Company a copy of such subpoena or other notice,
unless such disclosure would, in the opinion of a recognized legal expert on
such matters, be prohibited by law.
(c) Until March 31, 2003, the Consultant shall not
provide similar consulting services to any business or other enterprise in the
assisted-living industry directly competing with the Company in any geographic
market where the Company maintains an assisted-living facility (unless the Board
of Directors of the Company shall have authorized such activity or the Company
shall have consented thereto in writing).
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(d) The Consultant agrees that during the term of this
Agreement and for twelve (12) months thereafter he will not solicit any employee
of the Company to leave the Company's employment (unless the Company shall have
consented thereto).
8. TERMINATION OF SERVICE; BOARD RESIGNATION; SEVERANCE.
(a) Either party shall have the right to terminate this
Agreement and the Consultant's services hereunder in accordance herewith at any
time upon thirty (30) days prior written notice to the other party.
(b) The Consultant and the Company shall use their best
efforts to provide for a proper transition and wind-down of the Consultant's
activities hereunder in connection with any such termination of this Agreement
and of such services.
(c) Upon termination of this Agreement, the Consultant
agrees to resign from the Company's Board of Directors and all committees
thereof, and to resign as Vice Chairman of the Board, effective in each case,
upon such termination, unless the Company, acting through its Board of
Directors, requests in writing that the Consultant withdraws such resignation
and the Consultant agrees in writing to so withdraw such resignation prior to
the termination of this Agreement. In furtherance thereof, the Consultant shall
provide a letter to the Company embodying the agreement set forth in the
immediately preceding sentence.
(d) The Consultant shall be entitled to the benefits
established for an "Executive" under the Company's Senior Executive Severance
Plan as adopted by the Board of Directors of the Company on February 25, 2000 or
as amended hereafter for the President of the Company (the "Severance Plan")
notwithstanding anything herein or in any other agreement entered into by the
Company and/or the Consultant to the contrary, and the Consultant shall be
subject to all the terms of the Severance Plan as if he were designated as an
"executive" under the Severance Plan (including, without limitation, the
provisions regarding parachute payments contained in Section 6 of the Severance
Plan) until the termination of this Agreement (unless at the time of any such
termination by the Company, the Consultant is performing his duties hereunder
and the Company has knowledge of a pending change in control transaction that
upon consummation would entitle the Consultant to benefits under the Severance
Plan, in which event the Consultant's entitlement to the benefits established
under the Severance Plan will survive with respect to such change in control
transaction as if he continued as an "executive" thereunder).
9. NO ASSIGNMENTS. This Agreement is personal to each of the
parties hereto. Neither party may assign or delegate any rights or obligations
hereunder without first obtaining the written consent of the other party hereto.
However, in the event of the death of the Consultant all rights to receive
payments hereunder shall become rights of the Consultant's estate.
10. AMENDMENT; MODIFICATION: WAIVER. No amendments or additions
to this Agreement shall be binding unless in writing and signed by both of the
parties hereto. No delay or failure at any time on the part of the Company or
the Consultant in exercising any right, power or privilege under this Agreement,
or in enforcing any provision of this Agreement, shall impair any such right,
power, or privilege, or be construed as a waiver of any default or as any
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acquiescence therein, or shall affect the right of the Company or the Consultant
thereafter to enforce each and every provision of this Agreement in accordance
with its terms.
11. SECTION HEADINGS. The section headings used in this
Agreement are included solely for convenience and shall not affect, or be used
in connection with, the interpretation of this Agreement.
12. SEVERABILITY. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.
13. NOTICES. For purposes of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when hand delivered, sent by overnight
courier, or mailed by first-class, registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Company:
Sunrise Assisted Living, Inc.
9401 Lee Highway
Suite 300
Fairfax, Virginia 22031
Fax No. (703) 374-4765
Attention: Chairman of the Board and Chief Executive
Officer
with a copy (which shall not constitute notice) to:
Hogan & Hartson, L.L.P.
555 13th Street, N.W.
Washington, D.C. 20004-1109
Attention: William L. Neff, Esq.
