<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-11999
ALTERNATIVE LIVING SERVICES, INC.
DELAWARE 39-1771281
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
450 N. SUNNYSLOPE ROAD, SUITE 300
BROOKFIELD, WI
53005
(Address of principal executive offices)
(Zip Code)
(414) 641-5100
(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 period 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 NOVEMBER 9, 1998, THERE WERE 21,953,646 SHARES OF THE
REGISTRANT'S COMMON STOCK, PAR VALUE $0.01, OUTSTANDING.
(Number of shares outstanding of each class of the issuer's classes of common
stock, as of the latest practical date.)
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ALTERNATIVE LIVING SERVICES, INC.
INDEX
Part I. Financial Information
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets as of September 30, 1998 and
December 31, 1997..................................................... 1
Condensed Consolidated Statements of Operations for the Three and Nine
Months Ended September 30, 1998 and 1997.............................. 2
Condensed Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 1998 and 1997..................................... 3
Notes to Condensed Consolidated Financial Statements.................. 4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................. 7
Item 3. Quantitative and Qualitative Disclosures About Market Risk............ 12
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K...................................... 13
</TABLE>
<PAGE> 3
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ALTERNATIVE LIVING SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------ -----------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 65,957 $ 79,838
Short-term investments................................. -- 90,000
Resident receivables, net of allowance................. 3,885 1,832
Pre-opening costs, net of amortization................. 8,610 5,785
Other current assets................................... 19,526 21,378
------------ -----------
Total current assets................................. 97,978 198,833
------------ -----------
Property and equipment:
Land................................................... 44,032 34,143
Building and improvements.............................. 407,107 160,991
Furniture, fixtures and equipment...................... 41,752 23,702
Construction in progress............................... 105,664 114,277
------------ -----------
Property and equipment, gross.......................... 598,555 333,113
Less: accumulated depreciation......................... (16,944) (9,500)
------------ -----------
Property and equipment, net............................. 581,611 323,613
Long-term investments................................... 4,435 4,435
Investments in and advances to unconsolidated affiliates 15,729 1,607
Goodwill, net........................................... 5,279 5,380
Other assets............................................ 31,906 19,684
------------ -----------
Total assets......................................... $736,938 $553,552
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term obligations.......... $ 1,445 $ 2,677
Short-term notes payable............................... 3,363 18,900
Accounts payable....................................... 19,046 20,645
Accrued expenses....................................... 33,693 27,083
------------ -----------
Total current liabilities............................ 57,547 69,305
------------ -----------
Long-term obligations, less current installments........ 251,550 108,069
Convertible debt........................................ 228,600 210,000
Deferred gain on sale and other......................... 16,066 12,421
Minority interest....................................... 13,132 9,860
Stockholders' equity:
Common stock........................................... 219 214
Additional paid-in capital............................. 177,068 165,206
Accumulated deficit.................................... (7,244) (21,523)
------------ -----------
Total stockholders' equity........................... 170,043 143,897
------------ -----------
Total liabilities and stockholders' equity......... $736,938 $553,552
============ ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
1
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ALTERNATIVE LIVING SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three months Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue:
Resident service fees.................................. $64,544 $35,528 $164,830 $87,783
Other.................................................. 1,742 614 3,139 1,321
--------- --------- --------- ---------
Total operating revenue............................... 66,286 36,142 167,969 89,104
Operating expenses:
Residence operations................................... 40,492 22,563 104,063 56,153
Lease expense.......................................... 11,901 6,672 30,952 18,088
General and administrative............................. 6,307 4,155 16,292 11,480
Depreciation and amortization.......................... 5,534 3,023 13,180 6,828
--------- --------- --------- ---------
Total operating expenses.............................. 64,234 36,413 164,487 92,549
--------- --------- --------- ---------
Operating income (loss)................................. 2,052 (271) 3,482 (3,445)
--------- --------- --------- ---------
Other income (expense):
Interest expense, net.................................. (2,744) (1,617) (5,285) (2,236)
Other, net............................................. 12 (43) (85) (67)
Equity in losses of unconsolidated affiliates.......... (32) (58) (54) (195)
Minority interest in losses of consolidated
subsidiaries.......................................... 5,984 3,190 15,672 6,022
--------- --------- --------- ---------
Total other income (expense) net...................... 3,220 1,472 10,248 3,524
--------- --------- --------- ---------
Income before income taxes.............................. 5,272 1,201 13,730 79
Income tax benefit...................................... 549 -- 549 --
--------- --------- --------- ---------
Net income.............................................. $ 5,821 $ 1,201 $ 14,279 $ 79
========= ========= ========= =========
Net Income Per Share Data:
- --------------------------
Basic:
Net income per common share............................ $ 0.27 $ 0.06 $ 0.65 $ 0.00
========= ========= ========= =========
Weighted average common shares outstanding............. 21,946 19,087 21,876 18,989
========= ========= ========= =========
Diluted:
Net income per common and common equivalent
share................................................. $ 0.26 $ 0.06 $ 0.64 $ 0.00
========= ========= ========= =========
Weighted average common and common equivalent
shares outstanding.................................... 22,409 19,087 22,386 18,989
========= ========= ========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE> 5
ALTERNATIVE LIVING SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------
1998 1997
------------ --------------
<S> <C> <C>
Cash flows from operating activities:
Net income.................................................................. $ 14,279 $ 79
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization............................................... 13,180 6,828
Equity in net loss from investments in unconsolidated affiliates............ 54 195
Minority interest in losses of consolidated subsidiaries.................... (15,672) (6,022)
Tax effect of stock options exercised....................................... 1,330 --
Increase in net resident receivables........................................ (2,119) (3,775)
Increase in pre-opening costs............................................... (9,179) (4,872)
(Increase) decrease in other current assets................................. (4,221) 2,410
(Decrease)increase in accounts payable...................................... (1,816) 1,857
Increase in accrued expenses................................................ 10,686 6,359
Decrease in accrued merger costs............................................ (4,160) (459)
Changes in other assets and liabilities, net................................ (7,663) (5,310)
----------- -------------
Net cash used in operating activities........................................ (5,301) (2,710)
----------- -------------
Cash flows from investing activities:
Payments for property, equipment and project development costs.............. (283,767) (171,043)
Acquisitions of affiliates and facilities, net of cash...................... (43,278) (22,914)
Changes in investments in and advances to unconsolidated affiliates......... (11,818) (12,393)
Purchase of limited partnership interests................................... (17,755) --
Decrease in short-term investments.......................................... 90,000 --
----------- -------------
Net cash used in investing activities........................................ (266,618) (206,350)
----------- -------------
Cash flows from financing activities:
Repayments of short-term borrowings......................................... (15,537) (8,304)
Repayments of long-term obligations......................................... (53,015) (301)
Proceeds from issuance of debt.............................................. 176,177 74,504
Proceeds from issuance of convertible debt.................................. 18,750 50,000
Payments for financing costs................................................ (4,803) (2,936)
Proceeds from sale/leaseback transactions................................... 107,563 72,438
Issuance of common stock and other capital contributions.................... 10,149 44
Equity Funding by minority partners ........................................ 18,754 3,726
----------- -------------
Net cash provided by financing activities.................................... 258,038 189,171
----------- -------------
Net decrease in cash and cash equivalents.................................... (13,881) (19,889)
----------- -------------
Cash and cash equivalents:
Beginning of period......................................................... 79,838 39,455
----------- -------------
End of period............................................................... $ 65,957 $ 19,566
=========== =============
Supplemental disclosure of cash flow information:
Cash paid for interest, including amounts capitalized....................... $ 14,312 $ 5,238
=========== =============
Cash paid during year for income taxes...................................... $ 1,322 $ --
=========== =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
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ALTERNATIVE LIVING SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) BASIS OF PRESENTATION
The condensed consolidated balance sheets as of September 30, 1998 and
December 31, 1997, the condensed consolidated statements of operations for the
three and nine months ended September 30, 1998 and 1997 and the condensed
consolidated statements of cash flows for the nine months ended September 30,
1998 and 1997 contained herein include the accounts of Alternative Living
Services, Inc. (the "Company") and its affiliates which are under the common
financial control of the Company. All significant intercompany accounts have
been eliminated in consolidation. In the opinion of management, all
adjustments (consisting only of normal recurring items) necessary for a fair
presentation of such condensed consolidated financial statements have been
included. The results of operations for the nine months ended September 30,
1998, are not necessarily indicative of the results to be expected for the full
fiscal year.
The condensed consolidated financial statements do not include all
information and footnotes necessary for a complete presentation of financial
position, results of operations, and cash flows in conformity with generally
accepted accounting principles. The accompanying condensed consolidated
financial statements should be read in conjunction with the audited
consolidated financial statements and notes thereto included in the Company's
Annual Report on Form 10-K, for the year ended December 31, 1997.
(2) ACQUISITIONS
On March 5, 1998, the Company acquired an assisted living residence having
an aggregate capacity of 167 residents in Oceanside, California. This
acquisition, which has been accounted for as a purchase, had a purchase price
of $18.1 million, $9.9 million of which was paid in cash and the remainder was
debt and liabilities assumed by the Company.
On September 4, 1998, the Company acquired six assisted living residences
in Kansas for an aggregate purchase price of $23.0 million in cash from a
franchisee of the Company. These residences have an aggregate capacity of 223
residents. The acquisition was accounted for as a purchase. The Company also
entered into an agreement with the franchisee to manage one additional
residence in Kansas with capacity of 37 residents. The Company anticipates
acquiring ownership of the managed residence by the end of the year.
On September 28, 1998, the Company acquired two assisted living residences
having an aggregate capacity of 165 residents in Wisconsin. This acquisition,
which has been accounted for as a purchase, had a purchase price of $13.0
million, all of which was paid in cash.
4
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(3) FINANCING
The Company obtained the following mortgage financing from Nomura Asset
Capital Corporation during 1998:
<TABLE>
<CAPTION>
No. of Secured
---------------
Date Closed Principal Residences Interest Rate Term
- ----------- --------- ---------- ------------- ----
<S> <C> <C> <C> <C>
March 31, 1998 $31.0 million 10 7.83% per annum 17 years
May 26, 1998 $32.5 million 13 7.68% per annum 17 years
July 31, 1998 $21.3 million 4 7.59% per annum 17 years
August 28, 1998 $19.1 million 8 7.31% per annum 17 years
September 30, 1998 $26.9 million 8 7.40% per annum 17 years
</TABLE>
On July 30, 1998, the Company obtained $25.0 million in mortgage financing
from General Motors Acceptance Corporation. This mortgage financing is secured
by five existing residences, bears interest at a rate of 6.98% per annum and is
to be repaid over 10 years.
The Company obtained the following sale/leaseback financing during 1998.
Initial lease terms for these arrangements range from 12 to 17 years. Any gain
or loss has been deferred and will be amortized into income in proportion to
rental expense over the initial term of the lease.
<TABLE>
<CAPTION>
Weighted Average
Quarter Proceeds Residences Effective Lease Rate
- ------- -------- ---------- --------------------
<S> <C> <C> <C>
First $12.3 million 5 9.03% per annum
Second $36.8 million 15 8.90% per annum
Third $58.3 million 18 8.65% per annum
</TABLE>
(4) SUBSEQUENT EVENT
On October 6, 1998, the Company obtained a $200 million
construction/mini-perm credit facility from a syndicate of seven banks to be
used for continued development of the Company's assisted living residences.
(5) NEW ACCOUNTING PRONOUNCEMENTS
In April 1998, the AICPA issued Statement of Position No. 98-5 "Reporting
on the Costs of Start-up Activities." This statement provides guidance on the
financial reporting of start-up activities and organization costs. It requires
that costs of start-up activities and organization costs be expensed when
incurred. Adoption of this statement is required for fiscal years beginning
after December 15, 1998, and the Company plans to adopt the statement effective
January 1, 1999, and report the impact as a cumulative effect of a change in
accounting principle. As of September 30, 1998, the effect of this statement
would result in a maximum charge to earnings of approximately $6.1 million, or
$0.27 per diluted share.
In September of 1998 the Financial Accounting Standards Board issued SFAS
133 "Accounting for Derivative Instruments and Hedging Activities," which will
be effective for the Company's fiscal year 1999. This statement establishes
accounting and reporting standards requiring that every derivative
5
<PAGE> 8
instrument, including certain derivative instruments imbedded in other
contracts, be recorded in the balance sheet as either an asset or liability
measured at its fair value. The statement also requires that changes in the
derivative's fair value be recognized in earnings unless specific hedge
accounting criteria are met. The Company currently does not participate in any
hedging activities. However, the Company will assess the impact of this new
statement on any future hedging transactions.
(6) RECLASSIFICATIONS
Certain reclassifications have been made in the 1997 financial statements to
conform with the 1998 financial statement presentation.
6
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The Company's continued rapid growth has had a significant impact on the
Company's results of operations and accounts for most of the changes in results
between the first nine months of 1998 and 1997. As of September 30, 1998 and
1997, the Company operated or managed 336 and 208 residences with aggregate
capacities of 14,315 and 8,738, respectively. The Company is also constructing
or developing approximately 172 residences with aggregate capacity of 7,846 as
of September 30, 1998. For the nine months ended September 30, 1998, the
Company generated operating revenue of $168.0 million, operating income of $3.5
million, and realized net income of $14.3 million.
THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 1997
Operating Revenue. Operating revenues for the three months ended September
30, 1998 were $66.3 million representing an increase of $30.1 million, or 83%,
from the $36.1 million for the comparable 1997 period. Substantially all of
this increase resulted from the addition of newly constructed residences and
other residences acquired by the Company. The Company operated 336 and 208
residences at September 30, 1998 and 1997, respectively.
Residence Operating Expenses. Residence operating expenses for the three
months ended September 30, 1998 increased to $40.5 million from $22.6 million
in the three-month period ended September 30, 1997 due to the increased number
of residences operated during the 1998 period. Operating expenses as a
percentage of operating revenue for the three months ended September 30, 1998
and 1997 were 61.1% and 62.4%, respectively.
Lease Expense. Lease expense for the three months ended September 30,
1998 was $11.9 million, compared to $6.7 million in the comparable period in
1997. Such increase was primarily attributable to the utilization of
additional sale/leaseback financing totaling $196 million during the
twelve-month period ended September 30, 1998.
General and Administrative Expense. General and administrative expenses
for the three months ended September 30, 1998 were $6.3 million compared to
$4.2 million for the comparable 1997 period, representing a decline as a
percentage of operating revenue to 9.5% in 1998 from 11.5% in 1997. The
increase in expenses was primarily attributable to salaries, related payroll
taxes and employee benefits for additional corporate personnel retained to
support the Company's actual and anticipated growth. The Company also incurred
$500,000 of costs related to terminated merger and acquisition discussions
during the third quarter of 1998. The Company expects that its general and
administrative expenses will continue to decrease as a percentage of operating
revenue as the Company grows and achieves additional economies of scale.
Depreciation and Amortization. Depreciation and amortization for the
three months ended September 30, 1998 was $5.5 million, representing an
increase of $2.5 million, or 83%, from $3.0 million for the comparable period
in 1997. This increase resulted primarily from depreciation of fixed assets
and amortization of pre-opening costs on the greater number of new residences
that opened during the 12 month period ended September 30, 1998, versus the
comparable period in 1997. The Company amortizes pre-opening costs over a
twelve-month period from the date the residence opens. Upon the adoption of
the AICPA Statement of Position No. 98-5 "Reporting on the Costs of Start-up
Activities," on January 1, 1999, the Company will expense pre-opening costs, as
defined, when they are incurred.
7
<PAGE> 10
Interest Expense, Net. Interest expense, net of interest income, was $2.7
million for the three months ended September 30, 1998, compared to $1.6 million
for the comparable period in 1997. Gross interest expense (before interest
capitalization and interest income) for the 1998 period was $8.0 million
compared to $4.2 million for the 1997 period, an increase of $3.8 million.
This increase is primarily attributable to the issuance in December 1997 of the
5.25% Convertible Subordinated Debentures due 2002 and an increase in the
amount of mortgage financing used in the 1998 period as compared to the 1997
period. The Company capitalized $3.7 million of interest expense in the 1998
period compared to $1.7 million in the comparable 1997 period due to increased
construction activity in 1998. The Company opened 37 newly constructed
residences during the three month period ended September 30, 1998 compared to
27 newly constructed residences during the comparable period last year.
Interest income for the 1998 period was $1.6 million as compared to $843,000
for the 1997 period. This increase was primarily due to the investment of the
proceeds received from the Company's December 1997 concurrent convertible debt
and equity offering.
Minority Interest in Losses of Consolidated Subsidiaries. Minority
interest in losses of consolidated subsidiaries for the three months ended
September 30, 1998 was $6.0 million, representing an increase of $2.8 million
from $3.2 million for the comparable period in 1997. The increase was
primarily attributable to the increase in the number of residences in various
stages of lease-up that are owned by the Company with joint venture partners.
During the third quarter of 1998, the Company had an average of 61 residences
held in joint venture relationships compared to an average of 22 residences
held in joint venture relationships during the third quarter of 1997.
Income Taxes. During the three months ended September 30, 1998, the Company
recorded a current income tax provision of $4.3 million which was offset by the
recognition of $4.9 million of deferred tax assets resulting in a current income
tax benefit of $549,000.
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1997
Operating Revenue. Operating revenues for the nine months ended September
30, 1998 were $168.0 million representing an increase of $78.9 million, or 89%,
from the $89.1 million for the comparable 1997 period. Substantially all of
this increase resulted from the addition of newly constructed residences and
other residences acquired by the Company. The Company operated 336 and 208
residences at September 30, 1998 and 1997, respectively.
Residence Operating Expenses. Residence operating expenses for the nine
months ended September 30, 1998 increased to $104.1 million from $56.2 million
in the nine-month period ended September 30, 1997 due to the increased number
of residences operated during the 1998 period. Operating expenses as a
percentage of operating revenue for the nine months ended September 30, 1998
and 1997 were 62.0% and 63.0%, respectively.
Lease Expense. Lease expense for the nine months ended September 30, 1998
was $31.0 million, compared to $18.1 million in the comparable period in 1997.
Such increase was primarily attributable to the utilization of additional
sale/leaseback financing totaling $196 million during the twelve-month period
ended September 30, 1998.
General and Administrative Expense. General and administrative expenses
for the nine months ended September 30, 1998 were $16.3 million compared to
$11.5 million for the comparable 1997 period, representing a decline as a
percentage of operating revenue to 9.7% in 1998 from 12.9% in 1997. The
8
<PAGE> 11
increase in expenses was primarily attributable to salaries, related
payroll taxes and employee benefits for additional corporate personnel retained
to support the Company's actual and anticipated growth. The Company also
incurred $500,000 of costs related to terminated merger and acquisition
discussions during the nine month period ended September 30, 1998. The Company
expects that its general and administrative expenses will continue to decrease
as a percentage of operating revenue as the Company grows and achieves
additional economies of scale.
Depreciation and Amortization. Depreciation and amortization for the nine
months ended September 30, 1998 was $13.2 million, representing an increase of
$6.4 million, or 93%, from $6.8 million for the comparable period in 1997.
This increase resulted primarily from depreciation of fixed assets and
amortization of pre-opening costs on the larger number of new residences that
opened during the 12 month period ended September 30, 1998, versus the
comparable period in 1997. The Company amortizes pre-opening costs over a
twelve-month period from the date the residence opens. Upon the adoption of
the AICPA Statement of Position No. 98-5 "Reporting on the Costs of Start-up
Activities," on January 1, 1999, the Company will expense pre-opening costs, as
defined, when they are incurred.
Interest Expense, Net. Interest expense, net of interest income, was $5.3
million for the nine months ended September 30, 1998, compared to $2.2 million
for the comparable period in 1997. Gross interest expense (before interest
capitalization and interest income) for the 1998 period was $20.8 million
compared to $8.2 million for the 1997 period, an increase of $12.6 million.
This increase is primarily attributable to the issuance in May 1997 of the 7%
Convertible Subordinated Debentures due 2004, the issuance in December 1997 of
the 5.25% Convertible Subordinated Debentures due 2002, and an increase in the
amount of mortgage financing used in the 1998 period as compared to the 1997
period. The Company capitalized $10.6 million of interest expense in the 1998
period compared to $4.4 million in the comparable 1997 period due to increased
construction activity in 1998. The Company opened 104 newly constructed
residences during the nine month period ended September 30, 1998 compared to
57 newly constructed residences opened in the comparable period in 1997.
Interest income for the 1998 period was $4.9 million as compared to $1.6
million for the 1997 period. This increase was primarily due to the investment
of the proceeds received from the December 1997 concurrent convertible debt and
equity offering.
Minority Interest in Losses of Consolidated Subsidiaries. Minority
interest in losses of consolidated subsidiaries for the nine months ended
September 30, 1998 was $15.7 million, representing an increase of $9.7 million
from $6.0 million for the comparable period in 1997. The increase was primarily
attributable to the increase in the number of residences in various stages of
lease-up that are owned by the Company with joint venture partners. Through
September of 1998, the Company had an average of 51 residences held in joint
venture relationships compared to an average of 13 residences held in joint
venture relationships during the first nine months of 1997.
Income Taxes. During the nine months ended September 30, 1998, the Company
recorded a current income tax provision of $4.3 million which was offset by the
recognition of $4.9 million of deferred tax assets resulting in a current income
tax benefit of $549,000.
LIQUIDITY AND CAPITAL RESOURCES
For the nine months ended September 30, 1998 and 1997, cash flow used in
operations was $5.3 million and $2.7 million, respectively. Cash flows
provided by operations in the 1998 period were offset by pre-opening costs
incurred during the start-up phase of newly constructed residences and by
Sterling House Corporation merger related costs paid during 1998.
9
<PAGE> 12
During the nine months ended September 30, 1998, the Company closed
approximately $326 million of financing. Financing was provided through the
sale of 5.25% Convertible Subordinated Debentures due 2002 pursuant to the
exercise of an overallotment option and the issuance of common stock in January
1998 which provided net proceeds of $18.3 million and $9.2 million,
respectively, $107.6 million of sale/leaseback financing, $172.1 million of
secured mortgage financing and $18.7 million of joint venture partner equity
contributions. In addition, the Company assumed existing debt of $13.3 million
related to acquisitions completed in 1998.
The above financing, along with $90.0 million in short-term investments,
was used to fund $283.8 million in construction and development activity, $43.3
million in acquisition activity, $17.8 million in joint venture partner
buy-outs, $11.8 million in advances to affiliates and operating cash flow
deficits. An additional $68.5 million of cash and cash equivalents was used to
pay down or retire notes payable and debt.
The above activity resulted in a decrease in cash and cash equivalents at
September 30, 1998 of $13.9 million.
To achieve its growth objectives, the Company will need to obtain
sufficient financing to fund its development, construction and acquisition
activities. The Company has plans to develop approximately $400 million of
residences for the 12-month period ending September 30, 1999. Historically,
the Company has financed its development program and acquisitions through a
combination of various forms of real estate financing (mortgage and
sale/leaseback financing), capital contributions from joint venture partners
and the sale of its securities. The Company currently has executed non-binding
letters of intent with various healthcare REITS and commitments from
conventional lenders for financing. As of September 30, 1998, the Company has
$40 million and $316 million of remaining financing commitments from these
healthcare REITS and conventional lenders, respectively. In addition to
financing construction and development costs, the Company will require capital
resources to meet its operating and working capital needs incurred primarily
through the start-up and lease-up phases of new residences. The Company
believes that its cash on hand, financing under these commitments, other
financing that the Company expects to be able to access and equity
contributions from its joint venture development partners will be sufficient to
fund its growth strategy for the next 12 months.
The Company is obligated under its joint venture arrangements to purchase
the equity interests of its joint venture partners upon the election of such
partners at fair market value. Within the next twelve months, the Company will
become subject to such contingent purchase obligations with respect to equity
interests held by joint venture partners, exercisable at their election,
related to certain of the Company's residences. At such times, or earlier, as
such contingent purchase obligations are exercisable, the Company may also
elect to exercise its rights to purchase such interests. Based on a number of
assumptions, including assumptions as to the number of residences to be
developed with joint venture partners, the timing of such development, the time
at which such options may be exercised and the fair market value of such
residences at the date such options are exercised, the Company estimates that
it may require approximately $30 million to $35 million to satisfy these
purchase obligations during the 12 month period ended September 30, 1999.
IMPACT OF INFLATION
To date, inflation has not had a significant impact on the Company.
Inflation could, however, affect the Company's results of operations due to the
Company's dependence on its resident population who rely on liquid assets and
relatively fixed incomes to pay for the Company's services. As a result, the
Company may not be able to increase residence service fees to account fully for
increased operating expenses. In structuring its fees, the Company considers,
among other factors, anticipated inflation levels, but there can be no
assurance that the Company will be able to anticipate fully or otherwise
respond to any
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future inflationary pressures. In addition, given the significant amount of
planned construction and development activity, inflationary pressures could
affect the Company's cost of new product deployment and financing. There can
be no assurances that financing will be available on terms acceptable to the
Company.
YEAR 2000 ISSUE
As a result of certain computer programs being written using two digits
rather than four to define the applicable year, any of the Company's computer
systems that have date sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000 (the so-called "Year 2000 Issue").
This could result in certain system failures or miscalculations causing
disruptions to the operations or business activities of the Company.
The Company, which is young in terms of systems and system development,
began evaluating its compliance with year 2000 issues in 1997. An assessment
of existing systems indicated that all systems such as general ledger, accounts
payable, billing, property management, and all desktop applications such as
word processing, e-mail and spreadsheet applications, were all compliant. To
address the significant growth of the Company, a new corporate
telecommunications system was installed in 1998; in addition, a new Human
Resources and Payroll system was purchased in 1998 and is targeted for
implementation by January 1, 1999. While preliminary indications are that
there are no systems in the residences that will be affected (call systems,
elevators, phones, etc.), the Company will be evaluating compliance of these
systems during the remainder of 1998. While the Company does not believe that
it has any significant exposure from lack of compliance by third party vendors,
it will also be completing its evaluation of those vendor systems by the end of
1998, thus allowing for all of 1999 to develop any contingency plans that might
be required.
Because the Company's hardware and software has been determined to be Year
2000 compliant, and third party vendor arrangements are not anticipated to have
a significant effect on operations, the Company does not expect that issues
associated with Year 2000 compliance will have any material adverse effect on
its consolidated financial position or results of operations. There can be no
assurance, however, that the computer systems of other businesses on which the
Company's operations rely, such as utilities, transportation, communications,
banking and government, will be timely modified, or that a failure to modify
such systems by such businesses, or modifications that are incompatible with
the Company's systems, would not have a material adverse effect on the Company.
Because the remaining focus around Year 2000 compliance issues relates
primarily to identifying third party problems or issues and contingency plans,
if necessary, the Company believes that the associated costs related to Year
2000 compliance will be immaterial.
FORWARD-LOOKING STATEMENTS
Any statements contained in this Form 10-Q, which are not historical
facts, are forward-looking statements that involve risks and uncertainties.
The Company cautions the reader that forward-looking statements, such as the
future impact of the Company's growth on profitability and liquidity and
capital resources may differ materially as a result of risks facing the
Company. These risks include, but are not limited to, the history of operating
losses, ability to continue growth, ability to manage rapid expansion,
development and construction risks, risks associated with acquisitions,
possible need for additional financing, risk of rising interest rates and
substantial debt and operating lease payment obligations.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.1 Loan Agreement dated July 30, 1998, by and between ALS
Financing, Inc. and GMAC Commercial Mortgage Corporation;
10.2 First Amendment to Loan Agreement and Reaffirmation Agreement
dated July 30, 1998, by and between The Capital Company of
America LLC and ALS Venture II, Inc.;
10.3 First Amendment to Loan Agreement and Reaffirmation Agreement
dated August 28, 1998, by and between Nomura Asset Capital
Company and ALS Venture I, Inc.;
10.4 Guaranty of Payment Agreement dated September 28, 1998, by
Alternative Livings Services, Inc., for the benefit of Bank
United;
10.5 Financing and Security Agreement dated September 28, 1998, by
and between ALS Holdings, Inc. and Bank United;
10.6 Second Amendment to Loan Agreement, First Amendment to
Guaranty and Suretyship Agreement, and Reaffirmation
Agreement dated September 30, 1998, by and between The
Capital Company of America LLC and ALS-Venture II, Inc.;
10.7 Form of Facility Lease dated as of September 4, 1998, between
Meditrust Acquisition Corporation III and ALS Leasing, Inc.
("Form of Facility Lease");
10.8 Schedule of Additional Facility Leases which are substantially
similar to the Form of Facility attached as Exhibit 10.7;
10.9 Sixth Amendment to Amended and Restated Agreement Regarding
Related Lease Transactions, Amended and Restated
Environmental Indemnity Agreement and Amended and Restated
Affiliated Party Subordination Agreement dated September 4,
1998, by and among ALS Leasing, Inc., the Company and
Meditrust Acquisition Corporation III;
10.10 Seventh Amendment to Amended and Restated Agreement Regarding
Related Lease Transactions, dated September 4, 1998, by and
among ALS Leasing, Inc., the Company and Meditrust Acquisition
Corporation III;
10.11 Eleventh Amendment to Amended and Restated Agreement Regarding
Related Lease Transactions, dated September 4, 1998, by and
among Assisted Living Properties, Inc., Meditrust Company, LLC
Meditrust Of Texas, Inc., Meditrust of Kansas, Inc., Meditrust
of Ohio, Inc. and MOC Health Care Company;
11.1 Statement Regarding Computation of Per Share Earnings;
27.1 Financial Data Schedule.
(b) Reports on Form 8-K: The Registrant has filed no reports with the
Securities and Exchange Commission on Form 8-K during the quarter
ended September 30, 1998.
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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, in the City of Brookfield, State of
Wisconsin, on the 13th day of November, 1998.
ALTERNATIVE LIVING SERVICES, INC.
Date: November 13, 1998 By: /s/ Thomas E. Komula
------------------------------------------
Thomas E. Komula
Senior Vice President, Treasurer, Chief
Financial Officer and Secretary
(Principal Financial Officer)
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<PAGE> 1
(Alternative Living Services)
EXHIBIT 10.1
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement") is made as of the _____ day of
July, 1998, by and between ALS FINANCING, INC., a Kansas corporation (together
with its successors and assigns, the "Borrower"), and GMAC COMMERCIAL MORTGAGE
CORPORATION, a California corporation (together with its successors and assigns,
the "Lender").
R E C I T A L S:
1. Borrower has requested that the Lender make a loan to Borrower
in the principal sum of $25,000,000 (the "Loan").
2. Lender has agreed to make the Loan on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, it is hereby agreed as follows:
ARTICLE I
DEFINITIONS, ACCOUNTING PRINCIPLES, UCC TERMS.
1.1 As used in this Agreement, the following terms shall have
the following meanings unless the context hereof shall otherwise indicate:
"ACCOUNTS" means any rights of Borrower arising from the
operation of the Facility to payment for goods sold or leased or for services
rendered, not evidenced by an Instrument, including, without limitation, (i) all
accounts arising from the operation of the Facility, (ii) all moneys and
accounts held by Lender pursuant to Section 4.13 of this Agreement, and (iii)
all rights (if any) to payment from Medicare or Medicaid programs, or similar
state or federal programs, boards, bureaus or agencies and rights to payment
from patients, residents, private insurers, and others arising from the
operation of the Facility, including rights to payment pursuant to Reimbursement
Contracts. Accounts shall include the proceeds thereof (whether cash or noncash,
moveable or immoveable, tangible or intangible) received from the sale,
exchange, transfer, collection or other disposition or substitution thereof.
"ACTUAL MANAGEMENT FEES" means actual management fees paid or
incurred in connection with operation of the Facility.
"AFFILIATE" means, with respect to any Person, (i) each Person
that controls, is controlled by or is under common control with such Person,
(ii) each Person that, directly or indirectly, owns or controls, whether
beneficially or as a trustee, guardian or other fiduciary, more than 49% of the
Stock of such Person, and
<PAGE> 2
(iii) each of such Person's officers, directors, members, joint venturers and
partners.
"ASSIGNMENT OF LEASES AND RENTS" means, collectively, those
certain Assignments of Leases and Rents of even date herewith executed by
Borrower for the benefit of Lender.
"ASSUMED MANAGEMENT FEES" means imputed management fees of
five percent (5%) of net resident revenues of the Facility (which shall be
reduce by those expenses normally compensated as part of management fees and
separately paid by Borrower and otherwise included in net income and also for
any Medicare and Medicaid contractual adjustments, if Borrower elects in its
sole discretion, to participate in such programs).
"BUSINESS DAY" means a day on which commercial banks are not
authorized or required by law to close in New York, New York.
"CLOSING DATE" means the date on which all or any part of the
Loan is disbursed by the Lender to or for the benefit of Borrower.
"COLLATERAL" means, collectively, the Property, Improvements,
Equipment, Rents, Accounts, General Intangibles, Instruments, Inventory, Money,
Permits (to the fullest extent assignable), Reimbursement Contracts, and all
Proceeds, all whether now owned or hereafter acquired, and including
replacements, additions, accessions, substitutions, and products thereof and
thereto, and all other property which is or hereafter may become subject to a
Lien in favor of Lender as security for any of the Loan Obligations.
"COLLATERAL ASSIGNMENT OF LESSEE'S SECURITY AGREEMENTS" means
the Collateral Assignment of Lessee's Security Agreements of even date herewith
executed by Borrower for the benefit of Lender.
"COMMITMENT LETTER" means the commitment letter issued by
Lender to Borrower dated June 26, 1998.
"DEBT SERVICE COVERAGE FOR THE FACILITY" means a ratio in
which the first number is the sum in the aggregate for all Facilities of net
pre-tax income of the Borrower from the operations of the Facilities as set
forth in the quarterly statements provided to Lender (without deduction for
Actual Management Fees paid or incurred), calculated based upon the preceding
twelve (12) months (or such lesser period as shall have elapsed following the
closing of the Loan), plus interest expense, to the extent deducted in
determining net income, plus non-cash expenses or allowances for depreciation
and amortization of the Facilities for said period, less either Assumed
Management Fees or Actual Management Fees, as applicable, and the second number
is the sum of the actual principal amounts due (even if not paid) on the
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<PAGE> 3
Loan (but which shall not include that portion associated with the balloon
payment of the Loan) for the applicable period plus the interest expense on such
Loan for the applicable period. In calculating "pre-tax income", Extraordinary
Income and Extraordinary Expenses shall be excluded.
"DEFAULT" means the occurrence or existence of any event
which, but for the giving of notice or expiration of time or both, would
constitute an Event of Default.
"DEFAULT RATE" means a per annum rate equal to the lesser of
the interest rate on the Note plus five percent (5%) per annum or the maximum
rate permitted by applicable law.
"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 Property and/or the
Improvements.
"EQUIPMENT" means all beds, linen, televisions, carpeting,
telephones, cash registers, computers, lamps, glassware, rehabilitation
equipment, restaurant and kitchen equipment, and other fixtures and equipment of
Borrower located on, attached to or used or useful in connection with any of the
Property or the Facility and all renewals and replacements thereof and
substitutions therefor; provided, however, that with respect to any items which
are leased for the benefit of the Facility and not owned by Borrower, the
Equipment shall include the leasehold interest only of Borrower together with
any options to purchase any of said items and any additional or greater rights
with respect to such items which Borrower may hereafter acquire, but the
foregoing shall not be construed to mean that such leasing shall be permitted
except as provided hereunder and under the other Loan Documents.
"EVENT OF DEFAULT" means any "Event of Default" as defined
in Article VII hereof.
"EXTRAORDINARY INCOME AND EXTRAORDINARY EXPENSES" means
material items of a character significantly different from the typical or
customary business activities of Borrower which would not be expected to recur
frequently and which would not be considered as recurring factors in any
evaluation of the ordinary operating processes of Borrower's business.
"EXHIBIT" means an Exhibit to this Agreement, unless the
context refers to another document, and each such Exhibit shall be deemed a part
of this Agreement to the same extent as if it were set forth in its entirety
wherever reference is made thereto.
"FACILITIES" means all of the facilities described and named
in Schedule I hereto.
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<PAGE> 4
"FACILITY" means, collectively and individually, each facility
named and described in Schedule I attached hereto and made a part hereof.
"GAAP" means, as in effect from time to time, generally
accepted accounting principles consistently applied as promulgated by the
American Institute of Certified Public Accountants.
"GENERAL INTANGIBLES" means all intangible personal property
of Borrower arising out of or connected with the Property or the Facility and
all renewals and replacements thereof and substitutions therefor (other than
Accounts, Rents, Instruments, Inventory, Money, Permits, and Reimbursement
Contracts), including, without limitation, things in action, contract rights and
other rights to payment of money.
"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
Property and/or the Improvements or the use, operation or improvement of the
Property.
"GUARANTOR" means Alternative Living Services, Inc., a
Delaware corporation.
"GUARANTY AGREEMENT" means that certain Exceptions to
Nonrecourse Guaranty of even date herewith from Guarantor to Lender.
"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 storage tanks, whether empty or containing any
substance; any substance the presence of which on the 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.
"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 Property and/or the
Improvements. 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
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<PAGE> 5
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 1801, and their state analogs.
"IMPROVEMENTS" means all buildings, structures and
improvements of every nature whatsoever now or hereafter situated on the
Property, including, but not limited to, all gas and electric fixtures,
radiators, heaters, engines and machinery, boilers, ranges, elevators and
motors, plumbing and heating fixtures, carpeting and other floor coverings,
water heaters, awnings and storm sashes, and cleaning apparatus which are or
shall be attached to the Property or said buildings, structures or improvements.
"INDEBTEDNESS" means any (i) obligations for borrowed money,
(ii) obligations, payment for which is being deferred by more than thirty (30)
days, representing the deferred purchase price of property other than accounts
payable arising in connection with the purchase of inventory customary in the
trade and in the ordinary course of Borrower's business, (iii) obligations,
whether or not assumed, secured by Liens or payable out of the proceeds or
production from the Accounts and/or property now or hereafter owned or acquired,
and (iv) the amount of any other obligation (including obligations under
financing leases) which would be shown as a liability on a balance sheet
prepared in accordance with GAAP.
"INSTRUMENTS" means all instruments, chattel paper, documents
or other writings obtained from or in connection with the operation of the
Property or the Facility (including, without limitation, all ledger sheets,
computer records and printouts, data bases, programs, books of account and files
relating thereto).
"INVENTORY" means all inventories of food, beverages and other
comestibles held by Borrower for sale or use at or from the Property or the
Facility, and soap, paper supplies, medical supplies, drugs and all other such
goods, wares and merchandise held by Borrower for sale to or for consumption by
guests, patients or residents of the Property or the Facility and all such other
goods returned to or repossessed by Borrower.
"LEASE AGREEMENT" means the following:
(a) with respect to the Loma Linda Facility that certain Lease
Agreement between the Borrower and the Guarantor, as Lessee, of even date
herewith, whereby the Lessee has leased the Loma Linda Facility from the
Borrower;
(b) with respect to the Oceanside Facility that certain Lease
Agreement between the Borrower and the Guarantor, as Lessee, of even date
herewith, whereby the Lessee has leased the Oceanside Facility from the
Borrower;
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<PAGE> 6
(c) with respect to the Augusta Facility that certain Lease
Agreement between the Borrower and the Guarantor, as Lessee, of even date
herewith, whereby the Lessee has leased the Augusta Facility from the Borrower;
(d) with respect to the Liberal Facility that certain Lease
Agreement between the Borrower and the Guarantor, as Lessee, of even date
herewith, whereby the Lessee has leased the Liberal Facility from the Borrower;
and
(e) with respect to the Colorado Facility (i) that certain
Lease Agreement between the Borrower and the Sterling House, as Lessee, of even
date herewith, whereby Sterling House, as Lessee has leased the Colorado
Facility from the Borrower and (ii) that certain Lease Agreement between the
Borrower and the Guarantor, as Lessee of even date herewith, whereby the
Guarantor, as Lessee has leased the Colorado Facility from the Borrower
automatically upon termination of the Lease Agreement with Sterling House.
"LESSEE" means (a) the Guarantor with respect to the Loma
Linda Facility, the Oceanside Facility, the Augusta Facility and the Liberal
Facility, and (b) with respect to the Colorado Facility, Sterling House until
the Lease Agreement automatically terminates and, thereafter the Guarantor.
"LESSEE'S SECURITY AGREEMENTS" means the respective Lessee's
Security Agreements of even date herewith by and between each Lessee and the
Borrower, as assigned by the Borrower to the Lender pursuant to the Collateral
Assignment of Lessee's Security Agreements.
"LIEN" means any voluntary or involuntary mortgage, security
deed, deed of trust, lien, pledge, assignment, security interest, title
retention agreement, financing lease, levy, execution, seizure, judgment,
attachment, garnishment, charge, lien or other encumbrance of any kind,
including those contemplated by or permitted in this Agreement and the other
Loan Documents.
"LOAN" means the Loan in the principal sum of $25,000,000 made
by Lender to Borrower as of the date hereof.
"LOAN DOCUMENTS" means, collectively, this Agreement, the
Assignment of Leases and Rents, the Note, the Assignment of Licenses, Permits
and Contracts, the Guaranty Agreement, the Mortgage, the Collateral Assignment
of Lessee's Security Agreements, and the Subordination Agreement, together with
any and all other documents executed by Borrower or others, evidencing, securing
or otherwise relating to the Loan.
"LOAN OBLIGATIONS" means the aggregate of all principal and
interest owing from time to time under the Note and all expenses, charges and
other amounts from time to time owing under
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<PAGE> 7
the Note, this Agreement, or the other Loan Documents and all covenants,
agreements and other obligations from time to time owing to, or for the benefit
of, Lender pursuant to the Loan Documents.
"MANAGEMENT AGREEMENT" means the Management Agreement dated
March 5, 1998, as amended, by and between R.A.C. Lake Park, Ltd., a
California limited partnership, and the Guarantor.
"MATURITY DATE" means August 1, 2008.
"MEDICAID" means that certain program of medical assistance,
funded jointly by the federal government and the States, for impoverished
individuals who are aged, blind and/or disabled, and/or members of families with
dependent children, which program is more fully described in Title XIX of the
Social Security Act (42 U.S.C. ss. 1396 et seq.) and the regulations
promulgated thereunder.
"MEDICARE" means that certain federal program providing health
insurance for eligible elderly and other individuals, under which physicians,
hospitals, skilled nursing homes, home health care and other providers are
reimbursed for certain covered services they provide to the beneficiaries of
such program, which program is more fully described in Title XVIII of the Social
Security Act (42 U.S.C. ss. 1395 et seq.) and the regulations promulgated
thereunder.
"MONEY" means all monies, cash, rights to deposit or savings
accounts or other items of legal tender obtained from or for use in connection
with the operation of the Facility.
"MORTGAGE" means, collectively and individually, that certain
Deed of Trust (or Mortgage) and Security Agreement, of even date herewith, from
Borrower to or for the benefit of Lender and covering specific Property
described in Exhibits "A" through "A-4" hereto and identified in Exhibit "B"
hereto.
"NOTE" means the Promissory Note of even date herewith in the
principal amount of the Loan payable by Borrower to the order of Lender.
"O&M PROGRAM" means a written program of operations and
maintenance established or approved in writing by Lender relating to any
Hazardous Materials in, on or under the Property or the Improvements.
"PERMITS" means all licenses, permits and certificates
required under applicable federal and state law in connection with the
ownership, operation, use or occupancy of the Property and/or the Facility,
including, without limitation, business licenses, state health department
licenses, food service licenses, licenses to conduct business, and certificates
of need.
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<PAGE> 8
"PERMITTED ENCUMBRANCES" has the meaning given to that term
in Section 5.2 hereof.
"PERSON" means any natural person, firm, trust, corporation,
partnership, limited liability company, trust and any other form of legal
entity.
"PROCEEDS" means all proceeds (including proceeds of
insurance and condemnation) from the sale, exchange, transfer, collection, loss,
damage, disposition, substitution or replacement of any of the Collateral.
"PROPERTY" means the five (5) parcels of real estate which are
more particularly described in Exhibits "A" through "A-4" attached hereto, upon
which the Facilities are located, and which, concurrent with the Closing Date,
will be owned by the Borrower.
"REIMBURSEMENT CONTRACTS" means all third party reimbursement
contracts for the Facility which are now or hereafter in effect with respect to
residents qualifying for coverage under the same, including Medicare, Medicaid
and private insurance agreements, and any successor program or other similar
reimbursement program and/or private insurance agreements.
"RENTS" means all rent and other payments of whatever nature
from time to time payable pursuant to leases of the Property or the Facility, or
for retail space or other space at the Property (including, without limitation,
rights to payment earned under leases for space in the Improvements for the
operation of ongoing retail businesses such as newsstands, barbershops, beauty
shops, physicians' offices, pharmacies and specialty shops).
"SINGLE-PURPOSE ENTITY" means a Person which owns no interest
or property other than the Property, the Improvements or interests in the
Borrower.
"STERLING HOUSE" means Sterling House Corporation, a Kansas
corporation and a wholly-owned subsidiary of the Guarantor.
"STOCK" means all shares, options, warrants, general or
limited partnership interests, membership interests, participations or other
equivalents (regardless of how designated) in a corporation, limited liability
company, partnership or any equivalent entity, whether voting or nonvoting,
including, without limitation, common stock, preferred stock, or any other
"equity security" (as such term is defined in Rule 3a11-1 of the General Rules
and Regulations promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended).
"SUBORDINATION AGREEMENT" means that certain Subordination of
Management Agreement of even date herewith by and among Borrower, Guarantor, and
Lender solely with respect to the Oceanside Facility.
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1.2 Singular terms shall include the plural forms and vice
versa, as applicable, of the terms defined.
1.3 Terms contained in this Agreement shall, unless
otherwise defined herein or unless the context otherwise indicates, have the
meanings, if any, assigned to them by the Uniform Commercial Code in effect in
the State of Kansas.
1.4 All accounting terms used in this Agreement shall be
construed in accordance with GAAP, except as otherwise specified.
1.5 All references to other documents or instruments shall
be deemed to refer to such documents or instruments as they may hereafter be
extended, renewed, modified, or amended and all replacements and substitutions
therefor.
1.6 All references herein to "Medicaid" and "Medicare" shall
be deemed to include any successor program thereto.
ARTICLE II
TERMS OF THE LOAN
2.1 THE LOAN. Borrower has agreed to borrow the Loan from
Lender, and Lender has agreed to make the Loan to Borrower, subject to
Borrower's compliance with and observance of the terms, conditions, covenants,
and provisions of this Agreement and the other Loan Documents, and Borrower has
made the covenants, representations, and warranties herein and therein as a
material inducement to Lender to make the Loan.
2.2 SECURITY FOR THE LOAN. The Loan will be evidenced,
secured and guaranteed by the Loan Documents.
ARTICLE III
BORROWER'S REPRESENTATIONS AND WARRANTIES
To induce Lender to enter into this Agreement, and to make the Loan to
Borrower, Borrower represents and warrants to Lender as follows:
3.1 EXISTENCE, POWER AND QUALIFICATION. Borrower is a duly
organized and validly existing Kansas corporation, has the power to own its
properties and to carry on its business as is now being conducted, and is duly
qualified to do business and is in good standing in every jurisdiction in which
the character of the properties owned by it or in which the transaction of its
business makes its qualification necessary.
3.2 POWER AND AUTHORITY. Borrower has full power and
authority to borrow the indebtedness evidenced by the Note and to incur the Loan
Obligations provided for herein, all of which have
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<PAGE> 10
been authorized by all proper and necessary action. All consents, approvals,
authorizations, orders or filings of or with any court or governmental agency or
body, if any, required for the execution, delivery and performance of the Loan
Documents by the Borrower have been obtained or made.
3.3 DUE EXECUTION AND ENFORCEMENT. Each of the Loan Documents
to which Borrower is a party constitutes a valid and legally binding obligation
of Borrower, enforceable in accordance with its respective terms (except as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
receivership, moratorium, or other laws relating to the rights of creditors
generally and by general principles of equity) and does not violate, conflict
with, or constitute any default under any law, government regulation, decree,
judgment, Borrower's articles of organization/incorporation, partnership
agreement or operating agreement, as applicable, or any other agreement or
instrument binding upon Borrower.
3.4 SINGLE PURPOSE ENTITY. Borrower is a Single Purpose
Entity.
3.5 PENDING MATTERS.
a. Operations; Financial Condition. No action or
investigation is pending or, to the best of Borrower's knowledge, threatened
before or by any court or administrative agency which might result in any
material adverse change in the financial condition, operations or prospects of
Borrower or any lower reimbursement rate under the Reimbursement Contracts. The
Borrower is not in violation of any agreement, the violation of which might
reasonably be expected to have a material adverse effect on its business or
assets, and the Borrower is not in violation of any order, judgment, or decree
of any court, or any statute or governmental regulation to which it is subject,
the violation of which could reasonably be expected to have a material adverse
effect on the operation of the Facility or on any of the Collateral.
b. Condemnation or Casualty. There are no proceedings
pending, or, to the best of Borrower's knowledge, threatened, to acquire through
e exercise of any power of condemnation, eminent domain or similar proceeding
any part of the Property, the Improvements or any interest therein, or to enjoin
or similarly prevent or restrict the use of the Property or the operation of the
Facility in any manner. None of the Improvements is subject to any unrepaired
casualty or other damage having a cost to repair in excess of $5,000.
3.6 FINANCIAL STATEMENTS ACCURATE. All financial statements
heretofore or hereafter provided by Borrower and Guarantor are and will be true
and complete in all material respects as of their respective dates and fairly
present the respective financial
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condition of Borrower and Guarantor and each Facility, and there are no material
liabilities, direct or indirect, fixed or contingent, as of the respective dates
of such statements which are not reflected therein or in the notes thereto or in
a written certificate delivered with such statements. The financial statements
of the Borrower have been prepared on an accounting basis consistent with
Guarantor's audited financial statements. There has been no material adverse
change in the financial condition, operations, or prospects of Borrower and
Guarantor since the dates of such statements except as fully disclosed in
writing with the delivery of such statements. All financial statements of the
operations of the Facility heretofore or hereafter provided to Lender are and
will be true and complete in all material respects as of their respective dates.
3.7 COMPLIANCE WITH FACILITY LAWS. Each of the Facilities are
duly licensed as follows:
(a) with respect to the Loma Linda Facility, as a
110-bed assisted living facility (currently operated as a 70-bed assisted living
facility) and a 70-bed senior housing facility under the applicable laws of the
State of California;
(b) with respect to the Oceanside Facility as a 160-bed
assisted living facility under the applicable laws of the State of California,
and is currently operated as an assisted living facility;
(c) with respect to the Augusta Facility as a 21-bed
assisted living facility under the applicable laws of the State of Kansas, and
is currently operated as an assisted living facility;
(d) with respect to the Liberal Facility, as a 44-bed
assisted living facility under the applicable laws of the State of Kansas, and
is currently operated as an assisted living facility; and
(e) with respect to the Colorado Springs Facility, as a
37-bed assisted living facility under the applicable laws of the State of
Colorado, and is currently operated as an assisted living facility.
Lessee is the lawful owner of all Permits for the Loma Linda Facility. Borrower
and Lessee are the lawful owners of all Permits for the Liberal Facility and the
Augusta Facility. Lessee has filed an application for licensure in its name and
is operating the Oceanside Facility with the knowledge and consent of the
applicable California regulatory authorities pending review of its application.
Sterling House is the sole owner of all Permits for the Colorado Springs
Facility. Lessee has filed an application for licensure in its name. The
Borrower has no reason to believe that any of such applications will not be
approved as to the Lessee.
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The Borrower anticipates that the Lessee will be licensed to operate (a) the
Oceanside Facility before October 31, 1998, and (b) the Colorado Springs
Facility before October 1, 1998.
All Permits for the Facilities (a) are in full force and effect, (b)
constitute all of the material permits, licenses and certificates required for
the use, operation and occupancy thereof, (c) have not been pledged as
collateral for any other loan or Indebtedness, (d) are held free from
restrictions or any encumbrance which would materially adversely affect the use
or operation of the Facility, and (e) are not provisional, probationary or
restricted in any way. The Borrower and the Lessee as well as the operation of
each Facility, are in compliance in all material respects with the applicable
provisions of assisted living facility laws, rules, regulations and published
interpretations to which each Facility is subject. No waivers of any laws,
rules, regulations, or requirements (including, but not limited to, minimum foot
requirements per bed or unit) are required for any Facility to operate at its
current licensed bed capacity. All Reimbursement Contracts (if any) are in full
force and effect with respect to the Facility, and Borrower and Lessee are in
good standing with all the respective agencies governing such applicable
assisted living licenses, program certifications, and Reimbursement Contract (if
any). Borrower and Lessee are current in the payment of all so-called provider
specific taxes or other assessments with respect to such Reimbursement Contract
(if any). Borrower will maintain, and will cause Lessee to maintain, (without
allowing to lapse) the Certificate of Need, if applicable, and any required
Permits. In the event that Lender acquires the Facility through foreclosure or
otherwise, neither Lender nor a subsequent manager, a subsequent lessee or any
subsequent purchaser (through foreclosure or otherwise) must obtain a
Certificate of Need prior to applying for and receiving a license to operate the
Facility and certification to receive Medicare and Medicaid payments
(and its successor programs) for patients having coverage thereunder (if any),
provided that no service or bed unit complement is changed.
3.8 MAINTAIN UNIT CAPACITY. Neither Borrower nor the Lessee
has granted to any third party the right to reduce the number of licensed units
in the Facility or to apply for approval to transfer the right to any and all of
the licensed Facility units/beds to any other location.
3.9 MEDICARE AND MEDICAID COMPLIANCE. The Facility has no
patient reimbursement agreements, cost reports or Medicare or Medicaid surveys
or provider agreements.
3.10 THIRD-PARTY PAYORS. There is no threatened or pending
revocation, suspension, termination, probation, restriction, limitation, or
nonrenewal affecting Borrower, Lessee or any Facility or any participation or
provider agreement with any third-party payor, including Medicare, Medicaid,
Blue Cross and/or Blue Shield, if applicable, and any other private commercial
insurance
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managed care and employee assistance program (such programs, the "Third-Party
Payors' Programs") to which Borrower or Lessee presently is subject. All
Medicare (if any), Medicaid (if any), and private insurance cost reports and
financial reports submitted by Borrower or Lessee are and will be materially
accurate and complete and have not been and will not be misleading in any
material respects. No cost reports for the Facility remain "open" or unsettled,
except as otherwise disclosed in writing.
3.11 GOVERNMENTAL PROCEEDINGS AND NOTICES. Neither Borrower
nor Lessee nor the Facility is currently the subject of any proceeding by any
governmental agency that would, and no notice of any violation has been received
from a governmental agency that would, directly or indirectly, or with the
passage of time:
a. Have a material adverse impact on Borrower's ability
to accept and/or retain residents or result in the imposition of a fine, a
sanction, a lower rate certification or a lower reimbursement rate for services
rendered to eligible residents; or
b. Modify, limit or annul or result in the transfer,
suspension, revocation or imposition of probationary use of any of the Permits.
3.12 PHYSICAL PLANT STANDARDS. The Facility and the use
thereof complies in all material respects with applicable local, state and
federal building codes, fire codes, zoning codes, use restrictions, health care,
health care facility and other similar regulatory requirements (the "Physical
Plant Standards"), and no material waivers of Physical Plant Standards exist at
the Facility.
3.13 PLEDGES OF RECEIVABLES. The Borrower has not pledged its
Accounts as collateral security for any loan or indebtedness other than, if
applicable, the Loan.
3.14 PAYMENT OF TAXES AND PROPERTY IMPOSITIONS. Borrower has
filed or has obtained appropriate extensions for filing of all federal, state,
and local tax returns which it is required to file and has paid, or made
adequate provision for the payment of, all taxes which are shown pursuant to
such returns or are required to be shown thereon or to assessments received by
Borrower, including, without limitation, provider taxes. All such returns are
complete and accurate in all respects. Borrower has paid or made adequate
provision for the payment of all insurance premiums, applicable water and sewer
charges, government assessments or charges, ground rents (if applicable) and
Taxes (as defined in the Mortgage) with respect to the Property.
3.15 TITLE TO COLLATERAL. Borrower has good and marketable
title to all of the Collateral, subject to no lien, mortgage, pledge,
encroachment, zoning violation, or encumbrance, except Permitted Encumbrances,
which Permitted Encumbrances do not and
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will not materially interfere with the security intended to be provided by the
Mortgage or the current use or operation of the Property and or the current
ability of the Facility to generate net operating income sufficient to service
the Loan. All Improvements situated on the Property are situated wholly within
the boundaries of the Property.
3.16 PRIORITY OF MORTGAGE. Each Mortgage constitutes a valid
first lien against the real and personal property described therein, prior to
all other liens or encumbrances, including those which may hereafter accrue,
excepting only Permitted Encumbrances, which Permitted Encumbrances do not and
will not materially and adversely affect (a) the ability of the Borrower to pay
in full the principal of and interest on the Note when due, (b) the security
(and its value) intended to be provided by the Mortgage or (c) the current use
of the Property and the Improvements.
3.17 LOCATION OF CHIEF EXECUTIVE OFFICES. The location of
Borrower's principal place of business and chief executive office is set forth
on Exhibit B hereto.
3.18 DISCLOSURE. All information furnished or to be furnished
by Borrower to Lender in connection with the Loan or any of the Loan Documents,
is, or will be at the time the same is furnished, accurate and correct in all
material respects and complete insofar as completeness may be necessary to
provide Lender with true and accurate knowledge of the subject matter.
3.19 TRADE NAMES. Except as shown on Exhibit B, neither
Borrower nor the Loma Linda Facility, which operates under the trade name
"Crossings at the Palms", has ever changed its name, been known by any other
name or been a party to a merger, reorganization or similar transaction since
the date acquired by Guarantor or an Affiliate thereof. Except as shown on
Exhibit B, the Oceanside Facility, which operates under the trade name "Lake
Park Villas" has never changed its name, been known by any other name or been a
party to a merger, reorganization or similar transaction since the date acquired
by Guarantor or an Affiliate thereof. Except as shown on Exhibit B, the Augusta
Facility, which operates under the trade name "Sterling House of Augusta", has
never changed its name, been known by any other name or been a party to a
merger, reorganization or similar transaction since the date acquired by
Guarantor or an Affiliate thereof. Except as shown on Exhibit B, the Liberal
Facility, which operates under the trade name "Woodland Terrace", has never
changed its name, been known by any other name or been a party to a merger,
reorganization or similar transaction since the date acquired by Guarantor or an
Affiliate thereof. Except as shown on Exhibit B, the Colorado Springs Facility,
which operates under the trade name "Sterling House at Broadmoor", has never
changed its name, been known by any other name or been a party to a merger,
reorganization or similar transaction since the date acquired by Guarantor or an
Affiliate thereof. An Affiliate of Borrower listed on Exhibit B hereto, with
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<PAGE> 15
respect to each Facility, has owned such Facility for the period shown on
Exhibit B and is transferring the Facility (the Property and all other real and
personal property located thereon). Borrower is purchasing the Facilities with
the proceeds of the Loan.
3.20 ERISA. Borrower is in compliance in all material respects
with applicable provisions of the Employee Retirement Income Security Act of
1974, as amended ("ERISA").
3.21 OWNERSHIP. The ownership interests of the Persons
comprising the Borrower and each of the respective interests in the Borrower are
correctly and accurately set forth on Exhibit "C" hereto.
3.22 COMPLIANCE WITH APPLICABLE LAWS. The Facility and its
operations and the Property comply in all material respects with all covenants
and restrictions of record and applicable laws, ordinances, rules and
regulations, including, without limitation, the Americans with Disabilities Act
and the regulations thereunder, and all laws, ordinances, rules and regulations
relating to zoning, setback requirements and building codes. There are no
waivers of any building codes currently in existence for the Facility except for
waivers with respect to parking requirements, in which case each Facility
complies with the applicable parking requirement resulting from such waiver.
3.23 SOLVENCY. Borrower is solvent for purposes of 11 U.S.C.
ss.548, and the borrowing of the Loan will not render Borrower insolvent for
purposes of 11 U.S.C. ss.548.
3.24 OTHER INDEBTEDNESS. Borrower has no outstanding
Indebtedness, secured or unsecured, direct or contingent (including any
guaranties), other than (a) the Loan, (b) indebtedness which represents trade
payables or accrued expenses incurred in the ordinary course of business of
owning and operating the Property, and (c) indebtedness secured by purchase
money liens provided that the aggregate amount of such indebtedness incurred
with respect to any one Facility, together with the rental income from all
Leases (other than resident agreements) of space in such Facility entered into
by Borrower as landlord, does not exceed the lesser of $500,000 or five percent
(5%) of the portion of the Loan allocated to such Facility as shown on Exhibit
B; no other debt will be secured (senior, subordinate or pari passu) by the
Property except for an additional lien on accounts receivable which may be
granted by Borrower in the future solely in compliance with the terms of the
Mortgage.
3.25 OTHER OBLIGATIONS. Borrower has no material financial
obligation under any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which Borrower is a party or by which Borrower or the
Property is otherwise bound, other than obligations incurred in the ordinary
course of the
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operation of the Property and other than obligations under the Mortgage and
the other Loan Documents.
3.26 FRAUDULENT CONVEYANCES. Borrower (1) has not entered into
this Agreement or any of the other Loan Documents with the actual intent to
hinder, delay, or defraud any creditor and (2) has received reasonably
equivalent value in exchange for its obligations under the Loan Documents.
Giving effect to the transactions contemplated by the Loan Documents, the fair
saleable value of Borrower's assets exceeds and will, immediately following the
execution and delivery of the Loan Documents, be greater than Borrower's
probable liabilities, including the maximum amount of its contingent liabilities
or its debts as such debts become absolute and mature. Borrower's assets do not
and, immediately following the execution and delivery of the Loan Documents will
not, constitute unreasonably small capital to carry out its business as
conducted or as proposed to be conducted. Borrower does not intend to, and does
not believe that it will, incur debts and liabilities (including, without
limitation, contingent liabilities and other commitments) beyond its ability to
pay such debts as they mature (taking into account the timing and amounts to be
payable on or in respect of obligations of Borrower).
3.27 MANAGEMENT AGREEMENT. The Management Agreement is in full
force and effect and there are no defaults (either monetary or nonmonetary) by
the Lessee or R.A.C. thereunder. Borrower has not entered into any other
management agreement with respect to the operation of the Facility.
3.28 REPRESENTATIONS AND WARRANTIES. Borrower agrees that its
representations and warranties and covenants contained herein are true and
correct as of the date hereof and shall survive closing of the Loan and the
assignment and delivery of the Loan to Investor. Borrower agrees that Investor
shall be a third party beneficiary of the representations, warranties and
covenants set forth herein.
3.29 LEASE AGREEMENT. Each Lease Agreement is in full force
and effect, and there are no defaults (either monetary or nonmonetary) by
Borrower or Lessee thereunder.
ARTICLE IV
AFFIRMATIVE COVENANTS OF BORROWER
Borrower agrees with and covenants unto the Lender that until the Loan
Obligations have been paid in full, Borrower shall:
4.1 PAYMENT OF LOAN/PERFORMANCE OF LOAN OBLIGATIONS. Duly and
punctually pay or cause to be paid the principal and interest of the Note in
accordance with its terms and duly and punctually pay and perform or cause to be
paid or performed all Loan Obligations hereunder and under the other Loan
Documents.
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4.2 MAINTENANCE OF EXISTENCE. Maintain its existence as a
Kansas corporation, and, in each jurisdiction in which the character of the
property owned by it or in which the transaction of its business makes
qualification necessary, maintain good standing.
4.3 MAINTENANCE OF SINGLE PURPOSE. Maintain its existence as a
Single Purpose Entity.
4.4 ACCRUAL AND PAYMENT OF TAXES. During each fiscal year,
make accurate provision for the payment of all current tax liabilities of all
kinds (including, without limitation, federal and state income taxes, franchise
taxes, payroll taxes, provider taxes (to the extent necessary to participate in
and receive maximum funding pursuant to Reimbursement Contracts, if any) and
Taxes (as defined in the Mortgage)), all required withholding of income taxes of
employees, all required old age and unemployment contributions, and all required
payments to employee benefit plans, and pay the same when they become due.
4.5 INSURANCE. Maintain or cause Lessee to maintain the
following insurance coverages with respect to the Property and the Facility:
a. Insurance against loss or damage by fire, casualty and
other hazards as now are or subsequently may be covered by an "all risk" policy
or a policy covering "special" causes of loss, with such endorsements as Lender
may from time to time reasonably require and which are customarily required by
institutional lenders of similar properties similarly situated, including,
without limitation, building ordinance law, lightning, windstorm, civil
commotion, hail, riot, strike, water damage, sprinkler leakage, collapse,
malicious mischief, explosion, smoke, aircraft, vehicles, vandalism, falling
objects and weight of snow, ice or sleet, and covering the Facility in an amount
equal to 100% of the full insurable replacement value of the Facility (exclusive
of footings and foundations below the lowest basement floor) without deduction
for depreciation. The determination of the replacement cost amount shall be
adjusted annually to comply with the requirements of the insurer issuing the
coverage or, at Lender's election, by reference to such indexes, appraisals or
information as Lender determines in its reasonable discretion, and, unless the
insurance required by this paragraph shall be effected by blanket and/or
umbrella policies in accordance with the requirements of this Agreement, the
policy shall include inflation guard coverage that ensures that the policy
limits will be increased over time to reflect the effect of inflation. Each
policy shall, subject to Lender's approval, contain (i) a replacement cost
endorsement, without deduction for depreciation, (ii) either an agreed amount
endorsement or a waiver of any co-insurance provisions, and (iii) an ordinance
or law coverage or enforcement endorsement if the Improvements or the use of the
Property constitutes any legal nonconforming structures or
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uses, and shall provide for deductibles in such amounts as Lender may permit in
its sole discretion.
b. Commercial general liability insurance under a policy
containing "Comprehensive General Liability Form" of coverage (or a comparably
worded form of coverage) and the "Broad Form CGL" endorsement (or a policy which
otherwise incorporates the language of such endorsement), providing coverage on
an occurrence (not "claims made") basis, which policy shall include, without
limitation, coverage against claims for personal injury, bodily injury, death
and property damage liability with respect to the Facility and the operations
related thereto, whether on or off the Property, and the following coverages:
Employee as Additional Insured, Product Liability/Completed Operations; Broad
Form Contractual Liability, Independent Contractor, Personal Injury and
Advertising Injury Protection, Medical Payment (with a minimum limit of $5,000
per person), Broad Form Cross Suits Liability Endorsement, where applicable,
hired and non-owned automobile coverage (including rented and leased vehicles),
and, if any alcoholic beverages shall be sold, manufactured or distributed in
the Facility, liquor liability coverage, all of which shall be in such amounts
as Lender may from time to time reasonably require, but not less than One
Million Dollars ($1,000,000) per occurrence, Two Million Dollars ($2,000,000) in
the aggregate and with umbrella coverage not less than Five Million Dollars
($5,000,000). If such policy shall cover more than one property, such limits
shall apply on a "per location" basis. If any swimming pool is located at any
Facility in the future, such umbrella coverage shall be increased to Ten Million
Dollars ($10,000,000). Such liability policy shall delete the contractual
exclusion under the personal injury coverage, if possible, and if available,
shall include the following endorsements: Notice of Accident, Knowledge of
Occurrence, and Unintentional Error and Omission.
c. Professional liability insurance coverage in an amount
equal to not less than One Million Dollars ($1,000,000) per occurrence and One
Million Dollars ($1,000,000) in the aggregate and insuring Borrower for acts
occurring prior to the date of the Loan.
d. Business interruption insurance (i) covering the same
perils of loss as are required to be covered by the property insurance required
under Section 4.5(a) above, (ii) in an amount equal to the projected annual net
income from the Facility plus carrying costs and extraordinary expenses of the
Property for a period of twelve (12) months, based upon Borrower's reasonable
estimate thereof as approved by Lender, (iii) including either an agreed amount
endorsement or a waiver of any co-insurance provisions, so as to prevent
Borrower, Lender and any other insured thereunder from being a co-insurer, and
(iv) providing that any covered loss thereunder shall be payable to Lender.
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e. During the period of any new construction on the
Premises, a so-called "Builder's All-Risk Completed Value" or "Course of
Construction" insurance policy in non-reporting form for any improvements under
construction, including, without limitation, for demolition and increased cost
of construction or renovation, in an amount equal to 100% of the estimated
replacement cost value on the date of completion, including "soft cost"
coverage, and Workers' Compensation Insurance covering all persons engaged in
such construction, in an amount at least equal to the minimum required by law.
In addition, each contractor and subcontractor shall be required to provide
Lender with a certificate of insurance for (i) workers' compensation insurance
covering all persons engaged by such contractor or subcontractor in such
construction in an amount at least equal to the minimum required by law, and
(ii) general liability insurance showing minimum limits of at least $5,000,000,
including coverage for products and completed operations. Each contractor and
subcontractor also shall cover Borrower and Lender as an additional insured
under such liability policy and shall indemnify and hold Borrower and Lender
harmless from and against any and all claims, damages, liabilities, costs and
expenses arising out of, relating to or otherwise in connection with its
performance of such construction.
f. If the Facility contains steam boilers, steam pipes,
steam engines, steam turbines or other high pressure vessels, insurance covering
the major components of the central heating, air conditioning and ventilating
systems, boilers, other pressure vessels, high pressure piping and machinery,
elevators and escalators, if any, and other similar equipment installed in the
Improvements, in an amount equal to one hundred percent (100%) of the full
replacement cost of the Facility, which policies shall insure against physical
damage to and loss of occupancy and use of the Improvements arising out of an
accident or breakdown covered thereunder.
g. Flood insurance with a deductible not to exceed Three
Thousand Dollars ($3,000), or such greater amount as may be satisfactory to
Lender in its sole discretion, and in an amount equal to the full insurable
value of the Facility or the maximum amount available, whichever is less, if the
Facility is located in an area designated by the Secretary of Housing and Urban
Development or the Federal Emergency Management Agency as having special flood
hazards.
h. Workers' compensation insurance or other similar
insurance which may be required by governmental authorities or applicable legal
requirements in an amount at least equal to the minimum required by law, and
employer's liability insurance with a limit of One Hundred Thousand Dollars
($100,000) per accident and per disease per employee, and Five Hundred Thousand
Dollars ($500,000) in the aggregate for disease arising in connection with the
operation of the Property.
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i. Such other insurance coverages, in such amounts, and
such other forms and endorsements, as may from time to time be reasonably
required by Lender and which are customarily required by institutional lenders
to similar properties, similarly situated, including, without limitation,
coverages against other insurable hazards (including, by way of example only,
earthquake, sinkhole and mine subsidence), which at the time are commonly
insured against and generally available.
All insurance required under this Section 4.5 shall have a
term of not less than one year and shall be in the form and amount and with
deductibles as, from time to time, shall be reasonably acceptable to Lender,
under valid and enforceable policies issued by financially responsible insurers
either licensed to transact business in the State where the Facility is located,
or obtained through a duly authorized surplus lines insurance agent or otherwise
in conformity with the laws of such State, with (a) a rating of not less than
the third (3rd) highest rating category by either Standard & Poor's Ratings
Group, Duff & Phelps Credit Rating Co., Moody's Investors Service, Inc., Fitch
Investors Service, Inc. or any successors thereto, or (b) an A-:V rating in
Best's Key Rating Guide; provided, however, that if the initial principal
balance of the Loan is greater than Seven Million Five Hundred Thousand Dollars
($7,500,000.00), such insurer must, in lieu of such Best's rating, have a long
term senior debt rating of at least "A-" by Standard & Poor's Ratings Group.
Certificates of Insurance shall be delivered to and held by Lender, and, upon
Lender's reasonable request, originals or certified copies of all insurance
policies shall be delivered to Lender. All such policies shall name Lender as an
additional insured, shall provide for loss payable solely to Lender and shall
contain: (i) standard "non-contributory mortgagee" endorsement or its equivalent
relating, inter alia, to recovery by Lender notwithstanding the negligent or
willful acts or omissions of Borrower and notwithstanding (a) occupancy or use
of the Facility for purposes more hazardous than those permitted by the terms of
such policy, (b) any foreclosure or other action taken by Lender pursuant to the
Mortgage upon the occurrence of an Event of Default, or (c) any change in title
or ownership of the Facility; and (ii) a provision that such policies shall not
be canceled or amended, including, without limitation, any amendment reducing
the scope or limits of coverage, or failed to be renewed, without at least
thirty (30) days prior written notice to Lender in each instance. With respect
to insurance policies which require payment of premiums annually, not less than
thirty (30) days prior to the expiration dates of the insurance policies
obtained pursuant to this Agreement, Borrower shall pay such amount, except to
the extent Lender is escrowing sums therefor pursuant to the Loan Documents. Not
less than thirty (30) days prior to the expiration dates of the insurance
policies obtained pursuant to this Agreement, certificates evidencing renewals
of such policies bearing notations evidencing the payment of premiums or
accompanied by other evidence reasonably satisfactory to Lender of such payment
shall be delivered by
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Borrower to Lender. Borrower shall not carry separate insurance, concurrent in
kind or form or contributing in the event of loss, with any insurance required
under this Section 4.5. If the limits of any policy required hereunder are
reduced or eliminated due to a covered loss, Borrower shall pay the additional
premium, if any, in order to have the original limits of insurance reinstated,
or Borrower shall purchase new insurance in the same type and amount that
existed immediately prior to the loss.
If Borrower fails to maintain and deliver to Lender the
certificates of insurance required by this Agreement, Lender may, at its option,
procure such insurance and Borrower shall pay or, as the case may be, reimburse
Lender for, all premiums thereon promptly, upon demand by Lender, with interest
thereon at the Default Rate from the date paid by Lender to the date of
repayment and such sum shall constitute a part of the Loan Obligations.
The insurance required by this Agreement may, at the
option of Borrower, be effected by blanket and/or umbrella policies issued to
Borrower or to an Affiliate of Borrower covering the Facility and the properties
of such Affiliate; provided that, in each case, the policies otherwise comply
with the provisions of this Agreement and allocate to the Facility, from time to
time, the coverage specified by this Agreement, without possibility of reduction
or coinsurance by reason of, or damage to, any other property (real or personal)
named therein. If the insurance required by this Agreement shall be effected by
any such blanket or umbrella policies, Borrower shall furnish to Lender
certificates of insurance showing the amount of the insurance provided under
such policies which is applicable to the Facility.
Neither Lender nor its agents or employees shall be liable
for any loss or damage insured by the insurance policies required to be
maintained under this Agreement; it being understood that (i) Borrower shall
look solely to its insurance company for the recovery of such loss or damage,
(ii) such insurance company shall have no rights of subrogation against Lender,
its agents or employees, and (iii) Borrower shall use its best efforts to
procure from such insurance company a waiver of subrogation rights against
Lender. If, however, such insurance policies do not provide for a waiver of
subrogation rights against Lender (whether because such a waiver is unavailable
or otherwise), then Borrower hereby agrees, to the extent permitted by law and
to the extent not prohibited by such insurance policies, to waive its rights of
recovery, if any, against Lender, its agents and employees, whether resulting
from any damage to the Facility, any liability claim in connection with the
Facility or otherwise. If any such insurance policy shall prohibit Borrower from
waiving such claims, then Borrower must obtain from such insurance company a
waiver of subrogation rights against Lender.
Net proceeds of insurance or condemnation (after payment
of Lender's reasonable costs and expenses) (a) in an amount less than
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$250,000, shall be made available, and (b) in the amount of $250,000 or more may
be made available, in the Lender's sole discretion, to Borrower for Borrower's
repair, restoration and replacement of the Improvements, Equipment and Inventory
damaged or taken on the following terms and subject to Borrower's satisfaction
of the following conditions:
a. The aggregate amount of all such proceeds shall not
exceed the aggregate amount of all such Loan Obligations.
b. At the time of such loss or damage and at all times
thereafter while Lender is holding any portion of such proceeds, there shall
exist no Default or Event of Default;
c. The Improvements, Equipment, and Inventory for which
loss or damage has resulted shall be capable of being restored to its
preexisting condition and utility in all material respects with a value equal to
or greater than that which existed prior to such loss or damage and such
restoration shall be capable of being completed prior to the earlier to occur of
(i) the expiration of business interruption insurance as determined by an
independent inspector or (ii) the Maturity Date;
d. Within thirty (30) days from the date of such loss or
damage Borrower shall have given Lender a written notice electing to have the
proceeds applied for such purpose;
e. Within sixty (60) days following the date of notice
under the preceding subparagraph (c) and prior to any proceeds being disbursed
to Borrower, Borrower shall have provided to Lender all of the following:
(i) complete plans and specifications for
restoration, repair and replacement of the Improvements,
Equipment and Inventory damaged to the condition, utility
and value required by (b) above,
(ii) if loss or damage exceeds $50,000, fixed-price
or guaranteed maximum cost bonded construction contracts
with a bondable contractor for completion of the repair and
restoration work in accordance with such plans and
specifications,
(iii) builder's risk insurance for the full cost of
construction with Lender named under a standard mortgagee
loss-payable clause,
(iv) such additional funds as in Lender's reasonable
opinion are necessary to complete such repair, restoration
and replacement, and
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(v) copies of all material permits and licenses
necessary to complete the work in accordance with the
plans and specifications;
f. Lender may, at Borrower's expense, retain an
independent inspector to review and approve plans and specifications and
completed construction and to approve all requests for disbursement, which
approvals shall be conditions precedent to release of proceeds as work
progresses;
g. No portion of such proceeds shall be made available by
Lender for architectural reviews or for any other purposes which are not
directly attributable to the cost of repairing, restoring or replacing the
Improvements, Equipment and Inventory for which a loss or damage has occurred
unless the same are covered by such insurance;
h. Borrower shall diligently pursue such work and shall
complete such work prior to the earlier to occur of the expiration of business
interruption insurance or the Maturity Date;
i. The Facility continues to achieve the Debt Service
Coverage requirements set forth in Section 4.13 below;
j. Each disbursement by Lender of such proceeds and
deposits shall be funded subject to conditions and in accordance with
disbursement procedures which a commercial construction lender would typically
establish in the exercise of sound banking practices and shall be made only upon
receipt of disbursement requests on an AIA G702/703 form (or similar form
approved by Lender) signed and certified by Borrower and, if required by the
Lender, its architect and general contractor with appropriate invoices and lien
waivers as required by Lender;
k. Lender shall have a first lien security interest in all
building materials and completed repair and restoration work and in all fixtures
and equipment acquired with such proceeds, and Borrower shall execute and
deliver such mortgages, deeds of trust, security agreements, financing
statements and other instruments as Lender shall request to create, evidence, or
perfect such lien and security interest; and
In the event and to the extent such proceeds are not
permitted or required to be used for the repair, restoration and replacement of
the Improvements, Equipment and Inventory for which a loss or damage has
occurred, or in the event Borrower fails to timely make the election to have
insurance proceeds applied to the restoration of the Improvements, Equipment, or
Inventory, or, having made such election, fails to timely comply with the terms
and conditions set forth herein, or, if the conditions set forth herein for such
application are otherwise not satisfied, then Lender shall be entitled without
notice to or consent from Borrower to apply such proceeds, or the balance
thereof, at Lender's option
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<PAGE> 24
either (i) to the full or partial payment or prepayment of the Loan Obligations
(without premium) in the manner aforesaid, or (ii) to the repair, restoration
and/or replacement of all or any part of such Improvements, Equipment and
Inventory for which a loss or damage has occurred.
Borrower appoints Lender as Borrower's attorney-in-fact to
cause the issuance of an endorsement of any insurance policy to bring Borrower
into compliance herewith and, as limited above, at Lender's sole option, to make
any claim for, receive payment for, and execute and endorse any documents,
checks or other instruments in payment for loss, theft, or damage covered under
any such insurance policy; however, in no event will Lender be liable for
failure to collect any amounts payable under any insurance policy.
4.6 FINANCIAL AND OTHER INFORMATION. Provide Lender, or cause
the Lessee to provide to Lender, at its address set forth in Section 8.7 and at
GMAC Commercial Mortgage Corporation, 2200 Woodcrest Place, Suite 305,
Birmingham, Alabama 35209, the following financial statements and information on
a continuing basis during the term of the Loan:
a. Within ninety (90) days after the end of each fiscal
year of each Facility and the Borrower (if different from such Facility)
unaudited financial statements of the operations of such Facility and the
Borrower, which statements shall be prepared on an accounting basis consistent
with Guarantor's audited financial statements, and shall include a balance sheet
and a statement of income and expenses for the year then ended, certified by a
financial officer of Borrower to be true and correct in all material respects.
b. Within one hundred twenty (120) days after the end of
each fiscal year of the Guarantor, audited financial statements of the Guarantor
prepared by KPMG Peat Marwick or any other nationally recognized accounting firm
or independent certified public accountant reasonably acceptable to Lender,
which statements shall be prepared in accordance with GAAP, and shall include a
balance sheet and a statement of income and expenses for the year then ended. In
lieu of its obligations hereunder, Guarantor may submit to Lender, upon its
filing thereof, a copy of Form 10K as filed with the United States Securities
and Exchange Commission.
c. Within forty-five (45) days after the end of each
fiscal quarter of each Facility and Borrower (if different from such Facility),
unaudited financial statements of the operations of such Facility and Borrower
prepared on an accounting basis consistent with Guarantor's audited financial
statements, which statements shall include a balance sheet and statement of
income and expenses for the quarter then ended, and shall be certified as true
and correct in all material respects by a financial officer of Borrower.
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<PAGE> 25
d. Within forty-five (45) days after the end of each
fiscal quarter of the Guarantor, unaudited interim financial statements of the
Guarantor, prepared on an accounting basis consistent with Guarantor's audited
financial statements, which shall include a balance sheet and statement of
income and expenses for the quarter then ended, and shall be certified as true
and correct in all material respects by a financial officer of the Guarantor. In
lieu of its obligations hereunder, Guarantor may submit to Lender a copy of Form
10Q as filed by Guarantor with the United States Securities and Exchange
Commission.
e. Within forty-five (45) days of the end of each fiscal
quarter of each Facility, a statement of the number of bed days available and
the actual resident days incurred for such quarter, together with, if
applicable, quarterly census information of such Facility as of the end of such
quarter in sufficient detail to show patient-mix (i.e., private, Medicare,
Medicaid, and V.A.), if applicable, on a daily average basis for such year
through the end of such quarter, certified by a financial officer of Borrower
and Guarantor to be true and correct. Such statements of each Facility shall be
accompanied by a summary showing the information described in Exhibit "D".
f. Within ten (10) days of filing or receipt, all
Medicare and/or Medicaid cost reports and any amendments thereto filed with
respect to the Facility, if any, and all responses, audit reports, or other
inquiries with respect to such cost reports.
g. Within ten (10) days of receipt, a copy of the
Medicaid Rate Calculation Worksheet (or the equivalent thereof), if any, issued
by the appropriate Medicaid Agency for the Facility.
h. Within ten (10) days of receipt, any and all notices
(regardless of form) from any and all licensing and/or certifying agencies that
the Facility license and/or the Medicare and/or Medicaid certification of the
Facility (if any) is being downgraded to a substandard category, revoked, or
suspended or that any such action is pending or being considered.
i. Upon Lender's request, evidence of payment by Borrower
or Lessee of any applicable provider bed taxes or similar taxes, which taxes
Borrower agrees to pay or cause Lessee to pay.
j. Within one hundred twenty (120) days after the end of
each of Lessee's fiscal years, and more frequently if reasonably requested by
Lender, an aged accounts receivable report for the Facility in sufficient detail
to show amounts due from each class of patient-mix, if applicable, (i.e.,
private, Medicare, Medicaid and V.A.), by the account age classifications of 30
days, 60 days, 90 days, 120 days, and over 120 days.
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<PAGE> 26
The Lender reserves the right to require that the annual
financial statements of the Borrower be audited by a nationally recognized
accounting firm or independent certified public accountant acceptable to Lender
if (i) a monetary default continues beyond the applicable cure period or, (ii)
if Lender has reasonable grounds to believe that the unaudited financial
statements do not accurately represent the financial condition of the Borrower,
on an accounting basis consistent with Guarantor's audited financial statements.
The Lender further reserves the right to require such
other financial information of Borrower, Guarantor and/or the Facility, in such
form and at such other times (including monthly or more frequently) as Lender
shall reasonably require, and Borrower agrees promptly to provide or to cause to
be provided, such information to Lender. All financial statements must be in the
form and detail as Lender may from time to time reasonably request, provided,
however, that Lender will make reasonable efforts to use Borrower's existing
forms of reports for all purposes.
4.7 COMPLIANCE CERTIFICATE. At the time of furnishing the
quarterly operating statements required under the foregoing Section, furnish to
Lender a compliance certificate in the form attached hereto as Exhibit "E"
executed by a financial officer of Borrower and of the Lessee.
4.8 BOOKS AND RECORDS. Keep and maintain at all times at the
Facility, and upon Lender's reasonable request make available at the Borrower's
office, complete and accurate books of account and records (including copies of
supporting bills and invoices) adequate to reflect correctly the results of the
operation of the Facility, and copies of all written contracts, subleases (if
any), and other instruments which affect the Property, which books, records,
contracts, subleases (if any) and other instruments shall be subject to
examination and inspection at any reasonable time by Lender (upon reasonable
advance notice, which for such purposes only may be given orally, except in the
case of an emergency or following an Event of Default, in which case no advance
notice shall be required); provided, however, that if an Event of Default has
occurred and is continuing, Borrower shall deliver to Lender upon written demand
all books, records, contracts, subleases (if any) and other instruments relating
to the Facility or its operation and Borrower authorizes Lender to obtain a
credit report on Borrower at any time.
4.9 PAYMENT OF INDEBTEDNESS. Duly and punctually pay or cause
to be paid all other Indebtedness now owing or hereafter incurred by Borrower in
accordance with the terms of such Indebtedness, except such Indebtedness owing
to those other than Lender which is being contested in good faith and with
respect to which any execution against properties of Borrower has been
effectively stayed and for which reserves and collateral for the
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<PAGE> 27
payment and security thereof have been established as determined by Lender in
its sole discretion.
4.10 RECORDS OF ACCOUNTS. Maintain all records, including
records pertaining to the Accounts of Borrower, at the principal place of
business of Borrower as set forth in this Agreement.
4.11 CONDUCT OF BUSINESS. Conduct, or cause the Lessee to
conduct, the operation of the Facility at all times in a manner consistent with
the level of operation of the Facility as of the date hereof, including without
limitation, the following:
(i) to maintain the standard of care for the
residents of the Facility at all times at a level
necessary to ensure quality care for the residents of
the Facility in accordance with customary and prudent
industry standards;
(ii) to operate the Facility in a prudent manner
and in compliance with applicable laws and regulations
relating thereto and cause all Permits, Reimbursement
Contracts, and any other agreements necessary for the
use and operation of the Facility or as may be necessary
for participation in the Medicaid, Medicare, or other
applicable reimbursement programs if Lessee, in its sole
discretion, elects to participate in any such program to
remain in effect without reduction in the number of
licensed beds authorized for use in the Medicaid,
Medicare, or other applicable reimbursement programs;
(iii) to maintain sufficient Inventory and
Equipment of types and quantities at the Facility to
enable Lessee adequately to perform operations of the
Facility;
(iv) to keep all Improvements and Equipment
located on or used or useful in connection with the
Facility in good repair, working order and condition,
reasonable wear and tear excepted, and from time to time
make all needed and proper repairs, renewals,
replacements, additions, and improvements thereto to
keep the same in good operating condition;
(v) to maintain sufficient cash in the operating
accounts of the Facility in order to satisfy the working
capital needs of the Facility; and
(vi) to keep all required Permits current and in
full force and effect.
4.12 PERIODIC SURVEYS. Furnish or cause Lessee to furnish to
Lender, within thirty (30) days of receipt, a copy of any Medicare, Medicaid, or
other licensing agency survey or report and any
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<PAGE> 28
statement of deficiencies and/or any other report indicating that any action is
pending or being considered to downgrade the Facility to a substandard category,
and within the time period required by the particular agency for furnishing a
plan of correction also furnish or cause to be furnished to Lender a copy of the
plan of correction generated from such survey or report for the Facility, and
correct or cause to be corrected any deficiency, the curing of which is a
condition of continued licensure or for full participation in Medicaid, Medicare
or other reimbursement program pursuant to any Reimbursement Contract for
existing residents or for new residents to be admitted with Medicaid or Medicare
coverage, if Borrower or Lessee, in its sole discretion, elects to participate
in any such program, by the date required for cure by such agency (plus
extensions granted by such agency).
4.13 DEBT SERVICE COVERAGE REQUIREMENTS.
a. Maintain (commencing with the closing of the Loan),
and, within forty-five (45) days after the end of each fiscal quarter of the
Facility, provide evidence satisfactory to the Lender of the achievement of, the
following Debt Service Coverage for the Facility ratios until the Loan
Obligations are paid in full:
(i) a Debt Service Coverage for the Facility,
after deduction of Actual Management Fees, of not less
than 1.0 to 1.0; and
(ii) a Debt Service Coverage for the Facility,
after deduction of Assumed Management Fees, of not less
than 1.25 to 1.0.
b. If the Facilities fail for two consecutive quarters
to achieve or provide evidence of achievement of the Debt Service Coverage for
the Facility, upon fifteen (15) days written notice to Borrower, Borrower will
deposit with Lender additional cash or other liquid collateral in an amount
which, when added to the first number of the debt service coverage calculation,
would have resulted in the noncomplying debt service coverage requirement having
been satisfied. If such failure continues for four (4) consecutive quarters
after deposit of the requisite additional cash or other liquid collateral, upon
fifteen (15) days written notice to Borrower, Borrower will deposit with Lender
additional cash or other liquid collateral (with credit for amounts currently
being held by Lender pursuant to the foregoing sentence), in an amount which, if
the same had been applied on the first day of the first quarter for which such
noncompliance of the debt service coverage requirement occurred to reduce the
outstanding principal indebtedness of the Loan Obligations, would have resulted
in the noncomplying debt service coverage requirement having been satisfied, and
Borrower agrees promptly to provide such additional cash or other liquid
collateral. Such additional Collateral will be held by the Lender in a standard
custodial account, and shall
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constitute additional collateral for the Loan Obligations and an "Account" as
defined in this Agreement, and, upon the occurrence of an Event of Default, may
be applied by the Lender, in such order and manner as the Lender may elect, to
the reduction of the Loan Obligations. Borrower shall not be entitled to any
interest earned on such additional Collateral. Provided that there is no
outstanding Default or Event of Default, such additional Collateral which has
not been applied to the Loan Obligations will be released by the Lender at such
time as Borrower provides the Lender with evidence that the required debt
service coverage requirements outlined above have been achieved and maintained
(without regard to any cash deposited pursuant to this Section 4.13) as of the
end of each of two (2) consecutive quarters.
4.14 OCCUPANCY. Maintain or cause to be maintained at all
times a daily average annual (calender year) occupancy for the Facility, on a
combined basis, of eighty percent (80%) or more (based on the number of beds
available at each Facility with the minimum number of beds available at any
Facility remaining at or in excess of the number of beds set forth in the
Facility description in Schedule I); provided, however, that failure to maintain
such occupancy level shall not constitute an Event of Default if, at such time,
the Debt Service Coverage for the Facility ratios are being achieved.
4.15 CAPITAL EXPENDITURES. Maintain and cause the Lessee to
maintain the Facility in good condition and make minimum capital expenditures
for the Facility in each fiscal year in the amount of $250 per unit, on a
combined basis, (which capital expenditures may include those necessary for
ordinary repairs and routine maintenance), commencing the first year of the Loan
term (with the exception of the Loma Linda Facility for which such expenditures
shall commence the second year of the Loan term) and, within ninety (90) days of
the end of such fiscal year, provide evidence thereof satisfactory to Lender. In
determining whether or not such requirement has been met, with respect to each
Facility, the Lender will carry forward to the next year(s) the excess amount of
capital expenditures made for such Facility in excess of $250.00 per unit in any
one year. In the event that Borrower shall fail to do so, Borrower shall, upon
Lender's written request, immediately establish and maintain a capital
expenditures reserve fund with Lender equal to the difference between the
required amount per unit and the amount per unit actually spent by the Borrower.
Borrower grants to Lender a right of setoff against all moneys in the capital
expenditures reserve fund, and Borrower shall not permit any other Lien to exist
upon such fund. The proceeds of such capital expenditures reserve fund will be
disbursed monthly upon Lender's receipt of satisfactory evidence that Borrower
has made the required capital expenditures. Upon Borrower's failure to
adequately maintain the Facility in good condition, Lender may, but shall not be
obligated to, make such capital expenditures and may apply the moneys in the
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<PAGE> 30
capital expenditures reserve fund for such purpose. To the extent there are
insufficient moneys in the capital expenditures reserve fund for such purposes,
all funds advanced by Lender to make such capital expenditures shall constitute
a portion of the Loan Obligations, shall be secured by the Mortgage and shall
accrue interest at the Default Rate until paid. Upon an Event of Default, Lender
may apply any moneys in the capital expenditures reserve fund to the Loan
Obligations, in such order and manner as Lender may elect. For any partial
fiscal year during which the Loan is outstanding, the required expenditure
amount shall be prorated by multiplying the total of the required amount per
unit by a fraction, the numerator of which is the number of days during such
year for which all or part of the Loan is outstanding and the denominator of
which is the number of days in such year.
4.16 MANAGEMENT AGREEMENT. Not permit the termination (except
upon issuance of a Permit to the Lessee of the Oceanside Facility), amendment or
assignment of the Management Agreement unless the prior written consent of
Lender is first obtained, which consent shall not be unreasonably withheld.
Borrower will enter and cause the Guarantor to enter into the Subordination
Agreement. Borrower will not enter into any other management agreement without
Lender's prior written consent, which consent shall not be unreasonably
withheld.
4.17 UPDATED APPRAISALS. For so long as the Loan remains
outstanding, if any Event of Default shall occur hereunder, or if, in Lender's
judgment, a material depreciation in the value of the Property shall have
occurred, then in any such event, Lender may cause the Property to be appraised
by an appraiser selected by Lender, and in accordance with Lender's appraisal
guidelines and procedures then in effect, and Borrower agrees to cooperate in
all respects with such appraisals and furnish to the appraisers all requested
information regarding the Property and the Facility. Borrower agrees to pay all
reasonable costs incurred by Lender in connection with such appraisal which
costs shall be secured by the Mortgage and shall accrue interest at the Default
Rate until paid.
4.18 COMPLY WITH COVENANTS AND LAWS. Comply, and cause the
Lessee to comply in all material respects, with all applicable covenants and
restrictions of record and all laws, ordinances, rules and regulations and keep
the Facility and the Property in compliance in all material respects with
applicable laws, ordinances, rules and regulations, including, without
limitation, the Americans with Disabilities Act and regulations promulgated
thereunder, and laws, ordinances, rules and regulations relating to zoning,
health, building codes, setback requirements, Medicaid and Medicare laws, if
applicable, and keep the Permits for the Facility in full force and effect.
4.19 TAXES AND OTHER CHARGES. Subject to Borrower's right to
contest the same as set forth in Section 9(c) of the Mortgage, pay and cause the
Lessee to pay all taxes, assessments, charges, claims for labor, supplies, rent,
and other obligations which, if unpaid,
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might give rise to a Lien against property of Borrower, except Liens to the
extent permitted by this Agreement.
4.20 COMMITMENT LETTER. Provide all items and pay all amounts
required by the Commitment Letter. If any term of the Commitment Letter shall
conflict with the terms of this Agreement, this Agreement shall govern and
control. As to any matter contained in the Commitment Letter, and as to which no
mention is made in this Agreement or the other Loan Documents, the Commitment
Letter shall continue to be in effect and shall survive the execution of this
Agreement and all other Loan Documents.
4.21 CERTIFICATE. Upon Lender's written request, furnish
Lender with a certificate stating that Borrower has complied with and is in
compliance with all terms, covenants and conditions of the Loan Documents to
which Borrower is a party and that there exists no Default or Event of Default
or, if such is not the case, that one or more specified events have occurred,
and describing such event.
4.22 NOTICE OF FEES OR PENALTIES. Notify Lender, within 15
days of Borrower's knowledge thereof, of the assessment by any state or any
Medicare, Medicaid, health or licensing agency of any material fines or
penalties against Borrower, Lessee or the Facility.
4.23 LOAN CLOSING CERTIFICATION. Immediately notify Lender,
in writing, in the event any representation, warranty or covenant contained
herein or in that certain Loan Closing Certification, executed by Borrower for
the benefit of Lender of even date herewith, becomes untrue in any material
respect.
4.24 LEASE AGREEMENT.
a. Maintain the Lease Agreement in full force and effect
and timely perform all of its obligations thereunder and not permit the
termination or amendment of the Lease Agreement unless the prior written consent
of Lender is first obtained (which consent will not be unreasonably withheld or
delayed); provided, however, that the Lender's prior consent shall not be
required for termination of the Lease Agreement in the event of emergency
situations (i.e., termination of the Facility's license);
b. In the event that proceedings are instituted to
terminate the Facility's license, immediately engage oversight management
services from a management company reasonably acceptable to Lender; and
c. In the event that bankruptcy or insolvency proceedings
are instituted by or against the Lessee, Borrower shall (to the extent permitted
by the applicable bankruptcy court having jurisdiction over such proceedings),
upon written instruction received from Lender, terminate the Lease Agreement.
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ARTICLE V
NEGATIVE COVENANTS OF BORROWER
Until the Loan Obligations have been paid in full, Borrower shall not:
5.1 ASSIGNMENT OF LICENSES AND PERMITS. Assign or transfer
any of its interest in the Permits, or Reimbursement Contracts, if any,
(including rights to payment thereunder) pertaining to the Facility, or assign,
transfer, or remove or permit any other person to assign, transfer, or remove
any records pertaining to the Facility including, without limitation, resident
records, medical and clinical records (except for removal of such resident
records as directed by the residents owning such records, without Lender's prior
written consent, which consent may be granted or refused in Lender's sole
discretion.
5.2 NO LIENS; EXCEPTIONS. Create, incur, assume or suffer to
exist any Lien upon or with respect to the Facility or any of its properties,
rights, income or other assets relating thereto, including, without limitation,
the Collateral, whether now owned or hereafter acquired, other than the
following permitted Liens ("Permitted Encumbrances"):
a. Liens at any time existing in favor of the Lender;
b. Liens which are listed in Exhibit "F" attached hereto;
c. Inchoate Liens arising by operation of law for the
purchase of labor, services, materials, equipment or supplies, provided payment
shall not be delinquent and, if such Lien is a lien upon any of the Property or
Improvements, such Lien must be fully disclosed to Lender and bonded off and
removed from the Property and Improvements within thirty (30) days of its
creation in a manner satisfactory to Lender;
d. Liens incurred in the ordinary course of business in
connection with workers' compensation, unemployment insurance or other forms of
governmental insurance or benefits, or to secure performance of tenders,
statutory obligations, leases and contracts (other than for money borrowed or
for credit received with respect to property acquired) entered into in the
ordinary course of business as presently conducted or to secure obligations for
surety or appeal bonds;
e. Liens for current year's taxes, assessments or
governmental charges or levies not yet due and payable; and
f. Liens securing indebtedness permitted under Section
3.24.
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5.3 MERGER, CONSOLIDATION, ETC. Except as otherwise provided
in the Mortgage, consummate any merger, consolidation or similar transaction, or
sell, assign, lease or otherwise dispose of (whether in one transaction or in a
series of transactions), all or substantially all of its assets (whether now or
hereafter acquired), without the prior written consent of the Lender, which
consent may be granted or refused in Lender's sole discretion.
5.4 MAINTAIN SINGLE-PURPOSE ENTITY STATUS.
a. Dissolve or terminate or materially amend the terms of
its certificate of incorporation, articles of organization, operating agreement
or partnership agreement, as applicable, the terms of which require Borrower to
be a Single-Purpose Entity;
b. enter into any transaction of merger or consolidation,
or liquidate or dissolve itself (or suffer any liquidation or dissolution), or
acquire by purchase or otherwise all or substantially all the business or assets
of, or any Stock or other evidence of beneficial ownership of, any Person;
c. guarantee or otherwise become liable on or in
connection with any obligation of any other Person;
d. at any time own any encumbered asset other than (i)
the Property, and (ii) incidental personal property necessary for the operation
of the Property;
e. at any time be engaged directly or indirectly, in any
business other than the ownership, management and operation of the Property;
f. enter into any contract or agreement with any general
partner, principal, member or Affiliate of Borrower or any Affiliate of any
general partner, principal or member of Borrower except upon terms and
conditions that are intrinsically fair and substantially similar to those that
would be available on an arm's-length basis with third parties other than an
Affiliate;
g. incur, create or assume any indebtedness, secured or
unsecured, direct or contingent (including guaranteeing any obligation), other
than (i) the Loan, and (ii) indebtedness which represents trade payables or
accrued expenses incurred in the ordinary course of business of owning and
operating the Property, indebtedness secured by purchase money liens or
represented by equipment or vehicle leases, provided that the aggregate amount
of such indebtedness incurred with respect to a Facility does not exceed the
lesser of $500,000 or five percent (5%) of the portion of the Loan allocated to
such Facility as shown on Exhibit B; no other debt will be secured (senior,
subordinate or pari passu) by the Property except for an additional lien on
accounts receivable which may be granted by Borrower in the future solely in
compliance with the terms of the Mortgage;
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<PAGE> 34
h. make any loans or advances to any third party
(including any Affiliate);
i. become insolvent or fail to pay its debts from its
assets as the same shall become due;
j. fail to do all things necessary to preserve its
existence as a Single-Purpose Entity, and will not, nor will any partner,
limited or general, member or shareholder thereof, amend, modify or otherwise
change its partnership certificate, partnership agreement, articles of
organization, operating agreement, articles of incorporation or by-laws in a
manner which adversely affects Borrower's existence as a Single-Purpose Entity;
k. fail to conduct and operate its business as presently
conducted and operated; provided however, that no default shall exist hereunder
if Borrower engages in activities closely related to and compatible with
assisted living or offers additional services not offered on the date hereof to
the extent permitted under applicable law with respect to assisted living
facilities;
l. fail to maintain books and records and bank accounts
separate from those of its Affiliates, including its members, general partners
or shareholders, as applicable;
m. fail to at all times hold itself out to the public as
a legal entity separate and distinct from any other entity (including any
Affiliate thereof, including the general partner or any member or shareholder of
Borrower or any Affiliate of the general partner or any member or shareholder of
Borrower, as applicable);
n. fail to file its own tax returns;
o. fail to maintain adequate capital for the normal
obligations reasonably foreseeable in a business of its size and character and
in light of its contemplated business operations;
p. seek the dissolution or winding up, in whole or in
part, of Borrower;
q. commingle the funds and other assets of Borrower with
those of any general partner, any member, any shareholder, any Affiliate or any
other Person;
r. fail to maintain its assets in such a manner that it
is not costly or difficult to segregate, ascertain or identify its individual
assets from those of any Affiliate or any other Person; and
s. hold itself out to be responsible for the debts or
obligations of any other Person.
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5.5 CHANGE OF BUSINESS. Make any material change in the
nature of its business as it is being conducted as of the date hereof; provided,
however, that Borrower may engage in activities closely related to and
compatible with assisted living and offer additional services not offered on the
date hereof to the extent permitted with respect to assisted living facilities
and under applicable Permits.
5.6 CHANGES IN ACCOUNTING. Change its methods of accounting,
unless such change is permitted by GAAP, and provided such change does not have
the effect of curing or preventing what would otherwise be an Event of Default
or Default had such change not taken place.
5.7 ERISA FUNDING AND TERMINATION. Permit (a) the funding
requirements of ERISA with respect to any employee plan to be less than the
minimum required by ERISA at any time, or (b) any employee plan to be subject to
involuntary termination proceedings at any time.
5.8 TRANSACTIONS WITH AFFILIATES. Enter into any transaction
with any Affiliate of Borrower other than in the ordinary course of its business
and on fair and reasonable terms no less favorable to Borrower than those it
could obtain in a comparable arms-length transaction with a Person not an
Affiliate.
5.9 TRANSFER OF OWNERSHIP INTERESTS. Except as otherwise
provided in the Mortgage, permit a change in the majority ownership of the stock
of Borrower as of the date of this Agreement unless the written consent of the
Lender is first obtained, which consent may be granted or refused in Lender's
sole discretion.
5.10 CHANGE OF USE. Alter or change the use of the Facility
or permit any management agreement other than the Management Agreement or lease
(other than the Lease Agreement and a sublease which, together with all other
space and personal property leases entered into by Borrower as landlord, with
respect to a single facility, does not exceed, when added together with all
purchase money security interests applicable to such Facility, does not exceed
the lesser of $500,000 or 5% of the portion of the Loan allocated to such
Facility, as set forth on Exhibit B) for the Facility or enter into any
operating lease for the Facility, unless Borrower first notifies Lender and
provides Lender a copy of the proposed lease agreement or management agreement,
obtains Lender's written consent thereto, which consent shall not be
unreasonably withheld, and obtains and provides Lender with a subordination
agreement in form satisfactory to Lender, as determined by Lender in its sole
reasonable discretion, from such Lessee or lessee subordinating to all rights of
Lender.
5.11 PLACE OF BUSINESS. Change its chief executive office or
its principal place of business, as set forth on Exhibit B hereto, without first
giving Lender at least thirty (30) days prior written notice thereof and
promptly providing Lender such information and
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amendatory financing statements as Lender may request in connection therewith.
5.12 ACQUISITIONS. Directly or indirectly, purchase, lease,
manage, own, operate, or otherwise acquire any property or other assets (or any
interest therein) which are not used in connection with the operation of the
Facility.
ARTICLE VI
ENVIRONMENTAL HAZARDS
6.1 PROHIBITED ACTIVITIES AND CONDITIONS. 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 6.2, Borrower shall
not cause or permit any of the following:
a. The presence, use, generation, release, treatment,
processing, storage (including storage in above ground and underground storage
tanks), handling, or disposal-of any Hazardous Materials in, on or under the
Property or any Improvements;
b. The transportation of any Hazardous Materials to,
from, or across the Property;
c. Any occurrence or condition on the Property or in the
Improvements or any other property of Borrower that is adjacent to the Property,
which occurrence or condition is or may be in violation of Hazardous Materials
Laws; or
d. Any violation of or noncompliance with the terms of
any Environmental Permit with respect to the Property, the Improvements or any
property of Borrower that is adjacent to the Property.
The matters described in clauses (a) through (d) above are referred to
collectively in this Article VI as "Prohibited Activities and Conditions" and
individually as a "Prohibited Activity and Condition."
6.2 EXCLUSIONS. Notwithstanding any other provision of
Article VI to the contrary, "Prohibited Activities and Conditions" shall not
include the safe and lawful use and storage of quantities of (i) pre- packaged
supplies, medical waste, cleaning materials and petroleum products customarily
used in the operation and maintenance of comparable Facilities, (ii) cleaning
materials, personal grooming items and other items sold in pre-packaged
containers for consumer use and used by occupants of the Facility; and (iii)
petroleum products used in the operation and maintenance of motor vehicles from
time to time located on the Property's parking areas, so long as all of the
foregoing are used, stored,
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handled, transported and disposed of in compliance with Hazardous Materials
Laws.
6.3 PREVENTIVE ACTION. Borrower shall take all appropriate
steps (including the inclusion of appropriate provisions in any Leases approved
by Lender which are executed after the date of this Agreement) to prevent its
employees, agents, contractors, tenants and occupants of the Facility from
causing or permitting any Prohibited Activities and Conditions.
6.4 O & M PROGRAM COMPLIANCE. If an O&M Program has been
established with respect to Hazardous Materials, Borrower shall comply
in a timely manner with, and cause all employees, agents, and contractors of
Borrower and any other persons present on the 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 Loan Obligations.
6.5 BORROWER'S ENVIRONMENTAL REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants to Lender that, except as previously disclosed
by Borrower to Lender in writing:
a. Borrower has not at any time caused or permitted any
Prohibited Activities and Conditions.
b. No Prohibited Activities and Conditions exist or have
existed.
c. The Property and the Improvements do not now contain
any underground storage tanks, and, to the best of Borrower's knowledge after
reasonable and diligent inquiry, the Property and the Improvements have not
contained any underground storage tanks in the past. If there is an underground
storage tank located on the Property or the Improvements which has been
previously disclosed by Borrower to Lender in writing, that tank complies with
all requirements of Hazardous Materials Laws.
d. 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
Property and the Improvements in accordance with Hazardous Materials Laws now in
effect and all such Environmental Permits are in full force and effect. No event
has occurred with respect to the Property and/or Improvements that constitutes,
or with the passing of time or the giving of notice would constitute,
noncompliance with the terms of any Environmental Permit.
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e. 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 Property and/or the Improvements and
allege, arise out of, or relate to any Prohibited Activity and Condition.
f. 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 Property, the
Improvements or any other property of Borrower that is adjacent to the Property.
The representations and warranties in this Article VI 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 Loan
Obligations have been paid in full.
6.6 NOTICE OF CERTAIN EVENTS. Borrower shall promptly notify
Lender in writing of any and all of the following that may occur:
a. Borrower's discovery of any Prohibited Activity and
Condition.
b. 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 and Conditions or any other environmental, health or safety matters
affecting the Property, the Improvements or any other property of Borrower that
is adjacent to the Property.
c. Any representation or warranty in this Article VI
which becomes untrue at any time 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 Agreement, the Note, or
any of the other Loan Documents.
6.7 COSTS OF INSPECTION. Borrower shall pay promptly the
costs of any environmental inspections, tests or audits required by Lender in
connection with any foreclosure or deed in lieu of foreclosure, or, if required
by Lender, as a condition of Lender's consent to any "Transfer" (as defined in
the Mortgage), or required by Lender following a reasonable determination by
Lender that Prohibited Activities and 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 Loan Obligations.
6.8 REMEDIAL WORK. If any investigation, site monitoring,
containment, clean-up, restoration or other remedial work
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("Remedial Work") is necessary to comply with any Hazardous Materials Laws or
order of any Governmental Authority that has or acquires jurisdiction over the
Property, the Improvements or the use, operation or improvement of the Property
under any Hazardous Materials Laws, Borrower shall, by the earlier of (1) the
applicable deadline required by Hazardous Materials Laws 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 such work by the time required by applicable Hazardous Materials Laws.
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 Loan Obligations.
6.9 COOPERATION WITH GOVERNMENTAL AUTHORITIES. 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 and Condition.
6.10 INDEMNITY.
a. Borrower shall hold harmless, defend and indemnify
(i) Lender, (ii) any prior owner or holder of the Note, (iii) the officers,
directors, partners, agents, shareholders, employees and trustees of any of the
foregoing, and (iv) the heirs, legal representatives, successors and assigns of
each of the foregoing (together, the "Indemnitees") against all proceedings,
claims, damages, losses, expenses, penalties and costs (whether initiated or
sought by any Governmental Authority 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 Article VI.
2. Any failure by Borrower to perform any of its
obligations under this Article VI.
3. The existence or alleged existence of any
Prohibited Activity and Condition.
4. The presence or alleged presence of Hazardous
Materials in, on, or around under the Property, the Improvements or any property
of Borrower that is adjacent to the Property, or
5. Actual or alleged violation of any Hazardous
Materials Laws.
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b. Counsel selected by Borrower to defend Indemnitees
shall be subject to the approval of those Indemnitees. Notwithstanding anything
contained herein, any Indemnitee may elect to defend any claim or legal or
administrative proceeding at the Borrower's expense if such Indemnitee has
reason to believe that its interests are not being adequately represented or
diverge from other interests being represented by such counsel (but Borrower
shall be obligated to bear the expense of at most only one such separate
counsel). Nothing contained herein shall prevent an Indemnitee from employing
separate counsel in any such action at any time and participating in the defense
thereof at its own expense.
c. 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 any Indemnitee, as determined
by such Indemnitee in its sole discretion.
d. The liability of Borrower 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 of the Loan Documents.
3. The accuracy or inaccuracy of any representations
and warranties made by Borrower under this Agreement or any other Loan Document.
4. The release of Borrower or any other person, by
Lender or by operation of law, from performance of any obligation under any of
the Loan Documents.
5. The release or substitution in whole or in part of
any security for the Loan Obligations.
6. Lender's failure to properly perfect any lien or
security interest given as security for the Loan Obligations.
e. 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
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administrative proceeding incident to any matters against which Indemnitees are
entitled to be indemnified under this Article VI.
2. Reimburse Indemnitees for any expenses paid or
incurred in connection with any matters against which Indemnitees are entitled
to be indemnified under this Article VI.
3. Reimburse Indemnitees for any and all expenses,
including reasonable fees and costs of attorneys and expert witnesses, paid or
incurred in connection with the enforcement by Indemnitees of their rights under
this Article VI, or in monitoring and participating in any legal or
administrative proceeding.
f. In any circumstances in which the indemnity under this
Article VI 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 reasonable fees and out of
pocket expenses of such attorneys and consultants.
g. The provisions of this Article VI shall be in addition
to any and all other obligations and liabilities that Borrower may have under
the applicable law or under the other Loan Documents, and each Indemnitee shall
be entitled to indemnification under this Article VI without regard to whether
Lender or that Indemnitee has exercised any rights against the Property and/or
the Improvements 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
Article VI shall be joint and several. The obligations of Borrower to indemnify
the Indemnitees under this Article VI shall survive any repayment or discharge
of the Loan Obligations, any foreclosure proceeding, any foreclosure sale, any
delivery of any deed in lieu of foreclosure, and any release of record of the
lien of the Mortgage.
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
7.1 EVENTS OF DEFAULT. The occurrence of any one or more of
the following shall constitute an "Event of Default" hereunder:
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a. The failure by Borrower to pay any installment of
principal, interest, or other payments required under the Note, within five (5)
days after the same becomes due; or
b. Borrower's violation of any covenant set forth in
Article V hereof; or
c. Borrower's failure to deliver or cause to be delivered
the financial statements and information set forth in Section 4.6 above within
the times required and such failure is not cured within thirty (30) days
following Lender's written notice to Borrower thereof; or
d. The failure of Borrower properly and timely to perform
or observe any covenant or condition set forth in this Agreement (other than
those specified in (a), (b) and (c) of this Section) or any other Loan Documents
which is not cured within any applicable cure period as set forth herein or, if
no cure period is specified therefor, is not cured within thirty (30) days of
Lender's notice to Borrower of such Default; provided, however, that if such
default cannot be cured within such thirty (30) day period, such cure period
shall be extended for an additional sixty (60) days, as long as Borrower is
diligently and in good faith prosecuting said cure to completion; or
e. The filing by Borrower or Guarantor of a voluntary
petition, or the adjudication of any of the aforesaid Persons, or the filing by
any of the aforesaid Persons of any petition or answer seeking or acquiescing,
in any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief for itself under any present or future federal,
state or other statute, law or regulation relating to bankruptcy, insolvency or
other relief for debtors, or if any of the aforesaid Persons should seek or
consent to or acquiesce in the appointment of any trustee, receiver or
liquidator for itself or of all or any substantial part of its property or of
any or all of the rents, revenues, issues, earnings, profits or income thereof,
or the mailing of any general assignment for the benefit of creditors or the
admission in writing by any of the aforesaid Persons of its inability to pay its
debts generally as they become due; or
f. The entry by a court of competent jurisdiction of an
order, judgment, or decree approving a petition filed against Borrower or
Guarantor which petition seeks any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future federal, state or other statute, law or regulation relating to
bankruptcy, insolvency, or other relief for debtors, which order, judgment or
decree remains unvacated and unstayed for an aggregate of sixty (60) days
(whether or not consecutive) from the date of entry thereof, or the appointment
of any trustee, receiver or liquidator of any of the aforesaid Persons or of all
or any substantial part of its properties or of any or all of the rents,
revenues, issues,
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earnings, profits or income thereof, which appointment shall remain unvacated
and unstayed for an aggregate of sixty (60) days (whether or not consecutive);
or
g. Unless otherwise permitted hereunder or under any
other Loan Documents, the sale, transfer, lease, assignment, or other
disposition, voluntarily or involuntarily, of the Collateral, or any part
thereof, or, except for Permitted Encumbrances as described in Section 5.2
above, any further encumbrance of the Collateral, unless the prior written
consent of Lender is obtained; or
h. The failure of Borrower to take the corrective
measures required in this Agreement within the time periods specified following
Lender's demand because the Debt Service Coverage for the Facility has not been
met; or
i. Any certificate, statement, representation, warranty
or audit heretofore or hereafter furnished by or on behalf of Borrower or
Guarantor pursuant to or in connection with this Agreement (including, without
limitation, representations and warranties contained herein or in any Loan
Documents) or as an inducement to Lender to make the Loan to Borrower, (i)
proves to have been false in any material respect at the time when the facts
therein set forth were stated or certified, or (ii) proves to have omitted any
substantial contingent or unliquidated liability or claim against Borrower, or
(iii) on the date of execution of this Agreement there shall have been any
material adverse change in any of the facts previously disclosed by any such
certificate, statement, representation, warranty or audit, which change shall
not have been disclosed to Lender in writing at or prior to the time of such
execution; or
j. The failure of Borrower to correct or cause the Lessee
to correct, within the time deadlines set by any applicable Medicare, Medicaid
or licensing agency, any deficiency which would result in the following actions
by such agency with respect to the Facility:
1. a termination of any Reimbursement Contract
or any Permit; or
2. a ban on new admissions generally or on
admission of patients otherwise qualifying for Medicare or
Medicaid coverage; or
k. The Borrower or the Facility should be assessed fines
or penalties by any state or any Medicare, Medicaid, health or licensing agency
having jurisdiction over such Persons or the Facility in excess of $25,000 which
are not paid within the time specified therefor; or
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l. A final judgment shall be rendered by a court of law
or equity against Borrower in excess of $25,000, and the same shall remain
undischarged for a period of thirty (30) days, unless such judgment is either
(i) fully covered by collectible insurance and such insurer has within such
period acknowledged such coverage in writing, or (ii) although not fully covered
by insurance, enforcement of such judgment has been effectively stayed, such
judgment is being contested or appealed by appropriate proceedings and Borrower
or Guarantor, as the case may be, has established reserves adequate for payment
in the event such Person is ultimately unsuccessful in such contest or appeal
and evidence thereof is provided to Lender; or
m. The occurrence of any material adverse change in the
financial condition or prospects of Borrower or Guarantor, or the existence of
any other condition which, in Lender's reasonable determination, constitutes a
material impairment of any such Person's ability to operate the Facility or of
such Person's ability to perform their respective obligations under the Loan
Documents, and is not remedied within thirty (30) days after written notice.
n. The Lease Agreement is terminated.
Notwithstanding anything in this Section, all
requirements of notice shall be deemed eliminated if Lender is prevented from
declaring an Event of Default by bankruptcy or other applicable law. The cure
period, if any, shall then run from the occurrence of the event or condition of
Default rather than from the date of notice.
7.2 REMEDIES. Upon the occurrence of any one or more of the
foregoing Events of Default, the Lender may, at its option:
a. Declare the entire unpaid principal of the Loan
Obligations to be, and the same shall thereupon become, immediately due and
payable, without presentment, protest or further demand or notice of any kind,
all of which are hereby expressly waived.
b. Proceed to protect and enforce its rights by action at
law (including, without limitation, bringing suit to reduce any claim to
judgment), suit in equity and other appropriate proceedings including, without
limitation, for specific performance of any covenant or condition contained in
this Agreement.
c. Exercise any and all rights and remedies afforded by
the laws of the United States, the states in which any of the Property or other
Collateral is located or any other appropriate jurisdiction as may be available
for the collection of debts and enforcement of covenants and conditions such as
those contained in this Agreement and the Loan Documents.
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d. Exercise the rights and remedies of setoff and/or
banker's lien against the interest of Borrower in and to every account and other
property of Borrower which is in the possession of the Lender or any person who
then owns a participating interest in the Loan, to the extent of the full amount
of the Loan.
e. Exercise its rights and remedies pursuant to any other
Loan Documents.
ARTICLE VIII
MISCELLANEOUS
8.1 WAIVER. No remedy conferred upon, or reserved to, the
Lender in this Agreement or any of the other Loan Documents is intended to be
exclusive of any other remedy or remedies, and each and every remedy shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing in law or in equity. Exercise of or omission to exercise
any right of the Lender shall not affect any subsequent right of Lender to
exercise the same. No course of dealing between Borrower and Lender or any delay
on the Lender's part in exercising any rights shall operate as a waiver of any
of the Lender's rights. No waiver of any Default under this Agreement or any of
the other Loan Documents shall extend to or shall affect any subsequent or other
then existing Default or shall impair any rights, remedies or powers of Lender.
8.2 COSTS AND EXPENSES. Borrower will bear all taxes, fees
and expenses (including reasonable attorneys' fees and expenses of counsel for
Lender) in connection with the Loan, the Note, the preparation of this Agreement
and the other Loan Documents (including any amendments hereafter made), and in
connection with any modifications thereto and the recording of any of the Loan
Documents. If, at any time, a Default occurs or Lender becomes a party to any
suit or proceeding in order to protect its interests or priority in any
Collateral for any of the Loan Obligations or its rights under this Agreement or
any of the Loan Documents, or if Lender is made a party to any suit or
proceeding by virtue of the Loan, this Agreement or any Collateral and as a
result of any of the foregoing, the Lender employs counsel to advise or provide
other representation with respect to this Agreement, or to collect the balance
of the Loan Obligations, or to take any action in or with respect to any suit or
proceeding relating to this Agreement, any of the other Loan Documents, the
Lease Agreement, any Collateral, Borrower, any Guarantor or Lessee or to
protect, collect, or liquidate any of the security for the Loan Obligations, or
attempt to enforce any security interest or lien granted to the Lender by any of
the Loan Documents, then in any such events, all of the actual attorney's fees
arising from such services, including attorneys' fees for preparation of
litigation and in any appellate or bankruptcy proceedings, and any expenses,
costs and charges relating thereto shall constitute additional obligations of
Borrower to the Lender payable on demand of the Lender. Without
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limiting the foregoing, Borrower has undertaken the obligation for payment of,
and shall pay, all recording and filing fees, revenue or documentary stamps or
taxes, intangibles taxes, and other taxes, expenses and charges payable in
connection with this Agreement, any of the Loan Documents, the Loan Obligations,
or the filing of any financing statements or other instruments required to
effectuate the purposes of this Agreement, and should Borrower fail to do so,
Borrower agrees to reimburse Lender for the amounts paid by Lender, together
with penalties or interest, if any, incurred by Lender as a result of
underpayment or nonpayment. Such amounts shall constitute a portion of the Loan
Obligations, shall be secured by the Mortgage and shall bear interest at the
Default Rate from the date advanced until repaid.
8.3 PERFORMANCE OF LENDER. At its option, upon Borrower's
failure to do so, the Lender may make any payment or do any act on Borrower's
behalf that Borrower or others are inquired to do to remain in compliance with
this Agreement or any of the other Loan Documents, and Borrower agrees to
reimburse the Lender, on demand, for any payment made or expense incurred by
Lender pursuant to the foregoing authorization, including, without limitation,
reasonable attorneys' fees, and until so repaid any sums advanced by Lender
shall constitute a portion of the Loan Obligations, shall be secured by the
Mortgage and shall bear interest at the Default Rate from the date advanced
until repaid.
8.4 INDEMNIFICATION. Borrower shall, at its sole cost and
expense, protect, defend, indemnify and hold harmless the Indemnified Parties
from and against any and all claims, suits, liabilities (including, without
limitation, strict liabilities), actions, proceedings, obligations, debts,
damages, losses, costs, expenses, diminutions in value, fines, penalties,
charges, fees, judgments, awards, amounts paid in settlement, punitive damages,
foreseeable and unforeseeable consequential damages, of whatever kind or nature
(including but not limited to reasonable attorneys' fees and other costs of
defense) imposed upon or incurred by or asserted against Lender by reason of (a)
ownership of the Note, the Mortgage, the Property or any interest therein or
receipt of any Rents; (b) any amendment to, or restructuring of, the Loan
Obligations and/or any of the Loan Documents; (c) any and all lawful action that
may be taken by Lender in connection with the enforcement of the provisions of
the Mortgage or the Note or any of the other Loan Documents, whether or not suit
is filed in connection with same, or in connection with Borrower, the Lessee,
any guarantor and/or any partner, joint venturer, member or shareholder thereof
becoming a party to a voluntary or involuntary federal or state bankruptcy,
insolvency or similar proceeding; (d) any accident, injury to or death of
persons or loss of or damage to property occurring in, on or about the Property,
the Improvements or any part thereof or on the adjoining sidewalks, curbs,
adjacent property or adjacent parking areas, streets or ways; (e) any use,
nonuse or condition in, on or about the Property, the Improvements or any part
thereof or on the adjoining sidewalks, curbs, adjacent
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property or adjacent parking areas, streets or ways; (f) any failure on the part
of Borrower, the Lessee, or any guarantor to perform or comply with any of the
terms of this Agreement or any of the other Loan Documents; (g) any claims by
any broker, person or entity claiming to have participated in arranging on
behalf of Borrower the making of the Loan evidenced by the Note; (h) any failure
of the Property to be in compliance with any applicable laws; (i) performance of
any labor or services or the furnishing of any materials or other property with
respect to the Property, the Improvements or any part thereof; (j) the failure
of any person to file timely with the Internal Revenue Service an accurate Form
1099-b, statement for recipients of proceeds from real estate, broker and barter
exchange transactions, which may be required in connection with the Mortgage, or
to supply a copy thereof in a timely fashion to the recipient of the proceeds of
the transaction in connection with which the Loan is made; (k) any
misrepresentation made to Lender in this Agreement or in any of the other Loan
Documents; (l) any tax on the making and/or recording of the Mortgage, the Note
or any of the other Loan Documents; (m) the violation of any requirements of the
Employee Retirement Income Security Act of 1974, as amended; (n) any fines or
penalties assessed or any corrective costs incurred by Lender if the Facility or
any part of the Property is determined to be in violation of any covenants,
restrictions of record, or any applicable laws, ordinances, rules or
regulations; or (o) the enforcement by any of the Indemnified Parties of the
provisions of this Section 8.4; provided, however, that no indemnity shall be
required for any such damages, costs, liabilities, losses or judgments arising
from the gross negligence or willful misconduct of the Indemnified Party. Any
amounts payable to Lender by reason of the application of this Section 8.4 shall
become immediately due and payable and shall constitute a portion of the Loan
Obligations, shall be secured by the Mortgage and shall accrue interest at the
Default Rate. The obligations and liabilities of Borrower under this Section 8.4
shall survive any termination, satisfaction, assignment, entry of a judgment of
foreclosure or exercise of a power of sale or delivery of a deed in lieu of
foreclosure of the Mortgage. For purposes of this Section 8.4, the term
"Indemnified Parties" means Lender and any Person who is or will have been
involved in the origination of the Loan, any Person who is or will have been
involved in the servicing of the Loan, any Person in whose name the encumbrance
created by the Mortgage is or will have been recorded, any Person who may hold
or acquire or will have held a full or partial interest in the Loan (including,
without limitation, any investor in any securities backed in whole or in part by
the Loan) as well as the respective directors, officers, shareholder, partners,
members, employees, agents, servants, representatives, contractors,
subcontractors, affiliates, subsidiaries, participants, successors and assigns
of any and all of the foregoing (including, without limitation, any other Person
who holds or acquires or will have held a participation or other full or partial
interest in the Loan or the Property, whether during the term of the Mortgage or
as a part of or following a foreclosure of
47
<PAGE> 48
the Loan and including, without limitation, any successors by merger,
consolidation or acquisition of all or a substantial portion of Lender's assets
and business).
8.5 HEADINGS. The headings of the Sections of this Agreement
are for convenience of reference only, are not to be considered a part hereof,
and shall not limit or otherwise affect any of the terms hereof.
8.6 SURVIVAL OF COVENANTS. All covenants, agreements,
representations and warranties made herein and in certificates or reports
delivered pursuant hereto shall be deemed to have been material and relied on by
Lender, notwithstanding any investigation made by or on behalf of Lender, and
shall survive the execution and delivery to Lender of the Note and this
Agreement.
8.7 NOTICES, ETC. Any notice or other communication required
or permitted to be given by this Agreement or the other Loan Documents or by
applicable law shall be in writing and shall be deemed received (a) on the date
delivered, if sent by hand delivery (to the person or department if one is
specified below) with receipt acknowledged by the recipient thereof, (b) three
(3) Business Days following the date deposited in the U.S. mail, certified or
registered, with return receipt requested, or (c) one (1) Business Day following
the date deposited with Federal Express or other national overnight carrier, and
in each case addressed as follows:
If to Borrower:
ALS Financing, Inc.
c/o Alternative Living Services, Inc.
450 North Sunnyslope Road, Suite 300
Brookfield, Wisconsin 53005
Attention: Thomas E. Komula
Fax: (414) 789-6182
With a copy to:
Alan C. Leet, Esq.
Rogers & Hardin
2700 International Tower
229 Peachtree Street, N.E.
Atlanta, GA 30303
Fax: (404) 525-2224
provided, however, that failure to send such copies shall not render any such
notice or other communications invalid.
48
<PAGE> 49
If to Lender:
GMAC Commercial Mortgage Corporation
650 Dresher Road
P.O. Box 1015
Horsham, Pennsylvania 19044-8015
ATTN: Servicing Department
with a copy to:
Kelly M. Wrenn, Esquire
Ballard Spahr Andrews & Ingersoll, LLP
601 13th Street, NW Suite 1000 South
Washington, DC 20005-3807
Either party may change its address to another single address by notice given as
herein provided, except any change of address notice must be actually received
in order to be effective.
8.8 BENEFITS. All of the terms and provisions of this
Agreement shall bind and inure to the benefit of the parties hereto and their
respective successors and assigns. No Person other than Borrower or Lender shall
be entitled to rely upon this Agreement or be entitled to the benefits of this
Agreement.
8.9 PARTICIPATION. Borrower acknowledges that Lender may, at
its option, sell participation interests in the Loan or to other participating
banks or Lender may (but shall not be obligated to) assign its interest in the
Loan to its affiliates or to other assignees (the "Assignee") to be included as
a pool of properties to be financed in a proposed Real Estate Mortgage
Investment Conduit (REMIC). Borrower agrees with each present and future
participant in the Loan or Assignee of the Loan that if an Event of Default
should occur, each present and future participant or Assignee shall have all of
the rights and remedies of Lender with respect to any deposit due from the
Borrower. The execution by a participant of a participation agreement with
Lender, and the execution by the Borrower of this Agreement, regardless of the
order of execution, shall evidence an agreement between Borrower and said
participant in accordance with the terms of this Section. If the Loan is
assigned to the Assignee, the Assignee will engage an underwriter (the
"Underwriter"), who will be responsible for the due diligence, documentation,
preparation and execution of certain documents required in connection with the
offering of interests in the REMIC. Borrower agrees that Lender may, at its sole
option and without notice to or consent of the Borrower, assign its interest in
the Loan to the Assignee for inclusion in the REMIC and, in such event,
Borrower agrees to provide the Assignee with such information as may be
reasonably required by the Underwriter in connection therewith or by an investor
in any securities backed in whole or in part by the Loan or any rating agency
rating such securities. Borrower irrevocably waives any and all right it may
have under applicable law to prohibit such disclosure, including,
49
<PAGE> 50
but not limited to, any right of privacy, and consents to the disclosure of such
information to the Underwriter, to potential investors in the REMIC, and to such
rating agencies.
8.10 SUPERSEDES PRIOR AGREEMENTS; COUNTERPARTS. This
Agreement and the instruments referred to herein supersede and incorporate all
representations, promises, and statements, oral or written, made by Lender in
connection with the Loan. This Agreement may not be varied, altered, or amended
except by a written instrument executed by an authorized officer of the Lender.
This Agreement may be executed in any number of counterparts, each of which,
when executed and delivered, shall be an original, but such counterparts shall
together constitute one and the same instrument.
8.11 LOAN AGREEMENT GOVERNS. The Loan is governed by terms
and provisions set forth in this Loan Agreement and the other Loan Documents and
in the event of any irreconcilable conflict between the terms of the other Loan
Documents and the terms of this Loan Agreement, the terms of this Loan Agreement
shall control; provided, however, that in the event there is any apparent
conflict between any particular term or provision which appears in both this
Loan Agreement and the other Loan Documents, and it is possible and reasonable
for the terms of both this Loan Agreement and the Loan Documents to be performed
or complied with, then, notwithstanding the foregoing, both the terms of this
Loan Agreement and the other Loan Documents shall be performed and complied
with.
8.12 CONTROLLING LAW. THE PARTIES HERETO AGREE THAT THE
VALIDITY, INTERPRETATION, ENFORCEMENT AND EFFECT OF THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF KANSAS
AND THE PARTIES HERETO SUBMIT (AND WAIVE ALL RIGHTS TO OBJECT) TO NON-EXCLUSIVE
PERSONAL JURISDICTION IN THE STATE OF KANSAS, FOR THE ENFORCEMENT OF ANY AND ALL
OBLIGATIONS UNDER THE LOAN DOCUMENTS, EXCEPT THAT IF ANY SUCH ACTION OR
PROCEEDING ARISES UNDER THE CONSTITUTION, LAWS OR TREATIES OF THE UNITED STATES
OF AMERICA, OR IF THERE IS A DIVERSITY OF CITIZENSHIP BETWEEN THE PARTIES
THERETO, SO THAT IT IS TO BE BROUGHT IN A UNITED STATES DISTRICT COURT, IT SHALL
BE BROUGHT IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF KANSAS OR ANY
SUCCESSOR FEDERAL COURT HAVING ORIGINAL JURISDICTION.
8.13 WAIVER OF JURY TRIAL. BORROWER AND LENDER HEREBY WAIVE
ANY RIGHT THAT THEY MAY HAVE TO A TRIAL BY JURY ON ANY CLAIM, COUNTERCLAIM,
SETOFF, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING OUT OF OR IN ANY WAY
RELATED TO THIS AGREEMENT OR THE LOAN OR (B) IN ANY WAY CONNECTED WITH OR
PERTAINING OR RELATED TO OR INCIDENTAL TO ANY DEALINGS OF LENDER AND/OR BORROWER
WITH RESPECT TO THE LOAN DOCUMENTS OR IN CONNECTION WITH THIS AGREEMENT OR THE
EXERCISE OF EITHER PARTY'S RIGHTS AND REMEDIES UNDER THIS AGREEMENT OR
OTHERWISE, OR THE CONDUCT OR THE RELATIONSHIP OF THE PARTIES HERETO, IN ALL OF
THE FOREGOING CASES WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER
SOUNDING IN CONTRACT, TORT OR
50
<PAGE> 51
OTHERWISE. BORROWER AND LENDER AGREE THAT EITHER PARTY MAY FILE A COPY OF THIS
AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY, AND
BARGAINED AGREEMENT OF EITHER PARTY HERETO TO IRREVOCABLY WAIVE THEIR RIGHTS TO
TRIAL BY JURY AS AN INDUCEMENT OF LENDER TO MAKE THE LOAN AND THAT, TO THE
EXTENT PERMITTED BY APPLICABLE LAW, ANY DISPUTE OR CONTROVERSY WHATSOEVER
(WHETHER OR NOT MODIFIED HEREIN) BETWEEN BORROWER AND LENDER SHALL INSTEAD BE
TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
[REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
51
<PAGE> 52
8.14 NONRECOURSE. NOTWITHSTANDING ANYTHING TO THE CONTRARY
HEREIN, OR IN ANY OF THE OTHER LOAN DOCUMENTS EVIDENCING THE LOAN, THE LIABILITY
OF THE BORROWER FOR THE PAYMENT OF PRINCIPAL AND INTEREST AND AGREED CHARGES,
AND THE OBSERVANCE AND PERFORMANCE OF ALL OF THE TERMS, COVENANTS, AND
CONDITIONS AND PROVISIONS OF THE NOTE AND THE OTHER LOAN DOCUMENTS, SHALL BE
LIMITED TO THE EXTENT PROVIDED IN THE MORTGAGE AND THE NOTE.
IN WITNESS WHEREOF, the Borrower and the Lender have caused
this Agreement to be properly executed, by their respective duly authorized
representatives, as of the date first above written.
WITNESS: BORROWER:
ALS FINANCING, INC., a Kansas
corporation
By: (SEAL)
-------------------------
David M. Boitano
Vice President
WITNESS: LENDER:
GMAC COMMERCIAL MORTGAGE
CORPORATION, a California
corporation
By: (SEAL)
-------------------------
William E. Shine
Executive Vice President
52
<PAGE> 53
(Alternative Living Services)
SCHEDULE I
"FACILITY" means the following:
(a) the facility known as Crossings at the Palms, presently a
140-bed facility, consisting of 70 assisted living beds and 70 senior housing
beds, and located at 25585 Van Leuven, in Loma Linda, California 92354, as it
may now or hereafter exist, together with any other general and specialized care
facilities, if any (including any Alzheimer's care unit, subacute, and nursing
home facility), now or hereafter operated on the Property ( the "Loma Linda
Facility");
(b) the facility known as "Lake Park Villas," presently a
160-bed assisted living facility located at 3524 Lake Boulevard, in Oceanside,
California 92056, as it may now or hereafter exist, together with any other
general or specialized care facilities, if any (including any Alzheimer's care
unit, subacute, and nursing home facility), now or hereafter operated on the
Property (the "Oceanside Facility");
(c) the facility known as "Sterling House of Augusta",
presently a 21-bed assisted living facility located at 1611 Fairway Drive, in
Augusta, Kansas 67010, as it may now or hereafter exist, together with any other
general or specialized care facilities, if any (including any Alzheimer's care
unit, subacute, and any nursing home facility), now or hereafter operated on the
Property (the "Augusta Facility");
(d) the facility known as "Woodland Terrace," presently a
44-bed assisted living facility located at 1500 Terrace, in Liberal, Kansas
67901, as it may now or hereafter exist, together with any other general or
specialized care facilities, if any (including any Alzheimer's care unit,
subacute, and any nursing home facility), now or hereafter operated on the
Property (the "Liberal Facility"); and
(e) the facility known as "Sterling House at Broadmoor",
presently a 37-bed assisted living facility located at 615 Southpointe Court, in
Colorado Springs, Colorado 80906, as it may now or hereafter exist, together
with any other general or specialized care facilities, if any (including any
Alzheimer's care unit, subacute, and any nursing home facility), now or
hereafter operated on the Property (the "Colorado Springs Facility").
53
<PAGE> 54
EXHIBIT A
[LEGAL DESCRIPTION]
54
<PAGE> 55
EXHIBIT B
[TO BE PROVIDED AND ATTACHED]
55
<PAGE> 56
EXHIBIT C
OWNERSHIP INTERESTS
<TABLE>
<CAPTION>
% of Ownership
Shareholder in Borrower
----------- -----------
<S> <C>
Alternative Living Services, Inc., 100
a Delaware corporation
</TABLE>
56
<PAGE> 57
EXHIBIT D
SUMMARY OF FINANCIAL STATEMENTS
AND CENSUS DATA
Facility Name:
------------------------------------------------------------------
Report Date:
------------------------------------------------------------------
<TABLE>
<CAPTION>
QUARTER QUARTER QUARTER 12 MONTH
ENDING ENDING ENDING ENDING
(DATE) (DATE) (DATE) (DATE)
<S> <C> <C> <C> <C>
CENSUS DATA
Total Number
of Beds:
------- ------- ------- ---------
Number of Days in
Period:
------- ------- ------- ---------
Total Resident Days
Available: ------- ------- ------- ---------
Resident Utilization
Days:
Medicaid
------- ------- ------- ---------
Private
------- ------- ------- ---------
Medicare
------- ------- ------- ---------
Other
------- ------- ------- ---------
Total Utilization
Days:
------- ------- ------- ---------
CASH FLOW ANALYSIS
Total Routine Resident
Revenue:
------- ------- ------- ---------
Total Net
Revenues:
------- ------- ------- ---------
Total
Expenses:
------- ------- ------- ---------
Pre-Tax
Income:
------- ------- ------- ---------
</TABLE>
57
<PAGE> 58
<TABLE>
<S> <C> <C> <C> <C>
ADD BACK
Depreciation and
Amortization:
------- ------- ------- ---------
Interest on
Mortgage:
------- ------- ------- ---------
Facility Lease
Expense (if
applicable):
------- ------- ------- ---------
Management
Fees:
------- ------- ------- ---------
Extraordinary
Items:
------- ------- ------- ---------
Net Operating
Income:
------- ------- ------- ---------
</TABLE>
I hereby certify the above to be true and correct as of the
date for which the information is provided. Dated this ____ day of
________________, 199_.
By:
--------------------------------
Its:
-------------------------------
58
<PAGE> 59
EXHIBIT E
COMPLIANCE CERTIFICATE
GMAC COMMERCIAL MORTGAGE CORPORATION
2200 WOODCREST PLACE, SUITE 305
BIRMINGHAM, ALABAMA 35209
RE: Loan Agreement dated July __, 1998 (together with amendments, if
any, the "Loan Agreement") by and between GMAC Commercial Mortgage
Corporation, as Lender, and ALS Financing, Inc., as Borrower
The undersigned officer of the above-named Borrower, does hereby certify that
for the quarterly financial period ending ____________________:
1. No Default or Event of Default has occurred or exists except
____________________.
2. The Debt Service Coverage for the Facility after deduction of Actual
Management Fees for the preceding twelve (12) months (or such lesser
period as shown have elapsed following the closing of the Loan) through
the end of such period was:
Required: 1.0 to 1.0
Actual: _____ to 1.0
THE MANNER OF CALCULATION IS ATTACHED.
3. The Debt Service Coverage for the Facility after deduction of Assumed
Management Fees for the preceding twelve (12) months (or such lesser
period as shall have elapsed following the closing of the Loan) through
the end of such period was:
Required: 1.25 to 1.0
Actual: _____ to 1.0
THE MANNER OF CALCULATION IS ATTACHED.
4. The fiscal year to date average daily occupancy for the Facility:
Required: Not less than 80%
Actual: __________
5. The capital expenditures per unit was: [ANNUAL COMPLIANCE
CERTIFICATE ONLY]
Required: $250 per unit.
Actual: $______ per unit.
EVIDENCE OF SUCH CAPITAL EXPENDITURES IS ATTACHED.
59
<PAGE> 60
6. Capitalized terms not defined herein shall have the meanings given to
such terms in the Loan Agreement.
7. All information set forth in this Certificate is true and correct in
all material respects (a) as of the date of this Certificate with
respect to Paragraph 1, and (b) as of the end of the quarter for which
the information is provided in all other Paragraphs.
ALS FINANCING, INC., a Kansas corporation,
Borrower
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
ALTERNATIVE LIVING SERVICES, INC., a
Delaware corporation, Lessee
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
Dated this the _____ day of ____________________.
60
<PAGE> 61
EXHIBIT F
PERMITTED ENCUMBRANCES
[Insert Schedule B exceptions in Title Insurance Policy]
61
<PAGE> 1
EXHIBIT 10.2
FIRST AMENDMENT TO LOAN AGREEMENT
AND REAFFIRMATION AGREEMENT
This FIRST AMENDMENT TO LOAN AGREEMENT AND REAFFIRMATION
AGREEMENT ("Amendment"), made as of July ___, 1998 is by and among THE CAPITAL
COMPANY OF AMERICA LLC, a Delaware limited liability company, having an address
at 2 World Financial Center, Building B, New York, New York 10281-1198,
Attention: Christopher Tierney, Telefax Number (212) 667-1666 (together with its
successors and assigns, "Lender"), ALS-VENTURE II, INC., a Delaware corporation
having an address at c/o Alternative Living Services, Inc., 450 North Sunnyslope
Road, Suite 300, Brookfield, Wisconsin 53005, Attention: Chief Financial
Officer, Thomas E. Komula, Telefax Number (414) 789-6182 ("Borrower"),
ALTERNATIVE LIVING SERVICES, INC., a Delaware corporation, 450 North Sunnyslope
Road, Suite 300, Brookfield, Wisconsin 53005, Attention: Chief Financial
Officer, Thomas E. Komula, Telefax Number (414) 789-6182 ("Guarantor" and
"Parent Pledgor", as applicable) and ALS-CLARE BRIDGE, INC., a Delaware
corporation, 450 North Sunnyslope Road, Suite 300, Brookfield, Wisconsin 53005
("Subsidiary Pledgor"; the "Parent Pledgor" and the "Subsidiary Pledgor" are
referred to herein collectively as the "Pledgors").
RECITALS
A. WHEREAS, Nomura Asset Capital Corporation, a Delaware
corporation, as Lender ("Nomura"), and Borrower entered into that certain Loan
Agreement made as of May 26, 1998 (the "Original Loan Agreement") which Original
Loan Agreement provides for a series of advances (collectively, the "Loan") from
Nomura in the principal amount up to $82,000,000 which amount may be increased
by the Earn-Out Advance for up to $8,000,000, provided the terms of the Loan
Agreement are complied with. The Loan is evidenced by four promissory notes each
dated as of May 26, 1998 and each executed and delivered by Borrower to Nomura.
The Loan is secured by, inter alia, real property, improvements thereon and
other collateral (collectively, "Property"). Unless otherwise defined herein,
capitalized terms used in this Amendment shall have the meaning set forth in the
Original Loan Agreement;
B. WHEREAS, subsequent to making the Closing Date Advance, and
pursuant to that certain Assignment and Assumption Agreement dated as of July
___, 1998, Allonge and other documents related thereto, Nomura assigned to
Lender, and Lender assumed from Nomura, all of Nomura's right, title, interest,
duties and obligations in, to and under the Original Loan Agreement and the
other Loan Documents;
C. WHEREAS, pursuant to Article III of the Original Loan
Agreement, the parties to this Amendment desire Lender to make an Additional
Facility Advance.
- 1 -
<PAGE> 2
D. WHEREAS, in connection with the foregoing recitals, and as a condition
to Lender making the Additional Facility Advance, the parties desire to amend
the Original Loan Agreement in the manner set forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals,
which are by this reference incorporated herein, and for other valuable
consideration the receipt and sufficiency of which is hereby acknowledged, the
parties, intending to be legally bound, hereby agree as follows:
1. Exhibit B. Exhibit B of the Original Loan Agreement is hereby
deleted in its entirety and replaced with the Exhibit B attached hereto and by
this reference incorporated herein.
2. Section 2.15(b)(1) of the Original Loan Agreement is hereby amended
by adding the words "and licensed" after the phrase "be a property operated."
3. Section 5.1(z) of the Original Loan Agreement is hereby amended by
adding the following sentence to the end of Section 5.1(z): "Notwithstanding the
foregoing, any security deposits collected by Borrower shall be held and
administered in accordance with applicable laws governing the use and operation
of assisted living facilities."
4. Section 6.1(m)(6) of the Original Loan Agreement is hereby amended
by adding the words "or which is not in compliance with Legal Requirements"
after the word "Facility".
5. Ratification and Reaffirmation. Each of Borrower, Guarantor and
Pledgors hereby ratify and confirm, and reaffirm in all respects and without
condition, all of the terms, covenants and conditions set forth in the Loan
Documents to which each is bound and hereby respectively agree as follows:
5.1 Borrower, Guarantor and Subsidiary Pledgor each
acknowledge the assignment by Nomura, and the assumption by Lender, of Nomura's
right, title and interest in and to the Loan Documents.
5.2 Borrower remains unconditionally liable to Lender in
accordance with the terms, covenants and conditions of the Loan Documents, all
Collateral, Liens, and other security interests and pledges created pursuant
thereto or referred to therein shall continue unimpaired and in full force and
effect and shall continue to secure all of the existing and future Indebtedness
due under the Original Loan Agreement.
5.3 Guarantor remains unconditionally liable to Lender in
accordance with the terms, covenants and conditions of the Guaranty and
Suretyship Agreement, the Environmental Indemnity Agreement, Equity Pledge
Agreement and any other Loan Document by which Guarantor is bound.
- 2 -
<PAGE> 3
5.4 Subsidiary Pledgor remains unconditionally liable to
Lender in accordance with the terms, covenants and conditions of the Equity
Pledge Agreement and any other Loan Document by which Subsidiary Pledgor is
bound.
5.5. Borrower, Guarantor and Subsidiary Pledgor agree that the
Loan Documents, as so modified, remain in full force and effect as of the date
hereof, and nothing herein contained shall be construed to impair the security
or affect the first priority of the lien of any mortgage, nor impair any rights
or powers which Lender or its successors may have for nonperformance of any term
of any of the Loan Documents. All Collateral, Liens and other security interests
and pledges created pursuant to, or referred to in, the Loan Documents shall
continue unimpaired and in full force and effect and shall continue to secure
all of the existing and future Indebtedness due under the Original Loan
Agreement.
6. Representations and Warranties. Borrower, Guarantor and Pledgors
acknowledge and agree that any and all representations and warranties
(including, without limitation, the Single-Purpose Entity representations and
warranties) contained in the Original Loan Agreement and all the other Loan
Documents shall be deemed to be remade as of the date hereof. Further, Borrower,
Guarantor and Pledgors represent and warrant that there are no existing or
pending Defaults or Events of Default under the Loan Agreement or any other Loan
Document.
7. Severability. In case any provision of this Amendment shall be
invalid, illegal, or unenforceable, such provision shall be deemed to have been
modified to the extent necessary to make it valid, legal, and enforceable. The
validity, legality, and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
8. No Modification Except in Writing. None of the terms of this
Amendment may be modified, waived, altered, amended, supplemented, extended,
consolidated, replaced, exchanged or otherwise changed except by an instrument
in writing duly executed by all of the parties hereto.
9. Further Assurances. Borrower, Guarantor and Subsidiary Pledgor shall
execute and deliver such further instruments and perform such further acts as
may be requested by Lender from time to time to confirm the provisions of this
Amendment and the Loan Documents, to carry out more effectively the purposes of
this Amendment and the Loan Documents, or to confirm the priority of any Lien
created by any of the Loan Documents.
10. Miscellaneous.
10.1 This Amendment constitutes the entire agreement among the
parties concerning its subject matter.
10.2 This Amendment shall inure to the benefit of and be
binding upon the parties and their respective heirs, successors and assigns.
- 3 -
<PAGE> 4
10.3 This Amendment may be executed in two or more
counterparts each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.4 This Amendment shall be governed by and construed in
accordance with the laws of the State of New York (without giving effect to New
York's principles of conflict of law).
10.5 Any reference to the Loan Agreement in any of the Loan
Documents shall hereafter mean the Original Loan Agreement as amended by this
Amendment as the same may be subsequently amended, modified, altered,
supplemented, extended, consolidated, replaced, exchanged or otherwise changed.
10. Effective Date. This Amendment was signed and notarized on July 28,
1998. However, this Amendment is effective only as of July __, 1998.
[Signatures Appear On Next Page]
- 4 -
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this FIRST AMENDMENT
TO LOAN AGREEMENT AND REAFFIRMATION AGREEMENT to be duly executed by their duly
authorized representatives, all as of the day and year first above written.
LENDER:
THE CAPITAL COMPANY OF AMERICA LLC, a
Delaware limited liability company
By:_________________________________
Christopher Tierney
Vice President
BORROWER:
ALS-VENTURE II, INC., a Delaware
corporation
By:_________________________________
David Boitano
Vice President
GUARANTOR / PARENT PLEDGOR:
ALTERNATIVE LIVING SERVICES, INC.,
a Delaware corporation
By:__________________________
David Boitano
Vice President
SUBSIDIARY PLEDGOR:
ALS-CLARE BRIDGE, INC., a Delaware
corporation
By:___________________________
David Boitano
Vice President
<PAGE> 6
EXHIBIT B
Additional Definitions
<TABLE>
<S> <C> <C>
Base Adjusted NOI $__________
Closing Date Advance $32,516,000
Initial Basic Carrying Costs Amount $82,222.66
Initial Capital Reserve Amount $0
Additional Facility Advance $21,330,000
ALLOCATED LOAN AMOUNTS
1. Clare Bridge of Cheswick $4,271,000
Cheswick, PA
2. Clare Bridge of Murrysville $3,358,000
Export, PA
3. Sterling House of Columbia $2,352,000
Columbia, SC
4. Sterling House of Rock Hill $2,259,000
Rock Hill, SC
5. WovenHearts of Battle Creek $2,495,000
Battle Creek, MI
6. WovenHearts of Bay City $2,478,000
Bay City, MI
7. WovenHearts of Midland $2,500,000
Midland, MI
8. WovenHearts of Monroe $2,769,000
Monroe, MI
9. WovenHearts of Penn Hills $1,690,000
Penn Hills, PA
</TABLE>
<PAGE> 7
<TABLE>
<S> <C>
10. WovenHearts of Saginaw $2,547,000
Saginaw Township, MI
11. WovenHearts of Swartz Creek $1,069,000
Swartz Creek, MI
12. WovenHearts of West St. Paul $2,206,000
West St. Paul, MN
13. WovenHearts of Westland $2,502,000
Westland, MI
14. Sterling House of South Bend $2,210,000
SouthBend, IN
15. WovenHearts of Coon Rapids $3,330,000
Coon Rapids, MN
16. ClareBridge of Oviedo/ $6,940,000
WovenHearts of Oviedo
Oviedo, FL
17. Hamilton House of Portage/ $8,850,000
Wynwood of Portage
Portage, MI
</TABLE>
<TABLE>
<CAPTION>
LEASED FACILITIES OPERATOR ADDRESS
- ----------------- -------- -------
<S> <C> <C>
Clare Bridge of Cheswick ALS-Indiana (PA) 931 Route 910
Cheswick, PA Partners, a Pennsylvania Cheswick, PA 15024
general partnership
Clare Bridge of Murrysville Clare Bridge of 5300 Old William
Export, PA Murrysville L.P., a Penn Highway
Delaware limited partnership Export, PA 15632
Sterling House of Columbia Burkshire Development, L.L.C., 251 Springtree Drive
Columbia, SC a South Carolina limited Columbia, SC 29223
liability company
Sterling House of Rock Hill Gatwick Development, L.L.C., 1920 Ebenezer Road
Rock Hill, SC a South Carolina limited Rock Hill, SC 29732
liability company
</TABLE>
<PAGE> 8
<TABLE>
<S> <C> <C>
WovenHearts of Bay City WovenHearts of Bay City L.P., 720/734 N. Pine Road
Bay City, MI a Delaware limited partnership Bay City, MI 48707
WovenHearts of Midland WovenHearts of Midland L.P., 4012/4004 Waldo Avenue
Midland, MI a Delaware limited partnership Midland, MI 48642
WovenHearts of Monroe WovenHearts of Monroe L.P., 1615/1605 Fredericks Drive
Monroe, MI a Delaware limited partnership Monroe, MI 48162
WovenHearts of Saginaw WovenHearts of Saginaw L.P., 2445/2485 McCarty Road
Saginaw, MI a Delaware limited partnership Saginaw, MI 48162
WovenHearts of West WovenHearts of West St. Paul 305/315 E. Thompson Avenue
St. Paul L.P., a Delaware limited West St. Paul, MN 55118
West St. Paul, MN partnership
WovenHearts of Westland WovenHearts of Westland 32111/32151 Cherry Hill Rd.
Westland, MI L.P., a Delaware limited Westland, MI 48186
partnership
Sterling House of Rosebery Development, L.L.C. 17441 State Road 23,
South Bend South Bend, IN
WovenHearts of Coon WovenHearts of Coon Rapids I, 1770 113th Lane,
Rapids (I) L.P. Coon Rapids, MN
WovenHearts of Coon WovenHearts of Coon Rapids II, 11372 Robinson Drive,
Rapid (II) L.P. Coon Rapids, MN
Clare Bridge of WovenHearts of Oviedo I, L.P. 445 Alexandria Blvd.,
Oviedo (I) Oviedo, FL
WovenHearts of Oviedo WovenHearts of Oviedo II, L.P. 395 Alafaya Woods Blvd.,
(II) Oviedo, FL
WovenHearts of Oviedo WovenHearts of Oviedo III, L.P. 355 Alafaya Woods Blvd.,
(III) Oviedo, FL
Hamilton House of Portage Hamilton House of Portgage L.P. 3150 Old Centre Avenue,
Portage, MI
Wynwood of Portage Wynwood of Portage L.P. 3150 Old Centre Avenue,
Portage, MI
</TABLE>
<PAGE> 9
<TABLE>
NONLEASED FACILITIES ADDRESS
- -------------------- -------
<S> <C>
WovenHearts of Battle Creek 191/197 Lois Drive
Battle Creek, MI Battlecreek, MI 49015
WovenHearts of Penn Hills 7151 Saltsburg Road
Penn Hills, PA Penn Hills, PA 15235
WovenHearts of Swartz Creek 8240 Miller Road
Swartz Creek, MI Swartz Creek, MI 48476
</TABLE>
<TABLE>
<CAPTION>
JOINT VENTURE FACILITIES JOINT VENTURE ADDRESS
- ------------------------ ------------- -------
<S> <C> <C>
None
</TABLE>
ADDITIONAL FACILITIES
Sterling of Michigan City (II)
Sterling of Alliance
Sterling of Columbus IN
Sterling of Evansville
Sterling of Greenville SC Sterling
Sterling Cot of La Crosse (I)
WovenHearts of La Crosse (II)
Sterling of Marion IN
Clare Bridge of Oro Valley (I)
Sterling of Southern Pines
Sterling of Sun City
SUBLEASED FACILITIES
Clare Bridge of Oviedo (I)
* The Initial Basic Carrying Costs are allocated among the Facilities as
follows:
<TABLE>
<CAPTION>
Facility Real Estate Insurance
Taxes Premiums
<S> <C> <C>
Clare Bridge of Cheswick $3,333.33 $640.00
Clare Bridge of Murrysville 2,083.33 608.25
Sterling House of Columbia 2,730.92 504.17
</TABLE>
<PAGE> 10
<TABLE>
<S> <C> <C>
Sterling House of Rock Hill 2,482.67 458.33
WovenHearts of Battle Creek (I) & (II) 4,583.33 596.00
WovenHearts of Bay City (I) & (II) 2,700.00 596.00
WovenHearts of Midland (I) & (II) 2,700.00 596.00
WovenHearts of Monroe (I) & (II) 2,700.00 596.00
WovenHearts of Penn Hills 2,916.67 300.00
WovenHearts of Saginaw (I) & (II) 2,700.00 596.00
WovenHearts of Swartz Creek 2,416.67 298.00
WovenHearts of West St. Paul (I) & (II) 2,700.00 596.00
WovenHearts of Westland (I) & (II) 4,583.33 596.00
Sterling House of SouthBend 2,979.17 650.00
WovenHearts of Coon Rapids (I) & (II) 6,883.33 875.00
ClareBridge of Oviedo (I) &
WovenHearts of Oviedo (II) & (III) 11,100.00 1,483.25
Hamilton House of Portage &
Wynwood of Portage 11,083.33 1,557.58
</TABLE>
DOING BUSINESS AS NAMES
Clare Bridge of Cheswick
Clare Bridge of Murrysville
Sterling House of Columbia
Sterling House of Rock Hill
WovenHearts of Battle Creek
WovenHearts of Bay City
WovenHearts of Midland
WovenHearts of Monroe
WovenHearts of Penn Hills
WovenHearts of Saginaw
WovenHearts of Swartz Creek
WovenHearts of West St. Paul
WovenHearts of Westland
Sterling House
WovenHearts
Clare Bridge
Hamilton House
Wynwood
<PAGE> 1
EXHIBIT 10.3
FIRST AMENDMENT TO LOAN AGREEMENT
AND REAFFIRMATION AGREEMENT
This FIRST AMENDMENT TO LOAN AGREEMENT AND REAFFIRMATION
AGREEMENT ("Amendment"), made as of August 28, 1998 is by and among NOMURA ASSET
CAPITAL COMPANY, a Delaware corporation, having an address at 2 World Financial
Center, Building B, New York, New York 10281-1198, Attention: Christopher
Tierney, Telefax Number (212) 667-1666 (together with its successors and
assigns, "Lender"), ALS-VENTURE I, INC., a Delaware corporation having an
address at c/o Alternative Living Services, Inc., 450 North Sunnyslope Road,
Suite 300, Brookfield, Wisconsin 53005, Attention: Chief Financial Officer,
Thomas E. Komula, Telefax Number (414) 789-6182 ("Borrower"), ALTERNATIVE LIVING
SERVICES, INC., a Delaware corporation, 450 North Sunnyslope Road, Suite 300,
Brookfield, Wisconsin 53005, Attention: Chief Financial Officer, Thomas E.
Komula, Telefax Number (414) 789-6182 ("Guarantor" and "Parent Pledgor", as
applicable) and ALS-CLARE BRIDGE, INC., a Delaware corporation, 450 North
Sunnyslope Road, Suite 300, Brookfield, Wisconsin 53005 ("Subsidiary Pledgor";
the "Parent Pledgor" and the "Subsidiary Pledgor" are referred to herein
collectively as the "Pledgors").
RECITALS
A. Lender and Borrower are parties to that certain Loan
Agreement made as of March 31, 1998 (the "Original Loan Agreement") which
Original Loan Agreement provides for a loan (the "Loan") from Nomura in the
principal amount $31,000,000 which amount may be increased by the Earn-Out
Advance, provided the terms of the Loan Agreement are complied with. The Loan is
evidenced by a promissory note dated as of March 31, 1998 and executed and
delivered by Borrower to Lender. The Loan is secured by, inter alia, real
property, improvements thereon and other collateral (collectively, "Property").
Unless otherwise defined herein, capitalized terms used in this Amendment shall
have the meaning set forth in the Original Loan Agreement;
B. Lender and Borrower desire to amend the Loan
Agreement to reflect an additional advance of by Lender to Borrower in the
amount of Nineteen Million One Hundred Forty Thousand Dollars ($19,140,000.00)
(the "Additional Advance") such that the loan amount is Fifty Million One
Hundred Forty Thousand Dollars ($50,140,000.00) and the addition of certain
properties as security for the Loan.
C. In connection with the foregoing recitals, and as a
condition to Lender making the Additional Advance, the parties desire to amend
the Original Loan Agreement in the manner set forth herein.
<PAGE> 2
NOW, THEREFORE, in consideration of the foregoing recitals,
which are by this reference incorporated herein, and for other valuable
consideration the receipt and sufficiency of which is hereby acknowledged, the
parties, intending to be legally bound, hereby agree as follows:
1. Exhibits. The Exhibits to the Original Loan Agreement are
hereby amended as follows:
1.1 Exhibit B. Exhibit B of the Original Loan Agreement
is hereby deleted in its entirety and the Exhibit B attached hereto is
substituted in its place.
1.2 Exhibit G. The fifth paragraph of Exhibit G is hereby
deleted in its entirety and the following substituted in its place:
The above underwriting assumes that there is no
material adverse change anticipated in the operations of any
Facility or in the Adjusted Net Operating Income of any
Facility from the Closing Date or, as to the Additional
Facilities only, the Additional Facilities Closing Date to and
including the Stabilization Date.
2. Recitals. The Recitals of the Original Loan Agreement are
hereby amended as follows:
2.1 Recital A. Recital A is hereby deleted in its
entirety and the following substituted in its place:
WHEREAS, Borrower desires to obtain a loan
(the "Loan") from Lender in the maximum principal amount of
$50,140,000 (such amount together with the Earn-Out Advance,
if any, the "Loan Amount");
3. Definitions. Section 1.1 of the Original Loan Agreement is
hereby amended as follows:
3.1 Adjusted Net Operating Income. The definition of
"Adjusted Net Operating Income" is hereby deleted in its entirety and replaced
with the following:
"Adjusted Net Operating Income" means
(calculated for the Facilities or any Facility), for
any period, the Net Operating Income for such period
reduced by (i) the Capital Reserve Amount, pro rated
for the applicable period, (ii) to the extent not
reflected in the Net Operating Income, annual base
management fees, pro rated for the applicable period,
equal to the greater of (y) actual base management
fees paid pursuant to the applicable Management
Agreement and (z) five percent (5%) of Gross Revenues
(provided, however, in no event shall the annual base
management fees included in this clause (ii)
- 2 -
<PAGE> 3
include any management expenses, such as, but not
limited to, accounting expenses, marketing costs,
regional and corporate personnel expenses and general
corporate overhead, to the extent such expenses are
actually reflected in the Net Operating Income), and
(iii) an amount necessary to reflect a minimum annual
vacancy factor of five percent (5%), pro rated for
the applicable period. Notwithstanding the foregoing
, to the extent Adjusted Net Operating Income must be
calculated for a period which is less than twelve
(12) months, Adjusted Net Operating Income shall be
calculated for such period on an annualized basis.
3.2 Base Adjusted NOI. The definition of "Base Adjusted
NOI" is hereby deleted in its entirety.
3.3 Closing Date. The definition of the term "Closing
Date" is hereby deleted in its entirety and the following substituted in its
place:
"Closing Date" means March 31, 1998; provided,
however, that as used in the definitions of the terms
"Assignment of Agreements Borrower", "Assignment of Agreements
- Joint Venture"; "Assignment of Leases - Borrower",
"Assignment of Leases - Joint Venture", "Manager's
Subordination", "Mortgage - Borrower", "Mortgage - Joint
Venture", "Permitted Encumbrances" and "Secretary's
Certificate" to the extent such terms relate to those
Facilities which are Additional Facilities, the terms "Closing
Date" shall mean August 28, 1998.
3.4 Additional Facilities. The following language is
added to Section 1.1:
"Additional Facilities" means those Facilities as
shown on Exhibit B.
"Additional Facilities Closing Date" means August 28,
1998.
3.5 Facility. The definition of the term Facility is
hereby deleted in its entirety and the following substituted in its place:
"Facility" means the Land, Improvements and Equipment
and all other Collateral subject to a Related Mortgage and the term
"Facilities" means every Facility collectively.
3.6 Initial Interest Rate. The definition of the term
"Initial Interest Rate" is hereby deleted in its entirety and the
following substituted in its place:
"Initial Interest Rate" means 7.63% per annum.
- 3 -
<PAGE> 4
3.7 Maximum Facility Amount. The defined term of "Maximum
Facility Amount" is hereby deleted in its entirety and the following substituted
in its place:
Maximum Facility Amount means Fifty Eight Million One
Hundred Forty Thousand Dollars ($58,140,000.00).
3.8 Single-Purpose Entity. The definition of the term
"Single-Purpose Entity" is amended to delete clause (xx)(a)(1) in its entirety
and substitute the following in its place:
(1) do not exceed, at any time, a maximum amount of One
Hundred Fifty Thousand Dollars ($150,000) for each Facility
(provided, however, the aggregate amount for all Facilities at
any one time shall not exceed Two Million Two Hundred Fifty
Thousand Dollars ($2,250,000) and
4. Article II. Article II of the Original Loan Agreement is
amended as follows:
4.1 Monthly Funding of Sub-Accounts. The following
sentence is added as the final sentence to Section 2.11(g):
Notwithstanding anything contained herein to the contrary, on
the Additional Facilities Closing Date, Borrower shall deposit
(i) the amount designated as the "Additional Facilities
Initial Basic Carrying Costs Amount" on Exhibit B into the
Basic Carrying Costs Sub-Account and (ii) the amount
designated as the"Additional Facilities Initial Capital
Reserve Amount" on Exhibit B into the Capital Reserve
Sub-Account.
4.2 Supplemental Mortgage Affidavits. The penultimate
sentence of Section 2.14 is hereby deleted and the following substituted in its
place:
As of the Closing Date and, with respect to the Additional
Facilities only, the Additional Facilities Closing Date,
Borrower shall have paid all state, county and municipal
recording and all other taxes imposed upon the execution and
recordation of the Mortgages.
4.3 Substitute Property Requirements. Clause (1) of
Section 2.15(b) of the Original Loan Agreement is hereby deleted in its entirety
and the following substituted in its place:
(1) be a property operated and licensed as an
assisted living facility as to which Borrower will hold
indefeasible fee simple title free and clear of any lien or
other encumbrance except for Permitted Encumbrances;
5. Article III. Article III of the Original Loan Agreement is
hereby amended as follows:
- 4 -
<PAGE> 5
5.1 Conditions Precedent to the Making of the Loan. The
first sentence of Section 3.1(a) is hereby deleted and the following substituted
in its place:
As a condition precedent to the making of the Loan, Borrower
shall have satisfied the following conditions (unless waived
by Lender in accordance with Section 8.4) with respect to each
Facility on or before the Closing Date or, as to the
Additional Facilities only, as of the Additional Facilities
Closing Date (to the extent the term "Closing Date" is used in
this Section 3.1 in the context of the Additional Facilities
only, "Closing Date" shall mean the Additional Facilities
Closing Date):
6. Representations and Warranties. Article IV of the Original
Loan Agreement is hereby amended as follows:
6.1 Other Debt and Obligations. The first sentence of
Section 4.1(j) of the Original Loan Agreement is hereby deleted and the
following substituted in its place:
Borrower has no financial obligation under any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument to which Borrower is a party, or by which Borrower
or any Facility is bound, other than unsecured trade payables
incurred in the ordinary course of business relating to the
ownership and operation of such Facility and financing
Equipment or vehicles used in the ordinary course of owning
and operating the Facility (including capitalized leases of
Equipment and vehicles) which trade payables and Equipment and
vehicles financing do not exceed a maximum amount of One
Hundred Fifty Thousand Dollars ($150,000) for each Facility
(provided, however, the aggregate amount for all Facilities at
any one time shall not exceed Two Million Two Hundred Fifty
Thousand Dollars ($2,250,000) and, with respect to the trade
payables, are paid within thirty (30) days of the date
incurred, and other than obligations under the Mortgage and
the other Loan Documents.
6.2 Survival of Representations and Warranties. The first
sentence of Section 4.2 is hereby deleted in its entirety and the following
substituted in its place:
Borrower agrees that (i) all of the representations and
warranties made by Borrower set forth in this Agreement and in
the other Loan Documents delivered on the Closing Date are
made as of the Closing Date (except as expressly otherwise
provided); provided, however, that the representations and
warranties made by Borrower set forth in this Agreement and in
the other Loan Documents with respect to the Additional
Facilities are made as of the Additional Facilities Closing
Date and (ii) all representations and warranties made by
Borrower shall survive the delivery of the Note and
continue for so long as any amount remains owing to Lender
under this Agreement, the Note or any of the other Loan
Documents; provided, however, that the representations,
warranties and covenants set forth in Section 4.1(v) and
- 5 -
<PAGE> 6
Sections 5.1(d) through 5.1(i), inclusive, shall survive in
perpetuity and shall not be subject to the exculpation
provisions of Section 8.14.
7. Covenants. Article VII of the Original Loan Agreement is
hereby amended as follows:
7.1 Security Deposits. Section 5.1(z) of the Original
Loan Agreement is hereby amended to add the following at the end of such
section:
Notwithstanding the foregoing, any security deposits collected
by Borrower shall be held and administered in accordance with
applicable laws governing the use and operation of living
facilities.
8. Negative Covenants. Article VI of the Original Loan Agreement
is hereby amended as follows:
8.1 Other Borrowings. The first sentence of Section
6.1(c) of the Original Loan Agreement is hereby deleted in its entirety and the
following substituted in its place:
Incur, except for unsecured trade payables incurred in the
ordinary course of business relating to the ownership and
operation of the Facilities and financing of Equipment or
vehicles used in the ordinary course of owning and operating
the Facilities (including capitalized leases of such Equipment
or vehicles) which trade payables and Equipment or vehicles
financings do not exceed, at any time a maximum amount of One
Hundred Fifty Thousand Dollars ($150,000) for each Facility
(provided, however, the aggregate amount for all Facilities at
any one time shall not exceed Two Million Two Hundred Fifty
Thousand Dollars ($2,250,000) for all the Facilities and, with
respect to the trade payables, are paid within thirty (30)
days of the date incurred, create, assume, become or be liable
in any manner with respect to Other Borrowings.
8.2 Change in Business. Section 6.1(d) of the Original
Loan Agreement is hereby deleted in its entirety and the following substituted
in its place:
Change In Business. Cease to be a Single-Purpose
Entity or make any material change in the scope or nature of
its business objectives, purposes or operations, or undertake
or participate in activities other than the continuance of its
present business and activities closely related to and
compatible with assisted living or, in the case of the
Facilities located in New York, congregate care; provided,
however, Borrower may offer additional services not offered on
the Closing Date and, as to the Additional Facilities only,
the Additional Facilities Closing Date to the extent permitted
with respect to assisted living facilities, or with respect to
the Facilities located in New York, congregate care facilities
under applicable Legal Requirements.
- 6 -
<PAGE> 7
9. Miscellaneous. Article VIII of the Original Loan Agreement is
hereby amended as follows:
9.1 Notices. The second sentence of Section 8.6 is hereby
deleted in its entirety and the following substituted in its place:
A copy of all notices, consents, approvals and requests
directed to Lender shall be delivered concurrently to each of
the following: Dechert Price & Rhoads, 90 State House Square,
Hartford, Connecticut 06103, Attention: John J. Gillies, Jr.,
Esquire, Telefax Number 860/524-3930; Two World Financial
Center, Building B, New York, New York 10281-1198, Attention:
Christopher Tierney, Telefax Number (212) 667-1666; The
Capital Company of America Client Services LLC, 600 East Las
Collinas Boulevard, Suite 1300, Irving, Texas 75039,
Attention: Legal Counsel, Telefax Number 972/401-8556; and Two
World Financial Center, Building B, New York, NY 10281-1198,
Attention: Barry Funt, General Counsel, Telefax Number (212)
667-1206; copies of notices to Borrower shall be delivered
concurrently to each of the following: David Boitano,
Alternative Living Services, Inc., 1201 Pacific Avenue, Suite
1800, Tacoma, Washington 98402, Telefax Number (253) 383-0855,
Alan C. Leet, Rogers & Hardin, 2700 International Tower,
Peachtree Center, 229 Peachtree Street, N.E., Atlanta, Georgia
30303, Telefax Number (404) 525-2224, and Mark W. Ohlendorf,
Alternative Living Services, Inc., 450 North Sunnyslope Road,
Suite 300, Brookfield, Wisconsin 53005, Telefax Number (414)
789-6182.
10. Ratification and Reaffirmation. Each of Borrower, Guarantor
and Pledgors hereby ratify and confirm, and reaffirm in all respects and without
condition, all of the terms, covenants and conditions set forth in the Loan
Documents to which each is bound and hereby respectively agree as follows:
10.1 Borrower remains unconditionally liable to Lender in
accordance with the terms, covenants and conditions of the Loan Documents, all
Collateral, Liens, and other security interests and pledges created pursuant
thereto or referred to therein shall continue unimpaired and in full force and
effect and shall continue to secure all of the existing and future Indebtedness
due under the Original Loan Agreement.
10.2 Guarantor remains unconditionally liable to Lender in
accordance with the terms, covenants and conditions of the Guaranty and
Suretyship Agreement, the Environmental Indemnity Agreement, Equity Pledge
Agreement and any other Loan Document by which Guarantor is bound.
10.3 Subsidiary Pledgor remains unconditionally liable to
Lender in accordance with the terms, covenants and conditions of the Equity
Pledge Agreement and any other Loan Document by which Subsidiary Pledgor is
bound.
- 7 -
<PAGE> 8
10.4 Borrower, Guarantor and Subsidiary Pledgor agree that
the Loan Documents, as so modified, remain in full force and effect as of the
date hereof, and nothing herein contained shall be construed to impair the
security or affect the first priority of the lien of any mortgage, nor impair
any rights or powers which Lender or its successors may have for nonperformance
of any term of any of the Loan Documents. All Collateral, Liens and other
security interests and pledges created pursuant to, or referred to in, the Loan
Documents shall continue unimpaired and in full force and effect and shall
continue to secure all of the existing and future Indebtedness due under the
Original Loan Agreement.
11. Representations and Warranties. Borrower, Guarantor and
Pledgors acknowledge and agree that any and all representations and warranties
(including, without limitation, the Single-Purpose Entity representations and
warranties) contained in the Original Loan Agreement and all the other Loan
Documents shall be deemed to be remade as of the date hereof. Further, Borrower,
Guarantor and Pledgors represent and warrant that there are no existing or
pending Defaults or Events of Default under the Loan Agreement or any other Loan
Document.
12. Severability. In case any provision of this Amendment shall be
invalid, illegal, or unenforceable, such provision shall be deemed to have been
modified to the extent necessary to make it valid, legal, and enforceable. The
validity, legality, and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
13. No Modification Except in Writing. None of the terms of this
Amendment may be modified, waived, altered, amended, supplemented, extended,
consolidated, replaced, exchanged or otherwise changed except by an instrument
in writing duly executed by all of the parties hereto.
14. Further Assurances. Borrower, Guarantor and Subsidiary Pledgor
shall execute and deliver such further instruments and perform such further acts
as may be requested by Lender from time to time to confirm the provisions of
this Amendment and the Loan Documents, to carry out more effectively the
purposes of this Amendment and the Loan Documents, or to confirm the priority of
any Lien created by any of the Loan Documents.
15. Miscellaneous.
15.1 This Amendment constitutes the entire agreement among
the parties concerning its subject matter.
15.2 This Amendment shall inure to the benefit of and be
binding upon the parties and their respective heirs, successors and assigns.
15.3 This Amendment may be executed in two or more
counterparts each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
- 8 -
<PAGE> 9
15.4 This Amendment shall be governed by and construed in
accordance with the laws of the State of New York (without giving effect to New
York's principles of conflict of law).
14.5 Any reference to the Loan Agreement in any of the
Loan Documents shall hereafter mean the Original Loan Agreement as amended by
this Amendment as the same may be subsequently amended, modified, altered,
supplemented, extended, consolidated, replaced, exchanged or otherwise changed.
[Signatures Appear On Next Page]
- 9 -
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have caused this SECOND
AMENDMENT TO LOAN AGREEMENT AND REAFFIRMATION AGREEMENT to be duly executed by
their duly authorized representatives, all as of the day and year first above
written.
LENDER:
NOMURA ASSET CAPITAL CORPORATION, a
Delaware corporation
By:
---------------------------------
Name:
Title:
BORROWER:
ALS-VENTURE I, INC., a Delaware
corporation
By:
---------------------------------
David Boitano
Vice President
GUARANTOR / PARENT PLEDGOR:
ALTERNATIVE LIVING SERVICES, INC.,
a Delaware corporation
By:
---------------------------------
David Boitano
Vice President
SUBSIDIARY PLEDGOR:
ALS-CLARE BRIDGE, INC., a Delaware
corporation
By:
---------------------------------
David Boitano
Vice President
<PAGE> 11
EXHIBIT B
Additional Definitions
<TABLE>
<S> <C>
Initial Basic Carrying Costs Amount $48,670.42 *
Initial Capital Reserve Amount $14,843.75 **
Additional Facilities Initial Basic Carrying Costs Amount $35,451.71 *
Additional Facilities Initial Capital Reserve Amount $7,333.33 **
</TABLE>
<TABLE>
<CAPTION>
ALLOCATED LOAN AMOUNTS
- ----------------------
<S> <C> <C>
1. Clare Bridge
Tallahassee, Florida $2,894,000.00
2. Clare Bridge
Tempe, Arizona $4,214,000.00
3. Clare Bridge
Winston-Salem, North Carolina $3,014,000.00
4. Crossings
Colorado Springs, Colorado $4,615,000.00
5. Crossings
Pueblo, Colorado $3,839,000.00
6. Crossings
Twin Falls, Idaho $4,408,000.00
7. WovenHearts
Blaine, Minnesota $1,032,000.00
8. WovenHearts
Inver Grove Heights, Minnesota $1,039,000.00
9. Clinton Village
Sherman Brook, New York $1,760,000.00
10. Summer Field Village
Syracuse, New York $4,185,000.00
</TABLE>
B-1
<PAGE> 12
<TABLE>
<S> <C> <C>
11. Sterling House of Alliance
Alliance, Ohio $1,900,000.00
12. Sterling House of Columbus
Columbus, Indiana $2,090,000.00
13. Sterling House of Evansville
Evansville, Indiana $2,030,000.00
14. Sterling House of Marion
Marion, Indiana $2,050,000.00
15. Sterling House of Sun City
Sun City, Florida $2,340,000.00
16. Sterling House of Beavercreek
Beaver Creek, Ohio $2,100,000.00
17. WovenHearts of La Crosse (I) and (II)
La Crosse, Wisconsin $3,310,000.00
18. Clare Bridge of Oro Valley
Oro Valley, Arizona $3,320,000.00
</TABLE>
<TABLE>
<CAPTION>
LEASED FACILITIES OPERATOR ADDRESS
- ----------------- -------- -------
<S> <C> <C>
Clare Bridge Clare Bridge of 1610 East Guadalupe Road
Tempe, AZ Tempe, L.P. Tempe, AZ 85283
Crossings Crossings of Colorado 2780 Vickers Drive
Colorado Springs, CO Springs L.P. Colorado Springs, CO 80918
Crossings Crossings of 4723 Surfwood Lane
Pueblo, CO Pueblo, L.P. Pueblo, CO 81005
Crossings Crossings of Twin Falls 1367 Locust Street North
Twin Falls, ID L.P. Twin Falls, ID 83301
WovenHearts WovenHearts of Blaine 1005 Paul Parkway
Blaine, MN L.P. Blaine, MN 55434
</TABLE>
B-2
<PAGE> 13
<TABLE>
<S> <C> <C>
WovenHearts WovenHearts of Inver 5891 Carment Avenue
Inner Grove Heights, MN Grove Heights L.P. Inner Grove Heights, MN 55076
Sterling House of Sterling Marion/Alliance 1277 S. Sawburg Avenue
Alliance LLC Alliance Corp.
Sterling House of Wiltshire Development, 2564 Foxpointe Drive,
Columbus L.L.C. Columbus, Indiana
Sterling House of Rosebery Development, 6521 Greendale Drive,
Evansville L.L.C. Evansville, Indiana
Sterling House of Marion Sterling of Marion/ 2452 W. Kem Road
Alliance LLC Marion, Indiana
Sterling House of Sterling of Sun City 758 Cortaro Drive
Sun City LLC Sun City, Florida
Sterling House of Sterling of Beavercreek 3839 Indian Ripple Road
Beavercreek LLC Beaver Creek, Ohio
WovenHearts of Sterling Cottage of 3161 E. Avenue South
LaCrosse (I) LaCrosse L.P. La Crosse, Wisconsin
WovenHearts of WovenHearts of 3141 E. Avenue South
LaCrosse (II) LaCrosse L.P. La Crosse, Wisconsin
Clare Bridge of Clare Bridge of Oro 10175 N. Oracle Road
Oro Valley (I) Valley L.P. Oro Valley, Arizona
NONLEASED FACILITIES ADDRESS
- -------------------- -------
Clinton Village 100 Summerfield Village Lane
Sherman Brook, NY Syracuse, NY 13215
Summer Field Village 99 Brookside Drive
Syracuse, NY Clinton, NY 13323
Clare Bridge 1980 Centre Pointe Boulevard
Tallahassee, FL Tallahassee, FL 32308
</TABLE>
B-3
<PAGE> 14
<TABLE>
<CAPTION>
JOINT VENTURE FACILITIES JOINT VENTURE ADDRESS
- ------------------------ ------------- -------
<S> <C> <C>
Clare Bridge Clare Bridge of Winston- 275 South Peace Haven Road
Winston-Salem, NC Salem, LLC Winston-Salem, NC 27104
</TABLE>
SUBLEASED FACILITIES
Clare Bridge Tempa, Arizona; Clare Bridge of Oviedo (I); Sterling House of Sun
City; Clare Bridge of Oro Valley
* The Initial Basic Carrying Costs and the Additional Facilities Initial
Basic Carrying Costs are allocated among the Facilities as follows:
<TABLE>
<CAPTION>
Facility Real Estate Insurance
Taxes Premiums
<S> <C> <C> <C>
1. Clare Bridge
Tallahassee, FL $4,750.00 $ 638.08
2. Clare Bridge
Tempe, Arizona $3,050.00 $ 635.00
3. Clare Bridge
Winston-Salem, NC $3,291.67 $ 638.08
4. Crossings
Colorado Springs, CO $4,600.00 $ 640.00
5. Crossings
Pueblo, CO $4,600.00 $ 640.00
6. Crossings
Twin Falls, ID $5,250.00 $ 640.00
7. WovenHearts
Blaine, MN $1,400.00 $ 196.67
8. WovenHearts
Inver Grove Heights, MN $1,400.00 $ 195.63
9. Clinton Village
Sherman Brook, NY $4,750.00 $ 638.00
</TABLE>
B-4
<PAGE> 15
<TABLE>
<S> <C> <C> <C>
10. Summer Field Village
Syracuse, NY $9,675.00 $1,050.00
11. Sterling House of Alliance $3,068.58 $ 669.50
Alliance, Ohio
12. Sterling House of Columbus $669.50 $3,068.58
Columbus, Indiana
13. Sterling House of Evansville $669.50 $3,068.58
Evansville, Indiana
14. Sterling House of Marion $669.50 $3,068.58
Marion, Indiana
15. Sterling House of Sun City $836.88 $3,068.58
Sun City, Florida
16. Sterling House of Beavercreek $682.50 $3,128.17
Beaver Creek, Ohio
17. WovenHearts of LaCrosse (I) and (II) $875.00 $6,883.33
La Crosse, Wisconsin
18. Clare Bridge of Oro Valley (I) $608.25 $4,416.67
Oro Valley, Arizona
</TABLE>
** The Initial Capital Reserve Amount and the Additional Facilities
Initial Capital Reserve Amount are allocated as follows:
<TABLE>
<S> <C>
Clinton Village $10,625.00
Summer Field Village $ 4,218.75
Sterling House of Alliance $ 875.00
Sterling House of Columbus $ 875.00
Sterling House of Evansville $ 875.00
Sterling House of Marion $ 875.00
Sterling House of Sun City $ 875.00
Sterling House of Beavercreek $ 875.00
WovenHearts of LaCrosse (I) and (II) $ 1,291.67
Clare Bridge of Oro Valley (I) $ 791.67
</TABLE>
DOING BUSINESS AS NAMES
B-5
<PAGE> 16
Crossings at Summerfield
Crossings at Sherman Brook
Clare Bridge of Tempe
Crossings at Twin Falls
Crossings at Colorado Springs
Crossings at Pueblo
WovenHearts of Blaine
WovenHearts of Inver Grove Heights
Clare Bridge of Winston-Salem
Clare Bridge of Tallahassee
Sterling House
WovenHearts
Clare Bridge
ADDITIONAL FACILITIES
1. Sterling House of Alliance
Alliance, Ohio
2. Sterling House of Columbus
Columbus, Ohio
3. Sterling House of Evansville
Evansville, Illinois
4. Sterling House of Marion
Marion, Indiana
5. Sterling House of Sun City
Sun City, Florida
6. Sterling House of Beavercreek
Beaver Creek, Ohio
7. Woven Hearts of LaCrosse (I) and (II)
LaCrosse, Wisconsin
8. Clare Bridge of Oro Valley
Oro Valley, Arizona
B-6
<PAGE> 1
EXHIBIT 10.4
GUARANTY OF PAYMENT AGREEMENT
THIS GUARANTY OF PAYMENT AGREEMENT (this "Agreement") is made this
28th day of September, 1998, by ALTERNATIVE LIVING SERVICES, INC., a Delaware
corporation, (the "Guarantor") for the benefit of BANK UNITED ("Agent") for
itself and for such additional lenders (collectively with Agent, the "Lenders")
who may from time to time agree to act as lenders in the Credit Facility (as
hereinafter defined).
RECITALS
A. The Borrower (as defined in the Financing Agreement) has
obtained from the Agent a revolving credit facility (such credit facility being
hereinafter referred to as the "Credit Facility" or the "Loan") in the maximum
principal sum of up to $45,000,000 or such greater amount as the Lenders may
from time to time commit to lend pursuant to an Agency Agreement which may be
executed in the future, not to exceed $100,000,000. Advances or readvances
under the Credit Facility are to be made pursuant to, and secured by, the
provisions of that certain Financing and Security Agreement dated the same date
as this Agreement by and between the Agent and the Borrower (as amended,
restated or substituted from time to time, the "Financing Agreement").
B. The Loan will be evidenced by one or more Promissory Notes (as
amended, restated, renewed or resubstituted from time to time, whether one or
more, collectively the "Note") payable to the Agent on behalf of the respective
Lenders. The Note will be secured by, among other things, certain Deeds of
Trust (as defined in the Financing Agreement) from a Borrower in favor of the
Lenders covering the Borrower's interest in the Land and the Improvements for
the applicable Facility (as defined hereinafter) and such other real and
personal property as shall be therein more particularly set forth
(collectively, the "Property"). The Credit Facility is evidenced, secured and
guaranteed by certain Financing Documents (as defined in the Financing
Agreement).
C. The Guarantor has requested the Lender to enter into the
Financing Agreement with the Borrower and to make the Loan to the Borrower
pursuant thereto.
D. The Lender has required, as a condition to the making of the
Loan, that the Guarantor execute and deliver this Agreement to the Lender.
E. All defined terms used in this Agreement and not defined
herein shall have the meaning given to such terms in the Financing Agreement.
NOW, THEREFORE, in order to induce the Lender to make the Loan to the
Borrower, the Guarantor covenants and agrees with the Lender as follows:
<PAGE> 2
ARTICLE 1
THE GUARANTY
Section 1.1 Guaranty.
The Guarantor hereby unconditionally and irrevocably
guarantees to the Lenders:
(a) the due and punctual payment in full
(and not merely the collectibility) of the principal of the Note and the
interest thereon, in each case when due and payable, whether on any installment
payment date or at the stated or accelerated maturity, all according to the
terms of the Note and the other Financing Documents;
(b) the due and punctual payment in full
(and not merely the collectibility) of all Obligations and other sums and
charges which may at any time be due and payable in accordance with, or secured
by, the Note or any of the other Financing Documents;
(c) the due and punctual performance of
all of the other terms, covenants and conditions contained in the Financing
Documents; and
(d) all indebtedness, obligations and
liabilities of any kind and nature of the Borrower to the Lenders, whether now
existing or hereafter created or arising, direct or indirect, matured or
unmatured, and whether absolute or contingent, joint, several or joint and
several, and howsoever owned, held or acquired.
Section 1.2 Guaranty Unconditional.
The obligations and liabilities of the Guarantor under this Agreement
shall be absolute and unconditional, irrespective of the genuineness, validity,
priority, regularity or enforceability of the Note or any of the Financing
Documents or any other circumstance which might otherwise constitute a legal or
equitable discharge of a surety or guarantor. The Guarantor expressly agrees
that the Lenders may, in their sole and absolute discretion, without notice to
or further assent of the Guarantor and without in any way releasing, affecting
or in any way impairing the obligations and liabilities of the Guarantor
hereunder:
(a) waive compliance with, or any
defaults under, or grant any other indulgences under or with respect to any of
the Financing Documents;
(b) modify, amend, change or terminate
any provisions of any of the Financing Documents;
(c) grant extensions or renewals of or
with respect to the Note or any of the other Financing Documents;
(d) effect any release, subordination,
compromise or settlement in connection with the Note or any of the other
Financing Documents;
2
<PAGE> 3
(e) agree to the substitution, exchange,
release or other disposition of the Collateral or any part thereof, or any
other collateral for the Credit Facility or to the subordination of any lien or
security interest therein;
(f) make advances for the purpose of
performing any term, provision or covenant contained in the Note or any of the
other Financing Documents with respect to which the Borrower shall then be in
default;
(g) make future advances to the
Borrower pursuant to the Financing Agreement or any of the other Financing
Documents;
(h) assign, pledge, hypothecate or
otherwise transfer the Note, any of the other Financing Documents or this
Agreement or any interest therein;
(i) deal in all respects with the
Borrower as if this Agreement were not in effect; and
(j) effect any release, compromise or
settlement with any of the Guarantor or any other guarantor.