Fax No.: (202) 637-5910
If to the Consultant:
David W. Faeder
1501 Brookmeade Place
Vienna, VA 22182
Fax No.: (703) 759-2156
with a copy (which shall not constitute notice) to:
Shaw Pittman
2300 N Street, N.W.
Washington, DC 20037
Attention: Craig A. de Ridder, Esq.
Fax No.: (202) 663-8007
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or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
14. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties hereto, and supersedes all prior oral or written
agreements, commitments or understandings, with respect to the matters provided
for herein, except that the various stock option agreements and/or severance or
entitlement agreements between the Consultant and the Company (including the
Severance Plan) shall not be superseded by this Agreement.
15. INDEPENDENT CONTRACTOR STATUS. The Consultant shall have
sole control of the manner and means of performing his services under this
Agreement and shall complete such services in accordance with his own means and
methods of work. The parties intend that the Consultant shall be an independent
contractor and that the Consultant shall be responsible for the payment of
applicable income and self-employment taxes with respect to his compensation
under this Agreement.
16. GOVERNING LAW. This Agreement shall be governed by the laws
of the State of Delaware, excluding the choice of law rules thereof.
17. ARBITRATION. Any disputes between the Company and the
Consultant in any way concerning this Agreement or the services to be provided
hereunder shall be submitted at the initiative of either party to mandatory
arbitration before a single arbitrator in Wilmington, Delaware pursuant to the
Commercial Arbitration Rules of the American Arbitration Association, or its
successor, then in effect. The decision of the arbitrator shall be rendered in
writing, shall be final and may be entered as a judgment in any court in the
State of Delaware. The parties irrevocably consent to the jurisdiction of the
federal and state courts located in Delaware for this purpose. Each party shall
be responsible for its or his own costs incurred in such arbitration and in
enforcing any arbitration award, including attorney's fees.
18. AUTHORITY TO ENTER INTO THIS AGREEMENT. Each party
executing this Agreement has the requisite corporate power and authority to
enter into this Agreement and all of the provisions of this Agreement have been
duly authorized by all necessary corporate action.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered in their name and on their behalf as of the date first
above written.
SUNRISE ASSISTED LIVING, INC.
Attest:
By: s/ Paul J. Klaassen
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(Secretary) Chairman of the Board and
Chief Executive Officer
CONSULTANT
s/ David W. Faeder
---------------------------------------
David W. Faeder
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EXHIBIT 10.8
SUNRISE ASSISTED LIVING, INC.
1996 NON-INCENTIVE STOCK OPTION PLAN,
AS AMENDED FEBRUARY 25, 2000
SUNRISE ASSISTED LIVING, INC., a Delaware corporation (the
"Corporation"), sets forth herein the terms of this 1996 Non-Incentive Stock
Option Plan, as amended (the "Plan") as follows:
1. PURPOSE
The Plan is intended to advance the interests of the Corporation and any
subsidiary thereof within the meaning of Rule 405 of Regulation C under the
Securities Act of 1933, as amended (with the term "person" as used in such Rule
405 being defined as in Section 2(2) of such Act) (a "Subsidiary"), by providing
eligible individuals (as designated pursuant to Section 4 below) with incentives
to improve business results, by providing an opportunity to acquire or increase
a proprietary interest in the Corporation, which thereby will create a stronger
incentive to expend maximum effort for the growth and success of the Corporation
and its Subsidiaries, and will encourage such eligible individuals to continue
to serve the Corporation and its Subsidiaries, whether as an employee, as a
director, as a consultant or advisor or in some other capacity. To this end, the
Plan provides for the grant of stock options, as set out herein.
This Plan provides for the grant of stock options (each of which is an
"Option") in accordance with the terms of the Plan. An Option will be a
non-incentive stock option (an "NSO"). Each Option shall be evidenced by a
written agreement between the Corporation and the recipient individual that sets
out the terms and conditions of the grant as further described in Section 8.