Section 1.3 Guaranty Primary.
The obligations and liabilities of the Guarantor under this
Agreement shall be primary, direct and immediate, shall not be subject to any
counterclaim, recoupment, set off, reduction or defense based upon any claim
that the Guarantor may have against the Borrower, the Lenders and/or any other
guarantor and shall not be conditional or contingent upon pursuit or
enforcement by the Lenders of any remedies they may have against the Borrower
with respect to the Note or any of the other Financing Documents, whether
pursuant to the terms thereof or by operation of law. Without limiting the
generality of the foregoing and except to the extent any applicable notice
and/or opportunity to cure is required under the Financing Documents, the
Lenders shall not be required to make any demand upon the Borrower or to sell
the Collateral or otherwise pursue, enforce or exhaust their remedies against
the Borrower or the Collateral either before, concurrently with or after
pursuing or enforcing their rights and remedies hereunder. Any one or more
successive or concurrent actions or proceedings may be brought against the
Guarantor under this Agreement, either in the same action, if any, brought
against the Borrower or in separate actions or proceedings, as often as the
Lenders may deem expedient or advisable. Without limiting the foregoing, it is
specifically understood that any modification, limitation or discharge of any
of the liabilities or obligations of the Borrower or any other obligor under
any of the Financing Documents, arising out of, or by virtue of, any
bankruptcy, arrangement, reorganization or similar proceeding for relief of
debtors under federal or state law initiated by or against the Borrower or the
Guarantor or any obligor under any of the Financing Documents shall not modify,
limit, lessen, reduce, impair, discharge, or otherwise affect the liability of
the Guarantor hereunder in any manner whatsoever, and this Agreement shall
remain and continue in full force and effect. It is the intent and purpose of
this Agreement that the Guarantor shall and does hereby waive all rights and
benefits which might accrue to any other guarantor by reason of any such
proceeding, and the Guarantor
3
<PAGE> 4
agrees that it shall be liable for the full amount of the obligations and
liabilities under this Agreement, regardless of, and irrespective to, any
modification, limitation or discharge of the liability of the Borrower, any
other guarantor or any obligor under any of the Financing Documents, that may
result from any such proceedings.
Section 1.4 Certain Waivers by the Guarantor.
Except with respect to any applicable notice and/or opportunity to
cure required to be given under the Financing Documents, the Guarantor hereby
unconditionally, irrevocably and expressly waives:
(a) presentment and demand for payment
of the principal of or interest on the Note and protest of non-payment;
(b) notice of acceptance of this
Agreement and of presentment, demand and protest thereof;
(c) notice of any default hereunder or
under the Note or any of the other Financing Documents and notice of all
indulgences;
(d) notice of any increase in the amount
of any portion of or all of the indebtedness guaranteed by this Agreement;
(e) demand for observance, performance
or enforcement of any of the terms or provisions of this Agreement, the Note or
any of the other Financing Documents;
(f) all errors and omissions in
connection with the Lenders' administration of all indebtedness guaranteed by
this Agreement, except errors and omissions resulting from acts of bad faith or
gross negligence;
(g) any right or claim of right to cause
a marshalling of the assets of the Borrower;
(h) any act or omission of the Lenders
(except acts or omissions in bad faith or constituting gross negligence) which
changes the scope of the Guarantor's risk hereunder; and
(i) all other notices and demands
otherwise required by law which the Guarantor may lawfully waive.
Section 1.5 Reimbursement for Expenses.
In the event the Lenders shall commence any action or proceeding for
the enforcement of this Agreement, then the Guarantor will reimburse the
Lenders, promptly upon demand, for any and all expenses incurred by the Lenders
in connection with such action or proceeding including, without limitation,
reasonable, actual attorneys' fees together with interest thereon at the
Post-Default Rate.
4
<PAGE> 5
Section 1.6 Events of Default.
The occurrence of any one or more of the following events shall
constitute an "Event of Default" under the provisions of this Agreement
(individually, an "Event of Default" and collectively, the "Events of
Default"):
(a) The failure of the Guarantor to pay
and/or perform any of the Obligations within five (5) calendar days of the date
as and when due and payable and/or perform any Obligations when required in
accordance with the provisions of this Agreement.
(b) Any representation or warranty made
in this Agreement or in any report, statement, schedule, certificate, opinion
(including any opinion of counsel for the Guarantor), financial statement or
other document furnished in connection with this Agreement, shall prove to have
been false or misleading when made (or, if applicable, when reaffirmed) in any
material respect.
(c) The failure of the Guarantor to
comply with Section 3.2 and 3.3 hereof.
(d) The failure of the Guarantor to
perform, observe or comply with any non- monetary covenant, condition or
agreement of Guarantor contained in this Agreement other than as set forth in
this Section, which default shall remain unremedied for more than thirty (30)
days after written notice thereof to the Guarantor by the Agent, unless the
nature of the failure is such that (a) it cannot be cured within the thirty
(30) day period, and (b) the Guarantor institutes corrective action within the
thirty (30) day period and (c) the Guarantor diligently pursues such action and
completes the cure within ninety (90) days.
(e) A default shall occur under any of
the other Financing Documents and such default is not cured within any
applicable grace period provided therein.
(f) The Guarantor shall (i) apply for or
consent to the appointment of a receiver, trustee or liquidator of itself or
any of its property, (ii) admit in writing its inability to pay its debts as
they mature, (iii) make a general assignment for the benefit of creditors, (iv)
be adjudicated a bankrupt or insolvent, (v) file a voluntary petition in
bankruptcy or a petition or an answer seeking or consenting to reorganization
or an arrangement with creditors or to take advantage of any bankruptcy,
reorganization, insolvency, readjustment of debt, dissolution or liquidation
law or statute, or an answer admitting the material allegations of a petition
filed against it in any proceeding under any such law, or take corporate action
for the purposes of effecting any of the foregoing, or (vi) by any act indicate
its consent to, approval of or acquiescence in any such proceeding or the
appointment of any receiver of or trustee for any of its property, or suffer
any such receivership, trusteeship or proceeding to continue undischarged for a
period of sixty (60) days, or (vii) by any act indicate its consent to,
approval of or acquiescence in any order, judgment or decree by any court of
competent jurisdiction or any Governmental Authority
5
<PAGE> 1
EXHIBIT 10.5
FINANCING AND SECURITY AGREEMENT
(Master Agreement)
ALS HOLDINGS, INC., et al
as BORROWER
BANK UNITED
as AGENT
September 28, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I................................................................................................1
SECTION 1.1 CERTAIN DEFINED TERMS..................................................................1
SECTION 1.2 ACCOUNTING TERMS AND OTHER DEFINITIONAL PROVISIONS....................................16
ARTICLE II..............................................................................................17
SECTION 2.1 THE LOAN..............................................................................17
SECTION 2.2 PROCEDURE FOR ADVANCES................................................................19
SECTION 2.3 FEES..................................................................................19
SECTION 2.4 INTEREST RATE MATTERS.................................................................20
SECTION 2.5 EXTENSIONS............................................................................22
ARTICLE III.............................................................................................22
COLLATERAL..............................................................................................22
SECTION 3.1 COLLATERAL............................................................................22
SECTION 3.2 ELIGIBLE PROJECTS.....................................................................22
SECTION 3.3 GUARANTIES............................................................................23
SECTION 3.4 COLLATERAL FOR OBLIGATIONS............................................................23
SECTION 3.5 COSTS.................................................................................23
ARTICLE IV..............................................................................................23
GENERAL FINANCING PROVISIONS............................................................................23
SECTION 4.1 CONDITIONS PRECEDENT TO CREDIT FACILITY CLOSING AND ADDITION OF DEEDS OF TRUST........23
SECTION 4.2 CONDITIONS PRECEDENT TO ACCEPTING AN ELIGIBLE PROJECT WHICH IS UNDER
CONSTRUCTION OR TO BE CONSTRUCTED:....................................................24
SECTION 4.3 CONDITIONS PRECEDENT TO ACCEPTING AN ELIGIBLE PROJECT WHICH HAS BEEN
CONSTRUCTED OR ACQUIRED:..............................................................29
SECTION 4.4 CONDITIONS PRECEDENT TO DETERMINING ADDITIONAL AVAILABILITY UNDER BORROWING BASE......31
SECTION 4.5 CONDITIONS UNDER WHICH AN ELIGIBLE PROJECT IS A COMPLETED PROJECT.....................34
SECTION 4.6 VERIFICATION OF OPERATING RESERVE EXPENDITURES........................................34
SECTION 4.7 ASSIGNMENTS OF PAYMENTS...............................................................35
SECTION 4.8 LIABILITY OF THE LENDERS..............................................................35
SECTION 4.9 COMPUTATION OF INTEREST AND FEES......................................................35
SECTION 4.10 LIENS; SETOFF.........................................................................35
SECTION 4.11 PAYMENT AND PERFORMANCE OF OBLIGATIONS................................................35
SECTION 4.12 PAYMENTS TO OTHERS FOR THE ACCOUNT OF THE BORROWER....................................36
SECTION 4.13 PREPAYMENT............................................................................36
ARTICLE V...............................................................................................37
REPRESENTATIONS AND WARRANTIES..........................................................................37
SECTION 5.1 GOOD STANDING.........................................................................37
SECTION 5.2 POWER AND AUTHORITY...................................................................37
SECTION 5.3 BINDING AGREEMENTS....................................................................37
SECTION 5.4 LITIGATION............................................................................37
SECTION 5.5 NO CONFLICTING AGREEMENTS.............................................................38
SECTION 5.6 FINANCIAL INFORMATION.................................................................38
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 5.7 NO DEFAULT UNDER OTHER AGREEMENTS.....................................................38
SECTION 5.8 TAXES.................................................................................38
SECTION 5.9 PLACE(S) OF BUSINESS AND LOCATION OF COLLATERAL.......................................39
SECTION 5.10 TITLE TO PROPERTIES...................................................................39
SECTION 5.11 MARGIN STOCK..........................................................................39
SECTION 5.12 ERISA.................................................................................39
SECTION 5.13 GOVERNMENTAL CONSENT..................................................................40
SECTION 5.14 FULL DISCLOSURE.......................................................................40
SECTION 5.15 BUSINESS NAMES AND ADDRESSES..........................................................40
SECTION 5.16 LICENSES AND CERTIFICATIONS...........................................................40
SECTION 5.17 OPERATING AGREEMENTS AND MANAGEMENT CONTRACTS.........................................41
SECTION 5.18 PARTICIPATION AGREEMENTS AND RESIDENT AGREEMENTS......................................41
SECTION 5.19 COMPLIANCE WITH LAWS..................................................................42
SECTION 5.20 PRESENCE OF HAZARDOUS MATERIALS OR HAZARDOUS MATERIALS CONTAMINATION..................42
SECTION 5.21 COMPLIANCE IN ZONING..................................................................42
SECTION 5.22 PLANS AND SPECIFICATIONS..............................................................42
SECTION 5.23 BUILDING PERMITS; OTHER PERMITS.......................................................42
SECTION 5.24 UTILITIES.............................................................................43
SECTION 5.25 ACCESS; ROADS.........................................................................43
SECTION 5.26 OTHER LIENS...........................................................................43
SECTION 5.27 DEFAULTS..............................................................................43
SECTION 5.28 NATURE OF CREDIT FACILITY; USURY; DISCLOSURES.........................................43
SECTION 5.29 SURVIVAL; UPDATES OF REPRESENTATIONS AND WARRANTIES...................................43
SECTION 5.30 ACCOUNTS..............................................................................44
ARTICLE VI..............................................................................................44
CONDITIONS OF LENDING...................................................................................44
SECTION 6.1 NO DEFAULT............................................................................44
SECTION 6.2 OPINION OF COUNSEL FOR THE BORROWER...................................................45
SECTION 6.3 APPROVAL OF COUNSEL FOR THE LENDERS...................................................45
SECTION 6.4 SUPPORTING DOCUMENTS..................................................................45
SECTION 6.5 FINANCING DOCUMENTS...................................................................45
SECTION 6.6 INSURANCE.............................................................................45
SECTION 6.7 SECURITY DOCUMENTS....................................................................45
SECTION 6.8 ADDITIONAL BORROWER JOINDER SUPPLEMENT................................................46
ARTICLE VII.............................................................................................46
AFFIRMATIVE COVENANTS OF BORROWER.......................................................................46
SECTION 7.1 FINANCIAL STATEMENTS..................................................................46
SECTION 7.2 FINANCIAL COVENANTS...................................................................47
SECTION 7.3 TAXES AND CLAIMS......................................................................49
SECTION 7.4 LEGAL EXISTENCE.......................................................................49
SECTION 7.5 CONDUCT OF BUSINESS AND COMPLIANCE WITH LAWS..........................................49
SECTION 7.6 USE OF PROCEEDS.......................................................................51
SECTION 7.7 INSURANCE.............................................................................51
SECTION 7.8 MAINTENANCE OF PROPERTIES.............................................................53
SECTION 7.9 MAINTENANCE OF THE COLLATERAL.........................................................54
SECTION 7.10 OTHER LIENS, SECURITY INTERESTS, ETC..................................................54
SECTION 7.11 DEFENSE OF TITLE AND FURTHER ASSURANCES...............................................54
SECTION 7.12 SUBSEQUENT OPINION OF COUNSEL AS TO RECORDING REQUIREMENTS............................54
SECTION 7.13 BOOKS AND RECORDS.....................................................................54
SECTION 7.14 COLLECTIONS...........................................................................55
SECTION 7.15 NOTICE TO ACCOUNT DEBTORS AND ESCROW ACCOUNT..........................................55
</TABLE>
ii
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<TABLE>
<S> <C> <C>
SECTION 7.16 BUSINESS NAMES........................................................................55
SECTION 7.17 ERISA.................................................................................55
SECTION 7.18 MANAGEMENT............................................................................56
SECTION 7.19 SURVEYS...............................................................................57
SECTION 7.20 INSPECTIONS; COOPERATION; PAYMENT OF INSPECTING ENGINEER..............................57
SECTION 7.21 VOUCHERS AND RECEIPTS.................................................................57
SECTION 7.22 PAYMENTS FOR LABOR AND MATERIALS......................................................58
SECTION 7.23 CORRECTION OF CONSTRUCTION DEFECTS....................................................58
SECTION 7.24 FEES AND EXPENSES; INDEMNITY..........................................................58
SECTION 7.25 GOVERNMENTAL SURVEYS OR INSPECTIONS...................................................58
SECTION 7.26 COST REPORTS..........................................................................58
SECTION 7.27 UPDATED APPRAISALS....................................................................58
SECTION 7.28 NOTIFICATION OF CERTAIN EVENTS, EVENTS OF DEFAULT AND ADVERSE DEVELOPMENTS............59
SECTION 7.29 COMPLIANCE WITH ENVIRONMENTAL LAWS....................................................60
SECTION 7.30 HAZARDOUS MATERIALS; CONTAMINATION....................................................60
SECTION 7.31 PARTICIPATION IN REIMBURSEMENT PROGRAMS...............................................61
ARTICLE VIII............................................................................................61
NEGATIVE COVENANTS OF BORROWER..........................................................................61
SECTION 8.1 BORROWINGS............................................................................62
SECTION 8.2 DEEDS OF TRUST AND PLEDGES............................................................62
SECTION 8.3 SALE OR TRANSFER OF ASSETS............................................................62
SECTION 8.4 OTHER LIENS; TRANSFERS; "DUE-ON-SALE"; ETC............................................62
SECTION 8.5 ADVANCES AND LOANS....................................................................63
SECTION 8.6 CONTINGENT LIABILITIES................................................................63
SECTION 8.7 LICENSES..............................................................................63
SECTION 8.8 ERISA COMPLIANCE......................................................................63
SECTION 8.9 TRANSFER OF COLLATERAL................................................................64
SECTION 8.10 SALE OF ACCOUNTS OR RECEIVABLES.......................................................64
SECTION 8.11 AMENDMENTS; TERMINATIONS..............................................................64
SECTION 8.12 PROHIBITION ON HAZARDOUS MATERIALS....................................................64
SECTION 8.13 SUBSIDIARIES..........................................................................65
SECTION 8.14 MERGERS OR ACQUISITIONS...............................................................65
SECTION 8.15 CONDITIONAL SALES.....................................................................65
SECTION 8.16 CHANGES TO PLANS AND SPECIFICATION....................................................65
SECTION 8.17 CONSTRUCTION CONTRACT; CONSTRUCTION MANAGEMENT........................................65
ARTICLE IX..............................................................................................65
EVENTS OF DEFAULT.......................................................................................65
SECTION 9.1 FAILURE TO PAY AND/OR PERFORM THE OBLIGATIONS.........................................65
SECTION 9.2 BREACH OF REPRESENTATIONS AND WARRANTIES..............................................66
SECTION 9.3 FAILURE TO COMPLY WITH COVENANTS......................................................66
SECTION 9.4 FAILURE TO COMPLY WITH FINANCIAL REPORTING OR BOOKS AND RECORDS.......................66
SECTION 9.5 OTHER DEFAULTS........................................................................66
SECTION 9.6 DEFAULT UNDER OTHER FINANCING DOCUMENTS...............................................66
SECTION 9.7 RECEIVER; BANKRUPTCY..................................................................66
SECTION 9.8 JUDGMENT..............................................................................66
SECTION 9.9 EXECUTION; ATTACHMENT.................................................................67
SECTION 9.10 DEFAULT UNDER OTHER BORROWINGS........................................................67
SECTION 9.11 CHANGE IN STATUS OR OWNERSHIP.........................................................67
SECTION 9.12 DAMAGE TO IMPROVEMENTS................................................................67
SECTION 9.13 MECHANIC'S LIEN.......................................................................67
</TABLE>
iii
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<TABLE>
<S> <C> <C>
SECTION 9.14 SURVEY MATTERS........................................................................67
SECTION 9.15 GENERAL CONTRACTOR DEFAULT............................................................68
SECTION 9.16 ZONING................................................................................68
ARTICLE X...............................................................................................68
RIGHTS AND REMEDIES UPON DEFAULT........................................................................68
SECTION 10.1 DEMAND; ACCELERATION..................................................................68
SECTION 10.2 FURTHER ADVANCES; IMMEDIATE ACCELERATION..............................................68
SECTION 10.3 FURTHER ADVANCES; MATERIAL ADVERSE CHANGE OR IMPAIRMENT OF POSITION...................68
SECTION 10.4 SPECIFIC RIGHTS WITH REGARD TO COLLATERAL.............................................69
SECTION 10.5 PERFORMANCE BY LENDERS................................................................71
SECTION 10.6 UNIFORM COMMERCIAL CODE AND OTHER REMEDIES............................................72
SECTION 10.7 RECEIVER OR OTHER COURT ORDER.........................................................72
ARTICLE XI..............................................................................................73
MISCELLANEOUS...........................................................................................73
SECTION 11.1 NOTICES...............................................................................73
SECTION 11.2 CONSENTS AND APPROVALS................................................................74
SECTION 11.3 REMEDIES, ETC. CUMULATIVE.............................................................74
SECTION 11.4 NO WAIVER OF RIGHTS BY THE LENDERS....................................................74
SECTION 11.5 ENTIRE AGREEMENT......................................................................74
SECTION 11.6 SURVIVAL OF AGREEMENT; SUCCESSORS AND ASSIGNS.........................................74
SECTION 11.7 EXPENSES..............................................................................75
SECTION 11.8 COUNTERPARTS..........................................................................75
SECTION 11.9 GOVERNING LAW.........................................................................75
SECTION 11.10 MODIFICATIONS......................................................................76
SECTION 11.11 ILLEGALITY.........................................................................76
SECTION 11.12 GENDER, ETC........................................................................76
SECTION 11.13 HEADINGS...........................................................................76
SECTION 11.14 WAIVER OF TRIAL BY JURY............................................................76
SECTION 11.15 NO WARRANTY BY LENDERS.............................................................77
SECTION 11.16 LIABILITY OF THE LENDERS...........................................................77
SECTION 11.17 LICENSE OF TRADENAME...............................................................77
SECTION 11.18 NO PARTNERSHIP.....................................................................78
SECTION 11.19 THIRD PARTIES; BENEFIT.............................................................78
SECTION 11.20 CONDITIONS; VERIFICATION...........................................................78
SECTION 11.21 SIGNS; PUBLICITY...................................................................78
SECTION 11.22 MANDATORY ARBITRATION..............................................................79
SECTION 11.23 TIME OF ESSENCE....................................................................80
</TABLE>
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FINANCING AND SECURITY AGREEMENT
THIS FINANCING AND SECURITY AGREEMENT (the "Agreement") is made this
28th day of September, 1998, by and between ALS HOLDINGS, INC., a Delaware
corporation ("Holdings"), and BANK UNITED as agent (the "Agent") for itself and
for certain additional Lenders (as hereinafter defined).
R E C I T A L S
A. The Borrower (as hereinafter defined) has applied to the Lenders for
a revolving credit facility in the amount of the Credit Facility Committed
Amount (as hereinafter defined) to be evidenced by one or more Promissory Notes
of the Borrower (the "Note") for the purpose set forth herein.
B. The Lenders have agreed to make available the Credit Facility upon
the condition that this Agreement be executed and delivered to the Agent.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises, the mutual agreements
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower and the Lender hereby
agree as follows:
ARTICLE I
Definitions
Section 1.1 Certain Defined Terms.
As used herein, the terms defined in the Preamble and Recitals hereto
shall have the respective meanings specified therein, and the following terms
shall have the following meanings:
"Account", individually, and "Accounts", collectively, mean with
respect to any Borrower and with respect to the Guarantor pertaining to all
Eligible Projects, all presently existing or hereafter acquired or created
accounts, accounts receivable, contract rights, notes, drafts, instruments,
acceptances, chattel paper, leases and writings evidencing a monetary obligation
or a security interest in or a lease of goods, all rights to receive the payment
of money or other consideration under present or future contracts arising out of
or relating to any and all Eligible Projects (including, without limitation, all
rights to receive the payment of money or other consideration from, or on behalf
of, any private pay patient), or by virtue of services rendered, loans and
advances made or other considerations given, by or set forth in, or arising out
of, any present or future chattel paper, note, draft, lease, acceptance,
writing, bond, insurance policy, instrument, document or general intangible, and
all extensions and renewals of any thereof, all rights
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<PAGE> 7
under or arising out of present or future contracts, agreements which gave rise
to any or all of the foregoing insofar as they pertain to the Eligible Projects,
including all claims or causes of action now existing or hereafter arising in
connection with or under any agreement or document or by operation of law or
otherwise, all collateral security of any kind (including real property
mortgages) given by any person with respect to any of the foregoing, including,
without limitation, all rights to receive payment of money or other
consideration from, or on behalf of, any private pay patient, all rights to
receive payments under all Resident Agreements, and all third-party payor
contracts (including Medicare and Medicaid to the extent permitted by Law),
including, but not limited to, the Veterans Administration, Participation
Agreements, and any and all depository accounts (other than resident trust
accounts) into which the proceeds of all or any portion of such accounts may be
now or hereafter deposited, and all proceeds (cash and non-cash) of the
foregoing.
"Account Debtor" means any Person who is obligated on a Receivable and
"Account Debtors" mean all Persons who are obligated on the Receivables.
"Act of Bankruptcy" means the filing of a petition in bankruptcy under
the Bankruptcy Code or the other commencement of a proceeding under any other
applicable law concerning insolvency, reorganization or bankruptcy, now or
hereafter in effect.
"Acquired Project" means a Facility, purchased by a Borrower from a
third party as a Completed Project, which has been open and operating for less
than twelve (12) months.
"Acquisition Project" means a Facility, purchased by a Borrower from a
third party as a Completed Project, which has been open and operating for twelve
(12) consecutive months or longer.
"Additional Borrower" means each Wholly Owned Subsidiary of Holdings or
ALS which is acceptable to the Agent and which has executed and delivered an
Additional Borrower Joinder Supplement and has otherwise complied with the
provisions of Section 4.1.
"Additional Borrower Joinder Supplemental" means an Additional Borrower
Joinder Supplement in the form to be provided by the Agent, with the blanks
appropriately completed and executed and delivered by the Additional Borrower
and by the Borrowers.
"Affiliate" means an entity in which ALS (or another entity which ALS
controls), holds an ownership interest equal to or greater than fifty-one
percent (51%).
"Agency Agreement" means that any Agency Agreement which may be
executed by and among the Agent and the other Lenders, as the same may be
amended, restated or substituted from time to time.
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<PAGE> 8
"Agent" means Bank United, its successors and assigns.
"Agreement" means this Financing and Security Agreement and all
amendments, extensions, restatements, substitutions and supplements hereto which
may from time to time become effective in accordance with the provisions of
Section 11.10 hereof.
"ALS" means Alternative Livings Services, Inc. a Delaware corporation.
"Architect" means the architect named in an Architect's Contract, if
any, and his or its successors and permitted assigns.
"Architect's Contract" means an agreement by and between the Borrower,
as owner, and the architect for a particular Facility, or any contract for
architectural services relating to the development of the Land and/or the
construction of the Improvements for each of the Eligible Projects made by the
Borrower and an architect and approved in writing by the Agent, as the same may
be amended from time to time with the prior written approval of the Agent.
"Banking Days" means a day on which a Lender is open for the conduct of
substantially all of its banking business at its office in the city in which the
Note is payable and must also be a day on which dealings are carried on in the
applicable interbank Eurodollar market.
"Bankruptcy Code" means the United States Bankruptcy Code, 11 U.S.C.
101 et seq.
"Borrower" means individually and/or collectively Holdings or any
Additional Borrower.
"Borrowing Base" means at any time an amount equal to the lesser of (a)
the aggregate dollar amounts of the Deed of Trust Lien Amounts for each of the
Eligible Projects or, in cases where an appraisal is obtained pursuant to
Section 7.27 hereof, the lesser of the Deed of Trust Lien Amount or 75% of the
appraised value of such Eligible Project; or (b) the aggregate dollar amount
equal to 80% of the Costs Incurred to Date for each Pool A Project, 60% of the
Costs Incurred to Date for each Pool B Project, and 40% of the Costs Incurred to
Date for each Pool C Project.
"Borrowing Base Report" shall have the meaning set forth in Section
2.1(d) hereof.
"Campus Project" means more than one Facility at a single location
consisting of two or more Senior Living Facility buildings of one or more model
type.
"Chattel Paper" means a writing or writings which evidence both a
monetary obligation and a security interest in or lease of specific goods; any
returned, rejected or repossessed goods covered by any such writing or writings
and all proceeds (in any form
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<PAGE> 9
including, without limitation, accounts, contract rights, documents, chattel
paper, instruments and general intangibles) of such returned, rejected or
repossessed goods; and all proceeds (cash and non-cash) of the foregoing.
"Collateral" means all of the Borrower's Accounts, Equipment, General
Intangibles, documents, Chattel Paper, Instruments and Inventory, all right,
title and interest of the Borrower in and to the Operating Agreements and
Management Contracts (including, without limitation, the Management Agreement),
Resident Agreements (to the extent and only to the extent the same can be
pledged or assigned in compliance with applicable law), Physician Contracts,
Participation Agreements, the Licenses to the extent and only to the extent the
same can be pledged or assigned in compliance with applicable law (whether or
not designated with initial capital letters), and all other management
contracts, operating agreements, service agreements and any other agreements
pertaining to the Eligible Projects as those terms are defined herein and in the
Uniform Commercial Code as presently adopted and in effect in the State of
Texas, and shall also cover, without limitation, (i) any and all property
specifically included in those respective terms in this Agreement or in the
Financing Documents, (ii) all right, title and interest of the Borrower in and
to Leases or subleases, rents, royalties, issues, profits, revenues, earnings,
income or other benefits of the Property, or arising from the use or enjoyment
of the Property, or from any lease or other use and occupancy agreement
pertaining to the Property (to the extent and only to the extent the same can be
pledged or assigned in compliance with applicable law), (iii) all right, title
and interest of the Borrower under all construction, architectural and design
contracts and plans and specifications,(iv) any and all property and/or
collateral described in any of the Security Documents, including, without
limitation, this Agreement, and the Deeds of Trust, (v) any and all bank
accounts or other deposit accounts of the Borrower wherever located, and (vi)
all proceeds (cash and non-cash, including, without limitation, insurance
proceeds) of the foregoing.
"Collateral Assignments" means collectively the Collateral Assignment
of Licenses, Participation Agreements and Resident Agreements executed in
connection with each Facility Closing among the Borrower, the Management Company
and the Agent and the Collateral Assignment of Operating Agreements and
Management Contracts executed in connection with each Facility Closing among the
Borrower, the Management Company and the Agent.
"Commonly Controlled Entity" means an entity, whether or not
incorporated, which is under common control with the Borrower within the meaning
of Section 414(b) or (c) of the Internal Revenue Code of 1986, as amended and
the regulations promulgated or issued thereunder.
"Completion Guaranty" or "Completion Guaranties" means, individually or
collectively, a Guaranty of Completion executed by the Guarantor in favor of the
Lenders in connection with the Facility Closing for a Development Project which
is not a Completed Project.
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<PAGE> 10
"Completed Project" means an Eligible Project for which the Lender has
received all of the due diligence items listed in Section 4.4 hereof.
"Construction Contract" or "Construction Contracts" means, individually
or collectively, the general contractor's agreements by and between the
Borrower, as owner, and a general contractor for the development of any of the
Land and/or the construction of any of the Improvements and approved in writing
by the Agent, as the same may be amended from time to time with the prior
written approval of the Agent.
"Costs Incurred to Date" means as to an Eligible Project constructed or
under construction by a Borrower, actual costs expended by the Borrower or a
Wholly Owned Subsidiary under a Total Development Budget and reported to the
Lender through the requisition process as verified by the Lender pursuant to the
provisions of the Financing Agreement; provided, however, no cost overruns not
otherwise covered by a contingency category in the Total Development Budget will
be included in the definition of Costs Incurred to Date without the Lender's
prior written consent. "Costs Incurred to Date" for an Acquisition Project or a
completed Eligible Project means the purchase price and related expenses of
acquisition.
"Credit Facility" means the revolving line of credit in a maximum
principal sum at any one time outstanding equal to the Credit Facility Committed
Amount.
"Credit Facility Closing" shall mean the date on which the documents
evidencing and initially securing the Credit Facility are executed and delivered
to the Agent.
"Credit Facility Committed Amount" means $45,000,000 or such larger
amount, not to exceed $100,000,000, which the Lenders may from time to time
severally commit to lend to the Borrower pursuant to the terms of the Agency
Agreement, any amendment to this Agreement and the applicable Note.
"Debt Service" means for any period of determination the annual
principal and interest payments required to fully amortize an Eligible Project's
Costs Incurred to Date in equal monthly installments of principal and interest
based on a 25-year amortization schedule and a rate equal to 200 basis points
per annum in excess of the then current rate for ten (10) year United States
Treasury Notes, as reported in the most recent Federal Reserve Statistical
Release H.15(519) but in no event shall the rate (as calculated as aforesaid) be
less than 7.5% per annum.
"Debt Service Coverage Ratio" means the ratio of Net Operating Income
to Debt Service.
"Deed of Trust" or "Deeds of Trust" means, individually or
collectively, a Deed of Trust, Assignment and Security Agreement, a Mortgage,
Assignment and Security Agreement, an Indemnity Deed of Trust, Assignment and
Security Agreement or an Indemnity Mortgage, Assignment and Security Agreement
or comparable security
5
<PAGE> 11
documents covering Property and securing the Obligations as the same may be from
time to time amended, restated, or replaced.
"Deed of Trust Lien Amount" means the dollar amount of the Lien created
by a Deed of Trust on the Borrower's fee simple interest in an Eligible Project,
the lien amount being the lesser of (i) 75% of such Eligible Project's appraised
value at stabilization, or (ii) 80% of such Eligible Project's Total Development
Budget.
"Default" means, with respect to each Financing Document, a default
which, with the giving of notice or the passage of time, or both, would
constitute an Event of Default.
"Development Project" means a Facility being constructed by a Borrower
which has not been open and operating for more than one (1) year, or a Facility
which has been acquired by a Borrower which has been open for less than one (1)
year.
"EBITDAR" means earnings before interest, taxes, depreciation,
amortization, and Rent, plus the dollar amount of the Guarantor's minority
interest in losses of unconsolidated subsidiaries.
"Eligible Project" means any location in the United States (a) of a
Development Project, an Acquisition Project or a Stabilized Project; (b) for
which the Lender has received and reviewed all pre-closing due diligence items;
(c) for which the Lender has received a Total Development Budget including a pro
forma operating budget acceptable to the Lender; (d) for which a Facility
Closing has been completed and a Deed of Trust has been recorded on the Eligible
Project; and (e) for which Lender has received other documentation necessary to
perfect a lien on the Collateral in favor of the Bank Group.
"Enforcement Costs" means all expenses, charges, costs and fees
whatsoever (including, without limitation, attorney's fees and expenses) of any
nature whatsoever paid or incurred by or on behalf of the Lenders in connection
with (a) the collection or enforcement of any or all of the Obligations, (b) the
preparation of or changes to this Agreement, the Note, the Security Documents
and/or any of the other Financing Documents, (c) the creation, perfection,
collection, maintenance, preservation, defense, protection, realization upon,
disposition, sale or enforcement of all or any part of the Collateral,
including, without limitation, those sums paid or advanced, and costs and
expenses, more specifically described in Sections 10.4 and 11.7, (d) the
monitoring, administration, processing, servicing of any or all of the
Obligations and/or the Collateral (e) post-judgment enforcement or collection
actions, and (f) bankruptcy proceedings of the Borrower.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Equipment" means all equipment, machinery, furniture and fixtures and
supplies of every nature, presently existing or hereafter acquired or created
and wherever located, together with all accessions, additions, fittings,
accessories, special tools, and
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<PAGE> 12
improvements thereto and substitutions therefor and all parts and equipment
which may be attached to or which are necessary for the operation and use of
such personal property, whether or not the same shall be deemed to be affixed to
real property, and all rights under or arising out of present or future
contracts relating to the foregoing and all proceeds (cash and non-cash) of the
foregoing.
"Eurodollar Period" or "Eurodollar Periods" shall have the meaning set
forth in the Note.
"Eurodollar Rate" means, for any portion of the principal sum for any
Eurodollar Period therefor, the rate per annum (rounded upwards, if necessary,
to the nearest 1/100 of 1%) appearing on Telerate Page 3750 (or any successor
page) as the London interbank offered rate for deposits in Dollars at
approximately 11:00 a.m. (London Time) three (3) Banking Days prior to the first
day of such Eurodollar Period for a term comparable to such Eurodollar Period.
If for any reason such rate is not available, the term "Eurodollar Rate" shall
mean, for any Eurodollar Loan for any Eurodollar Period therefor, the rate per
annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on
Reuters Screen LIBO Page as the London interbank offered rate for deposits in
Dollars at approximately 11:00 a.m. (London Time) three (3) Banking Days prior
to the first day of such Eurodollar Period for a term comparable to such
Eurodollar Period; provided, however, if more than one rate is specified on
Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of
all such rates.
"Event(s) of Default" means the occurrence of any one or more of the
events specified in Part IX of this Agreement or in the other Financing
Documents and the continuance of such event beyond the applicable grace and/or
cure periods therefor, if any, set forth in Part IX or in the other Financing
Documents.
"Expense Payments" shall have the meaning set forth in Section 10.5
hereof.
"Facility" and "Facilities" mean, individually or collectively, a
Senior Living Facility.
"Facility Closing" has the meaning set forth in Section 4.1 hereof.
"Financing Documents" means at any time collectively this Agreement,
the Note, the Deeds of Trust, the Guaranty Agreement, the Performance Guaranty,
any Additional Borrower Joinder Supplements, the Management Fee Subordination
Agreement, the Security Documents, and any other instrument, agreement or
document previously, simultaneously or hereafter executed and delivered by the
Borrower and/or any other Person, singly or jointly with another Person or
Persons, evidencing, securing, guarantying or in connection with any of the
Obligations and/or in connection with this Agreement, the Note and/or any of the
Security Documents, as the same may from time to time be amended, restated,
supplemented or otherwise modified.
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<PAGE> 13
"Force Majeure" means events occasioned by strikes, lock-outs, labor
unrest war or civil disturbance, materials shortages, unavailability of
materials, fire, natural disaster or acts of God which cause a delay in the
Borrower's performance of an obligation; provided, however, that the Borrower
must give Notice to the Agent within ten (10) days after the Borrower knew of or
should have known of the occurrence of an event which it believes to constitute
an event of Force Majeure.
"GAAP" means generally accepted accounting principles in effect in the
United States of America from time to time.
"General Contractor" or "General Contractors" shall mean individually
or collectively the general contractors named in the Construction Contracts and
his or its respective successors and permitted assigns.
"General Intangibles" means any and all general intangibles of every
nature, whether presently existing or hereafter acquired or created arising out
of or relating to any or all of the Eligible Projects, including without
limitation all books, correspondence, credit files, records, computer programs,
computer tapes, cards and other papers and documents in the possession or
control of the Borrower or the Guarantor, claims (including without limitation
all claims for income tax and other refunds), choses in action, judgments,
patents, patent licenses, trademarks (excluding the "Wynwood" trademark or
tradename), trademark licenses (excluding any license to the Borrower for the
"Crossings", "Clare Bridge", Wovenhearts" "Sterling House" or "Sterling Cottage"
trademarks or tradenames), licensing agreements, rights in intellectual
property, goodwill, as that term is defined in accordance with GAAP (including
all goodwill of the Borrower's business symbolized by, and associated with, any
and all trademarks, trademark licenses, copyrights and/or service marks),
royalty payments, contractual rights, rights as lessee under any lease of real
or personal property, literary rights, copyrights, service names, service marks,
logos, trade secrets, all amounts received as an award in or settlement of a
suit in damages, deposit accounts, interests in joint ventures or general or
limited partnerships, all Licenses, construction permits, Operating Agreements
and Management Contracts, Participation Agreements, Management Agreements and
Resident Agreements, and all proceeds (cash and non-cash) of the foregoing.
"Governmental Authority or Authorities" means any nation or government,
any state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Guarantor" means ALS.
"Guaranty Agreement" means the Guaranty of Payment Agreement by the
Guarantor of even date herewith.
"Hazardous Materials" means any flammable explosives, radioactive
materials, hazardous waste, toxic substances or related materials, including,
without limitation, asbestos, polychlorinated biphenyls, urea-formaldehyde,
radon, and any substance
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<PAGE> 14
defined as or included in the definition of (a) any "hazardous waste" as defined
by the Resource Conservation Recovery Act of 1976, as amended from time to time,
and regulations promulgated thereunder; (b) any "hazardous substance" as defined
by the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended from time to time, and regulations promulgated thereunder; (c)
any "toxic substance" as defined by the Toxic Substances Control Act, as amended
from time to time, and regulations promulgated thereunder; (d) any hazardous or
infectious medical waste including, but not limited to, cultures and stocks of
infectious agents and associated biologicals, pathological wastes, human and
animal blood specimens and blood products, anatomical materials, blood,
blood-soiled articles, contaminated materials, microbiological laboratory
wastes, sharps, chemical wastes, infectious wastes, chemotherapeutic wastes, and
radioactive wastes; (e) any substance, the presence of which on any property now
or hereafter owned, operated or acquired by the Borrower is prohibited or
regulated under any applicable Federal or state laws or regulations; and (f) any
other substance, pollutant, contaminant, chemical, or industrial toxic hazardous
substance or waste, including without limitation hazardous materials, which by
law is prohibited or is otherwise regulated as a hazardous material.
"Hazardous Materials Contamination" means the contamination by, release
or spill of (whether presently existing or occurring after the date of this
Agreement), Hazardous Materials of or on any property owned, operated or
controlled by the Borrower, or for which the Borrower has responsibility,
including, without limitation, improvements, facilities, soil, ground water, air
or other elements on, or of, any property now or hereafter owned, operated or
acquired by the Borrower, and any other contamination by Hazardous Materials for
which the Borrower is, or is claimed to be, responsible.
"Holdings" means ALS Holdings, Inc., a Delaware corporation.
"Hydric Soils" means any soil category upon which building would be
prohibited or restricted under applicable governmental requirements (including,
without limitation, those imposed by the U.S. Army Corps of Engineers based upon
its guidelines as to, among other things, soil, vegetation and effect on the
ecosystem).
"Improvements" shall have the meaning given to that term in each Deed
of Trust.
"Inspecting Engineer" shall mean such person or firm as the Agent may
from time to time appoint or designate for purposes related to the inspection of
the progress of the development of any of the Land and the construction of any
of the Improvements, conformity of construction with the applicable Plans and
Specifications, and for such other purposes as the Agent may from time to time
deem appropriate or as may be required by the terms of this Agreement.
"Instruments" means any and all notes, notes receivable, drafts,
acceptances, and similar instruments or documents, both now owned or hereafter
created or acquired arising out of or relating to the Facility (or any part
thereof).
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<PAGE> 15
"Interest" means the sum of all interest expense (as defined by GAAP),
net of interest income.
"Inventory" means any and all inventory of the Borrower and all right,
title and interest of the Borrower in, and to, all of its now owned and
hereafter acquired goods, merchandise and other personal property furnished
under any contract of service or intended for sale or lease arising out of or
relating to any and all Facilities, including, without limitation, all supplies
of any kind, nature or description which are used or consumed in the Borrower's
business and all documents of title or documents representing the same and all
proceeds (cash and non-cash) and products of the foregoing.
"Joint Venture" means an entity formed as a joint venture between ALS
or a Wholly Owned Subsidiary and one (1) or more joint venture partners as a
single-purpose, bankruptcy-remote legal entity.
"Joint Venture Lease" means a lease between a Borrower and a Joint
Venture to operate an Eligible Project.
"Land" shall have the meaning described in the Deeds of Trust or in any
applicable Deed of Trust as the context shall indicate.
"Laws" means all ordinances, statutes, rules, regulations, orders,
injunctions, writs or decrees of any Governmental Authority or any court or
similar entity established by any thereof.
"Lease" shall have the meaning set forth in a Deed of Trust.
"Lender Tax" means any present or future tax, levy, cost or charge of
any nature imposed by any Governmental Authority, excluding taxes on or measured
by the net income of any Lender imposed by the Internal Revenue Service or by
any jurisdiction in which the principal or relevant lending office of such
Lender is located.
"Licenses" means any and all licenses, certificates of need, operating
permits, franchises, and other licenses, authorizations, certifications,
permits, or approvals, other than construction permits, issued by, or on behalf
of, any Governmental Authority now existing or at any time hereafter issued,
with respect to the acquisition, construction, renovation, expansion, leasing,
management, ownership and/or operation of any and all Facilities, accreditation
of any Facility, and/or the participation or eligibility for participation in
any third party payment or reimbursement programs to the extent the Borrower or
any Guarantor Subsidiary is participating in such programs (but specifically
excluding any and all Participation Agreements to the extent required by law),
any and all operating licenses issued by any state Governmental Authority, any
and all pharmaceutical licenses and other licenses related to the purchase,
dispensing, storage, prescription or use of drugs, medications, and other
"controlled substances," any and all
10
<PAGE> 16
licenses relating to the operation of food or beverage facilities or amenities,
if any, and any and all certifications and eligibility for participation in
Medicare, Medicaid, Blue Cross and/or Blue Shield, or any of the Managed Care
Plans, private insurer, employee assistance programs or other third party
payment or reimbursement programs as the same may from time to time be amended,
renewed, restated, reissued, restricted, supplemented or otherwise modified.
"Lien" means any mortgage, deed of trust, deed to secure debt, grant,
pledge, security interest, assignment, encumbrance, judgment, lien or charge of
any kind, whether perfected or unperfected, avoidable or unavoidable, consensual
or non-consensual, including, without limitation, any conditional sale or other
title retention agreement, filed or un-filed tax liens, any lease in the nature
thereof, and the filing of or agreement to give any financing statement under
the Uniform Commercial Code of any jurisdiction.
"Liquidation Costs" shall have the meaning set forth in Section 10.6
hereof.
"Loan" shall have the meaning set forth in Section 2.1 hereof.
"Managed Care Plans" means any health maintenance organization,
preferred provider organization, individual practice association, competitive
medical plan, or similar arrangement, entity, organization, or Person.
"Management Agreement" means any and all Management Agreements entered
into or to be entered into by and between the Borrower or the Joint Venture and
the Management Company relating to the management of and Eligible Facility, as
the same may from time to time be amended, restated, supplemented or otherwise
modified.
"Management Company" means ALS, its successors and assigns and any
other Person which may become the manager of the Facilities.
"Management Fee Subordination Agreement" shall have the meaning set
forth in Section 7.18 hereof.
"Material Lease" shall mean a lease of a portion of any of the Property
which generates $25,000 per year or more in gross revenue for such Property.
"Maximum Construction Period" means construction has been on-going for
not longer than the applicable period for the Facility model type as set forth
in Section 7.2.2 hereof.
"Minimum Occupancy Requirement" means for an Eligible Project a minimum
Resident Occupancy for the particular type and model of Facility as set forth in
Section 7.2.2 hereof.
"Mortgage Lien Amount" means Deed of Trust Lien Amount.
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<PAGE> 17
"Multiemployer Plan" shall mean a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"Net Operating Income" means total operating revenue less total
operating expenses (excluding interest, federal and state income taxes,
depreciation and amortization) but including a management fee to the Management
Company of the higher of five percent (5%) of gross revenues net of management
expenses reflected in the income statement for the Facility or the actual
management fee if paid to a non-affiliate of the Guarantor for the period in
question as shown in financial information provided by the Borrowers.
"Note" shall have the meaning set forth in Section 2.1 hereof.
"Obligations" means all present and future debts, obligations, and
liabilities, whether now existing or hereafter arising, of the Borrower to the
Agent or any Lender under, arising pursuant to, in connection with and/or on
account of the provisions of this Agreement, the Note, the Deeds of Trust, each
Security Document, and any of the other Financing Documents, including, without
limitation, the principal of, and interest on, the Note, late charges,
Enforcement Costs, and other prepayment penalties (if any), letter of credit
fees or fees charged with respect to any guaranty of any letter of credit, and
also means all other present and future indebtedness, liabilities and
obligations, whether now existing or hereafter arising, of the Borrower to the
Lenders of any nature whatsoever regardless of whether such debts, obligations
and liabilities be direct, indirect, primary, secondary, joint, several, joint
and several, fixed or contingent, and any and all renewals, extensions and
rearrangements of any such debts, obligations and liabilities.
"Operating Agreements and Management Contracts" means any and all
contracts and agreements previously, now or at any time hereafter at any time
entered into by the Borrower with respect to the acquisition, construction or
renovation of a significant nature, expansion, ownership, operation,
maintenance, use or management of any or all of the Facilities or otherwise
concerning the operations and business of any or all of the Facilities,
including, without limitation, any and all service and maintenance contracts,
any employment contracts, any and all management agreement other than the
Management Agreements, any and all consulting agreements, laboratory servicing
agreements, pharmaceutical contracts, physician, other clinician or other
professional services provider contracts, food and beverage service contracts,
and other contracts for the operation and maintenance of, or provision of
services to, a Facility, as the same may from time to time be amended, restated,
supplemented, renewed, or modified.
"Operating Month" means the first full calendar month after the
issuance of a certificate of occupancy for any Facility and each month
thereafter.
"Operating Reserve" shall mean a reserve in an amount approved by the
Agent included in each Total Development Budget to cover the costs of leasing up
a Facility and initial operating deficits.
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"Participation Agreements" means any and all third party payor
participation or reimbursement agreements now or at any time hereafter existing
for the benefit of the Borrower relating to rights to payment or reimbursement
from, and claims against, private insurers, Managed Care Plans, material
employee assistance programs, Blue Cross and/or Blue Shield, federal, state and
local Governmental Authorities, including without limitation, Medicare and
Medicaid, and other third party payors, as the same may from time to time be
amended, restated, extended, supplemented or modified.
"Performance Guaranty" means individually or collectively a Guaranty of
Performance by the Guarantor in connection with a Facility Closing.
"Permitted Equipment Financing" means equipment leases with a total
value not in excess of $250,000 per Facility.
"Permitted Liens" means: (a) Liens for Taxes which are not delinquent
or which the Agent has determined in the exercise of its sole and absolute
discretion (i) are being diligently contested in good faith and by appropriate
proceedings, (ii) the Borrower has the financial ability to pay, with all
penalties and interest, at all times without materially and adversely affecting
the Borrower, and (iii) are not, and will not be with appropriate filing, the
giving of notice and/or the passage of time, entitled to priority over any Lien
of the Lenders; (b) deposits or pledges to secure obligations under workers'
compensation, social security or similar laws, or under unemployment insurance
in the ordinary course of business; (c) Liens in favor of the Lenders pursuant
to the Credit Facility or the Interest Rate Protection; (d) judgment Liens to
the extent the entry of such judgment does not constitute an Event of Default
under the terms of this Agreement or result in the sale of, or levy of execution
on, any of the Collateral; (e) Liens approved by the Agent which have been
created to secure permitted subordinated debt on a junior lien basis; (f) the
Permitted Equipment Financing; and (g) such other Liens, if any, as are
identified as Permitted Encumbrances as defined in a Deed of Trust.
"Person" shall mean and include an individual, a corporation, a
partnership, a limited liability company, a joint venture, a trust, an
unincorporated association, any Governmental Authority or any other entity.
"Plans and Specifications" shall mean any and all plans and
specifications prepared in connection with the development of the Land and/or
the construction of the Improvements for any Eligible Project which is a
Development Project and which are approved in writing by the Agent, as the same
may from time to time be amended with the prior written approval of the Agent,
including but not limited to, plans and specifications prepared by an Architect,
a copy of which have been initialed by the Borrower and the Agent for
identification and delivered to the Agent.
"Pool A Project" means any Eligible Project for which, at any time when
the Borrowing Base is computed meets the applicable Pool A covenants set forth
in Paragraph 29(a)(ii)(B).
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"Pool B Project" means any Eligible Project which, when the Borrowing
Base is computed, has not met the definition of a Pool A Project for the most
recent three (3) months.
"Pool C Project" means any Eligible Project which, when the Borrowing
Base is computed, has not met the definition of a Pool A Project for the most
recent six (6) months.
"Post Default Rate" means the interest rate on the Note in the absence
of an Event of Default plus two percent (2%) per annum.
"Prime Rate" shall have the meaning set forth in Section 2.4.2 hereof.
"Pro Forma Operating Statement" means the Borrower's projection for not
less than 36 months from the first Operating Month including occupancy
projections and projected operating expenses and operating loses.
"Property" shall mean collectively the "Property" as that term is
defined in each of the Deeds of Trust.
"Receivables" means all of the Borrower's now or hereafter owned,
acquired or created Accounts, Chattel Paper, Contract Rights, General
Intangibles and Instruments, and all cash and noncash proceeds and products
thereof.
"Rent" means lease expense as defined pursuant to GAAP.
"Reportable Event" shall mean any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder.
"Requisition" or "Requisitions" shall have the meaning set forth in
Section 2.2 hereof.
"Resident Agreements" means any and all contracts, authorizations,
agreements and/or consents executed by, or on behalf of any resident or other
person seeking services from the Borrower pursuant to which the Borrower
provides or furnishes health or assisted living care and related services at any
and all of the Facilities, including the consent to treatment, assignment of
payment of benefits by third party, as the same may from time to time be
amended, restated, supplemented or modified.
"Resident Occupancy" means the number of residents who are in occupancy
at a Facility and paying fees pursuant to a resident agreement.
"Revolving Credit Expiration Date" means September 28, 2001 or any date
to which it may be extended from time to time pursuant to the terms of Section
2.5 hereof.
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"Revolving Credit Termination Date" means the earlier of (a) the
Revolving Credit Expiration Date, or (b) the date on which the Credit Facility
is terminated pursuant to Article X hereof or otherwise.
"Security Documents" shall mean, collectively, any assignment,
including, without limitation, the Collateral Assignments and any assignment,
pledge agreement, security agreement, mortgage, deed of trust (including the
Deeds of Trust), leasehold mortgage, leasehold deed of trust, deed to secure
debt, financing statement, initial transaction statement and any similar
instrument, document or agreement under or pursuant to which a Lien is now or
hereafter granted to, or for the benefit of, the Lenders on any collateral to
secure the Obligations, as the same may from time to time be amended, restated,
supplemented or otherwise modified.
"Senior Living Facility" and "Senior Living Facilities" mean
individually or collectively, an assisted living facility, an independent living
facility or a dementia care facility for persons with Alzheimer's disease and
other forms of memory impairment.
"Stabilized Project" means an Eligible Project with a Resident
Occupancy of at least 85% and for a Development Project which has been open for
twelve (12) months or longer or has earlier achieved a ratio of Net Operating
Income to Debt Service of not less than 1.25 to 1.00 measured for three
consecutive months.
"Subordinated Debt" means any indebtedness of a person incurred at any
time the repayment of which is subordinated to other indebtedness of such person
pursuant to a written agreement and specifically including (i) the Guarantor's
$143,750,000 aggregate original principal amount of 5.25% convertible
subordinated debentures due December 15, 2002; (ii) the Guarantor's $50,000,000
aggregate original principal amount of 7.00% convertible subordinated debentures
due June 1, 2004; (iii) the Guarantor's $35,000,000 aggregate original principal
amount of 6.75% convertible subordinated debentures due June 20, 2006.
"Survey" shall mean a plat of the Land for any Facility which clearly
designates at least (i) the location of the perimeter of such Land by courses
and distances; (ii) the location of all easements, rights-of-way, alleys,
streams, waters, paths and encroachments; (iii) the location of all building
restriction lines and set-backs, however established; (iv) the location of any
streets or roadways abutting such Land; and (v) the ten "as-built" locations of
the Improvements located on such Land and the relation of such Improvements by
courses and distances to the perimeter of such Land, building restriction lines
and set-backs, all in conformity with the Minimum Standard Detail Requirements
for Land Title Surveys adopted by the American Congress on Surveying and Mapping
(1992 Edition).
"Taxes" means all taxes and assessments whether general or special,
ordinary or extraordinary, or foreseen or unforeseen, of every character
(including all penalties or interest thereon), which at any time may be
assessed, levied, confirmed or imposed by
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any Governmental Authority on the Borrower or any of its properties or assets or
any part thereof or in respect of any of its franchises, businesses, income or
profits.
"Total Capital" means the sum of Net Worth, Total Funded Debt and
Subordinated Debt.
"Total Development Budget" means the development, construction and
opening operating expense budget or acquisition and opening operating expense
budget for an Eligible Project as reviewed and approved by the Lender.
"Total Funded Debt" at any time means the sum at such time of (a)
indebtedness for borrowed money or for the deferred purchase price of property
or services, (b) any obligations in respect of letters of credit, banker's or
other acceptances or similar obligations issued or created for the account of
the Guarantor, (c) lease obligations which have been or should be, in accordance
with GAAP, capitalized on the books of the Guarantor, (d) all liabilities
secured by any property owned by the Guarantor, as the case may be, to the
extent attached to the Guarantor's interest in such property, even though the
Guarantor has not assumed or become liable for the payment thereof, and in the
case of the Guarantor, and (e) any obligation of the Guarantor or a Commonly
Controlled Entity to a Multiemployer Plan; but excluding trade and other
accounts payable in the ordinary course of business in accordance with customary
trade terms and which are not overdue (as determined in accordance with
customary trade practices) or which are being disputed in good faith by the
Guarantor and for which adequate reserves are being provided on the books of the
Guarantor in accordance with GAAP.
"Wholly Owned Subsidiary" or "Wholly Owned Subsidiaries" means one or
more subsidiaries 100% owned by ALS which is or has been created for the sole
purpose of acquiring or constructing and owning and operating a Facility.
Section 1.2 Accounting Terms and Other Definitional Provisions.
Unless otherwise defined in this Agreement, as used in this Agreement
and in any certificate, report or other document made or delivered pursuant
hereto, accounting terms not otherwise defined in this Agreement, and accounting
terms only partly defined in this Agreement, to the extent not defined, shall
have the respective meanings given to them under GAAP. Unless otherwise defined
in this Agreement, all terms used in this Agreement which are defined by the
Texas Uniform Commercial Code shall have the same meanings as assigned to them
by the Texas Uniform Commercial Code unless and to the extent varied by this
Agreement. The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, Section, subsection, schedule
and exhibit references are references to sections or subsections of, or
schedules or exhibits to, as the case may be, this Agreement unless otherwise
specified. As used in this Agreement, the singular number shall include the
plural, the plural the singular and the use of the masculine, feminine or neuter
gender shall include all genders, as the context may require. Any reference to
Land, the Improvements or the Property shall
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mean all or any portion of each of the foregoing, respectively unless the
context indicates that such terms refer to an individual Facility. Reference to
any one or more of the Financing Documents and any of the Financing Documents
shall mean the same as the foregoing may from time to time be amended, restated,
substituted, extended, renewed, supplemented or otherwise modified.
ARTICLE II
BORROWING
Section 2.1 The Loan.
(a) The Lenders agree to lend to the Borrower
pursuant to the terms and conditions of this Agreement and the Borrower agrees
to borrow on a revolving basis from the Lenders from time to time the principal
amount (the "Loan") not to exceed at any time outstanding the lesser of (i) the
Credit Facility Committed Amount, or (ii) the Borrowing Base.
(b) The obligation of the Borrower to repay the Loan
shall be evidenced by the Promissory Note of even date herewith payable to the
Agent in the form attached hereto as EXHIBIT A and any other Promissory Notes
which may be executed by the Borrower in the future payable to the Agent on
behalf of the Lenders in substantially the form set forth in EXHIBIT A
(collectively, as amended, restated, substituted, extended, renewed and
otherwise modified from time to time, the "Note"). The Note shall bear interest
and shall be repaid by the Borrower in the manner and at the times set forth in
the Note.
(c) The conditions precedent for making an advance
under the Loan shall be as set forth in this Agreement. Sums borrowed and repaid
may be readvanced under the terms and conditions of this Agreement.
(d) Not more frequently than monthly but at least
quarterly, the Agent will prepare a Borrowing Base Report (each a "Borrowing
Base Report") in the form attached or to be attached hereto as EXHIBIT B which
must be certified by the Borrower listing for each of the Eligible Projects (i)
the applicable Deed of Trust Lien Amount, (ii) the status of the Eligible
Facility as a Development Project, an Acquired Project or a Stabilized Project,
(iii) the Costs Incurred to Date, as described in the applicable Total
Development Budget, (iii) the length of time the Facility has been under
construction (if applicable), and (iv) its status as of the most recent
reporting date as a Pool A, Pool B or Pool C Project. The foregoing
notwithstanding, the Borrowing Base Report will be issued more frequently than
monthly if the Borrower requests the addition of an additional Eligible Project
or Projects with a value of at least $3,000,000 to the Borrowing Base; provided,
however, Borrowing Base Reports will not be issued more frequently than
semi-monthly. The Borrowing Base Report will be based on the outcome of the cost
verification procedures hereinafter described, appraisals obtained by the Agent
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and other information on the Eligible Projects provided by the Borrower or
obtained by the Agent. The Borrowing Base shall be computed based on the
Borrowing Base Report most recently prepared by the Agent. In the event the
Borrower shall fail to furnish other current reports or information as
reasonably required by the Agent pursuant to the Financing Documents, or in the
event the Agent believes that a Borrowing Base Report is no longer accurate, the
Agent may, in its reasonable discretion exercised from time to time and without
limiting its other rights and remedies under the Financing Documents, upon
notice to the Borrower and the expiration of a cure period of five (5) Banking
Days, designate any Eligible Project as a Pool C Project or suspend the making
of or limit advances under the Loan. The Borrowing Base shall be subject to
reduction as a result of the following events: (i) the release of an Eligible
Project from the lien of the applicable Deed of Trust; (ii) by the change of any
Eligible Project's status as a Pool A or B Project to a Pool B or C Project
respectively as determined by the Agent; or (iii) the diminution in the value of
an Eligible Project based upon an appraisal obtained pursuant to Section 7.28.
The Borrowing Base shall be subject to increase as a result of the following
events: (i) addition of Eligible Projects; (ii) increase in the Costs Incurred
to Date as determined by the Agent during the period since the last Borrowing
Base Report; or (iii) the change of an Eligible Project's status as a Pool B or
C Project to a Pool A Project since the date of the most recent Borrowing Base
Report as determined by the Agent.
(e) No advances may be made or be outstanding under
the Credit Facility of availability under the Borrowing Base from Pool B or C
Projects until there are at least five (5) Pool A Projects in the Borrowing Base
and until and during such times as sixty percent (60%) of all Eligible Projects
in the Borrowing Base are Pool A Projects.
(f) For purposes of determining Costs Incurred to
Date, each Total Development Budget may include the cost of (i) the acquisition
by the Borrower of the Land which is the site of such Facility or, in the case
of an Acquired Facility, the Land and the Facility's Improvements including the
purchase price paid and expenses incurred in connection with due diligence and
in closing of such acquisition; (ii) the construction on the Property of a
Facility which is not an Acquired Facility containing residential units and
common facilities; (iii) marketing, staffing and similar pre-opening expenses;
and (iv) an Operating Reserve.
(g) The Borrower shall furnish to the Agent such
schedules, certificates, lists, records, reports, information and documents as
required by the Agent from time to time so that the Agent may, in its reasonable
discretion, determine the Borrowing Base.
(h) If at any time the aggregate principal amount of
the Loan outstanding exceeds the Borrowing Base, a borrowing base deficiency
("Borrowing Base Deficiency") shall exist. Each time a Borrowing Base Deficiency
exists, the Borrower shall within three (3) banking days of notice thereof from
the Agent either pay the amount of the Borrowing Base Deficiency and/or add
Eligible Projects to increase the
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Borrowing Base to an amount which is at least equal to the aggregate principal
amount outstanding under the Loan.
Section 2.2 Procedure for Advances.
(a) The Agent will make advances not more frequently
than twice during each month upon receipt of a written request from the Borrower
in the form designated by the Agent (each a Requisition, collectively, the
"Requisitions") signed by Mark W. Ohlendorf or David M. Boitano on behalf of
Borrower.
(b) Each Requisition is subject to Agent's
determination that after giving effect to the Requisition, the outstanding
principal balance of the Loan would not exceed the lesser of the then applicable
Credit Facility Committed Amount or the Borrowing Base. Each advance under the
Loan shall be in an amount of not less than $1,000,000, and in increments of
$100,000 in excess thereof. Advances or the renewal of a Eurodollar Period shall
be requested by the Borrower orally or in writing by 10:00 A.M. (Houston time)
three (3) Banking Days prior to the Banking Day on which the funds will be
advanced or the applicable Eurodollar Period will expire. The Agent shall have
no obligation to make any advance if at the time such advance is requested
and/or is proposed to be funded, there exists an Event of Default or an event
which upon notice or lapse of time or both would constitute an Event of Default
under the Financing Documents. If the Borrower fails to advise the Agent three
(3) Banking Days in advance of the expiration of a Eurodollar Period of its
intention to either pay off such portion of the Loan or renew the applicable
Eurodollar Period, it shall be assumed by the Agent that the Eurodollar Period
is to be renewed.
(c) In addition, if the Agent has reason to believe a
Default or an Event of Default has occurred, the Borrower hereby irrevocably
authorizes the Lenders to make advances of the Loan at any time and from time to
time, without further request from or notice to the Borrower, which the Lenders,
in their sole and absolute discretion, deems necessary or appropriate to protect
the Lenders' interests under this Agreement or otherwise, including, without
limitation, advances of the Loan made to cover interest on the Loan, fees,
and/or Enforcement Costs, prior to, on, or after the termination of this
Agreement, regardless of whether the aggregate amount of the advances of the
Loan which the Lenders may make hereunder exceeds the Credit Facility Committed
Amount. The Lenders shall have no obligation whatsoever to make any advance
under this subsection and the making of one or more advances under this
subsection shall not obligate the Lenders to make other similar advances. Any
such advances will be evidenced by the Note secured by the Collateral and the
Deeds of Trust.
Section 2.3 Fees.
The Borrower shall pay to the Agent the fees described in the Fee
Agreement between the Borrower and the Agent of even date herewith.
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Section 2.4 Interest Rate Matters.
2.4.1 Lender Tax Adjustment
Each payment made by the Borrower under the Note shall either (i) be
exempt from, and be made without reduction by reason of, any Lender Tax or (ii)
to the extent that any such payment shall be subject to any Lender Tax, be
accompanied by an additional payment by the Borrower of such amount as may be
necessary so that the net amount received by each Lender (after deducting all
applicable Taxes) is the same as such Lender would have received had such
payment not been subject to such Lender Tax. Upon any payment of Lender Tax by
the Borrower, the Borrower shall promptly (and in any event within 30 days)
furnish to the Agent and applicable Lender such tax receipts, certificates an
other evidence of such payment as the Borrower may have or the Agent or the
applicable Lender may reasonably request.
2.4.2 Inability to Determine Eurodollar Rate.
In the event that the Agent determines (which determination shall be
conclusive absent manifest error) that, by reason of circumstances affecting the
London interbank market, quotation of Eurodollar Rates for any portion of the
Note are not being provided in the relevant amounts or for the relevant
maturities for the purpose of determining a Eurodollar Rate for any portion of
the Principal Sum, the Agent will give notice of such determination to the
Borrower and each Lender at least one day prior to the date of an advance or any
subsequent Eurodollar Period for the Loan. If any such notice is given, no
Lender shall have any obligation to make any advance or maintain any principal
sum outstanding at a Eurodollar Rate. Until the earlier of the date any such
notice has been withdrawn by the Agent or the date when the Lenders and the
Borrower have mutually agreed upon an alternate method of determining the rates
of interest payable on the Loan, as the case may be, the Borrower shall not have
the right to have additional advances or maintain any portion of the Credit
Facility at a Eurodollar Rate and interest shall accrue on all sums then
outstanding under the Note and on any additional advances at the fluctuating
prime rate of interest established and declared by the Agent from time to time
(the "Prime Rate") and shall be adjusted immediately and contemporaneously with
any change in the Prime Rate. Interest accruing at the Prime Rate shall be
computed for the actual number of days which have elapsed from the date of each
advance at the Prime Rate or the date of conversion to the Prime Rate on the
basis of a 360-day year. The Prime Rate does not necessarily represent the
lowest rate of interest charged by the Agent to Borrowers.
2.4.3 Illegality
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Notwithstanding any other provision of the Financing Documents to the
contrary, in the event that it shall become unlawful for any Lender to obtain
funds in the London interbank market or for such Lender to maintain the Loan at
the Eurodollar Rate, then, by written notice to the Borrower and to the Agent,
such Lender may declare that advances will not thereafter be made or the Loan
maintained by such Lender hereunder at the Eurodollar Rate, whereupon the
Lenders and the Borrower shall mutually agree upon an alternate method of
determining the rates of interest payable on the Loan or interest shall
immediately commence to accrue at the Prime Rate as provided in Section 2.4.2.
2.4.4 Increased Costs and Reduced Return.
(a) If any event shall occur (whether in the form of
a reserve requirement (not included in the definition of the Eurodollar Rate),
exchange control regulations, governmental charges, compliance with any
guideline or request from any central bank or other Governmental Authority,
changes in the London interbank market or the position of any Lender in such
market or otherwise) and the result of any such event is, in such Lender's
reasonable judgment, to increase the costs which such Lender determines are
attributable to its making or maintaining the Loan at the Eurodollar Rate, or
its obligation to make available the Loan at the Eurodollar Rate or to reduce
the amount of any sum received or receivable by such Lender under the Note,
then, within ten (10) days after demand by such Lender, Borrower hereby agrees
to pay to such Lender such additional amount or amounts as will compensate such
Lender for such increased cost or reduction.
(b) In addition to any amounts payable pursuant to
Section 2.4.2 if any Lender shall have determined that the applicability of any
law, rule, regulation or guideline adopted pursuant to or arising out of the
July 1988 report of the Basle Committee on Banking Regulations and Supervisory
Practices entitled "International Convergence of Capital Measurement and Capital
Standards," or the adoption after the date hereof of any other law, rule,
regulation or guideline regarding capital adequacy, or any change in any of the
foregoing or in the enforcement or interpretation or administration of any of
the foregoing by any court or any central bank or other Governmental Authority,
charged with the enforcement or interpretation or administration thereof, or
compliance by such Lender (or any lending office of such Lender) or such
Lender's holding company with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority, central
bank or comparable agency, has or would have the effect of reducing the rate of
return on such Lender's capital or on the capital of such Lender's holding
company, if any, as a consequence of its making or maintaining the Loan or its
incurring any obligations under this Agreement to a level below that which such
Lender or such Lender's holding company could have achieved but for such
applicability, adoption, change or compliance (taking into consideration such
Lender's policies and the policies of such Lender's holding company with respect
to capital adequacy) by an amount deemed by such Lender to be material, then,
upon demand by such Lender, the Borrower hereby agrees to pay to such Lender
from time to time such additional amount or amounts as will compensate such
Lender or such Lender's holding company for any such reduction suffered.
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(c) If any Lender shall seek payment of any amounts
from Borrower pursuant to this Section or under Section 2.4.2, it shall notify
the Borrower and the Agent of the amount payable by the Borrower to such Lender
hereunder. A certificate of such Lender seeking payment setting forth in
reasonable detail the factual basis for and the computation of the amount
specified, shall be conclusive and binding on all parties for all purposes,
absent manifest error, as to the amounts owned. The Borrower's obligations under
this Section shall survive the termination of this Agreement and the repayment
of the Obligations.
Section 2.5 Extensions.
Provided that no Event of Default has occurred, at any time not later
than sixty (60) days nor earlier than one hundred twenty (120) days prior to the
Revolving Credit Expiration Date or any anniversary of the date of this
Agreement, the Borrower may request that the Agent and the Lenders, in their
sole discretion, may agree to extend the Revolving Credit Expiration Date one
(1) or more times for a period of twelve (12) months each.
ARTICLE III
COLLATERAL
Section 3.1 Collateral.
As security for the payment of any and all of the Obligations and for
the Borrower's performance of, and compliance with, all of the terms, covenants,
conditions, stipulations and agreements contained in the Financing Documents,
the Borrower hereby assigns, grants and conveys to the Lenders, and agrees that
the Lenders shall have, to the extent permitted by law a perfected, continuing
security interest in, all of the Collateral. The Borrower further agrees that
the Lenders shall have in respect of the Collateral all of the rights and
remedies of a secured party under the Texas Uniform Commercial Code and the
Uniform Commercial Code of those other states in which the Facilities are
located, whichever is applicable, and under other applicable Laws as well as
those provided in this Agreement. The Borrower covenants and agrees to execute
and deliver such financing statements and other instruments and filings as are
necessary in the opinion of the Agent to perfect such security interest.
Notwithstanding the fact that the proceeds of the Collateral constitute a part
of the Collateral, the Borrower may not dispose of the Collateral, or any part
thereof, other than in the ordinary course of its business or as otherwise may
be permitted by this Agreement or other Security Agreements.
Section 3.2 Eligible Projects.
The Borrower shall from time to time designate Facilities owned by the
Borrower as Eligible Projects included in the Borrowing Base pursuant to the
terms
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hereof. The Facilities which are then Eligible Projects shall be listed on any
future Borrowing Base Report. The Credit Facility shall be secured by (a) the
first lien Deeds of Trust on the fee simple interests of the Borrower in the
Eligible Projects, (b) a first lien security interest in all fixtures, building
materials and all other machinery, equipment and other personalty used or
installed by the Borrower or each of the premises of an Eligible Project or in
the Improvements constructed thereon, with the exception of equipment subject to
Permitted Equipment Financing, and (c) all of the other Collateral relating to
the Eligible Projects. The Borrower may release an Eligible Project from the
lien of its Deed of Trust at any time provided no Event of Default has occurred
and is continuing and provided at least sixty percent (60%) Eligible Projects
which will remain in the Borrowing Base are Pool A Projects.
Section 3.3 Guaranties.
The Obligations are the subject of the Guaranty Agreement executed and
delivered by the Guarantor in favor of the Lenders and of one or more completion
Guaranties which may from time to time be executed and delivered by the
Guarantor.
Section 3.4 Collateral for Obligations.
The Borrower acknowledges that it is the intention of the Borrower that
the Collateral and all the Deeds of Trust be security for all of the
Obligations, both those now existing and those hereafter created or incurred by
future loans, advances, extensions of credit or otherwise and whether or not
currently contemplated by the Borrower and/or the Lenders on or about the date
hereof.
Section 3.5 Costs.
The Borrower agrees to pay on demand, to the fullest extent permitted
by applicable laws, all reasonable fees, commissions, costs, charges, travel
expenses and other expenses incurred by the Lenders, or any of them, in
connection with the taking, perfection, preservation, protection and/or release
of any security interest or lien on any of the Collateral or Deeds of Trust. The
foregoing notwithstanding, the Borrower shall not be obligated to pay the travel
expenses of the Lenders with the exception of travel expenses incurred in
connection with any enforcement actions following the occurrence of an Event of
Default.
ARTICLE IV
GENERAL FINANCING PROVISIONS.
Section 4.1 Conditions Precedent to Credit Facility Closing and
Addition of Deeds of Trust.
Conditions Precedent to Facility Closing. The following shall be
conditions precedent to the Credit Facility Closing or to the addition of a
Borrower and/or the addition of an Eligible Project to the Borrowing Base (a
"Facility Closing"):
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(a) The Note, the Deeds of Trust and Security
Documents and the other Financing Documents in connection with the Eligible
Projects initially securing the Loan shall have been properly executed and
delivered to the Agent, the applicable Deeds of Trust shall be acknowledged and
recorded in the appropriate public office or delivered to a representative of
the title company for recording and payment shall have been made for all
conveyancing and recording in connection with the settlement of the Loan, and
for any transfer or documentary stamp taxes due under any federal, state or
municipal law.
(b) The Agent shall have received and approved a copy
of the Borrower's fully executed Articles of Incorporation and By-Laws. In
connection with the provision of a Deed of Trust by an Additional Borrower, the
Agent shall have received and approved copies of all organizational documents,
including certified copies of all documents on record with the State in which
such entity is organized.
(c) The Agent shall have received and approved a
secretary's certificate of borrowing resolution authorizing the execution and
delivery of the Financing Documents and consenting to the Loan and similar
resolutions.
(d) The Agent shall have received and approved a
current certificate of good standing from the State of Delaware for Holdings and
a certificate of good standing or certificate of fact from the State in which
any additional Borrower is formed and certificates of authority to do business
in any state in which an Eligible Project is located.
(e) The Agent shall have received and approved an
opinion of counsel for the Borrower as to the Borrower's good standing, form,
powers and authority and as to the validity, binding effect and enforceability
of the Financing Documents.
(f) The Agent shall have received a properly executed
Additional Borrower Joinder Supplement from any Additional Borrower.
(g) The Agent shall have reviewed and approved the
Borrower's standard form of Joint Venture Lease. Any material change from such
form for an individual Eligible Project must be consented to by the Agent prior
to the Facility Closing for such Eligible Project.
(h) The Agent shall have reviewed and approved the
Borrower's standard form of Management Agreement. Any material change from such
form for an individual Eligible Project must be consented to by the Agent prior
to the Facility Closing for such Eligible Project.
Section 4.2 Conditions Precedent to Accepting an Eligible Project Which
is Under Construction or to be Constructed:
(a) The Facility Closing shall have been completed.
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(b) The Agent shall have received a certificate of
authority to do business for the Borrower in the jurisdiction where the Facility
is located.
(c) The Total Development Budget for such Eligible
Project shall have been reviewed and approved in writing by the Agent. Each
Total Development Budget for an Eligible Project under construction or to be
constructed shall include (A) a project summary describing such proposed
Eligible Project in reasonable detail, (B) indicating whether or not such
Facility is one of the types of projects covered by the Master Plans and
Specifications, and if such Facility involves any material deviations from the
Master Plans and Specifications, describing such deviations in reasonable
detail, (C) containing a detailed construction cost estimate and a 2-year
estimated cash flow analysis (or such longer period as is necessary to include
at least 12 complete calendar months of full commercial operation), and (D)
containing other cost, feasibility, demographic and marketing information and
analysis with respect to such Project; and all such material shall be
satisfactory in all respects to the Lender, in its reasonable discretion. Such
Total Development Budget shall demonstrate to the Agent's satisfaction in its
sole discretion that the Eligible Project will qualify and continue as a Pool A
Project. Such review for a Facility to be constructed or under construction
shall include a review of the Plans and Specifications (as hereinafter defined)
by an inspecting engineer selected by the Agent to verify that the Improvements
can be constructed for the amount set forth in the Total Development Budget.
(d) The Pro Forma Operating Statement for such
Eligible Project shall have been reviewed and approved in writing by the Agent.
Each Pro Forma Operating Statement shall demonstrate to the Agent's satisfaction
in its sole discretion that the Eligible Project will qualify and continue to
qualify as a Pool A Project.
(e) The Agent shall have received a paid policy of
title insurance (American Land Title Association Standard Form "B" Loan
Policy-Current Edition) covering the Facility or a valid and enforceable
commitment to issue the same, together with such reinsurance agreements and
direct access agreements as may be required by the Agent and/or endorsements to
policies issued to the Agent in connection with the Credit Facility Closing, in
the amount agreed upon by the Agent from either Chicago Title Insurance Company
or Stewart Title Insurance Company and which may be endorsed or assigned to the
successors and assigns of the Lenders and to additional Lenders without
additional cost, insuring the liens of the Deeds of Trust to be valid first
liens on the Property, free and clear of all defects, exceptions and
encumbrances except such as the Agent and its counsel shall have approved but
without a creditor's rights exception and (unless otherwise agreed by the Agent)
containing affirmative insurance against mechanic's liens.
(f) The Agent shall have received advice, in form and
substance and from a search company or other source satisfactory to the Agent,
to the effect that a UCC, judgment and tax lien search of the applicable public
records discloses no conditional sales contracts, chattel mortgages, leases of
personalty, financing
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statements or title retention agreements filed or recorded against the Property
except such as the Agent shall have approved.
(g) The Agent shall have received ACORD Evidence
forms evidencing all policies of insurance required by the terms hereof and by
the other Financing Documents to be in effect from a company or companies and in
form and amount satisfactory to the Agent, including without limitation, flood
insurance (in the amount required by the applicable Deed of Trust or evidence
that flood insurance is not available or otherwise required with respect to the
Property), together with written evidence, in form and substance satisfactory to
the Agent, that all fees and premiums due on account thereof have been paid in
full.
(h) The Agent shall have received and accepted an
appraisal of the Facility.
(i) Master Plans and Specifications, for Standard
Projects Already Approved, etc. The Borrower shall submit to the Agent for
approval Master Plans and Specifications covering the approximately five (5)
different types of project improvements typically constructed by the Borrower
and Affiliates. Such Master Plans and Specifications shall be approved by an
Inspecting Engineer and are acceptable to the Agent (the "Master Plans and
Specifications").
(j) Delivery and Approval of Specific Plans and
Specifications for Non-Standard Projects, etc. If the Improvements for a
particular Eligible Project which the Borrower proposes be included in the
Borrowing Base are not one of the types of project improvements covered by the
Master Plans and Specifications, or involve any material design or construction
deviations (e.g., siding, roofing, foundation, unit mix, etc., exclusive of
adaptions to meet local building codes or other requirements) from the Master
Plans and Specifications which are anticipated for such proposed Project:
(i) The Borrower shall have submitted to the
Agent and the Inspecting Consultant (1) copies of either (x) the
proposed Plans and Specifications for the Improvements on such specific
Project, or (y) an identification of the particular Master Plans and
Specifications which will be used for such specific Project, and a
reasonably detailed description of the material deviations, if any,
from such Master Plans and Specifications which will be involved for
such Project, in either case which shall be satisfactory to the Agent
and the Inspecting Engineer, in their reasonable discretion, together
with (2) evidence satisfactory to the Agent that such Plans and
Specifications (or the Master Plans and Specifications with such
material deviations) have been approved by (or will in the normal
course of business, without undue difficulty, be approved by) all
Governmental Authorities in accordance with all applicable Legal
Requirements, and
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(ii) The Agent shall have received from the
Inspecting Engineer a favorable report with respect to such Plans and
Specifications or such deviations from the Master Plans and
Specifications, as the case may be, and such report shall be
satisfactory in all respects to the Lender in its reasonable
discretion.
(k) The Agent shall have received and approved a
fully executed copy of the applicable Construction Contract and the Architect's
Contract as well as any information regarding the General Contractor or the
Architect which the Agent has requested.
(l) The Agent shall have received and approved a copy
of a current Survey of the Land certified to the Agent and to the title
insurance company.
(m) The Agent shall have received and approved a site
plan for the Improvements approved by all appropriate Governmental Authorities.
(n) The Agent shall have received from the Borrower
written evidence, in form and substance satisfactory to the Agent, from all
Governmental Authorities having or claiming jurisdiction to the effect that all
building, construction and other permits required in connection with the
development of the Land and the construction of the Improvements have been
validly issued, that all fees and bonds required in connection therewith have
been paid in full or posted, as the circumstances may require, and that the
Improvements meet zoning requirements and all sewer and storm drain
requirements.
(o) The Agent shall have received and approved a
report setting forth a construction progress schedule in form and substance
satisfactory to the Agent, calling for the completion of the Improvements by a
date no later than the end of the applicable Maximum Construction Period.
(p) If construction work of any kind has commenced
upon the Land or materials have been placed or stored upon the Land prior to the
recordation of the Deed of Trust among the Land Records where the Land is
located, the same shall be fully insured against by the title insurance company.
(q) The Agent shall have received and approved
evidence that the applicable General Contractor carries public liability and
property damage insurance and workers' compensation insurance in form and
amounts and issued by companies acceptable to the Agent.
(r) The Agent shall have received and accepted a
Phase I environmental audit of the applicable Facility prepared by a person or
firm acceptable to the Agent. ATEC and Giles are environmental audit firms
acceptable to the Agent.
(s) The Agent shall have received evidence acceptable
in all respects through certification by the Architect or other source
acceptable to the
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Agent that the applicable Improvements, when constructed, will comply with all
legal requirements regarding access and facilities for handicapped or disabled
persons, including, without limitation and to the extent applicable to assisted
living facilities (or, if applicable, independent living facilities), The
Federal Architectural Barriers Act (42 U.S.C. Section 4151 et seq.), The Fair
Housing Amendments Act of 1988 (42 U.S.C. Section 3601 et seq.), The Americans
With Disabilities Act of 1990 (42 U.S.C. Section 12101 et seq.), The
Rehabilitation Act of 1973 (29 U.S.C. Section 794) and any applicable state
statutes relating to access and facilities for handicapped or disabled persons.
(t) The Agent shall have received and approved soil
reports demonstrating that the soil conditions of the Property are suitable for
construction of the Improvements, which reports shall include evidence to the
Agent's satisfaction that there are no hydric soils on the Land.
(u) The Agent shall have received and approved copies
of any executed Material Leases and any fully executed Joint Venture Lease of
the applicable Facility or of any portion thereof and subordination and
attornment agreements acceptable to the Lender (with non-disturbance provisions
for Joint Venture Leases and if acceptable to the Agent for other Material
Leases) from each.
(v) The Agent shall have received and approved an
opinion of Borrower's outside or in-house regulatory counsel regarding licensing
requirements and the transferability of licenses and an opinion of local counsel
in the jurisdiction where the applicable Facility is located that the Financing
Documents applicable to that Facility are enforceable and for the Borrower that
neither the making nor the servicing of the Loan will subject the Lenders to a
requirement of qualifying to do business or taxation (except ad valorem taxes on
the Property) in the State where the applicable Facility is located and that the
Loan is not usurious, which opinion must also inform the Lenders (i) of the cost
and timing of foreclosure; (ii) of any limitations on the Lenders' right to
obtain, or the amount of, a deficiency judgment; and (iii) the existence of and
details surrounding any redemption period enjoyed by the Borrower following a
sale at foreclosure.
(w) With regard to any Deed of Trust for a Facility
located in any state having such requirement, the Agent shall have received
evidence satisfactory to the Agent that a Certificate of Need has been issued
for such Facility.
(x) The Lender shall have received and approved any
Management Agreement then in place for the Facility.
(y) The Lender shall have received and approved a
market feasibility study for the Facility satisfactory to the Lender including,
but not limited to, information regarding market occupancy rates, proposed and
existing competition, monthly rates and a Claritas Senior Life Report (or other
source acceptable to the Lender) on the defined market area for the Facility.
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(z) The Lender shall have received a copy of any
acquisition contract for the Property.
(aa) If applicable in the state where the Property is
located, the Lender shall have received evidence that the Borrower has applied
for or is otherwise diligently pursuing obtaining a certificate of occupancy for
the Improvements being constructed.
Section 4.3 Conditions Precedent to Accepting an Eligible Project Which
Has Been Constructed or Acquired:
(a) The Facility Closing shall have been completed.
(b) The Agent shall have received a certificate of
authority to do business for the Borrower in the jurisdiction where the Facility
is located.
(c) The Total Development Budget for such Eligible
Project shall have been reviewed and approved in writing by the Agent consistent
with the provision of Section 2.1. Each Total Development Budget shall
demonstrate to the Agent's satisfaction in its sole discretion that the Eligible
Project will be designated as a Pool A Project.
(d) The Pro Forma Operating Statement for any such
Eligible Project which is not a Stabilized Project shall have been reviewed and
approved in writing by the Lender. Each Pro Forma Operating Statement shall
demonstrate to the Lender's satisfaction in its sole discretion that the
Eligible Project will qualify and continue to qualify as a Pool A Project.
(e) The Agent shall have received a paid policy of
title insurance (American Land Title Association Standard Form "B" Loan
Policy-Current Edition) covering the Facility or a valid and enforceable
commitment to issue the same, together with such reinsurance agreements and
direct access agreements as may be required by the Agent and/or endorsements to
policies issued to the Agent in connection with the Credit Facility, in the
amount agreed upon by the Agent from either Chicago Title Insurance Company or
Stewart Title Insurance Company and which may be endorsed or assigned to the
successors and assigns of the Lenders and to additional Lenders without
additional cost, insuring the liens of the Deeds of Trust to be valid first
liens on the Property, free and clear of all defects, exceptions and
encumbrances except such as the Agent and its counsel shall have approved but
without a creditor's rights exception and (unless otherwise agreed by the Agent)
containing affirmative insurance against mechanic's liens.
(f) The Agent shall have received advice, in form and
substance and from a search company satisfactory to the Agent, to the effect
that a UCC, judgment and tax lien search of the applicable public records
discloses no conditional sales contracts, chattel mortgages, leases of
personalty, financing statements or title retention agreements filed or recorded
against the Property except such as the Agent shall have approved.
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(g) The Agent shall have received ACORD Evidence
forms evidencing all policies of insurance required by the terms hereof and by
the other Financing Documents to be in effect from a company or companies and in
form and amount satisfactory to the Agent, including without limitation, flood
insurance (in the amount required by the applicable Deed of Trust or evidence
that flood insurance is not available or otherwise required with respect to the
Property), together with written evidence, in form and substance satisfactory to
the Agent, that all fees and premiums due on account thereof have been paid in
full.
(h) The Agent shall have received and accepted an
appraisal of the Facility.
(i) The Agent shall have received and approved a copy
of a current Survey of the Land certified to the Agent and to the title
insurance company.
(j) The Agent shall have received and accepted a
Phase I environmental audit of the applicable Facility prepared by a person or
firm acceptable to the Agent. ATEC and Giles are environmental audit firms
acceptable to the Agent.
(k) The Agent shall have received evidence acceptable
in all respects through certification by the Architect or other source
acceptable to the Agent that the applicable Improvements comply with all legal
requirements regarding access and facilities for handicapped or disabled
persons, including, without limitation and to the extent applicable to assisted
living facilities (or, if applicable, independent living facilities), The
Federal Architectural Barriers Act (42 U.S.C. Section 4151 et seq.), The Fair
Housing Amendments Act of 1988 (42 U.S.C. Section 3601 et seq.), The Americans
With Disabilities Act of 1990 (42 U.S.C. Section 12101 et seq.), The
Rehabilitation Act of 1973 (29 U.S.C. Section 794) and any applicable state
statutes relating to access and facilities for handicapped or disabled persons.
(l) The Agent shall have received and approved copies
of any executed Material Leases of the applicable Property or of any portion
thereof and any fully executed Joint Venture Lease and subordination and
attornment agreements acceptable to the Agent (with non-disturbance provisions
for Joint Venture Leases and other leases if acceptable to the Agent) from each.
(m) The Agent shall have received and approved an
opinion of Borrower's outside or in-house regulatory counsel regarding licensing
requirements and the transferability of licenses and an opinion of local counsel
in the jurisdiction where the applicable Facility is located that the Financing
Documents applicable to that Facility are enforceable and for the Borrower that
neither the making nor the servicing of the Loan will subject the Lenders to a
requirement of qualifying to do business or taxation (except ad valorem taxes on
the Property) in the State where the applicable Facility is located and that the
Loan is not usurious, which opinion must also inform the Lenders (i) of the cost
and timing of foreclosure; (ii) of any limitations on the Lenders' right to
obtain, or the amount of, a deficiency judgment; and (iii) the existence
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of and details surrounding any redemption period enjoyed by the Borrower
following a sale at foreclosure.
(n) With regard to any Deed of Trust for a Facility
located in any state having such requirement, the Agent shall have received
evidence satisfactory to the Agent that a Certificate of Need has been issued
for such Facility.
(o) The Agent shall have received a copy of the fully
executed Management Agreement for the Facility.
(p) The Agent shall have received each of the items
listed in Section 4.5 hereof.
Section 4.4 Conditions Precedent to Determining Additional Availability
Under Borrowing Base.
The Lenders shall not be obligated to include any costs incurred by the
Borrower under a Total Development Budget in the calculation of the Borrowing
Base unless the conditions described in Sections 4.1, 4.2 and 4.3 and the
following additional conditions shall have been satisfied to the Agent's
satisfaction:
(a) Construction cost reports prepared by a
construction manager and certified by an officer of ALS showing the percentage
of completion and setting forth in trade breakdown form and in such detail as
may be required by the Agent, the amounts expended and/or costs incurred for
work done and necessary materials incorporated into the Improvements. The cost
reports shall also show the percentage of completion of each line item on the
Borrower's cost breakdown approved by the Agent. The Borrower shall submit with
each cost report a statement that the work completed to the date of such cost
report is of quality consistent with the applicable Plans and Specifications. In
addition, at the time of delivery of each cost report by the Borrower, the
Borrower shall furnish to the Agent such additional information (such as paid
receipts, invoices, statements of accounts, etc.) as the Agent may reasonably
require to assure that amounts shown in the cost report have been paid by the
Borrower.
(b) Cost reports verified by the Agent's Construction
Real Estate Loan Administration Group during the period since the issuance of
the last Borrowing Base Report will be included in the calculation of the next
Borrowing Base Report. Unless otherwise agreed to by the Agent and to the extent
specifically permitted by the Agent, the process of verification of Requisitions
shall confirm the payment by the Borrower of the following costs and expenses
related to the development of the Land and the construction of the Improvements
and no others may be included in a Total Development Budget: (i) the payment of
interest when due without further authorization or consent of the Borrower; (ii)
the actual cost of the Land and all labor, services, materials, supervision,
construction fees and the like reasonably incurred by the Borrower in connection
with the construction upon the Land of the Improvements in accordance with the
Plans and Specifications; (iii) for the actual cost of pre-opening expenses,
marketing expenses and operations of the Facility to the extent of operating
deficits; (iv)
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for the actual cost of commitment fees, extension fees, appraisal fees, closing
or settlement costs, fees of attorneys, engineers, architects and accountants,
insurance and bond premiums, ad valorem real estate taxes and other costs
directly related to the development of the Land and the construction, marketing,
initial start-up operating of the Improvements; and (v) for the Development Fee
and other pre-opening fees.
(c) The cost verification procedure hereunder will be
administered by the Lender's Real Estate Loan Administration group. Validation
of Costs Incurred to Date for Development Projects under the construction or
constructed by a Borrower shall be based upon inspections and certifications by
or on behalf of the Lender demonstrating that the work included in Costs
Incurred to Date shown in the most current reports submitted by the Borrower has
been completed in a manner satisfactory to the Lender and upon verification by
the Lender that the Borrower has paid for the Costs Incurred to Date shown on
such requisition. In determining the percentage of completion, the Lender shall
primarily utilize the information contained in the forms described in
sub-paragraph (a) below and the supporting materials provided in connection
therewith. In addition, from time to time, at intervals which approximate 1/3
completion, 2/3 completion and 100% completion, or more frequently if reasonably
required by the Lender, the Lender will cause the Inspecting Engineer to make
physical inspections of the Improvements to such Eligible Project and to issue a
report with respect thereto. The Lender shall use the information so provided by
the Inspecting Engineer to verify that the construction disbursements which have
theretofore been made by the Borrower accurately reflected the amount of
construction completed at such times. It shall not be a condition to issuing a
new Borrowing Base Report reflecting updated Costs Incurred to Date that the
Lender shall have actually received a report of the Inspecting Engineer
verifying that the actual construction completed and paid for conforms to the
percentage of completion reflected in the Borrower's reports to the Lender.
Rather, it is anticipated that the Lender will use reasonable discretion in
scheduling the physical inspections and reports by the Inspecting Engineer so
that such reports may be used by the Lender as a periodic verification of the
information contained in the Borrowing Base Report. The applicable Borrower
shall make arrangements for advance payment or reimbursement by the Borrower of
the fees and expenses of the Inspecting Engineer in making any such physical
inspections. The following provisions shall also be applicable to advances under
the Loan:
(d) All reports of costs incurred shall be made on
forms approved by the Lender similar to construction loan requisition forms
detailing the purpose and application of the Costs Incurred to Date by Eligible
Project at such times as the Borrower may determine, using (x) as to "hard
costs", AIA Form 0702, or such other standarized forms or formats for
information typically used by the Borrower as shall be reasonably acceptable to
the Lender accompanied by a cost breakdown, the accuracy of which shall be
certified by the Company on behalf of such Borrower, and (y) as to "soft costs",
a standardized request form, containing such information and/or documentation,
certified by the Borrower on behalf of the applicable Borrower, as the Lender
may reasonably require hereunder.
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(e) Costs Incurred to Date on Acquisition Projects
will be verified from the settlement sheet signed at the closing of the
acquisition and other records deemed acceptable by the Lender.
(f) Validation of requisitions will also be
contingent upon receipt of the most current monthly report to title to all
Eligible Projects which are under construction or have been completed less than
120 days (or such longer beyond as the Lender shall deem necessary based on
applicable mechanics' lien laws), which must be satisfactory to the Lender. If
required by the terms of the existing title insurance policy, the Agent shall
have received an endorsement which shall have the effect of advancing the
effective date of the policy to the date of the advance then being made and
increasing the coverage of the policy by an amount equal to the cost report
being verified if the policy does not by its terms provide for such an increase.
(g) No Default or Event of Default shall have
occurred and be continuing under any Note or any of the other Financing
Documents.
(h) The Improvements shall not have been materially
damaged by fire or other casualty unless the Agent shall have received proceeds
of insurance sufficient in the judgment of the Agent to effect a satisfactory
restoration of such Improvements in accordance with the terms of the Deed of
Trust.
(i) The Agent shall have received written evidence,
in form and substance satisfactory to the Agent, in its reasonable discretion,
to the effect that all work requiring inspection by Governmental Authorities
having or claiming jurisdiction has been duly inspected and approved by such
authorities and by any rating or inspection organization, bureau, association or
office having or claiming jurisdiction.
(j) The representations and warranties made in
ARTICLE V of this Agreement shall be true and correct in all material respects
on and as of the date of the advance with the same effect as if made on such
date.
(k) All terms and conditions of the Financing
Documents required to be met as of the date of consideration applicable cost
report shall have been met to the complete satisfaction of the Agent.
(l) In the reasonable judgment of the Agent, all work
completed on the applicable Eligible Project under construction at the time of
the application for an advance has been performed in a good and workmanlike
manner and all materials and fixtures usually furnished and installed at that
stage of construction have been furnished and installed. All costs covered by
the cost report have been paid by the Borrower.
(m) At least sixty percent (60%) of the Eligible
Projects in the Borrowing Base shall be Pool A Projects. The Agent shall have
determined whether each Eligible Project is a Pool A, Pool B or Pool C Project.
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(n) Before verifying any cost report for construction
costs, the Agent shall require the Borrower to obtain from the applicable
General Contractor and, if required by the applicable title insurance company,
from all subcontractors and material suppliers acknowledgments of payment and
releases of liens and rights to claim liens for work performed or materials
delivered covered by such Requisition. All such acknowledgments and releases
shall be in form of AIA Forms G706 or G706A.
Section 4.5 Conditions Under Which an Eligible Project is a Completed
Project.
The Agent shall verify that an Eligible Project is a Completed Project
based on the satisfaction of the following additional conditions:
(a) The Agent shall have received the final "as
built" Survey for the applicable Facility within sixty (60) days after the
issuance of the applicable certificate of occupancy.
(b) The Agent shall have received written evidence
from a qualified third party, in form and substance satisfactory to the Agent,
to the effect that the applicable Improvements have been substantially completed
in accordance with their Plans and Specifications within sixty (60) days after
the issuance of the applicable certificate of occupancy.
(c) The Agent shall have received written evidence,
in form and substance satisfactory to the Agent, to the effect that requisite
certificates for permanent occupancy or completion of the Improvements have been
validly issued.
(d) Final waivers of liens of the General Contractor,
and if required by the applicable title insurance company, subcontractors,
laborers and material suppliers have been furnished to the Agent or, as to any
disputed lien or claim of lien, a bond in form and substance acceptable to the
Agent has been provided or other arrangements satisfactory to the Agent have
been made.
(e) The Agent shall have received a copy of an
operating License for the Facility or other evidence satisfactory to the Agent
that the Facility may be lawfully operated as contemplated by the Financing
Documents.
Section 4.6 Verification of Operating Reserve Expenditures.
No portion of any costs included in the Operating Reserve shall be
verified until both a certificate of occupancy has been issued by the applicable
governmental authorities and, if applicable to the Facility, an operating
License has been issued for the Facility by the appropriate Governmental
Authority or Authorities. Advances from the Operating Reserve shall be for the
sole purpose of paying a portion of the Debt Service on the Loan or net
operating losses as shown on a monthly financial report for such Facility
prepared in accordance with the requirements set forth in the Financing
Agreement, and certified by the Chief Financial Officer of the Borrower.
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Section 4.7 Assignments of Payments.
The Borrower agrees not to transfer, assign, pledge or hypothecate any
right or interest in any payment or advance due pursuant to this Agreement, or
any of the other benefits of this Agreement, without the prior written consent
of the Agent. Any assignment made or attempted by the Borrower without the prior
written consent of the Agent shall be void and of no effect. No consent by the
Agent to an assignment by the Borrower shall release the Borrower as the party
primarily obligated and liable under the terms of this Agreement unless the
Borrower shall be released specifically by the Agent in writing. No consent by
the Agent to an assignment shall be deemed to be a waiver of the requirement of
prior written consent by the Agent with respect to each and every further
assignment and as a condition precedent to the effectiveness of such assignment.
Section 4.8 Liability of the Lenders.
The Lenders shall in no event be responsible or liable to any person
other than the Borrower for the disbursement of or failure to disburse the Loan
proceeds or any part thereof and neither the General Contractor nor any
subcontractor, laborer or material supplier shall have any right or claim
against the Lenders under this Agreement or the administration thereof.
Section 4.9 Computation of Interest and Fees.
All applicable fees and interest shall be calculated on the basis of a
year of 360 days for the actual number of days elapsed pursuant to the terms
of each Note and interest shall be payable monthly in arrears.
Section 4.10 Liens; Setoff.
The Borrower hereby grants to the Lenders a continuing lien and
security interest for all the Obligations upon any and all monies, securities,
and other property of the Borrower and the proceeds thereof, now or hereafter
held or received by or in transit to, the Lenders, or any affiliate of any of
the Lenders, from or for the Borrower, and also upon any and all deposits
(general or special) and credits of the Borrower with any of the Lenders, if
any, at any time existing. During the continuance of any Event of Default under
this Agreement, each Lender is hereby authorized by the Borrower at any time and
from time to time, without notice to the Borrower, to set off, appropriate and
apply any or all items hereinabove referred to against all Obligations then
outstanding.
Section 4.11 Payment and Performance of Obligations.
The payment and performance by the Borrower of the Obligations shall be
absolute and unconditional, irrespective of any defense or any rights of
set-off, recoupment or counterclaim it might otherwise have against the Lenders,
or any of them, and the Borrower shall pay absolutely net all of the
Obligations, free of any deductions and without abatement, diminution or
set-off; and until payment in full of all of the Obligations, the Borrower: (a)
will not suspend or discontinue any payments provided for in the Note and (b)
will perform and observe all of its other agreements contained in this
Agreement, including (without limitation) all payments required to be made to
the Agent, and (c) will not terminate or attempt to terminate this Agreement or
any of the other Financing Documents to which the Borrower is a party for any
cause.
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Section 4.12 Payments to Others for the Account of the Borrower
At the option of the Agent and without any request from the Borrower,
and without waiving any of its rights hereunder, the Agent may do the following:
(a) Elect to cure or avoid any default by the
Borrower under the Financing Documents by applying amounts due hereunder or
advancing the Lenders' own funds to the satisfaction of the conditions of the
Financing Documents and any amounts so applied shall be part of the Loan and
shall be secured by the Deeds of Trust and the other Collateral. The Agent
agrees to endeavor to give the Borrower notice of any such payment or performing
such act and the amount of any payment whether prior to or contemporaneously
with its making such payment or performance of such act; provided, however, that
failure to give such notice shall not constitute a waiver by the Lenders of, or
constitute a defense to, any of the rights of the Lenders under this Agreement,
or the Deeds of Trust, including (without limitation) the right of the Lenders
to repayment of the amount of such payment.
(b) Apply amounts due hereunder to the satisfaction
of the conditions of the Financing Documents and any amounts so applied shall be
part of the Loan and shall be secured by the Deeds of Trust and other
Collateral. At the option of the Agent, and without limiting the generality of
the foregoing, the Agent may pay directly from the Loan proceeds all interest
bills rendered by the Agent in connection with the Loan, and following the
occurrence of an Event of Default may make advances directly to the General
Contractor, the title insurance company, any subcontractor or materialmen, or to
any of them jointly, and the execution hereof by the Borrower shall, and hereby
does, constitute an irrevocable authorization to so advance the proceeds of the
Loan. No further direction or authorization from the Borrower shall be necessary
to warrant such direct advances and all such advances shall satisfy pro tanto
the obligations of the Lenders hereunder and shall be secured by the Deeds of
Trust and other Collateral as fully as if made to the Borrower, regardless of
the disposition thereof by the party or parties to whom such advances is made.
Section 4.13 Prepayment.
The Borrower shall have the right to prepay the Loan in full or in
part, at any time and from time to time, upon five (5) days' prior written
notice to the Agent without premium or penalty. The foregoing notwithstanding,
in connection with any prepayment of a principal sum on any day other than the
last day of the Eurodollar Period applicable thereto, the Borrower shall pay to
the Agent upon request by the Agent, such amount as shall be sufficient to
compensate any of the Lenders for any and all losses or expenses which such
Lender may sustain or incur (including without limitation, any such loss or
expense arising from the redeployment of funds obtained by such Lender). Unless
an Event of Default has occurred, any partial prepayment shall be applied first
to such breakage costs, second to accrued and unpaid interest and third to the
outstanding principal balance of the Loan due and owing at maturity. Sums
borrowed and repaid may be readvanced. The Borrower's obligations under this
Section shall survive the termination of this Agreement and the repayment of the
Obligations.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
To induce the Lenders to make available the Credit Facility,
the Borrower represents and warrants to the Lenders that:
Section 5.1 Good Standing.
The Borrower (a) is a legal entity duly organized and existing and in
good standing under the laws of the state of formation, (b) has the power to own
its property and to carry on its business as now being conducted, and (c) is
duly qualified to do business and is in good standing in each jurisdiction in
which each Facility it owns is located and in which the character of the
properties owned by it therein or in which the transaction of its business makes
such qualification necessary.
Section 5.2 Power and Authority
The Borrower has full power and authority to execute and deliver this
Agreement and each of the other Financing Documents executed and delivered by
it, to make the borrowing hereunder, and to incur the Obligations, all of which
have been duly authorized by all proper and necessary corporate action. No
consent or approval of holders of ownership interests in or lenders to, the
Borrower, and no consent or approval of any Governmental Authority or any third
party payor on the part of the Borrower, is required as a condition to the
validity or enforceability of this Agreement or any of the other Financing
Documents executed and delivered by the Borrower or to the payment or
performance by the Borrower of the Obligations.
Section 5.3 Binding Agreements.
This Agreement and each of the other Financing Documents executed and
delivered by the Borrower have been properly executed by the Borrower,
constitute valid and legally binding obligations of the Borrower, and are fully
enforceable against the Borrower in accordance with their respective terms.
Section 5.4 Litigation.
There are no proceedings pending before any court or arbitrator or
before or by any Governmental Authority which, in any one case or in the
aggregate, will cause a material adverse change in the financial condition or
operations of the Borrower or affect the authority of the Borrower to enter into
this Agreement or any of the other Financing Documents executed and delivered by
the Borrower. There is no pending revocation, suspension, termination,
probation, restriction, limitation or non-renewal of any License, Participation
Agreement or any similar accreditation or approval organization or Governmental
Authority for healthcare providers, including, without limitation, the issuance
of any provisional License or other License with a term of less than twelve (12)
months, as a consequence of any sanctions imposed by any Governmental Authority,
nor is there any pending assessment of any civil or criminal penalties by any
Governmental Authority, the outcome of which, if determined adversely to the
Borrower, could result in a material adverse change in the business or financial
condition of the Borrower. The
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Borrower does not have any appeals regarding rates or reimbursements currently
pending or contemplated before any Governmental Authority or any administrator
of any third party payor or preferred provider program or referral source, the
outcome of which, if determined adversely to the Borrower, could result in a
material adverse change in the financial condition or operations of the
Borrower. There are no Medicare or Medicaid recoupments or recoupments of any
other third party payor being sought, requested or claimed, against the
Borrower, the outcome of which, if determined adversely to the Borrower, could
materially impair the Borrower's ability to pay the Obligations, except as
otherwise disclosed in writing to, and approved by, the Agent.
Section 5.5 No Conflicting Agreements.
There is (a) no provision of the Borrower's Articles of Incorporation
or By-Laws and no provision of any existing mortgage, indenture, contract or
agreement binding on the Borrower or affecting its property, and (b) to the
knowledge of the Borrower no provision of law or order of court binding upon the
Borrower, which would conflict with or in any way prevent the execution,
delivery, or performance of the terms of this Agreement or of any of the other
Financing Documents executed and delivered by the Borrower, or which would be
violated as a result of such execution, delivery or performance, or, if so, all
necessary consents have been obtained.
Section 5.6 Financial Information.
All financial statements or information hereto furnished to the Lenders
with respect to the Borrower, each Facility and the Guarantor is complete and
correct in all material respects and fairly presents the financial position of
the Borrower, the Facilities and the Guarantor. There are no liabilities, direct
or indirect, fixed or contingent, of the Borrower or Guarantor which are not
reflected in the their respective financial statements or in the notes thereto
except those incurred subsequently in the ordinary course of their business.
There has been no material adverse change in the financial condition or
operations of the Guarantor since the financial statements dated June 30, 1998
(and to the Borrower's and Guarantor's knowledge, no such material adverse
change is pending), and neither the Borrower nor the Guarantor has guaranteed
the obligations of, or made any investments in or advances to, any company,
individual or other entity, except as disclosed in such information and except
those incurred subsequently in the ordinary course of their business.
Section 5.7 No Default Under Other Agreements.
The Borrower is not in default under or with respect to any obligation
under any agreement to which the Borrower is a party in any respect which could
result in a material adverse change in the financial condition or operations of
the Borrower.
Section 5.8 Taxes.
The Borrower has filed or has caused to have been filed all federal,
state and local tax or informational returns which are required by law to be
filed, and has paid or caused to have been paid all Taxes as shown on such
returns or on any assessment received by it, to the extent that such Taxes have
become due, or which are required by law to be paid, unless and to the extent
only that such Taxes, assessments and governmental charges are
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currently contested in good faith and by appropriate proceedings by the Borrower
and adequate reserves therefor have been established as required under GAAP.
Section 5.9 Place(s) of Business and Location of Collateral.
The Borrower warrants that the address of the Borrower's chief
executive office is as specified in EXHIBIT C attached hereto and made a part
hereof and that the address of each other place of business of the Borrower, if
any, is as disclosed in EXHIBIT C. The Collateral and all books and records
pertaining to the Collateral are and/or will be located at the addresses
indicated on EXHIBIT C. The Borrower will immediately advise the Agent in
writing of the opening of any new place of business or the closing of any
existing place of business of the Borrower, and of any change in the location of
the places where the Collateral, or any part thereof, or the books and records
concerning the Collateral, or any part thereof, are kept. EXHIBIT C may be
modified from time to time to add the locations of additional Facilities.
Section 5.10 Title to Properties.
The Borrower has good and marketable title to all of its properties,
including, without limitation, the Property and the Collateral, and the Property
and the Collateral are free and clear of mortgages, pledges, liens, charges and
other encumbrances other than the Permitted Liens.
Section 5.11 Margin Stock.
None of the proceeds of the Loan will be used, directly or indirectly,
by the Borrower for the purpose of purchasing or carrying, or for the purpose of
reducing or retiring any indebtedness which was originally incurred to purchase
or carry, any "margin security" within the meaning of Regulation G (12 CFR Part
207), or "margin stock" within the meaning of Regulation U (12 CFR Part 221), of
the Board of Governors of the Federal Reserve System (herein called "margin
security" and "margin stock") or for any other purpose which might make the
transactions contemplated herein a "purpose credit" within the meaning of said
Regulation G or Regulation U, or cause this Agreement to violate any other
regulation of the Board of Governors of the Federal Reserve System or the
Securities Exchange Act of 1934 or the Small Business Investment Act of 1958, as
amended, or any rules or regulations promulgated under any of such statutes.
Section 5.12 ERISA.
With respect to any "pension plan", as defined in Section 3(2) of
ERISA, which plan is now or previously has been maintained or contributed to by
the Borrower and/or by any Commonly Controlled Entity: (a) no "accumulated
funding deficiency" as defined in Code 412 or ERISA 302 has occurred, whether or
not that accumulated funding deficiency has been waived; (b) no "reportable
event" as defined in ERISA 4043 has occurred; (c) no termination of any plan
subject to Title IV of ERISA has occurred; (d) neither the Borrower nor any
Commonly Controlled Entity has
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incurred a "complete withdrawal" within the meaning of ERISA 4203 from any
multiemployer plan; (e) neither the Borrower nor any Commonly Controlled Entity
has incurred a "partial withdrawal" within the meaning of ERISA 4205 with
respect to any multiemployer plan; (f) no multiemployer plan to which the
Borrower or any Commonly Controlled Entity has an obligation to contribute is in
"reorganization" within the meaning of ERISA 4241 nor has notice been received
by the Borrower or any Commonly Controlled Entity that such a multiemployer plan
will be placed in "reorganization".
Section 5.13 Governmental Consent.
Neither the nature of the Borrower or of its business or properties,
nor any relationship between the Borrower and any other Person, nor any
circumstance in connection with the making of the Loan, or the offer, issue,
sale or delivery of the Note is such as to require a consent, approval or
authorization of, or filing, registration or qualification with, any
Governmental Authority, on the part of the Borrower, as a condition to the
execution and delivery of this Agreement or any of the other Financing
Documents, the borrowing of the principal amounts of the Loan or the offer,
issue, sale or delivery of the Note.
Section 5.14 Full Disclosure.
The financial statements referred to in this Part V do not, nor does
this Agreement, nor do any written statements furnished by the Borrower to the
Agent in connection with the making available of the Credit Facility, contain
any untrue statement of fact or knowingly omit a material fact necessary to make
the statements contained therein or herein not materially misleading. The
Borrower has not failed to disclose any fact to the Agent in writing which
materially adversely affects or, will or could prove to materially adversely
affect the properties, business, prospects, profits or condition (financial or
otherwise) of the Borrower or the ability of the Borrower to perform this
Agreement or any of the other Financing Documents.
Section 5.15 Business Names and Addresses.
The Borrower has not conducted business under any name other than its
current name, and has not conducted its business in any jurisdiction other than
those listed on EXHIBIT C. The Borrower intends to operate the Facilities under
the names set forth on EXHIBIT C. The Borrower shall promptly notify the Agent
of any change in the name of any Facility.
Section 5.16 Licenses and Certifications.
The Borrower further represents and warrants to the Lenders that, with
respect to any License it possesses or has applied for, (a) no Default or Event
of Default has occurred or is continuing under the terms of any of the Licenses,
or any condition to the issuance, maintenance, renewal and/or continuance of any
License, (b) the Borrower has paid all fees, charges and other expenses to the
extent due and payable with respect to, and has provided all information and
otherwise complied with all material conditions precedent to, the issuance,
maintenance, renewal, and continuance of all Licenses, (c) the Borrower has not
received any notice from any Governmental Authority relating to any actual or
pending suspension, revocation, restriction, or imposition of any probationary
use, of any License, nor has any License been materially amended, supplemented,
rescinded, terminated, or otherwise modified except as otherwise disclosed in
writing to, and approved by, the Agent, (d) the Borrower has not made any
previous assignment of any of the Licenses to any Person, and (e) no financing
statement covering any of the
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Licenses is on file in any public office except financing statements in favor of
the Lenders. Without implying any limitation to the other representations and
warranties contained in this Agreement, the Borrower is not required by any
applicable Law of any state, county or city in which any of the Facilities is
located to obtain a Certificate of Need to operate any Facility for its intended
purpose or has applied for and obtained such Certificate(s) of Need. Licenses to
operate are required in most states where the Facilities are located and
Certificates of Need are also required in the certain states.
Section 5.17 Operating Agreements and Management Contracts.
The Borrower has furnished to the Agent photocopies of all material
Operating Agreements and Management Contracts entered into with respect to the
Facilities, and all amendments, supplements and modifications thereto including,
without limitation, the Management Agreement. The Borrower further represents
and warrants to the Lenders that (a) all of the material Operating Agreements
and Management Contracts are or will be at the time of execution and delivery
thereof valid and binding on the parties thereto and in full force and effect,
(b) no Default or Event of Default has occurred or is continuing under the terms
of any of the material Operating Agreements and Management Contracts, and no
party thereto has attempted or threatened to terminate any such Management
Contract or Operating Agreement, (c) the Borrower has not made any previous
assignment of any Operating Agreements, Management Contracts, Management
Agreements or Management Lease to any Person, and (d) no financing statement
covering any of the Operating Agreements, Management Contracts, Management
Agreement or Management Leases is on file in any public office, except financing
statements in favor of the Lenders in connection with the Credit Facility.
Section 5.18 Participation Agreements and Resident Agreements.
(a) The Borrower has furnished to the Agent, on or
before the applicable Facility Closing, the Borrower's form of Resident
Agreement used with respect to all Facilities and, if requested by the Agent,
copies of all current, executed Resident Agreements.
(b) The Borrower further covenants to the Lenders
that, with respect to the Participation Agreements, if any, (i) to the best of
its knowledge, all Participation Agreements will be at the time of execution and
delivery thereof valid and binding on the parties thereto and in full force and
effect, and (ii) all Participation Agreements will provide for payment to the
Borrower for services rendered to residents. The Borrower represents and
warrants that as of the date hereof it has not entered into any Participation
Agreement for any Facility.
(c) To the extent the Borrower participates or will
participate in Medicare or Medicaid payment and reimbursement programs, the
Borrower has complied and will comply with all notice and other requirements
under Title XVIII and Title XIX of the Social Security Act to enable the
Borrower to participate in the Medicare and Medicaid payment and reimbursement
programs.
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Section 5.19 Compliance with Laws.
The Borrower is not in violation of any applicable laws of any
Governmental Authority pertaining to employment practices, health standards or
controls, environmental and occupational standards or controls or order of any
court or arbitrator, the violation of which, considered in the aggregate, would
result in a material adverse change in the financial condition or operations of
the Borrower. The Borrower is in compliance with all material accreditation
standards and requirements to which it is subject. The Borrower has obtained or
will obtain all Licenses necessary to the ownership of its property or to the
conduct of its activities which, if not obtained, could materially adversely
affect the ability of the Borrower to conduct its activities of operating each
Facility as a Senior Living Facility, including, without limitation if and as
required by any Governmental Authorities for the dispensing, storage,
prescription, disposal, and use of drugs, medications and other "controlled
substances" and for the maintenance of cafeteria and other food and beverage
facilities or services or the condition (financial or otherwise) of the
Borrower.
Section 5.20 Presence of Hazardous Materials or Hazardous Materials
Contamination.
The Borrower has not placed Hazardous Materials on any real property
owned, controlled or operated by the Borrower or for which the Borrower is
responsible. To the best of the Borrower's knowledge, no Hazardous Materials are
located on any real property owned, controlled or operated by the Borrower or
for which the Borrower is responsible, except for reasonable quantities of
necessary supplies for use by the Borrower in the ordinary course of its current
line of business and stored, used and disposed of in accordance with applicable
Laws, and no property owned, controlled or operated by the Borrower has ever
been used by the Borrower or, to the best of the Borrower's knowledge, by any
other Person as a manufacturing, storage, or dump site for Hazardous Materials
nor is such property affected by Hazardous Materials Contamination, except as
may be disclosed in any Phase I environmental assessment delivered to the Agent.
Section 5.21 Compliance in Zoning.
The anticipated use of each Eligible Project complies with applicable
zoning ordinances, regulations and restrictive covenants affecting such Land,
all use requirements of any Governmental Authority having jurisdiction have been
satisfied, and no violation of any law or regulation exists with respect
thereto.
Section 5.22 Plans and Specifications.
The Borrower represents and warrants that, to the extent required by
applicable law or any effective restrictive covenant, the Plans and
Specifications for each Eligible Project have been approved by all Governmental
Authorities having or claiming jurisdiction and by any beneficiary of any such
restrictive covenant.
Section 5.23 Building Permits; Other Permits.
All building, construction and other permits then necessary or required
in connection with the development of the Land and the construction of the
Improvements
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have been or, will be on a timely basis, unless otherwise agreed to by the
Agent, validly issued and all fees and bonds required in connection therewith
have been paid or posted, as the circumstances may require.
Section 5.24 Utilities.
All utility services necessary for the development of all the Land and
the construction of the Improvements for each Eligible Project and the operation
thereof for their intended purpose are or will be available at the boundaries of
all the Land, including, without limitation, telephone service, water supply,
storm and sanitary sewer facilities, natural gas (if available) and electric
facilities.
Section 5.25 Access; Roads.
All roads and other accesses necessary for the development of all the
Land and the construction of all the Improvements for all Eligible Projects and
full utilization thereof for their intended purposes have either been completed
or the necessary rights of way therefor have either been or will be acquired by
the appropriate Governmental Authorities or have been or will be dedicated to
public use and accepted by such Governmental Authorities and all necessary steps
have been taken by the Borrower or such Governmental Authorities to assure the
complete construction and installation thereof by a date sufficient to ensure
the timely completion of the Improvements and in no event later than the end of
the applicable Maximum Construction Peiord.
Section 5.26 Other Liens.
Except as otherwise provided in the Financing Documents, the Borrower
has made no contract or arrangement of any kind the performance of which by the
other party thereto would give rise to a lien on any Eligible Project.
Section 5.27 Defaults.
There is no default on the part of the Borrower under the Financing
Documents and no event has occurred and is continuing which, with notice or the
passage of time, or both, would constitute a default under the Note or any of
the other Financing Documents.
Section 5.28 Nature of Credit Facility; Usury; Disclosures.
The Borrower is a business or commercial organization, and the Credit
Facility is being made solely for the purpose of carrying on or acquiring a
business or commercial enterprise. The rate or rates of interest charged on the
Note do not, and will not, violate any applicable usury Law or interest rate
limitation. The Credit Facility is not subject to the federal Consumer Credit
Protection Act (15 U.S.C. 1601 et. seq.) nor any other federal or state
disclosure or consumer protection laws. The Credit Facility is being transacted
solely for business or commercial purposes and not for personal, family or
household purposes.
Section 5.29 Survival; Updates of Representations and Warranties.
Each Requisition shall constitute an affirmation that the foregoing
representations and warranties of the Borrower and those set forth in the other
Financing Documents are true and correct as of the date thereof and, unless the
Agent is notified to the contrary
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prior to the disbursement of an advance, will be so as of the date thereof. All
representations and warranties contained in or made under or in connection with
this Agreement and the other Financing Documents shall survive the date of this
Agreement and the Loan made hereunder. The Lenders acknowledge and agree that
any and all representations and warranties contained in, or made under, or in
connection with, this Agreement may be amended, changed or otherwise modified by
the Borrower at any time and from time to time after the date of this Agreement
so as to accurately reflect the matters represented and warranted therein;
provided, that such amendments, changes and/or modifications are disclosed in
writing to the Agent. The Lenders shall have no obligation to waive any Event of
Default due to any present or future inaccuracy of such representation or
warranty or to agree to any amendment, change or modification of any such
representation or warranty.
Section 5.30 Accounts.
With respect to all of the Borrower's Accounts and to the best of the
Borrower's knowledge (a) they are genuine, and in all respects what they purport
to be, and are not evidenced by a judgment, an instrument, or chattel paper
(unless such judgment has been assigned and such instrument or chattel paper has
been endorsed and delivered to the Agent); (b) they represent undisputed, bona
fide transactions completed in accordance with the terms and provisions
contained in the invoices relating thereto; (c) the services rendered which
resulted in the creation of the Accounts have been delivered or rendered to and
accepted by the Account Debtor; (d) the amounts shown on the Borrower's books
and records, with respect thereto are actually and absolutely owing to the
Borrower and are not contingent for any reason; (e) there are no set-offs,
counterclaims or disputes known by the Borrower or asserted with respect
thereto, and the Borrower has made no agreement with any Account Debtor thereof
for any deduction or discount of the sum payable thereunder except regular
discounts allowed by the Borrower in the ordinary course of its business for
prompt payment; (f) there are no facts, events or occurrences known to the
Borrower which in any way impair the validity or enforcement thereof or tend to
reduce the amount payable thereunder; (g) all Account Debtors thereof, to the
best of the Borrower's knowledge, have the capacity to contract; (h) the
services furnished giving rise thereto are not subject to any Liens other than
Permitted Liens; and (i) the Borrower has no knowledge of any fact or
circumstance which would impair the validity or collectibility thereof.
ARTICLE VI
CONDITIONS OF LENDING
The making of any advance under the Loan is subject to the
conditions set forth under this Agreement and the following conditions
precedent:
Section 6.1 No Default.
No Event of Default and no event which with the giving of notice or the
passage of time would become an Event of Default has occurred and is existing
and all
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representations and warranties set forth herein or in the other Financing
Documents are true and correct.
Section 6.2 Opinion of Counsel for the Borrower.
At the Facility Closing and when a lien on an Eligible Project is
subsequently granted by the Borrower, the Lenders shall receive a written
opinion of counsel for the Borrower and the Guarantor satisfactory in all
respects to the Agent.
Section 6.3 Approval of Counsel for the Lenders.
All legal matters incident to the Loan and all documents necessary in
the opinion of the Agent to make the Loan or the addition of either an Eligible
Project to the Borrowing Base or add such Deeds of Trust and related Collateral
shall be satisfactory in all material respects to counsel for the Lenders.
Section 6.4 Supporting Documents.
The Agent shall receive at the Credit Facility Closing and in
connection with the subsequent Facility Closing: (a) a certificate of a duly
authorized officer of the Borrower, in a form acceptable to the Agent in all
respects, dated as of the date hereof and certifying (i) that attached thereto
is a true, complete and correct copy of resolutions duly adopted by board of
directors of the Borrower authorizing the execution and delivery of this
Agreement, the Note and the other Financing Documents, the borrowing thereunder,
and the performance of the Obligations, and (ii) as to the incumbency and
specimen signature of the authorized officer of the Borrower executing this
Agreement, the Note and the other Financing Documents; (b) such other documents
as the Agent may reasonably require the Borrower to execute, in form and
substance acceptable to the Agent; and (c) such additional information,
instruments, opinions, documents, certificates and reports as the Agent may
reasonably deem necessary.
Section 6.5 Financing Documents.
All of the Financing Documents required by the Agent whether at the
Credit Facility Closing or any subsequent Facility Closing shall be executed,
delivered and, if deemed necessary by the Agent, recorded, all at the sole
expense of the Borrower.
Section 6.6 Insurance.
The Borrower shall have satisfied the Agent that any and all insurance
required by this Agreement is in effect as of the date of this Agreement or as
of the date of the addition of a Deed of Trust and related Collateral, and that,
to the extent required by the Financing Documents, the Lenders have been named
as an insured lienholder.
Section 6.7 Security Documents.
In order to perfect the lien and security interest created by this
Agreement, the Borrower shall have executed and delivered to the Agent all
Security Documents (in form and substance acceptable to the Agent in its sole
discretion) deemed necessary by the Agent, in a sufficient number of
counterparts for recordation, and, at the Borrower's sole expense, shall record
all such financing statements and Security Documents, or cause them to be
recorded, in all public offices deemed necessary by the Agent.
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Section 6.8 Additional Borrower Joinder Supplement.
In order to add an Additional Borrower, under the Credit Facility,
confirm that such additional Borrower is jointly and severally liable with
existing Borrower for all the Obligations, perfect the lien and security
interest of the Lenders in the Collateral related to the construction and
operation of any Facility encumbered by a Deed of Trust provided by an
Additional Borrower, such Additional Borrower shall execute and deliver to the
Agent, an Additional Borrower Joinder Supplement joining in the Note, this
Agreement, such assignments of Collateral and such other Security Documents as
the Agent may require and in sufficient number of counterparts for recordation,
and, at the Borrower's sole expense, shall make available for recording all such
financing statements and other Security Documents, or cause them to be recorded,
in all public offices deemed necessary to the Agent.
ARTICLE VII
AFFIRMATIVE COVENANTS OF BORROWER
Until payment in full and the performance of all of the
Obligations hereunder, the Borrower shall:
Section 7.1 Financial Statements.
Furnish to the Agent:
(a) as soon as available but in no event more than
one hundred twenty (120) days after the close of each of the Borrower's fiscal
years, (i) a copy of the consolidated annual financial statement of the Borrower
in reasonable detail satisfactory to the Agent, prepared on a basis of
accounting consistent with that of the Guarantor consistently applied, which
financial statement shall include a balance sheet of the Borrower, as at the end
of such fiscal year and a certificate of compliance signed by the Borrower's
Chief Financial Officer regarding the covenants contained in the Financing
Documents and whether there has been an event which constitutes an Event of
Default under the Financing Documents, or which would constitute such an Event
of Default with the giving of notice or the lapse of time or both, and, if so,
stating the facts with respect thereto, (ii) and the related statements of
operations in a format acceptable to the Agent;
(b) beginning with the first Operating Month, as soon
as available but in no event more than thirty (30) days after the last day of
each such calendar month, operating statements for each Eligible Project for
such month, including an income and expense statement for such period and
certified rent roll with respect to each Eligible Project then operating for
such period;
(c) with reasonable promptness such additional
information, reports or statements as the Agent may from time to time reasonably
request; and
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<PAGE> 52
(d) all required financial statements, required
pursuant to Sub-paragraphs (a) and (b) hereof shall include the following
certification:
"The undersigned, as _____________ of ____________, certifies
that the financial information contained in the financial statement
dated _________, is true and complete when interpreted in conjunction
with the Guarantor's most recent annual and quarterly financial
statements, as of this date. This statement is provided to Bank United
(the "Bank") as agent for the Lenders set forth in the Agency Agreement
dated _____________, ________, as amended, restated or substituted from
time to time, for the purpose of obtaining credit or in fulfillment of
the terms and conditions of credit already provided. Accordingly, it is
intended that the Bank may rely on this information."
(e) All required financial statements required under
(a) hereof shall be accompanied by a certificate of compliance with the
applicable financial covenants signed by a responsible officer of the Borrower
and shall include the Borrower's computation of such covenants.
Section 7.2 Financial Covenants.
7.2.1 Minimum Pool A Projects.
At least sixty percent (60%) of the Eligible Projects shall qualify as
Pool A Projects. The foregoing notwithstanding, if the Borrower fails to satisfy
this covenant and at the time of such failure no more than four (4) Eligible
Projects are Pool B or Pool C Projects, such failure shall not constitute an
event of default under the Financing Documents unless the Borrower fails within
ninety (90) days thereof to restore the composition of the Borrowing Base to not
less than sixty (60%) Pool A Projects.
7.2.2 Pool A Project Covenants.
Each Development Project, Stabilized Project, Acquired Project or
Acquisition Project shall satisfy the applicable performance requirements
hereinafter set forth to qualify as a Pool A Project as set forth below:
(a) Maximum Construction Period. Each Development
Project will be individually monitored for on-going construction for not more
than the applicable period as follows:
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<PAGE> 53
<TABLE>
<CAPTION>
Model Sterling
Types WovenHearts Clare Bridge Crossings Wynwood Campus
<S> <C> <C> <C> <C> <C>
Maximum
Construction
Period 12 months 12 months 14 months 14 months 24 months
</TABLE>
(b) Minimum Occupancy Requirement. Each Development
Project shall maintain a minimum resident occupancy as of the Operating Month
shown below:
<TABLE>
<CAPTION>
Min. Occupancy Sterling Acquired
Requirement WovenHearts Clare Bridge Crossings Wynwood Project.
<S> <C> <C> <C> <C> <C>
50% by 6 mos by 6 mos by 7 mos by 7 mos by 6 mos
75% by 9 mos by 9 mos by 10 mos by 10 mos by 9 mos
85% by 12 mos by 12 mos by 14 mos by 14 mos by 12 mos
</TABLE>
(c) Debt Service Coverage Ratio (Stabilized Project).
Each Stabilized Project shall maintain an 85% minimum resident occupancy
requirement, and a Debt Service Coverage Ratio equal to not less than 1.25 to
1.0 as of the end of each fiscal quarter ending, as set forth below:
<TABLE>
<CAPTION>
Stabilized Projects 1Q 2Q 3Q 4Q thereafter
<S> <C> <C> <C> <C> <C>
Debt Service Coverage
Ratio 1.25x 1.25x 1.25x 1.25x 1.25x
Rolling Historical
Operations 3 mos 6 mos 9 mos 12 mos 12mos
test test test test test
</TABLE>
(d) Debt Service Coverage Ratio (Acquisition
Project). Each Acquisition Project, shall maintain a Debt Service Coverage Ratio
equal to not less than 1.25 to 1.0 as of the end of each fiscal quarter ending
after its acquisition, as set forth below:
48
<PAGE> 54
<TABLE>
<CAPTION>
Acquisition Projects 1Q 2Q 3Q 4Q 5Q thereafter
<S> <C> <C> <C> <C> <C> <C>
Debt Service
Coverage Ratio NA 1.25x 1.25x 1.25x 1.25x 1.25x
Rolling Historical
Operations NA 3 mos 6 mos 9 mos 12 mos 12 mos
test test test test test
</TABLE>
7.2.3 Debt Service Coverage Prospective Test for
Acquisition Projects.
Prior to the inclusion of any Acquisition Projects which the Borrower
has requested be included in the Borrowing Base (each, a "Prospective
Acquisition Project"), all Stabilized Projects and all Acquisition Projects
already in the Borrowing Base plus the Prospective Acquisition Project(s) shall
maintain a Debt Service Coverage Ratio of not less than 1.25 to 1.0 projected on
an annualized basis measured using the Borrowing Base Report for the most recent
three (3) months and operating statements for Prospective Acquisition Project(s)
for the same period.
Section 7.3 Taxes and Claims.
Pay and discharge all taxes, assessments and governmental charges or
levies imposed upon it or any of its income or properties prior to the date on
which penalties attach thereto, and all lawful claims which, if unpaid, might
become a lien or charge upon any of its properties; provided, however, the
Borrower shall not be required to pay any such tax, assessment, charge, levy or
claim, the payment of which is being contested in good faith and by proper
proceedings.
Section 7.4 Legal Existence.
Maintain its legal existence in good standing in the state of its
formation and in each jurisdiction where it is required to register or qualify
to do business.
Section 7.5 Conduct of Business and Compliance with Laws.
7.5.1 Maintenance of Agreements
Do or cause to be done all things necessary to obtain, enter into,
preserve and to keep in full force and effect its material rights and its trade
names, patents, trademarks and Licenses, Participation Agreements, and Operating
Agreements and Management Contracts which are necessary for the operation of
each Facility as its respective type of Senior Living Facility and as
contemplated by the Borrower.
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<PAGE> 55
7.5.2 Maintenance of Agreements
Engage in and continue to engage substantially only in the business of
owning and operating a Senior Living Facility and related services in compliance
with all applicable laws of the state in which the applicable Facility is
located or any other Governmental Authority having jurisdiction over such
Facility.
7.5.3 Compliance with Laws Governing Participation
Agreements.
Comply with all applicable Laws, including, without limitation,
regulations issued under the Omnibus Budget Reconciliation Act of 1987 (OBRA'87)
(Pub.L.No. 100-203), as amended, and observe the valid requirements of
Governmental Authorities, and perform the terms of all Participation Agreements
to which it is a party, the noncompliance with or the nonobservance of which
might materially interfere with the performance of its Obligations or the proper
or prudent conduct of its business or the applicable Property.
7.5.4 Other Operating Covenants.
In addition, the Borrower covenants and agrees that it will:
(a) obtain and maintain in full force and effect all
Licenses necessary to the acquisition and/or ownership and/or operation of each
Facility including, without limitation, Licenses and other approvals related to
the storage, dispensation, use, prescription and disposal of drugs, medications
and other "controlled substances" and, to the extent offered by the Borrower,
the maintenance of cafeteria and other food and beverage facilities or services;
(b) administer, maintain and operate (or will cause
to be administered, maintained and operated) each Facility as a
revenue-producing Senior Living Facility;
(c) to the extent the Borrower participates in any
such programs, maintain and operate each Facility to meet the standards and
requirements and to provide healthcare of such quality and in such manner as
would enable the Borrower to participate in, and provide services in connection
with, recognized medical and healthcare insurance programs;
(d) obtain, maintain and comply with all conditions
for the continuance of all Licenses, including without limitation, Licenses
which may at any time be required by the state in which the applicable Facility
is located or other appropriate governmental entity, necessary or desirable for
the operation of each Facility as its applicable Senior Living Facility;
(e) to the extent the Borrower presently participates
or in the future will participate in such programs, obtain, maintain and comply
with all
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<PAGE> 56
conditions for the continuance of certification from each applicable
Governmental Authority that the Borrower meets all conditions for participation
in the Medicare and Medicaid programs; and
(f) construct the Improvements entirely on the Land
without encroaching upon any easement or right-of-way or upon the land of others
in accordance with all applicable (whether present or future) laws, ordinances,
rules, regulations, requirements and orders of any Governmental Authority having
or claiming jurisdiction, including all applicable building restriction lines
and set-backs, all use or other restrictions and the provisions of any prior
agreements, declarations, covenants and all applicable zoning and subdivision
ordinances and regulations unless a variance shall have been obtained.
Section 7.6 Use of Proceeds.
Use the proceeds of the Loan for the purpose or purposes set forth in
Section 2.l and, without the prior written consent of the Agent for no other
purpose or purposes.
Section 7.7 Insurance.
Provide or cause to be provided to the Agent and maintain in full force
and effect at all times during the term of the Loan, such policies of insurance
as may be required by the terms of the Financing Documents from a company or
companies, and in form and amounts satisfactory to the Agent including, by way
of example and not by way of limitation, at least the following:
7.7.1 Builder's Risk Insurance
During any period of construction in or on an Eligible Project,
"builder's risk" insurance, including vandalism and malicious mischief and
collapse endorsements in amounts not less than the replacement cost of the
Improvements being constructed or of the Property and naming the Agent on behalf
of the Lenders as a loss payee in the mortgagee clause thereof;
7.7.2 Property Insurance
Casualty or physical damage insurance coverage for each completed
Eligible Project affording protection against loss or damage by fire or other
hazards covered in the form of an "all-risk" 100% non-reporting fire and hazard
insurance policy with "extended coverage" endorsement and insurance for boiler
or pressure vessel explosion (if boilers or pressure vessels are located on the
Property) and such other risks as shall be customarily covered with respect to
projects similar in construction, location and use as the Property, or as the
Agent may from time to time otherwise require in amounts necessary to prevent
the application of any co-insurance provisions of any applicable policies up to
an amount not less than the greater of the full insurable value of the
Improvements (as defined in the Deed of Trust) or the aggregate principal amount
of the Obligations; no policy of insurance shall be written such that the
proceeds thereof will produce less than the minimum coverage required by this
Section by reason of co-insurance provisions or otherwise; the term "full
insurable value" means the actual replacement cost of the
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<PAGE> 57
Property (as defined in the Deed of Trust) (excluding foundation and excavation
costs and costs of underground flues, pipes, drains and other uninsurable
items); and as to Eligible Projects naming the Agent on behalf of the Lenders as
loss payee in the mortgagee clause thereof;
7.7.3 Liability Insurance
Comprehensive public liability insurance in amounts usually carried by
similar operations against claims for bodily injury or death and property damage
insurance for claims for damage to property (including loss of use) occurring
upon, in or about the Property naming the Agent on behalf of the Lenders as loss
payee thereunder, with such insurance to afford protection to the limit of not
less than $5,000,000 for the aggregate of all occurrences during any given
annual policy period for each Eligible Project shall name the Agent as a
certificate holder and shall prohibit cancellation or reduction in coverage upon
less than thirty (30) days prior written notice to the Agent;
7.7.4 Worker's Compensation Insurance
Workers' compensation insurance in accordance with the requirements of
applicable law or regulation naming the Agent on behalf of the Lenders as loss
payee thereunder;
7.7.5 Business Interruption Insurance
Business interruption insurance naming the Lenders as additional
insureds with respect to each Facility once a certificate of occupancy has been
issued for such Facility in an amount equal to at least twelve (12) months' debt
service on the applicable Loan; and
7.7.6 Professional Liability Insurance
To the extent that healthcare professionals are employed by the
Borrower, medical liability, malpractice and other healthcare professional
liability insurance protecting the Borrower and its employees against claims
arising from the professional services performed by the Borrower and its
employees with limits of not less than One Million Dollars ($1,000,000.00) with
respect to injury or death for each person or occurrence and an umbrella policy
insuring against such liability in an aggregate amount of not less than Ten
Million Dollars ($10,000,000.00). In addition, the Borrower shall ensure that
all healthcare providers with whom the Borrower contracts to provide services at
any Facility are insured against claims arising from such services with limits
as set forth above.
7.7.7 Flood Insurance.
If required by applicable law or regulation, provide or cause to be
provided to the Agent a separate policy of flood insurance in the aggregate
amount of the applicable Loan or the maximum limit of coverage available with
respect to the Property, whichever
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<PAGE> 58
is the lesser, from a company or companies satisfactory to the Agent and written
in strict conformity with the Flood Disaster Protection Act of 1973, as amended,
and all applicable regulations adopted pursuant thereto. In the event that flood
insurance is not required by applicable law or regulation to be provided in
connection with the applicable Loan or is not otherwise available with respect
to the Property, the Borrower shall supply the Agent with written evidence, in
form and substance satisfactory to the Agent, to that effect. Any such policy
shall provide that the policy may not be surrendered, canceled or substantially
modified (including, without limitation, cancellation for nonpayment of
premiums) without at least thirty (30) days' prior written notice to any and all
insureds named therein, including the Lenders.
7.7.8 General Insurance Provisions
The Borrower shall file with the Agent, upon its request, a detailed
list of the insurance then in effect and stating the names of the insurance
companies, the amounts and rates of the insurance, dates of the expiration
thereof and the properties and risks covered thereby. Each policy of insurance
shall (a) be issued by one or more recognized, financially sound and responsible
insurance companies approved by the Agent and which are qualified or authorized
by the laws of the state in which the applicable Facility is located to assume
the risk covered by such policy, (b) with respect to the insurance described
under the preceding subsections 7.7.1, 7.7.2 and 7.7.6, have attached thereto
standard noncontributing, non-reporting mortgagee clauses in favor of and
entitling the Lenders without contribution to collect any and all proceeds
payable under such insurance, (c) provide that such policy shall not be canceled
or modified without at least thirty (30) days prior written notice to the Agent,
and (c) provide that any loss otherwise payable thereunder shall be payable
notwithstanding any act or negligence of the Borrower which might, absent such
agreement, result in a forfeiture of all or a part of such insurance payment.
Unless an escrow account has been established for insurance premiums pursuant to
the provisions of a Deed of Trust, the Borrower shall promptly pay all premiums
when due on such insurance and, on or prior to the expiration date of each such
policy, the Borrower shall deliver to the Agent a renewal policy or policies
marked "premium paid" and ACORD evidence of insurance or other evidence of
payment satisfactory to the Agent. The Borrower shall immediately give the Agent
notice of any cancellation of, or change in, any insurance policy. The Lenders
shall not individually or collectively, because of accepting, rejecting,
approving or obtaining insurance, incur any liability for (i) the existence,
nonexistence, form or legal sufficiency thereof, (ii) the solvency of any
insurer, or (iii) the payment of losses.
Section 7.8 Maintenance of Properties.
Keep its properties, whether owned in fee or otherwise, or leased,
including, without limitation, all of the Property, in good operating condition;
make all proper repairs, renewals, replacements, additions and improvements
thereto needed to maintain such properties in good operating condition; comply
with the provisions of all leases to which it is a party or under which it
occupies property so as to prevent any loss or forfeiture thereof or thereunder;
and comply with all laws, rules, regulations and orders applicable to its
properties or business or any part thereof.
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<PAGE> 59
Section 7.9 Maintenance of the Collateral.
Not permit anything to be done to the Collateral which may impair the
value thereof. Any of the Lenders or an agent designated by such Lender, shall
be permitted upon prior notice to the Borrower to enter the premises of the
Borrower and examine, audit and inspect the Collateral at any reasonable time
and from time to time without notice. The Lenders shall not have any duty to,
and the Borrower hereby releases the Lenders from, all claims of loss or damage
caused by the delay or failure to collect or enforce any of the Accounts or
Receivables or to preserve any rights against any other party with an interest
in the Collateral.
Section 7.10 Other Liens, Security Interests, etc.
Keep the Collateral and the Property free from all liens, security
interests and claims of every kind and nature, other than Permitted Liens.
Section 7.11 Defense of Title and Further Assurances.
At its expense, defend the title to the Collateral (or any part
thereof), and promptly upon request execute, acknowledge and deliver any
financing statement, renewal, affidavit, deed, assignment, continuation
statement, security agreement, certificate or other document the Agent may
reasonably require in order to perfect, preserve, maintain, protect, continue
and/or extend any lien or security interest granted to the Lenders under this
Agreement or any of the Security Documents and its priority. The Borrower shall
pay to the Agent, on demand all taxes, costs and expenses incurred by any of the
Lenders, in connection with the preparation, execution, recording and filing of
any such document or instrument.
Section 7.12 Subsequent Opinion of Counsel as to Recording
Requirements.
Provide to the Agent a subsequent opinion of counsel as to the filing,
recording and other requirements with which the Borrower has complied to
maintain the liens and security interests in favor of the Lenders in the
Collateral in the event that the Borrower shall transfer its principal place of
business or the office where it keeps its records pertaining to the Accounts and
Receivables.
Section 7.13 Books and Records.
(a) Keep and maintain accurate books and records;
(b) make entries on such books and records in form
reasonably satisfactory to the Agent disclosing the Lenders' assignment of, and
security interest in and lien on, the Collateral and all collections received by
the Borrower on its Accounts;
(c) furnish to the Agent promptly upon request such
information, reports, contracts, invoices, lists of purchases of Inventory
(showing names, addresses and amount owing) and other data concerning Account
Debtors and the Borrower's Accounts and Inventory and all contracts and
collection(s) relating thereto as the Agent may from time to time specify; and
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<PAGE> 60
(d) unless the Agent shall otherwise consent in
writing, keep and maintain all such books and records mentioned in (a) above
only at the addresses listed in EXHIBIT C, and (a) permit any person designated
by any of the Lenders to enter the premises of the Borrower upon prior notice to
the Borrower and examine, audit and inspect the books and records at any
reasonable time and from time to time.
Section 7.14 Collections.
Until such time as the Agent shall notify the Borrower of the
revocation of such privilege following an Event of Default, (a) at its own
expense exercise the privilege for the account of and in trust for the Lenders
of collecting its Accounts and receiving in respect thereto all items of payment
and shall otherwise completely service all of the Accounts including (i) the
billing, posting and maintaining of complete records applicable thereto, and
(ii) the taking of such action with respect to such Accounts as the Agent may
reasonably request or in the absence of such request, as the Borrower may deem
advisable; and (b) in its discretion, grant, in the ordinary course of business,
to any Account Debtor, any rebate, refund or adjustment to which the Account
Debtor may be lawfully entitled. The Agent may, at its option but solely in
accordance with applicable law, at any time or from time to time after the
occurrence of an Event of Default hereunder, revoke the collection privilege
given to the Borrower herein by either giving notice of its assignment of, and
lien on the Collateral, subject to the provisions of Section 7.15 hereof, to the
Account Debtors or giving notice of such revocation to the Borrower.
Section 7.15 Notice to Account Debtors and Escrow Account.
In the event that (a) a Default or an Event of Default exists, or (b)
demand has been made for any or all of the Obligations, promptly upon the
request of the Agent in such form and at such times as reasonably specified by
the Agent, give notice of the Lenders' lien on the Accounts to the Account
Debtors requiring those Account Debtors which are permitted by applicable law to
make payments thereon directly to the Agent.
Section 7.16 Business Names.
Immediately notify the Agent of any change in the name or names under
which it conducts its business.
Section 7.17 ERISA.
With respect to any pension plan which the Borrower and/or any Commonly
Controlled Entity maintains or contributes to, either now or in the future,
that: (a) such bonding as is required under ERISA 412 will be maintained; (b) as
soon as practicable and in any event within 15 days after the Borrower or any
Commonly Controlled Entity knows or has reason to know that a "reportable event"
has occurred or is likely to occur, the Borrower will deliver to the Agent a
certificate signed by its chief financial officer setting forth the details of
such "reportable event"; (c) neither the Borrower nor any Commonly Controlled
Entity will: (i) engage in or permit any "prohibited transaction" (as defined in
ERISA 406 or Code 4975) to occur; (ii) cause any "accumulated funding
deficiency" as defined in ERISA 302 and/or Code 412; (iii) terminate any pension
plan in a manner which could result in the imposition of a lien on the property
of the Borrower
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<PAGE> 61
pursuant to ERISA 4068; (iv) terminate or consent to the termination of any
multiemployer plan; (v) incur a complete or partial withdrawal with respect to
any multiemployer plan within the meaning of ERISA 4203 and 4205; and (d) within
15 days after notice is received by the Borrower or any Commonly Controlled
Entity that any multiemployer plan has been or will be placed in
"reorganization" within the meaning of ERISA 4241, the Borrower will notify the
Agent to that effect. Upon the Agent's request, the Borrower will deliver to the
Agent a copy of the most recent actuarial report, financial statements and
annual report completed with respect to any "defined benefit plan", as defined
in ERISA 3(35).
Section 7.18 Management.
(a) Prior to the Credit Facility Closing, the
Borrower shall provide the Agent with a proposed form of Management Agreement to
be entered into by the Borrower or a Joint Venture with the Management Company.
The terms and provisions of the Management Agreement shall be fully approved by
the Lender prior to each applicable Facility Closing. The interest of the
Borrower in the Management Agreement shall be assigned to the Lender as security
for the Credit Facility.
(b) Subject to the terms of a Management Fee
Subordination Agreement by and among the Borrower, the Management Company and
the Agent executed in connection with each Facility Closing, the Borrower shall
cause the Management Company to subordinate payment of any and all management
fees under, or in connection with, the Management Agreement (the "Management
Fees") to payment of the Obligations, in accordance with the terms and
conditions of one or more subordination agreements in form and content
acceptable to the Agent in its reasonable discretion, and shall not amend,
restate, supplement, terminate, cancel or otherwise modify any of the terms or
conditions of such Management Agreement, in any material respect, without the
prior written consent of the Agent; however, payments of Management Fees may be
made as contracted for until the occurrence of an Event of Default.
(c) The Management Agreement shall provide that the
Borrower or subsequent owner may terminate such agreement, at the discretion of
the Borrower, upon thirty (30) days' prior written notice to the Management
Company; the Management Company shall acknowledge and consent in writing to the
assignment by the Borrower of its rights under the Management Agreement to the
Agent. The Borrower hereby agrees to enter into a Management Agreement with an
independent manager, acceptable to the Agent in its reasonable discretion, as
and when directed by the Agent, if the Management Agreement has been terminated
pursuant to the immediately preceding sentence; and it shall constitute an Event
of Default under the Financing Documents if the Borrower fails to do so. Except
as provided hereinafter, the Financing Documents shall provide that termination
of the Management Agreement without the prior written consent of the Agent shall
constitute an Event of Default under the Financing Documents. No consent of the
Lender shall be required for the termination of a Management Agreement if it is
required to meet an obligation for a License and (a) the Management Company
remains the Borrower, ALS or a Wholly Owned Subsidiary of ALS and (b) any
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<PAGE> 62
additional assignments of such Management Agreements required by the Agent are
provided by the Borrower.
Section 7.19 Surveys.
Upon the completion of the construction of the Improvements, the
Borrower shall furnish the Agent with an ALTA Survey with a current
certification to the Agent by a registered land surveyor of the jurisdiction in
which the Land is located. At any time the Borrower is required to furnish an
ALTA Survey to the Agent pursuant to the terms of this Agreement, the Borrower
shall also furnish an original print thereof to the title insurance company and
such Survey shall not be sufficient for the purposes of this Agreement unless
and until the title insurance company shall advise the Agent, by endorsement to
the title insurance policy or otherwise, that the Survey discloses no
violations, encroachments or other variances from applicable set-backs or other
restrictions except such as the Agent and its counsel shall approve.
Section 7.20 Inspections; Cooperation; Payment of Inspecting Engineer.
Permit the Lenders and their duly authorized representatives
(including, without limitation, the Inspecting Engineer) to enter upon any of
the Land, to inspect the Improvements and any and all materials to be used in
connection with the development of any of the Land and/or the construction of
the Improvements, to examine all detailed plans and shop drawings and similar
materials as well as all records and books of account maintained by or on behalf
of the Borrower relating thereto and to discuss the affairs, finances and
accounts pertaining to any Facility and any of the Improvements with
representatives of the Borrower. The Borrower shall at all times cooperate and
cause the General Contractor and each and every one of its subcontractors and
materialmen to cooperate with the Lenders and their duly authorized
representatives (including, without limitation, the Inspecting Engineer) in
connection with or in aid of the performance of the Agent's or Lenders'
functions under this Agreement. The reasonable fees of any Inspecting Engineer
engaged or employed by the Agent in connection with or in aid of the performance
of the Agent's or the Lenders' functions under this Agreement shall be paid by
the Borrower.
Section 7.21 Vouchers and Receipts.
Furnish to the Agent, promptly on demand, any contracts, bills of sale,
statements, receipted vouchers or agreements pursuant to which the Borrower has
any claim of title to any materials, fixtures or other articles delivered or to
be delivered to the Land or incorporated or to be incorporated into any of the
Improvements. The Borrower shall furnish to the Agent, promptly on demand, a
verified written statement, in such form and detail as the Agent may require,
showing all amounts paid for labor and materials and all items of labor and
materials furnished or to be furnished for which payment has not been made and
the amounts to be paid therefor.
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Section 7.22 Payments for Labor and Materials.
Pay when due all bills for services or labor performed and materials
supplied in connection with the development of the Land and the construction of
the Improvements. In the event any mechanics' lien or other lien or encumbrance
shall be filed or attached against the Property without the prior written
consent of the Agent in each instance, the Borrower covenants and agrees that,
within twenty (20) days after the filing of such lien, the Borrower will
promptly discharge the same by payment or filing bond or otherwise as permitted
by law; and if the Borrower fails to do so, the Agent may, at its option, in
addition to, and not in limitation of, all other rights and remedies of the
Agent in the Event of Default by the Borrower, and without regard to the
priority of said mechanics' lien or other lien or encumbrance, pay the same, and
all amounts expended by the Agent for such purpose shall constitute loans to the
Borrower and shall be secured by the Deed of Trust and the other Financing
Documents, and be due and payable forthwith by the Borrower to the Agent with
interest thereon at the Reimbursement Rate provided for in the Deed of Trust.
Section 7.23 Correction of Construction Defects.
Promptly following any demand by the Agent, correct or cause the
correction of any structural defects in the Improvements and any material
departures or deviations from the Plans and Specifications, as determined by the
Agent in its sole but reasonable discretion, not approved in writing by the
Agent.
Section 7.24 Fees and Expenses; Indemnity.
Pay all reasonable fees, charges, costs and expenses required to
satisfy the conditions of the Financing Documents. The Borrower shall hold the
Lenders harmless and indemnify the Lenders and the Lenders shall hold the
Borrower harmless and will indemnify the Borrower against all claims of brokers
and "finders" arising by reason of the execution and delivery of the Financing
Documents or the consummation of the transaction contemplated hereby. Neither
party is aware of any broker having a claim for payment.
Section 7.25 Governmental Surveys or Inspections.
Furnish to the Agent upon its request, within thirty (30) days of
receipt thereof, copies of any and all annual surveys or inspections performed
by any Governmental Authority or accreditation or certification organization
with respect to any Facility. Section 7.26 Cost Reports.
Prepare and file all applicable cost reports to all third-party payors,
if any, to the extent required by any such third-party payor and, within thirty
(30) days thereafter, notify the Agent of any settlement of any cost report
disclosed to the Agent as being open or unsettled as of the Closing Date to the
extent any such cost report would have a materially adverse effect on the
Borrower.
Section 7.27 Updated Appraisals.
In addition, the Agent shall have the right but not the obligation to
require annual updated appraisals of any or all the Property and the Facilities,
which appraisals shall be
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prepared by an appraiser or appraisers designated by the Agent and shall be in
all respects reasonably acceptable to the Agent which appraisals shall include,
if deemed necessary by the Agent, in its reasonable discretion, updated
discounted cash flow analysis, inspections of and commentary on the physical
status of the applicable Facility and an engineering review. The basis of the
appraisal calculations shown on such appraisal reports and all other aspects of
the appraisal reports must be satisfactory to the Agent in all material
respects. The release of such appraisal reports by the Agent to the Borrower
shall be at the Agent's sole option if the Borrower has not paid the cost of
such appraisal. If the Borrower has paid the cost of the appraisal, a copy of
the appraisal will be provided to the Borrower upon its signing of the Agent's
standard appraisal release letter. The Borrower shall reimburse the Agent upon
demand for all costs and expenses incurred by any of the Lenders with respect to
the preparation and review of all future appraisals required pursuant to the
terms hereof, if either (i) such appraisal is required by law or banking
regulation, (ii) an Event of Default has occurred under the Financing Documents,
or (iii) the Agent has a good faith reason to believe a significant change in
value has occurred in the Facility being appraised due to a material adverse
change in the Facility's occupancy status or operating performance and such
appraisal actually reflects such significant change.
Section 7.28 Notification of Certain Events, Events of Default and
Adverse Developments.
Promptly give written notice to the Agent who will forward a copy of
the notice to the Lenders upon obtaining knowledge of the occurrence of any of
the following:
(a) any Event of Default under the Financing
Documents;
(b) any event, development or circumstance whereby
the financial statements furnished under the Financing Documents fail in any
material respect to present fairly the financial condition and operational
results of the Borrower;
(c) any judicial, administrative or arbitral
proceeding pending against the Borrower or any judicial or administrative
proceeding known by the Borrower to have been threatened against it in a written
communication which threatened proceeding, if adversely decided, could
materially adversely affect its financial condition or operations (present or
prospective);
(d) (i) the revocation, suspension, probation,
restriction, limitation or refusal to renew, or any administrative procedure
then in process for the revocation, suspension, probation, restriction,
limitation, or refusal to renew, of any License, or (ii) the decertification,
revocation, suspension, probation, restriction, limitation, or refusal to renew,
or the pending, decertification, revocation, suspension, probation, restriction,
limitation, or refusal to renew or any administrative procedure then in process
for any participation or eligibility in any third party payor program in which
the Borrower elects to participate, including, without limitation, Medicare,
Medicaid or other private insurer programs or any accreditation of the Borrower,
or (iii) the issuance
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or pending issuance of any License for a period of less than twelve (12) months,
as a consequence of sanctions imposed by any Governmental Authority, or (iv) the
assessment or pending assessment, of any civil or criminal penalties by any
Government Authority, any third party payor or any accreditation organization or
Person, which could materially adversely affect the financial condition or
operations of the Borrower or an Affiliate (present or prospective) as
determined by the Agent, in its sole but reasonable discretion;
(e) any action, including, but not limited to, the
filing of any certificate of need application if required by law, the amendment
of any Facility License or certification, or the issuance of any new License or
certification for any Facility, under which the Borrower proposes (i) to develop
a new Facility or service and/or (ii) eliminate, materially expand or materially
reduce any service;
(f) any actual contingent liability or a potential
contingent liability of the Borrower of $1,000,000 or more;
(g) any material default or failure to perform by the
Borrower, the General Contractor or any subcontractor or materialmen with
respect to the Property of if such notice relates to any matter requiring the
Agent's or the Lenders' approval hereunder; and
(h) any other development in the business or affairs
of the Borrower results in a material adverse change therein; and in each case
listed in clauses (a) through (g), inclusive, of this Section describing in
detail satisfactory to the Agent the nature thereof and, in the case, if any, of
notification under clause (a), the action the Borrower proposes to take with
respect thereto or a statement that the Borrower intends to take no action and
an explanation of the reasons for such inaction. In addition, the Borrower will
furnish to the Agent immediately after receipt thereof copies of all
administrative notices material to Borrower's business and operation of any
Facility and all responses by or on behalf of the Borrower with respect to such
administrative notices.
Section 7.29 Compliance with Environmental Laws.
If any Hazardous Materials are used, present or generated on any real
property owned or controlled by the Borrower or for which the Borrower is
responsible, use, process, distribute, handle, maintain, treat, store, dispose
of and transport such substance in compliance with all applicable laws,
including, but not limited to, those regulating PCB, underground storage tanks,
radon and medical waste tracking, as well as any laws that are enacted after the
date of this Agreement.
Section 7.30 Hazardous Materials; Contamination.
(a) Give notice to the Agent within five (5) Banking
Days of the Borrower's acquiring knowledge of the presence of any Hazardous
Materials
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on any property owned or controlled by the Borrower or for which the Borrower is
responsible or of any Hazardous Materials Contamination with a full description
thereof, except for reasonable quantities of necessary supplies for use by the
Borrower in the ordinary course of its current line of business and stored, used
and disposed of in accordance with applicable Laws;
(b) promptly comply with any laws requiring special
handling, maintenance, servicing, removal, treatment or disposal of Hazardous
Materials or Hazardous Materials Contamination and provide the Agent upon
request with satisfactory evidence of such compliance;
(c) provide the Agent, within thirty (30) days after
a demand by the Agent, with a bond, letter of credit or similar financial
assurance evidencing to the Agent's satisfaction that funds are available to pay
the cost of removing, treating, and disposing of such Hazardous Materials or
Hazardous Materials Contamination and discharging any lien which may be
established as a result thereof on any property owned, operated or controlled by
the Borrower or for which the Borrower is responsible; and
(d) defend, indemnify and hold harmless the Lenders
and each of their agents, employees, trustees, successors and assigns from any
and all claims which may now or in the future (whether before or after the
termination of this Agreement) be asserted as a result of the presence of any
Hazardous Materials on any property owned, operated, controlled or managed by
the Borrower for which the Borrower is responsible for any Hazardous Materials
Contamination.
Section 7.31 Participation in Reimbursement Programs.
In the event the Borrower elects to participate in any or all plans
and/or programs for third party payment and/or reimbursement, and the revenues
derived from a single plan or program exceed ten percent (10%) of the gross
revenues of the applicable Facility, continue its participation in any and all
such plans and/or programs for third party payment and/or reimbursement from,
and claims against, private insurers or programs for payment and/or
reimbursement from federal, state and local governmental agencies and/or private
or quasi-public insurers, including, without limitation, Managed Care Plans,
Medicaid and Medicare and the Veterans Administration (as determined by the
Borrower in the good faith exercise of its prudent and commercially reasonable
business judgment). While participating in such plans, the Borrower shall comply
with any and all rules, regulations, standards, procedures and decrees necessary
to maintain the Borrower's participation in any such third party payment or
reimbursement program or plan.
ARTICLE VIII
NEGATIVE COVENANTS OF BORROWER
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Until payment in full and the performance of all of the
Obligations, without the prior written consent of the Agent as permitted
pursuant to the Agency Agreement, the Borrower will not directly or indirectly:
Section 8.1 Borrowings.
Create, incur, assume or suffer to exist any liability for borrowed
money other than the Credit Facility and Permitted Equipment Financing or
unsecured loans from Affiliates which are bearing an interest rate no higher
than that then applicable to the Loan, are fully subordinated as to payment of
principal and interest (either by their terms or by separate written agreement)
to the Credit Facility; provided, however, so long as no Event of Default has
occurred or will occur upon the payment of interest on such indebtedness under
the Financing Documents, the Borrower may make scheduled payments of interest on
such debt.
Section 8.2 Deeds of Trust and Pledges.
Create, incur, assume or suffer to exist any deed of trust, mortgage,
pledge, Lien or other encumbrance of any kind upon, or any security interest in,
any of its property or assets, including the Collateral or impair the value
thereof, whether now owned or hereafter acquired.
Section 8.3 Sale or Transfer of Assets.
Directly or indirectly enter into any arrangement whereby the Borrower
shall sell, lease, transfer, assign or otherwise dispose of any of its assets
other than (a) sales or other disposition of assets in the ordinary course of
business for value, provided the proceeds thereof are used to pay down one or
more of the Loans or the asset sold or disposed of is replaced by one of equal
or greater value or (b) the transfer of an Eligible Project or the sale of an
Eligible Project, in either case, in which case the Borrowing Base will be
reduced by the availability attributed to such Facility.
Section 8.4 Other Liens; Transfers; "Due-on-Sale"; etc.
The Borrower shall not, without the prior written consent of the Agent,
create or permit to be created or remain with respect to any of the Property or
any party thereof or income therefrom, any mortgage, pledge, lien, encumbrance
or charge, or security interest, or conditional sale or other title retention
agreement, whether prior or subordinate to the lien of the Financing Documents,
other than in connection with the Financing Documents or as otherwise provided
or permitted therein. Except for any grant, conveyance, sale, assignment or
transfer in the ordinary course of the Borrower's business and which is
specifically conditioned upon the release of records of the lien of the Deed of
Trust and the other Financing Documents as to that Eligible Project granted,
conveyed, sold, assigned or transferred as otherwise permitted hereunder, the
Borrower shall not, without the prior written consent of the Agent, make,
create, permit or consent to any conveyance, sale, assignment or transfer of any
of the Property or any party thereof, other than in connection with the
Financing Documents or as otherwise provided or permitted therein.
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Section 8.5 Advances and Loans.
Make loans or advances to any Person, including, without limitation,
Affiliates, partners and employees of the Borrower.
Section 8.6 Contingent Liabilities.
Assume, guarantee, endorse, contingently agree to purchase or otherwise
become liable upon the obligation of any Person, except by the endorsement of
negotiable instruments for deposit and collection or similar transactions in the
ordinary course of business.
Section 8.7 Licenses.
Allow any Licenses, permit, right, franchise or privilege necessary for
the ownership or operation of any Facility for the purposes for which any
Facility is intended to be used to lapse, be suspended, be revoked, be denied
renewal or be forfeited or be placed on probation unless solely due to
administrative delay by the licensing authority; to fail to receive a License
for any Facility within sixty (60) days of the issuance of a certificate of
occupancy for such Facility or to suffer the issuance or pending of any License
for a period of less than twelve (12) months as a consequence of any sanctions
imposed by any Governmental Authority or the Assessment or pending assessment of
any civil or criminal penalties by any Governmental Authority or any third party
payor.
Section 8.8 ERISA Compliance.
(a) Restate or amend any Plan established and
maintained by the Borrower or any Commonly Controlled Entity and subject to the
requirements of ERISA, in a manner designed to disqualify such Plan and its
related trusts under the applicable requirements of the Code;
(b) permit any partners of the Borrower or any
Commonly Controlled Entity to materially adversely affect the qualified
tax-exempt status of any Plan or related trusts of the Borrower or any Commonly
Controlled Entity under the Code;
(c) engage in or permit any Commonly Controlled
Entity to engage in any Prohibited Transaction;
(d) incur or permit any Commonly Controlled Entity to
incur any Accumulated Funding Deficiency, whether or not waived, in connection
with any Plan;
(e) take or permit any Commonly Controlled Entity to
take any action or fail to take any action which causes a termination of any
Plan in a manner which could result in the imposition of a lien on the property
of the Borrower or any Commonly Controlled Entity pursuant to Section 4068 of
ERISA;
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(f) fail to notify the Agent that notice has been
received of a "termination" (as defined in ERISA) of any Multiemployer Plan to
which the Borrower or any Commonly Controlled Entity has an obligation to
contribute;
(g) incur or permit any Commonly Controlled Entity to
incur a "complete withdrawal" or "partial withdrawal" (as defined in ERISA) from
any Multiemployer Plan to which the Borrower or any Commonly Controlled Entity
has an obligation to contribute; or
(h) fail to notify the Agent that notice has been
received from the administrator of any Multiemployer Plan to which the Borrower
or any Commonly Controlled Entity has an obligation to contribute that any such
Plan will be placed in "reorganization" (as defined in ERISA).
Section 8.9 Transfer of Collateral.
Transfer, or permit the transfer, to another location of any of the
Collateral or the books and records related to any of the Collateral; provided,
however, that the Borrower may transfer the Collateral or the books and records
related thereto to another location if the Borrower shall have provided to the
Agent prior to such transfer an opinion of counsel addressed to the Agent to the
effect that the Lenders' perfected security interest shall not be affected by
such move or if it shall be affected, setting forth the steps necessary to
continue the Lender's perfected security interest together with the commencement
of such steps by the Borrower at its expense.
Section 8.10 Sale of Accounts or Receivables.
Sell, discount, transfer, assign or otherwise dispose of any of its
Accounts or Receivables of any Facility, such as accounts receivable, notes
receivable, installment or conditional sales agreements or any other rights to
receive income, revenues or moneys, however evidenced.
Section 8.11 Amendments; Terminations.
Except as otherwise provided herein, amend or terminate or agree to
amend or terminate any License, the Management Agreement, or any participation
agreement which exceeds 10% of the gross revenue of the applicable Facility, or
except in the ordinary course of business any other Management Contracts and
Operating Agreements which may have been entered into by the Borrower with
respect to any Facility and which exceeds 10% of its gross revenue, or consent
to or waive any material provisions thereof.
Section 8.12 Prohibition on Hazardous Materials.
Place, manufacture or store or permit to be placed, manufactured or
stored, any Hazardous Materials on any property owned, controlled or operated by
the Borrower or any Wholly Owned Subsidiary or for which the Borrower or any
Wholly Owned Subsidiary is responsible, except for reasonable quantities of
necessary supplies for use by the Borrower or any Wholly Owned Subsidiary in the
ordinary course of its current line of business and stored, used and disposed of
in accordance with applicable Laws.
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Section 8.13 Subsidiaries.
The Borrower will not create or acquire any Subsidiaries other than
Wholly Owned Subsidiaries of which the Requisite Lenders have approved in the
exercise of their sole and absolute discretion, which approval may be
conditioned, among other things, on the execution and delivery of an Additional
Borrower Joinder Supplemental and such other Financing Documents as the Agent
may require.
Section 8.14 Mergers or Acquisitions.
Enter into any merger or consolidation or amalgamation, wind up or
dissolve itself (or suffer any liquidation or dissolution), or acquire all or
substantially all of the assets of any person, firm, joint venture or
corporation except to acquire a Wholly Owned Subsidiary.
Section 8.15 Conditional Sales.
The Borrower shall not incorporate in the Improvements any property
acquired under a conditional sales contract, or lease, or as to which the vendor
retains title or a security interest with the exception of Permitted Equipment
Financing, without the prior written consent of the Agent.
Section 8.16 Changes to Plans and Specification.
After review and approval of a Total Development Budget by the Agent,
the Borrower shall not permit any change order increasing the price of the
Improvement for an Eligible Project by more than $50,000 for any one change
order or by more than $50,000 in the aggregate or materially altering the scope
of the Improvements, without the prior written consent of the Agent which
consent will not be unreasonably withheld.
Section 8.17 Construction Contract; Construction Management.
The Borrower shall not execute any contract or agreement or become a
party to any arrangement for the construction of any Improvements or for
construction management services with respect to any Property without the prior
written consent of the Agent.
ARTICLE IX
EVENTS OF DEFAULT
The occurrence of one or more of the following events shall be "Events
of Default" under this Agreement, and the terms "Event of Default" shall mean,
whenever they are used in this Agreement, any one or more of the following
events:
Section 9.1 Failure to Pay and/or Perform the Obligations.
The Borrower shall fail to
(a) make any payment of interest on the Note within
five (5) calendar days of the date when due, or
(b) pay any of the other Obligations including but
not limited to the Expense Payments and Liquidation Costs within five (5)
calendar days of the date when due, except with regard to payment of (a) any
Borrowing Base Deficiency
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which shall be due as provided in Section 2.1(h) hereof, and (b) amounts due at
maturity for which no notice or cure period shall be required to be given.
Section 9.2 Breach of Representations and Warranties.
Any material representation or warranty made in this Agreement or in
any report, certificate, opinion (including any opinion of counsel for the
Borrower), financial statement or other instrument furnished in connection with
the Obligations or with the execution and delivery of any of the Financing
Documents, shall prove to have been false or misleading when made (or, if
applicable, when reaffirmed) in any material respect.
Section 9.3 Failure to Comply with Covenants.
Default shall be made by the Borrower in the due observance and
performance of any covenant, condition or agreement contained in Article VII
hereof (except for Sections 7.8, 7.9, 7.12, 7.13, 7.17, 7.19, 7.20, 7.24, 7.27)
or in Article VIII hereof.
Section 9.4 Failure to Comply with Financial Reporting or Books and
Records.
Default shall be made by the Borrower in the due observance or
performance of Section 7.1 or 7.13, which default shall remain unremedied, and
the Borrower shall cure such default promptly, but in no event more than ten
(10) days after written notice thereof to the Borrower by the Agent.
Section 9.5 Other Defaults.
Default shall be made by the Borrower in the due observance or
performance of any other term, covenant or agreement other than as set forth in
this Article IX, which default shall remain unremedied for more than thirty (30)
days after written notice thereof to the Borrower by the Agent, unless the
nature of the failure is such that (a) it cannot be cured within the thirty (30)
day period, and (b) the Borrower institutes corrective action within the thirty
(30) day period and (c) the Borrower diligently pursues such action and
completes the cure within ninety (90) days.
Section 9.6 Default Under Other Financing Documents.
A Default shall occur under any of the other Financing Documents, and
such Default is not cured within any applicable grace period provided therein.
Section 9.7 Receiver; Bankruptcy.
An Act of Bankruptcy occurs with respect to the Borrower or the
Borrower becomes generally unable to pay its debts as they become due; provided,
however, if a proceeding with respect to an Act of Bankruptcy is filed or
commenced against the Borrower, the same shall not constitute an Event of
Default if such proceeding is dismissed within sixty (60) days from the date of
such Act of Bankruptcy.
Section 9.8 Judgment.
Unless adequately insured in the reasonable opinion of the Lender, the
entry of a final judgment against the Borrower of $1,000,000 or more or any
attachment or other levy against the property of the Borrower remains unpaid,
unstayed on appeal, undischarged, unbonded or undismissed for a period of thirty
(30) days.
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Section 9.9 Execution; Attachment.
Any execution or attachment shall be levied against the Collateral, or
any part thereof, and such execution or attachment shall not be set aside,
discharged or stayed within thirty (30) days after the same shall have been
levied.
Section 9.10 Default Under Other Borrowings.
(a) Default which continues beyond any applicable
grace period shall be made under any obligation of or guaranteed by the Borrower
equal to or greater than $1,000,000, if the effect of such default is to
accelerate the maturity of such obligation or to permit the holder or obligee
thereof to cause such obligation to become due prior to its stated maturity;
(b) Default shall be made under any obligation equal
to or greater than $20,000,000 of a consolidated Affiliate, which is otherwise
non-recourse to the Borrower, if the holder or obligee of such obligation has
commenced action on any of the remedies available to it under the obligation.
Section 9.11 Change in Status or Ownership.
The Borrower is dissolved, merged, consolidated or reorganized, or any
change occurs in the ownership of the outstanding stock of the Borrower without
the prior written consent of the Agent.
Section 9.12 Damage to Improvements.
At any time prior to the issuance of a certificate of occupancy or
completion therefor, any of the Improvements are substantially damaged or
destroyed by fire or other casualty and the Agent determines in good faith that
such Improvements cannot be restored and completed in accordance with the terms
and provisions of the Deed of Trust unless the Borrower excludes the affected
Eligible Project from the calculation of the Borrowing Base.
Section 9.13 Mechanic's Lien.
A lien for the performance of work or the supply of materials which is
perfected against any of the Land remains unsatisfied or un-bonded or for which
no other arrangements satisfactory to the Agent have been made for a period of
twenty (20) days after the date of perfection unless the Borrower excludes the
affected Eligible Project from the calculation of the Borrowing Base.
Section 9.14 Survey Matters.
Any Survey required by the Lenders during the period of construction
shows any matters not approved by the Agent and such matters not approved are
not removed within 30 days after Notice thereof by the Agent to the Borrower
unless the Borrower excludes the affected Eligible Project from the Borrowing
Base.
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Section 9.15 General Contractor Default.
The General Contractor shall have defaulted under any Construction
Contract, which default the Agent, in its sole discretion, shall deem
substantial, and the Borrower, after thirty (30) days Notice from the Agent,
shall fail to commence exercising any resulting right or remedy to which it may
be entitled thereunder and diligently pursue such right or remedy unless the
Borrower excludes the affected Eligible Project from the calculation of the
Borrowing Base.
Section 9.16 Zoning.
Any change in any zoning ordinance or any other public restriction is
enacted, limiting or defining the uses which may be made of any of the Property
or a part thereof, such that the use of any of the Property, as specified
herein, would be in material violation of such restriction or zoning change
unless the Borrower excludes the affected Eligible Project from the calculation
of the Borrowing Base.
ARTICLE X
RIGHTS AND REMEDIES UPON DEFAULT
Section 10.1 DEMAND; ACCELERATION.
THE OCCURRENCE OR NONOCCURRENCE OF AN EVENT OF DEFAULT UNDER THIS
AGREEMENT SHALL IN NO WAY AFFECT OR CONDITION THE RIGHT OF THE LENDERS TO DEMAND
PAYMENT AT ANY TIME OF ANY OF THE OBLIGATIONS WHICH ARE PAYABLE ON DEMAND
REGARDLESS OF WHETHER OR NOT AN EVENT OF DEFAULT HAS OCCURRED. Upon the
occurrence of an Event of Default, and in every such event and at any time
thereafter, the Agent may declare the Obligations due and payable, without
presentment, demand, protest, or any notice of any kind, all of which are hereby
expressly waived, anything contained herein or in any of the other Financing
Documents to the contrary notwithstanding.
Section 10.2 Further Advances; Immediate Acceleration.
Following an Event of Default the Agent may from time to time without
notice to the Borrower suspend, terminate or limit any further advances under
the Loan or other extensions of credit under this Agreement and under any of the
other Financing Documents. Further, upon the occurrence of an Event of Default
or Default specified in Article IX above, the unpaid principal amount of the
Note (with accrued interest thereon) and all other Obligations then outstanding,
shall immediately become due and payable in the Agent's sole discretion without
further action of any kind and without presentment, demand, protest or notice of
any kind, all of which are hereby expressly waived by the Borrower.
Section 10.3 Further Advances; Material Adverse Change or Impairment of
Position.
If the Agent determines in its reasonable discretion that (a) a
material adverse change has occurred in the financial condition or operation of
the Guarantor or the Borrower or an event has occurred which impairs the
prospect of payment of the
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obligations and/or the value of the Facilities or the Collateral ( in either
case, regardless of whether it would constitute an Event of Default under this
Agreement), the Agent may from time to time without notice to the Borrower
suspend, terminate or limit and further advances under the Loan or other
extensions of credit under this Agreement and refuse to include any additional
Eligible Projects in the Borrowing Base.
Section 10.4 Specific Rights With Regard to Collateral.
Following an Event of Default, in addition to all other rights and
remedies provided hereunder, the Deed of Trust, any of the Financing Documents
or as shall exist at law or in equity from time to time, the Agent may, without
further notice to the Borrower and subject to the terms of the Agency Agreement:
(a) assign any and all Operating Agreements and
Management Contracts to any Person designated by the Agent, and/or exercise all
rights and privileges of the Borrower under such contracts and agreements for
the purpose of realizing on the Collateral and to the extent and for the time
required to realize the value of the Collateral;
(b) to the extent permitted by applicable law,
(i) enter into possession of any of the
Property and perform any and all work and labor necessary to complete
the development of the Land and the construction of the Improvements
thereon (whether or not in accordance with the Plans and Specifications
thereon);
(ii) employ watchmen to protect the Property
and the Improvements; and
(iii) assume such management, operation and
control of the Property to the extent and for the time necessary to
realize the value of the Collateral;
(c) cause the Borrower to engage, contract with,
and/or hire qualified service, billing, collection and other such agents,
organizations and companies acceptable to the Agent to collect and/or realize
upon any or all of the Collateral and to remit the proceeds to the Agent;
(d) subject to applicable state and federal laws
pertaining to resident confidentiality, request any Account Debtor obligated on
any of the Accounts to make payments thereon directly to the Agent to the extent
permitted by applicable law, with the Agent taking control of the cash and
non-cash proceeds thereof and/or direct the Borrower to (and the Borrower shall)
turn over to the Agent immediately following receipt all payments with respect
to the Collateral in the form received (with the addition of all necessary
endorsements) and not to deposit, negotiate or otherwise deal with those
payments;
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(e) compromise, extend or renew any of the Collateral
or deal with the same as it may deem advisable;
(f) make exchanges, substitutions or surrenders of
all or any part of the Collateral;
(g) remove from any of the Borrower's places of
business all books, records, ledger sheets, correspondence, invoices and
documents, relating to or evidencing any of the Collateral or without cost or
expense to the Lenders, make such use of the Borrower's place of business as may
be reasonably necessary to administer, control and collect the Collateral;
(h) demand, collect, receipt for and give renewals,
extensions, discharges and releases of any of the Collateral;
(i) institute and prosecute legal and equitable
proceedings to enforce collection of, or realize upon, any of the Collateral;
(j) settle, renew, extend, compromise, compound,
exchange or adjust claims in respect of any of the Collateral or any legal
proceedings brought in respect thereof;
(k) endorse the name of the Borrower upon any items
of payment relating to the Collateral or on any Proof of Claim in Bankruptcy
against an Account Debtor; and
(l) notify the Post Office authorities to change the
address for the delivery of mail to the Borrower to such address or Post Office
Box as the Agent may designate and receive and open all mail addressed to the
Borrower.
In addition, the Borrower shall, following an Event of Default
promptly, upon request, execute and deliver to the Agent written assignments, to
the extent permitted by applicable law, in form and content acceptable to the
Agent, of specific Accounts or groups of Accounts; provided, however, that the
lien and/or security interest granted to the Lenders under this Agreement shall
not be limited in any way to or by the inclusion or exclusion of Accounts within
such assignments. Such Accounts shall secure payment of the Obligations and are
not sold to the Lenders whether or not any assignment thereof, which is separate
from this Agreement, is in form absolute.
Following an Event of Default, the Lenders may also direct the Borrower
to appoint a manager for any or all of the Facilities and enter into a
management agreement with one or more management companies approved by the
Lenders, the terms of which agreement shall be approved by the Lenders.
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Section 10.5 Performance by Lenders.
Following an Event of Default, the Agent without the necessity of prior
notice to or demand upon the Borrower and without waiving or releasing any of
the Obligations or any Event of Default, may (but shall be under no obligation
to) at any time thereafter make such payment or perform such act for the account
and at the expense of the Borrower, and may enter upon the premises of the
Borrower for that purpose and take all such action thereon as the Agent may
consider necessary or appropriate for such purpose. The Agent will give the
Borrower notice at least subsequently of any such performance by the Agent. All
sums so paid or advanced by the Agent and all costs and expenses (including,
without limitation, reasonable attorneys' fees and expenses) incurred in
connection therewith (the "Expense Payments") together with interest thereon
from the date of payment, advance or incurring until paid in full at the
Post-Default Rate shall be paid by the Borrower to the Agent on demand and shall
constitute and become a part of the Obligations and be secured by the Deed of
Trust. For this purpose, the Borrower hereby constitutes and appoints the
Lenders, or the Agent on behalf of the Lenders, its true and lawful
attorney-in-fact with full power of substitution to complete work on any
Eligible Project in the name of the Borrower, and hereby empowers said attorney
or attorneys as follows:
(a) To use any funds of the Borrower including any
balance which may be held in escrow and any funds which may remain un-advanced
under any of the Loan for the purpose of completing the development of any of
the Land and the construction of any of the Improvements, whether or not in the
manner called for in the Plans and Specifications;
(b) To make such additions and changes and
corrections to any of the Plans and Specifications which shall be necessary or
desirable in the judgment of the Agent to complete the development of any of the
Land and the construction of any of the Improvements;
(c) To employ such contractors, subcontractors,
agents, architects and inspectors as shall be necessary or desirable for said
purpose;
(d) To pay, settle or compromise all existing bills
and claims which are or may be liens against any of the Property, or may be
necessary or desirable for the completion of the work or the clearance of title
to any of the Property;
(e) To execute all applications and certificates
which may be required in the name of the Borrower; and
(f) To do any and every act with respect to the
development of the Land and the construction of the Improvements which the
Borrower may do in its own behalf.
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It is understood and agreed that this power of attorney shall be deemed
to be a power coupled with an interest which cannot be revoked. Said
attorney-in-fact shall also have the power to prosecute and defend all actions
or proceedings in connection with the development of the Land and the
construction of the Improvements and to take such actions and to require such
performance as the Lenders may deem necessary.
Section 10.6 Uniform Commercial Code and Other Remedies.
Upon the occurrence of an Event of Default (and in addition to all of
its rights, powers and remedies under this Agreement), the Lenders shall have
all of the rights and remedies of a secured party under the applicable Uniform
Commercial Code and other applicable laws, and the Lenders are authorized to
offset and apply to all or any part of the Obligations all moneys, credits and
other property of any nature whatsoever of the Borrower now or at any time
hereafter in the possession of, in transit to or from, under the control or
custody of, or on deposit with, any of the Lenders; and upon demand by the
Agent, the Borrower shall assemble the Collateral and make it available to the
Lenders, at a place designated by the Agent; and the Lenders or their agents may
enter upon the Borrower's premises to take possession of the Collateral, to
remove it, to render it unusable, or to sell or otherwise dispose of it.
Any written notice of the sale, disposition or other intended action by
the Lenders with respect to the Collateral which is sent by certified mail,
postage prepaid, to the Borrower at the address set forth in Section 11.1
hereof, or such other address of the Borrower which may from time to time be
shown on the Lenders' records, at least ten (10) days prior to such sale,
disposition or other action, shall constitute reasonable notice to the Borrower.
The Borrower shall pay on demand all costs and expenses, including, without
limitation, attorneys' fees and expenses, incurred by or on behalf of the
Lenders, or any of them, in preparing for sale or other disposition, selling,
managing, collecting or otherwise disposing of, the Collateral. All of such
costs and expenses (the "Liquidation Costs") together with interest thereon from
the date incurred until paid in full at the Post-Default Rate, shall be paid by
the Borrower to the Agent on demand and shall constitute and become a part of
the Obligations. Any proceeds of sale or other disposition of the Collateral
will be applied by the Lenders to the payment of the Liquidation Costs and
Expense Payments, and any balance of such proceeds will be applied by the
Lenders to the payment of the balance of the Obligations in such order and
manner of application as the Lenders may from time to time in its sole
discretion determine. After such application of the proceeds, any balance shall
be paid to the Borrower or to any other party entitled thereto.
Section 10.7 Receiver or Other Court Order.
Following an Event of Default, as a matter of right, following ten (10)
days notice and without regard to the adequacy of the security, and upon
application to a court of competent jurisdiction, the Lenders shall be entitled
to the immediate appointment of a receiver for all or any part of the
Collateral, and of the payments and proceeds thereof and therefrom, whether such
receivership be incidental to a proposed sale of the
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Collateral or otherwise, and the Borrower hereby consent to the appointment of
such a receiver and to an order of court directing that payments, including
Medicare and Medicaid payments, be made directly to the receiver. The Borrower
will pay to the Beneficiary, upon demand, all expenses, including receiver's
fees, attorney's fees, costs and agents compensation, advanced by the Borrower
and incurred pursuant to the provisions contained in this Section.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Notices.
All notices, certificates or other communications hereunder shall be
deemed given when delivered by hand or courier, the following Bank Day after
delivery by Federal Express or similar overnight delivery service, or three (3)
Banking Days after being mailed by certified mail, postage prepaid, return
receipt requested, addressed as follows:
if to the Agent
or the Lenders: Bank United
3200 Southwest Freeway
Suite 1902
Houston, TX 77027
Attn: William B. Roberson
and
David Jones, Esq.
Office of General Counsel
Bank United
3200 Southwest Freeway
Suite 1610
Houston, Texas 77027
With a courtesy
copy to: Mays & Valentine L.L.P.
8201 Greensboro Drive, Suite 800
McLean, Virginia 22102
Attn: Margaret Ann Brown, Esq.
if to the Borrower: c/o Alternative Living Services, Inc.
450 North Sunnyslope Road
Brookfield, Wisconsin 53005
Attn: Mark W. Ohlendorf
With a Courtesy Rogers & Hardin
Copy to: 2700 International Tower, Peachtree Center
229 Peachtree Street, N.E.
Atlanta, GA 30303-1601
Attn: Miriam J. Dent, Esq.
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Section 11.2 Consents and Approvals.
If any consent, approval, or authorization of any Governmental
Authority or of any Person having any interest therein, should be necessary to
effectuate any sale or other disposition of the Collateral, the Borrower agrees
to execute all such applications and other instruments, and to take all other
action, as may be required in connection with securing any such consent,
approval or authorization.
Section 11.3 Remedies, etc. Cumulative.
Each right, power and remedy of the Lenders as provided for in this
Agreement or in any of the other Financing Documents or now or hereafter
existing at law or in equity or by statute or otherwise shall be cumulative and
concurrent and shall be in addition to every other right, power or remedy
provided for in this Agreement or in any of the other Financing Documents or now
or hereafter existing at law or in equity, by statute or otherwise, and the
exercise or beginning of the exercise by the Lenders of any one or more of such
rights, powers or remedies shall not preclude the simultaneous or later exercise
by the Lenders of any or all such other rights, powers or remedies. In order to
entitle the Lenders to exercise any remedy reserved to it herein, it shall not
be necessary to give any notice, other than such notice as may be expressly
required in this Agreement.
Section 11.4 No Waiver of Rights by the Lenders.
No failure or delay by the Agent or the Lenders to insist upon the
strict performance of any term, condition, covenant or agreement of this
Agreement or of any of the other Financing Documents, or to exercise any right,
power or remedy consequent upon a breach thereof, including foreclosure on the
Property under the Deed of Trust shall constitute a waiver of any such term,
condition, covenant or agreement or of any such breach or preclude the Agent or
the Lenders from exercising any such right, power or remedy at any later time or
times. By accepting payment after the due date of any amount payable under this
Agreement or under any of the other Financing Documents, neither the Agent nor
the Lenders shall be deemed to waive the right either to require prompt payment
when due of all other amounts payable under this Agreement or under any of the
other Financing Documents, or to declare a default for failure to effect such
prompt payment of any such other amount.
Section 11.5 Entire Agreement.
The Financing Documents shall completely and fully supersede all other
agreements, both written and oral, between the Lenders and the Borrower relating
to the Obligations. Neither the Lenders nor the Borrower shall hereafter have
any rights under such prior agreements but shall look solely to the Financing
Documents for definition and determination of all of their respective rights,
liabilities and responsibilities relating to the Obligations.
Section 11.6 Survival of Agreement; Successors and Assigns.
All covenants, agreements, representations and warranties made by the
Borrower herein and in any certificate, in the Financing Documents and in any
other instruments or documents delivered pursuant hereto shall survive the
making by the Lenders of the Loan
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and the execution and delivery of the Note, and shall continue in full force and
effect so long as any of the Obligations are outstanding and unpaid. Whenever in
this Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and assigns of such party; and all covenants,
promises and agreements by or on behalf of the Borrower, which are contained in
this Agreement shall inure to the benefit of the respective successors and
assigns of each of the Lenders, and all covenants, promises and agreements by or
on behalf of the Lenders which are contained in this Agreement shall inure to
the benefit of the permitted successors and permitted assigns of the Borrower,
but this Agreement may not be assigned by the Borrower without the prior written
consent of the Lenders.
Section 11.7 Expenses.
The Borrower agrees to pay all reasonable out-of-pocket expenses of the
Lenders including the reasonable fees and expenses of the legal counsel of the
Agent or any other Lender) in connection with the preparation of this Agreement,
the issuance of the Loan hereunder, the recordation of all financing statements
and such other instruments as may be required by the Agent at the time of, or
subsequent to, the execution of this Agreement to secure the Obligations
(including any and all recordation tax and other costs and taxes incident to
recording), the administration of the Credit Facility (not otherwise
contemplated by any fee paid by the Borrower), any future modification of the
Financing Documents, the addition of Eligible Projects to the Borrowing Base, or
the enforcement of any provision of this Agreement and the collection of the
Obligations. The Borrower agrees to indemnify and save harmless the Lenders from
any liability resulting from the failure to pay any required recordation tax,
transfer taxes, recording costs or any other expenses incurred by the Lenders in
connection with the Obligations. The provisions of this Section shall survive
the execution and delivery of this Agreement and the repayment of the
Obligations. The Borrower further agrees to reimburse the Lenders upon demand
for all reasonable out-of-pocket expenses (including reasonable attorneys' fees
and legal expenses and travel expenses) incurred by the Lenders, or any of them,
in enforcing any of the Obligations or any security therefor or incurred in
connection with any bankruptcy proceeding or in any post-judgment enforcement or
collection action, together with interest at the Post-Default Rate which
agreement shall survive the termination of this Agreement and the repayment of
the Obligations.