2. ADMINISTRATION
(a) BOARD
The Plan shall be administered by the Board of Directors of the
Corporation (the "Board"), which shall have the full power and authority to take
all actions and to make all determinations required or provided for under the
Plan or any Option granted or Option Agreement (as defined in Section 8 below)
entered into hereunder and all such other actions and determinations not
inconsistent with the specific terms and provisions of the Plan deemed by the
Board to be necessary or appropriate to the administration of the Plan or any
Option granted or Option Agreement entered into hereunder. The interpretation
and construction by the Board of any provision of the Plan or of any Option
granted or Option Agreement entered into hereunder shall be final, binding and
conclusive.
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(b) ACTION BY COMMITTEE
The Board from time to time may appoint a Stock Option Committee
consisting of two or more members of the Board of Directors who, in the sole
discretion of the Board, may be the same Directors who serve on the Compensation
Committee, or may appoint the Compensation Committee to serve as the Stock
Option Committee (the "Committee"). The Board, in its sole discretion, may
provide that the role of the Committee shall be limited to making
recommendations to the Board concerning any determinations to be made and
actions to be taken by the Board pursuant to or with respect to the Plan, or the
Board may delegate to the Committee such powers and authorities related to the
administration of the Plan, as set forth in Section 2(a) above, as the Board
shall determine, consistent with the Restated Certificate of Incorporation and
By-Laws of the Corporation and applicable law. In the event that the Plan or any
Option granted or Option Agreement entered into hereunder provides for any
action to be taken by or determination to be made by the Board, such action may
be taken by or such determination may be made by the Committee if the power and
authority to do so has been delegated to the Committee by the Board as provided
for in this Section. Unless otherwise expressly determined by the Board, any
such action or determination by the Committee shall be final and conclusive.
(c) NO LIABILITY
No member of the Board or of the Committee shall be liable for any action
or determination made in good faith with respect to the Plan or any Option
granted or Option Agreement entered into hereunder.
3. STOCK
The stock that may be issued pursuant to Options under the Plan shall be
shares of common stock, par value $.01 per share, of the Corporation (the
"Stock"), which shares may be treasury shares or authorized but unissued shares.
The number of shares of Stock that may be issued pursuant to Options under the
Plan shall not exceed, in the aggregate, one million six hundred thousand
(1,600,000) shares. If any Option expires, terminates, or is terminated or
canceled for any reason prior to exercise, the shares of Stock that were subject
to the unexercised, forfeited, terminated or canceled portion of such Option
shall be available immediately for future grants of Options under the Plan.
4. ELIGIBILITY
(a) DESIGNATED RECIPIENTS
Options may be granted under the Plan to (i) any employee of the
Corporation or any Subsidiary (including any such individual who is an officer
or director of the Corporation or any Subsidiary) as the Board shall determine
and designate from time to time or (ii) any consultant or advisor providing bona
fide services to the Corporation or any Subsidiary (provided that such services
must not be in connection with the offer or sale of
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securities in a capital-raising transaction) whose participation in the Plan is
determined by the Board to be in the best interests of the Corporation and is so
designated by the Board.
(b) SUCCESSIVE GRANTS
An individual may hold more than one Option, subject to such restrictions
as are provided herein.
5. EFFECTIVE DATE AND TERM OF THE PLAN
(a) EFFECTIVE DATE
The Plan shall be effective as of the date of adoption by the Board.
(b) TERM
The Plan shall have no termination date.
6. GRANT OF OPTIONS
Subject to the terms and conditions of the Plan, the Board may, at any
time and from time to time, grant to such eligible individuals as the Board may
determine (each of the whom is an "Optionee"), Options to purchase such number
of shares of Stock on such terms and conditions as the Board may determine. Such
authority specifically includes the authority, in order to effectuate the
purposes of the Plan but without amending the Plan, to modify grants to eligible
individuals who are foreign nationals or are individuals who are employed
outside the United States to recognize differences in local law, tax policy, or
custom.