Section 11.8 Counterparts.
This Agreement may be executed in any number of counterparts all of
which together shall constitute a single instrument.
Section 11.9 Governing Law.
This Agreement and all of the other Financing Documents shall be
governed by and construed in accordance with the laws of the State of Texas;
provided, however, any Deed of Trust and any financing statements covering
fixtures securing such Loan shall be governed by, and construed in accordance
with, the laws of the state in which the applicable Facility is located.
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Section 11.10 Modifications.
No modification or waiver of any provision of this Agreement or of any
of the other Financing Documents, nor consent to any departure by the Borrower
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Agent, and then such waiver or consent shall be effective only
in the specific instance and for the purpose for which given. No notice to or
demand on the Borrower in any case shall entitle the Borrower to any other or
further notice or demand in the same, similar or other circumstance.
Section 11.11 Illegality.
If fulfillment of any provision hereof or any transaction related
hereto or to any of the other Financing Documents, at the time performance of
such provision shall be due, shall involve transcending the limit of validity
prescribed by law, then ipso facto, the obligation to be fulfilled shall be
reduced to the limit of such validity; and if any clause or provisions herein
contained other than the provisions hereof pertaining to repayment of the
Obligations operates or would prospectively operate to invalidate this Agreement
in whole or in part, then such clause or provision only shall be void, as though
not herein contained, and the remainder of this Agreement shall remain operative
and in full force and effect; and if such provision pertains to repayment of the
Obligations, then, at the options of the Lenders, all of the Obligations of the
Borrower to the Lenders shall become immediately due and payable.
Section 11.12 Gender, etc.
Whenever used herein, the singular number shall include the plural, the
plural the singular and the use of the masculine, feminine or neuter gender
shall include all genders.
Section 11.13 Headings.
The headings in this Agreement are for convenience only and shall not
limit or otherwise affect any of the terms hereof.
Section 11.14 Waiver of Trial by Jury.
THE BORROWER AND THE LENDERS HEREBY JOINTLY AND SEVERALLY WAIVE TRIAL
BY JURY IN ANY ACTION OR PROCEEDING TO WHICH ANY OF THEM MAY BE PARTIES, NOT
GOVERNED BY THE ARBITRATION PROVISIONS OF THE NOTE [OR THE GUARANTIES] ARISING
OUT OF OR IN ANY WAY PERTAINING TO (A) THIS AGREEMENT, (B) ANY OF THE FINANCING
DOCUMENTS, OR (C) THE COLLATERAL. THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY
JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING
CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS AGREEMENT.
This waiver is knowingly, willingly and voluntarily made by the
Borrower and the Lenders, and the Borrower and the Lenders hereby represent that
no representations of fact or opinion have been made by any individual to induce
this waiver of trial by jury or to in any way modify or nullify its effect. The
Borrower and the Lenders further represent that they have been represented in
the signing of this Agreement and in the
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making of this waiver by independent legal counsel, selected of their own free
will, and that they have had the opportunity to discuss this waiver with
counsel.
Section 11.15 No Warranty by Lenders.
By accepting or approving anything required to be observed, performed
or fulfilled by the Borrower or to be given to the Agent or the Lenders pursuant
to this Agreement, including, without limitation, any certificate, balance
sheet, statement of profit and loss or other financial statement, Survey,
receipt, appraisal or insurance policy, the Lenders shall not be deemed to have
warranted or represented the sufficiency, legality, effectiveness or legal
effect of the same, or of any term, provision or condition thereof and any such
acceptance or approval thereof shall not be or constitute any warranty or
representation with respect thereto by the Lenders.
Section 11.16 Liability of the Lenders.
No Lender shall be liable for another Lender's failure to fund its
ratable share of any advance under the Loan. The Lenders shall not be liable for
any other act or omission by the Lenders, or any of them, pursuant to the
provisions of this Agreement in the absence of fraud or gross negligence. The
Lenders shall incur no liability to the Borrower or any other party in
connection with the acts or omissions of any of the Lenders in reliance upon any
certificate or other paper believed by the Lenders to be genuine or with respect
to any other thing which the Lenders may do or refrain from doing, unless such
act or omission amounts to fraud or gross negligence. The Borrower hereby agrees
that the Lenders shall not be chargeable for any negligence, mistake, act or
omission of any accountant, examiner, agency or attorney employed by the
Lenders, or any of them, (except for the gross negligence or willful misconduct
of any person, corporation, partnership or other entity employed by any of the
Lenders) in making examinations, investigations or collections, or otherwise in
perfecting, maintaining, protecting or realizing upon any lien or security
interest or any other interest in the Collateral or other security for the
Obligations. In connection with the performance of their duties pursuant to this
Agreement, the Lenders may consult with counsel of their own selection, and do
anything which the Lenders may do or refrain from doing, in good faith, in
reliance upon the opinion of such counsel shall be full justification and
protection to the Lenders. The Borrower shall indemnify, defend and hold the
Lenders and their successors and assigns harmless from and against any and all
claims, demands, suits, losses, damages, assessments, fines, penalties, costs or
other expenses (including reasonable attorney's fees and court costs) arising
from or in connection with this Agreement. Any indemnity provision for the
benefit of the Lenders set forth herein or in any of the Financing Documents
shall extend to any other lender who becomes a Lender under the Credit Facility.
The provisions of this Section shall survive the termination of the Credit
Facility.
Section 11.17 License of Tradename.
The Borrower does hereby grant to each of the Lenders and their
affiliates and any trustee under a Deed of Trust and their management company a
license to use the Borrower's name, and the names "Wynwood", "Crossings", "Clare
Bridge", WovenHearts", or "Sterling Cottage" and "Sterling House" and any marks
associated
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therewith in the operation of a Facility upon such Lender's or trustee's taking
of possession or taking over management of a Facility or acquiring title thereto
at a foreclosure sale which license shall be in effect for a period of
twenty-four (24) months from the date thereof but shall be extended for any
period up to an additional six (6) months if the Borrower takes any action to
delay or obstruct the Lenders' exercise of their remedies under the Financing
Documents. The Borrower further agrees that a third-party purchaser of a
Facility may continue to operate the Facility under the Borrower's name unless
the Borrower objects in writing thereto.
Section 11.18 No Partnership.
Nothing contained in this Agreement shall be construed in a matter to
create any relationship between the Borrower and the Lenders other than the
relationship of borrower and lender and the Borrower and the Lenders other than
the relationship of borrower and lender and the Borrower and the Lenders shall
not be considered partners or co-venturers for any purpose on account of this
Agreement.
Section 11.19 Third Parties; Benefit.
All conditions to the obligation of the Lenders to make advances
hereunder are imposed solely and exclusively for the benefit of the Lenders and
their assigns and no other persons shall have standing to require satisfaction
of such conditions in accordance with their terms or be entitled to assume that
the Lenders will refuse to make advances in the absence of strict compliance
with any or all thereof and no other person shall, under any circumstances, be
deemed to be the beneficiary of such conditions, any or all of which may be
freely waived in whole or in part by the Agent at any time in the sole and
absolute exercise of its discretion pursuant to its agreements with the Lenders.
The terms and provisions of this Agreement are for the benefit of the parties
hereto and, except as herein specifically provided, no other person shall have
any right or cause of action on account thereof.
Section 11.20 Conditions; Verification.
Any condition of this Agreement which requires the submission of
evidence of the existence or non-existence of a specified fact or facts implies
as a condition to the existence or non-existence, as the case may be, of such
fact or facts that the Lenders shall, at all times, be free independently to
establish to their satisfaction and in its absolute discretion such existence or
non-existence.
Section 11.21 Signs; Publicity.
At the Agent's request, but at the expense of the Agent, the Borrower
shall place a sign acceptable to the Borrower at a location on each of the
Eligible Projects satisfactory to the Agent, which sign shall recite, among
other things, that the Lenders are financing the development of the Land and the
construction of the Improvements. The Borrower expressly authorizes the Agent to
prepare and to furnish to the news media for publication from time to time news
releases with respect to the Credit Facility and each Eligible Project,
specifically to include but not limited to, releases detailing the Agent's and
the Lenders' involvement with the Credit Facility and the financing of any
Eligible Project, all subject to prior review by the Borrower.
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Section 11.22 Mandatory Arbitration.
To the maximum extent not prohibited by law, any controversy, dispute
or claim arising out of, in connection with, or relating to this Agreement or
any other Financing Documents or any transaction provided for therein, including
but not limited to any claim based on or arising from an alleged tort or an
alleged breach of any agreement contained in any of the Financing Documents,
shall, at the request of any party to the Financing Documents (either before or
after the commencement of judicial proceedings) be settled by arbitration
pursuant to Title 9 of the United States Code, which the parties acknowledge and
agree applies to the transaction involved herein, and in accordance with the
Commercial Arbitration Rules of the American Arbitration Association (the
"AAA"). In any such arbitration proceeding: (i) all statutes of limitation which
would otherwise be applicable shall apply; and (ii) the proceeding shall be
conducted in Houston, Texas, by a single arbitrator, if the amount in
controversy is $1 million or less, or by a panel of three arbitrators if the
amount in controversy is over $1 million. All arbitrators shall be selected by
the process of appointment from a panel pursuant to Section 13 of the AAA
Commercial Arbitration Rules and each arbitrator will have AAA acknowledged
expertise in the appropriate subject matter. Any award rendered in any such
arbitration proceeding shall be final and binding, and judgment upon any such
award may be entered in any court having jurisdiction.
If any party to this Agreement or other Financing Documents files a
proceeding in any court to resolve any such controversy, dispute or claim, such
action shall not constitute a waiver of the right of such party or a bar to the
right of any other party to seek arbitration under the provisions of this
Section of that or any other claim, dispute or controversy, and the court shall,
upon motion of any party to the proceeding, direct that such controversy,
dispute or claim be arbitrated in accordance with this Section.
Notwithstanding any of the foregoing, no arbitrator or panel of
arbitrators shall possess or have the power to (i) assess punitive damages, (ii)
dissolve, rescind or reform (except that the arbitrator may construe ambiguous
terms) any Financing Document to which the Borrower or the Guarantor is a party,
(iii) enter judgment on the debt, (iv) exercise equitable powers or issue or
enter any equitable remedies or (v) allow discovery of attorney/client
privileged information. The Commercial Arbitration Rules of the AAA are hereby
modified to this extent for the purpose of arbitration of any dispute,
controversy or claim arising out of, in connection with, or relating to any
Financing Document to which the Borrower or the Guarantor is a party. The
parties further waive, each to the other, any claims for punitive damages, and
agree that neither an arbitrator nor any court shall have the power to assess
such damages.
No provisions of, or the exercise of any rights under, this Section
shall limit or impair the right of any party to the Financing Documents before,
during or after any arbitration proceeding to take any of the following actions
or contest any of the following actions: (i) exercise self-help remedies such as
set off or repossession, (ii) foreclose (judicially or otherwise) any lien on or
security interest in any real or personal property collateral; or (iii) obtain
emergency relief from a court of competent jurisdiction to prevent the
dissipation, damage, destruction, transfer, hypothecation, pledging or
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concealment of assets or of collateral securing any indebtedness, obligation or
guaranty referenced in the Financing Documents. Such emergency relief and action
to contest the same shall include equitable relief and may be in the nature of,
but is not limited to: pre-judgment attachments, garnishments, sequestrations,
appointments of receivers, or other emergency injunctive relief to preserve the
status quo.
In the event applicable law prohibits the submission of a particular
controversy, dispute or claim arising out of or in connection with any of the
Financing Documents or transactions contemplated therein to arbitration, the
parties agree that any actions or proceedings in connection therewith shall be
tried and litigated only in the state and federal courts located in the
jurisdiction in which the Property is located or any other court in which the
Lenders shall initiate legal or equitable proceedings that has subject matter
jurisdiction over the matter in controversy and to the extent permitted by
applicable law, waive any right to assert the doctrine of forum non-conveniens
or to object to the venue to the extent any proceeding is brought in accordance
with this paragraph.
Section 11.23 Time of Essence.
Time shall be of the essence for each and every provision of this
Agreement of which time is an element.
[SIGNATURE PAGE TO FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have signed and sealed this
Agreement on the day and year first above written.
WITNESS/ATTEST: ALS HOLDINGS, INC, a
Delaware Corporation
By: (SEAL)
- ----------------------------- ---------------------------------
Name: Mark W. Ohlendorf
Title: Vice President and Assistant Secretary
WITNESS: BANK UNITED, as Agent for the Lenders
By: (SEAL)
- ----------------------------- ---------------------------------
Name:
Title:
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LIST OF EXHIBITS
A Form of Note
B Form of Borrowing Base Report
C Places of Business
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EXHIBIT A
FORM OF NOTE
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EXHIBIT B
FORM OF BORROWING BASE CERTIFICATE
To be provided at a later date by the Agent
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EXHIBIT C
PLACES OF BUSINESS
AS OF SEPTEMBER, 28 1998
The Borrower's Chief Executive
Office is:
c/o Alternative Living Services, Inc.
450 North Sunnyslope Road
Suite 300
Brookfield, Wisconsin 53005
Locations of Collateral:
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<PAGE> 1
SECOND AMENDMENT TO LOAN AGREEMENT, FIRST AMENDMENT TO
GUARANTY AND SURETYSHIP AGREEMENT,
AND REAFFIRMATION AGREEMENT
This SECOND AMENDMENT TO LOAN AGREEMENT, FIRST AMENDMENT TO GUARANTY
AND SURETYSHIP AGREEMENT, AND REAFFIRMATION AGREEMENT ("Amendment"), made as of
September ___, 1998 is by and among THE CAPITAL COMPANY OF AMERICA LLC, a
Delaware limited liability company, having an address at 2 World Financial
Center, Building B, New York, New York 10281-1198, Attention: Christopher
Tierney, Telefax Number (212) 667-1666 (together with its successors and
assigns, "Lender"), ALS-VENTURE II, INC., a Delaware corporation having an
address at c/o Alternative Living Services, Inc., 450 North Sunnyslope Road,
Suite 300, Brookfield, Wisconsin 53005, Attention: Chief Financial Officer,
Thomas E. Komula, Telefax Number (414) 789-6182 ("Borrower"), ALTERNATIVE
LIVING SERVICES, INC., a Delaware corporation, 450 North Sunnyslope Road, Suite
300, Brookfield, Wisconsin 53005, Attention: Chief Financial Officer, Thomas E.
Komula, Telefax Number (414) 789-6182 ("Guarantor" and "Parent Pledgor", as
applicable) and ALS-CLARE BRIDGE, INC., a Delaware corporation, 450 North
Sunnyslope Road, Suite 300, Brookfield, Wisconsin 53005 ("Subsidiary Pledgor";
the "Parent Pledgor" and the "Subsidiary Pledgor" are referred to herein
collectively as the "Pledgors").
RECITALS
A. WHEREAS, Lender and Borrower are parties to that certain Loan
Agreement made as of May 26, 1998 and amended as of July 31, 1998 pursuant to
that certain First Amendment to Loan Agreement and Reaffirmation Agreement (the
"Original Loan Agreement") which Original Loan Agreement provides for a series
of advances (collectively, the "Loan") from Lender in the principal amount up
to $82,000,000 which amount may be increased by the Earn-Out Advance for up to
$8,000,000, provided the terms of the Loan Agreement are complied with. The
Loan is evidenced by those certain promissory notes each dated as of May 26,
1998 and each executed and delivered by Borrower to Lender. The Loan is secured
by, inter alia, real property, improvements thereon and other collateral
(collectively, "Property"). Unless otherwise defined herein, capitalized terms
used in this Amendment shall have the meaning set forth in the Original Loan
Agreement;
B. WHEREAS, pursuant to Article III of the Original Loan
Agreement, the parties to this Amendment desire Lender to make the final
Additional Facility Advance;
C. WHEREAS, Lender and Borrower have agreed, among other things,
to amend the Loan by having the Loan be evidenced by five notes, instead of the
four notes referenced in the Original Loan Agreement. Accordingly, Borrower is
splitting the note in
- 1 -
<PAGE> 2
the amount of $72,681,000 ("Original Master Note") and, in exchange therefor,
delivering to Lender a note in the amount of $65,737,000 ("Note A") and a note
in the amount of $5,650,000 ("Note B"); and
D. WHEREAS, in connection with the foregoing recitals, and as a
condition to Lender making the Additional Facility Advance, the parties desire
to amend the Original Loan Agreement in the manner set forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals, which are
by this reference incorporated herein, and for other valuable consideration the
receipt and sufficiency of which is hereby acknowledged, the parties, intending
to be legally bound, hereby agree as follows:
1. Amendments to Original Loan Agreement.
1.1 Exhibit B. Exhibit B of the Original Loan Agreement
is hereby deleted in its entirety and replaced with the Exhibit B attached
hereto and by this reference incorporated herein.
1.2 Adjusted Net Operating Income Definition. The
definition of "Adjusted Net Operating Income" is hereby deleted in its entirety
and replaced with the following:
"Adjusted Net Operating Income" means (calculated for the
Facilities or any Facility), for any period, the Net
Operating Income for such period reduced by (i) the Capital
Reserve Amount, pro rated for the applicable period, (ii) to
the extent not reflected in the Net Operating Income, annual
base management fees, pro rated for the applicable period,
equal to the greater of (y) actual base management fees paid
pursuant to the applicable Management Agreement and (z) five
percent (5%) of Gross Revenues (provided, however, in no
event shall the annual base management fees included in this
clause (ii) include any management expenses, such as, but not
limited to, accounting expenses, marketing costs, regional
and corporate personnel expenses and general corporate
overhead, to the extent such expenses are actually reflected
in the Net Operating Income), and (iii) an amount necessary
to reflect a minimum annual vacancy factor of five percent
(5%), pro rated for the applicable period. Notwithstanding
the foregoing , to the extent Adjusted Net Operating Income
must be calculated for a period which is less than twelve
(12) months, Adjusted Net Operating Income shall be
calculated for such period on an annualized basis.
-2-
<PAGE> 3
1.3. Base Adjusted NOI Definition. The definition of "Base
Adjusted NOI" is hereby deleted in its entirety.
1.4. Note. The definition of "Note" is hereby deleted in
its entirety and replaced with the following:
"Note" means and refers to collectively, (i) the $1,690,000
promissory note relating to the Facility located in Penn
Hills, Pennsylvania, (ii) the $4,271,000 promissory note
relating to the Facility located in Cheswick, Pennsylvania,
(iii) the $3,358,000 promissory note relating to the Facility
located in Export, Pennsylvania, (iv) the $5,650,000
promissory note relating to the Facility located in Mars,
Pennsylvania, and (v) the $65,737,000 promissory note
relating to all the other Facilities, each in form and
substance satisfactory to Lender in Lender's discretion,
dated the Closing Date, made by Borrower to Lender or made by
Borrower to Nomura Asset Capital Corporation, a Delaware
corporation ("Nomura") and subsequently assigned and endorsed
by Nomura to Lender pursuant to this Agreement, as any such
promissory notes may be modified, amended, supplemented,
extended or consolidated in writing, and any note(s) issued
in exchange therefor or in replacement thereof.
1.4. Spread. The definition of "Spread" is hereby deleted
in its entirety and replaced with the following:
"Spread" means 2.18%, which is a weighted average of the
following spreads: (i) 1.95% spread on the Closing Date
Advance on May 26, 1998, (ii) 1.95% spread on the Additional
Facility Advance on July 31, 1998, and (iii) 2.65% spread on
the Additional Facility Advance on the date hereof.
2. Amendments to Guaranty and Suretyship Agreement. The Guaranty
and Suretyship Agreement is hereby amended to delete the first "Whereas"
paragraph thereof and to replace such paragraph with the following:
"WHEREAS, Borrower and Lender are parties to a Loan Agreement dated as
of May 26, 1998 and amended as of July 31, 1998 and as of the date of
the September Additional Facility Advance (said Loan Agreement, as
modified and supplemented and in effect from time to time, the "Loan
Agreement"), which Loan Agreement provides for a series of advances
(collectively, the "Loan") to be made by the Lender to Borrower. The
Loan is to be evidenced by, and repayable with interest thereon,
Default Rate interest, and Late Charges, together with the Yield
Maintenance Premium, if any, in accordance with those certain
promissory notes each dated as of May 26, 1998 (such notes, as
modified and supplemented and in effect from time to time,
collectively, the
-3-
<PAGE> 4
"Note"). Capitalized terms when used herein without definition shall
have the same meaning as defined in the Loan Agreement;"
3. Ratification and Reaffirmation. Each of Borrower, Guarantor
and Pledgors hereby ratify and confirm, and reaffirm in all respects and
without condition, all of the terms, covenants and conditions set forth in the
Loan Documents to which each is bound and hereby respectively agree as follows:
3.1 Borrower remains unconditionally liable to Lender in
accordance with the terms, covenants and conditions of the Loan Documents, all
Collateral, Liens, and other security interests and pledges created pursuant
thereto or referred to therein shall continue unimpaired and in full force and
effect and shall continue to secure all of the existing and future Indebtedness
due under the Original Loan Agreement.
3.2 Guarantor remains unconditionally liable to Lender in
accordance with the terms, covenants and conditions of the Guaranty and
Suretyship Agreement, the Environmental Indemnity Agreement, Equity Pledge
Agreements and any other Loan Document by which Guarantor is bound.
3.3 Subsidiary Pledgor remains unconditionally liable to
Lender in accordance with the terms, covenants and conditions of the Equity
Pledge Agreements and any other Loan Document by which Subsidiary Pledgor is
bound.
3.4 Borrower, Guarantor and Subsidiary Pledgor agree that
the Loan Documents, as so modified, remain in full force and effect as of the
date hereof, and nothing herein contained shall be construed to impair the
security or affect the first priority of the lien of any mortgage, nor impair
any rights or powers which Lender or its successors may have for nonperformance
of any term of any of the Loan Documents. All Collateral, Liens and other
security interests and pledges created pursuant to, or referred to in, the Loan
Documents shall continue unimpaired and in full force and effect and shall
continue to secure all of the existing and future Indebtedness due under the
Original Loan Agreement.
4. Representations and Warranties. Borrower, Guarantor and
Pledgors acknowledge and agree that any and all representations and warranties
(including, without limitation, the Single-Purpose Entity representations and
warranties) contained in the Original Loan Agreement and all the other Loan
Documents shall be deemed to be remade as of the date hereof. Further,
Borrower, Guarantor and Pledgors represent and warrant that there are no
existing or pending Defaults or Events of Default under the Loan Agreement or
any other Loan Document.
5. Severability. In case any provision of this Amendment shall be
invalid, illegal, or unenforceable, such provision shall be deemed to have been
modified to the extent necessary to make it valid, legal, and enforceable. The
validity, legality, and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
-4-
<PAGE> 5
6. No Modification Except in Writing. None of the terms of this
Amendment may be modified, waived, altered, amended, supplemented, extended,
consolidated, replaced, exchanged or otherwise changed except by an instrument
in writing duly executed by all of the parties hereto.
7. Further Assurances. Borrower, Guarantor and Subsidiary Pledgor
shall execute and deliver such further instruments and perform such further
acts as may be requested by Lender from time to time to confirm the provisions
of this Amendment and the Loan Documents, to carry out more effectively the
purposes of this Amendment and the Loan Documents, or to confirm the priority
of any Lien created by any of the Loan Documents.
8. Miscellaneous.
8.1 This Amendment constitutes the entire agreement among
the parties concerning its subject matter.
8.2 This Amendment shall inure to the benefit of and be
binding upon the parties and their respective heirs, successors and assigns.
8.3 This Amendment may be executed in two or more
counterparts each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.4 This Amendment shall be governed by and construed in
accordance with the laws of the State of New York (without giving effect to New
York's principles of conflict of law).
8.5 Any reference to the Loan Agreement in any of the
Loan Documents shall hereafter mean the Original Loan Agreement as amended by
this Amendment as the same may be subsequently amended, modified, altered,
supplemented, extended, consolidated, replaced, exchanged or otherwise changed.
9. Effective Date. This Amendment was signed on September 16,
1998. However, this Amendment is effective only as of September ___, 1998.
[Signatures Appear On Next Page]
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this SECOND
AMENDMENT TO LOAN AGREEMENT, FIRST AMENDMENT TO GUARANTY AND SURETYSHIP
AGREEMENT, AND REAFFIRMATION AGREEMENT to be duly executed by their duly
authorized representatives, all as of the day and year first above written.
LENDER:
THE CAPITAL COMPANY OF AMERICA LLC, a
Delaware limited liability company
By:
---------------------------------
Christopher Tierney
Vice President
BORROWER:
ALS-VENTURE II, INC., a Delaware
corporation
By:
---------------------------------
David Boitano
Vice President
GUARANTOR / PARENT PLEDGOR:
ALTERNATIVE LIVING SERVICES, INC.,
a Delaware corporation
By:
--------------------------
David Boitano
Vice President
SUBSIDIARY PLEDGOR:
ALS-CLARE BRIDGE, INC., a Delaware corporation
By:
---------------------------
David Boitano
Vice President
<PAGE> 7
EXHIBIT B
<TABLE>
Additional Definitions
<S> <C>
Closing Date Advance (May 26, 1998) $32,516,000
Initial Basic Carrying Costs Amount $121,905.16
Initial Capital Reserve Amount $ 0
Additional Facility Advance (July 31, 1998) $21,330,000
Additional Facility Advance (September ___, 1998) $26,860,000
</TABLE>
<TABLE>
ALLOCATED LOAN AMOUNTS
- ----------------------
<S> <C> <C>
1. Clare Bridge of Cheswick $4,271,000
Cheswick, PA
2. Clare Bridge of Murrysville $3,358,000
Export, PA
3. Sterling House of Columbia $2,352,000
Columbia, SC
4. Sterling House of Rock Hill $2,259,000
Rock Hill, SC
5. WovenHearts of Battle Creek $2,495,000
Battle Creek, MI
6. WovenHearts of Bay City $2,478,000
Bay City, MI
7. WovenHearts of Midland $2,500,000
Midland, MI
8. WovenHearts of Monroe $2,769,000
Monroe, MI
9. WovenHearts of Penn Hills $1,690,000
Penn Hills, PA
</TABLE>
<PAGE> 8
<TABLE>
<S> <C> <C>
10. WovenHearts of Saginaw $2,547,000
Saginaw Township, MI
11. WovenHearts of Swartz Creek $1,069,000
Swartz Creek, MI
12. WovenHearts of West St. Paul $2,206,000
West St. Paul, MN
13. WovenHearts of Westland $2,502,000
Westland, MI
14. Sterling House of South Bend $2,210,000
SouthBend, IN
15. WovenHearts of Coon Rapids $3,330,000
Coon Rapids, MN
16. Clare Bridge of Oviedo/ $6,940,000
WovenHearts of Oviedo
Oviedo, FL
17. Hamilton House of Portage/ $8,850,000
Wynwood of Portage
Portage, MI
18. Wynwood of Adams (I) $5,650,000
Mars, PA
19. Clare Bridge of Sun City West $4,610,000
Sun City West, AZ
20. Clare Bridge of Eagan $4,500,000
Eagan, MN
21. Clare Bridge of Brandon (II) $2,530,000
Brandon, FL
22. Sterling House of Maryville $2,300,000
Maryville, TN
23. Sterling House of Littleton $2,730,000
Littleton, CO
</TABLE>
<PAGE> 9
<TABLE>
<S> <C> <C>
24. Sterling Cottage of Goodlettsville $2,180,000
Goodlettsville, TN
25. Sterling House of Cape Coral $2,360,000
Cape Coral, FL
</TABLE>
<TABLE>
<CAPTION>
LEASED FACILITIES OPERATOR ADDRESS
- ----------------- -------- -------
<S> <C> <C>
Clare Bridge of Cheswick ALS-Indiana (PA) 931 Route 910
Cheswick, PA Partners, a Pennsylvania Cheswick, PA 15024
general partnership
Clare Bridge of Murrysville Clare Bridge of 5300 Old William
Export, PA Murrysville L.P., a Penn Highway
Delaware limited partnership Export, PA 15632
Sterling House of Columbia Burkshire Development, L.L.C., 251 Springtree Drive
Columbia, SC a South Carolina limited Columbia, SC 29223
liability company
Sterling House of Rock Hill Gatwick Development, L.L.C., 1920 Ebenezer Road
Rock Hill, SC a South Carolina limited Rock Hill, SC 29732
liability company
WovenHearts of Bay City WovenHearts of Bay City L.P., 720/734 N. Pine Road
Bay City, MI a Delaware limited partnership Bay City, MI 48707
WovenHearts of Midland WovenHearts of Midland L.P., 4012/4004 Waldo Avenue
Midland, MI a Delaware limited partnership Midland, MI 48642
WovenHearts of Monroe WovenHearts of Monroe L.P., 1615/1605 Fredericks Drive
Monroe, MI a Delaware limited partnership Monroe, MI 48162
WovenHearts of Saginaw WovenHearts of Saginaw L.P., 2445/2485 McCarty Road
Saginaw, MI a Delaware limited partnership Saginaw, MI 48162
WovenHearts of West WovenHearts of West St. Paul 305/315 E. Thompson
Avenue St. Paul L.P., a Delaware limited West St. Paul, MN 55118
West St. Paul, MN partnership
WovenHearts of Westland WovenHearts of Westland 32111/32151 Cherry Hill
Rd L.P., a Delaware limited Westland, MI 48186
Westland, MI partnership
</TABLE>
<PAGE> 10
<TABLE>
<S> <C> <C>
Sterling House of Rosebery Development, L.L.C., 17441 State Road 23,
South Bend an Indiana limited liability South Bend, IN
company
WovenHearts of Coon WovenHearts of Coon Rapids I, 1770 113th Lane,
Rapids (I) L.P., a Delaware limited Coon Rapids, MN
partnership
WovenHearts of Coon WovenHearts of Coon Rapids II, 11372 Robinson Drive,
Rapid (II) L.P., a Delaware limited Coon Rapids, MN
partnership
Clare Bridge of Oviedo (I) WovenHearts of Oviedo I, L.P., 445 Alexandria Blvd.,
a Delaware limited partnership Oviedo, FL
WovenHearts of Oviedo WovenHearts of Oviedo II, L.P., 395 Alafaya Woods Blvd.,
(II) a Delaware limited partnership Oviedo, FL
WovenHearts of Oviedo WovenHearts of Oviedo III, L.P., 355 Alafaya Woods Blvd.,
(III) a Delaware limited partnership Oviedo, FL
Hamilton House of Portage Hamilton House of Portage L.P. 3150 Old Centre Avenue,
a Delaware limited partnership Portage, MI
Wynwood of Portage Wynwood of Portage L.P., 3150 Old Centre Avenue,
a Delaware limited partnership Portage, MI
Wynwood of Adams (I) Wynwood of Adams L.P., a 10 Adams Ridge Blvd.,
Delaware limited partnership Mars, PA
Clare Bridge of Sun City Clare Bridge of Sun City West 14001 W. Meeker Blvd.,
West L.P., a Delaware limited Sun City West, AZ
partnership
Clare Bridge of Eagan Clare Bridge of Eagan L.P., a 1365 Crestridge Lane,
Delaware limited partnership Eagan, MN
Sterling House of Brandon Sterling of Brandon II/Cape 524 N. Parsons Avenue,
Coral LLC, a Delaware limited Brandon, FL
liability company
</TABLE>
<PAGE> 11
<TABLE>
<S> <C> <C>
Sterling House of Sterling of Maryville/ 511 Pearson Springs Road,
Maryville Goodlettsville LLC, a Delaware Maryville, TN
limited liability company
Sterling House of Sterling of Littleton LLC, a 8271 S. Continental
Littleton Delaware limited liability Divide Road,
Littleton, CO
Sterling Cottage of Sterling Cottage Maryville/ 2025 Caldwell Drive,
Goodlettsville Goodlettsville LLC, a Delaware Goodlettsville, TN
limited liability company
Sterling House of Sterling of Brandon II/Cape 1416 Country Club Road,
Cape Coral Coral LLC, a Delaware limited Cape Coral, FL
liability company
</TABLE>
<TABLE>
<CAPTION>
NONLEASED FACILITIES ADDRESS
- -------------------- -------
<S> <C>
WovenHearts of Battle Creek 191/197 Lois Drive
Battle Creek, MI Battlecreek, MI 49015
WovenHearts of Penn Hills 7151 Saltsburg Road
Penn Hills, PA Penn Hills, PA 15235
WovenHearts of Swartz Creek 8240 Miller Road
Swartz Creek, MI Swartz Creek, MI 48476
</TABLE>
JOINT VENTURE FACILITIES JOINT VENTURE ADDRESS
- ------------------------ ------------- -------
None
ADDITIONAL FACILITIES
- ---------------------
None
SUBLEASED FACILITIES
- --------------------
Clare Bridge of Oviedo (I)
Clare Bridge of Sun City West
Clare Bridge of Brandon II
Sterling House of Cape Coral
<PAGE> 12
* The Initial Basic Carrying Costs are allocated among the Facilities as
follows:
<TABLE>
<CAPTION>
Facility Real Estate Insurance
Taxes Premiums
<S> <C> <C>
Clare Bridge of Cheswick $ 3,333.33 $ 640.00
Clare Bridge of Murrysville 2,083.33 608.25
Sterling House of Columbia 2,730.92 504.17
Sterling House of Rock Hill 2,482.67 458.33
WovenHearts of Battle Creek (I) & (II) 4,583.33 596.00
WovenHearts of Bay City (I) & (II) 2,700.00 596.00
WovenHearts of Midland (I) & (II) 2,700.00 596.00
WovenHearts of Monroe (I) & (II) 2,700.00 596.00
WovenHearts of Penn Hills 2,916.67 300.00
WovenHearts of Saginaw (I) & (II) 2,700.00 596.00
WovenHearts of Swartz Creek 2,416.67 298.00
WovenHearts of West St. Paul (I) & (II) 2,700.00 596.00
WovenHearts of Westland (I) & (II) 4,583.33 596.00
Sterling House of SouthBend 2,979.17 650.00
WovenHearts of Coon Rapids (I) & (II) 6,883.33 875.00
Clare Bridge of Oviedo (I) &
WovenHearts of Oviedo (II) & (III) 11,100.00 1,483.25
Hamilton House of Portage &
Wynwood of Portage 11,083.33 1,557.58
Wynwood of Adams (I) 3,333.33 949.33
Clare Bridge of Sun City West 5,600.00 708.25
Clare Bridge of Eagan 5,600.00 708.25
Sterling House of Brandon (II) 3,000.00 2,500.00
Sterling House of Maryville 2,979.17 550.00
Sterling House of Littleton 3,800.00 925.00
Sterling Cottage of Goodlettsville 2,979.17 550.00
Sterling House of Cape Coral 3,000.00 2,500.00
----------- ---------
Total $100,967.75 Total $ 20,937.41
</TABLE>
DOING BUSINESS AS NAMES
- -----------------------
Clare Bridge of Cheswick
Clare Bridge of Murrysville
Sterling House of Columbia
Sterling House of Rock Hill
WovenHearts of Battle Creek
WovenHearts of Bay City
WovenHearts of Midland
WovenHearts of Monroe
<PAGE> 13
WovenHearts of Penn Hills
WovenHearts of Saginaw
WovenHearts of Swartz Creek
WovenHearts of West St. Paul
WovenHearts of Westland
Sterling House
WovenHearts
Clare Bridge
Hamilton House
Wynwood
Sterling Cottage
<PAGE> 1
EXHIBIT 10.7
FACILITY LEASE AGREEMENT
MEDITRUST ACQUISITION CORPORATION III
(A Delaware Corporation)
as
Lessor
AND
ALS LEASING, INC.
(A Delaware Corporation)
as
Lessee
Dated As Of July 31, 1998
For Premises Located At
Hamilton House of Delta I
7235 Delta Commerce Drive
Lansing, Michigan 48917
and
WovenHearts of Delta II
7323 Delta Commerce Drive
Lansing, Michigan 48917
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
ARTICLE 1
LEASED PROPERTY; TERM; EXTENSIONS.................................... 1
1.1 Leased Property.............................................. 1
1.2 Term......................................................... 2
1.3 Extended Terms............................................... 2
ARTICLE 2
DEFINITIONS AND RULES OF CONSTRUCTION................................ 2
2.1 Definitions.................................................. 2
2.2 Rules of Construction........................................ 20
ARTICLE 3
RENT................................................................. 20
3.1 Rent for Land, Leased Improvements, Related Rights
and Fixtures................................................. 20
3.1.2 Additional Rent.................................... 21
3.2 Calculation and Payment of Additional Rent; Annual
Reconciliation............................................... 21
3.2.1 Estimates and Payments............................. 22
3.2.2 Annual Statement................................... 22
3.2.3 Deficits........................................... 22
3.2.4 Overpayments....................................... 22
3.2.5 Final Determination................................ 22
3.2.6 Best Efforts To Maximize........................... 22
3.3 Confirmation and Audit of Additional Rent.................... 23
3.3.1 Maintain Accounting Systems........................ 23
3.3.2 Audit By Lessor.................................... 23
3.3.3 Deficiencies and Overpayment....................... 23
3.3.4 Survival........................................... 24
3.4 Additional Charges........................................... 24
3.5 Leasing Commitment Fee....................................... 24
3.6 Net Lease.................................................... 24
3.7 No Lessee Termination or Offset.............................. 24
3.7.1 No Termination..................................... 24
3.7.2 Waiver............................................. 25
3.7.3 Independent Covenants.............................. 25
3.8 Abatement of Rent Limited.................................... 25
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE 4
IMPOSITIONS; TAXES; UTILITIES;
INSURANCE PAYMENTS................................................... 26
4.1 Payment of Impositions....................................... 26
4.1.1 Lessee To Pay...................................... 26
4.1.2 Installment Elections.............................. 26
4.1.3 Returns and Reports................................ 26
4.1.4 Refunds............................................ 27
4.1.5 Protest............................................ 27
4.2 Notice of Impositions........................................ 27
4.3 Adjustment of Impositions.................................... 27
4.4 Utility Charges.............................................. 27
4.5 Insurance Premiums........................................... 27
4.6 Deposits..................................................... 28
4.6.1 Lessor's Option.................................... 28
4.6.2 Use of Deposits.................................... 28
4.6.3 Deficits........................................... 29
4.6.4 Other Properties................................... 29
4.6.5 Transfers.......................................... 29
4.6.6 Security........................................... 30
4.6.7 Return............................................. 30
4.6.8 Receipts........................................... 30
ARTICLE 5
OWNERSHIP OF LEASED PROPERTY AND PERSONAL PROPERTY;
INSTALLATION, REMOVAL AND REPLACEMENT OF
PERSONAL PROPERTY.................................................... 30
5.1 Ownership of the Leased Property............................. 30
5.2 Personal Property; Removal and Replacement of Personal
Property..................................................... 30
5.2.1 Lessee To Equip Facility........................... 30
5.2.2 Sufficient Personal Property....................... 31
5.2.3 Removal and Replacement; Lessor's Option to
Purchase........................................... 31
ARTICLE 6
SECURITY FOR LEASE OBLIGATIONS....................................... 32
6.1 Security for the Lessee's Obligations; Permitted Prior
Security Interests........................................... 32
6.1.1 Security........................................... 32
6.1.2 Purchase-Money Security Interests and Equipment
Leases............................................. 32
6.2 Cash Collateral.............................................. 33
6.2.1 Cash Collateral.................................... 33
6.2.2 Application of Cash Collateral..................... 33
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
6.2.3 Replenishment of Cash Collateral................... 33
6.3 Guaranty..................................................... 33
ARTICLE 7
CONDITION AND USE OF LEASED PROPERTY;
MANAGEMENT AGREEMENTS................................................ 34
7.1 Condition of the Leased Property............................. 34
7.2 Use of the Leased Property; Compliance; Management........... 35
7.2.1 Obligation to Operate.............................. 35
7.2.2 Permitted Uses..................................... 35
7.2.3 Compliance With Insurance Requirements............. 35
7.2.4 No Waste........................................... 35
7.2.5 No Impairment...................................... 35
7.2.6 No Liens........................................... 35
7.3 Compliance with Legal Requirements........................... 35
7.4 Management Agreements........................................ 36
ARTICLE 8
REPAIRS; RESTRICTIONS................................................ 37
8.1 Maintenance and Repair....................................... 37
8.1.1 Lessee's Responsibility............................ 37
8.1.2 No Lessor Obligation............................... 38
8.1.3 Lessee May Not Obligate Lessor..................... 38
8.1.4 Lessee's Obligation to Perform Upgrade Renovations. 39
8.2 Encroachments; Title Restrictions............................ 39
ARTICLE 9
MATERIAL STRUCTURAL WORK AND
CAPITAL ADDITIONS.................................................... 40
9.1 Lessor's Approval............................................ 40
9.2 General Provisions as to Capital Additions and Certain
Material Structural Work..................................... 40
9.2.1 No Liens........................................... 40
9.2.2 Lessee's Proposal Regarding Capital Additions and
Material Structural Work........................... 41
9.2.3 Lessor's Options Regarding Capital Additions and
Material Structural Work........................... 41
9.2.4 Lessor May Elect to Finance Capital Additions or
Material Structural Work........................... 41
9.2.5 Legal Requirements; Quality of Work................ 41
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C> <C>
9.3 Capital Additions and Material Structural Work Financed by
Lessor....................................................... 41
9.3.1 Lessee's Financing Request......................... 41
9.3.2 Lessor's General Requirements...................... 42
9.3.3 Payment of Costs................................... 44
9.4 General Limitations.......................................... 44
9.5 Non-Capital Additions........................................ 44
9.6 Permitted Work............................................... 45
ARTICLE 10
WARRANTIES AND REPRESENTATIONS....................................... 45
10.1 Representations and Warranties............................... 45
10.1.1 Existence; Power; Qualification.................... 45
10.1.2 Valid and Binding.................................. 45
10.1.3 Single Purpose..................................... 46
10.1.4 No Violation....................................... 46
10.1.5 Consents and Approvals............................. 46
10.1.6 No Liens or Insolvency Proceedings................. 46
10.1.7 No Burdensome Agreements........................... 47
10.1.8 Commercial Acts.................................... 47
10.1.9 Adequate Capital, Not Insolvent.................... 47
10.1.10 Not Delinquent..................................... 47
10.1.11 No Affiliate Debt.................................. 47
10.1.12 Taxes Current...................................... 48
10.1.13 Financials Complete and Accurate................... 48
10.1.14 Pending Actions, Notices and Reports............... 48
10.1.15 Compliance with Legal and Other Requirements....... 49
10.1.16 No Action By Governmental Authority................ 50
10.1.17 Property Matters................................... 50
10.1.18 Third Party Payor Agreements....................... 51
10.1.19 Rate Limitations................................... 52
10.1.20 Free Care.......................................... 52
10.1.21 No Proposed Changes................................ 52
10.1.22 ERISA.............................................. 52
10.1.23 No Broker.......................................... 52
10.1.24 No Improper Payments............................... 52
10.1.25 Nothing Omitted.................................... 53
10.1.26 No Margin Security................................. 53
10.1.27 No Default......................................... 53
10.1.28 Principal Place of Business........................ 54
10.1.29 Labor Matters...................................... 54
10.1.30 Intellectual Property.............................. 54
10.1.31 Management Agreements.............................. 54
10.1.32 Fiscal Year........................................ 54
</TABLE>
iv
<PAGE> 6
<TABLE>
<S> <C> <C>
10.1.33 Rates.............................................. 54
10.2 Continuing Effect of Representations and Warranties.......... 54
ARTICLE 11
FINANCIAL AND OTHER COVENANTS........................................ 55
11.1 Status Certificates.......................................... 55
11.2 Financial Statements; Reports; Notice and Information........ 55
11.2.1 Obligation To Furnish.............................. 55
11.2.2 Responsible Officer................................ 59
11.2.3 No Material Omission............................... 59
11.2.4 Confidentiality.................................... 59
11.3 Financial Covenants.......................................... 60
11.3.1 Rent Coverage Ratio................................ 60
11.3.2 [Intentionally Omitted]............................ 60
11.3.3 [Intentionally Omitted]............................ 60
11.3.4 [Intentionally Omitted]............................ 60
11.3.5 Current Ratio - Guarantor.......................... 60
11.3.6 Net Worth of Guarantor After a Permitted
Transaction or Permitted Merger.................... 60
11.3.7 Tangible Net Worth - Guarantor..................... 61
11.3.8 No Indebtedness.................................... 61
11.3.9 No Guaranties...................................... 61
11.4 Affirmative Covenants........................................ 61
11.4.1 Maintenance of Existence........................... 61
11.4.2 Materials.......................................... 61
11.4.3 Compliance With Legal Requirements And Applicable
Agreements............................................... 62
11.4.4 Books And Records.................................. 62
11.4.5 Participation in Third Party Payor Programs........ 62
11.4.6 Conduct of its Business............................ 62
11.4.7 Address............................................ 62
11.4.8 Subordination of Affiliate Transactions............ 63
11.4.9 Inspection......................................... 63
11.4.10 Additional Property................................ 63
11.4.11 Acceptable Licensed Operator....................... 63
11.4.12 [Intentionally Omitted]............................ 64
11.5 Additional Negative Covenants................................ 64
11.5.1 Restrictions Relating to Lessee.................... 64
11.5.2 No Liens........................................... 65
11.5.3 Limits on Affiliate Transactions................... 65
11.5.4 Non-Competition.................................... 65
11.5.5 No Default......................................... 67
11.5.6 Restrictions Relating to the Guarantor............. 67
</TABLE>
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<TABLE>
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11.5.7 [Intentionally Omitted]............................ 67
11.5.8 ERISA.............................................. 67
11.5.9 Forgiveness of Indebtedness........................ 67
11.5.10 Value of Assets.................................... 67
11.5.11 Changes in Fiscal Year and Accounting Procedures... 68
11.5.12 [Intentionally Omitted]............................ 68
ARTICLE 12
INSURANCE AND INDEMNITY.............................................. 68
12.1 General Insurance Requirements............................... 68
12.1.1 Types and Amounts of Insurance..................... 68
12.1.2 Insurance Company Requirements..................... 70
12.1.3 Policy Requirements................................ 70
12.1.4 Notices; Certificates and Policies................. 71
12.1.5 Lessor's Right to Place Insurance.................. 71
12.1.6 Payment of Proceeds................................ 71
12.1.7 Irrevocable Power of Attorney...................... 72
12.1.8 Blanket Policies................................... 72
12.1.9 No Separate Insurance.............................. 72
12.1.10 Assignment of Unearned Premiums.................... 72
12.2 Indemnity.................................................... 73
12.2.1 Indemnification.................................... 73
12.2.2 Indemnified Parties................................ 74
12.2.3 Defense of Actions by the Lessee................... 74
12.2.4 Limitation on Lessor Liability..................... 74
12.2.5 Risk of Loss....................................... 74
ARTICLE 13
FIRE AND CASUALTY.................................................... 75
13.1 Restoration Following Fire or Other Casualty................. 75
13.1.1 Following Fire or Casualty......................... 75
13.1.2 Procedures......................................... 75
13.1.3 Disbursement of Insurance Proceeds................. 76
13.2 Disposition of Insurance Proceeds............................ 80
13.2.1 Proceeds To Be Released to Pay For Work............ 80
13.2.2 Proceeds Not To Be Released........................ 80
13.2.3 Lessee Responsible for Short-Fall.................. 81
13.3 Tangible Personal Property................................... 81
13.4 Restoration of Certain Improvements and the Tangible
Personal Property............................................ 82
13.5 No Abatement of Rent......................................... 82
13.6 Termination of Certain Rights................................ 82
13.7 Waiver....................................................... 82
</TABLE>
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<TABLE>
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13.8 Application of Rent Loss and/or Business Interruption
Insurance.................................................... 82
13.9 Obligation To Account........................................ 83
ARTICLE 14
CONDEMNATION......................................................... 83
14.1 Parties' Rights and Obligations.............................. 83
14.2 Total Taking................................................. 83
14.3 Partial or Temporary Taking.................................. 83
14.4 Restoration.................................................. 84
14.5 Award Distribution........................................... 85
14.6 Control of Proceedings....................................... 85
ARTICLE 15
PERMITTED CONTESTS................................................... 85
15.1 Lessee's Right to Contest.................................... 85
15.2 Lessor's Cooperation......................................... 86
15.3 Lessee's Indemnity........................................... 86
ARTICLE 16
DEFAULT.............................................................. 86
16.1 Events of Default............................................ 86
16.2 Remedies..................................................... 91
16.3 Damages...................................................... 92
16.4 Lessee Waivers............................................... 93
16.5 Application of Funds......................................... 94
16.6 Intentionally Omitted........................................ 94
16.7 Lessor's Right to Cure....................................... 94
16.8 No Waiver By Lessor.......................................... 94
16.9 Right of Forbearance......................................... 95
16.10 Cumulative Remedies.......................................... 95
ARTICLE 17
SURRENDER OF LEASED PROPERTY OR LEASE; HOLDING OVER.................. 96
17.1 Surrender.................................................... 96
17.2 Transfer of Permits and Contracts............................ 96
17.3 No Acceptance of Surrender................................... 97
17.4 Holding Over................................................. 97
</TABLE>
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ARTICLE 18
RIGHT OF FIRST REFUSAL TO
PURCHASE THE LEASED PROPERTY......................................... 97
18.1 Right of First Refusal to Purchase the Leased Property....... 97
ARTICLE 19
SUBLETTING AND ASSIGNMENT............................................ 98
19.1 Subletting and Assignment.................................... 98
19.2 Permitted Subleases.......................................... 98
19.3 Attornment................................................... 98
ARTICLE 20
TITLE TRANSFERS AND LIENS GRANTED BY LESSOR.......................... 99
20.1 No Merger of Title........................................... 99
20.2 Transfers By Lessor.......................................... 99
20.3 Lessor May Grant Liens....................................... 99
20.4 Subordination and Non-Disturbance............................ 99
ARTICLE 21
LESSOR OBLIGATIONS................................................... 100
21.1 Quiet Enjoyment.............................................. 100
21.2 Memorandum of Lease.......................................... 101
21.3 Default by Lessor............................................ 101
ARTICLE 22
NOTICES.............................................................. 101
ARTICLE 23
LIMITATION OF LIABILITY.............................................. 102
ARTICLE 24
MISCELLANEOUS PROVISIONS............................................. 103
24.1 Broker's Fee Indemnification................................. 103
24.2 No Joint Venture or Partnership.............................. 103
24.3 Amendments, Waivers and Modifications........................ 103
24.4 Captions and Heading......................................... 104
24.5 Time is of the Essence....................................... 104
</TABLE>
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24.6 Counterparts................................................. 104
24.7 Entire Agreement............................................. 104
24.8 Waiver of Jury Trial......................................... 104
24.9 Successors and Assigns....................................... 105
24.10 No Third Party Beneficiaries................................. 105
24.11 Governing Law................................................ 105
24.12 General...................................................... 105
24.13 Intention of Parties......................................... 106
24.14 Appraisal.................................................... 106
24.14.1 Designation of Appraisers.......................... 106
24.14.2 Appraisal Process.................................. 106
24.14.3 Specific Enforcement and Costs..................... 107
EXHIBIT A
PROPERTY DESCRIPTION.................................................. 109
EXHIBIT B
PERMITTED ENCUMBRANCES................................................ 110
EXHIBIT C
LIST OF SHAREHOLDERS.................................................. 111
EXHIBIT D
NATIONAL ACCOUNTS AND LOCAL DISCOUNTS................................. 112
EXHIBIT E
OPEN COST REPORTS..................................................... 113
EXHIBIT F
RATE LIMITATIONS...................................................... 114
EXHIBIT G
FREE CARE REQUIREMENTS................................................ 115
EXHIBIT H
CURRENT RATES......................................................... 116
</TABLE>
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EXHIBIT I
RENT COVERAGE RATIO CALCULATION....................................... 117
EXHIBIT J
[INTENTIONALLY OMITTED]............................................... 118
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FACILITY LEASE AGREEMENT
This FACILITY LEASE AGREEMENT ("Lease") is dated as of the 31st day of July,
1998, is between MEDITRUST ACQUISITION CORPORATION III ("Lessor"), a Delaware
corporation having its principal office at 197 First Avenue, Needham Heights,
Massachusetts 02194, and ALS LEASING, INC. ("Lessee"), a Delaware corporation,
having its principal office at 450 N. Sunnyslope Road, Suite 300, Brookfield,
Wisconsin 53005, Attn: Mr. William F. Lasky.
ARTICLE 1
LEASED PROPERTY; TERM; EXTENSIONS
1.1 LEASED PROPERTY. Upon and subject to the terms and conditions
hereinafter set forth, the Lessor leases to the Lessee and the Lessee rents and
leases from the Lessor all of the Lessor's rights and interests in and to the
following real and personal property (collectively, the "Leased Property"):
(A) the real property described in EXHIBIT A attached hereto
(the "Land");
(B) all buildings, structures, Fixtures (as hereinafter defined)
and other improvements of every kind including, but not limited to,
alleyways and connecting tunnels, sidewalks, utility pipes, conduits and
lines, and parking areas and roadways appurtenant to such buildings and
structures presently or hereafter situated upon the Land (collectively,
the "Leased Improvements");
(C) all easements, rights and appurtenances of every nature and
description now or hereafter relating to or benefitting any or all of the
Land and the Leased Improvements; and
(D) all equipment, machinery, building fixtures, and other items
of property (whether realty, personalty or mixed), including all
components thereof, now or hereafter located in, on or used in connection
with, and permanently affixed to or incorporated into the Leased
Improvements, including, without limitation, all furnaces, boilers,
heaters, electrical equipment, heating, plumbing, lighting, ventilating,
refrigerating, incineration, air and water pollution control, waste
disposal, air-cooling and air-conditioning systems and apparatus,
sprinkler systems and fire and theft protection equipment, and built-in
oxygen and vacuum systems, all of which, to the greatest extent permitted
by law, are hereby deemed by the parties hereto to constitute real estate,
together with all replacements, modifications, alterations and additions
thereto, but specifically excluding all items included within the category
of Tangible Personal Property (as hereinafter defined) which are not
permanently affixed to or incorporated in the Leased Property
(collectively, the "Fixtures").
The Leased Property is leased in its present condition, AS IS, without
representation or warranty of any kind, express or implied, by the Lessor and
subject to: (I) the rights of parties in
<PAGE> 13
possession; (II) the existing state of title including all covenants,
conditions, Liens (as hereinafter defined) and other matters of record
(including, without limitation, the matters set forth in EXHIBIT B); (III) all
applicable laws; and (IV) all matters, whether or not of a similar nature, which
would be disclosed by an inspection of the Leased Property or by an accurate
survey thereof.
1.2 TERM. The term of this Lease shall consist of: the "Initial Term",
which shall commence on July 31, 1998 (the "Commencement Date") and end on April
30, 2010 (the "Expiration Date"); provided, however, that this Lease may be
sooner terminated as hereinafter provided. In addition, the Lessee shall have
the option(s) to extend the Term (as hereinafter defined) as provided for in
Section 1.3.
1.3 EXTENDED TERMS. Provided that this Lease has not been previously
terminated, and as long as there exists no Lease Default (as hereinafter
defined) at the time of exercise and on the last day of the Initial Term or the
then current Extended Term (as hereinafter defined), as the case may be, the
Lessee is hereby granted the option to extend the Initial Term of this Lease for
three (3) additional periods (collectively, the "Extended Terms") as follows:
three (3) successive five (5) year periods for a maximum Term, if all such
options are exercised, which ends on April 30, 2025. The Lessee's extension
options shall be exercised by the Lessee by giving written notice to the Lessor
of the Lessee's exercise of each such extension at least one hundred eighty
(180) days, but not more than three hundred sixty (360) days, prior to the
termination of the Initial Term or the then current Extended Term, as the case
may be. The Lessee shall have no right to rescind any such notice once given.
The Lessee may not exercise its option for more than one Extended Term at a
time. During each effective Extended Term, all of the terms and conditions of
this Lease shall continue in full force and effect, except that the Base Rent
(as hereinafter defined) for each such Extended Term shall be adjusted as set
forth in Section 3.1.1.
Notwithstanding anything to the contrary set forth herein, the Lessee's
rights to exercise the options granted in this Section 1.3 are subject to the
further condition that concurrently with the exercise of any extension option
hereunder, the Lessee shall have exercised its option to extend the terms of all
of the Group Two Acquisition Facility Leases (as defined in the Agreement
Regarding Related Lease Transactions) in accordance with the provisions of the
Agreement Regarding Related Lease Transactions and the provisions of Section 1.3
of each of the Group Two Acquisition Leases.
ARTICLE 2
DEFINITIONS AND RULES OF CONSTRUCTION
2.1 DEFINITIONS. For all purposes of this Lease and the other Lease
Documents (as hereinafter defined), except as otherwise expressly provided or
unless the context otherwise requires, (I) the terms defined in this Article
have the meanings assigned to them in this Article and include the plural as
well as the singular and (II) all references in this Lease or any of the other
Lease Documents to designated "Articles", "Sections" and other subdivisions are
to the designated Articles, Sections and other subdivisions of this Lease or the
other applicable Lease Document.
2
<PAGE> 14
ACCEPTABLE LICENSED OPERATOR: Any of (A) the Current Manager, (B) the
Lessee, (C) the Guarantor, (D) any Manager of the Facility (pursuant to a
Management Agreement approved by the Lessor) that is wholly-owned by Alternative
Living Services, Inc. and, during the Term, is engaged in no business or venture
other than the ownership and/or operation of any health care facility owned or
financed by any Meditrust Entity, or (E) any Sublessee of the Facility (pursuant
to a Sublease approved by the Lessor) that is wholly-owned or is controlled by
Alternative Living Services, Inc. and, during the Term, is engaged in no
business or venture other than the ownership and/or operation of any health care
facility owned or financed by any Meditrust Entity.
ACCOUNTS: As defined in the UCC.
ACCREDITATION BODY: All Persons having jurisdiction over the
accreditation, certification, evaluation or operation of the Facility. The
Lessor understands that neither the Lessee nor any Sublessee nor the Facility is
currently under the jurisdiction, or is otherwise subject to the rules, of any
Accreditation Body and that, accordingly, the provisions of this Lease relating
in any way to an Accreditation Body are presently inapplicable to this
transaction; however, in the event that at any time during the Term, any of the
Lessee, any Sublessee or the Facility falls under the jurisdiction of, or
otherwise becomes subject to the rules of, any Accreditation Body, then all such
provisions of this Lease and the other Lease Documents relating to an
Accreditation Body shall apply with full force and effect.
ADDITIONAL RENT: As defined in Section 3.1.2.
ADDITIONAL RENT COMMENCEMENT DATE: As defined in Section 3.1.2.
ADDITIONAL CHARGES: As defined in Section 3.4.
ADDITIONAL LAND: As defined in Section 9.3.
AFFILIATE: With respect to any Person (I) any other Person which, directly
or indirectly, controls or is controlled by or is under common control with such
Person, (II) any other Person that owns, beneficially, directly or indirectly,
five percent (5%) or more of the outstanding capital stock, shares or equity
interests of such Person, or (III) any officer, director, employee, general
partner or trustee of such Person, or any other Person controlling, controlled
by, or under common control with, such Person (excluding trustees and Persons
serving in a fiduciary or similar capacity who are not otherwise an Affiliate of
such Person). For the purposes of this definition and the definition of
Acceptable Licensed Operator, "control" (including the correlative meanings of
the terms "controlled by" and "under common control with"), as used with respect
to any Person, shall mean the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of such Person,
through the ownership of voting securities, partnership interests or other
equity interests.
AFFILIATED PARTY SUBORDINATION AGREEMENT: That certain Amended and
Restated Affiliated Party Subordination Agreement dated as of April 30, 1997 by
and among the Lessee, the Guarantor,
3
<PAGE> 15
and various Affiliates of the Lessor, as amended by that certain First Amendment
to Amended and Restated Agreement Regarding Related Lease Transactions, Amended
and Restated Environmental Indemnity Agreement and Amended and Restated
Affiliated Party Subordination Agreement dated as of June 18, 1997 by and among
the Lessee, the Guarantor and the Lessor, as further amended by that certain
Third Amendment to Amended and Restated Agreement Regarding Related Lease
Transactions, Amended and Restated Environmental Indemnity Agreement and Amended
and Restated Affiliated Party Subordination Agreement dated as of November 21,
1997, as further amended by that certain Fourth Amendment to Amended and
Restated Agreement Regarding Related Lease Transactions, Amended and Restated
Environmental Indemnity Agreement and Amended and Restated Affiliated Party
Subordination Agreement dated as of July 1, 1998, as further amended by that
certain Fifth Amendment to Amended and Restated Agreement Regarding Related
Lease Transactions, Amended and Restated Environmental Indemnity Agreement and
Amended and Restated Affiliated Party Subordination Agreement of even date
herewith, as may be amended from time to time.
AGREEMENT REGARDING RELATED LEASE TRANSACTIONS: That certain Amended and
Restated Agreement Regarding Related Lease Transactions dated as of April 30,
1997 by and among the Lessee, the Lessor and any Related Party that is a party
to any Related Lease, as amended by that certain First Amendment to Amended and
Restated Agreement Regarding Related Lease Transactions, Amended and Restated
Environmental Indemnity Agreement and Amended and Restated Affiliated Party
Subordination Agreement dated as of June 18, 1997 by and among the Lessee, the
Guarantor and the Lessor, as further amended by that certain Second Amendment to
Amended and Restated Agreement Regarding Related Lease Transactions dated as of
October 22, 1997 by and among the Lessee, the Guarantor and the Lessor, as
further amended by that certain Third Amendment to Amended and Restated
Agreement Regarding Related Lease Transactions, Amended and Restated
Environmental Indemnity Agreement and Amended and Restated Affiliated Party
Subordination Agreement dated as of November 21, 1997, as further amended by
that certain Fourth Amendment to Amended and Restated Agreement Regarding
Related Lease Transactions, Amended and Restated Environmental Indemnity
Agreement and Amended and Restated Affiliated Party Subordination Agreement
dated as of July 1, 1998, as further amended by that certain Fifth Amendment to
Amended and Restated Agreement Regarding Related Lease Transactions, Amended and
Restated Environmental Indemnity Agreement and Amended and Restated Affiliated
Party Subordination Agreement of even date herewith, and as may be amended from
time to time. The Lessor and the Lessee anticipate that the Agreement Regarding
Related Lease Transactions will be amended from time to time in order to (A)
include Affiliates of each of the Lessor and the Lessee as parties thereto in
connection with future transactions, (B) amend EXHIBITS A and B to the
Environmental Indemnity Agreement amending the list of environmental site
assessment reports and the list of state and local environmental laws,
respectively, in connection with the inclusion of
4
<PAGE> 16
additional facilities, (C) amend SCHEDULE A to the Affiliated Party
Subordination Agreement to include additional parties as the "Manager" thereto
in connection with the inclusion of additional facilities, and (D) include
additional facilities within the scope of such related transactions and
acknowledge and agree that for all purposes under this Lease such amendments
shall be deemed to be included in this definition.
ANNUAL FACILITY UPGRADE EXPENDITURE: The aggregate amount spent on Upgrade
Renovations during any Lease Year.
APPURTENANT AGREEMENTS: Collectively, all instruments, documents and other
agreements that now or hereafter create any utility, access or other rights or
appurtenances benefiting or relating to the Leased Property.
AWARD: All compensation, sums or anything of value awarded, paid or
received on a total or partial Condemnation.
BANKRUPTCY CODE: Subsection 365(h) of the United States Bankruptcy Code,
11 U.S.C. ss.365(h), as the same may hereafter be amended and including any
successor provision thereto.
BASE RENT: As defined in Section 3.1.1 and adjusted pursuant to Section
3.1.1.
BUSINESS DAY: Any day which is not a Saturday or Sunday or a public
holiday under the laws of the United States of America, the Commonwealth of
Massachusetts, the State or the state in which the Lessor's depository bank is
located.
CAPITAL ADDITIONS: Collectively, all new buildings and additional
structures annexed to any portion of any of the Leased Improvements and material
expansions of any of the Leased Improvements which are constructed on any
portion of the Land during the Term, including, without limitation, the
construction of a new wing or new story, the renovation of any of the Leased
Improvements on the Leased Property in order to provide a functionally new
facility that is needed or used to provide services not previously offered, and
any expansion, construction, renovation or conversion or in order to (I)
increase the unit capacity of a Facility, (II) change the purpose for which such
units are utilized and/or (III) change the utilization of any material portion
of any of the Leased Improvements.
CAPITAL ADDITION COST: The cost of any Capital Addition made by the Lessee
whether paid for by the Lessee or the Lessor. Such cost shall include all costs
and expenses of every nature whatsoever incurred directly or indirectly in
connection with the development, permitting, construction and financing of a
Capital Addition as reasonably determined by, or to the reasonable satisfaction
of, the Lessor.
CASH COLLATERAL: As defined in Section 6.2.1.
5
<PAGE> 17
CASH FLOW: The Consolidated Net Income (or Consolidated Net Loss), arising
solely from the operation of the Leased Property, before federal and state
income taxes for any period plus (I) the amount of the provision for
depreciation and amortization actually deducted on the books of the applicable
Person for the purposes of computing such Consolidated Net Income (or
Consolidated Net Loss) for the period involved, plus (II) Rent and interest on
all other payments with respect to all Indebtedness and/or other obligations
(including, without limitation, management fees) which are fully subordinated to
the Lease Obligations pursuant to the Affiliated Party Subordination Agreement.
CASUALTY: As defined in Section 13.1.1.
CHATTEL PAPER: As defined in the UCC.
CODE: The Internal Revenue Code of 1986, as amended.
COLLATERAL: All of the property in which security interests are granted to
the Lessor and the other Meditrust Entities pursuant to the Lease Documents and
the Related Party Agreements to secure the Lease Obligations, including, without
limitation, the Cash Collateral and the Receivables.
COMMENCEMENT DATE: As defined in Section 1.2.
COMPETITIVE ACTIVITY: As defined in Section 11.5.4.
CONDEMNATION: With respect to the Leased Property or any interest therein
or right accruing thereto or use thereof (I) the exercise by a Condemnor,
whether by legal proceedings or otherwise, resulting in a Taking or (II) a
voluntary sale or transfer by the Lessor to any Condemnor, either under threat
of Condemnation or Taking or while legal proceedings for a Taking are pending.
CONDEMNOR: Any public or quasi-public authority, or private corporation or
Person, having the power of condemnation.
CONSOLIDATED AND CONSOLIDATING: When used with reference to any term
otherwise defined herein, means such term as applied to the consolidated and
consolidating accounts of the relevant Person and its Subsidiaries consolidated
in accordance with GAAP.
CONSOLIDATED FINANCIALS: For any fiscal year or other accounting period
for any Person and its consolidated Subsidiaries, statements of earnings and
retained earnings and of changes in financial position for such period and for
the period from the beginning of the respective fiscal year to the end of such
period and the related balance sheet as at the end of such period, together with
the notes thereto, all in reasonable detail and setting forth in comparative
form the corresponding figures for the corresponding period in the preceding
fiscal year, and prepared in accordance with GAAP.
6
<PAGE> 18
CONSULTANTS: Collectively, the architects, engineers, inspectors,
surveyors and other consultants that are engaged from time to time by the Lessor
to perform services for the Lessor in connection with this Lease.
CONSUMER PRICE ADJUSTMENT FACTOR: A fraction, the numerator of which is
the Consumer Price Index in effect as of first day of the Lease Year for which
the Annual Facility Upgrade Expenditure increase is being calculated and the
denominator of which is the Consumer Price Index in effect as of the
Commencement Date.
CONSUMER PRICE INDEX: The Consumer Price Index for Urban Wage Earners and
Clerical Workers, All Items-U.S. Cities Average (1982-84=100), published by the
Bureau of Labor Statistics, U.S. Department of Labor; provided, that, if the
compilation of the Consumer Price Index in its present form and calculated on
its present basis is discontinued or transferred to any other Governmental
Authority, then, the index most similar to the Consumer Price Index published by
the Bureau of Labor Statistics shall be used. If there is no such similar index,
a substitute index which is then generally recognized as being similar to the
Consumer Price Index shall be used, with such substitute index to be reasonably
selected by the Lessor and reasonably approved by the Lessee.
CONTRACTS: All agreements (including, without limitation, Provider
Agreements and Resident Agreements), contracts, (including without limitation,
construction contracts, subcontracts, and architects' contracts,) contract
rights, warranties and representations, franchises, and records and books of
account benefiting, relating to or affecting the Leased Property or the
ownership, construction, development, maintenance, management, repair, use,
occupancy, possession, or operation thereof, or the operation of any programs or
services in conjunction with the Leased Property and all renewals, replacement
and substitutions therefor, now or hereafter issued by or entered into with any
Governmental Authority, Accreditation Body or Third Party Payor or maintained or
used by any member of the Leasing Group or entered into by any member of the
Leasing Group with any third Person.
CURRENT ASSETS: All assets of any Person which would, in accordance with
GAAP, be classified as current assets of a Person.
CURRENT LIABILITIES: All liabilities of any Person which would, in
accordance with GAAP, be classified as current liabilities of a Person.
CURRENT MANAGEMENT AGREEMENT: That certain Management and Operations
Agreement of even date herewith by and between the Lessee and the Current
Manager.
CURRENT MANAGER: Alternative Living Services, Inc.
DATE OF TAKING: The date the Condemnor has the right to possession of the
property being condemned.
DECLARATION: As defined in Article 23.
7
<PAGE> 19
DEPOSIT PLEDGE AGREEMENT: The pledge and security agreement so captioned
and dated as of even date herewith between the Lessee and the Lessor, as may be
amended from time to time.
DOCUMENTS: As defined in the UCC.
ENCUMBRANCE: As defined in Section 20.3.
ENVIRONMENTAL INDEMNITY AGREEMENT: The Amended and Restated Environmental
Indemnity Agreement dated as of April 30, 1997 by and among the Lessee, the
Guarantor and the Lessor, as amended by that certain First Amendment to Amended
and Restated Agreement Regarding Related Lease Transactions, Amended and
Restated Environmental Indemnity Agreement and Amended and Restated Affiliated
Party Subordination Agreement dated as of June 18, 1997 by and among the Lessee,
the Guarantor and the Lessor, as further amended by that certain Third Amendment
to Amended and Restated Agreement Regarding Related Lease Transactions, Amended
and Restated Environmental Indemnity Agreement and Amended and Restated
Affiliated Party Subordination Agreement dated as of November 21, 1997, as
further amended by that certain Fourth Amendment to Amended and Restated
Agreement Regarding Related Lease Transactions, Amended and Restated
Environmental Indemnity Agreement and Amended and Restated Affiliated Party
Subordination Agreement dated as of July 1, 1998, as further amended by that
certain Fifth Amendment to Amended and Restated Agreement Regarding Related
Lease Transactions, Amended and Restated Environmental Indemnity Agreement and
Amended and Restated Affiliated Party Subordination Agreement of even date
herewith, and as may be amended from time to time.
ENVIRONMENTAL LAWS: As defined in the Environmental Indemnity Agreement.
ERISA: The Employment Retirement Income Security Act of 1974, as amended.
EVENT OF DEFAULT: As defined in Section 16.1.
EXCESS GROSS REVENUES: Gross Revenues for a calendar year less the Gross
Revenues for the immediately preceding calendar year.
EXCLUDED FACILITIES: As defined in Section 11.5.4.
EXPIRATION DATE: As defined in Section 1.2.
EXTENDED TERMS: As defined in Section 1.3.
FACILITY: Collectively, the thirty-four (34) unit, thirty-eight (38) bed
fully licensed (to the extent licensing is required by the State) assisted
living and dementia care facility (known for regulatory purposes in the State as
a home for the aged) known as Hamilton House of Delta I and the
8
<PAGE> 20
nineteen (19) unit, twenty (20) bed, fully licensed (to the extent licensing is
required by the State) assisted living facility (known for regulatory purposes
in the State as an adult foster care facility) known as WovenHearts of Delta II,
on the Land, together with related parking and other amenities.
FAILURE TO OPERATE: As defined in Section 16.1.
FAILURE TO PERFORM: As defined in Section 16.1.
FAIR MARKET ADDED VALUE: The Fair Market Value of the Leased Property
(including all Capital Additions) minus the Fair Market Value of the Leased
Property determined as if no Capital Additions paid for by the Lessee had been
constructed.
FAIR MARKET VALUE OF THE CAPITAL ADDITION: The amount by which the Fair
Market Value of the Leased Property upon the completion of a particular Capital
Addition exceeds the Fair Market Value of the Leased Property just prior to the
construction of the particular Capital Addition.
FAIR MARKET VALUE OF THE LEASED PROPERTY: The fair market value of the
Leased Property, including all Capital Additions, and including the Land and all
other portions of the Leased Property, and (A) assuming the same is unencumbered
by this Lease, (B) determined in accordance with the appraisal procedures set
forth in Section 24.14 or in such other manner as shall be mutually acceptable
to the Lessor and the Lessee and (C) not taking into account any reduction in
value resulting from any Lien to which the Leased Property is subject and which
Lien the Lessee or the Lessor is otherwise required to remove at or prior to
closing of the transaction. However, the positive or negative effect on the
value of the Leased Property attributable to the interest rate, amortization
schedule, maturity date, prepayment provisions and other terms and conditions of
any Lien on the Leased Property which is not so required or agreed to be removed
shall be taken into account in determining the Fair Market Value of the Leased
Property. The Fair Market Value of the Leased Property shall be determined as
the overall value based on due consideration of the "income" approach, the
"comparable sales" approach and the "replacement cost" approach.
FAIR MARKET VALUE OF THE MATERIAL STRUCTURAL WORK: The amount by which the
Fair Market Value of the Leased Property upon the completion of any particular
Material Structural Work exceeds the Fair Market Value of the Leased Property
just prior to the construction of the applicable Material Structural Work.
FEE MORTGAGE: As defined in Section 20.3.
FEE MORTGAGEE: As defined in Section 20.3.
FINANCING PARTY: Any Person who is or may be participating with the Lessor
in any way in connection with the financing of any Capital Addition.
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FINANCING STATEMENTS: Uniform Commercial Code financing statements
evidencing the security interests granted to the Lessor in connection with the
Lease Documents.
FISCAL QUARTER: Each of the three (3) month periods commencing on January
1st, April 1st, July 1st and October 1st.
FISCAL YEAR: The twelve (12) month period from January 1st to December
31st.
FIXTURES: As defined in Section 1.1.
GAAP: Generally accepted accounting principles, consistently applied
throughout the relevant period.
GENERAL INTANGIBLES: As defined in the UCC.
GOVERNMENTAL AUTHORITIES: Collectively, all agencies, authorities, bodies,
boards, commissions, courts, instrumentalities, legislatures, and offices of any
nature whatsoever of any government, quasi-government unit or political
subdivision, whether with a federal, state, county, district, municipal, city or
otherwise and whether now or hereinafter in existence.
GROSS REVENUES: Collectively, all revenues generated by reason of the
operation of the Leased Property (including any Capital Additions), whether or
not directly or indirectly received or to be received by the Lessee, including,
without limitation, all resident revenues received or receivable for the use of,
or otherwise by reason of, all rooms, units and other facilities provided, meals
served, services performed, space or facilities subleased or goods sold on or
from the Leased Property and further including, without limitation, except as
otherwise specifically provided below, any consideration received under any
subletting, licensing, or other arrangements with any Person relating to the
possession or use of the Leased Property and all revenues from all ancillary
services provided at or relating to the Leased Property; provided, however, that
Gross Revenues shall not include non-operating revenues such as interest income
or gain from the sale of assets not sold in the ordinary course of business; and
provided, further, that there shall be excluded or deducted (as the case may be)
from such revenues:
(I) contractual allowances (relating to any period during the Term
of this Lease and thereafter until the Rent hereunder is paid in full)
for billings not paid by or received from the appropriate Governmental
Agencies or Third Party Payors,
(II) allowances according to GAAP for uncollectible accounts,
(III) all proper resident billing credits and adjustments according
to GAAP relating to health care accounting,
(IV) federal, state or local sales, use, gross receipts and excise
taxes and any tax based upon or measured by said Gross Revenues which is
added to or made a part of the
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amount billed to the resident or other recipient of such services or
goods, whether included in the billing or stated separately, and
(V) deposits refundable to residents of the Facility.
To the extent that the Leased Property is subleased or occupied by an
Affiliate of the Lessee, Gross Revenues calculated for all purposes of this
Lease (including, without limitation, the determination of the Additional Rent
payable under this Lease) shall include the Gross Revenues of such Sublessee
with respect to the premises demised under the applicable Sublease (i.e., the
Gross Revenues generated from the operations conducted on such subleased portion
of the Leased Property) and the rent received or receivable from such Sublessee
pursuant to such Subleases shall be excluded from Gross Revenues for all such
purposes. As to any Sublease between the Lessee and a non- Affiliate of the
Lessee, only the rental actually received by the Lessee from such non-Affiliate
shall be included in Gross Revenues.
GROUP ONE ACQUISITION TRANSACTION DOCUMENTS: As defined in the Agreement
Regarding Related Lease Transactions.
GROUP TWO ACQUISITION TRANSACTION DOCUMENTS: As defined in the Agreement
Regarding Related Lease Transactions.
GUARANTOR: Alternative Living Services, Inc. and its successors and
assigns.
GUARANTY: The Amended and Restated Guaranty dated as of April 30, 1997
executed by Guarantor in favor of the Lessor, relating to the Lease Obligations,
as may be amended from time to time.
HAZARDOUS SUBSTANCES: As defined in the Environmental Indemnity Agreement.
IMPOSITIONS: Collectively, all taxes (including, without limitation, all
capital stock and franchise taxes of the Lessor, all ad valorem, property,
sales, use, single business, gross receipts, transaction privilege, rent or
similar taxes), assessments (including, without limitation, all assessments for
public improvements or benefits, whether or not commenced or completed prior to
the date hereof and whether or not to be completed within the Term), ground
rents, water and sewer rents, water charges or other rents and charges, excises,
tax levies, fees (including, without limitation, license, permit, inspection,
authorization and similar fees), transfer taxes and recordation taxes imposed as
a result of the conveyance of the Land to the Lessor (and/or the conveyance of
the Leased Property to the Lessee pursuant to the terms of this Lease), this
Lease or any extensions hereof, and all other governmental charges, in each case
whether general or special, ordinary or extraordinary, or foreseen or
unforeseen, of every character in respect of either or both of the Leased
Property and the Rent (including all interest and penalties thereon due to any
failure in payment by the Lessee), which at any time prior to, during or in
respect of the Term hereof and thereafter until the Leased Property is
surrendered to the Lessor as required by the terms of this
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Lease, may be assessed or imposed on or in respect of or be a Lien upon (A) the
Lessor or the Lessor's interest in the Leased Property, (B) the Leased Property
or any rent therefrom or any estate, right, title or interest therein, or (C)
any occupancy, operation, use or possession of, sales from, or activity
conducted on, or in connection with, the Leased Property or the leasing or use
of the Leased Property. Notwithstanding the foregoing, nothing contained in this
Lease shall be construed to require the Lessee to pay (1) any tax based on net
income (whether denominated as a franchise or capital stock or other tax)
imposed on the Lessor or any other Person, except the Lessee or its successors,
(2) any net revenue tax of the Lessor or any other Person, except the Lessee and
its successors, (3) any tax imposed with respect to the sale, exchange or other
disposition by the Lessor of the Leased Property or the proceeds thereof, (4)
any tax imposed with respect to any Fee Mortgage or any Fee Mortgagee, (5)
except as expressly provided elsewhere in this Lease, any principal or interest
on any Encumbrance on the Leased Property, or (6) any portion of assessments
which are assessed during the Term of this Lease and amortized over a period
which extends beyond the Term of this Lease provided the Lessee (and not the
Lessor) shall be responsible for that portion of the amortized assessment due
and owing during the Term and any and all finance charges and/or penalties which
accrue as a result of amortizing any such assessments, including, without
limitation, any finance charges and/or penalties (other than penalties which
accrue as a result of late payment after the expiration of the Term of this
Lease) which accrue after the expiration of the Term of this Lease; provided,
however, the provisos set forth in clauses (1) and (2) of this sentence shall
not be applicable to the extent that any tax, assessment, tax levy or charge
which the Lessee is obligated to pay pursuant to the first sentence of this
definition and which is in effect at any time during the Term hereof is totally
or partially repealed, and a tax, assessment, tax levy or charge set forth in
clause (1) or (2) is levied, assessed or imposed expressly in lieu thereof. In
computing the amount of any franchise tax or capital stock tax which may be or
become an Imposition, the amount payable by the Lessee shall be equitably
apportioned based upon all properties owned by the Lessor that are located
within the particular jurisdiction subject to any such tax.
INDEBTEDNESS: The total of all obligations of a Person, whether current or
long-term, which in accordance with GAAP, would be included as liabilities upon
such Person's balance sheet at the date as of which Indebtedness is to be
determined.
INDEMNIFIED PARTIES: As defined in Section 12.2.2.
INDEX: The rate of interest of actively traded marketable United States
Treasury Securities bearing a fixed rate of interest adjusted for a constant
maturity of ten (10) years as calculated by the Federal Reserve Board.
INITIAL TERM: As defined in Section 1.2.
INSTRUMENTS: As defined in the UCC.
INSURANCE REQUIREMENTS: All terms of any insurance policy required by this
Lease, all requirements of the issuer of any such policy with respect to the
Leased Property and the activities
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conducted thereon and the requirements of any insurance board, association or
organization or underwriters' regulations pertaining to the Leased Property.
JCAHO: The Joint Commission on Accreditation of Health Care Organizations.
LAND: As defined in Article 1.
LEASE: As defined in the preamble of this Lease.
LEASE DEFAULT: The occurrence of any default or breach of condition
continuing beyond any applicable notice and/or grace and/or cure periods under
this Lease and/or any of the other Lease Documents.
LEASE DOCUMENTS: Collectively, this Lease, the Guaranty, the Security
Agreement, the Deposit Pledge Agreement, the Pledge Agreement, the Agreement
Regarding Related Lease Transactions, the Permits Assignment, the Financing
Statements, the Affiliated Party Subordination Agreement, the Environmental
Indemnity Agreement, the other Facility Lease Agreements referred to in the
Agreement Regarding Related Transactions, and any and all other instruments,
documents, certificates or agreements now or hereafter (I) executed or furnished
by any member of the Leasing Group in connection with the transactions evidenced
by this Lease and/or any of the foregoing documents and/or (II) evidencing or
securing any of the Lessee's obligations relating to the Leased Property.
LEASE OBLIGATIONS: Collectively, all indebtedness, covenants, liabilities,
obligations, agreements and undertakings (other than the Lessor's obligations)
under this Lease and the other Lease Documents.
LEASE YEAR: A twelve-month period ending on December 31 of each year;
provided, that the first Lease Year shall begin on the Commencement Date and
shall end on December 31, 1998.
LEASED IMPROVEMENTS: As defined in Article 1.
LEASED PROPERTY: As defined in Article 1.
LEASING COMMITMENT FEE: $6,180.00
LEASING GROUP: Collectively, the Lessee, the Guarantor, any Sublessee
which is an Affiliate of the Lessee or the Guarantor and any Manager which is an
Affiliate of the Lessee or the Guarantor.
LEGAL REQUIREMENTS: Collectively, all statutes, ordinances, by-laws,
codes, rules, regulations, restrictions, orders, judgments, decrees and
injunctions (including, without limitation, all applicable building, health
code, zoning, subdivision, and other land use and assisted living licensing
statutes, ordinances, by-laws, codes, rules and regulations), whether now or
hereafter enacted, promulgated or issued by any Governmental Authority,
Accreditation Body or Third Party
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Payor affecting any member of the Leasing Group and relating to the Leased
Property or the ownership, construction, development, maintenance, management,
repair, use, occupancy, possession or operation thereof or the operation of any
programs or services in connection with the Leased Property, including, without
limitation, any of the foregoing which may (I) require repairs, modifications or
alterations in or to the Leased Property, (II) in any way affect (adversely or
otherwise) the use and enjoyment of the Leased Property or (III) require the
assessment, monitoring, clean-up, containment, removal, remediation or other
treatment of any Hazardous Substances on, under or from the Leased Property.
Without limiting the foregoing, the term Legal Requirements includes all
Environmental Laws and shall also include all Permits and Contracts issued or
entered into by any Governmental Authority, any Accreditation Body and/or any
Third Party Payor and all Permitted Encumbrances, but shall exclude any
non-binding or non-mandatory rules or guidelines promulgated by an Accreditation
Body or Third Party Payor.
LESSEE: As defined in the preamble of this Lease and its successors and
assigns.
LESSEE'S ELECTION NOTICE: As defined in Section 14.3.
LESSOR: As defined in the preamble of this Lease and its successors and
assigns.
LIEN: With respect to any real or personal property, any mortgage, deed of
trust, easement, restriction, lien, pledge, collateral assignment,
hypothecation, charge, security interest, title retention agreement, levy,
execution, seizure, attachment, garnishment or other encumbrance of any kind in
respect of such property, whether or not choate, vested or perfected.
LIMITED PARTIES: As defined in Section 11.5.4; provided, however, in no
event shall the term Limited Parties include any Person in its capacity as a
shareholder of a public entity, unless such shareholder is a member of the
Leasing Group or an Affiliate of any member of the Leasing Group.
MANAGED CARE PLANS: All health maintenance organizations, preferred
provider organizations, individual practice associations, competitive medical
plans, and similar arrangements.
MANAGEMENT AGREEMENT: Any agreement, whether written or oral, between the
Lessee or any Sublessee and any other Person pursuant to which the Lessee or
such Sublessee provides any payment, fee or other consideration to any other
Person to operate or manage the Facility.
MANAGER: Any Person who has entered into a Management Agreement with the
Lessee or any Sublessee.
MATERIAL STRUCTURAL WORK: Any (I) structural alteration, (II) structural
repair or (III) structural renovation to the Leased Property that would require
(A) the design and/or involvement of a structural engineer and/or architect
and/or (B) the issuance of a Permit.
MEDICAID: The medical assistance program established by Title XIX of the
Social Security Act (42 USC ss.ss.1396 et seq.) and any statute succeeding
thereto.
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MEDICARE: The health insurance program for the aged and disabled
established by Title XVIII of the Social Security Act (42 USC ss.ss.1395 et
seq.) and any statute succeeding thereto.
MEDITRUST: As defined in Article 23.
MEDITRUST/ALS TRANSACTION DOCUMENTS: As defined in the Agreement Regarding
Related Lease Transactions, including Meditrust/ALS Transaction Documents which
are by implication added to, or deleted from, such definition as EXHIBITS A, B
OR C to the Agreement Regarding Related Lease Transactions are amended or
modified from time to time in order to reflect the addition of facilities or the
removal of one or more facilities.
MEDITRUST ENTITIES: Collectively, Meditrust, the Lessor and any other
Affiliate of the Lessor which may now or hereafter be a party to any Related
Party Agreement.
MEDITRUST INVESTMENT: The sum of (I) the Original Meditrust Investment
plus (II) the aggregate amount of all Subsequent Investments.
MONTHLY DEPOSIT DATE: As defined in Section 4.6.1.
NET INCOME (OR NET LOSS): The net income (or net loss, expressed as a
negative number) of a Person for any period, after all taxes actually paid or
accrued and all expenses and other charges determined in accordance with GAAP.
OBLIGATIONS: Collectively, the Lease Obligations and the Related Party
Obligations.
OFFER: As defined in Section 18.1.
OFFERED PROPERTY: As defined in Section 18.1.
OFFICER'S CERTIFICATE: A certificate of the Lessee signed on behalf of the
Lessee by the Chairman of the Board of Directors, the President, any Vice
President or the Treasurer of the Lessee, or another officer authorized to so
sign by the Board of Directors or By-Laws of the Lessee, or any other Person
whose power and authority to act has been authorized by delegation in writing by
any of the Persons holding the foregoing offices.
ORIGINAL MEDITRUST INVESTMENT: FIVE MILLION SIX HUNDRED EIGHTEEN
THOUSAND FORTY-NINE AND 00/100 DOLLARS ($5,618,049.00).
OTHER PERMITTED USES: To the extent the Lessee elects, in its sole
discretion, to engage in same and then only if permitted under Legal
Requirements and under Insurance Requirements, and so long as the same do not
detract in any material manner from the Primary Intended Use, (I) medical or
dental offices or clinics, (II) medical or dental laboratories, (III) day care
center, (IV) hospitals, (V) pharmacy, (VI) medical services and physical
therapy, (VII) florists and card shops
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which do not have a separate entrance, (VIII) ancillary parking, (IX) beauty
salons, and (X) other similar ancillary uses currently being conducted at the
Facility.
OVERDUE RATE: On any date, a rate of interest per annum equal to the
greater of: (I) a variable rate of interest per annum equal to one hundred
twenty percent (120%) of the Prime Rate, or (II) eighteen percent (18%) per
annum; provided, however, in no event shall the Overdue Rate be greater than the
maximum rate then permitted under applicable law to be charged by the Lessor.
PBGC: Pension Benefit Guaranty Corporation.
PERMITS: Collectively, all permits, licenses, approvals, qualifications,
rights, variances, permissive uses, accreditations, certificates,
certifications, consents, agreements, contracts, contract rights, franchises,
interim licenses, permits and other authorizations of every nature whatsoever
required by, or issued under, applicable Legal Requirements benefiting, relating
or affecting the Leased Property or the construction, development, maintenance,
management, use or operation thereof, or the operation of any programs or
services in conjunction with the Leased Property and all renewals, replacements
and substitutions therefor, now or hereafter required or issued by any
Governmental Authority, Accreditation Body or Third Party Payor to any member of
the Leasing Group, or maintained or used by any member of the Leasing Group, or
entered into by any member of the Leasing Group with any third Person.
PERMITS ASSIGNMENT: The Amended and Restated Collateral Assignment of
Permits, Licenses and Contracts dated as of April 30, 1997 granted by the Lessee
to the Lessor, as may be amended from time to time.
PERMITTED ENCUMBRANCES: As defined in Section 10.1.17.
PERMITTED PRIOR SECURITY INTERESTS: As defined in Section 6.1.2.
PERSON: Any individual, corporation, general partnership, limited
partnership, joint venture, stock company or association, company, bank, trust,
trust company, land trust, business trust, unincorporated organization,
unincorporated association, Governmental Authority or other entity of any kind
or nature.
PLANS AND SPECIFICATIONS: As defined in Section 13.1.2.
PLEDGE AGREEMENT: The Amended and Restated Stock Pledge Agreement dated as
of April 30, 1997 by and among the Guarantor, the Lessee and the Lessor, as may
be amended from time to time.
PRIMARY INTENDED USE: The use of the portion of the Facility known as
Hamilton House of Delta I as an assisted living and dementia care facility
(known for regulatory purposes in the State as a home for the aged) with
thirty-four (34) licensed assisted living units and dementia care units and
thirty-eight (38) beds, and the use of the portion of the Facility known as
WovenHearts of Delta II as an assisted living facility (known for regulatory
purposes in the State as an adult foster care facility) with nineteen (19)
licensed assisted living units and twenty (20) beds, and such ancillary uses as
are permitted by law and may be necessary in connection therewith or incidental
thereto.
PRIME RATE: The variable rate of interest per annum from time to time
announced by the Reference Bank as its prime rate of interest and in the event
that the Reference Bank no longer announces a prime rate of interest, then the
Prime Rate shall be deemed to be the variable rate of interest per annum which
is the prime rate of interest or base rate of interest from time to time
announced by any other major bank or other financial institution reasonably
selected by the Lessor.
PRINCIPAL PLACE OF BUSINESS: As defined in Section 10.1.28.
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PROCEEDS: As defined in the UCC.
PROVIDER AGREEMENTS: All participation, provider and reimbursement
agreements or arrangements now or hereafter in effect for the benefit of the
Lessee or any Sublessee in connection with the operation of the Facility
relating to any right of payment or other claim arising out of or in connection
with the Lessee's or such Sublessee's participation in any Third Party Payor
Program.
PURCHASER: As defined in Section 11.5.4.
RECEIVABLES: Collectively, all (I) Instruments, Documents, Accounts,
Proceeds, General Intangibles and Chattel Paper and (II) rights to payment for
goods sold or leased or services rendered by the Lessee or any other party in
connection with the operation of the Facility, whether now in existence or
arising from time to time hereafter and whether or not yet earned by
performance, including, without limitation, obligations evidenced by an account,
note, contract, security agreement, chattel paper, or other evidence of
indebtedness.
REFERENCE BANK: Fleet Bank of Connecticut, N.A.
RELATED LEASES: Collectively, those Facility Leases relating to each of
the facilities listed on any of EXHIBITS A, B AND C of the Agreement Regarding
Related Lease Transactions, as such exhibits may be amended or modified from
time to time in order to reflect the addition of facilities or the removal of
one or more facilities.
RELATED PARTIES: Collectively, each Person that may now or hereafter be a
party to any Related Party Agreement other than the Meditrust Entities.
RELATED PARTY AGREEMENT: Any agreement, document or instrument now or
hereafter evidencing or securing any Related Party Obligation, including,
without limitation, the Related Leases and any agreements listed in Schedule 2.6
of the Security Agreement.
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RELATED PARTY DEFAULT: The occurrence of a default or breach of condition
continuing beyond the expiration of any applicable notice and grace and cure
periods, if any, under the terms of any Related Party Agreement.
RELATED PARTY OBLIGATIONS: Collectively, all indebtedness, covenants,
liabilities, obligations, agreements and undertakings due to, or made for the
benefit of, the Lessor or any of the other Meditrust Entities by the Lessee or
any other member of the Leasing Group or any of their respective Affiliates;
whether such indebtedness, covenants, liabilities, obligations, agreements
and/or undertakings are direct or indirect, absolute or contingent, liquidated
or unliquidated, due or to become due, joint, several or joint and several,
primary or secondary, now existing or hereafter arising, including, without
limitation, the obligations set forth under the Meditrust/ALS Transaction
Documents.
RENT: Collectively, the Base Rent, the Additional Rent, the Additional
Charges and all other sums payable under this Lease and the other Lease
Documents.
RENT ADJUSTMENT DATE: The first day of each Extended Term.
RENT ADJUSTMENT RATE: Three hundred thirty (330) basis points over the
Index.
RENT COVERAGE RATIO: The ratio of (I) Cash Flow for each applicable period
to (II) the total of all Rent paid or payable during such period or accrued for
such period.
RENT INSURANCE PROCEEDS: As defined in Section 13.8.
RESIDENT AGREEMENTS: Collectively, all Subleases now or hereafter executed
or entered into by or on behalf of any Person allowing such Person to reside at
the Facility.
RETAINAGE: As defined in Section 13.1.3.
RIGHT OF FIRST REFUSAL: As defined in Section 18.1.
SECURITY AGREEMENT: The Amended and Restated Security Agreement dated as
of April 30, 1997 herewith between the Lessee and the Lessor, as may be amended
from time to time.
STATE: The state or commonwealth in which the Leased Property is located.
STATED AMOUNT: An amount equal to three (3) months Base Rent during the
first Lease Year.
SUBLEASE: Collectively, all subleases, licenses, use agreements,
concession agreements, tenancy at will agreements, rentals of other facilities
of the Leased Property and all other occupancy agreements of every kind and
nature (including all Resident Agreements), whether oral or in writing,
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now in existence or subsequently entered into by the Lessee, encumbering or
affecting the Leased Property.
SUBLESSEE: Any sublessee, licensee, concessionaire, tenant or other
occupant under any of the Subleases, but excluding any resident of the Facility
under any Resident Agreement.
SUBSEQUENT INVESTMENTS: The aggregate amount of all sums expended and
liabilities incurred by the Lessor in connection with Capital Additions.
SUBSIDIARY OR SUBSIDIARIES: With respect to any Person, any corporation or
other entity of which such Person, directly, or indirectly, through another
entity or otherwise, owns, or has the right to control or direct the voting of,
fifty percent (50%) or more of the outstanding capital stock or other ownership
interest having general voting power (under ordinary circumstances).
TAKING: A taking or voluntary conveyance during the Term of the Leased
Property, or any interest therein or right accruing thereto, or use thereof, as
the result of, or in settlement of, any Condemnation or other eminent domain
proceeding affecting the Leased Property.
TANGIBLE NET WORTH: An amount determined in accordance with GAAP equal to
the total assets of any Person, excluding the total intangible assets of such
Person, minus the total liabilities of such Person. Total intangible assets
shall be deemed to include, but shall not be limited to, the excess of cost over
book value of acquired businesses accounted for by the purchase method,
formulae, trademarks, trade names, patents, patent rights and deferred expenses
(including, but not limited to, unamortized debt discount and expense,
organizational expense and experimental and development expenses).
TANGIBLE PERSONAL PROPERTY: All vehicles, machinery, equipment, furniture,
furnishings, movable walls or partitions, computers or trade fixtures, goods,
inventory, supplies, and other personal property owned or leased (pursuant to
equipment leases) by the Lessee and used in connection with the operation of the
Leased Property.
TERM: Collectively, the Initial Term and each Extended Term which has
become effective pursuant to Section 1.3, as the context may require, unless
earlier terminated pursuant to the provisions hereof.
THIRD PARTY PAYOR PROGRAMS: Collectively, all third party payor programs
in which the Lessee or any Sublessee presently or in the future may participate,
including without limitation, Medicare, Medicaid, Blue Cross and/or Blue Shield,
Managed Care Plans, other private insurance plans and employee assistance
programs.
THIRD PARTY PAYORS: Collectively, Medicare, Medicaid, Blue Cross and/or
Blue Shield, private insurers and any other Person which presently or in the
future maintains Third Party Payor Programs.
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UCC: The Uniform Commercial Code as in effect from time to time in the
State.
UNAVOIDABLE DELAYS: Delays due to strikes, lockouts, inability to procure
materials, power failure, acts of God, governmental restrictions, enemy action,
civil commotion, fire, unavoidable casualty or other causes beyond the control
of the party responsible for performing an obligation hereunder, provided that
lack of funds shall not be deemed a cause beyond the control of either party
hereto.
UNITED STATES TREASURY SECURITIES: The uninsured treasury securities
issued by the United States Federal Reserve Bank.
UNSUITABLE FOR ITS PRIMARY INTENDED USE: As used anywhere in this Lease,
the term "Unsuitable For Its Primary Intended Use" shall mean that, by reason of
Casualty, or a partial or temporary Taking by Condemnation, as jointly
determined by the Lessor and the Lessee in good faith, the Facility cannot be
operated on a commercially practicable basis for the Primary Intended Use,
taking into account, among other relevant factors, the number of usable units
affected by such Casualty or partial or temporary Taking.
UPGRADE RENOVATIONS: As defined in Section 8.1.4.
WORK: As defined in Section 13.1.1.
WORK CERTIFICATES: As defined in Section 13.1.3.
2.2 RULES OF CONSTRUCTION. The following rules of construction shall apply
to the Lease and each of the other Lease Documents: (A) references to "herein",
"hereof" and "hereunder" shall be deemed to refer to this Lease or the other
applicable Lease Document, and shall not be limited to the particular text or
section or subsection in which such words appear; (B) the use of any gender
shall include all genders and the singular number shall include the plural and
vice versa as the context may require; (C) references to the Lessor's attorneys
shall be deemed to include, without limitation, special counsel and local
counsel for the Lessor; (D) reference to attorneys' fees and expenses shall be
deemed to include only actual attorneys' fees reasonably incurred and only
actual costs reasonably incurred for administrative, paralegal and other support
staff; (E) references to Leased Property shall be deemed to include references
to all of the Leased Property and references to any portion thereof; (F)
references to the Lease Obligations shall be deemed to include references to all
of the Lease Obligations and references to any portion thereof; (G) references
to the Obligations shall be deemed to include references to all of the
Obligations and references to any portion thereof; (H) the term "including",
when following any general statement, will not be construed to limit such
statement to the specific items or matters as provided immediately following the
term "including" (whether or not non- limiting language such as "without
limitation" or "but not limited to" or words of similar import are also used),
but rather will be deemed to refer to all of the items or matters that could
reasonably fall within the broadest scope of the general statement; (I) any
requirement that financial statements be Consolidated in form shall apply only
to such financial statements as relate to a period during any portion of which
the relevant Person has one or more
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Subsidiaries; (J) all accounting terms not specifically defined in the Lease
Documents shall be construed in accordance with GAAP; and (K) all exhibits
annexed to any of the Lease Documents as referenced therein shall be deemed
incorporated in such Lease Document by such annexation and/or reference.
ARTICLE 3
RENT
3.1 RENT FOR LAND, LEASED IMPROVEMENTS, RELATED RIGHTS AND FIXTURES. The
Lessee will pay to the Lessor, in lawful money of the United States of America,
at the Lessor's address set forth herein or at such other place or to such other
Person as the Lessor from time to time may designate in writing not less than
five (5) Business Days in advance, rent for the Leased Property, as follows.
3.1.1 BASE RENT: The Lessee shall pay to the Lessor, commencing on
July 31, 1998, a base rent (the "Base Rent") equal to (I) FOUR HUNDRED
NINETY-FIVE THOUSAND FIVE HUNDRED TWELVE AND 00/100 DOLLARS ($495,512.00)
per annum, payable in advance in equal, consecutive monthly installments,
provided that on the date hereof, the Lessee shall pay to the Lessor a
prorated portion of the Base Rent representing one (1) day's Base Rent for
July 31, 1998; and provided further that on each Rent Adjustment Date, the
Base Rent shall be adjusted to equal the greater of (X) the then current
Base Rent or (Y) an amount equal to the Meditrust Investment multiplied by
the Rent Adjustment Rate then in effect on such Rent Adjustment Date.
3.1.2 ADDITIONAL RENT. In addition to the Base Rent, the Lessee
shall pay to the Lessor additional rent (the "Additional Rent") which
shall equal, in each calendar year during the Term, the sum of (a) the
Additional Rent payable with respect to the immediately preceding calendar
year plus (b) twelve percent (12%) of Excess Gross Revenues for the then
current calendar year. Additional Rent shall accrue commencing on August
1, 1999, and shall be payable during the Term, quarterly in arrears,
commencing on October 20, 1999 ("Additional Rent Commencement Date") and
there shall be an annual reconciliation as provided in Section 3.2 below.
Notwithstanding the foregoing, in no event shall any increase to the
Additional Rent for any calendar year exceed two and one-half percent
(2.5%) of the total of Base Rent and Additional Rent payable with respect
to the immediately preceding calendar year.
Additional Rent payable hereunder for any fractional calendar year shall
be prorated so that such Additional Rent shall equal the product of (x)
the Additional Rent payable with respect to the immediately preceding
calendar year plus an amount equal to twelve percent (12%) of the
annualized Excess Gross Revenues for the applicable fractional calendar
year multiplied by (y) a fraction (the "Proration Factor"), the numerator
of which is the number of days in the applicable fractional calendar year
and the denominator of which is 365; provided, however, that, in no event
shall the Additional Rent payable during (a) the calendar
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year in which the Additional Rent Commencement Date occurs exceed the
product of two and one-half percent (2.5%) of the total of Base Rent
payable with respect to the immediately preceding calendar year multiplied
by the applicable Proration Factor and (b) any other fractional calendar
year increase by more than the product of two and one-half percent (2.5%)
of the total of Base Rent and Additional Rent payable with respect to the
immediately preceding calendar year multiplied by the applicable Proration
Factor.
3.2 CALCULATION AND PAYMENT OF ADDITIONAL RENT; ANNUAL RECONCILIATION.
3.2.1 ESTIMATES AND PAYMENTS. Commencing on October 20, 1999,
Additional Rent to be paid during each calendar year during the Term shall
be paid quarterly in arrears (in equal installments on the 20th day of
April, July, October and January) based on the actual increase in Gross
Revenues over the comparable fiscal quarter for the immediately preceding
calendar year, to be adjusted at the end of each such year based on the
actual Excess Gross Revenues calculated for that calendar year. Additional
Rent due for any portion of any calendar year shall be prorated
accordingly.
3.2.2 ANNUAL STATEMENT. In addition, on or before the first day of
April of each year following any calendar year for which Additional Rent
is payable hereunder, the Lessee shall deliver to the Lessor an Officer's
Certificate, reasonably acceptable to the Lessor and certified by the
chief financial officer of the Lessee, setting forth the Gross Revenues
for the immediately preceding calendar year.
3.2.3 DEFICITS. If the Additional Rent, as finally determined for
any calendar year (or portion thereof), exceeds the sum of the quarterly
payments of Additional Rent previously paid by the Lessee with respect to
said calendar year, within thirty (30) days after such determination is
required to be made hereunder, the Lessee shall pay such deficit to the
Lessor and, if the deficit exceeds five percent (5%) of the Additional
Rent which was previously paid to the Lessor with respect to said calendar
year, then the Lessee shall also pay the Lessor interest on such deficit
at the Overdue Rate from the applicable quarterly date that such payment
should have originally been made by the Lessee to the date that the Lessor
receives such payment.
3.2.4 OVERPAYMENTS. If the Additional Rent, as finally determined
for any calendar year (or portion thereof), is less than the amount
previously paid with respect thereto by the Lessee, and if no Lease
Default exists, the Lessee shall notify the Lessor either (A) to pay to
the Lessee an amount equal to such difference or (B) to grant the Lessee a
credit against Additional Rent next coming due in the amount of such
difference.
3.2.5 FINAL DETERMINATION. The obligation to pay Additional Rent
shall survive the expiration or earlier termination of the Term (as to
Additional Rent payments that are due and payable with respect to periods
prior to the expiration or earlier termination of the Term and during any
periods that the Lessee remains in possession of the Leased Property), and
a final reconciliation, taking into account, among other relevant
adjustments, any contractual
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allowances which related to Gross Revenues that accrued prior to the date
of such expiration or earlier termination, but which have been determined
to be not payable. The Lessee's good faith best estimate of the amount of
any unresolved contractual allowances shall be made not later than two (2)
years after said expiration or termination date. Within sixty (60) days
after the expiration or earlier termination of the Term, the Lessee shall
advise the Lessor of the Lessee's best estimate of the approximate amount
of such adjustments, which estimate shall not be binding on the Lessee or
have any legal effect whatsoever.
3.2.6 BEST EFFORTS TO MAXIMIZE. The Lessee further covenants that
the operation of the Facility shall be conducted in a manner consistent
with the prevailing standards and practices recognized in the assisted
living industry as those customarily utilized by first class business
operations. Subject to any applicable Legal Requirements, the members of
the Leasing Group shall use their best efforts to maximize the Facility's
Gross Revenues.
3.3 CONFIRMATION AND AUDIT OF ADDITIONAL RENT.
3.3.1 MAINTAIN ACCOUNTING SYSTEMS. The Lessee shall utilize, or
cause to be utilized, an accounting system for the Leased Property in
accordance with usual and customary practices in the assisted living
industry and in accordance with GAAP which will accurately record all
Gross Revenues. The Lessee shall retain, for at least three (3) years
after the expiration of each calendar year (and in any event until the
final reconciliation described in Section 3.2 above has been made),
adequate records conforming to such accounting system showing all Gross
Revenues for such calendar year.
3.3.2 AUDIT BY LESSOR. The Lessor, at its own expense except as
provided hereinbelow, shall have the right from time to time to have its
accountants or representatives audit the information set forth in the
Officer's Certificate referred to in Section 3.2 and in connection with
such audits, to examine the Lessee's records with respect thereto
(including supporting data, income tax and sales tax returns), subject to
any prohibitions or limitations on disclosure of any such data under
applicable law or regulations, including without limitation, any duly
enacted "Patients' Bill of Rights" or similar legislation, including such
limitations as may be necessary to preserve the confidentiality of any
Facility-patient relationship and any physician-patient privilege.
3.3.3 DEFICIENCIES AND OVERPAYMENTS. If any such audit discloses a
deficiency in the reporting of Gross Revenues and either the Lessee agrees
with the result of such audit or the matter is compromised, the Lessee
shall forthwith pay to the Lessor the amount of the deficiency in
Additional Rent which would have been payable by it had such deficiency in
reporting Gross Revenues not occurred, as finally agreed or determined,
together with interest on the Additional Rent which should have been
payable by it, calculated at the Overdue Rate, from the date when said
payment should have been made by the Lessee to the date that the Lessor
receives such payment. Notwithstanding anything to the contrary herein,
with respect to any audit that is commenced more than two (2) years after
the date Gross Revenues for any calendar year are reported by the Lessee
to the Lessor, the deficiency, if
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any, with respect to Additional Rent shall bear interest as permitted
herein only from the date such determination of deficiency is made, unless
such deficiency is the result of gross negligence or willful misconduct on
the part of the Lessee (or any Affiliate thereof). If any audit conducted
for the Lessor pursuant to the provisions hereof discloses that (A) the
Gross Revenues actually received by the Lessee for any calendar year
exceed those reported by the Lessee by more than five percent (5%), the
Lessee shall pay the reasonable cost of such audit and examination or (B)
the Lessee has overpaid Additional Rent, and if no Lease Default exists,
the Lessor shall so notify the Lessee and the Lessee shall direct the
Lessor either (I) to refund the overpayment to the Lessee or (II) grant a
credit against Additional Rent next coming due in the amount of such
difference.
3.3.4 SURVIVAL. The obligations of the Lessor and the Lessee
contained in this Section shall survive the expiration or earlier
termination of this Lease.
3.4 ADDITIONAL CHARGES. Subject to the rights to contest as set forth in
Article 15, in addition to the Base Rent and the Additional Rent, (A) the Lessee
will also pay and discharge as and when due and payable all Impositions, all
amounts, liabilities and obligations under the Appurtenant Agreements due from
or payable by the owner of the Leased Property, all amounts, liabilities and
obligations under the Permitted Encumbrances due from or payable by the owner of
the Leased Property and all other amounts, liabilities and obligations which the
Lessee assumes or agrees to pay under this Lease, and (B) in the event of any
failure on the part of the Lessee to pay any of those items referred to in
clause (a) above, the Lessee will also promptly pay and discharge every fine,
penalty, interest and cost which may be added for non-payment or late payment of
such items (the items referred to in clauses (a) and (b) above being referred to
herein collectively as the "Additional Charges"), and the Lessor shall have all
legal, equitable and contractual rights, powers and remedies provided in this
Lease, by statute or otherwise, in the case of non-payment of the Additional
Charges, as well as the Base Rent and the Additional Rent. To the extent that
the Lessee pays any Additional Charges to the Lessor pursuant to any requirement
of this Lease, the Lessee shall be relieved of its obligation to pay such
Additional Charges to any other Person to which such Additional Charges would
otherwise be due, and the Lessor shall be obligated to pay such Additional
Charges to any Person to whom such Additional Charges are due promptly and prior
to any additional costs or expenses being incurred.
3.5 LEASING COMMITMENT FEE: The Lessee shall pay to the Lessor the Leasing
Commitment Fee simultaneously with the execution of this Lease; provided,
however, that, at the Lessor's option, the Leasing Commitment Fee shall be held
in an escrow account established with a Person designated by the Lessor pursuant
to an escrow arrangement satisfactory to the Lessor, with interest thereon
benefiting the Lessor. If the Lessor exercises its option to require that the
Leasing Commitment Fee be held in such an escrow account (A) the Leasing
Commitment Fee shall be disbursed from said escrow account only upon the joint
instructions of the Lessee and the Lessor (which instructions from the Lessee
shall be immediately given upon the request of the Lessor) and in no event shall
the Leasing Commitment Fee be disbursed therefrom, in whole or in part, unless
and until so requested by the Lessor and (B) the Lessor shall bear the risk of
loss of or misappropriation of the Leasing Commitment Fee by such escrow agent.
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3.6 NET LEASE. The Rent shall be paid absolutely net to the Lessor, so
that this Lease shall yield to the Lessor throughout the Term the full amount of
the installments of Base Rent, the Additional Rent and the payments of
Additional Charges.
3.7 NO LESSEE TERMINATION OR OFFSET.
3.7.1 NO TERMINATION. Except as may be otherwise specifically and
expressly provided in Article 13 or Article 14 of this Lease, the Lessee,
to the extent not prohibited by applicable law, shall remain bound by this
Lease in accordance with its terms and shall neither take any action
without the consent of the Lessor to modify, surrender or terminate the
same, nor seek nor be entitled to any abatement, deduction, deferment or
reduction of Rent, or set-off against the Rent, nor shall the respective
obligations of the Lessor and the Lessee be otherwise affected by reason
of (A) any Casualty or any Taking of the Leased Property, (B) the lawful
or unlawful prohibition of, or restriction upon, the Lessee's use of the
Leased Property or the interference with such use by any Person (other
than the Lessor, except to the extent permitted hereunder) or by reason of
eviction by paramount title; (C) any claim that the Lessee has or might
have against the Lessor, (D) any default or breach of any warranty by the
Lessor or any of the other Meditrust Entities under this Lease, any other
Lease Document or any Related Party Agreement, (E) any bankruptcy,
insolvency, reorganization, composition, readjustment, liquidation,
dissolution, winding up or other proceedings affecting the Lessor or any
assignee or transferee of the Lessor or (F) any other cause whether
similar or dissimilar to any of the foregoing, other than a discharge of
the Lessee from any of the Lease Obligations as a matter of law.
3.7.2 WAIVER. The Lessee, to the fullest extent not prohibited by
applicable law, hereby specifically waives all rights, arising from any
occurrence whatsoever, which may now or hereafter be conferred upon it by
law to (A) modify, surrender or terminate this Lease or quit or surrender
the Leased Property or (B) entitle the Lessee to any abatement, reduction,
suspension or deferment of the Rent or other sums payable by the Lessee
hereunder, except as otherwise specifically and expressly provided in this
Lease.
3.7.3 INDEPENDENT COVENANTS. The obligations of the Lessor and the
Lessee hereunder shall be separate and independent covenants and
agreements and the Rent and all other sums payable by the Lessee hereunder
shall continue to be payable in all events unless the obligations to pay
the same shall be terminated pursuant to the express provisions of this
Lease or (except in those instances where the obligation to pay expressly
survives the termination of this Lease) by termination of this Lease other
than by reason of an Event of Default.
3.8 ABATEMENT OF RENT LIMITED. There shall be no abatement of Rent on
account of any Casualty, Taking or other event, except that in the event of a
partial Taking or a temporary Taking as described in Section 14.3 or in the
event of a Casualty described in Section 13.1.1, the Base Rent shall be abated
as follows: (A) in the case of such a partial Taking, the Meditrust Investment
shall be reduced for the purposes of calculating Base Rent pursuant to Section
3.1 by subtracting
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therefrom, as applicable, the net amount of the Award received by the Lessor;
(B) in the case of such a temporary Taking, by reducing the Base Rent for the
period of such a temporary Taking, by the net amount of the Award received by
the Lessor; and (C) in the event of a Casualty which is not the result of the
gross negligence or willful misconduct of any member of the Leasing Group and
which the Lessee is proceeding to restore in accordance with the provisions of
this Lease, by reducing the Base Rent, during the period the Lessee is unable to
use the Leased Property for the Primary Intended Use by the net amount of rent
loss and/or business interruption insurance received by the Lessor.
For the purposes of this Section 3.8, the "net amount of the Award
received by the Lessor" shall mean the Award paid to the Lessor on account of
such Taking, minus all costs and expenses incurred by the Lessor in connection
therewith, and minus any amounts paid to or for the account
of the Lessee to reimburse for the costs and expenses of reconstructing the
Facility following such Taking in order to create a viable and functional
Facility under all of the circumstances.
ARTICLE 4
IMPOSITIONS; TAXES; UTILITIES;
INSURANCE PAYMENTS
4.1 PAYMENT OF IMPOSITIONS.
4.1.1 LESSEE TO PAY. Subject to the provisions of Section 4.1.2 and
Article 15, the Lessee will pay or cause to be paid all Impositions before
any fine, penalty, interest or cost may be added for non-payment, such
payments to be made directly to the taxing authority where feasible, and
the Lessee, upon request by the Lessor, will promptly furnish the Lessor
copies of official receipts or other satisfactory proof evidencing payment
not later than the last day on which the same may be paid without penalty
or interest. The Lessor shall promptly forward to the Lessee for payment
any and all bills or invoices it receives with respect to Impositions.
4.1.2 INSTALLMENT ELECTIONS. If any such Imposition may, at the
option of the taxpayer, lawfully be paid in installments (whether or not
interest shall accrue on the unpaid balance of such Imposition), the
Lessee may exercise the option to pay the same (and any accrued interest
on the unpaid balance of such Imposition) in installments and, in such
event, shall pay such installments during the Term hereof (subject to the
Lessee's right to contest pursuant to the provisions of Section 4.1.5
below) as the same respectively become due and before any fine, penalty,
premium, further interest or cost may be added thereto.
4.1.3 RETURNS AND REPORTS. The Lessor, at its expense, shall, to the
extent permitted by applicable law, prepare and file all tax returns and
reports as may be required by Governmental Authorities in respect of the
Lessor's net income, gross receipts, franchise taxes and taxes on its
capital stock, and the Lessee, at its expense, shall, to the extent
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permitted by applicable laws and regulations, prepare and file all other
tax returns and reports in respect of any Imposition as may be required by
Governmental Authorities. The Lessor and the Lessee shall, upon request of
the other, provide such data as is maintained by the party to whom the
request is made with respect to the Leased Property as may be necessary to
prepare any required returns and reports. In the event that any
Governmental Authority classifies any property covered by this Lease as
personal property, the Lessee shall file all personal property tax returns
in such jurisdictions where it may legally so file. The Lessor, to the
extent it possesses the same, and the Lessee, to the extent it possesses
the same, will provide the other party, upon request, with cost and
depreciation records necessary for filing returns for any portion of
Leased Property so classified as personal property. Where the Lessor is
legally required to file personal property tax returns, if the Lessee
notifies the Lessor of the obligation to do so in each year at least
thirty (30) days prior to the date any protest must be filed, the Lessee
will be provided with copies of assessment notices so as to enable the
Lessee to file a protest.
4.1.4 REFUNDS. If no Lease Default shall have occurred and be
continuing, any refund due from any taxing authority in respect of any
Imposition paid by the Lessee shall be paid over to or retained by the
Lessee. If a Lease Default shall have occurred and be continuing, at the
Lessor's option, such funds shall be paid over to the Lessor and/or
retained by the Lessor and applied toward the Obligations in accordance
with the Lease Documents and/or the Related Party Agreements.
4.1.5 PROTEST. Upon giving notice to the Lessor, at the Lessee's
option and sole cost and expense, and subject to compliance with the
provisions of Article 15, the Lessee may contest, protest, appeal, or
institute such other proceedings as the Lessee may deem appropriate to
effect a reduction of any Imposition and the Lessor, at the Lessee's cost
and expense as aforesaid, shall fully cooperate in a reasonable manner
with the Lessee in connection with such protest, appeal or other action.
4.2 NOTICE OF IMPOSITIONS. The Lessor shall give prompt notice to the
Lessee of all Impositions payable by the Lessee hereunder of which the Lessor at
any time has knowledge, but the Lessor's failure to give any such notice shall
in no way diminish the Lessee's obligations hereunder to pay such Impositions.
4.3 ADJUSTMENT OF IMPOSITIONS. Impositions imposed in respect of the
period during which the expiration or earlier termination of the Term occurs
shall be adjusted and prorated between the Lessor and the Lessee, whether or not
such Impositions are imposed before or after such expiration or termination, and
the Lessee's obligation to pay and the Lessor's obligation to refund their
respective prorated share thereof shall survive such expiration or termination.
4.4 UTILITY CHARGES. The Lessee will pay or cause to be paid all charges
for electricity, power, gas, oil, water, telephone and other utilities used in
the Leased Property during the Term and thereafter until the Lessee surrenders
the Leased Property in the manner required by this Lease. If the Lessee is
required to pay a deposit to any of the utility providers serving the Leased
Property,
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any and all such deposits shall become the property of the Lessee at the
expiration of the Term (as opposed to an earlier termination of this Lease) if
and when the Lessee surrenders the Leased Property in the manner required by
this Lease.
4.5 INSURANCE PREMIUMS. The Lessee will pay or cause to be paid all
premiums for the insurance coverage required to be maintained pursuant to
Article 12 during the Term, and thereafter until the Lessee yields up the Leased
Property in the manner required by this Lease. All such premiums shall be paid
annually in advance and the Lessee, at the Lessor's request, shall furnish the
Lessor with evidence satisfactory to the Lessor that all such premiums have been
so paid prior to the commencement of the Term and thereafter at least thirty
(30) days prior to the due date of each premium which thereafter becomes due.
Notwithstanding the foregoing, the Lessee may pay such insurance premiums to the
insurer in monthly installments so long as the applicable insurer is
contractually obligated to give the Lessor not less than a sixty (60) days
notice of non-payment and so long as no Lease Default has occurred and is
continuing. In the event of the failure of the Lessee either to comply with the
insurance requirements in Article 12, or to pay the premiums for such insurance,
or to deliver such policies or certificates thereof to the Lessor at the times
required hereunder, the Lessor shall be entitled, but shall have no obligation,
to effect such insurance and pay the premiums therefor, which premiums shall be
a demand obligation of the Lessee to the Lessor.
4.6 DEPOSITS.
4.6.1 LESSOR'S OPTION. At the option of the Lessor, which may be
exercised at any time after an Event of Default occurs, the Lessee shall,
upon written request of the Lessor, on the first day on the calendar month
immediately following such request, and on the first day of each calendar
month thereafter during the Term (each of which dates is referred to as a
"Monthly Deposit Date"), pay to and deposit with the Lessor a sum equal to
one-twelfth (1/12th) of the Impositions to be levied, charged, filed,
assessed or imposed upon or against the Leased Property within one (1)
year after said Monthly Deposit Date and a sum equal to one-twelfth
(1/12th) of the premiums for the insurance policies required pursuant to
Article 12 which are payable within one (1) year after said Monthly
Deposit Date. If the amount of the Impositions to be levied, charged,
assessed or imposed or insurance premiums to be paid within the ensuing
one (1) year period shall not be fixed upon any Monthly Deposit Date, such
amount for the purpose of computing the deposit to be made by the Lessee
hereunder shall be reasonably estimated by the Lessor with an appropriate
adjustment to be promptly made between the Lessor and the Lessee as soon
as such amount becomes determinable. In addition, the Lessor may, at its
option, from time to time require that any particular deposit be greater
than one-twelfth (1/12th) of the estimated amount payable within one (1)
year after said Monthly Deposit Date, if such additional deposit is
reasonably required in order to provide to the Lessor a sufficient fund
from which to make payment of all Impositions on or before the next due
date of any installment thereof, or to make payment of any required
insurance premiums not later than the due date thereof.
4.6.2 USE OF DEPOSITS. The sums deposited by the Lessee under this
Section 4.6 shall be held by the Lessor and shall be applied by the Lessor
in payment of the Impositions
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or insurance premiums, as the case may be, on or before the due date
thereafter and prior to any penalty, interest, late fee or other similar
charge being imposed to the extent of available funds deposited by the
Lessee under this Section 4.6. Any such deposits may be commingled with
other assets of the Lessor, and shall be deposited by the Lessor at such
bank as the Lessor may, from time to time select, and the Lessor shall not
be liable to the Lessee or any other Person (A) based on the Lessor's (or
such bank's) choice of investment vehicles, (B) for any consequent loss of
principal or interest or (C) for any unavailability of funds based on such
choice of investment; provided, however, that notwithstanding the
foregoing, the Lessor shall only invest any such deposit in any of the
investment vehicles described on EXHIBIT A of the Deposit Pledge
Agreement. Furthermore, the Lessor shall bear no responsibility for the
financial condition of, nor any act or omission by, the Lessor's
depository bank. The income from such investment or interest on such
deposit shall be paid to the Lessee on a semi-annual basis as long as no
Lease Default has occurred and is then continuing, and as long as no fact
or circumstance exists which, with the giving of notice and/or the passage
of time, would constitute a Lease Default. The Lessee shall give not less
than ten (10) days prior written notice to the Lessor in each instance
when an Imposition or insurance premium is due, specifying the Imposition
or premium to be paid and the amount thereof, the place of payment, and
the last day on which the same may be paid in order to comply with the
requirements of this Lease. If the Lessor, in violation of its obligations
under this Lease, does not pay any Imposition or insurance premium when
due, for which a sufficient deposit exists, the Lessee shall not be in
default hereunder by virtue of the failure of the Lessor to pay such
Imposition or such insurance premium and the Lessor shall pay any interest
or fine assessed by virtue of the Lessor's failure to pay such Imposition
or insurance premium.
4.6.3 DEFICITS. If for any reason any deposit held by the Lessor
under this Section 4.6 shall not be sufficient to pay an Imposition or
insurance premium within the time specified therefor in this Lease, then,
within ten (10) days after demand by the Lessor, the Lessee shall deposit
an additional amount with the Lessor, increasing the deposit held by the
Lessor so that the Lessor holds sufficient funds to pay such Imposition or
premium in full (or in installments as otherwise provided for herein),
together with any penalty or interest due thereon. The Lessor may change
its estimate of any Imposition or insurance premium for any period on the
basis of a change in an assessment or tax rate or on the basis of a prior
miscalculation; in which event, within ten (10) days after demand by the
Lessor, the Lessee shall deposit with the Lessor the amount in excess of
the sums previously deposited with the Lessor for the applicable period
which would theretofore have been payable under the revised estimate.
4.6.4 OTHER PROPERTIES. If any Imposition shall be levied, charged,
filed, assessed, or imposed upon or against the Leased Property, and if
such Imposition shall also be a levy, charge, assessment, or imposition
upon or for any other real or personal property that does not constitute a
part of the Leased Property, then the computation of the amounts to be
deposited under this Section 4.6 shall be based upon the entire amount of
such Imposition and the Lessee shall not have the right to apportion any
deposit with respect to such
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Imposition. However, the Lessor will reasonably cooperate with the Lessee
(but at no cost or expense to the Lessor) to change the manner of
assessment for such Imposition so that such Imposition will thereafter
relate only to the Leased Property.
4.6.5 TRANSFERS. In connection with any assignment of the Lessor's
interest under this Lease, the original Lessor named herein and each
successor in interest shall be obligated to transfer all amounts deposited
pursuant to the provisions of this Section 4.6 then in its possession to
such assignee (as the subsequent holder of the Lessor's interest in this
Lease), who shall be obligated to assume the Lessor's obligations with
respect to all such deposited amounts, and upon such transfer, the
original Lessor named herein or the applicable successor in interest
transferring the deposits shall thereupon be completely released from all
liability with respect to such deposits so transferred and the Lessee
shall look solely to said assignee, as the subsequent holder of the
Lessor's interest under this Lease, in reference thereto. The original
Lessor named herein or the applicable successor in interest transferring
the deposits shall provide written notice to the Lessee of such transfer.
The original Lessor named herein or the applicable successor in interest
shall not be released from liability with respect to the deposits so
transferred unless the next successor in interest assumes liability for
such deposits.
4.6.6 SECURITY. All amounts deposited with the Lessor pursuant to
the provisions of this Section 4.6 shall be held by the Lessor as
additional security for the payment and performance of the Obligations
and, upon the occurrence of any Lease Default, the Lessor may, in its sole
and absolute discretion, apply said amounts towards payment or performance
of such Obligations.
4.6.7 RETURN. Upon the expiration or earlier termination of this
Lease, provided, that, all of the Lease Obligations have been fully paid
and performed, any sums then held by the Lessor under this Section 4.6
shall be refunded to the Lessee; unless a Related Party Default has
occurred, in which event such sums may be applied towards the Obligations
in accordance with the Related Party Agreements.
4.6.8 RECEIPTS. The Lessee shall immediately deliver to the Lessor
copies of all notices of non-payment of any insurance premiums and/or
Impositions and, upon the Lessor's request, shall deliver to the Lessor
copies of all other notices, demands, claims, bills and receipts in
relation to the Impositions and insurance premiums immediately upon
receipt thereof by the Lessee.
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ARTICLE 5
OWNERSHIP OF LEASED PROPERTY AND PERSONAL PROPERTY;
INSTALLATION, REMOVAL AND REPLACEMENT OF
PERSONAL PROPERTY
5.1 OWNERSHIP OF THE LEASED PROPERTY. The Lessee acknowledges that the
Leased Property is the property of the Lessor and that the Lessee has only the
right to the exclusive possession and use of the Leased Property upon the terms
and conditions of this Lease.
5.2 PERSONAL PROPERTY; REMOVAL AND REPLACEMENT OF PERSONAL PROPERTY.
5.2.1 LESSEE TO EQUIP FACILITY. The Lessee, at its sole cost and
expense, shall install, affix or assemble or place on the Leased Property,
sufficient items of Tangible Personal Property to enable the Leased
Property to be operated in accordance with the requirements of this Lease
for the Primary Intended Use and the Other Permitted Uses, and such
Tangible Personal Property and replacements thereof, shall be at all times
the property of the Lessee.
5.2.2 SUFFICIENT PERSONAL PROPERTY. The Lessee shall maintain,
during the entire Term, the Tangible Personal Property in good order and
repair and shall provide at its expense all necessary replacements
thereof, as may be necessary in order to operate the Leased Property in
compliance with all applicable Legal Requirements and Insurance
Requirements and otherwise in accordance with customary practice in the
industry for the Primary Intended Use and the Other Permitted Uses, unless
the failure to comply with the same will not have any adverse effect on
either the Leased Property or the Lessee. In addition, the Lessee shall
(A) furnish all necessary replacements of obsolete items of the Tangible
Personal Property during the Term, unless the Lessee provides the Lessor
with an explanation (reasonably acceptable to the Lessor) as to why such
Tangible Personal Property is no longer required in connection with the
operation of the Leased Property and (B) if requested by the Lessor,
deliver to the Lessor, a detailed inventory of all such Tangible Personal
Property.
5.2.3 REMOVAL AND REPLACEMENT; LESSOR'S OPTION TO PURCHASE. The
Lessee shall not remove from the Leased Property any one or more items of
Tangible Personal Property (whether now owned or hereafter acquired), the
fair market value of which exceeds TWENTY-FIVE THOUSAND AND NO/100 DOLLARS
($25,000.00), individually or ONE HUNDRED THOUSAND AND NO/100 DOLLARS
($100,000.00) collectively, except if such Tangible Personal Property is
simultaneously suitably replaced or the Lessee provides the Lessor with an
explanation (reasonably satisfactory to the Lessor) as to why such
Tangible Personal Property is no longer required in connection with the
operation of the Leased Property. At its sole cost and expense, the Lessee
shall restore the Leased Property to the condition required by Article 8,
including repair of all damage to the Leased Property caused by the
removal of the Tangible Personal Property, whether effected by the
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Lessee or the Lessor. Upon the expiration or earlier termination of this
Lease, the Lessor shall have the option, which may be exercised prior to
or within the relevant Decision Period (defined below), of (A) acquiring
the Tangible Personal Property (pursuant to a bill of sale and assignments
of any equipment leases, all in such forms as are reasonably satisfactory
to the Lessor) upon payment of its fair market value or (B) requiring the
Lessee to remove the Tangible Personal Property. For purposes of the
preceding sentence, the "Decision Period" shall mean (1) the last day of
the Term with respect to the expiration thereof in accordance with the
provisions of this Lease, (2) the fifth (5th) Business Day after the date
of any earlier termination of this Lease based on either Casualty or
Condemnation or (3) the thirtieth (30th) day after the date of any earlier
termination of this Lease based on any Event of Default. If the Lessor
exercises its option to purchase the Tangible Personal Property, the price
to be paid by the Lessor shall be (I) reduced by the amount of all
payments due on any equipment leases or any other Permitted Prior Security
Interests assumed by the Lessor and (II) applied to the Lease Obligations
before any payment to the Lessee. If the Lessor requires the removal of
the Tangible Personal Property, then all of the Tangible Personal Property
that is not removed by the Lessee within ten (10) days following such
request shall be considered abandoned by the Lessee and may be
appropriated, sold, destroyed or otherwise disposed of by the Lessor
without first giving notice thereof to the Lessee, without any payment to
the Lessee and without any obligation to account therefor.
ARTICLE 6
SECURITY FOR LEASE OBLIGATIONS
6.1 SECURITY FOR THE LESSEE'S OBLIGATIONS; PERMITTED PRIOR SECURITY
INTERESTS.
6.1.1 SECURITY. In order to secure the payment and performance of
all of the Obligations, the Lessee agrees to provide or cause there to be
provided, among other things, the following security:
(A) a first lien and exclusive security interest in the
Tangible Personal Property, Receivables and certain other Collateral
as more particularly provided for in the Security Agreement;
(B) the Cash Collateral described in Section 6.2;
(C) a first lien and exclusive pledge of all of the capital
stock of the Lessee all as more particularly set forth in the Pledge
Agreement(s). If any Person other than the Lessee or the Guarantor
shall ever operate the Facility, a pledge of all capital stock of,
or partnership or other ownership interests, in such Person shall
also be provided pursuant to a pledge and security agreement
substantially similar to the Pledge Agreements;
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(D) a first lien and exclusive pledge and assignment of, and
security interest in, all Permits and Contracts, as more
particularly provided for in the Permits Assignment, to the extent
permitted by law or the terms thereof; and
(E) in the event that at any time during the Term, the Lessee
holds the fee title to or a leasehold interest in any real property
and/or personal property which is used as an integral part of the
operation of the Leased Property (but is not subject to this Lease),
the Lessee shall (I) provide the Lessor with prior notice of such
acquisition and (II) shall take such actions and enter into such
agreements as the Lessor shall reasonably request in order to grant
the Lessor a first priority mortgage or other security interest in
such real property and personal property, subject only to the
Permitted Encumbrances and other Liens reasonably acceptable to the
Lessor.
6.1.2 PURCHASE-MONEY SECURITY INTERESTS AND EQUIPMENT LEASES.
Notwithstanding any other provision hereof regarding the creation of
Liens, but subject to Section 11.3.8, the Lessee may (A) grant priority
purchase money security interests in items of Tangible Personal Property
and (B) lease Tangible Personal Property from equipment lessors, as long
as in each instance where the aggregate amount of such purchase money
security interests and equipment leases will exceed TWO HUNDRED THOUSAND
AND NO/100 DOLLARS ($200,000.00): (I) all of the terms, conditions and
provisions of the purchase money security agreements or equipment leases
evidencing the financing arrangement are reasonably acceptable to the
Lessor; (II) promptly after the execution thereof, the Lessee provides to
the Lessor true and complete copies, as executed, of all such purchase
money security agreements and equipment leases (and all amendments
thereto); (III) no such purchase money security interest or equipment
lease shall be cross-defaulted or cross-collateralized with any other
obligation other than a purchase money security interest or equipment
lease entered into by the Lessee involving Tangible Personal Property and
the same secured party or equipment lessor, as applicable; (IV) the
secured party or equipment lessors enter into an intercreditor agreement
with, and satisfactory to, the Lessor, pursuant to which, without limiting
the foregoing: (X) the Lessor shall be afforded the option of curing
defaults and the option of succeeding to the rights of the Lessee; (Y) the
Lessor's security interest in Tangible Personal Property shall be
subordinated to the security interest granted to such secured party; and
(Z) the secured party or equipment lessor is not a member of the Leasing
Group or an Affiliate of any member of the Leasing Group. Security
interests granted by the Lessee in full compliance with the provisions of
this Section 6.1.2 are referred to as "Permitted Prior Security
Interests".
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6.2 CASH COLLATERAL.
6.2.1 CASH COLLATERAL. In order to further secure the Lessee's
performance of the Obligations, on the Commencement Date, pursuant to the terms
of the Deposit Pledge Agreement, the Lessee shall provide and pledge to the
Lessor a credit enhancement for the benefit of the Lessor in the form of cash or
other specified investments approved by the Lessor in the Lessor's name in the
total of the Stated Amount (the "Cash Collateral"). The Cash Collateral shall
serve as additional security for the Obligations and may be drawn upon by the
Lessor upon any Lease Default. The Lessee shall maintain the Cash Collateral in
the full Stated Amount throughout the Term, subject to the provisions of the
Agreement Regarding Related Lease Transactions. The Cash Collateral shall be in
form and substance and, if the Lessor elects a form of Cash Collateral other
than actual cash, from a bank continually acceptable to the Lessor in the
Lessor's reasonable discretion and shall be pledged to the Lessor pursuant to
the Deposit Pledge Agreement.
6.2.2 APPLICATION OF CASH COLLATERAL. Upon the occurrence of any
Lease Default, the Lessor shall be entitled, at its option, to use all or any
portion of the Cash Collateral, including interest thereon, then held by it to
pay any amount otherwise payable by the Lessee or the Guarantor under any of the
Lease Documents, in accordance with the terms of this Lease or the other Lease
Documents.
6.2.3 REPLENISHMENT OF CASH COLLATERAL. If the Lessor expends any of
the Cash Collateral to pay any amount payable by the Lessee, or otherwise
applies the same to or towards the Obligations, the Lessee shall, upon demand of
the Lessor, immediately augment the Cash Collateral so as to increase the amount
held by the Lessor to the full Stated Amount.
6.3 GUARANTY. All of the Lease Obligations shall be unconditionally
and irrevocably guaranteed by the Guarantor pursuant to the Guaranty.
ARTICLE 7
CONDITION AND USE OF LEASED PROPERTY;
MANAGEMENT AGREEMENTS
7.1 CONDITION OF THE LEASED PROPERTY. The Lessee acknowledges that the
Guarantor has caused the Leased Property to be sold to the Lessor and that the
Lessee and the Lessor have concurrently entered into this Lease. The Lessee
acknowledges receipt and delivery of possession of the Leased Property and that
the Lessee has examined and otherwise has acquired knowledge of the condition of
the Leased Property prior to the execution and delivery of this Lease and has
found the same to be in good order and repair and satisfactory for its purposes
hereunder. The Lessee is leasing the Leased Property "AS-IS" in its present
condition. The Lessee waives any claim or action against the Lessor in respect
of the condition of the Leased Property. THE LESSOR MAKES NO WARRANTY OR
REPRESENTATION, EXPRESS OR IMPLIED, WITH RESPECT TO THE LEASED PROPERTY, EITHER
AS TO ITS FITNESS FOR ANY
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PARTICULAR PURPOSE OR USE, ITS DESIGN OR CONDITION OR OTHERWISE, OR AS TO
DEFECTS IN THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT;
IT BEING AGREED THAT ALL RISKS RELATING TO THE DESIGN, CONDITION AND/OR USE OF
THE LEASED PROPERTY ARE TO BE BORNE BY THE LESSEE. THE LESSEE HEREBY ASSUMES ALL
RISK OF THE PHYSICAL CONDITION OF THE LEASED PROPERTY, THE SUITABILITY OF THE
LEASED PROPERTY FOR THE LESSEE'S PURPOSES, AND THE COMPLIANCE OR NON-COMPLIANCE
OF THE LEASED PROPERTY WITH ALL APPLICABLE REQUIREMENTS OF LAW, INCLUDING BUT
NOT LIMITED TO ENVIRONMENTAL LAWS AND ZONING OR LAND USE LAWS.
Upon the request of the Lessor following a Lease Default or if the Lessor
has a reasonable basis to believe any of the following circumstances exist, at
any time and from time to time during the Term, the Lessee shall engage one (1)
or more independent professional consultants, engineers and inspectors,
qualified to do business in the State and acceptable to the Lessor to perform
any environmental and/or structural investigations and/or other inspections of
the Leased Property and the Facility as the Lessor may reasonably request in
order to detect (A) any structural deficiencies in the Leased Improvements or
the utilities servicing and/or located on the Leased Property or (B) the
presence of any condition that (I) in the Lessor's reasonable judgment is likely
to be harmful or present a health hazard to the residents and other occupants of
the Leased Property or (II) constitutes a breach or violation of any of the
Lease Documents. In the event that the Lessor reasonably determines that the
results of such testing or inspections are unsatisfactory, within thirty (30)
days of notice from the Lessor (except as otherwise provided in the
Environmental Indemnity Agreement), the Lessee shall commence such appropriate
remedial actions as may be required under this Lease and reasonably requested by
the Lessor to correct such unsatisfactory conditions and, thereafter, shall
diligently and continuously prosecute such remedial actions to completion within
the time limits prescribed in this Lease or the other Lease Documents. Any
report produced by any aforementioned consultant, engineer or inspector in
connection with an environmental and/or structural investigation and/or other
investigation of the Leased Property shall be addressed to and provided to both
the Lessor and the Lessee.
7.2 USE OF THE LEASED PROPERTY; COMPLIANCE; MANAGEMENT.
7.2.1 OBLIGATION TO OPERATE. The Lessee or any other Acceptable
Licensed Operator shall continuously operate the Leased Property in
accordance with the Primary Intended Use and the Other Permitted Uses and
maintain its qualifications for licensure and accreditation as required by
all applicable Legal Requirements and Insurance Requirements.
7.2.2 PERMITTED USES. During the entire Term, the Lessee shall use
the Leased Property, or permit the Leased Property to be used, only for
the Primary Intended Use and the Other Permitted Uses. The Lessee shall
not use the Leased Property or permit the Leased Property to be used for
any other use without the prior written consent of the Lessor, which
consent may be withheld in the Lessor's sole and absolute discretion.
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7.2.3 COMPLIANCE WITH INSURANCE REQUIREMENTS. No use shall be made
or permitted to be made of the Leased Property and no acts shall be done
which will cause the cancellation of any insurance policy covering the
Leased Property, nor shall the Lessee, any Manager or any other Person
sell or otherwise provide to any residents, other occupants or invitees
therein, or permit to be kept, used or sold in or about the Leased
Property, any article which may be prohibited by any Legal Requirement or
by any of the Insurance Requirements. Furthermore, the Lessee shall, at
its sole cost and expense, take whatever other actions that may be
necessary to comply with and to insure that the Leased Property complies
with all Insurance Requirements.
7.2.4 NO WASTE. The Lessee shall not commit or suffer to be
committed any waste on, in or under the Leased Property, nor shall the
Lessee cause or permit any nuisance thereon.
7.2.5 NO IMPAIRMENT. The Lessee shall neither suffer nor permit the
Leased Property to be used in such a manner as (A) might reasonably tend
to impair the Lessor's title thereto or (B) may reasonably make possible a
claim or claims of adverse usage or adverse possession by the public or of
implied dedication of the Leased Property.
7.2.6 NO LIENS. Except as permitted pursuant to Section 6.1.2, the
Lessee shall not permit or suffer any Lien to exist on the Tangible
Personal Property and shall in no event cause, permit or suffer any Lien
to exist with respect to the Leased Property other than as set forth in
Section 11.5.2.
7.3 COMPLIANCE WITH LEGAL REQUIREMENTS. The Lessee covenants and agrees
that the Leased Property shall not be used for any unlawful purpose and that the
Lessee and any other Acceptable Licensed Operator, at their sole cost and
expense, shall promptly (A) comply with, and shall cause every other member of
the Leasing Group to comply with, all Legal Requirements relating to the use,
operation, maintenance, repair and restoration of the Leased Property, whether
or not compliance therewith shall require structural change in any of the Leased
Property or interfere with the use and enjoyment of the Leased Property and (B)
procure, maintain and comply with (in all material respects), and shall cause
every other member of the Leasing Group to procure, maintain and comply with (in
all material respects), all Contracts and Permits necessary or desirable in
order to operate the Leased Property for the Primary Intended Use and/or Other
Permitted Uses, and for compliance with all of the terms and conditions of this
Lease. Unless a Lease Default has occurred or any event has occurred which, with
the passage of time and/or the giving of notice would constitute a Lease
Default, the Lessee may, upon prior written notice to the Lessor, contest any
Legal Requirement to the extent permitted by, and in accordance with, Article
15.
7.4 MANAGEMENT AGREEMENTS. From and after the Commencement Date, the
Lessee shall not enter into any Management Agreement without the prior written
approval of the Lessor, in each instance, which approval shall not be
unreasonably withheld. The Lessee shall not, without the prior written approval
of the Lessor, in each instance, which approval shall not be unreasonably
withheld, agree to or allow (A) any change in any Manager or any change in the
ownership or control
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of any Manager except as otherwise permitted by the provisions of Sections
16.1(h)(vi) and 16.1(i), (B) the termination of any Management Agreement (other
than in connection with the exercise by the Lessee of any of its remedies under
the Management Agreement as a result of any default by the Manager thereunder),
(C) any assignment by any Manager of its interest under any Management Agreement
or (D) any material amendment of any Management Agreement. In addition, the
Lessee shall, at its sole cost and expense, promptly and fully perform or cause
to be performed every covenant, condition, promise and obligation of the
licensed operator of the Leased Property under any Management Agreement.
Notwithstanding the foregoing, in the event that the Lessee enters into any
Management Agreement with an Affiliate of the Lessee, the Lessor shall consent
to the execution and delivery of such Management Agreement, provided, that,
concurrently with the execution and delivery of such Management Agreement, the
Affiliated Party Subordination Agreement and the Environmental Indemnity
Agreement are amended so as to add as a party thereto the applicable Affiliate
of the Lessee that is to be the Manager (so that, among other things, the
payments to be made under such Management Agreement are fully subordinated to
the Lease Obligations).
Each Management Agreement shall provide that the Lessor shall be provided
notice of any defaults thereunder and, at the Lessor's option, an opportunity to
cure such default. The Lessee shall furnish to the Lessor, within three (3) days
after receipt thereof, or after the mailing or service thereof by the Lessee, as
the case may be, a copy of each notice of default which the Lessee shall give
to, or receive from any Person, based upon the occurrence, or alleged
occurrence, of any default in the performance of any covenant, condition,
promise or obligation under any Management Agreement.
Whenever and as often as the Lessee shall fail to perform, promptly and
fully, at its sole cost and expense, any covenant, condition, promise or
obligation on the part of the licensed operator of the Leased Property under and
pursuant to any Management Agreement, the Lessor, or a lawfully appointed
receiver of the Leased Property, may, at their respective options (and without
any obligation to do so), after five (5) days' prior notice to the Lessee
(except in the case of an emergency) enter upon the Leased Property and perform,
or cause to be performed, such work, labor, services, acts or things, and take
such other steps and do such other acts as they may deem advisable, to cure such
defaulted covenant, condition, promise or obligation, and any amount so paid or
advanced by the Lessor or such receiver and all costs and expenses reasonably
incurred in connection therewith (including, without limitation, attorneys' fees
and expenses and court costs), shall be a demand obligation of the Lessee to the
Lessor or such receiver, and, the Lessor shall have the same rights and remedies
for failure to pay such costs on demand as for the Lessee's failure to pay any
other sums due hereunder.
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ARTICLE 8
REPAIRS; RESTRICTIONS
8.1 MAINTENANCE AND REPAIR.
8.1.1 LESSEE'S RESPONSIBILITY. The Lessee, at its sole cost and
expense, shall keep the Leased Property and all private roadways,
sidewalks and curbs appurtenant thereto which are under the Lessee's
control in good order and repair (whether or not the need for such repairs
occurs as a result of the Lessee's use, any prior use, the elements or the
age of the Leased Property or such private roadways, sidewalks and curbs
or any other cause whatsoever). Subject to Articles 9, 13 and 14, the
Lessee shall promptly, with the exercise of all reasonable efforts,
undertake and diligently complete all necessary and appropriate repairs,
replacements, renovations, restorations, alterations and modifications
thereof of every kind and nature, whether interior or exterior, structural
or non-structural, ordinary or extraordinary, foreseen or unforeseen or
arising by reason of a condition (concealed or otherwise) existing prior
to the commencement of, or during, the Term and thereafter until the
Lessee surrenders the Leased Property in the manner required by this
Lease. The Lessor understands that the Facility will incur reasonable,
normal wear and tear during the Term of this Lease and agrees that the
Lessee shall not be obligated to repair or replace every incidence of
reasonable and normal wear and tear. However, nothing herein shall relieve
the Lessee of its obligation to maintain the Leased Property and all
private roadways, sidewalks and curbs appurtenant thereto which are under
the Lessee's control in good order and repair. And further, in no event
shall such wear and tear present any condition which may be harmful to
residents or other occupants of the Leased Property or which prevents the
Leased Property from being operated for the Primary Intended Use in
accordance with the provisions of this Lease. In addition, the Lessee, at
its sole cost and expense, shall make all repairs, modifications,
replacements, renovations and alterations of the Leased Property (and such
private roadways, sidewalks and curbs) that are necessary to comply with
all applicable Legal Requirements and Insurance Requirements so that the
Leased Property can be legally operated for the Primary Intended Use and
the Other Permitted Uses. All repairs, replacements, renovations,
alterations, and modifications required by the terms of this Section 8.1
shall be (A) performed in a good and workmanlike manner in compliance with
all Legal Requirements, Insurance Requirements and the requirements of
Article 9 hereof, using new materials well suited for their intended
purpose and (B) consistent with the operation of the Leased Property in a
first class manner. The Lessee will not take or omit to take any action
the taking or omission of which might materially impair the value or the
usefulness of the Leased Property for the Primary Intended Use and the
Other Permitted Uses. To the extent that any of the repairs, replacements,
renovations, alterations or modifications required by the terms of this
Section 8.1 constitute Material Structural Work, the Lessee shall obtain
the Lessor's prior written approval (which approval shall not be
unreasonably withheld) of the specific repairs, replacements, renovations,
alterations and modifications to be performed by or on behalf of the
Lessee in connection with such Material Structural Work, and shall perform
the same in accordance with the provisions of this Lease
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upon receipt of such approval. Notwithstanding the foregoing, in the event
of a bona fide emergency during which the Lessee is unable to contact the
appropriate representatives of the Lessor, the Lessee may commence such
Material Structural Work as may be necessary in order to address such
emergency without the Lessor's prior approval, provided, however, that the
Lessee shall immediately thereafter advise the Lessor of such emergency
and the nature and scope of the Material Structural Work commenced and
shall obtain the Lessor's approval of the remaining Material Structural
Work to be completed.
8.1.2 NO LESSOR OBLIGATION. The Lessor shall not, under any
circumstances (except to the extent of any damage caused thereto as a
result of the gross negligence or wilful misconduct of the Lessor or the
Lessor's employees, agents or contractors), be required to build or
rebuild any improvements on the Leased Property (or any private roadways,
sidewalks or curbs appurtenant thereto), or to make any repairs,
replacements, renovations, alterations, restorations, modifications, or
renewals of any nature or description to the Leased Property (or any
private roadways, sidewalks or curbs appurtenant thereto), whether
ordinary or extraordinary, structural or non-structural, foreseen or
unforeseen, or to make any expenditure whatsoever with respect thereto in
connection with this Lease, or to maintain the Leased Property (or any
private roadways, sidewalks or curbs appurtenant thereto) in any way.
8.1.3 LESSEE MAY NOT OBLIGATE LESSOR. Nothing contained herein nor
any action or inaction by the Lessor shall be construed as (A)
constituting the consent or request of the Lessor, express or implied, to
any contractor, subcontractor, laborer, materialman or vendor to or for
the performance of any labor or services for any construction, alteration,
addition, repair or demolition of or to the Leased Property or (B) giving
the Lessee any right, power or permission to contract for or permit the
performance of any labor or services or the furnishing of any materials or
other property in such fashion as would permit the making of any claim
against the Lessor for the payment thereof or to make any agreement that
may create, or in any way be the basis for, any right, title or interest
in, or Lien or claim against, the estate of the Lessor in the Leased
Property. Without limiting the generality of the foregoing, the right,
title and interest of the Lessor in and to the Leased Property shall not
be subject to liens or encumbrances for the performance of any labor or
services or the furnishing of any materials or other property furnished to
the Leased Property at or by the request of the Lessee or any other Person
other than the Lessor. The Lessee shall notify any contractor,
subcontractor, laborer, materialman or vendor providing any labor,
services or materials to the Leased Property of this provision.
8.1.4 LESSEE'S OBLIGATION TO PERFORM UPGRADE RENOVATIONS. Without
limiting the Lessee's obligations to maintain the Leased Property under
this Lease, within thirty (30) days after the end of each Lease Year
commencing with the end of the fourth (4th) Lease Year, the Lessee shall
provide the Lessor with evidence reasonably satisfactory to the Lessor
that the Lessee has in each and every consecutive thirty-six (36) month
period commencing with such fourth (4th) Lease Year spent an average
annual amount on Upgrade Renovations (collectively, the "Annual Facility
Upgrade Expenditure") equal to $200.00 per living unit
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within the Facility (as such per living unit amount shall be adjusted
annually at the beginning of each Lease Year (commencing with the second
(2nd) Lease Year) by an amount equal to the product of (i) $200.00
multiplied by (ii) the Consumer Price Adjustment Factor). The term
"Upgrade Renovations" is defined to mean upgrades or improvements to the
Leased Property which have the effect of maintaining or improving the
competitive position of the Leased Property in its marketplace; and
Upgrade Expenditures shall not include normal janitorial, cleaning and
maintenance activities. Non-exclusive examples of Upgrade Renovations
include new or replacement wallpaper, tiles, window coverings, lighting
fixtures, painting, upgraded landscaping, carpeting, architectural
adornments, common areas amenities and the like. It is expressly
understood that capital improvements or repairs (such as but not limited
to repairs or replacements to the structural elements of the walls,
parking area, or the roof or to the electrical, plumbing, HVAC or other
mechanical or structural systems in the Leased Property) shall not be
considered Upgrade Renovations. In the event that during a given Lease
Year Upgrade Renovations are not necessary (which necessity shall be
determined in the Lessee's reasonable discretion) and/or the full amount
of the respective Annual Facility Upgrade Expenditure is not made for the
Facility for whatever reason, the Lessee shall be required to show
evidence that a reserve fund has been established with the balance of the
unexpended Annual Facility Upgrade Expenditure to be used solely for
Upgrade Renovations in future Lease Years or as otherwise requested by the
Lessor. If the Lessee fails in each and every consecutive thirty-six (36)
month period (commencing with the end of the fourth (4th) Lease Year) to
make Upgrade Renovations in an average annual amount equal to the Annual
Facility Upgrade Expenditure or to establish a reserve fund as aforesaid,
the Lessee shall promptly on demand from the Lessor (but in no event
within more than five (5) days) pay to the Lessor the applicable shortfall
in the Annual Facility Upgrade Expenditure over any aforementioned
thirty-six (36) month period, as applicable; and the Lessor may retain
such funds as additional rent hereunder or, in its sole discretion,
provide such funds to the Lessee to perform Upgrade Renovations.
8.2 ENCROACHMENTS; TITLE RESTRICTIONS. If any of the Leased Improvements
shall, at any time, encroach upon any property, street or right-of-way adjacent
to the Leased Property, or shall violate the agreements or conditions contained
in any lawful restrictive covenant or other Lien now or hereafter affecting the
Leased Property, or shall impair the rights of others under any easement,
right-of-way or other Lien to which the Leased Property is now or hereafter
subject, then promptly upon the request of the Lessor, the Lessee shall, at its
sole cost and expense, subject to the Lessee's right to contest the existence of
any encroachment, violation or impairment as set forth in Article 15, (A) obtain
valid and effective waivers or settlements of all claims, liabilities and
damages resulting from each such encroachment, violation or impairment or (B)
make such alterations to the Leased Improvements, and take such other actions,
as the Lessee in the good faith exercise of its judgment deems reasonably
practicable, to remove such encroachment, or to end such violation or
impairment, including, if necessary, the alteration of any of the Leased
Improvements. Notwithstanding the foregoing, the Lessee shall, in any event,
take all such actions as may be reasonably necessary in order to be able to
continue the operation of the Leased Improvements for the Primary Intended Use
and the Other Permitted Uses substantially in the manner and to the extent that
the Leased Improvements were operated prior to the assertion of such
encroachment, violation
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or impairment and nothing contained herein shall limit the Lessee's obligations
to operate the Leased Property in accordance with its Primary Intended Use. Any
such alteration made pursuant to the terms of this Section 8.2 shall be
completed in conformity with the applicable requirements of Section 8.1 and
Article 9. The Lessee's obligations under this Section 8.2 shall be in addition
to and shall in no way discharge or diminish any obligation of any insurer under
any policy of title or other insurance.
ARTICLE 9
MATERIAL STRUCTURAL WORK AND
CAPITAL ADDITIONS
9.1 LESSOR'S APPROVAL. Without the prior written consent of the Lessor,
which consent may be withheld by the Lessor, in its sole and absolute
discretion, the Lessee shall make no Capital Addition or Material Structural
Work to the Leased Property (including, without limitation, any change in the
size or unit capacity of the Facility), except as may be otherwise expressly
required pursuant to Article 8.
9.2 GENERAL PROVISIONS AS TO CAPITAL ADDITIONS AND CERTAIN MATERIAL
STRUCTURAL WORK. As to any Capital Addition or Material Structural Work (other
than such Material Structural Work that is required to be performed pursuant to
the terms of Section 8.1) for which the Lessor has granted its prior written
approval, the following terms and conditions shall apply unless otherwise
expressly set forth in the Lessor's written approval.
9.2.1 NO LIENS. Subject to Article 15 of this Lease, the Lessee
shall not be permitted to create, nor suffer to exist, any Lien on the
Leased Property in connection with any Capital Addition or Material
Structural Work. NOTICE IS HEREBY GIVEN THAT THE LESSOR IS NOT AND SHALL
NOT BE LIABLE FOR ANY LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE
FURNISHED TO THE LESSEE OR TO ANYONE HOLDING ANY PART OF THE LEASED
PROPERTY, AND THAT NO MECHANICS' LIENS, CONSTRUCTION LIENS OR OTHER LIENS
FOR ANY SUCH LABOR, SERVICES OR MATERIALS SHALL ATTACH TO OR AFFECT THE
INTEREST OF THE LESSOR IN AND TO THE LEASED PROPERTY.
9.2.2 LESSEE'S PROPOSAL REGARDING CAPITAL ADDITIONS AND MATERIAL
STRUCTURAL WORK. If the Lessee desires to undertake any Capital Addition
or Material Structural Work, the Lessee shall submit to the Lessor in
writing a proposal setting forth in reasonable detail any proposed Capital
Addition or Material Structural Work and shall provide to the Lessor
copies of, or information regarding, the applicable plans and
specifications, Permits, Contracts and any other materials concerning the
proposed Capital Addition or Material Structural Work, as the case may be,
as the Lessor may reasonably request. Without limiting the generality of
the foregoing, each such proposal pertaining to any Capital Addition shall
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indicate the approximate projected cost of constructing such Capital
Addition and the use or uses to which it will be put.
9.2.3 LESSOR'S OPTIONS REGARDING CAPITAL ADDITIONS AND MATERIAL
STRUCTURAL WORK. The Lessor shall have the options of (A) denying
permission for the construction of the applicable Capital Addition or
Material Structural Work, (B) offering to finance the construction of the
Capital Addition or Material Structural Work pursuant to Section 9.3, (C)
allowing the Lessee to pay for or separately finance the construction of
the Capital Addition or Material Structural Work, subject to compliance
with the terms and conditions of Section 9.2.1, Section 9.4, Section 13.1,
all Legal Requirements and all other requirements of this Lease and to
such other terms and conditions as the Lessor may in its discretion impose
or (D) any combination of the foregoing. Unless the Lessor notifies the
Lessee in writing of a contrary election within thirty (30) days of the
Lessee's request, the Lessor shall be deemed to have denied the request
for the Capital Addition or Material Structural Work.
9.2.4 LESSOR MAY ELECT TO FINANCE CAPITAL ADDITIONS OR MATERIAL
STRUCTURAL WORK. If the Lessor elects to offer financing for the proposed
Capital Addition or Material Structural Work, the provisions of Section
9.3 shall apply.
9.2.5 LEGAL REQUIREMENTS; QUALITY OF WORK. All Capital Additions
and/or Material Structural Work shall be performed in full compliance with
all applicable Legal Requirements and shall be performed in a good and
workmanlike manner.
9.3 CAPITAL ADDITIONS AND MATERIAL STRUCTURAL WORK FINANCED BY LESSOR.
9.3.1 LESSEE'S FINANCING REQUEST. The Lessee may request that the
Lessor provide or arrange financing for a Capital Addition or Material
Structural Work by providing to the Lessor such information about the
Capital Addition or Material Structural Work as the Lessor may reasonably
request, including, without limitation, all information referred to in
Section 9.2 above. The Lessee understands, however, that the Lessor shall
be under no obligation to agree to such request. Nevertheless, the Lessor
shall notify the Lessee, within forty-five (45) days of receipt of such
information, as to whether the Lessor will finance the proposed Capital
Addition or Material Structural Work and, if so, the terms and conditions
upon which it would do so, including the terms of any amendment to this
Lease (including, without limitation, an increase in the Base Rent based
on the Lessor's then existing terms and prevailing conditions to
compensate the Lessor for the additional funds advanced by it). The Lessee
may withdraw its request by notice to the Lessor at any time before such
time as the Lessee accepts the Lessor's terms and conditions. All advances
of funds for any such financing shall be made in accordance with the
Lessor's then standard construction loan requirements and procedures,
which may include, without limitation, the requirements and procedures
applicable to Work under Section 13.1.
9.3.2 LESSOR'S GENERAL REQUIREMENTS. If the Lessor agrees to finance
the proposed Capital Addition or Material Structural Work and the Lessee
accepts the Lessor's
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proposal therefor, in addition to all other items which the Lessor or any
applicable Financing Party may reasonably require, the Lessee shall
provide to the Lessor the following:
(A) prior to any advance of funds, (I) any information,
opinions, certificates, Permits or documents reasonably requested by
the Lessor or any applicable Financing Party which are necessary to
confirm that the Lessee will be able to use the Capital Addition
upon the completion thereof or the applicable portion of the
Facility upon the completion of the Material Structural Work in
accordance with the Primary Intended Use and/or the Other Permitted
Uses and (II) evidence satisfactory to the Lessor and any applicable
Financing Party that all Permits required for the construction and
use of the Capital Addition or the applicable portion of the
Facility have been obtained, are in full force and effect and are
not subject to appeal, except only for those Permits which cannot in
the normal course be obtained prior to commencement or completion of
the construction; provided, that the Lessor and any applicable
Financing Party are furnished with reasonable evidence that the same
will be available in the normal course of business without unusual
condition;
(B) prior to any advance of funds, an Officer's Certificate
and, if requested, a certificate from the Lessee's architect,
setting forth in reasonable detail the projected (or actual, if
available) Capital Addition Cost or the cost of the Material
Structural Work;
(C) bills of sale, instruments of transfer and other documents
required by the Lessor so as to vest title to the Capital Addition
or the applicable Material Structural Work in the Lessor free and
clear of all Liens, and amendments to this Lease and any recorded
notice or memorandum thereof, duly executed and acknowledged, in
form and substance reasonably satisfactory to the Lessor, providing
for any changes required by the Lessor including, without
limitation, changes in the Base Rent and the legal description of
the Land;
(D) upon payment therefor, a deed conveying to the Lessor
title to any land acquired for the purpose of constructing the
Capital Addition or the applicable Material Structural Work
("Additional Land") free and clear of any Liens except those
approved by the Lessor;
(E) upon completion of the Capital Addition or the Material
Structural Work, a final as-built survey thereof reasonably
satisfactory to the Lessor, if required by the Lessor;
(F) during and following the advance of funds and the
completion of the Capital Addition or the Material Structural Work,
endorsements to any outstanding policy of title insurance covering
the Leased Property satisfactory in form and substance to the Lessor
and any Financing Party (I) updating the same without any additional
exception except as may be reasonably permitted by the Lessor, (II)
if
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applicable, including the Additional Land in the premises covered by
such title insurance policy and (III) increasing the coverage
thereof by an amount equal to any amount paid by the Lessor for the
Additional Land plus the Fair Market Value of the Capital Addition
or the Fair Market Value of the Material Structural Work (except to
the extent covered by the owner's policy of title insurance referred
to in subparagraph (g) below);
(G) simultaneous with the initial advance of funds, if
appropriate, (I) an owner's policy of title insurance insuring fee
simple title to any Additional Land conveyed to the Lessor pursuant
to subparagraph (d) free and clear of all Liens except those
approved by the Lessor and (II) a lender's policy of title insurance
reasonably satisfactory in form and substance to any applicable
Financing Party;
(H) following the completion of the Capital Addition or the
Material Structural Work, if reasonably deemed necessary by the
Lessor, an appraisal of the Leased Property by an M.A.I. appraiser
acceptable to the Lessor, which states that the Fair Market Value of
the Leased Property upon completion of the Capital Addition or the
Material Structural Work exceeds the Fair Market Value of the Leased
Property prior to the commencement of the construction of such
Capital Addition or Material Structural Work by an amount not less
than one hundred percent (100%) of the Capital Addition Cost or the
cost of the Material Structural Work; and
(I) during or following the advancement of funds, prints of
architectural and engineering drawings relating to the Capital
Addition or the Material Structural Work and such other materials,
including, without limitation, endorsements to the title insurance
policies (insuring the Lessor and any applicable Financing Party
with respect to the Leased Property) contemplated by subsection (f)
above, opinions of counsel, appraisals, surveys, certified copies of
duly adopted resolutions of the board of directors of the Lessee
authorizing the execution and delivery of the lease amendment and
any other documents and instruments as may be reasonably required by
the Lessor and any applicable Financing Party.
9.3.3 PAYMENT OF COSTS. By virtue of making a request to finance a
Capital Addition or any Material Structural Work, whether or not such
financing is actually consummated, the Lessee shall be deemed to have
agreed to pay, upon demand, all costs and expenses reasonably incurred by
the Lessor and any Person participating with the Lessor in any way in the
financing of the Capital Addition or Material Structural Work, including,
but not limited to (A) fees and expenses of their respective attorneys,
(B) all photocopying expenses, if any, (C) the amount of any filing,
registration and recording taxes and fees, (D) documentary stamp taxes and
intangible taxes and (E) title insurance charges and appraisal fees.
9.4 GENERAL LIMITATIONS. Without in any way limiting the Lessor's options
with respect to proposed Capital Additions or Material Structural Work, (A) no
Capital Addition or Material
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Structural Work shall be completed that could, upon completion, significantly
alter the character or purpose or detract from the value or operating efficiency
of the Leased Property, or significantly impair the revenue-producing capability
of the Leased Property, or adversely affect the ability of the Lessee to comply
with the terms of this Lease, (B) no Capital Addition or Material Structural
Work shall be completed which would tie in or connect any Leased Improvements on
the Leased Property with any other improvements on property adjacent to the
Leased Property (and not part of the Land covered by this Lease) including,
without limitation, tie-ins of buildings or other structures or utilities,
unless the Lessee shall have obtained the prior written approval of the Lessor,
which approval may be withheld in the Lessor's sole and absolute discretion and
(C) all proposed Capital Additions and Material Structural Work shall be
architecturally integrated and consistent with the Leased Property.
9.5 NON-CAPITAL ADDITIONS. The Lessee shall have the obligation and right
to make repairs, replacements and alterations which are not Capital Additions as
required by the other Sections of this Lease, but in so doing, the Lessee shall
always comply with and satisfy the conditions of Sections 9.2.1, 9.2.5 and 9.4,
mutatis, mutandis. The Lessee shall have the right, from time to time, to make
additions, modifications or improvements to the Leased Property which do not
constitute Capital Additions or Material Structural Work as it may deem to be
desirable or necessary for its uses and purposes, subject to the same limits and
conditions imposed under Sections 9.2.1, 9.2.5 and 9.4. The cost of any such
repair, replacement, alteration, addition, modification or improvement shall be
paid by the Lessee and the results thereof shall be included under the terms of
this Lease and become a part of the Leased Property, without payment therefor by
the Lessor at any time. Notwithstanding the foregoing, all such additions,
modifications and improvements which affect the structure of any of the Leased
Improvements, or which involve the expenditure of more than FIFTY THOUSAND AND
NO/100 DOLLARS ($50,000.00) in any consecutive twelve (12) month period, shall
be undertaken only upon compliance with the provisions of Section 13.1, all
Legal Requirements and all other applicable requirements of this Lease;
provided, however, that in the event of a bona fide emergency during which the
Lessee is unable to contact the appropriate representatives of the Lessor, the
Lessee may commence such additions, modifications and improvements as may be
necessary in order to address such emergency without the Lessor's prior
approval, as long as the Lessee immediately thereafter advises the Lessor of
such emergency and the nature and scope of the additions, modifications and
improvements performed and obtains the Lessor's approval of the remaining work
to be completed.
9.6 PERMITTED WORK. Notwithstanding Section 9.1 above, the Lessee shall
have the right to perform Permitted Work (as defined below) without the Lessor's
prior approval or consent as long as the Lessee gives to the Lessor prior notice
that the Lessee is undertaking such Permitted Work and provides the Lessor with
reasonably detailed plans and specifications describing the work to be done.
"Permitted Work" shall mean work to the Leased Improvements which will not
affect any of the structural elements of the Leased Improvements and which, in
the aggregate, costs less than FIFTY THOUSAND AND NO/100 DOLLARS ($50,000.00)
during any consecutive twelve (12) month period. Any work to the Facility,
regardless of cost, which (A) will affect any structural element of any of the
Leased Improvements and (B) is not otherwise subject to an approval of the
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Lessor pursuant to any other provision of this Lease, shall still require the
prior written consent of the Lessor, which consent may be withheld by the Lessor
in its sole and absolute discretion.
ARTICLE 10
WARRANTIES AND REPRESENTATIONS
10.1 REPRESENTATIONS AND WARRANTIES. The Lessee hereby represents and
warrants to, and covenants and agrees with, the Lessor that:
10.1.1 EXISTENCE; POWER; QUALIFICATION. The Lessee is a corporation
duly organized, validly existing and in good standing under the laws of
the State of Delaware. The Lessee has all requisite corporate power to own
and operate its properties and to carry on its business as now conducted
and as proposed to be conducted and is duly qualified to transact business
and is in good standing in each jurisdiction where such qualification is
necessary or desirable in order to carry out its business as presently
conducted and as proposed to be conducted. As of the date of this Lease,
the Lessee does not have any Subsidiaries and the Lessee is not a member
of any partnership or joint venture (except for each of the limited
partnerships which have been created with the Lessor's approval to be the
sublessees of the facilities known as Clare Bridge of Fort Myers, Florida
and Clare Bridge of Tampa, Florida, and Clare Bridge of Jacksonville,
Florida, respectively). Attached hereto as EXHIBIT C is a true and correct
list of all of the shareholders of the Lessee and their respective
ownership interests in the Lessee.
10.1.2 VALID AND BINDING. The Lessee is duly authorized to make and
enter into all of the Lease Documents to which the Lessee is a party and
to carry out the transactions contemplated therein. All of the Lease
Documents to which the Lessee is a party have been duly executed and
delivered by the Lessee, and each is a legal, valid and binding obligation
of the Lessee, enforceable in accordance with its terms.
10.1.3 SINGLE PURPOSE. The Lessee is, and during the entire time
that this Lease remains in force and effect the Lessee and any other
Acceptable Licensed Operator (other than the Guarantor or Current Manager,
if other than the Guarantor) shall be, engaged in no business, trade or
activity other than the operation of the Leased Property for the Primary
Intended Use and the Other Permitted Uses, and/or the lease and operation
of other assisted living facilities and/or Alzheimer's dementia care
facilities where the Lessor or some other Meditrust Entity is the owner,
lessor or holder of a first priority fee mortgage on such other facility.
10.1.4 NO VIOLATION. The execution, delivery and performance of the
Lease Documents and the consummation of the transactions thereby
contemplated shall not result in any breach of, or constitute a default
under, or result in the acceleration of, or constitute an event which,
with the giving of notice or the passage of time, or both, could result in
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default or acceleration of any obligation of any member of the Leasing
Group under any of the Permits or Contracts or any other contract,
mortgage, lien, lease, agreement, instrument, franchise, arbitration
award, judgment, decree, bank loan or credit agreement, trust indenture or
other instrument to which any member of the Leasing Group is a party or by
which any member of the Leasing Group or the Leased Property may be bound
or affected and do not violate or contravene any Legal Requirement.
10.1.5 CONSENTS AND APPROVALS. Except as already obtained or filed,
or except as otherwise expressly contemplated in any of the Lease
Documents, as the case may be, no consent or approval or other
authorization of, or exemption by, or declaration or filing with, any
Person and no waiver of any right by any Person is required to authorize
or permit, or is otherwise required as a condition of the execution and
delivery of any of the Lease Documents by any member of the Leasing Group
and the performance of such member's obligations thereunder or as a
condition to the validity (assuming the due authorization, execution and
delivery by the Lessor of the Lease Documents to which it is a party) and
the first priority of any Liens granted under the Lease Documents, except
the filing of the Financing Statements.
10.1.6 NO LIENS OR INSOLVENCY PROCEEDINGS. Each member of the
Leasing Group is financially solvent and there are no actions, suits,
investigations or proceedings including, without limitation, outstanding
federal or state tax liens, garnishments or insolvency or bankruptcy
proceedings, pending or, to the best of the Lessee's knowledge and belief,
threatened:
(A) against or affecting any member of the Leasing Group,
which if adversely resolved to such member of the Leasing Group,
would materially adversely affect the ability of any of the
foregoing to perform their respective obligations under the Lease
Documents;
(B) against or affecting the Leased Property or the ownership,
construction, development, maintenance, management, repair, use,
occupancy, possession or operation thereof; or
(C) which may involve or affect the validity, priority or
enforceability of any of the Lease Documents, at law or in equity,
or before or by any arbitrator or Governmental Authority.
10.1.7 NO BURDENSOME AGREEMENTS. No member of the Leasing Group is a
party to any agreement the terms of which now have, or, as far as can be
reasonably foreseen, may have, a material adverse affect on its respective
financial condition or business or operation of the Leased Property for
its Primary Intended Use or any Other Permitted Use.
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10.1.8 COMMERCIAL ACTS. The Lessee's performance of and compliance
with the obligations and conditions set forth herein and in the other
Lease Documents will constitute commercial acts done and performed for
commercial purposes.
10.1.9 ADEQUATE CAPITAL, NOT INSOLVENT. After giving effect to the
consummation of the transactions contemplated by the Lease Documents, each
of the Lessee and the Guarantor, taken as a whole:
(A) will be able to pay its debts as they become due;
(B) will have sufficient funds and capital to carry on its
business as now conducted or as contemplated to be conducted (in
accordance with the terms of the Lease Documents);
(C) will own property having a value both at fair valuation
and at present fair saleable value greater than the amount required
to pay its debts as they become due; and
(D) will not be rendered insolvent as determined by applicable
law.
10.1.10 NOT DELINQUENT. No member of the Leasing Group is delinquent
or claimed to be delinquent under any obligation for the payment of
borrowed money in excess of ONE HUNDRED THOUSAND AND NO/100 DOLLARS
($100,000.00).
10.1.11 NO AFFILIATE DEBT. The Lessee has not created, incurred,
guaranteed, endorsed, assumed or suffered to exist any liability (whether
direct or contingent) for borrowed money from the Guarantor (or any of its
Affiliates) or any Affiliate of the Lessee that is not fully subordinated
to the Lease Obligations pursuant to the Affiliated Party Subordination
Agreement.
10.1.12 TAXES CURRENT. Each member of the Leasing Group (A) has
filed all federal, state and local tax returns which are required to be
filed and as to which extensions are not currently in effect and (B) has
paid all taxes, assessments, impositions, fees and other governmental
charges (including interest and penalties) (I) which have become due
pursuant to such returns or pursuant to any assessment or notice of tax
claim or deficiency received by each such member of the Leasing Group and
(II) for which non-payment could result in assessment of a penalty against
(1) such member of the Leasing Group other than the Guarantor in excess of
ONE THOUSAND AND NO/100 DOLLARS ($1,000.00) or (2) the Guarantor in excess
of FIVE THOUSAND AND NO/100 DOLLARS ($5,000.00). No tax liability has been
asserted by the Internal Revenue Service against any member of the Leasing
Group or any other federal, state or local taxing authority for taxes,
assessments, impositions, fees or other governmental charges (including
interest or penalties thereon) in excess of those already paid.
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10.1.13 FINANCIALS COMPLETE AND ACCURATE. The financial statements
of each member of the Leasing Group given to the Lessor in connection with
the execution and delivery of the Lease Documents were true, complete and
accurate, in all material respects, and fairly presented the financial
condition of each such member of the Leasing Group as of the date thereof
and for the periods covered thereby, having been prepared in accordance
with GAAP and such financial statements disclosed all material
liabilities. There has been no material adverse change since such date
with respect to the Tangible Net Worth of any member of the Leasing Group
or with respect to any other matters contained in such financial
statements, nor have any additional material liabilities, including,
without limitation, contingent liabilities, of any member of the Leasing
Group arisen or been incurred or asserted since such date. The projections
heretofore delivered to the Lessor continue to be reasonable (with respect
to the material assumptions upon which such projections are based) and the
Lessee reasonably anticipates the results projected therein will be
achieved, there having been (A) no material adverse change in the
business, assets or condition, financial or otherwise of any member of the
Leasing Group or the Leased Property and (B) no material depletion of the
cash or decrease in working capital of any member of the Leasing Group.
10.1.14 PENDING ACTIONS, NOTICES AND REPORTS.
(A) There is no action or investigation pending or, to the best
knowledge and belief of the Lessee, threatened, anticipated or
contemplated (nor, to the knowledge of the Lessee, is there any reasonable
basis therefor) against or affecting the Leased Property or any member of
the Leasing Group (or any Affiliate thereof) before any Governmental
Authority, Accreditation Body or Third Party Payor which could prevent or
hinder the consummation of the transactions contemplated hereby or call
into question the validity of any of the Lease Documents or any action
taken or to be taken in connection with the transactions contemplated
thereunder or which in any single case or in the aggregate might result in
any material adverse change in the business, prospects, condition, affairs
or operations of the Lessee or the Guarantor or the Leased Property
(including, without limitation, any action to revoke, withdraw or suspend
any Permit necessary or desirable for the operation of the Leased Property
in accordance with its Primary Intended Use and any action to transfer or
relocate any such Permit to a location other than the Leased Property) or
any material impairment of the right or ability of the Lessee or the
Guarantor to carry on its operations as presently conducted or proposed to
be conducted or which may materially adversely impact reimbursement to the
Lessee for services rendered to beneficiaries of Third Party Payor
Programs.
(B) Neither the Facility nor any member of the Leasing Group has
received any notice of any claim, requirement or demand of any
Governmental Authority, Accreditation Body, Third Party Payor or any
insurance body having or claiming any licensing, certifying, supervising,
evaluating or accrediting authority over the Leased Property to rework or
redesign the Leased Property, its professional staff or its professional
services, procedures or practices in any material respect or to provide
additional furniture, fixtures, equipment or
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inventory or to otherwise take action so as to make the Leased Property
conform to or comply with any Legal Requirement;
(C) The most recent utilization reviews, if any, relating to the
Leased Property by all applicable Third Party Payors, Accreditation Bodies
and Governmental Authorities and reviews or scrutiny by any managed care
or utilization review companies have not had a material adverse impact on
the utilization of units or programs at the Leased Property. No claims or
assertions have been made in any utilization review that any of the
practices or procedures used at the Leased Property are improper or
inappropriate other than such claims or assertions which singly and in the
aggregate will not have a material adverse impact on the Leased Property;
and
(D) If applicable, the Lessee has delivered or caused to be
delivered to the Lessor true and correct copies of all licenses,
inspection surveys and accreditation reviews relating to the Leased
Property, issued by any Governmental Authority or Accreditation Body
during the most recent licensing period, together with all plans of
correction relating thereto.
10.1.15 COMPLIANCE WITH LEGAL AND OTHER REQUIREMENTS.
(A) The Lessee and the Leased Property and the ownership,
construction, development, maintenance, management, repair, use,
occupancy, possession and operation thereof comply with all applicable
Legal Requirements and there is no claim of any violation thereof known to
the Lessee which could have a material adverse effect on the Leased
Property or the Lessee. Without limiting the foregoing, the Acceptable
Licensed Operator is or will become the licensed operator of the Facility,
the Acceptable Licensed Operator has or will obtain all Permits that are
necessary to operate the Leased Property in accordance with its Primary
Intended Use and the Other Permitted Uses, if any, and all such Permits
are in full force and effect to the extent issued prior to the date
hereof.
(B) Except as previously delivered to the Lessor pursuant to Section
10.1.14(d) hereof, there are no outstanding notices of deficiencies,
notices of proposed action or orders of any kind relating to the Leased
Property issued by any Governmental Authority requiring conformity to any
of the Legal Requirements and which could have a material adverse effect
on the Leased Property or the Lessee.
10.1.16 NO ACTION BY GOVERNMENTAL AUTHORITY. There is no action
pending or, to the best knowledge and belief of the Lessee, recommended,
by any Governmental Authority or Accreditation Body to revoke, repeal,
cancel, modify, withdraw or suspend any Permit or Contract or to take any
other action of any other type which could have a material adverse effect
on the Leased Property.
10.1.17 PROPERTY MATTERS.
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(A) The Leased Property is free and clear of agreements, covenants
and Liens, except those agreements, covenants and Liens to which this
Lease is expressly subject, whether presently existing, as are listed on
EXHIBIT B or were listed on the UCC lien search results delivered to the
Lessor at or prior to the execution and delivery of this Lease (and were
not required to be terminated as a condition of the execution and delivery
of this Lease), or which may hereafter be created in accordance with the
terms hereof (collectively referred to herein as the "Permitted
Encumbrances"); and the Lessee shall warrant and defend the Lessor's title
to the Leased Property against any and all claims and demands of every
kind and nature whatsoever, subject to the Permitted Exceptions;
(B) There is no Condemnation or similar proceeding pending with
respect to or affecting the Leased Property, and the Lessee is not aware,
to the best of the Lessee's knowledge and belief, that any such proceeding
is contemplated;
(C) No part of the Collateral or the Leased Property has been
damaged by any fire or other casualty. The Leased Improvements, Fixtures
and Tangible Personal Property are in good operating condition and repair,
ordinary wear and tear excepted, free from known defects in construction
or design;
(D) All buildings, facilities and other improvements necessary, both
legally and practically, for the proper and efficient operation of the
Facility are located upon the Leased Property and all real property and
personal property currently utilized by the Lessee is included within the
definition of the Leased Property or the Collateral;
(E) The Leased Property abuts on and has direct vehicular access to
a public road or access to a public road via permanent, irrevocable,
appurtenant easements;
(F) The Leased Property constitutes a separate parcel for real
estate tax purposes and no portion of any real property that does not
constitute a portion of the Leased Property is part of the same tax parcel
as any part of the Leased Property;
(G) All utilities necessary for the use and operation of the
Facility are available to the lot lines of the Leased Property:
(I) in sufficient supply and capacity;
(II) through validly created and existing easements of record
appurtenant to or encumbering the Leased Property (which easements
shall not impede or restrict the operation of the Facility); and
(III) without need for any Permits and/or Contracts to be
issued by or entered into with any Governmental Authority, except as
already obtained or executed, as the case may be, or as otherwise
shown to the satisfaction of the Lessor to be readily obtainable;
and
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(H) Except as may be shown on the survey of the Leased Property that
has been reviewed and approved by the Lessor, the Lessee has made no
structural alterations or improvements to any of the Leased Improvements
that changed the foot-print of any of the Leased Improvements, added an
additional story to any of the Leased Improvements, decreased the amount
of parking available on the Leased Property or otherwise involved any
alteration which would be regulated by applicable zoning requirements.
10.1.18 THIRD PARTY PAYOR AGREEMENTS.
(A) The Lessee, the Acceptable Licensed Operator (as applicable) or
the Facility is fully qualified as a provider of services under and
participates in all Third Party Payor Programs and referral programs as is
necessary for the prudent operation of the Facility in the Lessee's good
faith exercise of commercially reasonable business judgment.
(B) Attached hereto as EXHIBIT D is a list of national accounts and
local discount agreements, which constitute all of the agreements between
the Lessee or the Facility, on the one hand, and Third Party Payors on the
other hand, pursuant to which the Lessee or the Facility agrees to provide
services based on a discount factor from the rates regularly charged for
services rendered by the Lessee or the Facility.
(C) No member of the Leasing Group, nor the Facility has any rate
appeal currently pending before any Governmental Authority or any
administrator of any Third Party Payor Program or any other referral
source other than such appeals which, if determined adversely to any
member of the Leasing Group or the Facility would not have a materially
adverse effect, either singly or in the aggregate, on the financial
condition of any member of the Leasing Group or the Facility.
(D) All cost reports and financial reports submitted to any Third
Party Payor with respect to the Facility by any member of the Leasing
Group have been materially accurate and complete and have not been
misleading in any material respect. As a result of any audits by any Third
Party Payor, there are no related recoupment claims made or contests
pending or threatened other than such recoupment claims or contests which,
if determined adversely to any member of the Leasing Group or the
Facility, would not have a materially adverse effect, either singly or in
the aggregate, on the financial condition of any member of the Leasing
Group or the Facility. As of the date hereof, no cost reports for the
Facility remain open or unsettled other than those listed on EXHIBIT E.
10.1.19 RATE LIMITATIONS. Except as disclosed on EXHIBIT F, the
State currently imposes no restrictions or limitations on rates which may
be charged to private pay residents receiving services at the Facility.
10.1.20 FREE CARE. Except as disclosed on EXHIBIT G, there are no
Contracts, Permits or Legal Requirements which require that a percentage
of units or slots in any program at the Facility be reserved for Medicaid
or Medicare eligible patients or that the
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Facility provide a certain amount of welfare, free or charity care or
discounted or government assisted resident care.
10.1.21 NO PROPOSED CHANGES. The Lessee has no actual knowledge of
any Legal Requirements which have been enacted, promulgated or issued
within the eighteen (18) months preceding the date of this Lease or any
proposed Legal Requirements currently pending in the State which may
materially adversely affect rates at the Facility (or any program operated
in conjunction with the Facility) or the imposition of Medicaid, Medicare,
charity, free care, welfare or other discounted or government assisted
residents at the Facility or require that the Lessee or the Facility
obtain a certificate of need, Section 1122 approval or the equivalent,
which the Lessee or the Facility does not currently possess.
10.1.22 ERISA. No employee pension benefit plan maintained by any
member of the Leasing Group has any accumulated funding deficiency within
the meaning of the ERISA, nor does any member of the Leasing Group have
any material liability to the PBGC established under ERISA (or any
successor thereto) in connection with any employee pension benefit plan
(or other class of benefit which the PBGC has elected to insure), and
there have been no "reportable events" (not waived) or "prohibited
transactions" with respect to any such plan, as those terms are defined in
Section 4043 of ERISA and Section 4975 of the Internal Revenue Code of
1986, as now or hereafter amended, respectively.
10.1.23 NO BROKER. No member of the Leasing Group nor any of their
respective Affiliates has dealt with any broker or agent in connection
with the transactions contemplated by the Lease Documents. The Lessor
hereby represents and warrants to the Lessee that no Meditrust Entity has
dealt with any broker or agent in connection with the transactions
contemplated by the Lease Documents.
10.1.24 NO IMPROPER PAYMENTS. No member of the Leasing Group nor, to
the best knowledge of the Lessee, any of their respective Affiliates
(other than individuals who are not acting on behalf of any such
non-individual Affiliates) has:
(A) made any contributions, payments or gifts of its funds or
property to or for the private use of any government official, employee,
agent or other Person where either the payment or the purpose of such
contribution, payment or gifts is illegal under the laws of the United
States, any state thereof or any other jurisdiction (foreign or domestic);
(B) established or maintained any unrecorded fund or asset for any
purpose or has made any false or artificial entries on any of its books or
records for any reason;
(C) made any payments to any Person with the intention or
understanding that any part of such payment was to be used for any other
purpose other than that described in the documents supporting the payment;
or
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(D) made any contribution, or has reimbursed any political gift or
contribution made by any other Person, to candidates for public office,
whether federal, state or local, where such contribution would be in
violation of applicable law.
10.1.25 NOTHING OMITTED.
(A) Neither this Lease, nor any of the other Lease Documents, nor
any certificate, agreement, statement or other document, including,
without limitation, any financial statements concerning the financial
condition of any member of the Leasing Group, furnished to or to be
furnished to the Lessor or its attorneys in connection with the
transactions contemplated by the Lease Documents, contains or will contain
any untrue statement of a material fact or omits or will omit to state a
material fact necessary in order to prevent all statements contained
herein and therein from being misleading.
(B) There is no fact within the special knowledge of the Lessee
which has not been disclosed herein or in writing to the Lessor that
materially adversely affects, or in the future, insofar as the Lessee can
reasonably foresee, may materially adversely affect the business,
properties, assets or condition, financial or otherwise, of any member of
the Leasing Group or the Leased Property.
10.1.26 NO MARGIN SECURITY. The Lessee is not engaged in the
business of extending credit for the purpose of purchasing or carrying
margin stock (within the meaning of Regulation U of the Board of Governors
of the Federal Reserve System), and no part of the proceeds of the
Meditrust Investment will be used to purchase or carry any margin security
or to extend credit to others for the purpose of purchasing or carrying
any margin security or in any other manner which would involve a violation
of any of the regulations of the Board of Governors of the Federal Reserve
System. The Lessee is not an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
10.1.27 NO DEFAULT. No event or state of facts which constitutes, or
which, with notice or lapse of time, or both, could constitute, a Lease
Default has occurred and is continuing.
10.1.28 PRINCIPAL PLACE OF BUSINESS. The principal place of business
and chief executive office of the Lessee is located at 450 N. Sunnyslope
Road, Suite 300, Brookfield, Wisconsin 53005 (the "Principal Place of
Business").
10.1.29 LABOR MATTERS. There are no proceedings now pending, nor, to
the best of the Lessee's knowledge, threatened with respect to the
operation of the Facility before the National Labor Relations Board, State
Commission on Human Rights and Opportunities, State Department of Labor,
U.S. Department of Labor or any other Governmental Authority having
jurisdiction of employee rights with respect to hiring, tenure and
conditions of employment, and no member of the Leasing Group has
experienced any material controversy
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with any Facility administrator or other employee of similar stature or
with any labor organization.
10.1.30 INTELLECTUAL PROPERTY. The Lessee is duly licensed or
authorized to use all (if any) copyrights, rights of reproduction,
trademarks, trade-names, trademark applications, service marks, patent
applications, patents and patent license rights, (all whether registered
or unregistered, U.S. or foreign), inventions, franchises, discoveries,
ideas, research, engineering, methods, practices, processes, systems,
formulae, designs, drawings, products, projects, improvements,
developments, know-how and trade secrets which are used in or necessary
for the operation of the Facility in accordance with its Primary Intended
Use, without conflict with or infringement of any, and subject to no
restriction, lien, encumbrance, right, title or interest in others.
10.1.31 MANAGEMENT AGREEMENTS. There is no Management Agreement in
force and effect as of the date hereof other than the Current Management
Agreement.
10.1.32 FISCAL YEAR. The fiscal year of each of the Lessee and the
Guarantor is the Fiscal Year.
10.1.33 RATES. The Lessee or the Facility, as the case may be,
currently charge those rates for private pay residents set forth on EXHIBIT H,
all of which rates are legal, valid and enforceable rates.