7. PARACHUTE LIMITATIONS
Notwithstanding any other provision of this Plan or of any other
agreement, contract, or understanding heretofore or hereafter entered into by
the Optionee with the Corporation, except an agreement, contract, or
understanding hereafter entered into that expressly modifies or excludes
application of this paragraph (an "Other Agreement"), and notwithstanding any
formal or informal plan or other arrangement for the direct or indirect
provision of compensation to the Optionee (including groups or classes of
participants or beneficiaries of which the Optionee is a member), whether or not
such compensation is deferred, is in cash, or is in the form of a benefit to or
for the Optionee (a "Benefit Arrangement"), if the Optionee is a "disqualified
individual," as defined in Section 280G(c) of the Internal Revenue Code of 1986,
as amended (the "Code"), any Option held by that Optionee and any right to
receive any payment or other benefit under this Plan shall not become
exercisable or vested (i) to the extent that such right to exercise, vesting,
payment, or benefit, taking into account all other rights, payments, or benefits
to or for the Optionee under this Plan, all Other Agreements, and all Benefit
Arrangements, would cause any payment or benefit to the Optionee under this Plan
to be considered a "parachute payment" within the meaning of Section 280G(b)(2)
of the Code as then in effect (a "Parachute
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Payment") and (ii) if, as a result of receiving a Parachute Payment, the
aggregate after-tax amounts received by the Optionee from the Corporation under
this Plan, all Other Agreements, and all Benefit Arrangements would be less than
the maximum after-tax amount that could be received by him without causing any
such payment or benefit to be considered a Parachute Payment. In the event that
the receipt of any such right to exercise, vesting, payment, or benefit under
this Plan, in conjunction with all other rights, payments, or benefits to or for
the Optionee under any Other Agreement or any Benefit Arrangement would cause
the Optionee to be considered to have received a Parachute Payment under this
Plan that would have the effect of decreasing the after-tax amount received by
the Optionee as described in clause (ii) of the preceding sentence, then the
Optionee shall have the right, in the Optionee's sole discretion, to designate
those rights, payments, or benefits under this Plan, any Other Agreements, and
any Benefit Arrangements that should be reduced or eliminated so as to avoid
having the payment or benefit to the Optionee under this Plan be deemed to be a
Parachute Payment.
8. OPTION AGREEMENTS
All Options granted pursuant to the Plan shall be evidenced by agreements
("Option Agreements"), to be executed by the Corporation and by the Optionee, in
such form or forms as the Board shall from time to time determine. Option
Agreements covering Options granted from time to time or at the same time need
not contain similar provisions; provided, however, that all such Option
Agreements shall comply with all terms of the Plan.
9. OPTION PRICE
The purchase price of each share of Stock subject to an Option (the
"Option Price") shall be fixed by the Board and stated in each Option Agreement.
The Option Price shall be not less than the greater of par value or 100 percent
of the fair market value of a share of Stock on the date on which the Option is
granted (as determined in good faith by the Board). In the event that the Stock
is listed on an established national or regional stock exchange or The Nasdaq
Stock Market, is admitted to quotation on the National Association of Securities
Dealers Automated Quotation System, or is publicly traded in an established
securities market, in determining the fair market value of the Stock, the Board
shall use the closing price of the Stock on such exchange or system or in such
market (the highest such closing price if there is more than one such exchange
or market) on the trading date immediately before the Option is granted (or, if
there is no such closing price, then the Board shall use the mean between the
highest bid and lowest asked prices or between the high and low prices on such
date), or, if no sale of the Stock has been made on such day, on the next
preceding day on which any such sale shall have been made.
10. TERM AND EXERCISE OF OPTIONS
(a) OPTION PERIOD AND LIMITATIONS ON EXERCISE
Each Option granted under the Plan shall be exercisable, in whole or in
part, at any time and from time to time, over a period commencing on or after
the date of grant
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and, to the extent that the Board determines and sets forth a termination date
for such Option in the Option Agreement (including any amendment thereto),
ending upon the stated expiration or termination date. The Board in its sole
discretion may specify events or circumstances, including the giving of notice,
which will cause an Option to terminate as set forth in the Option Agreement or
in this Plan. No Option granted to a person who is required to file reports
under Section 16(a) of the Securities Exchange Act of 1934 (as now in effect or
as hereafter amended) shall be exercisable during the first six months after the
date of grant. Without limiting the foregoing but subject to the terms and
conditions of the Plan, the Board may in its sole discretion provide that an
Option may not be exercised in whole or in part for any period or periods of
time during which such Option is outstanding and may condition exercisability
(or vesting) of an Option upon the attainment of performance objectives, upon
continued service, upon certain events or transactions, or a combination of one
or more of such factors, or otherwise, as set forth in the Option Agreement.
Subject to the parachute payment restrictions under Section 7, however, the
Board, in its sole discretion, may rescind, modify, or waive any such limitation
or condition on the exercise of an Option contained in any Option Agreement, so
as to accelerate the time at which the Option may be exercised or extend the
period during which the Option may be exercised.
(b) METHOD OF EXERCISE
An Option that is exercisable hereunder may be exercised by delivery to
the Corporation on any business day, at the Corporation's principal office,
addressed to the attention of the President, of written notice of exercise,
which notice shall specify the number of shares with respect to which the Option
is being exercised and shall be accompanied by payment in full of the Option
Price of the shares for which the Option is being exercised. The minimum number
of shares of Stock with respect to which an Option may be exercised, in whole or
in part, at any time shall be the lesser of (i) 100 shares or such lesser number
set forth in the applicable Option Agreement and (ii) the maximum number of
shares available for purchase under the Option at the time of exercise. Payment
of the Option Price for the shares of Stock purchased pursuant to the exercise
of an Option shall be made (i) in cash or in cash equivalents; (ii) to the
extent permitted by applicable law and under the terms of the Option Agreement
with respect to such Option, through the tender to the Corporation of shares of
Stock, which shares shall be valued, for purposes of determining the extent to
which the Option Price has been paid thereby, at their fair market value on the
date of exercise; (iii) to the extent permitted by applicable law and under the
terms of the Option Agreement with respect to such Option, by the delivery of a
promissory note of the person exercising the Option to the Corporation on such
terms as shall be set out in such Option Agreement; (iv) to the extent permitted
by applicable law and under the terms of the Option Agreement with respect to
such Option, by causing the Corporation to withhold shares of Stock otherwise
issuable pursuant to the exercise of an Option equal in value to the Option
Price or portion thereof to be satisfied pursuant to this clause (iv); or (v) by
a combination of the methods described in (i), (ii), (iii), and (iv). An attempt
to exercise any Option granted hereunder other than as set forth above shall be
invalid and of no force and effect. Payment in full of the Option Price need not
accompany the written notice of exercise provided the notice directs that the
Stock certificate or certificates for the
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shares for which the Option is exercised be delivered to a licensed broker
acceptable to the Corporation as the agent for the individual exercising the
Option and, at the time such Stock certificate or certificates are delivered,
the broker tenders to the Corporation cash (or cash equivalents acceptable to
the Corporation) equal to the Option Price. Promptly after the exercise of an
Option and the payment in full of the Option Price of the shares of Stock
covered thereby, the individual exercising the Option shall be entitled to the
issuance of a Stock certificate or Stock certificates evidencing his ownership
of such shares. Unless otherwise stated in the applicable Option Agreement, an
individual holding or exercising an Option shall have none of the rights of a
stockholder (for example, the right to receive cash or stock dividend payments
attributable to the subject shares or to direct the voting of the subject
shares) until the shares of Stock covered thereby are fully paid and issued to
him. Except as provided in Section 16 below, no adjustment shall be made for
dividends or other rights for which the record date is prior to the date of such
issuance.
(c) DATE OF GRANT
The date of grant of an Option under this Plan shall be the date as of
which the Board approves the grant.
11. TRANSFERABILITY OF OPTIONS
During the lifetime of an Optionee, only such Optionee (or, in the event
of legal incapacity or incompetency, the guardian or legal representative of the
Optionee) may exercise the Option, except as otherwise specifically permitted by
this Section 11. No Option shall be assignable or transferable other than by
will or in accordance with the laws of descent and distribution; provided,
however, subject to the terms of the applicable Option Agreement, and to the
extent the transfer is in compliance with any applicable restrictions on
transfers, an Optionee may transfer an Option to a family member of the Optionee
(defined as an individual who is related to the Optionee by blood or adoption)
or to a trust established and maintained for the benefit of the Optionee or a
family member of the Optionee (as determined under applicable state law and the
Code).