10.2 CONTINUING EFFECT OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained in this Lease and the other Lease
Documents shall constitute continuing representations and warranties which shall
remain true, correct and complete throughout the Term. Notwithstanding the
provisions of the foregoing sentence but without derogation from any other terms
and provisions of this Lease, including, without limitation, those terms and
provisions containing covenants to be performed or conditions to be satisfied on
the part of the Lessee, the representations and warranties contained in Sections
10.1.6, 10.1.7, 10.1.10, 10.1.14, 10.1.15, 10.1.17(b), 10.1.17(c), 10.1.18(b),
10.1.18(c), 10.1.19, 10.1.20, 10.1.21, 10.1.22, 10.1.25(b), 10.1.28, 10.1.29, in
the second sentence of Section 10.1.12, in the second and third sentences of
Section 10.1.13, and in the second and third sentences of Section 10.1.18(d)
shall not constitute continuing representations and warranties throughout the
Term.
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ARTICLE 11
FINANCIAL AND OTHER COVENANTS
11.1 STATUS CERTIFICATES. At any time, and from time to time, upon request
from the Lessor, the Lessee shall furnish to the Lessor, within ten (10)
Business Days' after receipt of such request, an Officer's Certificate
certifying that this Lease is unmodified and in full force and effect (or that
this Lease is in full force and effect as modified and setting forth the
modifications) and the dates to which the Rent has been paid. Any Officer's
Certificate furnished pursuant to this Section shall be addressed to any
prospective purchaser or mortgagee of the Leased Property as the Lessor may
request and may be relied upon by the Lessor and any such prospective purchaser
or mortgagee of the Leased Property.
11.2 FINANCIAL STATEMENTS; REPORTS; NOTICE AND INFORMATION.
11.2.1 OBLIGATION TO FURNISH. The Lessee will furnish and shall
cause to be furnished to the Lessor the following statements, information
and other materials:
(A) ANNUAL STATEMENTS. Within ninety (90) days after the end
of each of their respective fiscal years, (I) a copy of the
Consolidated Financials for each of (X) the Lessee, (Y) the
Guarantor and (Z) any other Acceptable Licensed Operator for the
preceding fiscal year, certified and audited (only with respect to
the Guarantor) by, and with the unqualified opinion of, independent
certified public accountants from a nationally recognized public
accounting firm (it being hereby acknowledged that KPMG Peat Marwick
is acceptable for this purpose) and certified as true and correct by
the Lessee, the Guarantor or the applicable Acceptable Licensed
Operator, as the case may be (and, without limiting anything else
contained herein, the Consolidated Financials for the Lessee and for
any other Acceptable Licensed Operator shall include a detailed
income statement for Leased Property as of the last day of such
fiscal year and an unaudited statement of earnings from the Leased
Property for such fiscal year showing, among other things, all rents
and other income therefrom and all expenses paid or incurred in
connection with the operation of the Leased Property); (II) separate
statements, certified as true and correct by the Lessee, the
Guarantor and any other Acceptable Licensed Operator, stating
whether, to the best of the signer's knowledge and belief after
making due inquiry, the Lessee, the Guarantor or such Acceptable
Licensed Operator, as the case may be, is in default in the
performance or observance of any of the terms of this Lease or any
of the other Lease Documents and, if so, specifying all such
defaults, the nature thereof and the steps being taken to
immediately remedy the same; (III) a copy of all letters from the
independent certified accountants engaged to perform the annual
audits referred to above, directed to the management of the Lessee,
the Guarantor or any other Acceptable Licensed Operator, as the case
may be, regarding the existence of any reportable conditions or
material weaknesses and (IV) a statement certified as true and
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correct by the Lessee setting forth any and all Subleases (excluding
Resident Agreements) as of the last day of such fiscal year, the
respective areas demised thereunder, the names of the Sublessees
thereunder, the respective expiration dates of such Subleases, the
respective rentals provided for therein, and such other information
pertaining to such Subleases as may be reasonably requested by the
Lessor and (V) evidence satisfactory to the Lessor that the Lessee
has fulfilled its obligation to make the Annual Facility Upgrade
Expenditure in accordance with the provisions of Section 8.1.4.
Notwithstanding any provisions of this Section 11.2.1(a) to the
contrary, the Lessee may provide the Lessor with Consolidated
Financials covering each of the Lessee, the Guarantor and any other
Acceptable Licensed Operator in accordance with the aforementioned
provisions; provided, however, the Lessee shall provide the Lessor
with a separate detailed balance sheet and an unaudited statement of
earnings for the Leased Property.
(B) MONTHLY STATEMENTS OF LESSEE. Within thirty (30) days
after the end of each calendar month during the pendency of this
Lease, (I) an unaudited, detailed month and year to date income and
expense statement for the Leased Property which shall include a
comparison to corresponding budget figures, occupancy statistics
(including the actual number of residents, the number of units
available and total patient days for such month) and resident mix
breakdowns (for each resident day during such month classifying
residents by the type of care required and source of payment) and
(II) an express written calculation showing the compliance or
non-compliance, as the case may be, with the specific financial
covenants set forth in Section 11.3 for the applicable period,
including, with respect to the calculation of the Lessee's Rent
Coverage Ratio, a schedule substantially in the form attached hereto
as EXHIBIT I (which calculation with respect to the Lessee's Rent
Coverage Ratio shall be provided only within thirty (30) days after
the end of each Fiscal Year).
(C) [INTENTIONALLY OMITTED].
(D) QUARTERLY STATEMENTS OF THE GUARANTOR. Within forty-five
(45) days after the end of each Fiscal Quarter ending March 31, June
30 and September 30 respectively, all 10Q reports required to be
filed with the Securities and Exchange Commission for the Guarantor,
certified as true and correct by the Guarantor.
(E) PERMITS AND CONTRACTS. Promptly after the issuance or the
execution thereof, as the case may be, true and complete copies of
(I) all Permits which constitute operating licenses for the Facility
issued by any Governmental Authority having jurisdiction over
assisted living matters and (II) Contracts (involving payments in
the aggregate in excess of $100,000 per annum), including, without
limitation, all Provider Agreements.
(F) CONTRACT NOTICES. Promptly after the receipt thereof, true
and complete copies of any notices, consents, terminations or
statements of any kind or
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nature relating to any of the Contracts (involving payments in the
aggregate in excess of $100,000 per annum) other than those issued
in the ordinary course of business.
(G) PERMIT OR CONTRACT DEFAULTS. Promptly after the receipt
thereof, true and complete copies of all surveys, follow-up surveys,
licensing surveys, complaint surveys, examinations, compliance
certificates, inspection reports, statements (other than those
statements that are issued in the ordinary course of business),
terminations and notices of any kind (other than those notices that
are furnished in the ordinary course of business) issued or provided
to the Lessee or any other Acceptable Licensed Operator by any
Governmental Authority, Accreditation Body or any Third Party Payor,
including, without limitation, any notices pertaining to any
delinquency in, or proposed revision of, the Lessee's or any
Acceptable Licensed Operator's obligations under the terms and
conditions of any Permits or Contracts now or hereafter issued by or
entered into with any Governmental Authority, Accreditation Body or
Third Party Payor and the response(s) thereto made by or on behalf
of the Lessee or any Acceptable Licensed Operator.
(H) OFFICIAL REPORTS. Upon completion or filing thereof,
complete copies of all applications (other than those that are
furnished in the ordinary course of business), notices (other than
those that are furnished in the ordinary course of business),
statements, annual reports, cost reports and other reports or
filings of any kind (other than those that are furnished in the
ordinary course of business) provided by the Lessee or any other
Acceptable Licensed Operator to any Governmental Authority,
Accreditation Body or any Third Party Payor with respect to the
Leased Property.
(I) OTHER INFORMATION. With reasonable promptness, such other
information as the Lessor may from time to time reasonably request
respecting (I) the financial condition and affairs of each member of
the Leasing Group and the Leased Property and (II) the licensing and
operation of the Leased Property; including, without limitation,
audited financial statements, certificates and consents from
accountants and all other financial and licensing/operational
information as may be required or requested by any Governmental
Authority.
(J) DEFAULT CONDITIONS. As soon as possible, and in any event
within five (5) Business Days after the occurrence of any Lease
Default, or any event or circumstance which, with the giving of
notice or the passage of time, or both, could constitute a Lease
Default, a written statement of the Lessee setting forth the details
of such Lease Default, event or circumstance and the action which
the Lessee proposes to take with respect thereto.
(K) OFFICIAL ACTIONS. Promptly after the commencement thereof,
notice of all actions, suits and proceedings before any Governmental
Authority or Accreditation Body which could have a material adverse
effect on (I) any member of
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the Leasing Group to perform any of its obligations under any of the
Lease Documents or (II) the Leased Property.
(L) AUDIT REPORTS. Promptly after receipt, a copy of all
audits or reports submitted to any member of the Leasing Group by
any independent public accountant in connection with any annual,
special or interim audits of the books of any such member of the
Leasing Group and, if requested by the Lessor, any letter of
comments directed by such accountant to the management of any such
member of the Leasing Group.
(M) ADVERSE DEVELOPMENTS. Promptly after the Lessee acquires
knowledge thereof, written notice of:
(I) the potential termination of any Permit or
Provider Agreement necessary for the operation of
the Leased Property;
(II) any loss, damage or destruction to or of the Leased
Property in excess of FIFTY THOUSAND AND NO/100
DOLLARS ($50,000.00) occurring within any twelve
(12) month period (regardless of whether the same
is covered by insurance);
(III) any material controversy involving the Lessee or
any other Acceptable Licensed Operator;
(IV) any controversy that calls into question the
eligibility of the Lessee, any other Acceptable
Licensed Operator or the Facility for the
participation in any Medicaid, Medicare or other
Third Party Payor Program;
(V) any refusal of reimbursement by any Third Party
Payor which, singularly or together with all other
such refusals by any Third Party Payors, could have
a material adverse effect on the financial
condition of the Lessee or any other Acceptable
Licensed Operator; and
(VI) any fact within the special knowledge of any member
of the Leasing Group, or any other development in
the business or affairs of any member of the
Leasing Group, which may be materially adverse to
the business, properties, assets or condition,
financial or otherwise, of any member of the
Leasing Group or the Leased Property.
(N) INTENTIONALLY OMITTED.
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(O) RESPONSES TO INSPECTION REPORTS. Within thirty (30) days
after receipt of an inspection report relating to the Leased
Property from the Lessor, a written response describing in detail
prepared plans to address concerns raised by the inspection report.
(P) PUBLIC INFORMATION. Upon the completion or filing, mailing
or other delivery thereof, complete copies of all financial
statements, reports, notices and proxy statements, if any, sent by
any member of the Leasing Group (which is a publicly held
corporation) to its shareholders and of all reports, if any, filed
by any member of the Leasing Group (which is a publicly held
corporation) with any securities exchange or with the Securities
Exchange Commission.
(Q) ANNUAL BUDGETS. At least thirty (30) days prior to the end
of each Fiscal Year, the Lessee, any Sublessee and/or any Manager
shall submit to the Lessor a preliminary annual financial budget for
the Facility for the next Fiscal Year, a preliminary capital
expenditures budget for the Facility for the next Fiscal Year and a
report detailing the capital expenditures made in the then current
Fiscal Year and on or before the end of the first month of each
Fiscal Year, the Lessee, any Sublessee and/or any Manager shall
submit to the Lessor revised finalized versions of such budgets and
report.
11.2.2 RESPONSIBLE OFFICER. Any certificate, instrument, notice, or
other document to be provided to the Lessor hereunder by any member of the
Leasing Group shall be signed by an executive officer of such member (in
the event that any of the foregoing is not an individual), having a
position of Vice President or higher and with respect to financial
matters, any such certificate, instrument, notice or other document shall
be signed by the chief financial officer of such member.
11.2.3 NO MATERIAL OMISSION. No certificate, instrument, notice or
other document, including without limitation, any financial statements
furnished or to be furnished to the Lessor pursuant to the terms hereof or
of any of the other Lease Documents shall contain any untrue statement of
a material fact or shall omit to state any material fact necessary in
order to prevent all statements contained therein from being misleading.
11.2.4 CONFIDENTIALITY. The Lessor shall not disclose any
information received pursuant to the provisions of the Lease Documents to
any competitor of the Lessee and shall afford any such information the
same degree of confidentiality that the Lessor affords similar information
proprietary to the Lessor; provided, however, that the Lessor does not in
any way warrant or represent that such information received from any
member of the Leasing Group shall remain confidential (and shall not be
liable in any way for any subsequent disclosure of such information by any
Person that the Lessor has provided such information in accordance with
the terms hereof, including, without limitation, a disclosure by such
Person to any competitor of the Lessee) and provided, further, that the
Lessor shall have the unconditional right to (A) disclose any such
information as the Lessor deems necessary or
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appropriate in connection with any sale, transfer, conveyance,
participation or assignment of the Leased Property or any of the Lease
Documents or any interest therein and (B) use such information in any
litigation or arbitration proceeding between the Lessor and any member of
the Leasing Group. Without limiting the foregoing, the Lessor may also
utilize any information furnished to it hereunder as and to the extent (I)
counsel to the Lessor determines that such utilization is necessary
pursuant to 15 U.S.C. 77a-77aa or 15 U.S.C. 78a-78jj and the rules and
regulations promulgated thereunder, (II) the Lessor is required or
requested by any Governmental Authority to disclose any such information
and/or (III) the Lessor is requested to disclose any such information by
any of the Meditrust Entities' lenders or potential lenders. The Lessor
shall not be liable in any way for any subsequent disclosure of such
information by any Person to whom the Lessor provided such information in
accordance with the terms hereof. Nevertheless, in connection with any
such disclosure, the Lessor shall inform the recipient of any such
information of the confidential nature thereof. The Lessor shall observe
any prohibitions or limitations on the disclosure of any such information
under applicable confidentiality law or regulations, to the extent that
the same are applicable to such information, including, without
limitation, any duly enacted "Patients' Bill of Rights" or similar
legislation, including such limitations as may be necessary to preserve
the confidentiality of the facility-patient relationship and the
physician-patient privilege.
11.3 FINANCIAL COVENANTS. The Lessee covenants and agrees that, throughout
the Term and as long as the Lessee is in possession of the Leased Property:
11.3.1 RENT COVERAGE RATIO. The Lessee shall comply with the
provisions of the Agreement Regarding Related Lease Transactions
pertaining to Rent Coverage Ratio.
11.3.2 [INTENTIONALLY OMITTED].
11.3.3 [INTENTIONALLY OMITTED].
11.3.4 [INTENTIONALLY OMITTED].
11.3.5 CURRENT RATIO - GUARANTOR. The Guarantor shall achieve, as of
December 31, 1998, a ratio of Consolidated Current Assets to Consolidated
Current Liabilities equal to or greater than 1.0 to 1 and, as of December
31 of each year thereafter during the Term, shall maintain a ratio of
Consolidated Current Assets to Consolidated Current Liabilities equal to
or greater than 1.0 to 1; provided however that if a Permitted Transaction
(as defined in Section 16.1(h)(vi)) occurs, or if increased ratios are
triggered by a Permitted Merger pursuant to Section 16.1(i), then such
ratios shall increase to 1.0 to 1.0 and 1.2 to 1.0, respectively.
11.3.6 NET WORTH OF GUARANTOR AFTER A PERMITTED TRANSACTION OR
PERMITTED MERGER. From and after the occurrence of a Permitted Transaction
or if triggered by a Permitted Merger pursuant to Section 16.1(i), the
Guarantor shall maintain a "Net Worth"
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(determined in accordance with GAAP) of not less than FIFTY-FIVE MILLION
DOLLARS ($55,000,000.00).
11.3.7 TANGIBLE NET WORTH - GUARANTOR. The Guarantor shall maintain,
at all times, a Tangible Net Worth of not less than FORTY MILLION AND
NO/100 DOLLARS ($40,000,000.00).
11.3.8 NO INDEBTEDNESS. The Lessee shall not create, incur, assume
or suffer to exist any liability for borrowed money except (I)
Indebtedness to the Lessor under the Lease Documents and, (II) Impositions
allowed pursuant to the provisions of the Lease, (III) unsecured normal
trade debt incurred upon customary terms in the ordinary course of
business, (IV) Indebtedness created in connection with any financing of
any Capital Addition, provided, that each such financing has been approved
by the Lessor in accordance with the terms of Article 9 hereof, (V)
Indebtedness to any Affiliate, provided, that, such Indebtedness is fully
subordinated to the Lease Obligations pursuant to the Affiliated Party
Subordination Agreement, (VI) other Indebtedness of the Lessee in the
aggregate amount not to exceed TWO HUNDRED THOUSAND AND NO/100 DOLLARS
($200,000.00) incurred, for the exclusive use of the Leased Property, on
account of purchase money indebtedness or finance lease arrangements, each
of which shall not exceed the fair market value of the assets or property
acquired or leased and shall not extend to any assets or property other
than those purchased or leased and (VII) purchase money security interests
in equipment and equipment leases which comply with the provisions of
Section 6.1.2.
11.3.9 NO GUARANTIES. The Lessee shall not assume, guarantee,
endorse, contingently agree to purchase or otherwise become directly or
contingently liable (including, without limitation, liable by way of
agreement, contingent or otherwise, to purchase, to provide funds for
payment, to supply funds to or otherwise to invest in any debtor or
otherwise to assure any creditor against loss) in connection with any
Indebtedness of any other Person, except by the endorsement of negotiable
instruments for deposit or collection or similar transactions in the
ordinary course of business.
11.4 AFFIRMATIVE COVENANTS. The Lessee covenants and agrees that
throughout the Term and any periods thereafter that the Lessee remains in
possession of the Leased Property:
11.4.1 MAINTENANCE OF EXISTENCE. If the Lessee is a corporation,
trust or partnership, during the entire time that this Lease remains in
full force and effect, the Lessee shall keep in effect its existence and
rights as a corporation, trust or partnership under the laws of the state
of its incorporation or formation and its right to own property and
transact business in the State.
11.4.2 MATERIALS. Except as provided in Section 6.1.2, the Lessee
shall not suffer the use in connection with any renovations or other
construction relating to the Leased Property of any materials, fixtures or
equipment intended to become part of the Leased Property which are
purchased upon lease or conditional bill of sale or to which the Lessee
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does not have absolute and unencumbered title, and the Lessee covenants to
cause to be paid punctually all sums becoming due for labor, materials,
fixtures or equipment used or purchased in connection with any such
renovations or construction, subject to the Lessee's right to contest to
the extent provided for in Article 15.
11.4.3 COMPLIANCE WITH LEGAL REQUIREMENTS AND APPLICABLE AGREEMENTS.
The Lessee and the Leased Property and all uses thereof shall comply with
(I) all Legal Requirements, (II) all Permits and Contracts, (III) all
Insurance Requirements, (IV) the Lease Documents, (V) the Permitted
Encumbrances and (VI) the Appurtenant Agreements.
11.4.4 BOOKS AND RECORDS. The Lessee shall cause to be kept and
maintained, and shall permit the Lessor and its representatives to inspect
at all reasonable times, accurate books of accounts in which complete
entries will be made in accordance with GAAP reflecting all financial
transactions of the Lessee (showing, at a minimum, all income and expenses
of the Leased Property as a discernable component of such books of
account).
11.4.5 PARTICIPATION IN THIRD PARTY PAYOR PROGRAMS. The Lessee and
any other Acceptable Licensed Operator shall participate in all Third
Party Payor Programs (which would be participated in by a prudent operator
in the good faith exercise of commercially reasonable business judgment),
in accordance with all requirements thereof (including, without
limitation, all applicable Provider Agreements), and shall remain eligible
to participate in such Third Party Payor Programs, all as shall be
necessary for the prudent operation of the Facility in the good faith
exercise of commercially reasonable business judgment.
11.4.6 CONDUCT OF ITS BUSINESS. The Lessee will maintain, and cause
any Sublessee and any Manager to maintain, experienced and competent
professional management with respect to its business and with respect to
the Leased Property. The Lessor agrees that management by the executive
officers listed on EXHIBIT J attached hereto is satisfactory for the
purposes of this provision. The Lessee, any Sublessee and any Manager
shall conduct, in the ordinary course, the operation of the Facility, and
the Lessee and any other Acceptable Licensed Operator (other than the
Guarantor, if applicable) shall not enter into any other business or
venture during the Term or such time as the Lessee or any other Acceptable
Licensed Operator is in possession of the Leased Property, other than the
development, ownership and/or operation of any other health care facility
owned or financed by any Meditrust Entity.
11.4.7 ADDRESS. The Lessee shall provide the Lessor thirty (30)
days' prior written notice of any change of its Principal Place of
Business from its current Principal Place of Business. The Lessee shall
maintain the Collateral, including without limitation, all books and
records relating to its business, solely at its Principal Place of
Business and at the Leased Property. The Lessee shall not remove the
Collateral, including, without limitation, any books or records relating
to the Lessee's business from either the Leased Property or the Lessee's
Principal Place of Business.
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11.4.8 SUBORDINATION OF AFFILIATE TRANSACTIONS. Without limiting the
provisions of any other Section of this Lease or the Affiliated Party
Subordination Agreement, any payments to be made by the Lessee to (A) any
member of the Leasing Group (or any Affiliate of any member of the Leasing
Group) or (B) any Affiliate of the Lessee, in connection with any
transaction between the Lessee and such Person, including, without
limitation, the purchase, sale or exchange of any property, the rendering
of any service to or with any such Person (including, without limitation,
all allocations of any so-called corporate or central office costs,
expenses and charges of any kind or nature) or the making of any loan or
other extension of credit or the making of any equity investment, shall be
subordinate to the complete payment and performance of the Lease
Obligations; provided, however, that all such subordinated payments may be
paid at any time unless: (X) after giving effect to such payment, the
Lessee shall be unable to comply with any of its obligations under any of
the Lease Documents or (Y) a Lease Default has occurred and is continuing
and has not been expressly waived in writing by the Lessor or an event or
state of facts exists, which, with the giving of notice or the passage of
time, or both, would constitute a Lease Default.
11.4.9 INSPECTION. At reasonable times and upon reasonable notice,
the Lessee shall permit (and shall cause any other Acceptable Licensed
Operator to permit) the Lessor and its authorized representatives
(including, without limitation, the Consultants) to inspect the Leased
Property as provided in Section 7.1 above.
11.4.10 ADDITIONAL PROPERTY. In the event that at any time during
the Term, the Lessee holds the fee title to or a leasehold interest in (A)
any personal property which was purchased or financed by a Meditrust
Entity or which replaces any personal property purchased or financed by a
Meditrust Entity or which is a Fixture or (B) any real property and such
real or personal property is used as an integral part of the operation of
the Leased Property (but is not subject to this Lease), the Lessee shall
(I) provide the Lessor with prior notice of such acquisition and (II)
shall take such actions and enter into such agreements as the Lessor shall
reasonably request in order to grant the Lessor a first priority mortgage
or other security interest in such real property and personal property,
subject only to the Permitted Encumbrances and other Liens reasonably
acceptable to the Lessor.
11.4.11 ACCEPTABLE LICENSED OPERATOR. In the event that the Lessee
proposes that any other Acceptable Licensed Operator become the licensed
operator of the Facility, the Lessee shall so advise the Lessor and,
subject to the Lessor's review and approval of any applicable Sublease or
Management Agreement (pursuant to which the proposed Acceptable Licensed
Operator shall operate the Facility), the Lessor shall consent to such
operation of the Facility by the proposed Acceptable Licensed Operator, as
long as, prior to or contemporaneously with the commencement of the
operation of the Facility by such proposed Acceptable Licensed Operator
and without limiting any other terms and conditions of the Lease
Documents, the Lessor receives (A) such evidence as the Lessor may request
evidencing that the proposed Acceptable Licensed Operator has received all
Permits necessary for the operation of the Facility in accordance with its
Primary Intended Use, (B) such documents executed by the proposed
Acceptable Licensed Operator as the Lessor may
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request to maintain and protect the Lessor's security for the Lease
Obligations (including, without limitation, documents in form and
substance substantially similar to the Permits Assignment and Security
Agreement), (C) a copy of the proposed Acceptable Licensed Operator's
articles of incorporation as certified by the Secretary of State of the
state of its incorporation, (D) a certificate of the Secretary of State of
the state of incorporation of the proposed Acceptable Licensed Operator to
the effect that the proposed Acceptable Licensed Operator is in legal
existence and good standing on the records of such Secretary of State as
of the date of such Certificate, (E) a copy of the by-laws of the proposed
Acceptable Licensed Operator as certified by the Secretary of the proposed
Acceptable Licensed Operator, (F) resolutions certified by the Secretary
of the proposed Acceptable Licensed Operator evidencing the execution and
delivery of the documents required under this Section 11.4.11 by the
Lessor and (G) if requested by the Lessor, a due authorization and
enforceability opinion, addressed to the Lessor, in form and substance
reasonably acceptable to the Lessor, rendered by counsel to the Lessee and
the proposed Acceptable Licensed Operator, opining as to the due
authorization, execution, delivery and enforceability of the documents
required under this Section 11.4.11 by the Lessor.
11.4.12 [INTENTIONALLY OMITTED].
11.5 ADDITIONAL NEGATIVE COVENANTS. The Lessee covenants and agrees that,
throughout the Term and such time as the Lessee remains in possession of the
Leased Property:
11.5.1 RESTRICTIONS RELATING TO LESSEE. Except as may otherwise be
expressly provided in any of the other Lease Documents, the Lessee shall
not, without the prior written consent of the Lessor, in each instance,
which consent may be withheld in the sole and absolute discretion of the
Lessor:
(A) convey, assign, hypothecate, transfer, dispose of or
encumber, or permit the conveyance, assignment, transfer,
hypothecation, disposal or encumbrance of all or any part of any
legal or beneficial interest in this Lease, its other assets or the
Leased Property; provided, however, that this restriction shall not
apply to (I) the Permitted Encumbrances that may be created after
the date hereof pursuant to the Lease Documents; (II) Liens created
in accordance with the applicable provisions of Section 6.1.2
against Tangible Personal Property securing Indebtedness permitted
under Section 11.3.8(vi) relating to equipment leasing or financing
for the exclusive use of the Leased Property; (III) the sale,
conveyance, assignment, hypothecation, lease or other transfer of
any material asset or assets (whether now owned or hereafter
acquired), the fair market value of which equals or is less than
TWENTY-FIVE THOUSAND AND NO/100 DOLLARS ($25,000.00), individually,
or ONE HUNDRED THOUSAND AND NO/100 DOLLARS ($100,000.00)
collectively; (IV) without limitation as to amount, the disposition
in the ordinary course of business of any obsolete, worn out or
defective fixtures, furnishings or equipment used in the operation
of the Leased Property provided that the same are replaced with
fixtures, furnishings or equipment of equal or greater utility or
value or the Lessee provides
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the Lessor with an explanation (reasonably satisfactory to the
Lessor) as to why such fixtures, furnishings or equipment is no
longer required in connection with the operation of the Leased
Property; (V) without limitation as to amount, any sale of inventory
by the Lessee in the ordinary course of business; (VI) agreements
entered into with utility companies creating easements in favor of
such companies as are required to service the Facility, provided,
however, the term of any such agreement shall not extend beyond the
Term and shall be in form reasonably acceptable to the Lessor; and
(VII) subject to the terms of the Pledge Agreement and the
Affiliated Party Subordination Agreement, distributions to the
shareholders of the Lessee;
(B) permit the use of the Facility for any purpose other than
the Primary Intended Use and the Other Permitted Uses;
(C) subject to the terms of Section 11.4.11, permit any Person
other than the Lessee to be the Licensed Operator of the Facility;
or
(D) liquidate, dissolve or merge or consolidate with any other
Person.
11.5.2 NO LIENS. The Lessee will not directly or indirectly create
or allow to remain and will promptly discharge at its expense any Lien,
title retention agreement or claim upon or against the Leased Property
(including the Lessee's interest therein) or the Lessee's interest in this
Lease or any of the other Lease Documents, or in respect of the Rent,
excluding (A) this Lease and any permitted Subleases, (B) the Permitted
Encumbrances, (C) Liens which are consented to in writing by the Lessor,
(D) Liens for those taxes of the Lessor which the Lessee is not required
to pay hereunder, (E) Liens of mechanics, laborers, materialmen, suppliers
or vendors for sums either not yet due or being contested in strict
compliance with the terms and conditions of Article 15, (F) any Liens
which are the responsibility of the Lessor pursuant to the provisions of
Article 20, (G) Liens for Impositions which are either not yet due and
payable or which are in the process of being contested in strict
compliance with the terms and conditions of Article 15 and (H) involuntary
Liens caused by the actions or omissions of the Lessor.
11.5.3 LIMITS ON AFFILIATE TRANSACTIONS. The Lessee shall not enter
into any transaction with any Affiliate, including, without limitation,
the purchase, sale or exchange of any property, the rendering of any
service to or with any Affiliate and the making of any loan or other
extension of credit, except in the ordinary course of, and pursuant to the
reasonable requirements of, the Lessee's business and upon fair and
reasonable terms no less favorable to the Lessee than would be obtained in
a comparable arms'-length transaction with any Person that is not an
Affiliate.
11.5.4 NON-COMPETITION. The Lessee acknowledges that upon and after
any termination of this Lease, any competition by any member of the
Leasing Group with any subsequent owner or subsequent lessee of the Leased
Property (the "Purchaser") would cause irreparable harm to the Lessor and
any such Purchaser. To induce the Lessor to enter into
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this Lease, the Lessee agrees that, from and after the end of the seventh
(7th) Lease Year and thereafter until the later of (A) the expiration of
this Lease or (B) the fifth (5th) anniversary of the termination of this
Lease on account of a Lease Default, without the prior written consent of
the Lessor (which consent shall not be unreasonably withheld or delayed),
no member of the Leasing Group nor any Subsidiary of any member of the
Leasing Group (collectively, the "Limited Parties") shall be involved in
any capacity in or lend any of their names to or engage in any capacity in
any assisted living facility (or other facility operated for any use
included within the definition of the Primary Intended Use), center, unit
or program (or in any Person engaged in any such activity or any related
activity competitive therewith), excluding however any of the facilities
described on Schedule 11.5 attached hereto (collectively, the "Excluded
Facilities"), whether such competitive activity (the "Competitive
Activity") shall be as an officer, director, owner, employee, agent,
advisor, independent contractor, developer, lender, sponsor, venture
capitalist, administrator, manager, investor, partner, joint venturer,
consultant or other participant in any capacity whatsoever with respect to
an assisted living facility (or other facility operated for any use
included within the definition of Primary Intended Use), center, unit or
program located within a seven (7) mile radius of the Leased Property.
The Lessee hereby acknowledges and agrees that none of the time
span, scope or area covered by the foregoing restrictive covenants is or
are unreasonable and that it is the specific intent of the Lessee that
each and all of the restrictive covenants set forth hereinabove shall be
valid and enforceable as specifically set forth herein. The Lessee further
agrees that these restrictions are special, unique, extraordinary and
reasonably necessary for the protection of the Lessor and any Purchaser
and that the violation of any such covenant by any of the Limited Parties
would cause irreparable damage to the Lessor and any Purchaser for which a
legal remedy alone would not be sufficient to fully protect such parties.
Therefore, in addition to and without limiting any other remedies
available at law or hereunder, in the event that any of the Limited
Parties breaches any of the restrictive covenants hereunder or shall
threaten breach of any of such covenants, then the Lessor and any
Purchaser shall be entitled to obtain equitable remedies, including
specific performance and injunctive relief, to prevent or otherwise
restrain a breach of this Section 11.5.4 (without the necessity of posting
a bond) and, unless the Lessee prevails, to recover any and all costs and
expenses (including, without limitation, attorneys' fees and expenses and
court costs) reasonably incurred in enforcing the provisions of this
Section 11.5.4. The existence of any claim or cause of action of any of
the Limited Parties or any member of the Leasing Group against the Lessor
or any Purchaser, whether predicated on this Lease or otherwise, shall not
constitute a defense to the enforcement by the Lessor or any Purchaser of
the foregoing restrictive covenants and the Limited Parties shall not
defend on the basis that there is an adequate remedy at law.
Without limiting any other provision of this Lease, the parties
hereto acknowledge that the foregoing restrictive covenants are severable
and separate. If at any time any of the
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foregoing restrictive covenants shall be deemed invalid or unenforceable
by a court having jurisdiction over this Lease, by reason of being vague
or unreasonable as to duration, or geographic scope or scope of activities
restricted, or for any other reason, such covenants shall be considered
divisible as to such portion and such covenants shall be immediately
amended and reformed to include only such covenants as are deemed
reasonable and enforceable by the court having jurisdiction over this
Lease to the full duration, geographic scope and scope of restrictive
activities deemed reasonable and thus enforceable by said court; and the
parties agree that such covenants as so amended and reformed, shall be
valid and binding as through the invalid or unenforceable portion has not
been included therein.
The provisions of this Section 11.5.4 shall survive the termination
of the Lease and any satisfaction of the Lease Obligations in connection
therewith or subsequent thereto. The parties hereto acknowledge and agree
that any Purchaser may enforce the provisions of this Section 11.5.4 as a
third party beneficiary.
11.5.5 NO DEFAULT. The Lessee shall not commit any default or breach
under any of the Lease Documents.
11.5.6 RESTRICTIONS RELATING TO THE GUARANTOR. If, at any time
during the Term, the Tangible Net Worth of the Guarantor is less than
FORTY MILLION AND NO/100 ($40,000,000.00), the Guarantor shall not,
without the prior written consent of the Lessor, in each instance, which
consent may be withheld in the sole and absolute discretion of the Lessor,
convey, assign, donate, sell, mortgage or pledge any real or personal
property or take any other action which would have a materially adverse
effect upon the Tangible Net Worth or general financial condition of the
Guarantor.
11.5.7 [INTENTIONALLY OMITTED].
11.5.8 ERISA. The Lessee shall not establish or permit any Sublessee
to establish any new pension or defined benefit plan or modify any such
existing plan for employees subject to ERISA, which plan provides any
benefits based on past service without the advance consent of the Lessor
to the amount of the aggregate past service liability thereby created,
which consent shall not be unreasonably withheld.
11.5.9 FORGIVENESS OF INDEBTEDNESS. The Lessee will not waive, or
permit any Sublessee or Manager which is an Affiliate of the Lessee or the
Guarantor to waive any debt or claim, except in the ordinary course of its
business.
11.5.10 VALUE OF ASSETS. Except as disclosed in the financial
statements provided to the Lessor as of the date hereof, the Lessee will
not write up (by creating an appraisal surplus or otherwise) the value of
any assets of the Lessee above their cost to the Lessee, less the
depreciation regularly allowable thereon, unless the same is allowed to be
done by GAAP in the normal course of business.
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11.5.11 CHANGES IN FISCAL YEAR AND ACCOUNTING PROCEDURES. The Lessee
may (A) change its fiscal year or capital structure or (B) change, alter,
amend or modify, but only in accordance with GAAP, any of its current
accounting procedures related to the method of revenue recognition,
billing procedures or determinations of doubtful accounts or bad debt
expenses or (C) permit any of its Subsidiaries to change its fiscal year
provided that (I) the Lessee shall have notified the Lessor of any such
change not less than thirty (30) days prior to the proposed effective date
of such change and shall have promptly furnished to the Lessor all such
financial information as the Lessor may have reasonably requested in order
to determine the impact of such change on the Lessee's financial
statements, (II) no such change shall be permitted if its effect would be
to enable the Lessee to satisfy any covenant contained in this Lease
which, absent such change, would not have been satisfied and (III) the
Lessee shall have entered into any amendment to this Lease which the
Lessor shall have reasonably requested in order to maintain the intended
effect of the covenants contained in this Lease.
11.5.12 [INTENTIONALLY OMITTED]
ARTICLE 12
INSURANCE AND INDEMNITY
12.1 GENERAL INSURANCE REQUIREMENTS. During the Term of this Lease and
thereafter until the Lessee surrenders the Leased Property in the manner
required by this Lease, the Lessee shall at its sole cost and expense keep the
Leased Property and the Tangible Personal Property located thereon and the
business operations conducted on the Leased Property insured as set forth below.
12.1.1 TYPES AND AMOUNTS OF INSURANCE. The Lessee's insurance shall
include the following:
(A) property loss and physical damage insurance on an all-risk
basis (with only such exceptions as the Lessor may in its reasonable
discretion approve) covering the Leased Property (exclusive of Land)
for its full replacement cost, which cost shall be reset once a year
at the Lessor's option, with an agreed- amount endorsement and a
deductible not in excess of FIFTY THOUSAND AND NO/100 DOLLARS
($50,000.00). Such insurance shall include, without limitation, the
following coverages: (I) increased cost of construction, (II) cost
of demolition, (III) the value of the undamaged portion of the
Facility and (IV) contingent liability from the operation of
building laws, less exclusions provided in the normal "All Risk"
insurance policy. During any period of construction, such insurance
shall be on a builder's-risk, completed value, non-reporting form
with permission to occupy;
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(B) flood insurance (if the Leased Property or any portion
thereof is situated in an area which is considered a flood risk area
by the U.S. Department of Housing and Urban Development or any other
Governmental Authority that may in the future have jurisdiction over
flood risk analysis) in limits acceptable to the Lessor;
(C) boiler and machinery insurance (including related
electrical apparatus and components) under a standard comprehensive
form, providing coverage against loss or damage caused by explosion
of steam boilers, pressure vessels or similar vessels, now or
hereafter installed on the Leased Property, in limits acceptable to
the Lessor;
(D) earthquake insurance (if deemed necessary by the Lessor)
in limits and with deductibles acceptable to the Lessor;
(E) business interruption and/or rent loss insurance in an
amount equal to the annual Base Rent and Additional Rent due
hereunder plus the aggregate sum of the Impositions relating to the
Leased Property due and payable during one year;
(F) comprehensive general public liability insurance including
coverages commonly found in the Broad Form Commercial Liability
Endorsements with amounts not less than FIVE MILLION AND NO/100
DOLLARS ($5,000,000.00) per occurrence with respect to bodily injury
and death and THREE MILLION AND NO/100 DOLLARS ($3,000,000.00) for
property damage and with all limits based solely upon occurrences at
the Leased Property without any other impairment;
(G) professional liability insurance in an amount not less
than TEN MILLION AND NO/100 DOLLARS ($10,000,000.00) for each
medical incident;
(H) physical damage insurance on an all-risk basis (with only
such exceptions as the Lessor in its reasonable discretion shall
approve) covering the Tangible Personal Property for the full
replacement cost thereof and with a deductible not in excess of one
percent (1%) of the full replacement cost thereof;
(I) Workers' Compensation and Employers' Liability Insurance
providing protection against all claims arising out of injuries to
all employees of the Lessee or of any Sublessee (employed on the
Leased Property or any portion thereof) in amounts equal for
Workers' Compensation, to the statutory benefits payable to
employees in the State and for Employers' Liability, to limits of
not less than ONE HUNDRED THOUSAND AND NO/100 DOLLARS ($100,000.00)
for injury by accident, ONE HUNDRED THOUSAND AND NO/100 DOLLARS
($100,000.00) per employee for disease and FIVE HUNDRED THOUSAND AND
NO/100 DOLLARS ($500,000.00) disease policy limit;
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(J) subsidence insurance (if deemed necessary by the Lessor)
in limits acceptable to the Lessor; and
(K) such other insurance as the Lessor from time to time may
reasonably require and also, as may from time to time be required by
applicable Legal Requirements and/or by any Fee Mortgagee (other
than a Meditrust Entity); provided, however, that the cost of any
additional insurance required by any Fee Mortgagee shall be borne by
the Lessor.
12.1.2 INSURANCE COMPANY REQUIREMENTS. All such insurance required
by this Lease or the other Lease Documents shall be issued and
underwritten by insurance companies licensed to do insurance business by,
and in good standing under the laws of, the State and which companies have
and maintain a rating of A- or better by A.M. Best Co.
12.1.3 POLICY REQUIREMENTS. Every policy of insurance from time to
time required under this Lease or any of the other Lease Documents (other
than worker's compensation) shall name the Lessor as owner, loss payee,
secured party (to the extent applicable) and an additional named insured
as its interests may appear. To the extent appropriate, the same policies
may be used to insure the Lessee's various interests in the Leased
Property and to provide liability coverage to the Lessee as long as
combining the interests of the Lessor and the Lessee in a single policy in
no way impairs or diminishes the Lessor's rights in such policies. If an
insurance policy covers properties other than the Leased Property, then
the Lessor shall be so named with respect only to the Leased Property.
Each such policy, where applicable or appropriate, shall:
(A) include an agreed amount endorsement and loss payee,
additional named insured and secured party endorsements, in forms
acceptable to the Lessor in its sole and absolute discretion;
(B) include mortgagee, secured party, loss payable and
additional named insured endorsements reasonably acceptable to each
Fee Mortgagee; provided, however, that the cost of any additional
insurance required by any Fee Mortgagee shall be borne by the
Lessor.
(C) provide that the coverages may not be canceled or
materially modified except upon thirty (30) days' prior written
notice to the Lessor and any Fee Mortgagee;
(D) be payable to the Lessor and any Fee Mortgagee
notwithstanding any defense or claim that the insurer may have to
the payment of the same against any other Person holding any other
interest in the Leased Property;
(E) be endorsed with standard noncontributory clauses in favor
of and in form reasonably acceptable to the Lessor and any Fee
Mortgagee; provided, however,
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that the cost of any additional insurance required by any Fee
Mortgagee shall be borne by the Lessor.
(F) expressly waive any right of subrogation on the part of
the insurer against the Lessor, any Fee Mortgagee or the Leasing
Group; and
(G) otherwise be in such forms as shall be reasonably
acceptable to the Lessor.
12.1.4 NOTICES; CERTIFICATES AND POLICIES. The Lessee shall promptly
provide to the Lessor copies of any and all notices (including notice of
non-renewal), claims and demands which the Lessee receives from insurers
of the Leased Property. At least ten (10) days prior to the expiration of
any insurance policy required hereunder, the Lessee shall deliver to the
Lessor certificates and evidence of insurance relating to all renewals and
replacements thereof, together with evidence, satisfactory to the Lessor,
of payment of the premiums thereon. The Lessee shall deliver to the Lessor
original counterparts or copies certified by the insurance company to be
true and complete copies, of all insurance policies required hereunder not
later than the earlier to occur of (A) ninety (90) days after the
effective date of each such policy and (B) ten (10) days after receipt
thereof by the Lessee.
12.1.5 LESSOR'S RIGHT TO PLACE INSURANCE. If the Lessee shall fail
to obtain any insurance policy required hereunder by the Lessor, or shall
fail to deliver the certificate and evidence of insurance relating to any
such policy to the Lessor, or if any insurance policy required hereunder
(or any part thereof) shall expire or be canceled or become void or
voidable by reason of any breach of any condition thereof, or if the
Lessor determines that such insurance coverage is unsatisfactory by reason
of the failure or impairment of the capital of any insurance company which
wrote any such policy, upon demand by the Lessor, the Lessee shall
promptly obtain new or additional insurance coverage on the Leased
Property, or for those risks required to be insured by the provisions
hereof, satisfactory to the Lessor, and, at its option, if the Lessee
fails to obtain any insurance coverage required under this Lease or after
demand by the Lessor, the Lessor may obtain such insurance and pay the
premium or premiums therefor; in which event, any amount so paid or
advanced by the Lessor and all costs and expenses incurred in connection
therewith (including, without limitation, attorneys' fees and expenses and
court costs), shall be a demand obligation of the Lessee to the Lessor,
payable as an Additional Charge.
12.1.6 PAYMENT OF PROCEEDS. All insurance policies required
hereunder (except for general public liability, professional liability and
workers' compensation and employers liability insurance) shall provide
that, in the event of loss, injury or damage, all proceeds shall be paid
to the Lessor alone (rather than jointly to the Lessee and the Lessor).
The Lessor is hereby authorized to adjust and compromise any such loss
with the consent of the Lessee or, following any Lease Default, if not
cured, without the consent of the Lessee, and to collect and receive such
proceeds in the name of the Lessor and the Lessee, and the Lessee appoints
the Lessor (or any agent designated by the Lessor) as the Lessee's
attorney-in-fact
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with full power of substitution, to endorse the Lessee's name upon any
check in payment thereof. Subject to the provisions of Article 13, such
insurance proceeds shall be applied first toward reimbursement of all
costs and expenses reasonably incurred by the Lessor in collecting said
insurance proceeds, then toward payment of the Lease Obligations or any
portion thereof, then due and payable, in such order as the Lessor
determines, and then in whole or in part toward restoration, repair or
reconstruction of the Leased Property for which such insurance proceeds
shall have been paid.
12.1.7 IRREVOCABLE POWER OF ATTORNEY. The power of attorney
conferred on the Lessor pursuant to the provisions of this Section 12.1,
being coupled with an interest, shall be irrevocable for as long as this
Lease is in effect or any Lease Obligations are outstanding, shall not be
affected by any disability or incapacity which the Lessee may suffer and
shall survive the same. Such power of attorney is provided solely to
protect the interests of the Lessor and shall not impose any duty on the
Lessor to exercise any such power, and neither the Lessor nor such
attorney-in-fact shall be liable for any act, omission, error in judgment
or mistake of law, except as the same may result from its gross negligence
or wilful misconduct.
12.1.8 BLANKET POLICIES. Notwithstanding anything to the contrary
contained herein, the Lessee's obligations to carry the insurance provided
for herein may be brought within the coverage of a so-called blanket
policy or policies of insurance carried and maintained by the Lessee and
its Affiliates; provided, however, that the coverage afforded to the
Lessor shall not be reduced or diminished or otherwise be different from
that which would exist under a separate policy meeting all other
requirements of this Lease by reason of the use of such blanket policy of
insurance, and provided, further that the requirements of this Section
12.1 are otherwise satisfied.
12.1.9 NO SEPARATE INSURANCE. The Lessee shall not, on the Lessee's
own initiative or pursuant to the request or requirement of any other
Person, take out separate insurance concurrent in form or contributing in
the event of loss with the insurance required hereunder to be furnished by
the Lessee, or increase the amounts of any then existing insurance by
securing an additional policy or additional policies, unless (A) all
parties having an insurable interest in the subject matter of the
insurance, including the Lessor, are included therein as additional
insureds and (B) losses are payable under said insurance in the same
manner as losses are required to be payable under this Lease. The Lessee
shall immediately notify the Lessor of the taking out of any such separate
insurance or of the increasing of any of the amounts of the then existing
insurance by securing an additional insurance policy or policies.
12.1.10 ASSIGNMENT OF UNEARNED PREMIUMS. The Lessee hereby assigns
to the Lessor all rights of the Lessee in and to any unearned premiums on
any insurance policy required hereunder to be furnished by the Lessee
which may become payable or are refundable after the occurrence of an
Event of Default hereunder. In the event that this Lease is terminated for
any reason (other than the purchase of the Leased Property by the Lessee),
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the insurance policies required to be maintained hereunder, including all
right, title and interest of the Lessee thereunder, shall become the
absolute property of the Lessor.
In the event that this Lease is terminated for any reason (other
than the purchase of the Leased Property by the Lessee), the insurance
policies required to be maintained hereunder, excluding Workers'
Compensation and Employers Liability Insurance, shall continue to be
maintained for a period of fifteen (15) days following such termination;
provided, however, that the Lessee shall not be obligated to maintain
commercial general liability and professional liability insurance for such
fifteen (15) day period to the extent that any such insurance is
unavailable from the then current insurer as a result of any such
termination. The provisions of this Section 12.1.10 shall survive any
termination of this Lease.
12.2 INDEMNITY.
12.2.1 INDEMNIFICATION. Except with respect to the gross negligence
or wilful misconduct of the Lessor or any of the other Indemnified
Parties, as to which no indemnity is provided, the Lessee hereby agrees to
defend with counsel acceptable to the Lessor, indemnify and hold harmless
the Lessor and each of the other Indemnified Parties from and against all
damages, losses, claims, liabilities, obligations, penalties, causes of
action, costs and expenses (including, without limitation, attorneys'
fees, court costs and other expenses of litigation) suffered by, or
claimed or asserted against, the Lessor or any of the other Indemnified
Parties, directly or indirectly, based on, arising out of or resulting
from (A) the use and occupancy of the Leased Property or any business
conducted therein, (B) any act, fault, omission to act or misconduct by
(I) any member of the Leasing Group, (II) any Affiliate of the Lessee or
(III) any employee, agent, licensee, business invitee, guest, customer,
contractor or sublessee of any of the foregoing parties, relating to,
directly or indirectly, the Leased Property, (C) any accident, injury or
damage whatsoever caused to any Person, including, without limitation, any
claim of malpractice, or to the property of any Person in or about the
Leased Property or outside of the Leased Property where such accident,
injury or damage results or is claimed to have resulted from any act,
fault, omission to act or misconduct by any member of the Leasing Group or
any Affiliate of the Lessee or any employee, agent, licensee, contractor
or sublessee of any of the foregoing parties, (D) any Lease Default, (E)
any claim brought or threatened against any of the Indemnified Parties by
any member of the Leasing Group (unless such member of the Leasing Group
prevails in such claim against one of the Indemnified Parties) or by any
other Person on account of (I) the Lessor's relationship with any member
of the Leasing Group pertaining in any way to the Leased Property and/or
the transaction evidenced by the Lease Documents and/or (II) the Lessor's
negotiation of, entering into and/or performing any of its obligations
and/or exercising any of its right and remedies under any of the Lease
Documents, (F) any attempt by any member of the Leasing Group or any
Affiliate of the Lessee to transfer or relocate any of the Permits to any
location other than the Leased Property and/or (G) the enforcement of this
indemnity. Any amounts which become payable by the Lessee under this
Section 12.2.1
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shall be a demand obligation of the Lessee to the Lessor, payable as an
Additional Charge. The indemnity provided for in this Section 12.2.1 shall
survive any termination of this Lease.
12.2.2 INDEMNIFIED PARTIES. As used in this Lease the term
"Indemnified Parties" shall mean the Meditrust Entities, any Fee Mortgagee
which is an Affiliate of Meditrust and their respective successors,
assigns, employees, servants, agents, attorneys, officers, directors,
shareholders, partners and owners.
12.2.3 DEFENSE OF ACTIONS BY THE LESSEE. The Lessee's obligation to
defend, set forth in Section 12.2.1 above, may be satisfied by the defense
of such actions by counsel retained by any insurance carrier having an
obligation to defend any such action provided the counsel is acceptable to
the Lessor in its reasonable discretion. Further, if the insurance carrier
having the obligation to defend such action makes available insurance
proceeds for the payment of defense rather than retaining its own defense
counsel, then such insurance proceeds shall be made available to the
Lessee to defray the costs of such defense.
12.2.4 LIMITATION ON LESSOR LIABILITY. Neither the Lessor nor any
Affiliate of the Lessor shall be liable to any member of the Leasing Group
or any Affiliate of any member of the Leasing Group, or to any other
Person whatsoever for any damage, injury, loss, compensation, or claim
(including, but not limited to, any claim for the interruption of or loss
to any business conducted on the Leased Property) based on, arising out of
or resulting from any cause whatsoever, including, but not limited to, the
following: (A) repairs to the Leased Property, (B) interruption in use of
the Leased Property; (C) any accident or damage resulting from the use or
operation of the Leased Property or any business conducted thereon; (D)
the termination of this Lease by reason of Casualty or Condemnation, (E)
any fire, theft or other casualty or crime, (F) the actions, omissions or
misconduct of any other Person, (G) damage to any property, or (H) any
damage from the flow or leaking of water, rain or snow. All Tangible
Personal Property and the personal property of any other Person on the
Leased Property shall be at the sole risk of the Lessee and the Lessor
shall not in any manner be held responsible therefor. Notwithstanding the
foregoing, the Lessor shall not be released from liability for any injury,
loss, damage or liability suffered directly by the Lessee to the extent
caused directly by the gross negligence or willful misconduct of the
Lessor, any Affiliate of the Lessor or any of their respective successors,
assigns, employees, servants, agents, attorneys, officers, directors,
shareholders, partners or owners on or about the Leased Property or in
regards to the Lease; provided, however, that in no event shall the
Lessor, any Affiliate of the Lessor or any of their respective successors,
assigns, employees, servants, agents, attorneys, officers, directors,
shareholders, partners or owners have any liability based on any loss with
respect to or interruption in the operation of any business at the Leased
Property or for any indirect or consequential damages.
12.2.5 RISK OF LOSS. During the Term of this Lease, the risk of loss
or of decrease in the enjoyment and beneficial use of the Leased Property
in consequence of any damage or destruction thereof by fire, the elements,
casualties, thefts, riots, wars or otherwise, or in consequence of
foreclosures, levies or executions of Liens (other than those
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created by the Lessor in accordance with the provisions of Article 20) is
assumed by the Lessee and, in the absence of the gross negligence or
willful misconduct as set forth in Section 12.2.4, the Lessor shall in no
event be answerable or accountable therefor (except for the obligation to
account for insurance proceeds and Awards to the extent provided for in
Articles 13 and 14) nor shall any of the events mentioned in this Section
entitle the Lessee to any abatement of Rent (except for an abatement, if
any, as specifically provided for in Section 3.8).
ARTICLE 13
FIRE AND CASUALTY
13.1 RESTORATION FOLLOWING FIRE OR OTHER CASUALTY.
13.1.1 FOLLOWING FIRE OR CASUALTY. In the event of any damage or
destruction to the Leased Property by reason of fire or other hazard or
casualty (a "Casualty"), the Lessee shall give immediate written notice
thereof to the Lessor and, subject to the terms of this Article 13, the
Lessee shall proceed with reasonable diligence, in full compliance with
all applicable Legal Requirements, to perform such repairs, replacement
and reconstruction work (referred to herein as the "Work") to restore the
Leased Property to the condition it was in immediately prior to such
damage or destruction and to a condition adequate to operate the Facility
for the Primary Intended Use and the Other Permitted Uses and in
compliance with Legal Requirements. All Work shall be performed and
completed in accordance with all Legal Requirements and the other
requirements of this Lease within one hundred eighty (180) days following
the occurrence of the damage or destruction plus a reasonable time to
compensate for Unavoidable Delays (including for the purposes of this
Section, delays in obtaining Permits and in adjusting insurance losses),
but in no event beyond two-hundred and seventy (270) days following the
occurrence of the Casualty.
13.1.2 PROCEDURES. In the event that any Casualty results in
non-structural damage to the Leased Property in excess of FIFTY THOUSAND
AND NO/100 DOLLARS ($50,000.00) or in any structural damage to the Leased
Property, regardless of the extent of such structural damage, prior to
commencing the Work, the Lessee shall comply with the following
requirements:
(A) The Lessee shall furnish to the Lessor complete plans and
specifications for the Work (collectively, the "Plans and
Specifications"), for the Lessor's approval, in each instance, which
approval shall not be unreasonably withheld or delayed. The Plans
and Specifications shall bear the signed approval thereof by an
architect, licensed to do business in the State, reasonably
satisfactory to the Lessor and shall be accompanied by a written
estimate from the architect, bearing the architect's seal, of the
entire cost of completing the Work, and to the extent feasible, the
Plans and Specifications shall provide for Work of such nature,
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quality and extent, that, upon the completion thereof, the Leased
Property shall be at least equal in value and general utility to its
value and general utility prior to the Casualty and shall be
adequate to operate the Leased Property for the Primary Intended Use
and the Other Permitted Uses;
(B) The Lessee shall furnish to the Lessor certified or
photostatic copies of all Permits and Contracts required by all
applicable Legal Requirements in connection with the commencement
and conduct of the Work;
(C) The Lessee shall furnish to the Lessor a cash deposit or a
payment and performance bond sufficient to pay for completion of and
payment for the Work in an amount not less than the architect's
estimate of the entire cost of completing the Work, less the amount
of property insurance proceeds, if any, then held by the Lessor and
which the Lessor shall be required to apply toward restoration of
the Leased Property as provided in Section 13.2;
(D) The Lessee shall furnish to the Lessor such insurance with
respect to the Work (in addition to the insurance required under
Section 12.1 hereof) in such amounts and in such forms as is
reasonably required by the Lessee; and
(E) The Lessee shall not commence any of the Work until the
Lessee shall have complied with the requirements set forth in
clauses (a) through (d) immediately above, as applicable, and,
thereafter, the Lessee shall perform the Work diligently, in a good
and workmanlike fashion and in good faith in accordance with (I) the
Plans and Specifications referred to in clause (a) immediately
above, (II) the Permits and Contracts referred to in clause (b)
immediately above and (III) all applicable Legal Requirements and
other requirements of this Lease; provided, however, that in the
event of a bona fide emergency during which the Lessee is unable to
contact the appropriate representatives of the Lessor, the Lessee
may commence such Work as may be necessary in order to address such
emergency without the Lessor's prior approval, as long as the Lessee
immediately thereafter advises the Lessor of such emergency and the
nature and scope of the Work performed and obtains the Lessor's
approval of the remaining Work to be completed.
13.1.3 DISBURSEMENT OF INSURANCE PROCEEDS. If, as provided in
Section 13.2, the Lessor is required to apply any property insurance
proceeds toward repair or restoration of the Leased Property, then as long
as the Work is being diligently performed by the Lessee in accordance with
the terms and conditions of this Lease, the Lessor shall disburse such
insurance proceeds from time to time during the course of the Work in
accordance with and subject to satisfaction of the following provisions
and conditions. The Lessor shall not be required to make disbursements
more often than at thirty (30) day intervals. The Lessee shall submit a
written request for each disbursement at least ten (10) Business Days in
advance and shall comply with the following requirements in connection
with each disbursement:
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(A) Prior to the commencement of any Work, the Lessee shall
have received the Lessor's written approval of the Plans and
Specifications (which approval shall not be unreasonably withheld or
delayed) and the Work shall be supervised by an experienced
construction manager with the consultation of an architect or
engineer qualified and licensed to do business in the State.
(B) Each request for payment shall be accompanied by (X) a
certificate of the architect or engineer, bearing the architect's or
engineer's seal, and (Y) a certificate of the general contractor,
qualified and licensed to do business in the State, that is
performing the Work (collectively, the "Work Certificates"), each
dated not more than ten (10) days prior to the application for
withdrawal of funds, and each stating:
(I) that all of the Work performed as of the date of the
certificates has been completed in compliance with the
approved Plans and Specifications, applicable Contracts
and all applicable Legal Requirements;
(II) that the sum then requested to be withdrawn has been
paid by the Lessee or is justly due to contractors,
subcontractors, materialmen, engineers, architects or
other Persons, whose names and addresses shall be stated
therein, who have rendered or furnished certain services
or materials for the Work, and the certificate shall
also include a brief description of such services and
materials and the principal subdivisions or categories
thereof and the respective amounts so paid or due to
each of said Persons in respect thereof and stating the
progress of the Work up to the date of said certificate;
(III) that the sum then requested to be withdrawn, plus all
sums previously withdrawn, does not exceed the cost of
the Work insofar as actually accomplished up to the date
of such certificate;
(IV) that the remainder of the funds held by the Lessor will
be sufficient to pay for the full completion of the Work
in accordance with the Plans and Specifications;
(V) that no part of the cost of the services and materials
described in the applicable Work Certificate has been or
is being made the basis of the withdrawal of any funds
in any previous or then pending application; and
(VI) that, except for the amounts, if any, specified in the
applicable Work Certificate to be due for services and
materials, there is no outstanding indebtedness known,
after due inquiry, which is then due and payable for
work, labor, services or materials in connection with
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the Work which, if unpaid, might become the basis of a
vendor's, mechanic's, laborer's or materialman's
statutory or other similar Lien upon the Leased
Property.
(C) The Lessee shall deliver to the Lessor satisfactory
evidence that the Leased Property and all materials and all property
described in the Work Certificates are free and clear of Liens,
except (I) Liens, if any, securing indebtedness due to Persons
(whose names and addresses and the several amounts due them shall be
stated therein) specified in an applicable Work Certificate, which
Liens shall be discharged upon disbursement of the funds then being
requested, (II) any Fee Mortgage and (III) the Permitted
Encumbrances. The Lessor shall accept as satisfactory evidence of
the foregoing lien waivers in customary form from the general
contractor and all subcontractors performing the Work, together with
an endorsement of its title insurance policy (relating to the Leased
Property) in form acceptable to the Lessor, dated as of the date of
the making of the then current disbursement, confirming the
foregoing.
(D) If the Work involves alteration or restoration of the
exterior of any Leased Improvement that changes the footprint of any
Leased Improvement, the Lessee shall deliver to the Lessor, upon the
request of the Lessor, an "as-built" survey of the Leased Property
dated as of a date within ten (10) days prior to the making of the
first and final advances (or revised to a date within ten (10) days
prior to each such advance) showing no encroachments other than such
encroachments, if any, by the Leased Improvements upon or over the
Permitted Encumbrances as are in existence as of the date hereof.
(E) The Lessee shall deliver to the Lessor (I) an opinion of
counsel or licensed architect or engineer (satisfactory to the
Lessor both as to counsel, architect or engineer and as to the form
of opinion) prior to the first advance opining that all necessary
Permits for the repair, replacement and/or restoration of the Leased
Property have been obtained and that the Leased Property, if
repaired, replaced or rebuilt in accordance, in all material
respects, with the approved Plans and Specifications and such
Permits, shall comply with all applicable Legal Requirements and
(II) an architect's certificate (satisfactory to the Lessor both as
to the architect and as to the form of the certificate) prior to the
final advance, certifying that the Leased Property was repaired,
replaced or rebuilt in accordance, in all material respects, with
the approved Plans and Specifications and complies with all
applicable Legal Requirements, including, without limitation, all
Permits referenced in the foregoing clause (i).
(F) There shall be no Lease Default or any state of facts or
circumstance existing which, with the giving of notice and/or the
passage of time, would constitute any Lease Default.
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The Lessor, at its option, may waive any of the foregoing requirements in
whole or in part in any instance. Upon compliance by the Lessee with the
foregoing requirements (except for such requirements, if any, as the
Lessor may have expressly elected to waive), and to the extent of (X) the
insurance proceeds, if any, which the Lessor may be required to apply to
restoration of the Leased Property pursuant to the provisions of this
Lease and (Y) all other cash deposits made by the Lessee, the Lessor shall
make available for payment to the Persons named in the Work Certificate
the respective amounts stated in said certificate(s) to be due, subject to
a retention of ten percent (10%) as to all hard costs of the Work (the
"Retainage"). It is understood that the Retainage is intended to provide a
contingency fund to assure the Lessor that the Work shall be fully
completed in accordance with the Plans and Specifications and the
requirements of the Lessor. Upon the full and final completion of all of
the Work in accordance with the provisions hereof, the Retainage shall be
made available for payment to those Persons entitled thereto.
Upon completion of the Work, and as a condition precedent to making any
further advance, in addition to the requirements set forth above, the
Lessee shall promptly deliver to the Lessor:
(I) written certificates of the architect or engineer, bearing the
architect's or engineer's seal, and the general contractor,
certifying that the Work has been fully completed in a good
and workmanlike manner in material compliance with the Plans
and Specifications and all Legal Requirements;
(II) an endorsement of its title insurance policy (relating to the
Leased Property) in form reasonably acceptable to the Lessor
insuring the Leased Property against all mechanic's and
materialman's liens accompanied by the final lien waivers from
the general contractor and all subcontractors;
(III) a certificate by the Lessee in form and substance reasonably
satisfactory to the Lessor, listing all costs and expenses in
connection with the completion of the Work and the amount paid
by the Lessee with respect to the Work; and
(IV) a temporary certificate of occupancy (if obtainable) and all
other applicable Permits and Contracts (that have not
previously been delivered to the Lessor) issued by or entered
into with any Governmental Authority with respect to the
Leased Property and the Primary Intended Use and the Other
Permitted Uses and by the appropriate Board of Fire
Underwriters or other similar bodies acting in and for the
locality in which the Leased Property is situated; provided,
that within thirty (30) days prior to the expiration of any
temporary certificate of occupancy, the Lessee shall obtain
and deliver to the Lessor a permanent certificate of occupancy
for the Leased Property.
Upon completion of the Work and delivery of the documents required
pursuant to the provisions of this Section 13.1, the Lessor shall pay the
Retainage to the Lessee or to those
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Persons entitled thereto and if there shall be insurance proceeds or cash
deposits, other than the Retainage, held by the Lessor in excess of the
amounts disbursed pursuant to the foregoing provisions, then provided that
no Lease Default has occurred and is continuing, nor any state of facts or
circumstances which, with the giving of notice and/or the passage of time
would constitute a Lease Default, the Lessor shall pay over such proceeds
or cash deposits to the Lessee.
No inspections or any approvals of the Work during or after
construction shall constitute a warranty or representation by the Lessor,
or any of its agents or Consultants, as to the technical sufficiency,
adequacy or safety of any structure or any of its component parts,
including, without limitation, any fixtures, equipment or furnishings, or
as to the subsoil conditions or any other physical condition or feature
pertaining to the Leased Property. All acts described in this paragraph,
including any failure to act, relating to the Lessor are performed solely
for the benefit of the Lessor to assure the payment and performance of the
Lease Obligations and are not for the benefit of the Lessee or the benefit
of any other Person.
13.2 DISPOSITION OF INSURANCE PROCEEDS.
13.2.1 PROCEEDS TO BE RELEASED TO PAY FOR WORK. In the event of any
Casualty, except as provided for in Section 13.2.2, the Lessor shall
release proceeds of property insurance held by it to pay for the Work in
accordance with the provisions and procedures set forth in this Article
13, only if:
(A) all of the terms, conditions and provisions of Sections
13.1 and 13.2.1 are satisfied;
(B) there does not then exist any Lease Default or any state
of facts or circumstance which, with the giving of notice and/or the
passage of time, would constitute such a Lease Default;
(C) The Lessee demonstrates to the Lessor's satisfaction that
the Lessee has the financial ability to satisfy the Lease
Obligations during such repair or restoration; and
(D) no Sublease (excluding Resident Agreements) material to
the operation of the Facility immediately prior to such damage or
taking shall have been canceled or terminated, nor contain any still
exercisable right to cancel or terminate, due to such Casualty if
and to the extent that the income from such Sublease is necessary in
order to avoid the violation of any of the financial covenants set
forth in this Lease or otherwise to avoid the creation of an Event
of Default.
13.2.2 PROCEEDS NOT TO BE RELEASED. If, as the result of any
Casualty, the Leased Property is damaged to the extent it is rendered
Unsuitable For Its Primary Intended
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Use and if either: (A) the Lessee, after exercise of diligent efforts,
cannot within a reasonable time (not in excess of ninety (90) days) obtain
all necessary Permits in order to be able to perform all required Work and
to again operate the Facility for its Primary Intended Use and the Other
Permitted Uses within two hundred and seventy (270) days from the
occurrence of the damage or destruction in substantially the manner as
immediately prior to such damage or destruction or (B) such Casualty
occurs during the last twenty-four (24) months of the Term and would
reasonably require more than nine (9) months to obtain all Permits and
complete the Work, then the Lessee may either (I) acquire the Leased
Property from the Lessor for a purchase price equal to the greater of (X)
the Meditrust Investment or (Y) the Fair Market Value of the Leased
Property minus the Fair Market Added Value, with the Fair Market Value and
the Fair Market Added Value to be determined as of the day immediately
prior to such Casualty and prior to any other Casualty which has not been
fully repaired, restored or replaced, in which event, the Lessee shall be
entitled upon payment of the full purchase price to receive all property
insurance proceeds (less any costs and expenses incurred by the Lessor in
collecting the same), or (II) terminate this Lease, in which event
(subject to the provisions of the last sentence of this Section 13.2.2)
the Lessor shall be entitled to receive and retain the insurance proceeds;
provided, however, that the Lessee shall only have such right of
termination effective upon payment to the Lessor of all Rent and other
sums due under this Lease and the other Lease Documents through the date
of termination plus an amount, which when added to the sum of (1) the Fair
Market Value of the Leased Property as affected by all unrepaired or
unrestored damage due to any Casualty (and giving due regard for delays,
costs and expenses incident to completing all repair or restoration
required to fully repair or restore the same) plus (2) the amount of
insurance proceeds actually received by the Lessor (net of costs and
expenses incurred by the Lessor in collecting the same) equals (3) the
greater of the Meditrust Investment or the Fair Market Value of the Leased
Property minus the Fair Market Added Value, with the Fair Market Value and
the Fair Market Added Value to be determined as of the day immediately
prior to such Casualty and prior to any other Casualty which has not been
fully repaired. Any acquisition of the Leased Property pursuant to the
terms of this Section 13.2.2 shall be consummated in accordance with the
terms and conditions of this Lease and normal and customary practices of
the State and at a time satisfactory to the Lessor. If such termination
becomes effective, the Lessor shall assign to the Lessee any outstanding
insurance claims.
13.2.3 LESSEE RESPONSIBLE FOR SHORT-FALL. If the cost of the Work
exceeds the amount of proceeds received by the Lessor from the property
insurance required under Article 12 (net of costs and expenses incurred by
the Lessor in collecting the same), the Lessee shall be obligated to
contribute any excess amount needed to repair or restore the Leased
Property and pay for the Work. Such amount shall be paid by the Lessee to
the Lessor together with any other property insurance proceeds for
application to the cost of the Work.
13.3 TANGIBLE PERSONAL PROPERTY. All insurance proceeds payable by reason
of any loss of or damage to any of the Tangible Personal Property shall be paid
to the Lessor as secured party, subject to the rights of the holders of any
Permitted Prior Security Interests, and, thereafter, provided
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that no Lease Default, nor any fact or circumstance which with the giving of
notice and/or the passage of time could constitute a Lease Default, has occurred
and is continuing, the Lessor shall pay such insurance proceeds to the Lessee to
reimburse the Lessee for the cost of repairing or replacing the damaged Tangible
Personal Property, subject to the terms and conditions set forth in the other
provisions of this Article 13, mutatis mutandis.
13.4 RESTORATION OF CERTAIN IMPROVEMENTS AND THE TANGIBLE PERSONAL
PROPERTY. If the Lessee is required or elects to restore the Facility, the
Lessee shall either (A) restore (I) all alterations and improvements to the
Leased Property made by the Lessee and (II) the Tangible Personal Property or
(B) replace such alterations and improvements and the Tangible Personal Property
with improvements or items of the same or better quality and utility in the
operation of the Leased Property.
13.5 NO ABATEMENT OF RENT. The obligation to pay Rent shall not abate as a
result of any Casualty. However, any insurance proceeds received by the Lessor
on account of rent loss insurance carried by the Lessee shall be credited
against Rent and any other amounts due hereunder or owed during the period of
restoration on account of such Casualty as provided in Section 13.8(b) below
provided no fact or circumstance exists which constitutes, or with notice, or
passage of time, or both, would constitute a Lease Default.
13.6 TERMINATION OF CERTAIN RIGHTS. Any termination of this Lease pursuant
to this Article 13 shall cause any right of the Lessee to extend the Term of
this Lease, any right of first refusal granted to the Lessee herein and any
right of the Lessee to purchase the Leased Property contained in this Lease to
be terminated and to be without further force or effect.
13.7 WAIVER. The Lessee hereby waives any statutory rights of termination
which may arise by reason of any damage or destruction to the Leased Property
due to any Casualty which the Lessee is obligated to restore or may restore
under any of the provisions of this Lease.
13.8 APPLICATION OF RENT LOSS AND/OR BUSINESS INTERRUPTION INSURANCE. All
proceeds of rent loss and/or business interruption insurance (collectively,
"Rent Insurance Proceeds") shall be paid to the Lessor and dealt with as
follows:
(A) if the Work has been promptly and diligently commenced by the
Lessee and is in the process of being completed in accordance with this
Lease and no fact or condition exists which constitutes, or which with the
giving of notice and/or the passage of time would constitute, a Lease
Default, the Lessor shall each month pay to the Lessee out of the Rent
Insurance Proceeds a sum equal to that amount, if any, of the Rent
Insurance Proceeds paid by the insurer which is allocable to the rental
loss and/or business interruption for the preceding month minus an amount
equal to the sum of the Rent due hereunder for such month plus any
Impositions relating to the Leased Property then due and payable;
(B) if the Work has not been promptly and diligently commenced by
the Lessee or is not in the process of being completed in accordance with
this Lease, the Rent Insurance
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Proceeds shall be applied to any Rent then due, and, to the extent
sufficient therefor, an amount equal to Base Rent, Additional Rent,
Impositions and insurance premiums payable for the next twelve (12)
months, as reasonably projected by the Lessor, shall be held by the Lessor
as security for the Lease Obligations and applied to the payment of Rent
as it becomes due;
(C) if such Rent Insurance Proceeds received by the Lessor (net of
costs and expenses incurred by the Lessor in collecting the same) exceed
the amounts required under clauses (a) and (b) above, the excess shall be
paid to the Lessee, provided no fact or circumstance exists which
constitutes, or with notice, or passage of time, or both, would
constitute, a Lease Default; and
(D) if the Casualty causing such business interruption of the Lessee
is the result of the gross negligence or willful misconduct of the Lessor
or any of Lessor's employees, agents or contractors, then the proceeds of
business interruption insurance (as distinguished from proceeds of rent
loss insurance) shall be paid over to the Lessee provided no fact or
circumstance exists which constitutes, or with notice, or passage of time,
or both, would constitute, a Lease Default.
Notwithstanding the foregoing, the Lessor may at its option use or release the
Rent Insurance Proceeds to pay for the Work and, if a Lease Default exists, the
Lessor may apply all such insurance proceeds towards the Lease Obligations or
hold such proceeds as security therefor.
13.9 OBLIGATION TO ACCOUNT. Within fifteen (15) Business Days of the
Lessee's written request, which may not be made not more than once in any three
(3) month period, the Lessor shall provide the Lessee with a written accounting
of the application of all insurance proceeds received by the Lessor.
ARTICLE 14
CONDEMNATION
14.1 PARTIES' RIGHTS AND OBLIGATIONS. If during the Term there is any
Taking of all or any part of the Leased Property or any interest in this Lease,
the rights and obligations of the parties shall be determined by this Article
14.
14.2 TOTAL TAKING. If there is a permanent Taking of all or substantially
all of the Leased Property, this Lease shall terminate on the Date of Taking.
14.3 PARTIAL OR TEMPORARY TAKING. If there is a Permanent Taking of a
portion of the Leased Property, or if there is a temporary Taking of all or a
portion of the Leased Property, this Lease shall remain in effect so long as the
Leased Property is not thereby rendered permanently Unsuitable For Its Primary
Intended Use or temporarily Unsuitable For Its Primary Intended Use
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for a period not likely to, or which does not, exceed two hundred and seventy
(270) days. If, however, the Leased Property is thereby so rendered permanently
or temporarily Unsuitable For Its Primary Intended Use: (A) the Lessee shall
have the right to restore the Leased Property, at its own expense, (subject to
the right under certain circumstances as provided for in Section 14.5 to receive
the net proceeds of an Award for reimbursement) to the extent possible, to
substantially the same condition as existed immediately before the partial or
temporary Taking or (B) the Lessee shall have the right to acquire the Leased
Property from the Lessor (I) upon payment of all Rent due through the date that
the purchase price is paid, for a purchase price equal to the greater of (X) the
Meditrust Investment or (Y) the Fair Market Value of the Leased Property minus
the Fair Market Added Value, with the Fair Market Value of the Leased Property
and the Fair Market Added Value to be determined as of the day immediately prior
to such partial or temporary Taking and (II) in accordance with the terms and
conditions set forth in Section 24.14; in which event, this Lease shall
terminate upon payment of such purchase price and the consummation of such
acquisition. Notwithstanding the foregoing, (1) if the Taking occurs at a time
when there is less than two (2) years remaining on the Term of this Lease and
the Lessee has elected to restore the Leased Property under clause (a) above,
then, unless the Lessee extends the Term pursuant to the provisions hereof, the
Lessor may overrule the Lessee's election and terminate this Lease as of the
date when the Lessee is required to surrender possession of the portion of the
Leased Property so taken and (2) if the Taking occurs at a time when there are
two (2) years or more remaining on the Term and the Lessee elects to acquire the
Leased Property under clause (b) above, then the Lessor may overrule the
Lessee's election and compel the Lessee to keep the Lease in full force and
effect and to restore the Leased Property as provided in clause (a) above, but
only if the Leased Property may be operated for at least eighty percent (80%) of
the licensed unit capacity of the Facility if operated in accordance with its
Primary Intended Use. The Lessee shall exercise its election under this Section
14.3 by giving the Lessor notice thereof ("Lessee's Election Notice") within
sixty (60) days after the Lessee receives notice of the Taking. The Lessor shall
exercise its option to overrule the Lessee's election under this Section 14.3 by
giving the Lessee notice of the Lessor's exercise of its rights under Section
14.3 within thirty (30) days after the Lessor receives the Lessee's Election
Notice. If, as the result of any such partial or temporary Taking, this Lease is
not terminated as provided above, the Lessee shall be entitled to an abatement
of Rent, but only to the extent, if any, provided for in Section 3.8, effective
as of the date upon which the Leased Property is rendered Unsuitable For Its
Primary Intended Use.
14.4 RESTORATION. If there is a partial or temporary Taking of the Leased
Property and this Lease remains in full force and effect pursuant to Section
14.3, the Lessee shall accomplish all necessary restoration and the Lessor shall
release the net proceeds of such Award to reimburse the Lessee for the actual
reasonable costs and expenses thereof, subject to all of the conditions and
provisions set forth in Article 13 as though the Taking was a Casualty and the
Award was insurance proceeds. If the cost of the restoration exceeds the amount
of the Award (net of costs and expenses incurred in obtaining the Award), the
Lessee shall be obligated to contribute any excess amount needed to restore the
Facility or pay for such costs and expenses. To the extent that the cost of
restoration is less than the amount of the Award (net of cost and expenses
incurred in obtaining the Award), the remainder of the Award shall be retained
by the Lessor and Rent shall be abated as set forth in Section 3.8.
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14.5 AWARD DISTRIBUTION. In the event the Lessee completes the purchase of
the Leased Property, as described in Section 14.3, the entire Award shall, upon
payment of the purchase price and all Rent and other sums due under this Lease
and the other Lease Documents, belong to the Lessee and the Lessor agrees to
assign to the Lessee all of the Lessor's rights thereto. In any other event, the
entire Award shall belong to and be paid to the Lessor. However, if the Lessor
has recovered the entire Meditrust Investment from such Award then the Lessee
shall be entitled to prosecute a claim against the Condemnor for the value of
the Lessee's leasehold estate under this Lease (although in no event shall the
Lessee be entitled to seek or recover any portion of the leasehold value from
the Lessor).
14.6 CONTROL OF PROCEEDINGS. Subject to the rights of any Fee Mortgagee,
unless and until the Lessee completes the purchase of the Leased Property as
provided in Section 14.3, all proceedings involving any Taking and the
prosecution of claims arising out of any Taking against the Condemnor shall be
conducted, prosecuted and settled by the Lessor; provided, however, that the
Lessor shall keep the Lessee apprised of the progress of all such proceedings
and shall solicit the Lessee's advice with respect thereto and shall give due
consideration to any such advice. In addition, the Lessee shall reimburse the
Lessor (as an Additional Charge) for all costs and expenses, including
reasonable attorneys' fees, appraisal fees, fees of expert witnesses and costs
of litigation or dispute resolution, in relation to any Taking, whether or not
this Lease is terminated; provided, however, if this Lease is terminated as a
result of a Taking, the Lessee's obligation to so reimburse the Lessor shall be
diminished by the amount of the Award, if any, received by the Lessor which is
in excess of the Meditrust Investment.
ARTICLE 15
PERMITTED CONTESTS
15.1 LESSEE'S RIGHT TO CONTEST. To the extent of the express references
made to this Article 15 in other Sections of this Lease, the Lessee, any
Sublessee or any Manager on their own or on the Lessor's behalf (or in the
Lessor's name), but at their sole cost and expense, may contest, by appropriate
legal proceedings conducted in good faith and with due diligence (until the
resolution thereof), the amount, validity or application, in whole or in part,
of any Imposition, Legal Requirement, the decision of any Governmental Authority
related to the operation of the Leased Property for its Primary Intended Use
and/or any of the Other Permitted Uses or any Lien or claim relating to the
Leased Property not otherwise permitted by this Lease; provided, that (A) prior
written notice of such contest is given to the Lessor, (B) in the case of an
unpaid Imposition, Lien or claim, the commencement and continuation of such
proceedings shall suspend the collection thereof from the Lessor and/or
compliance by any applicable member of the Leasing Group with the contested
Legal Requirement or other matter may be legally delayed pending the prosecution
of any such proceeding without the occurrence or creation of any Lien, charge or
liability of any kind against the Leased Property, (C) neither the Leased
Property nor any rent therefrom would be in any immediate danger of being sold,
forfeited, attached or lost as a result of such proceeding, (D) in the case of a
Legal Requirement, neither the Lessor nor any member of the Leasing Group would
be in
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any immediate danger of civil or criminal liability for failure to comply
therewith pending the outcome of such proceedings, (E) in the event that any
such contest shall involve a sum of money or potential loss in excess of TEN
THOUSAND AND NO/100 DOLLARS ($10,000.00), the Lessee shall deliver to the Lessor
an Officer's Certificate and opinion of counsel, if the Lessor deems the
delivery of an opinion to be appropriate, certifying or opining, as the case may
be, as to the validity of the statements set forth to the effect set forth in
clauses (b), (c) and (d), to the extent applicable, (F) the Lessee shall give
such cash security (or letter of credit in form and substance acceptable to the
Lender) as may be demanded in good faith by the Lessor to insure ultimate
payment of any fine, penalty, interest or cost and to prevent any sale or
forfeiture of the affected portion of the Leased Property by reason of such
non-payment or non-compliance, (G) if such contest is finally resolved against
the Lessor or any member of the Leasing Group, the Lessee shall promptly pay, as
Additional Charges due hereunder, the amount required to be paid, together with
all interest and penalties accrued thereon and/or comply (and cause any
Sublessee and any Manager to comply) with the applicable Legal Requirement, and
(H) no state of facts or circumstance exists which constitutes, or with the
passage of time and/or the giving of notice, could constitute a Lease Default;
provided, however, the provisions of this Article 15 shall not be construed to
permit the Lessee to contest the payment of Rent or any other sums payable by
the Lessee to the Lessor under any of the Lease Documents.
15.2 LESSOR'S COOPERATION. The Lessor, at the Lessee's sole cost and
expense, shall execute and deliver to the Lessee such authorizations and other
documents as may reasonably be required in any such contest, so long as the same
does not expose the Lessor to any civil or criminal liability, and, if
reasonably requested by the Lessee or if the Lessor so desires, the Lessor shall
join as a party therein.
15.3 LESSEE'S INDEMNITY. The Lessee, as more particularly provided for in
Section 12.2, shall indemnify, defend (with counsel acceptable to the Lessor)
and save the Lessor harmless against any liability, cost or expense of any kind,
including, without limitation, attorneys' fees and expenses that may be imposed
upon the Lessor in connection with any such contest and any loss resulting
therefrom and in the enforcement of this indemnification.
ARTICLE 16
DEFAULT
16.1 EVENTS OF DEFAULT. Each of the following shall constitute an "Event
of Default" hereunder and shall entitle the Lessor to exercise its remedies
hereunder and under any of the other Lease Documents:
(A) any failure of the Lessee to pay any amount due hereunder or
under any of the other Lease Documents within ten (10) days following the
date when such payment was due;
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(B) any failure in the observance or performance of any other
covenant, term, condition or warranty provided in this Lease or any of the
other Lease Documents, other than the payment of any monetary obligation
and other than as specified in subsections (c) through (w) below (a
"Failure to Perform"), continuing for thirty (30) days after the giving of
notice by the Lessor to the Lessee specifying the nature of the Failure to
Perform; except as to matters not susceptible to cure within thirty (30)
days, provided that with respect to such matters, (I) the Lessee commences
the cure thereof within thirty (30) days after the giving of such notice
by the Lessor to the Lessee, (II) the Lessee continuously prosecutes such
cure to completion, (III) such cure is completed within one hundred eighty
(180) days after the giving of such notice by the Lessor to the Lessee,
and (IV) such Failure to Perform does not materially impair the value of,
or the Lessor's rights with respect to, the Leased Property or otherwise
materially impair the Collateral or the Lessor's security interest
therein;
(C) the occurrence of any default or breach of condition continuing
beyond the expiration of the applicable notice and grace periods, if any,
under any of the other Lease Documents;
(D) if any representation, warranty or statement contained herein or
in any of the other Lease Documents proves to be untrue in any material
respect as of the date when made or at any time during the Term if such
representation or warranty is a continuing representation or warranty
pursuant to Section 10.2 and the breach of any such representation or
warranty is not cured by the Lessee after notice from the Lessor in the
same time periods specified for a cure under Section 16.1(b) above;
(E) if any member of the Leasing Group shall (I) voluntarily be
adjudicated a bankrupt or insolvent, (II) seek or consent to the
appointment of a receiver or trustee for itself or for the Leased
Property, (III) file a petition seeking relief under the bankruptcy or
other similar laws of the United States, any state or any jurisdiction,
(IV) make a general assignment for the benefit of creditors, (V) make or
offer a composition of its debts with its creditors or (VI) be unable to
pay its debts as such debts mature;
(F) if any court shall enter an order, judgment or decree
appointing, without the consent of any member of the Leasing Group, a
receiver or trustee for such member or for any of its property and such
order, judgment or decree shall remain in force, undischarged or unstayed,
sixty (60) days after it is entered;
(G) if a petition is filed against any member of the Leasing Group
which seeks relief under the bankruptcy or other similar laws of the
United States, any state or any other jurisdiction, and such petition is
not dismissed within sixty (60) days after it is filed;
(H) in the event that, without the prior written consent of the
Lessor, in each instance, which consent may be withheld by the Lessor in
its sole and absolute discretion, and except as permitted in subsection
(h)(vi) or subsection (i) below:
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I. there shall be a change in the Person or Persons presently in
control of any member of the Leasing Group (other than changes
in stock ownership of the Guarantor or changes in the officers
or directors of either the Lessee or the Guarantor) (whether
by operation of law or otherwise);
II. any member of the Leasing Group (other than changes in the
stock ownership of the Guarantor), all or any portion of the
interest of any partner or member of any member of the Leasing
Group shall be, on any one or more occasions, directly or
indirectly, sold, assigned, hypothecated or otherwise
transferred (whether by operation of law or otherwise), if
such member of the Leasing Group shall be a partnership, joint
venture, syndicate or other group;
III. any of the shares of the issued and outstanding capital stock
of any member of the Leasing Group (other than changes of
stock ownership of the Guarantor) shall be, on any one or more
occasions, directly or indirectly, sold, assigned,
hypothecated or otherwise transferred (whether by operation of
law or otherwise), if such member of the Leasing Group shall
be a corporation;
IV. all or any portion of the beneficial interest in any member of
the Leasing Group shall be, directly or indirectly, sold or
otherwise transferred (whether by operation of law or
otherwise), if such member of the Leasing Group shall be a
trust;
V. except as otherwise expressly permitted in accordance with the
provisions of Section 11.4.11, if any Person other than the
Lessee is the licensed operator of the Facility; or
VI. more than fifty percent (50%), in the aggregate, of the shares
of the issued and outstanding capital stock of the Guarantor
are held by a single Person or two (2) or more Affiliates
(collectively, an "Acquiror"), except in a Permitted
Transaction (defined below). If immediately after the date on
which the Acquiror acquire(s) more than fifty percent (50%) of
such stock, the "Net Worth" (defined as an amount determined
in accordance with GAAP) of the Guarantor is equal to or
greater than FIFTY-FIVE MILLION DOLLARS ($55,000,000.00), then
such acquisition shall be deemed to be a "Permitted
Transaction." However, in the event that a Permitted
Transaction occurs, then the higher ratios specified in
Section 11.3.5 and the Net Worth covenant specified in Section
11.3.6 shall both become operative and effective;
(I) the death, incapacity, merger, liquidation, dissolution or
termination of existence of any member of the Leasing Group (except (A) in
the case of a merger or consolidation of some other Person with the
Guarantor, which shall be a "Permitted Merger" or (B) in the case of a
Permitted Transaction); provided however, if the Persons who were
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the shareholders of the Guarantor immediately prior to the Permitted
Merger hold in the aggregate less than 50% of the outstanding voting stock
of the surviving corporation which results from the Permitted Merger, then
(I) the higher ratios specified in Section 11.3.5 and the Net Worth
covenant specified in Section 11.3.6 shall both become operative and
effective, and (II) if Alternative Living Services, Inc. is not the
surviving corporation which results from such Permitted Merger, the new
surviving corporation will affirm in writing its obligations under the
Guaranty;
(J) except as otherwise permitted pursuant to Article 15 or Section
19.2 hereof, if, without the prior written consent of the Lessor, in each
instance, which consent may be withheld by the Lessor in its sole and
absolute discretion, the Lessee's or any Sublessee's interest in the
Leased Property shall be, directly or indirectly, mortgaged, encumbered
(by any voluntary or involuntary Lien other than the Permitted
Encumbrances), subleased, sold, assigned, hypothecated or otherwise
transferred (whether by operation of law or otherwise);
(K) the occurrence of a default or breach of condition continuing
beyond the expiration of the applicable notice and grace periods, if any,
in connection with the payment or performance of any other material
obligation of the Lessee or any Sublessee, whether or not the applicable
creditor or obligee elects to declare the obligations of the Lessee or the
applicable Sublessee under the applicable agreement due and payable or to
exercise any other right or remedy available to such creditor or obligee,
if such creditor's or obligee's rights and remedies may involve or result
in (I) the taking of possession of the Leased Property or (II) the
assertion of any other right or remedy that, in the Lessor's reasonable
opinion, may impair the Lessee's ability punctually to perform all of its
obligations under this Lease and the other Lease Documents, may impair
such Sublessee's ability punctually to perform all of its obligations
under its Sublease or may materially impair the Lessor's security for the
Lease Obligations; provided, however, that in any event, the election by
the applicable creditor or obligee to declare the obligations of the
Lessee under the applicable agreement due and payable or to exercise any
other right or remedy available to such creditor or obligee shall be an
Event of Default hereunder only if such obligations, individually or in
the aggregate, are in excess of FIVE HUNDRED THOUSAND AND NO/100 DOLLARS
($500,000.00);
(L) the occurrence of a Related Party Default;
(M) the occurrence of any default or breach of condition continuing
beyond the expiration of the applicable notice and grace periods, if any,
under any credit agreement, loan agreement or other agreement establishing
a major line of credit (or any documents executed in connection with such
lines of credit) on behalf of any member of the Leasing Group whether or
not the applicable creditor has elected to declare the indebtedness due
and payable under such line of credit or to exercise any other right or
remedy available to it. For the purposes of this provision, a major line
of credit shall, with respect to any member of the Leasing Group other
than the Guarantor, mean and include any line of credit established in an
amount equal to or greater than ONE MILLION AND NO/100 DOLLARS
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($1,000,000.00) and, with respect to the Guarantor mean and include any
line of credit established in an amount equal to or greater than FIVE
MILLION AND NO/100 DOLLARS ($5,000,000.00);
(N) except as a result of Casualty or a partial or complete
Condemnation, if the Lessee or any Sublessee ceases operation of the
Facility for a period in excess of thirty (30) days, except that if it is
not possible to resume operation of the Facility within thirty (30) days
then the Lessee shall have up to ninety (90) days to reopen the Facility
subject to the terms of subparts (i) and (ii) of Section 16.1(b) above (a
"Failure to Operate");
(O) if one or more judgments against the Lessee or any other
Acceptable Licensed Operator or attachments against the Lessee's interest
or any other Acceptable Licensed Operator's interest in the Leased
Property, which in the aggregate exceed ONE HUNDRED THOUSAND AND NO/100
DOLLARS ($100,000.00) or which may materially and adversely interfere with
the operation of the Facility, remain unpaid, unstayed on appeal,
undischarged, unbonded or undismissed for a period of thirty (30) days;
(P) if any malpractice award or judgment exceeding any applicable
professional liability insurance coverage by more than FIVE HUNDRED
THOUSAND AND NO/100 DOLLARS ($500,000) shall be rendered against any
member of the Leasing Group and either (I) enforcement proceedings shall
have been commenced by any creditor upon such award or judgment or (II)
such award or judgment shall continue unsatisfied and in effect for a
period of ten (10) consecutive days without an insurance company
satisfactory to the Lessor (in its sole and absolute discretion) having
agreed to fund such award or judgment in a manner satisfactory to the
Lessor (in its sole and absolute discretion) and in either case such award
or judgment shall, in the reasonable opinion of the Lessor, have a
material adverse effect on the ability of any member of the Leasing Group
to operate the Facility;
(Q) any failure to comply with the Legal Requirements applicable to
any Third Party Payor Program in which the Lessee or the Applicable
Licensed Operator elects to participate, continuing for thirty (30) days
after the giving of notice by the Lessor to the Lessee specifying the
nature of any such failure (except as to matters not susceptible to cure
within thirty (30) days, provided that with respect to such matters, (I)
the Lessee commences the cure thereof within thirty (30) days after the
giving of such notice by the Lessor to the Lessee, (II) the Lessee
continuously prosecutes such cure to completion, (III) such cure is
completed within one hundred eighty (180) days after the giving of such
notice by the Lessor to the Lessee, and (IV) such failure to comply does
not materially impair the value of, or the Lessor's rights with respect
to, the Leased Property or otherwise materially impair the Collateral or
the Lessor's security interest therein), unless the Lessee elects to no
longer participate in any such Third Party Payor Program and sends written
notice of such election to the Lessor;
(R) any failure to comply with the Legal Requirements applicable to
any Accreditation Body under whose jurisdiction the Lessee or any other
Acceptable Licensed
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Operator elects to subject itself, continuing for thirty (30) days after
the giving of notice by the Lessor to the Lessee specifying the nature of
any such failure (except as to matters not susceptible to cure within
thirty (30) days, provided that with respect to such matters, (I) the
Lessee commences the cure thereof within thirty (30) days after the giving
of such notice by the Lessor to the Lessee, (II) the Lessee continuously
prosecutes such cure to completion, (III) such cure is completed within
one hundred eighty (180) days after the giving of such notice by the
Lessor to the Lessee, and (IV) such failure to comply does not materially
impair the value of, or the Lessor's rights with respect to, the Leased
Property or otherwise materially impair the Collateral or the Lessor's
security interest therein), unless the Lessee elects to no longer be
subject to the jurisdiction of any such Accreditation Body and sends
written notice of such election to the Lessor;
(S) if any member of the Leasing Group receives notice of a final
unappealable determination by applicable Governmental Authorities of the
revocation of any Permit required for the lawful construction or operation
of the Facility in accordance with the Primary Intended Use or the loss
of, or the failure to obtain and/or renew, any Permit under any other
circumstances under which any member of the Leasing Group is required to
cease the operation of the Facility in accordance with the Primary
Intended Use; and
(T) any failure to maintain the insurance required pursuant to
Section 12 of this Lease in force and effect at all times until the Lease
Obligations are fully paid and performed;
(U) the appointment of a temporary manager (or operator) for the
Leased Property by any Governmental Authority;
(V) the entry of an order by a court with jurisdiction over the
Leased Property to close the Facility; or
(W) the entry of an order to transfer one or more residents from the
Facility as a result of an allegation of abuse or neglect or to take any
action to eliminate an emergency situation then existing at the Facility
where such order would have a material adverse effect in the Lessor's
reasonable judgment on the continued operation of the Facility (it being
understood, however, that if there are more than three (3) such orders at
any time during the term of this Lease, then, ipso facto, the Lessor shall
be entitled to deem there to be a material adverse effect on the operation
of the Facility) .