12. TERMINATION OF EMPLOYMENT OR OTHER RELATIONSHIP OF OPTIONEE
In the Board's sole discretion, the Board may include language in an
Option Agreement providing for the termination of any unexercised Option in
whole or in part upon or at any time after the termination of employment or
other relationship of the Optionee with the Corporation or a Subsidiary (whether
as an employee, a director, a consultant or advisor providing bona fide services
to the Corporation or a Subsidiary, or otherwise). Whether a leave of absence or
leave on military or government service shall constitute a termination of
employment or other relationship of the Optionee with the Corporation or a
Subsidiary for purposes of the Plan shall be determined by the Board, which
determination shall be final and conclusive.
- 6 -
<PAGE> 7
13. USE OF PROCEEDS
The proceeds received by the Corporation from the sale of Stock pursuant
to the exercise of Options granted under the Plan shall constitute general funds
of the Corporation.
14. REQUIREMENTS OF LAW
The Corporation shall not be required to sell or issue any shares of
Stock under any Option if the sale or issuance of such shares would constitute a
violation by the Optionee, the individual exercising the Option, or the
Corporation of any provisions of any law or regulation of any governmental
authority, including without limitation any federal or state securities laws or
regulations. If at any time the Corporation shall determine, in its discretion,
that the listing, registration, or qualification of any shares subject to the
Option upon any securities exchange or under any state or federal law, or the
consent or approval of any government regulatory or self-regulatory body is
necessary or desirable as a condition of, or in connection with, the issuance or
purchase of shares, the Option may not be exercised in whole or in part unless
such listing, registration, qualification, consent, or approval shall have been
effected or obtained free of any conditions not acceptable to the Corporation,
and any delay caused thereby shall in no way affect the date of termination of
the Option. Specifically in connection with the Securities Act of 1933 (as now
in effect or as hereafter amended), upon the exercise of any Option, unless a
registration statement under such Act is in effect with respect to the shares of
Stock covered thereby, the Corporation shall not be required to sell or issue
such shares unless the Board has received evidence satisfactory to it that the
holder of such Option may acquire such shares pursuant to an exemption from
registration under such Act. Any determination in this connection by the Board
shall be final, binding, and conclusive. The Corporation may, but shall in no
event be obligated to, register any securities covered hereby pursuant to the
Securities Act of 1933 (as now in effect or as hereafter amended). The
Corporation shall not be obligated to take any affirmative action in order to
cause the exercisability or vesting of an Option or to cause the exercise of an
Option or the issuance of shares pursuant thereto to comply with any law or
regulation of any governmental authority. As to any jurisdiction that expressly
imposes the requirement that an Option shall not be exercisable unless and until
the shares of Stock covered by such Option are registered or are subject to an
available exemption from registration, the exercise of such Option (under
circumstances in which the laws of such jurisdiction apply) shall be deemed
conditioned upon the effectiveness of such registration or the availability of
such an exemption.
15. AMENDMENT AND TERMINATION OF THE PLAN
The Board may, at any time and from time to time, amend, suspend, or
terminate the Plan as to any shares of Stock as to which Options have not been
granted. The Corporation may also retain the right in an Option Agreement to
cause a forfeiture of the shares of Stock or gain realized by a holder of an
Option (a) if the holder violates any agreement covering non-competition with
the Corporation or any Subsidiary or nondisclosure of confidential information
of the Corporation or any Subsidiary, (b) if the
- 7 -
<PAGE> 8
holder's employment is terminated for cause or (c) if the Board determines that
the holder committed acts or omissions which would have been the basis for a
termination of holder's employment for cause had such acts or omissions been
discovered prior to termination of holder's employment. Furthermore, the
Corporation may, in the Option Agreement, retain the right to annul the grant of
an Option, if the holder of such grant was an employee of the Corporation or a
Subsidiary and the holder's employment is terminated for cause, as defined in
the applicable Option Agreement. Except as permitted under this Section 15 or
Section 16 hereof, no amendment, suspension, or termination of the Plan shall,
without the consent of the holder of the Option, alter or impair rights or
obligations under any Option theretofore granted under the Plan.
16. EFFECT OF CHANGES IN CAPITALIZATION
(a) CHANGES IN STOCK
If the number of outstanding shares of Stock is increased or decreased or
the shares of Stock are changed into or exchanged for a different number or kind
of shares or other securities of the Corporation on account of any
recapitalization, reclassification, stock split-up, combination of shares,
exchange of shares, stock dividend or other distribution payable in capital
stock, or other increase or decrease in such shares effected without receipt of
consideration by the Corporation, occurring after the effective date of the
Plan, the number and kind of shares for the acquisition of which Options may be
granted under the Plan shall be adjusted proportionately and accordingly by the
Corporation. In addition, the number and kind of shares for which Options are
outstanding shall be adjusted proportionately and accordingly so that the
proportionate interest of the holder of the Option immediately following such
event shall, to the extent practicable, be the same as immediately before such
event. Any such adjustment in outstanding Options shall not change the aggregate
Option Price payable with respect to shares that are subject to the unexercised
portion of the Option outstanding but shall include a corresponding
proportionate adjustment in the Option Price per share.
(b) REORGANIZATION IN WHICH THE CORPORATION IS THE SURVIVING
CORPORATION
Subject to Subsection (c)(iv) hereof, if the Corporation shall be the
surviving corporation in any reorganization, merger, or consolidation of the
Corporation with one or more other corporations, any Option theretofore granted
pursuant to the Plan shall pertain to and apply to the securities to which a
holder of the number of shares of Stock subject to such Option would have been
entitled immediately following such reorganization, merger, or consolidation,
with a corresponding proportionate adjustment of the Option Price per share so
that the aggregate Option Price thereafter shall be the same as the aggregate
Option Price of the shares remaining subject to the Option immediately prior to
such reorganization, merger, or consolidation.
- 8 -
<PAGE> 9
(c) DISSOLUTION, LIQUIDATION, SALE OF ASSETS, REORGANIZATION IN WHICH
THE CORPORATION IS NOT THE SURVIVING CORPORATION, ETC.
The Plan and all Options outstanding hereunder shall terminate (i) upon
the dissolution or liquidation of the Corporation, or (ii) upon a merger,
consolidation, or reorganization of the Corporation with one or more other
corporations in which the Corporation is not the surviving corporation, or (iii)
upon a sale of substantially all of the assets of the Corporation to another
person or entity, or (iv) upon a merger, consolidation or reorganization (or
other transaction if so determined by the Board in its sole discretion) in which
the Corporation is the surviving corporation, that is approved by the Board and
that results in any person or entity (other than persons who are holders of
Stock of the Corporation at the time the Plan is approved by the stockholders
and other than an Affiliate) owning 80 percent or more of the combined voting
power of all classes of stock of the Corporation, except to the extent provision
is made in writing in connection with any such transaction covered by clauses
(i) through (iv) for the continuation of the Plan or the assumption of such
Options theretofore granted, or for the substitution for such Options of new
options covering the stock of a successor corporation, or a parent or subsidiary
thereof, with appropriate adjustments as to the number and kind of shares and
exercise prices, in which event the Plan and Options theretofore granted shall
continue in the manner and under the terms so provided. In the event of any such
termination of the Plan, each individual holding an Option shall have the right
(subject to the general limitations on exercise set forth in Section 10(a)
above), during such period occurring before such termination as the Board in its
sole discretion shall determine and designate, and in any event immediately
before the occurrence of such termination, to exercise such Option in whole or
in part, to the extent that such Option was otherwise exercisable at the time
such termination occurs, except that, by inclusion of appropriate language in an
Option Agreement, the Board may provide that the Option may be exercised before
termination without regard to any installment limitation or other condition on
exercise imposed pursuant to Section 10(a) above. The Corporation shall send
written notice of a transaction or event that will result in such a termination
to all individuals who hold Options not later than the time at which the
Corporation gives notice thereof to its stockholders.
(d) ADJUSTMENTS
Adjustments under this Section 16 related to stock or securities of the
Corporation shall be made by the Board, whose determination in that respect
shall be final, binding, and conclusive. No fractional shares of Stock or units
of other securities shall be issued pursuant to any such adjustment, and any
fractions resulting from any such adjustment shall be eliminated in each case by
rounding downward to the nearest whole share or unit.