16.2 REMEDIES.
(A) If any Lease Default shall have occurred, the Lessor may at its option
terminate this Lease by giving the Lessee not less than ten (10) days' notice of
such termination, or exercise any one or more of its rights and remedies under
this Lease or any of the other Lease Documents, or as available at law or in
equity. In the event of such termination and upon the expiration of the time
fixed in such notice, the Term shall terminate (but only if the Lessor shall
have specifically elected
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by a written notice to so terminate the Lease) and all rights of the Lessee
under this Lease shall cease as though that date was the date originally set as
the Expiration Date. Notwithstanding the foregoing, in the event of the Lessee's
failure to pay Rent, if such Rent remains unpaid beyond ten (10) days from the
due date thereof, the Lessor shall not be obligated to give ten (10) days notice
of such termination or exercise of any of its other rights and remedies under
this Lease, or the other Lease Documents, or otherwise available at law or in
equity, and the Lessor shall be at liberty to pursue any one or more of such
rights or remedies without further notice. No termination of this Lease or
taking of possession of the Leased Property by or on behalf of the Lessor, and
no other act done by or on behalf of the Lessor, shall constitute an acceptance
of surrender of the Leased Property by the Lessee or release or reduce the
Lessee's obligations under this Lease or the other Lease Documents (which shall
expressly survive any such termination, repossession or other act), unless
otherwise expressly agreed to in a written document signed by an authorized
officer or agent of the Lessor.
(B) To the extent permitted under applicable law, the Lessee shall pay as
Additional Charges all costs and expenses (including, without limitation,
attorneys' fee and expenses) reasonably incurred by or on behalf of the Lessor
as a result of any Lease Default.
(C) If any Lease Default shall have occurred, whether or not this Lease
has been terminated pursuant to Paragraph (a) of this Section, the Lessee shall,
to the extent permitted under applicable law, if required by the Lessor so to
do, upon not less than ten (10) days' prior notice from the Lessor, immediately
surrender to the Lessor the Leased Property pursuant to the provisions of
Paragraph (a) of this Section and quit the same, and the Lessor may enter upon
and repossess the Leased Property by reasonable force, summary proceedings,
ejectment or otherwise, and may remove the Lessee and all other Persons and any
and all of the Tangible Personal Property from the Leased Property, subject to
the rights of any residents or patients of the Facility and any Sublessees who
are not Affiliates of any member of the Leasing Group and to any requirements of
applicable law, or the Lessor may claim ownership of the Tangible Personal
Property as set forth in Section 5.2.3 hereof or the Lessor may exercise its
rights as secured party under the Security Agreement. The Lessor shall use
reasonable, good faith efforts to relet the Leased Property or otherwise
mitigate damages suffered by the Lessor as a result of the Lessee's breach of
this Lease.
(D) In addition to all of the rights and remedies of the Lessor set forth
in this Lease and the other Lease Documents, if the Lessee shall fail to pay any
rental or other charge due hereunder (whether denominated as Base Rent,
Additional Rent, Additional Charges or otherwise) within ten (10) days after
same shall have become due and payable, then and in such event the Lessee shall
also pay to the Lessor (I) a late payment service charge (in order to partially
defray the Lessor's administrative and other overhead expenses) equal to two
hundred-fifty ($250) dollars and (II) to the extent permitted by applicable law,
interest on such unpaid sum at the Overdue Rate; it being understood, however,
that nothing herein shall be deemed to extend the due date for payment of any
sums required to be paid by the Lessee hereunder or to relieve the Lessee of its
obligation to pay such sums at the time or times required by this Lease.
16.3 DAMAGES. None of (A) the termination of this Lease pursuant to
Section 16.2, (B) the eviction of the Lessee or the repossession of the Leased
Property, (C) the failure or inability of the
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Lessor, notwithstanding reasonable good faith efforts, to relet the Leased
Property, (D) the reletting of the Leased Property or (E) the failure of the
Lessor to collect or receive any rentals due upon any such reletting, shall
relieve the Lessee of its liability and obligations hereunder, all of which
shall survive any such termination, repossession or reletting. In any such
event, the Lessee shall forthwith pay to the Lessor all Rent due and payable
with respect to the Leased Property to and including the date of such
termination, repossession or eviction. Thereafter, the Lessee shall forthwith
pay to the Lessor, at the Lessor's option, either:
(I) the sum of: (X) all Rent that is due and unpaid at later to occur of
termination, repossession or eviction, together with interest
thereon at the Overdue Rate to the date of payment, plus (Y) the
worth (calculated in the manner stated below) of the amount by which
the unpaid Rent for the balance of the Term after the later to occur
of the termination, repossession or eviction exceeds the fair market
rental value of the Leased Property for the balance of the Term,
plus (Z) any other amount necessary to compensate the Lessor for all
damage proximately caused by the Lessee's failure to perform the
Lease Obligations or which in the ordinary course would be likely to
result therefrom; or
(II) each payment of Rent as the same would have become due and payable
if the Lessee's right of possession or other rights under this Lease
had not been terminated, or if the Lessee had not been evicted, or
if the Leased Property had not been repossessed which Rent, to the
extent permitted by law, shall bear interest at the Overdue Rate
from the date when due until the date paid, and the Lessor may
enforce, by action or otherwise, any other term or covenant of this
Lease. There shall be credited against the Lessee's obligation under
this Clause (ii) amounts actually collected by the Lessor from
another tenant to whom the Leased Property may have actually been
leased or, if the Lessor is operating the Leased Property for its
own account, the actual Cash Flow of the Leased Property.
In making the determinations described in subparagraph (i) above, the
"worth" of unpaid Rent shall be determined by a court having jurisdiction
thereof using the lowest rate of capitalization (highest present worth)
reasonably applicable at the time of such determination and allowed by
applicable law.
16.4 LESSEE WAIVERS. If this Lease is terminated pursuant to Section 16.2,
the Lessee waives, to the extent not prohibited by applicable law, (A) any right
of redemption, re-entry or repossession, (B) any right to a trial by jury in the
event of summary proceedings to enforce the remedies set forth in this Article
16, and (C) the benefit of any laws now or hereafter in force exempting property
from liability for rent or for debt.
In the event the Lessor elects to regain possession of the Leased Property
by a forcible detainer proceeding, the Lessee hereby specifically waives any
statutory notice which may be required prior to any such proceeding, and agrees
that the Lessor's execution of this Lease is, in part, consideration for this
waiver. Except as otherwise set forth herein, the Lessee further waives any
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demand for Rent, notice of termination and any notice to quit required pursuant
to statutes of the State or otherwise and agrees that the Lessor's execution of
this Lease is, in part, consideration for these waivers.
All claims for damages by reason of re-entry and/or repossession and/or
alteration of locks or other security devices are hereby waived, as are all
claims for damages by reason of any distress warrant, forcible detainer
proceedings, sequestration proceedings or other legal process. The Lessee agrees
that any re-entry by the Lessor may be pursuant to judgment obtained in forcible
detainer proceedings or other legal proceedings or without the necessity for any
legal proceedings, as the Lessor may elect, and the Lessor shall not be liable
in trespass or otherwise.
The Lessee shall not interpose any counterclaim of any kind in any action
or proceeding commenced by the Lessor to recover possession of the Leased
Property.
16.5 APPLICATION OF FUNDS. Any payments otherwise payable to the Lessee
which are received by the Lessor under any of the provisions of this Lease
during the existence or continuance of any Lease Default shall be applied to the
Lease Obligations in the order which the Lessor may reasonably determine or as
may be required by the laws of the State.
16.6 INTENTIONALLY OMITTED.
16.7 LESSOR'S RIGHT TO CURE. If the Lessee shall fail to make any payment,
or to perform any act required to be made or performed under this Lease and to
cure the same within the relevant time periods provided in Section 16.1, the
Lessor, after five (5) Business Days' prior notice to the Lessee (except in an
emergency when such shorter notice shall be given as is reasonable under the
circumstances), and without waiving or releasing any obligation or Event of
Default, may (but shall be under no obligation to) at any time thereafter make
such payment or perform such act for the account and at the expense of the
Lessee, and may, to the extent permitted by law, enter upon the Leased Property
for such purpose and take all such action thereon as, in the Lessor's opinion,
may be necessary or appropriate therefor. No such entry shall be deemed an
eviction of the Lessee. All sums so paid by the Lessor and all costs and
expenses (including, without limitation, reasonable attorneys' fees and
expenses, in each case, to the extent permitted by law) so incurred shall be
paid by the Lessee to the Lessor on demand as an Additional Charge. The
obligations of the Lessee and rights of the Lessor contained in this Article
shall survive the expiration or earlier termination of this Lease.
16.8 NO WAIVER BY LESSOR. The Lessor shall not by any act, delay, omission
or otherwise (including, without limitation, the exercise of any right or remedy
hereunder) be deemed to have waived any of its right or remedies hereunder or
under any of the other Lease Documents unless such waiver is in writing and
signed by the Lessor, and then, only to the extent specifically set forth
therein. No waiver at any time of any of the terms, conditions, covenants,
representations or warranties set forth in any of the Lease Documents
(including, without limitation, any of the time periods set forth therein for
the performance of the Lease Obligations) shall be construed as a waiver of any
other term, condition, covenant, representation or warranty of any of the Lease
Documents,
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nor shall such a waiver in any one instance or circumstances be construed as a
waiver of the same term, condition, covenant, representation or warranty in any
subsequent instance or circumstance. No such failure, delay or waiver shall be
construed as creating a requirement that the Lessor must thereafter, as a result
of such failure, delay or waiver, give notice to the Lessee, any guarantor of
the Lease Obligations, or any other Person that the Lessor does not intend to,
or may not, give a further waiver or to refrain from insisting upon the strict
performance of the terms, conditions, covenants, representations and warranties
set forth in the Lease Documents before the Lessor can exercise any of its
rights or remedies under any of the Lease Documents or before any Lease Default
can occur, or as establishing a course of dealing for interpreting the conduct
of and agreements between the Lessor and the Lessee, any guarantor of the Lease
Obligations or any other Person.
The acceptance by the Lessor of any payment that is less than payment in
full of all amounts then due under any of the Lease Documents at the time of the
making of such payment shall not: (A) constitute a waiver of the right to
exercise any of the Lessor's remedies at that time or at any subsequent time,
(B) constitute an accord and satisfaction or (C) nullify any prior exercise of
any remedy, without the express written consent of the Lessor. Any failure by
the Lessor to take any action under this Lease or any of the other Lease
Documents by reason of a default hereunder or thereunder, any acceptance of a
past due installment, or any indulgence granted from time to time shall not be
construed (I) as a novation of this Lease or any of the other Lease Documents,
(II) as a waiver of any right of the Lessor thereafter to insist upon strict
compliance with the terms of this Lease or any of the other Lease Documents or
(III) to prevent the exercise of any right of acceleration or any other right
granted hereunder or under applicable law; and to the maximum extent not
prohibited by applicable law, the Lessor hereby expressly waives the benefit of
any statute or rule of law or equity now provided, or which may hereafter be
provided, which would produce a result contrary to or in conflict with the
foregoing.
16.9 RIGHT OF FORBEARANCE. Whether or not for consideration paid or
payable to the Lessor and, except as may be otherwise specifically agreed to by
the Lessor in writing, no forbearance on the part of the Lessor, no extension of
the time for the payment of the whole or any part of the Obligations, and no
other indulgence given by the Lessor to the Lessee or any other Person, shall
operate to release or in any manner affect the original liability of the Lessee
or such other Persons, or to limit, prejudice or impair any right of the Lessor,
including, without limitation, the right to realize upon any collateral, or any
part thereof, for any of the Obligations evidenced or secured by the Lease
Documents; notice of any such extension, forbearance or indulgence being hereby
waived by the Lessee and all those claiming by, through or under the Lessee.
16.10 CUMULATIVE REMEDIES. The rights and remedies set forth under this
Lease are in addition to all other rights and remedies afforded to the Lessor
under any of the other Lease Documents or at law or in equity, all of which are
hereby reserved by the Lessor, and this Lease is made and accepted without
prejudice to any such rights and remedies. All of the rights and remedies of the
Lessor under each of the Lease Documents shall be separate and cumulative and
may be exercised concurrently or successively in the Lessor's sole and absolute
discretion.
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ARTICLE 17
SURRENDER OF LEASED PROPERTY OR LEASE; HOLDING OVER
17.1 SURRENDER. The Lessee shall, upon the expiration or prior termination
of the Term (unless the Lessee has concurrently purchased the Leased Property in
accordance with the terms hereof), vacate and surrender the Leased Property to
the Lessor in good repair and condition, in compliance with all Legal
Requirements, all Insurance Requirements, and in compliance with the provisions
of Article 8, except for: (A) ordinary wear and tear (subject to the obligation
of the Lessee to maintain the Leased Property in good order and repair during
the entire Term of the Lease), (B) damage caused by the gross negligence or
willful acts of the Lessor, any Affiliate of the Lessor and any of their
respective successors, assigns, employees, servants, agents, attorneys,
officers, directors, shareholders, partners or owners, and (C) any damage or
destruction resulting from a Casualty or Taking that the Lessee is not required
by the terms of this Lease to repair or restore.
17.2 TRANSFER OF PERMITS AND CONTRACTS. In connection with the expiration
or any earlier termination of this Lease (unless the Lessee has concurrently
purchased the Leased Property in accordance with the terms hereof), upon any
request made from time to time by the Lessor, the Lessee shall (at no
out-of-pocket costs to the Lessee in connection with the expiration or
termination of this Lease for reasons other than a Lease Default) (A) promptly
and diligently use its best efforts to (I) transfer and assign all Permits and
Contracts necessary or desirable for the operation of the Leased Property in
accordance with its Primary Intended Use to the Lessor or its designee and/or
(II) arrange for the transfer or assignment of such Permits and Contracts to the
Lessor or its designee, all to the extent the same may be transferred or
assigned under applicable law and the terms thereof, and (B) cooperate in every
respect (and to the fullest extent possible) and assist the Lessor or its
designee in obtaining such Permits and Contracts (whether by transfer,
assignment or otherwise). Such efforts and cooperation on the part of the Lessee
shall include, without limitation, the execution, delivery and filing with
appropriate Governmental Authorities and Third Party Payors of any applications,
petitions, statements, notices, requests, assignments and other documents or
instruments requested by the Lessor. Furthermore, the Lessee shall not take any
action or refrain from taking any action which would defer, delay or jeopardize
the process of the Lessor or its designee obtaining said Permits and Contracts
(whether by transfer, assignment or otherwise). Without limiting the foregoing,
the Lessee shall not seek to transfer or relocate any of said Permits or
Contracts to any location other than the Leased Property. The provisions of this
Section 17.2 shall survive the expiration or earlier termination of this Lease.
The Lessee hereby appoints the Lessor as its attorney-in-fact, with full
power of substitution to take such actions, in the event that the Lessee fails
to comply with any request made by the Lessor hereunder, as the Lessor (in its
sole absolute discretion) may deem necessary or desirable to effectuate the
intent of this Section 17.2. The power of attorney conferred on the Lessor by
the provisions of this Section 17.2, being coupled with an interest, shall be
irrevocable until the Obligations are fully paid and performed and shall not be
affected by any disability or incapacity which the Lessee may suffer and shall
survive the same. Such power of attorney is provided solely to protect the
interests of the Lessor and shall not impose any duty on the Lessor to exercise
any
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such power and neither the Lessor nor such attorney-in-fact shall be liable for
any act, omission, error in judgment or mistake of law, except as the same may
result from its gross negligence or willful misconduct.
17.3 NO ACCEPTANCE OF SURRENDER. Except at the expiration of the Term in
the ordinary course, no surrender to the Lessor of this Lease or of the Leased
Property or any interest therein shall be valid or effective unless agreed to
and accepted in writing by the Lessor and no act by the Lessor or any
representative or agent of the Lessor, other than such a written acceptance by
the Lessor, shall constitute an acceptance of any such surrender.
17.4 HOLDING OVER. If, for any reason, the Lessee shall remain in
possession of the Leased Property after the expiration or any earlier
termination of the Term, such possession shall be as a tenant at sufferance
during which time the Lessee shall pay as rental each month, one and one-half
times the aggregate of (I) one-twelfth of the aggregate Base Rent and Additional
Rent payable at the time of such expiration or earlier termination of the Term;
(II) all Additional Charges accruing during the month and (III) all other sums,
if any, payable by the Lessee pursuant to the provisions of this Lease with
respect to the Leased Property. During such period of tenancy, the Lessee shall
be obligated to perform and observe all of the terms, covenants and conditions
of this Lease, but shall have no rights hereunder other than the right, to the
extent given by law to tenants at sufferance, to continue its occupancy and use
of the Leased Property. Nothing contained herein shall constitute the consent,
express or implied, of the Lessor to the holding over of the Lessee after the
expiration or earlier termination of this Lease.
ARTICLE 18
RIGHT OF FIRST REFUSAL TO
PURCHASE THE LEASED PROPERTY
18.1 RIGHT OF FIRST REFUSAL TO PURCHASE THE LEASED PROPERTY. At any time
during the Term, as long as there exists no Lease Default at the time of
exercise and the Closing Date (as hereinafter defined), and this Lease is then
in full force and effect and there exists no event or state of facts which
constitutes, or with the passage of time and/or the giving of notice would
constitute, a Lease Default, the Lessee shall have a "Right of First Refusal"
subject to the following terms and conditions: (A) if the Lessor receives a bona
fide written offer to purchase the Leased Property from a Person which is not a
member of the Leasing Group or an Affiliate of any member of the Leasing Group
(the "Offer"), acceptable to the Lessor in the Lessor's sole and absolute
discretion and the Lessor elects, in the Lessor's sole and absolute discretion,
to sell the Leased Property in accordance with the Offer, the Lessee shall have
thirty (30) days following delivery of the notice of the Offer to the Lessee to
elect to purchase the Leased Property and any and all other property subject to
the Offer (collectively, the "Offered Property") on the same terms and
conditions as specified therein; (B) unless the Lessor receives notice from the
Lessee within such thirty (30) day period setting forth the Lessee's election to
so purchase the Offered Property and unless thereafter the Lessee completes the
acquisition of the Offered Property exactly as provided for, and by the date
specified (the
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"Closing Date"), in the Offer, the Lessor shall be at liberty, and shall have
the absolute and unconditional right, to sell the Leased Property to any Person
within the next twelve (12) months on the same terms and conditions set forth in
the Offer or on any other terms and conditions more favorable to the Lessor and
(C) any such sale consummated in accordance with the provisions of the foregoing
clause (b) shall extinguish all rights granted to the Lessee under this Section
18.1. If the Lessor does not sell the Leased Property within the next twelve
(12) months as aforesaid, the Lessee's Right of First Refusal to purchase the
Leased Property in accordance with the provisions of this Section 18.1 shall
remain in full force and effect. The Lessee's Right of First Refusal shall not
apply to and shall survive: (A) any sale or transfer of the Leased Property to
any Affiliate of the Lessor or of Meditrust; (B) any sale or transfer of the
Leased Property occasioned by the exercise of any rights or remedies of any Fee
Mortgagee or (C) a deed or transfer in lieu of foreclosure to any Fee Mortgagee
or any Affiliate thereof. The Lessee's Right of First Refusal shall in all
events terminate upon the expiration or any earlier termination of this Lease.
ARTICLE 19
SUBLETTING AND ASSIGNMENT
19.1 SUBLETTING AND ASSIGNMENT. Except as specifically set forth in
Section 19.2 below, the Lessee may not, without the prior written consent of the
Lessor, which consent may be withheld in the Lessor's sole and absolute
discretion, assign or pledge all or any portion of its interest in this Lease or
any of the other Lease Documents (whether by operation of law or otherwise) or
sublet all or any part of the Leased Property. For purposes of this Section
19.1, the term "assign" shall be deemed to include, but not be limited to, any
one or more sales, pledges, hypothecations or other transfers (including,
without limitation, any transfer by operation of law) of any of the capital
stock of or partnership interest in the Lessee or sales, pledges, hypothecations
or other transfers (including, without limitation, any transfer by operation of
law) of the capital or the assets of the Lessee. Any such assignment, pledge,
sale, hypothecation or other transfer made without the Lessor's consent shall be
void and of no force and effect.
19.2 PERMITTED SUBLEASES. Notwithstanding the foregoing, the Lessee shall
have the right to enter into Resident Agreements without the prior consent of
the Lessor.
19.3 ATTORNMENT. The Lessee shall insert in each Sublease approved by the
Lessor or permitted under Section 19.2, provisions to the effect that (A) such
Sublease is subject and subordinate to all of the terms and provisions of this
Lease and to the rights of the Lessor hereunder, (B) in the event this Lease
shall terminate before the expiration of such Sublease, the Sublessee thereunder
will, at the Lessor's option, attorn to the Lessor and waive any right the
Sublessee may have to terminate the Sublease or to surrender possession
thereunder, as a result of the termination of this Lease and (C) in the event
the Sublessee receives a written notice from the Lessor stating that the Lessee
is in default under this Lease, the Sublessee shall thereafter be obligated to
pay all rentals accruing under said Sublease directly to the Lessor or as the
Lessor may direct. All rentals received from the Sublessee by the Lessor shall
be credited against the amounts owing by the Lessee under this Lease.
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ARTICLE 20
TITLE TRANSFERS AND LIENS GRANTED BY LESSOR
20.1 NO MERGER OF TITLE. There shall be no merger of this Lease or of the
leasehold estate created hereby with the fee estate in the Leased Property by
reason of the fact that the same Person may acquire, own or hold, directly or
indirectly (A) this Lease or the leasehold estate created hereby or any interest
in this Lease or such leasehold estate and (B) the fee estate in the Leased
Property.
20.2 TRANSFERS BY LESSOR. If the original Lessor named herein or any
successor in interest shall convey the Leased Property in accordance with the
terms hereof, other than as security for a debt, and the grantee or transferee
of the Leased Property shall expressly assume all obligations of the Lessor
hereunder arising or accruing from and after the date of such conveyance or
transfer, the original Lessor named herein or the applicable successor in
interest so conveying the Leased Property shall thereupon be released from all
future liabilities and obligations of the Lessor under this Lease arising or
accruing from and after the date of such conveyance or other transfer as to the
Leased Property and all such future liabilities and obligations shall thereupon
be binding upon the new owner.
20.3 LESSOR MAY GRANT LIENS. Without the consent of the Lessee, but
subject to the terms and conditions set forth below in this Section 20.3, the
Lessor may, from time to time, directly or indirectly, create or otherwise cause
to exist any lien, encumbrance or title retention agreement upon the Leased
Property or any interest therein ("Encumbrance"), whether to secure any
borrowing or other means of financing or refinancing, provided that the Lessee
shall have no obligation to make payments under such Encumbrances. The Lessee
shall subordinate this Lease to the lien of any such Encumbrance, on the
condition that the beneficiary or holder of such Encumbrance executes a
non-disturbance agreement in conformity with the provisions of Section 20.4. To
the extent that any such Encumbrance consists of a mortgage or deed of trust on
the Lessor's interest in the Leased Property the same shall be referred to
herein as a "Fee Mortgage" and the holder thereof shall be referred to herein as
a "Fee Mortgagee".
20.4 SUBORDINATION AND NON-DISTURBANCE. Concurrently with the execution
and delivery of any Fee Mortgage entered into after the date hereof, provided
that the Lessee executes and delivers an agreement of the type described in the
following paragraph, the Lessor shall obtain and deliver to the Lessee an
agreement by the holder of such Fee Mortgage, pursuant to which, (A) the
applicable Fee Mortgagee consents to this Lease and (B) agrees that,
notwithstanding the terms of the applicable Fee Mortgage held by such Fee
Mortgagee, or any default, expiration, termination, foreclosure, sale, entry or
other act or omission under or pursuant to such Fee Mortgage or a transfer in
lieu of foreclosure, (I) the Lessee shall not be disturbed in peaceful enjoyment
of the Leased Property nor shall this Lease be terminated or canceled at any
time, except in the event that the Lessor shall have the right to terminate this
Lease under the terms and provisions expressly set forth herein, (II) the
Lessee's rights under this Lease shall not be diminished or adversely effected
in any way provided no Event of Default exists hereunder, (III) all insurance
proceeds received in
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connection with any loss, injury or damage relating to the Leased Property shall
be paid to the Lessor in accordance with the provisions of this Lease and the
Fee Mortgagee shall have no rights with respect to any such proceeds unless the
Lessee elects to terminate this Lease pursuant to the provisions of Section
13.2.2, (IV) the Lessee's Right of First Refusal to purchase the Leased Property
shall remain in force and effect pursuant to the terms hereof and (V) in the
event that the Lessee elects to exercise the Right of First Refusal to purchase
the Leased Property and performs all of its obligations hereunder in connection
with any such election, the holder of the Fee Mortgage shall release its Fee
Mortgage upon payment by the Lessee of the purchase price required hereunder,
provided, that (1) such purchase price is paid to the holder of the Fee
Mortgage, in the event that the Indebtedness secured by the applicable Fee
Mortgage is equal to or greater than the purchase price or (2) in the event that
the purchase price is greater than the Indebtedness secured by the Fee Mortgage,
a portion of the purchase price equal to the Indebtedness secured by the Fee
Mortgage is paid to the Fee Mortgagee and the remainder of the purchase price is
paid to the Lessor.
At the request from time to time by any Fee Mortgagee, the Lessee shall
(A) subordinate this Lease and all of the Lessee's rights and estate hereunder
to the Fee Mortgage held by such Fee Mortgagee, (B) agree that the Lessee will
attorn to and recognize such Fee Mortgagee or the purchaser at any foreclosure
sale or any sale under a power of sale contained in any such Fee Mortgage as the
Lessor under this Lease for the balance of the Term then remaining and (C) enter
into a new lease with the Fee Mortgagee or the purchaser at any such sale on the
same terms and conditions of this Lease for the balance of the Term then
remaining. To effect the intent and purpose of the immediately preceding
sentence, the Lessee agrees to execute and deliver such instruments in
recordable from as are reasonably requested by the Lessor or the applicable Fee
Mortgagee; provided, however, that such Fee Mortgagee simultaneously executes,
delivers and records a written agreement of the type described in the preceding
paragraph.
ARTICLE 21
LESSOR OBLIGATIONS
21.1 QUIET ENJOYMENT. As long as the Lessee shall pay all Rent and all
other sums due under any of the Lease Documents as the same become due and shall
fully comply with all of the terms of this Lease and the other Lease Documents
and fully perform its obligations thereunder, the Lessee shall peaceably and
quietly have, hold and enjoy the Leased Property throughout the Term, free of
any claim or other action by the Lessor or anyone claiming by, through or under
the Lessor, but subject to the Permitted Encumbrances and such Liens as may
hereafter be consented to by the Lessee. No failure by the Lessor to comply with
the foregoing covenant shall give the Lessee any right to cancel or terminate
this Lease, or to fail to pay any other sum payable under this Lease, or to fail
to perform any other obligation of the Lessee hereunder. Notwithstanding the
foregoing, the Lessee shall have the right by separate and independent action to
pursue any claim it may have against the Lessor as a result of a breach by the
Lessor of the covenant of quiet enjoyment contained in this Article 21.
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21.2 MEMORANDUM OF LEASE. The Lessor and the Lessee shall, promptly upon
the request of either, enter into a short form memorandum of this Lease, in form
suitable for recording under the laws of the State, in which reference to this
Lease and all options contained herein shall be made. The Lessee shall pay all
recording costs and taxes associated therewith.
21.3 DEFAULT BY LESSOR. The Lessor shall be in default of its obligations
under this Lease only if the Lessor shall fail to observe or perform any term,
covenant or condition of this Lease on its part to be performed and such failure
shall continue for a period of thirty (30) days after notice thereof from the
Lessee (or such shorter time as may be necessary in order to protect the health
or welfare of any residents of the Facility or to insure the continuing
compliance of the Facility with the applicable Legal Requirements), unless such
failure cannot with due diligence be cured within a period of thirty (30) days,
in which case such failure shall not be deemed to continue if the Lessor, within
said thirty (30) day period, proceeds promptly and with due diligence to cure
the failure and diligently completes the curing thereof. The time within which
the Lessor shall be obligated to cure any such failure shall also be subject to
extension of time due to the occurrence of any Unavoidable Delay.
ARTICLE 22
NOTICES
Any notice, request, demand, statement or consent made hereunder or under
any of the other Lease Documents shall be in writing and shall be deemed duly
given if personally delivered, sent by certified mail, return receipt requested,
or sent by a nationally recognized commercial overnight delivery service with
provision for a receipt, postage or delivery charges prepaid, and shall be
deemed given when so personally delivered or postmarked or placed in the
possession of such mail or delivery service and addressed as follows:
If to the Lessee: ALS Leasing, Inc.
c/o Alternative Living Services, Inc.
450 N. Sunnyslope Road, Suite 300
Brookfield, Wisconsin 53005
With a copy to: Miriam J. Dent, Esq.
[The Lessee's counsel] Rogers & Hardin
229 Peachtree Street, N.E., 2700 International
Tower
Atlanta, Georgia 30303
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If to the Guarantor: Alternative Living Services, Inc.
450 N. Sunnyslope Road, Suite 300
Brookfield, Wisconsin 53005
With a copy to: Miriam J. Dent, Esq.
[Guarantor's Counsel] Rogers & Hardin
229 Peachtree Street, N.E., 2700 International
Tower
Atlanta, Georgia 30303
If to the Lessor: Meditrust of Acquisition Corporation III
197 First Avenue
Needham Heights, Massachusetts 02194
Attn: President
With copies to: Meditrust Corporation
197 First Avenue
Needham Heights, Massachusetts 02194
Attn: General Counsel
and Frank Giso III, Esq.
Choate, Hall & Stewart
Exchange Place
53 State Street
Boston, Massachusetts 02109
or such other address as the Lessor, the Lessee or the Guarantor shall
hereinafter from time to time designate by a written notice to the others given
in such manner. Any notice given to the Lessee or the Guarantor by the Lessor at
any time shall not imply that such notice or any further or similar notice was
or is required.
ARTICLE 23
LIMITATION OF LIABILITY
All Persons dealing with the Lessor, in any way, shall look only to the
assets of the Lessor for the payment of any sum or the performance of any
obligation. Furthermore, in no event shall the Lessor ever be liable to the
Lessee or any other Person for any indirect or consequential damages incurred by
the Lessee or such other Person resulting from any cause whatsoever.
Notwithstanding the foregoing, the Lessee hereby acknowledges and agrees that
the Lessee shall look only to the assets of the Lessor for the payment of any
sum or performance of any obligation due by or from the Lessor pursuant to the
terms and provisions of the Lease Documents.
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ARTICLE 24
MISCELLANEOUS PROVISIONS
24.1 BROKER'S FEE INDEMNIFICATION. Each of the Lessor and the Lessee
hereby represents and warrants to the other that it has not dealt with any
broker or any other similar agent in connection with any of the transactions
contemplated by the Lease Documents. Each of the Lessor and the Lessee shall and
hereby agrees to indemnify, defend (with counsel acceptable to the other) and
hold the other harmless from and against any and all claims for premiums or
other charges, finder's fees, taxes, brokerage fees or commissions and other
similar compensation and all other costs and expenses, including, without
limitation, reasonable attorneys' fees, due in connection with or otherwise
incurred as a result of the indemnifying party's breach of the representation
and warranty set forth in the preceding sentence. Notwithstanding the foregoing,
each of the Lessor and the Lessee shall have the option of conducting its own
defense against any such claims with counsel of its own choice, but at the
expense of the other, as aforesaid. This indemnification shall include all
attorneys' fees and expenses and court costs reasonably incurred by the Lessor
in connection with the defense against any such claims and the enforcement of
this indemnification agreement and shall survive the termination of this Lease.
24.2 NO JOINT VENTURE OR PARTNERSHIP. Neither anything contained in any of
the Lease Documents, nor the acts of the parties hereto, shall create, or be
construed to create, a partnership or joint venture between the Lessor and the
Lessee. The Lessee is not the agent or representative of the Lessor and nothing
contained herein or in any of the other Lease Documents shall make, or be
construed to make, the Lessor liable to any Person for goods delivered to the
Lessee, services performed with respect to the Leased Property at the direction
of the Lessee or for debts or claims accruing against the Lessee.
24.3 AMENDMENTS, WAIVERS AND MODIFICATIONS. Except as otherwise expressly
provided for herein or in any other Lease Document, none of the terms,
covenants, conditions, warranties or representations contained in this Lease or
in any of the other Lease Documents may be renewed, replaced, amended, modified,
extended, substituted, revised, waived, consolidated or terminated except by an
agreement in writing signed by (A) all parties to this Lease or the other
applicable Lease Document, as the case may be, with regard to any such renewal,
replacement, amendment, modification, extension, substitution, revision,
consolidation or termination and (B) the Person against whom enforcement is
sought with regard to any waiver. The provisions of this Lease and the other
Lease Documents shall extend and be applicable to all renewals, replacements,
amendments, extensions, substitutions, revisions, consolidations and
modifications of any of the Lease Documents, the Management Agreements, the
Related Party Agreements, the Permits and/or the Contracts. References herein
and in the other Lease Documents to any of the Lease Documents, the Management
Agreements, the Related Party Agreements, the Permits and/or the Contracts shall
be deemed to include any renewals, replacements, amendments, extensions,
substitutions, revisions, consolidations or modifications thereof.
104
<PAGE> 116
Notwithstanding the foregoing, any reference contained in any of the Lease
Documents, whether express or implied, to any renewal, replacement, amendment,
extension, substitution, revisions, consolidation or modification of any of the
Lease Documents or any Management Agreement, Related Party Agreement, Permit
and/or the Contract is not intended to constitute an agreement or consent by the
Lessor to any such renewal, replacement, amendment, substitution, revision,
consolidation or modification; but, rather as a reference only to those
instances where the Lessor may give, agree or consent to any such renewal,
replacement, amendment, extension, substitution, revision, consolidation or
modification as the same may be required pursuant to the terms, covenants and
conditions of any of the Lease Documents.
24.4 CAPTIONS AND HEADINGS. The captions and headings set forth in this
Lease and each of the other Lease Documents are included for convenience and
reference only, and the words contained therein shall in no way be held or
deemed to define, limit, describe, explain, modify, amplify or add to the
interpretation, construction or meaning of, or the scope or intent of, this
Lease, any of the other Lease Documents or any parts hereof or thereof.
24.5 TIME IS OF THE ESSENCE. Time is of essence of each and every term,
condition, covenant and warranty set forth herein and in the other Lease
Documents.
24.6 COUNTERPARTS. This Lease may be executed in one or more counterparts,
each of which taken together shall constitute an original and all of which shall
constitute one and the same instrument.
24.7 ENTIRE AGREEMENT. This Lease and the other Lease Documents set forth
the entire agreement of the parties with respect to the Facility and the other
Leased Property and shall, with respect to the Facility and the other Leased
Property, supersede in all respects the letter of intent dated July 22, 1996
(and all prior iterations thereof) from Meditrust to the Guarantor; provided,
however, said letter of intent is not superseded with respect to the subject
matter not contemplated by the Lease Documents.
24.8 WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE
LAW, THE LESSOR AND THE LESSEE HEREBY MUTUALLY, KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT WHICH ANY PARTY HERETO MAY NOW OR HEREAFTER HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THE LEASE OR ANY OF THE LEASE DOCUMENTS. The Lessee hereby
certifies that neither the Lessor nor any of the Lessor's representatives,
agents or counsel has represented expressly or otherwise that the Lessor would
not, in the event of any such suit, action or proceeding seek to enforce this
waiver to the right of trial by jury and acknowledges that the Lessor has been
induced by this waiver (among other things) to enter into the transactions
evidenced by this Lease and the other Lease Documents and further acknowledges
that the Lessee (A) has read the provisions of this Lease, and in particular,
the paragraph containing this waiver, (B) has consulted legal counsel, (C)
understands the rights that it is granting in this Lease and the rights that it
waiving in this
105
<PAGE> 117
paragraph in particular and (D) makes the waivers set forth herein knowingly,
voluntarily and intentionally.
24.9 SUCCESSORS AND ASSIGNS. This Lease and the other Lease Documents
shall be binding and inure to the benefit of (A) upon the Lessee and the
Lessee's legal representatives and permitted successors and assigns and (B) the
Lessor and any other Person who may now or hereafter hold the interest of the
Lessor under this Lease and their respective successors and assigns.
Notwithstanding the foregoing, except as may be permitted pursuant to Article
19, the Lessee shall not assign any of its rights or obligations hereunder or
under any of the other Lease Documents without the prior written consent of the
Lessor, in each instance, which consent may be withheld in the Lessor's sole and
absolute discretion.
24.10 NO THIRD PARTY BENEFICIARIES. This Lease and the other Lease
Documents are solely for the benefit of the Lessor, its successors, assigns and
participants (if any), the Meditrust Entities, the Indemnified Parties, the
Lessee, the Guarantor, the other members of the Leasing Group and their
respective permitted successors and assigns, and, except as otherwise expressly
set forth in any of the Lease Documents, nothing contained therein shall confer
upon any Person other than such parties any right to insist upon or to enforce
the performance or observance of any of the obligations contained therein. All
conditions to the obligations of the Lessor to advance or make available
proceeds of insurance or Awards, or to release any deposits held for Impositions
or insurance premiums are imposed solely and exclusively for the benefit of the
Lessor, its successors and assigns. No other Person shall have standing to
require satisfaction of such conditions in accordance with their terms, and no
other Person shall, under any circumstances, be a beneficiary of such
conditions, any or all of which may be freely waived in whole or in part by the
Lessor at any time, if, in the Lessor's sole and absolute discretion, the Lessor
deems it advisable or desirable to do so.
24.11 GOVERNING LAW. This Lease shall be construed and the rights and
obligations of the Lessor and the Lessee shall be determined in accordance with
the laws of the State.
The Lessee hereby consents to personal jurisdiction in the courts of the
State and the United States District Court for the District in which the Leased
Property is situated as well as to the jurisdiction of all courts from which an
appeal may be taken from the aforesaid courts, for the purpose of any suit,
action or other proceeding arising out of or with respect to any of the Lease
Documents, the negotiation and/or consummation of the transactions evidenced by
the Lease Documents, the Lessor's relationship of any member of the Leasing
Group in connection with the transactions evidenced by the Lease Documents
and/or the performance of any obligation or the exercise of any remedy under any
of the Lease Documents and expressly waives any and all objections the Lessee
may have as to venue in any of such courts.
24.12 GENERAL. Anything contained in this Lease to the contrary
notwithstanding, all claims against, and liabilities of, the Lessee or the
Lessor arising prior to any date of termination of this Lease or any of the
other Lease Documents shall survive such termination.
106
<PAGE> 118
If any provision of this Lease or any of the other Lease Documents or any
application thereof shall be invalid or unenforceable, the remainder of this
Lease or the other applicable Lease Document, as the case may be, and any other
application of such term or provision shall not be affected thereby.
Notwithstanding the foregoing, it is the intention of the parties hereto that if
any provision of any of this Lease is capable of two (2) constructions, one of
which would render the provision void and the other of which would render the
provision valid, then such provision shall be construed in accordance with the
construction which renders such provision valid.
If any late charges provided for in any provision of this Lease or any of
the other Lease Documents are based upon a rate in excess of the maximum rate
permitted by applicable law, the parties agree that such charges shall be fixed
at the maximum permissible rate.
The Lessee waives all presentments, demands for performance, notices of
nonperformance, protests, notices of protest, notices of dishonor, and notices
of acceptance and waives all notices of the existence, creation, or incurring of
new or additional obligations, except as to all of the foregoing as expressly
provided for herein.
24.13 INTENTION OF PARTIES. The Lessor and the Lessee acknowledge and
agree that this Lease is intended to be a lease of the Leased Property and is in
no way intended to be a mortgage encumbering the Leased Property.
24.14 APPRAISAL.
24.14.1 DESIGNATION OF APPRAISERS. In the event that it becomes
necessary to determine the Fair Market Value of the Leased Property for
any purpose of this Lease, the party required or permitted to give notice
of such required determination shall include in the notice the name of a
Person selected to act as appraiser on its behalf. Within ten (10) days
after receipt of any such notice, the Lessor (or the Lessee, as the case
may be) shall by notice to the Lessee (or the Lessor, as the case may be)
appoint a second Person as appraiser on its behalf.
24.14.2 APPRAISAL PROCESS. The appraisers thus appointed, each of
whom must be a member of the American Institute of Real Estate Appraisers
(or any successor organization thereto), shall, within forty-five (45)
days after the date of the notice appointing the first appraiser, proceed
to appraise the Leased Property to determine the Fair Market Value of the
Leased Property as of the relevant date (giving effect to the impact, if
any, of inflation from the date of their decision to the relevant date);
provided, however, that if only one appraiser shall have been so
appointed, or if two appraisers shall have been so appointed but only one
such appraiser shall have made such determination within fifty (50) days
after the making of the Lessee's or the Lessor's request, then the
determination of such appraiser shall be final and binding upon the
parties. If two appraisers shall have been appointed and shall have made
their determinations within the respective requisite periods set forth
above and if the difference between the amounts so determined shall not
exceed ten per cent (10%) of the lesser of such amounts, then the Fair
Market Value of the Leased Property shall be an
107
<PAGE> 119
amount equal to fifty percent (50%) of the sum of the amounts so
determined. If the difference between the amounts so determined shall
exceed ten percent (10%) of the lesser of such amounts, then such two
appraisers shall have twenty (20) days to appoint a third appraiser, but
if such appraisers fail to do so, then either party may request the
American Arbitration Association or any successor organization thereto to
appoint an appraiser within twenty (20) days of such request, and both
parties shall be bound by any appointment so made within such twenty (20)
day period. If no such appraiser shall have been appointed within such
twenty (20) days or within ninety (90) days of the original request for a
determination of Fair Market Value of the Leased Property, whichever is
earlier, either the Lessor or the Lessee may apply to any court having
jurisdiction to have such appointment made by such court. Any appraiser
appointed by the original appraisers, by the American Arbitration
Association or by such court shall be instructed to determine the Fair
Market Value of the Leased Property within thirty (30) days after
appointment of such Appraiser. The determination of the appraiser which
differs most in terms of dollar amount from the determinations of the
other two appraisers shall be excluded, and fifty percent (50%) of the sum
of the remaining two determinations shall be final and binding upon the
Lessor and the Lessee as the Fair Market Value of the Leased Property.
24.14.3 SPECIFIC ENFORCEMENT AND COSTS. This provision for
determination by appraisal shall be specifically enforceable to the extent
such remedy is available under applicable law, and any determination
hereunder shall be final and binding upon the parties except as otherwise
provided by applicable law. The Lessor and the Lessee shall each pay the
fees and expenses of the appraiser appointed by it and each shall pay
one-half of the fees and expenses of the third appraiser and one-half of
all other cost and expenses incurred in connection with each appraisal.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
108
<PAGE> 120
IN WITNESS WHEREOF, the parties have caused this Facility Lease Agreement
to be executed and attested by their respective officers thereunto duly
authorized.
WITNESSES: LESSEE:
ALS LEASING, INC., a Delaware
corporation
By:
/s/ Lesley Yanak /s/ David M. Boitano
- ------------------------------ ----------------------------------
Name: David M. Boitano, Vice President
/s/ Lesley Garban
- ------------------------------
Name:
WITNESSES: LESSOR:
MEDITRUST ACQUISITION
CORPORATION III, a Delaware
corporation
/s/ Luis Areiy Richards By:/s/ Michael F. Bushee
- ------------------------------ ----------------------------------
Name: Name:
Title:
/s/ Partricia Howell
- ------------------------------
Name:
/s/ [Illegible signatory]
- ------------------------------
Name:
[signature page for Hamilton House of Delta I and WovenHearts of Delta II,
Michigan]
109
<PAGE> 121
EXHIBIT A
PROPERTY DESCRIPTION
HAMILTON HOUSE OF DELTA I
7235 DELTA COMMERCE DRIVE
LANSING, EATON COUNTY, MI 48917
WOVENHEARTS OF DELTA II
7323 DELTA COMMERCE DRIVE
LANSING, EATON COUNTY, MI 48917
The land which is situated in the County of Eaton, Township of Delta, State of
Michigan, is described as follows:
PARCEL A (Hamilton House of Delta I):
A part of Lot 6 of DELTA COMMERCE PARK SUBDIVISION, a Subdivision located in the
Southwest 1/4 of Section 10, Town 4 North, Range 3 West, Delta Township, Eaton
County, Michigan, as recorded in Liber 11, pages 72 through 75 of Plats, Eaton
County Records, being more particularly described as: Beginning at the Southeast
corner of said Lot 6; thence South 89 degrees 30 minutes 33 seconds West 518.96
feet along the South line of said Lot 6; thence North 00 degrees 29 minutes 27
seconds West, 60.81 feet; thence North 23 degrees 53 minutes 44 seconds East,
334.86 feet to a point on the South right-of-way line of Delta Commerce Drive,
the following two courses being along said South right-of-way: (1) South 64
degrees 45 minutes 27 seconds East, 111.36 feet and (2) along a curve to the
right 434.94 feet; said curve having a radius of 546.15 feet, central angle of
45 degrees 37 minutes 41 seconds and a long chord bearing of South 41 degrees 56
minutes 36 seconds East 423.53 feet to the point of beginning.
PARCEL B (WovenHearts of Delta II):
A part of Lot 6 of DELTA COMMERCE PARK SUBDIVISION, a Subdivision located in the
Southwest 1/4 of Section 10, Town 4 North, Range 3 West, Delta Township, Eaton
County, Michigan, as recorded in Liber 11, pages 72 through 75 of Plats, Eaton
County Records, being more particularly described as: Commencing at the
Southeast corner of said Lot 6; thence South 89 degrees 30 minutes 33 seconds
West, 518.96 feet along the South line of said Lot 6 to the point of beginning;
thence continuing along said line South 89 degrees 30 minutes 33 seconds West,
153.46 feet; thence North 00 degrees 29 minutes 27 seconds West, 471.32 feet to
a point on the South line of Delta Commerce Drive; thence the following two
courses being along said South right-of-way: (1) along a curve to the right
187.10 feet, said curve having a radius of 548.49 feet, central angle of 19
degrees 32 minutes 43 seconds and a long chord bearing of South 74 degrees 31
minutes 48 seconds East, 186.20 feet, and (2) South 64 degrees 45 minutes 27
seconds East, 125.11 feet; thence South 23 degrees 53 minutes 44 seconds West,
334.86 feet; thence South 00 degrees 29 minutes 27 seconds East, 60.81 feet to
the point of beginning.
110
<PAGE> 122
EXHIBIT B
PERMITTED ENCUMBRANCES
1. All matters pertaining to the Leased Property and enumerated on Schedule B
(Part I and Part II) of the Lessor's Owner's Title Insurance Policy issued
by Lawyers Title Insurance Corporation and effective as of the date
hereof.
111
<PAGE> 123
EXHIBIT C
LIST OF SHAREHOLDERS
1. Alternative Living Services, Inc. - sole shareholder of the Lessee
112
<PAGE> 124
EXHIBIT D
NATIONAL ACCOUNTS AND LOCAL DISCOUNTS
None
113
<PAGE> 125
EXHIBIT E
OPEN COST REPORTS
None
114
<PAGE> 126
EXHIBIT F
RATE LIMITATIONS
None
115
<PAGE> 127
EXHIBIT G
FREE CARE REQUIREMENTS
None
116
<PAGE> 128
EXHIBIT H
CURRENT RATES
Hamilton House of Delta I
Admission Fee: $3,000
Companion Suite: $2,850
Private Suite: $3,525
WovenHearts of Delta II
Admission Fee: $ 500
Companion Suite: $1,800
Private Single: $2,395
Private Deluxe: $3,200
117
<PAGE> 129
EXHIBIT I
RENT COVERAGE RATIO CALCULATION
See Exhibit D to Agreement Regarding Related Lease Transactions.
118
<PAGE> 130
EXHIBIT J
[INTENTIONALLY OMITTED]
119
<PAGE> 131
SCHEDULE 11.5
1. Any assisted living facility (or other facility operated for any use
included within the definition of the Primary Intended Use), center, unit or
program (or any such activity or any related activity competitive therewith)
which is in whole or in part, owned, operated, leased, managed or under
construction by Lessee, Guarantor or any Affiliate thereof or which Lessee,
Guarantor or any Affiliate thereof has a right to acquire within a two (2) year
period, which is either in existence or under construction as of the end of the
seventh (7th) Lease Year.
<PAGE> 132
EXHIBIT 10.8
SCHEDULE OF FACILITY LEASES
WHICH ARE SUBSTANTIALLY IN THE FORM OF LEASE
ATTACHED AS EXHIBIT 10.7
<TABLE>
<CAPTION>
ORIGINAL
LEASING MEDITRUST NO. OF UNITS
FACILITY NAME LOCATION COMMITMENT FEE INVESTMENT BASE RENT IN FACILITY
------------- -------- -------------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C>
Hamilton House of Grand Blanc (I) Grand Blanc $31,867.00 Total $5,583,530.00 * 46
Township, for both Grand
Genesee County, Blanc facilities
Michigan
Wynwood of Grand Blanc (II) Grand Blanc $7,603,158.00 * 66
Township,
Genesee County,
Michigan
Hamilton House of Troy (I) Troy, $33,891.00 Total $5,694,528.00 * 46
Oakland County, for both Troy
Michigan facilities
Wynwood of Troy (II) Troy, $7,694,620.00 * 66
Oakland County,
Michigan
</TABLE>
* Confidential portions omitted and filed separately with the Commission.
<PAGE> 1
EXHIBIT 10.8
SCHEDULE OF FACILITY LEASES
WHICH ARE SUBSTANTIALLY IN THE FORM OF LEASE
ATTACHED AS EXHIBIT 10.7
<TABLE>
<CAPTION>
ORIGINAL
LEASING MEDITRUST NO. OF UNITS
FACILITY NAME LOCATION COMMITMENT FEE INVESTMENT BASE RENT IN FACILITY
------------- -------- -------------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C>
Hamilton House of Grand Blanc (I) Grand Blanc $31,867.00 Total $5,583,530.00 * 46
Township, for both Grand
Genesee County, Blanc facilities
Michigan
Wynwood of Grand Blanc (II) Grand Blanc $7,603,158.00 * 66
Township,
Genesee County,
Michigan
Hamilton House of Troy (I) Troy, $33,891.00 Total $5,694,528.00 * 46
Oakland County, for both Troy
Michigan facilities
Wynwood of Troy (II) Troy, $7,694,620.00 * 66
Oakland County,
Michigan
</TABLE>
* Confidential portions omitted and filed separately with the Commission.
<PAGE> 1
EXHIBIT 10.9
SIXTH AMENDMENT TO AMENDED AND
RESTATED AGREEMENT REGARDING RELATED LEASE TRANSACTIONS,
AMENDED AND RESTATED ENVIRONMENTAL INDEMNITY
AGREEMENT AND AMENDED AND RESTATED
AFFILIATED PARTY SUBORDINATION AGREEMENT
MEDITRUST ACQUISITION CORPORATION III/ALS LEASING, INC.
($100 MILLION MEDITRUST INVESTMENT)
This SIXTH AMENDMENT (this "Amendment") to the Amended and Restated
Agreement Regarding Lease Transactions dated as of April 30, 1997 (as amended
and as may be amended from time to time the "Agreement Regarding Related Lease
Transactions"), to the Amended and Restated Environmental Indemnity Agreement
dated as of April 30, 1997 (as amended and as may be amended from time to time
the "Environmental Indemnity Agreement") and to the Amended and Restated
Affiliated Party Subordination Agreement dated as of April 30, 1997 (as amended
and as may be amended from time to time the "Affiliated Party Subordination
Agreement") is made as of the 4th day of September, 1998 by and among (I) ALS
LEASING, INC., a Delaware corporation, having its principal place of business
at 450 North Sunnyslope Road, Suite 300, Brookfield, Wisconsin 53005
("Lessee"); (II) ALTERNATIVE LIVING SERVICES, INC., a Delaware corporation,
having its principal place of business at 450 North Sunnyslope Road, Suite 300,
Brookfield, Wisconsin 53005 ("ALS"); and (III) MEDITRUST ACQUISITION
CORPORATION III, a Delaware corporation, having its principal place of business
c/o Meditrust Mortgage Investments, Inc., 197 First Avenue, Needham Heights,
Massachusetts 02194 ("Meditrust").
W I T N E S S E T H:
WHEREAS, Lessor and Lessee have entered into certain Acquisition
Facility Leases of even date relating to four (4) additional Group Two
Acquisition Facilities; and
WHEREAS, the parties desire to amend EXHIBIT B to the Agreement
Regarding Related Lease Transactions to add the four (4) additional Group Two
Acquisition Facilities, to amend EXHIBIT C to the Agreement Regarding Related
Lease Transactions to add the additional Group Two Acquisition Facilities, to
amend EXHIBIT A to the Environmental Indemnity Agreement to add environmental
site assessment reports pertaining to each of the additional Group Two
Acquisition Facilities, to amend Schedule A to the Affiliated Party
Subordination Agreement to add additional managers for each of the additional
Group Two Acquisition Facilities, and to otherwise amend the Agreement
Regarding Related Lease Transactions, the Environmental Indemnity Agreement and
the Affiliated Party Subordination Agreement, as provided herein.
<PAGE> 2
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Defined Terms. Initial capitalized terms used herein and not
otherwise defined shall have the meanings respectively ascribed to such terms
in the Agreement Regarding Related Lease Transactions.
2. EXHIBIT B to Agreement Regarding Related Lease Transactions.
EXHIBIT B to the Agreement Regarding Related Lease Transactions is hereby
deleted in its entirety, and EXHIBIT B attached hereto is substituted therefor.
3. EXHIBIT C to Agreement Regarding Related Lease Transactions.
EXHIBIT C to the Agreement Regarding Related Lease Transactions is hereby
deleted in its entirety, and EXHIBIT C attached hereto is substituted therefor.
4. EXHIBIT A to the Environmental Indemnity Agreement. EXHIBIT A to
the Environmental Indemnity Agreement is hereby deleted in its entirety, and
EXHIBIT A attached hereto is substituted therefor.
5. Schedule A, List of Managers, to Affiliated Party Subordination
Agreement. The provisions of the Affiliated Party Subordination Agreement are
hereby incorporated herein by this reference. Attached hereto is an Addendum to
Schedule A, List of Managers, to the Affiliated Party Subordination Agreement.
By executing a copy of this Amendment, the parties listed on such Addendum are
included in the definition of the "Manager" and hereby join in the Affiliated
Party Subordination Agreement and consent to the provisions thereof.
6. Miscellaneous. The parties hereto acknowledge and agree that,
except as specifically amended by the terms of this Amendment, all terms,
covenants and provisions of the Agreement Regarding Related Lease Transactions,
the Environmental Indemnity Agreement and the Affiliated Party Subordination
Agreement are hereby ratified and confirmed and shall remain in full force and
effect. From and after the date hereof, all references to the "Agreement
Regarding Related Lease Transactions," the "Environmental Indemnity Agreement,"
and the "Affiliated Party Subordination Agreement" in any of the Group One
Acquisition Transaction Documents or the Group Two Acquisition Transaction
Documents, whether any such Group One or Group Two Acquisition Transaction
Documents has been executed prior to or contemporaneously with this Amendment,
shall be deemed to refer to the Agreement Regarding Related Lease Transactions,
the Environmental Indemnity Agreement and the Affiliated Party Subordination
Agreement as amended hereby and as may be amended from time to time.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 3
IN WITNESS WHEREOF, the parties have executed this Sixth Amendment to
Amended and Restated Agreement Regarding Related Lease Transactions, Amended
and Restated Environmental Indemnity Agreement and Amended and Restated
Affiliated Party Subordination Agreement under seal as of the day and year above
written.
WITNESSES: LESSEE:
ALS LEASING, INC.
/s/ LESLEY YANAK
- ------------------------------ By: /s/ DAVID M. BOITANO
Name: Lesley Yanak ---------------------------------
David M. Boitano, Vice President
/s/ LESLEY GARBAR
- ------------------------------
Name: Lesley Garbar
LESSOR:
MEDITRUST ACQUISITION
CORPORATION III
/s/
- ------------------------------- By: /s/ MICHAEL F. BUSHEE
Name: ---------------------------------
Name: Michael F. Bushee
Title: Chief Operating Officer
/s/ PATRICIA HOWELL
- -------------------------------
Name: Patricia Howell
GUARANTOR:
ALTERNATIVE LIVING SERVICES, INC.
/s/ LESLEY YANAK
- ------------------------------- By: /s/ DAVID M. BOITANO
Name: ---------------------------------
David M. Boitano, Vice President
/s/ LESLEY GARBAR
- -------------------------------
Name:
<PAGE> 4
[09/04/98]
EXHIBIT B
TO
THE AMENDED AND RESTATED AGREEMENT REGARDING RELATED LEASE TRANSACTIONS
GROUP TWO ACQUISITION FACILITIES
1. Liberty Commons, 100 Flume Road, Manlius, Onondaga County, New York
13104
2. WovenHearts of Menomonie, 820 17th Avenue, Menomonie, Dunn County,
Wisconsin 54751
3. WovenHearts of New Richmond, 1310 Circle Pine Drive, New Richmond, St.
Croix County, Wisconsin 54017
4. WovenHearts of Wisconsin Rapids, 2711 12th Street, South, Wisconsin
Rapids, Wood County, Wisconsin 54494
5. WovenHearts of Plymouth, 112 South River Boulevard, Plymouth,
Sheboygan County, Wisconsin 53073
6. StoneCroft Manor, 1014 West Broadway, Medford, Taylor County,
Wisconsin 54451
7. The Evergreens, 2831 Maple Drive, Plover, Portage County, Wisconsin
54467
8. The Evergreens South, 2841 Maple Drive, Plover, Portage County,
Wisconsin 54467
9. The Pines, 210 West Campus Drive, Wausau, Marathon County, Wisconsin
54401
10. The Pines North, 220 West Campus Drive, Wausau, Marathon County,
Wisconsin 54401
11. The Oaks, 2941 16th Street South, Wisconsin Rapids, Wood County,
Wisconsin 54494
12. WovenHearts of Davison, 432 E. Clark Street, Davison, Genesee County,
Michigan 48423
13. WovenHearts of Kenosha, 3109 12th Street, Kenosha, Kenosha County,
Wisconsin 53144
14. Hamilton House of Delta I, 7235 Delta Commerce Drive, Lansing, Eaton
County, Michigan 48917
15. WovenHearts of Delta II, 7323 Delta Commerce Drive, Lansing, Eaton
County, Michigan 48917
16. Hamilton House of Grand Blanc I, 5130 Baldwin Road, Holly, Genesee
County, Michigan 48442-9306
<PAGE> 5
17. Wynwood of Grand Blanc II, 5080 Baldwin Road, Holly, Genesee County,
Michigan 48442-9306
18. Hamilton House of Troy I, 4900 Northfield Parkway, Troy, Oakland
County, Michigan 48098
19. Wynwood of Troy II, 4850 Northfield Parkway, Troy, Oakland County,
Michigan 48098
<PAGE> 6
EXHIBIT C
MEDITRUST/ALS FACILITIES
KANSAS
1. Sterling House of Wichita, Wichita, Kansas
2. Sterling House of Derby, Derby, Kansas
3. Sterling House of Wellington, Wellington, Kansas
4. Sterling House of Hays, Hays, Kansas
5. Sterling House of Abilene II, Abilene, Kansas
OKLAHOMA
6. Sterling House of Bethany, Bethany, Oklahoma
7. Sterling House of Bartlesville II, Bartlesville, Oklahoma
FLORIDA
8. Sterling House of Tequesta, Tequesta, Florida
9. Sterling House of West Melbourne, West Melbourne, Florida
10. Sterling House of Stuart, Stuart, Florida
11. Sterling House of Vero Beach, Vero Beach, Florida
12. Sterling House of Leesburg, Leesburg, Florida
13. Sterling House of Port Orange, Port Orange, Florida
14. Sterling House of Ocala, Ocala, Florida
15. Sterling House of Deland, Deland, Florida
16. Sterling House of Ormond Beach, Ormond Beach, Florida
17. Sterling House of West Melbourne II, West Melbourne, Florida
18. Clare Bridge of Fort Myers, Fort Myers, Florida
19. Clare Bridge of Tampa, Tampa, Florida
20. Clare Bridge of Jacksonville, Jacksonville, Florida
21. Sterling House of Tequesta ll, Tequesta, Florida
TEXAS
22. Sterling House of Temple, Temple, Texas
23. Sterling House of Carrollton, Carrollton, Texas
24. Sterling House of Kerrville, Kerrville, Texas
25. Sterling House of San Antonio-Whitby Road, San Antonio, Texas
26. Sterling House of New Braunfels, New Braunfels, Texas
27. Sterling House of Lancaster, Lancaster, Texas
<PAGE> 7
OHIO
28. Sterling House of Bowling Green, Bowling Green, Ohio
29. Sterling House of Englewood, Englewood, Ohio
30. Sterling House of Barberton, Barberton, Ohio
31. Sterling House of Mansfield, Mansfield, Ohio
32. Sterling House of Marion, Marion, Ohio
WISCONSIN
33. WovenHearts of Brown Deer, Brown Deer, Wisconsin
34. WovenHearts of Sussex, Sussex, Wisconsin
35. WovenHearts of Onalaska, Onalaska, Wisconsin
36. WovenHearts of Menomonie, Menomonie, Wisconsin
37. WovenHearts of New Richmond, New Richmond, Wisconsin
38. WovenHearts of Wisconsin Rapids, Wisconsin Rapids, Wisconsin
39. WovenHearts of Plymouth, Plymouth, Wisconsin
40. The Evergreens, Plover, Wisconsin
41. The Evergreens South, Plover, Wisconsin
42. StoneCroft Manor, Medford, Wisconsin
43. The Pines, Wausau, Wisconsin
44. The Pines North, Wausau, Wisconsin
45. The Oaks, Wisconsin Rapids, Wisconsin
46. WovenHearts of Eau Claire, Eau Claire, Wisconsin
47. WovenHearts of Manitowoc, Manitowoc, Wisconsin
48. WovenHearts of Middleton, Middleton, Wisconsin
49. WovenHearts of Neenah, Neenah, Wisconsin
50. WovenHearts of Oshkosh, Oshkosh, Wisconsin
51. WovenHearts of Sun Prairie, Sun Prairie, Wisconsin
52. WovenHearts of Kenosha, Kenosha, Wisconsin
MICHIGAN
53. Hamilton House of Farmington Hills I, Farmington Hills, Michigan
54. Hamilton House of Farmington Hills II, Farmington Hills, Michigan
55. Hamilton House of Ann Arbor, Ann Arbor, Michigan
56. Hamilton House of Utica, Utica, Michigan
57. Wynwood of Lansing, Lansing, Michigan
58. WovenHearts of Davison, Davison, Michigan
59. Hamilton House of Delta I, Lansing, Michigan
60. WovenHearts of Delta II, Lansing, Michigan
61. Hamilton House of Grand Blanc I, Holly, Michigan
62. Wynwood of Grand Blanc II, Holly, Michigan
63. Hamilton House of Troy I, Troy, Michigan
64. Wynwood of Troy II, Troy, Michigan
<PAGE> 8
PENNSYLVANIA
65. Northampton Manor, Richboro, Pennsylvania
66. Clare Bridge of Lower Makefield, Yardley, Pennsylvania
67. Clare Bridge of Montgomery and Wynwood of Montgomery, North Wales,
Pennsylvania
NEW YORK
68. Liberty Commons, Manlius, New York
MINNESOTA
69. WovenHearts of Faribault, Faribault, Minnesota
70. WovenHearts of Mankato, Mankato, Minnesota
71. WovenHearts of Owatonna, Owatonna, Minnesota
72. WovenHearts of Sauk Rapids, Sauk Rapids, Minnesota
73. WovenHearts of Willmar, Willmar, Minnesota
74. WovenHearts of Winona, Winona, Minnesota
NORTH CAROLINA
75. Clare Bridge of Charlotte, Charlotte, North Carolina
76. Wynwood of Charlotte, Charlotte, North Carolina
77. Clare Bridge of Greensboro, Greensboro, North Carolina
78. Wynwood of Greensboro, Greensboro, North Carolina
SOUTH CAROLINA
79. Clare Bridge of Charleston, Mt. Pleasant, South Carolina
80. Clare Bridge of Columbia, Irmo, South Carolina
[TO BE SUPPLEMENTED BY AMENDMENTS TO THIS AGREEMENT]
<PAGE> 9
[09/04/98]
EXHIBIT A
TO
THE AMENDED AND RESTATED ENVIRONMENTAL INDEMNITY AGREEMENT
ENVIRONMENTAL SITE ASSESSMENT REPORTS
1. Phase I Environmental Site Assessment dated November 26, 1996 prepared
by ATEC Associates, Inc. respecting the property known as Clare Bridge
of Lower Makefield, 600 Township Line Road, Yardley, Bucks County,
Pennsylvania.
2. Phase I Environmental Site Assessment dated November 26, 1996 prepared
by ATEC Associates, Inc. respecting the property known as Wynwood of
Northampton Manor, 65 Newtown Richboro Road, Richboro, Bucks County,
Pennsylvania.
3. Phase I Environmental Site Assessment dated November 15, 1996 prepared
by ATEC Associates, Inc. respecting the property known as Clare Bridge
of Montgomery, 1089 Horsham Road, North Wales, Montgomery County,
Pennsylvania.
4. Phase I Environmental Site Assessment dated November 19, 1996 prepared
by ATEC Associates, Inc. respecting the property known as WovenHearts
of Onalaska, 949 10th Avenue North, Onalaska, La Crosse County,
Wisconsin.
5. Phase I Environmental Site Assessment dated November 25, 1996 prepared
by ATEC Associates, Inc. respecting the property known as Hamilton
House of Ann Arbor, 750 West Eisenhower Parkway, Ann Arbor, Washtenaw
County, Michigan.
6. Phase I Environmental Site Assessment dated November 14, 1996 prepared
by ATEC Associates, Inc. respecting the property known as Clare Bridge
of Farmington, Hamilton House I, 27950 Drake Road, Farmington Hills,
Oakland County, Michigan.
7. Phase I Environmental Site Assessment dated November 14, 1996 prepared
by ATEC Associates, Inc. respecting the property known as Clare Bridge
of Farmington, Hamilton House II, 27900 Drake Road, Farmington Hills,
Oakland County, Michigan.
8. Phase I Environmental Site Assessment dated December 3, 1996 prepared
by ATEC Associates, Inc. respecting the property known as Hamilton
House of Utica, 45959 North Pointe Boulevard, Utica, Macomb County,
Michigan.
9. Phase I Environmental Site Assessment dated November 14, 1996 prepared
by ATEC Associates, Inc. respecting the property known as WovenHearts
of Brown Deer, 4015 West Woodale Avenue, Brown Deer, Milwaukee County,
Wisconsin.
<PAGE> 10
10. Phase I Environmental Site Assessment dated December 6, 1996 prepared
by ATEC Associates, Inc. respecting the property known as WovenHearts
of Sussex, W240 N6351 Maple Avenue, Sussex, Waukesha County,
Wisconsin.
11. Phase I Environmental Site Assessment dated December 3, 1996 prepared
by ATEC Associates, Inc. respecting the property known as Clare Bridge
of Tampa, 1513 West Fletcher Avenue, Tampa, Hillsborough County,
Florida.
12. Phase I Environmental Site Assessment dated December 6, 1996 prepared
by ATEC Associates, Inc. respecting the property known as Clare Bridge
of Ft. Myers, 13565 American Colony Boulevard, Ft. Myers, Lee County,
Florida
13. Phase I Environmental Site Assessment and Limited Subsurface
Investigation, dated April 30, 1997, prepared by ATEC Associates, Inc.
respecting the property known as Liberty Commons, 100 Flume Road,
Manlius, Onondaga County, New York.
14. Phase I Environmental Site Assessment dated November 19, 1996 prepared
by ATEC Associates, Inc. respecting property known as WovenHearts of
Menomonie, 820 17th Avenue, Menomonie, Dunn County, Wisconsin.
15. Phase I Environmental Site Assessment dated November 26, 1996 prepared
ATEC Associates, Inc. respecting property known as WovenHearts of New
Richmond, 1310 Circle Pine Drive, New Richmond, St. Croix County,
Wisconsin.
16. Phase I Environmental Site Assessment dated November 13, 1996,
prepared by ATEC Associates, Inc., respecting property known as
WovenHearts of Wisconsin Rapids, 2711 12th Street South, Wisconsin
Rapids, Sheboygen County, Wisconsin.
17. Phase I Environmental Site Assessment dated May 19, 1997, prepared by
ATEC Associates, Inc., respecting property known as WovenHearts of
Plymouth, 112 South River Boulevard, Plymouth, Wisconsin.
18. Phase I Environmental Site Assessment dated December 13, 1996 and
updated November 7, 1997 prepared by ATEC Associates, Inc. respecting
property known as StoneCroft Manor, 1401 West Broadway, Medford,
Taylor County, Wisconsin.
19. Phase I Environmental Site Assessment dated December 13, 1996 and
updated November 7, 1997 prepared by ATEC Associates, Inc. respecting
property known as The Evergreens, 2831 Maple Drive, Plover, Portage
County, Wisconsin.
20. Phase I Environmental Site Assessment dated December 13, 1996 and
updated November 7, 1997 prepared by ATEC Associates, Inc. respecting
property known as The Evergreens South, 2841 Maple Drive, Plover,
Portage County, Wisconsin.
<PAGE> 11
21. Phase I Environmental Site Assessment dated December 13, 1996 and
updated November 7, 1997 prepared by ATEC Associates, Inc. respecting
property known as The Pines, 210 West Campus Drive, Wausau, Marathon
County, Wisconsin.
22. Phase I Environmental Site Assessment dated December 13, 1996 and
updated November 7, 1997 prepared by ATEC Associates, Inc. respecting
property known as the Pines North, 220 West Campus Drive, Wausau,
Wisconsin.
23. Phase I Environmental Site Assessment dated December 20, 1996 and
updated November 7, 1997 prepared by ATEC Associates, Inc. respecting
property known as The Oaks, 2941 16th Street South, Wisconsin Rapids,
Wood County, Wisconsin.
24. Phase I Environmental Site Assessment dated March 25, 1998, prepared
by Giles Engineering Associates, Inc. respecting property known as
WovenHearts of Kenosha, 3109 12th Street, Kenosha, Kenosha County,
Wisconsin.
25. Phase I Environmental Site Assessment dated March 25, 1998, prepared
by Giles Engineering Associates, Inc. respecting property known as
WovenHearts of Davison, 432 East Clark Street, Davison, Genesee
County, Michigan.
26. Phase I Environmental Site Assessment dated April 20, 1998, prepared
by Giles Engineering Associates, Inc. respecting property known as
Hamilton House of Delta I, 7235 Delta Commerce Drive, Lansing, Eaton
County, Michigan.
27. Phase I Environmental Site Assessment dated April 20, 1998, prepared
by Giles Engineering Associates, Inc. respecting property known as
WovenHearts of Delta II, 7323 Delta Commerce Drive, Lansing, Eaton
County, Michigan.
28. Phase I Environmental Site Assessment dated April 20, 1998, prepared
by Giles Engineering Associates, Inc. respecting property known as
Hamilton House of Grand Blanc I, Holly, Genesee County, Michigan.
29. Phase I Environmental Site Assessment dated April 20, 1998, prepared
by Giles Engineering Associates, Inc. respecting property known as
Wynwood of Grand Blanc II, Holly, Genesee County, Michigan.
30. Phase I Environmental Site Assessment dated April 20, 1998, prepared
by Giles Engineering Associates, Inc. respecting property known as
Hamilton House of Troy I, Troy, Oakland County, Michigan.
31. Phase I Environmental Site Assessment dated April 20, 1998, prepared
by Giles Engineering Associates, Inc. respecting property known as
Wynwood of Troy II, Troy, Oakland County, Michigan.
<PAGE> 12
[TO BE SUPPLEMENTED FROM TIME TO TIME AS ADDITIONAL ASSISTED LIVING FACILITIES
ARE ADDED TO EXHIBITS A OR B OF THE AMENDED AND RESTATED AGREEMENT REGARDING
RELATED LEASE TRANSACTIONS]
<PAGE> 13
ADDENDUM TO SCHEDULE A
To Amended and Restated Affiliated Party Subordination Agreement
LIST OF MANAGERS
1. Alternative Living Services, Inc., a Delaware corporation.
<PAGE> 1
EXHIBIT 10.10
SEVENTH AMENDMENT
TO
AGREEMENT REGARDING RELATED LEASE TRANSACTIONS
MEDITRUST ACQUISITION CORPORATION III/ALS LEASING, INC.
($150,000,000 MEDITRUST INVESTMENT)
Reference is hereby made to the Agreement Regarding Related Lease
Transactions ($150,000,000 Meditrust Investment) (the "Related Transactions
Agreement"), dated as of November 21, 1997, by and among (i) ALS LEASING, INC.,
a Delaware Corporation, having its principal place of business at 450 North
Sunnyslope Road, Suite 300, Brookfield, Wisconsin 53005 ("Lessee"); (ii)
ALTERNATIVE LIVING SERVICES, INC., a Delaware Corporation, having its principal
place of business at 450 North Sunnyslope Road, Suite 300, Brookfield,
Wisconsin 53005 ("ALS"); and (iii) MEDITRUST ACQUISITION CORPORATION III, a
Delaware corporation, having a principal place of business of c/o Meditrust
Mortgage Investments, Inc., 197 First Avenue, Needham Heights, Massachusetts
02194 ( "Meditrust").
W I T N E S S E T H
WHEREAS, the parties desire to reflect that additional assisted living
facilities have become subject to the transactions between Meditrust and
Lessee.
NOW, THEREFORE, for good and valuable consideration the sufficiency
and receipt of which is hereby acknowledged, the parties hereto agree as
follows:
1. Exhibit D to the Related Transactions Agreement is hereby
deleted and the following new Exhibit D is substituted
therefor in order to reflect that Hamilton House of Grand
Blanc I, Holly, Michigan, Wynwood of Grand Blanc II, Holly,
Michigan, Hamilton House of Troy I, Troy, Michigan, and
Wynwood of Troy II, Troy, Michigan, have been added as
acquisition facilities to the transactions described in the
Related Transactions Agreement; and
2. Except as expressly modified above, the Related Transactions
Agreement, as previously amended, remains unchanged and in
full force and effect.
1
<PAGE> 2
IN WITNESS WHEREOF, the parties have executed this Seventh Amendment
to Agreement Regarding Related Lease Transactions under seal as of the 4th day
of September, 1998.
WITNESS:
ALS LEASING, INC., a Delaware corporation
/s/ LESLEY GARBAR
- ----------------------------- By: /s/ DAVID M. BOITANO
Name: Lesley Garbar --------------------------------------
Name: DAVID M. BOITANO
-------------------------------
Title: VICE PRESIDENT
------------------------------
WITNESS:
MEDITRUST ACQUISITIONS
CORPORATION III, a Delaware
corporation
/s/
- ----------------------------- By: /s/ MICHAEL F. BUSHEE
Name: --------------------------------------
Name: Michael F. Bushee
-------------------------------
Title: Chief Operating Officer
------------------------------
[Seventh Amendment of Agreement Regarding Related Lease Transactions]
2
<PAGE> 3
JOINDER AND CONSENT
Sterling House Corporation, being a guarantor of the various
obligations of ALS Leasing Inc. under one or more guaranties (collectively, the
"Guaranty") delivered to the Meditrust Parties in connection with the
Meditrust/ALS Transactions (as defined in the Related Transactions Agreement),
hereby (A) joins in this Seventh Amendment and consents to the provisions
hereof, and (B) agrees that it will not in any way raise any aspect of this
Seventh Amendment as a defense to any action or proceeding instituted by any of
the Meditrust Parties to enforce the Guaranty.
WITNESS: STERLING HOUSE CORPORATION,
a Kansas corporation
/s/ ALICE LASSLEY
- ------------------------------ By: /s/ R. GAIL KNOTT
Name: Alice Lassley -----------------------------
Name: R. Gail Knott
------------------------
Title: Vice President
-----------------------
JOINDER AND CONSENT
Alternative Living Services, Inc., being a guarantor of the various
obligations of the ALS Leasing Inc. under one or more guaranties (collectively,
the "Guaranty") delivered to the Meditrust Parties in connection with the
Meditrust/ALS Transactions (as defined in the Related Transactions Agreement),
hereby (A) joins in this Seventh Amendment and consents to the provisions
hereof, and (B) agrees that it will not in any way raise any aspect of this
Seventh Amendment as a defense to any action or proceeding instituted by any of
the Meditrust Parties to enforce the Guaranty.
WITNESS: ALTERNATIVE LIVING SERVICES,
INC., a Delaware corporation
/s/ LESLEY GARBAR
- ----------------------------- By: /s/ DAVID M. BOITANO
Name: Lesley Garbar --------------------------------------
Name: David M. Boitano
-------------------------------
Title: Vice President
------------------------------
3
<PAGE> 4
EXHIBIT D
MEDITRUST/ALS FACILITIES
KANSAS
1. Sterling House of Wichita, Wichita, Kansas
2. Sterling House of Derby, Derby, Kansas
3. Sterling House of Wellington, Wellington, Kansas
4. Sterling House of Hays, Hays, Kansas
5. Sterling House of Abilene II, Abilene, Kansas
OKLAHOMA
6. Sterling House of Bethany, Bethany, Oklahoma
7. Sterling House of Bartlesville II, Bartlesville, Oklahoma
FLORIDA
8. Sterling House of Tequesta, Tequesta, Florida
9. Sterling House of West Melbourne, West Melbourne, Florida
10. Sterling House of Stuart, Stuart, Florida
11. Sterling House of Vero Beach, Vero Beach, Florida
12. Sterling House of Leesburg, Leesburg, Florida
13. Sterling House of Port Orange, Port Orange, Florida
14. Sterling House of Ocala, Ocala, Florida
15. Sterling House of Deland, Deland, Florida
16. Sterling House of Ormond Beach, Ormond Beach, Florida
17. Sterling House of West Melbourne II, West Melbourne, Florida
18. Clare Bridge of Fort Myers, Fort Myers, Florida
19. Clare Bridge of Tampa, Tampa, Florida
20. Clare Bridge of Jacksonville, Jacksonville, Florida
21. Sterling House of Tequesta ll, Tequesta, Florida
TEXAS
22. Sterling House of Temple, Temple, Texas
23. Sterling House of Carrollton, Carrollton, Texas
24. Sterling House of Kerrville, Kerrville, Texas
25. Sterling House of San Antonio-Whitby Road, San Antonio, Texas
26. Sterling House of New Braunfels, New Braunfels, Texas
27. Sterling House of Lancaster, Lancaster, Texas
4
<PAGE> 5
OHIO
28. Sterling House of Bowling Green, Bowling Green, Ohio
29. Sterling House of Englewood, Englewood, Ohio
30. Sterling House of Barberton, Barberton, Ohio
31. Sterling House of Mansfield, Mansfield, Ohio
32. Sterling House of Marion, Marion, Ohio
WISCONSIN
33. WovenHearts of Brown Deer, Brown Deer, Wisconsin
34. WovenHearts of Sussex, Sussex, Wisconsin
35. WovenHearts of Onalaska, Onalaska, Wisconsin
36. WovenHearts of Menomonie, Menomonie, Wisconsin
37. WovenHearts of New Richmond, New Richmond, Wisconsin
38. WovenHearts of Wisconsin Rapids, Wisconsin Rapids, Wisconsin
39. WovenHearts of Plymouth, Plymouth, Wisconsin
40. The Evergreens, Plover, Wisconsin
41. The Evergreens South, Plover, Wisconsin
42. StoneCroft Manor, Medford, Wisconsin
43. The Pines, Wausau, Wisconsin
44. The Pines North, Wausau, Wisconsin
45. The Oaks, Wisconsin Rapids, Wisconsin
46. WovenHearts of Eau Claire, Eau Claire, Wisconsin
47. WovenHearts of Manitowoc, Manitowoc, Wisconsin
48. WovenHearts of Middleton, Middleton, Wisconsin
49. WovenHearts of Neenah, Neenah, Wisconsin
50. WovenHearts of Oshkosh, Oshkosh, Wisconsin
51. WovenHearts of Sun Prairie, Sun Prairie, Wisconsin
52. WovenHearts of Kenosha, Kenosha, Wisconsin
MICHIGAN
53. Hamilton House of Farmington Hills I, Farmington Hills, Michigan
54. Hamilton House of Farmington Hills II, Farmington Hills, Michigan
55. Hamilton House of Ann Arbor, Ann Arbor, Michigan
56. Hamilton House of Utica, Utica, Michigan
57. Wynwood of Lansing, Lansing, Michigan
58. WovenHearts of Davison, Davison, Michigan
59. Hamilton House of Delta I, Lansing, Michigan
60. WovenHearts of Delta II, Lansing, Michigan
61. Hamilton House of Grand Blanc I, Holly, Michigan
5
<PAGE> 6
62. Wynwood of Grand Blanc II, Holly, Michigan
63. Hamilton House of Troy I, Troy, Michigan
64. Wynwood of Troy II, Troy, Michigan
PENNSYLVANIA
65. Northampton Manor, Richboro, Pennsylvania
66. Clare Bridge of Lower Makefield, Yardley, Pennsylvania
67. Clare Bridge of Montgomery and Wynwood of Montgomery, North Wales,
Pennsylvania
NEW YORK
68. Liberty Commons, Manlius, New York
MINNESOTA
69. WovenHearts of Faribault, Faribault, Minnesota
70. WovenHearts of Mankato, Mankato, Minnesota
71. WovenHearts of Owatonna, Owatonna, Minnesota
72. WovenHearts of Sauk Rapids, Sauk Rapids, Minnesota
73. WovenHearts of Willmar, Willmar, Minnesota
74. WovenHearts of Winona, Winona, Minnesota
NORTH CAROLINA
75. Clare Bridge of Charlotte, Charlotte, North Carolina
76. Wynwood of Charlotte, Charlotte, North Carolina
77. Clare Bridge of Greensboro, Greensboro, North Carolina
78. Wynwood of Greensboro, Greensboro, North Carolina
SOUTH CAROLINA
79. Clare Bridge of Charleston, Mt. Pleasant, South Carolina
80. Clare Bridge of Columbia, Irmo, South Carolina
[TO BE SUPPLEMENTED BY AMENDMENTS TO THIS AGREEMENT]
6
<PAGE> 1
EXHIBIT 10.11
ELEVENTH AMENDMENT
TO
AGREEMENT REGARDING RELATED TRANSACTIONS
($50,000,000 COMBINED SALE/LEASEBACK)
Reference is hereby made to the Agreement Regarding Related
Transactions ($50,000,000 Combined Sale/Leaseback) (the "Related Transactions
Agreement"), dated as of September 30, 1997, as amended, by and among (i)
ASSISTED LIVING PROPERTIES, INC., a Kansas corporation having its principal
place of business c/o Sterling House Corporation, 453 South Webb Road, Suite
500, Wichita, Kansas 67207 ("ALP"), (ii) MEDITRUST COMPANY, LLC, a Delaware
limited liability company and successor by merger to MEDITRUST OF FLORIDA,
INC., a New York corporation ("MOF"), MEDITRUST OF TEXAS, INC., a Delaware
corporation ("MOT"), MEDITRUST OF KANSAS, INC., a Kansas corporation ("MOK"),
MEDITRUST OF OHIO, INC., a Delaware corporation ("MOO"), and (iii) MOC HEALTH
CARE COMPANY, a Delaware corporation ("MOC") all having a principal place of
business c/o Meditrust Mortgage Investments, Inc., 197 First Avenue, Needham
Heights, Massachusetts 02194 (collectively, MOF, MOK, MOT, MOO and MOC are
sometimes referred to herein as the "Meditrust Subsidiaries").
Capitalized terms used herein and not otherwise defined shall have the
meanings ascribed to such terms in the Related Transactions Agreement.
W I T N E S S E T H
WHEREAS, the parties desire to reflect that additional assisted living
facilities have become subject to the sale/leaseback transactions between
Meditrust, MOC and ALP; and
NOW, THEREFORE, for good and valuable consideration the sufficiency
and receipt of which is hereby acknowledged, the parties hereto agree as
follows:
1. Exhibit C to the Related Transactions Agreement is hereby
deleted and the following new Exhibit C is substituted
therefor in order to reflect that Hamilton House of Grand
Blanc I, Wynwood of Grand Blanc II, Hamilton House of Troy I,
and Wynwood of Troy II have been added as Acquisition
Facilities to the transactions described in the Related
Transactions Agreement.
2. Except as expressly modified above, the Related Transactions
Agreement, as previously amended, remains unchanged and in
full force and effect.
<PAGE> 2
IN WITNESS WHEREOF, the parties have executed this Eleventh Amendment
to Agreement Regarding Related Transactions under seal as of the 4th day of
September, 1998.
WITNESS: ALP
ASSISTED LIVING PROPERTIES, INC.,
a Kansas corporation
/s/ ALICE LASSLEY
- ------------------------------ By: /s/ R. GAIL KNOTT
Name: Alice Lassley -------------------------------------
Name: R. GAIL KNOTT
--------------------------------
Title: VICE PRESIDENT
-------------------------------
WITNESS: MEDITRUST:
MEDITRUST COMPANY LLC,
a Delaware limited liability company
/s/
- ----------------------------- By: /s/ MICHAEL F. BUSHEE
Name: --------------------------------------
Name: MICHAEL F. BUSHEE
-------------------------------
Title: CHIEF OPERATING OFFICER
------------------------------
WITNESS: MOC HEALTHCARE COMPANY,
a Delaware corporation
/s/ JUDITH H. HUBBARD
- ----------------------------- By: /s/ MICHAEL J. BOHNEN
Name: Judith H. Hubbard --------------------------------------
Name: MICHAEL J. BOHNEN
-------------------------------
Title: SECRETARY
------------------------------
2
<PAGE> 3
JOINDER AND CONSENT
Alternative Living Services, Inc., being a guarantor of the various
obligations of the ALP Parties under one or more guaranties (collectively, the
"Guaranty") delivered to the Meditrust Parties in connection with the
Meditrust/ALP Transactions (as defined in the Related Transactions Agreement),
hereby (a) joins in this Eleventh Amendment and consents to the provisions
hereof, and (b) agrees that it will not in any way raise any aspect of this
Eleventh Amendment as a defense to any action or proceeding instituted by any
of the Meditrust Parties to enforce the Guaranty.
WITNESS: ALTERNATIVE LIVING SERVICES,
INC., a Delaware corporation
/s/ LESLEY GARBAR
- ----------------------------- By: /s/ DAVID M. BOITANO
Name: Lesley Garbar --------------------------------------
Name: David M. Boitano
-------------------------------
Title: Vice President
------------------------------
JOINDER AND CONSENT
Sterling House Corporation, being a guarantor of the various
obligations of the ALP Parties under one or more guaranties (collectively, the
"Guaranty") delivered to the Meditrust Parties in connection with the
Meditrust/ALP Transactions (as defined in the Related Transactions Agreement),
hereby (a) joins in this Eleventh Amendment and consents to the provisions
hereof, and (b) agrees that it will not in any way raise any aspect of this
Eleventh Amendment as a defense to any action or proceeding instituted by any
of the Meditrust Parties to enforce the Guaranty.
WITNESS: STERLING HOUSE CORPORATION,
a Kansas corporation
/s/ ALICE LASSLEY
- ----------------------------- By: /s/ R. GAIL KNOTT
Name: Alice Lassley --------------------------------------
Name: R. Gail Knott
-------------------------------
Title: Vice President
------------------------------
3
<PAGE> 4
EXHIBIT C
MEDITRUST/ALP-ALS FACILITIES
KANSAS
1. Sterling House of Wichita, Wichita, Kansas
2. Sterling House of Derby, Derby, Kansas
3. Sterling House of Wellington, Wellington, Kansas
4. Sterling House of Hays, Hays, Kansas
5. Sterling House of Abilene II, Abilene, Kansas
OKLAHOMA
6. Sterling House of Bethany, Bethany, Oklahoma
7. Sterling House of Bartlesville II, Bartlesville, Oklahoma
FLORIDA
8. Sterling House of Tequesta, Tequesta, Florida
9. Sterling House of West Melbourne, West Melbourne, Florida
10. Sterling House of Stuart, Stuart, Florida
11. Sterling House of Vero Beach, Vero Beach, Florida
12. Sterling House of Leesburg, Leesburg, Florida
13. Sterling House of Port Orange, Port Orange, Florida
14. Sterling House of Ocala, Ocala, Florida
15. Sterling House of Deland, Deland, Florida
16. Sterling House of Ormond Beach, Ormond Beach, Florida
17. Sterling House of West Melbourne II, West Melbourne, Florida
18. Clare Bridge of Fort Myers, Fort Myers, Florida
19. Clare Bridge of Tampa, Tampa, Florida
20. Clare Bridge of Jacksonville, Jacksonville, Florida
21. Sterling House of Tequesta ll, Tequesta, Florida
TEXAS
22. Sterling House of Temple, Temple, Texas
23. Sterling House of Carrollton, Carrollton, Texas
24. Sterling House of Kerrville, Kerrville, Texas
25. Sterling House of San Antonio-Whitby Road, San Antonio, Texas
26. Sterling House of New Braunfels, New Braunfels, Texas
27. Sterling House of Lancaster, Lancaster, Texas
4
<PAGE> 5
OHIO
28. Sterling House of Bowling Green, Bowling Green, Ohio
29. Sterling House of Englewood, Englewood, Ohio
30. Sterling House of Barberton, Barberton, Ohio
31. Sterling House of Mansfield, Mansfield, Ohio
32. Sterling House of Marion, Marion, Ohio
WISCONSIN
33. WovenHearts of Brown Deer, Brown Deer, Wisconsin
34. WovenHearts of Sussex, Sussex, Wisconsin
35. WovenHearts of Onalaska, Onalaska, Wisconsin
36. WovenHearts of Menomonie, Menomonie, Wisconsin
37. WovenHearts of New Richmond, New Richmond, Wisconsin
38. WovenHearts of Wisconsin Rapids, Wisconsin Rapids, Wisconsin
39. WovenHearts of Plymouth, Plymouth, Wisconsin
40. The Evergreens, Plover, Wisconsin
41. The Evergreens South, Plover, Wisconsin
42. StoneCroft Manor, Medford, Wisconsin
43. The Pines, Wausau, Wisconsin
44. The Pines North, Wausau, Wisconsin
45. The Oaks, Wisconsin Rapids, Wisconsin
46. WovenHearts of Eau Claire, Eau Claire, Wisconsin
47. WovenHearts of Manitowoc, Manitowoc, Wisconsin
48. WovenHearts of Middleton, Middleton, Wisconsin
49. WovenHearts of Neenah, Neenah, Wisconsin
50. WovenHearts of Oshkosh, Oshkosh, Wisconsin
51. WovenHearts of Sun Prairie, Sun Prairie, Wisconsin
52. WovenHearts of Kenosha, Kenosha, Wisconsin
MICHIGAN
53. Hamilton House of Farmington Hills I, Farmington Hills, Michigan
54. Hamilton House of Farmington Hills II, Farmington Hills, Michigan
55. Hamilton House of Ann Arbor, Ann Arbor, Michigan
56. Hamilton House of Utica, Utica, Michigan
57. Wynwood of Lansing, Lansing, Michigan
58. WovenHearts of Davison, Davison, Michigan
59. Hamilton House of Delta I, Lansing, Michigan
60. WovenHearts of Delta II, Lansing, Michigan
61. Hamilton House of Grand Blanc I, Holly, Michigan
62. Wynwood of Grand Blanc II, Holly, Michigan
63. Hamilton House of Troy I, Troy, Michigan
5
<PAGE> 6
64. Wynwood of Troy II, Troy, Michigan
PENNSYLVANIA
65. Northampton Manor, Richboro, Pennsylvania
66. Clare Bridge of Lower Makefield, Yardley, Pennsylvania
67. Clare Bridge of Montgomery and Wynwood of Montgomery, North Wales,
Pennsylvania
NEW YORK
68. Liberty Commons, Manlius, New York
MINNESOTA
69. WovenHearts of Faribault, Faribault, Minnesota
70. WovenHearts of Mankato, Mankato, Minnesota
71. WovenHearts of Owatonna, Owatonna, Minnesota
72. WovenHearts of Sauk Rapids, Sauk Rapids, Minnesota
73. WovenHearts of Willmar, Willmar, Minnesota
74. WovenHearts of Winona, Winona, Minnesota
NORTH CAROLINA
75. Clare Bridge of Charlotte, Charlotte, North Carolina
76. Wynwood of Charlotte, Charlotte, North Carolina
77. Clare Bridge of Greensboro, Greensboro, North Carolina
78. Wynwood of Greensboro, Greensboro, North Carolina
SOUTH CAROLINA
79. Clare Bridge of Charleston, Mt. Pleasant, South Carolina
80. Clare Bridge of Columbia, Irmo, South Carolina
[TO BE SUPPLEMENTED BY AMENDMENTS TO THIS AGREEMENT]
6
<PAGE> 1
EXHIBIT 11.1 COMPUTATION OF NET INCOME PER SHARE
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- ----------------------
1998 1997 1998 1997
--------- --------- --------- -----------
<S> <C> <C> <C> <C>
Basic:
Net income attributable to common shares....... $ 5,821 $ 1,201 $14,279 $ 79
========= ========= ========= ===========
Weighted average common shares outstanding...... 21,946 19,087 21,876 18,989
========= ========= ========= ===========
Per share amount................................ $ 0.27 $ 0.06 $ 0.65 $ 0.00
========= ========= ========= ===========
Diluted:
Net income...................................... $ 5,821 $ 1,201 $14,279 $ 79
Net effect of convertible debentures based on the
if-converted method, assuming 100% conversion:
$35,000,000, 6.75%, due 2006.................. 630 630 1,890 1,890
$50,000,000, 7.0%, due 2004................... 947 947 2,841 1,473
$143,750,000, 5.25%, due 2002................. 2,089 -- 6,267 --
--------- --------- --------- -----------
Net income attributable to common shares........ $ 9,487 $ 2,778 $25,277 $ 3,442
========= ========= ========= ===========
Weighted average common shares outstanding...... 21,946 19,087 21,876 18,989
Net effect of convertible debentures based on the
if-converted method, assuming 100% conversion:
$35,000,000, 6.75%, due 2006.................. 1,710 1,717 1,714 1,717
$50,000,000, 7.0%, due 2004................... 2,469 2,469 2,469 1,280
$143,750,000, 5.25%, due 2002................. 5,000 -- 5,000 --
Net effect of dilutive stock options based on the
treasury stock method, using average market
price.......................................... 463 380 510 380
--------- --------- --------- -----------
Totals........................................ 31,588 23,653 31,569 22,366
========= ========= ========= ===========
Per share amount................................ $ 0.30 $ 0.12 $ 0.80 $0.15
========= ========= ========= ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet and consolidated statements of operations of
Alternative Living Services, Inc., filed with the Company's Form 10-Q for the
period ended September 30, 1998 and is qualified in its entirety by reference to
such financial statements and related footnotes.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 65,957
<SECURITIES> 0
<RECEIVABLES> 3,885
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 97,978
<PP&E> 598,555
<DEPRECIATION> (16,944)
<TOTAL-ASSETS> 736,938
<CURRENT-LIABILITIES> 57,547
<BONDS> 480,150
177,287
0
<COMMON> 0
<OTHER-SE> (7,244)
<TOTAL-LIABILITY-AND-EQUITY> 736,938
<SALES> 167,969
<TOTAL-REVENUES> 167,969
<CGS> 0
<TOTAL-COSTS> 164,487
<OTHER-EXPENSES> 85
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,285
<INCOME-PRETAX> 13,730
<INCOME-TAX> (549)
<INCOME-CONTINUING> 14,279
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,279
<EPS-PRIMARY> .65
<EPS-DILUTED> .64
</TABLE>