(e) NO LIMITATIONS ON CORPORATION
The grant of an Option pursuant to the Plan shall not affect or limit in
any way the right or power of the Corporation to make adjustments,
reclassifications,
- 9 -
<PAGE> 10
reorganizations, or changes of its capital or business structure or to merge,
consolidate, dissolve, or liquidate, or to sell or transfer all or any part of
its business or assets.
17. DISCLAIMER OF RIGHTS
No provision in the Plan or in any Option granted or Option Agreement
entered into pursuant to the Plan shall be construed to confer upon any
individual the right to remain in the employ or service of or to maintain a
relationship with the Corporation or any Subsidiary, or to interfere in any way
with any contractual or other right or authority of the Corporation or any
Subsidiary either to increase or decrease the compensation or other payments to
any individual at any time, or to terminate any employment or other relationship
between any individual and the Corporation or any Subsidiary. The obligation of
the Corporation to pay any benefits pursuant to this Plan shall be interpreted
as a contractual obligation to pay only those amounts described herein, in the
manner and under the conditions prescribed herein. The Plan shall in no way be
interpreted to require the Corporation to transfer any amounts to a third party
trustee or otherwise hold any amounts in trust or escrow for payment to any
participant or beneficiary under the terms of the Plan.
18. NONEXCLUSIVITY OF THE PLAN
The adoption of the Plan shall not be construed as creating any
limitations upon the right and authority of the Board to adopt such other
incentive compensation arrangements (which arrangements may be applicable either
generally to a class or classes of individuals or specifically to a particular
individual or particular individuals) as the Board in its discretion determines
desirable, including, without limitation, the granting of stock options
otherwise than under the Plan.
19. CAPTIONS
The use of captions in this Plan or any Option Agreement is for the
convenience of reference only and shall not affect the meaning of any provision
of the Plan or such Option Agreement.
20. WITHHOLDING TAXES
The Corporation shall have the right to deduct from payments of any kind
otherwise due to an Optionee any federal, state, or local taxes of any kind
required by law to be withheld with respect to any shares issued upon the
exercise of an Option under the Plan or in connection with the purchase of an
Option by the Corporation. At the time of exercise, the Optionee shall pay to
the Corporation any amount that the Corporation may reasonably determine to be
necessary to satisfy such withholding obligation. The Board in its sole
discretion may provide in the Option Agreement that, subject to the prior
approval of the Corporation, which may be withheld by the Corporation in its
sole discretion, the Optionee may elect to satisfy such obligations, in whole or
in part, (i) by causing the Corporation to withhold shares of Stock otherwise
issuable pursuant to the exercise of an Option or (ii) by delivering to the
Corporation shares of Stock already owned by the Optionee. The shares so
- 10 -
<PAGE> 11
delivered or withheld shall have a fair market value equal to such withholding
obligations. The fair market value of the shares used to satisfy such
withholding obligation shall be determined by the Corporation as of the date
that the amount of tax to be withheld is to be determined. An Optionee who has
made an election pursuant to this Section 20 may only satisfy his or her
withholding obligation with shares of Stock that are not subject to any
repurchase, forfeiture, unfulfilled vesting, or other similar requirements.
21. OTHER PROVISIONS
Each Option granted under the Plan may be subject to, and the Option
Agreement relating to such Option may contain, such other terms and conditions
not inconsistent with the Plan as may be determined by the Board, in its sole
discretion.
22. NUMBER AND GENDER
With respect to words used in this Plan, the singular form shall include
the plural form, the masculine gender shall include the feminine gender, etc.,
as the context requires.
23. SEVERABILITY
If any provision of the Plan or any Option Agreement shall be determined
to be illegal or unenforceable by any court of law in any jurisdiction, the
remaining provisions hereof and thereof shall be severable and enforceable in
accordance with their terms, and all provisions shall remain enforceable in any
other jurisdiction.
24. GOVERNING LAW
The validity and construction of this Plan and the instruments evidencing
the Options granted hereunder shall be governed by the laws of the State of
Delaware (excluding its choice of law rules).
* * *
- 11 -
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0
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